New VA Sales Down But Beat Forecast



Morningstar reported new variable annuity (VA) sales for 2013 were $141.2 billion, down 1.5 percent from 2012. The company forecast a 2 to 3 percent drop in new VA sales for 2013.

“Net cash flow made a significantly worse showing, however, with the industry barely treading water at $1.3 billion positive net flow for the year,” Frank O’Connor, product manager with the Morningstar Annuity Research Center, said in a note to clients.

Cash flows slowed to a trickle in part because of runoff business, where life insurers left the business but are paying off existing guarantee contracts.

The Hartford, ING and Sun Life are among the largest insurance companies to have exited the VA business recently.

In addition, “massive outflows” from group annuities as a result of aging workers rolling out of qualified retirement accumulation plans, were to blame for the industry bringing in only $1.3 billion of net new money, O’Connor said.

“While the drag resulting from the resolution of high-liability blocks of business is temporary, expect the drag from group plan rollouts to only intensify as more baby boomers retire and cash out their annuity-funded plans,” he said.

O’Connor also said the fourth quarter was notable for the shift in company market share rankings, with Prudential dropping to fifth place last year from first place in 2012. The company’s market share of the VA market sank to 8.1 percent from 13.9 percent, with new sales dropping nearly 43 percent, O’Connor said.

“By design, to be sure, as Prudential, along with other carriers, was grappling with ‘too many eggs in one basket’ and a need to rebalance their lines of business,” O’Connor said.

MetLife dropped to sixth place from third place in 2012, and its market share tumbled to 7.5 percent of new sales in 2013, down from a 12.4 percent share in 2012, O’Connor added.

Prudential and MetLife have spent the past two years lowering their risk exposure to VAs as managers sought to rebalance their companies’ life, annuity and retirement product portfolios.

As these two annuities giants reduced their VA exposure, Jackson National, Lincoln Financial, Axa, SunAmerica/VALIC and Aegon/Transamerica stepped in.

In 2013, Lincoln, SunAmerica and Aegon booked new VA sales gains of 36.9 percent, 39.3 percent and 59.3 percent respectively, over 2012, O’Connor said.

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Jackson was the No. 1 seller of new VAs in 2013 with 14.8 percent market share, Morningstar said.

is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at

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