Date posted: December 31, 2008
NAVA (the Association for Retirement Solutions) has released its annual predictions for the variable annuity industry. President and CEO Cathy Weatherford predicts that demand for VA insurance guarantees–such as guaranteed lifetime income benefits, beneficiary protection, and VA living benefit guarantees–will keep growing, even in these uncertain economic times that have negatively impacted the sales of other types of variable annuities.
Variable annuity insurance guarantees are predicted to become more popular because they may offer greater security to investors. Those nearing retirement, especially, don’t want to risk their entire nest eggs for the chance at a comfortable life as a retiree. VA insurance guarantees can provide both, says NAVA; which explains their increased popularity in 2008 that is set to grow further in 2009.
The market for VA living benefit insurance guarantees has been expanding over the past few years and is also predicted to increase in ’09.
Finally, NAVA is promoting a Straight-Through Processing Initiative (STP) to improve the process of selling variable annuity products. It’s intended to streamline the sales process, increase transparency, and reduce industry costs; the goal is to make variable annuities easier for potential investors to understand and then buy. If the initiative is successful, NAVA’s bright predictions of higher profitability and sales for the industry might be accurate.
Date posted: December 29, 2008
The Association for Insured Retirement Solutions, also known as NAVA, has released its latest data on the variable annuity industry. Their third quarter figures for show that variable annuities have taken a beating in the midst of economic uncertainty and troubled financial markets:
Decreased value of variable annuities’ net assets
- In Q3 2008, the net assets of all variable annuities in the U.S. were worth about $1.3 trillion. That’s an over 13% drop from their worth one year ago (Q3 2007), when net assets were worth almost $1.5 trillion, and an 8% decrease from last quarter (Q2 2008)
Significant drop in sales of variable annuities as consumers become more risk-averse
- Premium flows (total variable annuity sales) in Q3 2008 are off by 18% from Q3 one year ago.
- Net flows (variable annuity net sales) were off over 47% in the third quarter from Q3 2007.
- 66% of total sales in Q3 2008 were in qualified plans.
Trends in variable annuity asset classes
- Predictably, equity has become a smaller part of the mix of variable annuity assets over the past year, dropping 27% over the third quarter last year. Equity was 51.2% of total assets, or $662.9 billion, compared to 60.8% of total assets in Q3 2007.
- About 22% of variable assets (or $289 billion) are now held in fixed accounts, up from 17% last year.
- The proportions of variable annuity assets in balanced accounts, bonds, and money market funds have also increased.
Come back on Wednesday for NAVA’s predictions for variable annuities in 2009!
Date posted: December 26, 2008
Hartford Business Journal’s Greg Bordonaro has mentioned the recent trend in major life insurance companies acquiring small savings and loan institutions.
Lincoln National, Hartford Financial, and Genworth Financial are among those that have recently bought up S&Ls.
The acquisitions make life insurers eligible for funding from the Capital Purchase Program provided by the federal government. That program’s money is reserved for depository institutions.
Date posted: December 25, 2008
No matter what you celebrate, we at the Annuity FYI Visitor blog wish you a peaceful holiday.
(Photo credit: kimberlyfaye under CC 2.0)
Date posted: December 23, 2008
Greg Bordonaro recently mentioned in the Hartford Business Journal that the American Council of Life Insurers, a trade group for the life insurance industry, has asked the National Association of Insurance Commissioners to loosen several regulations in order to help the industry recover after suffering recent losses. Among their proposals is a decrease in the amount of reserves and capital required to sell life insurance, which could lead to insurers being unable to cover the risk of their products.
The NAIC likes other ACLI proposals to loosen certain investment and accounting practices because it believes it will cut costs by eliminating redundancies in insurance.
Most states adopt NAIC changes to meet solvency standards, although they’re not required to do so.
NAIC members are set to vote on the proposed changes by the end of this year, according to Greg.