After a sleepy 2005 in variable annuity sales, the outlook is brightening, an analyst says, and Jackson National Life’s first-quarter results — its best quarter ever for variable annuity sales overall, and best sales period in banks since the third quarter of 2003 — are an example.
The Jackson National Life Insurance Co. unit of London’s Prudential PLC reported more than $1.5 billion of variable annuity sales overall for the first quarter, up 51%. Of this, $153 million was sold through banks, a 50% jump from the year earlier and 47% more than in the fourth quarter. The company did not set a record for bank channel sales but had its best showing since the $209 million in summer 2003.
Though not all the data are in, said Kenneth Kehrer, the president of Kenneth Kehrer Associates, a Princeton, N.J., consulting firm that tracks bank annuity sales, he expects many of the companies that distribute variable annuities through banks to post first-quarter increases.
“Last year variable annuity sales in banks were barely up. This is good news for the variable annuity underwriters that sales look like they are up substantially in the first quarter,” Mr. Kehrer said.
Of course, growth in the broader variable annuity market depends on factors like stock market performance. And Mr. Kehrer said growth also will rely on continued consumer enthusiasm for “living benefits” such as guaranteed minimum income or guaranteed withdrawals for life, which give investors a safety net as well as the potential to participate in a market rally.
At Jackson National Greg Salsbury, an executive vice president of Jackson National Life Distributors, attributed the sales growth much less to living benefits than to factors such as hands-on support from the wholesaling team, lower-cost variable annuity options, and an unbundled structure, allowing investors to pick and choose among features.
The sales growth at Jackson National came as it bolstered efforts to provide education and resources to advisers. For instance, it spent much of 2005 promoting a retirement brochure and CD-ROM presentation — “But What If I Live: The American Retirement Crisis” — that proved popular with financial advisers. The brochure highlights seven challenges to funding retirement, analyzes them, and points to possible solutions, Mr. Salsbury said.
Guaranteed lifetime withdrawal “appears to be the hottest feature, and it’s what’s attracting a lot of money,” Mr. Kehrer said, viewing the annuity industry as a whole. These riders have become somewhat controversial, however, as critics question whether investors really know what they are getting for their money.
Jackson National, by contrast, has been more focused on its seminar systems group, a business unit designed to help advisers conduct prospecting seminars to generate sales, Mr. Salsbury said.
The Lansing, Mich., company is a middle-ranking player in the bank variable annuity channel. It was ranked 14th in the channel last year, with $457 million of variable sales, according to data from the Kehrer firm. That was far behind the leaders such as Hartford Financial Services Group Inc., the Connecticut insurer that was ranked first with $4.47 billion of bank variable sales; Pacific Life, with $2.8 billion; and Axa Financial Inc., No. 3, with $1.64 billion.
Mr. Salsbury said he is counting on the 77 million baby boomers to fuel sales as they reach their 60’s and look for investments that can provide an income stream in retirement. “There is an increasing awareness of how variable annuities can solve the retirement-income riddle,” he said.
