Variable annuity sales may be down, but that's not stopping life insurers from filing new products aimed at fee-based financial advisers. And that approach could dramatically alter the VA landscape.
At the second quarter, Morningstar Inc.'s Annuity Intelligence report showed 55 I-share variable annuity contracts were available, up from 34 a year ago. I-share variable annuities are aimed at fee-based advisers. The Vass allow them to charge an asset-based fee rather than receiving a commission.
Tax-deferred growth within the contract — as opposed to lifetime withdrawal benefits — is the attribute life insurers are highlighting with these fee-based products.
Products launched in the second quarter include Symetra Financial's True VA, which includes 117 subaccount options and no living benefits. Another, Sammons Retirement Solutions Inc.'s Live Well variable annuity, offers 79 options and a series of risk-based asset-class model portfolios called Live Well Models.
I-shares made up 3.0% of second-quarter VA sales, according to Morningstar, up from 2.9% in the year-earlier period.
Overall, sales of variable annuities were slower, with sales of more than $37 billion in the second-quarter down 4.6% from a year earlier, according to Morningstar's quarterly VA report.
It appears that full-year VA sales will either be slightly down or flat. Sales for the first half topped $73 billion, or 48% of the full-year figure in 2011, according to John McCarthy, product manager of annuity solutions at Morningstar.
Despite lukewarm industry sales, carriers believe that the I-share is the next frontier for variable annuities, especially as fewer companies offer them with living benefits.
Though tax deferral was a major selling point in the 1990s, fund menus were relatively limited. Any of the new offerings come with a broad array of investments.
“It portends to a fundamental shift in the variable annuity business,” said William Lowe, president of Sammons Retirement Solutions. “How does the VA business continue to grow and confront challenges facing retirees and pre retirees? You have to make some different shifts.”