Life and annuity insurers have been revamping their variable annuity product offerings to better fit a post financial crisis environment.
As discussed in recent blog entries, variable annuity product revamps basically boil down to increasing prices and benefit reductions.
The unanswered question is what impact the product changes will have on variable annuity sales.
According to a recent Wall Street Journal Article, variable annuity sales grew at an 11% annual rate from 1995 through 2007. However, variable annuity sales did fall last year.
Some industry analysts and executives see this trend continuing in the near-term:
"When the equity market recovers, variable annuities will recover, with a bit of a lag," Mueller said. Based on first-quarter sales, he estimates 2009 variable annuity gross sales will be around $120 billion to $130 billion, down from $155 billion 2008 and well off the all-time peak of $186 billion in 2007.
Some see this declining trend continuing for the longer-term:
Conning's Martin believes that variable annuities, currently "the big-ticket item" of insurer retirement products, could lose ground to fixed annuities and mutual funds for a long time to come if customers are turned off by the slimmed-down products. "It is a wildcard whether they will ever regain that dominance," Martin wrote in a report published Tuesday.
The above said, some of the stronger players in the industry such as MetLife have actually seen their sales of variable annuities pick-up in the current environment.
Source: Wall Street Journal (subscription required)
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