Morningstar Advisor - Fall 2007 - 88

By the Numbers: VAs VA Sales Surge Built on Diversification Sales and net cash flow in variable annuities surged in the second quarter of 2007, with sales reaching a record high of $46.4 billion for the quarter. Net cash flow into variable annuities was more than $8.8 billion. It’s not a record relative to the bubble years of 1999 and 2000, but is significantly higher than recent quarters that have averaged around $5 billion. The difference between this sales surge and the peaks in 1999 and 2000 is investor motivation. In the tech bubble years, capital intent on leveraging the advantages of moving rapidly in and out of investment options without tax consequences flowed into VAs with obvious results when the bubble burst. For example, large-cap growth subaccounts accounted for 18.6% of total VA assets in the middle of 2000 but represent just 9.2% of total assets today. This is partly due to the collapse of ridiculously high valuations, but it also shows the greater diversification across asset classes now. Today’s VA investor is more likely to maintain a well-diversified portfolio, which we’ve noted before in this column and is evident in the table. For a good example of the way investors are using VAs, look at John Hancock Venture III. Thirty-five percent of its assets are in its most aggressive fund of funds that is available with a living benefit. The debate rages on regarding the value of living benefits and the fees charged, but one question remains: How will these investors, who are often accused “paying too much” for these guarantees, fare against those who are overexposed to riskier investments when the next protracted downturn arrives? K Frank O’Connor is manager of Morningstar’s variable annuity software applications. Sales Rank Contract Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 RiverSource Life Insurance Company RVS RAVA4 Advantage Jackson Natl Life Insurance Co Perspective II John Hancock Life Insurance Co (USA) Venture III Pacific Life Insurance Company Innovations Select Metropolitan Life Insurance Preference Plus Select Hartford Life Insurance Company Leaders 3 American Skandia Life Assurance Co XTra Credit Six AXA Equitable Life Insurance Co Accumulator Elite 2006 Pacific Life Insurance Company Value Hartford Life Insurance Company Leaders Outlook 3 John Hancock Life Insurance Co (USA) Venture (2006) Hartford Life Insurance Company Director M American Skandia Life Assurance Co APEX II AXA Equitable Life Insurance Co Accumulator 2006 AXA Equitable Life Insurance Co Accumulator Plus 2006 Jackson Natl Life Insurance Co Perspective L Series Lincoln National Life Insurance Company American Legacy III View AXA Equitable Life Insurance Co EQUI-VEST 300/400 Nationwide Life Insurance Co BOA - Achiever ING USA Annuity and Life Insurance Co GoldenSelect Landmark Fidelity Investments Life Ins Personal Retirement ING USA Annuity and Life Insurance Co GoldenSelect ES II MetLife Investors USA Insurance Company MetLife Investors Series XC VA ING USA Annuity and Life Insurance Co GoldenSelect PREMIUM PLUS Lincoln National Life Insurance Company ChoicePlus Assur. (L Share) RiverSource Life Insurance Company RVS RAVA4 Select Lincoln National Life Insurance Company American Legacy III Lincoln National Life Insurance Company Am. Leg. Shareholder's Advan. Hartford Life Insurance Company Director M Outlook Sun Life Assurance Co of Canada (US) Masters Flex John Hancock Life Insurance Co (USA) Venture Vantage Pacific Life Insurance Company Pacific Voyages Ohio National Life Insurance Co. ONcore Lite AIG SunAmerica Life Assurance Company Polaris II A-Class Platinum Series Nationwide Life Insurance Co BOA - All American Gold New England Life Insurance Co American Forerunner Series Hartford Life Insurance Company Leaders Plus 3 Thrivent Financial For Lutherans Thrivent - Flexible Prem. DVA (New) Genworth Life and Annuity Insurance Co. RetireReady Choice Pacific Life Insurance Company Pacific Portfolios MetLife Investors USA Insurance Company MetLife Investors Series L VA American Skandia Life Assurance Co Advisors Plan III Allianz Life Ins Co of North America High Five Nationwide Life Insurance Co BOA - America's Future II Pruco Life Insurance Premier VA X Series MetLife Investors USA Insurance Company PrimElite III MetLife Investors USA Insurance Company MetLife Investors Series L-4 Year Lincoln National Life Insurance Company ChoicePlus Assur. (Bonus) Lincoln National Life Insurance Company ChoicePlus Assur. (B Share) AIG SunAmerica Life Assurance Company Polaris Platinum II Data as of June 30, 2007 GMWB Guaranteed Minimum Withdrawal Benefit GMIB Guaranteed Minimum Income Benefit 88 Morningstar Advisor Fall 2007
Morningstar Advisor - Fall 2007

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