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NAVA: Variable Annuities Slump in Third Quarter


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!

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