Robust first six months for segregated funds and annuities

By Alain Thériault | October 21 2014 09:00AM

Premiums grew in all annuity market segments, both in the second quarter of 2014 versus a year earlier, and in the first half of the year compared with the same period in 2013. In particular, there was a major upsurge for segregated funds, which ended 2013 down from 2012.Segregated funds garnered premiums of $4.9 billion in the first six months of 2014, a 19% increase compared with the first half of 2013, and rose by 18% in the second quarter, the latest LIMRA survey on individual annuities results in Canada shows. LIMRA included accumulation tax-free savings accounts (TFSAs) in this category.

Premiums in the fixed annuities category, which includes both payout and accumulation annuities, also increased in the first six months compared with the same period last year. They reached $1.2 billion, for growth of 16% during this comparison period. In the second quarter, growth was a more modest 5% compared with the same quarter in 2013.

With premiums of $1.8 billion, sales of fixed annuities and segregated funds combined advanced 18% in the first six months of 2014 compared with the same period in 2013. In the second quarter, they grew 20%.

These solid results propelled assets. “Total individual annuity assets increased 1 percent over first quarter 2014 and totaled $132.5 billion at the end of second quarter 2014,” Sally Bryck, survey coordinator says.

The premiums gathered in the first six months of the year took multiple paths. In segregated funds, 78% of premiums went to accumulation products, broken down into 42% for RRSPs and 35% for nonregistered funds. Payout products drew 16% of segregated fund premiums during this period.

In the fixed annuities category, payout products cornered 64% of premiums in the first half year, corresponding to 57% in payout annuities and 7% in registered products (retirement income funds or RRIF, and life income funds).

Of the total premiums paid into segregated funds, 6% went into Tax Free Savings Accounts. This subcategory of the LIMRA survey points to strong growth in segregated funds. TFSAs amounted to $311 million of total of seg fund premiums, up 50% in the first half year compared with the corresponding period in 2013.

Interest in TFSAs was weaker in the fixed annuities category, although the LIMRA report indicates solid growth. TFSAs represented $48 million in total premiums paid into fixed annuities (insurers’ term deposits), amounting to 12% growth in the first half of 2014 compared with the same period in 2013.

The payout life annuity is another powerhouse in the fixed annuity category, with premiums of $236 million and 34% growth. Non registered payout life annuities made up $219 million of the total, with 3% growth. Another favorite, the non registered certain payout life annuity, captured $226 million of fixed annuities, up by 21%.

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