Seg funds sluggish

By Alain Thériault | April 17 2012 08:30PM

Despite slight growth in the fourth quarter, segregated fund sales in Canada did not end the year on an upbeat note.
The latest LIMRA statistics point to a 5% dip in segregated fund sales in Canada in 2011 versus 2010. In the fourth quarter of 2011, sales rose by 1% compared with the same quarter in 2010. For all of 2011, seg fund sales totalled $8.6 billion.

By comparison, fixed annuities (deposits with guaranteed interest and immediate annuities) plunged by 22% in 2011 compared with 2010, and lost 16% in the fourth quarter compared with the same quarter of 2010. Total sales of these products were $2.7 billion in 2011.

Sales of combination products ebbed by 9% in 2011 compared with 2010. They slumped by 26% in the fourth quarter of 2011 compared with the corresponding quarter in the previous year. Total product sales stood at $3.1 billion in 2011. Combination products are deferred annuity contracts that let the holder make deposits in two investment categories. They are known as hybrid annuities in the United States. Seven companies offer them in Canada, the LIMRA report points out.

Total annuity and segregated fund assets were $116.3 billion at Dec. 31, 2011, equal to growth of 3% since 2010.

Apart from a few good quarters, segregated fund sales have been freefalling since 2004, Sally Bryck, associate research director at LIMRA, told The Insurance and Investment Journal in an interview. “Segregated fund premium growth increased slightly this quarter… but the number of contracts is down,” she adds.

Segregated fund deposits within TFSAs (tax-free savings accounts) rose by 60% in Q4 2011 compared with the same quarter of 2010 (73% in 2011 compared with 2010). “They are not taking off as hoped, but there is steady growth,” Ms. Bryck says. LIMRA data show that TFSAs represent only 2% of deposits channeled into segregated funds in 2011.