Segregated fund sales stall in third quarter

By Alain Thériault | November 12 2010 02:31PM

Sales of segregated funds in Canada fell 1% in third quarter 2010 compared with the same period in 2009, to reach $1.9 billion. LIMRA reports a sharp downturn from the previous quarters.

Segregated funds began the year in high gear, with growth in premiums booming at 31% in Q1 2010 versus the same quarter in 2009. Second quarter 2010 saw a gain of 8% compared to the same period the previous year.

Apart from the third quarter setback, segregated fund sales have been solid since the start of the year, totaling $7.4 billion at Sept. 30, 2010. They rose by 14% in the first nine months of 2010 compared with the same period in 2009.

LIMRA’s segregated fund data includes seg fund sales for accumulation products such as RRSPs and non-registered accumulation plans. It also includes segregated fund deposits into Tax Free Savings Accounts and into retirement income vehicles, such as RRIFs and LIFs.

The study finds that 87% of new segregated fund premiums were funneled into accumulation products in the first nine months of the year, with the remainder flowing to income products.

RRSP segregated funds garnered $4.0 billion at Sept. 30, 2010, 30% more than the same quarter in the previous year. Non-registered segregated funds stood at $2.2 billion by Q3 2010, a 2% decline from the same period in 2009.

TFSAs attracted 1% of new segregated fund premiums at Sept. 30, 2010. The $92 million total corresponds to growth of 115% compared to the previous year.

Income products

Regarding income products, RRIF segregated funds racked up $615 million in new premiums at Sept. 30, 2010, 13% more than a year earlier. Life income funds, instruments that generate income from locked-in retirement accounts, reported new premiums of $401 million in the first nine months of the year, down 24% from the same period last year.

At Sept. 30, 2010, total assets held in accumulation and income products, including term deposits and annuities, were $112.8 billion. This represents growth of 5% compared with assets accumulated on June 30, 2010.

The LIMRA report also shows growth of combination or hybrid annuity products, which combine the benefits of fixed and variable annuities (including term deposits)  within one product. Sales of these products advanced by 16% in third quarter 2010 and by 17% YTD at Sept. 30, 2010 compared with similar periods in 2009. Q3 sales were $656 million, compared with $2.4 billion for the first nine months of 2010.

Segregated funds will probably end the year robustly. Last year, the economic crisis slowed seg funds sales by 18% compared to 2008. In 2008, segregated fund sales climbed 7% compared with the previous year. All the same, the industry is far from the growth of 23% reported in 2007 and the record of 52% in 2004. w

The LIMRA data shows that segregated fund sales growth in Canada has outpaced growth in the United States since 2004, with the exception of 2006.

LIMRA surveyed the following companies: BMO Insurance, Canada Life, Co-Operators Life, Desjardins Financial Security, Empire Life, Equitable Life, Great-West Life, Industrial Alliance, London Life, Manulife Financial, RBC Insurance, Standard Life, Sun Life Financial and Transamerica Life Canada.

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