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Segregated funds continue to grow

By Alain Thériault | September 30 2015 07:00AM

Segregated fund deposits rose by 6% in the first quarter of 2015 compared with the same quarter of 2014, to reach $3.1 billion.  

Segregated funds are insurers’ only investment product that grew in the first quarter, according to LIMRA’s figures on individual annuity sales. Deposits in fixed annuities plunged by 17% compared with Q1 2014, and combined annuities dove by 21%. These products reaped deposits of $558 million and $821 million respectively.  

Combination annuities, also called hybrid annuities, let investors enjoy the advantages of both a fixed income annuity and a variable income annuity.

Segregated funds almost singlehandedly drove asset growth because total assets rose by 3% compared with the first quarter of 2014, at $138 billion. Total sales were $4.49 billion in the first quarter of 2015, for growth of 2.7% compared with the same quarter in 2014.

Two-thirds of sales of fixed annuities flowed into income products and one-third into accumulation products. Note that segregated funds are accumulation products. Only 15% of sales come from traditional income products (RRIFs and lifetime annuity funds), and 7% from Tax-Free Savings Accounts (TFSAs). TFSAs can serve as both accumulation and payout products.

TSFAs continue to prosper, with sales of $227 million in the form of segregated funds, for growth of 26% in the first quarter of 2015 compared with the same quarter of 2014. 6,796 segregated fund contracts within TFSAs were sold in the first quarter of 2014, equal to 7% more than in the same quarter last year.

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