December 15, 2008 | last updated May 26, 2012 6:25 am
FINANCIAL SENSE

Variable Annuities Lag, Fixed Annuities Gain

Despite the decline of variable annuity sales, overall sales of individual annuities continue at a record setting pace in 2008, reaching $197.1 billion through the first three quarters, according to LIMRA, a worldwide association of insurance and financial services companies based in Windsor.

The growth was due mainly to the resurgence of individual fixed annuities, the more conservative investment option that guarantees a minimum rate of interest and does not depend as heavily on the stock market.

Fixed annuity sales were up 41 percent year-to-date as sales reached $75.1 billion. Sales increased 46 percent to $28.5 billion in the third quarter alone, according to LIMRA.

Conversely, variable annuity sales reached $122 billion through the first three quarters of 2008, a 10 percent decline over the same time period last year.

Variable annuity products have traditionally been more popular because they allow customers to invest their purchase payments in stocks or mutual funds. But the current market volatility has made investors skittish about the retirement product.

"The downward trend in the equities market has made a difficult environment for [variable annuity] sales in 2008," said Joe Montminy, research director for LIMRA's annuity research. "While [variable annuity] sales were virtually flat in the first quarter, second quarter sales decreased 12 percent and sales dropped 18 percent in the third quarter when compared to the same quarter from last year."

Nearly 80 percent of new variable annuity premiums went into contracts in which a guaranteed payment benefit was elected, LIMRA estimates.

"The availability of riders that offer guarantees that can protect either a consumers principal or provide guaranteed income appears to have softened the decline in variable annuity sales," Montminy said.

While they protect customers, those guarantees have negatively impacted the earnings of life insurance companies. That's because the steep decline in the stock market has caused equity portfolios held by annuity customers to underperform the guarantees, forcing life insurers to dish out millions of dollars in losses.

The Hartford Life insurance company ranks ninth in the country in total variable annuity sales so far this year with $6.7 billion in sales, according to LIMRA. MetLife and Prudential rank third and sixth in total variable annuity sales for 2008 with $10.5 billion and $8.1 billion in sales respectively.

ING tops the list in sales for 2008 with $11.4 billion.

Papermaster Tapped

Bingham McCutchen LLP has named Daniel Papermaster, a partner in the Institutional Finance Practice Group, managing partner of the Hartford office.

Papermaster's practice concentrates on syndicated bank financings, counseling hedge funds in debt and equity investments and cross-border financings representing institutional investors of privately placed debt.

Lawyers in Bingham's Hartford office work with multinational clients on financial restructuring, institutional finance, financial litigation and bankruptcy. Papermaster aims to position the office to take further advantage of Bingham's global platform, while maintaining its local connection.

"The Hartford office is unique in that our lawyers practice national and international law at the highest levels right here," Papermaster said.

Papermaster was a senior adviser to Sen. Joseph Lieberman's 2000 vice presidential campaign, and was legal counsel for his 2006 U.S. Senate campaign.

In 2003, the mayor of Hartford appointed Papermaster to chair a commission to reorganize the city's Office of Corporation Counsel.

Patterson Honored

Peyton Patterson, president and CEO of New Haven-based NewAlliance Bank was selected by American Banker magazine as one of three "Community Bankers of the Year" for 2008.

In selecting Patterson, American Banker noted that NewAlliance Bank "ranks among the Northeast's strongest savings banks today because it stuck to its credit standards while some competitors were relaxing theirs. NewAlliance has emerged as the top Small Business Administration lender in its home state, and it is on pace to set a full-year mortgage origination record this year."

Net income for NewAlliance Bank, which has $8.3 billion in assets, increased to $35.6 million during the first nine months of 2008, a 177 percent increase over the $12.9 million the company made during the first three quarters of 2007.

Greg Bordonaro is a Hartford Business Journal staff writer.

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