Briefly:

Despite a challenging environment, sales of variable annuities in the U.K. fell by only 7% in the second quarter of 2009, according to research from Watson Wyatt.

Second quarter variable annuity sales in the U.K. were £343.7 million, down from £370.2 million in the first quarter. Q2 2009 sales matched those achieved in the last quarter of 2008.

“Despite the fall in sales, relative to the first three months of this year, this is quite a resilient performance from the sector,” says Andy Sanders, senior Watson Wyatt consultant. “There were a number of developments during the period including re-pricing exercises and product redesigns to allow for the increased costs of guarantees as well as the withdrawal of one of the leading product providers, the Hartford. It’s apparent, however, that there’s demand for such products from a segment of consumers both approaching and at retirement.”

Watson Wyatt explains variable annuities are still a relatively new type of financial product in the U.K., with sales predominately being made through independent financial advisers. These are unit-linked investment products with explicit guarantees and are currently available through a small number of providers, either as a pension or as a life assurance (investment) bond.

“Consumers are seeking alternatives to annuities and income drawdown, and given the growth anticipated in the ‘at-retirement’ market, the prospects for variable annuities and other similar ‘third way’ product propositions look positive,” says Sanders. “The eventual size of the variable annuity market will depend on the product design and costs matching consumer needs as well as convincing a wider cross-section of the population and the adviser community of the virtues of what’s available. It will be interesting to see whether these challenges are left to the existing providers or whether there are others that feel the variable annuity market has sufficient long-term potential for them to pursue market entry.”

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Bank bailout earns a profit

It seems bank bailouts are not necessarily the money pit critics claimed they were. The government of Switzerland has sold off the stake it took in UBS last year.

The Swiss government propped UBS up in October with a 6 billion franc investment in the form of convertible notes. Officials in Berne announced on Thursday that it had sold the 9% stake for 5.56 billion francs, and is expected to collect 1.8 billion francs in interest.

The Swiss treasury stands to earn a tidy profit of 1.36 billion francs — about $1.4 billion Canadian — on the bailout. Fingers crossed that the Canadian bailout of General Motors fares half as well.

(08/20/09)

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.