Facts, Facts and More Facts: Focus on Segregated Funds

The closing of several Guaranteed Withdrawal Benefit (GWB) policies—the segregated funds’ engine of growth for the past several years—has raised questions over the near-term prospects of the entire segregated fund segment.

However, if October’s Insurance Advisory Service report is any indication, segregated funds outside of GWBs fared reasonably well in 2011 and through the first half of 2012. The lowest traditional fund guarantee option (75/75 maturity/death benefit) generated over $1 billion in net flows in 2011. While the product manufacturers currently display little appetite for assuming additional risk onto their balance sheets, distributors continue to highlight the segregated funds’ application as a risk management and estate planning vehicle (probate avoidance, anyone?).

The source of the guarantee combination metric is our Annual Segregated Funds Survey, just released as part of Section 3 of the October’s issue of the Insurance Advisory Service. The section is replete with analytical views highlighting the various aspects of the segregated fund and GWB business. In addition to the guarantee option breakdowns, the readers of the October report will learn that:

  • The managing general agency channel (MGAs) was the fastest-growing channel for segregated funds in the 12 months ending June 2012.
  • In the first half of 2012, the share of the GWB assets held by policyholders in all age brackets above 45 years increased.
  • In the 12 months ended June 2012, segregated fund assets increased in all regions with the exception of Ontario and Quebec.
  • TFSA accounts led all registered segregated fund account types. Introduced in 2009, TFSA accounts now account for 1.1% of total segregated fund assets.
  • The 75/75 guarantee level category now accounts for 13.5% of traditional segregated funds.

For more information on news and developments in the segregated fund segment, please see the latest issue of Insurance Advisory Service http://investoreconomics.com/issue/insurance-advisory-service-october-2012-pre-release. Posted by Karol Kalejta Karol@iei.ca.