Insurance Advisory Service January 2013

This month’s report includes the analytical spotlight featuring the 2012 wrap-up on the segregated funds asset and sales trends, in addition to our monthly coverage of recent developments in the insurance industry and the segregated fund segment. Segregated fund assets ended the year on a new high, at $91.5 billion. While recalibration of the guaranteed withdrawal benefit (GWB) products undoubtedly impacted overall net flows negatively, from the supply side, the rush to lock-in GWB features before changes take effect prompted spikes in sales activity throughout the year which aided the overall growth. As a result, market valuation was the dominant driver in this year’s asset growth, with net flows accounting for only a fraction of the asset expansion. Fixed income funds outpaced the growth of all other asset classes—a reflection of the investors’ continuing fascination with yield products and a risk-averse stance. Another contributing factor was the manufacturers’ desire to establish a more conservative profile to their segregated fund book of business by focusing their marketing and product development efforts on the balanced and fixed income categories. Consequently, while balanced funds remained the largest asset category, equity funds contracted in spite of the market gains achieved during the year. If you already subscribe to the Insurance Advisory Service, the report is now available for downloading on our Client Extranet. If you do not, but would like to find out more about this research, please contact me directly.