Soaring interest in variable annuities as a retirement income solution has pushed Jackson National Financial Life's business out of "balance," its UK parent says.
Jackson sold about $3 billion in variable annuity products last quarter, up 31% over last year as even advisors who formerly didn't sell VA contracts enter the space.
However, Prudential PLC, which owns the company, warns that this growth has come at the cost of its fixed annuity and institutional sales products.
VA contracts are still extremely profitable for Jackson and for Prudential, earning an average margin of 73%. However, the cost of acquiring these customers -- in the form of commissions, concessions, and other outflows -- brought Jackson's internal rate of return on new business down to 20%.
That evidently isn't good enough for Prudential, which hints that VA sales will have to "moderate" over the next six months in order to re-balance the company's business footprint.
Since these products are aggressively sold rather than bought, as it were, this note from the top may cool the VA market for the remainder of the year.
And since Prudential says its competitors in the space haven't come back around as fast as it suspected, things might get a little quiet where annuities are on the table.