Seg funds market stabilizing: A.M. Best

Thanks to stronger performance in equity markets, the segregated fund market in Canada is stabilizing, notes a new report by rating agency A.M. Best.
According to Best data, at yearend 2003, the top 20 seg fund insurers accounted for basically the entire market, totaling $92 billion in assets. In fact, the top 10 companies manage more than 93% of Canada’s seg fund assets.
Improvement in equity markets helped boost seg fund company performance in 2003, the rating agency says. But competition from mutual fund companies and other financial services remains strong. “Consumers continue to demand segregated-funds products with guarantees, requiring more capital for insurers, which have proactively increased management expense ratios to support pricing margins.”
Nonetheless, the rater predicts continued near-term growth in seg funds, albeit modest. Equity market volatility and increasing expense ratios for seg funds companies will hamper growth to some extent, and the exodus of small players from the market is likely given their lack of scale and higher expenses due to weaker technology.