Although insurance carriers aren’t disclosing exact sales figures, industry data and anecdotal evidence suggest that segregated funds sales were flat through the first quarter of 2008, which included a big part of the recent RRSP season.

Unless clients were interested in one of the industry’s new guaranteed minimum withdrawal benefit products, they weren’t too enthusiastic about investing in seg funds, says Tina Tehranchian, a certified financial planner and branch manager with Assante Financial Management Ltd. in Richmond Hill, Ont.

Some insurers say sales of GMWB products were healthy. This was the first RRSP sales season for them in volatile markets. Theoretically, clients thus should be interested in this product type, which offers an insurance guarantee on the principal, along with variable reset features that let clients lock in gains at market highs.

Overall, sales of both seg funds and mutual funds were down in the first quarter of 2008, but both types still posted net inflows throughout the quarter, during which the S&P/TSX composite index dropped by 7.1%, according to figures from Toronto-based Investment Economics Inc.

Individual seg fund sales were $1.6 billion in the quarter, down by 11% compared to the first three months of 2007. Seg funds continued to post relatively better results than the mutual fund segment, which added $8.8 billion since the beginning of 2008, down by almost 50% against the same period last year.

January was a tough month, during which seg fund sales reached only $207 million, including $46 million for long-term funds. Year-over-year, the monthly total was down by 35%. Investor Economics notes that the total for the category in January virtually equalled that of mutual funds, a market that’s historically 10 times greater by sales volume.

“I think what happens is a lot of folks shove the money under the mattress and stay out of the way when the waves are really rolling up and down, when markets are bad. They don’t get in,” says Doug Conick, vice president of investment fund products at Toronto-based Manulife Financial Inc. “That has a muted impact on segregated funds.”

February saw a turnaround: seg funds brought in $760 million in net flows, up from February 2007’s total of $741 million.

“We felt that, relatively speaking, in times of market volatility, you’ll see people moving toward more of an insurance wrapper product because of the guarantees, the reset options and things like that,” says Mick Kelly, vice president of sales for retail markets for Montreal-based Standard Life Assurance Co. of Canada.

That said, many seg fund clients — just as in the mutual fund segment — avoided equities altogether, and found peace in money market seg funds. “We saw a trend toward renewed interest in short-term investments,” says Brenda Moore, manager of wealth products at Kingston, Ont.-based Em-pire Life Co. , “such as our money market fund and treasury interest option.”

That statement sums up the industry experience for carriers that do not offer a GMWB product this year.

On the other hand, Manulife says that it experienced “very good sales in the first quarter, given the market conditions.” But Conick would only reflect on 2007 results ahead of its 2008 first-quarter earnings announcement, expected on May 8.

As a sort of harbinger of those results, Conick points to December 2007, a month during which the firm sold about $680 million of its IncomePlus GIF product. Conick notes, however, that the bonus feature in this product is calculated on a calendar-year basis, which encourages clients to invest before the end of the year.

Toronto-based CI Financial Income Fund was more forthcoming with its sales performance figures, although it was still mum on the specifics of the GMWB category. Seg funds are becoming increasingly important to CI, says Derek Green, president and national sales manager of its Toronto-based subsidiary, CI Investments Inc.

Seg funds accounted for 15% of CI’s gross investment funds sales in the first quarter of each of 2006 and 2007, but reached 18% in the first quarter of 2008, reaching a total of about $180 million.

“A bigger and bigger portion of underlying business is going into segregated product,” says Green, “and a bigger portion is contributing to net sales.”

That total figure includes all seg funds managed by CI but not the external seg fund programs in which it participates, including the Manulife GIF program; Manulife invests in several funds in CI’s Harbour and Signature series.

@page_break@CI’s key product in the GMWB category is SunWise Elite, manufactured by Toronto-based Sun Life Financial Inc., which maintains a more than 30% equity interest in CI. Sun Life introduced the SunWise Elite GMWB in April 2007, and it added the GMWB “for life” option in late March of this year.

The sales push has not finished. Through March and April, CI was on a 31-stop road trip across Canada, marketing the product and explaining its features to advisors.

Standard Life’s Kelly says that firm posted reasonable first-quarter numbers, but adds frankly that he’s looking more forward to sales in the second quarter. The firm began a national marketing campaign for its Ideal Segregated Funds product line in April. “We’re hoping markets stabilize,” he says, “and it looks like they are [doing so].”

Looking even further ahead, Kelly confirms that Standard Life will enter the GMWB market at some point within the next year, and the firm expects to announce a launch date in the autumn.

“The market in the segregated fund category is being dominated by GMWB product,” says Kelly. “We’re keen to launch a similar product for the payout market.”

Standard Life’s parent company, Britain-based Standard Life PLC, has never developed a seg fund for its own domestic market, but is doing so now. It will include a GMWB rider, a feature that will be rolled out to the Canadian unit as well. IE