As the large Baby Boomer generation approaches retirement in an era in which employer-sponsored pension plans are less common, variable life insurance and annuity products have become increasingly popular.

Variable annuities -- insurance products designed to provide a steady post-retirement income stream backed by underlying investments -- have become particularly attractive the past couple of years because of the strength in the stock market.

The popularity of these products have helped fuel the growth of the nation's life insurers, according to a new report released today by the Ratings.

As of March 31, separate account holdings -- the accounts that hold the assets to back variable products -- jumped to $1.8 trillion, compared to $1.5 trillion the year before, a gain of $213.2 billion, or 13.8%, according to the report. These results are astonishing given they represent 36% of the life and health insurance industry's total assets.

The National Underwriter

, a publication covering the insurance industry, further reported that during the first three months of 2007, sales of variable annuities were $40.1 billion, up 6.6% from the same period in 2006.

Likewise, variable life product sales reached $641.7 million, a 9.8% increase over first-quarter 2006 results.

The top 10 insurers with the greatest percentage increase in separate account assets from March 31, 2006 to March 31, 2007 are listed in the table below.

This list represents 0.5% of total market share in terms of total assets in separate accounts as of March 31. Life Investors Insurance Co. of America (Rated B) is at the top, with an increase of $98.7 million, a 542% increase over the year-ago figure. This is outstanding for a company that has only 1.2% of its total assets in separate accounts. Variable products are clearly hot sellers right now, and it appears that life insurers of all sizes and specializing in all lines of products are cashing in on their popularity.

Prudential Financial

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last year acquired Allstate's variable annuity unit for approximately $560 million. As of March 31, Prudential Insurance Co. of America (Rated B), a unit of Prudential Financial, remained the second-largest U.S. life insurer with total assets of $249 billion. Prudential trailed only Metropolitan Life Insurance Co. (Rated B+), a unit of

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, with total assets of $287 billion.

The top 10 insurers with the greatest dollar increase in separate account assets from March 31, 2006 to March 31, 2007 are:

Hartford Life Insurance Co. (Rated B), a subsidiary of

Hartford Financial Services

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, experienced the largest gain in separate account assets with $17.8 billion at the end of the first quarter, compared to the prior year. In fact, it remains the leader in broker-sold variable annuity assets under management, with $113.2 billion, representing a market share of 6.5%.

In 2006, Hartford added two new features to its variable annuity products: Hartford's Lifetime Income Builder II and Hartford's Lifetime Income Foundation. Lifetime Income Builder II gives contract holders the ability to permanently lock in market gains in the form of increased lifetime income, if the contract performs well. Lifetime Income Foundation provides guaranteed lifetime income with the ability to take additional income in any given year if the contract performs well. These features are the continued evolution of guaranteed lifetime withdrawal benefits. There were $3.3 billion total deposits in Hartford's variable annuities at the end of the first quarter and 48% of new contracts selected one of these two features.

According to Timothy Benedict, a Hartford spokesman, the company has no specific plan to add new features to its variable annuity lineup. Its main focus will be on educating clients about current features and how they work.

With the increased demand for retirement investment products, we are seeing insurers become more creative in developing income-stream-type investments that are suitable for a wide range of consumers.

As long as the market performs well, we are likely to see more variable annuity products developed and offered. The combination of an increasing population of retirees and good performance in the market makes it an attractive investment for insurers.

Melanie Dufour joined TSC Ratings as a life and health insurance analyst in February 2007. She has an actuarial background with a BS degree in Actuarial Mathematics and Finance from Concordia University in Montreal, QC. Melanie has most recently worked as an actuarial analyst with Aequicap Insurance Company in Ft. Lauderdale, FL and prior to that as a senior analyst with Watson Wyatt Worldwide in Montreal, QC.