Variable annuity players join the fixed indexed annuity fray

John Hancock launches new product; Pac Life, Mass Mutual and Hartford file with regulators

Sep 29, 2011 @ 11:17 am

By Darla Mercado

Carriers that have been stalwarts in the variable annuity industry are trying their hand at manufacturing and selling fixed indexed annuities.

John Hancock Annuities earlier this month launched its Inflation Guard annuity, which credits a fixed interest rate during the first year, and a rate pegged to the consumer price index-urban for subsequent years. Customers can choose how long they'll stay in the annuity, up to 10 years, according to a prospectus filed with the Securities and Exchange Commission. But for now, only the 10 year structure is available to clients, said Tom Mullen, chief marketing officer at John Hancock Annuities. Surrender fees at their highest are 8% and decline from there.

The insurer has labeled its product a registered market value adjusted annuity.

John Hancock joins Massachusetts Mutual Life Insurance Co., which filed its New Elevations indexed annuity with state insurance regulators in May. A John Hancock spokesman declined to comment. MassMutual is currently deciding on the timing for launching its indexed annuity, said spokeswoman Patricia Norris Lubold.

Pacific Life Insurance Co. and The Hartford Financial Services Inc. filed indexed annuities with insurance regulators in June. Pacific Life spokesman Tennyson Oyler declined to comment on the filing.

The Hartford withdrew its application in August, according to the Connecticut Insurance Department, but the carrier can re-file and observers expect it to launch an indexed annuity this fall.

The carrier's spokesman, David Potter, declined to comment on the filing.

Given the carriers' history in the variable annuity business, industry experts expect the companies to target the same audience of registered reps at broker-dealers. Currently, ING USA Annuity and Life Insurance Co., Jackson National Life Insurance Co. and Lincoln National Corp. are the most popular issuers of indexed annuities among registered reps.

But tapping that audience isn't going to be easy, as the insurance companies will have to change their tune to get the reps' attention — especially in an environment that's traditionally been more open toward variable annuities rather than indexed annuities.

“[Variable annuity wholesalers] have been selling against the indexed annuity for so long, it's hard to ratchet back and say that they're not the enemy,” said Jack Marrion, president of Advantage Compendium Ltd., an indexed annuity research firm.

Successfully marketing the product likely will require wholesalers and carriers to rethink their marketing approach.

“It requires a different view of how to present the product,” said Mr. Marrion. “Reps are used to presenting ‘return.' This is ‘safety.'”

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