Protective Life pulling in reins on variable annuity flows

Insurer won't accept payments from 1035 exchange or a retirement plan rollover

May 14, 2013 @ 3:12 pm

By Darla Mercado

Up-and-coming variable annuity player Protective Life Insurance Co. is taking steps to stem the flow of contract premiums.

In filing yesterday with the Securities and Exchange Commission, Protective said that as of May 20, it no longer will accept any variable annuity payments if the money is coming from either a 1035 exchange or a retirement plan rollover.

Advisers and clients who wish to fund a VA through a rollover or contract exchange have until May 17 to do so, according to the filing. Protective will continue to take payments that aren't funded through 1035s or rollovers, the company noted.

The company's profile has been raised considerably among financial advisers since the biggest VA sellers, having decided they've had their fill of the business and its exposure to long-term liabilities and low interest rates, have pulled back.

Protective's block of VA business has fared well due to recent rising markets, which is a boon for fee income, John D. Johns, president and chief executive of the insurer, noted in a first-quarter earnings call.

The carrier had $797.1 million in new VA sales during the fourth quarter of 2012, compared with $853.9 million in the year-earlier period. Over the past five years, Protective has seen significant momentum in VA sales, ending 2012 with $2.73 billion in variable annuity sales, up from $452 million in 2008.

Protective has climbed the ranks among VA sellers, reaching No. 13 in the fourth quarter of last year, up from No. 16 in the fourth quarter of 2011, according to Morningstar Inc.

In general, the majority of overall variable annuity sales come from 1035 exchanges, as opposed to new money.

Protective has been taking steps to slow sales; the company “has been taking different price actions in derisking,” Mr. Johns noted on the first-quarter call.

“We have been planning for variable annuity sales to moderate as they did on a sequential basis in the quarter,” he said on the call. “We view that as very much in line with our plan.”

Protective Life spokeswoman Eva Robertson was not available to comment.

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