MassMutual enters long-term distribution deal for MetLife fixed indexed annuities

The deal is part of a broader deal announced Feb. 29 between the two insurers, which includes the purchase of MetLife's Premier Client Group

Feb 29, 2016 @ 2:41 pm

By Greg Iacurci

Massachusetts Mutual Life Insurance Co. has entered a long-term distribution deal with MetLife Inc. whereby it will exclusively sell fixed indexed annuities manufactured by MetLife.

The deal is part of a broader deal announced Feb. 29 between the two insurers, which includes the purchase of MetLife's Premier Client Group, a network of 4,000 financial advisers, and MetLife Securities, Inc., its affiliated broker-dealer. The deal, expected to close early in third quarter this year, ups the tally of MassMutual's career agents to 9,600.

The agreement, set for a period of 10 years, stipulates that a new fixed indexed annuity offering currently being developed by MetLife is the only one MassMutual can distribute through its network, according to Michael Fanning, executive vice president of MassMutual's U.S. Insurance Group.

“They do not have this product on the shelf at this point,” Mr. Fanning said, adding that he doesn't know if MetLife expects to distribute the new fixed indexed annuity through other channels as well.

(More: MetLife exits brokerage business as DOL rule looms)

This will be MetLife's first fixed indexed annuity. A MetLife spokeswoman confirmed it is currently in development, but wasn't able to provide additional details by press time.

The deal “rounds out” MassMutual's product offering for advisers, because the firm doesn't have proprietary fixed indexed annuities and hasn't distributed any others in the past, Mr. Fanning said.

The agreement comes on the heels of a record year and quarter for fixed indexed annuity sales, and ahead of a pending Labor Department rule governing investment-advice standards for retirement accounts that could potentially push more flows to fixed indexed annuities.

“I think both firms recognize this is a market opportunity, especially post-Department of Labor,” Mr. Fanning said.

Fixed indexed annuities inked a record $54.5 billion in sales in 2015, a 13% increase over $48.2 billion in 2014. That popularity is due largely to investors seeking out relative safety in light of market volatility, more insurers piling into the fixed indexed annuity market, and distribution growing through banks and independent broker-dealers. Last year capped an eight-year growth run for fixed indexed annuities.

The Labor Department's proposed fiduciary rule, a final version of which is expected as early as next month, would place a higher compliance burden on variable annuities compared to fixed indexed annuities, leading some to believe sales in the latter would increase as a result.

On top of fixed indexed annuity distribution, MassMutual will also begin selling MetLife variable annuity products. MassMutual currently offers variable annuity products from other insurers. MetLife's “current retail variable annuity suite” has passed evaluation by MassMutual's due diligence committee, and will be available following close of the deal later this year, Mr. Fanning said.

Fidelity Investments recently suspended sales of MetLife's annuities due to uncertainty surrounding a break-up of the insurer's U.S. retail operations through a possible public offering, spin-off or sale, which would include large blocks of variable annuity business.

Mr. Fanning said MassMutual's distribution agreement for MetLife annuities would be with the new entity that emerges from the eventual split.

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