Ameriprise bails on outside sales of RiverSource

Limits sales of VA product to company's reps; Big Three getting bigger

Ameriprise Financial Inc. has cut off outside broker-dealers from selling its RiverSource variable annuity, limiting sales to Ameriprise registered representatives.
The company contacted outside broker-dealers last week to notify them that Ameriprise is disbanding its outside distribution for variable annuities and that it will sell its RiverSource variable annuity product solely through reps in the Ameriprise Financial system.
“We have decided to focus our variable annuities business on meeting the needs of Ameriprise clients and advisers,” said spokesman Ryan S. Lund. About 15% of the insurer’s sales come from outside distribution, while the remaining 85% comes from Ameriprise reps.
Mr. Lund also confirmed that the wholesalers who had worked with outside distributors were let go and will likely apply for open positions within Ameriprise. He would not confirm how many of the wholesalers lost their jobs, noting it was a “small number of positions.”
Mr. Lund added that the decision to scrap outside distribution of RiverSource will not have a material impact on Ameriprise Financial’s earnings.
Ameriprise is no longer actively wholesaling the RiverSource variable annuity, ceasing outside distribution as of Nov. 18. It will continue to accept applications until the end of the year, however.
The announcement comes amid a sizable shift in the variable annuity landscape. Over the past two years, three major life carriers — Prudential Financial Inc., MetLife Inc. and Jackson National Life Insurance Co. — have come to dominate the VA market, particularly among the independent-broker-dealer channel.
The numbers tell the tale. The three carriers accounted for 40% of variable annuity sales ($39.6 billion) for the first nine months of the year, according to Morningstar Inc. That’s double their share in 2008.
Among indie broker-dealers, the Big Three accounted for 57% of variable annuity sales during the first nine months of 2010, up from 31% in 2008, according to data from Morningstar.
The cost of distribution, particularly as smaller players struggle to compete against the Big Three, could be a major reason a vendor would want to limit its outside distribution.
“It’s expensive to distribute annuities: You have to support the broker-dealers and fund marketing meetings,” said Kevin Loffredi, vice president of Morningstar’s annuity solutions group. “Companies do this to cut costs.”