ING wins fixed-annuity deal as Allstate narrows focus

ING U.S. Inc. will begin selling fixed annuities through Allstate Corp. agencies as the largest publicly traded U.S. auto and home insurer ceases to offer its own brand of the retirement products.
DEC 12, 2013
ING U.S. Inc. will begin selling fixed annuities through Allstate Corp. agencies as the largest publicly traded U.S. auto and home insurer ceases to offer its own brand of the retirement products. The deal gives ING U.S. access to one of the biggest insurance customer bases in the country, while furthering a strategy by Allstate chief executive Tom Wilson to scale back from a business that has proven less profitable amid low interest rates. Terms weren't disclosed in a statement released Monday announcing the agreement. Mr. Wilson has refashioned his company's life insurance division by winding down sales of retirement products and focusing on Allstate-branded agencies. The insurer sold a variable-annuity business to Prudential Financial Inc. in 2006 and in July said it would halt fixed- annuity sales at the end of this year. Allstate also agreed to divest Lincoln Benefit Life Co., which provided life and retirement products through independent agents. The deal with ING U.S. is “the next step that will move us toward what we've been trying to accomplish for the last several years,” Don Civgin, CEO of the life division, said in an interview. Allstate will still sell life policies through its agencies. Returns on those products are “pretty good” and an area that the insurer would like to expand, Mr. Civgin said. INTEREST RATES Operating return on equity for life insurance was 9% last year, compared with 6.5% for annuities and institutional products, according to data on Allstate's website. Life insurers have faced pressure in recent years as record-low interest rates narrow the spread between what they can earn on investments and guarantees made to clients. “This interest-rate environment has made it challenging for everybody, not just Allstate,” Civgin said. “Everyone's been struggling with how to run their businesses.” ING U.S. is seeking to add clients as it distances itself from Dutch parent ING Groep NV. The U.S. business, which will be renamed Voya Financial, had an initial public offering in May that raised more than $1 billion. The Dutch company is winding down its ownership to comply with terms of a 2008 government rescue. SALES IMPROVING Sales of the retirement products have been recovering this year as rising interest rates make the products more appealing to clients. Customers purchased $58 billion of individual fixed annuities in the first nine months of 2013, compared with $54.6 billion in the same period last year, according to industry group Limra. “Working with Allstate will help expand our growing footprint in the fixed-annuity marketplace,” Chad Tope, president of annuity and asset sales at ING U.S., said in the statement. Allstate had about 11,200 exclusive agencies and financial representatives in the U.S. and Canada as of Dec. 31, according to the insurer's website. Allstate, once among the largest providers of the products, has scaled back in recent years, reducing the channels it sells through. The company collected $786 million in fixed-annuity deposits in the first nine months of this year, according to data on its website. ING U.S. had about $1 billion of fixed-annuity deposits in the first three quarters of this year, according to the insurer's website. Fixed annuities generally guarantee customers a stream of payments over time. Some of the products ensure that a client's initial deposit will increase in value. (Bloomberg News)

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