Though variable annuity sales continue to be dominated by a few big companies, lower-profile carriers may seek opportunities in product innovation and new distribution channels.
Though variable annuity sales continue to be dominated by a few big companies, lower-profile carriers may seek opportunities in product innovation and new distribution channels.
Forty-three percent of new variable annuity sales go to MetLife Inc., Prudential Financial Inc. and Jackson National Life Insurance Co., according to data from Morningstar Inc. At least 72% of the VA market share in the broker-dealer, wirehouse and bank channels goes to the top five sellers, which includes SunAmerica Financial Group and Lincoln National Corp., according to Cerulli.
A handful of contenders — Ohio National Financial Services Inc., The Guardian Life Insurance Co. of America and Pacific Life Insurance Co. — could snatch some business from the largest sellers, but it's safe to say that the Big Three will remain, said Donnie Ethier, a senior analyst with Cerulli.
However, a study from Cerulli shows that there is growth potential for life insurers that turn to other distribution opportunities, including direct-to-consumer channels through partnerships with the likes of Fidelity Investments and The Vanguard Group Inc.
For instance, MetLife's Growth Guaranteed Income variable annuity is sold exclusively through Fidelity and hit $1.6 billion in new sales last year, reflecting annualized growth of 65%. The product provides only one investment allocation option — Fidelity's VIP FundsManager 60% Portfolio — but this means clients get transparency at a low cost, according to Cerulli's report.
“It's a relationship with multiple benefits, where Fidelity has the direct-to-consumer reputation and MetLife is very reputable,” said Mr. Ethier.
Other opportunities could be available in product innovation, including the use of stand-alone living benefits or contingent deferred annuities. These products attach a lifetime income rider to a managed account that's held outside of the insurer providing the guarantee. Still, carriers need to work out the kinks in these innovations in order to have distributors accept them, Mr. Ethier said. Those problems include portability of the guarantee in the event the adviser or client decides to switch firms and the assets end up being held elsewhere.
“Everyone's talking about contingent deferred annuities, but there are many questions around them,” Mr. Ethier said.
Finally, variable annuities for the fee-based or fee-only adviser present another opportunity for carriers — such as Symetra Life Insurance Co. and Jefferson National Life Insurance Co. — provided they can get those advisers to catch on. “The election rates are low, and there's a need for innovation,” Mr. Ethier said. “The industry isn't there yet.”
dmercado@investmentnews.com
