The variable annuity market is currently facing a number of challenges, and carriers are adjusting to the changes. According to a recent report from Celent, variable annuities products are particularly vulnerable to a combination of increasing competition from elsewhere in the financial services industry, and a historically low level of interest rates.
The report, “Wealth Management Opportunities in the European Life Insurance Industry: A Focus on Protection Product,” says with the high turbulence experienced by financial markets in 2008 and 2009, insurers with variable annuity books have realized that their hedging programs did not provide the level of protection that many had expected. In addition, the high volatility of financial markets increases the cost of hedging, making variable annuities more difficult to sell even to high-net-worth clients. The report also states that in order to thrive in this evolving marketplace, insurers will need to rethink their product portfolio strategy and to improve operational efficiency.
Announcements regarding variable annuities offerings from Genworth Financial Inc., Western & Southern Financial Group and Allianz Life Insurance Company of North America indicate insurers are rethinking their strategies.
Genworth announced it is discontinuing new sales of retail variable annuities and group variable annuities, as part of ongoing refinement of its business strategies.
“With this decision, we have taken an additional step in advancing our specialist strategy to concentrate on the markets, customers and products where we have distinct leadership positions and strengths,” says Michael Fraizer, chairman and CEO. “Looking ahead, Genworth continues to help people meet their financial security needs by focusing on key protection, wealth accumulation and mortgage insurance offerings across its businesses.”
In addition, Genworth is suspending sales of one type of linked benefit offering, which combines annuities and long-term care insurance, until that market develops further. Genworth continues to provide fixed annuities as well as other leading offerings, including life insurance, long-term care insurance and wealth management.
Allianz Life Insurance Company of North America, on the other hand, recently selected Accenture’s life insurance platform to support Allianz Life’s annuity business.
“The new system will enable us to continue to put our customers first in responding to their evolving needs in a rapidly changing environment,” says Cathy Mahone, SVP of Enterprise Operations at Allianz Life. “It will allow us to streamline our business processes and continue to bring innovative new products to market. We selected the Accenture Life Insurance Platform because of its ability to support leading-edge annuity products that are highly configurable.”
Western & Southern Financial Group’s member companies recently introduced VAROOM—variable annuity for rollover only money. VAROOM is exclusively for the $365 billion qualified rollover market, representing assets consumers have worked hard to save in 401(k)s, 403(b)s and IRAs, the insurer says.
"VAROOM has the potential to change the way consumers and their representatives perceive value within a variable annuity," says Mark Caner, president of W&S Financial Group Distributors Inc., Western & Southern's wholesale distribution subsidiary serving financial institutions, broker-dealers and independent financial professionals. "VAROOM is the first variable annuity to offer subaccounts investing in individual ETFs. It also is the first variable annuity to give representatives the ability to build client portfolios using individual ETFs from iShares and Vanguard."
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access