Pacific Life Insurance Company of Newport, Calif. is adding 12 mutual funds to its line up of life insurance and annuity products, according to a preliminary proxy statement filed with the Securities and Exchange Commission last week.
The new funds will be clones of variable annuity portfolios offered by Pacific Life and run by the existing sub-advisers. The funds cover a spectrum of investment styles including value, aggressive growth and include a bond and money market fund, according to the filing.
All of the new Pacific Funds will be sub-advised by large, well-known fund companies including AIM Funds of Houston, Janus Funds of Denver, PIMCO of Newport Beach, Calif., MFS of Boston, INVESCO of Denver and Salomon Brothers and Lazard Asset Management, both of New York, according to the proxy.
Pacific Life's plan to enter the fund business using some of the top money managers in the industry to is a good strategy, said Scott Cooley, an analyst with Morningstar of Chicago.
"It's a sensible model trying to get started because you don't have to pay big bucks management-wise," he said.
Several insurance companies have had success following a similar strategy of offering sub-advised funds, he said. Insurance companies are driven to offer funds because of the relatively low barriers to entry in offering them through sub-advisers and profit margins of up to 50 to 60 percent, according to Cooley.
"I think there are some diversification benefits and this is a high-margin business," he said. "For all the talk of consolidation in the industry, there are more companies offering funds right now than there were 10 years ago."
Another factor that may be driving life insurers to offer funds is growing political support for either a reduction or termination of the estate tax, according to Donald Cassidy, a senior analyst with Lipper of Summit N.J.
Also, by offering a lineup of mutual funds, Pacific Life gives its sales representatives another product to offer clients, he said. By offering an expanded product line, Pacific Life may be able to reach new markets, he said.
"I think this is part of an overall mega-trend in financial services to be all things to all people," he said.
The new funds include: PF AIM Blue Chip Fund, PF AIM Aggressive Growth Fund, PF INVESCO Health Sciences Fund, PF INVESCO Technology Fund, PF Janus Strategic Value Fund, PF Janus Growth LT Fund, PF Lazard International Value Fund, PF MFS Mid-Cap Growth Fund, PF MFS Global Growth Fund, PF PIMCO Managed Bond Fund, PF Pacific Life Money Market Fund and the PF Salomon Brothers Large-Cap Value Fund.
The funds will include A, B and C shares, according to the prospectus.
Currently, Pacific Life offers 31 different annuity portfolios managed by 14 different money managers. With $14.5 billion in variable annuity assets under management as of the end of March, Pacific Life was the 17th largest issuer in terms of annuity assets, according to VARDS of Marietta, Ga.
Other asset managers that sub-advise Pacific Life annuity portfolios include Alliance Capital Management, Mercury, Goldman Sachs, Morgan Stanley Dean Witter, J.P. Morgan and Capital Guardian Trust Company, all of New York.