CHAPEL HILL, N.C.--Banks expect hybrid annuities with long-term-care riders to be the next hot product on brokerage platforms, as soon as product providers ramp up their offerings in this area, a Kehrer-Limra executive said.

The 15 banks at the firm's Annuity Product Management Roundtable here ranged from the very largest to community banks. Kehrer-Limra polled them throughout the event on what was working, what wasn't and where they saw opportunities for growth.

Fifty-seven percent of bankers said that out of a choice of seven annuity types, hybrid annuities with a long-term-care component are the most likely to take off in terms of sales.

"Banks think these combo products best meet their customers' evolving needs," said Scott Stathis, Kehrer-Limra's chief operating officer and managing director.

Providers at the meeting said they recognize the opportunity but that there is a lot of risk involved from an underwriter's perspective.

"They all said they had products in the works, but no one wants to dive in first," Stathis said.

"There have been combo products for a long time, but now tax changes have put them on the radar, so everyone's looking at them," he said. "The problem with the first ones is that more people used them than they thought."

Tax changes mean that money in a hybrid product that is used to pay for long-term care isn't taxed.

Sixty-sever percent of bankers said that fixed annuities with terms of two to four years are selling the best; 22% said five- to seven-year products were most popular.

While rates are still very low, they're a little higher on these longer-term products than they are on one-year annuities, which bankers say are not selling at all.

People at the roundtable were upbeat about indexed annuities' future.

Though Stathis remarked that indexed annuities "are getting cannibalized by indexed CDs right now," 41% of bankers said indexed annuities are somewhat important and 18% said they are very important to future revenues.

"Once their guarantees get a little richer, they'll start winning the day," Stathis said.

Banks don't expect fixed annuities to do much this year: 65% of attendants said they expect sales to be flat. Variable annuities look brighter, however. Sixty-eight percent of bankers said that as long as the market keeps improving they expect sales of variable annuities to follow suit.

Bankers said they want simper variable annuities, not because they expect simplified ones to sell well — 58% of bankers said simplified annuities would play no more than a minor role in sales — but because simplified ones are a gateway to the variable annuities that reps actually sell.

"Banks want these VAs with training wheels, because advisers who don't currently sell VAs will graduate to VAs with more features," Stathis said.

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