From the April 2010 issue of Boomer Market Advisor • Subscribe!

Crawling out from "in the money"

It took all of three seconds for the phone to start ringing, and it didn't stop for three days.

In the run-up to his State of the Union address, President Obama said a key goal of his Middle Class Task Force will be to promote "the availability of annuities and other forms of guaranteed lifetime income."

Just about every press person, trade group rep and even some "annuity salespeople" (ugh) called to give me their take. Which is certainly understandable; a presidential product endorsement is undoubtedly good for business in an industry hit hard by living benefit overextensions and solvency concerns.

This being our annual annuity issue, we asked contributors about just how overextended manufacturers got, what they've done to fix it and (most importantly) what they're doing to ensure it doesn't happen again.

"Contracts were heavily in the money, but it's not so significant anymore," says Scott Stolz, president of Raymond James Insurance Group. "They've come back to more manageable levels. In fact, we're getting to the point where contracts sold in certain times periods might actually experience step-ups because of the market's performance."

Good news, and in this month's "10 Questions for..." Stolz rattles off a few safeguards built into new product designs.

"It's going to be about finding creative ways to continue to offer the features we've seen in the past, but without tying up as much capital and/or taking on as much risk."

Which has always been an industry goal, but like everyone else, they got a bit carried away in the bull market. Understandable in my wife's checking account, but in the life insurance sector, which boasts the largest concentration of capital of any industry in the world? Not so much.

Because of the guarantees they offer, guarantees particularly important after all we've experienced, they're attracting more high-net-worth advisors for the first time. But attracting them is one thing. Keeping them is quite another. From crisis comes opportunity and the rock-solid case for annuities, argued for years, is finally coming to fruition. We'll see how well the industry responds.

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