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November 04, 2001 at 07:00 PM
Growing The VA Book–It’s A Front Burner Issue Again
By
Boston, Mass.
All eyes and ears seemed trained on one issue at the annual meeting here of National Association for Variable Annuities.
That issue was: How to grow the business?
That might seem a no-brainer for members of this Reston, Va.-based trade group, given that VA sales have risen nonstop for the past 10 years, industry wide.
But since 2nd quarter VA sales came in at $58 billion, or 42% of year-end 2000′s figure of $138 million (source: Info-One/VARDS), many executives here were moving about, scouting for new answers.
A rebound in the stock market would help pump sales back up, several told National Underwriter. But they said they don’t want to rely on that alone. Hence, most speakers proffered ideas, lots of them.
Keynoter Jack Brennan, chairman and chief executive officer of The Vanguard Group, Valley Forge, Pa., set the tone with his assessment. In the future, he said, only “best in class” products and services will be acceptable.”
The VA business will become ever more competitive, he predicted, so “mediocre products with mediocre returns won’t cut it.”
Being best in class “doesn’t mean you have to shoot out the lights every year,” he said.
But it does require things like well constructed and durable investment options, and transparent pricing and fees.
Some of Brennan’s other suggestions:
–Emphasize value. “Selling gimmicks will work only one time,” he said.
–Be willing to partner, “to produce top quality and top value.”
–Provide continued constructive innovation. Simplicity should be the goal, he cautioned. “You won’t be successful if the result of adding options only baffles clients.”
–”Put the client first at all times.” This creates an image of a highly competent market that has integrity and truth, he said.
But what if yours is a publicly held company?
“Shareholders and analysts like to see steady, predictable earning growth, with improvement in ROE,” said Mary Ann Brown in an address presenting her personal views. She is president of New England Products and Services for New England Financial, a Boston unit of MetLife, Inc.
Shareholders and analysts “do not appreciate surprises in earnings, even if they are positive,” Brown pointed out.
Therefore, “we need to help our analysts and constituents understand how to more simply measure our companies than with complexities that only actuaries and state insurance departments understand.”
Furthermore, Brown urged companies to stay the course. “Changing direction can hurt a company’s analyst reports and valuation,” she explained.
“For example, redefinition of your core business, based on whatever is profitable that year, is not a good idea. We’ve all seen companies decide to divest themselves of a line of business that used to be an important source of future earnings.
“We need to stick to the business we’re in, and grow it.”
How do you do that? Consider organic forms of growth, Brown suggested. Perhaps add other product lines for existing distribution systems or do some joint venturing.
Demutualization, and acquisitions based on additional distribution outlets are other strategies, she said.
What can distributors do? For one thing, keep in mind that “advice couldn’t be more important to clients than right now,” said David Byrnes, senior vice president and director of the annuity group at SalomonSmithBarney, New York, N.Y.
In view of today’s economic slump, people are looking for security and advice, he explained.
