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Hancock To Cut Minimum Annuity Rate To 2%

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NU Online News Service, June 5, 2003, 4:31 p.m. EDT – John Hancock Financial Services Inc., Boston, issued a clear warning today stating that the current low interest rate environment will force it to adjust the rates it offers on fixed annuities.

Some insurers have been dancing around the issue, but they have persuaded more than two-thirds of the states to lower the minimum guaranteed annuity rate to 1.5%, from 3%.

Hancock now says John Hancock Life Insurance Company Inc., the subsidiary that writes Hancock annuities, will be lowering its minimum guaranteed interest rate to 2% per year, from 3%.

But the life unit will still guarantee a minimum rate of 3% for assets kept in fixed annuities for at least 10 years, Hancock says.

Hancock also will shift to a stricter withdrawal-charge schedule, to encourage customers to keep assets in fixed annuities longer. The change will “enable the company to purchase fixed-income investments with a longer duration and potentially higher returns,” Hancock says.

Hancock adds that it will emphasize one-year rate guarantees because many consumers are reluctant to lock in the current low rates for any longer than one year.

James Benson, president of Hancock’s sales arm, says in a statement about the moves that Hancock is simply adapting to current conditions, not backing away from fixed annuities.

“John Hancock is committed to remaining a leading fixed annuity provider, and doing what is necessary to compete in this market,” Benson says.