BROOKLYN, N.Y. — Insurers that want to stay in the variable annuity industry need to stand up to their distributors, two stock analysts said here today.
Jimmy Bhullar, a senior analyst at J.P. Morgan Chase & Company Inc., New York, and David Havens, a managing director at Hexagon Securities L.L.C., New York, appeared here at an insurance industry conference organized by Standard & Poor’s, New York.
“Do variable annuities have a future?” Mark Puccia, an S&P managing director, asked the analysts during a session on Wall Street’s view of the insurance industry.
“The product has a future,” Bhullar said. “I don’t know if the companies that sell them have a future.”
The variable annuity is a popular product that can help life insurers compete with banks, but insurers are depending more on independent distributors, rather than their own career agents, to sell the products, and the independent distributors have succeeded at demanding lower prices, more generous benefits guarantees, and richer producer compensation arrangements, Bhullar said.
Insurers that sell plain vanilla variable annuities should do well, but issuers that continue to sell more complicated annuities likely will report losses every fifth or sixth year, Bhullar predicted.