As a result of the current economic environment, John Hancock is the latest insurer to limit its annuity exposure.
“Due to volatile equity markets and the historically low interest rate environment that is expected to continue for an extended period of time, John Hancock is restructuring its annuity business,” Beth McGoldrick, assistant vice president of public relations for the firm, said.
The firm is discontinuing its Venture 7 series, 4 series and Frontier variable annuities. Of its market-value-adjusted annuities, it will withdraw its JH Signature, JH Choice and Inflation Guard annuities. It will also end its Essential Income Immediate Annuity.
John Hancock will accept new business on the discontinued annuities until Dec. 16, according to McGoldrick. Current annuity clients will see “no change in how their accounts are handled,” she said. John Hancock is owned by a Canadian insurance company, Manulife Financial.
Kerry Pechter, editor of RetirementIncomeJournal.com, compared John Hancock’s move to a similar decision from Sun Life, another U.S. affiliate of a Canadian company. “After losing $621 million to low interest rates and falling stock prices, its parent, Sun Life of Canada, had to add $500 million to reserves. Sun Life then announced a new, low-risk variable annuity,” Pechter, said.
This mirrors what happened to John Hancock. “ManuLife announced a $900-million charge triggered by its John Hancock unit’s annuity-related losses. Canadian companies are under stricter accounting standards than U.S. companies, so it’s no surprise that these two companies came under pressure to do something.”
Genworth announced Jan. 6 that it would discontinue its sales of retail variable annuities and group variable annuities, while ING announced in May 2010 that it was formally exiting the variable annuity business.
It’s a trend that Pechter expects to continue. “As long as there’s so much uncertainty/volatility in the equity markets and less-than-2 percent 10-year Treasury rates, insurers will hurt,” he said. “For some, the losses have been literally unsustainable.”