Bruce Ferris, (below right) head of sales and distribution for Prudential Annuities, doesn’t worry so much about low interest rates, although he concedes that has an effect on the business. What’s he’s more concerned about is making the public more knowledgeable about annuities in particular and retirement planning in general.
“First, we need to do a better job of helping educate retirees and potential retirees to the value of our products and services, where they fit and just as importantly where they don’t fit in terms of their retirement planning needs,” says the Shelton, Conn.-based executive, who spoke recently with LifeHealthPro.com. “Number two, we have to appreciate that individuals are still hesitant, cautious and fearful, or some combination of those, of loss of principal and loss of their investments as a result of 2008-09. Yet with today’s economic outlook and specifically interest rates, we have to help get them more comfortable in recognizing the challenges they face if they don’t take actions today and if they don’t prepare for their retirement.”
In regards to interest rates, Ferris acknowledges the current economic climate influences how carriers like Prudential make decisions. “No one, either individually, corporately or governmentally, is immune from the low interest rate environment and the challenges it poses,” he says. “Certainly, from the standpoint that we make long-term guarantees and promises, particularly in the annuity industry, we are big buyers as an industry of fixed income and long-term fixed income to satisfy those liabilities, which in some cases are many years off in the distance. Low interest rates are challenging to that objective of buying long-term fixed income. That said, we can’t let it deter us from providing the ultimate objective which is providing solutions to help Americans retire with dignity.”
Protection on the Downside
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Prudential’s core annuity products are variable annuities; yet it also provides fixed annuities and single premium immediate annuities.
Like other carriers, Prudential has implemented strategies in its VAs that protect not only the policyholder, but the company’s shareholders as well. Specifically, it employs an algorithm within its variable annuities that, based on market fluctuations, moves the client’s underlying assets in their individual sub-accounts to a bond portfolio.