One day after announcing its exit from the individual annuity business and the potential sale of its indivual life and retirement plan businesses, as well as broker-dealer Woodbury Financial Services, The Hartford remains mostly mum on the details moving forward.
Industry recruiters and watchers, however, have plenty to say about what they believe to be the reasons behind the move and its potential impact on the advisor space.
“It’s part of a trend of large insurance companies parting ways with their broker-dealers,” said Dan Inveen, director of research with Tacoma, Wash.-based FA Insight. “It’s tougher to earn money off of annuity-based products, primarily due to lower interest rates. But regardless of the interest rate environment, it’s no longer as easy or acceptable to have manufacturers control distribution.”
A more educated public that understands potential conflicts of interest and the value of “independence” is driving the mood, Inveen says.
A second reason was noted in a response to a question during Wednesday’s presentation by the company to analysts and the media. Christopher Swift, executive vice president and CFO of The Hartford, characterized Woodbury’s earnings as “modest,” noting that its $250 million in revenues “are essentially offset by commissions and operating expenses.”
“Of course, everyone is more cost-conscious today than in the past,” Inveen added. “The Hartford was getting pressure from investors on this front. It used to be that a company could run a BD at a loss and make up for it on the product side, but no longer. Investors want them to be profit centers, not cost centers.”
If Woodbury were to be sold, private equity firms would be the most likely suitors, said Jon Henschen (left), president of the independent recruiting firm Henschen & Associates in Marine on St Croix, Minn. Allianz, which is based in St. Louis Park, Minn., close to Woodbury’s headquarters, is also a likely suitor, as the insurance giant is looking to expand further into U.S. markets.