Insurance: Allmerica Retools an Annuity with Banks in Mind

Allmerica Financial Life Insurance and Annuity Co. has redesigned its variable annuity product with an eye towards selling it in the bank marketplace.

Select Resource II imposes fewer penalties for withdrawals than its predecessor. Also, the payout is at least 5% of the investment compounded daily or an amount equal to the value of the underlying assets at the point it was highest: the holder's date of death or any anniversary during the life of the contract.

"We think that actuarially we can afford the risk and still make a reasonable profit," said Mark G. Steinberg, managing director of Allmerica Investment Services, a unit of the Worcester, Mass.-based insurance company.

While other variable annuities in the Allmerica's Select family are geared to the wealthy, Resource II can be bought for $1,000 with minimum additional investments of $50.

"We're trying to make investment-based insurance available to a lot of people and that's particularly valuable for the bank market," Mr. Steinberg said. He described it as a "safety net" for consumers.

Allmerica pointed out that many of the mutual funds packaged in Select Resource II are managed by companies familiar to retail bank investors - such as Putnam Investments, Janus Capital Corp., T. Rowe Price Associates Inc., and Fidelity Investments. The list of money managers also includes Bank of Ireland Asset Management, Nicholas-Applegate Capital Management, John A. Levin & Co., and Standish Ayer & Wood Inc., which traditionally works for institutional investors.

But whether banks will sell the product remains to be seen.

"It sounds very complicated for someone who may be still learning about investing for retirement," said Peter F. Mackie, executive vice president of investment management at Commerce Bank, St. Louis. "The challenge on the retail side is the customer needs to understand what they are buying."

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