Rob Shore says the phrase “new fixed annuity” is an oxymoron, but the senior vice president of financial institutions for Glenbrook Life and Annuity goes on to say, “We really think we have something here.”
That something is the Allstate Treasury-Linked Annuity developed by Glenbrook’s parent company.
“The simplicity and predictability of the product is attractive to the consumer, considering today’s consumer’s concerns with the equity marketplace,” Mr. Shore said.
The product’s yield is tied entirely to the five-year Treasury rate. So an investor gets a yearly growth rate approximating that on the five-year Treasury security, with the exact yield also depending on how much the customer invests, Mr. Shore said.
“And if the five-year Treasury drops, the customer stays locked in to the Treasury rate they locked in when they bought the annuity,” he said.
Kenneth Kehrer, the president of Kenneth Kehrer Associates in Princeton, N.J., which tracks annuity sales through banks, said the product’s tie-in with the five-year Treasury really is different.
“This product is actually easy for the bank rep to explain because it’s clear-cut: If the Treasury goes up, so will the percentage increase of the investments,” Mr. Kehrer said. “Normally with annuities, there are guarantees, but what it’s all tied to can be a little confusing because the annuity provider invests in corporate bonds, which, yes, generally pay more than the Treasury, but there is risk.”
There is almost no risk in the product, said Mr. Shore, and Allstate thinks the product is so original that it has applied for a patent.
“Since 1962, the five-year Treasury [yield] has been more than 5% over 80% of the time and over 6% more than 60% of the time, over 7% about 45% of the time,” Mr. Shore said. “Right now it’s in the 4.4% range. While you can’t predict the future, this is an opportunity to take advantage of historically low rates.”
Allstate launched the product in mid-February, and it’s being sold through “about a dozen banks,” Mr. Shore said, adding that not all those banks had existing Allstate distribution agreements.
“We’re just getting off the ground with this, so our sales through banks so far are at about $5 million,” Mr. Shore said. “It’s still a small part of Allstate’s fixed annuity sales, but we’re of course hoping that a lot of the banks we have distribution agreements with already take this on.”
