Variable annuities are getting a big marketing push once again from Keyport Life Insurance Co.
This time, the Boston-based company is homing in on sales representatives, and emphasizing that they stand to make big commissions from Keyport's higherthan-usual average sales ticket of $79,000 per annuity purchase.
"We're really pushing this hard," said Michael Mulkern, national product manager.
He noted that annuity buyers at most companies invest $30,000 on average, so "reps stand to gain 2 1/2 times the commission on this."
Variable annuities invest in mutual funds, in this case equity funds, and pay a return that varies depending on the performance of the underlying fund.
The investments are promoted as ideal for retirees because the money earned from annuities is tax-free until the proceeds are withdrawn.
Keyport is targeting its product, known as the "preferred income plan," to consumers who have amassed substantial assets through savings or other investments, and now wish to park their money in an instrument that doles out a steady flow of income.
"We want to shift some of the focus from the accumulation of assets to income stream," said Bruce J. Crozier, vice president and chief actuary for Keyport.
Unlike fixed annuities, which pay out a preset yield, variable annuities can pay out higher returns as markets surge.
Mr. Crozier admits, however, that there are downsides.
Because variable annuities are tied to the market, they provide a better hedge against inflation than fixed annuities, he explained.
The income they generate, however, varies from month to month, and some investors may be uncomfortable with that.
Variable annuities have taken a hit in recent months as the decline in the markets pushed down the returns to some investors. And investors incur tax penalties and surrender charges when they cash in the investments.
To make the product more attractive to consumers, Keyport has softened some of those restrictions.
Annuity holders are allowed to switch among fund portfolios every six months as their tolerance for risk shifts.
Investors can also redeem their investment at any time with surrender charges that start off at 7% but decline 1% every year.
In the event of death, survivors can continue to receive income or can cash in the annuity.
Mr. Mulkern says these measures give investors a modicum of control not available with traditional life insurance policies.
"They don't want to tie up their money for life," he added.
With literally hundreds of investment alternatives out there, Keyport knows it's in an uphill battle to widen the market for its variable annuities.
"There are a lot of reps out there who don't know anything about annuities," said Mr. Mulkern.
"There's a novelty to this and we have to get people up to speed on it."
The company has sent out field agents to educate brokers, especially those based in banks, about the product and has even brought sales representatives to their Boston headquarters for seminars.
In 1993, more than $26 billion of variable annuities were sold, up from $16 tfdlion the preceding year, according to Kenneth Kehrer, president of a Princeton, N.J., consulting firm that bears his name.
Sales through banks accounted for $2.82 of that total, a gain of $1.47 million over 1992.