Phoenix Cos. has hired an executive vice president to be in charge of developing wealth-transfer products, including annuities, and she has her work cut out for her in variable annuities, according to analysts.
Sue Ann Collins is to join the company May 1 as executive vice president of annuity products and operations. She was not available to comment, but analysts had plenty to say about a variable annuity withdrawn last year after falling interest rates compromised the profitability of the fixed buckets that were the product's most popular feature.
"They had a product, a variable annuity, that was problematic," said Arthur M. Fliegelman, a senior credit officer in New York for Moody's Investors Service. "They pulled that product off the market because customers were putting too much of their money into the fixed buckets. It was more than Phoenix had planned. Sometimes, I guess, a product sells too well."
The product, Retirement Planners Edge, was available from 2000 to 2002, said Julie Burke, a managing director at Fitch Inc., a New York ratings agency.
"The second half of 2002, they had a lot move into the guaranteed option, which had a 3% minimum guarantee," Ms. Burke said. "Interest rates continued to drop, and they withdrew the product in September. But it's going to take a couple years to run off the book."
Ms. Burke said Ms. Collins must get busy to fill the gap in its product lineup left by the withdrawal of Retirement Planners Edge because Phoenix is not now well positioned in the variable annuity marketplace.
"They need to find new products, they need to get going there," she said.
The variable annuity market was a major reason why Phoenix was ranked third in a Moody's special comment this month listing the "top ten negative percentage changes in total statutory capital by rated legal entity." The comment, written by Mr. Fliegelman, said Phoenix's total statutory capital was down 36.4% for the first quarter of 2002.
Ms. Burke said that Phoenix had $955 million of variable annuity deposits in fixed buckets at the end of 2001. But by last Dec. 31, the total had soared to $2.156 billion. In the Retirement Planners Edge variable annuity, investors' deposits in the fixed accounts stood at $1.346 billion at Dec. 31 - nearly $1 billion added to the $370 million in the accounts at the end of 2001.
Of course, Phoenix was not alone in getting burned by the excessive amounts put into fixed accounts within the variable annuity. Kenneth Kehrer Associates, a Princeton, N.J., consulting firm that tracks annuity sales through banks, says that more than half the $3.7 billion invested in variable annuities sold by banks in the fourth quarter went into fixed subaccounts.
Hartford-based Phoenix does not have much presence in the bank channel. It does not report its product sales to Kehrer Associates, which obtains annuity sales numbers from "practically every provider in the channel."
"They don't have a verifiable presence in the bank channel," said Kenneth Kehrer, the firm's president. "They appear not to attend industry conventions or advertise in directories or the industry press."
Last August, Phoenix said it was prepared to increase sales in the bank channel. At that time, it said it had $100 million of annuity sales through banks in the first half of 2002, the same bank-sales figure it claimed for all of 2001. The company did not specify the percentage of these sales that were of variable annuities.
However, Phoenix also said last year that its biggest push in banks would be in life insurance products, even if it launched annuities into the channel.
Ms. Collins, 49, was the general manager and group actuary at ING Group in Amsterdam, where she was responsible for insurance risk management, according to a Phoenix press release. Her specific responsibilities included setting standards for product development, pricing, asset-liability management, reserve adequacy, and minimum levels of required capital.
Ms. Collins was still in the Netherlands this week and unavailable to comment for this article, according to Phoenix spokesman Jon Sandberg. The company would not comment on its variable annuity challenges.
