Safeco Corp. might be on the verge of selling its life insurance unit, but that has not kept it from pushing new products into the bank channel.
The Seattle insurer said that this Thursday it will launch the Safeco Custom Annuity, a fixed product designed specifically for the bank channel (though it will be available through Safeco’s other distribution channels as well).
The product lets an investor lock in a guaranteed interest rate for one, three, or five years. The rate is higher if it is locked in after the first year. Of course, the risk is being locked in and seeing market rates shoot higher, but on the flip side, if rates drop further, a first year lock with a higher guarantee would work well.
Depending on the size of the deposit, the rates can be increased. For instance, a $25,000 premium would give the investor a one-percentage-point bump on the rate.
Scott Bartholomaus, a vice president of retirement services at Safeco, called Safeco Custom Annuity a conservative product for a conservative channel.
“The bank channel — oh, yes, it is a real conservative channel, and we have found that our average annuity customer on the fixed annuity side through banks is 70 years of age,” Mr. Bartholomaus said. “At that age, they want to leave money for their heirs. It is not necessarily money they want for themselves.”
Kenneth Kehrer, the president of Kenneth Kehrer Associates, a Princeton, N.J., consulting firm that tracks annuity sales through banks, said most annuity providers claim the average investor in fixed annuities in the bank channel is in the late 60’s or early 70’s.
“When you think about it, the sweet spot of the market on the fixed annuity side is people that are really conservative,” Mr. Kehrer said. “They have enough money to invest, and they are not looking for a complex product.
“And the bank investor tends to be older,” he added.
Mr. Bartholomaus would not comment on whether the expected sale of Safeco Life would affect bank distribution agreements for the new fixed annuity.
But Mr. Kehrer said it could.
“The fact that Safeco is for sale could influence banks and make them wary of the product,” Mr. Kehrer said. “Banks are looking for stability from the company they are doing business with. That stability includes pricing, and it also includes whether or not the new company would have the same dedication to the bank channel.”
Mr. Bartholomaus said only that any customer buying the product would secure at the time of purchase the rate guarantee, which would not be affected by a sale of Safeco Life.
But it remains possible that a Safeco Life buyer could scratch the product altogether. “And that would be disruptive to a bank’s sales force,” Mr. Kehrer said.
Safeco also sells mutual funds and life insurance through banks, though its volumes are small, the company has said.
Safeco Corp. announced in late September that it would shed its life company, though it has not said when a sale of the unit would occur. In mid-December, the Standard & Poor’s rating agency said it had met with Safeco officials and that they said bidding is going as planned.
Standard & Poor’s then put its A-minus rating for Safeco Life on CreditWatch, with developing implications. The rating went on CreditWatch because it could rise or fall, depending on how the sale is executed.
