After developing their annuity businesses in different ways, both Sun Life Financial Inc. in Toronto and Prudential Financial Inc. in Newark, N.J., have focused themselves on boosting sales by adding wholesalers in the bank channel.
Sun Life, which has concentrated on expanding organically, plans to increase its bank wholesaling force next year by 40%, to 35 people, and Prudential, which made two big purchases to gain scale, says it will add “substantially” to its 14 bank-channel wholesalers in the next 12 to 18 months.
“This is a contact sport, it always has been,” Bruce W. Ferris, the executive vice president of relationship management at Prudential, said in an interview last week. “We have to have the right number of wholesalers to educate each bank rep about the products we are offering.”
David G. Byrnes, an executive vice president and the sales director at Sun Life Financial Distributors in Boston, said in an interview last week that this year has seen strong annuity sales.
He said that this month year-to-date variable annuity sales by the U.S. division of Sun Life Financial are very likely to exceed the $1.7 billion in sales for all of last year. During the second quarter, its sales rose 96%, to $805 million, from a year earlier. The strong quarterly result benefited, it said, from the March introduction of the Income On Demand income storage benefit lifetime income rider.
“Our goal coming into this year was to increase sales by 53%,” Mr. Byrnes said. “Our goal for next year is to add wholesalers and maintain our growth rate.”
Kenneth Kehrer, the director of Kehrer-Limra in Princeton, N.J., which tracks annuity sales through banks, said other providers have beefed up their bank wholesaler forces. Companies are trying to take share, he said, from Hartford Financial Services Group Inc. and Pacific Life, which have dominated bank variable annuity sales.
Kehrer-Limra’s second-quarter bank-sales data gave Hartford a 22% share, Pacific Life 15%, Prudential 3.4%, and Sun Life 2.7%.
Other providers are adding wholesalers to develop business in banks. Axa Equitable Life Insurance Co. of New York , a unit of Axa SA, has two divisional vice presidents and 26 regional wholesalers who distribute variable and fixed annuities and expects to add a divisional vice president and five wholesalers this year.
Mr. Kehrer said a lot of the bad press and regulatory pressure that have affected annuity sales have begun to subside, creating opportunity.
“Hartford and Pacific Life are well-entrenched in the bank channel, but providers believe that banks can sell a lot more variable annuities than they have been,” he said. “Everyone believes that banks will expand distribution and hire more salespeople.”
In the past five years, Sun Life has grown by adding wholesalers and developing a channel-specific distribution strategy. It has 90 wholesalers — 35 for wire houses, 30 in the independent advisory channel, and 25 for banks, Mr. Byrnes said.
Sun Life plans to add wholesalers based on channel and geography needs, he said, and he expects to reach 110 wholesalers by the end of next year, most of them added to the independent advisory and bank channels.
“To be honest, we felt that we were a little light in the bank channel in terms of the number of wholesalers we had there,” Mr. Byrnes said. “We want to be a tier one annuity provider, and in order to accomplish that we really need more feet on the street.”
Bank sales grew 31% in the first half of this year, he said, but continue to lag wire house sales. Overall, banks have made 22% of Sun Life’s annuity sales this year.
“The fastest growth is always going to occur where we can spread the news the fastest, and we can talk to a lot more people when we speak to a wire house,” he said. “Banks are still more of a one-on-one approach.”
Mr. Ferris said banks accounted for less than 10% of Prudential’s annuity sales last year but that it is a “growing piece of the pie.”
“If you look at the industry, banks account for about 13% to 14% of total sales, but that is up from 10% to 11% a couple years ago,” he said. “There has been growth. Banks are still a meaningful piece of our distribution, but we think we have not chased banks as well as we can.”
Prudential was ranked ninth in bank annuity sales last year, according to the Vards Report, a quarterly publication of Morningstar Inc. that tracks variable annuity sales. But Mr. Ferris said, “We aspire to do much better than that.”
Prudential was not a major annuities player five years ago, he said. The Vards Report ranked it 14th in bank sales in 2002, with a 1.1% market share and $2 billion of sales. “Our annuity business lost money that year from an income standpoint,” Mr. Ferris said.
In 2003, Prudential bought American Skandia and at the end of last year it bought AllState Financial Services. These big deals helped it develop its annuity distribution. At the end of 2006, it had a 7% share, was ranked fourth in assets, and had $9.8 billion of sales as the annuity business generated $500 million in net income, according to Vards.
Mr. Ferris said he expects growth this year. “Our sales have been robust and continue to grow,” he said. “Obviously, we want, and the organization expects, growth. Our parent has listed us as a growth business that they plan to reinvest in. We want to grow in the bank channel now. We see it as an opportunity that Prudential has never really focused on, frankly.”
Last year, banks sales totaled less than $1 billion of Prudential’s $9.8 billion of sales. Mr. Ferris said he is confident that Prudential can achieve 20% to 25% sales growth in banks this year.
The company has already added wholesalers. Since the beginning of 2005, Prudential has expanded its bank sales force to 14, from four. “To be successful in the annuity business, you have to make a commitment and invest up-front so that you have that scale and a tangible presence that banks can rely on,” he said.
Mr. Byrnes agreed that it takes time. Sun Life will add wholesalers nationally, he said, but “you can’t microwave a turkey. We are getting feedback from banks that we doing are this the right way. It just takes time to build it right.”
