To expand the reach of its annuity products, Keyport Life Insurance Co. devised one that skirts two of the greatest stumbling blocks to annuity sales: surrender charges and annual maintenance fees.
The new product, Keyport Advisor Vista, a companion to the established Keyport Advisor, targets people with a large amount of money on hand to invest, including those who have an annuity elsewhere but would like to roll it into a Keyport annuity. It takes a hefty $25,000 to open a Keyport Advisor Vista annuity, while someone can open a traditional annuity with just $5,000.
"We sought to create (liquidity) flexibility," says Stephen Bonner, executive vice president of Boston-based Keyport Life. "And we believe it's opened segments of the market that would otherwise not be putting money into variable annuities. But obviously we still need to protect the company (from) quick-in, quick-out sales. The (annuity) still needs to be used as a long-term purchase."
With this in mind, Keyport has struck a deal with the 45 banks, wire houses, regional broker-dealers (including PaineWebber and Salomon Smith Barney) and financial planners that offer Keyport Advisor Vista: If there's an early surrender, the firm will repay Keyport a portion of the compensation paid for making the initial sale. "In this way, there's an incentive for the firm to keep the contract in place."
Bonner is encouraged by the program's success so far in attracting vendors to sell the product-several more are close to climbing on board- since its launch last summer (The company has no retail distribution of its own.). Besides the roster of companies that offer the traditional annuity, several new firms have joined the distribution network to sell Advisor Vista, a sign of real confidence in the product, Bonner argues.
Keyport has a team of wholesalers that visits the companies selling the product and conducts training. But Bonner is quick to point out that Keyport does not encourage one of its products over another. The type of annuity offered should be the result of a "needs analysis," he says.
Embedded in Keyport Advisor and Keyport Advisor Vista is a preferred income plan with two main components: complete liquidity even after the holder starts receiving income, and income levelization, which allows a person to set monthly payments in 12-month increments to make financial planning easier.
A half billion in sales?
Keyport Advisor Vista's 21 funds are managed by six fund managers: AIM Management Group, Alliance Capital, Colonial Management Associates, Inc., Liberty Asset Management Co., MFS Investment Management, and Stein Roe & Farnham, Inc.
Keyport Life, with more than $15 billion is assets, is one of the Liberty Financial Companies, a diversified asset management organization with nearly $54 billion in assets under management. In the third quarter of 1998, Keyport sold nearly $175 million of variable annuities, which approached the 1997 full-year total of $184.4 million. So far in 1998, Keyport has sold $407.6 million of variable annuities.