John Hancock latest to pare variable annuity distribution
November 17, 2011 by Darla Mercado
B-Ds get notice of pullback as job cuts in annuity unit are
reported
By Darla Mercado
November 16, 2011
Under pressure from low interest rates and market volatility, John Hancock
Financial Services Inc. is joining the ranks of carriers’ pulling its variable
annuities from most distributors’ shelves.
Notice of the change was given to most John Hancock broker-dealer
distributors late last week, as the carrier has decided to sell through only a
couple of firms. Executives at broker-dealers said they were told the change
would take effect mid-December.
John Hancock spokeswoman Beth McGoldrick would not comment on the timing of
the change, but wrote in an e-mail that “going forward, our annuities will be
sold through a narrow group of key distribution partners.”
Edward Jones is among the firms to make the short list and will continue
selling John Hancock’s A-share variable annuity. “We were told they would be
trying to focus their distribution on a few key partners, and we were reassured
that it wouldn’t affect us,” said Merry Mosbacher, a principal in Edward Jones’
insurance marketing unit.
News of the change follows closely on the heels of a report in The Boston
Globe that 116 positions were eliminated in a Boston office that handled John
Hancock’s annuity business. Ms. McGoldrick confirmed the number of eliminations
and noted it was equal to about 3% of the carrier’s workforce. She added that
the cuts were part of the insurer’s “restructuring of its annuity business and a
streamlining of its infrastructure.”
Some of the workers had been moved to John Hancock’s mutual funds and 401(k)
businesses — units the insurer expects to expand. Ms. McGoldrick said the
company is still actively hiring and has about 110 open positions.
Donald Guloien, chief executive of John Hancock’s Canadian parent, Manulife
Financial Corp., had noted on an earnings call Nov. 3 that it sought to moderate
its exposure to the VA business.
“Variable annuities … are a product that we don’t want to have a gigantic
exposure to moving forward,” he said. “Moderate amounts are fine, but I think
any sensible person would attenuate exposure to those products, given some of
the risks they expose one to.”
The insurer reported a third-quarter loss of $1.27 billion. Slumping interest
rates and rocky markets reduced earnings by $1.78 billion — $900 million of
which came from an increase in VA hedging liabilities.
John Hancock came in 15th place among all variable annuity carriers for
market share, according to FBR Capital Markets. However, its decision to step
back from the VA market follows exits by Massachusetts Mutual Life Insurance
Co., ING Groep NV and Genworth Financial Inc. Ameriprise Financial Inc. last
year decided to restrict VA distribution to its own advisers.
Even the most successful VA players — MetLife Inc. and Prudential Financial
Inc. — have reined in product features to temper demand.
