In May, Birmingham-headquartered Protective Life Corp. (Protective) announced enhancements to its variable annuities product line, including new relationships with four investment managers: AllianceBernstein, BlackRock, Columbia Threadneedle and T. Rowe Price. The company also added 29 new sub accounts to its traditional commission-based variable annuities and 38 new sub accounts to its fee-based advisory products.
Protective, which has more than 3,200 employees working across the U.S., is a wholly owned subsidiary of, and serves as the North American platform for, Dai-ichi Life Holdings Inc., a global life insurer based in Tokyo, Japan. Both companies have impressive lifespans: Protective was founded in 1907, and Dai-ichi Life Holdings dates back to 1902.
“We obviously have a long history of providing dependable products that solve a variety of planning needs for our clients, from asset protection and growth, to lifetime income and wealth transfer solutions,” says Martha Hart, vice president, annuity national sales manager at Protective.
The company has two divisions: the protection division, which offers life insurance products and focuses on legacy planning; and the retirement division, where Hart works, that offers a diversified suite of annuities designed to help retirees and pre-retirees plan for, and live in, a comfortable retirement.
“When we talk about retirees and pre-retirees, we’re talking a lot about Baby Boomers,” says Hart, citing that about 10,000 Boomers turn 65 every day. Naturally, a common concern centers on how much reliable income they’ll have available and how long it will last.
“The old-fashioned way of planning for retirement is the three-legged stool of Social Security, your savings and your pension, and that pension leg doesn’t exist for most Americans anymore. So, what we’re able to do with annuities and retirement planning is add certainty while you’re accumulating your assets. Then, when you’re ready to step into retirement, we can offer that third leg of the stool by turning some of your own money into a guaranteed stream of income.”
Annuities can play a key role in retirement
Equally important to the recently announced enhancements, Hart says, are updates Protective made to its protective lifetime income rates. “The income that’s provided from an annuity — in industry jargon it’s called a guaranteed lifetime withdrawal benefit — can play a pretty key role in helping clients protect their retirements and their retirement income.”
To illustrate, Hart points to an often-unforeseen risk to retirees, a sequence of returns risk. In the event that the market declines close to, or early in, retirement, a client making withdrawals during that decline risks reducing the longevity of his or her portfolio.
“What can help alleviate that risk is having a guaranteed stream of income coming from an annuity,” Hart explains. “[Among] our enhancements were an increase in those lifetime income rates, a guaranteed income that we can offer.”
Enhancing its variable annuity offerings contributes to Protective’s competitiveness in the marketplace, says Hart, adding that many of the company’s traditional competitors have shifted their focus to different types of annuities and have, in some cases, walked away from variable annuities entirely. “We see it as an opportunity for pre-retirees and retirees to get the potential of an equity broad-based portfolio [while placing] the risk of the portfolio on the shoulders of the insurance company.”
And, as Hart points out, there isn’t a one-size-fits-all solution when it comes to retirement planning. “I think it’s important to point out that we offer a diversified suite. We want to focus on developing simple, intentional products so that we can give clear guarantees and clear plan benefits so people can understand the sometimes complicated world of annuities.”
A variable annuity with a guaranteed income stream can offer an additional layer of financial security. Protective’s updated model portfolios can also support customers with different growth goals and risk tolerance. LIMRA, a worldwide research, consulting and professional development organization in the financial services industry, released a study in 2015 in which it identified three primary categories of annuity buyers: asset protectors, guarantee seekers and estate builders. Each has common concerns, such as running out of money or being able to keep up with rising expenses, particularly health care costs, that can be addressed by different annuity products.
What type of investor are you?
Hart explains that an asset protector, for example, is typically a client with a low risk tolerance who wants principal protection and is focused on generating income for everyday needs. According to Hart, they are more likely to be drawn to a fixed product or an index annuity that can guarantee a specific rate of return. Guarantee seekers are clients that understand the need to grow their assets but who may be nervous about the market. “They also have been identified as a type of client that doesn’t want to be a burden to their kids. So that guarantee seeker is drawn to a protected lifetime income.” The third category, the estate builder, Hart describes as someone who already works with a financial advisor, has probably saved a decent amount of money over the years, and wants to maintain some flexibility with their investments. The estate builder tends to be drawn towards a variable annuity. “Basically speaking, a variable annuity is a way for people to invest their money in an equity- and bond-based portfolio, based, of course, upon their risk tolerance and what they’re comfortable with.”
Hart reiterates the need for flexibility in being able to address the variety of financial situations and concerns people face as they consider retirement, and therein lies the strength of Protective’s new product enhancements. “Not only do we have this great variable annuity lineup, but it’s part of a whole suite of diversified annuity products that we have to try to meet the needs of all the different types of clients that are out there. Everybody is going to approach retirement at a different age, with a different amount of money to invest, or a different goal in mind. We want to be able to be the solution for those clients, with the right product, so they can go do the things they’ve dreamed about all these years.”
Katherine MacGilvray is a Huntsville-based freelance contributor to Business Alabama.
For more on Protective Life, listen to Business Alabama’s recent podcast with Rich Bielen, president and chief executive officer of Protective Life Corp.
