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Total fixed indexed annuities were $8.7 billion in 3Q 2012, up 0.04% from the previous quarter, according to the latest Indexed Sales and Market Report from AnnuitySpecs.com, which covered 45 carriers and 99% of FIA production.   

Despite historically low caps and crediting rates, sales were up 0.24% from the same period in 2011 and only half of one percent lower than 3Q 2010’s record sales levels, said Sheryl J. Moore, president and CEO of Moore Market Intelligence, owner of AnnuitySpecs.com.

Allianz Life maintained its leading sales position with a 14% market share, followed by Aviva Security Benefit Life, American Equity, and Great American (GAFRI). Security Benefit Life’s Total Value Annuity was the top-selling indexed annuity for the quarter.

Guaranteed Lifetime Withdrawal Benefit (GLWB) elections dropped for the third consecutive quarter, which Moore attributed to reductions in the rider terms.  

In the third quarter, there were four GLWB rider charge increases, eight reductions in the riders’ deferral bonuses and sixteen reductions in rider payout rates, as carriers reduced the risks of their products. The “de-risking” of these benefits over the quarter made income-based indexed annuity sales just as challenging as those based on accumulation, Moore said.

Prudential buys $7.5 billion portion of Verizon pension obligations

Prudential Insurance Co. of America, a unit Prudential Financial, has announced that the Verizon Management Pension Plan has purchased a single premium group annuity contract from Prudential Insurance to settle approximately $7.5 billion of Verizon’s pension liabilities of the Plan.

Under the contract, Prudential Insurance has irrevocably assumed the obligation, beginning January 1, 2013, to make future annuity payments to approximately 41,000 members of the Verizon Management Pension Plan. Only retirees with fixed benefit payments who have been receiving payments since at least January 1, 2010 are affected.

 Last Friday, U.S. District Court Judge Sidney Fitzwater in Texas rejected the November 27 request by two Verizon management retirees for a temporary restraining order and preliminary injunction blocking the transfer.

The two retirees said the move would strip them and approximately 41,000 other affected employees of their federal legal protections, such as pension guarantees through the Pension Benefit Guaranty Corp., and interfere with their rights under the retirement plan. 

In his ruling, Judge Fitzwater wrote, “Verizon’s proffered legitimate, nondiscriminatory reasons for defining the group of retirees for the annuity contract… Verizon explains that it chose this group of retirees for the annuity contract because, inter alia, it simplified the contract to include only retirees with fixed benefit payments who had been receiving such payments since at least January 1, 2010.

“Limiting the annuity contract to these stable pension obligations also reduced the cost to Verizon by limiting the uncertainty that would arise if the annuity contract included pensions for participants not yet in pay status, or for recent payees who are more likely to challenge the calculation of pension benefits.”

A.M. Best reviews Phoenix Companies ratings   

The Phoenix Companies’ financial strength (B+) and issuer credit ratings (bbb- and bb-) have been “placed under review with negative implications” by A.M. Best Co., the ratings agency said in a release.

The companies affected are Phoenix Life, PHL Variable Insurance, Phoenix Life and Annuity, and American Phoenix Life and Reassurance. The ratings are likely to remain under review pending the completion of the waiver process and the filing of the year-end 2012 Form 10-K.

Phoenix is seeking consent from its bondholders to waive the indenture’s requirement to furnish timely financials to the trustee on its 7.45% Quarterly Interest Bonds due 2032. A majority of the bondholders is required to extend the date on this requirement for the filing of third quarter 2012 financial statements.

Phoenix’s 7.45% Quarterly Interest Bonds, with approximately $253 million outstanding, are a retail issue sold in $25 increments. They currently trade near par. The under review status reflects A.M. Best’s concerns as to the uncertainty of achieving a successful outcome to the waiver process.

On November 8, Phoenix declared that it was postponing the release of its third quarter 2012 financial statements to restate its financial results. The company intends to file this report by the deadline for its 2012 Form 10-K, which is due by next March 18.

A. M. Best said it believes Phoenix has a “credible contingency strategy” in place if needed, but one that reduces its already limited financial flexibility. Its subsidiaries are profitable, but A. M. Best believes they will be hurt if Phoenix can’t obtain the necessary waiver.

Nationwide and Lincoln warn of need for LTC planning

A new Nationwide Financial-Harris Interactive survey of 501 financial advisors shows that 42% say their clients think of “Medicaid planning” as a way to protect their children’s inheritance from the potential cost of long-term care.

About half of Americans who need long-term care use Medicaid to pay for it, Nationwide said, in a release apparently intended to encourage the purchase of long-term care insurance instead of using Medicaid.

Besides the poor and those who have exhausted their assets, that number includes people who purposely shift assets to heirs to qualify for government coverage of their LTC expenses.

The Deficit Reduction Act of 2005 discourages transferring assets to children by implementing a five-year, look-back provision, instead of a three-year look back, but “Medicaid planning” is becoming a more often used tactic.

Disadvantages relying on Medicaid include:   

• Medicaid recipients don’t always get to live where they wish. Nursing homes are not required to accept new Medicaid patients.
• Medicaid often uses nursing home care to the exclusion of assisted living, home health care or adult day care.
• Medicaid patients do not get private rooms and may have limited ability to upgrade.   
• Healthy spouses may be deprived of resources if Medicaid planning is used. 

In the survey, advisors said only 15% of their clients understand the potential costs of long-term care well; 35% say their clients understand the costs “not at all well.” At age 65, people have a 70% chance of eventually needing long-term care. in their lifetime. The average annual cost for a shared room in a nursing home is projected to be $265,000 by 2030, Nationwide said.

Separately, a panel of long-term care experts participating in a webcast sponsored by Lincoln Financial Distributors encouraged Americans to be “more proactive in their long-term care efforts and to partner with knowledgeable financial professionals to ensure customized programs that can help protect assets and prepare for retirement issues.”

The panel of industry professionals included Steve Schoonveld, head of Linked Benefit Products for Lincoln Financial Group; Melissa Spickler, senior vice president, wealth management advisor of Merrill Lynch; and, Dr. Stephen Holland, chief medical officer of Univita Health. Moderating the webcast was Andrew Bucklee, head of MoneyGuard Solutions Distribution for Lincoln Financial Distributors.

Great-West Financial launches ‘Retirement Income Control Panel’   

Great-West Financial is expanding its suite of retirement readiness products and services for plan sponsors and participants, including “a real-time, personalized calculation of estimated retirement income based on the individual’s unique circumstances.”

The new tools include:

• The Retirement Income Control Panel provides a tailor-made retirement strategy for savings targets and gives each individual a custom income plan for spending down his or her retirement savings.
• 3(21) Fiduciary Services for new ERISA 401(k) plans provides plan sponsors and their advisors with co-fiduciary protection in the selection and monitoring of a plan’s investment options.
• Account Retirement Income Estimate on Physical Statements provides participants with an estimate of their monthly retirement income based on the accounts Great-West Financial record keeps for them.
• The Retirement Readiness Report Card for plan sponsors analyzes and reports on participants’ estimated retirement income levels versus participants’ target retirement income levels, then gives plan sponsors strategies for closing the gap (planned for the first quarter of 2013).

The Retirement Income Control Panel automatically draws real-time participant account data from Great-West Financial’s recordkeeping system. The panel also analyzes information an individual enters about assets outside of his or her Great-West Financial retirement plan. Industry expert Ibbotson Associates, Inc., part of the Morningstar Investment Management division, uses this custom data set to calculate the individual’s estimated monthly retirement income.

The Retirement Income Control Panel then compares the participant’s estimated retirement income with their target retirement income and highlights any gap between the estimated and target dollar amounts.

New York Life Retirement Plan Services to take new approach  

New York Life Retirement Plan Services has gained substantial assets under administration over the past year, has appointed new client-facing executives, and has expanded further into providing executive benefits after successfully implementing a new business model initiated a year ago, the mutual insurer said in a release.

Since September of 2011, New York Life has made sales conversions and commitments of more than $5 billion, lifting total assets under administration to $43 billion and the number of participants served to nearly 1.2 million from 1.1 million.

Among the company’s new business wins for bundled retirement plan services is the $1.2 billion retirement plan of the IT company Fujitsu Management Services of America, Inc. Other new business wins include: the $1.7 billion retirement plans of a pharmacy distribution provider; a $700 million Midwest-based life and property & casualty insurer’s plan; the $140 million retirement plan of a financial holding company with a portfolio of 15 regional banks; and a $90 million Pipefitters Local union plan.

In addition, notable new business wins in the executive benefits and stable value markets include: a $5.5 million COLI-funding for a multi-national bank; a $1 million COLI-funding for a grocery chain; a $70 million stable value placement at a technology company; and a $17 million stable value placement at a private university.

Over the past 12 months, New York Life has also added substantially to its relationship management and sales staff. The company has hired seven additional relationship managers to support the following practices: Taft-Hartley; financial and professional services; manufacturing, materials, distribution and retail; and technology and communications.

In addition, New York Life has added four new sales directors to support the company’s heightened focus on sales in the Western and South Central regions, as well as in the executive benefits market space.

John Hancock Financial Network introduces iPad app for advisors 

John Hancock Financial Network has introduced the “Retirement Ready” iPad app, an interactive tool designed to help financial professionals engage prospects and clients in an educational retirement income conversation.

The app, which is customizable to display the representative’s name and firm, includes information on the basic concepts of retirement income in distinct chapters, videos, exercises and interactive worksheets.

The content covers the client’s personal vision of retirement, the differences between the accumulation and distribution phases of life, detail on some of the key risks in retirement including longevity, market volatility and inflation, and creating a sustainable retirement income using a product allocation approach.

As with its original Retirement Ready microsite, JHFN worked with Blue Rush, a digital marketing firm, to develop the iPad app.

The Retirement Ready app is available now in the iTunes App store. General educational content will be available to the general public. The interactive tools will be accessible only to JHFN representatives.

Genworth Financial names president and CEO 

Thomas J. McInerney has been named by Genworth Financial Inc. as the company’s president and CEO, effective January 1, 2013. He also will be elected to the Genworth board of directors. James S. Riepe will continue to serve as the company’s non-executive chairman. 

Most recently, McInerney served as an advisor to The Boston Consulting Group. He previously held senior positions at both ING Groep and Aetna Financial Services. At ING, he was chief operating officer and a member of the Management Board for Insurance, responsible for the worldwide insurance and investment management businesses, encompassing some €425 billion of assets and 35,000 employees. He also served as CEO of ING Americas, overseeing insurance, pension, and investment management businesses in the United States, Canada, and Latin America. 

McInerney graduated with honors from Colgate University in 1978 with a BA in Economics and received an MBA with a concentration in Finance and Investments from the Tuck School of Business at Dartmouth in 1982.   

Lincoln Retirement names two sales directors

John McKeehan and Reed Steinmann have joined Lincoln Financial Group’s Retirement Plan Services as sales directors for the Institutional Retirement Solutions Distribution (IRSD) team. The IRSD team sells Lincoln’s full service retirement plan services to corporate and nonprofit/tax exempt plan sponsors.

McKeehan and Steinmann report to Michael Hall, IRSD National Sales Director. McKeehan supports the Southwestern region of the country and Steinmann covers the Midwestern region.

Prior to joining Lincoln, McKeehan was Regional 401(k) Director at Putnam Investments. He has served in retirement plan services roles with National Retirement Partners, Monarch Capital Management, Smith Barney and Morgan Stanley. McKeehan attended the University of Southern California and the Wharton School of Business. He also holds FINRA Series 63, 65, 7, 9 and 10 licenses. McKeehan is based in Orange County, California.

Steinmann comes to Lincoln from DWS Investments where he was a retirement consultant specializing in defined contribution and investment only solutions. He was also a financial advisor at Ameriprise Financial. Steinmann has a bachelor’s degree in economics from the University of Illinois, Urbana/Champaign. He also holds FINRA series 3, 7 and 66 licenses and has a Chartered Retirement Plans Specialist designation. Steinmann is based in Elgin, Illinois.

Cogent Research: Plan Participants ask for ‘auto features’

Americans participating in 401(k) and 403(b) plans want more support from their employers in reaching their retirement goals, according to “The Participant’s Retirement Plan,” a new report from Cogent Research.

The report is based on a survey of nearly 5,000 plan participants in the U.S. Americans participating in employer-sponsored retirement plans.

According to Cogent Research, 49% of plan participants across all plan sizes want a feature that automatically raises the contribution percentage by a specified amount each year. Only 18% of participants say they currently use such a feature.

Only 13% of the smallest employers are offering the feature to their plan participants, but 53% of employees of small business say they want access to it, the study showed.

Nearly half of all employers with 1,000+ employees say they offer contribution auto-increase, a number that matches interest levels among their employees (51%). However, only 19% of Americans tied to plans offered by large employers say they are currently enrolled in such a program.

“For small employers, the issue is a lack of access to this feature. However, for larger employers, the issue is more a lack of awareness that this feature is in place to help them,” said Christy White, principal of Cogent Research.  

The U.S. Treasury Department has priced an offering of about 234.2 million shares of AIG common stock at $32.50 per share, American International Group has announced. When the $7.6 billion transaction closes, Treasury will own no more AIG shares.

The transaction will fully resolve U.S. government support of AIG. Treasury will continue to hold warrants to purchase approximately 2.7 million shares of AIG common stock, the sale of which is expected to provide an additional positive return to taxpayers.

“We are very pleased to repay 100 percent of all that America invested in AIG plus a total combined positive return – or profit – of $22.7 billion,” said AIG president and CEO Robert H. Benmosche.   

Beginning in September 2008, Treasury committed $182.3 billion to stabilize AIG. Since then, through asset sales and other actions by AIG, America has recovered the principal and earned about $22.7 billion.

BofA Merrill Lynch, Citigroup, Deutsche Bank Securities Inc., Goldman, Sachs & Co. and J.P. Morgan Securities LLC have been retained as joint bookrunners for the offering.

American artist Thomas Hart Benton’s epic mural (detail) America Today—a panoramic celebration of American life in the booming 1920s—has been donated by AXA Equitable Life Insurance Company to New York’s Metropolitan Museum of Art.

Thomas P. Campbell, the Museum’s Director and CEO, and Mark Pearson, AXA Equitable chairman and CEO, announced the gift this week.

Over the past 80 years, the mural has travelled from the New School for Social Research at 66 W. 12^th St. in New York City, to AXA Equitable headquarters at 787 Seventh Ave., and to the insurer’s subsequent headquarters at 1290 Avenue of the Americas. A year ago, when renovations forced the mural to be moved, AXA Equitable decided to gift it to the Met.

The 10-panel mural spent decades in relative obscurity. Benton (1889–1975) created it in 1930–31 as a commission for the third-floor boardroom of the New School. The panels were unveiled when the International-style building at 66 West 12th St. opened on January 1, 1931. The artist completed the tenth panel later.

Filled with figures of farmers, coal miners, steelworkers, architects and builders, doctors and teachers, the panels covered the four walls of the 30-by-22-foot boardroom. They established Benton, who received no fee for it, as his era’s leading American muralist and it helped inspire the Works Progress Administration (WPA) mural program of the Great Depression—including murals in WPA-built post offices throughout the U.S.

In 1982, the New School sold the work to the Manhattan art dealer Maurice Segoura on the condition that he would not re-sell it outside the United States or as individual panels. It proved difficult to sell as a whole.

AXA Equitable (then Equitable Life) acquired America Today in 1984, helping then-Mayor Ed Koch and others keep it intact and in New York. Two years later, after a restoration, the mural was installed in AXA Equitable’s new headquarters at 787 Seventh Avenue.

In 1996, the company and the giant mural moved to 1290 Avenue of the Americas, where it decorated the lobby until January 2012. Amid lobby renovations, AXA Equitable decided to send the mural to a permanent public home. Curators Pari Stave, for AXA Equitable, and H. Barbara Weinberg, for the Met, directed the transfer.

Cost of health care is chief retirement worry:  T. Rowe Price  

Investors’ biggest retirement concern is rising health care costs, according to a survey of 850 investors ages 21 to 50 sponsored by T. Rowe Price and conducted last August by Harris Interactive. Health care was cited as a concern by 76% of respondents. 

The survey also found that investors have a significant lack of confidence in Social Security and in the ability of their parents and grandparents to finance their desired lifestyle in retirement.

Selected survey findings 

• The top retirement concerns among investors aged 21-50 are health care costs (76%), rising taxes (67%), Social Security availability (63%), inflation (61%), long-term care (58%), living too long and running out of money (52%), and housing values (52%).

• Only 16% of investors expect to receive full Social Security benefits as currently promised. Of the remaining 84%, 36% expect to receive no Social Security benefits and 48% expect reduced benefits when they retire.

• Among those who anticipated a weaker Social Security system, 42% said they would adapt by saving more, 29% by working longer, 11% by investing more aggressively and 5% by not retiring at all. About 13% expected to do nothing.

• As for helping their parents or grandparents with financial matters, 19% of investors said they are providing guidance with daily expenses, 15% are providing general retirement advice, 13% are providing assistance with daily expenses, and 9% are helping their elders better understand their Social Security options.   

• Of those providing “general retirement planning guidance,” only 59% believe their parents or grandparents will have enough money to maintain their desired lifestyle; 26% believe their elders will not have enough money and 15% say they are not sure if their elders will or won’t.    

Invesco updates retirement planning website for advisors and investors  

Invesco Distributors, Inc. has launched a comprehensive, “step-at-a-time” website financial advisors can use to help clients better prepare and account for the growing complexities of retirement planning.

The redesigned site was developed to help advisors take their clients through the planning stages by using an intuitive timeline format with easy access to a variety of beneficial tools and related information, Invesco said in a release.

The website is designed to help advisors:

• Identify the variables unique to their age group — starting in their 20s and lasting throughout their retirement.
• Take an active, hands-on, intentional approach to retirement readiness.
• Work closely with their financial advisors throughout the process.

Distinguishing features of the website, invesco.com/RetirementReady, include:

• A step-by-step presentation of the strategies, factors, variables and decisions that affect retirement savings.
• A Retirement Planning Timeline that enables investors to determine where they are in the process and access the resources and tools they need at their particular stage. 
• Numerous visuals to help investors more clearly understand the concepts presented.
• Twenty-three calculators to help advisors and investors personalize the planning process.
• A “next steps” call to action for each section that lists actionable items with links to resources and tools.

As working age populations shrink in the next eight years, it will put stress on national pension systems and pressure companies to compensate with stronger health and retirement benefits, according to a new survey from Mercer, IPE.com reported.

By 2020, Canada, Japan and Russia will each see a 4% decline in their working (ages 15 to 64) populations, while the UK, US and China could see a 2% decline, said the report, based on International Labor Organization data. Hong Kong’s working-age cohort will decline to 70% from 76% of the total population.     

“While the changes seem small in percentage terms, this is a dramatic demographic shift and can have a major impact on state pension systems,” said Deborah Cooper, partner in Mercer’s retirement business.

Companies, already faced with demographic change in their own retirement plans, would be expected by employees in many countries to fill the gap in health and retirement benefits as the government raises the minimum pension age and/or reduces benefits.

“To do this effectively,” Cooper said, “companies and employees need to revisit fundamental beliefs on how to prepare for and structure retirement.” 

The sustainability of the UK’s pension system is apparently lagging. The 2012 edition of the Melbourne Mercer Global Pension Index gave the UK a score of 46.5, compared with an average of 52.1. In 2009, when the index was launched, the UK’s sustainability score was 56.4.

The Index tracks the sustainability of the program in the face of factors like the old age dependency ratio, the state pension eligibility age, the opportunity for phased retirement and the labor force participation rates of older workers.

“Only about 50% of the workforce in the UK belongs to an employer-sponsored pension scheme, and there is a risk the system will fail the other 50%, since continuing demographic change will make it hard for the (sometimes self-) excluded group to catch up,” the Mercer report said.

© 2012 RIJ Publishing LLC. All rights reserved.

High-speed trading firms are taking significant profits from traditional investors, in the opinion of Andrei Kirilenko, the chief economist at the Commodity Futures Trading Commission, according to a report in the New York Times.

In a not-yet published study, the Times said, Kirilenko writes that high-frequency traders make an average profit of as much as $5.05 each time they go up against small traders buying and selling one of the most widely used financial contracts.

Kirilenko’s findings are being peer-reviewed, and not all academics agree with them.  But Bart Chilton, one of five CFTC commissioners, said Monday that the study will show that “high-frequency traders are really the new middleman in exchange trading, and they’re taking some of the cream off the top.”

Other government officials have merely expressed uncertainty about whether high-speed traders are earning profits at the expense of ordinary investors.

The Financial Stability Oversight Council, which consists of the nation’s top financial regulators, is said to be worried that the accelerating automation and speed of the financial markets may threaten other investors and the stability of the financial system. The Council took up the issue at a meeting in November that was closed to the public, according to minutes that were released Monday.

© 2012 RIJ Publishing LLC. All rights reserved.

No changes to the continuing education (CE) requirements for CFP certification will be immediately forthcoming, the directors of the Certified Financial Planner Board of Standards, Inc. have announced.

The board is seeking “further review of previously proposed changes before making any modifications,” the organization said in a release.

At its November meeting, the board resolved to call on the Council on Education (Council) and staff at CFP Board to “study and develop recommendations on the appropriate level of CE to maintain CFP professionals’ competency for the benefit of the public.” Additional public comments will be sought when proposed changes are developed.

In August, CFP Board requested public comment on proposed changes to its CE requirements. CFP Board originally proposed a number of changes that included increasing CE requirements from 30 to 40 hours every two years; increasing the CE ethics requirements from two to four hours; granting some CE credit for practice management courses and for pro bono activities; and expanding professional activities that qualify for CE. 

CFP Board received a record number of comments – more than 1,100 – in response to its proposed changes with the majority being reflective and providing pragmatic viewpoints. Eighty-five percent of those commenting opposed increasing the CE requirement from 30 to 40 hours. 

© 2012 RIJ Publishing LLC. All rights reserved.

Achaean Financial has announced a partnership with The International Foundation for Retirement Education (InFRE) to provide customized training to users of Achaean’s retirement advice software tool, Retirement Outcome.   

Retirement Outcome is an open-architecture retirement planning tool designed to help investors and their advisors weigh the tradeoffs they face in retirement and to create personalized solutions, including appropriate spending, overall portfolio risk and allocations to guaranteed-income products, Achaean said in a release.

Retirement Outcome takes information about a client’s wealth, income needs and asset allocation to produce a personalized outcome report.  Each of the various investing and spending decisions can then be adjusted to help the client understand the tradeoffs they must make and how they are likely to impact income and wealth throughout retirement.

InFRE, founded in 1997, is a 501(c)(3) non-profit education foundation devoted to “enhancing the retirement preparedness of the American worker.”  

Over 16,000 retirement professionals have participated in one of InFRE’s process-oriented retirement income training programs and almost 2,000 individuals now hold the independently accredited Certified Retirement Counselor (CRC) certification.

© 2012 RIJ Publishing LLC. All rights reserved.