Asset management veteran James Mullery has been hired to spearhead sales and distribution for Prudential Financial’s annuities business. This was announced as the company diversifies away from variable annuities and into the defined income space.
Mullery is a former managing director at Black Rock Asset Management and former manager with Security Benefit and AXA Equitable. He was named to a newly created position of senior vice president and head of distribution and sales.
He reports to Lori Fouché, president of Prudential Annuities, the company said.
“In addition to creating a sales strategy that best supports customers’ needs, I’m confident Jim’s proven track record and rich understanding of the challenges and opportunities facing our industry will help to drive innovations across our business,” Fouché said in a news release.
Mullery appears to have his work cut out for him as the global insurance and asset management giant repositions its annuities business.
The Centricity of Defined Income
Since 2014, Prudential has moved toward what a top company executive called “fixed income-centric” defined income products, also known as Prudential Defined Income (PDI).
Defined income products, which offer simpler investments and guaranteed income options, represent about half of Prudential's annuity sales. That's according to Stephen Pelletier, executive vice president and chief operating officer of Prudential’s U.S.-based businesses, in a Dec 15 call with analysts.
Pelletier said Prudential would continue to develop annuity products based on defined income in 2017. He added that Prudential also plans to refine a fee-based annuity the company already has in the marketplace.
“We’re focused on developing a broader array of products that emphasize simpler investment and guarantee options, and looking at alternative distribution channels,” Pelletier said in a Prudential Strategy Talks interview on Dec. 21.
Simplified products “sold through a broader array of platforms have the potential to drive the next phase of longer-term term growth,” Pelletier added.
Steering Away from Variable Annuities
Prudential, the No. 1 seller of variable annuities in the U.S. in 2012 with sales of nearly $20 billion, has retrenched over the past five years.
The company sold only $6.4 billion worth of variable annuities in the first three quarters of 2016, data tracked by LIMRA Secure Retirement Institute show.
Slowing variable annuity sales are due in part to the shrinking variable annuity market in the face of new Department of Labor regulations, competition for annuity dollars from fixed annuities and the scaling back of benefits in an era of record low interest rates.
But Prudential also has made a long-term decision to diversify its risk exposure and move away from relying too heavily on variable annuities.
Redirecting resources away from variable annuities has allowed company managers to develop new income solutions for retirees, many of whom are ill-prepared to finance a retirement that will last 30 years or more in the face of increasing life expectancies.