Now that the fiduciary rule is dead, the industry could see more distribution agreements like the one announced last week between Jackson National and State Farm, an analyst said.
The deal allows Jackson to distribute variable and index annuities through State Farm agents beginning in the second half of next year.
“It’s not groundbreaking, but it's an expansion of the current distribution channels,” said Deep Banerjee, a director at S&P Global. “The DOL fiduciary rule is now behind us, which means expansion of distribution is a bit easier now with no fiduciary rule to deal with.
“We would expect more of this in the future,” he added.
A federal court vacated the Department of Labor’s fiduciary earlier this year, but the industry had already been moving toward a best-interest standard.
State Farm agents, who already have access to a warehouse full of property-casualty, life insurance and fixed annuities, will be able to meet that standard more easily with access to retirement products like Jackson’s variable and index annuities.
“I would say this is a positive” for Jackson, said Katilyn Pulcher, associate director of S&P Global. “They already have top distribution, so they are adding on to an already present competitive advantage.”
Jackson maintains a dominant presence in institutional distribution channels through 180 wholesale relationships, so this deal opens the door to a new retail distribution world.
State Farm has a relationship with one out of every four or five families in the U.S., said Bob Garofalo, vice president and senior credit analyst with Moody’s Investors Service.
“State Farm is big. State Farm is very big.”
A Suite Of VAs
Jackson will begin making commissionable and fee-based versions of the Perspective II and Elite Access families of variable annuities available through State Farm agents in the second half of 2019, the company said.
Both versions of Market Protector, a fixed indexed annuity, will also be made available, said Alison Reed, executive vice president of operation for Jackson National Life Distributors.
In the indexed annuity market, banks and broker-dealer distribution channels have been gaining market share so linking up with a company with a massive retail presence makes sense, analysts said.
“There is no middleman between State Farm and Jackson,” said Missy Dundov, a spokeswoman for State Farm in Bloomington, Ill. “Once the arrangement becomes effective, authorized State Farm agents will market a select group of Jackson’s variable and fixed index annuity products direct to customers.”
Specific variable and index annuity products to be offered by agents are still being determined, but State Farm, which uses its own agents, can only sell what the company authorizes them to sell, Dundov explained.
Deal Seen As 'Additive'
State Farm has 19,000 independent contractors fanned out through nearly every Main Street in towns large and small in the U.S. But there is no danger of agents taking potential business away from Jackson’s other channels, Reed said.
“We view this as additive and incremental business for Jackson,” she said.
The deal will help boost Jackson’s fortunes, which have come under pressure recently from a shrinking variable annuity market, one that saw sales fall about 9 percent to $96 billion last year compared to 2016.
Jackson, a subsidiary of London-based Prudential Financial PLC, said sales and deposits fell 7 percent to $11.2 billion in the first half from a year earlier.
While the variable annuity market is shrinking or flat, the indexed annuity market appears resurgent and may even break sales records this year. But Jackson isn’t a top player in that market, at least not yet.
”The point is retirement money is moving away from variable annuities and into indexed products so there will be a push to try to get new and larger distribution,” Banerjee said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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