Genworth Re-Enters U.S. Indexed Annuity Market

Genworth Financial Inc. has re-entered the U.S. indexed annuity market following an absence of many years.

Annuities are a big opportunity for the industry, Pat Foley, president of U.S. life insurance distribution and marketing at Genworth Financial (NYSE: GNW) told Best's News Service. About 10,000 people turn 65 every day and this will continue over the next 20 years, he said.

Foley said they "play very well" with traditional insurance company expertise -- investing for the long term. They are very heavily bond-based investments so they allow insurance companies "to play to their strengths" from an investment management standpoint over the long term, while still giving the consumer from a hedging standpoint the opportunity to participate in a percentage of the growth in equities-based markets.

However, people approaching retirement "have just been through probably the most turbulent financial times" in the country's history, Foley said. Many saw their retirement nest eggs reduced substantially but must recover financially now, he said.

With these products, an insurance company invests most of the principal in bonds to ensure the policy will generate a small annual return but the insurer uses a small portion of the premium to buy options in a stock market index, usually the S&P 500 index. Options that are exercised can result in additional interest credited to a policy, potentially more than an investor might achieve through other fixed-income investments.

Genworth rolled out its indexed annuity in December and is "brand new" back in the market, Foley said, noting they fit with its strategy in serving "Main Street America," or the middle and upper-middle market -- the mass affluent, Foley said. They feature "straightforward" crediting methods tied to the S&P 500 and competitive cap rates and, have optional riders that provide a guaranteed minimum withdrawal benefit.

According to AnnuitySpecs,com, a firm that tracks sales of indexed annuities in the United States, companies that entered the indexed annuity market for the first time since 2010 include Hartford Life and Annuity Insurance Co. and Pacific Life, both in November 2011 and Security Benefit Life, in February 2011. Symetra Financial Corp. entered indexed annuities for the first time in April 2011 (Best's News Service, April 13, 2011).

Western National Life, which sold indexed annuities before as AIG Annuity but exited the market, changed its name to Western National Life, then re-entered the market in June 2010, according to AnnuitySpecs.com.

Genworth Life Insurance Co. and Genworth Life and Annuity Insurance Co. each currently have a Best's Financial Strength Rating of A (Excellent).

To listen to the interview with Foley, where he also discusses why Genworth Financial exited variable annuities last year, go to http://www3.ambest.com/ambv/displaycontent/video.aspx?vid=foley112.

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])