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John Hancock Q2 2005 Variable Annuity Sales Up 17 Percent Over Prior Quarter

BOSTON, Aug. 16 /PRNewswire-FirstCall/ -- Continuing to build on its sales success and momentum in the variable annuity market, John Hancock announced that sales of variable annuities for Q2 2005 totaled $1.748 billion, an increase of 17% over Q1 sales. John Hancock expects that this growth will outpace the general level of growth in the variable annuity market during the same period.
Based on current trends, John Hancock expects to sustain VA sales growth over the next quarter. Sales of John Hancock VA products in 9 of the company's top 10 distribution firms increased from Q1 2005 to Q2 2005, and the company has seen an increase in the number of new producers beginning to do business with John Hancock.

"Our success is based on helping financial professionals meet the needs of their clients with an innovative product that is easy to understand," says James R. Boyle, president, John Hancock Annuities. "With the leading edge of the baby boomers five years from retirement, we believe that we are uniquely positioned to provide distinctive product solutions to these individuals as they increasingly focus on retirement planning. We focus on providing simple solutions that protect investors' most significant retirement assets such as IRA and 401(k) rollovers."

Following the May 2005 launch of the Principal Plus for Life (PPFL) withdrawal benefit, sales climbed dramatically in June, finishing the best month in the history of John Hancock's variable annuity business.

The PPFL benefit can provide a guaranteed income clients can't outlive -- without the complexity and limitations associated with traditional annuitization. The PPFL rider offers financial advisors a tool they can use to help clients create a predictable, sustainable, income stream for life with upside potential. Eighty six percent of Venture variable annuity business elected the new rider in June 2005.

Continued popularity of John Hancock's Lifestyle funds, which offer investors a simple way to pursue a professionally managed, balanced investment approach that may be suitable for long-term, retirement- oriented portfolios, also contributed to the Quarter's strong showing. Through Q2, 63% of new John Hancock VA sales in 2005 elected Lifestyle funds, as compared to 55% of sales in 2004.

The Q2 2005 sales results also reflect a 4% increase over sales for Q2 2004. For more information about variable annuity sales please visit Manulife Financial.

New annuity may revolutionize industry

Contract offers lifetime income guarantee without giving up access to the principal.

A variable annuity is a contract with an insurance company that allows you to invest in mutual-fund-like "sub-accounts." No taxes are due on gains until the money is withdrawn. Variable annuities impose ongoing "mortality and expense" risk charges. The mortality charges, the bigger of the two, pay for your right (not obligation) to "annuitize," that is, convert your account balance to a lifetime income stream, and for a death benefit that typically pays your beneficiary at least as much as you put into the annuity if you die before starting to take your money out, no matter how your investments perform. Expense risk charges pay for actual contract expenses.

Critics contend, and usually with good reason, that these charges tend to be too high for the benefit they provide. Most variable annuities also impose hefty surrender charges on withdrawals the first few years. When the money is taken out, gains are taxed as ordinary income, not at the lower rates that apply to long-term capital gains.

Proponents point out that many annuities have added guaranteed "living benefits" regardless of how the investment sub-accounts perform. Common guarantees -- each costs extra -- include a minimum lifetime income if you annuitize, a minimum account value after a set number of years and a guaranteed return of principal, paid over time.

Considering the costs, which are built into the annuity charges, none of these benefits had caught my fancy until some issuers recently introduced a lifetime income benefit without having to annuitize. "This takes the lifetime income benefit to the next level," Mackey said, because there is an actual account value to access if needed or pass on to heirs.

While details differ, the typical guarantee sets the minimum lifetime income at 5 percent of the amount invested, paid every year for life. You may increase the income amount by waiting to make withdrawals. You also may lock in actual account gains that occur at predetermined times to increase the amount used to calculate the lifetime income.

In Georgina's case, among several options, our calculations show she is guaranteed to receive, starting in five years and every year for life, at least 6.76 percent of the amount she put in now. (She could withdraw more, but the guarantee would be reduced or lost). Unlike what happens with annuitization, she can stop receiving the guaranteed payments if she wants and access her actual account value, subject to surrender charges that end in 2015. This is not, I emphasize, a recommendation to buy these annuities. Consider investing only if the annuity meets your goals and fits your circumstances. Article by Humberto Cruz, for more information about new annuity revolutionize industry, please visit The Detroit News of Money & Life.

Fitch Affirms Teachers Insurance & Annuity's 'AAA' Ratings

CHICAGO--(BUSINESS WIRE)--July 11, 2005--Fitch Ratings has affirmed the ratings of Teachers Insurance and Annuity Association (TIAA) and its wholly owned subsidiaries, TIAA-CREF Life Insurance Company (TIAA-CREF Life) and TIAA Global Markets, Inc. (as listed below). The Rating Outlook for all ratings is Stable.
Rationales for the 'AAA' ratings include TIAA's dominant market share in the higher education pension marketplace and strong earnings capacity, driven by its very low operating expenses and sound spread management. TIAA enjoys a substantial cost advantage versus its peers due to economies of scale and a low-cost, non-commissioned distribution system. In addition, TIAA exhibits a very strong capital position on both an absolute and risk-adjusted basis. Fitch believes that TIAA could withstand a potential material, unfavorable IRS adjustment for prior tax years and still have surplus levels adequate for the rating.

Fitch's concerns include TIAA's product concentration in the very competitive, tax-advantaged retirement annuity marketplace and the ever-present, industrywide exposure to unfavorable tax legislation. While risky assets, such as below investment grade bonds and mortgages, as a percentage of invested assets declined in 2004, Fitch views TIAA's investment strategy as incorporating greater than average credit risk, which has resulted in higher than expected realized credit-related capital losses again in 2004.

TIAA reported over $166 billion in total assets at March 31, 2005 and is the third largest U.S. insurer based on admitted assets. TIAA and its companion organization, the College Retirement Equities Fund (CREF), form one of the world's largest private pension systems, based on total assets under management with over $343 billion at Dec. 31, 2004. Fitch believes TIAA's transition to a more customer-oriented strategy and open-architecture pension platform is progressing on schedule and expects that TIAA will maintain its dominant position in the higher education retirement market.

In addition, Fitch believes operating earnings will remain strong and will contribute to the maintenance of a very strong capital position in 2005, driven by very low overall operating expenses, moderate growth in assets under management, and more normalized investment performance due to declining credit-related capital losses in its investment portfolio. Fitch's 'F1+' rating on TIAA's $2 billion commercial paper(CP) program is supported by the organization's strong operating cash flow generation and a $1 billion revolving credit facility. TIAA had no outstanding CP issuance at year-end 2004.

Fitch's 'AAA' senior debt rating on TIAA Global Market's $2.25 billion of outstanding notes is based on the full and unconditional guarantee of Teachers Insurance and Annuity Association of America. TIAA-CREF Life had $3.4 billion in admitted assets at March 31, 2005, and provides fixed and variable personal annuity products, as well as life insurance products, to both the general public as well as members of the TIAA retirement programs. The company has an explicit support agreement with TIAA which provides support for the rating. For more information about teachers insurance and annuity ratings please visit Fitch Ratings.

Protective Life Launches ProtectiveRewgtardsSM B2A Variable Annuity

BIRMINGHAM, Alabama (May 5, 2005) Protective Life Insurance Company today announced the release of the ProtectiveRewardsSM B2A variable annuity product.

The innovative ProtectiveRewardsSM B2A variable annuity rewards long-term investors by reducing the ongoing cost of owning the annuity over time. This is accomplished by providing an annual credit that, in effect, offsets some of the ongoing fees.

Many financial professionals are familiar with "A-shares" and "B-shares", terms that refer to classes of mutual fund shares. “A-share” mutual funds typically involve front-end sales charges, as well as ongoing fees. “B-share” mutual funds, on the other hand, generally have no front-end sales charges, but may assess ongoing fees that are higher than those on A-share funds.

"As we looked at potential designs of our new annuity product, we took important cues from both A-share and B-share mutual funds", said John Deremo, Senior Vice President in Protective’s Institutional Distribution Group. "We found that we were able to develop an annuity with no up-front sales charges, similar to B-share mutual funds, but with persistency rewards that begin later in the term of the contract. In effect, those persistency rewards lower the long-term costs of ownership, similar to A-share mutual funds. The result is a groundbreaking variable annuity designed to reward the long-term annuity owner. That’s why we call it ProtectiveRewards B2A.”

"In building ProtectiveRewardsSM B2A, we set our sights on nothing less than a true industry breakthrough – a next-generation variable annuity designed to reward long-term investors focused on accumulating wealth today and ensuring retirement income in the future," said Eric Miller, Vice President and National Marketing Director in Protective’s Life and Annuity Division. “Financial advisers have been looking for innovative annuity designs with lower long-term costs and a diverse set of income and protection features. ProtectiveRewardsSM B2A answers that call." Etc, for more about ProtectiveRawards variable annuity features and benefits, please visit Protective Life Corporation.

Selecting The Payout On Your Annuity

For some investors, an annuity can be an appropriate part of their financial plan if utilized properly. Unfortunately, annuities are very complex insurance instruments that are sometimes sold inappropriately - their buyers often don't receive full and clear explanations of how the annuities work. Despite their intricacies, individual annuity sales in 2003 reached more than $216.8 billion worldwide, while the sale of variable annuities in 2003 increased 11% year-on-year, according to researcher and consultant LIMRA International. The features of an annuity that are often not properly explained are the payout options. Here we define these options, how they are calculated and how they are taxed.

Phases of an Annuity

The two phases in the life of an annuity are the accumulation phase and the annuitization phase (or payout phase). During the accumulation phase, you can add funds to your annuity contract by depositing cash, converting life insurance cash values or doing a 1035 exchange from another annuity (to name a few ways of contributing). If you follow the annuity rules, your annuity will accumulate earnings on a tax-deferred basis until you make withdrawals. Once you reach age 59.5, you can begin to withdraw funds from the annuity without penalty charges.

Annuity Payout Options

There are a few different methods for taking annuity payouts. Generally speaking, the two most common methods to receive cash payouts are the annuitization method and the systematic withdrawal schedule. The other is taking a lump-sum annuity payment. The annuitization method gives you some guarantee of monthly income for a determined period. Under the systematic withdrawal schedule, you have complete control over the timing of distributions but no protection against outliving annuity assets.

How Does the Insurance Company Compute your Monthly Payment?

There are several factors that insurance companies use to compute your monthly payment amount; two of the most common are gender and age - both of which affect your life expectancy. Since women have longer life expectancies than men, women won't receive as high of a payment as their male counterparts. And, of course, the older you are, the lower your life expectancy. A 75-year-old man with the life option will receive a higher monthly payout than a 65-year-old man because the older man's life expectancy is shorter.

Another major factor that affects the size of your monthly payout is the payout option that you select - which affects how long the payments will last. For example, if you select the joint-life option, your monthly payout most likely will be lower as the payment continues to your spouse after your death. Finally, the size of you monthly payout depends also on the insurance company that you use, and its expected investment returns on your money. If the company can make a 5% instead of a 3% return with your money, your payment will be higher. However, the increase in your payment when returns are higher depends on whether you select a fixed monthly payout or a variable monthly payout from your annuity. If you select the fixed amount, your payout will not change, and the insurance company assumes all investment risk. Under the variable payout, the size of the monthly payout fluctuates based on market conditions, so you assume the market risk.

Tax Treatment of Annuity Payouts

Once your contract is annuitized, part of each annutiy payment (from a fixed annuity) is considered a partial return of the basis (your contribution) and part is taxable income using an exclusion ratio. Once you select your payout method with your insurance company, you should ask for your exclusion ratio, which tells you how much is excluded from being taxed. If your exclusion ratio is 80% on a $1,000 monthly payout, then $800 is excluded from income tax and $200 is subject to ordinary income tax. Premature distributions (those occurring before you reach age 59.5) are subject to a 10% penalty, and for annuities purchased before Aug 14, 1982, the FIFO (first-in, first-out) method is used for withdrawals. For annuities purchased after Aug 13, 1982, the withdrawal rule is LIFO (last-in, first-out), meaning that earnings will come out first. You have to pay not only a 10% penalty on the withdrawal, but also income tax on any portion of the withdrawal attributable as investment gain. It is not a wise decision to pull funds prior to age 59.5, so try to avoid it at all costs. Etc, for read this full article and get more information about how to selecting a payout onf your annuity, please visit Investopedia.

Bad Citizens: Galvin probe targets bank's deleted e-mails

Citizens Bank has deleted potentially thousands of e-mails relating to the sale of controversial ``variable-annuity'' investment products from its computer system, the Herald has learned. Bank staff made the astonishing admission to Secretary of State William F. Galvin after he issued a subpoena for the e-mails as part of an investigation into variable-annuity sales.

Galvin's office has accused Citizens and several other banks of inappropriately selling high-fee, high-commission annuity products to elderly customers. On Feb. 16, Galvin issued a subpoena to Citizens demanding more than two years worth of records - including e-mails - from staff at the bank's investment division. After six weeks of delay, the bank replied that there were ``gaps'' and ``retention issues'' in its e-mail systems, and that many of the records had long been deleted. On June 29, Citizens further admitted that a new computer system installed last fall to correct the problem was still deleting records.

And in a stunning aside, the bank added that 44 employees of the investment business - which handles annuity sales - had not even been moved onto the new system until May. Galvin yesterday expanded his legal complaint against the bank over the matter.

Galvin added that he believed the bank's system is still deleting e-mails of ``branch registered representatives,'' who sell annuities at Citizens branches. Heather Campion, the bank's public relations boss, declined to comment on the revelations.

It isn't known at this stage how many records, if any, have been deleted since the bank received Galvin's subpoena in February. But at the very least, Galvin said, the bank failed to comply with strict regulations requiring it to retain records. The old computer system backed up e-mails on tapes that were recycled after 60 days. The secretary of state said the firm, which is owned by The Royal Bank of Scotland, knew by March 2004 that it was in breach of its obligations. He's seeking fines against Citizens for the failure. More acute is the question of why staff handling sales of controversial investment products were kept off the new backup systems until months after Galvin's investigation began. Etc, the article by Brett Arends, for more information about variable annuity and investment products, please visit Herald exclusive.

Annuity & Life Re Narrows Loss But Warns Of Further Problems

ANNUITY & LIFE RE NARROWS LOSS BUT WARNS OF FURTHER PROBLEMS
HAMILTON, Bermuda (BestWire) - Annuity & Life Re (Holdings) Ltd. narrowed its third-quarter net loss, as the group resolved one troubled life reinsurance contract and profited from its largest single contract. But existing problems with other existing contracts and a widened net investment loss continued to weigh on the bottom line.

The third-quarter net loss for Annuity & Life Re (OTC:ANNRF.OB) narrowed to $3.1 million, or 12 cents a share, from $3.8 million, or 15 cents a share, a year earlier. Net investment losses widened to $84,868 from $52,025.

Contributing to the net loss was a $2.4 million charge related to the group's recapture of its guaranteed minimum death benefit/guaranteed minimum income benefit agreement with Cigna. An additional $2.1 million loss was associated with an annuity reinsurance agreement with Transamerica. Annuity & Life Re also suffered a $700,000 loss related to its second-largest life reinsurance agreement, and a $300,000 loss from its second-largest annuity reinsurance agreement.

Those losses were offset in part by income from some of the group's other life reinsurance agreements, including a $2.1 million gain from its largest life reinsurance agreement. Chief Executive Officer Jay Burke said in a statement that Annuity & Life Re and Cigna were finally able to "resolve the long-standing problems" they had grappled with in their GMDB/GMIB agreement.

The settlement with Cigna represented a resolution of the last of the group's GMDB contracts, according to Annuity & Life Re's quarterly 10Q statement filed with the U.S. Securities and Exchange Commission. The Cigna resolution also means the group now has satisfied the collateral requirements of all its ceding companies, the 10Q said.

Under the settlement agreement, Cigna will retain $11 million it previously had drawn under a letter of credit with Annuity & Life Re. Cigna also received a warrant to acquire 1 million shares of Annuity & Life Re at an exercise price of $1 a share.The warrant expires on Sept. 30, 2014. Both sides released all obligations and claims under the GMDB agreement. Before resolution of the dispute, Cigna had been seeking $49 million in collateral from Annuity & Life Re, in addition to the $11 million Cigna already had drawn on the letter of credit, according to the 10Q statement. Etc, more information about annuity, and investment, customers, please visit Lexis Nexis.

2Q Bank Annuity Sales Up 12%

Bank sales of both fixed and variable annuities shot up 12 percent between the first and second quarter, to $8.5 billion, according to Kenneth Kehrer Associates, Princeton, N.J.

For the first time since the research firm began monitoring bank annuity sales in 1988, fixed and variable annuity sales grew at almost the same rate. VA sales in banks during the quarter were $4.4 billion, up 13 percent, while fixed annuity sales climbed 11 percent, to $4.1 billion.

VAs once again moved ahead of fixed annuities in sales volume after falling behind in the fourth quarter of 1999. Last year, higher rates on fixed annuities and stock market volatility helped boost fixed annuity sales, said Kenneth Kehrer, who heads the research firm.

Banks increased their market share during the second quarter for both types of annuities, Kehrer found.

Banks' share of $14.7 billion in total fixed annuity sales grew to 27.9 percent, up from 27 percent of $13.7 billion in the first quarter, based on data from LIMRA International.

For VAs, banks' market share climbed to 12.5 percent of $35.2 billion, up from 11.2 percent of $34.8 billion in the first quarter.

Despite this growth, however, banks' market share of VAs fell below second quarter 1999, when they had 13.4 percent of $29.2 billion in total VA sales.

Fixed annuities' share of the market during the quarter also fell from year-ago levels, to 27.9 percent, from 36.2 percent in the same period of 1999. But 1999's surge may simply have reflected that, in the second quarter of last year, stockbrokers and other nonbank channels favored other investment vehicles, Mr. Kehrer said.

While banks' slice was smaller this year, the pie was much bigger, the Kehrer firm's data showed. Fixed annuity sales in second quarter 2000 climbed to $14.7 billion, up from $9.4 billion in the same quarter in 1999.

Bank customers have been buying an increasing share of their mutual fund investments through variable annuities, the data showed.

Mr. Kehrer said this was due to product innovations in VAs, such as high dollar cost averaging rates, bonus credits, enhanced death benefits and guaranteed minimum income options. These enhancements cut financial risks, increasing their attractiveness vis-à-vis mutual funds.

The trend for various investment vehicles sold through banks shifted toward variable annuities during the quarter, at the expense of general securities transactions and fixed annuity sales, the Kehrer analysis found.

Looking at banks' general securities revenue in the second quarter as a whole, their broker/dealer revenue from stocks and bonds fell to 7 percent from 10 percent in the first quarter, and their revenue from fixed annuities fell to 23 percent of revenue, from 26 percent. Variable annuities, meanwhile, rose from 20 percent to 23 percent of these revenues during the period.

Among carriers, Hartford underwrote the most bank-sold VAs, with $922 million in the second quarter, $268 million more than second-ranked Nationwide. But Nationwide's bank VA sales rose by 21 percent in the period, compared to only 1 percent for Hartford, Kehrer reported. For more information about annuity sales please visit The National Underwriter Company.