In the fall of 2008, Standard Life Canada made the decision to suspend its planned entry into the guaranteed withdrawal benefits market due to unfavourable market conditions. The insurer now believes conditions have stabilized and is looking at entering the market with a guaranteed lifetime withdrawal benefit (GLWB) product, Michel Fortin, Vice President, Marketing, Retail Markets at Standard Life told The Insurance and Investment Journal in an exclusive interview.
"Standard Life is looking at all the options to potentially enter the GLWB market in Canada, both on the retail and the group sides," says Mr. Fortin. There is no set date yet, but the insurer expects to possibly enter the market within the next 12 months. If so, its GLWB would be offered under the company's Signature Series, says Mr. Fortin.
After the market crashed in 2008, Standard Life announced its decision that it would not launch a GLWB as had been previously planned. This decision was actually made before the market crash, Mr. Fortin, underlines. "[Competitors'] product offerings at the time were too aggressive according to our matrix." He adds that "Standard Life's philosophy is to offer sustainable and stable products to our advisors...After the market crash and after all of the corrections and adjustments to the product offerings, we now feel that the product and market conditions are more stable and they are more reasonable. So we are looking at our options to try to see if we could develop a product that would make sense in this market."
He adds that its decision in 2008 to cancel its plans to enter the market was difficult. "It was a tough decision when we saw all of the growth from our competitors who were gaining market share."
The year 2008 was certainly a difficult one for Standard Life in terms of net sales, which plummeted from $88 million in 2007 to just $8 million in 2008, according to data from Investor Economics.
However, even without a guaranteed benefit withdrawal offering on the shelf, 2009 sales bounced back for the insurer as it recorded $71 million in net sales. This improving sales trend, which began in Q2 of last year, appears to be continuing in 2010, Mr. Fortin adds. "Year over year we are 236% above last year."
How did it manage this sales turnaround in a year that saw most other companies which do not a GWB fall into negative sales territory? Mr. Fortin says two product launches last year helped Standard Life re-energize sales.
"Though we are not a participant in the (GWB) market for now, we improved our product line up by introducing in January a new Signature Series. We improved our product offering overall. We added the 100-100 guarantee. We added access to third party fund managers. We also improved our reset features within our products." In December, it added various load options to its Signature Series.
Meanwhile, market turmoil caused some other insurers to overhaul their segregated fund product lines to lower risk, he pointed out. "In 2009, we saw our competitors either increasing their MERs (management expense ratios); reducing their guarantee benefits on their regular segregated funds, for example, completely removing 100-100 guarantees; adding investment restrictions on some of their funds, especially on the equity side; some suspended sales of their GMWBs; other increased their GLWB fees. All of this was probably very negatively perceived and received by advisors," comments Mr. Fortin.
Asked why Standard Life decided to introduced a 100-100 guarantee while some other players were eliminating this option to mitigate risk, Mr. Fortin replied, "We still believe that 100-100 guarantees, if correctly priced and properly hedged, have value for some clients, so that is why we decided to add that to the series."
Mr. Fortin adds that although Standard Life is studying the possibility of offering a guaranteed lifetime withdrawal benefit, the company wants to ensure that its regular segregated fund line stays strong. "We don't think the GLWB is a silver bullet that will solve everything." That's why Standard Life revamped its regular seg fund line in 2009, he explains, adding that the goal is to provide clients with a complete seg fund product offering. "We truly believe clients should diversify their portfolios between seg funds and GLWBs."