Manulife Financial Corp. should not expect to immediately become a much bigger player in the bank channel than the company it agreed to buy last week, analysts said after the Canadian insurer unveiled its multibillion-dollar deal for John Hancock Financial Services Inc.
Hancock sells fixed annuities through banks but is, relatively, a nonplayer in the bank variable annuity market.
Toronto-based Manulife is a successful variable annuity seller in Canada, and this complementarity of product lines was praised on the day the deal was announced. But that does not mean Manulife will find it easy to sell variables, or its life insurance products, through U.S. banks, said Arthur Fliegelman, a vice president and the senior credit officer in the life insurance group at Moody's Investors Service Inc.
"It is not like Hancock doesn't sell life insurance already, and banks aren't selling much of life insurance anyway," Mr. Fliegelman said. "I've said it a hundred times, 'You're not buying life insurance at ATMs.' "
Robert Wick, the president of RVW Consulting Inc. in Davidson, N.C., said breaking into the bank channel with variable annuities is difficult.
"Hartford is the king of the hill, and then there's Axa, Nationwide, AIG, Pacific Life, all the usual suspects," Mr. Wick said. "Some of these companies have been there for a while and have quite a name for themselves."
The bank variable annuity market does not offer a newcomer the advantage of being fragmented, and many of the dominant distributors have been there for years. Data from Kenneth Kehrer Associates, a Princeton, N.J., firm that tracks annuity sales through banks, show that the top five variable annuity providers through banks sold about 70% of the volume during the second quarter.
The top five were Hartford, easily the biggest, and, in order, Axa, Pacific Life, Nationwide, and American Enterprise.
But Andy Davidson, a director of life insurance in Fitch Inc.'s Chicago office, said Manulife might become a force in the bank channel, given time, because Hancock already has made inroads there.
"Hancock has a great name, and they've had success with their fixed annuities in the bank channel in the past," Mr. Davidson said. "Manulife's variable annuity has historically been a superior product to Hancock's. I'd expect Hancock to market that Manulife variable annuity.
"As for universal life, yes, they both have it, but Manulife's has historically been stronger," he said.
Mr. Davidson added that Hancock also has a long-term-care product and that "very few companies can offer such an array of products."
John Hancock just last month changed the way it wholesales annuities to banks. It fired 10 of its 12 external wholesalers, keeping two to market annuities to broker-dealers and financial planners. It said it would move responsibility for bank wholesaling to New York's Essex Corp., its third-party marketing subsidiary.
Essex has 33 wholesalers, all dedicated to the bank channel. It is the second-largest third-party marketer of annuities through banks, trailing only Independent Financial Marketing Group in Purchase, N.Y., which is owned by Sun Life Financial Inc. of Toronto.
Stephen Burgay, a Hancock spokesman in Boston, said last Monday that the Essex wholesalers would end up selling Manulife's products, too, though he added that plans for this were not in place.
"This will be part of the core impact of this combination," Mr. Burgay said.
Mr. Wick said Manulife could take advantage of Hancock's established bank relationships. "That's really where I see an opportunity," he said.
