Tweet
• Hartford Life has sold more than 18,000 UK policies
• Announcement will mean the loss of 153 jobs
US insurance firm Hartford has failed in its attempt to break into the UK market and will close its London operation with the loss of 153 jobs next Friday.
The UK business has sold more than 18,000 life and pensions policies and has around £1.2bn of assets under management.
The announcement, which closely follows Hartford's decision to suspend sales from its Japanese operation in Tokyo, will raise question marks over the viability of so-called "third way annuities".
These are complex retirement products which allow pensioners to benefit from a guaranteed level of income while still investing in the stockmarket with its growth potential and so increase their final fixed annuity income. They are also known as "variable annuities".
Hartford, trading in the UK as Hartford Life, blamed "the continued turmoil in financial markets and our company's overall efforts to preserve capital and reduce the risks associated with various business lines" for its withdrawal.
"Our decision to suspend all sales in the UK is a difficult one," Hartford's president and chief executive, Marc Lieberman, said.
In January, Hartfold Life acknowledged that 2008 had been "challenging" but added "we are delivering real value to advisers and clients during these volatile times."
The Hartford decision could dampen attempts by other insurers to break into the third way annuity market. Lincoln, Met Life and Aegon all have variable products and had been encouraged by actuarial research from Tillinghast Towers Perrin suggesting a £70bn market by 2016.
Nigel Callaghan, a pensions expert at advisers Hargreaves Lansdown, said several things had gone wrong for Hartford. "The key isses have been extreme stock market volatility causing much higher than anticipated costs on the guaranteed elements; uncertainty over the strength of the guarantees from both advisers and clients following the Lehman collapse; complex and expensive product design; and a slow acceptance of a new concept by IFAs.
"Today's announcement comes as no surprise. For now, the much hyped 'third way' in retirement plans turns out to have lost its way."
Investors in Hartford's variable annuity have the option to transfer out. But for those whose guarantee price is currently higher than their underlying fund value, it probably makes sense to stay put at least until the fund value recovers.
Other providers are expected to continue promoting variable annuities in the UK, hoping to pick up business now the market leader has pulled out. But the withdrawal of a major player will dampen demand and possibly deter further entrants.
guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds
More...
