ANNUITIES in the 21st ANNUITIES in the 21st CENTURYCENTURY

Changing Annuities Distribution Business

Model

Traditional “Captive” Traditional “Captive” Distribution ModelDistribution Model

Sales are by “captive” agents selling insurer’s proprietary products

Generally used by insurers who don’t sell products through 3rd party insurance agents or registered representatives

2

Traditional/Captive Sales Force Traditional/Captive Sales Force Business ModelBusiness Model

Insurer affiliated agency or broker/dealer

Licensed insurance agent/Registered representative

• Solicits Business• Submits Applications to Insurer

Insurer• Contracts with, supervises and compensates agent• Screens applications for good order requirements

• Performs suitability review

Captive Sales Force Captive Sales Force VariationsVariations Captive agents may sometimes sell

other companies’ products– may have non-exclusivity agreement

with insurer– may be permitted to sell other

insurers’ products that primary insurer doesn’t offer

Some insurers sell through both captive and 3rd party agents

4

““New” Independent Distribution New” Independent Distribution ModelModel

Insurers may offer annuities through multiple licensed agent selling firms

Selling firms may offer multiple insurers’ annuities

5

New Business ModelNew Business Model

6

Hartford

Wirehouse B/D

Bank B/DIndependent

B/DRegional B/D

Insurance Affiliated B/D

AXALincoln

NationalPrudential

Nationwide

Met Life

Edward JonesA.G. Edwards

Raymond James & AssocWaddell & Reed

Legg MasonJeffries

Stiffel Nicholas

Merrill LynchWachovia Securities

Morgan StanleySalomon Smith Barney

UBS

Pruco SecuritiesNY LIFE SecuritiesAllstate Financial

AXA Advisors

Linsco Private LedgerAmeriprise Fin. AdvsSecurities America

NFPFirst Global Capital

Commonwealth FinancialCadaret Grant

BanksPNC Bank

Wachovia BankWells Fargo

Bank of America

Third Party MarketersIFMG Distributors

Pacific LifeAmeripris

eJohn

Hancock

Transamerica

AegonGenworthING

Examples of Independent Examples of Independent Firms: Wirehouse Firms: Wirehouse Broker/DealersBroker/Dealers

Merrill Lynch Wachovia Securities Morgan Stanley Salomon Smith Barney UBS

7

Examples of Independent Examples of Independent Firms: Regional Firms: Regional Broker/DealersBroker/Dealers

Edward Jones A.G. Edwards Raymond James & Assoc. Waddell & Reed Legg Mason Jeffries Stiffel Nicholas

8

Examples of Independent Examples of Independent Firms: Independent Firms: Independent Broker/DealersBroker/Dealers

Linsco Private Ledger AMEX Financial Advisors Securities America NFP First Global Capital Commonwealth Financial Cadaret Gran

9

Examples of Independent Examples of Independent Firms: BanksFirms: Banks

PNC Bank Wells Fargo Bank of America Chase bank U.S. Bank

10

Examples of Independent Firms: Examples of Independent Firms: Independent Marketing Independent Marketing OrganizationsOrganizations

IFMG Distributors Safe Harbor Creative Marketing Brokers International, Ltd.

11

Broker/Dealer Business ModelBroker/Dealer Business ModelInsurer

• Contracts with and compensates Broker Dealer• Delegates & Monitors Suitability Supervision

Broker Dealer• Either licensed ins. agency or has established affiliated ins agency

• Contracts with, compensates and supervises agent• Reviews applications for good order requirements

• Performs suitability review – in some cases, only for variable annuities• Submits applications to Insurer

Licensed Insurance Agent/Registered Representative

• Solicits Business• Submits applications to Broker Dealer

Bank (Non-Broker Dealer) Bank (Non-Broker Dealer) Business ModelBusiness Model

Insurer• Contracts with & compensates bank insurance agency

• Delegates & Monitors Suitability and Supervision

Bank Insurance Agency• Contracts with, compensates & supervises agents• Reviews applications for good order requirements

• Performs suitability review• Submits applications to Insurer

Licensed Insurance Agent/Registered Representative• Solicits Business

• Submits applications to Agency

IMO Business Model #1IMO Business Model #1

Independent Marketing Organization

• Provides access to group of agents• Performs Product Marketing• Communicates with agents

Insurer• Contracts with and compensates both IMO and Agent

• Screens applications for good order requirements• Performs suitability reviews and supervises agent

Licensed insurance agent

• Solicits Business• Submits Applications to

Insurer

IMO Business Model #2IMO Business Model #2

Licensed insurance agent

• Solicits Business• Submits Applications to

Insurer

Insurer• Contracts with & compensates both IMO & Agent• Screens applications for good order requirements• Performs suitability reviews & supervises agent

Managing General Agent• Contracts with agents• Compensates agents

• Provides agents with sales support

Independent Marketing Organization

• Provides access to group of agents• Performs Product Marketing• Communicates with agents