Next month will be the fifth anniversary of insurer MetLife’s UK business. It provides retirement and potection solutions to 70 million customers in 50 countries, a history which motivated its move into the UK market in 2007.
MetLife UK managing director Dominic Grinstead says: “We saw the obvious demographic trends in the UK in terms of the size of the retiring population and their longevity. This meant an increasing demand for innovative products, which is where MetLife came in.
“We had been one of the largest providers of variable annuities in the US and Japan over the last 15 to 20 years and to us the UK was a natural extension of that product category.”
The past five years have ratified MetLife’s decision to service the UK market.
Grinstead says: “In many cases, we have confounded expectations. The past few years have not been without their challenges but more IFAs are recommending us. I think this is because the financial crisis is continuing for much longer than people expected. People need to protect themselves against volatility, inflation and low gilt yields and unit-linked guarantees are a good way of doing this.”
Grinstead says MetLife’s retirement portfolio, launched in 2008, has proved popular because of this sense of safety first.
“It is a product that is focused on people who want drawdown but are concerned about the lack of guarantees. We know some of the issues surrounding GAD reviews and falling fund values impact on this, which is why the retirement portfolio has been so relevant.”
MetLife’s other key product is its fixed-term annuity. Having acquired the distribution rights to Living Time’s fixed-term annuity in January as part of its purchase of Alico last year, the company replaced that with its own product in September.
Grinstead says: “Our Freedom income plan is an alternative for people who would normally consider a lifetime annuity but do not believe now is the right time to lock into a lifetime annuity. It also suits people who are phasing themselves into retirement, perhaps through part-time work.
“We launched the Freedom income plan in order to widen our access to the market and I think it has done that. It had an excellent reception, partly helped by other providers launching similar products. IFAs are telling us they like the fact that although its written for a specific term, it has this freedom clause, which means clients can take the full value of the annuity fund should they be diagnosed with a critical illness, which is very attractive.”
Although both products fall under the third-way banner, this is not a term Grinstead would apply to them.
“Third way just sounds slightly Blairite. It also makes these products sound niche but with the RDR round the corner, IFAs owe it to their clients to look at every option, so I think they will become more mainstream. We need to forget these artificial category names.”
Grinstead believes that these products will also become more mainstream because of the growing consumer need for innovation.
He says: “Annuities have been around in their current guise since Roman times. There is nothing wrong with that but you only have to look around and you will see that people’s views on retirement are very different from those of previous generations. Financial products need to adapt to this.”
MetLife is planning to continue evolving its offering with new product launches in 2012.
Grinstead says: “In Q1, we will launch a new set of products which will be a further innovation on unit-linked guarantees. They will be based on a concept we launched in the US earlier this year which was incredibly popular. Unit-linked guarantees differentiate us from other providers. We are small in relation to other UK insurers, so we base our growth strategy on innovation.”
Although MetLife will continue to have unit-linked retirement products as the key to its UK offering, it will also focus on other business areas next year.
“We would definitely look at asset management. We regard the UK as a very exciting market and although we have no specific plans, it is something we are actively considering because some of the solutions we have could fit in very well within a non-insurance structure,” says Grinstead.
Group risk is the second area where MetLife will expand next year. “We must be one of the largest group risk providers in the world, so it makes sense for us to focus on it. Auto-enrolment may also create opportunities for us in terms of SMEs. I am not saying this applies to every SME but we believe that some of them will be interested in looking at the whole employee benefits package rather than just the pensions side.”
MetLife will also look at income protection. Grinstead says: “It is an area in which you can expect the state to pull back. IP is also best sold on a group basis as it is better value, with cheaper premiums and less onerous underwriting.”
However, he does not think 2012 will be plain sailing for financial services. “It is clearly a challenging time on the regulatory front. We are putting a huge amount of emphasis on Solvency II, like any other insurance company. Closer to home, there is also the RDR, which we all have to deal with.
“We do not see the RDR just as a challenge, however. It is a very clear opportunity for IFAs to demonstrate their real core value to clients. In an environment where retirement needs more detailed and regular planning, we can work with advisers to tailor our distribution to consumer needs.”
One area Grinstead thinks the retirement market is lacking in terms of responding to consumer needs is wraps.
“I think they have a clear place but one thing wraps have not got their heads around is how they work in the decumulation market. Wraps are more geared towards asset accumulation than decumulation.
“There are real opportunities to develop that further and I think that is the next step for the market. We have no intention of building our own wrap but we are interested in potentially partnering with platforms to see how our solutions can work in different environments.”