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Third way at crossroads as Hartford shuts down in UK

Variable annuity providers have rushed to reassure advisers they are committed to the market after Hartford announced its decision to shut down its UK new business operations last week.

After posting a £818m loss in the first quarter, the US-based firm revealed it was pulling out of the variable annuity market here and in Japan as well as abandoning plans to launch in Germany.

Hargreaves Lansdown says the outlook is bleak for remaining players. Pension analyst Nigel Callaghan says: “The Hartford has really suffered from poor timing. The cost of the underlying guarantees has gone through the roof in the last 12 months, variable annuities have not got a viable foothold in the UK retirement market and operational costs must have been astronomical. The outlook for the remaining third-way players is bleak – the current losses must be huge and the outlook for sales this year is grim.”

Variable players Lincoln, Aegon Scottish Equitable and Metlife claim Hartford’s decision is reflective of company difficulties rather than market difficulties. Living Time says it will be looking to recruit key staff from Hartford as the firm revealed it would be making significant redundancies.

Aegon and Metlife have recently increased the costs of their products and claim they are now prudent enough to survive the downturn. Lincoln maintains that it has no plans to put up charges on its var- iable annuity.

Aegon director of group development Adrian Grace says: “We remain committed to the variable annuity market in the UK and believe correctly positioned third-way products can offer significant value to customers and give adequate returns to providers and distributors.”

Metlife marketing director Dominic Grinstead says: “The UK is a key growth market for us and one to which we are entirely committed. Metlife has a strong excess capital position, a diversified investment portfolio and ample liquidity and is well positioned for the future.”

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