AD CAMPAIGN, NEW PRODUCTS REFLECT SHIFT TO VARIABLES: IN A FIX, KEYPORT TO TOUT ANNUITY PAYOUTS

In a move to bolster flagging asset growth, Keyport Life Insurance Co. is revving up its marketing machine.

Keyport, which sells annuities through brokers, banks and financial planners, is launching a $1 million national advertising campaign. The Boston-based insurer, which has $15 billion in assets, has also redesigned its corporate logo and expects to unveil several new products.

“It’s a very crowded, competitive marketplace out there,” says John W. Rosensteel, president and chief executive officer of Keyport, which is owned by Liberty Financial Cos. “You have to find ways to differentiate yourself so people can recognize who and what you are.”

By relying on the new tag line “A certain future,” the campaign is also intended to reflect a shift in Keyport’s focus from the accumulation phase of annuity investing to the payout phase, says Mr. Rosensteel.

shifting longevity risk

“There’s been a tremendous amount of focus on the annuity product as a way to accumulate money, mainly through the tax-deferral aspect,” he says. “While that’s all well and good, the real value of an annuity comes from its capacity to allow an individual to transfer his or her longevity risk (the risk of outliving one’s income) to an insurance company.”

Keyport’s national ad campaign, which is a first for the firm, comes just in time. In recent years, the insurer — historically focused on fixed annuities — has struggled to increase assets as tumbling interest rates have depressed sales. About 75% to 80% of the firm’s assets are in fixed annuities.

“A lot of the money in the fixed annuity market has been flowing into variable annuities, because investors are looking for exposure to the equity market,” says Patrick Reinkemeyer, an annuity consultant at Morningstar Inc., the Chicago mutual fund and annuity tracker.

Assets in annuities at Keyport grew a modest 5.8% in 1997 to $12.8 billion, vs. 36.2% nationwide, according to Morningstar.

Keyport’s sales of fixed annuities through banks, its largest distribution channel, totaled $457 million last year, down significantly from $555 million in 1995 and up slightly from $455 million in 1996, according to data from Kehrer Associates, a consulting firm in Princeton, N.J.

By comparison, the company’s bank sales of variable annuities, which totaled $45 million in 1996, rose to $138 million in 1997, according to Kehrer.

“A year ago variable annuities made up 14% of our business,” Mr. Rosensteel says. “Today, they account for 44% of our total sales.”

emergency plan

Keyport recently introduced a variable annuity — the Preferred Income Plan — that allows investors to withdraw money in the event of an emergency. Few annuities offer such payout flexibility. Similarly, Keyport is also developing an annuity that may be converted — at any time — into a fixed, variable or equity product. It hopes to roll out that annuity next year.

Keyport’s new advertising campaign features Keyport Adviser, a variable annuity with an immediate payout option, and KeyIndex, an equity index annuity. Print ads began appearing in May in such trade publications as American Banker and Bank Investment Marketing.

“Our intent is to stay behind this campaign,” Mr. Rosensteel says. “I’m sure that we will probably learn and will tinker with it.”