OneAmerica and Insurance and Insurance Benefits and Retirement Benefits and Retirement and Health Care & Insurance

Strong sales of retirement plans boost OneAmerica

March 22, 2013

A big bet on employer-sponsored retirement plans is paying off for locally based OneAmerica Financial Partners, a company best known for its life insurance offerings.

The company's sales of employer-sponsored plans rose 22 percent last year to $1.394 billion, adding to a 51-percent increase in 2011.

Total retirement services sales in 2012 were nearly $1.5 billion, or 10 percent higher than in 2011.

In 2009, OneAmerica ranked No. 44 for retirement assets under management; today it is more like No. 33, said Bill Yoerger, the company's president of retirement services. Still, OneAmerica’s retirement segment has some ways to go in terms of visibility.

“If Northwestern Mutual is 'The Quiet Company,' we’re perhaps the stealth division within OneAmerica,” Yoerger said of the policyholder-owned company.

While much of the sales growth in retirement plans in recent years has focused on larger plans, the financial services company has begun selling to smaller firms plans similar to those of large companies, which emphasize index investing.

Among OneAmerica’s retirement plan customers are clothing retailer Eddie Bauer and Indianapolis-based restaurant chain Steak ‘N Shake.

Launched in February, OneAmerica's Index(k) product is managed to match such benchmarks as the Russell 2000 index or Standard & Poor's 500. OneAmerica says such index funds have less cost than a typical mutual fund offering and have more predictable results, which should appeal to smaller retirement plans.

In some cases, the administrative cost of actively managed funds is 25 percent to 30 percent higher than index funds.

Index(k) consists of 18 trust investment options through Wilmington Trust Retirement and Institutional Services Co. It is managed by New York-based BlackRock Inc., which has the scale to help bring the administrative cost down, Yoerger said.

As of earlier this month, Index(k) had been purchased by three companies with retirement plan assets of $1 million, $4 million and $10 million.

By contrast, OneAmerica’s biggest sales growth has been in retirement plans with assets between $5 million and $20 million, and $20 million and above. That product is known as Premier Trust.

“We haven’t walked away from the small and micro-market” retirement plans, Yoerger said.

Recently, OneAmerica also struck a distribution affiliation with Edward Jones, whose 12,000-plus advisors can also sell OneAmerica 401(k) and 403(b) retirement plans.

OneAmerica, best known for its life insurance products, carved out a bigger chunk of business in retirement plans with the 2010 acquisition of Indianapolis-based employee benefits firm McCready & Keene Inc.

OneAmerica’s acquisition of McCready & Keene added $7 billion in retirement assets, bringing OneAmerica’s total retirement assets under management in 2012 to $21.5 billion.

McCready also brought with it Web tools to make it easier for employees to check the value of their own assets and make other transactions. 

Still, setting its sights on bigger retirement plans–-up to $100 million–-put OneAmerica in competition with larger insurers who rule that space such as The Hartford and New York Life.

The retirement services segment, which includes 401(k), 403(b) and 457 plans, now generates over one-third of the company’s consolidated earnings, according to a recent report by A.M. Best.

“The retirement services segment faces increased competition in its core full-service defined contribution line from large financial services companies with considerable scale and market penetration,” A.M. Best said in a report this month, maintaining its “A+” rating for the Indianapolis company. 

OneAmerica recently opened a regional sales office in Seattle as part of its growth into the retirement business.

Total enterprise sales for OneAmerica companies in 2012 were $2.17 billion.

Yoerger acknowledged that OneAmerica has an eye out for possible acquisitions, noting additional opportunities are likely to arise amid insurance industry consolidation.

“We don’t have to make an acquisition for the sake of an acquisition. ... We think we’re going to continue to grow with solid, double-digit growth.”

As for Index(k) sales projections, Yoerger said he expects it to contribute several hundred million dollars in new assets within the next couple of years.

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