A big player, toronto-based Manulife Financial Corp., has stepped out of the participating whole life insurance market, also known as “par,” leaving a handful of firms to fight over its share of sales.

Manulife will officially close the door on new par policies at the end of March. It is replacing the product with a non-par whole life product called Performax Gold that mimics some of the features of its par product, Performax.

“People didn’t think you could develop a product this way without it being par,” says Paul Smith, Manulife’s vice president of marketing and product development for individual insurance in Kitchener, Ont. “All the stuff the clients like — the features, the investments — were things that we found we could replicate in the non-par world.”

Manulife had decided after its demutualization in September 1999 that it would exit the par market, Smith adds. But it took time and financing to develop a replacement.

(Existing par policyholders will still see their accounts serviced as usual, Smith says.)

Whatever the sales performance of its new product, Manulife’s withdrawal from the par market leaves room for manoeuvring among competitors. The product is still popular with advisors at the major investment dealers, which have historical links with providers of par policies. Canada Life Assurance Co. in Toronto; Kingston, Ont.-based Empire Life Insurance Co. ; and Mississauga, Ont.-based Unity Life of Canada are champing at the bit in a race to fill what is still a viable niche in the marketplace.

Whole life constituted about 20% of new sales in premiums in 2007, including both par and non-par policies. But most of the sales are in par policies, according to NewLink Group Inc. , a Toronto-based industry consultancy.

Manulife’s withdrawal from par policies, says Saundra Edwards, assistant vice president for individual life marketing for Winnipeg-based Great-West Lifeco Inc. and sister companies London, Ont.-based London Life Insurance Co. and Canada Life, “gives us the opportunity to expand sales.

“We believe the need and desire among advisors and their clients isn’t going to change or decrease with Manulife out,” she adds. “We’re committed to staying in the marketplace, continuing to focus on managing the par [policy] business.”

Similarly, Peter Wouters, director of estate and tax planning, risk product marketing, at Empire Life, says Manulife’s exit has created a positive market opportunity for his firm. “We’re in that same market in the same distribution channel,” he says. “We see it as an opportunity because we have no plans to exit the market or the par product line.”

Manulife’s exit has been rumoured for months. The insurer had been one of the bigger players, Wouters says, “because it was one of the first companies to develop good relationships with the bank-owned [investment] firms and to find a market for par insurance.”

Newlink says par represents a major portion of insurance sales in both Investment Dealers Association of Canada member firms and independent advisor channels. But neither the managing general agencies nor the Mutual Fund Dealers Association of Canada member firms count par products as a major portion of their sales; they tend to prefer universal life.

In 2007, Montreal-based Power Financial Corp. ’s three manufacturers — GWL, London Life and Canada Life — reached a total of $100 million in par premiums, up more than 10% for the year, Edwards says. And at Canada Life, which re-launched its par whole life portfolio at the beginning of 2007, the growth was more than 30%.

Par policies are a vestige of the industry’s history as mutual insurers. The term “par” was literally meant to identify the product line that allowed policyholders to share in the growth of the mutual.

The product is particularly attractive for estate planning and capital gains tax liabilities because the death benefit can grow at a stable, relatively known rate. Several options, such as “paid-up additions,” allow clients to re-invest the dividends in the policy. This results in a known untaxed death benefit that can pay off estate taxes or flow directly to beneficiaries.

A critical part of the product’s appeal is the carrier’s ability to pay consistent and high dividends from the par account, which is a large investment portfolio tilted heavily toward fixed-income. That predictability attracts clients, particularly in volatile markets and in lower interest rate environments. IE

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