John Hancock built its 152-year-old brand by selling life insurance, but the Boston company is shifting its emphasis — and its advertising — toward more-profitable financial services, such as wealth management and mutual funds.
The change follows sales declines for some of Hancock’s core insurance products. Life insurance sales have dropped 12 percent since 2010, while sales of insurance for long-term care plunged 74 percent in the same period, according to the company’s financial statements.
In contrast, sales of mutual funds, college savings plans, and retirement accounts such as 401(k)s have jumped 87 percent since 2010.
“Fifty years ago, we were known just for insurance,” said Craig Bromley, president of John Hancock Financial Services. “I think 10 years from now we’ll be John Hancock insurance and wealth management. That’s already there, but not in the public perception.”
To help change the perception, Hancock launched an advertising campaign last year, featuring couples sitting around the kitchen table and at their financial adviser’s office and trying to figure out how they’ll prepare for retirement.
In another sign of the increasing importance of wealth-management services, Hancock has added 150 employees to the mutual fund division since 2005, enlarging it to more than 650 workers. The overall workforce has held steady for several years at about 3,500 employees.
The company also has made multimillion dollar investments in technology to help manage 401(k) retirement savings plans.
John Hancock’s transformation is driven by several factors, said Peter Routledge, an analyst with Montreal-based National Bank of Canada. First, the recent financial crisis and recession squeezed incomes, which led many households to defer buying life insurance to save money, he said.
Low interest rates have also shaved insurers’ profits because they make less on the premiums they invest. That has forced John Hancock to reduce benefits or raise prices for these policies, which has hurt sales, Routledge said.
And Hancock’s parent, Manulife Financial Corp. in Toronto, is trying in the United States to follow a strategy similar to the one that helped build the Canadian company into a financial services giant: offering a broad array of financial products.
“They’re trying to build out the US to include more wealth and replicate some of the successes of Canada in US,” he said.
Mutual funds and 401(k) plans are fee-based services and require consumers to take on more of the investment and the risk, making them an attractive alternative for the company, analysts and company officials said.
“There was a realization that the future of the company isn’t just about insurance,” said Andrew Arnott, chief executive of John Hancock Investments. “If we’re going to serve our investors, this has to be much broader.”
John Hancock has managed retirement plans for small businesses for about two decades and is trying to use that experience to capture a bigger share of the market for mid-size employers.
In addition, said Bromley, the company can use its large, established network of advisers to sell investment products to consumers.
“We really see the insurance and wealth management very well married up,” Bromley said. Consumers who are buying life insurance are likely to be looking at how to save for retirement and invest their money, too, Bromley said.Deirdre Fernandes
can be reached at deirdre. firstname.lastname@example.org. Follow her on Twitter @ fernandesglobe.