Competition / Competitors
The Company competes with the over 2,000 life insurance companies in the United
States, as well as certain banks, securities brokerage firms, investment
advisors and other financial intermediaries marketing insurance products,
annuities, mutual funds and other retirement-oriented investments. Some of these
companies have greater financial resources and currently have higher financial
strength and claims-paying ability ratings from major rating agencies than the
Company. National banks, in particular, may become more significant competitors
in the future for insurers who sell annuities, including the Company, as a
result of recent court decisions and regulatory actions discussed under
"-- Insurance Regulation -- Regulation at Federal Level". Although the effect
of these recent developments on the Company and its competitors is uncertain,
both the persistency of the Company's existing products and the Company's
ability to sell products could be materially impacted in the future. Also,
several proposals to repeal or modify the Glass-Steagall Act and the Bank
Holding Company Act have been made by members of Congress and the Executive
Branch. Certain of these proposals would repeal or modify the current
restrictions that prevent banks from being affiliated with insurance companies.
None of these proposals has yet been enacted, and it is not possible to predict
whether any of these proposals will be enacted or, if enacted, their potential
effect on the Company or its competitors.
The fundamental competitive factors affecting the sale of the Company's products
are price, the levels of commissions, charges and other expenses, financial
strength and claims-paying ability ratings, distribution capabilities,
reputation, quality of service, visibility in the marketplace and range of
products. For variable life insurance and annuity products, additional
competitive factors include mutual fund options, product design and investment
performance ratings. The Company's ability to compete is affected in part by its
ability to provide competitive products and quality service to the consumer,
wholesalers, general agents, licensed insurance agents and broker-dealers.
Management believes that its alternative and competing distribution systems
provide the Company with a competitive advantage in penetrating and
communicating with its growing target markets.
The Company also competes for distributors of its products such as banks,
broker-dealers and wholesalers. Management believes the principal bases upon
which insurance and financial services companies compete for distribution
channels are the services provided to, and the relationships developed with,
broker-dealers, wholesalers and other distributors, as well as compensation and
the variety and quality of products. Since the Company does not have a career
agency force, it must compete with other insurers and financial services
providers to attract and maintain productive independent distributors to sell
its products. Moreover, the Company does not have exclusive agency agreements
with many of its distributors and believes that certain of them sell products
similar to those marketed by the Company for other insurance companies.
In addition, the investment performance of investment managers chosen by the
Company to manage the assets related to its products may vary and non-
competitive investment performance could adversely affect the Company's ability
to market its products.