Annuity FYI Visitor Blog

In “Insurers Retool Annuity Offerings” by Leslie Scism of the Wall Street Journal, Scism describes how insurance companies are making changes to the variable annuities they offer to lower their risk while maintaining the products’ appeal to consumers.  The guarantees previously offered are the issue worrying many insurance companies.  While sales of variable annuities helped dozens of insurers grow exponentially over the past decade, the drop in the stock market brought the risk of these guarantees to the forefront.  Insurance companies have prepared their balance sheets for the impending lifetime income guarantees that will become payable based on the stock market’s high in 2007.  Two companies had to do this by taking federal bailout money.

But variable annuities are becoming popular again as their sales increased last quarter for the first time in over a year.  The new products are simpler but still offer most of the great benefits variable annuities are known to have.  Hartford has what they call a “derisked” VA offering and MetLife is coming out with their “Simple Solutions” product.  Although the products may have a higher cost to benefit ratio than variable annuities of the past, consumers are still receiving great annuity rates and benefits.  Consumers want to buy their annuities from companies that will stand the test of time and these changes are what will keep the insurance companies around.  Manulife’s John Hancock unit offers “AnnuityNote”, which has been on sale for a few months and is doing well while offering relatively low costs compared to their 5% and above lifetime annual payouts.  As advisers and consumers realize that these changes will benefit them with lifetime guaranteed income from an insurance company that will be around for their lifetime, variable annuities are sure to be purchased even more.

In a company press release entitled “John Hancock Expands Fixed Annuity Portfolio With New JH Signature Product,” the new JH Signature fixed annuity was introduced by John Hancock Financial’s Fixed Products Group.  The product is a guaranteed annuity with modifications.  JH Signature combines multiple ‘rate for term’ options, strong interest rates that are guaranteed, and eldercare support systems to help consumers manage.  John Hancock Financial is one of the top rated insurance companies and they believe that with that support and the benefits of safety, security, competitive rates, and tax deferred growth, JH Signature is a top of the line product offering.

Investors can select guarantee periods of 3, 5, 7, or 10 years and have a matching withdrawal charge schedule.  $25,000 is the minimum investment, but the interest rates do increase with additional investment levels.  Make a 401k annuity transfer when you retire and you could lock in a highly competitive interest rate.  During the guarantee period, investors can take withdrawals up to the amount of the last year’s interest without any penalty.  The Family Resource Benefits are offered with the JH Signature product with no extra cost involved.  These include a wealth of information on professional health and lifestyle for consumers looking for programs, referrals, and even discounts relating to eldercare situations.  The JH Signature fixed annuity is a product that may have the benefits to best suit your investing needs.

“A Summer Crop of Variable Annuities” in the Retirement Income Journal summarized this summer’s spectrum of variable annuity products.  Author Kerry Pechter stated that insurance companies are either reducing the cost of the product and making it much more simple or keeping the elaborate benefits and increasing the cost.  John Hancock and MetLife introduced simplified versions while Allianz Life and Genworth Financial’s new products are similar to traditional variable annuities.  As equity markets have rallied this summer from a DJIA of 6,700 points in March to 9,100 this week, this may be the time for some new products.

John Hancock Life’s AnnuityNote is one of the more straightforward products on the market.  There are one investment and one income option and only one inclusive cost.  With an S&P rating of AA+, John Hancock is aiming this product to the advisers that don’t normally recommend annuities, marketing AnnuityNote like “a mutual fund with a true guarantee.”  The Simple Solutions variable annuity from MetLife is also meant to be easily understood and lower cost than traditional VAs, while still offering good benefits.  It has a guaranteed lifetime withdrawal benefit (GLWB), one income option, four options for investments, and a short application that is only three pages.  The annuity rates of payout vary with age and investors have a choice of how they annuitize.

On the other side of the spectrum, the Vision variable annuity from Allianz Life has a complex prospectus and fees can be around 4%.  An Investment Protector and and Income Protector are the main riders offered with this product.  As you grow closer to receiving the income payments, the investments become more conservative, no matter which investments are chosen.  Their Vice President stresses that this new offering communicates what the company has learned in a tough market about product offerings and cost.  RetireReady One from Genworth also offers an Income Protector for its GLWB rider.  Speak with an expert about the details regarding any of these variable annuities.

According to “John Hancock Releases Retail Variable Annuity” by Rebecca Moore from Plan Advisor, this new annuity has fewer costs associated with it and is quite simple in comparison to other variable annuities.

AnnuityNote has 5 main benefits for the purchaser.  The first is a guaranteed income for life of 5% after waiting for 5 years.  There also is not a surrender charge so investors can access their money immediately if need be.  The annual expense is 1.74% which includes both the insurance fee and portfolio expense.  There is also exposure to the stock and bond markets, allowing for long-term gains.  Lastly, being insured by a strong company like John Hancock provides financial strenth over time.

There is a required minimum investment of $25,000 and a 3% sales charge to start.  John Hancock recommends purchasers be aged 55-75.  Interested investors can speak with an expert for advice on this and other annuity products.