Annuity FYI Blog

While demand for variable annuities is still very high, many insurers are stepping back from them quite a bit.  According to Investment News’s Darla Mercado in the article “VA carriers hunkering down,” life insurers have had a hard time hedging their variable annuities with living benefits.  Stock market volatility and low interest rates are making it expensive for insurers to offer variable annuities.  Genworth Financial stopped selling annuities at the beginning of 2011 and Sun Life Financial stopped their sales earlier this month.  Some of the biggest companies; like Jackson National, MetLife, and Prudential Financial; have stopped offering some of their living benefits and started using less risky investment options.

John Hancock Life plans to stop selling a lot of their annuity products as well as limiting their distribution channels.  As more companies do the same, there will be less competition in the industry and prices could rise.  Most advisors still send their clients to the top three sellers, MetLife, Jackson and Prudential.  There may be more room for the smaller companies in the future.  If living benefits drop below 5%, many advisors will be playing up the tax deferred growth benefit of variable annuities.  With fewer living benefits offered, advisors will go back to the root benefits of variable annuities, death benefits and tax deferred growth.  One advisor believes that 2013 will see a big focus on those benefits over the living benefits of variable annuities.

Written by Rachel Summit

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Even after being named one of the best annuity service companies, Sun Life Financial will no longer sell new annuities in the U.S.  According to The Boston Globe’s “Annuities a cloud over Sun Life,” Steven Syre says that the Canadian insurance company will also be getting rid of 800 jobs.  Around half of the jobs lost will be in the New England area.  Some employees will remain to offer service to all of the Sun Life clients who already hold annuities and life insurance policies with the company.  They will continue to sell insurance policies as well.

It hasn’t even been two years since Sun Life put out a massive marketing campaign to increase their name recognition in the U.S., so leaving the annuity market is a huge disappointment to the company.  They spent $37.5 million to have their name on the Miami Dolphins football stadium for five years.  But with low interest rates and crazy volatile markets, variable annuities have been a thorn in many insurance companies’ sides recently.  They offer great guarantees to the annuity purchaser, but the guarantees have hurt insurers’ bottom line.

After Sun Life’s stock went down 40%, they made the decision that exiting the annuity business in the U.S. would be in the company’s best interest.  They chose to exit a market that is riskier and more volatile for insurers because it takes the risk away from investors.  Manulife, John Hancock’s parent company, also ran into troubles with its U.S. annuity business.  They have lessened the distribution of the products that helped cause them a $1.3 billion third quarter loss.  Let’s hope that as the markets improve, so too will the annuity choices of these insurers.

Written by Rachel Summit

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For those looking for a new option to guarantee lifetime income, Sun Life Financial has both a new variable annuity and a new living benefit rider.  A company press release introduces the variable annuity, Sun Life Solutions, and the living benefit rider, Sun Income Vision.  Sun Life says that these products will help advisors customize retirement plans in a cost effective way.

There are many investment options from which to choose with the Sun Life Solutions variable annuity.  The Sun Income Vision rider lets you lock in your benefit base and any annual increases in your benefit base without worrying about any decreases in the market.  In addition to your investment choices, there are also choices for death benefits and withdrawal charge options.

Sun Life highlighted some of the top benefits of their variable annuity: earnings grow tax-deferred, there are 20 different money managers from which to choose, expense and mortality charges can be down to 1%, and options for death benefits at many different prices.  Some highlights of the living benefit rider are guaranteed lifetime income, equity participation up to 70%, yearly increases in your income if the underlying account increases, and low annual benefit costs.

Speak with an expert at Annuity FYI if you have any questions about this new variable annuity product.

Written by Rachel Summit

According to Investment News’ Darla Mercado, financial advisors are more loyal to Jackson National Life Insurance Co.’s variable annuity products than to any other company.  In the article, “Advisers most loyal to this VA provider,” we learn that Jackson National had the best variable annuity reviews followed by Prudential Financial Inc.  Jackson moved up from second place last year to throw Prudential out of the top spot this year.

Cogent Research performed the study of over 1,500 financial advisors.  They were asked what percentage of their business was dedicated to variable annuities and they rated their happiness with certain variable annuity factors.

Jackson’s internal wholesaler support had such a high ranking that it helped them grab the top spot.  Prudential had the highest variable annuity reviews for different product features, even though they didn’t get the top spot overall.  Advisors liked their guarantees, especially the Highest Daily feature.  Jackson does have nearly 100 subaccount choices as well, which still helped them reach number one.

The ChoicePlus variable annuity from Lincoln National kept them in third place this year.  Ameriprise Financial maintained their fourth place spot year to year.  Nationwide took the fifth spot from Ohio National, who came in seventh.  MetLife was in sixth place this year as well as last.  Sun Life, Allianz Life, and Transamerica finish the top ten for variable annuities.

Written by Rachel Summit

After a period of time where variable annuity products that were fee-based had a bad reputation, some of the biggest annuity companies are revamping the products.  Reuters Linda Stern discusses this new trend in her article “Analysis: New fee-only annuities aim to move upscale.”  More advisors are changing to fee-only practices now and insurance companies are making new products to attract them.  Retirement security has become more important than ever before during the past few years causing investors to change their willingness to pay more for better guarantees, like those offered with annuities.  More affluent investors tend to use fee-only advisors and they really appreciate the tax-deferral that comes with a variable annuity.

No-load, or fee-only, variable annuities are a very small portion of the total variable annuity market, but they are increasing yearly.  This year’s sales are expected to be 22% higher than sales in 2010.  Some of the big name companies introducing new fee-only variable annuity products include Allianz Life, AXA Equitable, Prudential, Lincoln National, and Sun Life.  In addition to the appeal of deferring taxes on all growth in the variable annuity, death benefits are another popular option for investors in these products.  Even fee-only variable annuities where you don’t pay commission are not right for everyone.  Depending on the mutual funds the annuities are tied to, your fees could be as much as commission on a basic variable annuity.  As with many annuities, getting past the preconceived notion the name carries can be the biggest hurdle for those who don’t understand all the benefits that come with a variable annuity.