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Variable Annuities Change to Benefit Everyone Involved


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.

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