Last month brought about a lot of changes to the annuity market, as May often does. In Darla Mercado’s Investment News article, “It must be May in VA-land: Payout cuts, price hikes, new products,” she writes about all of the variable annuity changes common to the month of May. Changes over the past couple of years have been consistent. Fees are higher, equity market risk is lower, and living benefits are not offered up as they used to be. Many companies who sell variable annuities have made sweeping changes so that they are not taking on large amounts of risk and accepting market flows that could be absorbed elsewhere. Those companies who haven’t tweaked their variable annuity business are jumping into the changes now.
MetLife made one of the biggest changes of the year, but it was not with a variable annuity. Their Shield Level Protector is a single premium annuity that combines indexed annuity features with those of a structured product. The annuity is tied to one of five different indexes, offers a few death benefit options, but does not have any lifetime income benefits. To keep themselves safe, MetLife has capped some of the potential earnings for their new annuity. The company points out that this annuity is not meant to be an income generator and it’s target market is pre-retirees rather than those very close to retirement. The Shield Level Protector helps you accumulate assets while protecting your money. AXA Equitable has a structured product similar to MetLife’s annuity and Allianz Life is releasing one later this year. Insurance companies like these products because clients’ accounts won’t grow quite as much as older variable annuities and they don’t have the long term lifetime payment liabilities.
Lincoln National’s first quarter variable annuity deposits increased 35%. They are decreasing living benefit riders for joint survivorship annuities in order to decrease their new premium flows. Jackson National increased prices on their LifeGuard Freedom Flex GMWB. The maximum charges went from 2.7% up to 3%. They are also no longer offering quarterly step-ups on some of their single life annuities, but you can still get the quarterly step-ups with the joint life products. The SafeGuard Max GMWB is no longer offered by Jackson. These companies are not trying to be stingy or hurt consumers though, they are doing what they need to do to stay in business in an economic environment that has been difficult at best for the past 5 or so years.
Nationwide Financial is one of many companies who are offering new funds to manage their volatility strategies. This strategy changes the equity exposure of the company’s clients as the markets increase and decrease. Other companies are offering more choices for investments, including Jackson National. It’s Elite Access variable annuity has 20 additional sub-accounts to give clients access to more investments rather than offering lifetime income. Prudential Annuities has increased their number of asset allocation portfolios to 21 to give more options to consumers. These changes that occurred in May are all settled now in June as we await the next changes to come in the variable annuity marketplace.
Written by Rachel Summit