MassMutual’s Capital Vantage is Latest Investment-Only Variable Annuity

Many of our recent blog posts have mentioned the increasing popularity of investment-only variable annuities. Variable annuities with living benefits have become more expensive for insurance companies and therefore, more expensive for consumers to purchase. For this reason, insurers are introducing more investment-only variable annuity products and consumers see their benefits. MassMutual is one of the latest companies to introduce an IOVA, the first one they have ever offered. Greg Iacurci talks about the new product in the Investment News article “MassMutual jumps into a hot investment-only variable annuity market.”

Last month, Massachusetts Mutual Life Insurance Co. introduced MassMutual Capital Vantage, the company’s first investment-only variable annuity. Sometimes these products are referred to as investment-focused or investment-oriented as well. IOVAs don’t offer the living benefits that people have come to expect from traditional variable annuities, but their stripped down benefits drastically lower their costs. The main reasons that consumers are choosing IOVA’s is that they are lower cost, you have a much larger choice of investment options and they allow your money to grow tax-deferred. Capital Vantage offers more than 50 different funds across a broad range of products. Some of the asset managers you can choose from are Oppenheimer Funds, Fidelity Investments and BlackRock. The annuity is offered in a B and C share class, with costs of 100 and 145 basis points. You can also add on a return of premium death benefit for 35 basis points. More insurance companies have been adding death benefit options to their IOVAs to meet consumer demand and increase the benefits.

Total variable annuity sales have seen declines over the past couple of years because of their increasing carrying costs. Sales went down 15.5% percent from 2011 through the second quarter of 2015. During that same time, investment-only variable annuity sales actually increased 93.8% to a total of $5.6 billion. Much of that increase was recent, so we expect these numbers to keep rising. There’s no risk to insurance companies with investment-only variable annuities. That is a sharp contrast to the guarantees that they’ve had to hedge against with traditional variable annuity products. Although fixed indexed annuities have been taking over some of the variable annuity business recently, this article says that IOVAs might just balance that out. They are an effective way to have market exposure while lessening your tax liability. MassMutual is following the investment-only variable annuity trend with their new MassMutual Capital Vantage IOVA.

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