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Product Review: Athene Amplify

By , with Annuity FYI

Athene Amplify offers buyers both “buffers” and “floors”, investors can pick one or the other with different levels of protection or combine them. A buffer – a 10% buffer is most common – protects investors from the first 10 percentage point decline in the underlying index. Should the S&P 500, for example, decline 20%, their loss is only 10%. If the S&P 500 declines 9% one year, Athene Amplify owners who choose this buffer lose nothing.

Just in case you didn’t notice, the S&P 500 stock market index soared 29% last year—the biggest one-year gain since 2013. It was a reminder – especially for conservative-oriented annuity buyers – that the market generates splendid returns from time to time and often generously rewards participants after a down year.

In this case, the S&P 500 rebounded from a modest 6.6% loss in 2018. For this reason and a number of others, the stock market over time has always been the best financial investment for those with staying power to weather the storm when the market periodically declines.

A relatively new type of annuity – a structured variable or ‘buffered’ annuity – makes it easier for prospective annuity buyers to break into the stock market because, unlike a variable annuity, it offers some downside protection. Hence the adjective, “buffered.” And a recent structured variable annuity entrant – Athene Amplify – is arguably the best of all.
It’s true that popular fixed indexed annuities (FIAs) protect their owners from any market losses whatsoever. But the downside with an FIA is that its owners pay a price for this protection. There are index “participation rates” — i.e., a substantial haircut on the percentage of an annual increase in an index they actually receive. In addition, there are usually caps – limits on the annual increase in a market index in terms of annuity owner remuneration.

Athene Amplify offers buyers both “buffers” and “floors”, and they can pick one or the other with different levels of protection or combine them. A buffer – a 10% buffer is most common – protects investors from the first 10 percentage point decline in the underlying index. Should the S&P 500, for example, decline 20%, their loss is only 10%. If the S&P 500 declines 9% one year, Athene Amplify owners who choose this buffer lose nothing.

With a floor, unlike a buffer, owners who pick it would absorb the first 10 percentage point loss in an index in a given year. Athene would absorb all losses, if any, after that. Essentially, a floor is catastrophic loss insurance.

Athene Amplify owners can invest in the S&P 500, the smaller stock Russell 2000 index or the international MSCI EAFE index – or all three together. If they choose one index, they can invest in it for one year or two years and, in the case of the S&P 500, one, two or six years. If they want to invest in all three indexes, they would have to stay with the investment for six years.

Athene Amplify offers generous participation rates on these indexes, some of which exceed 100%. It also offers unusually high “cap rates” – rates extremely common in FIAs – that limit how much of a gain in an index the annuity owner actually receives. Athene Amplify provides a cap rate of 16.25% on a one-year investment in the S&P 500 and an 18.25% rate on a one-year investment in the Russell 2000. There is no cap at all on an investment in the MSCI EAFE index or any other of these investments if they are made for at least two years.

Athene Amplify customers most typically opt for an investment with a buffer – one uncoupled with a floor – in the S&P 500 index for one, two or six years.

(It should be noted that structured variable annuities such as Athene Amplify are deemed to be securities, while FIAs are not.) Consequently, they can be sold by a broader array of brokers, often with lesser credentials. Nonetheless, the two products compete with each other.)
Structured variable annuities entered the market about four years ago. Now there are about a half dozen of these annuities on the market, and they represent the fastest-growing segment in the annuity industry. According to the Insured Retirement Institute, they generated aggregate revenue of $12.5 billion in the first nine months of 2019, an increase of 62% over the same period a year ago.

FIA sales remain much larger, and not only because there are far more FIAs on the market. Annuity buyers are mostly a conservative lot, and the FIA guarantee of no loss of principal in a down market remains highly appealing. “Many people just don’t want to risk losing any money, period,” says one annuity expert familiar with both FIAs and structured variable annuities.

Still, these folks may be too cautious for their own good. It may make little difference to them but investing in the stock market is not as risky as it may seem – and, of course, it’s even less so with a structured variable annuity. According to research by Athene, in the 91-year period stretching from 1928 through 2019, the S&P 500 posted a positive yearly return 61 times and a negative yearly return 29 times – less than half as often. (One time, the index broke even.)

Perhaps most telling, most annual downturns in the S&P 500 have not been steep. Only six times did the market drop more than 20%. Thirteen times, the market dropped more than 10% but less than 20%. And 10 times, the annual decline was less than 10%. (The smallest Athene Amplify buffer available – 10% – would have eliminated all these investor losses if this annuity existed at the time, assuming investors had invested in the S&P 500 index.)

Athene Amplify offers no income rider. Owners pay a fee of less than 1% a year – less than half of what they would pay for a variable annuity without an income rider. (FIAs without income riders, which are widespread, have zero fees.)

Athene Amplify is available in most states, but not yet in most of the biggest states, including California, Texas and New York. The minimum investment is $10,000.

Prospective buyers of this annuity must keep in mind that there is a risk of loss and no FDIC guarantee to recover losses. This annuity is a security that invests in stock market indexes that can rise or fall. Unlike a fixed indexed annuity, there is no guarantee against potential losses. People who want more information should contact their financial advisor.

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