It's almost May, and annuity geeks know what that means: the new variable annuity contract filings are here.
In preparation for spring product releases, life insurers spend the first quarter posting new variable annuity contracts with the Securities and Exchange Commission. The filings give some indication as to carriers' thoughts on what the next big product might be. See
here and
here for past product releases.
Thus far, carriers' test kitchens haven't been very busy.
“It looked like a very quiet quarter,” said John McCarthy, senior product manager of wealth management products at Morningstar Inc. “There aren't a ton of new contracts or benefits.”
Filings have been trending downward since the fourth quarter last year, and that continued through the first quarter. It reflects the difficulties carriers face as interest rates remain low.
“A lot of changes have already been done on the product management side,” Mr. McCarthy said. “At the same time, firms have pivoted into the investment-only variable annuity area. Many of those filings are done, and there isn't much insurers can do on the living benefits side until interest rates rebound.”
Nevertheless, there are still a few notable releases out there. Don't forget that earlier this spring MetLife announced its return to the
guaranteed lifetime withdrawal benefits game.
HYBRIDS ARE BACK
Remember the structured product or hybrid annuity? It's back. This time, Voya — once known as ING — is launching its PotentialPLUS annuity, which it describes as a “deferred combination variable, indexed and fixed annuity contract.”
Go
here for a look at the May 1 prospectus filing with the SEC.
Consider the way
structured product annuities generally operate. Clients can receive returns that are linked to an index but subject to a cap that's determined periodically. Downward movement in the index is buffered to a certain extent; carriers can shield clients from a portion of the loss.
The secret ingredient is options: insurers use them to duplicate the performance of the index and to buffer some downside risk.
The Voya product uses four indexes: The MSCI EAFE, Nasdaq 100, Russell 2000 and the S&P 500. All have a maximum buffer of 10%, and all are subject to a one-year segment term — the period for which the index credit is calculated and the cap rate is guaranteed.
Aside from the indexing options, Voya also offers a subaccount, which is called the Voya Liquid Assets portfolio. This is the variable part of the product. Clients also have access to a fixed account in the annuity, which offers a fixed rate of interest, but this account is really a short-term vehicle where money is held until it's transferred to the subaccount or to the indexed options.
This annuity has a seven-year surrender period, with charges starting at 8% and declining to zero at year eight.
AXA's LATEST UPDATES
In a prospectus dated May 1, AXA rolled out the carpet for its
Retirement Cornerstone Series 15.0. It's an update from the 13.0 version.
A notable difference, Mr. McCarthy points out, is the Guaranteed Minimum Income Benefit Multi-Year Lock, newly available on Series 15.0.
Per the filing with the SEC, the benefit base on the GMIB — which is used to calculate lifetime income — can increase with a step-up under one of two formulas.
There's the two-year lock, where the benefit base increases each year to equal the purchase payments the client puts into the contract, compounded by at least 4% each year.
The multi-year lock increases the benefit base annually so that it equals purchase payments compounded by a minimum of 3% each year. This “lock” lasts for the length of the surrender period. The maximum compounding factor for both “lock” options is 8%. The rate used will either be the lock-in rate, or a rate that AXA derives from a formula involving the 10-year Treasury rate.
Another notable feature AXA's adding to its Retirement Cornerstone VA is its RMD Wealth Guard guaranteed minimum death benefit. Clients who use this GMDB will be able to take required minimum distributions after age 70.5 without depleting the amount that will be left to beneficiaries.
ALLIIANZ'S NEW INVESTMENT OPTIONS
Earlier this week, Allianz announced it would add a pair of new investment options to new VA business and its in-force Allianz Vision and Connections variable annuities. Both choices protect clients from market volatility.
The first is the AZL MVP DFA multi-strategy fund, which grants exposure to a range of domestic large and small cap equities, as well as international and emerging markets equities and global fixed income. What's key here is that the fund uses a volatility management strategy when the markets become rocky.
The second is the RCM Dynamic Multi-Asset Plus VIT portfolio, which adjusts its equity allocation upward when markets are favorable and downward when things become risky. The allocation can go as high as 65% when markets are faring well, and decrease as low as 10% in difficult times, according to Allianz.
