The Hartford Financial Services Group Inc. has divulged the details of its variable annuity settlement program, which would give certain clients extra cash for dropping their contracts.
In a Dec. 28 filing with the Securities and Exchange Commission, Hartford spelled out the terms of its enhanced surrender value offer, which is available to legacy contract holders who also own the Lifetime Income Builder II benefit rider.
To be eligible, clients must not have annuitized their contract and can't be receiving lifetime- benefit payments from the income rider. The value of their contract can't be below a minimum contract value.
TERMS OF SURRENDER
Eligible customers who take the offer walk away from the variable annuity and any riders associated with it. These clients will get either the contract value on the full surrender date or the contract value plus 20% of the payment base, subject to a cap of 90% of the payment base.
Hartford will calculate the enhanced surrender value as of the valuation date after receiving the appropriate documents from the client.
The value of the contract could decrease between the time that clients are made the offer and when they decide to accept it, which could affect the enhanced surrender value that investors wind up collecting.
Rider charges, surrender fees and other costs won't be applied to contracts that are surrendered, but clients could face taxes if they cash out of the contract.
Contracts that are affected include the Director M and Hartford Leaders.
Hartford isn't the first insurer to make such an offer on legacy variable annuities.
Similar moves have been made by Axa Equitable Life Insurance Co. and Transamerica Life Insurance Co. Axa offered certain customers an increase in their account value in exchange for dropping their death benefits.
Executives at major broker-dealers report few customers' jumping at the Axa and Transamerica offers, but they predict that more clients will be eligible for Hartford's offer.
“It's a great option if you're on your deathbed, but if you're planning to live to 100, it can go either way,” said Zachary Parker, first vice president for income and distribution products at Securities America Inc.
dmercado@investmentnews.com Twitter: @darla_mercado
