Two of the largest variable annuity sellers sharply pulled back on additional premiums into existing contracts during a busy third quarter for the sellers.
Two of the largest variable annuity sellers sharply pulled back on additional premiums into existing contracts during a busy third quarter for the sellers.
This summer, MetLife Inc. and Prudential Financial Inc. both tightened the reins on investors' ability to add more money to their existing variable annuities, according to Morningstar Inc.'s roundup of quarterly variable annuity filings with the Securities and Exchange Commission.
MetLife Inc. on July 15 filed with the SEC to limit additional payments into variable annuities with its Guaranteed Minimum Income Benefit Max rider and its Enhanced Death Benefit Max rider, which are known as the GMIB Max I and EDB Max I.
The filing blocked additional payments into the contract starting Aug. 9 unless the contract's account value was below a minimum value or if the rider charge was greater than the value of the account.
Followers of the VA industry will recall the GMIB Max — originally released in May 2011 — spurred massive flows into MetLife, as the product offered 6% compounded growth and 6% withdrawals per year based on the benefit base. Similar benefits for new products have become scarce in the industry, so it only makes sense that advisers add to existing contracts.
Prudential, meanwhile, filed June 28 with the SEC to curb additions to contracts with the Highest Daily Lifetime Income rider, the Spousal Highest Daily Lifetime Income rider or the Highest Daily Lifetime Income rider with Lifetime Income Accelerator feature. As of July 29, those affected clients will be subject to a $50,000 annual limit on additional payments in any benefit year after the first anniversary of the benefit effective date.
Prudential spokeswoman Lisa Bennett noted that the change did not affect annuity contracts with Highest Daily Lifetime Income 2.0 or 2.1. “The $50,000 annual cap allows many investors to make contributions to SEP IRAs and other retirement plans originally set up to accommodate annual contributions,” she said. “We consider this change to be a prudent risk management measure in keeping up with our overall goal of balancing the needs of our clients while protecting the guarantees and assets they entrust to us.”
Nationwide Life and Annuity Insurance Co. also filed limits with the SEC that would allow it to curb additional payments into its lifetime-withdrawal benefits, which are 5%, 7% and 10% lifetime-income options, according to Morningstar.
“Unlike moves to limit additional contributions by some competitors, these clients will still be able to contribute up to $50,000 a year — up to $1 million in total premium — which is enough to accommodate the annual savings needs of many investors,” Nationwide spokesman Dace de la Foret said.
These days, advisers are annoyed about funding limits, which have become commonplace as insurers seek to limit their exposure to long-standing liabilities tied to living benefits. But they are moving on to other insurers and other contracts that are open to additions.
“The brokers were shoveling a lot of money into the older products for better benefits for the clients,” said Kraig Lange, first vice president and manager of the insurance department at Stifel Nicolaus & Co. Inc. These recent limits on subsequent premium payments “weren't well received, but we all got over it,” he added. Advisers at Stifel are selling policies from Jackson National Life Insurance Co., Lincoln Financial Corp. and Pacific Life Insurance Co., and they continue to recommend Nationwide and Prudential, Mr. Lange said.
Not all insurers are looking to take their foot off the gas on variable annuity sales. Some have filed for product enhancements that up the ante on withdrawal percentages. Such is the case with Securian Financial Group Inc., which added new income benefits in October — a suite of living benefits called MyPath.
Dan Kruse, second vice president and individual annuity actuary at Securian, noted that staying in the annuity game is a balancing act in terms of product development, moderating volume and keeping a close eye on the relationships the insurer has with its distributors.
“We aren't going to write business we don't want to write, but with a smaller number of distribution partners, I can keep market share in play: How much risk are you willing to take on before you undermine your distribution?” Mr. Kruse said. “Are we turning back relationships? No. But are we focused on which ones we want to go deepest on? Yes.”
