With the equity markets’ recent woes in the past,
According to data compiled for IRI by Morningstar Inc., new sales were $136.6 billion in 2010, up 10.3% from 2009, when new sales totaled $123.9 billion. What’s more, assets reached an all-time high of $1.5 trillion, finally lifting the
“This is all new money,” notes IRI President and CEO Cathy Weatherford. “We are on the front end of a curve of tremendous growth.”
Consumer reticence toward variable annuities, which are essentially tax-deferred investment vehicles wrapped in insurance contracts, seems to be fading, according to Weatherford. “I think everybody was in paralysis for a while,” she says. “But now people are figuring out how to position their portfolios to try to enjoy some growth.
In other highlights from the IRI report:
• Consolidation within the variable annuity industry continued in the first quarter of 2011, with the announcement that Genworth Financial will exit the business.
• In a noteworthy new product development, Western & Southern Financial Group issued VAROOM, or Variable Annuity for Roll Over Only Money. The product offers individual exchange-traded funds from iShares and Vanguard as subaccount options. Until now, ETFs were available in variable annuities only through a fund-of-funds structure. VAROOM carries a lifetime guaranteed minimum withdrawal benefit rider with a fee of 60 or 80 basis points, depending on the asset allocation chosen. The product is available for qualified money only as an IRA for tax-qualified rollovers. The Lifetime GMWB offers 4.5% at age 65 with a highest anniversary value step-up.
• Also in the first quarter, the variable annuity industry’s focus on the fee-only market continued. SunLife issued a no-load contract, one that offers an optional lifetime GMWB rider that allows 5% withdrawals for a 65-year-old individual. SunLife is one of five carriers on LPL’s newly established fee-only variable annuity platform, along with Allianz, AXA, Lincoln and Prudential.
• AXA has also created a version of its Retirement Cornerstone contract for the fee-only market. The total insurance expense on the contract is .65% and the contract carries only a Lifetime GMWB option and a death benefit with the three common step-up methods.
• The first quarter also saw the release of multiple lifetime GMWB riders. For example, John Hancock released one with a 5% withdrawal for a 65-year-old. Ohio National also released a lifetime GMWB with a 5% withdrawal for a 65-year-old.
Steve Garmhausen writes for Financial Planning, a SourceMedia publication.