Life insurers haven't turned off the tap on variable annuities, but clients and financial advisers must face the economic realities and the effect on the products, executives contend.
As many insurers pull back on VA living-benefit features, raise fees and step up their use of volatility management strategies at the subaccount level, advisers wonder whether they face an exodus of players from that market. Some companies have stopped selling new contracts altogether, including Sun Life Financial Inc. and The Hartford Financial Services Group Inc.
But a panel of executives at the Insured Retirement Institute's annual conference in San Diego last Monday said that there is still plenty of supply to meet the demand of clients and advisers — provided they are realistic about the capital markets and low interest rates.
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“We don't have a capacity issue; there is plenty of capacity for customers, but it has to be capacity at the right price and the right product design,” said Thomas A. Swank, Transamerica Life Insurance Co.'s president and chief executive of individual savings and retirement.
Executives pointed to the fact that the VA marketplace is significantly less frenetic than it was in 2007, when companies competed feverishly to offer more-attractive benefits.
These days, roll-ups — features that build the benefit base used to calculate lifetime income — as well as the actual withdrawal percentages themselves, have come down from 7% in the market's heyday to about 5% and slightly below. As the offerings become less rich and as pricing changes, companies feel more confident about taking on more business.
“We are going into a market where things are pretty rational,” said Michael Reardon, chief finance officer at Forethought Financial Group Inc., which took over The Hartford's new annuity business capabilities in April.
dmercado@investmentnews.com Twitter: @darla_mercado
