Allianz bumps rates on Income Protector

Allianz Life Insurance Co. of North America is raising the roll-up rate on its Income Protector variable annuity rider, citing better-than-expected capital markets.

In a filing with the Securities and Exchange Commission last Tuesday, the insurer said it will increase the annual rate at which clients’ benefit base grows to 6%, from 5%. The benefit base is not a pool of money that VA customers can use but rather a value that’s used to calculate income withdrawals in connection with the rider.

Chief distribution officer Tom Burns explained that the equity market’s volatility index and rates on 10-year Treasury notes are more accommodating than expected, allowing Allianz to bump up rates when many of its competitors are pulling back. The company set a parameter of 30 for the CBOE Volatility Index (VIX) and a downward limit of approximately 1% to 1.5% for the yield on 10-year Treasuries.

These days, the VIX is trading in the mid-teens, while 10-year Treasuries are yielding around 1.63%.

Allianz plans to tell reps about the change Oct. 12, Mr. Burns said.

The low-rate environment has led to a lot of changes in the VA space recently. On Sept. 17, the insurer stopped taking additional purchase payments into a number of its older VA contracts, including the Allianz High Five, High Five L, Valuemark II, Alterity and Rewards contracts. Legacy Vision contracts that were issued before Aug. 17, 2009, also were subject to the Sept. 17 purchase payment limit.

The carrier’s executives are confident that rates will rise, but hope that it doesn’t spark unreasonable product competition in the VA space.

“Rates will rise again at some point,” said Eric Thomes, senior vice president of sales at Allianz. “But we hope the VA arms race doesn’t return.”

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