Big VA seller puts the brakes on

Jackson eighty-sixes 1035 exchanges for the rest of the year

By Darla Mercado

Nov 9, 2012 @ 9:45 am (Updated 7:38 am) EST

variable annuities

Brokers got a surprise at the end of the day Thursday when Jackson National Life Insurance Co. announced it was nearing its 2012 limit for total variable annuity premium.

The carrier said that it has about $1 billion left in remaining capacity for the remainder of the year.

As a result, starting Nov. 13, the carrier will no longer take new 1035 exchange business or qualified transfers of assets for variable annuities that offer optional guaranteed living benefits. A 1035 exchange is a tax-free exchange of annuity contracts.

Jackson will resume accepting that business Dec. 15, as long as the total premium at that time is within the $1 billion of remaining capacity. Effectively, this move cuts off 1035 exchanges for the remainder of the year, as it takes weeks to process exchange paperwork, and transfers made in mid-December likely won't be wrapped up until January.

It's the latest pullback from the company, which just last month cut living-benefit features on a slate of variable annuity contracts. For reps, the moves are an about-face from a company that scooped up business from advisers at a time when other major VA competitors were retrenching.

“It was a curiosity why they kept pushing forward, and now we're seeing some reality set in,” said Mitchell Kauffman, an adviser at Kauffman Wealth Services.

'Some concern'

Still, the fact that the insurer is bumping up against its capacity for variable annuity business gives reps and annuity gatekeepers pause.

“When they curtailed their joint living benefits [in October], that didn't seem to be a proactive, orchestrated move,” Mr. Kauffman said. “To have the door shut rapidly like this gives me some concern about how they are managing their risk and capacity.”

“They've obviously reached their capacity for the year and, given the rate of business, one can conclude that they will reach that capacity earlier next year,” said Scott Stolz, president of Raymond James Insurance Group. “What will they do to fix this longer-term? They're putting Band-Aids on a big wound that requires surgery.”

In a statement, Jackson chief executive Mike Wells maintained that the company still is committed to VA space. “While it is always a difficult decision to limit new business production in our highly productive growth and service culture, it is consistent with Jackson's practice to actively manage our risk to avoid a concentration of exposure to any single product in any one year,” he said.