For Jackson National Life Insurance Co. and the reps who sell its variable annuities, patience during year-end variable annuity sales suspensions has paid off.
By now, advisers know that the carrier has blocked off sales for the richest version of its LifeGuard Freedom Flex and Freedom 6 Net guaranteed minimum withdrawal benefit contracts. It's a temporary suspension that will run from Sept. 15 to Jan. 12.
Some version of this has happened in the past. In 2012, the carrier blocked 1035 exchanges and qualified asset transfers into variable annuities with guaranteed living benefits from Nov. 13 to Dec. 15. Exchanges and transfers into these annuities were blocked again in 2013 from Oct. 25 to Dec. 16.
Though advisers at the time grumbled because they had to hold off on those Jackson VA sales during the end of the year, many of them ultimately completed transactions in the first quarter of the following year, according to broker-dealer executives.
“In a lot of cases, if you believe that Jackson's the right answer, a six-week period isn't a long time to wait, given the normal distractions in advisers' and clients' lives,” said Judson Forner, director of investment marketing at ValMark Securities Inc. “We didn't see a ton of business leave Jackson, but rather it was delayed in place when the suspension was lifted.”
That observation was shared at other broker-dealers.
“If you use the VA today or two months from now, it doesn't make that big of a difference — not if you're waiting for a better income proposition,” said Scott Stolz, senior vice president of Private Client Group investment products at Raymond James Insurance Group. “You know you're going to sell it. Why not just wait?”
In 2012, Jackson had a strong third quarter, with $5.35 billion in sales, according to data from Morningstar Inc. Sales slowed sharply in the fourth quarter to $4.17 billion, but then jumped modestly in the first quarter of 2013 to $4.31 billion.
Isolating for only sales of VAs with guaranteed living benefits, Jackson sold $4.7 billion in the third quarter of 2012, followed by $3.3 billion in both the fourth quarter of 2012 and first quarter of 2013, according to data from the insurer.
In the fourth quarter of 2013, sales hit $5.09 billion for Jackson's variable annuities and then jumped to nearly $6 billion in the first quarter of this year, according to Morningstar. The company sold $3.5 billion of variable annuities with guaranteed living benefits in the third quarter of 2013, $3.7 billion in the fourth quarter and $4.5 billion in the first quarter of 2014, according to data from the insurer.
Jackson National's experiences was not the pattern throughout the industry. In fact, competitors didn't enjoy the first-quarter bump, according to data from Morningstar.
Lincoln National Corp., for instance, sold $3.38 billion in variable annuities in the fourth quarter of 2013 and $2.90 billion in the first quarter of 2014. SunAmerica also experienced a slight decline in that period, as sales fell from $3.29 billion in the fourth quarter of 2013 to $2.99 billion in the first quarter of 2014. The same goes for Transamerica Life Insurance Co., which had $2.28 billion in VA sales during the final three months of 2013, and $2.01 billion in the first three months of 2014.
So will Jackson National see a carryover effect in 2015, with VA sales spiking in the first three months of the new year after the suspension on its richest benefit is lifted?
John McCarthy, director of insurance solutions at Morningstar, believes that effect might be limited this time because the insurer has other options available. “It's not a complete cutoff like the other [suspensions] were; you still have some tiers available to you,” he noted.
That seems to be playing out at some firms so far.
“We're seeing flows into the Jackson contract as of this time because of the open architecture,” said Zachary Parker, first vice president, income and distribution products at Securities America Inc. “It's a lower guarantee but they keep the open architecture.”