MetLife gets back in the variable-annuity-with-living-benefits game

Guaranteed lifetime withdrawal benefits are back

Feb 13, 2015 @ 3:18 pm

By Darla Mercado

Longtime variable annuity player MetLife Inc. is stepping off the sidelines and getting back into the game as it launches a new living benefit rider.

The New York-based insurer will release a new guaranteed lifetime withdrawal benefit rider, called FlexChoice, for sale on Saturday, Feb. 14. MetLife filed the contract with the Securities and Exchange Commission in November.

Readers will recall MetLife's meteoric rise up the variable annuity sales charts in 2011, when it brought in $28.4 billion in VA sales thanks to an attractive living benefit — the GMIB Max — it launched that year. That product went through subsequent revisions in order to bring the sales down to levels deemed more reasonable by management. MetLife's toned-down approach to VAs since then has led to results: sales were $6.3 billion in 2014.

“We've been actively selling the GMIB, but it's been a little uncompetitive,” said Elizabeth Forget, executive vice president of MetLife Retail Retirement & Wealth Solutions. “We spent time de-risking the variable annuity business, analyzing the space and designing a product that allows us to be in line with the competition on key features that are important to clients and advisers — and that allow us to meet profitability standards.”

For this latest release, MetLife went with a GLWB, as it's “more accepted in the market,” Ms. Forget added. The feature has a 5% roll-up.

The new FlexChoice currently costs 120 basis points, five basis points cheaper than when it was filed with the SEC. There are two versions of the rider: the Level and the Expedite.

With FlexChoice Level, clients can receive a steady rate throughout their lifetime. If a client takes the first withdrawal between ages 65 and 74, he can receive it at 5% for life. This comes down to 4% if it's the joint version.

With FlexChoice Expedite, a client ages 65 to 74 can take 6% withdrawals, but will receive less income depending on the age when his account hits zero. From there, the client, if he's 79 or under, will receive 4.5% income payments from MetLife for the single version of the rider. That number is adjusted to 3.5% for joint.

“One is geared more for people with less concern about the lifetime income component, and the other is for those who are worried about that and who want the security piece,” said Tamiko Toland, managing director, retirement income consulting at Strategic Insight. “There is something elegant about presenting it this way because it doesn't force people to learn actuarial science: You see it in a way that's tangible.”

Ms. Forget noted that clients don't have to decide at issue whether they want to go with a single life or joint life version. “People get married, they divorce and things change over 10, 15, 25 years,” she said. “This gives them the option to say, 'We don't have to decide today, and we can get 5% income at the 120 [bps] rider fee, which is competitive, until we run out of money.'”

Naturally, MetLife has taken risk management measures in light of the new product features, but Ms. Forget said the options have opened up compared to the GMIB Max feature. There is a restricted list of funds that clients can choose from, and 80% of the client's allocation has to be in MetLife's Protected Growth Strategies — portfolios that buffer accounts from sharp market swings. Twenty percent of the allocation can go toward fixed-income or balanced funds.

“We'll be able to see some nice business and regain market share in this piece of the VA market,” Ms. Forget said. “It provides income when clients want it and flexibility when they need it.”

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