Some Allianz variable annuities hit with fee hikes as firm dials back

Though many clients will see fees rise for protection riders, some will experience a decrease.
OCT 11, 2013
Fee hikes are on the way for a number of clients who own variable annuities from Allianz Life Insurance Co. of North America. Clients who own the Investment Protector variable annuity rider will see a 35-basis-point increase in their rider charges starting Aug. 19. The new charge will be 1.15%, 1.25% or 1.30%, depending on when the contract was issued. The Investment Protector is an accumulation benefit that protects investors' principal and locks in a percentage of the highest contract value for a date that's at least 10 years in the future. The affected block of business was originated in 2009, according to Adam Brown, assistant vice president of actuarial product development at Allianz. This product accounted for about 15% to 25% of the insurer's sales of variable annuities with living benefits. “As we look to manage our business, especially our in-force business, we manage it in blocks,” Mr. Brown said. “Unfortunately in this case, because of low rates and the immediate nature of the guarantee, we've had to raise fees.” The cost of Income Protector rider contracts with a 7% or 8% annual increase — a boost in the value of the benefit base used to calculate income payments — will increase by 20 basis points. The new charge for single life versions of the rider will be 1.35% or 1.40% and 1.40% or 1.50% for joint life, depending on when the contract was issued. On the flip side, Income Protector contracts that have a 5% annual increase will have a 10-basis-point cut in costs. The new charge for single and joint life is 1.10%. The richer versions of Income Protector were written in better economic times. However, the version with the 5% increase was written when interest rates were even less optimal. The improvement in rates since then has allowed the insurer to cut costs a bit, Mr. Brown observed. Since July 22, new sales or new additions of Investment Protector also have been subject to some changes. In the past, the feature gave clients 100% of their highest anniversary value guaranteed in 10 years, but clients now will receive 80% of their highest anniversary value or a return of purchase payments at the end of the 10-year period. “The low-interest-rate environment and the relatively volatile equity market have put pressure on the [guaranteed-minimum-accumulation-benefits] market,” Mr. Brown said. “We had what we believed to be the strongest benefits in the market, but we've dialed it back a little bit. They're still very strong.”

Latest News

'Bogged down' advisors just want to have fun (again)
'Bogged down' advisors just want to have fun (again)

Jim Cahn, of Wealth Enhancement Group, lifts the lid on his firm's partnership model, his views on RIA M&A, and the widely slept-on reason why advisors are merging into larger organizations.

Vestwell unveils new emergency savings account offering
Vestwell unveils new emergency savings account offering

The fintech firm is cementing its status in the workplace savings space with its latest ESA offering, which employers can integrate into their existing benefits package.

'Money Mimosas' and other ways to show your Valentine financial love
'Money Mimosas' and other ways to show your Valentine financial love

Wealth managers offer unique ideas for couples to grow closer emotionally and financially.

Limra research finds financial confidence on the rise among Black American workers
Limra research finds financial confidence on the rise among Black American workers

Survey findings suggest increased sense of financial security and more optimistic 2025 outlook, while highlighting employers' role in ensuring retirement readiness.

DOGE efforts sideswipe muni bonds backed by federal lease payments
DOGE efforts sideswipe muni bonds backed by federal lease payments

Falling prices for some securities within the $4 trillion state and local government debt market spotlight how the push to shrink spending is sending shockwaves across the US.

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.