SALB story: Loring Ward to offer stand-alone living benefits

With life insurers pulling back from the variable annuity business, other financial companies are looking at ways to help savers generate income. One, Loring Ward Securities Inc., aims to come out with a stand-alone living benefit — a product that will throw off income in an investment portfolio without the use of a VA. The turnkey asset manager is in talks with The Phoenix Cos. Inc. and Transamerica Life Insurance Co. to provide a guaranteed-income rider. That rider will wrap a portfolio combining Loring Ward's portfolio strategies with funds from Dimensional Fund Advisors, confirmed Steven J. Atkinson, executive vice president of advisor relations at Loring Ward. These so-called SALBs likely will provide clients with 4% to 5% income benefits and aim for an allocation that's split evenly between equities and fixed income, he added. The offering will target especially fee-based financial advisers. Stand-alone living benefits essentially function as a lifetime-income rider that's sold separately from a variable annuity chassis, eliminating costs such as the mortality-and-expense fee that's tied to a VA. The income rider is linked to an investment account that's held outside the life insurance company issuing the income benefit. Nevertheless, the life insurer still has some say in how aggressive the investments can be, as it still has to hedge against market risk. Loring Ward is also in talks with Nationwide Life and Annuity Insurance Co. to craft a portfolio that will be used as an investment option in the carrier's variable annuity suite. Mr. Atkinson noted that with life insurers retrenching at the moment, now is as good a time as any to get into the annuity and retirement income space — provided carriers are willing to provide solutions at lower margins. “The margins are squeezed at the carriers,” he said. “But there is a need [for retirement income], and companies must be willing to adapt, even with lower margins. You have to build the right solution.” He added that carriers previously have oversold variable annuities. He also noted that their pullback from VAs signals a shift from a product focus to a emphasis on service — namely providing lifetime income.