The Department of the Treasury and the Internal Revenue Service released new guidance that is “designed to expand the use of income annuities in 401(k) plans.”
By Linda Koco
There was something for just about every annuity wonk in the beginning of 2013. Forethought is moving forward as a variable annuity player. ING U.S. has snatched up a former Hartford Financial exec to head its fixed annuity business. And, four new products debuted (two deferred income annuities, a new fixed indexed annuity and a new “simpler” variable annuity).
If that has you panting for more, read on for a few details and takeaways:
Forethought: The announcement that Forethought Financial Group Inc. has completed the previously-announced acquisition of the individual annuity new business capabilities of The Harford Financial is a dazzler as is news that the company plans to launch its first variable annuity in first quarter 2013. Forethought has already opened offices in Simsbury, Conn., and Berwyn, Pa., to support the annuity business, and says it will distribute through a broker-dealer which it acquired from The Hartford and has since named Forethought Distributors LLC.
Takeaway: The industry now knows, for sure, that Forethought means to be a player in variable annuities, not just a sign-holder. Annuity pros will therefore be interested in seeing what that new Forethought variable annuity will look like. The fact that the company isn’t starting from scratch–it bought Hartford’s product management, distribution and marketing units—will be important to advisors. After all, Forethought is not a household name in variable annuity circles—not yet, anyhow—so the advisors will want to know about bench strength. For the same reason, it doesn’t hurt that Robert Arena will lead the annuity organization, called Forethought Annuity; he previously led The Hartford’s individual annuity business so he knows the ropes.
ING U.S.: This company just hired David Bedard to lead its fixed annuities business. His name should ring a bell. Bedard was formerly executive vice president of global annuities for The Hartford Financial Services Group and earlier served as chief financial officer of the firm's wealth management business. Now, as ING U.S.’s new president of annuities, Bedard is charged with “driving growth and long-term success for ING U.S. in the fixed annuity market.” The company’s annuities segment includes fixed, fixed-index and immediate annuities.
Takeaway: This is not a ho-hum hire. Bedard will be part of ING’s retirement solutions executive team, which collaborates on overall business strategy and direction. By putting Bedard into the picture, ING is following through on its intensions to align its annuity business with ING U.S.’s overall retirement strategy. Not incidentally, Bedard is a CPA. In the job he’s taking on, that number-crunching capability could come in handy.
Deferred income annuities (DIAs): First out of the gate this year with a new DIA was American General Life Companies. They launched Future Income Achiever, which allows the client to select an annuity income start date between 12 months and 40 years from purchase, and which includes three death benefit options, a medical underwriting option and four annual payment increase options. Just seven days later, The Guardian Insurance & Annuity Co. entered the DIA market with its Guardian SecureFuture Income Annuity. Available for a minimum initial premium of $5,000, this DIA accepts additional payments up to 13 months before the selected income start date. Owners may elect to receive monthly, quarterly, semi-annual or annual income payments, and may change their choice at any time up until the day before the first payment is made.
Takeaway: As noted last year, the DIA market is small but growing. There were six to eight players through year-end 2012, and now there are two more. Carriers are moving in this direction as part of their growing strategy to offer retirement income solutions, and in response to rising consumer demand for such products. Unlike traditional income annuities, these policies allow annuity owners to pick an income start date way into the future, if they like—a “set it and forget it” solution that appeals to some retirement-minded consumers.
Fixed indexed annuity: Security Benefit Life Insurance Co.’s new Foundations Annuity is a fixed indexed annuity that the carrier is labeling as next-generation. The product “capitalizes” on the general account capabilities of Guggenheim Investments, which is a subsidiary of Guggenheim Partners., . In addition, the policy includes an optional guaranteed lifetime withdrawal benefit rider along with a 1 percent bonus on first-year premium payments, three equities-linked interest-crediting strategies, and other features. The carrier is marketing the annuity-plus-rider combo as something that can provide clients with a “missing element” in traditional retirement portfolio drawdown plans, an element that will help maximize guaranteed income.
Takeaway: Since Security Benefit is also a Guggenheim Partners company, it’s safe to say the insurer is leveraging its Guggenheim pedigree. That will be a market differentiator. As for the features, the index annuity world is chock full of products that have a lot of variety in design and features, and this will add to the array. The thing worth noting is that the carrier seems to be positioning the policy squarely in the retirement income arena. Given that the age 65-plus population in the U.S keeps growing—from 31.2 million in 1990 to 40.3 million in 2010-- it’s easy to see why.
Variable annuity: Minnesota Life Insurance Co. made simplicity the focus of its first rollout for 2013, which is a variable annuity series called Guide. Offered as part of the carrier’s MultiOption variable annuity line, the series focuses on the most important benefits for clients, provides living benefits features at an additional cost, and streamlines the investment lineup., Thisis easier for clients to understand and is designed to meet the needs clients describe to their advisors, the company contends. What’s more, it’s a direct response to feedback from many advisors about how complex variable annuities have become, says Chris Owens, national sales vicepresident-retail life and annuities.
Takeaway: The issue of complexity has dogged variable annuities ever since early 1990s when the designs went “modern,” sporting ever-expanding menus of subaccounts, guarantees, riders and options. Certain variable annuity prospectuses have become so long and convoluted, they rival some of the legislation that Congress enacts. It will therefore be interesting to see how these simpler designs fare in the marketplace, and what demographics they attract. In the rollout announcement, Owens points out that the new products offer “less complexity and guaranteed income in retirement.” That combo could be just what the older set wants.
The above are only a few of the annuity developments in the early part of the year, selected more for their variety than anything else. All are rooted in activities and trends of the previous year or years, so it’s not accurate to label them the handiwork of 2013. Still, their debut so soon after the resolution of the fiscal cliff fiasco is somehow reassuring, kind of like the first buds of spring.
Takeaway: The annuity business had a tough go of it last year. Industrywide sales drooped in most lines, certain company deals reconfigured the annuity landscape, certain products were derisked to the bone, and certain advisors and distributors felt stuck in limbo. But 2013 is opening up more like business as usual than like a war zone. That could be a harbinger of a better year this year. Twelve months from now, we will know whether this was an auspicious beginning or not.
Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at email@example.com.
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