By Cyril Tuohy
Allianz Life has launched a new indexed variable annuity (IVA) branded as Allianz Index Advantage for investors willing to trade gains in market growth for a level of protection when markets fall.
IVAs differ from their fixed indexed annuity cousins by increasing the amount of potential return through much higher caps on the interest credit coming from the growth of an equity index in exchange for less protection, the company said.
Allianz Life Financial Services President Robert DeChellis said this new product is designed to give the retirement investor frustrated by low interest rates on fixed investments the opportunity to earn more reward as long as the investor is willing to accept “some downside risk in exchange for additional growth potential.”
Frank O’Connor, director of insurance solutions with Morningstar, said the Allianz Index Advantage product was part of a new category of variable annuity (VA) products defined by their “upside potential, downside protection” features.
IVA products are filed as securities with the Securities and Exchange Commission, in contrast to fixed indexed products that guarantee principal, he also said. Even with the recent rise in interest rates, companies are looking to offer more attractive options to annuities investors.
“Issuers are hard-pressed to offer guarantees that sit on their balance sheets in this interest rate environment, so these new products use options strategies to shift more of the risk to the investors balance sheet through caps on upside and sharing on downside,” O’Connor wrote, in an e-mail to InsuranceNewsNet.
The Allianz Index Advantage is similar to AXA Equitable’s Structured Capital Strategies product “in that there is upside potential and a ‘loss floor,’“ O’Connor said.
Index Advantage, approved in 43 states, offers a death benefit protection and allows contract holders to follow an “index performance strategy,” or an “index protection strategy,” the company said. Stock market indexes available to the buyers of Index Advantage include the S&P 500, Nasdaq 100 and the Russell 2000, Allianz said.
Because Index Advantage is so flexible, contract holders can customize their agreements based on accumulation objectives and risk tolerance, DeChellis said. “The product offers a possible solution for those seeking a potential middle ground between their timeline and goals.”
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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