By Linda Koco
MetLife has decided it’s time to get back into the guaranteed lifetime withdrawal benefit (GLWB) market for variable annuities (VAs).
The carrier had pulled its older GLWB rider from its core VA nearly four years ago as part of a derisking strategy, said Elizabeth Forget, executive vice president-retail retirement and wealth solutions.
Now, MetLife wants to get back into the GLWB market and be “more competitive,” she told InsuranceNewsNet.
To do that, MetLife is rolling out a new GLWB rider for its flagship VAs. In general, GLWB riders guarantee lifetime income based on withdrawals and insurance guarantees.
A year in the making, the new rider has features that Forget said enhances flexibility in unique ways as well as features that are comparable to other currently-sold GLWBs.
Competing on GLWB
The debut comes in the wake of declining VA sales for the carrier. MetLife ranked eighth in industrywide sales for the first nine months of 2014, according to LIMRA estimates. That’s down from sixth place in the first nine months of 2013, third place in the first nine months of 2012 and first place in the first nine months of 2011.
“Eighth place is not a competitive position,” Forget said. MetLife wants to change that.
“We are committed to the retirement market, and we want to have a competitive product in the variable annuity living benefits market” as part of that commitment, she said. That product is the new GLWB.
The company does have a guaranteed minimum income benefit (GMIB) rider available for sale, she noted. But that rider requires annuitization and its withdrawal rate is 4 percent. That’s not competitive in today’s market, Forget said.
The new GLWB does not require annuitization, she said. It guarantees lifetime income — for instance, at 5 percent at age 65 — first by withdrawals from account value and, if exhausted, from the insurance guarantee under the GLWB. The product has 5 percent rollup. People “get” the GLWB, Forget said.
MetLife dubbed the rider FlexChoice, to emphasize what its developers believe to be the rider’s distinguishing feature. “We call it ‘real life flexibility,’” because the riders have features that can adjust to changes that happen in client lives, Forget said.
For instance, a spousal flexibility provision does not require the client to elect coverage of one person or two spouses at time of policy issue, as is customary in most other GLWBs today.
Instead, a couple can wait to declare, she said. When withdrawals begin, the money is paid out on a single-life basis. When and if the account value is depleted, MetLife will ask the couple to decide whether to take a single- or joint-payout for the GLWB phase of the guarantee. If they elect single-payout, the guaranteed income amount continues as before. If they elect joint, MetLife reduces the payout to reflect two lives, based on actuarial tables.
The deferral allows spouses to defer their decision until a time when they may have a clearer idea of their situation and needs, Forget indicated.
Pricing for this flexibility is factored into the fee for the rider, which is 1.20 percent of the benefit base (value used in computing the withdrawal amount). “It’s not the lowest or the highest (fee) in the industry,” Forget said.
Another flexibility feature is a lump sum option. This kicks in when guaranteed payments under the GLWB are about to begin, she said. It offers the policyowner the option to take a lump sum in lieu of the guaranteed monthly payments. The lump sum is based on factors such as mortality and interest rates.
Other flex features include the ability to start and stop withdrawals; to cancel policy and rider and get back the initial investment (less withdrawals taken); and to cancel the rider only, in which case the rider fee falls off. An optional death benefit is available for an extra charge.
The target market is individuals and couples in the 55 to 65 age range who want to grow and protect their retirement assets and who also want to ensure retirement income, Forget said.
Distribution is through MetLife’s affiliated advisors, who sell the MetLife Preference Plus VA, and through third-party distributors (such as banks, wirehouses, etc.) which sell MetLife’s Series VA.
To keep the rider’s guarantee in force, the policyowner must maintain a certain allocation among risk managed investment funds and meet withdrawal and other restrictions, MetLife said.
InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at [email protected].
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