A pair of new index variable annuities launched last month are expected to help Allianz Life Insurance sell a record volume of the product in the second quarter, a company product expert said Tuesday.
The second quarter ends Friday.
The company sold over $420 million worth of indexed variable annuities in the first quarter and the category is a bright spot in an otherwise contracting variable annuity market.
“We’ve gotten really, really good feedback from this product category in general,” said Matt Gray, senior vice president of product innovation with Allianz Life.
Advisors and consumers are attracted to the simplicity of Allianz Index Advantage ADV and Allianz Index Advantage NF, both of which were launched last month, he said.
The ADV version is designed to be sold by fee-based advisors and the “NF” version removes the 1.25 percent product fee for the index strategies in exchange for a lower cap imposed on index gains.
The NF version, which is similar to the company’s Index Advantage product in the market since 2013, is targeted at commission-based advisors and appeals to consumers and broker-dealers that are more fee sensitive, Gray said.
Index Advantage NF comes with a seven-year surrender charge.
Broker-dealers are still adjusting their product shelves to meet the requirements of the Department of Labor’s new fiduciary rule, the first stage of which went into effect June 9.
“Broker-dealers are at all different stages of maturity,” Gray said.
Bright Spot in Slumping Market
Allianz Life sold $1.45 billion worth of indexed variable annuities last year, compared with $592 million for traditional variable annuities.
It is the first time index variable annuities have outsold the company’s regular variable annuities, the company said.
The two new indexed variable annuities, launched May 24, offer just enough index strategies “to help clients dial in their risk-return trade-off,” but not so many permutations as to confuse advisors and investors, Gray said.
Insurers like indexed VAs because they require less capital to support than traditional variable annuities.
Traditional variable annuities come with lifetime income guarantees, which some insurance companies have found difficult to honor with interest rates still low. Those VAs offer mutual fund subaccount allocations, living benefits and optional income riders with contract fees typically deducted from the fund performance.
By contrast, indexed variable annuities offer fewer subaccounts, no living benefits, no lifetime income riders and commit investors to shorter terms. Contract expenses are factored into the cap rate.
Unlike fixed indexed annuities that protect annuitants from market losses, indexed VAs expose policyholders to losses beyond a protection buffer offered by the insurer.
Buffers typically protect investors from market dips of 10, 20, or 30 percent after which policyholders take on the remaining exposure.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]