Forethought Life Broadens Platform, Launches First SPIA

Forethought Life Insurance launched of the company’s first single premium immediate annuity (SPIA), the “missing piece” to the company’s annuity platform of fixed, fixed index and variable annuities, the company said.

The SPIA, marketed under the brand ForeCertain, is available in 49 states and the District of Columbia, said Global Atlantic Financial Group, Forethought's parent, in a news release. The product is not available in New York due to regulatory hurdles.

ForeCertain will be distributed primarily through banks, independent, regional and national broker-dealers as well as independent marketing organizations, the company said.

Global Atlantic declined comment on commission rates paid by ForeCertain, but SPIAs — which bring the lowest rates of any annuity category due to their simplicity — typically reward agents with commissions ranging from 0.5 percent to 4 percent of premium.

A fee-based version of ForeCertain, developed to meet the Department of Labor’s new fiduciary rule, is also available, the Indianapolis-based company said.

The rule, which raises investment advice standards and is designed to encourage the move away from commission-based sales, goes into effect beginning April 10.

Rate Hikes a Bonus

SPIA sales rose a solid 11 percent to $7.2 billion in the first three quarters of 2016 compared with the year-ago period. Those figures lagged fixed annuity sales, which rose 25 percent to $91.5 billion in the same year-over-year period, according to LIMRA Secure Retirement Institute.

Annuity companies give advance notice of product introductions and ForeCertain’s introduction wasn’t related to the interest rate increase, company executives said.

Last month’s quarter-percent increase in a benchmark lending rate by the Federal Reserve, which came on the heels of a quarter-percent increase in December 2015, offers more sizzle to fixed products that have suffered from a long period of low rates.

The 50-basis point rise in rates in the past 13 months, coupled with the need for guaranteed income as companies freeze defined benefit pension plans, should augur well for a newcomer to the SPIA segment.

Adding ForeCertain to the company’s annuity portfolio is part of Forethought’s “consultative approach” to the market, Forethought executives said in an email. Wholesalers and advisors determine a client’s need, and then choose the right product from inventory, they explained.

In the past, many insurers and wholesalers would simply adapt a single annuity product to the need, which often served insurers to a greater degree than it did annuity buyers.

“This distribution model allows us to provide advisors with a consultative approach that’s client-centric and not based on the sale of one particular product,” said Paula Nelson, head of Retirement Distribution for Global Atlantic, in a news release.

Simple Product for a Complex World

Robert Arena, president of Retirement and Life at Global Atlantic, said retirees are “looking for certainty in an uncertain world.”

Just how uncertain the world has become was underscored by the events of 2016, which will surely go down in the record books.

Voters last year upended expectations on both sides of the Atlantic, and in the U.S., President-elect Donald J. Trump has sent markets to record highs, defying many pundits.

In short, the world appears as topsy-turvy as it has been in a generation.

“ForeCertain provides an uncomplicated means of generating reliable retirement income that can supplement existing sources such as pensions or Social Security,” Arena said.

SPIAs are considered the simplest of all fixed annuities, but even SPIAs come with income options — in ForeCertain’s case nine options.

They range from single-life and joint-life annuity with a guaranteed payment period, single-life and joint-life cash and installment refunds, and a guaranteed payment period, the company said.

Other benefits include turning the SPIA within a retirement account into a qualified longevity annuity contract, or QLAC, also known as a deferred income annuity, or DIA.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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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 cyril.tuohy@innfeedback.com.