Lincoln Enters the Buffered VA Market

Lincoln Financial jumped into a fast-growing segment of the variable annuity market with its first buffered VA.

The company’s Level Advantage is being sold through banks, wirehouses, independent broker dealers and registered investment advisors, said Brian Kroll, head of Lincoln Annuity Solutions. Level Advantage will be available for commission and fee-based sales, he said.

“We are expanding the markets in which we participate and the index VA market is one that is growing and one we've had our eye on,” Kroll said. “We've seen a lot of distribution partners be active in that space.”

The $9.2 billion buffered VA market grew 25 percent last year over 2016 and the market “looks like it’s continuing to grow,” he said.

Other insurers, looking to take advantage of buffered VAs’ hot streak, have recently entered the market as well.

A VA for a Low-Rate Age

Buffered VAs are structured to protect, or buffer, buyers against most market losses – but not huge losses – in exchange for a higher cap on credited interest.

Consumers like buffered VAs because they offer a measure of protection in an aging bull market while insurers like these products because they don’t have the same kind of guarantees that come with more traditional VAs.

Traditional VA guarantees are expensive to honor when interest rates are low.

Company executives had previously announced their entry in the buffered VA market, a bright spot in an otherwise shrinking overall VA market.

Lincoln was the No. 4 seller of VAs with $7.1 billion in sales last year.

Retirement savers are concerned about protecting their assets and 40 percent of investors say that any loss will require them to adjust their savings and retirement plan goals, according to an April survey by the company.

Product Features

Level Advantage comes with the option of buying an income rider, which allows contract holders to turn the account value into a lifetime income stream while the annuity value continues to grow, Lincoln said.

Lincoln offers its i4Life income rider on other VAs and indexed annuities.

Four indexed account options are available with Level Advantage: the S&P 500, the Russell 2000, the MSCI EAFE Index and the Capital Strength Index.

Investors can choose from three contract term options including a one-year, six-year and a six-year annual “lock option,” after which they can reinvest into another term.

Investors can also choose to protect themselves from market losses of 10 percent, 20 percent, 30 percent and 100 percent, the company said.

The 100 percent protection buffer is for clients who don’t think the market will perform, Kroll said.

“It offers them a safe place for their money,” he said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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