Lincoln To Offer First Buffered VA

By Cyril Tuohy

Lincoln Financial is jumping into the booming buffered variable annuity market with its first product next month.

“There are some advantages to our product versus the competition, and we expect that to both help us take market share and expand the size of the market with our presence and wholesaling capability,” said Lincoln president and CEO Dennis R. Glass in a conference call.

He declined to offer product details.

Buffered VAs are a fast growing subsegment of the broader VA market. Buffered VAs are designed to protect, or buffer, buyers against most market losses – but not the huge losses – in exchange for a higher cap on credited interest.

Overall VA sales in 2017 fell 9 percent to $95.6 billion compared to 2016 as insurers pulled back on product guarantees and adapted to fiduciary rules, which made it more difficult to sell commission-based annuities.

Sales of buffered VAs soared 25 percent last year to $9.2 billion compared with 2016.

At Lincoln, first quarter overall VA sales rose 40 percent to $2 billion over the year-ago quarter, the company reported.

The company sold $7.1 billion worth of VAs last year. Lincoln is also expanding into the independent broker-dealer channel.

VA Could Help Stem Annuity Outflows

Lincoln’s new product could help stem the company’s flows out of VAs, particularly as the company adds “significant shelf space,” with distributors, Glass also said.

Sales momentum “is encouraging with respect to reaching positive net flows,” Glass said. “This product could be a potential significant help to that.”

The company reported first quarter net annuity outflows of $606 million compared with outflows of $757 million in the first quarter of last year.

Industrywide net VA outflows reached $71.2 billion last year, nearly double the outflows of $38 billion in 2016, according to Morningstar.

Insurers and distributors like buffered VAs because they are typically shorter-duration products and well matched for an era of low interest rates.

Buffered VAs don’t require as much capital as traditional VAs that come with income guarantees, and adding buffered VAs allow insurers to diversify their VA book.

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

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].