Lincoln’s FIA Rider Signals Bullish Outlook for FIAs

The launch of a new income rider on three families of indexed annuities indicates that Lincoln Financial product managers remain confident in the future of fixed indexed annuities.

That confidence comes on the heels of disappointing second-quarter sales.

Lincoln’s i4LIFE Indexed Advantage rider is available on the company’s New Directions, OptiBlend, and OptiChoice FIAs. These families of FIAs are sold by commission-based advisors.

“We believe that for most people there will come a time when they need to replace that paycheck and i4LIFE is an excellent way to do that,” said Brian Kroll, head of Annuity Solutions for Lincoln Financial in Radnor, Pa. “The rider is really to broaden our portfolio and bring tools from our variable annuity suite to our FIA suite."

The rider for the index family is derived from an older cousin, the i4LIFE Advantage rider, available on the company’s variable annuity product line since 2000.

Good Run on VA Side

Since then, holders of Lincoln variable annuities have made more than 150,000 elections of i4LIFE Advantage, representing more than $30 billion of i4LIFE assets bought through Lincoln variable annuity products, the company said.

The i4LIFE rider, which is short for “income for life,” isn’t the only income rider available on Lincoln’s indexed annuities.

Lincoln’s Lifetime Income Edge rider offers guaranteed lifetime withdrawal benefits on some of the company’s FIAs, but i4LIFE is “more of an immediate income product,” Kroll said.

The company charges 0.95 percent annually of the FIA account value to pay for the income guarantees with i4LIFE Indexed Advantage, Lincoln said in a news release.

The index rider, launched last month, has been in the planning stages over the past two years, Kroll said.

Bucking a Trend?

Earlier this year, market analysts had noted an important shift away from annuities with guaranteed living benefits (GLB) and into annuities focused on accumulation.

In the first quarter, annuity companies sold $6.7 billion worth of FIA without GLBs compared with $6.5 billion worth of FIAs sold with GLBs, said Todd Giesing, assistant research director of LIMRA Secure Retirement Institute.

Despite the slowing of annuity income benefits sales, the big picture still favors a marketplace thirsting for income as baby boomers move deeper into retirement, Kroll said.

Pre-retirees remember the pain of the 2008 financial recession, which shrank account values by double digits.

The bull market celebrated its eighth anniversary in March and investors who suffered losses in 2008 won’t be able to stomach similarly brutal collapse, if only because they have less time to recover.

For many people, the time has come to think about protecting their principal and guaranteeing income, Kroll said.

“Longer term, FIAs are growing,” he said. “They’ve had strong growth over the last three, four or five years.”

FIA Growth Returns in 2Q

Earlier this year, CNO Financial Group reported that its FIA with a lifetime income rider was a hit with middle-market consumers and helped the company deliver better-than-expected results in the second quarter.

The indexed annuity market ended 2016 with record sales with $58 billion, up nearly 10 percent over 2015, according to Wink’s Sales & Market Report.

If FIA sales this year don’t surpass last year’s sales, they may well come close.

Second-quarter FIA sales fell nearly 6 percent to $14.6 billion compared with the year-ago period, but rose 13 percent compared with the first quarter, according to Wink.

By contrast, variable annuity market sales, which dropped 21 percent to $105 billion last year, is expected to fall a further in 2017.

In the second quarter, variable annuity sales shrank 8 percent to $24.7 billion compared with the year-ago period, LIMRA Secure Retirement Institute reported.

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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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].