Athene’s new Agility indexed annuity’s lifetime income and enhanced death benefit features come without a separate product fee.
And that makes it an unusual product in today's annuity marketplace.
Lifetime income features and more generous death benefits are typically offered as optional riders that usually come at an extra cost.
Built-in features represent an underserved niche in the growing indexed annuity space, said Adam Politzer, senior vice president of product management at Athene.
Some of Athene’s product lines offer built-in lifetime income withdrawals and enhanced death benefits, he said.
Only 14 indexed annuities – 3 percent – of all indexed annuities on the market have no separate fee for a lifetime withdrawal benefit feature, said Sheryl J. Moore, president and CEO of Moore Market Intelligence and Wink, publisher of Wink’s Sales & Market Report.
With recent reserving changes, pricing guaranteed lifetime income benefits has become more difficult, which may explain why so few indexed annuities come with lifetime income features included, Moore said.
More Built-In Features On The Way?
But that could change.
“Athene is a market leader, and if sales of Agility do well, it very well could signal the end of this ‘shortage,’ as companies are always looking to duplicate top-selling products,” Moore said.
North American’s Prime Path, an indexed annuity with no separate lifetime income withdrawal benefit fee, is selling very well since it entered the market in January 2016, Moore said.
Agility will be sold through independent marketing organizations, broker-dealers and banks, Politzer said.
Commission charges were not available, but Agility is available with surrender charges of seven and 10 years.
Lifetime income benefit riders allow annuity contract holders to continue receiving income even if the value of the contract falls to zero.
Raising or enhancing the generosity of the death benefit gives owners the opportunity to pass more to heirs.
Lifetime withdrawals represent distinct advantages for annuity products, which are seen as a vital leg in the three-legged stool – Social Security, savings and protected retirement income from an annuity – to ensure the retirement of millions of people.
Spreads' Key Role
The features come at a cost, however.
Lifetime income features and enhanced death benefits are paid for through the investment spread between what Athene earns on its assets and the benefits it offers on its life and annuity product, Politzer said.
Rising interest rates help because insurers can invest money at higher yields, the benefits of which are passed on to annuity contract owners.
“All fixed annuities are priced to allow the insurance carrier to make an investment spread between what we are able to earn our assets and the benefits we offer the customer,” he said. “We price these additional benefits from the spread we earn on the product.”
Athene USA was the No. 2 seller of indexed annuities in the market at the end of the first quarter with $1.2 billion in sales, according to Wink.
First quarter index annuity sales rose 10 percent to $14.2 billion compared to the year-ago period, Wink reported.
Athene offers built-in lifetime income withdrawals on Ascent Pro and an optional death benefit option on Ascent Accumulator, the company 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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