Rates on the move as Fed vows to slash interest rates

While the Federal Reserve left interest rates unchanged during its most recent meeting, the cuts are coming. And life insurers are getting ahead of the coming cuts by slashing rates on popular annuities.

Chairman Jerome Powell told "60 Minutes" Sunday night that the Federal Reserve remains on track to cut interest rates three times this year, a move that’s expected to begin as early as May.

Annuity providers typically buy government bonds to generate returns. High interest rates push these returns up, and usually push annuity crediting rates up as well. Declining interest rates send those crediting rates down.

While both rates might be falling in tandem throughout the 2024, Sheryl Moore, CEO of Moore Market Intelligence and Wink, Inc., said they are likely to remain healthy enough to fuel continued record-breaking annuity sales.

"Generally, we are seeing rates going down since the beginning of the year," Moore said. "I anticipate that the Fed Funds Rate dropping will drive the 10-year Treasury Rate down, which will result in more rate reductions for annuities. That said, I anticipate that these new rates will still be competitive with pre-4Q2022 rates."

Some rates increase

It's not all rate cuts, Moore noted. In January, Allianz Life increased the guaranteed lifetime withdrawal benefit (GLWB) on its Core Income 7, Essential Income 7, and Retirement Foundation ADV.

Likewise, Allianz is increasing street-level commission on the Allianz 222 Annuity, Allianz 360 Annuity, Allianz Accumulation Advantage Annuity, and the Allianz Benefit Control Annuity.

Here are some other 2024 rate changes announced by top annuity sellers, courtesy of Wink, Inc.'s AnnuitySpecs tool:

American Equity reduces the premium bonus on the AssetShield Bonus 9 & 10.

Athene Annuity and Life is decreasing bonuses on Ascent Pro Bonus 10 from 30% to 20%, and decreasing Payouts on Ascent Pro 7 and Ascent Pro 10.

New York Life reduces the guaranteed annual return on the entire Secure Term and Clear Income Advantage series.

Security Benefit Life increases the guaranteed annual return to 3.00% on the Advanced Choice Annuity series, Total Interest Annuity, and the RateTrack Annuity series.

Nationwide Life and Annuity increased select payouts and reduced one of the percentages on the Nationwide Lifetime Income Rider Plus Empire New York and the Nationwide Lifetime Income Rider Plus Empire Advisory New York GLWB riders available on all variable annuities.

Nationwide also increased payouts on the Nationwide Lifetime Income Rider Plus Core GLWB rider on the Destinations O variable annuity.

Transamerica Life increased the payouts and introduced additional age bands on the Transamerica Income Edge 1.2 GLWB rider available on the Transamerica B-Share, Transamerica I-Share II, Transamerica Axiom III and Transamerica Principium IV variable annuities.

Lincoln National Life increased the payouts on the Lincoln ProtectedPay Select Core and Lincoln ProtectedPay Secure Core GLWB riders available on all variable annuities.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.