Security Benefit Adds Lifetime Income to RateTrack

Seeking to appeal to independent agents, eager to capitalize on robust sales and eyeing steadily rising interest rates, Security Benefit Life has introduced a version of its RateTrack floating rate annuity that adds a lifetime income benefit.

The launch of the RateTrack Plus Annuity this week comes nearly two years after the entry of RateTrack, a floating-rate fixed annuity that company president Doug Wolff said has racked up “north of $2 billion” in sales.

“We have a lot of happy sellers and a lot of happy policyholders,” said Wolff, head of Security Benefit Life, the Topeka, Kan., based life and annuity issuer.

Annuity market analysts, who pointed to RateTrack’s relative simplicity two years ago, predicted the product would sell well.

RateTrack Plus, or RTP, is designed specifically to appeal to independent agents who sell through the independent marketing organizations (IMO) Advisors Excel, Gradient and Impact Partners, Wolff said.

IMO Appeal

While IMOs liked RateTrack, they were drawn even more to the guaranteed income rider offered by RateTrack Plus. It gave agents a fixed annuity in addition to other fixed indexed annuities, many of which come with guaranteed income benefit.

“We are competing in the IMO channel with FIAs with guaranteed lifetime withdrawal benefits, but RateTrack Plus with its guaranteed lifetime withdrawal benefit is a bit simpler than an FIA – there’s only one crediting bucket to choose from,” Wolff said.

RateTrack is a capital accumulation-focused annuity with five- and seven-year surrender charge periods that sold well in the bank channel and curried favor with IMOs. RT will still be available for sale as Security Benefit Life battles for market share against rivals American Equity Investment Life and Allianz Life Insurance Co. of North America.

RateTrack Plus, with its guaranteed lifetime withdrawal benefit, is geared toward income in retirement.

RTP comes with a 10-year surrender charge period and the lifetime income rider costs 0.95 percent of the benefit base, which is common across the industry.

The Plus in RateTrack Plus

The distinguishing investment feature of RateTrack and RateTrack Plus is the floating rate pegged to the London Interbank Offered Rate, or LIBOR, which closely tracks the U.S. federal funds rate.

Rates on fixed annuity account values, like most fixed savings instruments, don’t rise and fixed income investors miss out when rates rise, as they are doing now.

For RTP, interest on the account value is calculated and credited on the combination of a fixed interest rate and a floating rate based on LIBOR.

RTP was launched Tuesday when LIBOR was at 1.72 percent and Security Benefit’s declared rate was 0.35 percent, for a total of 2.07 percent. In March 2016, LIBOR stood at 0.62 percent.

And now for the “plus” in RateTrack Plus: A roll-up multiplier of a factor of two pushes the rate to 4.14 percent, and a 3 percent roll-up factor on top of that pushes the rate further still, to 7.14 percent on the income benefit base.

The initial declared rate is set for five years, but the LIBOR rate resets annually from the date of contract issue and in a rising rate environment, LIBOR will have risen beyond the 1.72 percent offered earlier in the week.

Overcoming “Fear Lock”

RTP comes with other goodies.

They include a 4 percent bonus on the purchase payment so that a $100,000 purchase will reset to $104,000. A “home healthcare doubler” doubles the rider income should the contract holder become unable to complete two of six basic activities of daily living.

A surrender charge waiver in case of terminal illness or nursing home admittance, which came with RateTrack, continues with RateTrack Plus, Security Benefit Life said.

Fixed annuity sales are expected to fall in 2017 after a record 2016 during which sales reached $117.4 billion.

“We’re not put off by that,” Wolff said. “Some of that softness has to do with rising rates and people don’t want to lock in for fear that rates won’t move, but you don’t have that fear with RateTrack Plus, so we think we can get more market share."

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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