Transamerica Latest To Exit VAs With Benefits, FIAs

By John Hilton

Transamerica will no longer sell variable annuities with benefit riders or fixed index annuities.

The company is also exiting the standalone long-term care market, Aegon executives said in a planning session last week. Executives at Aegon, which owns Transamerica, made it clear the company must retool to free up capital and increase margins. Products that rely on ultra-low interest rates are out.

“In the U.S., we will grow and invest in term life, index universal life, whole life, and final expense policies," Blake Bostwick, CEO of Transamerica’s Individual Solutions division, said in a statement. "We will focus on asset accumulation annuities that are less interest rate sensitive. We believe these product lines offer an attractive return on capital, where we are already well positioned for growth."

Transamerica is just the latest company to pull back on annuity lines. Last month, Prudential Financial discontinued all sales of variable annuities with guaranteed living benefits.

The move is needed as the insurer recalibrates amid economic uncertainty and ultra-low interest rates, said Prudential CEO Charles Lowrey.

But insurers who are leaving some products are not necessarily losing interest in annuities. Prudential is committed to its FlexGuard annuity rolled out in late May. The insurer's first indexed variable annuity product, FlexGuard is designed to provide customers with downside protection and the opportunity to grow and accelerate the performance of their retirement assets into the future.

"In terms of changing the focus within the business, we're on a path to de-risking, and have made major pivots to less interest-rate sensitive and more capitalized solutions in our individual annuities and in our life business," Lowrey explained.

"Specifically, you've seen us pivot away from VAs with lifetime income guarantees to less market-sensitive products," Lowrey said. "At the same time, you've seen us, in our life business, pivot to simpler, nonguaranteed products."

According to its planning PowerPoint, Aegon is committed to "grow market share in term, indexed universal life, and final expense with improved organizational agility."

Aegon acquired Transamerica in 1999 and the company primarily does business under the Transamerica name in the United States, where it employs about 6,500. While the Aegon stock share price is down 18.76% for the year to date, it is up 24.75% since June after a quick plunge during the early days of the global COVID-19 pandemic.

Transamerica came in 10th in third-quarter VA sales with about $2.1 billion, according to LIMRA's Secure Retirement Institute U.S. Individual Annuities Sales Survey. The insurer did not rank among the top 20 fixed index sellers.

The rest of Bostwick's statement reads: “We are excited about the opportunities ahead of us, and we will transform the organization by narrowing our strategic focus in order to create value for our customers and shareholders. Transamerica and its parent, Aegon, believe this strategy will create long-term value for shareholders and customers.

“In the U.S., we are ceasing the sale of interest rate sensitive living and death benefit riders, stand-alone long term care policies and fixed index annuities. These are capital intensive with relatively low returns on equity and capital, often due to the low interest rate environment. We are working closely with our distribution partners to ensure a smooth transition away from the sale of these products.

“We have set ambitious plans to service our customers going forward. We are confident in our ability to deliver on this strategy for our shareholders and customers.”

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.

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.