Variable Annuities
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[quote=snaggletooth][quote=Hank Moody] [quote=anonymous]“Axa and Mass Mutual are suspending some VA guarantees.”
We need some clarification on this one. Guarantees are not being suspended. Anyone who purchased a contract with a guarantee, still has a guarantee. What is being suspended is new sales. MassMutual came to the conclusion with one of their GMIB riders that under current market conditions they couldn't do it profitably, so they decide to stop offering this particular guarantee at this time. I don't know any AXA details.[/quote]Axa is permitting people that have GMIB's to switch to a GWB, so that they do NOT have to annuitize. This is better for the clients, which should be quite upsetting to the fearmongers on this board.
[/quote] Hank, Why is it better to switch from GMIB to GMWB? Is it just the annuitization thing? Because as far as income to the client, I would suspect they would receive more income from annuitizing than 5% withdrawal for life. If it's just an annuitization thing, than I would agree, clients like to not give up control.[/quote]
Personally, I don't like the thought of annuitization and I don't sell it for that reason.
Agreed. The only GMIB contracts on my book are from broker of record changes.
Personally, I don’t like the thought of annuitization and I don’t sell it for that reason.
Annuitization can make sense in lots of situations. The problem is that in order to give what APPEARS to be a great benefit with the GMIB, the insurers give lousy annuitization rates.
You can always buy an annuity, get the bonus for the client and the commission for yourself, annuitize after 2 years over a 5 year period and send the payments each year to another annuity for another commish.
That's what the annuity guys in my town do, and boy are they getting rich! And of course, eventually the insurance company will figure out what you're doing and drop you as an agent, but there are hundreds, if not thousands, of insurance companies to choose from.I don’t know what it’s called. I have a buddy who works there and he’s always telling me about the new ways they’ve found to screw the insurance companies.
There's a state law in Florida that forces insurance companies doing business there to allow their policy holders the ability to annuitize over 5 years after one year of being in the annuity without paying surrender fees. If they only wait one year to annuitize, though, the agent gets a charge-back on the commission. So, they wait two years.borker-i was referring to the crappy annuitization rates. most contracts which have a living benefit, often the gmib, make the client “look back” if they decide to annuitize. so a 70 year old who opts to annuitize would do so at a 60-65 year old factor.
your scenario is a form of annuity arbitrage.I have an idea – look at the prospectus real close and find out all the annual fee’s she’ll be paying – it’ll be beteen 2% and 4%. Then tell her “Look, so you get this minimum return of 3%, which you then pay to the insurer in fees”.
Now you can get all fancy and try to price in the min guar as a put option -- which it is -- and explain how NOBODY with a brain will pay a 3% annual premium for a 3% once-in-a decade option".[quote=MinimumVariance]I have an idea – look at the prospectus real close and find out all the annual fee’s she’ll be paying – it’ll be beteen 2% and 4%. Then tell her “Look, so you get this minimum return of 3%, which you then pay to the insurer in fees”.
Now you can get all fancy and try to price in the min guar as a put option -- which it is -- and explain how NOBODY with a brain will pay a 3% annual premium for a 3% once-in-a decade option". [/quote]Let me help you, so that you don't' sound so stupid. Minimum guarantees are net of expenses. Otherwise, they wouldn't be guarantees.
Pacific Life and The Hartford have become the latest insurance companies to reveal plans to either increase costs or discontinue certain variable annuity benefit riders.
In a letter to broker-dealers, Pacific Life announced it will hike charges and eliminate guaranties on a swath of its VA riders effective Jan. 1. Meanwhile, The Hartford will increase the prices on its existing guaranteed minimum withdrawal benefits (GMWB) riders.
Both firms’ product and pricing structure amendments underscore the challenges facing insurers and come on the heels of similar measures taken by AXA Equitable and Mass Mutual.
Pacific Life’s letter details several riders slated for restructuring and cutbacks. That includes Foundation 10, a guaranteed minimum withdrawal benefit for life (GMWL) rider that provides an annual 10% credit for up to 10 years. That benefit will no longer be available on new and existing contracts. Clients who have already purchased the rider will be able to keep it at a higher cost — 135 basis points, up from the current 85 basis points.
ING announced some changes today. Their GWB benefit will be 6% compounded (down from 7%) now with an annual step up and cost is going up .10.