Injecting Some ‘Forethought’ Into VA Space

Morningstar reports major changes in the variable annuity industry in first quarter of 2013

Firms are entering the variable annuity space with new product issues—are they crazy? Like a fox, some would say.

On Tuesday, Morningstar released its roundup of all things VA product-related for the first quarter of 2013, and it contained some surprises. The biggest, by far, was Forethought Financial’s foray into the market with a new VA issue.

“Forethought Financial issued its first variable annuity contract, the ForeRetirement VA (B-, C-, and L-shares),” Morningstar’s John McCarthy, product manager of annuity solutions, wrote in the report. “The fee for the B-share is 1.15%, which includes a 0.50% premium-based charge.”

The contract offers a lifetime guaranteed minimum withdrawal benefit with an age-banded withdrawal percentage (5% for a 65 year old; 4.5% in the joint-life version) and two types of step-ups: a highest anniversary (based on highest daily value) and a 6% fixed annual step-up for 10 years, he explained. The rider fee is 1.25%. There is also a second lifetime GMWB with similar withdrawal and step-up features and a highest anniversary (based on highest annual value) step-up for a fee of 1.05%.

He added that the first quarter saw a number of other changes in both the distribution channel and among variable annuity providers. SunLife sold its U.S. variable annuity business to Delaware Life Holdings, owned by Guggenheim Partners.  He also noted Hartford’s move to reduce its contract liability with a buyout offer.

Other highlights from the quarter include:

  • Carriers filed 97 annuity product changes in the first quarter of 2013, a significant jump from the 59 during the same period in 2012, and on par with the 101 filings in the fourth quarter of 2012.
  • Overall product development activity was healthy, as carriers continue to adjust benefit levels and seek to reduce volatility on the subaccount side.
  • Prudential, AXA Equitable, and SunAmerica/American General filed the most changes in the first quarter of 2013.
  • New benefits made up the largest group of filed changes in the first quarter, followed by VA product revisions. VA new contracts and VA benefits closed tied for third place.

“Over all, product development activity was robust,” McCarthy wrote. “Carriers continue to adjust benefit levels down. In addition, activity continued on the subaccount side to reduce volatility in investment offerings.”

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