Carriers continued to tinker with variable annuity contracts in the second quarter. According to a report from Morningstar, variable annuity (VA) carriers filed 182 changes in Q2, up from 97 in the first quarter and 168 in the same quarter a year earlier.
It comes as no surprise that Morningstar attributes this flurry of changes to protracted low interest rates that impede any chance of raising benefit levels. The firm characterizes the majority of changes as “low impact.” A deeper look into the changes highlighted in the Morningstar report finds that several involved fee hikes, benefit reductions in the form of lower lifetime withdrawal percentages and more sub-account options that veer toward lower volatility. Several carriers also tweaked the age bands on the lifetime withdrawal benefit.
For example, Jackson National raised the fee on the Lifeguard Freedom 6 Net lifetime withdrawal benefit by 0.15 percent, and reduced the withdrawal percentages for age bands starting at 75 and 81 by 0.5 percent and 1 percent, respectively.
Yet there were several significant moves announced by carriers, mostly with the aim of reducing the carriers’ risk burden.
Hartford, for one, carried on with its departure from the VA market. In May, it closed a number of contracts in the Personal Retirement Manager and Leaders IV series of products. By doing so, Hartford has no remaining Hartford contracts open, Morningstar reports.
In the same month, Hartford filed a change that requires certain contract owners with the Lifetime Income Builder rider to reshuffle their investments by Oct. 4 or lose the living benefit. The reallocation, which affects selected owners of the Director M lineup, mandates that policyholders place a minimum of 40 percent of assets in fixed income and a risk-based asset allocation model. That follows last quarter’s cash buyout offer covering the same contracts and benefits.