Equity Indexed Annuities: Are they the real deal or junk products?

[iceco1d]

The answer is that a small portion of future caps is determined by how well the call options perform.

Also, remember insurer general accounts have a time horizon of "forever" unlike a retail investor. They absolutely do not have to hold bonds to maturity...but interest rates take them to the cleaners, they certainly won't be forced to liquidate before maturity either.

 

[scagnt83]

No I'm not. But the carriers say caps can not go up on an issued policy because they buy long term bond obligations so how do they with a straight face lower caps.

I definitely understand what you are saying.

To be honest the GA is all a bit of a mystery to me.
Dont get me wrong, I understand the general principle of it and the basics.
But the inner workings and how different blocks of business are affected by it is something that is not very clear. And I think thats the way the carriers want it.

 

[Norwayguy]

This discussion has me looking at ANICOs Value Lock product again everything is locked in at issue partitipation is say now 100% but its a long term pt2pt and the client needs to iniatiate the lock date which is different than how I have always approached FIAs of locking in gains annually.

 

[scagnt83]

From my professional experience, looking at history, and speaking to many wholesalers it seems that is the story for more than just IAs.

Think about FAs after the Guaranteed period is up; have you ever seen rates raised after the Guarantee is up?
Sure they might stay the same, but what incentive does the IC have to raise them?

UL is very much the same. MY LFG wholesaler says straight up, "not to expect a higher rate than what was issued".


But seriously. The IC has little incentive to raise rates on existing products. Especially in a world of bonuses for new money and extended contract terms....

 

[WPM]

This discussion has me looking at ANICOs Value Lock product again everything is locked in at issue partitipation is say now 100% but its a long term pt2pt and the client needs to iniatiate the lock date which is different than how I have always approached FIAs of locking in gains annually.

I like this product bc of its simplicity and everything is guaranteed at issue, but I'm having a difficult time getting past the fact that clients could end up with no gain over the life of the contract.

The lock-in feature is nice, but then I feel like the agent would have to advise the client on when to pull the trigger.

 

[iceco1d]

From my professional experience, looking at history, and speaking to many wholesalers it seems that is the story for more than just IAs.

Think about FAs after the Guaranteed period is up; have you ever seen rates raised after the Guarantee is up?
Sure they might stay the same, but what incentive does the IC have to raise them?

UL is very much the same. MY LFG wholesaler says straight up, "not to expect a higher rate than what was issued".


But seriously. The IC has little incentive to raise rates on existing products. Especially in a world of bonuses for new money and extended contract terms....

The incentive is to keep the money in house after the surrender period.

 

[Norwayguy]

The incentive is to keep the money in house after the surrender period.

Very good point...The other point is most companies frown on internal transfers so the money walks out the door to another carrier and you the agent get paid again...I love carriers that have a trail built in or as an option with the fixed products.
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I like this product bc of its simplicity and everything is guaranteed at issue, but I'm having a difficult time getting past the fact that clients could end up with no gain over the life of the contract.

The lock-in feature is nice, but then I feel like the agent would have to advise the client on when to pull the trigger.

I agree we as agents would be some what involved in triggering the lock in though the statements kind of show what would happen if locked in now which gives the client a hint of locking in.

About the no gain over 10 years. Yes it could happen, but not if they lock in because after lock in they get prorated interest (if any) plus 2% (I know nothing to get excited about) or if they where in the market over the same 10 years they would have had a negative most likely if the index returns 0 after 10 years.

I just hate that they really have no good marketing materials. They have 3 statements on the IMG site but the before statement is a policy issued in 2004 and its 2005 statement lock in was in year 2006 so it doesn't really show much growth.

 

[0b1kanobee]

The incentive is to keep the money in house after the surrender period.

So much so that LSW now won't even accept a FIA without an income rider far as I'm aware. They never want that money to leave.

The flip side is there caps tend to remain constant from what I hear. I need to dig one up I wrote almost 4 years ago and see where the cap is now.

 

[iceco1d]

Curious on this..have any of you guys been writing FIAs in a rising rate environment? I mean, falling rates and falling cap rates make sense.

 

[Norwayguy]

Curious on this..have any of you guys been writing FIAs in a rising rate environment? I mean, falling rates and falling cap rates make sense.

No question it makes sense. But when you have been told that once a policy is issued rates will not go up based on X (being long term bond obligations) then falling caps don't make sense, its not like the carrier says okay we buy these bonds and are expecting a RISING interest rate environment to keep the caps stable.