Question for you FIA oldtimers. I was thinking about the difference between a flex prem and a single prem (rollover) FIA with regard to annual cap changes. Have you seen, over time, a tendency for flex prem FIAs to maintain higher relative caps that single prem? My thought is: flex prem might have need to be more competitive on a constant basis, since they still have ability to attract new money each year.
Flexible Prem FIA
- Thread starter jmhalvo
- Start date
I would think the opposite. The company makes more with the single premium as it is typically a lump sum rather than payments. They also need to attract new money every year but a 100K lump sum is more enticing than ten 10K deposits over the years. Flexible adds convenience to the client so they can make multiple deposits but at the cost of caps.
- 8,707
\"donamese;812138\" said:
X2 The carrier has the same need to attract dollars be it single premium or flexible once the money goes in it is subject to surrender charges and one could argue that flex premium opens the carrier up to more risk that late in the surrender period a lump sum could come in where the carrier is subject to minimum guarantees and have no time to recoup...Not as easy with a FIA but I have used as a sales tool a flex premium sold years ago coming up on the end of surrender charges that had a guarantee minimum now that blew away 1 year instruments.
- Thread starter
- #4
I have as well with a fixed annuity, but the indexed version is different due to the company having control over caps. Hence the question. I guess it depends on whether the later new money has a new CDSC sched?
- 10,711
I think that renewal rates depend more on the company than the type of product.
I also have the philosophy that carriers have a reason to keep renewals on Flex Prem products at a decent rate.
From my experience, Flex Prem products that I have sold have had stronger renewals vs. Single Prem products.
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That is a valid point, but also remember that most Flex Prem products cut the comp drastically after year 2 or 3 for new contributions.... if they pay after year 3 at all.
Midland is an exception if you use their products in a QP. Then they will pay a level comp.
Even in year 2 many companies decrease the comp vs. y1.
So even if they increase risk from a Surrender point of view, they also hedge that risk via lower comp/higher initial profit.
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Many Flex Prem Fixed Annuities are only guaranteed for the first 1-3 years, after that it is at the discretion of the carrier.... just like the Caps.
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I used to sell a lot of LFG Flex Prem IAs. They are some of the best performing IAs in my book of business. They are still at 6.5%/7% Yearly and 3.5% Monthly P2PCaps.
In my experience LFG and GA both have excellent renewal rates. GA actually has a sales piece on their renewal rates.... I will try to find it.
I also have the philosophy that carriers have a reason to keep renewals on Flex Prem products at a decent rate.
From my experience, Flex Prem products that I have sold have had stronger renewals vs. Single Prem products.
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That is a valid point, but also remember that most Flex Prem products cut the comp drastically after year 2 or 3 for new contributions.... if they pay after year 3 at all.
Midland is an exception if you use their products in a QP. Then they will pay a level comp.
Even in year 2 many companies decrease the comp vs. y1.
So even if they increase risk from a Surrender point of view, they also hedge that risk via lower comp/higher initial profit.
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Many Flex Prem Fixed Annuities are only guaranteed for the first 1-3 years, after that it is at the discretion of the carrier.... just like the Caps.
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I used to sell a lot of LFG Flex Prem IAs. They are some of the best performing IAs in my book of business. They are still at 6.5%/7% Yearly and 3.5% Monthly P2PCaps.
In my experience LFG and GA both have excellent renewal rates. GA actually has a sales piece on their renewal rates.... I will try to find it.
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- 438
I would like to see some flex products with a bailout cap
- Thread starter
- #7
great info. Case in point: GA is lowering caps in March, but not on their newest flex pay annuity
- 10,711
Actually they are lowering new issue rates for the new American Legend III flex product too.
But that doesnt mean that they are lowering renewal rates.
I think GA had their Caps up anticipating a tighter Fed this year.
They announced this rate decrease right after the most recent Fed minutes were announced....
- Thread starter
- #9
yes I was wrong. I see NA also lowering rates. Did not expect that in 2014....
- 15,041
Don't a lot of products have rolling surrender charges? Where the new money is subject to its own surrender period or did that stop?
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