John Hanc*** will discontinue
Effective April 3rd, John Hanc*** will discontinue all variable annuity share classes except their B-share Venture product.
Products to be withdrawn:
• Venture III Variable Annuity ("L-Share")
• Venture Vision Variable Annuity ("C-Share")
• Venture Vantage Variable Annuity ("Bonus")
• Venture Vantage Pro Variable Annuity ("Bonus")
They cite, among other reasons "(W)e are concerned that the customer value proposition in the variable annuity market may be approaching generally unattractive absolute levels..."
They continue, "Our move concentrates our current market position in the relatively lower-cost "B-Share" market segment."
My take-away is that, as I've said before, the fee-based investment model is coming under attack. Good luck to all who listened to their firms fee-based push over the years!
Yhwy-
I think we are seeing the beginning of change in the VA marketplace. LPL just came out with a nice communication regarding all the changes recently. Let's face it, prices are going up and benefits are being reduced or eliminated. Hanc*** is one of the first that I have seen to eliminate C and L share. Times are a changing...Elimination of the products may make sense. Raising costs can backfire.
[quote=YHWY]
Effective April 3rd, John Hanc*** will discontinue all variable annuity share classes except their B-share Venture product.
Products to be withdrawn:
• Venture III Variable Annuity ("L-Share")
• Venture Vision Variable Annuity ("C-Share")
• Venture Vantage Variable Annuity ("Bonus")
• Venture Vantage Pro Variable Annuity ("Bonus")
They cite, among other reasons "(W)e are concerned that the customer value proposition in the variable annuity market may be approaching generally unattractive absolute levels..."
They continue, "Our move concentrates our current market position in the relatively lower-cost "B-Share" market segment."
My take-away is that, as I've said before, the fee-based investment model is coming under attack. Good luck to all who listened to their firms fee-based push over the years!
I think it has more to do with not losing clients every 3-4 years with advisors/insurance guys, flipping people in and out of L shares every 4 years… There is a company now that is paying a loyalty bonus on L shares if you stay on through the 5th year…
These companies are losing money with their hedges and need away to make sure clients don't take out too much money too fast or they will have to do was AXA UK did a few years back and cut benefits in the contract.Let the spin begin! Time will tell.
You’d think they wouldn’t bleep out Hanc*** on a financial planning message board.
I'm not sure if any of these annuity companies have much of a choice. According to some studies annuities have been charging too little. Hard to believe.Elimination of the products may make sense. Raising costs can backfire.
seeing as the value of a guaranteed minimum payment benefit has been estimated as worth 1 bp its hard to see how the dumb ass insurance comp. could lose any $$$.
Why is it hard to believe? They’ve taken a bath on some of their riders. There are so many annuities out there where a client has invested $100,000 and the value is now $50,000, but the client can still take an income of $5,000 a year for the rest of their life.
Assume that the company charges .75% for this rider. Keep in mind that the cost of the rider is a % of the rider value and not the contract value. This means that the fact that the contract value has dropped in half while the rider value has remained constant means that the rider now costs 1.5% of the contract value. If they raise the cost of the rider to 1.5% from .75%, it means that the client would now be withdrawing 10% of their contract value from an investment with expenses of close to 5%. In short, this will make it very likely that the contract value will go to zero. When this happens, the insurance company will be paying $5,000 a year, but they never had the $100,000 in the beginning because it was in separate accounts. In short, increasing the cost of the rider increases the chance of the contract value going to zero. This is terrible for the insurance company.Yes, Mini, we know that you are much smarter than all of the insurance companies and everyone else on this board.seeing as the value of a guaranteed minimum payment benefit has been estimated as worth 1 bp its hard to see how the dumb ass insurance comp. could lose any $$$.
My comment was in the sarcasm font (must only be visible in my mind). There are some nice papers I have read in the last year basically saying the annuity companies are pricing these things too low.Why is it hard to believe?
[quote=OS]You’d think they wouldn’t bleep out Hanc*** on a financial planning message board. [/quote]
That is really funny
I remember reading articles (in multiple trade magazines but I’m too sleepy to copy the link now) about how the VA guarantees were underpriced. These calculations were done over a year ago, well before the market started to really tank.
I was told by a wholesaler last night that by May all the VA GMIB riders will be at 4% outside maybe a few smaller carriers.
Which wholesaler was that? I don’t think Prudential will be lowering theirs any time soon…
I’m sure there will be some that don’t have to lower them or don’t lower to gain a competitive advantage. But I think some of the bigger players that were first out with these riders are seeing alot of contracts 5+ years old that will be exercising these at some point. As said before, they initially were probably set to high on the guarantee and to low on the expense. Now they’re playing catch up.
The wholesaler was with one of the major annuity companies and referred to a few other big names that will be soon at 4%.
The perfect storm (the market downturn)has occurred if you are a policyholder of any company that was guarnteeing a double in 10 years or the higher age bands. The proof is in the puddin…if the carriers hedged their risk, maybe they are hurt somewhat but not like those who are making drastic changes like we are seeing every day.
In the end, it will be the smart conservative (i.e., the ability to manage their risks) companies that survive. I have been pounding the phones trying to get people to realize that these riders won't be here for long, so its best to move forward if they feel guarantees are important for lifetime income. Those clients that lost 50% of their account values are smiling with the income guarantees...and so am I. It's the only conversation that has a positive overtone to it in the last 6 months. The other realization is those dollars are going nowhere...probably forever. L share or not, I can't fathom how any benefits down the road are going to be better for the client than what they already have. Not to mention it seems incredibly unlikely we'll be above water when the surrender charges are gone.The B share is all I sell anyway. I still like the product and I think Hanc*** is a strong company.
Our new MetLife wholesaler was through here this week, and their new # will be no higher than 4.5%.
Doesn’t that eliminate the point of a VA if you are only allowed to get 4%?
totally agree with footsoldier. Also, most VA’s that are 3 years or older have some time before they even get close to getting back over the death benefit amount so it’ll be hard to move even contracts that right now are 10+ years old because of this.
Slim- yes, i think it will eliminate alot of the needs for VA’s. They still make sense for that non qualified tax deferral but I think alot of reps have been using the VA’s for qualified money and that will likely slow if 4% is the max.
But, some of the smaller players that weren’t first in this GMIB game still may be able to support 6% riders b/c they weren’t offering these riders 7 years ago.
[quote=anonymous]Why is it hard to believe? They’ve taken a bath on some of their riders. There are so many annuities out there where a client has invested $100,000 and the value is now $50,000, but the client can still take an income of $5,000 a year for the rest of their life.
Assume that the company charges .75% for this rider. Keep in mind that the cost of the rider is a % of the rider value and not the contract value. This means that the fact that the contract value has dropped in half while the rider value has remained constant means that the rider now costs 1.5% of the contract value. If they raise the cost of the rider to 1.5% from .75%, it means that the client would now be withdrawing 10% of their contract value from an investment with expenses of close to 5%. In short, this will make it very likely that the contract value will go to zero. When this happens, the insurance company will be paying $5,000 a year, but they never had the $100,000 in the beginning because it was in separate accounts. In short, increasing the cost of the rider increases the chance of the contract value going to zero. This is terrible for the insurance company. [/quote] Not necessarily. Part of the whole equation is that the insurance company banks on lots of the policy holders NOT drawing any income from the policies. So if they spread the rider increase over ALL the policies, it will pay for the people that are under-water and taking income.If we're talking about GMIB riders, it doesn't really matter if it's 4% or 7% because it's mostly smoke and mirrors anyway. I would say the Annuity Factors are more importants that the roll up %.
I think there could be worse things than limiting clients to a 4% draw throughout retirement. This will increase the liklihood that the 4% figure will be applied to larger balances in the future and decrease the possibility of clients running out of money and leaning entirely on the guarantees. I still think there is a place for VAs, especially when considering that the last two bears probably ruined a large part of a generation when considering stock allocations in their portfolios. Many people will be loathe to consider stocks without some kind of a safety net and annuities serve that purpose. I’m not exactly Mr. Annuity…it’s less than 20% of my book. At the same time, I don’t think the principals of asset allocation have been repealed. People…even retired people, can benefit from an allocation to stocks, and for many in that generation, you’re not going to get them to bite without some assurances that they won’t lose their shirts the next time the bear comes for an extended visit.
Like Footsoldier, my easiest reviews have been on VA clients. 5-6-7% for life looks pretty good today.Henceforth, we should refer to the company as John Hancaaahk...[quote=OS]You’d think they wouldn’t bleep out Hanc*** on a financial planning message board. [/quote]
That is really funny
[quote=B24][quote=anonymous]Why is it hard to believe? They’ve taken a bath on some of their riders. There are so many annuities out there where a client has invested $100,000 and the value is now $50,000, but the client can still take an income of $5,000 a year for the rest of their life.
Assume that the company charges .75% for this rider. Keep in mind that the cost of the rider is a % of the rider value and not the contract value. This means that the fact that the contract value has dropped in half while the rider value has remained constant means that the rider now costs 1.5% of the contract value. If they raise the cost of the rider to 1.5% from .75%, it means that the client would now be withdrawing 10% of their contract value from an investment with expenses of close to 5%. In short, this will make it very likely that the contract value will go to zero. When this happens, the insurance company will be paying $5,000 a year, but they never had the $100,000 in the beginning because it was in separate accounts. In short, increasing the cost of the rider increases the chance of the contract value going to zero. This is terrible for the insurance company. [/quote] Not necessarily. Part of the whole equation is that the insurance company banks on lots of the policy holders NOT drawing any income from the policies. So if they spread the rider increase over ALL the policies, it will pay for the people that are under-water and taking income. [/quote] B24, you are correct. What you are saying does play a part in this. However, the people not drawing money are the ones who are more likely to have a GMAB rider instead. The fact that some of the GMIB/GMWB riders are so far under-water, encourages people who don't need income to take money. If I was a 60 year old and had an investment that was originally $100,000 and is now $50,000, but I could take $5000 out for the rest of my life, you better believe that I would be doing so. This is true even if I didn't need the money. The fees of the VA become outrageous as the contract value decreases.[quote=Mike Damone]
If we're talking about GMIB riders, it doesn't really matter if it's 4% or 7% because it's mostly smoke and mirrors anyway. I would say the Annuity Factors are more importants that the roll up %.
[/quote] You are partially correct. It depends on how the GMIB works. Once the product gets annuitized, it is the annuity factors that matter. In general, a 7% GMIB won't be any better than a 4% GMIB. However, some of them would allow people to take out a certain % before the money was annuitized. For instance if someone had a 6% GMIB and invested $100,000, they could take out $6000 every year and then be guaranteed that their GMIB value would still be a minimum of $100,000. The higher the GMIB, the worse the annuity factors. I've always liked the GMAB better because of no smoke and mirrors.Source URL:https://www.wealthmanagement.com/forums/whats-firms/john-hanc-will-discontinue