John Hanc*** will discontinue

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Mar 25, 2009 2:17 pm

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Products to be withdrawn: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!

Mar 25, 2009 2:25 pm

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...
Mar 25, 2009 3:23 pm

Elimination of the products may make sense.  Raising costs can backfire.

Mar 25, 2009 3:31 pm
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Products to be withdrawn: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!


 
So you are saying that fee-based(fee only) is going away, in favor of back-end sales charges and CDSCs? That doesn't make  a lot of sense considering most fund companies are now eliminating B shares, so they are left with A shares or I shares.. Pay a commission or pay a fee.
Mar 25, 2009 3:34 pm

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.
Mar 25, 2009 4:25 pm

Let the spin begin! Time will tell.

Mar 25, 2009 4:40 pm

You'd think they wouldn't bleep out Hanc*** on a financial planning message board.

Mar 25, 2009 6:23 pm
anonymous:

Elimination of the products may make sense.  Raising costs can backfire.

 
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.
Mar 25, 2009 6:35 pm

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 $$$.

Mar 25, 2009 6:54 pm

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. 
Mar 25, 2009 6:56 pm
MinimumVariance:

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 $$$.


 
Yes, Mini, we know that you are much smarter than all of the insurance companies and everyone else on this board.
Mar 25, 2009 9:36 pm
anonymous:

Why is it hard to believe?   

 
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.
Mar 25, 2009 10:13 pm
OS:

You'd think they wouldn't bleep out Hanc*** on a financial planning message board.


That is really funny

Mar 26, 2009 12:46 am

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. 

Mar 26, 2009 8:05 am

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.  

Mar 26, 2009 8:50 am

Which wholesaler was that? I don't think Prudential will be lowering theirs any time soon..

Mar 26, 2009 9:50 am

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%. 

Mar 26, 2009 9:53 am

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.
Mar 26, 2009 9:54 am

The B share is all I sell anyway. I still like the product and I think Hanc*** is a strong company.

Mar 26, 2009 11:11 am

Our new MetLife wholesaler was through here this week, and their new # will be no higher than 4.5%.