Great-West Financial has released the Great-West Capital Choice, a single-premium, deferred index-linked variable annuity (ILVA) that offers investors 'the potential to grow principal and still have measures of protection'.
'Great-West Capital Choice is designed to help advisors create a strategy so their clients can continue to invest while protecting themselves and offering them the flexibility they need if their goals change,' said Bob Shaw (pictured), president of individual markets at Great-West. Investors in an ILVA may achieve an increase of principal through market gains - up to a specified cap - while managing risk during periods of market decline through pre-established measures of protection strategies, according to Shaw.
There is a substantial risk of loss of principal depending upon the chosen Index Strategy. The cap may cause the investment to underperform the index, allowing investors to strike a balance between upside potential on a tax-deferred basis and measures of downside protection through multiple options. The new annuity enables advisors to choose one or more index-linked options, including the S&P 500, Russell 2000 Price, Nasdaq 100 and MSCI EAFE price return indices.
The new offering includes multiple floors and a buffer or a combination of both to create a strategy that matches an investor's appetite for potential accumulation with their tolerance for risk, according to the company. The floor will act as a 'stop-loss', adding a measure of protection when index losses go beyond a pre-set threshold, while the buffer adds a measure of protection when losses on an underlying occur within a pre-set range, but not beyond. The product also allows adjustments to the strategies on each contract anniversary.
Great-West is also launching fee- and commission-based versions of Capital Choice, targeted specifically at advisors working within broker dealers or as registered investment advisors. Great-West's debut follows an announcement by American Equity Investment Life, that it will expand its core product line with a new guaranteed lifetime income-based FIA with fee options to be launched in March.
'We will have a bonus and non-bonus version of the new product,' said John Matovina, chairman and chief executive officer, in the company's annual report. 'Each version will have two fee-based options for lifetime income, allowing the policyholder to decide, at the time of purchase, whether to activate lifetime income after a shorter or longer deferral period, and a no-fee option, which will have lower lifetime income than the fee-based options. This product incorporates significant input from our distribution partners, and we expect it to be well received in the market as income levels are anticipated to be competitive.'
The long-term outlook for FIA sales remains favourable, driven by 'well understood demographic factors', according to Matovina. American Equity's FIA sales were up 8.4%, to US$945m, with the majority of the increase attributable to sales at subsidiary Eagle Life Insurance, which distributes FIAs through banks and broker dealers, although will not sell the new FIA.
'Our sequential sales pattern has largely tracked the industry on a directional basis with industry sales facing headwinds from the DOL fiduciary rule, the strong equity market and low interest rates,' said Matovina. 'In addition, we have dealt with increased competition, including a focus by certain distributors on products featuring complex "hybrid" market indices. We have avoided these hybrid indices, as we believe they lack the transparency that has been the hallmark of our safe money insurance products.'
There are over 10,000 live products in the US market linked to the S&P 500 index, of which 80 are annuities; with over 8,000 featuring the Russell 2000 (including 10 annuities), whereas the MSCI EAFE index has a marginal weight in the market, appearing in just over 600 live products and the Nasdaq 100 appearing in 168 live products, including 16 annuities.
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