MetLife Insurance Company in the US has reported good traction on its Shield Level Selector Annuity.

The MetLife Shield Level Selector single premium tax-deferred annuity has been available since May of this year and, unlike other annuities sold by the insurer, is the first MetLife annuity to offer investors a choice of a four-level shield against loss of principal. The annuity is also novel for MetLife as it is the first to focus on the accumulation phase rather than the payout phase for investors saving for retirement.

“Clients want to protect their assets but they still need growth. These shield levels offer them options and flexibility,” Dina Lumerman, vice president of MetLife’s annuity products division, told SRP. After conducting consumer research, MetLife chose to offer investors protection against the first 10%, 15%, 25% or 100% of decline in the underlying index they select for their investment for the particular term length they have chosen. The annuity offers terms of one, three and six years after which investors can reallocate their assets.

The annuity can offer a 10% shield on all five underlying equity indices which include the S&P500 Index, Russell2000 Index, Nasdaq-100 Index, MSCI EAFE Index and the Dow Jones UBS Commodity Index, and a choice of the larger 15%, 25% and 100% protection levels only for the S&P500 Index.

“This product allows individuals to get back into the equity market,” said Lumerman, who pointed to projections of the cash horde that investors have on the sidelines.

Although MetLife tested this product with individuals aged 40 years to 70 years old, it believes the sweet spot is for those aged 55 years to 65 years – those planning for retirement. Research showed that individuals are most concerned with equity market volatility as well as the continuing low interest rates, she added. “People don’t want a swing of more than 10%.”

MetLife itself hedges the protection levels. Each protection level also carries a maximum performance cap that will be paid to investors. The cap is periodically reset by the insurer. Currently, a 100% shield for a one-year term caps the performance return at between 2% and 3%, while the 10% shield for a one-year return has a maximum cap of between 5% and 6%. In this way, annuity investors can see growth in their investment if the underlying index rises, but are partially protected if the index declines over their chosen term.