As with other insurance companies that have crafted a structured annuity product within the last few years, Allianz Life Insurance Company of North America launched its Allianz Index Advantage Variable Annuity in September 2013 to fill a need. The firm saw a desire among retirees and those nearing retirement to protect their precious investment dollars along with the potential for an upside performance return. The insurer is based in Minneapolis.
The goal was to offer a variable annuity that strikes a balance between simplicity and choice, Matt Gray, vice-president of product innovation at Allianz Life, told SRP.
Striking a balance
Unlike other structured annuities that offer multiple first-loss downside buffers, Allianz Life’s structured annuity offers a single -10% buffer with an upside performance cap that periodically resets. It does not offer the largest choice of underlying indexes in the marketplace, but it has strategically chosen to offer arguably the three best-known equity ones: the S&P500 index, the Russell2000 index and the Nasdaq100index. Not only are these well-known to investors and easy for them to reference prices for, but they are easy for Allianz Life to hedge, Gray said.
What is unique is that the insurer offers a choice of two calculations which can be used for crediting purposes.
Under its current index performance strategy, the annual caps on this VA at the time of this article, and through August 4, are 13.00% for the S&P500, 15.00% for the Russell2000 and 12.25% for the Nasdaq100. It also offers an index protection strategy under which investors can lock in a declared protection strategy credit along the way which cannot be less than 1.5% linked to the S&P500 only. (Currently, that rate is 4.00%). “We wanted to have a more protective sleeve,” Gray said.
A new animal
Thus far, the Allianz Life Index Advantage Variable Annuity has amassed about $53m. “We are pretty happy with the ramp up,” Gray said. “We knew, given that it’s a new animal, that it would take a bit longer from a VA standpoint to build.” Allianz Life distributes this annuity through various wirehouses and their captive salesforces, as well as through independent broker-dealers.
“Distributors really like the performance strategy. That is something we felt we could offer and that is resonating very well,” Gray said. Allianz Life is seeking to capitalise on its innovation and expertise in indexing, while meeting consumer needs, he told SRP.
The target customer has been so-called transition Baby Boomers – those who are from five to 15 years away from retirement – who cannot stomach as much volatility as we saw a few years ago but still want upside potential for their assets accumulated, Gray noted. Allianz Life confirmed that the average age of the customer buying this annuity is about 60.
Gray said that Allianz Life is considering adding other options in future, including different crediting approaches and calculations.