Lincoln Financial has won the Best Fixed Index Annuity (FIA)/ Variable Index Annuity (VIA) Carrier accolade at the SRP Americas Awards 2023, which was presented in Chicago in September.

Since the debut in May 2018, the Lincoln Level Advantage has become “the most successful product” with US$21 billion in lifetime sales as of today, according to the insurer headquartered in Pennsylvania.

From early 2022, a rapid and steady rise in US interest rates benefitted interest rate sensitive products, greatly increasing the consumer value - Daniel Herr

A registered index-linked annuity (Rila), also called structured or buffered annuity, differs from a fixed index annuity (FIA) in that it offers participation and downside protection but principal is at risk.

Over 60% of the Lincoln Level Advantage sales volume, or US$13.0 billion has been generated since 2021. The NYSE-listed company has also collected US$9.7 billion from its FIA range comprising the Lincoln OptiBlend, Lincoln Covered Choice and Lincoln FlexAdvantage series during that period.

“From early 2022, a rapid and steady rise in US interest rates benefitted interest rate sensitive products, greatly increasing the consumer value,” Daniel Herr (pictured), senior vice president, annuity product management at Lincoln Financial told SRP.

“While the growth has been most pronounced for multi-year guaranteed fixed annuities (MYGAs), FIAs and Rilas are still critical for our total portfolio when it comes to asset protection for accumulation.”

In the first half of the year, Lincoln Financial was the fifth largest issuer of Rilas on the back of US$2.3 billion sales volume and was in the 11th place in the FIA market with US$1.6 billion, according to a survey conducted by Limra.  

Over the past five years the Lincoln Level Advantage has evolved with new features continuously added. Targeted both near-retirees and retirees, the first generation provided four indexed account options covering the S&P 500, Russell 2000, MSCI EAFE Index and Nasdaq’s Capital Strength Net Fee Index (NQCAPSTN).

Term options included one-year, six-year, and a six-year annual lock option while downside protection was available at 10%, 20% and 30%.

In March 2022, the issuer introduced the First Trust American Leadership Index (FTUSLDRS) to the Lincoln Level Advantage in partnership with FT Indexing Solutions, which measures the performance of four indexes whose constituents are US listed companies that are poised to drive the growth and innovation.

“We’ve focused on value proposition and innovation around crediting strategies within the Rila. Our sweet spot has been the six-year terms while we see a fair amount of allocation into one-year terms,” said Herr.

Dual direction

In August 2023, two crediting strategies - Dual Performance Trigger and Dual15 Plus – were rolled out for the Lincoln Level Advantage to allow for more upside in down markets.

The rationale lies in a need to address what the insurer saw as “shortcomings” in the traditional dual direction segment where investors receive a positive return at the opposite value of the underlying index loss when the index is down less than the protection level.  

“We didn’t want the cliffy nature where if the index goes negative, investors are rooting for it to go more negative to get a higher crediting. But if the decline goes too far, investors lose it all at once. So, we offer an option on our dual direction strategies to avoid that,” added Herr.

Specifically, the dual performance trigger rate is used to offset loss, which may provide a positive return, if the index change is down more than the protection level for Dual Performance Trigger, which lasts for one year.  

With a six-year tenor, Dual15 Plus features a 150% performance cap rate. Investors earn the greater of 15% or the index performance up to the cap if the index change is up or flat at the term end. And 15% is added to offset the loss which may provide a positive return if the index change is down.

“The sales of dual direction strategies currently form a small percentage for LLA,” said Herr without disclosing the volume. “But we understand the conversations are switching to the dual direction accounts from our distribution or wholesaling force.”

To enhance client experience, which “goes beyond crediting rates and accounts to the whole package”, the Rila issuer sends out alerts through texts and emails to advisors about the underlying index performance throughout the year.

Herr also noted an expansion of Rilas in the fee-based models as many advisors are shifting away from commission-based.

As part of continuing innovation, Lincoln Financial expects to unveil a feature that will be a highlight of the second generation of Lincoln Level Advantage in the second quarter of next year. 

“[The tool] will allow the client with their advisor to lock in any upside in an index within the term. Tying into the alerts, we're building that online experience to streamline the whole process for them to execute that lock,” he said.