Could see more takers than buybacks proposed by rivals; 'great option if you're on your deathbed'
The Hartford Financial Services Group Inc. has divulged the details of its variable annuity settlement program, which would give certain clients extra cash for dropping their contracts.
In a Dec. 28 filing with the Securities and Exchange Commission, Hartford spelled out the terms of its enhanced surrender value offer, a deal that's available to legacy contract holders who also happen to own the Lifetime Income Builder II benefit rider.
To be eligible, clients must not have annuitized their contract and cannot be receiving lifetime benefit payments from the income rider. The value of their contract cannot be below a minimum contract value.
Eligible customers who take the offer walk away from the variable annuity and any riders associated with it. These clients will get either the contract value on the full surrender date or the contract value, plus 20% of the payment base subject to a cap of 90% of the payment base. Hartford will calculate the enhanced surrender value as of the valuation date after receiving the appropriate documents from the client.
The value of the contract could decrease between the time the client is made the offer and when he or she decides to accept it, which could affect the enhanced surrender value the investor winds up collecting.
Rider charges, surrender fees and other costs won't be applied to contracts that are surrendered, but clients could face taxes if they cash out of the contract.
Contracts that are affected include the Director M (including Access, Edge, Plus and Outlook) and Hartford Leaders (Series III, Access Series III, Edge Series III, Plus Series III and Outlook Series III).
Hartford isn't the first carrier to make such an offer on legacy variable annuities: Similar moves have been made by Transamerica Life Insurance Co. and Axa Equitable Life Insurance Co. The latter offered certain customers an increase in their account value in exchange for dropping their death benefits.
Executives at major broker-dealers report few customers' jumping at the Transamerica and Axa offers, but they predict more clients will be eligible for Hartford's offer.
“It's a great option if you're on your deathbed, but if you're planning to live to 100, the offer can go either way,” said Zachary Parker, first vice president for income and distribution products at Securities America Inc. Clients whose contract value is closer to the benefit base likely will be better off than those whose accounts are far underwater, he added.
