MetLife floats a VA buyout offer
It’s been years since insurance companies dangled buyout offers or contract exchanges to annuity owners – but MetLife is planning to do just that.
The company, which no longer sells individual annuities in the US, will be reaching out to about 5,000 contract holders in the coming months, according to filings made this week with the Securities and Exchange Commission.
The forthcoming offer, which could go into effect in early April, affects clients who own certain Preference Premier VA contracts issued between late 2008 and 2011 that have guaranteed minimum income benefits riders, or GMIBs.
Many advisors will likely recall the flurry of buyout offers that insurance companies like The Hartford, AXA and Transamerica started making more than a decade ago. That trend emerged after insurers amassed VA sales in the aughts that at the time came with favorable guarantees for contract holders that became difficult to hedge amid historically low interest rates.
Now, of course, interest rates are comparably high. And the offer MetLife is proposing is different.
Rather than a lump-sum buyout, the company will take VA account values that are invested in the market and shift them to a fixed interest account. Customers would surrender their GMIBs for what the company is calling an “enhanced income option” that would provide guaranteed retirement income.
“This decision is a win-win for both MetLife and its customers. From a business perspective, MetLife is offering this Enhanced Income Option because given financial market volatility and the cost of hedging to support the GMIB guarantees, the company being released from its obligations under the GMIB Rider will be beneficial,” Michael Schmidt, vice president of retail life and annuity at
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