Week in Review – 4/18/2025

Product Updates

The Latest Approach to Reducing S&P 500 Cap Allocations 

In a market dominated by S&P 500 Caps, annuity carriers are continuing to get creative on ways to reduce the flow of premium into their S&P 500 Cap accounts. Why target a reduction in flows to the most popular index account in the industry? Follow the money hedge costs. To support a strong cap, many carriers choose to “subsidize” it by lowering their hedge costs on non-S&P 500 Cap accounts. In theory, this works if actual allocations line up with expected allocations. The problem, as many carriers are finding, is when allocations to the S&P 500 Cap account come in higher than expected: 

In a spread-driven product category, the 0.20% of additional hedge cost from the hypothetical example above can make all the difference between profitable sales of an accumulation-focused FIA and sales that are tough for a CFO to stomach. So how are carriers incentivizing lower allocations to the S&P 500? One approach, as we covered a few weeks ago, is to offer higher S&P cap rates within a model portfolio that strictly limits the account’s allocation. By doing some back-of-the-napkin option pricing, we can get a rough idea of how much subsidization seems to be going on within the 10-year version of North American’s NAC Guaranteed Allocation FIA to get the aggregate hedge costs between each model blend close to one another. 

AuguStar, formerly known as Ohio National, has taken on a new approach to reducing allocations to the S&P 500 Cap account. Rather than offer higher caps to a client allocating less money to the S&P 500 Cap account—a la North American—they are scaling the premium bonus available on their OrionShield 10 FIA based on how much premium is allocated to non-S&P 500 Cap index accounts. The approach neatly ratchets up the premium bonus paid to a client for every 25% of premium allocated away from the S&P 500 Cap. AuguStar’s marketing material and contract language indicates that the contract will be automatically rebalanced each year to maintain the allocations elected at issue, so there does not seem to be a way for a client to get the maximum premium bonus and then bolt to the S&P 500 Cap account the following year. With the launch special they’re running, a client can earn up to a 24% premium bonus if they avoid the S&P 500 Cap account entirely: 

But, is it worth it? Assuming each level is priced at roughly the same level, the expected hedge costs on a contract fully allocated to the S&P 500 Cap account cuts the premium bonus AuguStar is willing to offer in half from 24% to 12%. That’s a huge swing—and clearly indicates that AuguStar, like many others, is spending less to hedge rates offered on non-S&P 500 Cap accounts than on the S&P 500 Cap account itself.  Will the subsidization transparency incentivize more clients and producers to opt for the guaranteed payoff provided by the elevated premium bonus? Or will the approach, coupled with mixed feelings around engineered indices, struggle to generate new sales? Annuity carriers throughout the market will eagerly await the answer. -Jon Blomquist 

Athene Enhances Protector and Accumulator FIAs

Annuity juggernaut Athene has made strategic updates to two of its core accumulation-focused fixed indexed annuities—Protector and Accumulator—both of which are distributed primarily through financial institutions. These products continue to find success in the Bank and Broker/Dealer space, with Accumulator generating $1.6B and Protector $669M in 2024 sales, according to Beacon Research.

Not content with past success, Athene is building on this momentum and strengthening the value propositions of each product. Below is a breakdown of the latest changes:

Protector 5 & 7

Athene has refined its Protector offerings by eliminating two engineered indices and introducing guaranteed S&P 500 strategies. The enhancements emphasize simplicity and certainty — two qualities that are resonating with distributors in today’s annuity environment.

New Strategy Additions:

• Guaranteed S&P 500 Cap Rates
  • Protector 5 & 7: 8.00% Cap
• S&P 500 Performance Trigger Strategies
  • Performance Trigger:
    • Protector 5: 7.00%
    • Protector 7: 7.25%
  • Guaranteed Performance Trigger:
    • Protector 5 & 7: 6.00%

Note: The rate-locked strategies are only available at contract issue and may not be reallocated into or out of on contract anniversaries. Other indices may be reallocated.

New Rider Flexibility:

Athene has also introduced some additional customization and beefed up the guarantees for contract owners by expanding the rider selections to 3 distinct flavors:

• No rider
• Minimum Interest Credit Rider (0.20% annual fee):
  • Protector 5: 22% 
  • Protector 7: 27% 
• Minimum Interest Credits (from above) + Return of Premium Rider (0.40% annual fee)

The minimum interest provision includes a “true-up” at the end of the surrender charge period. If the total interest credited is below the guaranteed minimum, Athene will adjust the accumulated value accordingly; we covered the initial filing on the minimum interest in a previous issue. The return of premium feature allows clients to surrender their contract at any time for either the cash surrender value or their initial premium (less withdrawals), whichever is greater.

Accumulator 5, 7 & 10

In addition to Protector, Accumulator has shed some of its complexity while adding new growth features. The Legacy Rider and Minimum Interest Credit provisions have been removed—likely due to low utilization on the rider and not wanting to steal Protector’s thunder—and instead, Athene added enhanced interest crediting options.

New Index Options:

• New S&P 500 Strategy:
  • S&P 500 5-Year Point-to-Point with Participation Rate
• (2) New Preset Allocation Models Added:
  • Equal allocation to 2-year PTP indices
  • Equal allocation to 1-year PTPindices (excluding S&P 500 PTP with Cap)
    Note: A combination of preset and manual allocations is allowed

The preset allocations mirror features seen in Athene’s Performance Elite—its flagship IMO product. The marketing spin with the models is that they allow for easier diversification while minimizing zero interest credit scenarios. Preset models also allow Athene to strategically manage flows towards non-S&P strategies (as further noted in the article above).

Conclusion

Athene is certainly staying attuned to market demand.  The Protector suite now offers compelling guarantees—like the 22% and 27% minimum interest credits and locked-in S&P 500 cap and trigger rates—delivering peace of mind in multiple forms to both advisors and their clients.

Meanwhile, Accumulator is removing underused features and introducing allocation models that reduce complexity — and likely improve profitability. The push into financial institutions continues to deepen for Athene — which may be intended to not only grow their FIA distribution but lead to more sales of other products such as their RILA (Amplify). These product updates will likely accelerate that momentum. -Sam Wiss

DE Life Enters the Guaranteed Income Arena with TruePath Income

Group 1001 company, DE Life, recently introduced its latest FIA solution for guaranteed income in the IMO channel. The AM Best “A-” rated carrier captured over $1.5 billion in annuity premium last year through IMOs—half of which was MYGA business, according to Beacon Research. Now, they’re rounding out their fixed indexed annuity suite with a guaranteed income play, TruePath Income. And as you’ll see, they’re coming out swinging. Let’s dive into the product details and how it stacks up in today’s guaranteed income landscape.

Product Overview

For producers and clients evaluating TruePath, the key question is: When do I want to activate an income stream? The product offers two income rider strategies:

• Ready Strategy (Income sooner)
• Build Strategy (Income later)

From DE Life’s online marketing collateral, below is the structure of each option:

Each strategy is structured to align with a client’s timeline. The Ready option includes a substantial upfront, 25% benefit base bonus, boosting early deferral period payouts, along with a modest rollup rate of 6.75% compound interest for 10 years. In contrast, the Build strategy offers no initial bonus, but a significantly higher 9.75% compound interest rollup rate over the same 10-year deferral period.

TruePath also features:

• Level and Rising payout options
• Payout factors increase annually to allow DE Life to pick their spots
• ADL-based income doubler
• 1.20% rider fee based on the Benefit Base
• Access to Precision Portfolios (the same model portfolios available in DE Life’s other FIAs)

Market Competitiveness

We evaluated TruePath Income against the other leading guaranteed income solutions in the marketplace. The heatmap below highlights DE Life’s competitive positioning — spoiler, there’s a lot of 1’s and 2’s.

Conclusion

DE Life consistently ranks at the top across the core segments of the guaranteed market. At first glance, TruePath Income is a contender that’s built to compete. With TruePath Income, DE Life isn’t just rounding out their FIA lineup—they’re signaling serious intent to play in the guaranteed income space. The product is designed with simplicity, highly competitive, and immediately relevant for income oriented producers and their clients. Whether or not this is simply a quick promotional period to attract eyeballs or DE Life wants to play in this space for the long term is yet to be determined. -Sam Wiss

Fair-Market S&P 500 Caps and Participation Rates

YTD Index Returns (as of 4/17): 

• S&P 500: -9.98%
• Nasdaq: -15.53%
• Dow Jones: -7.67%    

Treasury Yields (week over week change, as of 4/17)   

• 1-year: 3.99% (+2 bps)
• 2-year: 3.81% (-3 bps)
• 3-year: 3.82% (-3 bps)
• 5-year: 3.95% (-9 bps)
• 10-year: 4.34% (-6 bps)
• 20-year: 4.82% (-8 bps)
• 30-year: 4.80% (-6 bps)

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