VA Competition Is Still Hot: MFS Adds Another Earnings Rider

Why so much choice, particularly in todays bear market? The answer has a lot to do with competition–and market trends, says Mulkern.

After MFS debuted its original EEB, a slew of competitors came out with earnings benefits of their own, he explains. Many have look-alike names, he adds, noting this has become a problem. "Sun Life, our parent, has service marked the 'earnings enhancement benefit name and also 'earnings enhancement benefit plus,'" he explains.

MFS did not want its own feature to fall by the wayside, Mulkern says. "It kills us to see the competition trying to steal our thunder. We wanted to get back on top."

So the company soon began talking with producers and wholesalers about new needs, and then drafting plans to offer a new option. The upshot: It developed EEB Plus for a very specific buyer.

"EEB Plus is for people who plan to hold their VAs for a long time and who expect the policy value to more than double by time of death," says Mulkern. Many such buyers exist, he indicates.

Although the company still offers both options, Mulkern says that, since rollout of Plus, the focus has been more on Package II. "Its still early," he allows, but "indications are that people with a longer time horizon favor taking EEB Plus with the MAV option."

He suspects the appeal is that the EEB Plus/MAV combo provides opportunity for beneficiaries to receive more money. To the target buyer, the extra 40 bps this combo costs is worth it, he says.

Sample case: Say a $100,000 VA has both the EEB Plus and the MAV. If the account value is $250,000 at time of death, but the highest maximum anniversary value (MAV) was $300,000, the company computes the EEB Plus benefit based on the $300,000. This benefit would be 40% of $200,000 ($300,000 minus the $100,000 principal), or $80,000. The beneficiary in this case would receive $380,000 (the $300,000 plus the $80,000 EEB Plus).

Mulkern speculates the combo has appeal, despite the nervousness in the stock market, because its a type of bulls-and-bears option. The Plus component responds to bull market scenarios, he explains, while the MAV piece has bear market qualities.

A "spousal continuance feature" offered in MFS VAs also has value for EEB buyers, he maintains. This allows a surviving spouse to continue the VA as the ownerat issue age, not attained agewith the account value equal to the selected death benefit plus the EEB or EEB Plus value. When the survivor later dies, the EEB or EEB Plus option kicks in again.

"Most VA owners are married, and theyre concerned about protecting their families in case of death," says Mulkern, so spousal features are part of longevity planning.

But EEB riders are not sold in a vacuum, he stresses. "We present them in the context of other core advantages of VAs, like tax deferral, flexible investments, income opportunities, etc."

Final notes: MFS believes EEB Plus will encourage persistency among VA owners. Approved in most states, the option is reinsured.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 3, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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