Corebridge Joins the Registered Index-Linked Annuity Market

Corebridge Financial has answered the question about whether it’s interested in the hot market for registered index-linked annuities: Sure.

The Houston-based company today introduced its own RILA, through a contract written by its American General Life Insurance Co. subsidiary.

The new contract includes access to a feature that can “lock and credit a rate based on actual S&P 500 index performance on the day the preset growth target is reached,” the company says.

Once a contract holder locks in gains, the holder will get a guaranteed higher, fixed rate of interest until the next contract anniversary, the company says.

The contract also offers holders access to 19 other strategies for maximizing the crediting rate. The strategies are tied to the performance of S&P 500 and the Nasdaq-100 indexes.

What it means: For financial professionals with relationships with Corebridge, the new RILA will make it easier to sell Corebridge annuities.

For clients with mixed feelings about the economy, the contract will provide another way to reflect their uncertainty in their portfolios.

For annuity strategists, the product launch may raise the question: Are RILAs so popular that new players should try to focus on some other, quieter niche, like the market for traditional variable annuities?

RILAs: A registered index-linked annuity gives the holder to tie the rate of the return to the performance of a stock index or other investment-market indicator.

Because the issuer registers the product with the U.S. Securities and Exchange Commission, it can expose the holder to the risk of loss of principal.

When the issuer ties the credit rate to the performance of an investment index, that means the issuer can manage the product market risk using derivatives based on that index, rather than having to cobble together hedging arrangements based on instruments without such a well-tailored fit.

The characteristics mean that issuers can choose how much market risk they accept, charge directly for whatever level of protection they provide, and pass much or all of the market risk they take to counterparties.

U.S. RILA sales increased to about $60 billion in the first half, up 25% from the first half of 2023.

Corebridge: Corebridge is the company that was created when AIG put its life and annuity operations in a separate company. It ended the second quarter with $390 billion in assets under management and administration.

The company ranked second in overall U.S. individual annuity sales in the second quarter, in spite of the lack of a RILA contract, according to LIMRA.

The company generated $14.5 billion in overall individual annuity sales, including $1.8 billion in variable annuity sales and $13 billion in fixed annuity sales.

The company believes its ability to let a contractor lock in the actual performance of an index will separate its contract from other RILAs with lock-in features, according to Tina Haley, a Corebridge executive.

The contract: Current strategies range from a 1-year strategy term tied to the S&P 500 with a 10% investment-loss buffer rate, a 17% “cap rate,” or limit, on returns, and a 100% rate of participation in the performance of the S&P 500, to a 6-year strategy term tie to the S&P 500 with a 10% buffer rate, a 12.5% cap rate and a 100% participation rate, according to the current rate sheet.

In some scenarios, the cap rate could fall to 2%.

“Index options are price return options and do not reflect dividends paid,” Corebridge says in the product brochure disclaimers. “Strategy account options are subject to change at any time … Strategy account options are not a permanent part of the contract and may be removed due to circumstances beyond the control of American General Life Insurance Company.”

The minimum purchase is $25,000.

Contract owners who take cash out within six years of the issue date may be assessed a withdrawal charge of up to 8% of the contract value withdrawn.

The maximum issue age is 86.

Corebridge could pay a sales commission of up to 6% of the purchase payment amount.

Corebridge executives at a New York Stock Exchange bell-ringing ceremony in 2022. Credit: NYSE