Across the variable annuities sector, numerous issuers took steps to reduce risk in the third quarter. Some insurers replaced older benefits with more expensive, less generous and more restrictive versions. Others closed older products or prohibited additional purchase payments to existing contracts. But new products were issued as well - many seem designed to appeal to underpenetrated market segments, primarily the RIA and direct sales channels.

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REVISING THE LINEUPS

Allianz closed the C and L versions of its Vision contract, while launching Retirement Advantage, a low-fee product with a guaranteed withdrawal benefit tied to the 10-year Treasury. It's designed to appeal to fee-only/fee-based advisors.

Hartford reduced withdrawal percentages to 4.5% from 5% on the Future5 lifetime withdrawal benefit and raises fees for the single and joint version of Future6 (to 1.05% from 0.85% and to 1.3% from 1.1% , respectively). Prudential suspended sales of the bonus version of its Premier Retirement product and launched a new lifetime withdrawal benefit with lower withdrawal rates, a higher fee (to 1% single or 1.1% joint from 0.95%), tighter investment restrictions and limitations on the ability to add premiums after issue.

MetLife closed several income and withdrawal benefits (GMIB Plus III, GMIB Plus IV and Lifetime Income Solution Plus) and age banded the no-lapse withdrawal percentage on its GMIB Max IV by introducing a 4.5% withdrawal percentage for ages 62 to 67, versus the previous 5% at any age. Lincoln introduced an optional step-up feature for its i4Life Advantage benefit and closed its 4Later Advantage with Guaranteed Income Benefit. SunAmerica lowered the fixed increase to 5.25% from 6% on its Income Builder GLWB when offered on the O-Share contract.

Jackson National increased both the pricing of its flagship Perspective II contract by 0.05% and issued a new lifetime withdrawal benefit, LifeGuard Freedom Flex; at age 65, the withdrawal rate is 4.75% and the fixed increase of the benefit base is 5%, compared with a 5% withdrawal rate and 6% benefit base in older versions of the rider. Ohio National decreased the withdrawal percentage to 5% from 5.1% on its single life withdrawal benefit and to 4.5% from 5% on the joint life version.

Allianz, AXA, MetLife, John Hancock, Prudential and Transamerica moved to limit additional contributions to contracts, which could be viewed as a positive for those with fully funded contracts (as an indicator of active management of risk) but would perhaps be painful for those who'd planned to make future contributions covered by older, richer benefits.

As part of the new issuance activity, New York Life introduced the Income Plus contract, a variable annuity with an embedded income benefit and an optional Guaranteed Future Income Benefit (1% annual charge) that allows use of automatic or discretionary transfers to purchase future guaranteed annuity payments. RiverSource launched a guaranteed accumulation benefit, Accumulation Protector (1.3% annual charge). It is distinctive in that it's tied to investment in a single subaccount, Columbia Managed Volatility.

Pacific Life began its new contract for the Schwab platform, Schwab Retirement Income, an iShare with a 0.6% annual contract charge and a lifetime withdrawal benefit (0.8% single life, 1% joint life); the withdrawal percentage is a straight 5% and the permissible underlying investments are three funds of ETFs subaccounts.

Frank O'Connor is product manager for annuity data at Morningstar.