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Variable Annuities Marry ETFs


According to Barron’s, variable annuities are getting a slight facelift.  In Murray Coleman’s article “Variable Annuity To Open Next Week Offering ETFs as Investment Options,” a new type of product is emerging.  Insurance companies selling variable annuities typically invest in mutual funds, but the first ETF-based variable annuities will be sold next week, according to Dow Jones Newswires.

Varoom, the Variable Annuity for Roll Over Only Money, allows investors to create their own personalized portfolio containing subaccounts investing in only ETFs.  Two companies that are part of Western and Southern Financial Group in Cincinnati created Varoom.  Integrity Life Insurance and National Integrity Life Insurance will offer investors eighteen different ETFs from which to choose.  They are from Vanguard and BlackRock’s iShares unit.

These products are unique from equity indexed annuities and even other variable annuities on the market.  The direct investment in the ETF subaccounts is the big change from previous products.  Lincoln FInancial Group’s SSgA Global Tactical Allocation Fund is one example of this kind of fund-of-funds approach.  The success of these new variable annuities should determine how many other insurance companies take on such a product.

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