As many variable annuity providers simplify and streamline their products, Axa Equitable Life Insurance Co. in New York is bundling theirs.

The company's new Retirement Cornerstone variable annuity is essentially two annuities in one package.

"We've seen over the last year a lot of takeaways in the variable annuity space," said Steve Mabry, senior vice president of annuity product development at Axa Equitable. "We wanted a whole new design concept."

Retirement Cornerstone includes two distinct accounts, or "sleeves." One caters to investors' desire to maximize their investment performance, while the other is designed to protect their assets. It provides a wide range of investment choices for investors to try to recoup some of their losses from the market crash, while using a lifetime income guarantee to protect a portion of their assets, Mabry said.

Axa Equitable's new hybrid product appears to be unique, said Doug Dannemiller, a senior analyst at the research firm Aite Group. The closest existing annuities to it might be those that have a variable annuity sleeve and a fixed annuity sleeve, he said.

Axa Equitable is "playing to the different elements advisers like," Dannemiller said.

Retirement Cornerstone comes along at a time when variable annuity providers are doing lots of tinkering with their offerings, and in some cases coming out with new products. Early this month, Sun Life Financial Distributors Inc. in Boston eliminated several versions of its living benefits. MetLife Inc. introduced a simplified variable annuity over the summer that it dubbed the Simple Solution Variable Annuity.

The strain that the market crash put on guaranteed-income rider providers is behind much of the change. Many providers have eliminated guarantees or raised their prices; second-quarter figures from the research firm Kehrer-Limra showed that variable annuity sales rose 17% in the quarter, compared with the first quarter, well behind the 55.9% gain posted by mutual funds. The disparity is striking, because sales of the two products usually move in tandem.

Mabry said that Retirement Cornerstone's long-term accumulation account gives advisers no shortage of options. It offers about 90 investment portfolios, including sector funds, Mabry said, from between 20 and 25 asset managers.

For their own part, consumers, Dannemiller said, like guarantees. And those guarantees are available within the product's downside-protection account, which provides a guaranteed-income benefit option that invests in asset allocation and index portfolios. The account also provides a hedge against rising interest rates. Its "roll-up" rate allows the account's income benefit to rise as interest rates rise.

From Axa Equitable's perspective, Retirement Cornerstone appears to have a risk management advantage. The number and types of investments within the protected portfolio give the company "a better handle on what the investor has guaranteed, and therefore the ability to manage or hedge that risk very tightly," Dannemiller said.

The base contract for Retirement Cornerstone costs 130 basis points of assets, and the guarantee costs 80 basis points, according to Mabry. Expenses related to the investments themselves are an additional layer, he said.

This article is reprinted with permission from American Banker.

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