Beginning on July 31, 2009, Sun Life Financial and CI Investments will close several of its segregated fund products to new deposits, including the SunWise Elite and SunWise Elite Plus funds with the full guarantee option (100% deposit maturity/ 100% death benefit). All SunWise and Clarica Portfolio funds will also be closed to new sales.
Sun Life and CI have stated that clients who are currently participating in a pre authorized chequing plan or a systematic transfer plan may continue to make these types of contributions to existing investment options. Funds with the combined guarantee option (75% deposit maturity/ 100% death benefit) and the basic guarantee option (75% deposit maturity/75% death benefit) will also remain open. In the case of new contracts, however, at least 30% of the value of the portfolio will have to be allocated to fixed income investments.
Sun Life and CI have also indicated that there will be increases in their segregated funds' insurance fees. These increases will be between zero to 0.30%, and will vary according to asset class, risk, and fund's type of guarantee.
As for SunWise Elite Plus, the guaranteed minimum withdrawal benefit (GMWB) rider fee will increase from 0.10% to 0.30%.
The move has provoked a lot of feedback from advisors, says Rocco Taglioni, Vice President, Individual Wealth Management at Sun Life.
Mr. Taglioni says many advisors called the company for clarifications since several changes were announced at the same time. Overall, he says, advisors said they were not surprised by the changes since they had seen insurers in other parts of the world make product adjustments to mitigate risk. "It's a global trend."
Some advisors have expressed unhappiness that pricing and the 30% fixed income allocation changes apply to existing GMWB contracts. Mr. Taglioni says the goal is to ensure that the product is "competitive and sustainable." To make changes to the future sales without including in-force products "would not be the right thing to do."
Pricing increases reflect the fact that the company has been experiencing volatility, which affects the costs of guarantees and hedging. By making these changes apply to all contracts, Sun Life "is looking forward, not backward," Mr. Taglioni adds.
In a letter to advisors dated May 27 obtained by The Insurance Journal, the insurer said that existing SunWise Elite Plus (GMWB) portfolios must be rebalanced to reflect the 30% fixed income change by December 31, 2011 or the insurer will take care of the rebalancing.
Does Sun Life anticipate that the changes will negatively impact product sales? Mr. Taglioni says he does not believe so, since the demand for products with guarantees is very high and increasing. "The bottom line is this product is focused and designed for clients looking for guarantees...the market conditions have emphasized the need for guarantees," he said.
Pointing to the company's hedging strategies that helped mitigate exposure during the market meltdown, Mr. Taglioni added, "I want to re-emphasize that it is an excellent product and our product risk management has served our clients well.
Dean Connor, president of Sun Life, says that the company has had to review its segregated funds options in light of current market conditions. "These changes balance our commitment to providing products that meet the needs of our clients throughout their lifetime, with the strong risk management focus that has put Canadian insurers in a position to weather these turbulent markets."