#140 | AXA IUL Protect Series 160
What’s the name of a legendary sports car that has the distinction of being the only car, let alone sports car, where the engine hangs behind the rear wheels? You’re on the right track if you’re thinking Porsche 911, but are we talking about the 964, the 993, the 996, the 997, the 991 or the 992? For people who like Porsches, each one of those numbers represents a distinct and different model, each with its own story. Porsche makes a lot of modifications under the skin, but the core remains – every 911 is immediately recognizable on the street by everyone from toddlers to grandmothers as being a Porsche 911.
So it goes with AXA’s odd naming convention. What, exactly, does Series 160 signify? Not much else other than that Series 159 preceded it. And like the different iterations of the Porsche 911, AXA IUL Protect Series 160 looks a lot like the one that came before it, AXA IUL Protect Series 159. The changes will go largely unnoticed by anyone who doesn’t work at AXA Equitable, but there was some tinkering under the hood that is worth noting.
Fixed charges in the first 10 years were increased by 10%, but the 10% Index Return Multiplier now starts in year 2 rather than in year 11 and premium loads have been reduced in the first 2 years by 2%. Intuitively, you can see that the net result is that any situation where more money goes into the policy will illustrate better than before because the premium load is lower and the multiplier starts earlier. The only drag is the slightly higher fixed charges, which will be more apparent in thin-funded scenarios but, in the long run, won’t materially impact premium solves. Consequently, level pay premium solves have gone up a smidge and short pay solves (and 1035 exchanges) are more competitive.
In the grand scheme of what’s happening in the Indexed UL market, these are mere tweaks. But they’re a continued sign of where the Indexed UL market is going – higher charges for more index participation. That’s exactly the trade in moving from Series 159 to Series 160. And if you were to stop there, you’d think that AXA was just following the herd, but there’s a broader context for the product that casts a different light.
As we covered in the original review for IUL Protect 159, the product has an Extra Interest Credit that adds any fixed account crediting rate above 3.5% to the indexed accounts. The current EIC is 0.5%, which means that IUL Protect policyholders are getting index performance plus an extra 0.5% regardless of what the index does. Over time, as rates hopefully go up, the EIC will go up as well (AXA is a longsuffering “new money” company) and additional interest will be added to the index credits. In other words, AXA made the call that it wanted to buck the herd by crediting excess fixed interest rather than spending that interest to buy a higher cap or Index Return Multiplier in order to further juice illustrated performance.
AXA is quite obviously not interested in just juicing leverage in its products to get better illustrated performance. If they were, the EIC would be an Index Return Multiplier and the fixed charges in AXA IUL Protect wouldn’t be some of the lowest in the industry, even after the 10% increase. This latest tweak from Series 159 to Series 160 is more about competitive positioning. And you can’t blame them – the death benefit IUL space is rapidly heating up and any company that built a highly leveraged product (John Hancock, PacLife PDP) is crushing it in single pays. This little modification puts AXA back in the hunt without modifying their core story. To put it in the Porsche analogy, this is akin to the 991 evolving to the 991.2 in 2017, which saw Porsche strap a turbocharger to its trademark flat six across the entire 911 lineup but the rest of the car remained largely the same. Just a little extra juice where they felt like they needed it.