MEM Capital acquired Mountain Life Insurance, a Tennessee-based insurer with over 50 years of experience. The company now offers multi-year guaranteed annuities (MYGAs) with fixed interest rates, appealing to retirees. MYGAs provide safety but have fees and limited liquidity.
Greenwich, Connecticut-based MEM Capital announced the acquisition of Mountain Life Insurance in August. The Tennessee-domiciled insurance company will keep its offices in Lexington, according to a press release.
As AM Best explains, Mountain Life Insurance “now exists within MEM Capital’s organizational structure.” Most recently, the company expanded its business by offering annuities.
What is Mountain Life Insurance?
Mountain Life Insurance, in business for more than 50 years, offers life insurance policies via independent agents in Alabama, Arizona, Arkansas, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Tennessee and Texas, according to its website.
It offers two primary types of insurance coverage: individual life and credit life.
Life insurance is a contract between you and an insurance company. Under this contract, you pay premiums to the company and in exchange, the company pays a death benefit to the policy beneficiary(s)—an individual(s) or entity chosen to receive the benefit—if you die while the policy is active.
Credit life insurance is a life insurance policy designed to pay off large loans, such as mortgages, if the insured individual dies.
If the insured individual dies while the policy is active and there is a balance on the loan, the insurer will issue payment directly to the lender.
In addition, Mountain Life’s credit life insurance includes disability coverage, which will cover your loan payments if you’re injured or are diagnosed with an illness that prevents you from working. Payments will last until you can return to work or until the policy term ends, whichever is first.
Adding New Business
Following the acquisition, the MEM said that “in addition to its existing life insurance business, Mountain Life is also planning to start “offering market-leading annuity products in the near future,” according to the release.
Indeed, the group introduced a multi-year guaranteed annuity (MYGA) product to Mountain Life’s product portfolio. According to AM Best, this “will diversify the liability profile and provide a source of growth for the company. “
Benjamin Keslowitz, FSA, MAAA, Mountain Life Insurance chairman, told Annuity.org that the company started selling annuities in November 2024.
“We have a very experienced executive team and Board of Directors with over 100 years of insurance and investment experience,” Keslowitz said. “Our experienced in-house team self-administers our business; many of our competitors instead use a third-party administrator that isn’t focused on any one company’s priorities.”
What Is a Multi-Year Guaranteed Annuity (MYGA)?
A multi-year guaranteed annuity, or MYGA, is a fixed annuity with a guaranteed interest rate, generally with a three- to 10-year term.
These are generally better suited for individuals close to retirement and “seeking tax deferral and investment return guarantees,”Annuity.org explains.
How Do MYGAs Work?
An MYGA is a contract between you and an insurance company. Under this contract, you pay a premium in exchange for a guaranteed fixed interest rate on your contribution for a specified term.
In other words, MYGAs enable you to invest a lump sum that earns interest over the agreed period. However, withdrawing funds before the end of the term may trigger surrender charges, reducing earnings.
Mountain Life Insurance’s MYGA enables individuals to lock in guaranteed rates for two, three, five, seven or 10 years.
“At the end of the renewal period, you will automatically be rolled into a contract for the same term and a guarantee period with a new rate,” the brochure notes.
After the accumulation phase, you can:
- Receive your initial premium and earned interest.
- Renew the contract, typically at a new rate.
- Transfer the funds into a different type of annuity.
As of January 18, 2024, Mountain Life Insurance has a B (Fair) rating from AM Best and its five-year term MYGA rate is 5.95%.
Benefits of MYGAs
There are several benefits to MYGAs, including safety, flexibility and tax benefits.
Benefits of MYGAs
- Safety
- Flexibility
- Tax Benefits
Safety of MYGAs
An MYGA can be an attractive investment vehicle for retirees and those looking to lower their market risk and defer some of their taxes while securing a regular income.
“As the name clearly states, the rate is guaranteed, so they provide both stability and predictability without market risk,” said Bobbi Rebell, CFP, personal finance expert at CardRates.com.
Rebell added that MYGAs are a good choice for someone who wants protection from the volatility and risk of other investments like the equity and fixed-income markets.
“Put simply, if the stock market crashes, it won’t have any impact on MYGAs,” said Rebell.
Flexibility of MYGAs
MYGAs are also flexible, as many providers include provisions enabling annual partial withdrawals without penalty.
MYGA Tax Benefits
“MYGAs allow your money to grow on a tax-deferred basis with a guaranteed rate of return,” explained Tony Steuer, CLU, LA, CPFFE, financial preparedness advocate at Tonysteuer.com. “This avoids a loss of principal,” he added.
Cons of MYGAs
While there are quite a few benefits that come alongside MYGAs, there are also some disadvantages.
“While a MYGA can provide some value, for most people, there are better ways to accumulate money for the future,” said Steuer, adding that MYGAs are also illiquid, so they are long-term vehicles.
Cons of MYGAs
- Not Backed by the FDIC (Federal Deposit Insurance Corporation)
- Fees
- Surrender Charges
- Potential Lower Returns
MYGAs Not Backed by the FDIC
As Creditcard.com’s Rebell explained, one risk investors should be aware of is that MYGAs are backed by the insurance company, not the FDIC. As such, it’s vital to choose an annuity company with a strong financial score from leading agencies, such as AM Best.
MYGA Fees
According to Rebell, MYGAs also carry fees and other expenses that can eat into the returns. Always ask the annuity provider about what fees apply and consider them when choosing the best product and provider.
Surrender Charges
Whether or not surrender charges apply and how much they are depends on the contract and the provider.
Mountain Life MYGAs have a 9% surrender charge in year one and 8% in year two for all guarantee periods. Steuer notes that longer guarantee periods have decreased surrender charges for the entire guarantee period.
“At the end of the contract period, the policies start a new guarantee period with the same duration. There is a 30-day window upon renewal where the contract can be surrendered without surrender charges,” he added.
Potential for Lower Returns
Locked-in rates protect you from market downturns, “But at the same time, you are locked in at the initial rate and can lose out on higher returns if rates go higher,” said Rebell.
Editor Norah Layne contributed to this article.
