Post on 30-Mar-2015
transcript
Aviva’s ProgressiveIndex Annuity
Ken MacArthur
Assistant Vice President
TSA Marketing
PRO5T044US For Agent Use Only
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AVIVA SEPTEMBER 2002
Introducing the Aviva
Progressive Index Annuity
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To begin, three key questions:
“Is the indexed annuity you currently sell one that was designed to reflect the real-world performance of the S&P 500® index?”
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Next question:
“Are you familiar with the concept of effective participation?”
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Final question:
“Does the contract you sell offer distinct account choices that play to different market conditions?”
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The Key to understanding Aviva’s role in the EIA marketplace
The Key to understanding your own ability to gain Competitive
Advantage
The Key to offering Your Customers the best choice among
many indexed annuities
Answering these questions is Critically Important…
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AVIVA SEPTEMBER 2002
I’ve seen that the vast majority of advisors genuinely want to
provide their clients the best product available
I’ve seen that most advisors want to benefit from a competitive
advantage
I’ve seen that most advisors achieve greater success when
these desires can be aligned
Over the years…
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AVIVA SEPTEMBER 2002
It wasn’t enough to simply create a copycat index annuity
Nor was it keeping in Aviva’s tradition of innovation and
choice as we have seen in other product types i.e. Enhanced
Guarantee Annuities
Waiting for an opportunity to do better…
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What we have here is one of those examples of a legitimate
and important improvement that occurs at the contract DNA
level
A contract design that substantively alters the status quo!
Waiting for an opportunity to do better…
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Aviva believes that you are likely not currently selling an
indexed annuity that recognizes a critical historical
performance characteristic of the S&P 500®
That is what we refer to as “Breakthrough Years”
Back to our questions…
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• That to properly serve your clients you must become familiar
with the concept of “Effective Participation”
• This recognizes and quantifies the capabilities of all types of
indexed accounts and defines what “participation” really
means
Aviva believes…
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Effective Participation !
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Demonstrating Effective Participation
Traditional Cap strategies with a 100% Participation Rate fail to capitalize on S&P 500®
breakthrough years
Annual S&P 500 Performance CAP Return 7% Cap Effective Participation
-10% 0% 0%
5% 5% 100%
10% 7% 70%
15% 7% 47%
20% 7% 35%
25% 7% 28%
30% 7% 23%
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In order to combat the limiting effect of Effective
Participation, Aviva has devised an innovative interest
crediting strategy designed to capitalize on those years
when the S&P 500® produces larger gains
Aviva wanted to do better…
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AVIVA SEPTEMBER 2002
To understand this new
strategy we need to become
familiar with a new term, the
“Breakthrough Level”
Because we now have a
new way to credit interest
when the S&P 500
“Breaks Through”
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AVIVA SEPTEMBER 2002
Annual Breakthrough Index Account
100% Participation over the
Breakthrough Level
(12.75% - 10/7/05)
PLUS
25% Participation up to the
Breakthrough Level
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How the Breakthrough Account Can Produce Outstanding Gains
in Breakthrough Years
Assumes a 25% participation up to a 15% Breakthrough Level, and 100% thereafter.
S&P 500 Performance 7% Cap Return Breakthrough Account
Effective Return
Breakthrough Effective
Participation
-10% 0% 0% 0%
5% 5% 1.25% 25%
10% 7% 2.50% 25%
15% 7% 3.75% 25%
20% 7% 8.75% 44%
25% 7% 13.75% 55%
30% 7% 18.75% 63%
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It can dramatically increase interest growth when the S&P
500® “Breaks Through”
An important question is, “How often does the S&P 500®
break through?”
Why is the Annual Breakthrough Strategy Important?
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AVIVA SEPTEMBER 2002
Even one or two Breakthrough years can carry a product’s effective annual return to greater levels over the product’s life
Breakthrough Years – How Often?
**Source: Standard & Poor’s market data since January 1970. Index represented is the S&P 500 without dividends. Average returns are based upon an annual point-to-point methodology. Past performance is no guarantee of future performance.
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So history shows why annuity contract holders should
have a way to capitalize on breakthrough years!
But what about years when S&P 500® performance is in
the single digits?
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Annual Cap Index Account
Interest is credited for 100% of those gains up to the indexed interest cap
6.5% (10/7/05)
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An Aviva Edge!Indexed Accounts That Complement One Another
Cap account returns tend to be more stable and yield moderate returns in most years that the S&P gains
Breakthrough account returns can fluctuate but yield opportunity in higher markets
Blending accounts can provide the best of both worlds
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50% 50%Breakthrough Annual Cap
An Aviva Edge!Choose an allocation that best suits your client’s needs
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33% 67%Breakthrough Annual Cap
An Aviva Edge!Choose an allocation that best suits your client’s needs
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100%Annual Cap
An Aviva Edge!Choose an allocation that best suits your client’s needs
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It gets better!
What about clients who do not want 100% of their
premium in an indexed strategy?
Or need systematic distributions?
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An Exceptional Fixed Interest Account
Declared and Guaranteed Annually
Compounds daily
Additional premiums go into Fixed Account; can be allocated at anniversary
Minimum rate guarantee of 1.5% to 3.0%; will apply for the life of the contract (2.7% Model Index – 10/7/05 )
Systematic withdrawals taken from the Fixed Account first to protect Indexed Accounts
No Market Value Adjustments
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An Exceptional Fixed Interest Account
3.15% Guaranteed One Year (10/7/05)
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How do the 3 Account Options Compare?
For example, look at page 4 of your Certificate of Disclosure
If we apply the actual S&P 500 values over the last 10 years with a hypothetical 3% fixed, 7% cap, and 15% breakthrough on a $10,000 premium, allocated exclusively in each account for 10 years -
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We get:
Example A (1/15/95-1/15/05)
Fixed = $13,440
Cap = $15,700
Breakthrough = $22,295*
*0% interest in 3 of 10 years
Example B (7/15/94-7/15/04)
Fixed = $13,440
Cap = $17,180
Breakthrough = $21,070*
*Sub-3% interest in 5 of 10 years
100% Breakthrough Account allocation is generally not recommended. These examples are for illustration purposes only.
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Salary Reduction works GREAT with Aviva Life Insurance Company
Client Statement is Simple to Understand in contrast to other companies
Upon withdrawal/surrender other contracts would need to stagger/delay payment to avoid losing potential S&P gains
Fixed Account offers Stable Returns and Ability to Access Money
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Salary Reduction works GREAT with Aviva Life Insurance Company
Diversify your Client’s Money with ONE contract through two Indexed Accounts and one Fixed Account
Declining 10 year surrender charges
On-going Compensation option – Trail Option case by case
300+ year Heritage (Aviva plc)
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Unmatched Flexibility
Choice Of Accounts – Allocate among two indexed and a fixed account; diversify according to risk tolerance, savings timeline and overall objectives
Transfers Among Accounts – Transfer values among the three accounts on contract anniversary
Flexible Premium – Add subsequent premium at any time; allocate at anniversary among the three accounts
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Access to Money
Surrender Charge Free Withdrawals – 10% starting from Day One
Fixed Account First – Preserves index growth
Systematic Distribution – For as little as $100
Nursing Home Waiver – Not available in all states or for TSA
Policy Loans – Available for TSAs only
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Outstanding GuaranteesGuaranteed Surrender Value: 87.5% of premium at 1.5% to 3.0% per year
Guaranteed Minimum Fixed Rate: Set at issue between 1.5% and 3.0% per year
Guaranteed Minimum Indexed Cap: 5.0%
Guaranteed Maximum Breakthrough Rate: 50.0%
Participation Rates: Set at issue; can’t change over contract life
Minimum Surrender Values as a % of Premium
0.85
0.90
0.95
1.00
1.05
1.10
1.15
1.20
0 1 2 3 4 5 6 7 8 9 10Contract Years
Min
Surre
nder
Valu
e Fa
ctor
Minimum Surrender Value at 1.5%
Minimum Surrender Value at 3.0%
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Payout Options
Income for a Fixed Period Life Only Income Life with a Guaranteed Period Life with Installment Refund Interest Only Income of a Fixed Amount Available with no surrender charges after five
years when paid out over at least five years by administrative practice
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Competitive Advantage
Issues to think about when comparing your current indexed annuity…
Is there a distinct choice of accounts to match changing markets?
What are the “Effective Participation” possibilities of that product?
Can you capitalize on Breakthrough Years?
Can you blend accounts to best serve clients’ long-term savings needs?
Does the contract have strong liquidity features?
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Summary SpecificationsIssue Ages/Premium 0-85 NQ and Q; 0-75 TSA; TSA = $50/mo. Min. Prem.
Minimum Premium $10,000; Contracts Issued Weekly
Indexing Method Point to Point Annual Reset
Min Guar Surr Value 87.5% of Premium Growing at Min Rate 1.5%, Max Rate 3.0%
Term/Charges 10-year Term – Surrender Charges -12-12-12-10-8-7-6-5-4-3%
Transfers Among Accounts on Anniversary
Death Benefit Greater of Accumulation Value or Min Cash Surrender Value
Withdrawals 10% Surrender Charge Free Withdrawal Available Year 1; No MVA
Annuitization Later of Age 85 or 15 Years after Contract Issue Periodic Payments Available after 5th Year for 5-year or by Admin Practice
Other Nursing Home Waiver Available (Not in all States; Not TSA)Loans Available for TSA only
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“Why would you sell an indexed annuity that doesn’t
provide all of this when you can sell one that does?”
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Questions?