For Agent Use Only. © 2009 American Financial I'd Like a Way to Fund My Retirement That Will: Index...

For Agent Use Only. © 2009 American Financial

I'd Like a Way to Fund My Retirement That Will:

• Index my value to the stock market

• Protect my money

• Allow for liquidity

• Have tax advantages

• Has growth potential


Life is All About Balance

Mutual Funds

Stocks

Variable Annuity

BondsCDsCash

Fixed Annuity FIA

Possible Gain

Possible Loss

10% CapNo Possible Loss

Risk Low Risk


What is a Fixed Index Annuity:

Grow retirement dollars without risking original investment

Gains tied to a market index Money is not invested in stocks Locks in gains annually

If market index decreases, value does not

Provides triple compoundingSurrender penalties may apply if product is not held for the term. Based on the claims paying ability and stability of the insurance company


Why Fixed Indexed Annuities?

OLD CHOICESLower Risk Fixed Investments –

CD’s, Savings, Fixed Annuities

Rates today are in the 3-4% range

Higher Risk Investments –

Stocks, Bonds, Mutual Funds, Variable Annuities

Value of investments can go up OR down and you pay fees either way


The FIA ChoiceFIA’s borrow the low risk guarantees offered from

the fixed products while borrowing some of the growth from the variable products.

Why Fixed Indexed Annuities?

Lower Risk

FIA’s

Higher Risk

CD’s, Savings, Fixed Annuities

Stocks, Bonds, Mutual Funds,

Variable Annuities


Investors Total Returns

Average S&P 500Returns

16.29%

Jan ’84Thru

Dec ‘00

Jan ’84Thru

Dec ‘00

Jan ’84Thru

Oct ‘03

Jan ’84Thru

Oct ‘03

* Source - Dalbar Study as reported in“The Advantage Group

Index AnnuitiesPower & Protection by Jack Marrion”

Average Equity Fund

Investor5.32% 2.57%

12.22%


Investors Fail Investment 101

Investor retention of funds is at it’s lowest level since 1988

The average equity investor remains invested in a fund for about 2 ½ years, down from a high in 1992 of about 3 ¼ years

Source - Dalbar Study


Power of Annual Reset


The Power of the Annual Reset

-100

-80

-60

-40

-20

0

20

40

2002 2003 2004

+15

-7

Case Study“Rule number one: Never lose money. Rule number two: Never forget rule number one.”

Warren Buffett


The Power of the Annual Reset

-100

-80

-60

-40

-20

0

20

40

60

80

1 2 3 4 5

Locks in Gains

“Sell High”

Resets

“Buy Low”

?

“As long as the basic concept remained intact – no downside for me and a 50 percent share of the upside – it was an extraordinary deal.”

Donald Trump from “The Art of the Deal”





This example is intended to highlight the annual reset feature of a fixed index annuity. This is not a comprehensive overview of all relevant annuity features and benefits. Be sure to review all material details about these products.

We are using actual S&P 500 data from 1/1/1999 to 1/1/2009, and are assuming the hypothetical product was available for purchase on 1/1/1999 utilizing the monthly sum crediting method with a hypothetical monthly cap of 2.7%.

Keep in mind that this represents past information only and results will vary depending on actual market conditions. Past performance may not be used to predict or project future results. Actual results will vary by the specific product chosen, crediting method, caps spreads, or participation rates.

No single crediting method consistently delivers the most interest under all market conditions. The minimum guarantee (light blue line) illustrates a market scenario where no indexed interest was earned during the period shown.

Although external indexes may affect your contract values, the contract does not directly participate in any stock or other investments. You are not buying bonds, shares of stock, or shares of an index fund. The indexes do not include the dividends paid on stocks underlying a stock index or interest paid on bonds underlying a bond index. Stock dividends and bond interest are not reflected in the interest we credit to your contract. The S&P 500 index does not include dividends.


GMWB “Income Benefit Riders”

The evolution of these riders – Here come the boomers

GMDBs - GMIBs - GMWBs

Comparing 1997 intro to indexed annuities 2007-2008 GMWBs


Problems with these Riders

Look at these riders more like a…PENSION

Like Defined Benefit Plan& Social Security

What is more valuable to a retiree?

Pension or 401(k)?


What is a Pension?

Guaranteed income Not an individual cash account

What is unique about this type of pension?

Creates lifetime income Adds an individual cash account

option


Guaranteed Income with Cash Option

Base Annuity $100,000 Base Annuity w/ Rider

Premium Bonus

Assumed 10-Year Roll-up

Income Bonus (5%)

Surrender Value

Income Factor@ Age 65 (5.5%)

Guaranteed Income of $11,928 /annually OR ($994 /month)

$105,000

N/A

$171,034*

N/A

Accumulation Value

$171,034*

N/A

$105,000

7%

N/A

$10,328

N/A

$216,879

(5%)

N/A Rider Income Value $206,551

* Assumes interest crediting of 5% annually – if we assume 0% interest, then the value is $105,000

(Income Rider Values)(Annuity Values)


Guaranteed Income with Cash Option

Base Annuity $100,000 Base Annuity w/ Rider

Premium Bonus

Assumed 10-Year Roll-up

Income Bonus (5%)

Surrender Value

Income Factor@ Age 65 (5.5%)

Guaranteed Income of $11,928 /annually OR ($994 /month)

$105,000

N/A

$171,034*

N/A

Accumulation Value

$171,034*

N/A

$105,000

7%

N/A

$10,328

N/A

$216,879

(5%)

N/A Rider Income Value $206,551

* Assumes interest crediting of 5% annually – if we assume 0% interest, then the value is $105,000

(Income Rider Values)(Annuity Values)


Control, Flexibility, Liquidity

GMWB features include…

Start & stop Step-up feature due to market increase Walk away feature Lump-sum at death Additional free withdrawals Income for life even if cash goes to zero

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