Presentation on theme: "Avivas Progressive Index Annuity Ken MacArthur Assistant Vice President TSA Marketing PRO5T044USFor Agent Use Only."— Presentation transcript:
Avivas Progressive Index Annuity Ken MacArthur Assistant Vice President TSA Marketing PRO5T044USFor Agent Use Only
AVIVA SEPTEMBER Introducing the Aviva Progressive Index Annuity
AVIVA SEPTEMBER 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?
AVIVA SEPTEMBER Next question: Are you familiar with the concept of effective participation?
AVIVA SEPTEMBER Final question: Does the contract you sell offer distinct account choices that play to different market conditions?
AVIVA SEPTEMBER The Key to understanding Avivas 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…
AVIVA SEPTEMBER Ive seen that the vast majority of advisors genuinely want to provide their clients the best product available Ive seen that most advisors want to benefit from a competitive advantage Ive seen that most advisors achieve greater success when these desires can be aligned Over the years…
AVIVA SEPTEMBER It wasnt enough to simply create a copycat index annuity Nor was it keeping in Avivas 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…
AVIVA SEPTEMBER 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…
AVIVA SEPTEMBER 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…
AVIVA SEPTEMBER 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…
AVIVA SEPTEMBER Effective Participation !
AVIVA SEPTEMBER Demonstrating Effective Participation Traditional Cap strategies with a 100% Participation Rate fail to capitalize on S&P 500 ® breakthrough years Annual S&P 500 PerformanceCAP Return7% Cap Effective Participation -10%0% 5% 100% 10%7%70% 15%7%47% 20%7%35% 25%7%28% 30%7%23%
AVIVA SEPTEMBER 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…
AVIVA SEPTEMBER 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
AVIVA SEPTEMBER Annual Breakthrough Index Account 100% Participation over the Breakthrough Level (12.75% - 10/7/05) PLUS 25% Participation up to the Breakthrough Level
AVIVA SEPTEMBER 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% 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%
AVIVA SEPTEMBER 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?
AVIVA SEPTEMBER Even one or two Breakthrough years can carry a products effective annual return to greater levels over the products life Breakthrough Years – How Often? **Source: Standard & Poors market data since January 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.
AVIVA SEPTEMBER 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?
AVIVA SEPTEMBER Annual Cap Index Account Interest is credited for 100% of those gains up to the indexed interest cap 6.5% (10/7/05)
AVIVA SEPTEMBER 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
AVIVA SEPTEMBER % BreakthroughAnnual Cap An Aviva Edge! Choose an allocation that best suits your clients needs
AVIVA SEPTEMBER % 67% BreakthroughAnnual Cap An Aviva Edge! Choose an allocation that best suits your clients needs
AVIVA SEPTEMBER % Annual Cap An Aviva Edge! Choose an allocation that best suits your clients needs
AVIVA SEPTEMBER It gets better! What about clients who do not want 100% of their premium in an indexed strategy? Or need systematic distributions?
AVIVA SEPTEMBER 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
AVIVA SEPTEMBER An Exceptional Fixed Interest Account 3.15% Guaranteed One Year (10/7/05)
AVIVA SEPTEMBER 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 -
AVIVA SEPTEMBER 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.
AVIVA SEPTEMBER 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
AVIVA SEPTEMBER Salary Reduction works GREAT with Aviva Life Insurance Company Diversify your Clients 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)
AVIVA SEPTEMBER 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
AVIVA SEPTEMBER 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
AVIVA SEPTEMBER Outstanding Guarantees Guaranteed 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; cant change over contract life
AVIVA SEPTEMBER 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
AVIVA SEPTEMBER 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?
AVIVA SEPTEMBER Summary Specifications Issue Ages/Premium 0-85 NQ and Q; 0-75 TSA; TSA = $50/mo. Min. Prem. Minimum Premium $10,000; Contracts Issued Weekly Indexing MethodPoint to Point Annual Reset Min Guar Surr Value87.5% of Premium Growing at Min Rate 1.5%, Max Rate 3.0% Term/Charges10-year Term – Surrender Charges % TransfersAmong Accounts on Anniversary Death BenefitGreater of Accumulation Value or Min Cash Surrender Value Withdrawals10% Surrender Charge Free Withdrawal Available Year 1; No MVA AnnuitizationLater of Age 85 or 15 Years after Contract Issue Periodic Payments Available after 5 th Year for 5-year or by Admin Practice OtherNursing Home Waiver Available (Not in all States; Not TSA) Loans Available for TSA only
AVIVA SEPTEMBER Why would you sell an indexed annuity that doesnt provide all of this when you can sell one that does?