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© 2010 Standard Insurance Company Index Growth Annuity 5 & 7 Product Training Module
© 2010 Standard Insurance Company Overview and Key Product Features Index Interest Account History of the S&P 500® Index Fixed Interest Account Surrender Schedules and Free Withdrawals Suitability Analysis During the Sales Process Compensation and Sales Support IGA Training 2
© 2010 Standard Insurance Company Overview and Key Product Features
© 2010 Standard Insurance Company What is an Index Annuity? – An index annuity (often referred to as an “equity-indexed annuity”) is a fixed-interest insurance product with interest crediting determined in part by reference to an investment-based index, such as a Standard & Poor’s ® index or a NASDAQ ® index. It is important to understand that indexed products do not invest in the index used to determine the interest crediting rate; these are not securities and should not be marketed or sold as such. Index annuity products are designed for those people who are interested in guaranteed rates with safety of principal, but who also desire a return that can capitalize on positive economic conditions, and which may exceed traditional fixed products. These clients will normally be moderately conservative savers who appreciate the tax-deferred aspects of annuities and may be interested in some diversification through different asset classifications and product designs. There are a number of index products on the market and each has its own unique design features. This training module provides a summary Standard Insurance Company’s Index Growth Annuity product. Before you sell this annuity you are required to review this training module carefully and pass the product exam at the end of the module. IGA Overview 4
© 2010 Standard Insurance Company The Index Growth Annuity (IGA) is a single-premium, deferred annuity with a Fixed-Interest account and an Index Interest account that participates in 100% of the growth of the S&P 500® index to a pre-specified rate cap. The Index Growth Annuity has a one-year interest-rate guarantee period on the Fixed Interest account and a 12-month point-to- point index term on the Index Interest account. At the end of the guarantee period and the index term, your client will benefit from competitive renewal rates based on the current economic environment and the performance of the fixed- income portfolio of The Standard. The IGA provides strong guarantees to protect hard-earned savings. This annuity is an ideal choice for a growth-focused saver who appreciates the benefits of safety, tax deferral and returns that are directly linked to the upside (but not the downside) performance of the Standard & Poor’s 500 index. The annuity will never participate in any losses the index may see, only in the gains. Plus, as interest is credited the earnings are locked into the account value. An Index Growth Annuity contract actually has very few moving parts. IGA Overview 5
© 2010 Standard Insurance Company Issue Ages – An Index Growth Annuity may be established for owners age 18-90. The maximum annuitant age for the IGA is 90. Annuitants and Owners – The Index Growth Annuity series contract language does allow the option of joint ownership and/or joint annuitants. Premium – The minimum premium amount for the annuity is $15,000 and the maximum is $1,000,000. Greater amounts may be considered, but must receive home office approval prior to application. Minimum Surrender Value Guarantee – The growth of the annuity value is guaranteed and protected. The contract includes a minimum surrender value that will grow as the contract remains in force. This rate on which this value is based is announced monthly as the “minimum contract guarantee rate.” After the surrender-charge period, your client or the beneficiary will receive no less than 100% of the premium, net of any withdrawals taken, accumulated at a rate that meets or exceeds minimum state requirements. IGA Overview 6
© 2010 Standard Insurance Company Tax Qualified Options -- This annuity may be established as an IRA (Traditional, Roth, or SEP), 403(b) Tax-Sheltered Annuity, or Qualified Pension. Non-qualified funds may also be used to establish the annuity. Rollovers, Transfers and Exchanges – The entire premium will be allocated to the Fixed Interest account, where it earns interest until all expected funds are received and then allocated on the 15 th day of the month as a lump sum, as directed on the application. Interest Rate Lock – The Index Growth Annuity may make available an interest rate cap lock. If available at the time of purchase, this would allow The Standard to hold a rate cap for a set time period from the home-office receipt of a request for a rollover, transfer or exchange. If the funds were to be received within this window, the client would receive the greater of the held interest rate cap or the current interest rate cap. If the premium is received after the rate-lock period, it would be assigned the interest rate cap in effect at the time the premium is received. Please note that this rate lock may be made available only for the index rate cap. A rate lock will never be offered for the minimum contract guarantee rate or the fixed interest crediting rate; those will be set at the rates in effect at the time the funds are received. IGA Overview 7
© 2010 Standard Insurance Company Accounts – There are two account options. The Index Interest account is that portion that is credited a rate based on the performance of the S&P 500®. The Fixed Interest account is that portion that is credited a guaranteed rate (no matter what happens in the S&P 500®). Any portion, totalling to 100 percent, may be held in each account. Account Allocation – If premium is allocated to the Fixed Interest account, it will be allocated on the contract effective date. If premium is allocated to the Index Interest account, it will be allocated (and the 12-month index term will begin) on the 15 th day of the month after all premium, as applied for, has been received. Each index term will be immediately followed by subsequent index terms of 12 months each. Though funds are not required in either the Index Interest account or Fixed Interest account, if any are directed to either, a $2,000 minimum balance must be maintained to keep the account open. Account Transfers – Funds may be transferred between the Index Interest account and the Fixed Interest account, receiving the index rate cap and interest rate in effect at the time the transfer is acted upon. A transfer must be elected prior to the end of an index term and will be transacted on the first day of the new index term. IGA Overview 8
© 2010 Standard Insurance Company The Index used for the IGA annuity is: NASDAQ S&P 500® Barclays Dow-Jones Additional premium may be paid during the first ________ after the contract effective date: 90 days 180 days 1 year No additional premium may be paid IGA Review 9
© 2010 Standard Insurance Company Index Term – Each index term is 12 months. On the first day of this term, the value of the S&P 500 will be set as the beginning value; on the last day of this term, the value of the S&P 500 will be set as the ending value. The difference is the growth or loss. If there is growth, the index rate cap will be applied and that will determine the interest to be credited to the Index Interest account. Index Participation – The portion of premium placed in the Index Interest account will participate in 100 percent of the growth of the S&P 500 ® index over each index term up to the stated index rate cap. Index Rate Cap – The index rate cap is the rate above which interest will not be credited for funds in the Index Interest account. In other words, the rate that will be credited to the Index Interest account is “capped” at a set percentage. At the end of each index term the contract will be assigned a renewal index rate cap for the subsequent index term, based on the current economic and interest-rate environment. Bailout Index Rate Cap – On the effective date, the annuity contract is assigned a bailout index rate cap that is equal to 2 percent less than the initial index rate cap. If a renewal index rate cap is ever declared below that bailout rate, funds may be withdrawn from the Index Interest account without a surrender charge (during that time the index rate cap is below the bailout rate). Index Interest Account 10 Index:S&P 500 Index Term:12 Months Participation Rate:100% Index Rate Cap:Declared Annually Bailout Index Rate:2% Less than Initial Interest Credited:Annually A T A G L A N C E
© 2010 Standard Insurance Company 100% of the increase in the S&P 500® will be credited at the end of each Index Term to the funds allocated to the Index Interest Account, subject to: No maximum on interest earnings A cap on the participation rate The index rate cap The length of each Index Term for the IGA annuity is: 1 month 6 months 1 year 2 years 5 years 7 years Index Interest Account 11
© 2010 Standard Insurance Company Interest Rate Crediting – Interest will be calculated and credited to the Index Interest account once each year, at the end of the 12-month index term. The interest rate is calculated by determining the value of the S&P 500® on the allocation day and comparing it to the value of the index 12 months later. If the value of the index has increased the Index Interest account will be credited with the same percentage increase, up to the index rate cap. If the value has decreased or remained level no interest will be credited to the Index Interest account. All gains are locked into the account. Interest Crediting Example Index Interest Account 12 Index Rate Cap Fixed Crediting Rate = 9.00% = 3.50% SampleS&P 500 Performance11.00%7.00% InterestCredited Index Interest9.00%7.00%0.00%
© 2010 Standard Insurance Company Widely regarded as one of the best gauges of the U.S. equities market, this world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 ® focuses on the large-cap segment of the market, with over 80 percent coverage of U.S. equities, it is also an ideal proxy for the total market. The S&P 500 ® is maintained by the S&P Index Committee, whose members include Standard and Poor’s economists and index analysts. Committee oversight gives investors the benefit of Standard and Poor’s depth of experience, research and analytic capabilities. The committee Policy used to maintain the indices in an independent and objective manner. The history of the S&P 500 dates back to 1923, when Standard and Poor’s introduced an index covering 233 companies. The index as it is known today was introduced in 1957, when it was expanded to include 500 companies. Past performance is not an indicator nor a guarantee of future results. History of the S&P 500® Index 13 End of year S&P 500 Index Value Annual Return 1995615.9334.11% 1996740.7420.26% 1997970.4331.01% 19981229.2326.67% 19991469.2519.53% 20001320.28-10.14% 20011148.08-13.04% 2002879.82-23.37% 20031111.9226.38% 20041211.928.99% 20051248.293.00% 20061418.3013.62% 20071486.363.53% 2008903.25-39.23% 20091115.1023.45%
© 2010 Standard Insurance Company Interest Crediting – In the Fixed Interest account, interest is calculated and credited daily. Interest Rate Guarantee – The portion of premium placed in the Fixed Interest account will be credited a guaranteed interest rate for one year. After the guarantee period, the premium will receive a renewal rate based on the current economic environment and the performance of the fixed-income portfolio of The Standard. Minimum Rate Guarantee – The contract will include a minimum guaranteed rate on funds in the Fixed Interest account, below which a renewal crediting rate will never fall. The guaranteed contract minimum interest rate is set in accordance with state requirements. Once set, it is guaranteed for the life of the contract. Fixed Interest Account 14 Rate Guarantee:1 Year Minimum Rate:Contractual By State Interest Credited:Daily A T A G L A N C E
© 2010 Standard Insurance Company Growth of the annuity fund for the IGA annuity is calculated as follows: A.A set interest rate is credited daily to funds in the fixed interest account. B.Increases in the index are applied at the end of the index term to funds in the index interest account. C.Decreases in the index are applied at the end of the index term to funds in the index interest account B only B and C only A only A, B and C A and B only A and C only IGA Review 15
© 2010 Standard Insurance Company Surrender Schedules and Free Withdrawals
© 2010 Standard Insurance Company IGA Surrender Charge Schedules 17 Contract Year1234567 8 IGA 58%7%6%4%2% IGA 79%8%7%6%5%4%2% Unlike short-term savings products, deferred annuities are designed and priced for long-term retirement savings. Part of this design relies on the fact that the advantages of tax deferral work best when the annuity’s growth is allowed to compound over time. So, though all or a portion of the funds may be withdrawn at any time, early withdrawals are discouraged and are subject to surrender charges. Expressed as a percentage of the annuity’s total value, these charges diminish to zero over time. The schedule is in effect for only one period during the life of the contract and will not reset. Please note that the surrender charges are not part of or associated with any state or federal taxes imposed on a distribution or with the IRS pre-age-59 ½ tax penalty that may apply to a withdrawal. Surrender charges are in addition to any applicable state or federal taxes or penalties.
© 2010 Standard Insurance Company 10% Annual Withdrawals – Beginning immediately, annual withdrawals up to 10 percent of the annuity value (as of the end of the preceding contract year) may be made. This percent would be inclusive of all withdrawals. IRS Required Minimum Distributions – If the contract is held as a tax-qualified plan, beginning immediately IRS Required Minimum Distributions may be made on the schedule requested. Substantially Equal Periodic Payments (SEPP) – The SEPP option allows early-retirement (pre-age-59 ½) income without imposition of the IRS 10% early-withdrawal penalty or incurring a surrender charge. Nursing Home Benefit - After the first contract year, if your client becomes a nursing home resident for 30 or more consecutive days, The Standard will waive surrender charges on all withdrawals, transfers and surrenders during the period of confinement. Written documentation is required. The nursing home waiver is not available in Massachusetts. Terminal Condition Benefit – If your client is diagnosed with a terminal condition, The Standard will waive surrender charges on all withdrawals, transfers and surrenders. Written documentation is required. State-specific conditions apply to the terminal condition waiver. Out of Surrender – After the end of the surrender period, your client may withdraw some or all of the Secured Rate Annuity funds without surrender charges. Death Benefits – Beginning immediately, upon the death of the owner the full annuity value is payable as death benefits to the named beneficiary. Surrender Free Withdrawals 18 If initiated mid-index term (and if the index experienced gains), a partial index credit will be granted when exercising the nursing-home or terminal condition waivers, annuitizing, or distributing death benefits. Unique Feature: Partial Indexing Credit
© 2010 Standard Insurance Company Annuitization – At any time the Index Growth Annuity may be converted to a payout annuity with The Standard. Available Income Options Include Certain Period – A guaranteed income for a time period chosen (5, 10, 15, or 20 years). At any time, benefits may be commuted to a lump-sum payment. If the annuitant dies prior to the end of the period specified, payments continue to the beneficiary until the end of the period (or may be commuted to a lump-sum payment). Life Income – A guaranteed income for as long as the annuitant lives. Payments will cease upon the death of the annuitant. Life Income with Installment Refund – A guaranteed income as long as the annuitant lives. The total payments will never be less than the total of the funds paid to purchase this option. If the annuitant dies before receiving at least that amount, payments continue to the beneficiary until the full amount is repaid (or may be commuted to a lump-sum payment). Life Income with Certain Period – A guaranteed income for as long as the annuitant lives. If the annuitant dies prior to the end of the period specified (5,10,15,or 20 years), payments continue to the beneficiary until the end of the period ( or may be commuted to a lump-sum payment). Surrender Free Withdrawals 19
© 2010 Standard Insurance Company Available Income Options (continued) Joint and Survivor Life Income – A guaranteed income for as long as both annuitants live. When either annuitant dies, payments will continue at 50%, 66 2/3%, 75% or 100% of the payments received when both were living. Payments will cease upon death of both annuitants. Joint and Survivor Life Income with Installment Refund – A guaranteed income for as long as both annuitants live. The total payments will never be less than the total of the funds paid to purchase this option. If both annuitants die before receiving at least that amount, payments continue to the beneficiary until the full amount is repaid (or may be commuted to a lump-sum payment). Joint and Survivor Life Income with Certain Period – A guaranteed income for as long as both annuitants live. When either annuitant dies, payments will continue at 100% of the payments received when both were living. If both annuitants die prior to the end of the period specified (5, 10, 15 or 20 years), payments continue to the beneficiary until the end of the period (or may be commuted to a lump-sum payment). Joint and Contingent Survivor Life Income – A guaranteed income for as long as both annuitants live. If the primary annuitant dies first, payments will continue at 50% of the payments received when both were living. If the contingent annuitant dies first, payments will continue at 100% of the payments received when both were living. Payments will cease upon death of both annuitants. Surrender Free Withdrawals 20
© 2010 Standard Insurance Company The Standard’s IGA annuity plan designs include a Bailout Index Rate Cap of: 1.00% below the initial Interest Rate Cap 1.50% below the initial Interest Rate Cap 0.05% below the initial Interest Rate Cap 2.50% below the initial Interest Rate Cap 2.00% below the initial Interest Rate Cap N/A – the IGA does not include a Bailout Index Rate Cap A partial index gain will be credited toward payment made mid-Index Term in the following instances: Check all that apply Any type of payment or withdrawal Payment of death benefits Payment of nursing home confinement benefits 10% Annual Withdrawals Terminal condition benefit payments Substantially equal periodic payments Annuitization with a Lifetime Income option N/A -- No benefit payments receive a partial index gain Surrender Free Withdrawals 21
© 2010 Standard Insurance Company Suitability Analysis During the Sales Process
© 2010 Standard Insurance Company Is the Product Right for Your Client? In recommending an annuity to a client, suitability regulations require a producer to have “reasonable grounds” to believe the recommended annuity is suitable for that particular client on the basis of facts disclosed by the client during the sales process. A producer should obtain and analyze the client’s: Age Annual Income Financial Situation and Needs (including financial resources used to fund the annuity) Financial Experience Financial Objectives Intended Use of the Annuity Financial Time Horizon Existing Assets (including investments and life insurance holdings) Liquidity Needs Liquid Net worth Risk Tolerance Tax Status Suitability Analysis During the Sales Process 23
© 2010 Standard Insurance Company As a result of a producer’s review of the previous, and analysis to determine suitability, the producer must have a “reasonable basis to believe:” The client has been “reasonably informed of the various features of the annuity” – this includes the surrender charge amounts; potential tax penalties associated with the sale, exchange, surrender or annuitization of the annuity; mortality, expenses and investment advisory fees; potential charges for and features of riders; limitations on interest returns; insurance and investment components and market risk; The client would benefit from certain features of the annuity, such as tax-deferred growth, annuitization, death benefits or living benefits; The particular annuity as a whole, any index accounts to which funds are allocated at the time of purchase or exchange of the annuity, and any riders and similar product enhancements, are suitable for the client based on his/her suitability information; and (If applicable) an exchange or replacement is suitable, taking into consideration whether the client: – Will incur a surrender charge, be subject to the commencement of a new surrender period, lose existing benefits (such as death, living or other contractual benefits), or be subject to increased fees, investment advisory fees or charges for riders and similar product enhancements; – Would benefit from product enhancements and improvements; and – Has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding 36 months. The Producer Must Have Reasonable Basis to Believe: 24
© 2010 Standard Insurance Company Compensation and Sales Support
© 2010 Standard Insurance Company Commission Amounts – Consult your Annuity Commission Schedule for details Commission Chargeback for IGA Surrenders – 100% of the commission will be recaptured on contracts surrendered in the first 6 contract months – 50% of commission will be recaptured on contracts surrendered in contract months 7 - 12 Death – There is no chargeback on death of an owner or annuitant except in those cases where the deceased was age 86 or older at contract issue, in which case the commission chargeback rules for surrenders apply – 100% of commission will be recaptured on death in the first six contract months – 50% of commission recaptured on death in the seventh to twelfth contract months Compensation 26
© 2010 Standard Insurance Company Please contact your NMO or our sales team The Standard sales team phone: 800.378.4578 The Standard sales team email alias: email@example.com Marketing Materials: www.standard.com/annuities New Business Forms and Materials: www.standard.com/annuities New Business Submission Annuity New Business, P5C The Standard PO Box 711 Portland, OR 97207-9971 Street Address for Overnight Deliveries Annuity New Business, P5C The Standard 1100 SW Sixth Avenue Portland, OR 97204 Sales Support 27
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