1. Mastering your
indexed UL sales: Deeper dive into IUL policy mechanics (For IUL Sellers)
Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY
LIFE MLINY /19
For Agent Use Only. This material may not be used with the public.

2. How do options come into play
Retail Investor
2% annual options budget buys 0% floor and 2.9% cap
2% opportunity cost of forgoing steady return
Insurance Carrier
Higher risk-adjusted options budget available: 5% buys 10.4% cap
5% opportunity cost of forgoing steady return
$2,500
$3,000
$3,500
$2,500
$3,000
$3,500
Let’s start by revisiting how options come into play in setting caps on IULs. To understand this part, you need to first understand how ULs and IULs are manufactured.
In the UL setting, John Hancock takes the premiums we have collected to buy fixed income assets. These fixed income assets are US treasuries, corporate bonds, and some mortgages. Because these assets generate interest payments, John Hancock take those interest payments from the underlying assets and give them right back to the policyholder. That’s it. John Hancock collects and we deposit.
Now in the IUL world, there is one more step. Rather than depositing the interests collected from underlying assets directly into policy, John Hancock takes the interests to go buy financial derivatives in the public market that would give us the risk return profile we saw earlier. The interest credit to the policy will then depend on the financial derivative payoff. If it pays 10%, we credit 10%. If it pays 1%, we credit 1%. It is as simple as that. The underlying assets backing the IUL are same as those you have seen in traditional UL. They are still the mortgages and bonds that we have talked about. By doing this one more step, we can change the risk return profile of the product and potentially elevate the interest earned over time.
The financial derivatives that we buy are called bull call spreads. These bull call spreads are made up of call options, which are publicly traded on CBOE. When you buy a bull call spread, you will be able to transform a flat return into payoff pattern presented on this slide. Let me be a little more specific. In a bull call spread, represented by the green line here, you have three components. The flat part on the left, the 45 degree angle line in the middle, and the flat part on the right. The flat part on the left here is the floor that people talk about in the IUL. Next is the 45 degree angle line. It is the part that gives you market return. For example, if market is up 5%, this is the part that pays that 5%. Finally, the flat part on the right here is what people called the cap. It is this mechanism that limits the upside gain you can get. Using a 5% earn rate as a hypothetical example, I will be able to buy a bull-call spread with a cap of 10.4% on August 22, 2018.
While some may be confused or turned off by this concept, it’s something any retail investor can do. For example let’s say you have a CD earning 2%, you could forego that steady 2% return and get a “cap” of 2.9%. That might be a tough sell, as you’re giving up the steady return for not much upside.
This is where the insurance carrier comes in. Because these products are backed by the general account performance, we can buy a higher cap. Just as an example a 5% yield could buy a cap of about 10.4%. This is an area we consider a strength for us, as John Hancock has one of the strongest general accounts in the industry and this allows us to have strong cap stability over the long term.
Steady return
Option spread
For Agent Use Only. This material may not be used with the public.

3. How do caps track interest rates and options costs?
Hypothetical historical caps based on interest rates and volatility
Cap Rate
However, we’re missing one piece of the equation, which is options costs. Options cost typically go up in periods of higher volatility, and down in periods of lower volatility. We mentioned earlier that options cost could affect caps, and they can, but temporary volatility is much less tied to the caps compared to long term interest rates. This chart shows volatility over time, and while this tends to fluctuate quite a bit, we see that caps would generally be much more linked to interest rates, and if those decline, it may drag down caps. Two things of note here, once again our strong general account performance can create a buffer against this and provide stability for clients. Secondly, our general account mostly invests in longer term assets, which makes the volatility have a lesser effect. There are carriers out there who may use shorter term financial instruments in their general accounts, and if they do, those are the carriers that are going to see a more pronounced effect of volatility, as the volatility could effect not just the cost of options, but also the cost of the short term instruments they’re investing in for their general account.
Year
1-Year Implied Volatility
AA Bond Yield
Hypo Segment Cap
Based on internal John Hancock analysis, Federal Reserve data, and S&P 500 options data as of June 2019.
For Agent Use Only. This material may not be used with the public.

4. Where do default rates come from?
John Hancock
Indexed Accounts 
Minimum
Average
Maximum
Capped Indexed Account
3.92%
6.12%
7.71%
High Capped Indexed Account
4.82%
7.75%
9.89%
Enhanced Capped Indexed Account
Enhanced High Capped Indexed Account
High Par Indexed Account
5.53%
6.99%
Capped Hang Seng Indexed Account
5.04%
7.17%*
8.84%
Loaned Indexed Account
Actuarial Guideline 49 (AG49) governs how default rates are set
Each indexed account has its own AG49 rate. When setting the AG49 rate, we have to compute the geometric average of every 25 year period over the last 65 years under each indexed account’s cap, floor, and participation rate
So if caps are mainly derived from a company’s general account performance, where do the default rates come from? This is mostly derived from Actuarial Guideline 49, which standardized how rates are set across the industry. What happens is that, using the current caps, a company will look back at what interest would’ve been credited for every 25 year period over the last 65 years and the average of those 25 year periods becomes the default rate. Companies will also typically show the minimum and maximum rates which reflect the best and worst 25 year periods as well, as seen to the right.
*AG49 rate for Capped Hang Seng Indexed Account is reduced to 6.12% in illustration due to the Benchmark Indexed Account requirement prescribed by AG49
For Agent Use Only. This material may not be used with the public.

5. What exactly is a multiplier?
Multiplier: Interest credits provided in addition to the Segment Growth Rate calculated
10% 0%
-10%
-15%
-5% 5%
15% 8%
12.4%
8.25%
12.8%
Moderate Return Scenario
High Return Scenario
Negative Return Scenario
Before we go any further let’s take a second to address what exactly is a multiplier. Earlier we got the basics on how an index account works with the cap, floor, and participation rate, and the multiplier is just the next step of that. As the name suggests these just multiply the segment growth rate to provide additional interest credits. Here we have an example that ties this all together with John Hancock’s High Par Account on the Accumulation IUL 18, which has a 55% guaranteed multiplier. First we have a moderate return scenario where the S&P 500 returns 5%. The participation rate of 160% takes us to an 8% segment growth rate. That’s when the multiplier kicks in to give an additional 55% interest, bringing the total interest credit to 12.4% in this example. The next example we have a high return in the index. Now the segment growth rate is capped at 8.25% and the multiplier takes the total interest credited to 12.8%. Now is a good time to make an important distinction. We can see here the participation rate does not increase the interest credited. That is because the participation rate is subject to the cap, while the multiplier is not. With the multiplier total interest credited can exceed the cap rate. Finally in the last example we can see that if the return is negative and the segment growth rate is at the floor of 0%, the multiplier would not create any positive effect.
Guaranteed product features are dependent upon minimum premium requirements and the claims-paying ability of the issuer.
Cap Rate (8.25%)
Segment Growth Rate
S&P 500
Crediting Rate
The figures used in this case study are for discussion purposes only. Values are not guaranteed and certain assumptions are subject to change by the insurer. Actual results may be more or less favorable and may not be used to project or predict results. This chart references the High Par Indexed Account on an AIUL ‘18 policy with a Cap Rate of 8.25%, Participation Rate of 160%, Floor Rate of 0% and a Multiplier of 55%. The availability of multipliers will vary based on carrier and product. Multipliers may or may not be guaranteed.
For Agent Use Only. This material may not be used with the public.

6. Putting it all together Determining higher caps/ multipliers
Portfolio yield
Helps determine higher caps/multipliers
Now that we’ve got more of a base for how the general account and options interact, let’s revisit this earlier slide when we mentioned companies could introduce additional charges to offer a higher cap or a multiplier. What these charges are generally being used for is to buy additional options and in turn support these product features. That said, the carrier is under no obligation to do that, just give what is guaranteed in the contract. That’s why it’s important when looking at these features what is guaranteed and what is not. If the carrier has to guarantee it, there can be a more reasonable assumption that the charges are being used to buy additional options, and in turn being creating more upside potential for your clients.
Guaranteed product features are dependent upon minimum premium requirements and the claims-paying ability of the issuer.
Additional policy charges
Cost of options
For Agent Use Only. This material may not be used with the public.

7. An additional charge example
Accumulation IUL’18
(Enhanced Accounts)
Lincoln
Nationwide
Pacific Life
Additional charge
1.98%
4.98%
Up to 6%
2.25% (guar. at 3.25%)
Up to 7.5%
Year 1 guar. multiplier
55% (30% High Capped Account)
122% (86% High Capped Account)
56%
50%
72%
Variable multiplier? No
Yes
Range for variable multiplier
N/A
0.01%-1000%
0%-2000%
We’ve talked about how carriers might have charges that support these multipliers, so let’s look at some examples. On our Accumulation IUL we have a 1.98% charge that helps to fund a 55% guaranteed multiplier, or our Enhanced Accounts, which has a 4.98% charge to provide greater upside potential. Other carriers assess higher charges, and could have a large portion of their multiplier that are tied to non-guaranteed, variable multipliers. Let’s focus on Lincoln for now. They have a lower guaranteed multiplier, but a charge that could be as high as 6% depending on the index account chosen. We are able to provide a higher guaranteed multiplier, which can offer greater value for the client with a smaller charge. Lincoln has the right to reduce their variable multiplier to almost nothing, so the client could be left with a charge that’s not really providing the benefit the client thought they would be getting. Pacific Life has a similar story, but a charge that could go up to 7.5%. Nationwide, on the other hand, doesn’t have a variable multiplier, but instead could raise the charge to provide their lower guaranteed multiplier.
Data taken from competitor illustrations and is current and accurate as of June Values are not guaranteed and certain assumptions are subject to change by the insurer. Actual results may be more or less favorable. Please have your clients consult with their professional advisors to find out which type of life insurance is most suitable for their needs.
For Agent Use Only. This material may not be used with the public.

8. Strong downside protection
Scenario
New Pacific Life
(7% Charge)
New Lincoln
(6% Charge)
Accumulation IUL’18
(1.98% Charge)
(4.98% Charge)
Steady State
Max Illustrated Rate in all years (~7%, varies by product)
$176,086
$180,846
$184,123
$238,092
One Zero
0% in Year 6, Max Illustrated Rate all other years
$150,145
$143,051
$166,594
$206,689
Two Zeros
0% in Years 6 and 11, Max Illustrated Rate all other years
$129,288
$117,166
$151,627
$180,866
Cyclical Zeros
0% in Year 2 and 7, 12 and 17, 22 and 27, etc, with Max Illustrated Rate in all other years
$56,897
$60,710
$113,930
$120,854
Male, 45, Best Class, 5 Pay, Max Age 49, MNMDB, Income from 66-85
So how does this affect actual policy performance? We can see that introducing volatility to these competitor products causes the income to quickly decline. At max rates our product is competitive, but it also holds up the best under these more conservative assumptions. This shows our product is built for stability, not just to illustrate well.
Competitor information is current and accurate to the best of our knowledge as of June Illustrations are based on $100K paid for 5 years; Minimum Non MEC Death Benefit; GPT Option 2 to 1 in Year 6; withdrawals to basis then standard loans from Year 21-40; Solve for $1 at Age 121, face reduction where available. Indexed Accounts used are John Hancock’s Enhanced High Capped, Pac Life’s High Cap, Lincoln’s Perform Plus, Nationwide’s 1-Yr High Cap S&P 500 Pt to Pt, and Symetra’s S&P 500 Index Select. Max Rates used are 7.75% for John Hancock, 7.76% for Symetra, 7.39% for Nationwide and 7.10% for Pac and Lincoln. Pac Life target blended to John Hancock target of $39,478. The data shown is taken from illustrations. Values are not guaranteed and certain assumptions are subject to change by the insurer. Actual results may be more or less favorable. This comparison cannot be used with the public. Please have your clients consult with their professional advisors to find out which type of life insurance is most suitable for their needs.
For Agent Use Only. This material may not be used with the public.

9. Helping your clients plan for a long life with living benefit riders from John Hancock
John Hancock Vitality PLUS Rider
Motivates clients to take the steps that can help them live longer, healthier lives.
Critical Illness Benefit Rider
Can help ensure your clients’ financial plans stay on track, even in the event of a serious illness.
Long-Term Care Benefit Rider
Gives your clients the flexibility to use all, some, or none of their life insurance benefit to pay for long-term care expenses
As we look for other ways to deliver value to the customers, John Hancock has pioneered an amazing suite of living benefits riders to go with our IUL offerings. The most popular ones are the Vitality PLUS Rider, the Critical Illness Benefit Rider, and the Long Term Care Rider. Vitality is a great solution we are offering to all our customers. Not only can our customers live a healthier lifestyle by engaging with our vitality program, they can get a lot of financial rewards through the program, with rewards such as Amazon Prime membership and COI discount. The Critical Illness Benefit Rider is a rider that will payout a one time payment of up to $250K upon diagnosis of 7 critical illness including can cancer, stroke, and heart attack. Finally, LTC rider is a reimbursement rider that helps the customers if they incur any cognitive impairment. The rate on the LTC rider is guaranteed and cannot increase once it is purchased.
Amazon Prime membership (not available in NY) is available to Vitality PLUS members who have reached Platinum Status for three consecutive program years.
The Critical Illness Benefit Rider provides a one-time lump sum benefit for covered critical illnesses subject to eligibility requirements. The benefit will not be paid for critical illnesses initially diagnosed before the rider effective date or during the waiting period. See the product producer guide for additional details. 
The Long-Term Care (LTC) rider is an accelerated death benefit rider and may not be considered long-term care insurance in some states. There are additional costs associated with this rider. The Maximum Monthly Benefit Amount is $50,000. When the death benefit is accelerated for long-term care expenses it is reduced dollar for dollar, and the cash value is reduced proportionately. Please go to to verify state availability.
For Agent Use Only. This material may not be used with the public.

10. Offer more comprehensive coverage
Product
Premium
Maximum Monthly LTC Benefit with 1% LTC Rider
Additional Critical Illness Benefit
Protection IUL'18 with Vitality Plus, LTC and CIB Riders
$90,632
$10,000
$100,000
Lincoln WealthPreserve IUL
$90,704 $0
Not Offered
Symetra Protector IUL 1.0
$93,636
Nationwide Indexed UL Protector II
$100,374
AIG Value+ Protector IUL
$102,886
Zurich Select Index UL
$106,328
Global Atlantic Lifetime Foundation Elite
$106,712
Principal IUL Flex II
$110,246
Male, 45, Preferred, $1 Million Death Benefit, Single Pay, 6% Solving for $1 at Lifetime
In addition to helping boost cash values or protect against volatility, Vitality can also be used to help offset the cost of our other living benefit riders. Here we can see the competitiveness of PIUL combined with Vitality can help us add our LTC and Critical Illness rider, and offer more comprehensive coverage for a premium that is still lower than the top competitors.
The data shown is taken from various company illustrations. For John Hancock, assuming Vitality Plus Gold status, 1% LTC rider, and 10% Critical Illness Benefit rider.
Protection IUL with Vitality Plus premium is based on achieving Gold status in all years. Protection IUL assumes an annual rate of return of 6%. Competitor products are run at 6%, or max. rate, if less. PIUL assumes 100% allocation to Capped Indexed Account, competitor illustrations assume a one-year point-to-point crediting option. Values are not guaranteed, and certain assumptions are subject to change by the insurer. Actual results may be more or less favorable. The comparisons in this communication are of different products which may vary in premiums, rates, fees, expenses, features and benefits. Competitor information is current and accurate to the best of our knowledge as of June This comparison cannot be used with the public. Please have your clients consult with their professional advisors to find out which type of life insurance is most suitable for their needs.
For Agent Use Only. This material may not be used with the public.

11. Vitality vs Volatility
Protection IUL
Scenario
Premium
Duration
Assume 6% all years
No Vitality Plus
$5,600
Lifetime
Two years of 0% in years 11 and 12
6% all other years
To age 92
Vitality Plus Gold first 10 years
Bronze 11+
Male, 45, Best Class, $1 Million Death Benefit, Solving for premium to endow at 6%
In addition to being a product built for stability, we can offer an additional differentiator with our Vitality Plus program. If we tie the volatility story in with our Protection IUL product, we can show how achieving a Vitality status can help offset those down years in the market. For a general scenario of a male, 45, for $1 million death benefit we see the premium at 6% comes out to $5,600. If the client gets two years of 0% return though, the policy only runs to age 92. However, if the client engages in Vitality at a Gold level for the first ten years, this can actually help offset those years of 0% return and ensure the policy stays in force under these assumptions. The client can use this as a way to engage and create a buffer against some of the volatility that could come with an IUL product.
This is a supplemental illustration. Not all benefits and values are guaranteed. The assumptions on which the non-guaranteed elements are based are subject to change by the insurer. Actual results may be more or less favorable.
For Agent Use Only. This material may not be used with the public.

12. Protection during the accumulation years
Scenario 1: Cash Value Withdrawal
Accumulation IUL’18
Scenario 2: Critical Illness Benefit Payment
Accumulation IUL’18 with 25% Critical Illness Benefit Rider (CIBR)
Before Event
Policy Withdrawal at Age 55
After Event
Projected Annual Income
$46,213
-$95,723
$27,364 (-41%)
Death Benefit
$259,724
$158,583 (-39%)
Before Event
CIBR Payment at Age 55
After Event
Projected Annual Income
$39,141
-$95,723
Death Benefit
$222,161
Male, 40, Best Class, $15K 10-Pay, 6% Crediting, Min Non-MEC DB, Option 2 to 1, Income from Years 26-45, Death Benefit at Age 80
We can also see how the Critical Illness rider offers a unique benefit with AIUL 18. A critical illness during a client’s working years could impact retirement planning, and if that illness occurs before age 59 ½ the client may not want to access other retirement vehicles that have an early withdrawal penalty. If they take an unscheduled withdrawal from their life insurance policy though, it could severely impact the supplemental retirement income they planned on. Adding the Critical Illness rider can help the client protect against this risk, and preserve the supplemental retirement income they planned on, while also helping to pay expenses when the client needs it most.
The data shown is taken from illustrations. Values are not guaranteed and certain assumptions are subject to change by the insurer. Actual results may be more or less favorable.
For Agent Use Only. This material may not be used with the public.

13. Design policy with competitive target
Product
Max Distribution
Initial Death Benefit
Death Benefit at Age 65
Target
Accumulation IUL 18
$202,749
$2,586,772
$1,778,917
$37,534
(Blending Up)
$182,737
$3,400,000
$49,334
Lincoln Financial
$180,666
$2,181,492
$2,697,650
$39,463
Pacific Life
$162,647
$2,849,966
$3,328,096
$43,000
AIG
$140,972
$2,726,327
$42,503
Symetra
$136,584
$2,679,489
$1,820,877
$42,060
Allianz
$129,780
$2,872,537
$40,152
Securian Financial
$97,561
$2,651,903
$3,159,948
$38,771
More coverage means more target!
Female, 45, Best Class, 5 Pay, Income from Years 66-85
Consider a client who’s looking to supplement her retirement income by funding an accumulation-oriented IUL over five years. With Accumulation IUL, she could realize an income of over $200,000 by purchasing a policy with the minimum death benefit. But, to meet her need for extra protection during her working years, she can increase her death benefit coverage by $800,000 and still maintain a highly competitive income in retirement. At the same time, the target has increased by $12,000, going up from $37K to $49K.
We call this Accumulation IUL’s “blending up” strategy, and it can mean more value for your clients — and for you!
The data shown is taken from illustrations. Competitor information is current and accurate to the best of our knowledge as of June Illustrations assume Fixed Annual Premium of $100,000 for five years; 100% allocation to S&P 500 Annual point to point; max rates used for all competitors; Min Non MEC DB used in all scenarios except ‘blending up’ which has a specified DB of $3.4M; Increasing death benefit switching to level in year 6, 20-year distributions starting at age 66; Withdrawals switching to Standard Loans at Basis targeting $10,000 CSV at age 100; Monthly distributions shown where available. Values are not guaranteed, and certain assumptions are subject to change by the Insurer. Actual results may be more or less favorable. Please have your clients consult with their professional advisors to find out which type of life insurance is most suitable for their needs.
For Agent Use Only. This material may not be used with the public.

14. The John Hancock advantage
Customize the policy with unique living benefit riders to provide more value and differentiate yourself
State-of-the art Illustration software: 
E-tool and calculators: John Hancock Needs Analysis Calculator
Comprehensive marketing materials:
Advanced Markets support for case design
Go to new “JH IUL Academy” at JHSaleshub.com/IUL to get started today!
Now we’ve gone over how to understand IUL both at a basic and advanced level, how to illustrate across carriers who may have different defaults for running these quotes, and also how to help service the policies post issue. It’s time to get your IUL diploma and turn to John Hancock to increase your sales in this growing life insurance market!
Go to < to access out <IUL Academy> and mastering your IUL sales and start selling JH IUL today!
For Agent Use Only. This material may not be used with the public.

15. Standard loan requests in excess of the Fixed Account balance can be taken from the Indexed Accounts. Amounts borrowed from the Indexed Accounts will be transferred to the Loan Account at Segment maturity. See the policy contract for more information. Index loans and Fixed Index Loans are available after the third policy year. Both Index loan and Fixed Index Loan requests in excess of the Index Appreciation Account will be secured by balances transferred from the Fixed Account to a Loan Account.  The cost of an index loan can vary substantially compared to that of a standard loan and the risk of policy lapse is greater than it would be with a standard loan. See the policy illustration and “Understanding Potential Loan Costs” for further details. Insurance policies and/or associated riders and features may not be available in all states. Some riders may have additional fees and expenses associated with them.
Standard & Poor’s®, S&P®, S&P 500®, Standard & Poor’s 500 and 500 are trademarks of Standard and Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. Hang Seng® Index is a trademark of Hang Seng Data Services Limited. John Hancock has been licensed to use the trademarks of S&P and Hang Seng Index (collectively, the “Indices”). Products are not sponsored, endorsed, sold or promoted by the licensors of the indices and they make no representation regarding the advisability of purchasing products. You cannot invest directly in the Indices.
Loans and withdrawals will reduce the death benefit and the cash surrender value, and may cause the policy to lapse. Lapse or surrender of a policy with a loan may cause the recognition of taxable income. Withdrawals in excess of the cost basis (premiums paid) will be subject to tax and certain withdrawals within the first 15 years may be subject to recapture tax. Additionally, policies classified as Modified Endowment Contracts may be subject to tax when a loan or withdrawal is made. A federal tax penalty of 10% may also apply if the loan or withdrawal is taken prior to age 59½. Cash value available for loans and withdrawals may be more or less than originally invested. Withdrawals are available after the first policy year.
John Hancock Vitality Program rewards and discounts are only available to the person insured under the eligible life insurance policy. Rewards and discounts are subject to change and are not guaranteed to remain the same for the life of the policy. Vitality is the provider of the John Hancock Vitality Program in connection with policies issued by John Hancock.
Guaranteed product features are dependent upon minimum premium requirements and the claims-paying ability of the issuer.
Insurance products are issued by John Hancock Life Insurance Company (U.S.A.), Boston, MA (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY
For Agent Use Only. This material may not be used with the public.