Transcript An Aviva Edge! - Platinum Insurance Marketing

Aviva’s Progressive
Index Annuity
Ken MacArthur
Assistant Vice President
TSA Marketing
PRO5T044US
For Agent Use Only
AVIVA SEPTEMBER 2002
Introducing the Aviva
Progressive Index Annuity
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AVIVA SEPTEMBER 2002
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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AVIVA SEPTEMBER 2002
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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Answering these questions is Critically Important…
 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
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Over the years…
 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
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AVIVA SEPTEMBER 2002
Waiting for an opportunity to do better…
 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
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Waiting for an opportunity to do better…
 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!
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AVIVA SEPTEMBER 2002
Back to our questions…
 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”
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Aviva believes…
• 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
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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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AVIVA SEPTEMBER 2002
Aviva wanted to do better…
 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
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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
S&P 500 Performance
7% Cap Return
Breakthrough Account
Breakthrough Effective
Effective Return
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%
Assumes a 25% participation up to a 15% Breakthrough Level, and 100% thereafter.
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Why is the Annual Breakthrough Strategy Important?
 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?”
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AVIVA SEPTEMBER 2002
Breakthrough Years – How Often?
Even one or two
Breakthrough years
can carry a
product’s effective
annual return to
greater levels over
the product’s life
**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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An Aviva Edge!
Choose an allocation that best suits your client’s needs
50%
Breakthrough
50%
Annual Cap
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An Aviva Edge!
Choose an allocation that best suits your client’s needs
33%
Breakthrough
67%
Annual Cap
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An Aviva Edge!
Choose an allocation that best suits your client’s needs
100%
Annual Cap
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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)
 Example B (7/15/94-7/15/04)
 Fixed = $13,440
 Fixed = $13,440
 Cap = $15,700
 Cap = $17,180
 Breakthrough = $22,295*
 Breakthrough = $21,070*
*0% interest in 3 of 10 years
*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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AVIVA SEPTEMBER 2002
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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AVIVA SEPTEMBER 2002
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 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
Min Surrender Value Factor
Minimum Surrender Values as a % of Premium
Minimum Surrender Value at 1.5%
1.20
Minimum Surrender Value at 3.0%
1.15
Guaranteed Minimum Indexed Cap:
5.0%
1.10
1.05
1.00
Guaranteed Maximum Breakthrough
Rate: 50.0%
0.95
0.90
0.85
0
1
2
3
4
5
Contract Years
6
7
8
9
10
Participation Rates: Set at issue;
can’t change over contract life
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Payout Options
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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 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 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?
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