Directed by: UConn Goldenson Center Fixed Index Annuity Directed by: UConn Goldenson Center Presented By: Bijie Hao Yuchen Lu Zhen(Jack) Zhang

Agenda What is Fixed Index Annuity Data Analysis & Compare FIA with Variable Annuity Potential Risk and Market Overview

What is Fixed Index Annuity 1. 2. 3. A certain range of return Fixed Your portfolio Index Common features of annuity Annuity

What is Fixed Index Annuity Calculating methods: Annual Reset, High-Water Mark, Point-to-Point, Ways to charge: Cap, Spread

What is Fixed Index Annuity Choices of indices: S&P 500, Russell 2000, Nasdaq 100, 10-year Treasury Bond S&P 500 5% Risk Control, Barclays US Dynamic Balance Index, PIMCO Tactical Balanced Index

What is Fixed Index Annuity How it works

Lincoln Financial Group American Equity Investment Life What is Fixed Index Annuity Top 10 Annuity Sellers: Rankings Company Name 1 AIG 2 Jackson National Life 3 New York Life 4 Allianz 5 TIAA 6 AXA 7 Lincoln Financial Group 8 MetLife 9 Prudential 10 American Equity Investment Life Source: HealthLifepro http://www.lifehealthpro.com/2016/08/18/top-10-annuity-providers-q2-2016

Agenda What is Fixed Index Annuity Data Analysis & Compare FIA with Variable Annuity Potential Risk and Market Overview

Data Analysis & Compare FIA with Variable Annuity 1 Return Rates Comparison Between Different Indexing Methods 2 Accumulation Value Comparison Between Company’s Account and Policyholder’s Account 3 Accumulation Value Comparison Between FIA and Variable Annuity -Thank you, Jack. In my part, I’m going to present by three parts, -first is the return rates comparison between different indexing method. -Second is the accumulation value comparison between company’s account and the policyholder’s account. -And the third is a comparison between Fixed index annuity and the variable annuity.

1  -In the very beginning, this a graph showing us the trend of S&P 500 in the past ten year, and the index data from 2007 to 20016 is the data I’m going to use in the following analysis.

1 Here is another graph about Nas/z/daq Index.

1 Return Rate Comparison Between Different Indexing Methods -Then, comes to the point. The yellow line is indexing by annual reset method, the red line is indexing by High-water Mark method, and the blue line is by Point-to-Point method. The high-water mark almost always has a higher return rates. And in most time, annual reset has a lowest return rates. They are get close to each other recently,

1 Return Rate Comparison Between Different Indexing Methods -Same thing happened in the Nasdaq index. -High-water mark gives a higher return rates, even in the bad year, like 2007 and 2008. - Annual reset gives the lowest return rates in most time .

2 FIA Linked to S&P 500 Index Annual Reset Indexing High-Water Mark Point-to-Point 2 now, I’m going to compare the company’s accumulation account with the policyholder’s accumulation account by using different indexing methods. -The interest of FIA could be linked to different index. In my part of the report, I’ve done the analysis not only about the S&P 500, but also about the Nasdaq. But here I’m going to present the S&P 500 only. -here, the yellow line is the accumulation value for company, the red line is the accumulation value for policy holder, the blue line is differences between these two. The blue line, the difference, is calculated by subtracting the policyholder’s account value from the company’s account value. -When the yellow line below the red line, the company is losing money. - By annual reset, from 2007 to the mid-year of 2012, the company is losing money, after then, the company starts making profits.

2 FIA Linked to S&P 500 Index Annual Reset Indexing High-Water Mark Point-to-Point 2 -As I said before, the high-water mark indexing method could always give us a higher return rate. -Here, by using the high-water mark, the yellow line is always abo/^/ve the red line, -company makes profits even in the bad year, like 2007.

2 FIA Linked to S&P 500 Index Annual Reset Indexing High-Water Mark Point-to-Point 2 -The point-to-point method, the company starts making profit after 2012.

3 Accumulation Value Comparison Between Variable Annuity and FIA -people always compare the fixed index annuity with the variable annuity. -Here is a graph showing the company’s accumulation value for FIA and for the variable annuity. For the calculation of the variable annuity, we use an average return rate of 10 companies in the market right now. The yellow line is variable annuity. The green line, the top one, is the FIA accumulation account for company by using the high-water mark indexing method. The red line is the accumulation account by using annual reset, not surprising, the annual reset gives the lowest account value. If we compare the blue line, FIA by point-to-point indexing, with the yellow line, the variable annuity, the variable annuity gives higher account values, but the end of the tenth year, the FIA has a higher account value.

3 Accumulation Value Comparison Between Variable Annuity and FIA -here is another graph showing what happens in policyholder’s account. Firstly, let’s the FIA. For policyholder, the account value’s differences by using the three indexing methods are not that big. Compare with FIA, the variable annuity account value is very high for policyholder.

Agenda What is Fixed Index Annuity Data Analysis & Compare FIA with Variable Annuity Potential Risk and Market Overview

Potential Risk and Market Overview 01 02 03 Surrender Risk Market Risk Mortality Risk Surrender Fee Bonus on Premiums Credit Better Interest Static, Customized Hedging Dynamic Hedging Mortality Reinsurance Annuity Reinsurance

Market Overview Sale

Market Overview Sale

Market Overview Sale

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