1. Insight on Annuities Good things you should know…
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5. Polling Throughout the class we will be conducting periodic polls
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The polls are intended to check participation but also to create discussion topics throughout the presentation 5 5

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7. Disclaimer
Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions; and state jurisdiction. This instructional materials provided by Insight is intended as a general guideline and any interpretations provided by Insight do not modify or revise insurance policy language. The authors of these materials, Insight Insurance Consultants is a division of Insight Consulting and Management Inc.: Insurance Community Center LLC and Quick life. In providing these materials, Insight, Insurance Community and Quick life assume neither liability nor responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials provided. Copyright 2010 – 2013 All Rights Reserved

8. Please Hold Up Your Hand

9. Your Instructor Today Presented by:
George Fraser, Director of Annuities
Quick Life, a strategic partner of the Insurance Community Center

10. About George Fraser, III
George Fraser has  over 40 years of Life and Annuity sales experience.  In that time, he has acted as an agent, General Agent and Vice President of Retail Sales for leading Insurance providers.
George has served as National President of GAMA International, Chairman of the Board for AMTC as well as committee work for LIMRA.  He also serves as a Director for Rainmaker Advisory LLC a leading consulting firm within the retail insurance broking sector.

11. What this course will cover:
What is an Annuity?
Different Types of Annuities
Contract Provisions
Taxation of Annuities
Common Annuity Riders
Settlement Options
Uses of Annuities

12. What is Retirement Income Planning?
Accumulation Phase: earning income and goal setting
Distribution Phase: ensuring that you do not outlive assets and maintaining an equitable lifestyle

13. What is Retirement Income Planning?
Most people do not know how to convert Assets to Income
External factors will impact planning more than ever
Most people will have an income gap at retirement

14. External Forces Demographics USA Tax Policy Savings Patterns
Social Security
Decline in Traditional Pension Plans
Unstable Economy

15. Why is Distribution Planning Important?
Company paid pensions are a thing of the past
Most people do not have a Financial Advisor
Other than their home, 401(k) often is an individual’s largest asset
Most people do not understand Tax Law
Most people are not informed regarding Social Security Benefits

16. Baby Boomer Demographics
: 80,000,000 babies born
: 37,000,000 babies born
1.8 babies per family post baby boom
2.1 babies per family needed for zero population growth

17. Demographics 3.3 people working for every one retiree
In 2030, one person working for every two retirees

18. Saving Patterns
Over the last decade, Americans have been a nation of spenders…not savers
Over the past five years, American workers have spent more than they have earned

19. Savings Rate Guidelines
This data includes Social Security benefits.

20. Income Planning Risk: Longer Lives
At Age 65, Your Probability of Living to Various Ages…
Age
Male
Female
One Member of Couple 80
71%
81%
94% 85
53%
65%
84% 90
34%
44%
63% 95
17%
23%
36%
Source: Society of Actuaries Annuity 2000 Mortality Tables
This data includes Social Security benefits

21. Income Planning Risk: Longer Lives
Probability of…
Chances Over the Next 20 Years…
Worth Insuring Against?
House Fire
5:1000
Yes
Car Wreck
70:1000
85th Birthday
840:1000
Source: Hartford 2006 Countrywide Claim Frequency Report/
NAIC/Society of Actuaries

22. Income Planning Risk: Withdrawal Lives
Source: Wiesenberger 1/07

23. Polling Question #1

24. What is an Annuity? Attributes:
A contract between and individual and an insurance company to pay out a benefit at a later date.
An accumulation phase and distribution phase
Can pay an income for life; regardless of the amount of principal going in.

25. What are Different Types of Annuities?
Variable Annuities
Fixed Annuities & Fixed Index Annuities
Deferred Annuities
Single Premium Immediate Annuities

26. Miscellaneous Contract Provisions
Free Look Provision 30 days in California
Can be jointly owned

27. Taxation of Annuities Funds grown on a tax deferred basis
LIFO – Last in, first out. Distributions are considered a return of gain first out.
Annuity exclusions table, premiums divided by life expectancy to determine basis excess amount is considered taxable income.

28. Surrender Charges
Charged if funds are taken out before the surrender period has expired
Vary in length depending on the product
Typically 4-9 years in length depending on the product and are declining each year
Bonus products typically have longer surrender periods

29. Surrender Charges
Waived for withdrawals up to 10% during the surrender charge period but charged on excess
Nursing home waiver of charges if confined to a home for more than 90 days. The waiver applies to withdrawals after the 1st contract year
Terminal illness waiver applies after the 1st contract year if you are not expected to live more than 12 months

30. Settlement Options Lifetime Income Joint & Survivor
10 or 20 year certain and continuous
Refund annuity 10 or 20 years
Fixed period

31. What is Annuitization?
The systematic distribution of principal and interest over the lifetime of the annuitant. That income is guaranteed for life no matter how long the individual lives or if they outlive the principal they started with
Once a settlement option is elected, annuitant cannot change that election.
Important to understand the difference between annuitization and an income benefit rider

32. How are Income Benefits Calculated?
Fixed life annuities are calculated using annuity rates
Rates vary from Company to Company
Longer life span = lower rates
Example:
25 Years ago the annuity rate for a male age 65 might have been 9 per 1000 of principal or 9,000 a year for a straight life annuity
Joint life annuity income options and refund income options create less immediate income
Today that same individual might only get a rate of 7.5

33. How are Income Benefits Calculated?
Variable annuity settlement options are calculated differently
At the point where the annuitant elects a settlement option the contract agrees to the distribution of annuity units.
Example:
Because the amount of principal the annuitant has, the contract would guarantee the payment of 100 units a month. At a beginning value of $10 a unit, the first month’s payment would be 1,000
If the value goes to $11 / unit, the annuitant would receive $1100

34. Polling Question #2

35. Variable Annuities Requires securities licensing
Underlying sub accounts investing in stocks and bonds
Gains or losses depend on the performance of the sub accounts in the market
Asset Allocation
Most companies allow custom account selection or have pre-populated allocation formulas

36. Variable Annuities
At retirement has a formula to convert settlement options in to annuity units
Has all of the settlement options available
Some companies offer bonus products
Most companies have the living and enhanced death benefit riders

37. Single Premium Immediate Annuities
Most commonly used at retirement
Payment made to insurance company for immediate income
All settlement options available
Used when goal is to annuitize contract

38. Fixed Index Annuities
Does not require a securities license, only state life insurance licensing
Is a fixed annuity by definition
Was designed to compete with the equity based products
Participant has choice of picking an index or a fixed interest option, or a combination of both
Has all the other features of fixed and variable annuities

39. How Fixed Annuities Work
The insurance company offers an index to participate in or a fixed interest rate option
Premiums are not actually put in the index, S&P 500 as an example
Index is only used to determine the amount of interest credited to the cash value
Each year values have a stepped up basis based on the index. It cannot decline

40. How Fixed Annuities Work Cont’d
There are three indexing methods
Annual reset, index value at the end of the contract year is compared to the index value at the beginning of the contract year. Any gain is credited as interest
High water mark, uses index values during the course of the year to determine gains
Point to Point, compares the change in the index between two distinct times

41. Factors in Determining Crediting Rate
CAP, some index annuities have a maximum rate of interest they will credit regardless of index result
PARTICIPATION RATE, some carriers will credit a portion of the index gain, i.e., the index earned 10% but the participation rate is 80% or 8% would be the crediting rate
SPREAD, the difference between the index rate and actual rate credited at a selected point in time

42. Bonus Index Annuities
Same as regular index annuities, except that money is credited to the cash value when annuity is established
Bonuses range from 5-10% depending on the carrier
Typically have longer surrender period charges depending on the amount of the bonus

43. Polling Question #3

44. Annuity Riders
Depending on the carrier available for both fixed and variable products
Charged for in the expenses of the contract, typically 25 basis points
The three most common riders are:
Guaranteed minimum income benefit
Enhanced death benefit
Earnings preservation benefit

45. Guaranteed Minimum Income Benefit
For people who do not want to tie up all funds while annuitizing
With some carriers can benefit both spouses
Allows withdrawals at a stated rate while still having availability of cash
If you do not take a withdrawal interest is credited at the rate stated, typically 5-5 ½
In the case of an index annuity if a higher rate is credited the value steps up
You can never loose gains

46. Enhanced Death Benefit Rider
Pays amount of money to a named beneficiary either premiums paid or account value which ever is greater
Account increases in value each year either by returns to cash value or a stated rate of return, typically 5%
Can take withdrawals while maintaining death benefit

47. Earnings Preservation Rider
Provides additional death benefit based on earnings in the account to offset potential tax costs

48. Polling Question #4

49. Issues to Consider California has CE requirements to sell annuities
If you are selling to seniors in California need to understand specific laws
In the next 20 years more annuities will be sold than in history of product

50. Uses of Annuities
As an accumulation vehicle product, can be used for people retiring in 20 years
Frequently for those who are risk adverse
For individuals looking for a lifetime income option without a fixed company pension
For individuals with a 401(k) and are looking to convert all or part of the funds to base income

51. Use of Annuities
For people who have no income producing assets who want to create income
For those that want income and also want to pass assts to another generation or spouse
For people looking to create liquidity in their estate at death

52. Please Hold Up Your Hand

53. Contact Information
George Fraser III
Main Phone: (main)
Cell Phone:

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