Success with fixed index annuities

Transcription

1 Allianz Life Insurance Company of North America M3596 For agent use only not for use with the public. Page 1 of 12

2 The Allianz vision At Allianz, we believe that every American should have the opportunity to live out their life with financial independence. Through our network of financial professionals, our goal is to be the preferred choice for insurance products offering security, stability, and value. You can count on Allianz to help you achieve success as a producer in today s financial world. With our track record of successful product development and attentive service, you ll have the tools to help you build your business. A leader in customized financial strategies Allianz is a leading innovator of financial solutions for consumers who want protection, income, and the guidance of a trusted financial professional. Through your relationship with Allianz, you can help your clients develop a successful financial strategy based on three cornerstones: accumulation, protection, and distribution. Accumulation: Building a solid nest egg for retirement Protection: Guarding assets from unforeseen events Distribution: Helping to ensure that clients don t outlive their wealth Look to Allianz for an effective portfolio of annuities, life insurance, and long term care insurance to help meet your clients financial needs before and during retirement. For agent use only not for use with the public. Page 2 of 12

3 Your clients can feel confident when they entrust their money to Allianz. Allianz Life Insurance Company of North America (Allianz) was originally established back in 1896 as North American Casualty. That company is now part of Allianz SE, one of the world s largest integrated financial services organizations and the 3 rd largest money manager (based on sales, profits, assets, and market value, according to the Forbes Global 2000, April 21, 2008). Some of our affiliates within Allianz SE include: PIMCO Oppenheimer Capital Fireman s Fund You can count on Allianz annuities to help your clients accumulate money for retirement or other financial goals. After all, every Allianz annuity is backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America, plus over a century of financial experience. Allianz is an industry leader in fixed index annuities (FIAs). No insurance company has sold more fixed index annuities than Allianz. 1 So when you recommend an Allianz FIA as part of your client s diverse retirement portfolio, you can be confident that the product was designed by an industry leader. Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. 1 National Underwriter, for fixed index annuity sales For agent use only not for use with the public. 1 Page 3 of 12

4 The fixed index annuity difference Like any annuity, a fixed index annuity (FIA) is a contract between a life insurance company and a contract owner. The contract owner pays premium to the insurance company, in return for which the insurance company promises to pay money back to the contract owner at some point in the future. FIAs offer clients the opportunity to enhance their retirement income by combining accumulation potential with principal protection. FIAs share the benefits of traditional fixed annuities: tax-deferred growth, death benefits, annuitization options, and income guarantees. FIAs also offer the potential for indexed interest. Annuities Long-term retirement vehicle Tax-deferred savings Estate planning benefits Immediate or deferred income with guarantees Traditional fixed annuities Interest and/or payments based on fixed interest rate Fixed index annuities Interest and/or payments based on changes in market indexes May offer fixed interest option 2 For agent use only not for use with the public. Page 4 of 12

5 The moving parts of FIAs There are a variety of moving parts that can affect an FIA s results, depending on how they are applied to individual products. It s very important that you ask some key questions: Is this product suitable for my client s needs? What market index conditions could impact the FIA s potential interest earned? What moving parts are included in this particular FIA? Here are the common moving parts of FIAs: Participation rate: A participation rate is a percentage used to calculate the indexed interest rate. This percentage is usually applied after all other calculations have been completed. A 100% participation rate means that we credit 100% of the calculated interest rate to a contract. Participation rates can be greater than, less than, or equal to 100%. Cap: A cap is a limit applied to a positive percentage change. Caps can be applied monthly or annually, depending on the crediting method. Annual point-topoint crediting uses an annual cap; the indexed interest rate in any year will never be greater than the annual cap. Monthly sum crediting uses a monthly cap; the monthly change used to calculate the indexed interest rate will never be greater than the monthly cap. Spread: A spread is a preset deduction used to calculate the indexed interest rate. If the result after subtracting a spread is positive, then that result becomes the indexed interest rate. Asset fee: Some companies charge a fee that is deducted from the indexed interest rate. Deducting an asset fee has an effect similar to applying a participation rate that is less than 100%. For agent use only not for use with the public. 3 Page 5 of 12

6 Protection with an opportunity for interest Fixed index annuities offer potential indexed interest based on one or more market indexes, with the added benefit of principal protection. Who is buying FIAs? Someone who: Understands that annuities are long-term vehicles Almost bought an equity index mutual fund, but didn t because of the level of risk Would like to benefit from tax deferral Wants potential interest from index participation Is concerned about the effects of inflation Profile: Indexes used to determine interest Two of the most common indexes used to calculate interest are the S&P 500 and the Nasdaq-100. Annuity companies have added additional indexes so clients can have more diversification within their fixed index annuity. Allianz has an international index, the FTSE 100, and a blended index that uses four indexes: Dow Jones Industrial Average, Barclays Capital U.S. Aggregate Bond Index, Russell 2000 Small Cap index, and EURO STOXX 50 or FTSE 100 International Index. Here is a quick look at these important indexes. Standard & Poor s 500: The S&P 500 is considered by many to be the most common benchmark used in measuring the performance of U.S. stock market large caps. The S&P 500 represents a broad cross section of common stocks traded on every major U.S. stock exchange. The Index is a selection of 500 leading companies from 100 distinct industry groups found in 10 leading American industrial market sectors. For more information about the S&P 500, visit Nasdaq-100: Launched in January 1985, the Nasdaq-100 includes 100 of the Nasdaq Stock Market s most actively traded issues, representing a crosssection of major industry groups. Its 100 companies are selected from the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market. Company size is based on market capitalization. For more information about the Nasdaq-100, visit Standard & Poor s, S&P, S&P 500, Standard & Poor s 500, and 500 are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Allianz Life Insurance Company of North America. The product is not sponsored, endorsed, sold, or promoted by Standard & Poor s and Standard & Poor s makes no representation regarding the advisability of purchasing the product. The Nasdaq-100 Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market, based on capitalization. The Nasdaq-100, Nasdaq-100 Index, Nasdaq, and OMX are registered trademarks of NASDAQ OMX Group, Inc. (which with its affiliates are the Corporations) and are licensed for use by Allianz Life Insurance Company of North America. The product(s) have not been passed on by the Corporations as to their legality or suitability. The product(s) are not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S). 4 For agent use only not for use with the public. Page 6 of 12

7 Dow Jones Industrial Average (DJIA): The DJIA is the oldest stock price index. Established in 1884 with only 11 stocks, there are now 30 stocks in the DJIA index. The DJIA is one of the most recognized stock indexes in the United States. For more information on DJIA, visit Barclays Capital U.S. Aggregate Bond Index: The U.S. Aggregate Index is part of the world s leading provider of fixed income benchmarks. The U.S. Aggregate Index is a mix of safe, level-performing bonds and is considered to be among the best in the U.S. For more information on Barclays Capital, visit Dow Jones EURO STOXX 50: The Dow Jones EURO STOXX 50 Index, Europe s leading blue-chip index for the Eurozone, provides a blue-chip representation of supersector leaders in the Eurozone. The index covers 50 stocks from 12 Eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. For more information on the EURO STOXX 50, visit FTSE 100 index: The FTSE (pronounced footsie ) 100 Index is part of the FTSE UK Index. The FTSE is an acronym for Financial Times Stock Exchange. The FTSE 100 Index is comprised of the 100 most highly capitalized blue chip companies, representing approximately 81% of the UK market. It is used extensively as a basis for investment products, such as derivatives and exchange-traded funds. For more information regarding the FTSE Index, visit Russell 2000 Index: The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not affect the performance and characteristics of the true small-cap index. For more information regarding the Russell 2000 Index, visit indexes/default.asp Dow Jones and Dow Jones Industrial Average SM are service marks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by Allianz Life Insurance Company of North America. Allianz products based on the Dow Jones Industrial Average are not sponsored, endorsed, sold, or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in such product(s). The Barclays Capital U.S. Aggregate Bond Index is comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate, and mortgage-backed securities. Barclays Capital and Barclays Capital U.S. Aggregate Bond Index are trademarks of Barclays Capital Inc. ( Barclays Capital ). The product is not sponsored or endorsed by Barclays Capital, and no representation or warranty to purchasers of the product is made regarding the advisability of purchasing the product. Barclays Capital s only relationship to Allianz Life Insurance Company of North America ( Allianz ) is the licensing of the Barclays Capital indices which are determined, composed, and calculated by Barclays Capital without regard to Allianz or the product. Barclays Capital does not guarantee the quality, accuracy, and/or completeness of the Barclays Capital indices, or any data included therein, or otherwise obtained by Allianz, owners of their products, or any other person or entity from the use of the Barclays Capital indices in connection with the right licensed hereunder or for any other use. The Dow Jones EURO STOXX 50 is the intellectual property (including registered trademarks) of Stoxx Limited, Zurich, Switzerland and/or Dow Jones & Company, Inc., a Delaware corporation, New York, USA, (the Licensors ), which is used under license. Allianz products based on the index are in no way sponsored, endorsed, sold, or promoted by the Licensors, and neither of the Licensors shall have any liability with respect thereto. FTSE, FT-SE, Footsie, FTSE4Good, and techmark are trademarks jointly owned by the London Stock Exchange Plc and the Financial Times and are used by the FTSE International Limited ( FTSE ) under license. All-World, All-Share, and All-Small are trademarks of FTSE. The FTSE 100 is calculated by FTSE. FTSE does not sponsor, endorse, or promote this product and is not in any way connected to it and does not accept any liability in relation to its issue, operation, and trading. Russell 2000 Index is an equity index representing 2,000 of the smallest companies within the larger Russell 3000 Index. Often looked at as one benchmark for small stock investors. Russell 2000 is a registered service mark of Frank Russell Company. For agent use only not for use with the public. 5 Page 7 of 12

8 A choice of crediting methods for indexing options Changes in an FIA s value are based on the movement of the index(es) and the crediting method the client selects. The following are examples of some crediting methods used today. These examples show how the crediting methods work in different market conditions. Recent years have provided good examples of how fixed index annuities provide principal protection. 1. Monthly sum The monthly change is the percentage of change from one month s index value to the next month s index value. Monthly changes may be positive or negative; positive changes are limited by a monthly cap. At the end of each contract year, the 12 capped monthly changes are added together to determine the indexed interest rate for that year. The cap can change annually. Examples: The following examples use actual S&P 500 data from and a 2.80% monthly cap. Increases impacted by the cap are shown below in bold type. January 1 December 31, 2007 January 1 December 31, Annual point-to-point With annual point-to-point crediting, the percentage change in the market index(es) is calculated at the end of each contract year. If the change is positive, we multiply the change by the participation rate to determine the indexed interest rate. If there is a cap, the cap percentage is the maximum rate we will credit to the contract. If the change is negative, the indexed interest rate will be zero. The cap and participation rate can change annually. Examples: The following examples use actual S&P 500 data from % participation rate and a 7% annual cap January 1 December 31, 2007 January 1 December 31, 2008 S&P 500 Capped End of monthly monthly month change change January % 1.41% February % -2.18% March % 1.00% April % 2.80% May % 2.80% June % -1.78% July % -3.20% August % 1.29% September % 2.80% October % 1.48% November % -4.40% December % -0.86% Indexed interest rate 1.14% The annuity s value increases by 1.14% S&P 500 Capped End of monthly monthly month change change January % -6.12% February % -3.48% March % -0.60% April % 2.80% May % 1.07% June % -8.60% July % -0.99% August % 1.22% September % -9.08% October % % November % -7.48% December % 0.78% Indexed interest rate 0.00% The annuity s value remains unchanged. End of month S&P 500 index value December December Percentage of change 3.53% (x 100% participation rate) Indexed interest rate 3.53% The annuity s value increases by 3.53% End of month S&P 500 index value December December Percentage of change 3.53% (x 75% participation rate) Indexed interest rate 2.65% The annuity s value increases by 2.65% End of month S&P 500 index value December December Percentage of change % (x 100% participation rate) Indexed interest rate 0.00% The annuity s value remains unchanged. 75% participation rate and no annual cap January 1 December 31, 2007 January 1 December 31, 2008 End of month S&P 500 index value December December Percentage of change % (x 75% participation rate) Indexed interest rate 0.00% The annuity s value remains unchanged. There is no limit on negative changes in any individual month. However, clients have protection. Fixed index annuities have guarantees that protect against loss of principal when the market index performance lags. Owners of FIA products are not purchasing any shares of stock or an index. These hypothetical examples are provided for illustrative purposes only. Source: finance.yahoo.com, 1/ For agent use only not for use with the public. Page 8 of 12

9 3. Monthly average with a spread There is no cap on the indexed interest rate with this crediting method, but there is a spread. The value of the index is captured at the end of each contract month. At the end of the contract year, monthly index values are added together and the average is determined by dividing the total by 12. That year s starting index value is subtracted from the average and divided by the starting value to find the averaged change. To determine the indexed interest rate for the year, the annual spread is deducted from the averaged change. If the result is negative, the indexed interest rate for the year will be zero. Examples: The following examples use actual S&P 500 index data from and a 2.80% spread. January 1 December 31, 2007 January 1 December 31, 2008 End of S&P 500 Month index value December January February March April May June July August September October November December Average index value Initial index value Percentage of change 4.22% Spread 2.80% Indexed interest rate 4.22% The annuity s value increases by 1.42% End of S&P 500 Month index value December January February March April May June July August September October November December Average index value Initial index value Percentage of change % Spread 2.80% Indexed interest rate 0.00% The annuity s value remains unchanged. These hypothetical examples are provided for illustrative purposes only. Source: finance.yahoo.com, 1/2009. For agent use only not for use with the public. 7 Page 9 of 12

10 Key feature that affects FIA performance Annual reset design Market index values are reset each contract year, locking in any interest earned in your contract. Each contract year, the index s ending value becomes next year s starting value. This means that a negative index return one year will not affect the interest earned for the following year. $150,000 $125,000 A $100,000 B $75,000 $50,000 Start Year 1 Year 2 Year 3 Year 4 Annuity s value Index value Initial principal A Indexed interest is locked in every year, never any losses. B Even if the index value has not recovered previous losses, the annuity s value will increase in any year there is a positive index change. This hypothetical example is provided for illustrative purposes only. Sales ideas Gazing into the crystal ball Clients know that market indexes move up and down. While saving for retirement, they want to improve their results and help ensure that their assets are safe. You might say: Wouldn t you like to have a crystal ball that could see into the future? That way, you would be able to see if your retirement savings were on track. Of course, no one has an actual crystal ball. The good news is that I have found a vehicle that can guarantee that you won t outlive your retirement savings. It can help you earn indexed interest when your selected indexes are up, and protect your principal when they re going down. You finally can enjoy the opportunity for interest linked to an index with the reassurance that your principal and credited interest are protected. Would you like to know about a way that can help take the guesswork out of how to reach your retirement goals? Odds are your clients may welcome a long-term product that can help smooth the road to retirement. Get out of harm s way Sometimes simplicity is best. You might say: Have you ever heard the saying, What goes up must come down? When you think about your retirement portfolio, do you ever worry about it having a lower value tomorrow than it does today? If the answer to that question is yes, you re off to an FIA presentation that emphasizes the idea of locking in interest and the importance of guaranteed principal against a negative change in an index. Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. 8 For agent use only not for use with the public. Page 10 of 12

11 Allianz: a strong, steady resource you can rely on Performance We are focused on you. We are a company that seeks to provide strong results with all of our products. Today s consumers are much more knowledgeable and demanding, and if you don t bring strong products to the table, those consumers will look elsewhere. Commission We understand that you are building a business. To be successful, you need insurance products that provide you with a fair and competitive commission, so you can grow your business. Our products are all designed to give you that fair and competitive commission. Protection Today s consumers are extremely interested in the safety of their wealth. With the size and strength of Allianz, our goal is to protect the money your clients entrust to us. Strength from an industry leader Allianz Life Insurance Company of North America (Allianz) is a member of Allianz SE. With over 80 million customers in about 70 countries, Allianz SE is one of the world s leading providers of integrated financial services. Allianz has consistently been assigned financial strength ratings by Standard & Poor s and A.M. Best that are among the highest available. It is one of a select group of major insurance companies to receive such high ratings. These independent agency ratings are based on an analysis of financial results and evaluation of management objectives and strategies. The ratings do not indicate approval by the analysts and are subject to change. We believe that the value proposition we provide you, the producer, is one that gives you the entire package of strong performance, fair and equitable commission, and the utmost in protection. Allianz. Financial solutions from A Z. Call the FASTeam at (press 1 for Sales Support, then 1 for Annuities) for detailed information, quotes, sales materials, and illustrations. Or visit Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. For agent use only not for use with the public. Page 11 of 12

12 Allianz Life Insurance Company of North America PO Box Minneapolis, MN For agent use only not for use with the public. Products and features may vary by state. (R-5/2009) Page 12 of 12