Annuity Presentation Guide 2010

Annuities can be complex if not understood. Like every product, however, they

have both pros and cons that need to be discussed. We’ll help review them

together in an easy to understand manner.

Understanding Annuities

Index Value

or

Cash Accumulation

Value

Personal Pension

or

Lifetime Income

Value

When you purchase many kinds of Fixed Index Annuities you get two components that simultaneously work

together. The Index or Cash Value is the accumulation value of your annuity. This value is based on the interest

that is credited to your annuity based on the rise and fall of the market. The second component is a book-

keeping component that grows each year at a guaranteed rate of interest and may be turned into a lifetime

stream of income at some future date. Let’s see how each of these components work:

Annuities Have Two Components

Index Value or Cash Accumulation Value Component

1. The Bonus and Annual Lock In

$100,000

$110,000

All guarantees are based on the claims paying ability of the insurance company

Participation rates will vary. A 10% federal tax penalty may apply to withdrawals taken prior to age 59 ½.

10% Bonus

Your value is locked in immediately upon premium payment and credit of bonus.

1 2 3 4 5 6

Many Fixed Index Annuities provide bonuses. Suppose you get a 10% bonus and deposit $100,000

in your annuity. The value of your annuity will then be $110,000 and it will be locked in at that level.

As your annuity rises in value, each new higher value is locked in each year at the anniversary date.

Once locked in that amount is guaranteed and cannot decrease in value.

Hypothetical example for illustration purposes only. Each product works differently. See product specific brochures and disclosures for more information.

2. Choosing the Guaranteed Interest Rate Option

$100,000

$110,000

10% Bonus

The insurance carrier will offer you a fixed, guaranteed interest rate in the first year and every year

thereafter which you may choose to take. In this example, suppose the guaranteed interest rate is

3.5%. Even if the market declines, you will earn 3.5%. If you include the bonus of 10% in calculating

the first year interest rate of your annuity, that would be a guaranteed first year return of 13.5%.

By taking the guaranteed interest rate for the first year, the total guaranteed first year

return including the 10% bonus is 13.5%



1 2 3 4 5 6Hypothetical example for illustration purposes only. Each product works differently. See product specific brochures and disclosures for more information.

$100,000

$110,000

S&P 500

10% Bonus

Crediting Formula

Monies linked to the index will increase in value when the market increases in value.

3. Choosing to Link Your Money toa Market Index, Like the S&P 500

It is important to remember that your monies are not invested in the S&P 500 but linked through a formula called a

Crediting Formula. It is this formula that will determine the interest credited to your annuity when the market index

increases in value. In most cases there will be a cap or limit and the interest credited to your annuity may not be as

much as the market gain. Many people feel that the protection against losing money is a good tradeoff for possibly not

getting an equivalent of the index gains.




4. If the Market Declines the Value of Your Annuity Cannot Go Down

$100,000

$110,000

10% Bonus

There are no losses due to market declines.

Because your monies are not invested in the market, a decline in the value of the index to which it is

linked will not effect the contract value. In a declining market you will not be credited any interest but

you will have the peace of mind of knowing that you will not lose any money.

S&P 500

Crediting Formula




5. Automatically Lock In Your Account Gains Each Year

$100,000

$110,000

10% Bonus

In a Fixed Index Annuity, interest earned can never be lost due to any decline of the stock market and

the corresponding index to which your annuity is linked. Each new, higher value of your annuity

establishes a new high watermark which is locked in on your anniversary date.

New High Watermark Locked In Value

S&P 500

Crediting Formula




6. Your Annuity Will Work This WayFor the Life of the Contract

$100,000

$110,000

10% Bonus

As the market and Index continue to rise and fall, your annuity will be credited with interest with each rise

in the market, establishing a new high watermark locked in value at each anniversary date. When the

market declines there will be no loss of value whatsoever.

New High Watermark Locked In Value

S&P 500

Crediting Formula




7. Downside Protection and Peace of Mind Linked to Upside Growth

$100,000

$110,000

10% Bonus

In this simple illustration the person who is invested in the market lived through a roller coaster of

ups and downs and finally broke even. On the other hand, the person in the Fixed Index Annuity

was free from stress of trying to figure out the market, what to buy, and when to buy it, and

sustains a positive contract value increase which can never be lost in the future.

Break Even

Positive Gain

S&P 500

Crediting Formula




Index Value or Cash Accumulation Value

Personal Pension orLifetime Income Value

Market Down = No Losses

Market Up = Market Linked

Interest Increase

Potential Principal Bonus

Lock in Account Value Yearly

Fixed Interest Alternative

10% Penalty Free Withdrawals*

Potential Surrender Charges

Terminal Illness/Nursing Home Rider**

Lawsuit Protection (Check Your State)

No Yearly Administrative Fees

Component Summary

*A 10% federal tax penalty may apply to withdrawals taken prior to age 59 ½. **May vary by product and state

Personal Pension or Lifetime Income Value Component

$100,000

$110,000

10% Bonus

8. Many Annuities Have a “Personal Pension” Alternative

This is called a Lifetime Income Rider (LIR). The LIR utilizes a bookkeeping

account that grows your monies at a specified guaranteed interest rate each

year which then may be converted into a lifetime of guaranteed income. In

this example the guaranteed income account grows at 8% per year.

8%

8%

8%

8%

8%

8%

S&P 500

Crediting Formula



1 2 3 4 5 6Hypothetical example for illustration purposes only. Each product works differently. See product specific brochures and disclosures for more information.Income Account varies by product and is only used to calculate lifetime payments and not available as a lump sum, cash surrender, or part of the death benefit calculation.

10% Bonus

$100,000

$110,000

9. Use the Guaranteed Income Account to Calculate Your Lifetime Pension Income

8%

8%

8%

8%

To calculate the income stream, multiply the guaranteed income account value by

a factor based on your age e.g. 6% if you are between 70 and 80. That amount is

then guaranteed as long as you live*. If you pass away, your beneficiaries will

receive the cash remaining in your Index Account. There is a small fee for this

rider typically .45% - .5% .The fee is always deducted from

your index value.

Guaranteed Income Account

Value is $149,654 x .06% =

$8,979 per year for life

S&P 500

Crediting Formula



1 2 3 4 5 6Hypothetical example for illustration purposes only. Each product works differently. See product specific brochures and disclosures for more information.*Excess withdrawals may impact the amount of lifetime income or deplete income stream.

$100,000

$110,000

10. Withdrawals from Your Annuity Deducted From Your Index Value

Break Even

8%

8%

Index Value or

Cash Value

As income is withdrawn from your annuity the Index or Cash Accumulation Value is reduced. The

amount of reduction may be replaced by interest credited based on the rises of the corresponding index. The LIBR income stream continues for life no matter the amount

the value of the Index or Cash Accumulation Value, even if it were to

go to zero.

10% Bonus

S&P 500

Crediting Formula

$8,979 per year for life

8%

8%




Index Value or Cash Accumulation Value

Personal Pension orLifetime Income Value

Market Down = No LossesGuaranteed Income Account Growth

Rate of 4% to 8%

Market Up = Market Linked

Interest IncreaseCreate a Lifetime of Income

Potential Principal Bonus Does Not Give Up Annuity Cash Value

Lock in Account Value Yearly Potential Annual Fee of .45% - .50%

Fixed Interest AlternativeIncome Account Value for Calculating

Lifetime Income Payments

10% Penalty Free Withdrawals*

Potential Surrender Charges

Terminal Illness/Nursing Home Rider**

Lawsuit Protection (Check Your State)

No Yearly Administrative Fees

Component Summary

*A 10% federal tax penalty may apply to withdrawals taken prior to age 59 ½. **May vary by product and state

The Pros and Cons of Fixed Index Annuities

Safe and insured financial product

Tax Deferred Accumulation

10% Penalty Free Withdrawals

Terminal Illness and Nursing Home Riders

Lawsuit Protected in Many States

Some Annuity Products May be Medicaid Friendly

No Administrative or Management Fees

Potential Length of Contracts

Potential Surrender Charges for Early

Access

Often Misunderstood with Variable

Annuities

.5% Fee for Lifetime Income Benefit Rider

Pros Cons

Options Can be Complex

How Do Insurance Companies Do It?

Insurance Company offers a

guaranteed Fixed Interest of 3%

or $3,000 for the year.

You elect not to take the

guaranteed interest preferring to

link your funds to a market

index in hope of greater gain.

You purchase a Fixed Index

Annuity for $100,000.

The Insurance Company takes

the $3,000 that it would have

given you and buys an S&P

Institutional Call Option.

The Insurance Company has

spent the same amount of money

it had planned to spend within its

original profit structure.

If the S&P goes up the Insurance

Company exercises the option

and credits you with interest

based on the option purchased.

If the S&P goes down the

Insurance Company cannot

exercise the option and loses

the $3,000 option purchase price.

You do not suffer any losses

since your monies were not

invested in the market. You,

however, do not make any

gains that year.

This is a hypothetical example for illustration purposes only

Documents

Annuity Presentation Guide 2010