Cap Gain-Not Loss (a/k/a Monthly Cap)  7/04
The fastest growing crediting methodology being adopted by carriers is the Cap Gain-Not Loss structure, also called the Monthly Cap design. The Cap Up method determines index movement for each month, adds any gains – up to a cap, or subtracts any loss – without a cap, to the previous subtotal. At the end of the period – one, two or three years – any final gain is credited to the index annuity. If the period ends with a loss the annuity is credited with zero gain. The cap may be raised or lowered (subject to a minimum limit) at the end of the crediting period when the design resets.

Salomon Smith Barney used the cap forward methodology a few years ago in an offshore asset trust. The first carrier to offer an index annuity version with the Cap Forward method was National Western and when I last counted half a dozen carriers were using the method with more on the way. It is not a bad design. However, I have found an incredible amount of confusion and hype surrounding the return realities of the methodology.

You Won’t Earn The Cap
Based on historical index performance, it is very unlikely that a 3% cap forward-fall back method will ever produce a year with a 36% return, or even a 20% return for that matter. Indexes do not tend to go straight up, and returns depend on when you begin and end the years.

If you look back over the last 50 years and apply the 3% cap forward structure you would have earned a 20%+ return three times (1959, 1996 and 2004), and only if you ended your annual periods during the school year. If you use the method with years beginning during the summer months you only have one year in the last 50 years with 20%+ returns.

A 3.5% monthly cap produces 20% annual returns three or four times over the last 50 years, but not one of those years produces a 42% return. The best of the best year flirts with 30%.

What about a two-year design with a 5% cap on upward monthly index gains? Well, you never hit a return of 120%, but unless you bought in the spring of the year you had at least one two year period in the last half century that delivered a 50% gain.

The correct way to describe a 3% annual cap forward or a 5% biennial cap forward is by saying “this method limits monthly index gains to 3% (or 5%) but any upward movement is not locked in and the cap doesn’t apply to index losses”. The wrong way to describe this method is to say, “your annual cap is 36%” or “you could make 120% in two years”. It is inaccurate to multiply the cap percentage by the number of months in the holding period because it creates an unrealistic picture of potential returns. If the cap forward design is presented as “maximum cap potential” you might meet me down the road – as a witness for the prosecution.

Cap Forward Designs Won’t Post Great Returns In Bad Times
Cap Forward designs are not going to produce great returns when the market becomes more volatile; although I have had several producers tell me this. The Cap Forward structure has a greater potential for producing at least some index-linked return in highly volatile times where other methods won’t.

Higher volatility means index-link sellers demand more money because the risk of big market swings – both up and down – has increased. Because the risk of catching the index-link seller on a big upswing is greater the cost of the index-link goes up. Higher costs mean insurers cannot buy as much index-linkage so traditional caps and/or participation rates go down.

Cap Forward methods share in this volatility, and with caps on monthly gains and not losses the index-link seller can be more generous on up cap limits, hoping that the down months will offset. This does not mean Cap Forward designs will post great returns in bad markets – 2001 and 2002 were years of high market volatility and Cap Forward methods would have credited the same zero returns as other methods – what it does mean is during periods when high volatility effectively shuts down returns from traditional crediting methods the Cap Forward design will still have caps that offer the potential for index-linked returns.

How Do They Perform?
I will begin by saying past performance in any shape or form whatsoever has absolutely no bearing, correlation or predictive powers regarding future returns of any financial vehicle. I also want to say if you’re looking at hypothetical performance using only the last ten or twenty years your vision is even more distorted. I plugged in current rates for a few different annual reset index annuity crediting methods for ten year segments using calendar years going back 50 years (there are 42 ten-year periods 1952-1962, 1953-1963...1993-2003). I then determined the average annualized return produced for each ten-year period and saw how often returns occurred.

For example, looking at the ten-year period annualized returns over the last 50 years for an annual point-to-point method with a 100% participation rate and a 9% interest cap shows 81% produced annualized returns between 5% and 6.99% a year and 19% of the periods had annualized returns below 5% a year. Here are current rates used for a few other methods and the dispersal of returns:

While, on a hypothetical historical basis, even a 3.5% cap forward design never produced a ten-year period averaging double-digit returns, the method can compare favorably with traditional cap designs.

This is a very limited comparison. When I took a broader view using current rates plugged in for periods during the last 50 years, and compared the hypothetical returns of cap forward products with other index annuities of the same surrender period, the cap forward methods tended to have higher average returns than other averaging methods. It should be noted that Cap Forward products, as with almost every other reset annuity on the market, have the ability to change a crediting variable – in this case the amount of the monthly cap – prior to the end of the surrender period, and future caps could, and probably will, differ from current levels, which will affect returns.

Summary
The bottom line is the Cap Forward design is a legitimate crediting methodology with the potential for higher returns than some other methods. It is a credible addition to the methodology lexicon. My concern is that it will be marketed to consumers using the maximum theoretical period cap rather than realistic return reality. The crediting method and the potential index-linked returns are real; overselling is not necessary. As with most other index annuities, cap forward returns will depend more on how the carrier treats you at renewal than the methodology used.

Methodology And Percentage of Index Gain Realized    7/04
This study shows how different index crediting structures and rates would have hypothetically performed for ten year periods ending during the 1980s (71-81, 72-82...80-90) and 1990s (81-91...90-00) calculated as a percentage of S&P 500 Index returns. For measurement the study uses the end of the year value for the S&P 500 index in calculating the returns. The results obtained should not be taken as a representation of actual returns for any product or period. This study is neither sponsored or endorsed by Standard & Poor’s or any insurance company, nor does Advantage Compendium market, sell or endorse any index product.

Example: The annualized S&P 500 Index return for ten year periods ending in the 1980s averaged 7.88%; the average for ten year periods ending in the 1990s was 13.06%. If you apply the Term End Point method with a 75% rate averaging the last 52 weeks of the period to ten year periods in the 1980s the average return of the method equaled 78.2% of the S&P 500 Index. Or, applying an Annual Reset offering 60% of annual point-to-point gain approach to ten year periods would have produced an average return that was equal to 88.2% of the average S&P 500 index return for the same ten year periods

Blatant Benefits of Index Annuities   8/04 
Modesty may be a fine quality for one desirous of living in a monastery, but it is at odds with the marketing of annuities. With all the noise created by purveyors of other financial product an annuity provider cannot be soft-spoken in relaying the benefits of buying one. You need to state annuity benefits loud and clear.

Don’t simply say Higher Potential Return, instead Shout – In the last year index annuities have delivered 3 to 8 times the return of CDs.

Don’t simply say Protected from market risk, instead Shout – No index annuity owner has ever lost a dime due to market downturn.

Don’t simply say Safe, instead Shout” – No index annuity owner has ever lost a dime because a carrier failed.

Don’t simply say An index annuity is an alternative to a bond, instead Shout – Unlike bonds index annuities don’t lose value when interest rates rise.

Don’t simply say Annual Reset, instead Shout – An index annuity let’s you take advantage of market drops.

Marketing is finding people that may need the solution you offer. In today’s crowded world you may only get one chance to be heard, so make it strong. 

A Minnesota Winter Lasts 9 Months  8/04 
In northern Minnesota January lasts 3 months, and then you add on the other snow months of October, November, December, February, March and April. So, by simple arithmetic, a Duluth winter lasts 9 months. That means the other seasons each last one month (The preceding is not really accurate; a northern Minnesota summer actually lasts from 4 July until 15 August – 6 weeks, so spring and autumn are each three weeks long).*Before I receive angry letters from frostbitten people on the Iron Range it should be noted that the writer grew up in Duluth and moved when he realized there were places where 21 March meant more than the occasion of penultimate snow storm.

That is my perception of a Minnesota winter, and although the reality of the calendar may have other dates, my beliefs and actions are guided by my perceptions. Annuity purchases are also driven by perceptions. Based on my talks I perceive consumers have many perceptions regarding annuities that do not reflect reality. A major part of the blame for these misconceptions is the extremely inept job the insurance industry has done in explaining and defending what fixed annuities do, but regardless of the reason a producer needs to address these perceptions before the annuity story will be believed and understood. What are the most common misperceptions?

A Fixed Annuity Is An Income Stream
A fixed annuity is a savings vehicle that offers minimum guarantees, tax advantages and the ability to receive an income one cannot outlive. Anecdotal evidence suggests 98% of the fixed annuities purchased are not annuitized, but instead used as a conservative savings instrument offering availability of interest and the ability to pass along assets to a designated beneficiary. And yet when I ask consumers what a fixed annuity is they tell me it is an income vehicle. They also often tell me they will not buy one because they do not need income.

The income benefits of a fixed annuity are wonderful. What other financial vehicle guarantees you will not outlive your money? And this benefit will become more important in years to come. But the income feature is only one benefit of owning an annuity. Tell the consumer you want to talk about a savings vehicle.

This is a savings vehicle that guarantees you will earn at least a minimum return regardless of where future interest rates go – only United States Savings Bonds also offer this feature.

This is a savings vehicle protected by a special fund designed to guarantee account values if the company backing the savings vehicle fails – only certain bank accounts also offer this feature.

This is a savings vehicle that can provide an income one cannot outlive – no one else offers this feature.

This is a savings vehicle that gives you a choice of receiving a stated rate of interest or the potential for more interest by participating in an external index – and this savings vehicle is a fixed annuity.

A Fixed Annuity Is A Variable Annuity
Often the financial press will write about annuities, usually with a negative tone, but invariably the article is about variable annuities. Variable annuities are as far away from fixed annuities as mutual funds are from certificates of deposit, and yet many consumers, and reporters, confuse the two.

When I get a call from a reporter wanting to talk about fixed annuities I always ask them a question – “Do fixed annuities have fees?” If they answer yes, I tell them to go to my web site and read the article “A Reporter’s Guide To Fixed Annuities”. Producers need to ask consumers the same question and then educate them on what a fixed annuity is.

A Fixed Annuity Is For Old People
A fixed annuity candidate is not determined by age but by needs and risk tolerance. To wit, a 75 year old with good genes and sufficient resources may never be a fixed annuity candidate because they do not want or need the safety features. On the other hand, an age 30 worker with scads of time until retirement may never develop the emotional tolerance to risk money and would be a good fixed annuity candidate.

I have heard fixed annuities slammed when used with people some deem too old or too young. The too old criticism usually is based on surrender charge and goes something like “an 80 year old should not buy an annuity with a (7, 10, 12, 15) year surrender charge because it ties up their money”. The truth in this argument depends on the needs – and not the age – of the annuity owner and the features of the annuity chosen. If the annuity owner will probably need access to most or all of the money before the annuity’s surrender period is over then they should buy a different annuity with a shorter surrender period, and other concerns can also be met by selecting an annuity with the features needed.

If an annuity owner believes they may need access to more than annual interest down the road then the annuity selected should offer a cumulative penalty-free withdrawal feature. If an annuity owner wishes to make all of the annuity value immediately available upon death, then the annuity chosen should not have any restrictions on payment of death proceeds. If the annuity owner is concerned about possible nursing home bills if future health fades, then the annuity selected should have a nursing home provision permitting access to funds. You can never be too old for the right annuity.

The “too young” slap against annuities is usually based on the IRS rule requiring a 10% penalty on most annuity withdrawals when under age 59½. Whether this really is a factor depends on the comparative returns of other vehicles. If the choice is between a certificate of deposit yielding 2% or a fixed annuity crediting 4%, the annuity still pays more even if hit with the IRS penalty.

I have discovered when you get pass the consumer’s misperceptions of what they think an annuity is and show how an annuity really works consumers like them. The industry needs to provide this education.  

A Reason To Believe  8/04 
When presenting an index annuity a producer will cite features, and how those features translate into benefits needed by the prospective buyer. However, even if the benefits perfectly mesh with the needs of the buyer a purchase will not result unless the buyer believes what the producer is saying. Without belief there is no sale. Consumers need a reason to believe they are hearing the truth and here are a few ways to help with that belief.

3^rd Party Sources: Last week I was asked if I had something that would counter an 8 year old negative article about index annuities. I said, “Yes, the fact that it is an 8 year old article”. There have been few general press articles on index annuities, either positive or negative.

The best one was “A Bear-Proof Way To Ride The Market” appearing in the 30 April 2001 issue of Business Week. “Retirement Years a Time To Lower Investment Risk” was in the 18 January 1998 edition of The Washington Post and another article titled “Equity-Indexed Annuities Appeal to the Squeamish” was syndicated by Los Angeles Times on 6 January 2002. A more recent one written by John Waggoner was in the 30 July edition of USA Today on page B3. It is balanced containing information like “EIAs are appealing because the stock market, in a word, stinks.” And it also contains nuggets like “Equity-indexed annuities offer juicy commissions, which is one reason people like to sell them.” There will be more articles in the mainstream press about index annuities because sales are growing. However, because bad news sells better than good I foresee more negative articles than positive ones.

Show Actual Interest Credited: The consumer wants to know if index annuity returns are for real, so show the actual interest credited by the carrier on their index annuities. Index annuities have been around for almost ten years and carriers can and have produced materials showing what their index annuities have credited.

Show Actual Interest Credited (Two): If the producer has offered index annuities for over a year copies of current client statements are showing very competitive credited interest. These statements, with personal data discreetly airbrushed out, demonstrate both a truth of the returns and the fact that other people trust the producer with their money.

It Takes A Village: Show consumers the steady growth in the amount of index annuities purchased quarter after quarter. There have been $60 billion of annuities purchased since 1995 and every year has been a new record. All of those index annuity buyers can’t be wrong?

Shoot Yourself First: Consumers expect to be lied to and misled...so the producer doesn’t do that. Instead, the producer shows all the warts of the product and why it is still the right solution.

If the producer thinks the surrender charge period will be an issue then the solution is to bring out the annuity disclosure form showing the surrender charges and then educating the consumer on why the annuity is still appropriate. What if the producer can’t overcome a surrender charge objection? Then obviously this was not the right index annuity for this consumer.

Producer Passion: If one believes strongly in their truth then others are likely to believe as well. If the producer honestly believes in the index annuity, and its appropriateness as a solution, the consumer will often also believe.

For a sale to result the consumer needs a rational benefit to justify the decision, an emotional benefit to be spurred to action, and because they have been burned in the past a reason to believe they are hearing the truth. Supply that reason.

2nd Quarter FIA Sales Set Record  9/04 
Sales for the second quarter of 2004 were $5277 million compared with sales of $3718 million for the second quarter of 2004. Second quarter index sales were up 26% when compared with first quarter index sales; up 42% when compared with the same period one year ago. Sales for the first six months of the year were $9464 million. The top selling index annuity carriers were:

Second quarter index life premium was a record $33,261,269 with AmerUs Group in first place accounting for most EIUL sales.

This is the twenty-eighth quarterly index sales survey conducted by Advantage Compendium. In all, 97% of the active index product companies accounting for over 99% of sales are represented.

There are 34 carriers offering equity index annuities. If you separate available products by features, there are:

153 Index Annuities - By Surrender Period & Methodology

158 Index Annuities - Previous Plus Bonuses, Cap Options

209 Index Annuities - Previous Plus Other Available Indices

Nine of the carriers offer a single product, 25 of the carriers offer multiple surrender period products, different crediting options or additional indices.

New products are AIGA Constellation and HorizonIndex, Allianz MasterDex, Allianz InCommandDex, American Equity Rewards Gold, Equitrust MarketValue Index and Allstate’s registered MarketSmart Annuity. The new player and product is Principal Performance Annuity.

A Marketing Fable  9/04 

Most people are aware that Henry Ford’s production of the Model T exploded a hundred years ago and they became the largest automaker in the world. Against the advice of the marketing department Henry Ford promoted his car as simply “Model T, dependable automobile, $695 FOB”. The car was pretty basic, lacking many refinements, but it performed as advertised and was a good value.

What many people have forgotten is that another car company also introduced a car during the same period and it was better than the Model T. The automobile, produced by Maidens Prayer Car Company, had a larger engine, power brakes, power steering, and a rudimentary On-Star^â navigation system whereby an operator would transmit in Morse Code to the receiver in your dashboard broadcasting which roads were impassable in your area.

It was a better car and the price was $595, a hundred dollars less than the Model T. However, the reason you have never heard of this automaker is because Maidens Prayer Car Company listened to their marketing department. The following is a text copy of the first advertisement produced by that marketing department and in parentheses the fine print at the bottom of the ad.

Because consumers never read the fine print – a fact marketing people depend upon – buyers of the Maidens Prayer car were universally disappointed due to unrealistic expectations based on what they had been told. The combination of negative press, lack of repeat sales, and lawsuits forced Maidens Prayer into bankruptcy and out of the car business, even though they actually offered the best value for the consumer.

Moral: When you sell unrealistic expectations you don’t have a prayer of long term success.

Allianz InCommandDex Is Product Innovation Of The Year 9/04 
The InCommandDex is an indexed income annuity with flexibility and consumer friendly features. This immediate annuity offers a life income linked to the performance of equity indices. Allianz is the only carrier offering indexed income annuities.

What makes InCommandDex innovative is the flexibility. Money may be allocated between two equity and one fixed account on each policy anniversary. The consumer may select a guaranteed income floor below which future income will never go regardless of how the indices perform. The consumer may partially annuitize the contract. And the consumer can cash in the immediate annuity during the first ten years and receive the cash surrender value of the policy.

Carriers say there needs to be a revolution in the immediate annuity world to produce products that meet the needs of future retirees because today’s income annuities don’t work well. Allianz has fired one of the first shots by developing an annuity where income is not solely dependent on interest rates and where the consumer has liquidity and choices. Advantage Compendium names Allianz InCommandDex the product innovation of the year.

Postmarked  9/04

My Child,
You have graduated from college (finally) and are entering the real world. Whatever your parents, teachers, friends, government did or did not do for you in your growing years is in the past; your future success and happiness now depends entirely on you. However, as ready as you think you may be for the challenge there are a few things you still need to know.

Take An Etiquette Class – Nothing will kill your career advancement faster than social gaffes. Although I taught you to chew with your mouth closed and that the salad fork is the outer one on the left, I am afraid I missed many of the nuances demanded in polite society. Regardless of how talented you are at your work you will never reach the upper levels if you are socially impaired and an etiquette class will polish you. You may think this is petty and silly, it is, but it is still the way the real world works.

Set Aside “Forget You” Money – You know the phrase I really mean. There will be times in your life when you will be asked by your boss to do something that you feel is morally wrong. If you don’t have enough cash set aside to quit your job and walk away, you will feel pressured to bend and demean yourself. With this money you can tell your boss “No”. It doesn’t have to be a lot – five or ten thousand will keep you going until the next job – and it will keep your soul and pride intact.

Keep Your Word – Ethically challenged people write binding contracts to keep their word and then hire lawyers to find loopholes so they can break them. When you make a promise to someone, keep it. This means you should only give your word when you know you can follow through. If you suspect you can’t, then don’t make the promise. And when it comes to keeping your word there is no difference between little and big promises. A person of honor always keeps their word.

Be Polite – Every old generation says the new one is discourteous, stand out by being polite. It does not cost anything to say “please” and “thank you” and to treat everyone with respect.

Develop A Passion – I’m not talking about becoming passionate about work or love or family. This passion is nurtured from your heart and helps you maintain perspective by giving you at least one thing in your life that is totally within your control. It could be collecting stamps or jogging or volunteer work, but it is something that is yours and yours alone, and when the world becomes too big or too bad you can retreat into your passion for awhile.

You Are Not Your Job – The personal identity of too many people is directly tied to their job. A problem arises when the job goes away – and it always does at least once in a lifetime – and the person is left with a void where their self should be. You are an individual. You have skills and traits and intelligence that are yours and can be applied to a thousand different jobs. You aren’t a plumber, doctor, mechanic; you are a unique being that currently works as a plumber, doctor or mechanic.

I am proud of you and everything you have become. I know you will face life’s challenges with the same enthusiasm and curiosity that has carried you thus far. I will leave you with one last thought: problems, regardless of severity, are always temporary.

All my love,

Dad

Compendium Facts  10/04
This all facts issue of Index Compendium talks about annuities in the IRA market, charts of effective total and annualized minimum guaranteed returns at various rates, senior demographics, renewal rates and annuity safety. Let’s begin with some index market superlatives derived from Advantage Compendium research:

Oldest Index Annuity Carrier (based on date of first sale):  Keyport (Sun Life)

Newest Index Annuity Carrier (based on date of first sale):  Principal Financial

Greatest Total Index Annuity Premium: Allianz

Greatest Total Index Life: Premium: AmerUs Life

Greatest Number of Available Index Annuity Indices: 5 – Midland National & North American

Longest Published Renewal History: 8 years – Lincoln Benefit Life

Amount of Index Annuity Premium Lost due to Failed Insurer? Zero

Number of fixed index annuities approved in New York: One (ING)

2004 World Series Champion: Boston Red Sox

Full Disclosure Carriers – Renewal Rates   Updated 08/05
A carrier’s renewal rate history and their treatment of policyholders is an important element in determining whether one should do business with the carrier. I asked the index carriers if they would agree to provide renewal data – renewal caps, participation rates, and/or fees – for currently offered index annuity products going back the lesser of 5 years or product launch, to anyone that asks ("anyone" does not include insurance company employees attempting to spy on competitors).

The following carriers have agreed to provide index annuity renewal information upon request.

The list of Full Disclosure Carriers is not intended to rate or judge any carrier's renewal rates, it simply lists the companies that have agreed to be open about their index annuity renewals.

Senior Stats (Source: U.S. Census)  10/04

Fixed Annuity Safety Update 10/04
In 2002 I began researching the question of fixed annuity losses because I had heard unsupported claims for years that annuity owners had either lost principal due to carrier failures, or, conversely, that no annuity owners had ever lost money, and I personally wanted to see if there was any truth out there. After four months of reviewing court records, state insurance department filings, news stories and talking to people that had been in the business for years I was unable to document any instance where an annuity owner received back less than 100 cents on the dollar of principal because of the failure of the insurance company. In 2003 I even offered a bounty on failed insurer data, and out of the nine leads received I was able to determine that two carriers did not return 100 cents on every dollar.

Those two troubled carriers were Inter-American Companies, an employee benefits carrier with some annuities that got into trouble in the ‘80s and liquidated in 1991, and National American Life Insurance Company of Pennsylvania.

Since then I have found two more carriers where annuityowners with values over state guaranty fund limits did not receive 100 cents on the dollar. Research by Advantage Compendium indicates owners of annuities issued by London Pacific Life and Summit National Life Insurance did receive up to guaranty limits but account amounts above those limits may never be fully paid. It appears that holders of annuity contracts received a little over 90 cents on the dollar on account values in excess of state guaranty limits in three of the cases – I was unable to determine precise numbers for Inter-American – but that in all cases amounts up to state guaranty fund limits were protected. There may be other carriers out there that have not returned a hundred cents on the annuity dollar, but I sure can’t find them. I can still affirm that no index annuity owner has ever lost a dime due to company failure.

During the period when 4 annuity carriers failed to return 100 cents on the dollar there were dozens of bank failures where accounts over FDIC limits failed to receive 100 cents on the excess dollars. But in every instance bank deposits within federal deposit insurance limits were protected [source: www.fdic.gov]. And in every instance annuity values within guaranty fund limits were protected [source: www.nolhga.com].

Even though there have been bank and annuity customers that have lost money due to company failure the reality is this:

Will a consumer lose money due to bank failure with their CD? Almost certainty not.

Will a consumer lose money in their fixed annuity due to an insurer failure? Almost certainly not.

Where The IRA Money Is 10/04
An Investment Company Institute report estimates total retirement assets (qualified plans, pension plans and non-qualified annuities) to be $12.1 trillion at the close of 2003, an 18% increase over the previous year, which I presume was mostly due to the start of the current bull market. Of this amount approximately $3 trillion is in IRAs. During the ten year period IRA assets tripled.¹

In 2001 respective IRA market shares were mutual funds 44%, brokerage accounts 38%, bank accounts 11% and fixed annuities 8%. By the end of 2003 all had surrendered at least a piece of their market share to fixed annuities, even though 2003 witnessed a roaring comeback for the stock market.

There are three stories here. The first is the bull market of the ‘90s caused the amount of IRA money in mutual fund and brokerage self-directed accounts to triple from 1994 through 2000.

The second story is the failure of banks to hold on to their market share. Throughout the 1980’s banks had the plurality of IRA assets. Even in 1994 one out of every four dollars in an IRA was in the bank, but by 2003 ten out of every eleven IRA dollars was not in the vault.

The third story is the leap of fixed annuity and fixed VA account assets during the millennium bear market. Individual Retirement Annuity assets rose steadily during the 1990s, but from 2001 to 2003 fixed annuity IRA assets exploded from $210 to $315 billion – a 50% increase. I believe much of the reason for the increase is due to some IRA owners deciding the stock market was not the right place for them. What is interesting is these newly risk averse IRA owners did not return to the bank – bank assets only increased 5% during this period – but instead chose fixed annuity accounts and at least a small portion of these fixed annuity dollars flowed into index annuities. Qualified index annuity sales increased from $2.86 billion to $6.59 billion during this period.²

The ‘90s exposed millions of consumers to the return side of equity investing and they were rewarded; the millennium bear market showed the risk face of investing and frightened IRA owners. The index annuity story should play well to these owners with its combination of protection and potential.

1 Investment Company Institute, Fundamentals, Volume 13, No 2, June 2004
2 Advantage Compendium, Index Sales & Market Report,. qualified totals include 403(b) contributions

Minimum Guaranteed Returns 10/04 
Quick, what does 2.25% interest on 90% of the premium grow to in 7 years? What is the equivalent bank rate to the annualized return produced by 3% interest on 80% of premium for 12 years? This link allows you to print an Adobe pdf copy of these charts. The pdf page is free, not copyrighted, and may be reproduced.