With FGL’s Performance Pro, Accumulation is Back in Vogue

For the last several years, the indexed annuity market has been primarily about income, income, income. But while the industry has been busy emphasizing income, we’ve ignored the need for accumulation.

Granted, it’s been much easier to tout roll-up percentages on income riders when low interest rates suppressed the caps on indexed crediting strategies throughout the industry.

But what if you could show a product’s hypothetical effective rate of account value growth was nearly 7 percent on an annual basis over the last 10 years? Using an index that has real historical backcasting? Could you make an accumulation sale with that?

Then check out the Performance Pro fixed indexed annuity, introduced in mid-March by Fidelity & Guaranty Life Insurance Company (FGL).

Here’s how we brought accumulation back in vogue with Performance Pro:

• We researched the financial universe in search of an index that would provide an alternative to the standard stock market indices.
• At the same time, this new index needed a strong history of performance; we were not interested in a newly created index.
• We determined this index should have a volatility control element.
• We designed a five-year point-to-point indexed crediting option to further minimize volatility.
• To give the product a higher potential for accumulation, we decide to make it an uncapped indexed crediting option.

The result of this process is Performance Pro’s Five-Year Dow Jones U.S. Real Estate Daily Risk Control 10% USD Total Return Index with a 5-year point-to-point calculation, NO CAP and a spread. With this crediting option, the account value of your client’s annuity will track the performance of the Dow Jones U.S. Daily Real Estate Risk Control 10% USD Total Return Index (DJUSR10T). Here are a few notable statistics on the index:

• Between January 1, 1993, and January 1, 2013, the DJUSR10T increased in value by more than 600 percent, compared with 227 percent for the S&P 500 and just under 300 percent for the Dow Jones Industrial Average.
• The DJUSR10T’s average annual return during this period was 9.84 percent.
• 75% of the time during this period, the index grew at least 6.74 percent on an annual basis.
• This growth includes the period during and immediately after the financial crisis of 2008-09 when real estate values plummeted throughout the country.

One of the keys to its growth is that, as a risk control index, DJUSR10T is actively managed to limit volatility. While volatility control limits growth on the high end, it also potentially results in fewer periods of zero credits. Using FGL’s illustration system, you can demonstrate to clients the potential this index has on account value growth:

 

FGL has also produced a two-page consumer flier that shows the historic index values of the DJUSR10T index between January 1993 and January 2013. It also shows hypothetical examples of how the Dow Jones U.S. Real Estate Daily Risk Control 10% USD Total Return Index crediting option would have performed in the last 20 years on Performance Pro, ending December 2013.

But what about income, you ask? Performance Pro has you covered there also. With our performance-driven income base, the same engine that drives account value accumulation also powers the product’s income rider income base. The result for your clients: The potential for a higher income base than those provided by fixed roll-up income riders. We will demonstrate this feature in a future article.

Or if you don’t want to wait, call CreativeOne’s sales team. They’re ready to introduce you to this unique product and to help you run illustrations. They can also help you get contracted with Fidelity & Guaranty Life. 800.992.2642.

Current rates and forms for Performance Pro are readily available on Annuity Solutions PRO, CreativeOne’s annuity product database.

See if you qualify for F&G’s Power Producer deferred compensation program!