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What Are Indexed Annuities Pros And Cons?

2011-04-19T00:12:00.001-05:00

What Is An Indexed Annuity?

What are Indexed Annuities?

According to The National Association of Insurance Commissioners Buyer’s Guide, “An indexed annuity is a fixed annuity, either immediate or deferred, that earns interest or provides benefits that are linked to an external equity reference or an equity index.

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Mini Masseuse Pro Series

2010-10-29T06:32:00.001-05:00

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2010-10-27T09:13:00.001-05:00

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Gold: What Is The Economy Usually Doing When It Goes Up?

2010-09-23T08:54:00.001-05:00

Gold: What Is The Economy Usually Doing When It Goes Up?

Gold: What Is The Economy Usually Doing When It Goes Up?
Research proves wrong the idea that gold reliably rises during recessions, says EWI President Robert Prechter.
September 21, 2010
By Elliott Wave International

...If gold isn’t going up when the economy is contracting, when is it going up? Table 4 (see chart on p. 24 of this free Club EWI report -- Ed.) answers the question: All the huge gains in gold have come while the economy was expanding. This is true of the three most dramatic gold gains of the past century:

(1) Congress changed the official price of gold from $20.67 to $35 per ounce in 1934, during an economic expansion. The gain against the dollar was 69 percent.
(2) The entire bull market from 1970 to 1980 occurred during an economic expansion... [Of] the $815 per ounce that gold rose from 1970 to 1980, $725 worth of it came while the economy was expanding.
(3) The entire bull market from 2001 to the present occurred during an economic expansion... [Of] the $748 per ounce that gold has risen since February 2001, $726 worth of it has come while the economy was expanding.

Even lesser rises in gold, such as the two big rallies during the 1980s, came during economic expansions. So the biggest gains in gold, by far, have occurred while the economy was in expansion, not contraction.

Why is such the case? Simple: During expansions, liquidity is available, and it has to go somewhere. Sometimes it goes into stocks, sometimes it goes into gold, and sometimes it goes into both. During times of extreme credit inflation, such as we have experienced over the past three decades, the moves in these markets during economic expansions are likewise extreme. When recession hits, liquidity dries up, and investors stop buying. During depressions, they sell assets with a vengeance.

Of course, we socionomists do not believe in the external causality of investment price movements. Recessions and expansions do not make investment prices move up and down. Fluctuations in social mood propel the economy, liquidity and movements in investment prices. So the only reason we bother with studies like this is to de-bunk various commonly held views of financial causality. Now we know: The idea that gold reliably rises during recessions and depressions is wrong; in fact, like most such passionately accepted lore, it’s backwards.
Finish reading this 16-chapter paper online now, free! Download Robert Prechter's FREE 40-Page Gold and Silver eBook.

Here's what else you'll learn:

* Why Gold Is Still Money
* What Long Term Analysis of Gold Stocks Shows
* Study: Does Gold Always Go Up in Recessions and Depressions?
* True or False: Gold Is Better Than Stocks During Expansions
* What’s Next for Gold?
* Elliott Waves in the Silver Market
* MORE

Keep reading this free report now -- Download Robert Prechter's FREE 40-Page Gold and Silver eBook.

This article was syndicated by Elliott Wave International and was originally published under the headline Gold: What Is The Economy Usually Doing When It Goes Up?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
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How to Forecast Markets Using Technical Analysis

2010-09-17T10:54:00.001-05:00

How to Forecast Markets Using Technical Analysis

Your Free Chance to Learn How to Forecast Markets Using Technical Analysis
EWI's Senior Tutorial Instructor Jeffrey Kennedy gives you practical lessons -- free
September 17, 2010
By Elliott Wave International

There are two camps of market analysts out there: the fundamental camp and the technical one. Fundamental analysts look at things like the GDP, unemployment, interest rates, etc. to make logical assumptions about where the stock market is going.

Technical analysts use none of that. They look at the market's internals to gauge the trend: things like momentum, trend channels -- and yes, Elliott wave patterns.

And this is your free chance to learn how they do it.

We've put together a free 54-page Club EWI resource for you, "The Ultimate Technical Analysis Handbook." Below is a short excerpt from chapter 3. Enjoy! (For details on how to read this free report in full, look below.)

The Ultimate Technical Analysis Handbook
Chapter 3: How To Integrate Technical Indicators Into an Elliott Wave Forecast
By EWI's Senior Tutorial Instructor Jeffrey Kennedy

I love a good love-hate relationship, and that’s what I’ve got with technical indicators. Technical indicators are those fancy computerized studies that you frequently see at the bottom of price charts that are supposed to tell you what the market is going to do next (as if they really could). The most common studies include MACD, Stochastics, RSI and ADX, just to name a few.

I often hate technical studies because they divert my attention from what’s most important -- PRICE. ... Nevertheless, I have found a way to live with them, and I do use them. Here’s how: Rather than using technical indicators as a means to gauge momentum or pick tops and bottoms, I use them to identify potential trade setups.

Out of the hundreds of technical indicators I have worked with over the years, my favorite study is MACD (an acronym for Moving Average Convergence-Divergence). ... Even though the standard settings for MACD are 12/26/9, I like to use 12/25/9 (it’s just me being different). An example of MACD is shown in Figure 6 (Coffee).

Coffee - December Contract Daily Data

The simplest trading rule for MACD is to buy when the Signal line (the thin line) crosses above the MACD line (the thick line), and sell when the Signal line crosses below the MACD line. Although many people use MACD this way, I choose not to... I like to focus on different information that I’ve observed and named: Hooks, Slingshots and Zero-Line Reversals. Once I explain these, you’ll understand why I’ve learned to love technical indicators. ...

Read the rest of the 50-page "Ultimate Technical Analysis Handbook" online now, free! All you need is to create a free Club EWI profile. Here's what else you'll learn:

Chapter 1: How the Wave Principle Can Improve Your Trading
Chapter 2: How To Confirm You Have the Right Wave Count
Chapter 3: How To Integrate Technical Indicators Into an Elliott Wave Forecast
Chapter 4: Origins and Applications of the Fibonacci Sequence
Chapter 5: How To Apply Fibonacci Math to Real-World Trading
Chapter 6: How To Draw and Use Trendlines
Chapter 7: Time Divergence: An Old Method Revisited
Chapter 8: Head and Shoulders: An Old-School Approach
Chapter 9: Pick Your Poison... And Your Protective Stops: Four Kinds of Protective Stops
Get more lessons like the one above in the free 50-page Ultimate Technical Analysis Handbook. Learn more and download your free copy here

This article was syndicated by Elliott Wave International and was originally published under the headline Your Free Chance to Learn How to Forecast Markets Using Technical Analysis. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
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Indexed Annuities

What is a Tax Deferred Indexed Annuity?

2010-09-07T11:55:00.001-05:00

What is a Tax Deferred Indexed Annuity?

Tax-deferred indexed annuities are contracts between you and the insurance company with guaranteed interest and guaranteed annuity income options. There are no upfront sales commissions or administrative fees during the life of your indexed annuity.

Advantages of Tax Deferred Indexed Annuities include tax deferral, stability, may avoid probate, liquidity features, guaranteed income and guaranteed lifetime income riders.

Your equity-indexed annuity, like other fixed annuities, also promises to pay a minimum interest rate. The rate that will be applied will not be less than this minimum guaranteed rate even if the index-linked interest rate is lower. The value of your index annuity also will not drop below a guaranteed minimum. For example, many indexed annuities guarantee the minimum value will never be less than 80 percent of the premium paid, plus at least 1% in annual interest (less any partial withdrawals). The guaranteed value is the minimum amount available during a term of withdrawals, as well as for some annuitizations and death benefits. The annuity life insurance company will adjust the value of the indexed annuity at the end of each term to reflect any index increases.

In some indexed annuities, the average of an index's value is used rather than the actual value of the index on a specified date. The index averaging may occur at the beginning, the end, or throughout the entire term of the index annuity.

One of the primary advantages of deferred indexed annuities is the opportunity to accumulate a substantial sum of money by allowing your premium and interest to grow tax-deferred. Unlike taxable investments, you pay no taxes on your indexed annuity interest until you begin to take withdrawals or receive income. This allows your money to grow faster than in a taxable account, because you earn interest on the money that would have otherwise been paid in taxes.

Your tax-deferred indexed annuity is stable and safe. State insurance department laws require annuity insurance companies establish and maintain reserves equal to the cash surrender value of your annuity contract at all times. In addition, state laws require annuity life insurance companies maintain minimum amounts of capital and surplus for further contract owner protection.

Annuity life insurance companies invest your premium dollars in a diversity of investments that are closely regulated by the insurance departments. These long-term investments ensure the stability of the annuity company and help to provide you with a competitive yield.

In the case of premature death, your beneficiaries have the accumulated funds within your indexed annuity available to them, with most companies and may avoid the expense, delay and publicity of probate.

Most indexed annuities provide you with opportunities to withdraw funds at any time (subject to applicable surrender charges). Most index annuity contracts allow some form penalty-free withdrawals after the first contract anniversary. Some indexed annuities also have available certain riders which increase liquidity in the event of confinement to a nursing home or if diagnosed with a terminal illness.

Tax deferred indexed annuities provide you with a guaranteed income within a tax-deferred indexed annuity. You have the ability to choose from several different income options, including payments for a specified number of years or income for life, no matter how long you live. With non-qualified (non-IRA, 401k) plans, a portion of each annuity income payment represents return of premium which is not taxed, thereby reducing your tax liability from your indexed annuity income payments.

It is important to understand the features and trade-offs available so you can choose the index annuity that is right for you. Be aware that it may be misleading to compare one index annuity to another unless you compare all the other features of each index annuity. You must decide for yourself what combination of index annuity benefits makes the most sense for you.

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Now is Not the Time to Speculate in Stocks

2010-08-31T15:38:00.001-05:00

3 Reasons Now is Not the Time to Speculate in Stocks - Fixed Annuity Definition, Fixed Indexed Annuities, Lifetime Income Annuity

3 Reasons Now is Not the Time to Speculate in Stocks
Sometimes the investment weather forces you to 'buy a coat,' says Robert Prechter
August 31, 2010
By Elliott Wave International

When it's sunny, you head outside without a thought, but when it's rainy, you look for your umbrella.

When the markets are trending up, you don't worry about your investments much, but when the markets turn bearish ... what do you do?

In an interview with Jeff Sommer of The New York Times in July 2010, Robert Prechter said that he is convinced that a "market decline of staggering proportions" is on its way, and that individual investors should get out of the market and into cash and cash equivalents, such as Treasury bills.

"I'm saying: 'Winter is coming. Buy a coat,'" Prechter said. "Other people are advising people to stay naked. If I'm wrong, you're not hurt. If they're wrong, you're dead. It's pretty benign advice to opt for safety for a while."

Read some of the latest nuggets directly from Elliott Wave International President Robert Prechter's desk -- FREE. Click here to download a free report packed with recent analysis and forecasts from Prechter's Elliott Wave Theorist.

For more specific advice as to why now is not the right time to speculate in stocks, here's an excerpt from chapter 20 of Prechter's business best-selling book, Conquer the Crash -- You Can Survive and Prosper in a Deflationary Depression, 2nd edition 2009.

* * * * *

Should You Speculate in Stocks?

Perhaps the number one precaution to take at the start of a deflationary crash is to make sure that your investment capital is not invested “long” in stocks, stock mutual funds, stock index futures, stock options or any other equity-based investment or speculation. That advice alone should be worth the time you spent to read this book.

1. Stocks May Go to Near Zero

In 2000 and 2001, countless Internet stocks fell from $50 or $100 a share to near zero in a matter of months. In 2001, Enron went from $85 to pennies a share in less than a year. These are the early casualties of debt, leverage and incautious speculation. Countless investors, including the managers of insurance companies, pension funds and mutual funds, express great confidence that their “diverse holdings” will keep major portfolio risk at bay. Aside from piles of questionable debt, what are those diverse holdings? Stocks, stocks and more stocks. Despite current optimism that the bull market is back, there will be many more casualties to come when stock prices turn back down again.

2. Stock Mutual Funds Will Fall, Too

Not only will many stocks fall 90 to 100 percent, but so will a substantial number of stock mutual funds, which cannot exit large equity positions without depressing prices and which have the added burden to you of one percent (or more) annual management fees. The good news is that we will finally find out who the few truly good fund managers are and which ones were heroes by virtue of being around for a bull market.

3. The Fed Won't Be Able To Save the Stock Market

Don’t presume that the Fed will rescue the stock market, either. In theory, the Fed could declare a support price for certain stocks, but which ones? And how much money would it commit to buying them? If the Fed were actually to buy equities or stock-index futures, the temporary result might be a brief rally, but the ultimate result would be a collapse in the value of the Fed’s own assets when the market turned back down, making the Fed look foolish and compromising its primary goals, as cited in Chapter 13. It wouldn’t want to keep repeating that experience. The bankers’ pools of 1929 gave up on this strategy, and so will the Fed if it tries it.

Read some of the latest nuggets directly from Elliott Wave International President Robert Prechter's desk -- FREE. Click here to download a free report packed with recent analysis and forecasts from Prechter's Elliott Wave Theorist.

This article was syndicated by Elliott Wave International and was originally published under the headline 3 Reasons Now is Not the Time to Speculate in Stocks. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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The Hindenburg Omen -- Omen-ous or Not? Robert Prechter

2010-08-25T13:09:00.001-05:00

The Hindenburg Omen -- Omen-ous or Not?

Hindenburg Omen -- Omen-ous or Not?
Elliott Wave International Chief Market Analyst Steve Hochberg Sheds Light on a Feared Technical Indicator
August 24, 2010

By Elliott Wave International

On Aug. 12, volatile market action coincided with a technical signal called the Hindenburg Omen, whereby a relatively high number of new highs and lows in individual stocks occur at the same time.

This indicator instantly gained an enormous amount of media attention. So we sat down with Steve Hochberg, EWI's chief market analyst and close colleague of Robert Prechter, to ask him about the now-infamous Hindenburg Omen.

EWI: Steve, recently a market indicator called the Hindenburg Omen has been in the news, what is going on?

Steve Hochberg: Discussion of this indicator certainly has been everywhere. Someone emailed us and said they even saw it mentioned on the front page of the Drudge Report! Look, headline-grabbing names grab headlines. Essentially it measures the fractured nature of market action. Over the years, we've discussed numerous times in our publications how a fractured market is oftentimes an unhealthy market. The multiple non-confirmations registered at the recent August 9 stock high, which we talked about in the Short Term Update, are another manifestation of this bearish behavior. The message is consistent with how we view the Elliott wave structure.

EWI: Why are people interested in this particular indicator?

SH: That's a good question, and it speaks to a broader issue, viz., the "re-emergence" of technical analysis into the mainstream consciousness of market participants. In Prechter's Perspective, Robert Prechter discusses the timing of the popularity of technical analysis, of which Elliott waves, or pattern recognition, is the highest form:

"In long term bull markets, no one really needs market timing because the market is always going up. This was true during the 1950s and 1960s, a period of market strength. And it has been mostly true since 1982. From 1966 to 1982, though, the market was very cyclic, so investors couldn't sleep like babies with a buy-and-hold blanket like they do today."

The S&P 500 has a negative return over at least the past 12 years, so investors are naturally questioning the "broadly diversified, buy and hold" stance advocated by 90%+ of investment advisors. EWI subscribers are way ahead of the mass of investors because as the bear market progresses, the media should show increased focus on technical analysis, including patterns such as head-and-shoulders as well as trendlines, moving averages and, yes, even Elliott waves, just as they did during the last great bear market from 1966 to 1982. It will be an exciting time for those with even a cursory knowledge of the technicals.

EWI: So, what are you seeing now?

SH: Obviously we cannot give away our analysis, but the wave structure is clear, the myriad indicators we keep offer compelling confirmation and the market is accommodating our forecast. If readers have any interest in what this means for not only the stock market, but also all other markets, please give us a read to see if our work might be useful in helping to formulate your investment portfolio. We think it will be a worthwhile endeavor.

Read some of the latest nuggets directly from Elliott Wave International President Robert Prechter's desk -- FREE. Click here to download a free report packed with recent analysis and forecasts from Prechter's Elliott Wave Theorist.

This article was syndicated by Elliott Wave International and was originally published under the headline The Hindenburg Omen -- Omen-ous or Not?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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Life Annuities Provide Life Annuity Income, But How To Find The Best Rate?

2010-08-21T13:18:00.001-05:00

Life Annuities - Life Annuity, Lifetime Annuities, Annuities For Life - Fixed Annuity Definition, Fixed Indexed Annuities, Lifetime Income Annuity

Life annuities:

Straight life annuity:

This option provides payments for the rest of your life, even if the payments exceed the money you put into the annuity. While this option usually pays out the most, if you die before all of the money you put in has been distributed, no additional payments will be made to your dependents.

Joint and survivor life annuities:

This life annuity provides payments to you as long as you live and to a designated beneficiary as long as he or she lives. Life income with refund annuity. With this product, payouts continue for life, but if you die before collecting all the premiums you have paid, your beneficiary collects the remaining money.

Life annuity with period certain:

This annuity offers income for life. If you die before receiving the total of premiums paid, your beneficiary receives payments for the remainder of the period.

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Fidelity 401k Hardship Withdrawals up 20% in Second Quarter.

2010-08-20T16:36:00.001-05:00

401k Withdrawal, 401(k) Withdrawals From Your 401k

Many 401(k) plans allow employees to make a hardship withdrawal because of immediate and heavy financial needs. Generally, hardship withdrawal distributions from a 401(k) plan are limited to the amount of the employees' elective contributions only, and do not include any income earned on the deferred amounts. Hardship 401k withdrawal distributions are not treated as eligible rollover withdrawal distributions.

401 k withdrawal distributions received before age 59 1/2 are subject to an early distribution penalty of 10% additional tax unless an exception applies. For more information about the treatment of retirement plan distributions, refer to Publication 575, Pension and Annuity Income.

Elliott Wave International - Efficient Market Hypothesis: R.I.P.

2010-08-19T18:51:00.001-05:00

Efficient Market Hypothesis: R.I.P. - Fixed Annuity Definition, Fixed Indexed Annuities, Lifetime Income Annuity

Efficient Market Hypothesis: R.I.P.

August 19, 2010
By Elliott Wave International

Of all the belief systems of Wall Street, few can claim the devoted following of the Efficient Market Hypothesis, the idea that stock prices adhere to the same laws of supply-and-demand that govern retail products. Once coined the theoretical "Parthenon" of economics, this notion has consistently endured the test of time ----- until now. Academics and advisors across the globe are currently exposing crack after crack in the "Efficient" model so deep as to bring the entire theory crashing to the ground.

"The EMH is not only dead," writes a July 29, 2010 news source. "It's really, most sincerely dead." (Minyanville)

As to what caused the theory's collapse -- one recent business journal offers this insight:

"Financial markets do not operate the same way as those for other goods and services. When the price of a television set or software package goes up, demand for it generally falls. When the prices of a financial asset rises, demand generally rises." (The Economist)

Here's the thing. SIX years ago, Elliott Wave International president Bob Prechter pronounced the exact same finding in his April 2004 Elliott Wave Theorist. (Read that full-length publication today, absolutely free by clicking on the hyperlink) In that groundbreaking report, Bob presented the compelling picture below that shows how investors increase their percentage of stock holdings as prices rise, and decrease them as prices fall:

The next question is why? Answer: Motivation: i.e. the purchase of goods and services is about need; while the purchase of stocks is about desire. Here, Bob Prechter's 2004 Theorist takes the rein:

"The fact is that everyday in finance, investors are uncertain. So they look to the herd for guidance. Because herds are ruled by the majority -- financial market trends are based on little more than the shared mood of investors -- how they feel -- which is the province of the emotional areas of the brain (limbic system), not the rational ones (neocortex)... Buyers, in a rising market appear unconsciously to think, 'The herd must know where the food is. Run with the herd and you will prosper.' Sellers in a falling market appear to unconsciously think, 'The herd must know that there's a lion racing toward us. Run with the herd or you will die.'"

Prechter and contributor Wayne Parker then expanded on his landmark observation in the 2007 Journal of Behavioral Finance. (Also available, absolutely free by clicking on the hyperlink)

In the end, it's not enough to just tear down the long-standing EMH. One must build another, more accurate model up in its place. And in the 2004 Theorist, Bob Prechter does just that with the Wave Principle, which reconciles the technical and psychological sides of stock market behavior into this key point: Herding impulses, while not rational, are also NOT random. They unfold in clear and calculable wave patterns as reflected in the price action of financial markets.

As the mainstream media continues to jump on board Prechter's Financial/Economic Dichotomy Theory, you can read both of Prechter's original writings. Enjoy your complimentary access to the 2004 April 2004 Elliott Wave Theorist and the 2007 Journal of Behavioral Finance.

Read some of the latest nuggets directly from Robert Prechter's desk -- FREE. Click here to download a free report packed with recent quotes from Prechter's Elliott Wave Theorist.

This article was syndicated by Elliott Wave International and was originally published under the headline Efficient Market Hypothesis: R.I.P.. EWI is the world's largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Annuity Definition

Slicing the Neckline: A Classic Technical Pattern Agrees with the Elliott Wave Count

2010-08-18T19:32:00.001-05:00

Slicing the Neckline: A Classic Technical Pattern Agrees with the Elliott Wave Count - Fixed Annuity Definition, Fixed Indexed Annuities, Lifetime Income Annuity

Slicing the Neckline: A Classic Technical Pattern Agrees with the Elliott Wave Count

August 17, 2010
By Elliott Wave International

In the August issue of his Elliott Wave Theorist, market forecaster Robert Prechter alerted readers that the U.S. stock market was slicing the neckline of a classic head-and-shoulders pattern in technical analysis, and that this may send the market into critical condition.

Prechter said that when the Elliott wave count and a head-and-shoulders pattern are saying the same thing about the stock market, it's best to pay attention.

Read some of the latest nuggets directly from Robert Prechter's desk -- FREE. Click here to download a free report packed with recent quotes directly from Prechter's Elliott Wave Theorist.

Here's how the August issue of the Elliott Wave Financial Forecast, the sister publication to Prechter's Theorist, described the head and shoulders pattern unfolding in the stock market:

"The weekly Dow chart [below] shows the development of an intermediate-term, head-and-shoulders pattern from the January high at 10,729.90 to the present. The January high marks the left shoulder, the April 26 high at 11,258 is the head, and the right shoulder is now ending. The April [Theorist] discussed the pertinent characteristics that Edwards and Magee used to define this technical pattern ... all apply to the current formation. Observe how weekly stock trading volume has contracted during the development of the right shoulder, a necessary trait of this pattern. The downward-sloping neckline -- exactly as on the big ten year pattern -- displays market weakness, which is consistent with our interpretation of the wave structure."

This chart shows the head-and-shoulders pattern.

Total U.S. Stock Market Volume

Here's what Robert Prechter himself said in a recent Elliott Wave Theorist:

"Generally, when the neckline slopes downward, the right shoulder does not rise to the level of the left shoulder ..."

Please look at the chart again -- then re-read Prechter's quote.

Read some of the latest nuggets directly from Robert Prechter's desk -- FREE. Click here to download a free report packed with recent quotes from Prechter's Elliott Wave Theorist.

This article was syndicated by Elliott Wave International and was originally published under the headline Slicing the Neckline: When the Market May Go into "Critical Condition". EWI is the world's largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Annuity Definition

Deflation: First Step, Understand It

2010-08-17T14:31:00.001-05:00

Deflation: First Step, Understand It
There is still time to prepare if deflation is indeed in our future.
August 16, 2010

By Elliott Wave International

"Fed's Bullard Raises Specter of Japanese-Style Deflation," read a July 29 Washington Post headline.

When the St. Louis Fed Chief speaks, people listen. Now that deflation -- something that EWI's president Robert Prechter has been warning about for several years -- is making mainstream news headlines, is it too late to prepare?

It's not too late.

There are still steps you can take if deflation is indeed in our future. The first step is to understand what it is. So we've put together a special, free, 60-page Club EWI resource, "The Guide to Understanding Deflation: Robert Prechter’s most important warnings about deflation." Enjoy this quick excerpt. (For details on how to read this important report free, look below.)

When Does Deflation Occur?
By Robert Prechter

To understand inflation and deflation, we have to understand the terms money and credit.

Money is a socially accepted medium of exchange, value storage and final payment; credit may be summarized as a right to access money. In today’s economy, most credit is lent, so people often use the terms "credit" and "debt" interchangeably, as money lent by one entity is simultaneously money borrowed by another.

Deflation requires a precondition: a major societal buildup in the extension of credit (and its flip side, the assumption of debt). Austrian economists Ludwig von Mises and Friedrich Hayek warned of the consequences of credit expansion, as have a handful of other economists, who today are mostly ignored. Bank credit and Elliott wave expert Hamilton Bolton, in a 1957 letter, summarized his observations this way:

In reading a history of major depressions in the U.S. from 1830 on, I was impressed with the following:
(a) All were set off by a deflation of excess credit. This was the one factor in common.
(b) Sometimes the excess-of-credit situation seemed to last years before the bubble broke.
(c) Some outside event, such as a major failure, brought the thing to a head, but the signs were visible many months, and in some cases years, in advance.
(d) None was ever quite like the last, so that the public was always fooled thereby.
(e) Some panics occurred under great government surpluses of revenue (1837, for instance) and some under great government deficits.

Near the end of a major expansion, few creditors expect default, which is why they lend freely to weak borrowers. Few borrowers expect their fortunes to change, which is why they borrow freely. The psychological aspect of deflation and depression cannot be overstated. ...

Read the rest of this important 60-page Robert Prechter's report online now, free! Here's what else you'll learn:

What Makes Deflation Likely Today?
How Big a Deflation?
Why Falling Interest Rates in This Environment Will Be Bearish
Myth: "Deflation Will Cause a Run on the Dollar, Which Will Make Prices Rise"
Myth: "Debt Is Not as High as It Seems"
Myth: "War Will Bail Out the Economy"
Myth: "The Fed Will Stop Deflation"

This article was syndicated by Elliott Wave International and was originally published under the headline Deflation: First Step, Understand It. EWI is the world's largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Annuity Definition

7 Ways to Become an Unsuccessful Trader

2010-08-12T13:18:00.001-05:00

7 Ways to Become an Unsuccessful Trader

Q&A with an experienced Elliott wave trader reveals seven common trading mistakes.
August 12, 2010

By Elliott Wave International

To be a successful trader demands knowledge.

If you'd prefer to become an unsuccessful trader, you can start by making the following common trading mistakes, detailed by a professional who spent 25 years in portfolio management, trading and forecasting in the financial capital of the world, New York City.

In 2002, Wayne Gorman, long-time Elliott wave trader and current head of trader education at Elliott Wave International, left his 35th floor Manhattan apartment and moved to the quiet of North Georgia. He's been sharing his knowledge and skills with aspiring traders ever since -- in both online seminars and before live audiences around the world.

Wayne graciously agreed to a Q&A about trading mistakes. In his interview, Wayne reveals seven common mistakes traders make.

--------

EWI: Could you name two mistakes frequently made by stock traders?

Wayne Gorman: (mistake 1) The first big mistake is the flawed logic of extrapolation. Many traders and investors assume that a trend will remain in force until an "event" comes along to change it. But market trends are not like billiard balls on a pool table. This false assumption will put you on the wrong side of the market more times than not, especially at major turning points.

(mistake 2) The second big mistake is to suppose that news events drive market trends. In fact, the opposite is true: economic, political and social events lag market trends.

EWI: What are two common mistakes among options traders?

WG: (mistake 3) One common mistake is to buy puts or calls that are way "out of the money," with no other transactions to compliment them. Unless your timing is absolutely perfect -- and who has perfect timing? -- your chance of success is low. It’s like buying a lottery ticket.

(mistake 4) Another common mistake is to buy options with too little time left to expiration. With less than one month to expiration, the time decay begins to accelerate and the chances of success diminish.

EWI: Please name a frequent mistake among traders who aim to catch the beginning of a particular Elliott wave.

WG: (mistake 5) In the middle of a corrective pattern, it's common to run out of patience while waiting for confirmation of a trend change. You have to give corrective patterns time to unfold before you jump in. This requires discipline, and a solid understanding of the many ways corrective patterns can unfold.

EWI: What's the biggest misconception among traders about using Elliott waves?

WG: (mistake 6) Too many traders think Elliott wave is a trading system that tells you exactly where to enter and exit a particular market. That's the biggest misconception. The reality is that it's an analytical and forecasting tool, which helps you develop and use your own trading system, based on your own personal risk tolerance.

EWI: What technical indicators do you believe traders over-rely on, and why?

WG: (mistake 7) Traders tend to over-rely on momentum indicators such as RSI, Stochastics and MACD to precisely spot turning points. But to paraphrase Mark Twain, markets can stay overbought or oversold a lot longer than either you or I can remain solvent.

EWI: How would you characterize today's market action, and do you teach courses that address this environment?

WG: This is a difficult stock market in the near term. Prices haven't strayed far from where they began in January. The action has yet to break out significantly to the downside or upside. This situation may not last much longer. I can suggest these online courses to deal with the current situation, and to prepare for the next big move:

This article was syndicated by Elliott Wave International and was originally published under the headline Do You Recognize These Six Common Trading Mistakes?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Annuity Definition

Indexed Annuities

The Economic Crisis No One Saw Coming: A Convenient Untruth

2010-08-10T11:55:00.001-05:00

The Economic Crisis No One Saw Coming: A Convenient Untruth - Fixed Annuity Definition, Fixed Indexed Annuities, Lifetime Income Annuity

August 9, 2010

By Elliott Wave International

The single most convenient untruth about the 2008 (and counting) financial crisis is that it was unforeseen. For two years policymakers have insisted "There was no way to know ahead of time" that the liquidity boom would come to a screeching halt. Back in November 2008, in fact, the usually tight-lipped Queen of England herself publicly described the turmoil of international markets as "awful" and openly asked a panel of experts from the London School of Economics "Why did nobody notice?"

Her Majesty is right: Most financial authorities did NOT notice the crisis before it was too late. Comedy Central's "The Daily Show with Jon Stewart" of all places provided the most poignant evidence: A March 2009 video montage shows executives and economists from the world's leading financial firms repeatedly forecasting continued upside strength in stocks, plus renewed bull market growth in financials -- right as debt markets came unhinged and the US stock market headed into a 50%-plus selloff.

Dubbed the "8-Minute Rap" (after the "18-Minute Gap" of Nixon's Watergate tapes), the Daily Show video feature sent an equally powerful message, as the clip below makes plain.

Yet even as the mainstream authorities failed to detect the economic earthquake moving below their own feet, somebody did "notice" well in advance. That person was EWI's president Bob Prechter.

The clip below is from a 2007 Bloomberg interview. Clear as PLAY, the foreseeable nature of the crisis emerges from Bob's October 19, 2007 interview.

As the historic trend change began to unfold, Bob issued this timely insight:

"We've seen the first crack in the credit structure with a huge drop in commercial paper... These are the harbingers of a change toward the downside for the stock market, commodities including oil, and the debt market itself."

Don't believe the convenient untruths. Get objective market analysis today. Download this free report that contains valuable market forecasts directly from the desk of Bob Prechter.

This article, The Economic Crisis No One Saw Coming: A Convenient Untruth, was syndicated by Elliott Wave International. EWI is the world's largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Annuity Definition

Stress Test: How to Find the Safest Banks in the U.S. and Abroad

2010-08-03T11:18:00.001-05:00

Stress Test: How to Find the Safest Banks in the U.S. and Abroad - Fixed Annuity Definition, Fixed Indexed Annuities, Lifetime Income Annuity

Stress Test: How to Find the Safest Banks in the U.S. and Abroad

August 3, 2010

By Elliott Wave International

Stress test results for the biggest European banks were recently released, while the largest U.S. banks took their first stress tests in May 2009. But most people don't really care how much stress their banks are under; they are more worried about their own stress levels. One thing that adds to personal stress is worrying about whether their deposits are in a safe place. Bob Prechter has encouraged people to find the safest banks for their money since he originally wrote his New York Times best-selling book, Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression in 2002. This excerpt explains why banks of all sizes are riskier than they used to be (think about portfolios stuffed with derivatives, emerging market debt and non-performing commercial loans). You can also get a list of the Top 100 Safest U.S. Banks -- two banks per state -- that was just updated in late June with the latest available data by joining Club EWI and receiving EWI's Safe Banks report.

* * * * *
Excerpted from Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression, by Robert Prechter

Many major national and international banks around the world have huge portfolios of “emerging market” debt, mortgage debt, consumer debt and weak corporate debt. I cannot understand how a bank trusted with the custody of your money could ever even think of buying bonds issued by Russia or Argentina or any other unstable or spendthrift government. As At the Crest of the Tidal Wave put it in 1995, “Today’s emerging markets will soon be submerging markets.” That metamorphosis began two years later. The fact that banks and other investment companies can repeatedly ride such “investments” all the way down to write-offs is outrageous.

Many banks today also have a shockingly large exposure to leveraged derivatives such as futures, options and even more exotic instruments. The underlying value of assets represented by such financial derivatives at quite a few big banks is greater than the total value of all their deposits. The estimated representative value of all derivatives in the world today is $90 trillion, over half of which is held by U.S. banks. Many banks use derivatives to hedge against investment exposure, but that strategy works only if the speculator on the other side of the trade can pay off if he’s wrong.

Relying upon, or worse, speculating in, leveraged derivatives poses one of the greatest risks to banks that have succumbed to the lure. Leverage almost always causes massive losses eventually because of the psychological stress that owning them induces. You have already read of the tremendous debacles at Barings Bank, Long-Term [sic] Capital Management, Enron and other institutions due to speculating in leveraged derivatives. It is traditional to discount the representative value of derivatives because traders will presumably get out of losing positions well before they cost as much as what they represent. Well, maybe. It is at least as common a human reaction for speculators to double their bets when the market goes against a big position. At least, that’s what bankers might do with your money.

Today’s bank analysts assure us, as a headline from The Atlanta Journal-Constitution put it on December 29, 2001, that “Banks [Are] Well-Capitalized.” Banks today are indeed generally considered well capitalized compared to their situation in the 1980s. Unfortunately, that condition is mostly thanks to the great asset mania of the 1990s, which, as explained in Book One, is probably over. Much of the record amount of credit that banks have extended, such as that lent for productive enterprise or directly to strong governments, is relatively safe. Much of what has been lent to weak governments, real estate developers, government-sponsored enterprises, stock market speculators, venture capitalists, consumers (via credit cards and consumer-debt “investment” packages), and so on, is not. One expert advises, “The larger, more diversified banks at this point are the safer place to be.” That assertion will surely be severely tested in the coming depression.

There are five major conditions in place at many banks that pose a danger: (1) low liquidity levels, (2) dangerous exposure to leveraged derivatives, (3) the optimistic safety ratings of banks’ debt investments, (4) the inflated values of the property that borrowers have put up as collateral on loans and (5) the substantial size of the mortgages that their clients hold compared both to those property values and to the clients’ potential inability to pay under adverse circumstances. All of these conditions compound the risk to the banking system of deflation and depression.

Financial companies are enjoying big advances in the current stock market rally. Depositors today trust their banks more than they trust government or business in general. For example, a recent poll asked web surfers which among a list of seven types of institutions they would most trust to operate a secure identity service. Banks got nearly 50 percent of the vote. General bank trustworthiness is yet another faith that will be shattered in a depression.

Well before a worldwide depression dominates our daily lives, you will need to deposit your capital into safe institutions. I suggest using two or more to spread the risk even further. They must be far better than the ones that today are too optimistically deemed “liquid” and “safe” by both rating services and banking officials.

Inside the revealing free report, you'll discover:

The 100 Safest U.S. Banks (2 for each state)
Where your money goes after you make a deposit
How your fractional-reserve bank works
What risks you might be taking by relying on the FDIC's guarantee

Please protect your money. Download the free 10-page "Safe Banks" report now.
Learn more about the "Safe Banks" report, and download it for free here.

This article, Stress Test: How to Find the Safest Banks in the U.S. and Abroad,was syndicated by Elliott Wave International. EWI is the world's largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Annuity Definition

Technicals vs. Fundamentals: Which are Best When Trading Crude Oil and Natural Gas?

2010-07-26T11:13:00.001-05:00

Technicals vs. Fundamentals: Which are Best When Trading Crude Oil and Natural Gas

Technicals vs. Fundamentals: Which are Best When Trading Crude Oil and Natural Gas?

July 26, 2010

By Elliott Wave International

If "fundamentals" drive trend changes in financial markets, then shouldn't the same factors have consistent effects on prices?

For example: Positive economic data should ignite a rally, while negative news should initiate decline. In the real world, though, this is hardly the case.

On a regular basis, markets go up on bad news, down on good news, and both directions on the same news -- almost as if to say, "Talk to the hand cuz the chart ain't listening."

Unable to deny this fly in the fundamental ointment, the mainstream experts often attempt to reconcile the inconsistencies with phrases like "shrugged off," "defied" or "in spite of."

That begs the next question: How do you know when a market is going to cooperate with fundamental logic and when it won't? ANSWER: You don't.

Get FREE access to Elliott Wave International's most intensive forecasting service for the global Energy markets. Now through noon Eastern time July 28, you can get timely intraday charts, forecasts and analysis for Crude Oil and Natural Gas. You'll also get daily, weekly and monthly analysis and forecasts for all major Energy markets and Energy ETFs. Access FreeWeek now.

Take, for instance, the first three news items below regarding the July 22 performance in crude oil, versus the fourth headline, which occurred on July 23:

Crude prices surge nearly 4% in their sharpest one-day percentage gain since May. The rally was "aided by fears that Tropical Storm Bonnie will enter the Gulf of Mexico over the weekend and disrupt oil production." (Wall Street Journal)
"Oil Prices Soar As Gulf Storm Threat Looms" (Associated Press)
"The storm should keep oil prices bubbling if it continues to strengthen and remain on track." (Bloomberg)

vs.

"Oil Slips From Surge Despite Storm Threats" (Commodity Online)

Unlike fundamental analysis, technical analysis methods don't rely on the news to explain or predict market moves. They look at the markets' internals instead.

Get FREE access to Elliott Wave International's most intensive forecasting service for the global Energy markets. Now through noon Eastern time July 28, you can get timely intraday charts, forecasts and analysis for Crude Oil and Natural Gas. You'll also get daily, weekly and monthly analysis and forecasts for all major Energy markets and Energy ETFs. Access FreeWeek now.
Annuity Definition

Quadrillion Dollar Debt: 'Day of Reckoning' Looms - Elliott Wave International

2010-07-22T11:54:00.001-05:00

Quadrillion Dollar Debt: 'Day of Reckoning' Looms - Fixed Annuity Definition, Fixed Indexed Annuities, Lifetime Income Annuity

Quadrillion Dollar Debt: 'Day of Reckoning' Looms
What Will Happen as $1,000,000,000,000,000 in Global Debt Winds Down?
July 22, 2010

By Elliott Wave International

The biggest balloon in the world is deflating.

This balloon had been inflated with a quadrillion (1015) dollars, which is to say: This balloon was filled not with air but with debt from around the globe.

What will happen as this global debt winds down? In two words: Deflationary Depression -- the likes of which could be unprecedented in history.

Want to Know How to Prosper in a Deflationary Depression?If you haven't yet given Robert Prechter's deflation argument your full attention, you should know now that yesterday was the best time to do so. Download Prechter's 60-Page Guide to Understanding Deflation here.

A thousand trillion in debt can't be wished away or swept under the rug. No one can "forgive" the debt. The consequences of unwinding this debt could be as massive as the dollar figure itself.

We've heard plenty about the debt problems of Greece, Spain, Portugal and Italy.

But how about the world's second largest economy? Consider this fact reported in the Japan Times (July 8):

"Japan's government debts are the highest the world has ever seen, at 219 percent of gross domestic product, according to the International Monetary Fund."

Then there's the world's sixth largest national economy. In January 2009, Robert Prechter wrote this in the Elliott Wave Theorist:

"British banks have amassed $4.4 trillion worth of foreign liabilities, twice Britain's annual GDP. ... England, moreover, 'has not defaulted since the Middle Ages.' The possibility that it may do so again is yet another indication that the bear market is of ... (larger) degree, exactly as Elliott wave analysts have predicted all along."

Remember, Japan and Great Britain are major world economies. Imagine what the debt totals would look like in a line-item analysis of other nations, regions, states, provinces and municipalities around the world, including the U.S.

De-leveraging will likely lead to a deflationary crash -- a "day of reckoning."

How can you prepare for a deflationary crash?

To start with, keep your money safe. As Bob Prechter mentions in the June 2010 Elliott Wave Theorist:

"Investors should be primarily in greenback cash and Treasury bills."

He also describes holdings which should be strictly avoided.

Want to Know How to Prosper in a Deflationary Depression?If you haven't yet given Robert Prechter's deflation argument your full attention, you should know now that yesterday was the best time to do so. Download Prechter's 60-Page Guide to Understanding Deflation here.
Annuity Definition

Annuities

2010-04-03T17:15:00.001-05:00

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Equity Index Annuity - Wharton Financial Institutions Center: Real World Index Annuity Returns

2009-12-04T16:28:00.001-06:00

Wharton Financial Institutions Center
Wharton Financial Institutions Center
Personal Finance
Real World Index Annuity Returns
Jack Marrion*
indexannuity@mail.com
Geoffrey VanderPal**
drvanderpal@gmail.com
David F. Babbel***
Babbel@Wharton.UPenn..edu
October 5, 2009

Abstract

• We offer the first empirical exploration of fixed indexed annuity returns based upon actual
contracts that were sold and actual interest that was credited.

• Annuity returns have been competitive with alternative portfolios of stocks and bonds.

• Their design has limited the downside returns associated with declining markets.

• They have achieved respectable returns in more robust equity markets.

• Studies that have criticized FIAs are typically based on hypothesized crediting rate formulae,
constant participation rates and caps, and unrealistic simulations of stock market and interest
rate behavior. When actual policy data are used, the conclusions change.

• Our study is exploratory, because although it is based on actual contracts and actual crediting
rates, our policy data set is neither randomly selected nor comprehensive.

Keywords: Indexed annuities, retirement, optimal asset allocation
JEL classifications: G11, G22, G23, J26
* MBA, doctoral candidate in the area of cognitive bias in decision-making, President of Advantage Compendium.
** DBA, MBA, CFP®, CLU, CFS, RFC®, CTP, CAMS, Chief Investment Officer of Skyline Capital Management.
*** Professor of Insurance and Finance, The Wharton School of Business, University of Pennsylvania; Senior Advisor
to Charles River Associates; Fellow of Wharton Financial Institutions Center.
Wharton Financial Institutions Center 1
Real World Index Annuity Returns
Jack Marrion, Geoffrey VanderPal, David F. Babbel

Introduction

Financial advisors and financial planners have sought various programs to provide clients protection
from systematic risk, also known as market risk. Various asset allocation strategies have
been used with limited success when extreme market movements and “black swans” occur
(Taleb, 2007). It has been known for close to 50 years that equity market returns do not conform
to a Guassian, or Normal distribution (Mandelbrot, 1963; Fama, 1963).i Rather, probability distributions
of market returns are typically skewed and leptokurtic (fat-tailed). When these leptokurtic
events occur on the positive side of the distribution, clients are delighted, but the opposite
is true when these events occur on the negative end of the two-tailed distribution.

Principal preservation products have evolved to address the needs of many risk-averse consumers
by providing them a safety net for their investment/savings capital. The products are structured
in a way that reduces correlations with other asset classes. To illustrate better the extremes
of market returns, we can examine the Russell 3000 index that accounts for nearly 98% of the
publicly traded U.S. equity market. A study by Eric Crittenden and Cole Wilcox (2008) at Blackstar
Funds was conducted using Russell 3000 data from 1983 through 2006. The findings were
that “about 40% of the stocks had negative returns over their lifetime, and about 20% of stocks
lost nearly all of their value. A little more than 10% of stocks recorded huge wins over 500%”
(Richardson, 2009). These data indicate that most of the positive market return over time comes
from relatively few performers, which lends support to the use of stock index strategies as part of
an overall portfolio. Furthermore it supports the notion that there is significant risk in the stock
market and thus, for moderately to highly risk-averse clients, the need for principal protection
programs such as fixed indexed annuities (FIA’s). Nearly 96% of FIA’s possess reset (or ratchet)
features that allow for locking in positive returns each annual or biannual period. By eliminating
the prejudicial effects occasioned by significant stock market declines, and locking in returns annually
or biannually, there is less of a need to try and capture large upside market swings to recover
from the declines.

As financial professionals, we are tasked with assisting our more risk-averse clients to protect
themselves from black swans and many of us have a fiduciary responsibility. One of the significant
developments for principal or asset preservation vehicles has been the fixed index annuity
(VanderPal, 2004). During the past few years various articles have been written regarding the
value in FIA’s and some people relying upon these studies have drawn misleading inferences
from them.

The article begins by dispelling the two basic errors people often make in assessing the message
of FIA studies. We will illustrate these misconceptions by using actual crediting rates on various
kinds of FIA policies. With these data we are able to show actual returns on FIA’s rather than
make inferences from hypothetical crediting rates derived from assumed (and often constant) rate
caps, assumed crediting rate formulae, and hypothetical participation rates, often coupled with
theoretical stock market and interest rate moves. This should help inform the public and correct
the inaccurate information portrayed by some journalists and industry professionals. Furthermore,
the article will delve into additional FIA features that provide advantages not found in ordinary
securities and various principal preservation programs.

FIA Market Growth
The table below indicates the growth in sales of FIA’s since 1997. Overall sales of FIA’s in 2008
of $26.7 billion are small compared to fixed deferred annuity sales of $95.1 billion and variable
annuities sales of $155 billion in 2008 (Green, 2009), and dwarfed by securities sales.
Equity Index Annuity Sales
Year In billions of dollars
1997-3.00
1998-4.20
1999-5.15
2000-5.25
2001-6.50
2002-11.70
2003-14.01
2004-23.00
2005-27.26
2006-25.30
2007-25.20
2008-26.70

Sources: Various reports from The Advantage Group, and (Koco, 2009)
Although the FIA market may be small relative to more established markets, it has nonetheless
attracted several performance studies. We have noticed two basic limitations that typify most
studies and articles that attempt to describe potential index annuity performance. The first of
these is assuming crediting formulae that are rarely used and crediting rates that are seldom observed.
While this type of exploratory exercise is fine in and of itself, a problem arises when
readers assume the theoretical results are somehow representative of the index annuity world.
The second limitation is making assumptions about stock market and interest rate behavior that
are not well supported. This can lead people to make inferences about actual FIA behavior that
are unjustified. Our study examines these limitations and shows how actual index annuity returns
are at odds with many of the hypothetical conclusions.

Are Hypothetical Returns Representative?

Collins, Lam and Stampfli (2009) created a term end point structure (they call it a multi-year,
point-to-point) that applied a 75% participation rate to any gain over a seven-year period. They
then calculated the annual return, deducted a 1% spread, and finally compounded the lower of
8% or the calculated annual yield to produce the total gain for the period. This is a rather cumbersome
structure, and one we cannot find was ever used on any index annuity.

In reviewing specifications on the over 400 index annuities marketed since the first index annuity
sale in February 1995 (Marrion, 2003), we failed to find any term end point product that used a
crediting method which had a participation rate of less than 100% combined with both a cap and
a yield spread greater than zero. Indeed, in reviewing all of the product information we have assembled
since 1995, the only annuity we found which had a participation rate of less than 100%
that could change each year and deducted a yield spread or asset fee and had a cap was the
Americo FlexPlus annuity marketed around the turn of the century. However, it did not use a
term end point design; instead this product used an annual reset or ratchet design, the performance
of which differs radically from a term end point structure (Marrion, 1996, 1997, 1998,
1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007).

Often a financial columnist or an occasional other writer will dismiss the index annuity concept
by proposing that a consumer purchase a long-term zero-coupon bond together with an index
fund instead of an index annuity (Clements, 2005; Pressman, 2007; Warner, 2005; McCann and
Luo, 2006). These columnists and other writers often posit the term end point crediting method
as the representative interest crediting structure. However, all term end point designs account for
less than 4.5% of sales over the last four years and term end point design using two crediting
components represents even less (Marrion, 2006, 2007; Moore, 2008, 2009). Indeed, Collins,
Lam and Stampfli (2009) base their conclusions on a term end point that uses a cap, but less than
1% of the products have ever placed a cap on a term end point crediting method (Marrion, 2009).
Such a product is certainly not representative of index annuity crediting methods in practice.

The assumed index participation rates may also not be representative. For example, for their
chart of seven-year periods starting in December 1988 and with the final seven-year period beginning
in December 2000, Collins, Lam and Stampfli (2009) assume a term end point participation
rate of 70% to 75%, depending upon whether the seventh-year index values are averaged,
and place an 8% cap on any yearly gain. Since index annuities were not around until the mid-
1990s we cannot decisively state what rates would have been for the early years used. However,
one can gather the actual participation rate data from when products did appear. We can state
that based on actual FIA’s offered, if you had purchased every available index annuity using a
term-end point annuity with a seven-year term on the first business day of each month from
January 1997 through December 2000 your average participation rate would have been 72%
without a cap (Marrion, 1997, 1998, 1999, 2000).ii

Looking at “representative” annual reset methods, Collins, Lam and Sampfli (2009) assume 55%
index participation with a 7% annual cap or 60% averaged index participation with a 7.5% cap.
McCann (2008) compares returns from 1990 through 2007 of the S&P 500 with a hypothetical
annual reset point-to-point design that assumes a constant 6.5% cap. However, in reviewing actual
new money rates for annual reset designs from 1996 to the present, one would have encountered
effective participation this low at only a few points in 2003 and 2004 and in 2007 and
2008. Indeed, many averaging products were offering 100% first-year participation without a cap
in the late ‘90s, and many annual point-to-point products have offered 100% participation allowing
for possible double-digit gains (Marrion, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003,
2004, 2005, 2006, 2007)

Wharton Financial Institutions Center

There is nothing wrong with showing how a term end point method might have performed under
these assumptions. However, we must keep in mind that the results of the study are not representative

of FIA’s performance, as they depend upon a crediting rate method not used in over 95%
of sales, and combinations of other contract features not observed in practice.

Dubious Assumptions

#1 Participation Rates and Caps Never Change

Collins, Lam and Stampfli (2009) assumed an averaging method had a 60% participation rate
with a 7.5% cap and applied it to the past. McCann (2008) assumed a constant 6.5% cap for all
of his index annuity performance calculations, which appears to have been a cap on the date his
story was completed, when interest rates were heading toward historic lows. On the day he completed
his story the constant maturity rate of a 10-year U.S. Treasury Note was 3.64%; by contrast,
during the 1990 until 2000 period (within the time frames of both studies) the 10-year
Treasury rate was nearly twice as high, averaging 6.66% (Federal Reserve Board, 2009). Lewis
(2005) assumed either a 5% or 9% cap on an annual reset design and ignored the interest rate environment
that might change these caps, but allowed for the returns to positively affect the T-bill
comparison he made. Higher bond yields generate more interest income thus allowing carriers to
buy or synthesize more options to increase index participation, which is why some annual pointto-
point products were able to offer 100% participation and 14% caps in the previous decade
(Marrion, 1996)
.
Lewis (2005), McCann (2008) and Collins, Lam and Stampfli (2009) assume constant index annuity
participation holding rates, caps and spreads steady over long periods of time. The flaw is
this does not take into account the real world effect of changes in interest rate environments and
market volatility’s effect on the cost of providing the index participation. One cannot assume today’s
rate would have existed in the past because the financial conditions of the past were often
quite different. One cannot simply posit a participation rate or cap on crediting rates, hold it constant,
and then attempt to make conclusive comparisons with actual stock index returns. Clearly
the reach of the conclusions is limited by the unrealistic assumptions underlying the annuity
modeled.

Not every study adopts these simplifying assumptions. Gaillardetz and Lin (2006) note that when
interest rates increase participation rates also go up, unless offset by increased volatility. One
carrier suggested that the uncapped guaranteed participation rates on their seven-year averaging
annual reset product from 1980 through 1995 would have ranged from 135% to 260% based on
bond yields and call option prices in effect (Physicians Life, 1996). They understand that index
participation is driven by bond yields and option costs and these change over time.

#2 Annual Stock Market Returns of 17.6% Are Normal

Collins, Lam and Sampfli (2009) mention that many attempts to show index annuity comparisons
are exercises in data mining and we quite agree. One way to data mine is to make long-term
predictions based on using low participation rates that do not represent the reality of long-term
rates. Another is to intentionally select periods that favor one choice over another.

McCann (2008) makes a performance comparison over a 30-year period that happens to start in a
year with the lowest end-of-year S&P 500 value over the previous 45 years. Using the correct
December 2004 index values, the annualized growth rate of the S&P 500 for McCann’s selected
comparison period is 10.05%. By contrast, the S&P 500 growth rate from December 1954 to December
1984, another 30-year period, was 5.25%, and the average annual growth from December
1964 to December 1994 was 5.79%.

In the 30-year period that McCann selected for constructing his comparisons, the S&P 500 ended
at 1211.92. If you used a monthly averaged annual reset method to compute where a monthly
averaged S&P 500 would have ended at you get an ending value of 591, which is 49% of the actual
S&P 500 level. By contrast, if your 30-year period ends December 1984 the S&P 500 level
is 167.24; however, the monthly averaged S&P 500 computed value is 161.37, almost equal to
the actual S&P 500 level. Many performance comparisons pit index annuities against stock market
investments over the ‘80s and ‘90s when stock market returns averaged 17.6% and ignore the
preceding eight decades with their average return of 8.5% (Bogle, 2003).

#3 Stock Market Returns Conform to a Normal Distribution, Interest Rates and Volatility Are Constant

A more egregious problem in some of the studies that simply simulate hypothetical stock market
return scenarios in order to generate hypothetical policy crediting rates is that the simulations are
often based on an assumed distribution of stock returns that cannot be supported. For example,
McCann and Luo (2006) have conducted studies of hypothetical crediting rate behavior assuming
that equity market rates of return conform to a Normal distribution. When Babbel, Herce and
Dutta (2008) re-examined that study but used an empirical distribution which matched the historical
record, while keeping in tact all of the other assumptions of McCann and Luo, they found
that annual crediting rates in the range of 5-15% were about twice as common as what were being
credited under the Normal assumption. This implies that FIA’s were far more valuable than
was being represented under the hypothetical distribution of stock market returns.
In a similar vein, several studies assume that interest rates and volatility are constant throughout
an annuity’s life, in order to construct their performance comparisons. Of course the simplifying
assumption has never occurred in the marketplace, and the alternative investments to which
FIA’s are compared have their returns affected by interest rate movements as well as volatility
changes.

#4 Managerial Discretion Is Not Involved

Over 95% of index annuity sales are in products that may change at least one element of their
interest crediting methodology after the reset period. Two primary factors affecting subsequent
index participation are bond yields and the price of call options (Gaillardetz and Lin, 2006).
However, the ultimate determining factor in setting index participation in future years is not the
interest rate environment or the cost of options, it is what carrier management decides to do. This
human element introduces a random variable that cannot be quantified, thereby making any attempt
to project any returns ultimately subjective.

Reality

Index annuities have been producing returns since the first one was purchased on February 15,
1995. Unfortunately, most of the articles and studies ignore these data and attempt to portray
how index annuities should have performed while ignoring actual results. What we show below
are actual results. They are not intended to be a prediction of how index annuities will perform in
the future, nor are the results intended to be representative of overall industry performance. They
results are what they are. Our data set does have limitations, which we describe presently so that
readers may draw their own conclusions.

Annualized Five-Year Returns

Period S&P return FIA avg. return Number of FIA’s Return Range
1997-2002
1998-2003
1999-2004
2000-2005
2001-2006
2002-2007
2003-2008
9.39%
-0.42%
-2.77%
-3.08%
5.11%
13.37%
3.18%
9.19%
5.46%
4.69%
4.33%
4.36%
6.12%
6.05%
5
13
8
28
13
23
19
7.80% to 12.16%
3.00% to 7.97%
3.00% to 6.63%
0.85% to 8.66%
1.91% to 6.55%
3.00% to 8.39%
3.00% to 7.80%

These results are based on copies of actual customer statements received with personal information
blacked out, for each of the preceding five-year periods, requested on an annual basis since
2002. The return data reflect contract periods closest to 30 September with the exception of the
1997-2002 period that uses a 2 January date. The returns reflect the results of products with term
end point, high water mark, and annual reset designs with and without crediting rate caps, and
with and without averaging. The returns do reflect any fees charged, but not surrender penalties.
Annuitization was not required to receive these returns. Initial premium bonuses, if any, were
reflected only if immediately available as cash values (did not require vesting or annuitization).

There are several limitations with the data above. The main one is that they are derived from carriers
that chose to participate and that chose the products for which they reported returns. This
could have imparted some bias in returns, and may differ from what a larger, more random sample
would have produced for the periods. Although some of the annuities had contract years ending
on the 30th, the contract anniversaries encompassed a three-week range around that end date.
The data collected are very few for some periods. And the data reflect results across a very small
spectrum of time, only looking at 1997-2008 and then only at one day out of each year. Nonetheless,
the 109 contracts for which we have data are real contracts and reflect actual crediting rates
that were provided to annuity owners over time under twelve different crediting rate structures
used in FIA designs.

From 1997 through 2007 the five-year annualized returns for FIA’s averaged 5.79%. This compares
to 5.39% for taxable bond funds and 4.73% for fixed annuities. The FIA and taxable bond
fund provided a negative correlation of 0.11 which is a very important consideration for invest
ing and asset allocation to work effectively. The FIA may be considered a separate asset class.
The authors support the concept of principal protected investments being their own asset class
due to removing the negative side of the two-tailed distribution and providing for variability in
upside performance with guaranteed minimum returns which sets the overall earnings at maturity
of the FIA contract above zero.

This next data set reflects the actual real-world total five-year returns credited to annuityowners
for an annual point-to-point with cap structured index annuity assuming an annuity is purchased
on the 21st of every month beginning April 1996 with a final purchase on December 2003. This
annuity was selected because it has been steadily offered every month for 13 years and its performance
is publicly available. It is not intended to be representative of anything except itself.
The chart below compares the FIA returns with the total returns of the S&P 500 over the same
period, and a blended return composed of 50% of the S&P 500 total return and 50% of the compounded
return for a series of one-year, U.S. constant maturity T-bills. We have not deducted
from these alternative portfolios any of the annual expenses that typify mutual funds, thereby
biasing the comparison to favor mutual funds.

Collins, Lam and Stampfli (2009) attempted to predict the future by using the past and creating
“a rich set of probable future results [that] is available for inspection.” Based on these “probable”
futures they found the index annuity minimum guarantee to be beneficial at times, but that the
index annuity payoff “always lags the investment portfolio’s payoff for returns.” McCann (2008)
created his own hypothetical annuity structure and in the future he created, he stated that “99.8%
of the time the investor would be better off with the Treasury securities and stocks than with the
equity-indexed annuity.” However, if your future was the actual period from April 1996 through
December 2008, and you had purchased this real-world-still-being-marketed index annuity
month after month, the not-pretend index annuity results bested the S&P 500 alone 66% of the
time and a 50/50 mix of one-year Treasury Bills and the S&P 500 80% of the time.

Liquidity and Risk

According to Collins, Lam and Stampfli (2009), FIA’s are not liquid investments and have “formidable”
surrender charges. The authors failed to take into account the various free withdrawal
provisions in all FIA’s. Generally a 10% withdrawal is allowed annually without surrender penalty
and some firms offer more standard withdrawal provisions. That is about triple what you can
withdraw from a Treasury bond portfolio in today’s interest rate climate without subjecting yourself
to losses of principal occasioned by bond price fluctuations, and even more so when the alternative
portfolio includes common stock. Most articles analyzing appropriate withdrawal rates
for retirees range in the 4-6% range annually, depending upon various methods of thought. This
being said, a 10% withdrawal privilege should not be an issue for most retirees and individuals.

Nearly all FIA’s provide a full surrender value upon death of the owner or annuitant. Many FIA
issuers offer full surrender for nursing home stays, extended hospital visits and terminal illness
(VanderPal, 2008). Several carriers offer full surrender for unemployment if under 65 years of
age. The surrender charges when applied outside of the free withdrawal provisions typically depend
on the minimum term of the annuity and whether any bonuses are paid, and usually decline
each following year. Another difference is that in the case of a non-qualified annuity purchase,
the accumulation value grows tax deferred, whereas with a non-qualified portfolio of stocks and
bonds, taxes are incurred along the way. Babbel and Reddy (2009) have shown that the difference
between these two tax treatments can ultimately produce after-tax income potential from
the annuity that would require alternative taxable mixes of stocks and bonds to produce annual
returns that must be substantially higher than the annuity returns in order to provide for an
equivalent after-tax income.iii This is another missing element in our comparison that biases the
result in favor of the alternative portfolio. Moreover, FIA’s in almost all states are protected from
creditors and against seizure in situations of litigation, which is not typically true of stock and
bond mutual funds unless held in a protected vehicle.

FIA opponents commonly cite surrender fees as an issue. First, with the various free withdrawal
privileges and based on the appropriate range of annual withdrawals, most individuals who purchase
an FIA will not encounter a penalty except through their choice. Second, surrender fees are
required by state insurance regulators in order for policies to be qualified for sale. The existence
of surrender fees helps an insurer recapture up-font costs on products that were designed to be
held for several years, and protects persisting policies from the imposition of extra costs by those
who choose to surrender early. Third, the idea that securities do not have penalties is not only
flawed but simply not accurate. Even if the actual mutual fund one is holding does not assess surrender
charges, it is subject to annual management fees and market risk. Bogle (2005) has shown
these costs of “financial intermediation” are non-trivial over time. If your mutual fund or investments
decline in value 20% and that investor is making withdrawals for income, this may become
a catastrophic event for the investor. Remember that the more an investment declines, exponentially, the more the investment must go up to simply recover and adding withdrawals to the
scenario can exacerbate a potential catastrophic event (VanderPal, 2008). Furthermore, FIA’s
provide a guaranteed minimum return along with principal preservation which mutual funds and
other similar investments do not provide.

The S&P 500 index as of August of 2009 finally reached 1,000. It has taken 12 years for the
S&P 500 index to break even due to the volatility and risk with the two economic bubbles experienced
from technology stocks and the real estate crisis. While the S&P 500 index has produced
near zero total return over 12 years, the FIA using the S&P 500 index on average produced returns
of 5.79% using a 5-year annualized rolling return from 1997-2007. Even if you add taxable
dividends to the index, the FIA has performed better, at least based on the data we have reviewed.

Fees and Expenses

“Although FIAs do not provide complete participation in an index, based on various crediting
methods and market anomalies, returns may actually be better over time than in mutual funds or
variable annuities. Consider that variable annuities with mortality and administration expenses
(M&E), sub-account management fees and other various charges can account for up to 4.00% of
annual expenses that erode market returns on variable annuities” (VanderPal, 2008). According
to Morningstar the average mortality and expense and management fees are 2.08%. For example,
a variable annuity sub-account that earned 10% in the market would net less than 8% to the client’s
account after internal fees are deducted from earnings. Unlike mutual funds, an FIA does
not deduct sales charges, management fees or 12b-1 marketing fees. Instead, the insurance company
uses a small amount from the underlying portfolio which lowers participation in the market
index to cover administrative costs and commissions to brokers (VanderPal, 2008). Because the
FIA provides policy crediting rate formulae and periodic annuityowner reports net of any fees
and management expenses, it does not separately disclose them.

Consumer Risk Aversion

Finally, most of the aforementioned fixed indexed annuity studies have failed to take into account
the level of risk aversion of an individual consumer. An exception to this pattern is the
study of Babbel, Herce and Dutta (2008) that explicitly takes into account the level of consumer
risk aversion. Using the criteria of multiperiod utility analysis, they find that for moderate and
strongly risk-averse individuals, the fixed indexed annuity is judged superior in performance to
various combinations of stocks and bonds. This is not surprising because a risk-averse consumer
will penalize an investment alternative that does not avoid downside risk in a quest to achieve
superior returns. Because FIA’s are designed in a way to avoid downside risk, they tend to produce
preferred return patterns for such consumers when compared to alternative investment
strategies that expose consumers to significant levels of that risk.

Conclusion

Much of the analysis published on index annuities is based on hypothetical returns that are generated
by using selected time periods and crediting criteria to produce the preordained conclusion
desired. If the analysis is produced for the annuity industry the conclusion is positive, if it is directed
towards the securities industry it is negative. The reality is at least some index annuities
have produced returns that have been truly competitive with certificates of deposit, fixed rate annuities,
taxable bond funds, and even equities at times (Marrion, 2008). How will index annuities
perform in the future? We do not know but the concept has proven to work in the past and any
articles should reflect this. FIAs were not designed to be direct competitors of index investing
nor have FIAs been promoted to provide returns to compete with equity mutual funds or ETFs.
The FIA is designed for safety of principal with returns linked to upside market performance.

References

Babbel, David F. and Ravi Reddy. 2009. “Measuring the Tax Benefit of a Tax-Deferred Annuity.” Journal
of Financial Planning 22, 10 (October).
Babbel, David F., Migel A. Herce, and Kabir Dutta. 2008. “Un-Supermodels and the FIA.” Presentation
given at the Morningstar- Ibbotson Associates / IFID Centre Retirement Income Products Executive
Symposium, University of Chicago, November 11; the slides presentation is available at:
http://corporate.morningstar.com/ib/documents/UserGuides/UnSupermodelsFIA.pdf and the video presentation
at: http://corporate.morningstar.com/ib/tools/David_Babbel/tape2b.html
Bogle, John C. 2005. “The Relentless Rules of Humble Arithmetic.” Financial Analysts Journal 61, 6
(November/December).
Bogle, John C. 2003. “The policy portfolio in an era of subdued returns.” Speech before the Investment
Analysts Society of Chicago and The EnnisKnupp Client Conference. Chicago, IL. June 5. Bogle Financial
Markets Research Center. http://www.vanguard.com/bogle_site/sp20030605.html
Collins, Patrick J., Huy Lam, and Josh Stampfli. 2009. “Equity Indexed Annuities: Downside Protection,
But at What Cost?” Journal of Financial Planning 22, 5 (May).
Clements, Jonathan. 2005. “A do-it-yourself kit for investors: Build your own equity-indexed annuity.”
Wall Street Journal. January 26: D.1.
Crittenden, Eric and Col Wilcox. 2008. “The Capitalism Distribution – The Realities of Common Stock
Returns.” BlackStar Funds. http://info@blackstarfunds.com/files/TheCapitalismDistribution.pdf
Fama, Eugene. 1965. “The Behavior of Stock-Market Prices.” Journal of Business 38, 1 (January).
Federal Reserve Board of Governors. “10-Year Treasury Constant Maturity Rate. H.15. 2009-06-02 9:06
AM CDT Release.”
Gaillardetz, Patrice, and X Sheldon Lin. 2006. “Valuation of equity-linked insurance and annuity products
with binomial models.” North American Actuarial Journal 10, 4 (October).
Green, James. 2009. “2008 Sales of Variable Annuities Faltered; Fixed Sales Soared.” Investment Advisor
Magazine (April).
Koco, Linda. (2009) “2008 FIA Sales Seen Rising 6.2%.” National Underwriter 13, 5 (March).
Lewis, W. Cris. 2005. A return-risk evaluation of an indexed annuity investment. The Journal of Wealth
Management 7, 4 (Spring).

Mandelbrot, Benoît. 1963. “The variation of certain speculative prices.” Journal of Business 36, 4 (October).
Marrion, Jack. 2009. “Product Trends.” Index Compendium. Advantage Compendium, Ltd. 13, 7.
Marrion, Jack. 2008. “Fixed annuities are competitive with taxable bond mutual funds.” Index Compendium
12, 2.
Marrion, Jack. 2003. Index Annuities: Power & Protection. Advantage Group. St. Louis.
Marrion, Jack. 2002. “Interest crediting concepts.” Index Compendium. Advantage Compendium, Ltd. 6,
3.
Marrion, Jack. 1996-2000. Index Annuities Report. Advantage Compendium, Ltd.
Marrion, Jack. 1996-2007. Advantage Index Product Sales & Market Report. Advantage Compendium,
Ltd. Volumes 1-39.
McCann, Craig J. 2008. “An Economic Analysis of Equity-Indexed Annuities.” Securities Litigation &
Consulting Group, Inc. September 10.
McCann, Craig J. and Dengpan Luo. 2006. “An Overview of Equity-Indexed Annuities.” Securities Litigation
& Consulting Group, Inc. June.
Moore, Sheryl. 2007-2009. Advantage Index Product Sales & Market Report. AnnuitySpecs.com. Volumes
40-46.
Physicians Life Insurance Company. 1996. Vista 500 Market Index Annuity Producers Guide, p.15.
Pressman, Aaron. 2007. “Retirement made complicated; why equity-indexed annuities have a bad name
and what investors need to know.” Business Week. Sep 24, Issue 4051; pg. 98.
Richardson, M. T. 2009. The Ivy Portfolio. Hoboken: John Wiley & Sons, Inc.
Taleb, N. N. 2007. The Black Swan:The Impact of the Highly Improbable. London: Penguin Books.
VanderPal, Geoffrey. (2008) “Equity Index Annuities.” Journal of Personal Finance 7, 2.
VanderPal, Geoffrey. (2004) “The Advantages and Disadvantages of Equity Index Annuities.” Journal of
Financial Planning 17, 1 (January).
Warner, Joan. 2005. “EIAs: Behind the hype: Equity-indexed annuities are flying off the shelves, but they
carry risks that regulators fear are not fully disclosed.” Financial Planning (October).

Endnotes

i A recent confirmation of this finding is in Babbel, Herce and Dutta (2008). In their study, the authors
found that there was less than one chance in a million that monthly stock market returns from 1926-2008,
and various sub-periods during that time interval, conform to a Normal distribution, whether measured by
a Jarque-Bera, an Anderson-Darling, or a Kolmogorov-Smirnov goodness of fit test.
ii To be precise, the average term end point participation rates for seven-year periods were: 1997-87%,
1998-71%, 1999-61%, 2000-70%.
iii Their study showed that an alternative portfolio would have to generate an additional pre-tax return that
in some cases reached over 200 basis points per year. The ultimate size of the tax benefit from tax deferral
depends on the length of time the annuity is held during the accumulation and decumulation phases of
ownership, whether a deferred annuity is annuitized at the end of the surrender period, or taken as a lump
sum distribution, the level of yields net of expenses, the marginal tax rates on ordinary income of the investor,
and the differential between tax rates on ordinary income and tax-preferred treatment of dividends
and capital gains. McCann and Luo (2006) claimed that the benefits of tax deferral were “de minimis.”

Wharton Financial Institutions Center

www.AnnuityDefinition.com

Technorati Tags: equity index annuity, indexed annuities, fixed index annuity, index annuities, fixed indexed annuities, deferred annuity, life annuity

Court Remands Rule 151A back to the SEC

2009-07-21T18:58:00.001-05:00
EXCERPT from the Order

The SEC explained that this newfound “clarity” brought about by the rule would:

enhance competition because insurers who may have been reluctant to issue indexed annuities, while their status was uncertain, may decide to enter the market. Similarly, registered broker-dealers who currently may be unwilling to sell unregistered indexed annuities because of their uncertain regulatory status may become willing to sell indexed annuities that are registered, thereby increasing competition among distributors of indexed annuities.

This reasoning is flawed. The lack of clarity resulting from the “uncertain legal status” of the financial product is only another way of saying that there was not a regulation in place prior to the adoption of Rule 151A determining the status of those products under the annuity exemption of §3(a)(8). The SEC cannot justify the adoption of a particular rule based solely on the assertion that the existence of a rule provides greater clarity to an area that remained unclear in the absence of any rule. Whatever rule the SEC chose to adopt could equally be said to make the previously unregulated market clearer than it would be without that adoption. Moreover, the fact that federal regulation of FIAs would bring “clarity” to this area of the law is not helpful in assessing the effect Rule 151A has on competition. Again, creating a rule that resolves the “uncertain legal status” of FIAs might be said to improve competition. But that conclusion could be asserted regardless of whether the rule deems FIAs to fall within the SEC’s regulatory reach or outside of it. Indeed, the SEC would achieve a similar clarity if it declined outright to regulate FIAs. Section 2(b) does not ask for an analysis of whether any rule would have an effect on competition. Rather, it asks for an analysis of whether the specific rule will promote efficiency, competition, and capital formation.

The SEC’s reasoning with respect to competition supports at most the conclusion that any SEC action in this area could promote competition, but does not establish Rule 151A’s effect on competition. The SEC’s competition analysis also fails because the SEC did not make any finding on the existing level of competition in the marketplace under the state law regime. The SEC asserted competition would increase based upon its expectation that Rule 151A would require fuller public disclosure of the terms of FIAs and thereby increase price transparency. The SEC could not accurately assess any potential increase or decrease in competition, however, because it did not assess the baseline level of price transparency and information disclosure under state law.

The SEC nevertheless argues that it is not required to conduct such a detailed § 2(b) analysis because doing so would contravene the Supreme Court’s reasoning in United Benefit and VALIC. [The] SEC’s § 2(b) analysis is arbitrary and capricious because it failed to consider the extent of the existing competition in its analysis. The Commission’s efficiency analysis is similarly arbitrary and capricious. The SEC concluded that Rule 151A would promote efficiency because the required disclosures under the rule would enable investors to make more informed investment decisions about purchasing indexed annuities. The SEC advanced further that the rule’s sales practice protections would enable sellers to promote more suitable recommendations to investors; this, in turn, would lead to investors making even better informed decisions, which would offer greater efficiency. As with its analysis of competition, however, the SEC’s analysis is incomplete because it fails to determine whether, under the existing regime, sufficient protections existed to enable investors to make informed investment decisions and sellers to make suitable recommendations to investors. The SEC’s failure to analyze the efficiency of the existing state law regime renders arbitrary and capricious the SEC’s judgment that applying federal securities law would increase efficiency. Finally, the SEC’s flawed efficiency analysis also renders its capital formation analysis arbitrary and capricious.

The SEC’s conclusion that Rule 151A would promote capital formation was based significantly on the flawed presumption that the enhanced investor protections under Rule 151A would increase market efficiency. This analysis fails with the failure of its underlying premise. Having determined that the SEC’s § 2(b) analysis is lacking, we conclude that this matter should be remanded to the SEC to address the deficiencies with its § 2(b) analysis.

It is obvious that the SEC believes imposing a federal framework on FIAs would be superior to the existing patchwork of state insurance laws. Indeed, after a more thorough review of the existing state law regime, the Commission may decide ultimately that Rule 151A will promote competition, efficiency, and capital formation. Nevertheless, the Commission must either complete an analysis sufficient to satisfy its obligations under § 2(b), or explain why that section does not govern this rulemaking. Accordingly, we grant the petitions and remand for further reconsideration consistent with this opinion. So ordered.

Five Fatal Flaws of Trading

2009-07-03T11:44:00.001-05:00

By Jeffrey Kennedy

Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit – and more importantly, do it consistently. How do they do that?

That's an age-old question. While there is no magic formula, one of Elliott Wave International's senior instructors Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don't claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person's life. Maybe you'll find one in Jeffrey's take on trading? We sincerely hope so.

The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.

Why Do Traders Lose?

If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.

Which brings us to the question: Why do traders lose? Or maybe we should ask, 'How do you stop the Hand?' Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.

Fatal Flaw No. 1 – Lack of Methodology

If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.

How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.

Fatal Flaw No. 2 – Lack of Discipline

When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.

Fatal Flaw No. 3 – Unrealistic Expectations

Between you and me, nothing makes me angrier than those commercials that say something like, "...$5,000 properly positioned in Natural Gas can give you returns of over $40,000..." Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.

Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them – and achieve them – you will fend off the Hand.

For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.

Fatal Flaw No. 4 – Lack of Patience

The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.

All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.

How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month ... I promise.

I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: 'Aim small, miss small.' I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small."

Fatal Flaw No. 5 – Lack of Money Management

The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.

Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% - 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50-$150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.

Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).

To overcome this fatal flaw, let me expand on the logic from the 'aim small, miss small' movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can weather the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.

Break the Hand’s Grip

Trading successfully is not easy. It’s hard work ... damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.

For more information on trading successfully, visit Elliott Wave International to download Jeffrey Kennedy’s free report, How to Use Bar Patterns to Spot Trade Setups.

Jeffrey Kennedy is the Chief Commodity Analyst at Elliott Wave International (EWI). With more than 15 years of experience as a technical analyst, he writes and edits Futures Junctures, EWI's premier commodity forecasting package.

Immediate Annuities - Lifetime Income

2009-07-03T11:11:00.001-05:00

Immediate Fixed Annuity - FIXED INDEX ANNUITY DEFINITION
Income NOW riders on fixed annuities are the most flexible. You are NOT annuitizing and the income can increase when the fixed annuity increases. The income can be stopped and restarted. If the fixed annuity yields 8% one year, you can take that out instead of the income rider payment. You'll enjoy much more potential and a guaranteed income. Fixed annuities can easily be annuitized (immediate annuity) in the future if base interest rates increase substantially as they did briefly in the early 80's. The year 1982 was the best time to buy a life income annuity also known as an immediate annuity.

Equity Index Annuities: Great Idea Or Flawed Flop?

2009-06-17T10:26:00.001-05:00

NAFA Responds to Inaccuracies in IndexUniverse.com Article
Equity Index Annuities: Great Idea Or Flawed Flop?
Written by Jeremy Burger
IndexUniverse.com
Wednesday, 10 June 2009
It is hard to understand why IndexUniverse.com would choose to publish an article filled with
misleading information and factual errors when its stated goal is to provide the “industry's best
news, columns, research, and features and the website aims to be “educational, thoughtprovoking,
and, rigorously independent in perspective.” Since fixed indexed annuities have an
interest crediting formula that is calculated using an index, we thought your readers might be
interested in the facts rather than the article’s reiteration of the same errors made by those in
the investing world. NAFA hopes this information helps IndexUniverse.com meet its goals by
publishing this clarification of information and, in so doing, achieve our mutual aim of aim of
education and independence
Error #1
Some policies make you wait as long as 20 years and charge you 20 percent for first-year
withdrawals.
The Facts:
1. There are 273 products available today and the maximum surrender period is 16 years
NOT 20.
2. The majority (82%) have surrender charge periods of 10 years or less.
3. 2/3rds of the products with surrender periods of 14-16 years (less than 1/10th of the total
products available) offer interest rate bonuses up front.
4. Only one product charges 20% surrender charge in the first year and that product also
pays the customer a 10% premium bonus on all premiums paid in the first year, making
the net charge roughly 10%. This product also automatically adds a Lifetime Income
Benefit Rider that guarantees annual withdrawals. Many consumers have decided that a
bonus and guaranteed income are benefits worth considering in exchange for
committing to a longer surrender period. Had Mr. Burger done more initial research, he
would have found that most states have adopted the latest NAIC annuity standard nonforfeiture
law which does not allow net surrender charges at the level he excoriates.
Error #2
Your guaranteed minimum return… probably doesn’t apply to the full balance in your
account.
The Facts:
Mr. Burger’s error is often made by those who write for the investment world because they
typically do not understand the insurance element of guaranteed minimum interest.
The minimum guarantee is in indexed annuity productsi provide a minimum guarantee that is a
minimum interest calculation (based on the state’s non-forfeiture law) such as 2 or 3% on 90%
of premiums or the contract’s current account value, whichever is greater1. The minimum
1 Based on the products currently available.

Lifetime Annuities-The Retirement Security Needs Lifetime Pay Act, H.R. 2748

2009-06-13T12:01:00.001-05:00

Congressman Earl Pomeroy -- Pomeroy, Brown-Waite Introduce Legislation to Promote Income Security in Retirement

Pomeroy, Brown-Waite Introduce Legislation to Promote Income Security in Retirement
Monday, June 08, 2009

Washington, D.C. – Congressman Earl Pomeroy today introduced bipartisan legislation along with Rep. Ginny Brown-Waite (R-FL) that will promote lifetime income security by providing incentives for workers to annuitize part of their retirement savings.

“For years, the federal government has recognized its duty to assist American families in building a retirement nest egg,” Pomeroy said. “Saving and investing for the long term is extremely important, especially in these challenging times. A greater retirement challenge lies ahead: managing assets to make sure that your retirement savings last a lifetime. The Retirement Security Needs Lifetime Pay Act will provide families with incentives to plan for a secure lifelong retirement.”

“American workers spend a significant portion of their careers planning for their retirement. When the economy falls on hard times, it should not mean that their plans have to go on hold as well,” Congresswoman Brown-Waite said. “This bill incentivizes workers to invest in a retirement annuity so that their golden years can go on as planned.”

The Retirement Security Needs Lifetime Pay Act, H.R. 2748, would encourage workers to annuitize some of their retirement savings by providing a 50 percent tax exclusion for up $10,000 of lifetime annuity payments each year. A lifetime annuity is the only financial vehicle that delivers a steady stream of income for life. Additionally, the bill would exclude from taxes, 25 percent of lifetime income payments from Individual Retirement Accounts (IRAs), qualified plans and similar employer-sponsored retirement savings plans other than defined benefit plans. The bill also excludes the value of longevity insurance from amounts subject to required minimum distributions and clarifies the taxation of partial annuity payments.

By providing incentives for workers to annuitize part of their retirement savings, this bill addresses the management of savings once an individual reaches retirement, an issue previously ignored by public policy. Congress has gone to great lengths to provide incentives to encourage workers to accumulate enough savings for retirement. However, upon retirement, workers face numerous risks in managing those savings throughout their retirement years.

AnnuityDefinition.com

Fixed Indexed Annuities: Forbes Article Errors, Omissions and Half-Statements

2009-06-10T07:47:00.001-05:00

Equity‐Indexed Annuities: A Costly Way to Limit Your Lossesi Strong recent results mask plenty of pitfalls.
By Scott Woolley
June 05, 2009
Forbes.com
NAFA, the National Association for Fixed Annuities, is an educational trade association incorporated to
promote the awareness and understanding of fixed annuities. The common media malady is that fixed
annuities – regardless of the interest crediting formula – are investment products. Fixed annuities are
no more purchased as investments than are life or long term care insurance ‐ nor should they be. All of
these products are purchased to protect and preserve assets. Fixed indexed annuities offer guaranteed
death benefits, minimum interest and income you cannot outlive. Fixed indexed annuities can also
provide additional interest over and above the guarantees when the index performance allows.
The headline demonstrates a complete misunderstanding of these products. They do not “limit your
losses” from stock market declines they ELIMINATE the possibility that any of your premium or earned
interest will be lost. While the list of errors, omissions and half‐statements in this article is very lengthy
indeed, we will limit our corrections to the most egregious ones. Helping Americans to better
understand fixed index annuities will encourage them to learn more about a product that has saved
millions of dollars of retirement savings from equity losses.
1. A major error in the article is the assertion that fixed indexed annuities are offered by Prudential
and Met Life. Neither company offers a fixed indexed annuity. Prudential offers only one choice
of a fixed deferred annuity product and Met Life offers two (single and flexible premium)
product choices and none of these deferred annuities credit interest based on the performance
of an index. MassMutual's product is a single premium variable annuity where the purchase
payment is allocated between a fixed account and an equity indexed subaccount like the S&P
500. Genworth exited the indexed annuity marketplace in October 2008. It is curious that you
did not choose to inform your readers with company names and website links to the real “major
companies” that offer indexed annuities. Just about 15 minutes of research would have
informed you that the four companies you named are not fixed indexed annuity carriers.
2. The article itself contradicts FINRA’s statement about fixed indexed annuities that “one of the
most confusing features is the method used to calculate the gain.” The article easily explains
the feature using a mere 45 words.
3. The bias of the article is transparent when the only “regulatory authorities” referenced are the
two that are seeking to claim jurisdiction over a product they actually do not understand. While
NAFA certainly has views that differ from those quoted, an effort at objectivity should have
referenced our White Paper on Indexed Annuity Productsii, so that readers could draw their own
conclusions. Also, IMSAiii and the NAICiv also provide good information for consumers on their
respective websites.

4. It is good that you acknowledge that fixed indexed annuities show strong results, but why do
you limit it to recent history? Perhaps because during the recent economic crisis, while millions
of Americans have seen their 401(k) and retirements savings slashed in half, owners of fixed
indexed annuities have not lost one penny of their account value? But it is also true that the
tradeoff for this protection has also rewarded them with very respectable interest earnings.
Below is NAFA’s report by Miguel A. Herce, Ph.D of CRA International, Inc. showing the
annualized return over 10‐year periods. Many American’s might disagree that 6.5% is a “costly
way to limit losses.”
Period S&P 500 with no Dividends Monthly Averaging Index
(0% floor)
JAN 1975 – OCT 2004 11.6% 7.7%
JAN 1975 – OCT 2008 10.8% 7.5%
JAN 1926 – OCT 2008 7.6% 7.0%
JAN1995 – OCT 2008 6.1% 6.5%
If you are reluctant to take our word for it, perhaps you will trust the excerpt from a fellow journalist,
Steven Hartv, who writes:
If you are generally concerned with potential downswings in the market, then an index annuity
can be a great choice for your investing needs. You can participate in the potential of a strong
market run without having to deal with severe loss during a sharp market downturn. In addition,
the overall principal is safely protected so that no loss will occur. The setup of the index annuity
to give a profit at a minimum rate of return, however, ensures that the investor still sees a profit
(however small) during the lean times of the index. In other words, the index annuity seems to
provide the chance to have your cake and eat it too with a low‐risk financial product that you
can benefit from over time.
i http://resources.nafa.com/files/2009/06‐jun/6‐9‐forbesresponse.pdf
ii http://www.nafa.us/local_links.php?action=jump&catid=7&id=105
iii http://www.nafa.us/local_links.php?action=jump&catid=7&id=106
iv http://resources.nafa.com/files/2009/06‐jun/6‐9‐naicbuyersguidetoannuities.pdf
v http://www.affsphere.com/Money‐and‐Finance/Annuities/What‐is‐an‐Index‐Annuity‐1.html

Equity-Indexed Annuities: A Costly Way To Limit Your Losses

2009-06-09T14:24:00.001-05:00

From: Sheryl Moore
Sent: Monday, June 08, 2009 7:24 PM
To: 'readers@forbes.com'
Subject: FW: ARTICLE: Equity-Indexed Annuities: A Costly Way To Limit Your Losses

Dear Forbes Editor,

I am an independent market research analyst who specializes exclusively in the indexed annuity and indexed life markets. I have tracked the companies, products, marketing, and sales of these products for over a decade. I do not endorse any company or financial product specifically, but I do believe in the value proposition of indexed products. I recently had the occasion to read your article, “Equity-Indexed Annuities: A Costly Way To Limit Your Losses.” As the foremost authority on indexed annuities, I wanted to personally respond to the material misstatements and misleading testimonial by Scot Woolley in this article. I was absolutely appalled that a source as credible as Forbes would publish such a blatantly false and ignorant article. Scott Woolley appears to be very uneducated on indexed annuities, and the insurance industry in general. I would like to think that Forbes generally does a better job at monitoring the accuracy of their contributors’ articles than they did on this occasion.

Specifically, the most shocking and obvious mistake in Woolley’s piece is the fact that Massachusetts Mutual Life Insurance Co, and Prudential Financial have never offered indexed annuities, EVER. Yet, he sites them as being carriers that underwrite these products. In addition, MetLife does not offer indexed annuities themselves, but instead offers their agents a choice of four indexed annuities that are offered by other insurers. Genworth Financial exited the indexed annuity market on September 20, 2008. Certainly Woolley could not have done his homework on this article, as all one needs to do is Google “first quarter 2009 indexed annuity sales,” and they would have found the most credible resource on current carriers in the market: my firm’s sales data. It is distressing that this reporter put so little effort into backing-up his information.

In addition, indexed annuities have not been referred to as “equity indexed annuities” since the late 1990s. The insurance industry has been careful to enforce a habit of referring to the products as merely “indexed annuities” or “fixed indexed annuities,” so as not to confuse consumers. This industry wants to make a clear distinction between these fixed insurance products and equity investments. It is the safety and guarantees of these products which appeal to consumers, particularly during times of market downturns and instability (such as what we are experiencing now).

Also, indexed annuities are not a “combination investment and insurance product[s].” They are not an investment at all. They are a fixed insurance product that provides minimum guarantees, death benefits, and an income stream that consumers cannot outlive. Excess interest is credited based on the performance of an outside stock index, such as the S&P 500. The indexed annuity consumer is never directly invested in the stock market, and thereby never subject to the risk of loss due to market downturn. These benefits, coupled with this unique interest crediting, are what makes indexed annuities such an appealing, value-added product- particularly during times of market turmoil. The products are regulated by state insurance divisions, like other fixed insurance products.

Indexed annuities do provide limited upside interest potential, unlike securities products. This is what allows the insurance company to be able to afford the minimum guarantee that is provided to the consumer. So, regardless of the market’s performance, the worst the client can receive is zero interest crediting- no risk to principal as a result of market losses. No other product can offer such a strong value proposition, coupled with the insurance benefits of the indexed annuity. It is important to note that if the potential gains were unlimited on indexed annuities, there would be no guarantees, and THAT would be a variable annuity, not a fixed insurance product. We in the indexed annuity industry, are happy for this differentiation, as it is what drives the sales of these products.

Scott Woolley’s understanding of the basic pricing of indexed annuities is flawed. He believes that “the insurers who sell the annuities use derivatives to put collars around the annuities with limit both the upside and downside for investors.” In reality, the insurance company invests the majority of their funds in bonds, which cover the indexed annuity’s minimum guarantees. The invest a minute percentage of the funds in options, which provide the index-linked interest on the products. Contrary to Woolley’s allusions, the insurance companies have no control over the prices for the bonds and options. So, when the market becomes volatile, the same dollar that purchased the company a potential indexed annuity gain of 8% last month, may only purchase them a potential indexed annuity gain of 6% presently. So, while “the counterparties selling the hedges” may “jack up their fees,” as a result of market volatility, that merely translates into lower caps, participation rates, and higher spreads that are passed on to the consumer. This is not discretionary on behalf of the insurance company. Indexed annuities not only have minimum guarantees, but also minimum guaranteed caps/participation rates, and maximum spreads that are approved by the insurance divisions in the state the product is being offered in, prior to the product ever being made available for sale. When these caps, participation rates and spreads become unattractive compared to fixed annuities, sales of indexed annuities decline.

As far as “other fees” being “so high as to make the product a lousy buy”- indexed annuities do not have fees. A few indexed annuities offer an optional rider that has an explicit, stated account valued-based charge. However, these products are not like variable annuities which have numerous fees such as administrative fees, mortality & expense charges, as well as fees for optional riders. There are no “fat expenses” on these products, nor “ways to make it hard” to understand what you are really paying. All annuity costs and benefits are clearly disclosed in the disclosures that the consumer signs at the time of purchase. Yes, all indexed annuities have surrender charges. All fixed annuities have surrender charges. These charges are ten years on average, but can be as low as one year. In addition, a large percentage of the longer-term products offer an up-front premium bonus to provide an incentive to the annuity consumer. A surrender penalty is merely what allows the insurance company to credit competitive interest rates to the annuity, while the client has agreed to keep their money with the insurance company. The insurance company invests the consumers premiums, in order to make a return on the money, and credit this competitive interest rate. Without a surrender penalty, the insurance company would incur tremendous expenses that they would not be able to recover. In short, surrender charges are a pricing measure that allows insurance companies to make good on their promises, and back-up their claims-paying abilities.

Woolley’s citing of firms that are seeking to extend their regulatory authority beyond the scope of their purview is incredulous. Both the SEC and FINRA have vested interests in regulating these fixed insurance products. They do not regulate these products today, and therefore the state insurance division would be a far more credible resource on these products. They cannot be considered a reliable source on indexed annuities, as they have a plethora of inaccurate information on the products on their public websites and “alerts.”

Unfortunately, a few complex products have afforded this industry the perception of complexity over the past 15 years. However, the bulk of indexed annuities sold today are very simple to understand. In fact, 95.2% of indexed annuities offered today have crediting methods based on the simple formula of (A – B)/B. All indexed annuities limit potential indexed interest through the use of a pricing lever such as a participation rate, a cap, or a spread. Typically, only one of these levers is used to limit the potential indexed interest on the annuity. However, the bottom line is that the crediting method and pricing lever used are irrelevant. Indexed annuities are priced to return about 1% - 2% greater than other traditional fixed money instruments. So, if fixed annuities are earning 5% today, and indexed annuity consumer can expect to receive 6% - 7% interest over the life of their indexed annuity. Sure, some years they will receive zero, and other years they may receive double-digit gains. However, the end goal is to receive a rate that is competitive with other safe money places, not to compete with securities products.

Every single indexed annuity ever sold limits the consumer’s risk of loss as a result of the market downturn at ZERO. No indexed annuity consumer has ever received a negative adjustment to their annuity’s value as a result of a market decline. This is precisely why these products are so appealing. In addition, when the annuity receives zero crediting, the market’s low point (the end measurement for the crediting method) is now the beginning date for the next index measurement on these products. This provides a tremendous opportunity for indexed gains when the market rebounds.

As a the foremost expert and consultant in this market, I can tell you that I have never heard of David Babbel. I can neither confirm nor deny the validity of his study, as neither myself nor my clients use him as a resource on these products. The bottom line is that indexed annuities are a great solution for millions of Americans that cannot stomach putting their retirement dollars at risk in the market. On the other hand, these same consumers can look forward to the opportunity for greater interest crediting than what they could earn at their local bank.

I was astounded to see Mr. Woolley’s statement that “getting stuck in these contracts if you need the money early” is a big problem. In reality, every indexed annuity sold today allows consumers annual penalty-free access to their account value, should the need arise. This amount is typically 10% of the annuity’s value annually, but it can be as high as 20%. In addition, 9 out of 10 fixed annuities provide penalty-free access to the account value in the event of certain triggers such as nursing home confinement, terminal illness, disability and even death. Quite contrary to this article’s statements, indexed annuities are some of the most liquid retirement vehicles available today.

Even more damaging was Scott Wooley’s statement that “many insurers rescind gains you may be owed if you get out early.” Exactly ONE of the 275 indexed annuities sold today works in this manner. In addition, sales of this product accounted for less than 2% of total industry sales as of the first quarter of 2009.

While it is true that all annuities are intended to be a long-term commitment, Mr. Woolley seems to miss the big picture. What makes indexed annuities the most important part of millions of American’s retirement plans is that indexed annuity consumers are more risk averse than individuals investing in securities products such as stocks, bonds, and mutual funds. Indexed annuities are a “safe money place,” intended to be compared against other safe money places (i.e. fixed annuities and certificates of deposit). Any insurance agent or advisor selling these products knows the difference. Why doesn’t Mr. Woolley, who purports himself as an expert on these products?

In closing, it would be so greatly appreciated if you would provide a correction to your readers on this blatantly false article. There are millions of Americans relying on the accuracy of your information, and clarifying Mr. Woolley’s article is a good way to attempt to repair the damage of his statements.

Please feel free to let me know if I can serve as a resource to you or your editorial staff in the future.

Thank you.

Sheryl J. Moore

President and CEO

LifeSpecs.com

AnnuitySpecs.com

Advantage Group Associates, Inc.

(515) 262-2623

Equity Index Annuities

2009-06-08T15:18:00.001-05:00

Forbes.com - Magazine Article

Forbes.com

Personal Finance
Equity-Indexed Annuities: A Costly Way To Limit Your Losses
Scott Woolley, 06.05.09, 5:35 PM ET

Their unsexy name aside, there's something undeniably seductive about equity-indexed annuities (EIA). Sold by insurance companies, these combination investment and insurance products promise investors a piece of any stock market gains while limiting downside when the market tanks. At the end of the investment, or accumulation, period, the annuity's owner is typically offered either a lump-sum distribution of the proceeds or regular payments based on the ending balance.

Over the past 15 years, the products have become increasingly popular and are offered by major insurers like Massachusetts Mutual Life Insurance Co., Prudential Financial, MetLife and Genworth Financial. While the investment features have looked increasingly alluring, the catch is that the stock market's wild seesawing could hardly have been better designed to enrich holders of equity-indexed annuities. Since 1995, these annuities have easily outpaced the S&P 500 and bond indexes alike.

"There is no asset category that outperformed them. We were extremely surprised, really just amazed," says David Babbel, professor emeritus of insurance and risk management, who conducted a study of equity-index annuity returns beginning in 1995.

Still, there are plenty of reasons to take a hard look at equity-indexed annuities before adding them to you portfolio. While rules differ, the basic idea is simple enough. The insurers who sell the annuities use derivatives to put collars around the annuities, which limit both their upside and downside for investors.

Tricky questions for buyers: Are those offsetting hedges being passed along at a fair price? And are other fees so high as to make the product a lousy buy?

The answer is "no" frequently enough that the investor alerts are posted by both the Securities and Exchange Commission and the Financial Industry Regulatory Authority. The products "are anything but easy to understand. One of the most confusing features of an EIA is the method used to calculate the gain in the index to which the annuity is linked," FINRA warns.

Typically, equity-linked annuities come with "participation rates" that limit the amount of market gains in which annuity holders share. If a contract has a 70% participation rate and the S&P climbs 10%, the annuity holder gets a 7% bump, for example. In exchange, the investor receives a loss limit, which often guarantees that he will do no worse than break even each calendar year. For 2008, when the market fell 38%, annuity investors' relative returns look brilliant.

Babbel, who has consulted for the insurance industry, is quick to point out that the period he studied was a highly unusual one, marked by quick, sharp drops in the market. Those are precisely the kind of collapses that equity-indexed annuities are good at sidestepping.

Even if you assume that the market will perform during the next 15 years like it did during the past 15, there's no guarantee that the counterparties selling the hedges won't jack up their fees and lower the performance of the equity indexed annuities.

Then there are the fees investors are likely to pay for the privilege of owning an equity-linked annuity. Like other deferred annuities, equity-index features regularly have fat expenses built in, often in ways that make it hard, if not impossible, to understand what you're really paying.

Another big problem: getting stuck in these contracts if you need the money early. Many come with sizable surrender fees that remain in force for several years. What's more, many insurers rescind gains you may be owed if you get out early.

As the old investing saw goes: Past performance is no guarantee of future results. If you have a long-term horizon and want to limit your potential losses, there are probably better ways to do it than equity-indexed annuities. Consider owing a mix of diversified, low-cost bond index funds to smooth out the bumps next time your equity holdings take a hit.

Also see: www.forbes.com/forbes/2008/1208/151.html

Fixed Index Annuity - Florida Annuity-Sales Fraud Bill Advances

2009-04-13T09:11:00.001-05:00

Florida annuity-sales fraud bill advances - Investment News
Florida annuity-sales fraud bill advances
By Darla Mercado
April 2, 2009, 9:11 AM EST
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Recommend (5)

A Florida Senate bill that would levy heavy penalties on agents and financial advisers who make fraudulent annuity sales has moved closer to becoming law — though not without a few insurance industry-friendly changes.

The Safeguard our Seniors Act, or SB 1372, on Monday moved to Florida’s Policy and Steering Committee on Ways and Means, placing it a step away from a full Senate vote.

Under the bill’s original provisions, which would apply to consumers over age 65, surrender periods — the length of time the investor must hold the annuity — would have been cut to five years.

It also set the maximum surrender fees, which investors must pay for exiting the product too soon, at 5% and reduced the fee 0% by the end of the fifth policy year.

Additionally, the original bill also extended the free-look period to 60 days from the normal 14-day limit.

In its new form, however, legislators have loosened the restrictions on the annuity sales, allowing for surrender charges to go as high as 10%, with the charge to fall by one percentage point each year, so that there is no surrender fee at the end of the 10th policy year.

Under the revised bill, the surrender fee changes don’t apply to accredited investors, defined as individuals with a net worth of greater than $1 million or with an annual income of more than $200,000 in each of the past two years, or $300,000 a year in joint income.

The amended bill also cuts the free-look period to 30 days.

The original bill also made “twisting” and “churning” annuities a third-degree felony punishable by up to five years in prison. The penalty has been expanded so as to cover fraudulent conduct in connection with the sales of all financial products.

The American Council of Life Insurers in Washington, the Florida chapter of the Falls Church, Va.-based National Association of Insurance and Financial Advisors and the National Association for Fixed Annuities of Milwaukee had combined efforts to fight the early version of the bill. NAIFA-Florida had also asked state finance chief Alex Sink to consider a maximum 10-year surrender period and 10% surrender charge limit.

Still, despite the adjustments, some carriers remain displeased.

For instance, American Equity Investment Life Insurance Co. of West Des Moines, Iowa, sent its sales force an e-mail, encouraging them to reach out to their legislators and let them know how the bill would affect their businesses.

“Now, more than ever, it is important that consumers have access to annuity products that protect their principal,” president Ron Grensteiner and Nick Gerhart, vice president of compliance communications, wrote in the e-mail.

“We do not believe in limiting product design and consumer choice,” theywrote. “Let your state representative know that by limiting the surrender charge to 10 years, they will limit product design.”

Indexed Annuity - The SEC's Annuity Grab

2009-04-10T15:00:00.001-05:00

Mary Schapiro's Securities and Exchange Commission Seeks to Extend Control Over Fixed Indexed Annuities - WSJ.com

An eternal Washington truth is that the more a federal agency gets beat up for regulatory failures, the more of the world it attempts to regulate. Witness the Securities and Exchange Commission, which has responded to recent criticism with a dubious power grab over another industry.

This particular overreach is aimed at fixed indexed annuities, a niche in the wider annuity market. Like traditional annuities, purchasers of the fixed index variety are guaranteed the return of their principal and a certain level of interest. The twist is that they also earn interest based on the upside performance of stock or bond indexes, say, the S&P 500. If the market goes up, investors get more. If it goes down, investors still get their principal and minimum interest.

Whatever their merits, these annuities have always been treated as insurance products, subject to myriad state rules that govern their marketing and sale, and the capital requirements of insurers. While the 1933 securities act gave the SEC the power to regulate securities, it exempted annuities.

Until last year, that is, when then SEC chief Christopher Cox announced his agency would regulate fixed indexed annuities. At the time, he claimed there were widespread sales abuses and that he was stepping up to protect senior citizens. Mr. Cox argued these annuities were "securities" that could be regulated by the SEC because they were tied to indexes and thus involved "risk."

This didn't go down well with state insurance commissioners, who explained their oversight and dared the agency to prove its sales abuse claims. The SEC couldn't do so, and by rule-writing time it was admitting that "the presence or absence of sales practice abuses is irrelevant." All that mattered was the risk: Specifically, the SEC claimed the risk to the annuity purchaser was that the market would rise, and that he'd get more than his minimum guarantee. In the age of Bernie Madoff, the SEC is thus putting itself on high alert to protect people whose only risk is making more money than they expect.

A coalition of insurers filed suit to block the proposed SEC rule in D.C. Circuit Court last month and has been granted expedited review. The National Association of Insurance Commissioners joined the legal fun this week. The suits note that a federal court has specifically ruled that these products are annuities, not securities. They also point out that the SEC has been negligent in considering the burden of its new rule, which by the agency's own admission will cost insurers $100 million in the first-year alone. In his blunt dissent to the rule, SEC Commissioner Troy Paredes noted the SEC was "entering into a realm that Congress prohibited us from entering" and would hurt small businesses and consumers.

This kind of regulatory wanderlust is all too typical of the modern SEC, which was once known as a cautious regulator but now looks for ever more financial land to grab. Never mind that the Madoff debacle, which followed the mutual fund late-trading fiasco, shows that the SEC can't properly supervise its current turf. There's a case to be made for national insurance regulation, including annuities, but the place to make that case is Congress. New SEC Chairman Mary Schapiro won't help investors or the reputation of her agency by continuing this legally suspect lunge for more power.

What Are The Benefits Of An Annuity?

2009-01-02T09:17:00.001-06:00

Benefits of an Annuity

Annuities are an excellent tool to help you plan
for your financial security. Fixed annuities offer a variety of benefits including
tax-deferred growth, ability to avoid probate, and lifetime income.

Tax-Deferred Growth

Tax-deferred annuity growth allows your money to grow faster because
you earn interest on dollars that would otherwise be paid as taxes. Your
principal earns interest, the interest compounds within the contract, and the
money you would have paid in taxes earns interest.

May Avoid Probate

Annuities offer the ability to name a beneficiary, which may
minimize the expense, delays, and publicity that comes with probate. Your named
beneficiary may receive death proceeds as either a lump sum or monthly income.

Lifetime Income

An immediate annuity can provide you with a guaranteed income
stream with the purchase of a tax-deferred annuity. You have the ability to
choose from several different income options, including life or a specific
period. With non-qualified plans, a portion of each income payment represents a
return of premium that is not taxable, reducing your tax
liabilities.

At McLeod Agency we understand that, depending on your
individual situation, you need the ability to choose whatever type of annuity
fits you best. With McLeod Agency, you have the ability to choose:

Traditional Fixed Annuity – Offers a
declared fixed interest rate that is guaranteed for a specific period and
guaranteed to never go below a specific percentage.

Index Annuity – Interest rate credited to
your annuity contract is linked to specific market indices that you can choose
on an annual basis. Once the interest is credited you are guaranteed that it can
never go down based on future market fluctuations.

Immediate Annuity – You are guaranteed an
income stream ranging from a specific period of time to your entire life. An
immediate annuity offers a solution to the problem of outliving your money.

What are the advantages and disadvantages of an Equity-Indexed Annuity?

2008-12-31T09:10:00.001-06:00

What are the advantages and disadvantages of an Equity-Indexed Annuity?
The major advantage of an equity-indexed annuity over other types of deferred annuity products is potentially higher interest rates available from links to equity indexes, which historically have provided significantly higher yields than fixed interest rate products. The major advantage, of course, may be the major disadvantage also, particularly in periods of index volatility. However, all equity-indexed annuities have an underlying minimum interest rate guarantee which guarantees you will never lose your premium due to index fluctuations or volatility. Thus the equity-indexed annuity provides the best of both worlds-linkage to equity indexes with no risk due to index volatility and safety of premium.

Annuity Guide

Fixed Annuity

What are the advantages and disadvantages of a Variable Annuity?

2008-12-30T10:59:00.001-06:00

What are the advantages and disadvantages of a Variable Annuity?

The advantage of a Variable Annuity is the ability to place your annuity
premium into equity investments such as stocks, bonds or mutual funds
and participate in the potentially higher increases available
historically in the equity or bond markets.
Increases in your Variable
Annuity are tax deferred until they are actually withdrawn from the
contract or annuitized. All increases in a Variable Annuity are taxed
as ordinary income the year the money is withdrawn.
The major
disadvantage of a Variable Annuity is that your assets, including your
premium, are subject to market risk, i.e. loss in value based upon poor
performance of the markets. As with a fixed deferred annuity, your
purchase of a Variable Annuity should be viewed as a means to fund your
long-term retirement goals.
Historically, products in the equity
markets have resulted in higher increases than fixed rate products. Of
course, many factors are important in determining whether a Variable
Annuity is right for you, including your age, retirement goals and
aversion to risk. If you are young and looking to preserve significant
funds for your long-term retirement needs, a Variable Annuity is an
excellent way to do so.
If you are older and closer to retirement, or
simply desire to preserve your accumulated assets by purchasing a
secure vehicle, a fixed deferred annuity may be the best choice.

Annuity Surrender Charges and How To Avoid Them.

2008-12-27T10:00:00.001-06:00

Is there any way to avoid the annuity surrender or early withdrawal charges?

Yes.
With most fixed deferred annuities, surrender or withdrawal charges are
waived if you (1) die;
(2) become confined to a hospital or nursing
home for a specified period; or
(3) you choose to take a guaranteed
income stream. In addition, most fixed deferred annuities allow you
take up to 10% of your annuity contract value each year without incurring a
surrender or withdrawal charge.
See tax consequences of early
annuity withdrawals. Annuity rollover.

There
are no penalties on distributions if:
(1) You are older than age 59 ½ (2) Distributions are made on or after
the death of the owner of the annuity (3) Become disabled
(4) Distributions are made as a series of substantially equal periodic
payments (not less than annually) for your life or your life expectancy
or joint life expectancies of you and your designated beneficiary
(5) Distributions are made under a single premium immediate annuity
with a starting date no later than one year from the date you purchase
the annuity.
(6) If the distributions are made under certain annuities issued as a
part of a structured settlement agreement.
There are additional exceptions in the case of IRAs. Please contact
your tax advisor for more details.

401k Annuity

Annuity Rate

What Are Advantages and Disadvantages of a Fixed Annuity?

2008-12-26T10:25:00.001-06:00

What are the advantages and disadvantages of a Fixed Deferred Annuity?

The
major advantages of a fixed deferred annuity are guarantee of premium
and tax deferral. Generally, fixed deferred annuities appeal to the
risk averse who are looking to preserve funds for retirement with
guarantee of premium, competitive fixed rate interest guarantees and no
risk to premium. The major disadvantage of a fixed rate deferred
annuity is that fixed rate guarantee-type products have provided lower
growth than those available historically in the equity markets. Of
course, many factors are important in determining whether a fixed rate
deferred annuity is right for you, including your age, retirement goals
and aversion to risk. If you are older and closer to retirement, or
simply desire to preserve your assets in a secure vehicle, a fixed
deferred annuity may be the best choice. If you are younger and looking
to preserve significant funds for your long-term financial needs and
are willing to take greater risk, an Equity-Indexed or Variable Annuity
might be a better alternative at the present time.

What is a Fixed Deferred Annuity?

2008-12-23T14:33:00.001-06:00

A Fixed Deferred Annuity is a contract between you and the insurance company which pays a guaranteed current interest rate.
The interest rate may be guaranteed for one or more years and earns compound interest. The interest earnings compound on a tax-deferred basis.
Fixed deferred annuities are offered either on a single premium basis, i.e. you give the insurance company a lump sum premium payment, (typically $5,000 or more) or on a flexible premium basis, i.e. you pay a lower re-occurring premium payment on a monthly, quarterly, or annual basis. In addition to tax deferral, fixed deferred annuities offer safety of your premium.
Fixed deferred annuities offer a current interest rate which may never be less than a lifetime minimum guaranteed interest rate (typically 3%).
The current interest rate is declared and guaranteed by the insurance company. Thus your premium in a fixed deferred annuity is not subject to market risk associated with volatile financial markets.
Fixed deferred annuities have penalties for early withdrawal called surrender charges or withdrawal charges. These charges typically decline over the length of the surrender charge period.

Dissent Regarding Final Rule 151A Index Annuities

2008-12-18T11:08:00.001-06:00

SEC Speech: Opening Remarks and Dissent Regarding Final Rule 151A: Indexed Annuities and Certain Other Insurance Contracts;(Troy A. Paredes) Washington, D.C.: December 17, 2008

Speech by SEC Commissioner:
Opening Remarks and Dissent Regarding Final Rule 151A
Indexed Annuities and Certain Other Insurance Contracts
by
Commissioner Troy A. Paredes
U.S. Securities and Exchange Commission
Open Meeting of the Securities & Exchange Commission
Washington, D.C.
December 17, 2008

Thank you, Chairman Cox.

I believe that proposed Rule 151A addressing indexed annuities is rooted in good intentions. For instance, at the time the rule was proposed, the Commission watched a television clip from Dateline NBC that described individuals who may have been misled by seemingly unscrupulous sales practices into buying these products. Part of our tripartite mission at the SEC is to protect investors, so there is a natural tendency to want to act when we hear stories like this.

However, our jurisdiction is limited; and thus our authority to act is circumscribed. Rule 151A is about this very question: the proper scope of our statutory authority.

In our effort to protect investors, we cannot extend our reach past the statutory stopping point. Section 3(a)(8) of the Securities Act of 1933 ('33 Act) provides a list of securities that are exempt from the '33 Act and thus, by design of the statute, fall beyond the Commission's reach. The Section 3(a)(8) exemption includes, in relevant part, "[a]ny insurance or endowment policy or annuity contract or optional annuity contract, issued by a corporation subject to the supervision of the insurance commissioner . . . of any State or Territory of the United States or the District of Columbia." I am not persuaded that Rule 151A represents merely an attempt to provide clarification to the scope of exempted securities falling within Section 3(a)(8). Instead, by defining indexed annuities in the manner done in Rule 151A, I believe the SEC will be entering into a realm that Congress prohibited us from entering. Therefore, I cannot vote in favor of the rule and respectfully dissent.

Rule 151A takes some annuity products (indexed annuities), which otherwise may be covered by the statutory exemption in Section 3(a)(8), and removes them from the exemption, thus placing them within the Commission's jurisdiction to regulate. If the Commission's Rule 151A analysis is wrong — which is to say that indexed annuities do fall within Section 3(a)(8) — then the SEC has exceeded its authority by seeking to regulate them. In other words, the effect of Rule 151A would be to confer additional authority upon the SEC when these products, in fact, are entitled to the Section 3(a)(8) exemption.

The Supreme Court has twice construed the scope of Section 3(a)(8) for annuity contracts in the VALIC and United Benefit cases.1 I believe the approach embraced by Rule 151A conflicts with these Supreme Court cases. Although neither VALIC nor United Benefit deals with indexed annuities directly, the cases nevertheless are instructive in evaluating whether such a product falls within the Section 3(a)(8) exemption. And despite the adopting release's efforts to discount its holding, at least one federal court applying VALIC and United Benefit has held that an indexed annuity falls within the statutory exemption of Section 3(a)(8).2

When fixing the contours of Section 3(a)(8), the relevant features of the product at hand should be considered to determine whether the product falls outside the Section 3(a)(8) exemption. Rule 151A places singular focus on investment risk without adequately considering another key factor — namely, the manner in which an indexed annuity is marketed.

Moreover, I believe that Rule 151A misconceptualizes investment risk for purposes of Section 3(a)(8). The extent to which the purchaser of an indexed annuity bears investment risk is a key determinant of whether such a product is subject to the Commission's jurisdiction. Rule 151A denies an indexed annuity the Section 3(a)(8) exemption when it is "more likely than not" that, because of the performance of the linked securities index, amounts payable to the purchaser of the annuity contract will exceed the amounts the insurer guarantees the purchaser. This approach to investment risk gives short shrift to the guarantees that are a hallmark of indexed annuities. In other words, the central insurance component of the product eludes the Rule 151A test. More to the point, Rule 151A in effect treats the possibility of upside, beyond the guarantee of principal and the guaranteed minimum rate of return the purchaser enjoys, as investment risk under Section 3(a)(8). I believe that it is more appropriate to emphasize the extent of downside risk — that is, the extent to which an investor is subject to a risk of loss — in determining the scope of Section 3(a)(8). When investment risk is properly conceived of in terms of the risk of loss, it becomes apparent why indexed annuities may fall within Section 3(a)(8) and thus beyond this agency's reach, contrary to Rule 151A.

Not only does Rule 151A seem to deviate from the approach taken by courts, including the Supreme Court, but it also appears to depart from prior positions taken by the Commission. For example, in an amicus brief filed with the Supreme Court in the Otto case,3 the Commission asserted that the Section 3(a)(8) exemption applies when an insurance company, regulated by the state, assumes a "sufficient" share of investment risk and there is a corresponding decrease in the risk to the purchaser, such as where the purchaser benefits from certain guarantees. Yet Rule 151A denies the Section 3(a)(8) exemption to an indexed annuity issued by a state-regulated insurance company that bears substantial risk under the annuity contract by guaranteeing principal and a minimum return.

In addition, Rule 151A seems to diverge from the analysis embedded in Rule 151. Rule 151 establishes a true safe harbor under Section 3(a)(8) and provides that a variety of factors should be considered, such as marketing techniques and the availability of guarantees. The Rule 151 adopting release even indicates that the rule allows for certain "indexed excess interest features" without the product falling outside the safe harbor.

An even more critical difference between Rule 151 and Rule 151A is the effect of failing to meet the requirements under the rule. If a product does not meet the requirements of Rule 151, there is no safe harbor, but the product nevertheless may fall within Section 3(a)(8) and thus be an exempted security. But if a product does not pass muster under the Rule 151A "more likely than not" test, then the product is deemed to fall outside Section 3(a)(8) and thus is under the SEC's jurisdiction. In essence, while Rule 151 provides a safe harbor, Rule 151A takes away the Section 3(a)(8) statutory exemption.

I am not aware of another instance in the federal securities laws where a "more likely than not" test is employed, and for good reason. A "more likely than not" test does not provide insurers with proper notice of whether their products fall within the federal securities laws or not. If an insurer applies the test in good faith and gets it wrong, the insurer nonetheless risks being subject to liability under Section 5 of the Securities Act, even if the insurer had no intent to run afoul of the federal securities laws. In addition, under the "more likely than not" test, the availability of the Section 3(a)(8) exemption turns on the insurer's own analysis. Accordingly, it is at least conceivable that the same product could receive different Section 3(a)(8) treatment depending on how each respective insurer modeled the likely returns.

Further, I am concerned that Rule 151A, as applied, reveals that the "more likely than not" test, despite its purported balance, leads to only one result: the denial of the Section 3(a)(8) exemption. In practice, Rule 151A appears to result in blanket SEC regulation of the entire indexed annuity market. The adopting release indicates that over 300 indexed annuity contracts were offered in 2007 and explains that the Office of Economic Analysis has determined that indexed annuity contracts with typical features would not meet the Rule 151A test. Indeed, the adopting release elsewhere expresses the expectation that almost all indexed annuity contracts will fail the test. If everyone is destined to fail, what is the purpose of a test? Further, there is at least some risk that in sweeping up the index annuity market, the rule may sweep up other insurance products that otherwise should fall within Section 3(a)(8).

The rule has other shortcomings, aside from the legal analysis that underpins it. These include, but are not limited to, the following.

First, a range of state insurance laws govern indexed annuities. I am disappointed that the rule and adopting release make an implicit judgment that state insurance regulators are inadequate to regulate these products. Such a judgment is beyond our mandate or our expertise. In any event, Section 3(a)(8) does not call upon the Commission to determine whether state insurance regulators are up to the task; rather, the section exempts annuity contracts subject to state insurance regulation.

Second, as a result of Rule 151A, insurers will have to bear various costs and burdens, which, importantly, could disproportionately impact small businesses. Some even have predicted that companies may be forced out of business if Rule 151A is adopted. Such an outcome causes me concern, especially during these difficult economic times. Even when the economy is not strained, such an outcome is disconcerting because it can lead to less competition, ultimately to the detriment of consumers.

Third, the Commission received several thousand comment letters since Rule 151A was proposed in June 2008. Consistent with comments we have received, I believe that there are more effective and appropriate ways to address the concerns underlying this rulemaking. One possible alternative to Rule 151A would be amending Rule 151 to establish a more precise safe harbor in light of all the relevant facts and circumstances attendant to indexed annuities and how they are marketed. A more precise safe harbor would provide better clarity and certainty in this area — regulatory goals the Commission has identified — and would preserve the ability of insurers to find an exemption outside the safe harbor by relying directly on Section 3(a)(8) and the cases interpreting it. I believe further exploration of alternative approaches is warranted, as is continued engagement with interested parties, including state regulators.

In closing, I request that my remarks be included in the Federal Register with the final version of the release. My remarks today do not give a full exposition of the rule's shortcomings, but rather highlight some of the key points that lead me to dissent. I wish to note that these dissenting remarks just given represent my view after giving careful consideration to the range of arguments presented by the Commission's staff, particularly the Office of General Counsel, the commenters, and my own counsel, as well as those of my fellow Commissioners. Although I cannot support the rule, I nonetheless thank the staff for the hard work they have devoted to its preparation.

Endnotes

1See generally SEC v. Variable Annuity Life Ins. Co. of Am., 359 U.S. 65 (1959); SEC v. United Benefit Life Ins. Co., 387 U.S. 202 (1967).

2See Malone v. Addison Ins. Mktg., Inc., 225 F. Supp. 2d 743 (W.D. Ky. 2002).

3Otto v. Variable Annuity Life Ins. Co., 814 F.2d 1127 (7th Cir. 1987). The Supreme Court denied the petition for a writ of certiorari.

http://www.sec.gov/news/speech/2008/spch121708tap.htm
Home | Previous Page
Modified: 12/17/2008

Annuity Leads - Question skillfully and listen carefully

2008-12-15T21:37:00.001-06:00
START SELLING! REMEMBER TO USE A

SERIES OF SIX "YES" QUESTIONS.

Give them the VERY unique "One Call Close" Presentation and set an appointment to come see them in one or two days and that referral prospect will now be ready for your "One Call Close" appointment.

Have any of your children ever been divorced?

Would you like to make sure that your saved dollar stays within your bloodline?

Do want your dollars to go to your child then your grandchildren?

When this annuity goes to your children, would you like them to spend this all at once or would you like them to receive it over a period of 5 years?

Do you also like the idea that by spreading it out over 5 years it doesn’t bump them into a higher tax bracket?

Or would you like to let them decide at that time?

Mr. Smith,

You indicated some discontent with your child. Would you like to skip your child altogether and have your dollars go straight to your grandchildren?

What do you want your grandchildren to use this for, living expenses, college or just let them decide at that time?

Do all of your children receive equal portions or do you wish to give one child more?

By asking these questions, you get emotionally involved with your prospect on the first appointment. Most systems require you to visit 3 or 5 times to get this deeply involved with your prospect.

Traditional Fixed Interest Rate Annuities

2008-12-13T10:04:00.001-06:00

American Equity - Products for Today - Fixed Rate Annuities
Traditional Fixed Interest Rate Annuities
A traditional fixed annuity is a contract between you and American Equity. Your annuity earns a competitive interest rate, which is declared by the board of directors at American Equity and is guaranteed for a specified period of time. It also contains a guaranteed minimum interest over the term of the contract. Taxes are not due on earnings until withdrawn.

The benefits and features of American Equity�s traditional fixed annuities include:

* Tax-Deferred Growth.
* Competitive current and renewal interest rates.
* First year additional interest rate bonuses or Multi-Year Guaranteed Interest Rates.
* Single or Flexible Premium.
* No up front sales charges or fees.
* Systematic Withdrawals of interest or amounts to satisfy IRS minimum distributions available immediately.**
* 10% penalty-free withdrawals starting in year 2.
* Additional liquidity if you are confined to a nursing home or diagnosed with a terminal illness (available by state approval).
* Company Surrender Charges may apply for early withdrawal.
* Surrender Charges are waived at death.

** Benefit not guaranteed and subject to change.

Features and benefits may vary by contract form and state. Please review the contract or product disclosure for more information.

Annuities are products of the insurance industry and are not guaranteed by any bank or insured by the FDIC.

What Is Triple Compounding?

2008-12-13T09:38:00.001-06:00

American Equity - Tax Deferral
Triple Compounding Solutions!

One of the primary advantages of deferred annuities is the opportunity to accumulate a substantial sum of money by allowing your premium and interest to grow tax-deferred. Interest earned on your American Equity annuity is not currently taxable by the federal or state government until you choose to make a withdrawal. This is the key difference between an annuity and other taxable financial vehicles. A 5% return may sound good initially, but if you are in a taxable vehicle with a combined 27% tax bracket, the actual return is 3.65%. Combine this with an average inflation rate of 4%, and what have you truly gained? That�s right... nothing!

Taxable vs. Tax-Deferred

With that in mind, consider the many advantages of an annuity, including triple compounding! With annuities you earn interest on your principal, interest on your interest, and interest on what you would normally pay in taxes. You will not pay income taxes on annuity interest until you withdraw it from your annuity. You control when you pay income taxes!

Deferred Annuity

SEC Ignores Congressional, State, and Industry Opposition to Indexed Annuity Proposal

2008-12-12T11:15:00.001-06:00

SEC Ignores Congressional, State, and Industry Opposition to Indexed Annuity Proposal
SEC Ignores Congressional, State, and Industry Opposition to Indexed Annuity Proposal

Last update: 11:09 a.m. EST Dec. 12, 2008
WASHINGTON, Dec 12, 2008 /PRNewswire via COMTEX/ -- The Coalition for Indexed Products issued a statement expressing "deep disappointment" in the Security and Exchange Commission's decision to pursue Proposed Rule 151A, which would require all indexed annuities to be registered as securities. The SEC announced yesterday that the proposal would be an agenda item on the Commission's December 17 meeting.
A letter signed by 19 members of Congress -- including several on the House Financial Services Committee -- was recently sent to SEC Commissioners expressing opposition to the proposed rule, according to the Coalition. It noted that Proposed Rule 151A would "reduce product availability and consumer choice" and "effectively [place] the cost of the regulation squarely on the shoulders of consumers."
Other high profile opponents include the National Association of Insurance Commissioners, the National Conference of Insurance Legislators, and a number of Congressional members who wrote separate letters to the SEC.
"The SEC's action appears to ignore the thousands of comments filed against this misguided proposal," said Jim Poolman, spokesperson for the Coalition and former North Dakota Insurance Commissioner.
"It is concerning that the SEC continues to see this issue as a priority in the middle of arguably the most severe financial crisis since World War II," Mr. Poolman added. "The Commission seems content to eliminate millions in market capital from the insurance industry, based on highly questionable suppositions."
SOURCE The Coalition for Indexed Products

Annuity
Annuity Rate
Annuity Guide
Index Annuities
Deferred Annuity

Fixed Indexed Universal Life Insurance

2008-12-12T09:10:00.001-06:00

Sagicor Life Introduces New Fixed Indexed Universal Life Product - 12/10/2008 - insurancenewsnet.com
Tampa, FL - December 9, 2008 – Sagicor Life Insurance Company is pleased to introduce its Platinum Series Fixed Indexed Universal Life product Which is now available in the following states: AL, AR, CO, DC, DE, GA, FL, HI, ID, IN, KS, MD, MO, NC, NE, NV, OK, RI, SC, and WA. More state approvals are soon.

The Platinum Series Fixed Indexed Universal Life product is ideal for family income protection, college savings, wealth building, retirement savings, estate planning, wealth transfer, charitable giving, business continuation, buy/sell plans, executive bonus plans, deferred compensation plans and more. The Fixed Indexed Universal Life is part of a growing portfolio of life and annuity products offered by Sagicor Life.

A key highlight of the Fixed Indexed Universal Life product is it provides immediate death benefit protection along with three distinct crediting strategies offering the potential for significant cash value growth on a taxed-deferred basis with no market risk. The available crediting strategies include a one-year Declared Rate Strategy, a one-year point-to-point strategy linked to the S&P 500® Index and a three-year point-to-point strategy based on a basket of indices made up of the Russell® 2000, the Dow Jones EURO STOXX 50® Index and the Hang Seng Index.

Other features include the Accelerated Benefit Insurance Rider which includes Terminal Illness and Chronic Illness Living Benefits*, penalty-free withdrawals, policy loans after the first year** and preferred loans available after the policy has been in force for ten years. Available optional riders include the Primary Insured Term Rider, Waiver of Monthly Deductions Rider, Additional Insured Term Rider, Children’s Term Rider, and Accidental Death Benefit Rider. Policy and Riders are not available in all states and state variations apply. For more information visit www.SagicorLifeUSA.com or contact our Sales Department at salesdept@sagicorlifeusa.com or call 800-406-9900.

About Sagicor Life Insurance Company

Sagicor Life Insurance Company is a full-service life insurance company offering a wide range of competitive products consisting of term, whole life, indexed life and annuities. Licensed in 44 states and the District of Columbia, Sagicor Life is a wholly-owned subsidiary of Sagicor Financial Corporation, one of the oldest insurance groups in the Americas, with operations in 22 countries including the United States, United Kingdom, Latin America and the Caribbean. Sagicor Life is committed to offering our agents and customers world-class service with integrity and value.

* Not available in all states.
** In Indiana, loans can be taken in the first year.

MEDIA CONTACT:

Anabel S. Thomas
Sagicor Life Insurance Company
Phone: (813) 287-1602 ext. 6207
Fax: (813) 287-7420
anabel_thomas@sagicor.com

Index Annuity
Equity Index
Index Annuity Rate

Fixed Income -- Annuities can’t be seen as asset in determining nursing home assistance.

2008-12-08T15:49:00.001-06:00

Annuity ruling sets standard | Wilkes-Barre News | The Times Leader
Annuity ruling sets standard
Recent decision reaffirms other rulings that annuity can’t be seen as asset in determining nursing home assistance.

By Terrie Morgan-Besecker tmorgan@timesleader.com
Law & Order Reporter

In a precedent-setting ruling, a federal appellate court has said the state Department of Public Welfare cannot consider a $250,000 annuity a Wilkes-Barre woman purchased following her husband’s entry into a nursing home as an asset when determining whether he was eligible for Medicaid benefits.

The ruling by the Third Circuit Court of Appeals is the latest in a series of court cases brought by welfare officials in Pennsylvania and other states. The cases challenge a loophole in the Medicaid law that officials say has allowed affluent couples to use annuities to shelter assets that otherwise would be available to pay for an institutionalized spouse’s care.

The decision, issued last month in the case of Josephine James, is significant because it reaffirms prior court rulings, said James’s attorney, Matthew Parker of Williamsport. It will affect all residents in the states covered by the Third Circuit – New Jersey, Pennsylvania and Delaware.

But Jason Manne, chief deputy counsel for DPW, said the court’s ruling is fact-specific to the James case. Even though the department lost, Manne contends the legal reasoning the court employed will help DPW challenge the use of annuities in calculating Medicaid benefits.

The ruling is being closely monitored by attorneys on both sides of the issue as the stakes are huge. The average annual cost of nursing home care for one person is $60,000, according to DPW. Last year, Pennsylvania’s Medicaid fund paid out more than $3 billion to nursing homes.

While providing health care coverage to all persons is a laudable goal, DPW says, it has an obligation to ensure that Medicaid is utilized for those who truly need it.

“This does not involve poor people or people of modest means,” Manne said. “The problem is you have individuals who have hundreds and hundreds of thousands of dollars, sometimes even millions, who, rather than use their money for their nursing home care, want the taxpayers to pay for that care.”
A legal loophole

But Parker and other elder-law attorneys say couples such as the Jameses are simply availing themselves of all options to ensure the non-institutionalized spouse is left with sufficient income to support him or herself.

They note that amendments to the law that went into effect in 2006 now require DPW be listed as a lien holder on annuities in which a person or the person’s spouse is receiving Medicaid benefits. That does not affect Josephine James, whose case started in 2005. For all subsequent cases, it allows DPW to recoup all money spent on caring for the institutionalized spouse from the estate of the non-institutionalized spouse after their death.

They also note that regulations are in place to ensure the process is not abused. Welfare officials, they say, are trying to use the courts to circumvent a law they don’t like.

“If in fact there are any alleged loopholes, they were created by Congress. It is not for DPW ... to determine what public policy is when Congress has spoken,” said attorney Shirley Berger Whitenack of New Jersey, a member of the National Academy of Elder Law Attorneys. “If DPW doesn’t like it, they can certainly lobby Congress” to change the law.

The key issue focuses on the structure of an annuity – a contractual agreement in which the buyer gives the seller, typically an insurance company or bank, a lump sum of money. The company or bank then pays the purchaser a consistent monthly amount, or an “income stream,” over a given period of time.

In determining whether an institutionalized spouse will qualify for Medicaid assistance, states consider a married couple’s assets – including cash, stocks, bonds and property. The law prohibits the state from considering the income of the non-institutionalized spouse – known as the community spouse – in that calculation.

The community spouse is afforded a percentage of the assets to live on. Any excess is deemed an “available asset” that can be used to pay nursing home costs. Medicaid kicks in once that money has been exhausted.

The key benefit of an annuity is that it allows couples to convert joint assets that otherwise would be deemed available into an “income stream” for the community spouse. Because that money is now considered to be the income of the community spouse – not an asset – it cannot be counted when determining the institutionalized spouse’s Medicaid eligibility.
How it worked

In the James case, Robert James, now deceased, was admitted to a Wilkes-Barre nursing home on Aug. 10, 2005. At that time, he and his wife had total assets of $381,443, of which roughly $278,000 was deemed “available assets” that could be used to pay for Robert’s care.

In order to qualify Robert for Medicaid, Josephine James purchased a $250,000 annuity on Sept. 12, 2005 – about a month after her husband entered the home. She also spent about $28,000 on a new car, leaving no available assets to pay for her husband’s care under Medicaid rules.

Robert James then applied for Medicaid benefits, but was denied by DPW.

The department did not allege Josephine James did anything improper when she converted the couple’s assets into an annuity for herself or when she purchased the car, both of which are allowed under the rules.

Rather, it argued the annuity was an asset because Josephine James could, if she chose, sell the “income stream” it generated to a firm such as J.G. Wentworth, a company that purchases annuities and other types of structured payments for a lump sum.

The Jameses’ filed a federal court action that challenged the department’s interpretation. A federal judge ruled in their favor, saying nothing within the Medicaid Act says DPW can force a person to sell an annuity to a second party.

DPW appealed to the Third Circuit, which also sided with the Jameses.
More tests ahead

In its ruling, the court said Medicaid rules state that an asset can only be deemed “available” if the owner has the ability to liquidate it without incurring legal liability.

In the James case, her annuity was non-transferable and non-revocable, meaning she could not access the principal and could not sell it. If she did, she would be breaking the contract, subjecting her to legal liability. The court said it therefore could not be considered an asset.

While the ruling benefits James, Manne said it will not benefit persons who purchase annuities today because Pennsylvania in 2005 amended its law to forbid sellers of annuities from including a clause that makes them non-transferable. That would allow annuities to be sold without legal liability, he said, and allow the state to consider them an asset.

Manne acknowledged that others have interpreted the Third Circuit’s decision differently. There are also other complex legal issues that still must be resolved, he said.

Given that, the true significance of the ruling won’t be known until other courts apply the decision to pending cases that raise issues similar to the James case, he said.

Terrie Morgan-Besecker, a Times Leader staff writer, may be reached at 570-829-7179.

Insurers Abandon Rosy View of Variable Annuities

2008-12-02T11:03:00.001-06:00

Insurers Abandon Rosy View of Variable Annuities at SmartMoney.com
Insurers Abandon Rosy View of Variable Annuities

For the last few years, insurance companies have been luring investors with an irresistible product: an investment that guaranteed market gains, with no risk, and generous income payments for life. Surprise of surprises, that pitch has worked, reviving the lackluster variable annuity and attracting about $140 billion a year in investor assets.

But the guarantees on these variable annuities sounded too good to be true, and a few months ago SmartMoney asked insurance company executives to explain how, exactly, they planned to keep them.

As it turns out, it’s not so easy. A variable annuity is basically an investment portfolio with an insurance overlay – investors got tax-deferral and, usually, a death benefit, but paid high fees and big withdrawal penalties. But in the last few years, insurance companies have started marketing the investments as safe havens for people in retirement or close to it: a typical product lets investors stay in the market, but promises a lifetime income stream based on an account value that can only go up, often by as much as 7% per year. That means investors’ potential income rises regardless of what happens in the market.

How’s that possible? Apparently, it’s not. When we asked earlier this year, the insurance companies told us they had it all under control, guaranteeing the benefits with sophisticated models and elaborate hedging strategies that would hold up even in a severe market downturn. But now that we’ve had that severe downturn, several companies have stopped selling their most generous variable annuities or raised fees, citing “prudence in light of current market conditions” – code for “we didn’t expect this.”

MassMutual has stopped selling an annuity that guaranteed a 6% annual return; AXA-Equitable has taken a product with a 6.5% guarantee off the shelf and raised the prices on its existing product; other companies are doing the same. “In today’s market, a 6.5% guarantee just is not prudent,” said Steve Mabry, senior vice president of product development at AXA-Equitable.

In theory, investors who already own one of these annuities are still entitled to the benefits for as long as they hold their contracts. And lucky them: in today’s markets, a 6.5% annual return looks downright spectacular. The problem is, the guarantees are still only as good as the companies that insure them. And this most recent move – discontinuing products, raising fees – acknowledges that the companies’ models and hedging strategies aren’t as stable as they thought. The financial crisis has hurt insurance companies across the board -- AIG has already received federal bailout funds; the Hartford has taken steps to apply for them – and the question policyholders need to ask is, “Will my company be around in four or five years, when I want to exercise that benefit,” says John McCarthy, vice president at Advance Sales, an annuity research company.

There are backstops in place, of course, but if companies go out of business, it won’t look good for investors. “You may be able to collect your account value,” said McCarthy. “But you’ve paid for a guarantee that you’ll never get.” The insurance companies say that won’t happen. They point to the rules and regulations that require them to keep a certain amount of money in reserve. Also, most states require insurers to guarantee at least $100,000 in annuity benefits, but it’s not clear whether these variable annuity benefits qualify. “They might be covered today, and they might not be, and that might not mean anything five or 10 years from now,” says Mike Surguine, the executive director of the Arizona Life and Disability Guaranty Fund. “The laws could change.” And, says AXA’s Mabry, the company discontinued its most generous guarantee precisely to insure the financial health of the parent company.

But some companies are showing no sign of retreat, at least not yet. Prudential is still selling its most generous annuity, which guarantees a 7% annual rate of return under any market conditions. It’s not cheap – the all-in cost for an annuity with the guarantee is well over 3% per year – but in this market, it’s selling like crazy: In the third quarter of 2008, 75% of Prudential annuities carried the benefit. The company says it has no plans to raise its prices or reduce the benefit, and says it’s confident it can handle these commitments. In any case it’s a big guarantee – as long as they’re around to keep it.

American Equity - News Article

2008-11-30T20:21:00.001-06:00

American Equity to Present at Friedman, Billings, Ramsey 2008 Fall Investor Conference
WEST DES MOINES, Iowa, Nov 25, 2008 (BUSINESS WIRE) -- American Equity Investment Life Holding Company (NYSE: AEL), today announced that Wendy Carlson, CFO and General Counsel, and John Matovina, Vice Chairman, will be presenting at the Friedman, Billings, Ramsey 2008 Fall Investor Conference in New York, NY on Tuesday, December 2 at 2:20 p.m. EST. Investors may access a web cast of this presentation on American Equity's Website, www.american-equity.com.

Certain statements made during this presentation may constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities and Reform Act of 1995. Actual results may differ materially. These forward-looking statements are subject to a number of risks and uncertainties discussed in detail in American Equity's most recent SEC filings.

ABOUT AMERICAN EQUITY

American Equity Investment Life Holding Company, through its wholly-owned operating subsidiaries, is a full-service underwriter of a broad line of annuity and insurance products with a primary emphasis on the sale of fixed-rate and index annuities. The company's headquarters are located at 5000 Westown Parkway, West Des Moines, Iowa, 50266. The mailing address of the company is: P.O. Box 71216, Des Moines, Iowa, 50325. For more information, visit our website www.american-equity.com.

SOURCE: American Equity Investment Life Holding Company

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Questions for your annuity leads

2008-11-27T21:34:00.000-06:00
1. Why did you make an appointment with me? or

Why did you let me come see you?

2. What about the presentation interested you most?

QUESTION SKILLYFULLY AND LISTEN CAREFULLY.

3. Do You need income now?

4. Will you need income later from your savings (IRA)? When?

5. Do you think you will need this account (money)

to live on or are you wanting to be a good steward

of this account until it goes to your beneficiaries?

(choose the good steward question wisely)

6. Would you like to protect your money now, and make

the decisions about how it is paid out later?

Get referrals by asking them the right questions.

7. "If you were mentally incapacitated or in a medical emergency, who, of your close friends could I give my phone number to? So they can call me in case of emergency."

Then immediately call & go to the referral and say this: "Mrs. Jones, your friend, Mrs. Smith, wants you to have my name in case of emergency, so I can help her family with their important papers.

Will you keep my name and number with you in case of emergency with Mrs. Smith?"

"Oh, Thank you. And by the way, Who do you have that will look out for you in case of an emergency? May we talk for a few minutes?"

Annuity Leads

Fixed Annuity - American Equity Announces AEL Management Succession

2008-11-22T10:14:00.001-06:00

American Equity - News Article
WEST DES MOINES, Iowa, Nov 21, 2008 (BUSINESS WIRE) -- American Equity Investment Life Holding Company (NYSE: AEL), today announced the implementation of a senior management succession plan as approved by its Board of Directors and David J. Noble, Chairman. Mr. Noble, who founded the company in 1995, has served as its Chairman, Chief Executive Officer, President and Treasurer from inception and led the Company through its dramatic growth over the last decade. Commented Mr. Noble: "I have built a senior management team who possess substantial industry experience as well as many years of working effectively together. The time has come to call upon them to assume full responsibility for the day-to-day management and operations of the Company. I am tremendously proud of American Equity and the people who helped me build it."

The management succession plan includes the following changes in the executive ranks of the company and of its primary operating subsidiary, American Equity Investment Life Insurance Company ("American Equity Life"), effective January 1, 2009:

AEL:

John M. Matovina, Vice Chairman, Chief Financial Officer and Treasurer

Wendy L. Carlson, Chief Executive Officer and President

American Equity Life:

Ron Grensteiner, President

Debra J. Richardson, Chief Administrative Officer, Executive Vice President and Secretary

Mr. Noble will remain as Chairman of the Board of AEL as well as American Equity Life. All other executive positions within the Company remain unchanged.

Kevin R. Wingert will resign as President of American Equity Life and as a Director of AEL and American Equity Life effective January 1, 2009, in order to form his own business as a national marketing organization. He intends to principally market American Equity Life products through a new agency force he will create. Commented Mr. Wingert: "I'm fortunate to have had such a great relationship with Mr. Noble and the entire AEL team, and I'm looking forward to partnering with them in the future on products and services for agents."

Biographical information concerning Ms. Richardson, Ms. Carlson, Mr. Matovina and Mr. Grensteiner is as follows:

Debra J. Richardson has served as Senior Vice President and Secretary of AEL and American Equity Life since 1996. At the Company's inception, Ms. Richardson became its second employee after Mr. Noble. She has served as a Director of AEL since September 2008 and as a Director of American Equity Life since June 1996. Ms. Richardson has over thirty years experience in the insurance industry, including nineteen years with The Statesman Group, Inc. ("Statesman") where she served in various positions including vice president-Shareholder/Investor Relations and Secretary.

Wendy L. Carlson has served as Chief Financial Officer and General Counsel of AEL and American Equity Life since June 1999. She has served as a Director of AEL since September 2008 and as a Director of American Equity Life since June 2006. Prior to joining AEL, Ms. Carlson was a member of the law firm of Whitfield & Eddy, PLC, where she practiced law in the areas of insurance, finance, securities and taxation. Ms. Carlson acted as outside counsel to American Equity from 1995, when it was formed, until she joined the company in 1999. Ms. Carlson is also a certified public accountant.

John M. Matovina has served as Vice Chairman of AEL since June 2003. Prior to being appointed Vice Chairman, Mr. Matovina was a private investor since 1996 and a financial consultant to the Company from 1997 to 2000. He has served as a Director of AEL since June 2000 and as a Director of American Equity Life since June 2003. From November 1983 through November 1996, he was a senior financial officer of Statesman and many of its subsidiaries, and prior to Statesman's acquisition in September 1994, he served as Statesman's Chief Financial Officer, Treasurer and Secretary. Mr. Matovina is a certified public accountant and has more than 25 years experience in the accounting and insurance industries.

Ron Grensteiner has served as Senior Vice President of Marketing for American Equity Life since November 1996. At the Company's inception, he and Mr. Wingert comprised its marketing department and together with Mr. Noble built American Equity Life's agency force which today stands at over 46,000 licensed, independent sales agents. Prior to joining American Equity Life, Mr. Grensteiner was a senior marketing officer of Statesman's principal operating subsidiary. Mr. Grensteiner has over 30 years experience in the insurance industry.

ABOUT AMERICAN EQUITY

American Equity Investment Life Holding Company, through its wholly-owned operating subsidiaries, is a full-service underwriter of a broad line of annuity and insurance products with a primary emphasis on the sale of fixed-rate and index annuities. The company's headquarters are located at 5000 Westown Parkway, West Des Moines, Iowa, 50266. The mailing address of the company is: P.O. Box 71216, Des Moines, Iowa, 50325. For more information, visit our website www.american-equity.com.

SOURCE: American Equity Investment Life Holding Company

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Annuity Lead Programs - Ask your annuity leads questions

2008-11-14T06:00:00.002-06:00
Sometimes they buy on the first closing attempt Because the "One Call Close Annuity" Presentation totally prepares your prospect for your first visit.

Even if you don't do a seminar you can send the presentation to your prospect before you first appointment. In fact, I ALWAYS send the "presentation" before every lead appointment generated outside my seminars!

Remember, The "One Call Close" Annuity Seminar and Presentation will show you how to ...Make Maximum Money in Minimum Time, Using Modern Direct Marketing Tools and Strategies Instead of Old-Fashioned "Grunt Work".

The most important secret to the "One Call Close" Annuity System in that you are set up to close on your first appointment. No other system does this for you.

Annuity Lead Programs - Questions to ask your annuity lead

2008-11-04T06:00:00.002-06:00
If you should live long enough or lose your memory wouldn't you like to have your financial matters automated on a guaranteed basis?

You do like the fact that your spouse or children won't have to make investment decisions for you don't you?

Why is that important to you?

With the application in your hand, make this statement--then question--"Steven Covey, in his book, "7 Habits of Highly Effective People" says "to begin with the end in mind first."

So, my question is, who do you want your money to go to if you and your spouse die simultaneously?"

"Do you want Mary, John and Bill to receive the money all at once or would you like to spread it out as an income?

For How Long? Five years? OK!"

START FILLING OUT THE APPLICATION NOW!

Most of the time I begin filling out the application on the secondary beneficiary portion of the application. THEN I ask for the full name of the Primary beneficiary and how they want the primary beneficiary to be paid---or do they want the beneficiary to be able to chose what to do at that time.

OR--the beneficiary doesn't even have to make a decision for one year! O.K. just let her decide at that time. "Can I have a glass of water?"

--Your prospect is very nervous when your closing. Getting them moving relieves that tension. You would be surprised how many men are standing above me when I begin filling out the application.

"What is your date of birth, Mr. Jones?"

You see, this close I just gave you is emotional

and benefit oriented. NOT Performance oriented!

Can you feel the psychology? Doesn't it tell you how to Tap into and TRIGGER a Retirees emotions?

I do this very early in my One Call Close appointment--if I get an objection, I harmonize with the objection and close again and again and again.

FREE Annuity Leads - More Questions To Ask Your Annuity Leads

2008-10-25T06:00:00.002-05:00
Are you concerned about outliving your money?

Did you know that most people in the retirement age group have

replaced the fear of dying with the fear of living too long?

Have you thought about living too long?

How long did your parents live?

What age would you like to live to?

What are some things you would like to do between now and then? (Goal seeking questions)

What one goal, if you achieved it, would have the greatest positive impact on your family?

What one goal, if you achieved it, would have the greatest positive impact on your financial life?

Are you aware that people turning 85 years of age are the fastest growing segment of our population? Will Your Money last until

you are 90, 92, --95???

Would you like to discover the only way to guarantee your money will last as long as you do?

If you should live long enough or lose your memory wouldn't you like to have your financial matters automated on a guaranteed basis?
Annuity Seminar

Questions to ask your annuity leads or prospects

2008-10-16T06:00:00.000-05:00
What one thing could you do, or stop doing, that would give you the greatest sense of peace and happiness?

How do you measure success in this area?

Could there be a better way? What might it be?

Do you know what your account will be worth on the day you die or become ill ?

Power Phrase

Just like at the Casino, you don't know what you have until the day you cash out and leave.

Is there anything in your financial papers that, knowing what you now know, you wouldn't get into again today?

Based on your answers to the above, what actions are you going to take immediately? What one action will you take first?

SEC to hear more on fixed index annuity regulation

2008-10-13T16:11:00.001-05:00

SEC to hear more on index annuity regulation - InvestmentNews
By Darla Mercado
October 13, 2008, 3:47 PM EST

The Securities and Exchange Commission has reopened the comment period for its proposed rule on federal regulation of index annuities.

The Washington-based regulator made the announcement on Friday, giving the public thirty days from the publication of the extension in the Federal Register.

The rule, known as 151 A, would define the terms “annuity contract” and “optional annuity contract” under the Securities Act of 1933, clarifying index annuities’ status under the federal securities laws.

Were the rule to be approved, the products would come under the jurisdiction of the SEC and the Financial Industry Regulatory Authority Inc. of New York and Washington.

Comments may be submitted here.

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Annuities

2008-10-11T09:13:00.001-05:00

AMEB,AEL American Equity: Year-to-Date Annuity Sales Up 6% From Year Ago
American Equity: Year-to-Date Annuity Sales Up 6% From Year Ago

WEST DES MOINES, Iowa, Oct 07, 2008 (A. M. Best via COMTEX) -- AEL | Quote | Chart | News | PowerRating -- American Equity Investment Life Holding Co., a top seller of equity-indexed annuities in the United States, said year-to-date annuity sales rose 6% from the same period a year ago.

Ahead of releasing its third-quarter earnings next month, American Equity (NYSE: AEL | Quote | Chart | News | PowerRating) on Oct. 3 said annuity sales for the quarter totaled $571.8 million, bringing year-to-date sales to $1.7 billion for the first nine months of this year, up from $1.6 billion in the same period in 2007.

At the end of trading Oct. 6, American Equity Investment Life led the A.M. Best Global Insurance Composite Index -- up 17.93% from the previous close. The A.M. Best Global Index closed at 859.99 -- down 6.72%.

The West Des Moines, Iowa-based company will release third-quarter earnings Nov. 5 after the market closes. For year-end 2007, American Equity's net income declined 61.6% to $29 million, while total revenues dropped to $915.9 million, a decrease of 22%.

Debate surrounds indexed annuities. Back in June, the U.S. Securities and Exchange Commission proposed a rule, 151A, that would define certain indexed annuities as securities products. Under the rule, these annuities ? currently regulated as insurance products ? would be treated as securities if amounts payable by the insurer are more likely than not to exceed amounts guaranteed under the contract.

Insurance carriers would need to refile the products with the SEC and offer them via a prospectus. Agents who wish to continue selling them would need to become registered representatives overseen by the Financial Industry Regulatory Authority, a status held by only about 55% of those who currently sell the products (BestWire, Sept. 8, 2008).

The comment period for the SEC's proposal ended Sept. 10. As of that day, 2,400 comments were sent to the SEC and about 90% were in opposition, American Equity said. The SEC has continued to accept comments received after the deadline, it said.

American Equity said it co-hosted a Congressional "fly-in" in Washington, D.C., on Sept. 23 in which the Coalition for Indexed Products, made up nine companies and a group of national marketing organizations representing the coalition, met with nearly 80 members of Congress. They urged members to tell the SEC the measure isn't needed because indexed annuity sales "are already heavily regulated by state insurance departments and would restrict consumer choice at a time when access to principal-protected products like fixed-index annuities should be carefully guarded," American Equity said.

The SEC, which adopted the proposed rule unanimously, has pointed to allegations of abuses in the marketing of indexed annuities to seniors, and has sought supervision by the Financial Industry Regulatory Authority of those who sell the products. According to the SEC, among complaints made to state securities regulators, cases involving annuities represented 65% of the caseload in Massachusetts, and 60% of the caseload in Hawaii and Mississippi (BestWire, July 28, 2008).

(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)

Annuity Index Annuity Fixed Annuity

Immediate Annuity - Women's financial security in retirement

2008-10-11T09:01:00.001-05:00

Advice for men and women about women's financial security in retirement - The Boston Globe

I've thought about dying before my wife Georgina after reading two recent studies on women and retirement.

"Compared with men, women will likely have lower retirement savings yet they'll need to make those savings last longer and plan on being on their own at some point," concludes "Why Women Worry," part of ongoing research on retirement issues by the financial firm The Hartford and MIT's AgeLab.

On average, a woman, 65, can expect to live to 85, about three years longer than men, and has a 23 percent chance of living past 95, based on mortality tables.

"When a woman outlives her husband, her income decreases by 50 percent on average yet expenses only decrease by 20 percent," the study said.

The second study, "Lifetime Income for Women: A Financial Economist's Perspective," was authored by David Babbel, a professor at the Wharton School of Business, and cosponsored by New York Life Insurance Co.

Babbel argues women should allocate substantially less money to stocks and stock mutual funds in retirement and more to immediate annuities that guarantee an income for life in return for a lump-sum premium.

"Annuities are even more important for women because their risks are compounded by longer life expectancy as well as potentially outliving husbands by six years or more (wives tend to be younger than their husbands)," said Babbel. He concludes that income annuities from top-rated insurance companies can provide secure lifetime income for 25 to 40 percent less money than it would take an individual.

That's because insurance companies base their payouts on average life expectancies (premiums from those who die early subsidize payments to those who live longer). When we invest on our own, we must plan for our money to last several years beyond life expectancy, just in case.

For this reason, financial planners often recommend retirees withdraw no more than 4 percent of savings the first year of retirement, increasing the amount by 3 percent a year to counteract inflation.

But, several top-rated insurance companies offer lifetime annuities with payout rates of 5 percent or more the first year for a 65-year-old couple, raising the amount 3 percent a year and with a "refund" feature (if both spouses die before income payments equal the premium, a beneficiary gets the difference).

But with income annuities, we typically give up our principal and can't access it beyond the scheduled income payments. Some contracts allow exceptions at the cost of lowering income.

In all states, guaranty associations belonging to the National Organization of Life and Health Guaranty Associations back income annuity obligations up to a limit ($100,000 or more per company depending on the state) per policyholder if an insurance company goes bankrupt.

Humberto Cruz is a syndicated columnist. He can be reached at askhumberto@aol.com.

Fixed Annuity

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Free Annuity Leads and Lead Programs

2008-10-03T06:00:00.000-05:00
RETIREES DON'T KNOW WHAT TO DO ABOUT...

* How to stop paying taxes on Social Security?

* How to protect assets from creditors?

* How to not outlive their income!!

* How to invest?

* How to make money when stocks go up and when stocks go down.

Imagine these topics advertised as a FREE 7 part email course!!

* How to make money when bonds go up and when bonds go down!

* If their IRA is set up correctly!

* How to control from the grave --- FREE!

* How to reduce IRA distribution and taxes.

* How to protect their life's savings!

And anything else about their retirement!

Yes, this Bear Market,

War on Terror,

this messed up economy,

runaway medical expenses,

the fear of losing their assets,

of running out of money,

or whatever...is the best EIA marketing opportunity we,

as wise annuity producers look for!

"So, Jeff", you're probably thinking,

"How do you fully exploit this wonder to

sell millions of dollars in Equity Index Annuities?"

I knew you'd ask, so I'll tell you.

WORKSHOPS AND SEMINARS

So, if you want the opportunity for profits that are truly extraordinary... And want to..."ONE CALL CLOSE ANNUITIES"

Now is the time to take action and get set for profits from the next leg down in this great bear market doing...

"DON'T BE A VICTIM OF THE STOCK MARKET COLLAPSE"

Seminars, or

"HOW TO RECEIVE STOCK MARKET GAINS WITHOUT

RISK TO YOUR PRINCIPAL"

workshops or

"HOW TO MAKE MONEY WHEN STOCKS GO UP OR

WHEN STOCKS GO DOWN"

seminars...

Annuity Leads

FDIC May Need $150 Billion Bailout as More Banks Fail

2008-10-01T18:44:00.001-05:00

FDIC May Need $150 Billion Bailout as More Banks Fail (Update3)

By David Evans
More Photos/Details

Sept. 25 (Bloomberg) -- Deborah Horn tugs on the handle of the glass-paned entrance of the IndyMac Bancorp Inc. branch in Manhattan Beach, California. The door won't budge. The weekend is approaching, and Horn, 44, the sole breadwinner in a family of three, needs cash.

A small notice taped to the window on this Friday afternoon in mid-July tells her why she's been locked out. IndyMac has failed, the single-spaced, letter-sized paper says; the bank is now in the hands of the Federal Deposit Insurance Corp.

``The Receiver is now taking possession of the Bank,'' the sign says.

``I'm physically shaking,'' says Horn, an academic tutor, as she peers into the bank. Inside, an FDIC examiner is talking to six stone-faced IndyMac employees. ``I don't know when I'm going to be able to get my money,'' Horn says. ``I'm a single mom. This is the money I live on.''

Don't worry about Horn. She'll be all right, as will most of Pasadena, California-based IndyMac's 200,000-plus customers.

That's because the FDIC, created in 1934, insures all accounts up to $100,000 at its member banks, and it has never failed to honor a claim. The people to worry about are U.S. taxpayers.

The IndyMac debacle is taking a large bite out of FDIC reserves, and if scores of other banks fail in the year ahead, the fund will be depleted. Taxpayers will have to step in.

Worst Wave

Americans had gotten used to the idea that bank failures were as rare as a category five hurricane. No banks went bust in 2005 or 2006. Seven collapsed in 2007 as the credit crisis began to exact a toll. So far in 2008, 12 more, with total assets of $42 billion, have fallen -- that's the worst wave of bank failures since 1992.

IndyMac, which had $32 billion in assets when it went into receivership, is the most expensive bank failure the FDIC has ever covered. And that record may not stand for long.

By the end of 2009, about 100 U.S. banks with collective assets of more than $800 billion will fail, predicts Christopher Whalen, managing director of Institutional Risk Analytics, a Torrance, California-based firm that sells its analysis of FDIC data to investors.

``It's not going to be Armageddon,'' says Mark Vaughan, a financial economist at the Federal Reserve Bank of Richmond, Virginia and a senior lecturer in economics at Washington University in St. Louis. ``But it's going to be bad.''

FDIC's Secret List

The FDIC knows which banks are at risk; it has a watch list with 117 institutions. The agency won't disclose their names because doing so could cause depositors to panic and pull out all of their funds.

It won't take many more failures before the FDIC itself runs out of money. The agency had $45.2 billion in its coffers as of June 30, far short of the $200 billion Whalen says it will need to pay claims by the end of next year. The U.S. Treasury will almost certainly come to the rescue by lending money to the FDIC.

Regardless of who wins control of the White House and Congress in November, no politician is likely to vote in favor of leaving federally insured depositors out in the cold.

A taxpayer bailout of the FDIC would come on the heels of intervention by the U.S. Treasury Department and Federal Reserve to save investment bank Bear Stearns Cos., mortgage giants Fannie Mae and Freddie Mac and the world's largest insurer, American International Group Inc.

Uninsured Deposits

Emergency federal lending to the FDIC could swell the cost of government rescues of failed financial institutions to more than $400 billion -- not including the $700 billion general Wall Street bailout now under discussion in Congress. Under federal statute, the FDIC must pay back any loans from the Treasury.

That number would be even higher if the government were on the hook for uninsured deposits -- which amount to $2.6 trillion, 37 percent of the total of $7 trillion held in the U.S. branches of all FDIC member banks.

The subprime crisis -- which started in the suburbs of California and Florida and migrated through the alchemy of securitization to Wall Street investment banks -- has come almost full circle, spreading its toxins to the very lenders who first extended those teaser-rate, no-document mortgages to homeowners.

In 2006, IndyMac was the largest provider of mortgages that didn't require borrowers to provide proof of their incomes. And as of mid-September, investors were worried that Washington Mutual Inc., the biggest thrift in the U.S., would be the next bank to go belly up.

A federal takeover of Washington Mutual, which has assets of $310 billion, could cost taxpayers $24 billion more, according to Richard Bove, an analyst at Miami-based Ladenburg Thalmann & Co.

Slower To Hit

The reckoning that has run through Wall Street, claiming investment banks Lehman Brothers Holdings Inc. and Bear Stearns among its victims, has been slower to hit Main Street. In mid- 2007, Wall Street firms began disclosing losses on their packages of securitized home loans.

From August 2007 to September 2008, banks worldwide wrote down more than $500 billion. Regional banks, by contrast, have waited to write off their bad mortgages, hoping the housing market would improve and defaults would level off. Instead, they've risen.

FDIC-insured banks charged off $26.4 billion of bad loans in the second quarter of 2008, the most since 1991.

U.S. lenders, in their embrace of subprime lending, committed the same analytical fallacy as their Wall Street counterparts. When it came to assessing risk, they relied on the recent past to predict the near future.

Living in the Past

They were blinded by years of rising home prices and low mortgage default rates.

The FDIC fell into the same trap. As recently as March, an internal FDIC memo estimated the cost to cover bank collapses in 2008 would be just $1 billion, dropping to $450 million in 2009. It wasn't even close.

The IndyMac failure alone, which happened four months after that memo was circulated, will cost the FDIC $8.9 billion -- and the bill for all 12 collapses will be about $11 billion, the FDIC says.

FDIC Chairman Sheila Bair says the agency's forecast was based on models using data from the past 20 years, which included long periods with few bank failures.

``Given the change in economic conditions, we need to weight the more recent data more heavily,'' Bair says. ``You also need a good dose of common sense.''

Bair says depositors shouldn't fret about their banks. ``We do have a handful with some significant challenges,'' she says. ``Overall, banks are quite safe and sound.''

Bair is duty bound to say that, says Joseph Mason, an economist who worked for the Treasury from 1995 to 1998. Part of the FDIC's job is to reassure the public and prevent runs on banks. Mason says Bair's rhetoric masks the agency's inability to grasp the scope of the coming crisis.

`Ignoring the Problem'

``The FDIC and the banking regulators are ignoring the problems, hoping they'll go away,'' he says. ``They won't.''

The quake that shook markets in September may make the FDIC's task more complicated and expensive. With investment banks in eclipse, deposit-taking institutions will now play a larger role in financing the economy.

Earlier this month, Bank of America Corp. agreed to buy Merrill Lynch & Co. for $50 billion, and Wachovia Corp. and Morgan Stanley were in talks about a potential merger.

'Would Be Miraculous'

From 2002 to 2007, U.S. lenders made a total of $2.5 trillion in subprime mortgages, according to the newsletter Inside Mortgage Finance. ``Given the magnitude of the bad loans still on bank balance sheets, it would be miraculous for the FDIC to squeak by with losses of less than $200 billion,'' Whalen says.

On Sept. 18, in yet another stunning turn of events, Paulson proposed a plan that would cost the government, if not necessarily the FDIC, hundreds of billions of dollars more.

The Treasury secretary says the government will purchase toxic mortgage debt from banks in an effort to cleanse the financial system. In an unprecedented move, the Treasury also pledged $50 billion to insure nonbank money market funds.

Bair says Paulson's plan won't reduce the number of banks on the FDIC's watch list.

One reason the rolling financial crisis is hitting regional banks later than it walloped Wall Street is because the very system that is meant to protect depositors -- federal insurance -- has also served to prop up weak lenders. So has the ready supply of credit extended to banks by another government-chartered group, the Federal Home Loan Banks.

Because all deposits up to $100,000 are insured, most savers can be agnostic about where they put their money. They don't have to know -- or care -- whether a bank is making sound or foolish loans.

Unlike buyers of stocks or bonds, people who put their money in banks rarely do research about the soundness of the institution. That makes it easy for banks -- both prudent and reckless ones -- to raise cash.

Brokered Deposits Loophole

Banks have taken the FDIC's protection and run with it, thanks to the phenomenon of brokered deposits -- and a giant loophole in federal regulations.

As of June 30, Whalen says banks held $644 billion from brokers who offer customers a way to gain FDIC insurance for multiple accounts.

Promontory Interfinancial Network LLC, an Arlington, Virginia-based company founded in 2002 by former federal officials --including some from the FDIC itself -- has figured out how to help wealthy clients insure as much as $50 million each by putting their money into separate accounts at 500 different banks.

While the law does limit insurance to $100,000 per account, it places no ceiling on the number of different banks where an individual can hold accounts -- a loophole Congress failed to close even after the savings and loan debacle of 1984-1992.

Missing Discipline

Bair says brokered deposits can provide quick cash but also create potential danger.

``It is quite easy to get brokered deposits, and there's not a lot of market discipline with the brokered deposits,'' she says. ``When there's excessive reliance on them, particularly to fuel rapid growth on the balance sheet, that's definitely a high-risk factor.''

The other big source of money for banks is the FHLB, an under-the-radar network of 12 regional banks created by Congress in 1932 to help lenders finance mortgages. Lenders had borrowed a total of $840.6 billion from the FHLB system as of June 30, up 38 percent from $608 billion in the same period a year earlier.

Treasury Secretary Henry Paulson, in a little-noticed action on Sept. 7, the day after he announced the bailout of Fannie and Freddie, extended a secured credit line to the FHLB to provide an emergency source of funding if needed.

FHLB Advances

Vaughan says credit from the FHLB is keeping some sick banks afloat and postponing the inevitable.

`What's going to happen,'' he says, ``is that weak banks will use FHLB advances to avoid discipline from funding markets. In some cases, that will keep their doors open longer than they otherwise would, all-the-while offloading more and more potential losses onto the FDIC and taxpayers.''

Normally, the FDIC is no more than four initials customers see when they walk into their banks. In recent years, the agency hasn't had to close many banks, as it collected small amounts of insurance premium payments.

President Franklin D. Roosevelt signed the law creating the FDIC in the middle of the Depression. As part of the New Deal, Congress created a system of federal insurance to end bank runs by reassuring the public that depositing money in banks was safe. All banks paid the same rate for insurance.

Wave of Failures

The FDIC shares regulatory authority with other agencies. The Office of Thrift Supervision oversees federally chartered savings and loans, the Comptroller of the Currency monitors national banks, and state banking regulators review state- chartered banks.

The FDIC is the only one of these agencies that insures deposits.

By and large, the government's insurance system worked until the 1980s, when thrifts went on a commercial real estate lending binge, triggering a wave of failures and consolidation that lasted from 1984 to 1992.

In 1991, Congress changed the way FDIC premiums were assessed, requiring banks to pay rates based on how well capitalized they were for the risks they faced. As bank failures subsided to less than a dozen a year by 1995, the FDIC's reserves began to swell.

As a result, the agency cut to zero the premiums it charged to the 90 percent of the banks deemed safest. That free ride continued for 10 years.

`No Good Way'

In 2006, Congress increased insurance payments for most banks, averaging $5-$7 per $10,000 of deposits.

The insurance premiums imposed by the FDIC on the riskiest banks -- running as high as $43 per $10,000 -- are still far below the rates private insurers would charge, says Sherrill Shaffer, former chief economist of the Federal Reserve Bank of New York.

At the same time, charging struggling banks a fair price for insurance premiums may drive them into insolvency, he says.

``That can be destabilizing,'' says Shaffer, who's now a professor of banking at the University of Wyoming in Laramie. ``There's really no good way around that. It's an issue that policy makers and analysts have wrestled with for decades.''

Bair says the FDIC is gearing up for the coming wave of bank failures. She says she's developing a plan to raise insurance premiums.

The agency's Division of Resolutions and Receiverships has boosted authorized staffing levels by 48 percent, to 331, this year. It has hired 178 new financial specialists and called up 65 retirees for temporary service under a special program.

Bair vs. Enron

Bair, 54, an attorney who graduated from the University of Kansas School of Law, has challenged financial institutions as a regulator for more than a decade. President George W. Bush nominated her as chairman, and she was sworn in on June 26, 2006.

She replaced Donald Powell, a former Texas banker. In 1992, as a member of the Commodity Futures Trading Commission, Bair cast the lone vote against Enron Corp.'s effort to exempt certain energy contracts from the agency's anti-fraud and anti- market manipulation enforcement powers.

Nine years later, Enron blew up in one of the biggest financial scandals in U.S. history.

As assistant secretary of the Treasury for financial institutions in 2002, Bair criticized abusive subprime mortgage brokers.

``Lenders have made loans with little or no regard for a borrower's ability to repay and have engaged in multiple refinance transactions that result in little or no benefit to a borrower,'' she told the Pittsburgh Community Reinvestment Group on March 18, 2002.

`Rock and Brock'

Bair has published two children's books. One of them, ``Rock, Brock, and the Savings Shock'' (Albert Whitman, 2006) is a tale of two twins -- Rock the Saver and Brock the Spender

To contact the reporter on this story: David Evans in Los Angeles at davidevans@bloomberg.net
Last Updated: September 25, 2008 19:54 EDT

Fixed Annuity Definition

Free Annuity Leads - How to get the best annuity prospects.

2008-09-28T06:00:00.000-05:00
Let's take a look at an annuity agents fantasy of the best marketing situation that could ever happen.

Folks are not spending money on things like they used to do. While allied troupes stormed through Baghdad, powerful economic forces are steamrolling over the investments of millions.

The Federal Budget deficit grows bigger and bigger. Manufacturing is close to 18 year lows.

Jobs are less and less secure.

Consumer confidence has just plunged to its lowest level since 1992. Retirement funds are going bankrupt.

Yes, no matter what you think of the powers that be in Washington.

The WAR on Terrorism and the BEAR MARKET has given all of us the key. The key to getting more responses, more appointments and more sales of Equity Index Annuities.

Why? Well, lets examine what's going on here.

For us, the FEAR of Terrorism and BEAR MARKET,

is truly an awesome marketing gift!

It's almost as easy as falling off a log to get responses, when you use this mind set to your marketing advantage.

The handwriting is on the wall, We're on the other side of a bull market now, and this bear market is going to last longer than almost anyone expects, which is great for the Fixed Annuity producer if you exploit it properly.

And I'm not using the word exploit in the sense of taking advantage of someone's misfortune.

Not At All.

No, I mean exploit in the sense of jumping on an opportunity that is there, waiting for us with baited breath!

So don't confuse exploitation of this incredible marketing chance.

Now, think about this...

Retirees Don't Have Any Idea About

What to Do With Their Financial Situations,

And Want Help From Someone They Can Believe!

And they feel helpless and double crossed. They want help. And as our political leaders continue to try to salvage the economy, the same basis of anxiety Americans feel will always be alive!

Annuity Seminars Produce Qualified Annuity Leads

2008-09-24T06:00:00.000-05:00
The Marketing Joy of "One Call Close" Annuity Seminars!

Learn How to Get New Clients Who are

"UNDER THE FOG OF WAR"

scared of the Stock Market Collapse,

IRS, Inflation, Etc.,

AND who have no clue or Idea about what to do

with their finances.

Through Seminars & email courses that cost you basically pennies on the dollar!

Dear Annuity Producer, who wants to get in front of Groups of curious, interested prospects all at once: And who are sick and tired of Bait and Switch 2,3, and 4 call appointment systems.

Let's take a look at an annuity agents fantasy of the best marketing situation that could ever happen.

Equity Index Annuity - Protections for AIG Policyholders

2008-09-21T13:44:00.001-05:00

Protections for AIG Policyholders - WSJ.com
People with an annuity or a life-insurance, auto or homeowners policy through American International Group are no doubt mighty worried right now as they watch that company struggling.

But policyholders don't need to panic, experts say. For one thing, while the holding company is in financial distress, AIG's insurance subsidiaries are separate entities that are financially sound, regulators and others say.

AIG's insurance subsidiaries "did not receive a bailout; they are financially solvent," Sandy Praeger, president of the National Association of Insurance Commissioners, said in a statement last week. She added in an interview that "state insurance laws regulate the AIG subsidiaries to assure that the assets are preserved to protect the interests of policyholders."

Further, if an insurance company were to fail, each state runs an insurance guaranty association to protect policyholders. Insurers ante up fees to ensure customers of failed firms are protected. Still, those state guarantees are limited -- and that potentially could mean problems for some policyholders if an insurer becomes insolvent.

Your best bet now is to take a measured approach. Find out whether you're fully protected by state guarantees. Contact your state insurance department, or look up your state's rules at www.nolhga.com.

If you're not, weigh your options. Talk to your insurance broker about possible surrender charges or other penalties for exiting your policy or annuity, and determine the cost of purchasing similar products elsewhere. Remember that even consumers with policies worth more than their state's guaranteed limit may have nothing to worry about given that these insurers are solvent.
Life-Insurance Protections

State guaranty associations protect life-insurance policyholders for at least $100,000 in cash surrender or withdrawal value and at least $300,000 ($250,000 in California) in death benefits, says Peter Gallanis, president of the National Organization of Life and Health Insurance Guaranty Associations in Herndon, Va. Some states provide protection up to $500,000.

For policyholders within their state's limits, if a company fails, "there is a very good chance that your policy will be transferred [to a different insurer] and you'll never miss a beat," Mr. Gallanis says.

For fixed annuities, states generally cover up to $100,000, though some guarantee $300,000 or more.

Variable annuities are investment products. Generally your money is invested through a subaccount that is separate from the insurer's assets and not covered by state associations. However, the portion of the contract that promises a payout from the insurer usually is covered.

Usually a failed insurer's business is taken over by another company in what can be a seamless transition for policyholders, Mr. Gallanis says.

"Typically the new insurer will provide all of the protection that would have been provided under the old policy," he says.

But it is possible in some situations that people with life-insurance policies worth more than the state limits may find they're on the hook for a higher premium or a reduced death benefit, Mr. Gallanis says.

Similarly, it's possible an annuity contract might be modified by an acquiring company; for instance, if the promised interest rate is deemed too high. But that's a rare event, requires approval by regulators, and is much likelier when an insurance company's failure is rooted in its policy-writing practices.
Auto, Home Policies

There are similar state guaranty associations protecting consumers with homeowners and auto-insurance policies. If you have a claim filed with a company that then fails, "the guaranty fund steps into the shoes of the insurance company from a claims-paying perspective," says Roger Schmelzer, chief executive of the National Conference of Insurance Guaranty Funds in Indianapolis. Most state guaranty associations cover homeowners- and auto-policy claims up to $300,000, he says.

If you've prepaid a premium, that is also usually recoverable through the guaranty association, says Barb Cox, the group's vice president of legal and regulatory affairs, though the limit may be $10,000 or $25,000.

Meanwhile, if you're simply holding a policy, with no claims in process, then consider shopping around, Mr. Schmelzer says.

Read more at marketwatch.com

Write to Andrea Coombes at andrea.coombes@dowjones.com

Fixed Annuity

Protections for AIG Policyholders

2008-09-21T13:42:00.001-05:00

Protections for AIG Policyholders - WSJ.com
People with an annuity or a life-insurance, auto or homeowners policy through American International Group are no doubt mighty worried right now as they watch that company struggling.

But policyholders don't need to panic, experts say. For one thing, while the holding company is in financial distress, AIG's insurance subsidiaries are separate entities that are financially sound, regulators and others say.

AIG's insurance subsidiaries "did not receive a bailout; they are financially solvent," Sandy Praeger, president of the National Association of Insurance Commissioners, said in a statement last week. She added in an interview that "state insurance laws regulate the AIG subsidiaries to assure that the assets are preserved to protect the interests of policyholders."

Further, if an insurance company were to fail, each state runs an insurance guaranty association to protect policyholders. Insurers ante up fees to ensure customers of failed firms are protected. Still, those state guarantees are limited -- and that potentially could mean problems for some policyholders if an insurer becomes insolvent.

Your best bet now is to take a measured approach. Find out whether you're fully protected by state guarantees. Contact your state insurance department, or look up your state's rules at www.nolhga.com.

If you're not, weigh your options. Talk to your insurance broker about possible surrender charges or other penalties for exiting your policy or annuity, and determine the cost of purchasing similar products elsewhere. Remember that even consumers with policies worth more than their state's guaranteed limit may have nothing to worry about given that these insurers are solvent.
Life-Insurance Protections

State guaranty associations protect life-insurance policyholders for at least $100,000 in cash surrender or withdrawal value and at least $300,000 ($250,000 in California) in death benefits, says Peter Gallanis, president of the National Organization of Life and Health Insurance Guaranty Associations in Herndon, Va. Some states provide protection up to $500,000.

For policyholders within their state's limits, if a company fails, "there is a very good chance that your policy will be transferred [to a different insurer] and you'll never miss a beat," Mr. Gallanis says.

For fixed annuities, states generally cover up to $100,000, though some guarantee $300,000 or more.

Variable annuities are investment products. Generally your money is invested through a subaccount that is separate from the insurer's assets and not covered by state associations. However, the portion of the contract that promises a payout from the insurer usually is covered.

Usually a failed insurer's business is taken over by another company in what can be a seamless transition for policyholders, Mr. Gallanis says.

"Typically the new insurer will provide all of the protection that would have been provided under the old policy," he says.

But it is possible in some situations that people with life-insurance policies worth more than the state limits may find they're on the hook for a higher premium or a reduced death benefit, Mr. Gallanis says.

Similarly, it's possible an annuity contract might be modified by an acquiring company; for instance, if the promised interest rate is deemed too high. But that's a rare event, requires approval by regulators, and is much likelier when an insurance company's failure is rooted in its policy-writing practices.
Auto, Home Policies

There are similar state guaranty associations protecting consumers with homeowners and auto-insurance policies. If you have a claim filed with a company that then fails, "the guaranty fund steps into the shoes of the insurance company from a claims-paying perspective," says Roger Schmelzer, chief executive of the National Conference of Insurance Guaranty Funds in Indianapolis. Most state guaranty associations cover homeowners- and auto-policy claims up to $300,000, he says.

If you've prepaid a premium, that is also usually recoverable through the guaranty association, says Barb Cox, the group's vice president of legal and regulatory affairs, though the limit may be $10,000 or $25,000.

Meanwhile, if you're simply holding a policy, with no claims in process, then consider shopping around, Mr. Schmelzer says.

Read more at marketwatch.com

Write to Andrea Coombes at andrea.coombes@dowjones.com

Fixed Annuity

Failures of SEC Chairman Cox

2008-09-21T13:37:00.001-05:00

5 Failures of SEC Chairman Cox - Seeking Alpha
5 Failures of SEC Chairman Cox
by: Mark Sunshine

Almost all paths of incompetence in the current crisis run through the office of the Chairman of the SEC, Chris Cox. McCain’s solution to fire Cox isn’t tough enough. Exile is better. Fortunately for Cox this isn’t the Stalinist Soviet Union or his fate could be a lot worse.

Cox’s failures are too numerous to count. However, I’ll give it a try. Below are what I think are his top 5 failings.

1.

Failure to enforce disclosure laws and regulations.

Disclosure rules and regulations protect investors by requiring companies to disclose everything that is needed for informed investment decisions. And, CEOs and CFOs are required to sign certifications that such disclosure is materially accurate, complete, and that their companies have adequate internal controls to ensure such accuracy and completeness.

Enforcement of disclosure rules and regulations has been a joke. CEOs lie to shareholders with impunity and without fear of SEC enforcement. It is impossible to conclude that SEC filings for Freddie, Fannie, AIG, Lehman, or Bear Stearns complied with SEC rules and regulations.

However, instead of enforcement by the SEC, there is silence. While not all management actions are criminal, why hasn’t the SEC used its civil enforcement authority, i.e., assessing fines and penalties? How about protecting future investors by banning failed executives and boards of directors from serving in executive management at other public companies?
2.

Failure to enforce accounting standards.

When Cox states that the SEC doesn’t have regulatory authority over capital adequacy of financial services companies, he isn’t telling the truth. The SEC has regulatory authority over the financial statements of ALL publicly traded companies in the U.S. which of course includes the financials. If Cox had required greater reserves and transparency of financial services companies it would have happened.

Every quarter all publically traded companies file reports with the SEC that are provided to shareholders and the SEC has review and comment authority. If the SEC deems financial disclosure inadequate, incomplete or opaque it has the authority to force the company to amend its filings. It also has authority to establish accounting standards for publically traded companies which means it can have different requirements than GAAP.

So when the AIG filed its last quarterly report and decided that it didn’t need to have loan loss reserves against defaulting mortgages and securities, the SEC had the ability to require additional loan loss reserves. When Freddie and Fannie decided to pretend that defaulted mortgage were good assets because it changed its accounting standards, the SEC could have just said “no”. When Lehman manufactured $2.4 billion of pre-tax income by pretending that it wasn’t going to repay its debts (one of the dumber aspects of mark to market accounting), the SEC should have protected investors with disclosure.
3.

Failure to supervise the rating agencies.

Cox wants everyone to believe that despite being the rating agency’s only regulator, the SEC has no oversight or enforcement authority and cannot influence their performance. Once again, the SEC’s statements are false. Cox assumes that no one will take the time to read the Credit Rating Agency Reform Act of 2006 which states that the SEC has the right to suspend or revoke the license of any of rating agency for a wide range of reasons. Rating agency regulation and reform is Cox’s responsibility.
4.

Failure to investigate and prevent market manipulation, i.e., naked short selling.

Free markets are supposed to be honest markets. The naked short selling issue isn’t new and the SEC’s knee jerk emergency response is an embarrassment. The ban on short selling of 799 stocks is very similar to Putin’s actions this week to manipulate the Russian stock market. I haven’t a clue whether or not the uptick rule works, but I know that enforcing rules on naked short selling shouldn’t have required destructive and ill thought out emergency orders. In the middle of the 1800’s the legendary financial scoundrel, Daniel Drew, understood naked short selling was bad (as he lost his fortune covering a short squeeze) when he said, “He who sells what isn’t his’n, Must buy it back or go to prison.” Too bad Cox never took economic history in school (or googled economic trivia).
5.

Failure to protect small investors.

It is no coincidence that according to the FT, stock ownership by individual investors is at an all-time low. The average individual investor knows that his chances in the market aren’t good. And the SEC doesn’t seem to care if the average guy is disenfranchised from the economic future of America. In addition to the above failures, Cox forgot that it was his job to make sure that brokers shouldn’t engage in deceptive sales practices (like in the sale of auction rate securities and the sale of Freddie and Fannie common and preferred stock to small investors because they were “guaranteed” by the government). Cox refuses to support private litigation by individual investors who were ripped off in the stock and bond market. If the SEC doesn’t protect the little guy, who will?

It is hard to think of how anyone could have done a worse job than Chris Cox (other than engaging in illegal conduct). But if anyone can think of things that I have missed, please feel free to tell everyone reading this by commenting. I doubt that my list is complete.

Fixed Annuities

Free Annuity Leads

2008-09-20T06:00:00.003-05:00
What about my annuity seminar interested you most?

Why did you want to see me today? (annuity leads)

How long, to what age, do you intend to live?

How much does it cost to support your current lifestyle?

If your health & finances were perfect in every way in five years, what would it look like?

How do you mean? Free Annuity Leads

How does this look to you?

How does that make you feel?

How does this sound?

If your investments and health was perfect three years from today, how would you describe it?

What are three activities you like to do?

When asking questions like these pay close attention to body language --Mirror.

I use forward looking questions to link & anchor emotions for later use in...(THE ONE CALL CLOSE).

Regulatory Safeguards Offer ‘Insurance Policy’ in Times of Crisis

2008-09-18T10:24:00.001-05:00

Insurance Consumers Protected by Solvency Standards (NAIC)
FOR IMMEDIATE RELEASE

INSURANCE CONSUMERS PROTECTED BY SOLVENCY STANDARDS
Regulatory Safeguards Offer ‘Insurance Policy’ in Times of Crisis

KANSAS CITY, Mo. (Sept. 16, 2008) — National Association of Insurance Commissioners (NAIC) President and Kansas Insurance Commissioner Sandy Praeger today issued the following statement in response to the financial issues facing American International Group (AIG):

“We have a very strong message for consumers: If you have a policy with an AIG insurance company, they are solvent and have the capability to pay claims. Our job is to ensure that they continue to have the ability to pay.

“In this particular instance, AIG’s insurance subsidiaries are being asked to provide liquid assets to the financially distressed non-insurance parent company in exchange for non-liquid assets. The New York State and Pennsylvania Insurance Departments are working with AIG to review the transaction. State insurance regulators will only approve this type of action if they are assured it is part of a total resolution of the liquidity issue at the parent company and fairly compensates its insurance company subsidiaries.

“As a holding company, AIG is a separate, federally regulated legal entity that is distinct and apart from its subsidiary insurers. The subsidiary insurers are governed by state laws designed to protect the interest of policyholders. State insurance regulators are committed to protecting the interest of policyholders and will work closely with AIG management and other regulators to fulfill this commitment.

“The No. 1 job of state insurance regulators is to make sure insurance companies operate on a financially sound basis. If needed, we immediately step in if it appears that an insurer will be unable to fulfill the promises made to its policyholders. This includes taking over the management of an insurer through a conservation or rehabilitation order, the goal being to get the insurer back into a strong solvency position.

“State regulators have numerous actions they can take to prevent an insurer from failing. Claims from individual policyholders are given the utmost priority over other creditors in these matters — and, in the unlikely event that assets are not enough to cover these claims, there is still another safety net in place to protect consumers: the state guaranty funds. These funds are in place in all states. If an insurance company becomes unable to pay claims, the guaranty fund will provide coverage, subject to certain limits.

“It is a state insurance regulator’s responsibility to protect policyholders and ensure a healthy, competitive market for insurance products. Strict solvency standards and keen financial oversight — based on conservative investment and accounting rules — continue to be the bedrock of state-based insurance regulation.”

About the NAIC

Headquartered in Kansas City, Mo., the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories. The NAIC’s overriding objective is to assist state insurance regulators in protecting consumers and helping maintain the financial stability of the insurance industry by offering financial, actuarial, legal, computer, research, market conduct and economic expertise. Formed in 1871, the NAIC is the oldest association of state officials. For more than 135 years, state-based insurance supervision has served the needs of consumers, industry and the business of insurance at-large by ensuring hands-on, frontline protection for consumers, while providing insurers the uniform platforms and coordinated systems they need to compete effectively in an ever-changing marketplace. For more information, visit www.naic.org/press_home.htm.

Annuity

INSURANCE CONSUMERS PROTECTED BY SOLVENCY STANDARDS

2008-09-18T10:23:00.001-05:00

Insurance Consumers Protected by Solvency Standards (NAIC)
FOR IMMEDIATE RELEASE

INSURANCE CONSUMERS PROTECTED BY SOLVENCY STANDARDS
Regulatory Safeguards Offer ‘Insurance Policy’ in Times of Crisis

KANSAS CITY, Mo. (Sept. 16, 2008) — National Association of Insurance Commissioners (NAIC) President and Kansas Insurance Commissioner Sandy Praeger today issued the following statement in response to the financial issues facing American International Group (AIG):

“We have a very strong message for consumers: If you have a policy with an AIG insurance company, they are solvent and have the capability to pay claims. Our job is to ensure that they continue to have the ability to pay.

“In this particular instance, AIG’s insurance subsidiaries are being asked to provide liquid assets to the financially distressed non-insurance parent company in exchange for non-liquid assets. The New York State and Pennsylvania Insurance Departments are working with AIG to review the transaction. State insurance regulators will only approve this type of action if they are assured it is part of a total resolution of the liquidity issue at the parent company and fairly compensates its insurance company subsidiaries.

“As a holding company, AIG is a separate, federally regulated legal entity that is distinct and apart from its subsidiary insurers. The subsidiary insurers are governed by state laws designed to protect the interest of policyholders. State insurance regulators are committed to protecting the interest of policyholders and will work closely with AIG management and other regulators to fulfill this commitment.

“The No. 1 job of state insurance regulators is to make sure insurance companies operate on a financially sound basis. If needed, we immediately step in if it appears that an insurer will be unable to fulfill the promises made to its policyholders. This includes taking over the management of an insurer through a conservation or rehabilitation order, the goal being to get the insurer back into a strong solvency position.

“State regulators have numerous actions they can take to prevent an insurer from failing. Claims from individual policyholders are given the utmost priority over other creditors in these matters — and, in the unlikely event that assets are not enough to cover these claims, there is still another safety net in place to protect consumers: the state guaranty funds. These funds are in place in all states. If an insurance company becomes unable to pay claims, the guaranty fund will provide coverage, subject to certain limits.

“It is a state insurance regulator’s responsibility to protect policyholders and ensure a healthy, competitive market for insurance products. Strict solvency standards and keen financial oversight — based on conservative investment and accounting rules — continue to be the bedrock of state-based insurance regulation.”

About the NAIC

Headquartered in Kansas City, Mo., the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories. The NAIC’s overriding objective is to assist state insurance regulators in protecting consumers and helping maintain the financial stability of the insurance industry by offering financial, actuarial, legal, computer, research, market conduct and economic expertise. Formed in 1871, the NAIC is the oldest association of state officials. For more than 135 years, state-based insurance supervision has served the needs of consumers, industry and the business of insurance at-large by ensuring hands-on, frontline protection for consumers, while providing insurers the uniform platforms and coordinated systems they need to compete effectively in an ever-changing marketplace. For more information, visit www.naic.org/press_home.htm.

Annuity

Annuity Lead Generation Programs

2008-09-15T20:29:00.000-05:00
The general structure is this:

A lead generation ad (often relatively small and inexpensive) drives people to a free 800 telephone number answered by live operator which ends with capturing their name, address and phone number,

(copies of which are listed on a real time web site).

The day before your seminar you print this ready to call list off your secure reservation site and call all RSVP's to confirm them.

One special question you will ask gets you their "Hot Button" before attending your seminar.

"What about my ad interest you most?"

This is your first bonding. You will discover much!!

In practice, this attracts plenty of leads, but screens out those likely to waste huge amounts of your time and energy, so you

ultimately invest your time only in talking to (eye contact during workshop) or meeting people very, very likely to say "YES to your proposition.

This takes a lot of wasted time, frustration, rejection and burn-out away from your business.

What is a "Headline Lead Generation Ad?"

Most of the time, this works like a news article: It describes who we want - and do NOT want - to hear from. For example:

______________________________________________________

IRA (401k) WARNING!

Don't Be A Victim of the Stock Market Collapse!

If you are retired or about to retire (age 50-74)

and have an IRA, 401k, a Pension or on Social Security

YOU MUST Attend this workshop before it's too late!

Is your Social Security Check taxed?

If so, you must attend this important workshop NOW!

Before it’s to late.

You'll discover how to.....................

$100,000 minimum, no agents or brokers

(new idea)..$35.00 Admission Fee

donated to local Charity ___________________________________________________

See! that ad described who we wanted:

IRA prospects, 401k Rollover prospects,

Scared Money in the stock market,

our targeted ages of 50-74.

And who make enough money to qualify for Social Security taxation AND are angry about it.

And no more free lunches!

Annuity Leads

2008-09-10T06:00:00.002-05:00
Federal Reserve STUNNED by sinking economy!

Time for YOU to take action. Get to Safety NOW! Here's How...

HOW ANNUITY AGENTS CAN USE

Direct - Response Marketing, too.

One of the most interesting uses of this kind of marketing is called "Lead Generation."

"It's the Leads..." (ha)

This means you use media (not grunt work) to cause people who "fit" with what you have to offer, to come to you, mentally

pre-disposed to do business with you.

The #1 paper USA TODAY has great headlines to study. Always change your headlines.

Selling Annuities

Or buy the Headline Creator Pro under marketing ideas tab. This software is free to “OCC” owners.

The "One Call Close" Annuity Seminar and or "one on one" Presentation is a system designed to really qualify the appointment.

Annuity lead programs

2008-09-06T06:00:00.000-05:00
How long did your parents live?

How many children & grand children do you have?

Would you like to discover how to win in today's market by never losing? (ask in seminar)

What are your three most important financial goals right now?

or Annuity Lead Programs

What is your single most important goal regarding your money & investments?

What is the key constraint that determines how you achieve this goal?

Who are the most important people in your life?

(This one gets referrals too)

Annuity Lead Programs

2008-09-03T20:09:00.001-05:00
Has you current Advisor (banker, broker, CPA) invested 20 minutes to 30 minutes with you in preparing your beneficiary designation form that keeps the IRS from getting 40% to 90% of your IRA?

Has you current advisor told you what happens to your IRA when you die?

Which will you like most, the stock market like gains without risk, eight easy ways you can withdraw your money, or that you only pay taxes when interest is withdrawn?...That's my favorite too. What is your secondary beneficiaries name?

As an agent, who wants to become the new advisor, you should begin a series of questions that drive a wedge between a prospect and their current advisor.

Annuity Leads

How To Sell Your Annuity Leads. Annuity Lead Programs

2008-08-28T08:24:00.000-05:00
You want at least 3 benefit questions per wedge.

You do want to avoid probate, don't you?

Well, it's pretty obvious that everyone wants to avoid probate isn't it!?! So, let me ask...

When you opened your account at the bank, did your banker ask you if you wanted to avoid probate after the death of the second spouse?

Doesn't it make sense that your banker should know everyone wants to avoid probate?

All the banker had to do is pull out one sheet of paper from the desk, fill in your name and make your account avoid probate.

Tell me--Do you know it takes an average of 18 months for your estate to go through probate?
Annuity Lead Programs
Who has your money during probate?

That may be why most bank accounts go through probate.

Mr. & Mrs. Jones, wouldn't you like to avoid probate?---and do it without a Living Trust?

How long did your parents live?

How many children & grand children do you have?

Annuity - Protest Rages over EIA Proposal

2008-08-26T12:01:00.001-05:00

Protest Rages over EIA Proposal
By Edward Hayes
August 18, 2008

The Comment period on the SEC’s rule proposal to regulate equity-indexed annuities (EIAs) as securities still has three weeks left. But some industry groups have come out to criticize the measure, with one of the biggest annuity trade groups still looking into it.

Last month, the SEC proposed treating EIAs, which individual states now regulate, as securities and to place them fall the jurisdiction of SROs like FINRA. Equity indexed annuities are investments that earn their returns from a stock index that the insurance firm invests in.

While regulators consider variable annuities to be securities products, EIAs have never been as clear-cut.

Until the proposal, there was no definitive guidance for firms as to whether or not EIAs were securities. The rule proposal specifically states that EIAs are securities offerings and must be sold by a broker-dealer certified to sell securities.

Some proponents of the rule change say the rule proposal was necessary because securities regulators focus on investor protection, while insurance regulators are primarily concerned that the insurance companies they oversee don’t become insolvent.

But the National Association for Fixed Annuities (NAFA) disagrees. It claims that state insurance regulators are equally concerned about investors.

“State insurance departments have very robust departments that deal with consumer complaints and sales tactics,” said James Jorden, an outside council with NAFA. “For years, they have been responding to issues of that sort.”

NAFA publically expressed its reservations about the proposal, although it has not yet submitted a letter to the SEC. Meanwhile NAVA, a major VA trade group, is still quiet about the measure. Both groups requested an additional 90 days to confer with their members.

Even though NAFA has not submitted its opinion yet, its representatives, as well as other groups have already laid out some initial concerns. Opponents of the proposal believe that the states the proper regulators to handle the offerings, and claim that state insurance regulators have been beefing up regulations concerning EIAs and seniors.

Some of the state insurance regulators’ measures include closer scrutiny on sales of EIAs and other fixed annuity offerings. Also some states have passed rules that require firms check the the suitability of EIA sales. At the same time, insurance companies have worked to improve the training of the sales staff and have given their own policies and procedures a closer look regarding the products.

Other commenters on the proposal have shown the more emotional side of the EIA regulatory issue.

“The securities industry is living in glass houses, and throwing stones at an industry that has protected the lives, property, and nest eggs of people for a long, long time,” said Steven Delaney, a member of American Annuity Advocates.com, said in his letter to the SEC. “It’s all ridiculous, again, greed, imperialism on the part of the Rulers of the Universe, FINRA.”

The proposal is part of the SEC and FINRA’s effort to combat unsuitable sales to seniors. After looking into “free lunch” seminars, the two have begun filing cases and proposing new rules and regulations. The rule proposal on the EIAs is the latest in that effort.

The problem is, while the regulators believe those offerings pose a threat to seniors, those who deal with EIAs on a regular basis aren’t convinced that is the case.

“Through state regulations, there are very robust standards applied to every sale,” Jorden said. “The vast majority of these sales are suitable.”

He went on to argue that the number of complaints about those specific offerings is less than 1% at each insurance company. Others argued that while there are unsuitable sales made with EIAs, it is a common fact found associated with all finance services offerings.

Some provisions that make EIAs a low-risk investment are the fact that they must guarantee a return on the buyer’s principal and rate of return, Jorden said. In other words, if a buyer invests $100 at 10% interest, so long as they remain in the offering for the required amount of time, they will have the same money when they pull out at the same interest rate.

NAFA also contends that Congress and the SEC have already established that EIAs can’t be securities. First, the ’33 Act lists “insurance or endowment policy or annuity contract or optional annuity contract[s]” as exempt from being classified as securities. And Rule 151, which became effective in 1986, establishes a safe harbor for fixed annuities from securities regulations, according to Jorden.

“Congress decided years ago [fixed annuities] should not be regulated under securities regulations and the courts have validated them,” Jorden said.

He also referenced the 2002 Malone v. Addison Marketing Insurance case, where a United States District Court ruled that the definition of a security does not include fixed annuities.

As it stands now, comments on the rule proposal will close on Sept. 10, but if the Commission wishes to extended the period it would most likely do so when the current comment period ends.

Have a comment? Let us know what you think of this or another CCH Wall Street story by clicking here.

Index Annuity Guide

Annuity Prospects - How Do I Sell Annuity Leads?

2008-08-20T20:06:00.000-05:00
How many benefit oriented questions are in your arsenal?

You need at least three benefit questions per benefit.

Example of three...

1. Do you want to pay taxes now or later?

2. Do you leave your interest in or do you take your interest out?

3. Would you like to stop paying taxes on interest you are not using?

The Secret to Selling Annuities is in the questions.

Telling is not Selling--Questioning is.

Question skillfully and listen carefully.

Annuity Lead - What are the questions I should ask when you see an annuity prospect?

2008-08-13T20:02:00.001-05:00
Doesn't this annuity now become your highest yielding financial vehicle?

Why did you want to see me?

Why is that important to you?

What about my ad interest you most?

How do you mean?

Annuity Lead - What are questions I should ask when selling annuity prospects?

2008-08-07T08:00:00.003-05:00
How long will the bank pay you that interest?

How many days does your Bank give you penalty free access to your saved dollar? Seven days or 10 days?

How long have you been a CD investor?

In 10 years you have had 100 free days of liquidity access to your saved dollar, isn't that true?

Would you feel better with more free access to your certificate of annuity?

Doesn't this annuity now become your highest yielding financial vehicle?

Annuity Sales

Annuity Leads - How To Sell Your Annuity Lead by Asking Questions.

2008-08-01T06:00:00.003-05:00
Who is your primary beneficiary?

Who is your secondary beneficiary?

Are they responsible with money?

How do you feel about that?

What is your date of birth? ( old )

When does your next CD come due?

Do you leave your interest in or do you take your interest out?

Annuity Leads

Annuity Prospects - How Do I Close My Annuity Leads?

2008-07-27T19:45:00.002-05:00
Do you want your children to receive your IRA in a lump sum at your death or do you want the income spread over several years?

Selling Annuity prospects is all about questions.

***Which will you like most, the Index Market like gains without risk, the Eight Easy ways you can withdraw your money, or that you only pay taxes when interest is withdrawn?...

...That's my favorite too!

How To Sell Your Annuity Leads

2008-07-20T19:02:00.002-05:00
Observation: For your annuity prospects or leads...

Does your Doctor present his credentials to you before treatment? Does your attorney, dentist or mechanic present their credentials
and designations before serving you?

How would it make you feel if they did?

You want to follow other professional's examples and expect that your annuity prospect assumes you are qualified.

Annuity Leads - How To Sell Your Annuity Prospects

2008-07-13T18:57:00.000-05:00
How to sell your annuity leads...

There are two types of annuities.

Fixed annuity means your principal is fixed and the guaranteed interest you make then becomes your principal.

Your interest will fluctuate higher, BUT is GUARANTEED never to go below 3% (or the amount promised by your company).

A VARIABLE annuity means your principal can vary up and down, which means risk.

You will enjoy guaranteed access to your safe and secure equity indexed annuity.

This guaranteed annuity is your ironclad guarantee against deflation

or a repeat of the great depression.

Deflation Proof Guaranteed Interest Rate you will never earn less X% guaranteed by your safe and secure annuity.

You will never earn less than 3% on your guaranteed fixed annuity.

Annuity Leads - Selling is not telling.

2008-07-05T18:40:00.000-05:00
How to sell your annuity leads.

Selling is not telling. Questioning is.

Question Skillfully and Listen carefully

The greatest benefit is safety, don't you agree?

Do you want monthly averaging or annual point to point?

Look up the word "annuity" in the dictionary.

Do you know the definition of the word "annuity"?

This is how we introduce an Annuity to a seminar class, prospect or referral.---"The word "annuity" is a Latin word.

The word annuity means to guarantee income.

The word is not a company invented word.

Annuity is the highest legal word for guaranteed safety that can be used in a contract with you."

An annuity is guaranteed safe and secure.

Your principal is guaranteed and your interest is guaranteed.

You will feel safe and secure.

Annuity Leads

Annuity Leads

2008-06-29T13:54:00.000-05:00
Annuity leads.
Would You Like To Sell Qualified "Pre-Sold" Annuity Leads?
Annuity lead prospect completes a long benefit oriented web site form. Annuity prospect receives one to four specific company brochures by e-mail and USPS mail. Products sent are based upon multiple choice selected. Usually two of the best short term and two of the best long term surrender periods with a bonus.

Prospect is phoned for clarification, qualification and an phone appointment is scheduled. Our annuity lead is completly prepared for a personal appointment with a local agent.

The annuity lead is emailed one, two, three or four brochures initially. Products sent are based on choices selected on the request form. Usually two of the best long term surrender period with a bonus and two of the best short term index annuities with no bonus.

Prospect is called and asked to confirm they actually made the index annuity request.

Prospect is questioned for clarification, qualification and a 6 to 8 minute verbal presentation is given.
Annuity Leads

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