IUL Web Ex Series Introduction to IUL Part 2 Learn to Embrace Indexed UL 1 For Insurance professional use only LAM 1921AO Disclosure Life Insurance issued by Nationwide Life Insurance Company andor Nationwide Life and Annuity Insurance Company ID: 492465
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Slide1
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NationwideIUL Web Ex Series
Introduction to IUL: Part 2Learn to Embrace Indexed UL
1
For Insurance professional use only
LAM-
1921AO
Slide2
Disclosure
Life Insurance issued by Nationwide Life Insurance Company and/or Nationwide Life and Annuity Insurance Company. Guarantees are subject to the claims paying ability of Nationwide. As your clients' personal situations change (i.e., marriage, birth of a child or job promotion), so will their life insurance needs. Care should be taken to ensure this product is suitable for their long-term life
insurance needs. They should weigh any associated costs before making a purchase. Life insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as gender, health and age, and has additional charges for riders that customize a policy to fit their individual needs.
Riders may be known by different names in different states, may not be available in every state and have an additional charge associated with them.
Indexed universal life insurance policies are not stock market investments, do not directly participate in any stock or equity investments, do not receive dividend or capital gains participation. Past index performance of an index is no indication of future crediting rates.
Not a deposit Not FDIC or NCUSIF insured Not guaranteed by the institution. Not insured by any federal government agency May lose value
© 2012 Nationwide Financial Services, Inc. All rights reserved
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For Insurance Professional Use Only - Not for distribution with the public LAM-
1921AO
Slide3
Nationwide YourLife
® Indexed UL3
3
S & P 500® is a trademark of Standard & Poor's and has been licensed for use by Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company. Nationwide YourLife® Indexed UL is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the Product.
NASDAQ
®, OMX®
, NASDAQ OMX
®
, NASDAQ-100®, and NASDAQ-100 Index® are registered trademarks of The NASDAQ OMX Group, Inc. (which with its affiliates is referred to as the "Corporations") and are licensed for use by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company. Nationwide YourLife® Indexed UL has not been passed on by the Corporations as to their legality or suitability. Nationwide YourLife® Indexed UL is not issued, endorsed, sold, or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the product.
The "Dow Jones Industrial AverageSM" is a product of Dow Jones Indexes, the marketing name and a licensed trademark of CME Group Index Services LLC ("CME"), and has been licensed for use. "Dow Jones®", "Dow Jones Industrial Average
SM" and "Dow Jones Indexes" are service marks of Dow Jones Trademark Holdings, LLC ("Dow Jones") and have been licensed for use for certain purposes by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company. Nationwide YourLife® Indexed UL based on the Dow Jones Industrial Average
SM
is not sponsored, endorsed, sold or promoted by CME Indexes, Dow Jones or their respective affiliates, and CME Indexes, Dow Jones and their respective affiliates make no representation regarding the advisability of trading in such product(s).
For Insurance Professional Use Only - Not for distribution with the public
LAM-
1921AO
Slide4
All competitive information is believed to be current May 2013. Information was compiled from the latest company software.
American General WinFlex Rev. 122012; AXA AEGIS 7.9.3; Prudential 43.00; AVIVA 2.95.0.55; Lincoln 16.0; Pacific Life 13.10.4777.24551; John Hancock 9.0.1 and Minnesota Life’s web based software. All information presented is reliable as at the date of comparison and Nationwide has made every effort to make sure it is reliable; however, its possible that there are differences between the products compared which are not reflected and/or of which we are unaware. For this reason, its completeness and accuracy cannot be guaranteed. These are mere hypothetical scenarios and not intended to represent any specific client or situation.
IMPORTANT BENCHMARKING INFORMATIONSlide5
Agenda
Annual Point to Point & Monthly Averaging Holding AccountSweep DatesGuaranteed Floor vs. Cumulative GuaranteeUnderstanding IUL StatementsIllustrating IULTypical Client Scenarios:
Alternative to GUL, Alternative to Current Assumption, Accumulation & Income and also LTC RiderNationwide’s YourLife Indexed UL Strengths
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For Insurance professional use onlySlide6
1 year Annual Point to Point
66
For Insurance professional use only
A good fit for clients who anticipate steady growth in the near future
Market timing risk because only comparing 2 points in time
Over time the indexed interest strategy becomes less relevant and the returns converge because some years Annual Point-to-Point credits higher, and some years Monthly
Averaging
credits higherSlide7
Monthly
Averaging77
For Insurance professional use only
May work better for clients who are wary of market volatility and believe it will continue in near future
Less Market timing risk using 12 points in time
Less Opportunity for higher crediting in consistently rising markets
Over time the indexed interest strategy becomes less relevant and the returns converge because some years Annual Point-to-Point credits higher, and some years Monthly
Averaging
credits higherSlide8
Annual Point to Point with Dollar Cost Averaging is Different from Monthly
AveragingAnnual Point-to-Point with DCAHelps minimize market timing riskAlways only comparing 2 points in time (will have more segments)
Monthly Averaging vs. Annual Point-to-Point with DCAWith
DCA the indexed interest strategy Cap rates can change while waiting
With DCA less of your money is in the indexed interest strategy
Impact of “Time
”
:
Over time the indexed interest strategy becomes less relevant and the returns converge because some years Annual Point-to-Point credits higher, and some years Monthly Averaging credits higher
Impact of Base Policy
:
Nationwide’s IUL base product low cost charge structure is critical advantage to performance irrespective of strategy or future changes to caps & pars
Note: Nationwide does Not offer Dollar Cost Averaging
8
For Insurance professional use onlySlide9
“Holding” Account RequirementsWhat are Fixed Account Requirements also known as Holding Accounts?
Requirement for money to be held here prior to being “Swept” into the Indexed Interest StrategyFixed Account can be traditional Fixed account premium allocations, or a special Fixed account with a different rate
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For Insurance professional use onlySlide10
Example: Holding Account Requirements At Nationwide: Minimum Required Fixed Account Allocation
“Holding” Account or Fixed Account Requirements: Some companies including Nationwide
hold back enough premium in the Fixed Interest Account to cover estimated policy charges and deductions for the next 12 monthsNationwide: Only net premium in excess of the Minimum Required Fixed Interest Strategy value (MRFISA) can be allocated from the Fixed Interest Account to the Indexed Interest Strategy
Example:
Both Companies use End Point Crediting (only pay indexed interest credit on money at segment maturity)
$10,000 Premium, $2,000 Policy Charges; Index growth 12%, Participation Rate 100%; 4% Fixed
*Note policy charges are deducted monthly, and interest is applied daily (so would not get 4% on entire $2,000)
Note: Having this requirement can be helpful to the policy holder as seen above. But, if they do not pay premium in excess of
MRFISA
(a projected 12 months worth of current policy charges), then they will not be allocated to the Indexed Interest Strategy Accounts.
10
For Insurance professional use only
Dollar
allocated
to Fixed Acct
Percent Credited Fixed
Interest Account
Dollar Allocated to Indexed Interest Strategy
Amount Credited Indexed Acct
Company A
(No Holding Requirement for Policy charges)
$0.00
0%
$10,000
12% to $8,000
Nationwide
$2,000
4% to
$2,000
*
$8,000
12% to $8,000Slide11
What are Sweep Dates?
Sweep Dates: Is the day or days of the month that premium is transferred from the Fixed Interest Account (or Holding account) into the Indexed Interest strategy(s). This day marks the start date of the Indexed Interest Strategy.
11
For Insurance professional use only
Usually 1 day per month
Sometimes
More
than 1 day
Where is Money Held in the interim?
Sweep Dates
15
th
11
th
& 26
th
Or 28th
Fixed Account
Holding AccountSlide12
Cumulative Guarantee vs. Guaranteed Floor
They are Not the Same
Guaranteed FloorMinimum amount credited at each Segment MaturityUsually 0%. Could be: 0.75%, 1% or 2%
Cumulative Guarantee (aka: “True Up” on Surrender or Alternate Policy Value)
Minimum amount credited upon Death, Surrender or Policy Maturity
Does Not apply credit at Segment MaturityCould be 1%, 2%, 3%
Example:
Underlying Index Growth 0% at Segment Maturity
12
For Insurance professional use only
Type
Percent
Applied at
Segment Maturity
Guaranteed Floor 1%
1%
Cumulative Guarantee 3%
0%Slide13
Understanding IUL Statements
Reflecting Index Credit on StatementMost companies do Not reflect credit applied to Indexed Interest Strategy for that year in the Annual StatementA few companies send out Monthly Confirmation Statements (including Nationwide)
Example: January 4, 2013 Policy Issued January 15, 2013 Monies Swept from Fixed Account into Indexed Interest Strategy
---------------------------------------------------------------------------------------
January 3, 2014 Statement Reporting Period 365 days (1/4/13 – 1/3/14)
January 4, 2014 Statement Automatically Generated
(but Indexed Interest Strategy hasn’t matured yet)
January 15, 2014 Index Interest Strategy Segment Matures (too late for statement)
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For Insurance professional use onlySlide14
Illustrating Indexed UL
Illustrating IUL’sCompanies assume Various Default Illustrated RatesCompanies assume Various Look back Periods to determine Default Rate
What rate should you use to illustrate IUL?
Company’s Default Rate, or
Flat rate: 6%, or 7%
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For Insurance professional use only
Term
Description
Usually
Sometimes
Default Rate
Rate company uses to hypothetically
project values in illustration
6% - 8%
4.60%
10%
Look Back Period
Number of preceding years used in formula to determine the default rate
20 – 30 yrs
10 yrs
28 yrs
35 yrsSlide15
How to Illustrate Nationwide’s IUL?
15
For Insurance professional use onlySlide16
Illustrating Allocations at Segment Maturity
16
For Insurance professional use onlySlide17
Client Scenario: Alternative to GUL
How Nationwide’s YourLife IUL* compares to Nationwide’s YourLife NLG-UL
Expect IUL price to be higher. Could be between 5% to 30% or morePrice between products are more aligned for Level Pay premium scenariosPrice between products are more comparable: $250,000 Face amount and below Male age 45, $250,000 Face,
NTP, NLG age 100
Male age 70, $250,000 Face, NT, NLG age 100
*Note:
IUL
assumes selection of optional Extended Death Benefit Guarantee Rider (
EDBG) and an illustrated rate of 6.00% allocated to Indexed Interest Strategy
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For Insurance professional use only
Product
Premium
Cash Surrender Value Year 10
Target Premium
Rolling Target
’s?
YourLife NLG UL
$2,122
$0.00
$2,061
No
YourLife
Indexed UL*
$2,256
$7,671
$2,967
Yes
Product
Premium
Cash Surrender Value Year 10
Target Premium
Rolling Targets?
YourLife Indexed UL*
$9,312
$10,621
$9,834
Yes
YourLife NLG UL
$9,688
$0.00
$9,454
No Slide18
Compare Feature in Nationwide’s Software Input Screens
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For Insurance professional use only
Comparing Nationwide’s IUL to GUL
Male, 50, NT, $250,000 Face, NLG to age 100Slide19
Client Scenario: Alternative to Current Assumption UL
Product
Face AmountInterest Rate
NLG Duration
Target Premium
Rolling Target
Premiums?
John
HancockProtection UL
$1,249,849
5.05%
Age 80
$14,141
No
Nationwide
YourLife
IUL
$1,110,724
N/A
to guarantee
Age
80
$24,491
Yes
John Hancock
Protection
UL
$ 736,969
3.00%
Age
87
$
8,427
No
Nationwide YourLife IUL
$ 972,301
N/A to guarantee
Age 87
$19,724
Yes
Nationwide
YourLife IUL
$736,969
N/A to guarantee
Age 98
$13,464
Yes
Nationwide YourLife NLG
UL
$1.000,000
N/A to Guarantee
Age 101
$11,820
No
Understanding the differences in Guaranteed Death Benefit
Female, Age 55, $200,000 Single Premium; NTP, Solve for Initial Face Amount
Note:
For Current Assumption the No Lapse Guarantee (NLG) duration is the maximum life expectancy solve based on current interest rates as of May 2013
19Slide20
20
Client Scenario: Alternative to Current Assumption Differences in the Guaranteed Death Benefit20For Insurance professional use only
NFM-10697Current Assumption with Life Expectancy Guarantee:
Do these products shift risk from Insurance Company to Consumers?
Hopefully no in force rate increase to impact the current Death Benefit duration
Hopefully no interest rate reduction to impact the current Death Benefit duration
Hopefully pay illustrated persistency credit – to help keep policy in force
Hopefully enough CV if policy holder lives past life expectancy – keep policy in force
Hopefully advisor has monitored policy for all of the above
Nationwide’s IUL with NLG
(Extended Death Benefit Guarantee Rider)
Even if in-force rate increases occur, this does Not impact the Guaranteed Death Benefit
Interest credited to the Indexed Interest Strategies is not at sole discretion of Nationwide
No persistency credit
Option at issue for no lapse guarantee duration up to age 120 (CV does not impact NLG)
Hopefully advisor monitored policy for paying scheduled
EDBG
premiums
(Unlimited cumulative premium interest free catch up for Level Pay scenarios)Slide21
Client Scenario: Accumulation & Income
Male, age 45, NTPP, 6% Rate, Minimum Non Mec, Option 1 Death Benefit$10,000 Premium Paid for 20 yrs; Solve for Maximum Monthly Income ages 66-85
21
21
FLM-0802AO.2 For Insurance professional use only
Company
Income
Face Amount
CSV yr 10
Target Premium
Pacific Life Indexed Performer LT
$
23,349
$504,973
$85,861
$9,938
Aviva Lifetime
Builder III IUL
$
23,234
$557,354
$84,798
$9,508
Nationwide
Indexed
UL
$22,992
$535,412
$92,477
$8,995
John Hancock Accumulation
IUL
$
22,464
$514,726
$93,335
$8,205
Axa Athena
Indexed UL
$
21,796
$542,884
$88,104
$7,818
Lincoln
LifeReserve
Indexed
UL
Accumulator
$
20,223
$491,912
$79,443
$9,312
Minnesota
Life
Eclipse Indexed
Life
$
19,986
$539,822
$91,082
$9,209
Prudential
Index
Advantage UL
$
19,868
$518,332
$
102,876
$4,245 Slide22
Client Scenario: Accumulation & Income
Male, age 45, NTPP, 6% Rate, Minimum Non Mec, Option 2/1 “Switch” Death Benefit $10,000 Premium Paid for 20 yrs; Solve for Maximum Monthly Income ages 66-85
22
22
FLM-0802AO.2 For Insurance professional use only
Company
Income
Face Amount
CSV yr
10
Target Premium
Aviva
Lifetime
Builder III IUL
$
28,352
$
213,759
$
115,297
$
3,647
Pacific
Life Indexed
Performer LT
$
27,414
$217,414
$107,633
$4,000
John Hancock Accumulation
IUL
$
25,946
$208,367
$108,663
$3,986
Nationwide YourLife Indexed
UL
$25,896
$252,340
$106,066
$4,239
Lincoln
LifeReserve
Indexed UL Accumulator
$25,777
$226,543
$110,002
$3,922
Minnesota
Life Eclipse
Indexed
Life
$
24,982
$214,456
$
114,973
$3,659
Axa Athena
Indexed UL
$
24,861
$222,402
$107,421
$3,425
American General, Elite Global Plus
$22,196
$216,836
$113,101
$2,898
Slide23
Comparing IUL’s with Indemnity Style Long Term Care Riders or Chronic Illness Riders
23
For Insurance professional use only
Premium
for Rider
is due beginning
Residual Death
Benefit*Pays for Permanent Conditions
Pays for Temporary ConditionsRequires Proof of Loss Each Month
NationwideAt issue
Yes
Yes
Yes
No
AXA
At
issue
Yes
Yes
Yes
No
Minnesota Life
At issue
Yes
Yes
Yes
Yes
Transamerica
At issue
Yes
Yes
Yes
Yes
Hartford
At Issue
No
Yes
No
No
Pacific
Life
At acceleration
No
Yes
No
No
AVIVA
At acceleration
No
Yes
No
No
IUL Indemnity Style LTC and Chronic Illness Riders
*
Residual Death Benefit in Excess of Initial Face AmountSlide24
Nationwide’s IUL Strengths
Nationwide YourLife IUL can be used for:Guaranteed Death Benefit (Optional Extended Death Benefit Guarantee Rider)
Low cost when Solving for Level Premium (Session 3)Accumulation & Income, Insurance Based Retirement PlanningLong Term Care Rider
Nationwide Offers Policy Management Program
Automated Premium Monitor to keep NLG on track (EDBG Rider)Automated Income Monitor to manage Income Stream
2/1 Switch Notification (for income scenarios)
Simple Indemnity Design for LTC rider Claims
24
For Insurance professional use onlySlide25
What we will cover next time
25
For Insurance professional use only
IUL Part 3: Commonly Misperceptions of IUL
June 25, 2013
IUL Part 4: Advanced Planning Applications of IUL
July 23, 2013