Nationwide
IUL Web Ex Series
Introduction to IUL: Part 2
Learn to Embrace Indexed UL
.
LAM-1921AO
For Insurance professional use only
1
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
For Insurance Professional Use Only - Not for distribution with the public
LAM-1921AO
2
Nationwide YourLife®
Indexed UL
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 AverageSM" 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 AverageSM 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
3
IMPORTANT BENCHMARKING
INFORMATION
•
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.
Agenda
Annual Point to Point & Monthly Averaging
Holding Account
Sweep Dates
Guaranteed Floor vs. Cumulative Guarantee
Understanding IUL Statements
Illustrating IUL
Typical Client Scenarios:
Alternative to GUL, Alternative to Current Assumption,
Accumulation & Income and also LTC Rider
Nationwide’s YourLife Indexed UL Strengths
For Insurance professional use only
5
1 year Annual Point to Point
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
higher
For Insurance professional use only
6
Monthly Averaging
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 higher
For Insurance professional use only
7
Annual Point to Point with Dollar Cost Averaging is
Different from Monthly Averaging
Annual Point-to-Point with DCA
• Helps minimize market timing risk
• Always only comparing 2 points in time (will have more segments)
Monthly Averaging vs. Annual Point-to-Point with DCA
• With 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
For Insurance professional use only
8
“Holding” Account Requirements
What are Fixed Account Requirements also known as Holding Accounts?
•
Requirement for money to be held here prior to being “Swept” into the Indexed Interest Strategy
•
Fixed Account can be traditional Fixed account premium allocations, or a special Fixed account
with a different rate
For Insurance professional use only
9
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 months
•
Nationwide: 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
Company A
(No Holding
Requirement for
Policy charges)
Nationwide
Dollar allocated
to Fixed Acct
Percent
Credited Fixed
Interest Account
Dollar Allocated
to Indexed
Interest Strategy
Amount Credited
Indexed Acct
$0.00
0%
$10,000
12% to $8,000
$2,000
4% to $2,000*
$8,000
12% to $8,000
*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.
For Insurance professional use only
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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.
Sweep Dates
Usually 1 day
per month
Sometimes
More than 1 day
Where is Money
Held in the interim?
15th
11th & 26th
Fixed Account
Holding Account
Or 28th
For Insurance professional use only
11
Cumulative Guarantee vs. Guaranteed Floor
They are Not the Same
Guaranteed Floor
• Minimum amount credited at each Segment Maturity
• Usually 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 Maturity
• Could be 1%, 2%, 3%
Example: Underlying Index Growth 0% at Segment Maturity
Type
Percent Applied at
Segment Maturity
Guaranteed Floor 1%
1%
Cumulative Guarantee 3%
0%
For Insurance professional use only
12
Understanding IUL Statements
Reflecting Index Credit on Statement
• Most companies do Not reflect credit applied to Indexed Interest
Strategy for that year in the Annual Statement
• A 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)
For Insurance professional use only
13
Illustrating Indexed UL
Illustrating IUL’s
•
Companies assume Various Default Illustrated Rates
•
Companies assume Various Look back Periods to determine Default Rate
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 yrs
What rate should you use to illustrate IUL?
•
•
Company’s Default Rate, or
Flat rate: 6%, or 7%
For Insurance professional use only
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How to Illustrate Nationwide’s IUL?
For Insurance professional use only
15
Illustrating Allocations at Segment Maturity
For Insurance professional use only
16
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 more
•
Price between products are more aligned for Level Pay premium scenarios
•
Price between products are more comparable: $250,000 Face amount and below
Male age 45, $250,000 Face, NTP, NLG age 100
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
Male age 70, $250,000 Face, NT, NLG age 100
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
*Note: IUL assumes selection of optional Extended Death Benefit Guarantee Rider (EDBG) and an illustrated
rate of 6.00% allocated to Indexed Interest Strategy
For Insurance professional use only
17
Compare Feature in Nationwide’s Software Input Screens
Comparing Nationwide’s IUL to GUL
Male, 50, NT, $250,000 Face, NLG to age 100
For Insurance professional use only
18
Client Scenario: Alternative to Current Assumption UL
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
Product
Face Amount
Interest Rate
NLG
Duration
Target
Premium
Rolling Target
Premiums?
John Hancock
Protection 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
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Client Scenario: Alternative to Current Assumption
Differences in the Guaranteed Death Benefit
Current 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)
NFM-10697
For Insurance professional use only
20
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
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
FLM-0802AO.2 For Insurance professional
use only
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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
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
FLM-0802AO.2 For Insurance professional
use only
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Comparing IUL’s with Indemnity Style
Long Term Care Riders or Chronic Illness Riders
IUL Indemnity Style LTC and Chronic Illness Riders
Premium for
Rider is due
beginning
Residual
Death
Benefit*
Pays for
Permanent
Conditions
Pays for
Temporary
Conditions
Requires
Proof of
Loss Each
Month
Nationwide
At 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
* Residual Death Benefit in Excess of Initial Face Amount
For Insurance professional use only
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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 Planning
Long 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
For Insurance professional use only
24
What we will cover next time
IUL Part 3: Commonly Misperceptions of IUL
June 25, 2013
IUL Part 4: Advanced Planning Applications of IUL
July 23, 2013
For Insurance professional use only
25