Focused Growth Annuity and Secured Rate Annuity
Product
Training
Module
© 2010 Standard
Insurance
Company
FGA and SRA Product Training Module
• Focused Growth Annuity (FGA)
• Product Overview
• Surrender Schedule and Market Value Adjustment
• Surrender and MVA Free Withdrawals
• Secured Rate Annuity (SRA)
• Product Overview and Key Features
• Surrender Schedules and Free Withdrawals
• Suitability Analysis During the Sales Process
• Compensation and Sales Support
2
© 2010 Standard Insurance Company
Focused Growth Annuity
Product Overview
© 2010 Standard Insurance Company
FGA Overview
The Focused Growth Annuity (FGA) is a single premium deferred annuity that offers a robust set of features to optimize
growth potential. The FGA is an ideal choice for a long-term saver who can appreciate tax-deferred growth, protection,
and limited access to funds. Few taxable investments provide this blend of safety, growth and flexibility.
Issue Ages – The FGA 5,6 and 7 may be established for owners age 18-90; The maximum owner age for the FGA 10
is 80. The maximum annuitant age for the FGA 5,6 and 7 is 90, while it is 80 for the FGA 10.
Single Annuitant and Single Owner – The Focused Growth Annuity series contract language does not allow for joint
annuitants or joint owners. In the case of a 1035 exchange we will facilitate a joint owner. If one owner dies, the death
benefit will be payable.
Tax Qualified Options – This annuity may be established as an IRA (Traditional, Roth, or SEP), 403(b) Tax-Sheltered
Annuity, or Qualified Pension. Non-qualified funds may also be used to establish the annuity.
Rate Guarantees – The Annuity will be credited an initial interest rate that is guaranteed for five, six, seven or ten
years, depending on the option selected. After that guarantee period, the contract will receive subsequent renewal rates
based on the current economic and interest-rate environment. The annuity contract is assigned a guaranteed minimum
rate; the renewal rate will never be set below this rate. Interest is calculated and credited daily.
Premium – The minimum premium amount for the annuity is $15,000 and the maximum is $1,000,000. Greater
amounts may be considered, but must receive home office approval prior to application. Additional premium payments
may be made during the first 90 days of the contract.
4
© 2010 Standard Insurance Company
FGA Surrender Schedule
and MVA Feature
© 2010 Standard Insurance Company
FGA Surrender Charge Schedule
Unlike short-term savings products, deferred annuities are designed and priced for long-term retirement
savings. Part of this design relies on the fact that the advantages of tax deferral work best when the
annuity’s growth is allowed to compound over time. So, though all or a portion of the funds may be
withdrawn at any time, early withdrawals are discouraged and are subject to surrender charges.
Expressed as a percentage of the annuity’s total value, these charges diminish to zero over time. The
schedule is in effect for only one period during the life of the contract and will not reset.
Please note that the surrender charges are not part of or associated with any state or federal taxes
imposed on a distribution or with the IRS pre-age-59 ½ tax penalty that may apply to a withdrawal.
Surrender charges are in addition to any applicable state or federal taxes or penalties.
6
Contract Year
1
2
3
4
5
FGA 5
8%
7%
6%
5%
4%
FGA 6
8%
7%
6%
5%
4%
3%
FGA 7
8%
7%
6%
5%
4%
3%
2%
FGA 10
8%
7%
6%
5%
4%
3%
2%
© 2010 Standard Insurance Company
6
7
8
9
1%
.9%
10
Market Value Adjustment (MVA)
Why an MVA? – The MVA helps optimize the growth potential of the Focused Growth Annuity over the long term. The
presence of an MVA helps protect the insurance company against investment losses due to early withdrawals from the
annuity, and in turn, the MVA allows the insurance company to credit a higher interest rate to the annuity contract. For
those clients who do not plan on taking distributions beyond the penalty-free withdrawals allowed during the surrender
period, the MVA can work to their advantage by helping them receive a more competitive interest rate.
How it Works – During the market value adjustment period an MVA will be applied to withdrawals or surrenders. This
adjustment is based on changes in yields of market interest rates and may increase or decrease the annuity’s surrender
value.
The contract details how this adjustment is calculated, but generally if interest rates have risen since the annuity
purchase, the adjustment will decrease the surrender value; if interest rates have fallen, the adjustment will increase the
surrender value.
In a withdrawal scenario where the surrender charge is being waived, the market value adjustment will also be waived.
7
© 2010 Standard Insurance Company
Market Value Adjustment (MVA)
8
Product
Surrender
charge period
MVA period
FGA 5
5 years
5 years
FGA 6
6 years
6 years
FGA 7
7 years
7 years
FGA 10
9 years
10 years
© 2010 Standard Insurance Company
FGA Market Value Adjustment Examples
During the initial interest rate guarantee period, an MVA is applied to withdrawals or surrenders that are subject to surrender
charges. On the FGA 5,6 and 7, both the surrender charge period and MVA period are the same number of years. On the FGA
10, the surrender charge period is nine years. However, the MVA is in effect for ten years. The MVA is based on changes in the
prescribed index, and may increase or decrease the annuity’s surrender value. Generally, if interest rates have risen since the
purchase, the adjustment will decrease the surrender value. Conversely, if interest rates have fallen since the purchase, the
MVA will increase the surrender value.
Focused Growth Annuity 5
9
Focused Growth Annuity 6
End of
year
Unchanged
at 3.00%
Increased
to 5.00%
Decreased
to 1.00%
End of
year
Unchanged
at 3.00%
Increased
to 5.00%
Decreased
to 1.00%
1
8.00%
11.60%
0.30%
1
8.00%
11.60%
-1.60%
2
7.00%
12.40%
1.20%
2
7.00%
14.00%
-0.80%
3
6.00%
9.70%
2.10%
3
6.00%
11.40%
-0.10%
4
5.00%
7.00%
3.00%
4
5.00%
8.70%
1.00%
5
4.00%
4.20%
3.80%
5
4.00%
6.00%
1.90%
6
0.00%
0.00%
0.00%
6
3.00%
3.20%
2.80%
7
0.00%
0.00%
0.00%
7
0.00%
0.00%
0.00%
© 2010 Standard Insurance Company
For illustrative purposes only; results may vary
FGA Market Value Adjustment Examples
Focused Growth Annuity 7
Focused Growth Annuity 10
End of
year
Unchanged
at 3.00%
Increased
at 5.00%
Decreased
at 1.00%
End of
year
Unchanged
at 3.00%
Increased
at 5.00%
Decreased
at 1.00%
1
8.00%
14.07%
1.93%
1
8.00%
14.11%
1.89%
2
7.00%
15.53%
-1.61%
2
7.00%
15.69%
-1.69%
3
6.00%
12.96%
-1.67%
3
6.00%
17.24%
-5.24%
4
5.00%
10.33%
-0.76%
4
5.00%
15.35%
-6.86%
5
4.00%
7.62%
0.16%
5
4.00%
12.80%
-5.89%
6
3.00%
4.85%
1.08%
6
3.00%
10.18%
-4.91%
7
2.00%
2.00%
2.00%
7
2.00%
7.49%
-3.94%
8
0.00%
0.00%
0.00%
8
1.00%
4.74%
-2.96%
9
0.00%
0.00%
0.00%
9
0.90%
2.79%
-1.06%
10
0.00%
0.00%
0.00%
10
0.00%
0.00%
0.00%
10 © 2010 Standard Insurance Company
For illustrative purposes only; results may vary
FGA Surrender and
MVA Free Withdrawals
© 2010 Standard Insurance Company
FGA Surrender and MVA Free Withdrawals
• Scheduled Payments of Interest Earnings – After 30 days, regularly scheduled withdrawals of interest earnings may
be made on a monthly, quarterly, semi-annual or annual basis.
• IRS Required Minimum Distributions – If the contract is held as a tax-qualified plan, IRS Required Minimum
Distributions may be made on the schedule requested.
• Annuitization – At any time the annuity may be converted to an income annuity with The Standard. Your client must
choose a Lifetime Income option or a Period Certain option of five years or longer. Annuitization is not available in
California.
• Nursing Home Benefit - After the first contract year, if your client becomes a nursing home resident for 30 or more
consecutive days, The Standard will waive surrender charges on all withdrawals, transfers and surrenders during the
period of confinement. Written documentation is required. The nursing home waiver is not available in Massachusetts.
• Terminal Condition Benefit – If your client is diagnosed with a terminal condition, The Standard will waive surrender
charges on all withdrawals, transfers and surrenders. Written documentation is required. State-specific conditions
apply to the terminal condition waiver.
• Out of Surrender – After the end of the surrender period, your client may withdraw some or all of the Focused Growth
Annuity funds without surrender charges.
• Death Benefits -- Beginning immediately, upon the death of the owner or annuitant, the full annuity value is payable as
death benefits to the named beneficiary.
12 © 2010 Standard Insurance Company
FGA Surrender and MVA Free Withdrawals
Available Income Options Include
• Certain Period – A guaranteed income for a time period chosen (5, 10, 15, or 20 years). At any time, benefits may be
commuted to a lump-sum payment. If the annuitant dies prior to the end of the period specified, payments continue to
the beneficiary until the end of the period (or may be commuted to a lump-sum payment).
• Life Income – A guaranteed income for as long as the annuitant lives. Payments will cease upon the death of the
annuitant.
• Life Income with Installment Refund – A guaranteed income as long as the annuitant lives. The total payments will
never be less than the total of the funds paid to purchase this option. If the annuitant dies before receiving at least that
amount, payments continue to the beneficiary until the full amount is repaid (or may be commuted to a lump-sum
payment).
• Life Income with Certain Period – A guaranteed income for as long as the annuitant lives. If the annuitant dies prior
to the end of the period specified (5,10,15,or 20 years), payments continue to the beneficiary until the end of the period
( or may be commuted to a lump-sum payment).
13 © 2010 Standard Insurance Company
FGA Surrender and MVA Free Withdrawals
Available Income Options Include
• Joint and Survivor Life Income – A guaranteed income for as long as both annuitants live. When either annuitant
dies, payments will continue at 50%, 66 2/3%, 75% or 100% of the payments received when both were living.
Payments will cease upon death of both annuitants.
• Joint and Survivor Life Income with Installment Refund – A guaranteed income for as long as both annuitants live.
The total payments will never be less than the total of the funds paid to purchase this option. If both annuitants die
before receiving at least that amount, payments continue to the beneficiary until the full amount is repaid (or may be
commuted to a lump-sum payment).
• Joint and Survivor Life Income with Certain Period – A guaranteed income for as long as both annuitants live.
When either annuitant dies, payments will continue at 100% of the payments received when both were living. If both
annuitants die prior to the end of the period specified (5, 10, 15 or 20 years), payments continue to the beneficiary until
the end of the period (or may be commuted to a lump-sum payment).
• Joint and Contingent Survivor Life Income – A guaranteed income for as long as both annuitants live. If the primary
annuitant dies first, payments will continue at 50% of the payments received when both were living. If the contingent
annuitant dies first, payments will continue at 100% of the payments received when both were living. Payments will
cease upon death of both annuitants.
14 © 2010 Standard Insurance Company
Secured Rate Annuity Overview
and Key Product Features
© 2010 Standard Insurance Company
SRA Overview and Key Product Features
The Secured Rate Annuity (SRA) is a single premium deferred annuity that offers optimized growth potential while
providing strong guarantees to protect hard-earned savings. The SRA is an ideal choice for a long-term saver who
appreciates the benefits of tax-deferred growth, principal protection, and generous access to funds. Few taxable
investments provide this blend of safety, growth and flexibility.
Issue Ages – The SRA may be established for owners age 18-90; The maximum issue age for an annuitant is 90.
Single Annuitant and Single Owner – The Secured Rate Annuity series contract language does not allow for joint
annuitants or joint owners. In the case of a 1035 exchange we will facilitate a joint owner. If one owner dies, the death
benefit will be payable.
Tax Qualified Options -- This annuity may be established as an IRA (Traditional, Roth, or SEP), 403(b) Tax-Sheltered
Annuity, or Qualified Pension. Non-qualified funds may also be used to establish the annuity.
Premium – The minimum premium amount for the annuity is $15,000 and the maximum is $1,000,000. Greater
amounts may be considered, but must receive home office approval prior to application. Additional premium payments
may be made during the first 90 days of the contract.
Principal Guarantee – Principal is 100% guaranteed. Regardless of economic fluctuations at home or abroad, we
guarantee that your client or the beneficiary will never receive less than the total premium payments, less any previous
withdrawals or outstanding loan balances.
16 © 2010 Standard Insurance Company
SRA Overview and Key Product Features
The Secured Rate Annuity (SRA) offers strong growth potential through competitive market interest rates. The
Standard has a long-standing history of excellent fixed annuity performance and competitive renewal rates.
Rate Guarantees – The Annuity will be credited an initial interest rate that is guaranteed for one, five or six years,
depending on the option selected. After that guarantee period, the contract will receive subsequent renewal rates based
on the current economic and interest-rate environment. The annuity contract is assigned a guaranteed minimum rate;
the renewal rate will never be set below this rate. Interest is calculated and credited daily.
Interest Rate Bonus (SRA 1 Only) – The Secured Rate Annuity 1 includes an interest rate bonus of 1.00% for the first
contract year.
Bailout Guarantee (SRA 1 Only) – The bailout interest rate for contract years one through five on the SRA 1 equals
the first-year guaranteed interest rate minus 1.00%. The bailout interest rate for contract year six equals the first-year
guaranteed interest rate minus 2.00%.
Persistency Bonus (SRA 1 Only) – At the end of the seventh contract year, the Secured Rate Annuity 1 will be
credited with additional interest equal to 1.00% of the total paid premiums, less any previous withdrawals, outstanding
loan balances or applicable loan interest; and at the end of the eight and subsequent years the annuity will be credited
with additional interest equal to 0.25% of the total paid premiums, less any previous withdrawals, outstanding loan
balances, or applicable loan interest.
17 © 2010 Standard Insurance Company
SRA 1 Bailout Guarantee
The Secured Rate Annuity (SRA) offers strong growth potential through competitive market interest rates. The
Standard has a long-standing history of excellent fixed annuity performance and competitive renewal rates.
Bailout Guarantee on Secured Rate Annuity 1 – The Secured Rate Annuity 1 provides an innovative bailout
guarantee. If future market conditions dictate that The Standard cannot perform at or above the bailout interest-rate
parameters defined when the contract was established, your client can make withdrawals or transfers – even surrender
the contract – without a surrender charge. No questions asked.
The bailout interest rate for contract years one through five on the SRA 1 equals the first-year guaranteed interest rate
minus 1.00%. The bailout interest rate for contract year six equals the first-year guaranteed interest rate minus 2.00%.
Secured Rate Annuity 1 Bailout Example – In the example below, 5.25% is guaranteed for year one and includes a
1.00% first-year bonus.
Contract Year 2
Bailout Rate
3
4.25% 4.25%
4
5
6
4.25%
4.25% 3.25%
If the interest rate credited in contract years two through six is lower than the corresponding bailout rate for that year,
then your client may make withdrawals, transfers or surrender the contract without surrender charges.
18 © 2010 Standard Insurance Company
SRA 1 Persistency Bonus
Persistency Bonus on the Secured Rate Annuity 1 – The Secured Rate Annuity 1 features an innovative
persistency bonus that rewards your client’s commitment to a long-term savings strategy. At the end of the seventh
contract year, the Secured Rate Annuity 1 will be credited with additional interest equal to 1.00% of the total paid
premiums, less any previous withdrawals, outstanding loan balances or applicable loan interest; and at the end of
the eight and subsequent years the annuity will be credited with additional interest equal to 0.25% of the total paid
premiums, less any previous withdrawals, outstanding loan balances, or applicable loan interest.
On the following page is an example of how the persistency bonus on the SRA 1 works.
19 © 2010 Standard Insurance Company
SRA 1 Persistency Bonus
SRA 1 Persistency Bonus Example – In the example below $100,000 in premium is guaranteed at 5.25% for one
year; a 4.25% rate is assumed for the second through seventh years (for illustration purposes only)
End of
Year
Before Persistency Bonus
After Persistency Bonus
20 © 2010 Standard Insurance Company
Account
Value
Cumulative
Return
Annual
Yield
1
$105,250
5.25%
5.25%
2
$109,723
9.72%
4.25%
3
$114,386
14.39%
4.25%
4
$119,248
19.25%
4.25%
5
$124,316
24.32%
4.25%
6
$129,599
29.60%
4.25%
7
$135,107
35.11%
4.25%
+$1,000
+1.00%
$136,107
36.11%
7
5.02%
SRA Surrender Schedules and
Free Withdrawals
© 2010 Standard Insurance Company
SRA Surrender Charge Schedules
Unlike short-term savings products, deferred annuities are designed and priced for long-term retirement
savings. Part of this design relies on the fact that the advantages of tax deferral work best when the
annuity’s growth is allowed to compound over time. So, though all or a portion of the funds may be
withdrawn at any time, early withdrawals are discouraged and are subject to surrender charges.
Expressed as a percentage of the annuity’s total value, these charges diminish to zero over time. The
schedule is in effect for only one period during the life of the contract and will not reset.
Please note that the surrender charges are not part of or associated with any state or federal taxes
imposed on a distribution or with the IRS pre-age-59 ½ tax penalty that may apply to a withdrawal.
Surrender charges are in addition to any applicable state or federal taxes or penalties.
Contract Year 1
2
3
4
5
6
SRA 1
7%
7%
7%
6%
5%
3%
SRA 5
9%
8%
7%
6%
5%
SRA 6
9%
8%
7%
6%
5%
22 © 2010 Standard Insurance Company
4%
SRA Surrender Free Withdrawals
• Scheduled Payments of Interest Earnings – After 30 days, regularly scheduled withdrawals of interest earnings may be
made on a monthly, quarterly, semi-annual or annual basis.
• 10% Annual Withdrawals – After the first contract year, your client may annually withdraw up to 10% of the annuity’s value
(as of the end of the preceding contract year) without incurring a surrender charge.
• IRS Required Minimum Distributions – If the contract is held as a tax-qualified plan, IRS Required Minimum Distributions
may be made on the schedule requested.
• Substantially Equal Periodic Payments (SEPP) – The SEPP option allows early-retirement (pre-age-59 ½) income
without imposition of the IRS 10% early-withdrawal penalty or incurring a surrender charge.
• Nursing Home Benefit - After the first contract year, if your client becomes a nursing home resident for 30 or more
consecutive days, The Standard will waive surrender charges on all withdrawals, transfers and surrenders during the period
of confinement. Written documentation is required. The nursing home waiver is not available in Massachusetts.
• Terminal Condition Benefit – If your client is diagnosed with a terminal condition, The Standard will waive surrender
charges on all withdrawals, transfers and surrenders. Written documentation is required. State-specific conditions apply to
the terminal condition waiver.
• Out of Surrender – After the end of the surrender period, your client may withdraw some or all of the Secured Rate Annuity
funds without surrender charges.
• Death Benefits -- Beginning immediately, upon the death of the owner or annuitant, the full annuity value is payable
as death benefits to the named beneficiary.
23 © 2010 Standard Insurance Company
Surrender Free Withdrawals
Annuitization – At any time the annuity may be converted to an income annuity with The Standard. Your client must
choose a Lifetime Income option or a Period Certain option of five years or longer.
Available Income Options Include
• Certain Period – A guaranteed income for a time period chosen (5, 10, 15, or 20 years). At any time, benefits may be
commuted to a lump-sum payment. If the annuitant dies prior to the end of the period specified, payments continue to
the beneficiary until the end of the period (or may be commuted to a lump-sum payment).
• Life Income – A guaranteed income for as long as the annuitant lives. Payments will cease upon the death of the
annuitant.
• Life Income with Installment Refund – A guaranteed income as long as the annuitant lives. The total payments will
never be less than the total of the funds paid to purchase this option. If the annuitant dies before receiving at least that
amount, payments continue to the beneficiary until the full amount is repaid (or may be commuted to a lump-sum
payment).
• Life Income with Certain Period – A guaranteed income for as long as the annuitant lives. If the annuitant dies prior
to the end of the period specified (5,10,15,or 20 years), payments continue to the beneficiary until the end of the period
( or may be commuted to a lump-sum payment).
24 © 2010 Standard Insurance Company
SRA Surrender Free Withdrawals
Available Income Options Include
• Joint and Survivor Life Income – A guaranteed income for as long as both annuitants live. When either annuitant
dies, payments will continue at 50%, 66 2/3%, 75% or 100% of the payments received when both were living.
Payments will cease upon death of both annuitants.
• Joint and Survivor Life Income with Installment Refund – A guaranteed income for as long as both annuitants live.
The total payments will never be less than the total of the funds paid to purchase this option. If both annuitants die
before receiving at least that amount, payments continue to the beneficiary until the full amount is repaid (or may be
commuted to a lump-sum payment).
• Joint and Survivor Life Income with Certain Period – A guaranteed income for as long as both annuitants live.
When either annuitant dies, payments will continue at 100% of the payments received when both were living. If both
annuitants die prior to the end of the period specified (5, 10, 15 or 20 years), payments continue to the beneficiary until
the end of the period (or may be commuted to a lump-sum payment).
• Joint and Contingent Survivor Life Income – A guaranteed income for as long as both annuitants live. If the primary
annuitant dies first, payments will continue at 50% of the payments received when both were living. If the contingent
annuitant dies first, payments will continue at 100% of the payments received when both were living. Payments will
cease upon death of both annuitants.
25 © 2010 Standard Insurance Company
Suitability Analysis During the
Sales Process
© 2010 Standard Insurance Company
Suitability Analysis During the Sales Process
• Is the Product Right for Your Client? In recommending an annuity to a client, suitability regulations require a producer
to have “reasonable grounds” to believe the recommended annuity is suitable for that particular client on the basis of
facts disclosed by the client during the sales process. A producer should obtain and analyze the client’s:
• Age
• Annual Income
• Financial Situation and Needs (including financial resources used to fund the annuity)
• Financial Experience
• Financial Objectives
• Intended Use of the Annuity
• Financial Time Horizon
• Existing Assets (including investments and life insurance holdings)
• Liquidity Needs
• Liquid Net worth
• Risk Tolerance
• Tax Status
27 © 2010 Standard Insurance Company
The Producer Must Have Reasonable Basis to Believe:
As a result of a producer’s review of the previous, and analysis to determine suitability, the producer must have a
“reasonable basis to believe:”
• The client has been “reasonably informed of the various features of the annuity” – this includes the surrender
charge amounts; potential tax penalties associated with the sale, exchange, surrender or annuitization of the
annuity; mortality, expenses and investment advisory fees; potential charges for and features of riders; limitations
on interest returns; insurance and investment components and market risk;
• The client would benefit from certain features of the annuity, such as tax-deferred growth, annuitization, death
benefits or living benefits;
• The particular annuity as a whole, any index accounts to which funds are allocated at the time of purchase or
exchange of the annuity, and any riders and similar product enhancements, are suitable for the client based on
his/her suitability information; and
• (If applicable) an exchange or replacement is suitable, taking into consideration whether the client:
– Will incur a surrender charge, be subject to the commencement of a new surrender period, lose existing
benefits (such as death, living or other contractual benefits), or be subject to increased fees, investment
advisory fees or charges for riders and similar product enhancements;
– Would benefit from product enhancements and improvements; and
– Has had another annuity exchange or replacement and, in particular,
an exchange or replacement within the preceding 36 months.
28 © 2010 Standard Insurance Company
Compensation and Sales Support
© 2010 Standard Insurance Company
Compensation
• Commission Amounts
• Consult your Annuity Commission Schedule for details
• Commission Chargeback
• Surrenders
– 100% of the commission will be recaptured on contracts surrendered in the first six contract months
– 50% of commission will be recaptured on contracts surrendered in the seventh to twelfth contract months
• Death
– There is no chargeback on death of an owner or annuitant except in those cases where the deceased was
age 86 or older at contract issue, in which case the commission chargeback rules for surrenders apply
– 100% of commission will be recaptured on death in the first six contract months
– 50% of commission recaptured on death in the seventh to twelfth
contract months
30 © 2010 Standard Insurance Company
Sales Support
• Please contact your NMO or our sales team
• The Standard sales team phone: 800.378.4578
• The Standard sales team email alias: annsales@standard.com
• Marketing Materials: www.standard.com/annuities
• New Business Forms and Materials: www.standard.com/annuities
• New Business Submission
Annuity New Business, P5C
The Standard
PO Box 711
Portland, OR 97207-9971
• Street Address for Overnight Deliveries
Annuity New Business, P5C
The Standard
1100 SW Sixth Avenue
Portland, OR 97204
31 © 2010 Standard Insurance Company
Focused Growth Annuity and Secured Rate Annuity
Product
Training
Module
© 2010 Standard
Insurance
Company