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Nationwide IUL Web Ex Series
Introduction to IUL: Part 2 Learn to Embrace Indexed UL .
LAM-1921AO
For Insurance professional use only
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Disclosure •
Life Insurance issued by Nationwide Life Insurance Company and/or Nationwide Life and Annuity Insurance Company.
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Guarantees are subject to the claims paying ability of Nationwide.
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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.
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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.
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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.
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Not a deposit Not FDIC or NCUSIF insured Not guaranteed by the institution. Not insured by any federal government agency May lose value
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© 2012 Nationwide Financial Services, Inc. All rights reserved
For Insurance Professional Use Only - Not for distribution with the public LAM-1921AO
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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
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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.
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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
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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
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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
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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
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“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
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Fixed Account can be traditional Fixed account premium allocations, or a special Fixed account with a different rate
For Insurance professional use only
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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
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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
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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
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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
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Illustrating Indexed UL Illustrating IUL’s •
Companies assume Various Default Illustrated Rates
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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
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Illustrating Allocations at Segment Maturity
For Insurance professional use only
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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
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Price between products are more aligned for Level Pay premium scenarios
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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
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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
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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
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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
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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
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