timothy c. pfeifer, fsa, maaa pfeifer advisory llc april 13, 2010
TRANSCRIPT
Timothy C. Pfeifer, FSA, MAAAPfeifer Advisory LLCApril 13, 2010
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Generating Assets
Stable Sales in All Environments
Generating Income
Hedging Effects for Other Product Lines
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Suppose you are handed a blank sheet of paper and are authorized to build the line in today’s environment:
Systems capabilities are available.Creative products are not out of the question.
“Develop an annuity portfolio which will enable our company to become a strong, sustaining player in the individual annuity marketplace, while achieving reasonable profitability.”
Assumptions
A. Bond Yields quite steep
B. Commercial Mortgages yielding 5.19%
C. Equities grew 40% in last year, but caution persists
D. Portfolios cash heavy, capacity existsE. Uncertainty about Indexed Annuities’ securities
treatment
F. Conservative investors and producers
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A Rated: 2 yr – 1.89% 10 yr – 5.05%
BBB Rated: 2 yr – 2.39% 10 yr – 5.49%
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Deferred Annuities
Immediate Annuities
Fixed/DeclaredVariable with GMAB, GLWB
Indexed with Annual PTP
ModularMYGA
Interest-Indexed One
Year RG
Indexed, w/S&P, Annual Adj.
CPI, or Interest-
Indexed Kicker
Investment wraps, or Stand-Alone Living Benefits, a contingent annuity providing a guarantee on hedgeable assets such as indexed mutual funds or passively managed ETFs.
Why? Although not a traditional annuity, such products open doors to large pools of invested assets and associated distribution and asset manager relationships.
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A. Variable Immediate Annuities
B. Longevity Insurance (maybe in another
environment)
C. LTC Rider (possibly on VA, not fixed)
D. Complicated indexed return structures
E. Straight one-year rate guarantee product
F. GMIB on VA
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Fixed/Declared Modular MYGA
Simple MVA Formula (non-security)
Levelized sales compensation
No ROP
5, 7, and 10-year IGPs, with autorenewal guarantee
$25,000 minimum (NQ), no policy fee
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Interest Indexed One-Year Rate Guarantee
Simple MVA Formula (non-security)
Levelized sales compensation,
if possible
Link credited rate to 5 or 10 yearTreasuries, or to CD rates
Higher minimum ($50,000), with no policy fee
Minimum credited rate equal to initial
credited rate for SC period
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Variable Deferred w/GMAB, GLWB
Heavily indexed-oriented subaccounts
with a small number of third partymanagers and 20-30 funds total
Minimal base GMDB10 year GMAB and GLWB with rising %, step-ups and controls on ph activation
Graded M&E scale,
emulates A sharedesign
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Indexed, w/Annual PTP
Registered and Non-Registeredversion, varying by guarantee and participation
Introduce new index choices beyond S&P 500, including non-equity
Option to give up mid-level return for sharing in “home-
runs”
SCs not larger than 10 years, and
minimum sizes of $25,000
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Indexed SPIA, with S&P Adjustment
Outstanding use of indexing,benefit can go up, not down
Liquidity (partial) at defined
internals, w/MVA
Can couple with fixed benefit SPIA bucket
% benefit trail
compensation
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CPI or Interest-Indexed SPIA
As with Indexed SPIA above,benefit can climb, but not fall
Must be priced for greatermortality anti-selection
Limited liquidity at defined intervals, w/MVA
Initial benefit disadvantagemay be greater in currentinterest rate environment for younger annuitants
1. Variable Deferred Annuity
2. Modular MYGA
3. CPI SPIA
4. Indexed Deferred
5. Indexed Immediate
6. One-Year Rate Guarantee Deferred with Interest
Index
7. Stand-Alone Living Benefit
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