Survey Definitions
Information has been provided on the 10 best-selling products during the 12 months ending September 30, 2008, in each of five distribution channels, defined as follows:
• Independent Producers (IP). Licensed insurance producers selling the products of several carriers direct from the carrier or through one or more wholesalers (known as brokerage general agents, financial marketing organizations, independent marketing organizations or master general agents). Such wholesalers do not distribute securities, and a securities license is not required to contract with them.
• Banks (B) and Savings and Loans (S&L). Financial institutions, including credit unions, primarily identified as accepting demand deposits and making commercial and/or consumer loans, including home mortgages. The vast majority are regulated by the federal government as depository institutions. This category also includes sales through distributors/wholesalers serving bank platforms.
• Captive Agents (CA). Also known as “career agents,” these insurance agents primarily sell the products of a single insurance company in return for financial and other support from that company. These producers are not employees of the carrier, however. This category includes agents affiliated with companies like Allstate and New York Life.
• Independent Broker/Dealers (IBD). Securities Brokerage firms serving independent registered representatives/financial planners.
• Stockbrokers. Very large to medium-sized securities brokerage firms with their own registered reps. This category combines wirehouses (WH) and large/regional broker/dealer (LRBD) firms. Wirehouses are the five largest firms, all based in the New York area and each operating with thousands of producers, including Merrill Lynch, Morgan Stanley Smith Barney, UBS Wealth Management and Wachovia Securities. Large/regional firms like Legg Mason also operate with their own registered reps.
Products are categorized by type, as follows:
• Income. These products provide a series of payments, whether within 13 months of purchase (immediate/SPIA) or more than 13 months after purchase (delayed/longevity insurance). This category does not include structured settlements/lottery payouts.
• Indexed. These are fixed deferred annuities that credit based on the movement of an equity or bond index. They are considered fixed products because they guarantee a minimum credited rate and/or surrender value. Products in this category may or may not impose a market value adjustment (MVA) on withdrawals made during the surrender charge period. (If interest rates have risen since the contract was purchased, the MVA will reduce the amount withdrawn. If rates have declined, the MVA will increase the withdrawn amount.)
Both single and flexible premium products are included in this category. (Flexible premium products accept additional contributions during the surrender charge period.)
• Traditional Non-MVA. These are fixed deferred annuities that declare an initial credited rate, which may or may not renew during the surrender charge period and which do not impose an MVA on withdrawals made during the surrender charge period. Both single and flexible premium products are included in this category.
• Traditional with MVA. These fixed deferred annuities also declare an initial rate which may be in effect for the entire surrender charge period or renew one or more times during that period. However, these products do impose an MVA on withdrawals. Both single and flexible premium products are included in this category.
The Ten Best Selling Products chart identifies additional distribution channels, if any, for each best-selling product. Wirehouses and large/regional broker/dealers are noted separately.
More detailed information is provided for the top 20 independent channel products, including:
• Ratings. Insurance company ratings by A.M. Best, Standard & Poors, Fitch (formerly Duff & Phelps) and Moody’s are included. An “NR” symbol indicates that the company is not rated by that agency.
• Indexed Annuity Crediting Strategies. Summaries are provided regarding how the product measures change in the underlying index and credits interest based on that change. Multiple strategies, including fixed interest options, are identified where applicable.
• Rate Term. This is the number of years for which a credited rate is declared, and applies only to traditional deferred annuities. An “NA” indicates that the product is not of this type.
• Surrender Period/Schedule. The number of years in which withdrawals are subject to surrender charges is noted, followed by the percentage of contract value that would be deducted in each contract year. (Most deferred annuities permit limited withdrawals which are not subject to surrender charge.) Surrender periods do not apply to immediate annuities, as noted by an NA symbol.
• Minimum and Maximum Contribution. These are the smallest and largest initial contribution (or premium) amounts accepted without home office approval.
• Minimum and Maximum Issue Ages. These are the youngest and oldest acceptable ages (without home office approval) for the annuity owner and/or annuitant at the time the policy is issued. Where different, minimum and maximum issue ages for owner and annuitant or qualified versus non-qualified purchases are noted separately.
• Waivers of Surrender Charges. Under certain circumstances, some fixed deferred annuities waive surrender charges when an owner accesses all or part of the contract’s accumulated value. (As noted, waivers as such apply only to deferred annuities, not immediates.)
Such circumstances may include various financial emergencies and the choice to annuitize the contract (convert it to a series of payments). These features are called waivers and include: annuitization, death (of the owner, the annuitant or both, as specified by the contract), hospital or nursing home confinement, terminal illness (often defined as life expectancy of 12 months or less), and unemployment.
Also included are surrender window waivers, which provide a “window” (usually two to four weeks) just before the surrender charge period in which the contract can be liquidated without a surrender charge.
• Availability by State. Like other insurance products, fixed annuities are approved for sale on a state-by-state basis. States in which the product is not available are noted.
Please note that the data and other information provided is offered solely for informational purposes and does not constitute investment advice. It has been obtained from documents and reports provided by insurance companies, financial reporting services and other sources believed by Beacon Research to be reliable. However, Beacon makes no representations, warranties or guarantees with respect to the accuracy, validity or completeness of such data or other information. The information provided regarding company ratings, distribution channels and product features are subject to change, and changes may have occurred between the time of data compilation and publication.
