[JMO Fan]

Originally Posted by URDRWHO

Apparently you need to take some classes on risk assumption and sharing.

Thanks, I have -- finished my FSA 20+ yrs ago. Did you see this one?
http://www.sec.gov/rules/concept/s72297/hippen1.txt

4. Referring to the index to determine the rate credited on existing funds shifts the investment risk away from the insurer, placing it squarely upon the policyowner. Retention of investment risk by the insured appeared to be the linchpin in the federal court decision in Otto v. VALIC (as well as Rule 151), which declared insurance to be a security when the excess interest rate was not guaranteed prospectively for at least 12 months. Virtually no equity index products guarantee the excess interest rate prospectively.

David J. Hippen, FSA, MAAA, FLMI
Actuary

[URDRWHO]

When did you get your fellowship?

Since I was once thinking of becoming a fellow (I was thinking CAS), I do have a question. WTF is an actuary doing spending an ounce of energy with AFLAC? I know very well the going rate of pay for an actuary with your 20 years of experience is more valued than selling pittance policies through the duck.
Newly qualified actuaries in insurance companies earn between $91,100–$108,900.

You being an actuary, must have already figured out how the insurance company can get around all this right? Unless the SEC is ready to stop allowing the general fund of an insurance company to invest in the stock market, with a few pen strokes to a contract, the EIA can change its spots. Kind of like when the municipality says a fence can not be higher than 5 feet from the ground. You build a 2 foot mound and place your 5 foot fence on top of it and there you have a legal 7 foot fence. Ask me how I know.

Was it you that said "The SEC said indexed products were securities 20+ years ago, so this is a small step for them. If they didn't act, federal courts would probably force them to."

I was not aware that an FIA existed 20 years ago. The SEC has a different statement: They were first introduced about 13 years ago, around 1995. Statement at Open Meeting on Equity-Indexed Annuities; Washington, D.C.; June 25, 2008 (Christopher Cox)

And of course who is behind all the banter: Statement at Open Meeting on Equity-Indexed Annuities; Washington, D.C.; June 25, 2008 (Christopher Cox)
"I would also like to thank the leadership of both the North American Securities Administrators Association, especially current president Karen Tyler, and past presidents Joe Borg and Patty Struck and FINRA. Their efforts have been instrumental in bringing to light the investor protection concerns related to equity indexed annuities that we are addressing today."

Do you seriously think that there aren't bad people selling variable annuities to unsuitable owners? FINRA and all of its nonsense has never, ever, never stopped somone from doing bad things.


Oh and BTW two things:

1. If you are using your real name....that is not a good idea on the net. My 14 year old knows better.
2. If you are not the same gentleman on the American Academy of Actuaries Life Products Committee, there are court cases on using anoter persons identy.

Originally Posted by JMO Fan

Thanks, I have -- finished my FSA 20+ yrs ago. Did you see this one?
http://www.sec.gov/rules/concept/s72297/hippen1.txt

4. Referring to the index to determine the rate credited on existing funds shifts the investment risk away from the insurer, placing it squarely upon the policyowner. Retention of investment risk by the insured appeared to be the linchpin in the federal court decision in Otto v. VALIC (as well as Rule 151), which declared insurance to be a security when the excess interest rate was not guaranteed prospectively for at least 12 months. Virtually no equity index products guarantee the excess interest rate prospectively.

David J. Hippen, FSA, MAAA, FLMI
Actuary

[URDRWHO]

MA CMS rules showing the insane government bureaucratic rules...

Talking to Mary about an MA plan

Mary: I like this plan, Jean across the hall would like to hear about it. I will give you her phone number.

Agent: That is against the rules, I can not call her out of the blue.

Mary: Ok I will give you her apartment number.

Agent: That is against the rules, I can't just go knock on her door to talk to her about the MA plans.

So if Mary calls Jean and says, here Jean talk to this agent. All is ok. The outcome is the same Jean is contacted but the silly rules have been followed.

Yep....the government wonks make their handsome salary and great bene's off the backs of taxpayers and then make silly rules that we must follow.

One of my long time friends does a lot of business in Russia. He says that the Russian business climate reminds him of the 1960's. It is robust and lacks all the bureaucrat nightmares that exist now in the USA.

Originally Posted by healthagent

Although there are deep problems with a small percentage of agents in all areas of insurance, it's magnified when seniors are the target.

We have decided, as a society, that we are going to offer seniors an extra layer of protection. For example, in many states crimes against seniors carry stiffer penalties.

We see CMS going nuts with MA plans and the life insurance industry had all the warning signs that unless they initiated more internal controls regarding annuity sales someone else would take control for them.

The insurance industry, as a whole (from what I've seen) has been mainly about "just write the damned deal." That can play out in other areas....it's not going to play out in the senior market.

I do not see the ethical agents being harmed by this. In fact, the opposite would be true. Annuities are picking up some bad press which has to make them more difficult to sell.

Get rid of the bad apples, grab a securities license and those agents will earn even more money.

[JMO Fan]

Originally Posted by URDRWHO

When did you get your fellowship?

As I said, over 20 years ago.

Originally Posted by URDRWHO

WTF is an actuary doing spending an ounce of energy with AFLAC?

Previous job, new CEO decided to sell the block I was hired to manage. The duck was available, good short-term experience, until this job.

You being an actuary, must have already figured out how the insurance company can get around all this right?

Separate accounts, which early EIAs were in.

Was it you that said "The SEC said indexed products were securities 20+ years ago, so this is a small step for them. If they didn't act, federal courts would probably force them to."

I was not aware that an FIA existed 20 years ago. The SEC has a different statement: They were first introduced about 13 years ago, around 1995. Statement at Open Meeting on Equity-Indexed Annuities; Washington, D.C.; June 25, 2008 (Christopher Cox)

June 4, 1986 (Federal Register v 51, no. 107), SEC said all indexed products were outside the "Safe Harbor" in introducing their newly proposed Rule 151. Indexing was a big NAIC issue then, although it sold badly, so few knew. Index futures (which are used to back EIAs) were not yet available, so indexed products were difficult to offer.

FIA/EIA started before 1995, but early ones were in separate accounts.

And of course who is behind all the banter: Statement at Open Meeting on Equity-Indexed Annuities; Washington, D.C.; June 25, 2008 (Christopher Cox)
"I would also like to thank the leadership of both the North American Securities Administrators Association, especially current president Karen Tyler, and past presidents Joe Borg and Patty Struck and FINRA. Their efforts have been instrumental in bringing to light the investor protection concerns related to equity indexed annuities that we are addressing today."

SEC's 1997 "Concept Letter" discussed EIAs at length, but SEC subsequently closed their file without comment.

Do you seriously think that there aren't bad people selling variable annuities to unsuitable owners? FINRA and all of its nonsense has never, ever, never stopped somone from doing bad things.

I like my father-in-law's statement: A locked door only keeps an honest man out.

Oh and BTW two things:

1. If you are using your real name....that is not a good idea on the net. My 14 year old knows better.
2. If you are not the same gentleman on the American Academy of Actuaries Life Products Committee, there are court cases on using anoter persons identy.

The 1997 quote, including name and designation, are directly from the SEC website. I agree with it. Enjoy your speculation.

[URDRWHO]

Its always the new CEO and when you hit fifty you get a target on your back. Yes, consulting work is great work at home stuff.

Originally Posted by JMO Fan

As I said, over 20 years ago.
Previous job, new CEO decided to sell the block I was hired to manage. The duck was available, good short-term experience, until this job.

[JMO Fan]

Interesting 1998 study on EIA, includes some history. Fidelity Benefit had a 1980s equity index annuity. The Keyport product it mentions was in a separate account.
403 Forbidden

[URDRWHO]

I did a search and found the same PDF as your link. The Net is an amazing thing isn't it? Weird that the SEC made a decision in the 1980's, on one existing EIA plus it was a product that didn't fly very long.

Still doing a PDF search where it mentions Keyport in a separate account. What page is it on? I do a search for Keyport and get one hit.

It mentions the EIA was originated in the UK "The equity-indexed annuity (EIA) concept has its origins outside the US,
mainly in the United Kingdom"....is the EIA a registered product in the UK?

It is a well written paper. Never knew the FIA originated in the UK. I'll read the entire thing tonight while waiting to fall off into a good nights sleep.

I remember I didn't like the original Keyport design but can't remember why?

From your link.........."The unique added benefit of the EIA is its provision of equity-linked returns without losing the guarantee of principal." The SEC says,
Statement at Open Meeting on Equity-Indexed Annuities; Washington, D.C.; June 25, 2008 (Christopher Cox)

"Surrender charges are another way that investors can find that they get back less money than they put in"....if you don't lose principal what is the first way.

And my favorite from FINRA.........
FINRA - Investor Information - Investor Alert - Equity-Indexed Annuities—A Complex Choice

"Many insurance companies only guarantee that you'll receive 90% of the premiums you paid" .... "Therefore, if you don't receive any index-linked interest, you could lose money on your investment."

The Washington NAIC person I talked with really, really wants FINRA to find those "many" insurance companies that only guarantee to give you 90% of the premiums paid.

This was the Google "Fidelity Benefit had a 1980s equity index annuity" that led me to the paper. Your link shows 403 Forbidden, I didn't think it was an active link so I did the search. Later I clicked the 403 Forbidden and it was an active link, going to the same site I found in the Google.

Thanks for the link....good stuff.

Originally Posted by JMO Fan

Interesting 1998 study on EIA, includes some history. Fidelity Benefit had a 1980s equity index annuity. The Keyport product it mentions was in a separate account.
403 Forbidden

[JMO Fan]

Try this link for some old EIAs: Derivatives Strategy - February'96: Insurers Play the Equity-Indexed Game

[URDRWHO]

I remember those first LBL policy's and sold them. I have one of them myself and I rolled back in after the seven years. All clients except one, have rolled back into the LBL when they received their offer.

Did CNA ever enter the market? I don't remember seeing their offer but I do remember them getting into the Viatical market.

This article
Bringing Clarity to Equity Indexed Annuities - Investment Advisor Magazine

led me to this site
FIAToday.com™ Dedicated to Presenting an Objective View of Fixed Indexed Annuity

But as of today I have yet to view the online demo.

I still say this is about politics. The insurance companies were losing money and came up with an idea. Now the equities people are losing money and they are getting government to help them regain markets.

Derivatives Strategy - February'96: Insurers Play the Equity-Indexed Game

"Insurers are also hoping EIAs will help them regain assets lost to the mutual fund industry. Between 1980 and 1990 mutual fund assets grew by 600 percent, while insurance company assets grew by just 223 percent. "The insurance industry has been asleep, letting customers move assets to other sectors," says Ray Mathews, president of FDI Financial. "This is its wake-up call."

I personally do not at all mind competition in the sale of FIA's BUT when the equities forces try and make FIA's their own baby.....that I do not like. When the SEC says that a registered product will cause loss of competition and raise cost....to me that means this is not about protecting consumers.

Originally Posted by JMO Fan

Try this link for some old EIAs: Derivatives Strategy - February'96: Insurers Play the Equity-Indexed Game

[JMO Fan]

I agree politics will be the deciding factor. Legal logic would say the SEC classifies all EIAs as securities. But if the SEC doesn't please political powers, the laws would be changed to follow federal forces.

FINRA, NASAA, and NFA will get SEC to adopt the proposed rule, perhaps stronger than now written.

[BrokersAllianceAnnuities]

Originally Posted by NHB_MMA

Okay, my company is critical of equity indexed annuities, saying they feel they are "too risky". They seem to be a great product on the surface, with a person being able to get a substantial portion of market gain most years and a guaranteed that ain't that far off what the fixed annuities offer. I actually wonder how the companies offer them and stay in business. An NASD article implied that there could be issues of insurer solvency down the road, but is that legit or does the NASD just want to get its regulating hands on them?

Thoughts please.

As far as regulation, it is a battle between state insurance regulators and federal securities regulators. I am sure this will be a fight, but the federal regulators are going up against a strong lobby. We'll just have to wait and see.

Article: http://www.individual.com/story.php?story=85845472

Originally Posted by Melmunch3

The argument that is made (by others) is, that variable annuities are invested in prospectus products, and the decision as to which mutual fund, or group of stocks to invest in, needs to be regulated, whereas indexed annuities are only linked to the various indices, but there is no individual stock or mutual fund picking.

Exactly. With variable annuities that agent is also there to give advice and to responsibly assess risk. Hence the requirement of securities licensing. As Melmunch states well, where indexed annuities are set to be linked to the various indices, the annuitant does not pick stocks or mutual fund, thereby the agent does not give advice as such.

[BrokersAllianceAnnuities]

To continue a subject that was within this thread about SPIAs. SPIAs constitute approximately 30% of our annuity business and it all depends on the customer's needs and suitability. So, in some instances, a SPIA is a good idea.

A recent client of mine was 76 and because he wanted to start a payout within several months, he thought he only qualified for a SPIA. I actually sold him a Global Indexed 10-Year annuity with a look-back feature and minimum guaranteed interest, that of course has the opportunity to renew. It also takes care of his spouse in the event he dies.

As opposed to a SPIA which provides a set amount, it allows more control and he can take out up to 10% per year on a monthly basis. Or, he has the choice to not take out any and have the balance continue to accrue.

For him, this was the right choice. For others who do not care to manage their money as closely, this would not be the right choice.