Introduction to EIA's

Thank you for your interest in the S&P 500 Index annuities.  Independent Sales and Brokerage, Inc., and American Life & Casualty (ALC) make the enclosed marketing information for index annuities available to you.

Index products are linked to the S&P 500 and guarantee no losses by the maturation date.  However, each has a different crediting method.  Here is a brief summary.

There are basically three methods of crediting gains to an index annuity: Annual Reset, Point to Point, and High Water Mark.  Generally speaking, only in hindsight can you determine which one would have been the best for your client.  However, each type has pluses, minuses and tendencies that will help you and your client make the best decision going in.

• Point to Point: The Point to Point method may be the easiest to understand and explain and may credit the best return when the S&P 500 is down.  This method credits gains only at the end of a 5 or 7-year period based on the change in the S&P 500 from start date to maturation date.  Therefore, your client won't know the return year-by-year, which may be difficult to accept since index annuities are new and have a limited track record.

• High Water Mark: The High Water Mark method may credit the best return if the S&P 500 Index stays up.  The down side is that it may be the most difficult to understand or explain to a client.  Since both agents and clients tend to shy away from what they don't understand, it may take longer to get an agent up and running, even though this method may be the most profitable.

• Annual Reset: The Annual Reset method, sometimes called the Ratchet method, performs best when the marked fluctuates.  The more changes and the bigger the changes up or down, the better.  This method may give the client the most consistent return year in and year out because  the S&P 500 does change frequently over time.  At the end of each policy year gains are credited to the principal and protected from future losses in the market.  A new S&P Index starting point is locked in for the following year based on where the S&P index ended the previous year--just like a ratchet.

Independent Insurance Sales & Brokerage, Inc. encourages you to write a product that you understand and with which you are comfortable.  Historically, agent preference has leaned more toward the Eagle products.  Agent seem to find that these products are easier to understand and explain.  In addition, since many think a ratchet method performs bets in a fluctuating market, agents appear to feel that a consistent return which is credited and protected annually is one they won't have to make excuses for alter on.  Also, American Life and Casualty provides the agent and client with a video that can be used for agent training or at the point-of-sale to a client.  The video can also work as a protection for both the company and agents by documenting what was presented, insuring that the product is not accidentally or intentionally misrepresented.

If you decide on an index using the ratchet method of creating, remember ALC has no cap, an 85% participation rate and a slightly better than average commission rate.  If it sounds like we recommend ALC above all other indexes it's because that has been what the majority of agent shave requested to date.
 

Intro to EIAs
S&P 500 Index
Benefits of the S&P
Advantage 500 Prospects
Gain without Pain
Extended Forecast
Sample Calculation
Selling Points
Best & Worst
Annuity Performance
Why EIAs are Popular