avivas progressive index annuity ken macarthur assistant vice president tsa marketing pro5t044usfor...

Aviva’s ProgressiveIndex Annuity

Ken MacArthur

Assistant Vice President

TSA Marketing

PRO5T044US For Agent Use Only

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AVIVA SEPTEMBER 2002

Introducing the Aviva

Progressive Index Annuity

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AVIVA SEPTEMBER 2002

To begin, three key questions:

“Is the indexed annuity you currently sell one that was designed to reflect the real-world performance of the S&P 500® index?”

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AVIVA SEPTEMBER 2002

Next question:

“Are you familiar with the concept of effective participation?”

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AVIVA SEPTEMBER 2002

Final question:

“Does the contract you sell offer distinct account choices that play to different market conditions?”

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AVIVA SEPTEMBER 2002

The Key to understanding Aviva’s role in the EIA marketplace

The Key to understanding your own ability to gain Competitive

Advantage

The Key to offering Your Customers the best choice among

many indexed annuities

Answering these questions is Critically Important…

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AVIVA SEPTEMBER 2002

I’ve seen that the vast majority of advisors genuinely want to

provide their clients the best product available

I’ve seen that most advisors want to benefit from a competitive

advantage

I’ve seen that most advisors achieve greater success when

these desires can be aligned

Over the years…

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AVIVA SEPTEMBER 2002

It wasn’t enough to simply create a copycat index annuity

Nor was it keeping in Aviva’s tradition of innovation and

choice as we have seen in other product types i.e. Enhanced

Guarantee Annuities

Waiting for an opportunity to do better…

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AVIVA SEPTEMBER 2002

What we have here is one of those examples of a legitimate

and important improvement that occurs at the contract DNA

level

A contract design that substantively alters the status quo!

Waiting for an opportunity to do better…

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AVIVA SEPTEMBER 2002

Aviva believes that you are likely not currently selling an

indexed annuity that recognizes a critical historical

performance characteristic of the S&P 500®

That is what we refer to as “Breakthrough Years”

Back to our questions…

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AVIVA SEPTEMBER 2002

• That to properly serve your clients you must become familiar

with the concept of “Effective Participation”

• This recognizes and quantifies the capabilities of all types of

indexed accounts and defines what “participation” really

means

Aviva believes…

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AVIVA SEPTEMBER 2002

Effective Participation !

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AVIVA SEPTEMBER 2002

Demonstrating Effective Participation

Traditional Cap strategies with a 100% Participation Rate fail to capitalize on S&P 500®

breakthrough years

Annual S&P 500 Performance CAP Return 7% Cap Effective Participation

-10% 0% 0%

5% 5% 100%

10% 7% 70%

15% 7% 47%

20% 7% 35%

25% 7% 28%

30% 7% 23%

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AVIVA SEPTEMBER 2002

In order to combat the limiting effect of Effective

Participation, Aviva has devised an innovative interest

crediting strategy designed to capitalize on those years

when the S&P 500® produces larger gains

Aviva wanted to do better…

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AVIVA SEPTEMBER 2002

To understand this new

strategy we need to become

familiar with a new term, the

“Breakthrough Level”

Because we now have a

new way to credit interest

when the S&P 500

“Breaks Through”

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AVIVA SEPTEMBER 2002

Annual Breakthrough Index Account

100% Participation over the

Breakthrough Level

(12.75% - 10/7/05)

PLUS

25% Participation up to the

Breakthrough Level

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AVIVA SEPTEMBER 2002

How the Breakthrough Account Can Produce Outstanding Gains

in Breakthrough Years

Assumes a 25% participation up to a 15% Breakthrough Level, and 100% thereafter.

S&P 500 Performance 7% Cap Return Breakthrough Account

Effective Return

Breakthrough Effective

Participation

-10% 0% 0% 0%

5% 5% 1.25% 25%

10% 7% 2.50% 25%

15% 7% 3.75% 25%

20% 7% 8.75% 44%

25% 7% 13.75% 55%

30% 7% 18.75% 63%

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AVIVA SEPTEMBER 2002

It can dramatically increase interest growth when the S&P

500® “Breaks Through”

An important question is, “How often does the S&P 500®

break through?”

Why is the Annual Breakthrough Strategy Important?

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AVIVA SEPTEMBER 2002

Even one or two Breakthrough years can carry a product’s effective annual return to greater levels over the product’s life

Breakthrough Years – How Often?

**Source: Standard & Poor’s market data since January 1970. Index represented is the S&P 500 without dividends. Average returns are based upon an annual point-to-point methodology. Past performance is no guarantee of future performance.

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AVIVA SEPTEMBER 2002

So history shows why annuity contract holders should

have a way to capitalize on breakthrough years!

But what about years when S&P 500® performance is in

the single digits?

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AVIVA SEPTEMBER 2002

Annual Cap Index Account

Interest is credited for 100% of those gains up to the indexed interest cap

6.5% (10/7/05)

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AVIVA SEPTEMBER 2002

An Aviva Edge!Indexed Accounts That Complement One Another

Cap account returns tend to be more stable and yield moderate returns in most years that the S&P gains

Breakthrough account returns can fluctuate but yield opportunity in higher markets

Blending accounts can provide the best of both worlds

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AVIVA SEPTEMBER 2002

50% 50%Breakthrough Annual Cap

An Aviva Edge!Choose an allocation that best suits your client’s needs

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AVIVA SEPTEMBER 2002

33% 67%Breakthrough Annual Cap

An Aviva Edge!Choose an allocation that best suits your client’s needs

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AVIVA SEPTEMBER 2002

100%Annual Cap

An Aviva Edge!Choose an allocation that best suits your client’s needs

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AVIVA SEPTEMBER 2002

It gets better!

What about clients who do not want 100% of their

premium in an indexed strategy?

Or need systematic distributions?

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AVIVA SEPTEMBER 2002

An Exceptional Fixed Interest Account

Declared and Guaranteed Annually

Compounds daily

Additional premiums go into Fixed Account; can be allocated at anniversary

Minimum rate guarantee of 1.5% to 3.0%; will apply for the life of the contract (2.7% Model Index – 10/7/05 )

Systematic withdrawals taken from the Fixed Account first to protect Indexed Accounts

No Market Value Adjustments

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AVIVA SEPTEMBER 2002

An Exceptional Fixed Interest Account

3.15% Guaranteed One Year (10/7/05)

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AVIVA SEPTEMBER 2002

How do the 3 Account Options Compare?

For example, look at page 4 of your Certificate of Disclosure

If we apply the actual S&P 500 values over the last 10 years with a hypothetical 3% fixed, 7% cap, and 15% breakthrough on a $10,000 premium, allocated exclusively in each account for 10 years -

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AVIVA SEPTEMBER 2002

We get:

Example A (1/15/95-1/15/05)

Fixed = $13,440

Cap = $15,700

Breakthrough = $22,295*

*0% interest in 3 of 10 years

Example B (7/15/94-7/15/04)

Fixed = $13,440

Cap = $17,180

Breakthrough = $21,070*

*Sub-3% interest in 5 of 10 years

100% Breakthrough Account allocation is generally not recommended. These examples are for illustration purposes only.

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AVIVA SEPTEMBER 2002

Salary Reduction works GREAT with Aviva Life Insurance Company

Client Statement is Simple to Understand in contrast to other companies

Upon withdrawal/surrender other contracts would need to stagger/delay payment to avoid losing potential S&P gains

Fixed Account offers Stable Returns and Ability to Access Money

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AVIVA SEPTEMBER 2002

Salary Reduction works GREAT with Aviva Life Insurance Company

Diversify your Client’s Money with ONE contract through two Indexed Accounts and one Fixed Account

Declining 10 year surrender charges

On-going Compensation option – Trail Option case by case

300+ year Heritage (Aviva plc)

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AVIVA SEPTEMBER 2002

Unmatched Flexibility

Choice Of Accounts – Allocate among two indexed and a fixed account; diversify according to risk tolerance, savings timeline and overall objectives

Transfers Among Accounts – Transfer values among the three accounts on contract anniversary

Flexible Premium – Add subsequent premium at any time; allocate at anniversary among the three accounts

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AVIVA SEPTEMBER 2002

Access to Money

Surrender Charge Free Withdrawals – 10% starting from Day One

Fixed Account First – Preserves index growth

Systematic Distribution – For as little as $100

Nursing Home Waiver – Not available in all states or for TSA

Policy Loans – Available for TSAs only

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AVIVA SEPTEMBER 2002

Outstanding GuaranteesGuaranteed Surrender Value: 87.5% of premium at 1.5% to 3.0% per year

Guaranteed Minimum Fixed Rate: Set at issue between 1.5% and 3.0% per year

Guaranteed Minimum Indexed Cap: 5.0%

Guaranteed Maximum Breakthrough Rate: 50.0%

Participation Rates: Set at issue; can’t change over contract life

Minimum Surrender Values as a % of Premium

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

0 1 2 3 4 5 6 7 8 9 10Contract Years

Min

Surre

nder

Valu

e Fa

ctor

Minimum Surrender Value at 1.5%

Minimum Surrender Value at 3.0%

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AVIVA SEPTEMBER 2002

Payout Options

Income for a Fixed Period Life Only Income Life with a Guaranteed Period Life with Installment Refund Interest Only Income of a Fixed Amount Available with no surrender charges after five

years when paid out over at least five years by administrative practice

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AVIVA SEPTEMBER 2002

Competitive Advantage

Issues to think about when comparing your current indexed annuity…

Is there a distinct choice of accounts to match changing markets?

What are the “Effective Participation” possibilities of that product?

Can you capitalize on Breakthrough Years?

Can you blend accounts to best serve clients’ long-term savings needs?

Does the contract have strong liquidity features?

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AVIVA SEPTEMBER 2002

Summary SpecificationsIssue Ages/Premium 0-85 NQ and Q; 0-75 TSA; TSA = $50/mo. Min. Prem.

Minimum Premium $10,000; Contracts Issued Weekly

Indexing Method Point to Point Annual Reset

Min Guar Surr Value 87.5% of Premium Growing at Min Rate 1.5%, Max Rate 3.0%

Term/Charges 10-year Term – Surrender Charges -12-12-12-10-8-7-6-5-4-3%

Transfers Among Accounts on Anniversary

Death Benefit Greater of Accumulation Value or Min Cash Surrender Value

Withdrawals 10% Surrender Charge Free Withdrawal Available Year 1; No MVA

Annuitization Later of Age 85 or 15 Years after Contract Issue Periodic Payments Available after 5th Year for 5-year or by Admin Practice

Other Nursing Home Waiver Available (Not in all States; Not TSA)Loans Available for TSA only

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AVIVA SEPTEMBER 2002

“Why would you sell an indexed annuity that doesn’t

provide all of this when you can sell one that does?”

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AVIVA SEPTEMBER 2002

Questions?