nationwide iul web ex series introduction to iul: part 2 learn to embrace indexed ul 1for insurance...

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NationwideIUL Web Ex

Series

Introduction to IUL: Part 2Learn to Embrace Indexed UL

1For Insurance professional use onlyLAM-1921AO

Disclosure• Life Insurance issued by Nationwide Life Insurance Company and/or Nationwide Life and Annuity Insurance

Company.

• Guarantees are subject to the claims paying ability of Nationwide.

• As your clients' personal situations change (i.e., marriage, birth of a child or job promotion), so will theirlife insurance needs. Care should be taken to ensure this product is suitable for their long-term lifeinsurance needs. They should weigh any associated costs before making a purchase. Life insurance hasfees and charges associated with it that include costs of insurance that vary with such characteristics of theinsured as gender, health and age, and has additional charges for riders that customize a policy to fit their individual needs.

• Riders may be known by different names in different states, may not be available in every state and have an additional charge associated with them.

• Indexed universal life insurance policies are not stock market investments, do not directly participate in any stock or equity investments, do not receive dividend or capital gains participation. Past index performance of an index is no indication of future crediting rates.

• Not a deposit Not FDIC or NCUSIF insured Not guaranteed by the institution. Not insured by any federal government agency May lose value

• © 2012 Nationwide Financial Services, Inc. All rights reserved

2For Insurance Professional Use Only - Not for distribution with the public

LAM-1921AO

Nationwide YourLife® Indexed UL

33

S & P 500® is a trademark of Standard & Poor's and has been licensed for use by Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company. Nationwide YourLife® Indexed UL is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the Product.

NASDAQ®, OMX®, NASDAQ OMX®, NASDAQ-100®, and NASDAQ-100 Index® are registered trademarks of The NASDAQ OMX Group, Inc. (which with its affiliates is referred to as the "Corporations") and are licensed for use by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company. Nationwide YourLife® Indexed UL has not been passed on by the Corporations as to their legality or suitability. Nationwide YourLife® Indexed UL is not issued, endorsed, sold, or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the product.

The "Dow Jones Industrial AverageSM" is a product of Dow Jones Indexes, the marketing name and a licensed trademark of CME Group Index Services LLC ("CME"), and has been licensed for use. "Dow Jones®", "Dow Jones Industrial AverageSM" and "Dow Jones Indexes" are service marks of Dow Jones Trademark Holdings, LLC ("Dow Jones") and have been licensed for use for certain purposes by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company. Nationwide YourLife® Indexed UL based on the Dow Jones Industrial AverageSM is not sponsored, endorsed, sold or promoted by CME Indexes, Dow Jones or their respective affiliates, and CME Indexes, Dow Jones and their respective affiliates make no representation regarding the advisability of trading in such product(s).

For Insurance Professional Use Only - Not for distribution with the public LAM-1921AO

• All competitive information is believed to be current May 2013. Information was compiled from the latest company software. American General WinFlex Rev. 122012; AXA AEGIS 7.9.3; Prudential 43.00; AVIVA 2.95.0.55; Lincoln 16.0; Pacific Life 13.10.4777.24551; John Hancock 9.0.1 and Minnesota Life’s web based software.

• All information presented is reliable as at the date of comparison and Nationwide has made every effort to make sure it is reliable; however, its possible that there are differences between the products compared which are not reflected and/or of which we are unaware. For this reason, its completeness and accuracy cannot be guaranteed. These are mere hypothetical scenarios and not intended to represent any specific client or situation.

IMPORTANT BENCHMARKING

INFORMATION

AgendaAnnual Point to Point & Monthly Averaging

Holding Account

Sweep Dates

Guaranteed Floor vs. Cumulative Guarantee

Understanding IUL Statements

Illustrating IUL

Typical Client Scenarios:

Alternative to GUL, Alternative to Current Assumption,

Accumulation & Income and also LTC Rider

Nationwide’s YourLife Indexed UL Strengths

5For Insurance professional use only

1 year Annual Point to Point


A good fit for clients who anticipate steady growth in the near future

Market timing risk because only comparing 2 points in time

Over time the indexed interest strategy becomes less relevant and the returns converge because some years Annual Point-to-Point credits higher, and some years Monthly Averaging credits higher

Monthly Averaging


May work better for clients who are wary of market volatility and believe it will continue in near future

Less Market timing risk using 12 points in time

Less Opportunity for higher crediting in consistently rising markets

Over time the indexed interest strategy becomes less relevant and the returns converge because some years Annual Point-to-Point credits higher, and some years Monthly Averaging credits higher

Annual Point to Point with Dollar Cost Averaging

is Different from Monthly AveragingAnnual Point-to-Point with DCA• Helps minimize market timing risk• Always only comparing 2 points in time (will have more segments)

Monthly Averaging vs. Annual Point-to-Point with DCA• With DCA the indexed interest strategy Cap rates can change while waiting• With DCA less of your money is in the indexed interest strategy

Impact of “Time”: Over time the indexed interest strategy becomes less relevant and the returns converge because some years Annual Point-to-Point credits higher, and some years Monthly Averaging credits higher

Impact of Base Policy: Nationwide’s IUL base product low cost charge structure is critical advantage to performance irrespective of strategy or future changes to caps & pars

Note: Nationwide does Not offer Dollar Cost Averaging


“Holding” Account Requirements

What are Fixed Account Requirements also known as Holding Accounts?

• Requirement for money to be held here prior to being “Swept” into the Indexed Interest Strategy

• Fixed Account can be traditional Fixed account premium allocations, or a special Fixed account with a different rate


Example: Holding Account Requirements

At Nationwide: Minimum Required Fixed

Account Allocation “Holding” Account or Fixed Account Requirements: • Some companies including Nationwide hold back enough premium in the Fixed

Interest Account to cover estimated policy charges and deductions for the next 12 months

• Nationwide: Only net premium in excess of the Minimum Required Fixed Interest Strategy value (MRFISA) can be allocated from the Fixed Interest Account to the Indexed Interest Strategy

Example: Both Companies use End Point Crediting (only pay indexed interest credit on money at segment maturity)

$10,000 Premium, $2,000 Policy Charges; Index growth 12%, Participation Rate 100%; 4% Fixed

*Note policy charges are deducted monthly, and interest is applied daily (so would not get 4% on entire $2,000)

Note: Having this requirement can be helpful to the policy holder as seen above. But, if they do not pay premium in excess of MRFISA (a projected 12 months worth of current policy charges), then they will not be allocated to the Indexed Interest Strategy Accounts.


Dollar allocated to Fixed Acct

Percent Credited

FixedInterest Account

Dollar Allocated to

Indexed Interest Strategy

Amount Credited

Indexed Acct

Company A(No Holding Requirement for Policy charges)

$0.00 0% $10,000 12% to $8,000

Nationwide $2,000 4% to $2,000* $8,000 12% to $8,000

What are Sweep Dates?

Sweep Dates: Is the day or days of the month that premium is transferred from the Fixed Interest Account (or Holding account) into the Indexed Interest strategy(s).

This day marks the start date of the Indexed Interest Strategy.


Usually 1 day per month

Sometimes More than 1 day

Where is Money Held in the interim?

Sweep Dates 15th 11th & 26th

Or 28th Fixed AccountHolding Account

Cumulative Guarantee vs. Guaranteed

Floor They are Not the Same

Guaranteed Floor• Minimum amount credited at each Segment Maturity• Usually 0%. Could be: 0.75%, 1% or 2%

Cumulative Guarantee (aka: “True Up” on Surrender or Alternate Policy Value)

• Minimum amount credited upon Death, Surrender or Policy Maturity• Does Not apply credit at Segment Maturity• Could be 1%, 2%, 3%

Example: Underlying Index Growth 0% at Segment Maturity


Type Percent Applied at Segment Maturity

Guaranteed Floor 1% 1%

Cumulative Guarantee 3% 0%

Understanding IUL StatementsReflecting Index Credit on Statement• Most companies do Not reflect credit applied to Indexed Interest

Strategy for that year in the Annual Statement• A few companies send out Monthly Confirmation Statements

(including Nationwide)

Example: January 4, 2013 Policy Issued

January 15, 2013 Monies Swept from Fixed Account into Indexed Interest Strategy

---------------------------------------------------------------------------------------

January 3, 2014 Statement Reporting Period 365 days (1/4/13 – 1/3/14)

January 4, 2014 Statement Automatically Generated

(but Indexed Interest Strategy hasn’t matured yet)

January 15, 2014 Index Interest Strategy Segment Matures (too late for statement) 13For Insurance professional use only

Illustrating Indexed ULIllustrating IUL’s• Companies assume Various Default Illustrated Rates

• Companies assume Various Look back Periods to determine Default Rate

What rate should you use to illustrate IUL?

• Company’s Default Rate, or• Flat rate: 6%, or 7%


Term Description Usually Sometimes

Default Rate Rate company uses to hypothetically project values in illustration

6% - 8% 4.60%10%

Look Back Period Number of preceding years used in formula to determine the default rate

20 – 30 yrs 10 yrs28 yrs35 yrs

How to Illustrate Nationwide’s IUL?


Illustrating Allocations at Segment

Maturity


Client Scenario: Alternative to GUL

How Nationwide’s YourLife IUL* compares to Nationwide’s YourLife NLG-UL

• Expect IUL price to be higher. Could be between 5% to 30% or more

• Price between products are more aligned for Level Pay premium scenarios

• Price between products are more comparable: $250,000 Face amount and below

Male age 45, $250,000 Face, NTP, NLG age 100

Male age 70, $250,000 Face, NT, NLG age 100

*Note: IUL assumes selection of optional Extended Death Benefit Guarantee Rider (EDBG) and an illustrated rate of 6.00% allocated to Indexed Interest Strategy


Product Premium Cash Surrender Value Year 10

Target Premium

Rolling Target’s?

YourLife NLG UL $2,122 $0.00 $2,061 No

YourLife Indexed UL* $2,256 $7,671 $2,967 Yes

Product Premium Cash Surrender Value Year 10

Target Premium Rolling Targets?

YourLife Indexed UL* $9,312 $10,621 $9,834 Yes

YourLife NLG UL $9,688 $0.00 $9,454 No

Compare Feature in Nationwide’s Software Input

Screens


Comparing Nationwide’s IUL to GULMale, 50, NT, $250,000 Face, NLG to age 100

Client Scenario: Alternative to Current

Assumption UL

Product Face Amount Interest Rate NLG Duration

Target Premium

Rolling Target Premiums?

John HancockProtection UL

$1,249,849 5.05% Age 80 $14,141 No

NationwideYourLife IUL

$1,110,724 N/A to guarantee

Age 80 $24,491 Yes

John HancockProtection UL

$ 736,969 3.00% Age 87 $ 8,427 No

Nationwide YourLife IUL

$ 972,301 N/A to guarantee

Age 87 $19,724 Yes

Nationwide YourLife IUL

$736,969 N/A to guarantee

Age 98 $13,464 Yes

Nationwide YourLife NLG UL

$1.000,000 N/A to Guarantee

Age 101 $11,820 No

Understanding the differences in Guaranteed Death Benefit

Female, Age 55, $200,000 Single Premium; NTP, Solve for Initial Face Amount

Note: For Current Assumption the No Lapse Guarantee (NLG) duration is the maximum life expectancy solve based on current interest rates as of May 2013

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Client Scenario: Alternative to Current Assumption

Differences in the Guaranteed Death Benefit

20For Insurance professional use onlyNFM-10697

Current Assumption with Life Expectancy Guarantee: Do these products shift risk from Insurance Company to Consumers? • Hopefully no in force rate increase to impact the current Death Benefit duration

• Hopefully no interest rate reduction to impact the current Death Benefit duration

• Hopefully pay illustrated persistency credit – to help keep policy in force

• Hopefully enough CV if policy holder lives past life expectancy – keep policy in force

• Hopefully advisor has monitored policy for all of the above

Nationwide’s IUL with NLG (Extended Death Benefit Guarantee Rider)

• Even if in-force rate increases occur, this does Not impact the Guaranteed Death Benefit

• Interest credited to the Indexed Interest Strategies is not at sole discretion of Nationwide

• No persistency credit

• Option at issue for no lapse guarantee duration up to age 120 (CV does not impact NLG)

• Hopefully advisor monitored policy for paying scheduled EDBG premiums(Unlimited cumulative premium interest free catch up for Level Pay scenarios)

Client Scenario: Accumulation & Income

Male, age 45, NTPP, 6% Rate, Minimum Non Mec, Option 1 Death Benefit$10,000 Premium Paid for 20 yrs; Solve for Maximum Monthly Income ages

66-85

2121FLM-0802AO.2 For Insurance professional

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Company Income Face Amount CSV yr 10 Target Premium

Pacific Life Indexed Performer LT $23,349 $504,973 $85,861 $9,938

Aviva Lifetime Builder III IUL $23,234 $557,354 $84,798 $9,508

Nationwide Indexed UL $22,992 $535,412 $92,477 $8,995

John Hancock Accumulation IUL $22,464 $514,726 $93,335 $8,205

Axa Athena Indexed UL $21,796 $542,884 $88,104 $7,818

Lincoln LifeReserve Indexed UL Accumulator $20,223 $491,912 $79,443 $9,312

Minnesota Life Eclipse Indexed Life $19,986 $539,822 $91,082 $9,209

Prudential Index Advantage UL $19,868 $518,332 $102,876 $4,245

Client Scenario: Accumulation & Income

Male, age 45, NTPP, 6% Rate, Minimum Non Mec, Option 2/1 “Switch” Death Benefit

$10,000 Premium Paid for 20 yrs; Solve for Maximum Monthly Income ages 66-85

2222FLM-0802AO.2 For Insurance professional

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Company Income Face Amount CSV yr 10 Target Premium

Aviva Lifetime Builder III IUL $28,352 $213,759 $115,297 $3,647

Pacific Life Indexed Performer LT $27,414 $217,414 $107,633 $4,000

John Hancock Accumulation IUL $25,946 $208,367 $108,663 $3,986

Nationwide YourLife Indexed UL $25,896 $252,340 $106,066 $4,239

Lincoln LifeReserve Indexed UL Accumulator $25,777 $226,543 $110,002 $3,922

Minnesota Life Eclipse Indexed Life $24,982 $214,456 $114,973 $3,659

Axa Athena Indexed UL $24,861 $222,402 $107,421 $3,425

American General, Elite Global Plus $22,196 $216,836 $113,101 $2,898

Comparing IUL’s with Indemnity Style

Long Term Care Riders or Chronic

Illness Riders


Premium for Rider is due beginning

Residual Death Benefit*

Pays for Permanent Conditions

Pays for Temporary Conditions

Requires Proof of Loss Each Month

Nationwide At issue Yes Yes Yes No

AXA At issue Yes Yes Yes No

Minnesota Life At issue Yes Yes Yes Yes

Transamerica At issue Yes Yes Yes Yes

Hartford At Issue No Yes No No

Pacific Life At acceleration No Yes No No

AVIVA At acceleration No Yes No No

IUL Indemnity Style LTC and Chronic Illness Riders

* Residual Death Benefit in Excess of Initial Face Amount

Nationwide’s IUL Strengths

Nationwide YourLife IUL can be used for:• Guaranteed Death Benefit (Optional Extended Death Benefit Guarantee Rider)

• Low cost when Solving for Level Premium (Session 3)• Accumulation & Income, Insurance Based Retirement Planning• Long Term Care Rider

Nationwide Offers Policy Management Program• Automated Premium Monitor to keep NLG on track (EDBG Rider)• Automated Income Monitor to manage Income Stream• 2/1 Switch Notification (for income scenarios)• Simple Indemnity Design for LTC rider Claims


What we will cover next time


IUL Part 3: Commonly Misperceptions of IUL June 25, 2013

IUL Part 4: Advanced Planning Applications of IUL July 23, 2013

nationwide iul web ex series introduction to iul: part 2 learn to embrace indexed ul 1for insurance...

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