AIG Unit Adds Indexed Variable Annuity with Extended Loss Protection

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What do you want to know

  • The prospectus states a base contract expense of 1.25%.
  • The fee for a 10% account value cushion over 10 years is 0.4%.
  • The underlying fund’s fees range from 0.48% to 1.24% of the underlying fund’s assets.

AIG Life & Retirement has introduced an indexed variable annuity with a flexible mechanism to protect account value.

AIG states that the design of the Advanced Outcomes Annuity The contract can maximize potential gains in a holder’s account value, by allowing the holder to seize winnings and reset loss protection at any time.

An annuity holder can use the contract’s Capture-Reset-Reinvest feature “at any time and for any reason,” AIG says. “As a result, finance professionals and their clients can capture investment gains whenever they want, then reset downside protection while reinvesting in new strategies.”

AIG Life and Retirement

AIG Life & Retirement is part of American International Group, based in New York. AIG has said it wants to turn AIG Life & Retirement into a separate company.

AIG issues the new annuity through American General Life Insurance, a Houston-based subsidiary.

Life insurers and regulators use a variety of terms to describe variable annuities that link deposit rates to the performance of one or more investment indices. AIG calls its new contract a “variable annuity with structured results investments.”

The Milliman Connection

AIG says it based the new contract’s investment loss reduction mechanism on strategies developed by Milliman Financial Risk Management.

One element of this strategy is that the contract frees about two-thirds of the available investment strategies from any performance caps or limits on the amount of gains on the investment index a holder can receive, explains AIG.

Choices

The contract offers buyers three different ways to link deposit rates to changes in the investment index and three different ways to reduce the effect of declines in the investment index.

Downside protection options can protect a holder against a predefined percentage of a market decline; setting a floor or maximum market loss figure; or create a buffer, providing a predefined level of market loss protection.

A buyer can use strategies with a six-month fund duration, as well as strategies with one-year or six-year durations.

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