Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Life Insurance

Nationwide Applies To Offer 5% VA Bonus

Your article was successfully shared with the contacts you provided.

NU Online News Service, Feb. 13, 2004, 2:52 p.m. EST – A unit of Nationwide Financial Services Inc., Columbus, Ohio, wants to offer a 5% bonus on some first-year variable annuity payments.[@@]

Nationwide Life Insurance Company has applied to the U.S. Securities and Exchange Commission for permission to market a 5% “Extra Value Option” with its Nationwide Variable Account-II annuity contract.

A customer who bought the option would have to pay 0.45% of the daily net assets of the variable account for the first 8 contract years.

In return, Nationwide Life would apply a credit equal to 5% of all purchase payments made during the first 12 months of the contract.

Nationwide Life would pay the credit from its general account.

Nationwide Life already offers a 3% Extra Value Option and a 4% Extra Value Option.

The annual variable account charge for the underlying contract would be 1.55% of the daily net assets of the variable account.

Nationwide Life would not recapture the 5% credit if a contract holder died, took the minimum distributions required by the tax code or made scheduled, age-based withdrawals.

The company would take all of the credit back in other cases if a customer dropped the annuity during the short “free look” period.

The company would take back some or all of the credit if the customer dropped the annuity before the end of the seventh contract year.

Nationwide Life says it is applying for the blessing of the SEC because, in theory, some might argue that the credit recaptures would violate Investment Company Act Rule 22c-1.

Some might view the recapture as a redemption of securities for a price other than one based on the current net asset value of the separate accounts, Nationwide Life says.

Rule 22c-1 bans investment companies from diluting the value of fund shares by redeeming fund shares for a price other than one based on the current net asset value of the separate accounts.

The rule also prohibits “speculative trading practices” based on backward pricing, Nationwide Life says.

In the past, backward pricing let some investors take advantage of changes in net asset values that were not yet reflected in the fund share prices.

But, in this case, because Nationwide Life will never get more cash than it paid out, “the recapture of credits described herein does not pose such a threat of dilution,” Nationwide Life says.

The recapture arrangement also is set up in such a way that it cannot lead to speculative trading practices, Nationwide Life says.

Margaret McFarland, a deputy secretary in the SEC’s investment management division, posted a copy of the Nationwide Life application in the Federal Register.

The Federal Register version is online at


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.