What You Need to Know
- The prospectus shows base contract expenses of 1.25%.
- The fee for a 10% 10-year account value buffer is 0.4%
- The underlying fund expenses range from 0.48% to 1.24% of the underlying fund assets.
AIG Life & Retirement has introduced an index-linked variable annuity with a flexible mechanism for protecting account value.
AIG says the design of the Advanced Outcomes Annuity contract can maximize a holder’s potential account value gains, by letting the holder capture gains and reset protection against losses 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, financial professionals and their clients can capture investment gains whenever they choose and then reset the downside protection while also reinvesting in new strategies.”
AIG Life & Retirement
AIG Life & Retirement is part of New York-based American International Group. AIG has said that it would like to turn AIG Life & Retirement into a separate company.
AIG is issuing the new annuity through American General Life Insurance, a subsidiary based in Houston.
Life insurers and regulators use a variety of terms to describe variable annuities that tie crediting rates to the performance of one or more investment indexes. AIG is calling its new contract a “variable annuity featuring structured outcome investments.”
The Milliman Connection
AIG says it based the investment-loss-reduction mechanism in the new contract on strategies developed by Milliman Financial Risk Management.
One component of that strategy is that the contract frees about two-thirds of the available investment strategies from any performance cap, or limit on the amount of investment index gains that a holder can collect, AIG says.
The contract offers buyers three different ways to connect crediting rates to investment index changes and three different ways to reduce the effect of investment index drops.
The downside protection options can protect a holder against a predefined percentage of a market decline; set a floor, or maximum market loss figure; or create a buffer, by providing a predefined level of protection against market losses.
A purchaser can use strategies with a fund investment term of six months, as well strategies with one-year or six-year terms.