Any Feedback On The Nationwide Insurance IUL?

[jtow11]

Another question then. Don't most, if not all, IUL carriers use a multiyear average of an indexes performance such as the S&P? If so, how could it ever hit the floor unless the S&P stayed negative for several years in a row? I saw a F&G illustration where SP500 was used, last year returned 7.06%, this year will return 6.96% with the SP500 19% decline last year. Same would be true to the upside. If the SP500 shot up 25% this year, the index would not hit the cap this year do to the 25 year average they use. Do any carriers give current year returns, subject to the floor/cap rates?

 

[scagnt83]

While I agree with nearly everything that @PrivClientSG suggests, I would not judge a product by whether/not it is approved in the state of New York.

Glad to see you around Sheryl!

He can correct me, but I dont think he was suggesting other agents do the same.

Being in NJ, he likely has a lot of NY based clients. Most NJ agents do. So his personal product lineup probably needs to have mostly NY carriers in it.

Just a guess though.

 

[Allen Trent]

Another question then. Don't most, if not all, IUL carriers use a multiyear average of an indexes performance such as the S&P? If so, how could it ever hit the floor unless the S&P stayed negative for several years in a row? I saw a F&G illustration where SP500 was used, last year returned 7.06%, this year will return 6.96% with the SP500 19% decline last year. Same would be true to the upside. If the SP500 shot up 25% this year, the index would not hit the cap this year do to the 25 year average they use. Do any carriers give current year returns, subject to the floor/cap rates?

2 year S&P 500 actual index (excluding dividends): S&P 500 2 Year Return (ycharts.com)

While not exact comparison to IUL/FIA index changes as this link is based on actual index at month end & IUL/FIA would be based on 3rd Friday of each month when options are traded/expire for the month.

Last I heard, the vast majority of cash value of IUL is sitting in the default index crediting segment, which is the 1 year annual point to point S&P500, which would look at lot more like this 1 year chart (assuming month end, not 3rd friday of month): S&P 500 1 Year Return (ycharts.com)

 

[Sheryl J Moore]

@Allen Trent According to "Wink's Sales & Market Report" for 4Q2022 (new sales only), 85.2% of all indexed life sales were in an annual point-to-point indexing method. Separately, 44.3% of indexed life sales were allocated to the S&P 500. This has been the trend for most of the existence of indexed life, with exception to the increased allocations to hybrid indices over the past decade, which has been stealing S&P 500's market share. sjm

 

[scagnt83]

Another question then. Don't most, if not all, IUL carriers use a multiyear average of an indexes performance such as the S&P? If so, how could it ever hit the floor unless the S&P stayed negative for several years in a row? I saw a F&G illustration where SP500 was used, last year returned 7.06%, this year will return 6.96% with the SP500 19% decline last year. Same would be true to the upside. If the SP500 shot up 25% this year, the index would not hit the cap this year do to the 25 year average they use. Do any carriers give current year returns, subject to the floor/cap rates?

No. Most do not.

The multi-year averages are a new invention in the indexed space, only been around for maybe the past 5-7 years in the IUL world. Probably10-12 in the FIA space by my guess.

And that is no guarantee of positive returns. The past decade is not a great time period to use for statistical analysis. Its something that has never happened before in 100 years of market history.

Spreading the index term out often can help the long term returns. But it also increases risk.... if you have a terrible year in y2 or y3, it can erase multiple years of positive returns.

It also increases drag on the policy during that 2 or 3 year period. The policy gets zero returns credited to it during that time.... but expenses come out monthly.

Putting it all in a 2y or 3y index term is not a safe bet. Diversify.

 

[jtow11]

Do any agents on here have an IUL on their own life or a family member who can chime in on how theirs has performed?

 

[Sheryl J Moore]

@jtow11 I own a couple dozen IULs. They have averaged 5% - 7% growth since purchase. sjm

 

[scagnt83]

Do any agents on here have an IUL on their own life or a family member who can chime in on how theirs has performed?

I do. I have family members who do. I also have a book of business with IULs in it.

Most have hit their Annual Caps over the past decade, in most years. But its been a bull market for the past 15 years. So not a big surprise.

I had a few in monthly P2P that killed it in certain years. Funny how that option is a lot rarer to see these days..... but hybrid indexes are all over the place!

I dont use hybrid indexes in most of my IULs. I mostly just use Annual P2P with Cap.

---

The real danger of IUL is not the index return. Its the renewal rates on the Caps/Spreads/Participation Rates/etc. They can lower them at will, and many carriers do so like clockwork after y2.

 

[Sheryl J Moore]

OH! And "HI!" @scagnt83 !! *sjm wave* sjm

 

[scagnt83]

It is 9% cap (and has been for as long as I have been aware of the product) and has a .5% floor meaning never a 0% year

What are the renewal rates like on the 9% Cap?