Which Is The Best Crediting Strategy?

[arnguy]

A question for you annuity mavens is in your opinion is Annual Point-to-Point, Monthly Point-to-Point, or Quarterly Point-to-Point the best strategy? Why do you think so? Opinions appreciated.

 

[annuityseller]

I like to spread the money to different crediting methods with in the annuity,that way you will alway get a taste of the one with the biggest gain!!!

 

[padthaiforlunch]

monthly ptp. More crediting points than the yearly ptp. In an up market, the monthly ptp can grossly out perform the annual. I've seen 23% one year gain with the monthly.

Going back to crediting points. The annual has one day to determine interest earned. Can be hit or miss depending on the day of the year. With monthly you have a decent number and the possibility to earn more than the annual. Daily has too many points. While the large number of points in time smooth out volatility, the daily method will have to fight harder to earn more than the annual because of the smoothing.

I'm also partial to using margins instead of ptp. Occasionally, you can find a small margin (spread) with near 100% participation.

 

[0b1kanobee]

The best crediting strategy was the one which yielded the most gain. If I knew the answer to which one would do that every time, I wouldn't be here right now. I would be in Vegas.

I like to mix it up a bit within the product. Overall I like the PTP yearly because it is the easies to understand and explain to the client and overall has done well. The monthly historically has not done as well with the products I offer and I'm told this by guys who write anywhere from 5 to 15 million a year in business at my satellite office.

If you have a monthly crediting that gets credited 15% for the year, obviously it would take 3 years (give or take) for a ptp to do the same earning 5%, providing the other 2 years the monthly didn't do squat. I normally do 10% to 15% in the fixed interest bucket, 25% to 35% in the monthly and the remainder in the yearly ptp.

 

[padthaiforlunch]

When the monthly ptp has a monthly cap of 3%, it could earn up to 36% on the year. No annual ptp comes close to having an upside anywhere near that. Like I said, I've seen 23% interest credited. When the bonus was added in, the client had 34% credited to his account in the first year.

 

[WPM]

Jack Marrion's new book covers this topic exhaustively. If I remember correctly, he says that based on past performance the rainbow/lookback yields the highest returns.

 

[Larry Tew]

Give me a crystal ball and I can answer your question. Jackson calls it the "Easy 33" where you divide the allocation equally to all three methods. Anything else is a guess.

There's a huge difference between "what method WAS the best" versus "what method WILL BE the best".

 

[Norwayguy]

When the monthly ptp has a monthly cap of 3%, it could earn up to 36% on the year. No annual ptp comes close to having an upside anywhere near that. Like I said, I've seen 23% interest credited. When the bonus was added in, the client had 34% credited to his account in the first year.

So very true...However lets not leave out the fact that you are cap only on the positive side, but negative months subtract fully from your positive gains....so if you had these monthly numbers
+6,-2,+4,+2,-1,+8,-4,+12,-5,-2,+2,+4= 5%

Now personally I am partial to lookback strategies...in particular a global lookback where the policy looks back at year end at 4 indexes from around the world and ranks them 1-4 and credits 40% to #1, 30% to #2, 20% to #3 and 10% to #4...I don't need a crystal ball with this strategy...I'm also partial in this market right now to participation rates or margin/spreads over caps...

 

[scagnt83]

This is something that I have been thinking about a lot lately.

While the MP2P looks very attractive; I have come to like it less and less the more I think about it.

I have had some clients with some very nice returns using MP2P, but in the long term I dont know how solid I feel about using it as a primary crediting method.

I am a fan of a 60/40 split of AP2p/various monthly strategies


Also the triggered accounts are very nice; probably my favorite when available and competitive.


Here is an interesting article about the subject; it has a 50 year historical average & median of the 3 main methods.
Article

 

[lbritt]

I'm becoming more and more of a fan of spreads w/ 100% participation or near 100%. American General has a policy with 3% spread and no caps on Mo. Avg. NWL usually has decent PR with a small asset fee, but their renewal rates can dip after the first year.