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While conventional wisdom assumed that interest rates would begin to rise during the second half of 2011, the fixed income market had other intentions. During late-July/early-August, the Federal Debt Ceiling negotiations and the Standard & Poor's downgrade of U.S. Government Debt were the catalysts that triggered the slide to historic lows. With sluggish economic growth, a poor employment picture, and the Federal Reserve committing to low rates through 2013 following their latest meeting, it is likely interest rates will remain at current levels for the foreseeable future.
Earlier this month, we announced significant reductions to our current interest rates to deal with lower yields. As a follow up to that announcement, we must also make changes to the Minimum Guaranteed Values for our Index Annuity Products to continue as a viable carrier for your index annuity business.
Keystone Index 5, 7 and 10 Products
The Guaranteed Minimum Annuity Value for the Keystone 5, 7, and 10 year products will change for the 4th Quarter of 2011, as will the minimum guaranteed caps and participation rates in accordance with the table below:
Product | New Rates | Old Rates | Change | Keystone 5 | | | | Minimum Guarantee | Greater of 100% of premium, minus withdrawals accumulated at 1.0% minus surrender charges, or 87.5% of premium, minus withdrawals accumulated at 1.00% | Greater of 100% of premium, minus withdrawals accumulated at 1.5% minus surrender charges, or 87.5% of premium, minus withdrawals accumulated at 1.00% | -.50% | Annual Point to Point – Cap | 2.0% | 3.0% | -1.00% | Annual Point to Point – Participation Rate | 5% | 10% | -5% | Annual Monthly Average – Cap | 2.0% | 3.0% | -1.00% | Annual Monthly Average – Participation Rate | 5% | 10% | -5% | Keystone 7 | | | | Minimum Guarantee | Greater of 100% of premium, minus withdrawals accumulated at 1.0% minus surrender charges, or 87.5% of premium, minus withdrawals accumulated at 1.00% | Greater of 100% of premium, minus withdrawals accumulated at 2.0% minus surrender charges, or 87.5% of premium, minus withdrawals accumulated at 1.00% | -1.00% | Annual Point to Point - Cap | 2.0% | 3.0% | -1.00% | Annual Point to Point – Participation Rate | 5% | 10% | -5% | Annual Monthly Average - Cap | 2.0% | 3.0% | -1.00% | Annual Monthly Average – Participation Rate | 5% | 10% | -5% | Keystone 10 | | | | Minimum Guarantee | Greater of 100% of premium, minus withdrawals accumulated at 1.0% minus surrender charges, or 87.5% of premium, minus withdrawals accumulated at 1.00% | Greater of 100% of premium, minus withdrawals accumulated at 2.0% minus surrender charges, or 87.5% of premium, minus withdrawals accumulated at 1.00% | -1.00% | Annual Point to Point - Cap | 2.0% | 3.0% | -1.00% | Annual Point to Point – Participation Rate | 5% | 10% | -5% | Annual Monthly Average - Cap | 2.0% | 3.0% | -1.00% | Annual Monthly Average – Participation Rate | 5% | 10% | -5% |
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Apollo & Eleos Products
The minimum guaranteed interest rate for all new Apollo and Eleos contracts will remain at 1.00% for the 4th Quarter of 2011. The minimum guaranteed interest rate at the time of issue will remain in effect for the life of the policy. We will continue to adjust the Minimum Guaranteed Interest Rate on a quarterly basis for products filed under the indexed standard non-forfeiture law (Apollo and Eleos products). Increases or decreases in this rate will be dependent upon market conditions, and will be no lower than the 6-month average of the 5 year Treasury Yield minus a spread of 1.25% (or 1% if greater, and no higher than 3%.)
The minimum guarantee, guaranteed caps and participation rates at time of issue will remain in effect for the life of the policy. Please note that the 45-day rate lock only applies to current caps and participation rates, and does NOT apply to minimum guaranteed rates. Contract must be issued before 10/1/2011 to get the old minimum guaranteed rates.
Should you have any questions, please feel free to contact a member of the Annuity Marketing Department. | |
