The Annuity Grader® Ranking methodology system uses it's own proprietary database as well as other market data vendors to first evaluate the structural integrity components. Annuities are then evaluated on popular rider benefits. The list of companies gathered are not meant to be all inclusive and yet consist of what we believe to be the most popular annuities that meet our criteria. (Go here to see the universe we rank). Components are objectively examined and assigned a grade. Each component then receives a percentage weighting. The data is then translated into an easy to understand star value (1-5 stars).
Annuity Integrity Components:
1. Comdex Rating: Integrity begins with the Insurance company's ability to pay promised obligations to the annuitant/owners or beneficiaries. The Comdex is a composite index based on the ratings an insurance company receives from Standard and Poors, Fitch, Moody's, & AM Best. We exclude any companies that have a Comdex ratings < 75, therefore, this will only include the top 25% rated companies from recognized agencies to be included in our Annuity Grader®. For a further explanation of Comdex, go here. The higher the Comdex rating the higher the grade assigned to this component.
2. Expenses: Expenses are a straightforward annualized measure of an Annuity expense amount paid by the policy owner. The more expensive an annuity, the less likely the annuity will be able to add value over other annuity contracts. Expenses also serve as a means for the investor to judge how effectively an insurance company is managing the operational issues of the contract. Lower expenses are better. A high expense ratio reduces the owners account value and helps to identify providers that are better at running the basic annuity contract. Expenses include mortality & expense as well as administration fees. Each annuity contract typically has several variations available. For evaluation purposes we use the lowest fee contract ('base' contract) as this is most often the best variation for long term investors. Among our company integrity components the expense ratio is assigned the highest weight.
3. Sub-account quality: The sub-account term is used to identify investment accounts. Annuity Grader® uses its own database as well as several other data vendors to rate sub-accounts. We believe that the use of a third party rating service on investment metric sub-accounts will help us remain objective. The metrics used are focused on performance and investment fundamentals of each sub-account and will vary depending on the asset class of funds being measured and analyzed against. Contracts are rated based on the number of sub-accounts that have the top two ratings from the third party. One contract may have 10 sub-accounts in the top two ratings versus say 5 for another contract. When using the allocation models provided by the variable annuity advisers to manage the client's investments, this rating could help allocate investments in a higher number of sub-accounts with the highest rating. A higher rating is given by the Annuity Grader® to contracts with the most highly rated sub-accounts and the least grade given to the contracts with the least number of highly rated sub-accounts. Among the company integrity components the sub-account quality is weight 2nd to expenses.
4. Surrender Charge Length: Annuity contracts are changing constantly with low fees and available rider features and benefits. We believe it to be in the best interest of the investor to the length of surrender charge down to minimum. Therefore, the ability of the owner to transfer/liquidate the contract without surrender charges is preferred and rewarded. The highest rating is given to the companies with the shortest time period of surrender charges.
Once all four of the above components are graded then a Company Contract Integrity Component Rating is assigned.
Annuity Rider Component Evaluation:
Unlike structural integrity of the annuity contract, riders are added benefits to meet specific needs. Today's most popular riders are 'lifetime withdrawal benefit' and 'minimum income benefit' riders. Thus, we have chosen to analyze these riders offered by most of today's popular annuities. Once the rider components are graded then an aggregate score is given to the Annuity Rider.
Overall Annuity Grade® with Guaranteed Income Benefit Rider
The final step on our Annuity Grader® is to combine the company integrity and the annuity rider grades for each annuity contract. Since we have compiled all of the grades for each component we now aggregate them together using our proprietary weighting system that accounts for the relative importance of each metric. Stars are assigned such that the distribution reflects a classic bell-shaped curve with the largest section in the center. The 10% of annuities with the highest rank receive five stars, the next 22.5% receive four stars, the middle 35% receive three stars, the next 22.5% receive two stars, and the bottom 10% receive one star.
Conclusion: We believe that the constituent inputs to this overall Annuity Grader® Star rank to be potentially very useful as a starting point in making investment decisions. However, investors should consider this rank to be informative for preliminary analysis only and should seek professional investment advice from their financial adviser or the experts at AnnuityGrader®. Variable annuities are generally considered long term investments, sold by prospectus only. The prospectus is available for download on this website or will be mailed to you in printed form upon request. Request and carefully read prospectuses and other materials before making any decisions. It is important that you have a clear understanding of the potential risks and benefits of each investment you make. If you have any questions about the information, ask your financial professional. Before investing or sending money to any financial professional, investors should carefully consider the investment objectives, risks, charges and expenses of the variable annuity and its underlying investment options. The current contract prospectus may be requested by calling 800-456-5907.
Annuity Integrity Components:
1. Comdex Rating: Integrity begins with the Insurance company's ability to pay promised obligations to the annuitant/owners or beneficiaries. The Comdex is a composite index based on the ratings an insurance company receives from Standard and Poors, Fitch, Moody's, & AM Best. We exclude any companies that have a Comdex ratings < 75, therefore, this will only include the top 25% rated companies from recognized agencies to be included in our Annuity Grader®. For a further explanation of Comdex, go here. The higher the Comdex rating the higher the grade assigned to this component.
2. Expenses: Expenses are a straightforward annualized measure of an Annuity expense amount paid by the policy owner. The more expensive an annuity, the less likely the annuity will be able to add value over other annuity contracts. Expenses also serve as a means for the investor to judge how effectively an insurance company is managing the operational issues of the contract. Lower expenses are better. A high expense ratio reduces the owners account value and helps to identify providers that are better at running the basic annuity contract. Expenses include mortality & expense as well as administration fees. Each annuity contract typically has several variations available. For evaluation purposes we use the lowest fee contract ('base' contract) as this is most often the best variation for long term investors. Among our company integrity components the expense ratio is assigned the highest weight.
3. Sub-account quality: The sub-account term is used to identify investment accounts. Annuity Grader® uses its own database as well as several other data vendors to rate sub-accounts. We believe that the use of a third party rating service on investment metric sub-accounts will help us remain objective. The metrics used are focused on performance and investment fundamentals of each sub-account and will vary depending on the asset class of funds being measured and analyzed against. Contracts are rated based on the number of sub-accounts that have the top two ratings from the third party. One contract may have 10 sub-accounts in the top two ratings versus say 5 for another contract. When using the allocation models provided by the variable annuity advisers to manage the client's investments, this rating could help allocate investments in a higher number of sub-accounts with the highest rating. A higher rating is given by the Annuity Grader® to contracts with the most highly rated sub-accounts and the least grade given to the contracts with the least number of highly rated sub-accounts. Among the company integrity components the sub-account quality is weight 2nd to expenses.
4. Surrender Charge Length: Annuity contracts are changing constantly with low fees and available rider features and benefits. We believe it to be in the best interest of the investor to the length of surrender charge down to minimum. Therefore, the ability of the owner to transfer/liquidate the contract without surrender charges is preferred and rewarded. The highest rating is given to the companies with the shortest time period of surrender charges.
Once all four of the above components are graded then a Company Contract Integrity Component Rating is assigned.
Annuity Rider Component Evaluation:
Unlike structural integrity of the annuity contract, riders are added benefits to meet specific needs. Today's most popular riders are 'lifetime withdrawal benefit' and 'minimum income benefit' riders. Thus, we have chosen to analyze these riders offered by most of today's popular annuities. Once the rider components are graded then an aggregate score is given to the Annuity Rider.
Overall Annuity Grade® with Guaranteed Income Benefit Rider
The final step on our Annuity Grader® is to combine the company integrity and the annuity rider grades for each annuity contract. Since we have compiled all of the grades for each component we now aggregate them together using our proprietary weighting system that accounts for the relative importance of each metric. Stars are assigned such that the distribution reflects a classic bell-shaped curve with the largest section in the center. The 10% of annuities with the highest rank receive five stars, the next 22.5% receive four stars, the middle 35% receive three stars, the next 22.5% receive two stars, and the bottom 10% receive one star.
Conclusion: We believe that the constituent inputs to this overall Annuity Grader® Star rank to be potentially very useful as a starting point in making investment decisions. However, investors should consider this rank to be informative for preliminary analysis only and should seek professional investment advice from their financial adviser or the experts at AnnuityGrader®. Variable annuities are generally considered long term investments, sold by prospectus only. The prospectus is available for download on this website or will be mailed to you in printed form upon request. Request and carefully read prospectuses and other materials before making any decisions. It is important that you have a clear understanding of the potential risks and benefits of each investment you make. If you have any questions about the information, ask your financial professional. Before investing or sending money to any financial professional, investors should carefully consider the investment objectives, risks, charges and expenses of the variable annuity and its underlying investment options. The current contract prospectus may be requested by calling 800-456-5907.
Securities offered through Veritrust Financial, L.L.C., Broker/Dealer Member
FINRA/MSRB/SIPC
3755 Capital of Texas Highway South, Suite 130, Austin, Texas 78704 — 512.448.0647
Securities custodial services offered through Pershing an affiliate of The Bank of New York Mellon Corporation
No information contained in this report constitutes a recommendation to buy, sell or hold any security. This website does not offer or provide any investment advice or opinion regarding the nature, potential, value, suitability or profitability of any particular security, portfolio of securities, transaction or investment strategy, and you shall be fully responsible for any investment decisions you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs. Please consult a tax attorney for legal advice. Please see the prospectus for details and read it carefully before investing. Contact AnnuityGrader at 800-456-5907 to request prospectus.
3755 Capital of Texas Highway South, Suite 130, Austin, Texas 78704 — 512.448.0647
Securities custodial services offered through Pershing an affiliate of The Bank of New York Mellon Corporation