Suitability Guidelines

Liquidity and Financial Thresholds

For applicants aged 65 and older, cases may be rejected if after purchase:

• The applicant has less than $50,000 in liquid net worth
• The applicant has less than six months of monthly expenses liquid in the event of an emergency.
• All annuities owned by the applicant represent more than 50% or more of his/her net worth.

For applicants aged 64 and younger, cases may be rejected if after purchase:

• The applicant has less than $50,000 in liquid net worth
• The applicant has less than three months of monthly expenses liquid in the event of an emergency.
• All annuities owned by the applicant represent more than 50% or more of his/her net worth.

If the applicant exceeds or is near these thresholds, a Supplemental Financial Form outlining liquid from non-liquid assets and monthly household income and expenses is required.

Other considerations that may enhance the applicant's financial flexibility:

• Monthly and yearly disposable income
• Other unique circumstances that can be accounted for in the suitability process

Replacements

For all replacements, tangible and significant benefit to the applicant must be proven.

• Any funding from an existing annuity will be considered as a replacement, including annuities surrendered within 60 days of receiving an application.
• An Annuity Comparison Form is required for all replacements of an existing annuity. For applications with multiple replacements, a separate Annuity Comparison Form for each replacement is required.
• Any replacement within two years of the original annuity purchase date will only be considered on a case-by-case basis. A current account statement will be required.

Net Loss

• For owners below the age of 80, the maximum allowable net loss* is 5%. Net Losses* above 5% will require extra processing time, as they require an enhanced due diligence review, and additional forms, including but not limited to:

  • A current carrier account statement.
  • For a fixed indexed annuity replacement, we will accept a written narrative summary from the producer.
    
    
• For owners 80 years of age and older, the maximum allowable net loss* before an exception review is 0%.
  • For an exception review, the following is required:
    • A current carrier account statement.
    • A letter from the applicant acknowledging the surrender charge, penalty, or loss triggered by the proposed exchange, providing the amount of that loss, further details on their reasoning for this replacement in relation to his/her current financial objectives, and the reason this proposed contract better aligns with his/her goals.

• • For California exchanges, transactions resulting in a net loss greater than 0% but not exceeding 1% require additional Compliance review and approval before the exchange may proceed.

*Net Loss is calculated by subtracting the current surrender charge, inclusive of any applicable Market Value Adjustment, after adding any applicable premium bonus.

Additional factors to be considered:

• The value of any forfeited benefits or features related to the surrendered policy regarding any Guaranteed Minimum Accumulation Benefits (GMABs), Guaranteed Minimum Death Benefits (GMDBs), and/or Guaranteed Lifetime Withdrawal Benefits (GLWBs), especially if these benefits are no longer available after the surrender. The impact of these factors is determined by the suitability analysis, which will depend on the client’s objectives for the exchange, and which features they are choosing to forfeit.
  
• Whether the applicant will incur a surrender charge or early withdrawal fee
• How the applicant will significantly benefit from this transaction over the life of the contract. Policy details include current interest rates, caps, participation rates, surrender charge periods, guarantee periods, initial bonus amounts, fees, limitations, riders, etc.
• Whether the applicant will lose a significant benefit by replacing the current annuity
• If the existing contract includes an income rider with a benefit value greater than the current cash surrender value, the case will be referred to for additional review by the Suitability Team.