Fees & Expenses
M & E Risk %
This is the mortality and expense (M&E) risk charge, which is the percentage of the subaccount's assets that the insurance company deducts to cover costs associated with mortality and expense risk. Specifically, it can serve as a source of profit for the insurance company in addition to compensating the company for offering features such as the variable-annuity death benefit and for compensation. The typical M&E charge for variable annuities runs at about 1.25%. Mortality and expense risk charges tend to be much lower for variable-life because they also deduct the cost of insurance from premiums. The typical variable-life M&E risk charge is 0.90%. If the subaccounts in the contract have different M&E risk charges, then the M&E risk charge for the contract will appear as Multiple.
Administration Charge %
The percentage of the subaccount's daily net assets deducted by the insurance company to cover the costs involved in offering and administering the variable annuity, such as the cost of distribution and printing of correspondence. If the subaccounts in the contract have different administration charges, then the administration charge for the contract will appear as Multiple.
Distribution Charge %
The distribution charge is intended to compensate the insurance company for a portion of its acquisition expenses under the Annuity, including promotion and distribution of the annuity and costs associated with its offering. The distribution charge is typically deducted against the contract holders' annuity account value.
Total Insurance Expense %
The percentage of subaccount assets deducted each year to cover M&E risk charges, and other miscellaneous administration fees.
Maximum Front Load %
The maximum fee charged by the insurance company on the investor's initial contribution to the variable account.
Unlike other charges, the front-end load is a one-time charge. Yet less of the investor's initial contribution will be put to work, because a front-end load is deducted before any money is actually invested in the subaccount.
Annual Contract Charge $
Expressed in dollars, this is the yearly fee charged to compensate the insurance company for the cost of maintaining and administering the variable account.
Annual Contract Charge %
Expressed as a percentage, this is the yearly fee charged to compensate the insurance company for the cost of maintaining and administering the variable account.
Surrender Charges
Surrender charges are levied by the insurance company when an investor withdraws money in excess of the acceptable amount before the specified date.
In variable annuities, surrender charges are often used in place of front-end sales loads and, in effect, compensate the insurance company for the expenses of starting up a contract. Usually, the surrender charge is expressed as a percentage of the amount of the money that is either withdrawn or surrendered, and is generally imposed on the premiums paid and not the gains. Because the surrender charge usually declines over time, it typically reaches 0% after a number of years. For example, a variable annuity might have a 7% surrender charge that declines one percentage point annually. Thus, an investor who surrenders the account in year three will pay a 5% penalty, while one who cashes out in year eight can withdraw the investment free of surrender charges. The manner in which the surrender charge declines is detailed in parentheses next to the percentage figure. A variable-annuity surrender-charge description followed by /R signifies that the insurance company levies a rolling back-end load, meaning that the surrender charge is assessed on each additional payment.
Features
Premium Type
Variable annuities offer either a Flexible Premium (XP) or Single Premium (SP) payment plan. In addition, a variable life may have a Modified Premium (MP), or Fixed Premium (FP) payment plan, depending on whether the contract is a VL or VUL.
Minimum Face Amount
The minimum death benefit that an investor may purchase through a variable-life contract. Exceptions to this minimum, however, may be made for young investors, usually those age 25 or younger. If the company states a minimum face amount, then the investor knows the minimum initial premium will be the amount of money necessary to attain that minimum face amount. Conversely, if the company sets only a minimum initial premium, then the minimum face amount will be the corresponding death benefit that can be guaranteed by the minimum initial premium.
Minimum Initial Purchase ($)
Listed for both qualified and non-qualified accounts (as denoted by Q, and NQ), this is the minimum dollar amount required to invest in a variable-annuity contract. Typically, the minimum amount to purchase a contract will differ for qualified and nonqualified accounts.
Minimum Additional Purchase ($)
Listed for both qualified and non-qualified accounts (as denoted by Q, and NQ), minimum additional purchase indicates the amount required to make subsequent investments in the contract. Typically, the minimum additional purchase for a contract will differ for qualified and nonqualified accounts.
Transfers
The number of transfers allowed per year without charge to the contract holder for transferring assets from one investment option to another.
Death Benefits
For variable annuities only, this is the payment guaranteed to the investor if he or she dies before the annuitization date. This benefit typically guarantees some base rate of payment to the investor's survivors. Generally, no surrender charges apply to the death benefit, and the beneficiary may receive the amount either as a lump sum or as an annuity. For annuities, the four types of death benefits include accumulation value (AV), rising floor (RF), principal (PR), and stepped-up (SU).
Accumulated-Value: Accumulated-value death benefits are much rarer than the principal death benefits. It simply pays the dollar amount accumulated in the investor's contract at the time of his or her death (also known as the contract value or cash value). Unlike the principal death benefit, the accumulated-value death benefit does not protect the investor's beneficiary from possible depreciation caused by negative returns on investments.
Rising Floor: These benefits are perhaps most useful to investors who maintain a conservative investment style and who are concerned that in the event of premature death, they will not have attained a desired level of return. It offers the best protection over the short term (which would be approximately 10 years if the contract were offering 7% in interest), because the rising-floor benefit is limited to just 200% of the premiums paid, less surrenders and withdrawals.
Principal: Total premiums less surrenders do not take into account any gains or losses in an investor's contract. For example, if an investor paid $1000 into a variable annuity contract and two years later withdrew $300, with the surrender charges totaling $20, the value of total premiums less surrenders would be $680 (contract contributions less withdrawal and corresponding surrender charges).
Because the principal benefit is the greater of the contract value or total premiums less surrenders, only appreciation (and not depreciation) in the investor's contract value will affect the death benefit.
Stepped-Up: With a stepped-up benefit, an investor with a six-year Stepped-Up benefit, for example, has the option on the sixth anniversary date of the contract, to replace the initial base death benefit (total premiums less withdrawals) with the current value of the contract, if it is more attractive. Moreover, six years later, the investor will have another opportunity to "step up" his or her death benefit to the contract's current value.
Annuity Options
The different types of annuity payments available. The payments may be a fixed amount, for a fixed period of time, or for a lifetime.
General Information
Insurance Company
The name of the company sponsoring a variable contract.
Address
The address of the insurance company sponsoring the variable contract.
A. M. Best Rating
A rating of the ability of the insurance company sponsoring the variable contract to pay its claims. Because a contract's subaccounts are invested in a separate account from that of the general insurance company, a low rating does not necessarily imply that investors are likely to lose money if the company is unable to pay its claims. In most cases, however, money invested in a contract's fixed account goes into the general account of the insurance company and may consequently be withheld from the investor. Refer to the For the Pros section for details on Best's Ratings.
Best's Ratings
Secure Ratings (2)
A++(1), A+: Superior
A, A-: Excellent
B++, B+(1): Very Good
Vulnerable Ratings(2)
B, B-: Fair
C++(1), C+(10): Marginal
C, C-(11): Weak
D(5,12): Poor
E(6): Under Regulatory Supervision
F: In Liquidation
S: Rating Suspended
Affiliation Codes
g: Group Rating
r: Reinsured Rating
p: Pooled
Rating Modifiers
u: Under Review
q: Qualified
Discontinued
c(3): Contingent Rating
e(4): Parent Rating
s(4): Consolidated Rating
w(4): Watch List
x(13): Revised Rating
q(13): Qualified Rating
Rating "Not Assigned" Categories
NR-1(14): Insufficient Data
NR-2: Insufficient Size and/or Operating Experience
NR-3: Rating Procedure Inapplicable
NR-4: Company Request
NR-5(15): Not Formally Followed
Discontinued
NA-1: Limited Data Filing
NA-2: Less Than Minimum Size
NA-3: Insufficient Operating Experience
NA-4: Rating Procedure Inapplicable
NA-5: Significant Change
NA-6: Reinsured by Unrated Reinsurer
NA-7(3): Below Minimum Standards
NA-8: Incomplete Financial Information
NA-9: Company Request
NA-10(3): Under State Supervision
NA-11(1): Rating Suspended
Financial Performance Rating (FPR, formerly termed FPI, prior to 1994)
Assigned to companies with Rating "Not Assigned" Categories of NA-2 and NA-3. The FPR measures the financial strength of small or new companies and is based on the following numerical scale:
Secure Ratings (3)
9 (16): Very Strong
8 (16), 7 (17): Strong
6 (17), 5(18): Good
Vulnerable Ratings (4)
4 (18): Fair
3 (19): Marginal
2 (19): Weak
1 (20): Poor
Discontinued
--
Footnotes
(1): Introduced in 1992
(2): Introduced in 1994
(3): Discontinued in 1992
(4): Discontinued in 1993
(5): Below Min. Std. prior to 1994
(6): NA-10 prior to 1992
(7): Termed "Good" prior to 1994
(8): Termed "FPI" prior to 1994
(9): Termed "Adequate" prior to 1998
(10): Termed "Fair" prior to 1998
(11): Termed "Marginal" prior to 1998
(12): Termed "Poor" prior to 1998
(13): Discontinued in 1998
(14): Termed "Limited Data" prior to 1998
(15): Named "N/F" prior to 1998
(16): Termed "Strong" prior to 1998
(17): Termed "Above Average" prior to 1998
(18): Termed "Average" prior to 1998
(19): Termed "Below Average" prior to 1998
(20): Termed "Not Assigned" prior to 1998
Financial Size Categories
(In $000,000 of reported contractholders' surplus plus conditional reserve funds)
Class I: Up to 1
Class II: 1 to 2
Class III: 2 to 5
Class IV: 5 to 10
Class V: 10 to 25
Class VI: 25 to 50
Class VII: 50 to 100
Class VIII: 100 to 250
Class IX: 250 to 500
Class X: 500 to 750
Class XI: 750 to 1,000
Class XII: 1,000 to 1,250
Class XIII: 1,250 to 1,500
Class XIV: 1,500 to 2,000
Class XV: 2,000 or more
Best's Ratings are under continuous review and subject to change and/or affirmation. For the latest Best's Ratings and Best's Company Reports (which include Best's Ratings), visit the A.M. Best Web site at www.ambest.com. See Guide to Best's Ratings for explanation of use and charges.
Best's Ratings reproduced herein appear under license from A.M. Best and do not constitute, either expressly or impliedly, an endorsement of Morningstar Advisor Workstation or its recommendations, formulas, criteria or comparisons to any other ratings, rating scales or rating organizations which are published or referenced herein. A.M. Best is not responsible for transcription errors made in presenting Best's Ratings. Best's Ratings are proprietary and may not be reproduced or distributed without the express written permission of A.M. Best Company.
Contract Inception
The contract (or separate account) inception marks the date on which the variable annuity or variable life contract began operations. The contract Inception Date is identical to the Separate Account Inception Date appearing on the Subaccount Detail report.
Money Managers
Advisor(s)
The company that takes primary responsibility for managing the underlying fund.
Subadvisor(s)
The company employed by the advisor to handle the fund's day-to-day management. In instances when a subadvisor is hired, the portfolio manager generally works for the fund's subadvisor, and not the advisor.
Investors can contact the advisor or subadvisor for more information about their variable product investment.
Subaccount Information
Style Distribution (Equity and Fixed-Income)
The Morningstar Style Box is a nine-square grid that provides a graphical representation of the "investment style" of stocks and mutual funds. For stocks and stock funds, it classifies securities according to market capitalization (the vertical axis) and growth and value factors (the horizontal axis). Fixed income funds are classified according to credit quality (the vertical axis) and sensitivity to changes in interest rates (the horizontal axis).
Morningstar Ratings
The Morningstar Risk-Adjusted Rating (commonly called the star rating) brings both performance and risk together into one evaluation. To determine a subaccount's star rating for a given period (three, five, or 10 years), the subaccount's Morningstar Risk score is subtracted from its Morningstar Return score. The resulting number is plotted along a bell curve to determine the subaccount's rating for each time period: If the subaccount scores in the top 10% of its broad investment class (domestic stock, international stock, taxable bond, or municipal bond), it receives 5 stars (Highest); if it falls in the next 22.5%, it receives 4 stars (Above Average); a place in the middle 35% earns it 3 stars (Average); those in the next 22.5% receive 2 stars (Below Average); and the bottom 10% get 1 star (Lowest). The star ratings are recalculated monthly.
Total Subaccounts
This is the number of subaccounts offered by a particular contract.
Fixed Account
Assets invested in this type of account earn a fixed rate of interest that is guaranteed by the insurance company. Many policies offer a variety of fixed option choices. Guaranteed periods range from one month to 10 years, with one year being the most common.
Asset Distribution by %
The percentage of the contract's assets invested in fixed accounts versus variable accounts.
Variable Breakdown by %
The percentage of the variable accounts' assets invested in domestic stock, international stock, bond, other variable subaccounts.
Variable Assets ($mil): The assets, in millions of dollars, in the variable annuity contract.
YTD Sales Premium ($mil): The amount of new sales and renewals of a contract for the year-to-date. Use this figure to track how the industry is growing, or to track the popularity of a particular contract. We survey the insurance companies quarterly for this data.