Interest Crediting Strategies

With indexed annuities, investors can direct their premium payments to interest crediting strategies that are consistent with the investor's preferences. These strategies vary among insurance companies, and include the following:

• Monthly Averaging: The current interest crediting rate is based on a portfolio rate declared monthly by the insurance company. The monthly averaging method averages the index performance over a period of time on a monthly basis.
• Point-to-Point: Point-to-Point methods credit interest as a portion of the percentage growth in the underlying index from the beginning of the term to the end of the term.
• Annual Point-to-Point: Index-linked interest earnings are credited at the end of each one-year term. The earnings rate is based on the growth in the index from the beginning of each term to the end of each term, subject to a maximum.
• Long-Term Point-to-Point: The long-term point-to-point strategy is designed to provide maximum exposure to equity index-linked growth. Earnings are based on the performance of the S&P 500 or other index used, but interest is credited at the end of a 5- or 10-year period. The rate credited is set by the percentage increase in the applicable index over the term, less an annual certificate charge. There are no cap earnings under this strategy and no limit on the percentage earned. Index growth is measured by comparing the beginning index level with the ending index level. Potentially, the problem with longer point-to-point contracts is erosion of gains if they're not locked in and the market trends downward.