Diversification with purpose

Transcription

1 For long-term retirement income Diversification with purpose A thoughtful approach to asset allocation American Legacy is a suite of variable annuities with investment options from and Lincoln Variable Insurance Products Trust. Insurance products issued by: The Lincoln National Life Insurance Company Lincoln Life & Annuity Company of New York

2 How balanced is your investment strategy? It s easy to forget the fundamentals of investing when the headlines are grim. The more you know, the better you can stay focused on your long-term goals. Is there safety in numbers? Bonds are a good example of how investors can get out of balance. Many investors think bonds are safer because they don t display the wild volatility we sometimes see with stocks. But bonds have risks of their own, and investors might not get the returns they need for the retirement they planned. Despite these risks, stock funds saw outflows of $537 billion from 2008 to 2012 as investors reacted to the market collapse. Unfortunately, they missed a corresponding surge in the equities market saw the first positive inflows into equities, with $160 billion invested. Bonds play an important role in diversification, but being overweighted in one area can disrupt even the best plan. A more diverse portfolio may help you better weather the market s storms. Diversification cannot guarantee a profit or protect against investment loss. Common stocks generally provide an opportunity for more capital appreciation than fixed income investments but are subject to greater market fluctuations. Bonds offer a fixed rate of return and a return of principal value if held to maturity. From 2008 to $537 billion Flowed out of equity funds $1,077 billion Flowed into fixed income funds Source: Investment Company Institute, Stock data reflect net flows into domestic and international equity mutual funds; bond data reflect net flows into taxable and tax-free fixed income funds. Are you missing other investment opportunities? Another challenge for investors is thinking they are diversified when, in reality, they could do more. Global investing gives you more opportunities to broaden your portfolio options and stay balanced during the market s ups and downs. U.S. markets vs. non-u.s. markets: Over a 30-year period, international markets have offered as many high returns as U.S. markets Sources: MSCI USA SM and MSCI EAFE indexes, both unmanaged. Past performance is no guarantee of future results. Gaining perspective Both stocks and bonds play a crucial role no matter what the market conditions. But how can you stay focused on your goals for the next few decades? Diversification can help you achieve balance for your longterm retirement plans. 2

3 Finding balance and consistency for the long-term and Lincoln Financial Group are highly regarded for their decades of experience and seasoned leadership. The Insurance Series difference Since 1931,, part of Capital Group, has helped investors pursue long-term investment success. Their consistent approach in combination with The Capital System has resulted in a notable long-term track record for Insurance Series. Aligned with investor success investment professionals base their decisions on a long-term perspective, which they believe aligns their goals with the interests of their clients. AFIS portfolio managers average 26 years of investment experience, including 23 years at Capital Group, reflecting a career commitment to a long-term approach. 1 The Capital System Their investment process, The Capital System, combines individual accountability with teamwork. Each fund is divided into portions that are managed independently by investment professionals with diverse backgrounds, ages and investment approaches. An extensive global research effort is the backbone of their system. Long-term track record The AFIS equity funds have beaten their comparable Lipper indexes or averages in 90% of 10-year periods and 100% of 20-year periods. The AFIS fixed income funds have beaten comparable Lipper indexes or averages in 58% of 10-year periods and 86% of 20-year periods. 2 strives to keep management fees competitive. AFIS fund management fees have generally been among the lowest in the industry. 3 More than 25 years ago, these two companies forged a relationship to create American Legacy variable annuities. Variable annuities are long-term investment products that offer a lifetime income stream, access to leading investment managers, options for guaranteed growth and income (available for an additional charge), and death benefit protection. To decide if a variable annuity is right for you, consider that its value will fluctuate; it is subject to investment risk and possible loss of principal; and there are associated costs such as mortality and expenses, administrative and advisory fees. All guarantees, including those for optional features, are subject to the claims-paying ability of the issuer. Limitations and conditions apply. 1 Portfolio manager experience as of May 1, Based on Class 2 share results for rolling periods through December 31, Periods covered are the shorter of the fund s lifetime or since the inception of the comparable Lipper indexes or averages. The comparable Lipper indexes and averages are: Global Funds Index (Global ), s Index (), International Funds Index (International Fund), Emerging Markets Funds Index (New World Fund ), Growth & Income Funds Index (Blue Chip Income and, Growth-Income Fund), Flexible Portfolio Funds Index (Asset Allocation Fund), Core Bond Funds Index (Bond Fund), High Yield Funds Index (High-Income Bond Fund), General U.S. Government Funds (U.S. Government/AAA-Rated Securities Fund), The Lipper Global Small-/Mid-Cap Funds Average was used for Global Small Capitalization Fund. 3 Based on management fees for the 20-year period ended December 31, 2014, versus comparable Lipper categories, excluding funds of funds. 3

4 Diversification with purpose Invest in portfolios designed for retirement with Insurance Series Portfolio Series Goal-oriented The five funds in Insurance Series Portfolio Series have been designed to help investors address specific needs such as: Building retirement savings Planning for retirement distributions Preserving long-term assets Objective-based Aligned with broad objectives capital growth or a balance of capital growth with income these portfolios provide investors with a structured approach to pursuing specific goals as well as broad diversification. Time-tested Each fund is a blend of individual funds within Insurance Series (AFIS), which has been helping investors pursue retirement goals since Enhanced risk management The three managed risk funds in the series seek to manage volatility and help preserve capital during significant market declines.* Alone or in combination, they are eligible for the Managed Risk version of our living benefit riders. Flexible These funds can be used together within an objective-based framework or individually, based on each investor s time frame, risk tolerance and other factors. Actively monitored An oversight committee meets regularly to review the portfolio series funds results and determine if any funds need to be rebalanced, or whether to make any changes to the target weighting. *The managed risk strategy is operated by Milliman Financial Risk Management LLC. Portfolio Oversight Committee The AFIS Portfolio Series is actively monitored by a Portfolio Oversight Committee a group of investment professionals with varied backgrounds and investment approaches, and decades of industry experience. Years of experience as of the prospectus dated May 1, Alan Berro Jody Jonsson Jim Lovelace Wesley Phoa John Smet Andrew Suzman Brad Vogt 29 years 26 years 33 years 21 years 33 years 21 years 27 years In addition to the Portfolio Oversight Committee, the three managed risk funds are also managed by: Milliman Financial Risk Management Alan Berro 29 years Adam Schenck 10 years Jim Mulally 39 years 4

5 Insurance Series Portfolio Series Underlying AFIS allocations Balance Appreciation Growth and Income Portfolio Managed Risk Growth and Income Portfolio Managed Risk Global Allocation Portfolio Global Growth Portfolio Managed Risk Growth Portfolio 1.04% 1.08% 1.18% 1.19% 1.02% 15% Global Growth and Income Fund Growth-Income Fund 15% Global Growth and Income Fund Growth-Income Fund Global Grow th Fund 15% International Fund Global Growth and Income Fund Asset Allocation Fund Global 30% Global Small Capitalization Fund Global Small Capitalization Fund International Fund Blue Chip Income and Capital Income Builder Capital Income Builder Global Balanced Fund New World Fund Growth-Income Fund Bond Fund Global Bond Fund Bond Fund Global Bond Fund Global Bond Fund Global Growth and Income Fund 30% Bond Fund Growth Growth and income Balanced/equity income Bond * Includes management fees, charges for underlying fund options, and 12b-1 fee. Funds of funds may have higher expenses than investing directly in the underlying fund options. The underlying fund allocations are as of May 1, Allocation percentages and underlying funds are subject to the Portfolio Oversight Committee s discretion and will evolve over time. Diversification and asset allocation can not assure a profit or protect against market loss. The AFIS Portfolio Series investment allocations may not achieve fund objectives. There are expenses associated with the underlying funds in addition to fund-of-funds expenses which are typically higher.. The funds risks are directly related to the risks of the underlying funds, as described below. Investing outside the United States involves risks such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in all the series prospectuses. These risks may be heightened in connection with investments in developing countries. Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks. The return of principal for bond funds and funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. Futures contracts may not provide an effective hedge of the underlying securities because changes in the prices of futures contracts may not track those of the securities they are intended to hedge. In addition, the managed risk strategy may not effectively protect the funds from market declines and will limit the funds participation in market gains. 5

6 Build your own portfolio Flexibility and focus with Managed Risk Funds Investors want to take advantage of these potential opportunities, but may shy away from volatility. The managed risk funds, part of the Insurance Series, seek to capture upside potential and minimize losses due to unexpected swings. Each fund invests in shares of its respective underlying fund and employs a risk management strategy operated by Milliman Financial Risk Management, LLC. Managed risk portfolio managers (years of experience)* Alan Berro (29 years) James Mulally (39 years) Underlying fund Subadviser portfolio manager Adam Schenck, Milliman Financial Risk Management (10 years) Fund option Types of investments Portfolio managers/ years of experience* Managed Risk Managed Risk International Fund Managed Risk Blue Chip Income and Managed Risk Growth-Income Fund Managed Risk Asset Allocation Fund Seeks growth opportunities anywhere Seeks to invest in companies that appear to offer opportunities for growth. Up to of assets can be invested in companies outside the U.S. Exclusively outside the U.S. Invests in companies of all sizes outside the U.S., including developing countries. High-quality investing with a dividend focus. The fund invests primarily in dividend-paying stocks of larger established U.S. companies. Up to of assets may be invested in stocks of larger companies outside the U.S. that are listed or traded in the U.S. A story of consistency Invests in companies with the potential for capital appreciation and/or dividend payments. Up to 15% of assets may be invested in securities of issuers outside the U.S. A strategic approach to diversification Invests in a diversified mix of stocks and bonds. The fund may invest up to 15% of assets in equity securities from outside the U.S. and up to of debt securities in lower rated bonds. 6 managers, median 31 years of experience 4 managers, median 21 years of experience 3 managers, median 20 years of experience 5 managers, median 23 years of experience 6 managers, median 25 years of experience *As of May % n Any combination of: Managed Risk Managed Risk International Fund Managed Risk Blue Chip Income and Managed Risk Growth-Income Fund Managed Risk Asset Allocation Fund n LVIP American Preservation Fund *Based on underlying fund data as of the prospectus dated May 1, Based on underlying fund data as of June 30, Maximum benefits, more flexibility All five managed risk funds, in any combination with in the LVIP American Preservation Fund, meet the investment requirements for the Managed Risk versions of our living benefit riders. This gives you access to: 38 portfolio managers* 998 total years of experience 23 median years of experience Portfolio breakdown U.S stocks: 450 U.S. bonds: 239 Non-U.S. stocks: 265 Non-U.S. bonds: 64 6

7 Additional options LVIP Managed Risk American Allocation Funds The portfolios shown on this page offer you options from the Insurance Series and mutual funds. Alone or in combination, they are eligible for the managed risk versions of our living benefit riders. 30% Risk-managed strategy sleeve 70% 50% Risk-managed strategy sleeve 50% 100% LVIP American Global Growth Allocation Managed Risk Fund LVIP American Global Balanced Allocation Managed Risk Fund LVIP American Preservation Fund Objective *Includes management fees, charges for underlying fund options, and 12b-1 fee. Funds of funds may have higher expenses than investing directly in the underlying fund options. Data are as of February 2, Portfolio allocations subject to change. Funds in boldface are mutual funds. Additional to the underlying funds allocation. Seeks a balance between a high level of current income and growth of capital, with a greater emphasis on growth of capital. Seeks a balance between a high level of current income and growth of capital, with an emphasis on growth of capital. Seeks current income, consistent with the preservation of capital. Stocks 70% 50% 0% Bonds 30% 50% 100% Number of funds Portfolio expense* 1.03% 0.99% 0.88% Growth funds Portfolio allocation AMCAP Fund 11% 9% EuroPacific 12% 5% Global Global Small Capitalization Fund 7% 6% New Perspective Fund 5% 1% New World Fund 3% Growth and income funds American Mutual Fund 9% Growth-Income Fund 9% 4% Equity income fund Capital Income Builder 17% Bond funds Bond Fund 12% 9% The Bond Fund of America 3% Global Bond Fund 3% 3% 3% High-Income Bond Fund 4% 5% 5% Intermediate Bond Fund of America 4% 6% 27% Mortgage Fund 3% 4% 5% Short-Term Bond Fund of America 34% U.S. Gov t./aaa-rated Securities Fund 3% 12% Money market funds LVIP Money Market Fund 2% Cash and futures 3% 7% 3% 7% 7

8 Two companies fostering confident futures At Lincoln Financial Group, we ve spent more than 100 years living up to the character of our namesake: integrity, honesty, and the belief in a better tomorrow. We acted on these attributes when we forged a relationship with to create American Legacy variable annuities. Together, we can help people secure and potentially maximize their income for a long-term retirement. Important information: AMERICAN FUNDS MANAGED RISK FUNDS AND LVIP MANAGED RISK AMERICAN ALLOCATION FUNDS ARE NOT GUARANTEED OR INSURED BY LINCOLN OR ANY OTHER INSURANCE COMPANY OR ENTITY, AND SHAREHOLDERS MAY EXPERIENCE LOSSES. THE STRATEGIES USED BY THESE FUNDS ARE SEPARATE AND DISTINCT FROM ANY ANNUITY OR INSURANCE CONTRACT RIDER OR FEATURES. Variable annuities are long-term investment products designed for retirement purposes and are subject to market fluctuation, investment risk and possible loss of principal. Variable annuities contain both investment and insurance components and have fees and charges, including mortality and expense, administrative and advisory fees. Optional features are available for an additional charge and are based on the financial strength of the insurer. The annuity s value fluctuates with the market value of the underlying investment options, and all assets accumulate tax-deferred. Withdrawals of earnings are taxable as ordinary income and, if taken prior to age 59½, may be subject to an additional federal tax. Withdrawals will reduce the death benefit and cash surrender value. Investors are advised to consider the investment objectives, risks, and charges and expenses of the variable annuity and its underlying investment options carefully before investing. The applicable variable annuity prospectus contains this and other important information about the variable annuity and its underlying investment options. Please call 800/ for a free prospectus. Read it carefully before investing or sending money. Products and features are subject to state availability. American Legacy variable annuities (contract forms A, B and state variations) are issued by The Lincoln National Life Insurance Company, Fort Wayne, IN, and distributed by Lincoln Financial Distributors, Inc., a broker-dealer. The Lincoln National Life Insurance Company does not solicit business in the state of New York, nor is it authorized to do so. Contracts sold in New York (contract forms NY28618-A, NY, 30070ANYFA1, 30070BNYFA3 and 30070BNYFA1) are issued by Lincoln Life & Annuity Company of New York, Syracuse, NY, and distributed by Lincoln Financial Distributors, Inc., a broker-dealer. All contract and rider guarantees, including those for optional benefits, fixed subaccount crediting rates, or annuity payout rates, are subject to the claims-paying ability of the issuing insurance company. They are not backed by the broker-dealer or insurance agency from which this annuity is purchased, or any affiliates of those entities other than the issuing company affiliates, and none makes any representations or guarantees regarding the claims-paying ability of the issuer. There is no additional tax-deferral benefit for an annuity contract purchased in an IRA or other tax-qualified plan. Lincoln Investment Advisors Corporation (LIAC) serves as the investment adviser to the LVIP Managed Risk American Allocation Funds. LIAC is the subsidiary of The Lincoln National Life Insurance Company responsible for analyzing and reviewing the investment options within Lincoln variable products and providing recommendations regarding these options to Lincoln senior management. Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Affiliates are separately responsible for their own financial and contractual obligations. American Legacy is a suite of variable annuities with investment options from and Lincoln Variable Insurance Products Trust Lincoln National Corporation LCN americanlegacy.com POD 9/15 Z14 INLNBR P Order code: AL-FOF-BRC001