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1 California Annuity Requirements SUITABILITY The State of California has adopted new Suitability Requirements for Annuity Transactions that take effect January 1, Please make note of the following requirements so that any annuity applications you submit can be processed smoothly. 1. Producer Training We previously notified producers of the continuing education training requirements imposed by the new California regulation. As a reminder, all producers must complete: An 8-hour annuity training course approved by the California Commissioner of Insurance prior to the soliciting or making recommendations regarding annuities; Four CE credits in annuity training prior to license renewal every two years; and Product Training for the specific annuity you plan to solicit or recommend, prior to the solicitation or recommendation of such annuity. THERE IS NO GRACE PERIOD FOR PRODUCER TRAIING. Beginning January 1, 2012, any annuity application submitted without the required training will be declined. 2. Suitability Acknowledgement Form (SAF) California Supplement Producers must complete and submit with every Fidelity & Guaranty Life annuity application the enclosed Suitability Acknowledgement Form California Supplement. This Supplement is in addition to the standard Suitability Acknowledgement Form. MEDI-CAL DISCLOSURE Just a reminder that the Notice Regarding Standards for Medi-Cal Eligibility and Recovery disclosure form is to be completed and submitted with an annuity application where the applicant is a senior (age 65 and above) purchasing a product based on its treatment under Medi-Cal. Thus, this form is required in any situation involving a senior applicant where question #6 on the Suitability Acknowledgement Form notes that Medicaid planning was a reason for purchasing the annuity. This form is available on Sales Link. Attached to this Bulletin is a copy of the new SAF California Supplement along with Instructions on how to complete the new SAF Supplement and a copy of the current Notice Regarding Standards for Medi-Cal Eligibility and Recovery disclosure form. Please Note: Fidelity & Guaranty Life has partnered with WebCE, SuccessCE and LIMRA to provide a comprehensive line of Continuing Education Services. You can access all sites by visiting Saleslink and following these directions: WebCE is available via the Saleslink homepage. Go to Popular Links.Insurance CE Center. SuccessCE is available via the Saleslink homepage. Go to Required Annuity Product Training for the lilnk. LIMRA is available via the Saleslink homepage. Go to Your Training Tracker. Fidelity & Guaranty Life is the marketing name of Fidelity & Guaranty Life Insurance Company and, in New York only, Fidelity & Guaranty Life Insurance Company of New York. Each Fidelity & Guaranty Life company is solely responsible for its contractual commitments. FOR PRODUCER USE ONLY NOT FOR THE USE WITH THE GENERAL PUBLIC. Fidelity & Guaranty Life Insurance Company, Baltimore, MD w w w. f g l i f e. c o m

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7 Annuity Suitability Instructions California Supplement INSURER: FIDELITY & GUARANTY LIFE INSURANCE COMPANY If you sell any Fidelity & Guaranty Life annuity in California, you and your client must complete the California Suitability Supplement Form (ADMIN 5656) in addition to our standard Suitability Acknowledgement Form (ADMIN 5463). This is required for annuity applications dated January 1, 2012 or later. The California Supplement Form is being implemented in response to California s adoption of new suitability requirements under the Annuities Protection Bill (Assembly Bill Number 689) that differ in certain respects from the NAIC Model. The supplemental questions are designed to help ensure you and the company are complying with California s unique requirements. The California Supplement Form has 4 questions: Question 1 asks if the consumer has a reverse mortgage. The question should be marked yes if the consumer has an existing reverse mortgage or will be purchasing a reverse mortgage in connection with or at the same time as purchasing our annuity. If the answer is yes, you should provide details on when the reverse mortgage was acquired, whether it is connected in any way to purchase of the annuity, and whether you or your agency has any affiliation or financial arrangement with the reverse mortgage provider or broker. Question 2 asks for an explanation on how purchasing the annuity will result in a net tangible benefit for your client. California s new suitability law requires that there be a reasonable basis for believing the annuity will result in a net tangible benefit. While that term is not defined by law, you and your client should explain how purchase of the annuity will demonstrably improve the financial position of the client. Your answer here may be similar to your answer to Question 19 of the Suitability Acknowledgment Form (Rationale) but additional details are helpful to spell out tangible benefits. Question 3 on the supplement form is the same as Question 17b on the standard Suitability Acknowledgment Form except it looks back 60 months rather than 36 months. As with Question 17b, if the answer is yes, you should provide enough background detail to enable the company to assess the effect of any past replacement activity on the current sale. In particular, this includes information about what policies or annuities were previously replaced, whether you were the agent involved in those replacements, why the client is replacing those policies again if the current sale involves the same funds, and any other relevant facts. Question 4 applies only if the client is 65 or older and replacing an annuity on which surrender charges will be incurred. In that situation, you and your client should explain how replacement will produce a substantial financial benefit to your client over the life of the annuity. Although this terminology is not defined by law, and although this question may to some extent overlap with Question 19 of the Suitability Acknowledgment Form (Rationale) and Question 2 of the supplement form (net tangible ADMIN 5656 ( ) Fidelity & Guaranty Life Insurance Company Baltimore, MD Page 1

8 Annuity Suitability Instructions California Supplement INSURER: FIDELITY & GUARANTY LIFE INSURANCE COMPANY benefit), it is important that you provide sufficient detail in order to show how the financial position of the client will be improved over the course of the life of the Fidelity & Guaranty Life annuity as compared to keeping the existing annuity. While we apologize for adding to your paperwork load, we believe this form is essential to ensure that annuity sales are meeting standards and requirements set by new California suitability laws. Please ensure your responses are detailed enough so that we may minimize additional follow up and strive to keep our new business processing as efficient as possible consistent with good compliance practices. As always, should you have questions, feel free to us at ADMIN 5656 ( ) Fidelity & Guaranty Life Insurance Company Baltimore, MD Page 2