Security Benefit Statement of Understanding

Transcription

1 Security Benefit Statement of Understanding Effective Date: October 1, 2014 Must be signed by the customer and agent and the signature page returned to Security Benefit with the application One Security Benefit Place, Topeka, KS securitybenefit.com IM /10/01

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3 Security Benefit Total Value Annuity Statement of Understanding Thank you for your interest in the Total Value Annuity from Security Benefit Life Insurance Company (SBL). It is important for you to read this summary before you decide to purchase the annuity. This summary will help you understand the features of the annuity and determine if it will help you meet your financial goals. Once you have read this summary, please sign the last page to confirm that you understand the annuity and submit this document with your application for the annuity and the Annuity Suitability Form. For more specific information, please refer to the annuity contract, and its attached riders and endorsements, as it contains the terms of the annuity. What is the Total Value Annuity? The Total Value Annuity (TVA) is a flexible premium, deferred fixed index annuity with a Bonus, Surrender Charge, Bonus Recapture and, in most states, a Market Value Adjustment (MVA). The Surrender Charge, Bonus Recapture, and if applicable, MVA, apply for 10 contract years*. Accordingly, you should only purchase the TVA if you do not expect to need the funds in the next 10 years*, other than amounts available through free withdrawals. The TVA is designed to be held for the long term. Also available with the TVA is (i) the optional Guaranteed Lifetime Withdrawal Benefit Rider - the Income Rider or (ii) the optional Guaranteed Minimum Death Benefit Rider - the Death Benefit Rider. Only one of these riders may be purchased, and they cannot be cancelled. What are the key terms I need to know to understand the Total Value Annuity? The following terms are keys to understanding the Total Value Annuity: Account Value: is the value of your Total Value Annuity, and is the sum of the Fixed Account Value and the Index Account Values. Bonus: is an amount added to your Account Value related to purchase payments received by SBL in the first contract year. Bonus Recapture: is a charge that reduces the amount of previously credited Bonus and reduces the amount available from your annuity during the Surrender Charge Period. Thus, if you surrender your annuity during the Surrender Charge Period, all or part of the Bonus credited will be taken away. Cap: The maximum amount of interest that may be credited for a particular time period. Current Interest Rate: is the interest rate applied to your Fixed Account Value. It will never be less than the GMIR. Five year Index Account: refers to either the 5 Year Annuity Linked TVI Index Account or the Transparent Value Blended Index Account options. Fixed Account Value: is the amount allocated to the Fixed Account. Guaranteed Minimum Interest Rate or GMIR: is the minimum annual interest rate that is used to compute the Guaranteed Minimum Cash Surrender Value and is the minimum interest rate for the Fixed Account. Index Account: are the accounts we establish when you allocate your Account Value to the S&P 500 Annual Point to Point Index Account, the 5 Year Annuity Linked TVI Index Account or the Transparent Value Blended Index Account. For both the 5 Year Annuity Linked TVI Index Account and the Transparent Value Blended Index Account, because of the five-year Index Term, we may establish more than one Index Account if you allocate to either five year index account on the date you purchase your annuity and on future contract anniversaries. Index Account Value: is the amount allocated to the S&P 500 Annual Point to Point Index Account, the 5 Year Annuity Linked TVI Index Account or the Transparent Value Blended Index Account. Index Interest Rate: is the interest rate based on the change of an index and credited on the Index Account Value. *9 years for contracts issued in CT and DE. Page 1 of 28 IM

4 Index Term: is the period for each Index Account during which you may not transfer out of an Index Account and at the end of which the Index Interest Rate is computed and credited (except for interim interest on the 5 Year Annuity Linked TVI Index Account and the Transparent Value Blended Index Account). Market Value Adjustment or MVA: is an increase or decrease of the amount available for withdrawals or, in most states, annuitization as a result of the change in the interest rate environment since your contract was issued. It applies during the Surrender Charge Period. Spread: the difference between the percentage change on underlying index value and the interest credited to the Index Account for a particular time period. Surrender Charge: is a charge that reduces the amount available from your annuity during the Surrender Charge Period. Surrender Charge Period: is the first 10 contract years (9 years for contracts issued in CT and DE). What do I pay for the Total Value Annuity? To purchase the Total Value Annuity, you must pay an initial amount or "purchase payment." The minimum initial purchase payment is $25,000. As a flexible premium annuity, you may make subsequent purchase payments to the annuity of at least $1,000. The maximum purchase payment is $1,000,000 without prior company approval. Can I change my mind after purchasing the Total Value Annuity? Yes, many states have laws that give you a specific number of days to You can return your annuity: review an annuity after you buy it. If you decide during that time that you During the free look period. do not want the annuity, you can return it and receive back your entire If you do, you will receive your purchase payment less any withdrawals. Read the cover page of your entire Purchase Payment, with contract to learn about your free look period. If your contract replaced a no penalty. previous annuity contract owned by you, the free look period may be You will not receive the Bonus. different than that listed on the cover page of your contract (varies by state). If so, there will be an additional notice for the free look period that was included with your contract. CA, FL CT, DE What is the Bonus? The "Bonus" is an amount we add to your Account Value for purchase payments we receive in the first contract year. The Bonus is equal to the purchase payments we receive in your first contract year multiplied by the Bonus rate. The Bonus rate depends on the state in which you purchase the contract, whether you purchased a rider, and for the Death Benefit Rider, your age. States All states except AK, IN, ME, MN, MO, NH, NJ, NV, those listed at right OK, OH,OR, PA, SC, TX, UT, WA Bonus 7% 5% 6% 2% Bonus with Income Rider Purchase Bonus with Death Benefit Rider Purchase* 8% 6% 7% 2% 7% 5% 6% 2% *If a Death Benefit Rider is purchased and you are 76 or older, the Bonus is reduced by 1%. The Bonus rate remains the same with the purchase of either Rider in CT or DE. The Death Benefit Rider is not available in CA, CT, MO, NV, NH or WA. Bonus annuities may use factors to determine interest rates that result in lower interest credited in future years, have higher surrender charges, and longer surrender charge periods or other charges than similar annuities without a bonus or other charges. The reduction of interest or higher charges may exceed the amount of the bonus. What interest crediting options are available under the Total Value Annuity? Under the TVA, you may select among four different interest crediting options: the Fixed Account and the three Index Accounts the S&P 500 Annual Point to Point Index Account, the 5 Year Annuity Linked TVI Index Account and the Transparent Value Blended Index Account. You may allocate purchase payments along with Bonus among the Fixed Account and Index Accounts in whole percentages. Page 2 of 28 IM

5 What is the Fixed Account? The Fixed Account is an interest crediting option that guarantees to credit a fixed interest rate. We declare a Current Interest Rate equal to at least the GMIR. At the time we issue you your contract, we set the GMIR and it will be shown in your contract. The GMIR will be at least 1%. Interest is credited daily on your Fixed Account Value. What is the S&P 500 Annual Point to Point Index Account? The S&P 500 Annual Point to Point Index Account is an interest crediting option that credits interest based on the change in the S&P 500 Index up to a cap. At the end of each Index Term, the Index Interest Rate is determined and is credited on your S&P 500 Annual Point to Point Index Account Value. The Index Interest Rate will never be less than 0%. For the S&P 500 Annual Point to Point Index Account, the Index Term is the period starting on your contract date or contract anniversary and ending on the earliest of: (i) your next contract anniversary; or (ii) the date due proof of death is received by SBL. In certain cases we may terminate the S&P 500 Annual Point to Point Index Account. If any amounts are withdrawn from the S&P 500 Annual Point to Point Index Account before the end of the Index Term, including for a surrender, the Index Interest Rate is not credited on those amounts. How is the S&P 500 Annual Point to Point Index Account Index Interest Rate computed? You are not investing in and your premiums are not being invested in the S&P 500 or any equity securities. As such, the interest credited for the Index Account does not equal the change in the S&P 500 Index. For the S&P 500 Annual Point to Point Index Account, we compute the Index Interest Rate at the end of each Index Term based upon the change in the index value at the start and the end of your Index Term, up to a cap. The ending index value for one Index Term will be the starting index value for the next Index Term. If the index value is not available for any day, we use the index value reported on the prior business day to that day. We compute the difference in the starting and ending index values for the Index Term. If the difference is positive, we divide that difference by the Index Term's starting index value to determine the percentage change in the index value for the Index Term. We then compare the percentage change to the cap and use the lower of the percentage change or the cap as the Index Interest Rate. If the difference in the beginning and ending index values is negative, the Index Interest Rate is 0%. The cap is the maximum Index Interest Rate that we will credit for the S&P 500 Annual Point to Point Index Account. At the time we issue your contract, we set the initial cap and the guaranteed minimum cap and they are shown in your contract. Each Index Term, we may change the cap, but it will never be less than the guaranteed minimum cap indicated in your contract. Example - Index Interest Rate at the end of the Index Term: Assume that (i) Mary was issued a contract on February 1, 2011, (ii) on February 1, 2011, the S&P 500 Annual Point to Point Index Account Value was $100,000, (iii) Mary did not take any withdrawals during the Index Term, (iv) the cap was 1%, (v) on February 1, 2011, the index value of the S&P 500 Index was 1,000, and (vi) On February 1, 2012, the index value of the S&P 500 Index was 1,100, then: Difference in Index Value S&P 500 Index Ending Index Value - S&P 500 Index Beginning Index Value Because the difference is positive, we determine the percentage change as follows: Percentage Change in Index Value Difference in Index Value Beginning Index Value 10% We then compare the percentage change to the cap and use the lower of the two. Because the 1% cap is lower than the 10% change in the index value, the Index Interest Rate for the S&P 500 Annual Point to Point Index Account for the year would be 1% and the index interest would be $1,000. Thus, Mary s ending S&P 500 Annual Point to Point Index Account Value would be $101,000. Page 3 of 28 IM

6 This example is only to show how the S&P 500 Annual Point to Point Index Account Index Interest Rate and index interest are computed and does not reflect what the interest would be for your annuity. What is the 5 Year Annuity Linked TVI Index Account? The 5 Year Annuity Linked TVI Index Account is a unique index crediting option available only through SBL that is based upon the change in the Annuity Linked TVI Index, which is reduced by the annual spread, currently 1.00% annually, and multiplied by a participation rate. What is the Annuity Linked TVI Index? The Index Interest Rate for the 5 Year Annuity Linked TVI Index Account is based on the Annuity Linked TVI Index. The Annuity Linked TVI Index is an index that is based upon the Trader Vic Index Excess Return index (TVI ) modified by an index cost fee and a volatility control overlay. The Annuity Linked TVI Index is a published index with the Bloomberg ticker "ALTVI:IND". The TVI is a published index on Bloomberg with the symbol "TVICTR:IND." The TVI was launched by the Royal Bank of Scotland N.V. (RBS) and EAM Partners LP (EAM). RBS serves as the calculation agent for the TVI and the Annuity Linked TVI Index. The TVI is an index that measures the movements in prices of futures contracts on physical commodities, global currencies and U.S. interest rates that are publicly traded on a U.S. exchange that publishes the contracts daily settlement prices. In computing the index value of the Annuity Linked TVI Index, RBS deducts from the TVI an index cost. The index cost is a charge by RBS to compute the Annuity Linked TVI Index. The index cost is deducted in computing the daily values of the Annuity Linked TVI Index at the rate of 125 basis points per annum. The volatility control overlay is a rules-based adjustment applied in computing the daily values of the Annuity Linked TVI Index. It measures how much the TVI s price is changing. The volatility control overlay reduces the impact of a fall in price, as well as increases in the price of the TVI. The volatility overlay will also reduce SBL's hedge costs for the 5 Year Annuity Linked TVI Index Account. The index cost and volatility overlay reduce the potential positive change in the Annuity Linked TVI Index and the Index Interest Rate for the Annuity Linked TVI Index Account. Because the TVI is based on the 24 futures contracts on commodities, global currencies and U.S. interest rates, the daily values of the TVI are likely to be independent from the price movement of equity and bond indices. In addition, unlike traditional equity and bond indices that increase and decrease when equities and bonds increase and decrease, the TVI can increase in value when the futures contract prices are decreasing. Because it is based on the TVI, the 5 Year Annuity Linked TVI Index Account provides you with the opportunity to receive index interest credits in times when an index crediting option based on equity or bond markets would not. What is the Transparent Value Blended Index Account? The Transparent Value Blended Index Account is another unique index crediting option, available only through SBL. It is based upon the Transparent Value Blended Index ( TVBI ), which is reduced by the annual spread, currently 1.50% annually, and multiplied by a participation rate. What is the Transparent Value Blended Index? The Transparent Value Blended Index is part of the Transparent Value Index family a series of quantitative strategy indexes offered by Transparent Value LLC using rules-based published analytics. The Transparent Value Indexes are designed to measure the performance of investment strategies based on the criteria established by Transparent Value LLC for the valuation of publicly traded companies. The Transparent Value Blended Index reallocates weights between the Price Return version of the Transparent Value Large-Cap Defensive Index without dividends ( Stock ) and the S&P 2-Year U.S. Treasury Note Futures Total Return Index ( Bond ). Components of the Transparent Value Large-Cap Defensive Index, which consists of 100 stocks chosen from the 750 stocks in the Dow Jones U.S. Large-Cap Total Stock Market Index, are selected in part based on their RBP probabilities. RBP, which stands for Required Business Performance, is calculated by using a reverse discounted cash flow approach to determine the future business performance required by a company to support its current stock price. RBP probabilities measure the Page 4 of 28 IM

7 likelihood that a company can deliver the required business performance identified by applying the methodology over specified time periods. The S&P 2-Year U.S. Treasury Note Futures Total Return Index tracks the performance of a portfolio that holds the nearest maturity 2-Year U.S. Treasury Note futures contract. The allocation between the two component indexes is calculated daily and the stock selection in the Transparent Value Large Cap Defensive Index is rebalanced quarterly. The goal of the Transparent Value Blended Index is to actively reallocate between the components depending on changing market conditions and volatility. During the times of increased stock market volatility followed by market downturn TVBI immediately allocates a larger portion to the Bond Index, while favoring the Stock Index during market upswings. General Information Regarding the 5 year Index Accounts At the end of each Index Term, the Index Interest Rate is determined and is credited on the 5 year Index Account Value. Any amount of a withdrawal (including Bonus Recapture, Surrender Charge, and MVA), deduction for rider charges, or amount for annuitization taken from the 5 Year Index after the first anniversary of the start of the Index Term but before the end of the Index Term, receives interim index credits that are based upon a vesting percentage. The Index Interest Rate will never be less than 0%, however, it is possible that no interest could be credited at the conclusion of a 5 year Index Account's Index Term. Because both 5 year Indexes have multi-year terms, no transfers from either the 5 Year Annuity Linked TVI Index Account or the Transparent Value Blended Index Account are permitted before the end of the Index Term. For both 5 year Index Accounts, the Index Term is the period starting on the contract date or contract anniversary and ending on the earliest of: (i) the fifth anniversary of the start of the Index Term or (ii) the date due proof of death is received by SBL. In certain situations we may terminate both 5 Year Indexes. How is the Index Interest Rate computed for a 5 year Index Account? For a 5 year Index Account, we compute the Index Interest Rate at the end of each Index Term based upon the change in the Index from the start and at the end of the Index Term, or in computing interim index interest, the relevant date. In computing the Index Interest Rate, an annual spread currently applies (the specific spreads applicable to each of the 5 year Index Accounts are set forth above), and a participation rate may also apply in the future. We set the annual spread and participation rate at the beginning of each Index Term. The annual spread is guaranteed to never be more than 5% annually or 25% for the entire Index Term. The participation rate is guaranteed to never be less than 50%. In addition, in computing the interim index interest, the computation is the same except that a vesting percentage also applies. The vesting percentage is: Vesting Percentage When Applicable Based on Start of Index Term 20% On the 1st anniversary and before 2nd anniversary 40% On the 2nd anniversary and before 3rd anniversary 60% On the 3rd anniversary and before 4th anniversary 80% On the 4th anniversary and before 5th anniversary 100% On the 5th anniversary We compute the Index Interest Rate for a 5 year Index Account as follows: Step 1. Compute the percentage change in the index value of the Index over the relevant period. Step 2. Subtract five years' of annual spread from the result in Step 1. If interim index interest is being determined, this would be based on the amount of days that have elapsed since the start of the Index Term. Step 3. Multiply the participation rate by the result in Step 2. Step 4. If interim index interest is being determined for a withdrawal (including Bonus Recapture, Surrender Charge, and MVA), deduction for rider charges, or for annuitization prior to the end of the Index Page 5 of 28 IM

8 Term, multiply the applicable vesting percentage, based on the amount of time elapsed since the start of the Index Term. Example Index Interest Rate at the end of the Index Term: Assume that (i) Bill was issued a contract on February 1, 2011, (ii) on February 1, 2011, Index Account Value was $100,000, (iii) Bill did not take any withdrawals and no rider charges were deducted during the Index Term, (iv) on February 1, 2011, the index value of the Index was 1,000, (v) on February 1, 2016, the index value of the Index was 1,500, (vi) the annual spread was 3%, and (vii) the participation rate was 100%, then: Step 1: Compute the percentage index change Difference in Index Value Index Ending Index Value - Index Beginning Index Value Because the difference is positive, we determine the percentage change as follows: Percentage Change in Index Value Difference in Index Value Index Beginning Index Value 50% Step 2: Subtract the annual spread from Step 1 Because for this example an annual spread of 3% applies, we subtract five years' of annual spread from the percentage change in the Index Value. Five years' of annual spread would be 15%. Subtracting 15% from Step 2 would be: Step 1 - Five Years' of Annual Spread 35% 50% - 15% Step 3: Multiply the participation rate by the result of Step 2 The percentage change in the index value, less the annual spread, is then multiplied by the participation rate. Because the participation rate is 100%, the Index Interest Rate for the Index Account would be 35% and the index interest would be $35,000. Thus, Bill s ending Index Account Value would be $135,000. This example is only to show how the 5 year Index Interest Rate and index interest are computed and does not reflect what the interest would be for your annuity. The above example assumes that you only allocate purchase payments to either the 5 Year Annuity Linked TVI Index Account or the Transparent Value Blended Index Account. Under the Total Value Annuity, you may allocate a percentage of your purchase payments to the Fixed Account and each of the Index Accounts. Example Index Interest Rate for a withdrawal prior to the end of the Index Term: Assume that (i) Bill was issued a contract on February 1, 2011 and allocated his entire Purchase Payment to a 5 Year Index Account, (ii) on February 1, 2011, the Index Account Value was $100,000, (iii) on August 1, 2013 (two and one-half years after the beginning of the Index Term), Bill took a withdrawal that reduced the Index Account Value by $10,000 (including Bonus Recapture, Surrender Charge, and MVA), (iv) on February 1, 2011, the value of the Index was 1,000, (v) on August 1, 2013, the value of the Index was 1,200, (vi) the annual spread was 3%, and (vii) the participation rate was 100%, then: Step 1: Compute the percentage index change Difference in Index Value Index Ending Index Value - Index Beginning Index Value Page 6 of 28 IM

9 Because the difference is positive, we determine the percentage change as follows: Percentage Change in Index Value Difference in Index Value Index Beginning Index Value 20% Step 2: Subtract annual spread from Step 1 For this example, because an annual spread of 3% applies, we then subtract two and one-half years' of annual spread from the percentage change in the index value. Two and one-half years' of annual spread would be 7.5%. Subtracting 7.5% from step 2 would be: Step 1 - Two and One-Half Years' of Annual Spread 12.5% 20% - 7.5% Step 3: Multiply the participation rate by the result of Step 2 The percentage change in the index value, less the annual spread, is then multiplied by the participation rate. Because the participation rate is 100%, this would result in 12.5%. Step 4: Because the withdrawal occurred during the index term, apply the vesting percentage Because Bill s withdrawal occurred after the second anniversary and before the third anniversary of the start of the Index Term, the vesting percentage would be 40% and it is applied to the result in Step 3. Index Interest Rate Step 3 x Vesting Percentage 5% 12.5% x 40% Thus, the Index Interest Rate used to determine the interim index interest credit would be 5%. To determine the Index Account Value after the withdrawal: Index Account Value After the Withdrawal Index Account Value Before the Withdrawal - Amount of Withdrawal / (1 + interim Index Interest Rate) $90, $100,000-10,000 / (1.05) This example is only to show how the Index Interest Rate and index interest, and the reduction to the Index Account Value are computed and does not reflect what the interest would be for your annuity. The above example assumes that you only allocate purchase payments to either the 5 Year Annuity Linked TVI Index Account or the Transparent Value Blended Index Account. Under the Total Value Annuity, you may allocate a percentage of your purchase payments to the Fixed Account and each of the Index Accounts. Can I change how interest is credited under my contract? Yes, after each contract anniversary we will send you a notice about the Fixed Account Value and Index Account Values available to be transferred and information on the interest crediting options then available. You must request the transfer of Account Value as of the applicable contract anniversary on a form accepted and received by SBL on or before the 21st day after that contract anniversary. Any request for transfer received after such date will not be honored and the allocation of the Account Value will remain the same, unless SBL ceases to offer an Index Account in which Account Value is held. If you do not request a transfer, the allocation of the Account Value will remain the same, unless SBL ceases to offer an Index Account in which the Account Value is held. If SBL ceases to offer an Index Account in which Account Value is held and a transfer request is not received by SBL in time or a transfer is not requested, SBL will transfer the Index Account Value in that Index Account to the Fixed Account. No Bonus Recapture, Surrender Charge, or any MVA applies to transfers. Page 7 of 28 IM

10 What is the value of my annuity? For the TVA, we compute your Account Value and your Cash Surrender Value. The greater of the Account Value and Cash Surrender Value is used to determine the amount received upon the death of the owner/annuitant and the death of the joint owner who is the spouse of the annuitant. The Cash Surrender Value is used to determine the amount received upon a surrender of the TVA, applied to an annuity option, or paid as a result of the death of the joint owner who is not the spouse of the annuitant. The "Account Value" equals the sum of the Fixed Account Value and the Index Account Values. The Fixed Account Value and Index Account Values include interest credited and take into account withdrawals or annuitization, including the Bonus Recapture, Surrender Charge, and any MVA that is applied to the withdrawals or annuitization, premium tax and rider charge. The "Cash Surrender Value" is equal to the greater of: (i) The Guaranteed Minimum Cash Surrender Value or (ii) The Account Value, (a) minus any Surrender Charge, (b) minus any Bonus Recapture, (c) minus any premium or other taxes that apply, including federal tax withholding, and (d) minus any rider charge that applies and (e) in most states, plus or minus any MVA. The "Guaranteed Minimum Cash Surrender Value" is equal to 87.5% of the purchase payments, increased by interest credited at the GMIR, less withdrawals, and less premium or other taxes that apply. What is a Bonus Recapture? A Bonus Recapture is a charge that reduces the amount of previously credited Bonus that applies during the Surrender Charge Period. The Bonus Recapture varies by contract year and is based upon the state where you purchase your contract. The Bonus Recapture provision is not applicable to contracts issued in CT or DE. If you take money from your Total Value Annuity during the surrender charge period, a surrender charge, bonus recapture and a Market Value Adjustment may apply. Year All states except those listed below 100% 100% 100% 100% 100% 100% 80% 60% 40% 20% 0% AK, IN, MN, MO, NH, NJ, NV, OH, OK, OR, PA, SC, TX, UT, WA 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% What is the Surrender Charge? The Surrender Charge is a charge that reduces the amount available from your annuity during the Surrender Charge Period. The Surrender Charge varies by contract year and is based upon where you purchase your contract. Year All states except those listed 12% 12% 11% 11% 10% 9% 8% 7% 6% 4% 0% below AK, IN, MN, MO, NH, NJ, NV, OH, OK, OR, PA, 9% 8.1% 7.2% 6.3% 5.4% 4.5% 3.6% 2.7% 1.8% 0.9% 0% SC, TX, UT, WA Florida 10% 10% 10% 10% 10% 9% 8% 7% 6% 4% 0% CT, DE 8.25% 7.25% 6.50% 5.50% 4.50% 3.50% 2.50% 1.50% 0.75% 0% 0% Page 8 of 28 IM

11 What is a Market Value Adjustment? The MVA applies during the Surrender Charge Period. The MVA is based on the interest rate market at the time you purchase your contract and when the MVA applies, measured by the 10-year Constant Maturity Treasury interest rate. If interest rates in the market are lower by 0.25% or less, or if the market interest rates are higher than when you purchase your contract, an additional amount is deducted. If market interest rates are lower by more than 0.25% than when you purchase your contract, an additional amount is added. The 0.25% threshold does not apply to contracts issued in Connecticut. The MVA does not apply in Alaska, California, Indiana, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, Ohio, Oregon, Pennsylvania, South Carolina, Texas, Utah and Washington. Examples of the Market Value Adjustment These examples show how the Market Value Adjustment (MVA) increases or decreases the Cash Surrender Value based on changes in the market interest rate and the GMIR. The MVA is equal to MVA Factor multiplied by the Account Value less any unvested Bonus, subject to the MVA limit. The MVA Factor is: [[(1 + i0) / (1 + i *)]^T] - 1 Where: i0 10-year treasury rate on the date prior to the contract date; i1 10-year treasury rate on the date prior to the withdrawal; and T the number of whole and fraction years until the end of the surrender charge period. *The in the MVA Factor is not applicable in Connecticut. The examples assume: $100,000 Purchase Payment allocated 50% to the 5 Year Annuity Linked TVI Index Account and 50% to the Transparent Value Blended Index Account with the following index interest rates for each Index Account: 5 Year Annuity Linked TVI Index Account Transparent Value Blended Index Account Year % 0.00% Year % 0.00% Year % 0.00% Year % 0.00% Year % 42.79% The surrender occurs at the start of the sixth contract year. The TVA was sold in Kansas. Therefore at the beginning of the sixth year the surrender charge is 9% and the Bonus Recapture is 100%. At the beginning of the sixth contract year, the Account Value is $131,107. Page 9 of 28 IM

12 The MVA limit is based upon the Guaranteed Minimum Cash Surrender Value. The Guaranteed Minimum Cash Surrender Value is based on the GMIR. The MVA limit based on different GMIRs is shown below: 3% GMIR The MVA limit is $11,639. 2% GMIR The MVA limit is $16,946. 1% GMIR The MVA limit is $22,049. Interest Rate Increase MVA Reduction Market interest rate at purchase 6% Market interest rate at surrender 8% First Step Compute the MVA: MVA the MVA Factor multiplied by the Account Value minus the bonus recapture. [[(1+.06) / ( )]^5] The MVA is -$12,273 [ * ($131,107- $8,000)]. Second Step See if MVA Limit Applies: If the GMIR is 3%, the MVA limit applies and the reduction to the Cash Surrender Value for the MVA would be $11,639. If the GMIR is 2%, the MVA limit does not apply and the reduction to the Cash Surrender Value for the MVA would be $12,273. If the GMIR is 1%, the MVA limit does not apply and the reduction to the Cash Surrender Value for the MVA would be $12,273. Interest Rate Reduction MVA Increase Market interest rate at purchase 6% Market interest rate at surrender 4% First Step Compute the MVA: MVA the MVA Factor multiplied by the Account Value minus the bonus recapture. [[(1+.06) / ( )]^5] The MVA is $10,686 [ * ($131,107- $8,000)]. Second Step See if MVA Limit Applies: If the GMIR is 3%, the MVA limit does not apply, and the increase to the Cash Surrender Value for the MVA would be $10,686. If the GMIR is 2%, the MVA limit does not apply, and the increase to the Cash Surrender Value for the MVA would be $10,686. If the GMIR is 1%, the MVA limit does not apply, and the increase to the Cash Surrender Value for the MVA would be $10,686. A surrender charge, bonus recapture and Market Value Adjustment apply to any partial withdrawal, surrender or when annuity payouts start,* unless: The total amount withdrawn during the contract year is equal to or less than the Free Withdrawal amount; The surrender charge period no longer applies. If you qualify for the Nursing Home or Terminal Illness Waiver. *In Florida, these do not apply when annuity payouts start. When do the Market Value Adjustment, Surrender Charge, and Bonus Recapture apply? In all states except those listed below, the Surrender Charge, Bonus Recapture, and an MVA apply during the Surrender Charge Period if: (i) you surrender your contract; (ii) you take withdrawals in excess of the free withdrawal amount; (iii) a payment is made upon the death of a joint owner who is not the spouse of the annuitant; or (iv) you apply your contract to an annuity option. In Alaska, California, Indiana, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, Ohio, Oregon, Pennsylvania, South Carolina, Texas, Utah and Washington, the Surrender Charge and Bonus Recapture apply if: (i) you surrender your contract; (ii) you take withdrawals in excess of the free withdrawal amount; or (iii) a payment is made upon the death of a joint owner who is not the spouse of the annuitant. No MVA applies. In Florida, the Surrender Charge, Bonus Recapture, and an MVA apply during the Surrender Charge Period if: (i) you surrender your contract; (ii) you take withdrawals in excess of the free withdrawal amount; or (iii) a payment is made upon the death of a joint owner who is not the spouse of the annuitant. If you apply your contract to an annuity option, in Florida, only the Bonus Recapture applies. Additionally, limited annuity options are available for contracts annuitized during the Surrender Charge Period in Florida. Page 10 of 28 IM

13 During the Surrender Charge Period, the Surrender Charge, Bonus Recapture, and MVA do not apply if you satisfy conditions in the Nursing Home Waiver or Terminal Illness Waiver, if allowed in your state after the waiting period. Rider charge and premium tax We deduct any rider charge as well as any premium tax from the Fixed Account. If any rider charges or premium tax is not fully paid from the Fixed Account, then we deduct the unpaid portion pro rata from the Account Value held in all Index Accounts with the same term, starting with the shortest term Index Accounts. For example, the unpaid portion is deducted first from the Account Value held in the S&P 500 Annual Point to Point Index Account and then pro rata from the Account Value held in the 5 year Index Accounts. The pro rata amounts are based upon the Index Account Values and the Account Value as of the date the rider charge, premium tax or both are deducted. If no funds are left in either the Fixed Account or the S&P 500 Annual Point to Point Index Account and you have purchased either the Income Rider or the Death Benefit Rider, the rider charge will be deducted pro rata from the 5 year Index Accounts. The amount of rider charge deducted from the 5 year Index Accounts may not receive any index interest or may only receive interim index interest, which is subject to a vesting percentage. How can I access funds from my annuity? You may request funds from your annuity at any time. During the Surrender Charge Period, the Surrender Charge, Bonus Recapture, and in most states, MVA, may apply if you access funds from your annuity. When you request funds from your annuity you may select from which interest crediting options we take the funds. If you do not make a selection, we will take the funds in the same way we deduct the rider charge and premium tax. Can I access funds from my annuity without any fees or charges? After the first contract year, you may take free withdrawals each contract year. After the first contract year, the total amount that you may withdraw as a free withdrawal in any contract year is 10% of the Account Value as of the beginning of the contract year. Limits: 1. On a surrender during the Surrender Charge Period, the Surrender Charge, Bonus Recapture, and in most states, MVA, applies to the entire amount surrendered; and 2. During the Surrender Charge Period, the Surrender Charge, Bonus Recapture, and in most states, MVA will be applied to the decrease in the Account Value with respect to all free withdrawals if within the 12 months after the free withdrawal (i) a surrender is taken, or (ii) a death payment is made as a result of the death of the joint owner who is not the spouse of the annuitant; or (iii) the annuity contract is annuitized (if permitted during the Surrender Charge Period). What annuity income may I take from my annuity? If you do not select a payout Under your annuity, you may receive annuity payments from your annuity option, the Life with 10-Year based on the eight different annuity Fixed Period Option applies. Up options we currently offer, except in Florida. If you purchased the annuity in to 30 days prior to the annuity Florida, (i) if you decide to take annuity payments during the Surrender start date, you may change the Charge Period, you may only elect options 1 through 4 or option 8 and; (ii) if payout option. you decide to take annuity payments after the Surrender Charge Period, you may elect any one of the eight options. The annuity options are: Option 1 Life Option: For the life of the annuitant. Upon death, no further payments will be made. Option 2 Life with Fixed Period Option: For the later of: (i) life of the annuitant or (ii) the end of a 5, 10, 15, or 20 contract year period that you choose.* Option 3 Life with Installment or Unit Refund Option: For the later of: (i) life of the annuitant or (ii) the end of the period equal to the annuity start amount divided by the first payment.* Page 11 of 28 IM

14 Option 4 Joint and Last Survivor Option: For as long as either the annuitant or joint annuitant is living. Option 5 Fixed Period Option: For a fixed number of contract years between 5 and 20.* Option 6 Option 7 Option 8 Fixed Payment Option: Of a fixed amount. If the annuitant dies before the amount applied plus daily interest credits is paid, the beneficiary receives the remaining annuity payments. Period Certain Option: Until the end of a 10, 15, or 20 contract year period that you choose.* Joint and Contingent Survivor Option: For the life of the primary annuitant and if the joint annuitant is living at the death of the primary annuitant, for the life of the joint annuitant. *If the annuitant dies before the end of the period, the beneficiary receives the remaining annuity payments. If you do not choose a payout option, the Life with 10-Year Fixed Period Option applies. Up to 30 days prior to the annuity start date, you may change the payout option. After the 30 days prior to the annuity start date, the Cash Surrender Value will be applied to the annuity option and you cannot change the payout option or surrender your annuity. When may I begin receiving annuity payments? When you may begin receiving annuity payments depends upon the terms of your contract. If your contract is issued in: For all states other than those listed below: You may begin receiving annuity payments on the later of: (i) the contract anniversary following the annuitant s 95 th birthday or (ii) the 26th contract anniversary. For Florida: The Income Rider guarantees that if you withdraw only a set amount each year, called the Lifetime Annual Income, this amount will be available for the rest of your life. The Income Rider allows you to choose the starting point the Income Phase Start Date at which to begin receiving Lifetime Annual Income. While the contract will state a maturity date, you may request to change the date to any day after the first contract anniversary and prior to the contract anniversary following the annuitant's 95 th birthday so long as we receive written notice at least 30 days prior to the day annuity payments are to begin. For Alaska, Indiana, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, Ohio, Oregon, Pennsylvania, South Carolina, Texas, Utah and Washington: Annuity payments may begin on any date after the Surrender Charge Period has elapsed so long as we receive the written request at least 30 days prior to the day annuity payments are to begin. Annuity payments must begin by the contract anniversary following the annuitant's 95 th birthday. What happens upon a death? If you apply the entire value of your contract to an annuity option, then upon the death of an annuitant, we will continue to make annuity payments, if any, as may apply under the annuity option chosen. If you have not applied the entire value of your contract to an annuity option, then an amount is payable under the contract upon the death of the annuitant or the owner. The amount payable depends upon who died. If the annuitant dies, the amount payable is the greater of: (i) the Cash Surrender Value or (ii) the Account Value. If the joint owner dies, the amount payable is equal to the Cash Surrender Value, unless the joint owner is the spouse of the annuitant. In that case, the amount payable is the greater of: (i) the Cash Surrender Value or (ii) the Account Value. In certain circumstances, the contract can be continued. What benefit riders or endorsements are available? The Nursing Home Waiver and Terminal Illness Waiver endorsements are included with your annuity for no additional fee or charge. In addition, you may purchase the optional Income Rider or the optional Death Benefit Rider, but not both. Page 12 of 28 IM

15 What are the Nursing Home Waiver and Terminal Illness Waiver? 1. Nursing Home Waiver: If you are confined to a hospital or nursing facility for a minimum of 90 consecutive days immediately preceding a withdrawal and continue to be confined at the time we receive the withdrawal request, no Surrender Charge, Bonus Recapture, or MVA applies in connection with the withdrawal request. The confinement must begin after the contract date and the withdrawal must be made after the third contract anniversary. We require proof of the confinement to the hospital or nursing home. The Nursing Home Waiver is not available in all states, and other state variations may apply. 2. Terminal Illness Waiver: If you have been diagnosed with a terminal illness by a licensed physician and the terminal illness was first diagnosed after the contract date, no Surrender Charge, Bonus Recapture, or MVA applies in connection with the withdrawal request. The request for withdrawal must be made after the third contract anniversary. We require proof of the terminal illness. The Terminal Illness Waiver is not available in all states, and other state variations may apply. What is the Income Rider? You may purchase the Income Rider at the same time you purchase the TVA and it cannot be purchased later. You cannot terminate the rider. The Income Rider guarantees that a specified amount - Lifetime Annual Income - is available for a single life or joint lives as long as you do not take any other withdrawals. To maximize Lifetime Annual Income, only this amount may be withdrawn each contract year. You may take withdrawals from the TVA at any time and in any amount; but, withdrawals other than Lifetime Annual Income will reduce the amount of Lifetime Annual Income available in the future and may result in the termination of the Income Rider. The Income Rider allows you to choose the starting point the Income Phase Start Date at which to begin to receive Lifetime Annual Income. The Income Rider also allows you to choose whether Lifetime Annual Income will be available for your life, your life and your spouse's life, or for those states that require it, your life and your domestic or civil union partner s life. If both domestic or civil union partners are covered, please note that upon the death of a partner who is an owner or the annuitant, the Income Rider will terminate upon such death because the contract will terminate to comply with federal tax laws. In such event, the Income Rider may terminate before the death of the last living partner. If you take withdrawals other than Lifetime Annual Income, your future Lifetime Annual Income will be reduced. It may cause the rider to terminate before the end of your life or your life and your spouse's (or for those states that require it, domestic or civil union partner s) life. The following terms are key to understanding the Income Rider: Excess Withdrawal: is the amount of a withdrawal on or after your Income Phase Start Date, taking into account all amounts withdrawn during the same contract year that exceeds the Lifetime Annual Income. Excess Withdrawals may reduce your Lifetime Annual Income by more than the amount of the Excess Withdrawal. Income Benefit Base: is used to compute your Lifetime Annual Income and the charge for the Income Rider. It is not an amount you may withdraw, or apply to an annuity option or be paid upon death. Income Phase Start Date: is the date on which you elect to start withdrawing Lifetime Annual Income. Interim Roll-up: is equal to the weighted Index Interest Rates for a 5 year Index Account computed on the Income Start Date. Lifetime Annual Income: is the amount you may withdraw each year, without reducing the benefits available under the Income Rider. Lifetime Withdrawal Rate: is the age-based percentage that applies to the Income Benefit Base to determine your Lifetime Annual Income. Non-Excess Withdrawal: is the amount of a withdrawal on or after the Income Phase Start Date, taking into account all amounts withdrawn during the same contract year, that are equal to or less than the Lifetime Annual Income. RMD Annual Income Amount: is determined by us based solely on the values under your contract using the IRS Uniform Lifetime table or Joint Life and Survivor Expectancy table. It does not apply to amounts required to be distributed following the qualified annuity owner's death. Page 13 of 28 IM

16 Stacking Roll-up: is the rate by which the Income Benefit Base increases during the Stacking Roll-up Term. It is not interest credited to your Account Value. Stacking Roll-up Term: begins on your contract issue date and ends on the 10th contract anniversary, unless renewed for another 10 years, until you reach age 85, start taking Lifetime Annual Income or the Account Value is zero. If you purchase the TVA and Income Rider after age 75, the Stacking Roll-up Term will be less than 10 years. If I purchase the Income Rider, when can I take withdrawals? You have the flexibility to take withdrawals whenever you like. However, the timing and the amount of the withdrawal may cause your Lifetime Annual Income to be reduced. In fact, withdrawals could reduce your Lifetime Annual Income to zero. How do withdrawals impact the guarantees under the Income Rider? Under the Income Rider, treatment of withdrawals is based upon whether the withdrawal is made before or after the date you start Lifetime Annual Income. You select when you want to start your Lifetime Annual Income. If you elect to take withdrawals prior to starting Lifetime Annual Income, the withdrawals will cause your Lifetime Annual Income to be lower than if you had not taken the withdrawals. Taking withdrawals other than the Lifetime Annual Income will reduce your benefits under the GLWB Rider. If you elect to take withdrawals after you start your Lifetime Annual Income that are equal to or less than your Lifetime Annual Income, the withdrawals will not reduce your Lifetime Annual Income. If you elect to take withdrawals after you start your Lifetime Annual Income that are in excess of the Lifetime Annual Income, the withdrawals will reduce your subsequent Lifetime Annual Income. How much is my Lifetime Annual Income? Your Lifetime Annual Income is the maximum amount that can be withdrawn each contract year without reducing or eliminating the guarantee of the Income Rider. Lifetime Annual Income is the greater of: 1. The Income Benefit Base multiplied by the applicable Lifetime Withdrawal Rate; and 2. The RMD Annual Income Amount. Note that since the RMD Annual Income Amount is calculated on a calendar year basis, and Lifetime Annual Income determined using the Income Benefit Base is calculated on a contract year basis, (i) it is possible that you could take out two RMDs during one contract year and (ii) the actual Lifetime Annual Income may change during a contract year due to changes in the RMD Annual Income Amount. The RMD Annual Income Amount is determined by us based solely on the values under your contract using the IRS Uniform Lifetime table or Joint Life and Survivor Expectancy table. It does not apply to amounts required to be distributed following the qualified annuity owner's death. The Lifetime Withdrawal Rate is based upon your age on the Income Phase Start Date and whether single life or joint lives are covered. If joint lives are covered, it is based on the younger age of you or your spouse (or domestic or civil union partner in certain states) on the Income Phase Start Date. Once Lifetime Annual Income begins, your Lifetime Withdrawal Rate is set and does not change. A single life Lifetime Withdrawal Rate starts at 3.80% for age 50 and increases 0.10% each year up to 7.80% at age 90. For joint lives, the Lifetime Withdrawal Rate is 0.70% lower than the corresponding single life Lifetime Withdrawal Rate. Lifetime Annual Income is computed on: 1. The Income Start Date; 2. Each contract anniversary; 3. When a request for the Home Healthcare Doubler is received; and 4. When Excess Withdrawals are taken. For example, assume that (i) Mary elected her Income Phase Start Date, (ii) the Account Value on the Income Phase Start Date was $100,000, (iii) the Income Benefit Base on the Income Phase Start Date was $120,000, (iv) Mary elected a single life payout option, (v) the contract was an IRA contract, (vi) the RMD Annual Income Amount for the current calendar year was $8,000, and (vii) Mary was 75. Mary s Income Benefit Base on the Income Phase Start Date would be the greater of the Account Value ($100,000) or the Income Benefit Base ($120,000). Accordingly, the Income Benefit Base would be $120,000. At age 75, the Lifetime Withdrawal Rate is 6.3%. The Lifetime Withdrawal Rate (6.3%) is multiplied by the Income Benefit Base ($120,000) to equal $7,560. Page 14 of 28 IM