Asset intensive reinsurance has been a hot topic in the marketplace, in particular reinsurance for fixed annuities, variable annuities and indexed annuities. With variable annuities in particular, the products have been written recently specifically combat the difficulties posed by the low interest rate environment. With GAAP ROEs as healthy as ever, solution providers (banks/reinsurers) are looking to enter into the variable annuity reinsurance market to get their "share of the pie". The asset intensive reinsurance world is evolving rapidly, and I will be presenting this evolution for certain high-profile products during the Valuation Actuary Symposium on 8/31 at 10:00 AM. Hope to see many of you friendly faces there!

1. REINSURANCE OF ASSET INTENSIVE
PRODUCTS
Amit Ayer, FSA, FRM, MAAA
Head of Willis Re Life Solutions Group (LSG) Analytics / Modeling
Valuation Actuary Symposium
August 31, 2015

2. 2
Table of Contents
A. Risks in “Asset Intensive” products…………………… 3
B. Dynamics of ceding companies and reinsurers……... 6
C. Challenges and considerations with reinsurance…… 9
D. Fixed Annuity reinsurance considerations …………. 10
E. Variable Annuity reinsurance considerations ………. 12
F. Indexed Annuity reinsurance considerations ………. 19
Appendix…………………………………………………….. 23

3. Risks in “Asset Intensive” Products
What does “Asset Intensive” mean?
• Products which, from a risk profile to the insurance company, are
affected by “assets” or investments on the company’s balance
sheet
• Annuity reinsurance is really the ultimate form of “Asset
Intensive” reinsurance, (e.g., reinsurance of liabilities that are
heavily weighted toward credit, interest rate and equity risks)
• One major exception to this rule is that variable annuity
reinsurance uses a modified coinsurance structure, so assets
never leave the cedant’s balance sheet
A B C D E F
3

4. Risks in “Asset Intensive” Products
Various risks considered in reinsurance of
individual products
4
Risks
Product Description Sub-products
GAAP
standard
Interest
rate Equity
Mortality/
Longevity Lapse / Other
Individual
annuities
Immediate /
Payout
Annuities
 Earn a fixed rate for the life of
the contracts
 Single-premium
immediate annuity
 Structured settlement
FAS 60  
Fixed
Deferred
Annuities
 Earn a fixed rate for a period followed
by a floating rate set by the insurer
 Fixed annuities
 Fixed indexed
annuities
FAS 97   
Variable
Annuities
 Premiums are invested in separate
account funds earning a floating rate
 Living benefit VA
 Death benefit VA
FAS 133/
SOP 03-1    
Individual
life
Term Life
 Provide a death benefit over a
specified benefit period with no cash
value
FAS 60   
Traditional
Whole Life
 Provide life insurance with cash value
 Whole life
 20 Pay Life
 Final Expense
FAS 60   
Universal
Life
 Flexible premiums, accumulated
account value, life insurance protection
 NLG-UL (term
alternative)
 Accumulation
 Indexed UL
FAS 97    
Individual
Health
Long-term
Care (LTC)
 Provide benefits based on need for
long-term care
FAS 60   
 Moderate risk exposure Some risk exposure Significant risk exposure
A B C D E F

5. Risks in “Asset Intensive” Products
Rationale for reinsuring “Asset Intensive”
products
5
Rationale Description Downstream Impact(s)
1 De-risk balance sheet
No appetite for on-going management of
non-core business
Focus on growing core business
2
Low interest rate
environment
• Spread compression on general
account assets
• Pressure on credited interest rates and
profit margins
• Reluctance of companies to invest
capital (Surplus Strain)
Demand for fixed annuity reinsurance is strong
3 Capital base Release of EV within closed blocks More readily support and grow new business
4 Diversification High concentration of risks
Diversify risks to protect balance sheet, in
particular during adverse environments
5
Investment
experience
Annuity reinsurers consider investment
management one of core strengths
Share in expertise
A B C D E F

6. Dynamics of ceding companies and
reinsurers
Characteristics of reinsurance markets to consider
6
Desirable characteristics of
reinsurers
Mitigation strategies by solution providers
1
Established, highly rated, well
capitalized
Generally, most have pulled back from capital driven reinsurance
2
Newer, annuity focused
reinsurance entities
• Growing
• Bring novel approaches to investment expertise / yield enhancing strategies
3 Off-shore vs. On-shore
Reinsurer can still be authorized and be off-shore if it is licensed to do business
in a given state (regardless of where it's domiciled);
4 Unauthorized vs. Authorized
• For unauthorized reinsurer, to obtain reserve credit, a market value trust is
established
• Assets held in trust are marked to market at all times
• Fluctuations in market conditions that impact asset value are responsibility
of reinsurer
• Investment guidelines are agreed to for trust assets
5 AM Best Rating
• AM Best rating helps reinsurer significantly, in particular if reinsurer is acting
in intermediary capacity
• Unrated Reinsurers: GAAP accounting, non-NAIC regulations, non-US tax,
collateral structure / flexible investment strategy
A B C D E F

7. Dynamics of ceding companies and reinsurers
Ceding company considerations when
choosing a reinsurer (1/2)
7
Ceding company considerations
when choosing reinsurer
Description
1 Credit rating
• Review of historical credit experience of reinsurer
• Analysis of other counterparty exposures of reinsurer
2 Experience in market
• Having an AM Best rating is preferred
• Can circumvent lack of AM Best rating, but creates more
obstacles
3 Investment expertise
Experience running general account and generating yield
enhancing strategies
4 Pricing / Competitiveness
• Annual full surrender (“lapse”) rate assumptions
• Expenses (for administration – typically paid to ceding
company)
• Commissions are an expense on new sales – shared
A B C D E F

8. Dynamics of ceding companies and reinsurers
Ceding company considerations when
choosing a reinsurer (2/2)
8
Ceding company considerations
when choosing reinsurer
Description
5 Regulatory concerns
• Reinsurance structure must meet definition of “risk transfer”
• Reinsurance treaty must specify “contingent event” upon which
claim is to be paid to cedant
6 Rating agency concerns
• Investment guidelines are agreed to for trust assets
• Collateral requirements are explicitly defined in case of reinsurer
default
7 Reinsurance structure proposed
• Captive of ceding company will often face directly with captive of
reinsurer
• In several cases, an intermediary reinsurer is needed for asset-
intensive reinsurance transactions
8 Partnership approach
Reinsurer should be viewed as partner to cedant, helping foster a
collaborative relationship, as product is sold and evolves over time
A B C D E F

9. Challenges and considerations with
reinsurance
Material issues in reinsurance negotiations
9
Considerations Difficulty Description
1 Quota share

• How do you manage different profit objectives and investment approaches?
• Quota share – Example 60/40, with reinsurer assuming 5% yield and cedant
assuming 3.5%
• If both have same profit objective, will need to discuss an on-going allowance
from reinsurer to cedant to off-set the lower return target
2
Investment
Guidelines

• Acceptable investment guidelines are defined in treaty
• Assets typically held in trust depending on reinsurance structure
• Prescription around asset quality defined in reinsurance treaty
3
Credit quality of
reinsurer
 • Over collateralized structures, with assets/LOC equal to x% of reserves pledged as
security
4 Treaty issues

• Reinsurer does NOT have authority to determine non-guaranteed interest rates;
must work in cooperation with the reinsurer.
• Agreement will specify process to be followed (should ideally address cure and
compromise approach)
 Marginally difficult to manage Highly difficult to manage
A B C D E F

10. Fixed annuity reinsurance
considerations
Interest Rates vs. Annuity Sales
• Fixed annuity sales have
historically shown a negative
correlation with interest rates
• Largest risk is disintermediation,
in particular when interest rates
rise precipitously
• 2015 sales are an annualized
estimate of sales based on one
quarter of data from LIMRA
• Baby boomers may be behind
increase in fixed annuity sales in
2014/2015 (estimated) (more
interested in financial products
with guarantees than with equity
markets)
10Source: LIMRA SRI
Fixed Annuity Sales vs. 10-Year Treasury Commentary
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
0
20
40
60
80
100
120
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(ann)
Fixed Annuity Sales (BN) (left) 10-Year Treasury Rate (right)
A B C D E F

11. Fixed annuity reinsurance considerations
100% risk transfer is common in Fixed
Annuity reinsurance structures
11
Risks transferred Mitigation strategies by solution providers
1 Disintermediation Managed through rate negotiation
2 Lapse Managed through rate negotiation
3 Credit Quality Reinsurer typically manages investments
4 Reinvestment Reinsurer typically manages investments
5 Mortality & Morbidity Generally secondary risks and of less concern
A B C D E F

12. Historical supply of VA reinsurance
market1
1. Fitch
Time
range
Supply Description Major products
Complexity of
reinsurance
1 1990s
• GMDB reinsurance was commonplace (CIGNA was one
of original GMDB reinsurers)
GMDB
2 2000-2002
• VA reinsurance dried up with “dot com” recession, as
reinsurance premiums increased drastically
GMDB, GMIB
3 2006-2007
• Reinsurers entered market as equity markets were rising
and interest rates remained at relatively high levels
GMIB, GLWB
4
2008 -
2009
• Reinsurance market creased to exist during global
financial crisis
GMIB, GLWB
5
2009 -
2014
• Reinsurance market growing slowly post financial crisis
• More companies considering VA reinsurance
GMDB, GMIB, GLWB
6 Present
• Banks and newer reinsurers have expressed interest in
both capital market risks and actuarial risks in VAs
• Living benefit rider reinsurance has increased the
complexity of transactions
GMDB, GMIB, GLWB
12
A B C D E F

13. Variable annuity reinsurance
considerations
Principles of VA reinsurance
Principles Description
1
Appetite for VA reinsurance is
not homogeneous across
markets
• Appetite for reinsurance of new business / in-force products varies across markets
• Appetite for VA products (GMDB, GMIB, GLWB, hybrid products) varies across markets
• Markets display heterogeneous appetite for reinsuring certain risks (e.g., actuarial, lapse, longevity, market,
credit, etc.)
2
Segments of the VA reinsurance
market are no longer dormant
• Cedents have recently been trying to reinsure the living benefit rider of new business, making VA portfolios
closer to an asset management business, via collection of revenue sharing fees
• In-force / block reinsurance is still an active market, driven by new market entrants and increasing equity
levels
3 Rationale for reinsurance
• Mitigate balance sheet fluctuations as asset values change by transferring underlying risks of policies (not
policies themselves) from ceding company’s balance sheet to reinsurer's balance sheet
4
Presence of base contract
makes reinsuring VA policy more
palatable
• The base contract is the most profitable part of the VA contract, leading most reinsurers to demand the
base contract M&E fees as part of reinsurance transaction
5
Separate account reserve and
asset treatment
• Non-NAIC regulated entities require reinsurer to post statutory reserves on funds withheld or coinsurance
basis with high quality assets held in a trust
• Separate accounts reserves are reinsured on modified coinsurance basis (policies retained on cedent
balance sheet but statutory requirements transferred to reinsurer)
• Separate account assets are never reinsured
6
Cost of reinsurance varies
considerably
• Pricing of reinsurance varies across reinsurers (e.g., reinsurance transactions can be structured with one-
time ceding commission or periodic reinsurance premiums)
• Whether tail protection is provided
• Richness of product, product vintage and net amount at risk are primary drivers of reinsurance premiums
13
A B C D E F

14. Variable annuity reinsurance
considerations
Segments of the VA reinsurance market are
no longer dormant
General observations
• New business reinsurance
will likely grow more rapidly
over next 2-3 years
compared to in-force
reinsurance
• Reinsuring living benefit
riders poses two risks
– Lack of experience of
policies
– Likely ceding
commission is necessary
from cedent to reinsurer
14
Cross-section of VA Reinsurance Market
VABusiness
NewBusinessIn-Force
Base Contract + Rider Living Benefit Rider
• New business products
have focused on de-
risked products that can
sustain low interest rate
environment (e.g.,
volatility managed funds,
CPPI, etc.)
VA contract
• Reinsurance for living
benefit riders have
becoming more popular
(Lincoln 50% coinsurance
of rider with Union
Hamilton)
• Companies are more apt
to cede GMIB and GLWB
riders to diversify away
interest rate risk
• Reinsuring richer riders
will require profitable
base contract to be
reinsured in conjunction,
thus there is a limited
market for living benefit
rider reinsurance for in-
force policies
• Block transactions for
GMDB products are
becoming more popular
• Certain cohorts of
GLWBs from 2008-09 with
policyholder experience
that are close to be being
at-the-money are
becoming more active
targets for reinsurers
Growth of market
Heavy
Evolving
Stagnant
A B C D E F

15. 15
Variable annuity reinsurance
considerations
Illustrative reinsurance structure
Ins Co Insurance
Captive
ModCo
Regulation 114
Trust:
• held on-shore by
cedant due to
agreement being
ModCo
Reinsurer
Captive
Reins Premium
Reins Claims
Reinsurer
Retrocession
Definition of Risk
transferred
All underlying
liabilities
transferred to
captive
Reinsurance
of Actuarial
Risk
ILLUSTRATIVE
A B C D E F

16. “Non-moneyness
sensitive”
lapse
Lapserate
Variable annuity policyholder behavior
reinsurance considerations
Multi-factorial drivers of lapse rates
Etiology of lapse sensitivity
“Moneyness
sensitive”
lapse
Client “need”-driven
• Clients’ immediate financial needs primarily
drive lapse
• Often (but certainly not always) health-related
• Seldom a 1035 exchange
Advisor-driven
• Advisors may advise clients to lapse in order
to generate commissions on new policies
• Policy characteristics matter
• Often a 1035 exchange
• If moneyness formula is defined using
present value of future withdrawals, interest
rate risk is implicitly reflected
16
A B C D E F

17. Variable annuity policyholder behavior
reinsurance considerations
Tail coverage of lapse rates
17
Distribution of lapse rates from
running stochastic scenarios
through dynamic lapse function
Lapse rate
Commentary
• Risk neutral stochastic interest and
equity scenarios run through dynamic
lapse function at policy inception
• Distribution will have to be re-assessed
on quarterly basis in event lower
corridor of dynamic lapse function has
to be readjusted by reinsurer
• Reinsurer can choose what CTE level
to cover by adjusting lower corridor of
dynamic lapse function
• While normal distribution is illustrated,
true lapse distribution will likely be
characterized by skew and kurtosis
Base lapse rate 6%
6%3%
CTE (75%)
Claim paid
by reinsurer
Illustrative
A B C D E F

18. Indexed annuity reinsurance
considerations
VA reinsurance market is accelerating faster
than FIA reinsurance market
18
Risks
VA
reinsurance
risks
FIA
reinsurance
risks
Description Commentary
1
General
account  
• Supporting fixed accounts in VAs and minimum
crediting rates / option budgets in FIAs are not
large considerations for reinsurers
• Reinsurers typically earn higher spreads on
assets compared to cedants
2 Equity risk  
• Equity risk has been mitigated by volatility
managed funds
• FIA account value never decreases but equity
movements determine crediting rate
• Reinsurers either use dynamic hedging
programs or exotic options to hedge equity risk
in VA products
3 Interest rate
  • Persistently low interest rate hurts VA profitability
• Reinsurer option budget typically set to cover
movements in equity levels
• Newer VA products are more “interest rate
friendly” but buying interest rate options/swaps
in low interest rate environment is expensive
4
Surrender
risk


• Risk of contract lapsing earlier than expected,
reducing overall margins on business and
increasing risk on not recovering acquisition
expenses (e.g., commissions)
• Primary risk is that actual deaths exceed
expected deaths
5 Death risk  
• Benefit to be paid over and above cash
surrender value and reserve for early death
• Mis-matching of hedges to liability (VA) and
indexing (FIA)
6
Policyholder
behavior risk
 
• Systematic withdrawals occur in different pattern
than expected, creating statutory and GAAP
volatility
• GLWB riders are being added to FIA base
product, however GLWB riders in FIA contracts
are not as risky as VA GLWB riders
• Companies have developed more
sophisticated policyholder behavior
frameworks for VAs
A B C D E F

19. Fixed indexed annuity reinsurance
considerations
Key principles of reinsurance of FIA with GLWBs
Principle Description Reinsurer Cedent
1
Holistic view of
profitability of
transaction
 Reinsurer can typically earn higher spreads on assets compared to those of cedent
 Reinsurer needs to understand details underlying pricing of cedent’s retained
business in order to support cedent’s profit target and overall profit target of
transaction
 Reinsurer helps cedent achieve profit target through in-force ceding allowance and /
or new business expense allowances
2
Reinsurance
structures
 Coinsurance vs. coinsurance with funds withheld are primary reinsurance structures
for FIA with GLWB
 Higher expense allowances do not necessarily make a reinsurance quote more
attractive, as allowances should be in proportion to level of supportable caps and
option budget
 Hedging of credited rates is typically 100% reinsured and should be performed by
reinsurer’s dedicated risk management function
3
Product
differentiation
 Reinsurers and cedents should take care to understand subtle differences across
product types and regimes, including variations in GLWB riders
4
Financing of reserve
redundancy
 Industry estimates are that AG33 redundancies range from 3-5%, creating drag on
capital
5
Drivers of
reinsurance premium
 Percent of underlying risks coinsured
 More complex FIA products (e.g., monthly sum cap) will have higher hedge costs
 Magnitude of one time ceding commission
Significant impact to FIA with GLWB reinsurance Immaterial impact to FIA with GLWB reinsurance
19
Assumption is that some FIA w/ GLWB product will be retained by cedent
A B C D E F

20. Q&A

21. Contact information
Amit Ayer, FSA, FRM, MAAA
Vice President, Analytics and Modeling
Life Solutions Group
(E): amit.ayer@willis.com
(T): +1 212 915 8310
21
Willis Re
Brookfield Place
200 Liberty Street
New York, NY 10281

22. APPENDIX

23. Variable annuity reinsurance
considerations
Dimensions of VA reinsurance
Dimensions Description
Impact on VA
reinsurance
framework
1
New business vs. In-
Force
• Appetite for reinsurance of in-force policies (block transactions) vs. new business
• New business transactions have become in vogue over the past two years with Wells Fargo’s
numerous transactions
2
VA product
preference
• Appetite for reinsuring GMDB, GMAB, GMIB, GLWB
• Appetite for reinsuring products is driven by 1) limiting exposures to certain capital market risks
and policyholder behavior risks and 2) to better diversify risks in in-force VA portfolio
3
Criteria driving
pricing
• Real world pricing of base contract and risk neutral pricing of rider
• Analysis of product features (e.g., benefits, funds, asset allocation algorithms, bonuses, etc.)
4
Full VA contract /
rider
• Rider reinsurance has become more popular in last few years, however reinsurers are demanding
certain incentives from cedents for rider reinsurance, given the rider is riskier than the base
contract
5 Preferred structure
• NAIC regulated entity is preferred, which avoid needs for trust
• One time ceding premium vs. ongoing reinsurance premiums depend on specifics of deal structure
6 Risks to avoid
• Some markets only want to reinsure VAs and hedge capital market risks
• Other market are comfortable with actuarial risks (policy holder behavior, mortality, longevity,
credit), often leveraging policyholder behavior frameworks from cedents
Significant impact in VA reinsurance framework Minimal impact on VA reinsurance framework
23
A B C D E F

24. Presence of base contract makes
reinsuring VA policy more palatable
Dimension VA Base Contract Living Benefit Rider
1 Profitability
• Without the living benefit rider, profitability relates to
accruing fees that are adequate to cover expenses
and death claims
• Driven primarily by performance of
underlying investments
2 Risk profile
• Roughly equivlavalent probability of upside loss and
gain since base product passes most of investment
risk to policyholders
• No embedded derivatives
• Increases risk of making large
guaranteed payments, with low upside
gain
• Embedded derivatives
3Drag on separate
account value
• M&E fee only, with no volatility in separate accounts
• Increased drag on account value from
rider fees and potential downward
movements in separate accounts
4 Policyholder
behavior
• Minimal
• Living benefit rider contributes higher
degree of uncertainty around policyholder
behavior
5
Reserve and
capital
requirements
• Dependent on equity long term expected volatilities
for reserve and capital charges
• AG43 and C3 Phase-II requirements
(while principles based) are higher in
presence of living benefit rider
6 Risk
Management
• Lack of need to hedge base contract
• Cost of hedging (economic, GAAP,
statutory, or combination)
Significant detraction to riskiness Significant contributor to riskiness
24
A B C D E F

25. Variable annuity reinsurance
considerations
Reinsurance premium sensitivity to moneyness
25
Low Medium High
Deeply in-the-moneyAt-the-moneyOut-of-the-money
Expected
lapse rate
Actual
lapse rate
Sensitivity of
PV(future
benefits) to 1%
reduction in lapse
rate
Out-of-the-money policies exhibit
higher probability of lapsation,
which is beneficial for reinsurer,
since VAs are lapse supported
products
Deeply-in-the-money policies will
display the highest sensitivities to
reductions in lapses due to highly
convex nature of the VA liability
At-the-money policies have
marginal sensitivities to
reductions in lapses, as they
have not hit “convex” portion of
liability curve
A B C D E F

26. Samples of recent asset
intensive reinsurance
transactions brokered
26
Cedant
In-Force vs. New
Business
Product
Solution
Provider
Rationale for transaction
1
CNO
Financial
In-Force
Long term care
(LTC)
Beechwood Re
• Closed block transaction, moved non-core
risks off BS
• Predictable cash flows made reinsurers
interested in managing the long-tail claims
liability with effective investment returns
2
Universal
Life (Puerto
Rico)
In-Force and New
Business
Fixed deferred
annuities
Beechwood Re
• Needed additional capital to fund growth of
life subsidiary of P&C parent.
• Partnership created with reinsurer to support
capital position, and help fund new business
growth
• Invested assets managed by reinsurer to
bring strong yield to product offering going
forward.
3 Client
In-Force and New
Business
Fixed Indexed
Annuities
Reinsurer
• Alleviate new business strain in writing FIA
products
• Hedging expertise for FIA product lies with
reinsurer
• Reinsurer supported product development
for new business.

27. Samples of current asset
intensive reinsurance
transactions
27
Cedant
In-Force vs. New
Business
Product
Solution
Provider
Rationale for transaction
4 Client New Business
Variable
Annuity
Investment Bank
/ Reinsurer
• Accelerate sales of novel VA product in
marketplace through bank distribution channels
• For a company that has no experience selling
VA products, acceleration of VA sales can occur
more rapidly with reinsurance partner in place
5 Life Insurer New Business
Variable
Annuity
Client
• Develop in conjunction with solution provider,
de-risked VA product that is attractive to
marketplace to help generate sales, as cedant is
bullish on distributing VA products to
marketplace
• Solution provider will fully reinsure de-risked
product in return for reinsurance premium
6 Client In-Force
Variable
Annuity - living
benefit rider
TBD
• Enhanced management strategy to move
portion of guaranteed living benefits off BS
• Willis charged with finding solution provider in a
difficult reinsurance market, part of our expertise
Transaction just starting
Transactions underway but agreement and pricing not yet finalized

28. Surrender Charge
Standard cash flows involved in a
variable annuity contract
Variable Annuity – key cash flow
diagram
28
Variable Annuity – key cash flow descriptions
Cashflow Description
Initial
Commission
• Paid by insurer to adviser at policy issue
• Typically ~ 5% of deposit
Trailer
Commission
• Paid by insurer to adviser in Years 2+ while business is
inforce
• Typically 0.5% – 1%. May be a function of deposit or AV
Investment
Management
Fee
• Fee charged for the management of the funds
in policy
• Typically 150 – 200 bps of AV
• Investment manager shares IMF with insurer
Insurance
charge
• Sometimes called M&E
• Typically 10 – 20 bps of AV
Rider charge • Fee to support rider
• Ranges between 50 – 100 bps of GV
Admin charge • Fee for contract admin; usually $30
Surrender
charge
• Paid by policyholder to insurer in the event of lapse (to
compensate for commissions paid)
• Typically 7 – 8%; declining by 1% pa
Separate
Account
Policyholder
Investment manager
Advisor
General
Account
Deposit
Commission
(Initial +
Trailer)
IMF = Investment
Management Fee
IMF
Insurance charge
Administrative Charges
Rider charge
Expenses
(e.g.,
Marketing,
Maintenance)
Revenue
sharing

29. Guaranteed Minimum Withdrawal Benefits
(GMWB) and Income Benefit (GMIB)
Guarantee description
• Insurer provides policyholder with a guaranteed withdrawal amount that never declines and
continues for life
• Insurers incur guarantee claims equal to all withdrawals once the account value is
exhausted
• Withdrawals can be fixed in number (e.g., 20 withdrawals permitted for 5% withdrawal rate)
or allowed for the lifetime of the insured
ROP GMWB – Policyholder taking regular withdrawals
Age /Time
Withdrawals incur
guarantee claims
Withdrawals reduce account
value
Strong market performance can
increase account value…
…but persistent withdrawals
tend to reduce it over time
Policyholder withdrawal
from account value
ROP benefit
base
Policyholder withdrawal
funded by insurer (i.e., claim)
Account value
29