Index strategies explained
ClearFlex utilizes a Point-to-Point strategy to track the performance of an index. First, we compare the index value at the start of the term to the index value at the end of the term. This gives us the index return. Then, depending on the index strategy(ies) you’ve selected, we will apply either a Cap Rate or a Participation Rate in order to determine how much interest you are credited. • A Cap Rate is the maximum rate of interest that can be credited at the end of the term. You will receive any amount of positive interest up to the limit of the cap.
• A Participation Rate is a set percentage of the index return that will be credited at the end of the term.
Let’s look at two hypothetical examples of how a strategy with a Cap Rate and a strategy with a Participation Rate would credit interest differently based on the assumptions below:
How it works
Index Return
Strategy A: 9% Cap Rate
Strategy B: 40% Participation Rate
If the index has 30% return and you are 100% allocated to: Strategy A: You will receive a 9% credit to your Account Value (30% Index Return x 40% Participation Rate = 12%) Strategy B: You would receive a 12% credit to your Account Value If the index has 7.5% return and you are 100% allocated to: Strategy A: You will receive a 7.5% credit to your Account Value (7.5% Index Return x 40% Participation Rate = 3%) Strategy B: You would receive a 3% credit to your Account Value
1
30%
A
9%
12%
B
2
7.5% 7.5%
A
B
3%
The cap rates and participation rates are specified in the FIA contract. Please refer to the most current rate sheet. Rates are declared in advance and are guaranteed for the entire strategy term but may change for future strategy terms. They will never be less than the guaranteed minimum rates described in the contract.
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