Introduction
Fixed Index Annuities are contracts between the annuitant and an insurance company in which the insurance company pays interest based on the performance of a certain stock market index, such as the S&P 500. Most Fixed Index Annuities have an inbuilt capital protection feature, so your principal will remain safe even if the index goes down; this is typically called the annual lock-in. Every year, on the contract anniversary, the earned interest is locked in, and you cannot lose the value of that interest or principle.
Annuities are complex products, and many advisors often do a poor job of relating the complexities to their customers. And worse, they often do not take the customers’ full financial context into consideration when making their sales pitch. It is imperative to educate yourself on these products and not solely depend upon the annuity agent’s oversimplified and uncontextualized sales pitch.
In this article, we dive into CoreBridge's (Formerly American General Life Insurance Company) Power 10 Protector and Power 10 Protector Plus Income fixed-indexed annuities. The Power 10 Protector series is an “index annuity focusing on asset accumulation” and an “Index annuity focusing on retirement income with a guaranteed living benefit rider.” Following comprehensive due diligence, this article aims to present an objective analysis of these financial products.
Company Info
The Power 10 Protector Series is issued by CoreBridge Financial (Formerly known as American General Life Insurance Company). Corebridge was spun off AIG in 2022 and was listed the same year on the NYSE with the ticker CRBG. As of the end of 2023, they managed or administered $383.9 billion in client assets.
As of December 2023, the company reported a
- Revenues of 18.9 billion
- Total assets of $379.3 billion
- Net income of $1 billion
- Shareholder's equity of $11.8 billion
For the year ended December 31, 2023, the company's businesses generated a spread income of $3.87 billion, fee income of $1.9 billion, and underwriting margin of $1.5 billion, resulting in a balanced mix of 53%, 26%, and 21% respectively, among these income sources.
Financial Strength and Credit Ratings
Corebridge Financial is rated as follows by the rating agencies:
Power 10 Protector Product Description
The Power 10 Protector is an FIA that provides the annuitant the opportunity to earn returns tied to a market index, without exposing them to the downside risks of the market (interest earned is never zero in flat or down markets). This plan may be particularly fitting for those nearing retirement, who have dual objectives of growing and preserving their retirement savings. For risk-averse investors seeking alternatives to bank CDs, indexed annuities offer a very good fit.
| Tenure | 10 Years |
|---|---|
Issue Age | 18 – 75 |
Minimum Initial Purchase Amount | $25,000 |
Surrender Charge Schedule | Withdrawals in excess of the Free Withdrawal Amount are subject to the following charges that decline over 10 years: 9-9-8-7-6-5-4-3-2-1% |
Indexes | S&P 500 Index, AQR DynamiQ Allocation Index, ML Strategic Balanced Index, PIMCO Global Optima Index |
Free Withdrawals | After the first contract year, you can withdraw up to 10% of your contract value (based on your prior anniversary value) without incurring any company-imposed charges (see withdrawal charges) |
Terminal Illness | Charges and Market Value Adjustments may be waived if diagnosed with a terminal illness, have extended care needs, confined to a nursing home or in an assisted living facility. Talk to your representative about restrictions/limitations that may apply. |
Riders | Guaranteed living benefit rider not available in the standard version. |
Annuitization Choices | Life Income; Joint/Survivor annuity 10-20 year period certain; and income for Specified period (5-30 years) |
Minimum Withdrawal Value | 87.5% of premiums, growing at an annual rate as specified in the contract |
Cash Surrender Value | Greater of the Minimum Withdrawal Value or contract value adjusted for any MVA, withdrawal charge, and premium enhancement recapture |
RMD Friendly | Yes |
Death Benefit | Greater of the annuity contract value adjusted for any premium enhancement recapture or Minimum Withdrawal Value |
Power 10 Protector Product Policy
How does the Power 10 Protector Product work?
Any annuitant (maximum age at the time of policy issue: 75) can purchase this annuity with a minimum initial purchase amount of $25,000, and in return, will earn market index returns (calculated through a formula that we will discuss shortly), credited as per the chosen crediting period.
There are two ways to help provide growth in this FIA:
Earn interest based on your choice of four (4) indices:
Index Interest Accounts based on equity market indices
S&P 500 - The S&P 500® is an equity index that tracks the performance of 500 of the largest companies in the U.S. It is a product of S&P Dow Jones Indices LLC (“SPDJI”) and has been licensed for use by American General Life Insurance Company (“AGL”) and affiliates.
Credit Period
1. Annual Point-to-Point with Cap Rate
2. Annual Point-to-Point with Participation Rate
3. Annual Point-to-Point with Enhanced Participation Rate
4. Annual Point-to-Point Performance-Triggered
Interest Accounts based on multi-asset, risk-managed indices
AQR DynamiQ Allocation Index - The AQR DynamiQ Allocation Index aims to optimize returns by providing effective and diversified exposure to global equity and fixed income markets. Employing a styles-based methodology, the Index systematically selects securities and investment instruments that are likely to excel in dynamic market conditions. It leverages advanced data and technology alongside economic and behavioral finance principles to maximize returns. Designed to seize upward market trends, the Index maintains a steady volatility level, which aims to yield stable returns with reduced fluctuations. However, this focus on controlling volatility may also cap the potential for higher gains.
ML Strategic Balanced Index- The ML Strategic Balanced Index® is a hybrid index that seeks growth and risk management by actively allocating to equities, fixed income, and cash. The ML Strategic Balanced Index® provides systematic, rules-based access to the blended performance of the S&P 500® (without dividends), which serves to represent equity performance, and the Merrill Lynch 10-year U.S. Treasury Futures Total Return Index, which serves to represent fixed income performance. It embeds an annual index cost in the calculations of the change in index value over the index term. This “embedded index cost” will reduce any change in index value over the index term that would otherwise have been used in the calculation of index interest, and it funds certain operational and licensing costs for the index. To help manage overall return volatility, the Index may also systematically utilize Cash performance in addition to the performance of these two underlying indices. However, this focus on controlling volatility may also cap the potential for higher gains.
PIMCO Global Optima Index - The PIMCO Global Optima Index® is a quantitative, rules-based index designed to capture upside from a diverse array of global equity and U.S. bond markets. This innovative index focuses on equity for robust growth potential and embraces global diversification to enhance the set of opportunities available. It is crafted for total return potential, featuring no embedded index-level performance drag and no allowable leverage.
Credit Period
Annual Point-to-Point Participation Rate
2-Year Point-to-Point Participation Rate
Annual Point-to-Point Enhanced Participation Rate
2-Year Point-to-Point Enhanced Participation Rate
1-Year Fixed Interest Account
$100k or more – 4.45%
Less than $100k – 4.20%
Power 10 Protector Rates and Costs
The earnings crediting formula
The earnings crediting formula is the most important part of almost any annuity discussion. It is important to know that we don’t simply get the index return credited to the annuity. There are a few rates and caps that the company has in place that affect earnings. These rates tend to change over time, and the updated rates can always be checked with the help of your advisor. The rates listed below are for information only (as of September 2024); please check the latest rates with your trusted financial advisor.
From the above, it should be noted that there are four types of rates across this fund, and the rates are dependent upon the amount purchased (greater than or less than $100k).
With most fixed index annuities, you can allocate the money to one or more of the indexes listed above. At the contract anniversary date, the index performance is measured, and the interest rate is calculated using the applicable formula for the indexes selected. This annual reset means that the index performance is reset and re-measured at the next contract anniversary, and your account value is locked in.
Key terms are defined, and example calculations are given below:
Index Rate Cap: Maximum percentage of index performance that can be credited as interest over an index term. For example: 10% index change > 5% cap = 5% interest earned.
Participation Rate (PAR Rate): Percentage of index performance that is used to calculate interest. For example: 10% index change x 50% PAR rate = 5% interest earned.
Premium: Money used to purchase the annuity.
Performance-Triggered: A flat or positive index return triggers the declared interest rate to be credited to the contract value. If the index return is negative, no interest is credited, but there will be no loss, and the contract value will remain the same. Suppose the change in the value of the index during a particular year is zero or positive. In that case, the declared index gain interest rate is multiplied by the option’s account value to determine the index interest credits. The declared interest rate is set at contract issue and applies for the entire withdrawal charge period. In this case, the performance-triggered rate for the S&P 500 Index is 6.60%. It means that if the S&P Index doesn’t go negative for a given 1-year period (even if the growth is 0% and not negative), the interest credited to the annuity will be 6.60% irrespective of the S&P 500 actual return.
Enhanced Participation Rate (EPR): These accounts are available for an annual fee. You may receive higher interest credits in EPR accounts, but interest credits are not guaranteed. At the end of your contract's withdrawal charge period, if the total amount of EPR strategy fees exceeds the total interest earned in the annuity, the difference will be credited to your annuity.
Surrender Charges
Should your needs change unexpectedly, and you need to take an excess withdrawal (a withdrawal that is above the free withdrawal amount available in a given contract year), you may be entitled to access additional monies, although certain charges and penalties may apply. Any amount withdrawn more than the remaining free withdrawal amount is subject to a Surrender Charge. Below is the Surrender Charge schedule:
| Completed Contract Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
|---|---|---|---|---|---|---|---|---|---|---|
Surrender Charge | % | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% |
Riders
As with most annuities, the Power 10 Protector has free in-built nursing home and terminal illness waivers.
Power 10 Protector Plus Income Product Description
The Power 10 Protector Plus Income is an FIA that provides the annuitant the opportunity to earn returns tied to a market index, without exposing them to the downside risks of the market (interest earned is never zero in flat or down markets). This plan may be particularly fitting for those nearing retirement, who have dual objectives of growing and preserving their retirement savings. For risk-averse investors seeking alternatives to bank CDs, indexed annuities offer a very good fit. Besides the regular features of Power 10 Protector, the Protector Plus version offers a paid Guaranteed Living Benefit Rider for an annual fee of 1.10% of the income base.
| Tenure | 10 Years |
|---|---|
Issue Age | 50 – 75 |
Minimum Initial Purchase Amount | $25,000 |
Surrender Charge Schedule | Withdrawals in excess of the 10% Free Withdrawal Amount or the Maximum Annual Withdrawal Amount under the Lifetime Income Plus, whichever is greater are subject to the following charges that decline over 10 years: 9-9-8-7-6-5-4-3-2-0% |
Indexes | S&P 500 Index, AQR DynamiQ Allocation Index, ML Strategic Balanced Index, PIMCO Global Optima Index |
Free Withdrawals | Up to 10% of the annuity contract value if taken after the first contract year, or the Maximum Annual Withdrawal Amount under the Lifetime Income Plus, whichever is greater |
Cash Surrender Value | Greater of the Minimum Withdrawal Value or contract value adjusted for MVA, living benefit fee and withdrawal charge |
Death Benefit | Greater of contact value or Minimum Withdrawal Value |
Riders | Lifetime Income Plus Guaranteed Living Benefit Rider is automatically included as part of the contract for an annual fee of 1.10% of the Income Base, Terminal Illness, Extended Care and Activities of Daily Living (see below for more information) |
Annuitization Choices | Life income Joint/survivor annuity 10-20 year period certain Specified period (5-30 years) |
Minimum Withdrawal Value | 87.5% of premiums, growing at an annual rate as specified in the contract |
RMD Friendly | Yes |
Power 10 Protector Plus Income Annuity Product Policy
How does the Power 10 Protector Plus Income Annuity Product work?
Any annuitant (maximum age at the time of policy issue: 75) can purchase this annuity with a minimum initial purchase amount of $25,000, and in return, will earn market index returns (calculated through a formula that we will discuss shortly), credited as per the chosen crediting period.
There are two ways to help provide growth in this FIA5:
Earn interest based on your choice of four (4) indices:
Index Interest Accounts based on equity market indices
S&P 500 - The S&P 500® is an equity index that tracks the performance of 500 of the largest companies in the U.S. It is a product of S&P Dow Jones Indices LLC (“SPDJI”) and has been licensed for use by American General Life Insurance Company (“AGL”) and affiliates.
Credit Period
Annual Point-to-Point with Cap Rate
Annual Point-to-Point Participation Rate
Annual Point-to-Point Enhanced Participation Rate
Annual Point-to-Point Performance-Triggered
Interest Accounts based on multi-asset, risk-managed indices
AQR DynamiQ Allocation Index - The AQR DynamiQ Allocation Index aims to optimize returns by providing effective and diversified exposure to global equity and fixed income markets. Employing a styles-based methodology, the Index systematically selects securities and investment instruments that are likely to excel in dynamic market conditions. It leverages advanced data and technology alongside economic and behavioral finance principles to maximize returns. Designed to seize upward market trends, the Index maintains a steady volatility level, which aims to yield stable returns with reduced fluctuations. However, this focus on controlling volatility may also cap the potential for higher gains.
ML Strategic Balanced Index- The ML Strategic Balanced Index® is a hybrid index that seeks growth and risk management by actively allocating to equities, fixed income, and cash. The ML Strategic Balanced Index® provides systematic, rules-based access to the blended performance of the S&P 500® (without dividends), which serves to represent equity performance, and the Merrill Lynch 10-year U.S. Treasury Futures Total Return Index, which serves to represent fixed income performance. It embeds an annual index cost in the calculations of the change in index value over the index term. This “embedded index cost” will reduce any change in index value over the index term that would otherwise have been used in the calculation of index interest, and it funds certain operational and licensing costs for the index. To help manage overall return volatility, the Index may also systematically utilize Cash performance in addition to the performance of these two underlying indices. However, this focus on controlling volatility may also cap the potential for higher gains.
PIMCO Global Optima Index - The PIMCO Global Optima Index® is a quantitative, rules-based index designed to capture upside from a diverse array of global equity and U.S. bond markets. This innovative index focuses on equity for robust growth potential and embraces global diversification to enhance the set of opportunities available. It is crafted for total return potential, featuring no embedded index-level performance drag and no allowable leverage.
Credit Period
Annual Point-to-Point with Participation Rate
2-Year Point-to-Point with Participation Rate
Annual Point-to-Point with Enhanced Participation Rate
2-Year Point-to-Point Enhanced with Participation Rate
1-Year Fixed Interest Account
$100k or more – 2.65%
Less than $100k – 2.40%
Power 10 Protector Plus Income Annuity Rates and Costs
The earnings crediting formula
The earnings crediting formula is the most important part of almost any annuity discussion. It is important to know that we don’t simply get the index return credited to the annuity. There are a few rates and caps that the company has in place that affect earnings. These rates tend to change over time, and the updated rates can always be checked with the help of your advisor. You can also check the latest rates on their website.
See the Rates schedule above under Power 10 Protector.
It should be noted that that there are four types of rates across this fund and the rates are dependent upon the amount purchased (greater than or less than $100k).
With most fixed index annuities, you can allocate the money to one or more of the indexes listed above. At the contract anniversary date, the index performance is measured, and the interest rate is calculated using the applicable formula for the indexes selected. This annual reset means that the index performance is reset and re-measured at the next contract anniversary and your account value is locked in.
Riders
The Power 10 Protector Plus Income offers the Lifetime Income Choice Guaranteed Living Benefit Rider for an annual fee of 1.10% of the income base. Income base is a different account than the account value, and is only used to calculate lifetime income payments. This account holds no cash value, and you can't make withdrawals out of it. According to AGI literature, this rider offers the following benefits:
Guarantee rising income base
Income base will increase by 10% (for every year withdrawals are not taken for the first 10 years)
Income base can continue to step up after 10 years if applicable
Guarantee more retirement income for life (annual withdrawals up to 7.5% maximum)
Flexibility
With this rider, the owner does have the option of penalty-free withdrawals after the first contract year and up to 10% of the contract value. There are also no withdrawal charges up the Maximum Annual Withdrawal Amount (MAWA) and Market Value Adjustments (MVAs) do not apply.
The owner also has access to the money if diagnosed with a terminal illness, need extended care or is confined to a nursing home/assisted living facility. Restrictions apply so consult the salesman and company literature.
More information is tabulated below (table taken from AGI literature available online).
The following are also riders included with the Power 10 Protector Plus Income annuity.
What Makes These Products Stand Out?
The Power 10 Protector Plus Income does offer a somewhat unique optional rider to increase potential returns. But keep in mind that this rider does come with a fee, and if you opt for this rider, you get relatively lower participation and cap rates compared to the standard product.
Corebridge Financial seems to be doing well as a company and has relatively high ratings.
Relatively flexible withdrawal options.
What I Don’t Like
This has a relatively high initial purchase amount ($25k vs $10k for many).
Relatively high surrender charge compared to some similar products.
The rider charge is relatively costly under the Protector Plus plan
Conclusion
With the advancement in healthcare and technology, the average American today is living longer than ever. At the same time, fewer and fewer companies offer traditional pension plans. The type of plans that can form a solid foundation for a retirement strategy. Thus, it is important to have a steady stream of guaranteed income (aside from Social Security). This not only helps you mitigate the risk of outliving your income but diversifies your portfolio to help smooth the volatility of retirement planning.
The Power 10 Protector and Power 10 Protector Plus Income annuities are products that, for the right individual or couple, can offer a more secure source of income. And judging by the most recent annual reports, Corebridge Financial is on a solid foundation. In the opinion of this author, these would be good insurance products to investigate if in the market for an index annuity.
We understand that choosing the right annuity can be a complex decision, influenced by a myriad of factors such as market conditions, individual financial goals, and evolving life circumstances. To better serve you in this critical decision-making process, we regularly conduct in-depth reviews of various annuity products, examining features, costs, and potential benefits. To delve deeper into our extensive reviews, click here.
Annuities are not direct investments in stocks or mutual funds. They are life insurance products backed by the claims paying ability of the issuing insurance company. Be sure to read all the fine print and make sure you are aware of all the fees, charges, commissions and potential taxes that could be incurred. Make sure to read reviews of the company and salesman also and ask for references of previous annuitants.
This is a review of this insurance product and does not serve as specific or individual financial advice. Please speak with a qualified financial advisor prior to purchasing any annuity product.