How Your Savings Can Grow With an Indexed Annuity

What is the upside potential of an indexed annuity?

The potential growth of an indexed annuity is based on the performance of a market index in a given period (usually over a one- or two-year period).

Indexed annuities typically offer a choice of interest crediting options based on different market indexes.

What indexes can I choose from when I get an annuity issued by the companies of National Life Group?

You can choose between three market indexes:

S&P 500 Index

The S&P 500® is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500® focuses on the large-cap segment of the market, it is also an ideal proxy for the total market.

US Fundamental Balanced Index³

This index aims to minimize volatility through a blend of U.S. equities, U.S. treasuries, and cash. The asset classes are rebalanced daily to seek to minimize risk, and the mix of U.S. equities is revised quarterly. This index was created and is owned by PIMCO.

Global Balanced Index⁴

This index aims to enhance risk-adjusted returns by tracking a blend of global asset classes: equities, bonds, and commodities. The index composition is rebalanced among asset classes monthly based on the SG Sentiment Indicator. This indicator is made up of six cross-asset market risk measures. The overall allocation is then reviewed daily to reduce market exposure in case of high volatility. This index was created and owned by Société Générale.

Which index crediting option should I choose?

That is up to you! No one can predict how the market will perform — and just because an index crediting option performed a certain way in the past, doesn’t mean it will perform that way in the future. You can also pick more than one crediting option. However, remember that diversification does not assure profit or protection against a loss in declining markets.

Learn more about choosing an index crediting option

What if I am worried about getting an indexed annuity just before a downturn?

With the point-to-point method, you have the option to spread your premiums over 12 months, using Dollar Cost Averaging (DCA). If you choose to allocate all of your premium to a DCA account, 1/12th of your premium is moved into the index crediting option of your choice each month, receiving that month’s rate for a 1-year or 2-year period.

You can also choose to allocate only a portion of your premium to a DCA account (with a minimum of $5,000), and every month, you have the option to move all remaining premium into an index crediting option of your choice.

Spreading out your premium over a 12-month period helps capitalize on more potential interest rate crediting dates and reduces risk associated with one annual crediting anniversary. However, this does not guarantee better outcomes.

Until allocated to a monthly crediting option, premiums will earn interest in a fixed interest crediting account.

Are there other interest crediting methods?

Yes, you can opt for a monthly sum cap method.

This method is similar to the point-to-point method, but interest crediting is based on the monthly index change, with a cap for that month. The 12 monthly changes, including negative percentages, are totaled at the end of every year to determine the interest credit.

Can I change crediting options?

Yes, you can change index crediting options at any time. Your new crediting option will take effect at the beginning of the next crediting period. You can change your allocations using the National Life Group customer portal or via our app.

How much will my cash value grow?

How much interest you are credited depends not just on the performance of the market index, but also on the participation rate and whether there is a cap.

What is a cap?

The cap determines the maximum interest you can earn in a period. For example, if the index grows by 10% but your cap is 6%, your policy will be credited with 6% interest.

Not all index strategies are capped.

What is a cap rate lock?

The cap can change after each crediting period. Choosing a Cap Rate Lock index crediting option keeps it from changing. Cap Rate Lock is available with the S&P 500 1-year point-to-point index crediting option for some annuities issued by the companies of National Life Group. It lets you lock in a cap rate you’re comfortable with today. With this crediting option, the cap rate will remain unchanged for the entire guarantee period of the annuity.

What is the participation rate?

The participation rate determines how much of the market index gains are credited to your policy.

Here are examples illustrating how interest is credited for a specific time period (known as “point to point”), which can be one or two years:

• If the chosen market index gained 8.00% and the participation rate is 140%, you would get credited 11.20% if there is no cap.
• If the chosen market index gained 8.00% and the participation rate is 60%, you would get credited 4.80% if there is no cap.
• The participation rate can also be 100%. In that case, you would get credited at the same rate as the market index gain if there is no cap.

What are performance trigger strategies?

Flexible premium and single premium indexed annuities issued by the companies of the National Life Group offer a performance trigger index crediting option. This index crediting option offers a fixed rate as long as the index performance is not negative. If the market index value goes down, you will be credited 0.00%, so you will never lose a penny of your paid premiums and earned interest⁵ — any gains are locked in.

What is a trigger rate lock?

With a trigger rate lock index crediting option, your performance trigger rate stays the same for the entire term. So, for a five-year annuity, you can lock in a rate for five years. You can switch to this crediting option at any time. If you start later, the lock-in period will be shorter.

What is the downside protection offered by an indexed annuity?

When a chosen market index goes down, you are protected from loss. All our indexed annuities offer a zero percent floor — the least interest you are ever credited is 0%.

Next steps?

Find out what is best for you and your unique situation: Work with your agent or a financial/tax professional.

Footnotes:

¹ The "S&P 500" is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI") and S&P Opco, LLC and has been licensed for use by Life Insurance Company of the Southwest (“LSW”). Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P") and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (''Dow Jones"). The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by LSW. These fixed indexed annuities (“the Product”) are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, "S&P Dow Jones Indices"). Neither S&P Dow Jones Indices nor S&P Opco, LLC make any representation or warranty, express or implied, to the owners of the Product or any member of the public regarding the advisability of investing in securities generally or in the Product particularly or the ability of the S&P 500 to track general market performance. S&P Dow Jones Indices and S&P Opco, LLC’s only relationship to LSW with respect to the S&P 500 is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P 500 is determined, composed and calculated by S&P Dow Jones Indices or S&P Opco, LLC without regard to LSW or the Product. S&P Dow Jones Indices and S&P Opco, LLC have no obligation to take the needs of LSW or the owners of Product into consideration in determining, composing or calculating the S&P 500. Neither S&P Dow Jones Indices nor S&P Opco, LLC are responsible for and have not participated in the determination of the prices, and amount of Product or the timing of the issuance or sale of the Product or in the determination or calculation of the equation by which the Product is to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and S&P Opco, LLC have no obligation or liability in connection with the administration, marketing or trading of the Product. There is no assurance that investment products based on the S&P 500 will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER S&P DOW JONES INDICES NOR S&P OPCO, LLC GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P 500 OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND S&P OPCO, LLC SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND S&P OPCO, LLC MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY LSW, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR S&P OPCO, LLC BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND LSW, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

² An indexed annuity’s 0% floor ensures that if index growth is negative during a crediting period, the interest credited to that strategy will not be less than 0%. This helps protect your premiums and any interest already credited from market declines. However, rider charges will still be deducted, even if no interest is credited. Indexed annuities do not directly participate in the market, market indexes, or any stock or equity investments. Guarantees are dependent upon the claims-paying ability of the issuing company.

³ The PIMCO US Fundamental Balanced Index (the "Index") is a trademark of Pacific Investment Management Company LLC ("PIMCO") and has been licensed for use for certain purposes by Life Insurance Company of the Southwest ("the Company") with this annuity ("the Product"). The Index is the exclusive property of PIMCO and is made and compiled without regard to the needs, including, but not limited to, the suitability or appropriateness needs, as applicable, of the Company, the Product, or owners of the Product. The Product is not sold, sponsored, endorsed or promoted by PIMCO or any other party involved in, or related to, making or compiling the Index. PIMCO does not provide investment advice to the Company with respect to the Product or to owners of the Product. It is not possible to directly invest in the Index.

PIMCO is not affiliated with the Company or the Company’s affiliates. PIMCO does not provide investment advice to the Company with respect to the Product or to owners of the Product.
 
Neither PIMCO nor any other party involved in, or related to, making or compiling the Index has any obligation to continue to provide the Index to the Company with respect to the Product. Neither PIMCO nor any other party involved in, or related to, making or compiling the Index makes any representation regarding the Index, Index information, performance, annuities generally or the Product particularly.

PIMCO disclaims all warranties, express or implied, including all warranties of merchantability or fitness for a particular purpose or use. PIMCO shall have no responsibility or liability whatsoever with respect to the Product.

The Index is calculated independently from PIMCO.

The Index is comprised of a number of constituents, some of which are owned by entities other than PIMCO. The Index relies on a variety of publicly available data and information and licensable equity and fixed income sub-indices. All disclaimers referenced in herein relative to PIMCO also apply separately to those entities that are owners of the constituents of the Index and to the Index calculation agent.

⁴ The Global Balanced Index (the “Index”) is the exclusive property of SG Americas Securities, LLC (SG Americas Securities, LLC, together with its affiliates, “SG”). SG has contracted with [S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC] (“S&P”) to maintain and calculate the Index. “SG Americas Securities, LLC”, “SGAS”, “Société Générale”, “SG”, “Société Générale Indices”, “SGI”, and “Global Balanced SG Index” (collectively, the “SG Marks”) are trademarks or service marks of SG. SG has licensed use of the SG Marks to National Life Insurance Company and Life Insurance Company of the Southwest, the insurance companies of National Life Group (“NLG”) for use in their insurance products (the “Products”). SG's sole contractual relationship with NLG is to license the Index and the SG Marks to NLG. None of SG, S&P, or other third party licensor (collectively, the “Index Parties”) to SG is acting, or has been authorized to act, as an agent of NLG or has in any way sponsored, promoted, solicited, negotiated, endorsed, offered, sold, issued, supported, structured or priced any Products or provided investment advice to NLG. No Index Party has passed on the legality or suitability of, or the accuracy or adequacy of the descriptions and disclosures relating to, the Products, including those disclosures with respect to the Index. The Index Parties make no representation whatsoever, whether express or implied, as to the advisability of purchasing, selling or holding any product linked to the Index, including the Products, or the ability of the Index to meet its stated objectives, including meeting its target volatility. The Index Parties have no obligation to, and will not, take the needs of NLG or any annuitant into consideration in determining, composing or calculating the Index. The selection of the Index as a crediting option under a Product does not obligate NLG or SG to invest any Product payments in the components of the Index.

THE INDEX PARTIES MAKE NO REPRESENTATION OR WARRANTY WHATSOEVER, WHETHER EXPRESS OR IMPLIED, AND HEREBY EXPRESSLY DISCLAIM ALL WARRANTIES (INCLUDING, WITHOUT LIMITATION, THOSE OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE), WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN OR RELATING THERETO, AND IN PARTICULAR DISCLAIM ANY GUARANTEE OR WARRANTY EITHER AS TO THE QUALITY, ACCURACY, TIMELINESS AND/OR COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN, THE RESULTS OBTAINED FROM THE USE OF THE INDEX AND/OR THE CALCULATION OR COMPOSITION OF THE INDEX, OR CALCULATIONS MADE WITH RESPECT TO ANY PRODUCT AT ANY PARTICULAR TIME ON ANY PARTICULAR DATE OR OTHERWISE. THE INDEX PARTIES SHALL NOT BE LIABLE (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY ERROR OR OMISSION IN THE INDEX OR IN THE CALCULATION OF THE INDEX, AND THE INDEX PARTIES ARE UNDER NO OBLIGATION TO ADVISE ANY PERSON OF ANY ERROR THEREIN, OR FOR ANY INTERRUPTION IN THE CALCULATION OF THE INDEX. NO INDEX PARTY SHALL HAVE ANY LIABILITY TO ANY PARTY FOR ANY ACT OR FAILURE TO ACT BY THE INDEX PARTIES IN CONNECTION WITH THE DETERMINATION, ADJUSTMENT OR MAINTENANCE OF THE INDEX. WITHOUT LIMITING THE FOREGOING, IN NO EVENT SHALL AN INDEX PARTY HAVE ANY LIABILITY FOR ANY DIRECT DAMAGES, LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

No Index Party is a fiduciary or agent of any purchaser, seller or holder of a Product. None of SG, S&P, or any third party licensor shall have any liability with respect to any Product in which an interest crediting option is based on the Index, nor for any loss relating any Product, whether arising directly or indirectly from the use of the Index, its methodology, any SG Mark or otherwise. Obligations to make payments under the Products are solely the obligation of NLG. In calculating the performance of the Index, SG deducts a maintenance fee of 0.50% per annum on the level of the Index, and fixed transaction and replication costs, each calculated and deducted on a daily basis. The transaction and replication costs cover, among other things, rebalancing and replication costs. The total amount of transaction and replication costs is not predictable and will depend on a number of factors, including the leverage of the Index, which may be as high as 200%, the performance of the indexes underlying the Index, market conditions and the changes in the market states, among other factors. The transaction and replication costs, which are increased by the Index's leverage, and the maintenance fee will reduce the potential positive change in the Index and increase the potential negative change in the Index. While the volatility control applied by the Index may result in less fluctuation in rates of return as compared to indices without volatility controls, it may also reduce the overall rate of return as compared to products not subject to volatility controls.

⁵ Assuming no withdrawals during the withdrawal charge period. Rider charges continue to be deducted regardless of whether interest is credited.

TC8927213(0526)3