Improving Variable Annuity Performance for VUL.

The text that used to be here about the advantages and disadvantages of variable annuities was removed because of the controversial content. It's all now part of the Money eBook. You'll know our "recommended VA carrier" when you buy the Money eBook or the Model Portfolios. All that's left is below:

How to use asset allocation techniques to reduce risk and increase investment returns with variable annuities

The concept is the same as the asset allocation models discussed on the model portfolios page. It just uses the existing limited number of variable subaccounts to fund a smaller number of asset classes. One just uses an Investment Fact Finder to determine Investment Risk Tolerance, invests according to the corresponding model allocation, and rebalances quarterly.

The following section shows the returns of asset allocation models made from the ten major variable annuity vendors. They can be easily created for any variable annuity, variable life insurance product, or 401k / 403b / 457 / TSA plan.

Performance of Asset Allocation Models Made from Ten of the Most Popular Variable Annuities, and Our Recommended VA

All returns are as of 31 December 2008 (these are not updated anymore due to lack of cost-effective data and interest in variable annuities in general by most everyone)

First, Please note that we used the same recommended life insurance company's variable universal life insurance policy to compare against buying term life insurance here.

Next, we didn't skimp on these VA models to make our recommended VA look good. Our customers pay us to make them so they can get the best returns for their clients that hold them.

Next is the 15-asset class model funded with benchmark indices. This is the same asset allocation model as the actual VA model we recommend, but funded with benchmark indices (that can't be invested in). It just serves as a baseline to compare performance:

Time Frames	Conservative Index Model	Moderately Conservative Index Model	Moderate Index Model	Moderately Aggressive Index Model	Aggressive Index Model	S&P 500	MSCI EAFE	BarCap Agg Bond
2008 YTD (31 Dec '08 to 31 January '09)	-3.69%	-5.14%	-5.35%	-5.46%	-5.25%	-8.43%	-9.88%	-0.88%
Last 12 Months	-12.65%	-20.92%	-25.86%	-31.43%	-35.10%	-38.63%	-45.45%	2.59%
Last 3 Years Annualized Average	-1.03%	-4.66%	-6.45%	-8.48%	-10.10%	-11.78%	-14.48%	5.19%

Next, returns for the 15-asset class variable annuity models we recommend:

Time Frames	Conservative Model	Moderately Conservative Model	Moderate Model	Moderately Aggressive Model	Aggressive Model	S&P 500	MSCI EAFE	BarCap Agg Bond
2008 YTD (31 Dec '08 to 31 January '09)	-1.23%	-2.90%	-3.54%	-3.59%	-4.31%	-8.43%	-9.88%	-0.88%
Last 12 Months	-10.34%	-15.67%	-19.56%	-22.47%	-25.30%	-38.63%	-45.45%	2.59%
Last 3 Years Annualized Average	-0.08%	-2.49%	-3.92%	-5.27%	-6.40%	-11.78%	-14.48%	5.19%

Next, our recommended VA models are compared to the Benchmark Index models. Positive numbers means the VA beat the index model by that much:

Time Frames	Conservative Model	Moderately Conservative Model	Moderate Model	Moderately Aggressive Model	Aggressive Model
2008 YTD (31 Dec '08 to 31 January '09)	2.46%	2.24%	1.81%	1.87%	0.94%
Last 12 Months	2.31%	5.25%	6.30%	8.96%	9.80%
Last 3 Years Annualized Average	0.95%	2.17%	2.53%	3.21%	3.70%

As you can see, our VA models creamed the benchmarks. This is very hard to do using the whole universe of no-load mutual funds, and almost impossible using the limited choices of subaccounts in most variable annuities. Compare the index model returns above to the other ten VA returns below, and you'll see that none of them even beat the index model.

Below are the return differences between 15 of the most popular variable annuity models and our recommended VA models.

Allianz Rewards (has 13 asset classes)

Total annual life-sucking fees (that our recommended VA doesn't have and that are subtracted from the model returns below): 3.4%