Advance Notice: Term Insurance Product Changes Coming in July 2009

In the interest of keeping our valued distribution partners informed, we are providing advance notice of upcoming changes to the level term insurance products issued by American General Life Insurance Company and the United Sates Life Insurance Company in the City of New York.

Our industry continues to operate in unprecedented financial times.  Tight credit markets have dramatically increased the cost of obtaining capital support to meet reserving requirements on life insurance products with long-term guarantees.  We have alreadty witnessed the impact of this increased cost of capital on the term marketplace in the form of higher premium rates, reduced availability of some long-term durations and/or lower compensation.

As a perennial term insurance market leader, American General Life Companies remains committed to offering fully guaranteed level term coverage for as long as 30 years at competitive rates with no changes to your compensation.  While the economic enviornment requires that we increase rates, we will retain the very popular AG Select-a-Term design with some very positive enhancements.

These changes will take effect in July and we will provide more complete details in that time frame.  For now, we are providing highlights so you can prepare for the transition.

Highlights of Upcoming Changes

• The new AG Select-a-Term will offer fully guaranteed level premiums for 10 and 15 through 30 years.  Given the current cost of meeting long-term reserving requirements, we must suspend sales of the 31- through 35-year durations and we will also discontinue the 12-year plan.  However, we are confident the remaining 17 coverage durations provide the flexibility and reach to cover most client needs.
• AG Select-a-Term rates will generally increase in line with the overall industry and the policy fee will increase from $50 to $65.  The general overall impact of the pricing changes is a premium increase in the 4-6 percent range, dependign on duration and face amount.  Please note, however, that individual rates may increase by more or less and some will decrease.
• There will be no changes to compensation on AG Select-a-Term.
• Many of the AG Select-a-Term durations will feature expanded issue ages.
• The face amount threshold to qualify for our most competitive rate band will now be $500,00 instead of $1 million.
• We will integrate the LTG Ultra-C small case term product into AG Select-a-Term in the form of a low-band for face amounts of $100,000 - $249,999 and will continue to pay commission on the policy fee in this band.  LTG Ultra-C will be discontinued and term coverage below $100,000 will no longer be available.
• The conversion period on AG Select-a-Term will be changed to the earlier of the end of the level term period or age 70.
• As a result of these changes, the new version of AG Select-a-Term will offer fully guaranteed level term coverage for 10- and 15- through 30-year durations with three premium bands:
  • Band 1: $100,000 - $249,999 (commissionable policy fee)
  • Band 2: $250,000 - $499,999 (non-commissionable policy fee)
  • Band 3: $500,000+ (non-commissionable policy fee)
• AG ROP Select-a-Term will remain available with no changes at this time.  It also features 17 guaranteed term durations in most states(15 and 20 through 35 years).
• We will introduce a new endorsement to the AG Select-a-Term policy that permits conversions to AG ROP Select-a-Term during the first two years of term coverage.  This provides a second opportunity for you to promote the return of premium concept and earn another commission.
• Both AG Select-a-Term and AG ROP Select-a-Term remain convertible to fixed and variable universal life products and they are convertible to our best guaranteed UL product - ContinUL Extend - during the first 60 months of term coverage.

Transition Rules

These changes will be activated in our illustration systems in mid-July.  At that time, we will also provide you with up-to-date state approvals and transition rules, mor detailed rate information and new marketing materials.

• AG Select-a-Term and LTG Ultra-C applications received in the home office on or before July 31, 2009 will be issued subject to rates, durations and face amount limits currently available.
• Applications received on or after August 1, 2009 will be issued subject to new product rates, durations and face amount limits described above.  In cases where applications request durations or face amounts that are no longer available, New Business will communicate with the processing agency regarding available options.
• Most of the changes require approval in only seven states and will take effect in all other states on the dates outlined above.  States which approve the chages after the mid-July announcement date will receive a 30-day transtion period during which applications for current rates and durations can still be submitted.

Why AG Select-a-Term?

Competivively priced long-term guarantees, top compensation, expanded conversion options and a small case term solution make the new AG Select-a-Term more compelling than ever.  We hope that this advance notice will enable you to make a smooth transition to the new product and provide you with ample time to place cases currently in process, particualrly those using the 12- and 31- through 35-year durations.  We appreciate you business and the trust you continue to place in us.  Please contact Madison Brokerage with any questions. 1-888-539-3232