With profit funds adopt an investment strategy that is geared towards the maturity date of the policies. This allows it to adopt a long-term strategy, which means that it can invest in more volatile assets. The unit price does not reflect the rise and fall of the underlying assets. It reflects the bonus rates declared from time to time. These bonuses are not guaranteed except at maturity. If you wish to withdraw your funds before the maturity date then the company may adjust the unit price to reflect the value of the underlying investments. This is often referred to as a Market Value Adjustment.
This provision adjusts the accumulated fund balance upward or downward. The adjustment is in the opposite direction of the movement in the interest rates.
With an MVA, the surrender value of a contract may increase or decrease depending on changes in the U.S. Treasury rates. The adjustment applies to amounts received upon a partial or full surrender, if made during the surrender charge period. It also applies if the policy is annuitized during the surrender charge period regardless of whether or not the surrender charges are waived under certain provisions. The adjustment does not apply when funds are withdrawn under the 10% free withdrawal provision.
The market adjusted value will equal: V * [(1 + i) / (1 + j)](N/12), where = the then current Interest rate being credited for the Interval Period in which the Surrender Date occurs. = the asked rate on the Applicable U.S. Treasury Strip maturing on, or closest to, the last Business Day of the current Interval Period as shown in The Wall Street Journal at the close of business on the Surrender Date, plus 200 basis points. = the number of whole months from the Surrender Date to the last Business Day of the then current Interval Period. = the Contract Value on the Surrender Date if Owner had not elected Surrender Option
The gain or loss incurred for withdrawing money from a fixed-rate option prior to maturity.
This is the amount by which the value of a with profits policy is adjusted to take into acount changes in stock market values.
This feature, which is included in some annuity contracts, imposes a positive or negative adjustment if you prematurely surrender your fixed annuity or the fixed account of your variable annuity. The adjustment offsets any losses the insurance company might incur in liquidating assets to pay the amount due to you.