CommandMarkSM Series Product Training - Wholesale Fixed Annuity

PH1050v0511 FOR BROKER USE ONLY. NOT FOR USE WITH CONSUMERS. BPD37917 07/11 1

CommandMarkSM

Series Product Training

Single Premium Deferred Fixed Indexed Annuities Issued by PHL Variable Insurance Company, Hartford, CT

Distributed by Legacy Marketing Group®

As of July 15, 2011

Products and features are not approved or available in all states; certain restrictions, conditions, and state variations may apply. Consult

the contract for more detailed product information.


TABLE OF CONTENTS

INTRODUCTION TO COMMANDMARKSM ANNUITIES ......................................................................................... 4

THINGS TO CONSIDER ........................................................................................................................................................ 4

COMMANDMARKSM HIGHLIGHTS .................................................................................................................................. 5

PREMIUM BONUS .................................................................................................................................................................. 6

CREDITING RATE STRATEGIES ...................................................................................................................................... 6

ACCESS TO ANNUITY VALUE ........................................................................................................................................... 9

SURRENDER CHARGES .................................................................................................................................................... 12

INCOME RIDER ..................................................................................................................................................................... 12

CONTRACT SETUP SCENARIOS ................................................................................................................................... 13

COMMISSIONS ...................................................................................................................................................................... 14

PHL VARIABLE INSURANCE COMPANY .................................................................................................................. 14

SUPPORT AND RESOURCES .......................................................................................................................................... 14

DEFINITIONS AND TERMS ............................................................................................................................................. 16

THE MODEL LAW ON SUITABILITY IN ANNUITY TRANSACTIONS .......................................................... 17

ADDITIONAL REQUIREMENTS FOR THE 2010 SUITABILITY IN ANNUITY

TRANSACTIONS MODEL .................................................................................................................................................. 19

PHOENIX’S SUITABILITY PROCESS ........................................................................................................................... 21

PHOENIX’S POSITION ON SUITABILITY ................................................................................................................. 24

PRODUCT TRAINING VERIFICATION ....................................................................................................................... 24

This sales guide is designed to answer your questions and provide ideas to help you sell CommandMarkSM annuities.

For further information, please call the specific resources listed at the back of this guide or refer to

www.legacynet.com.

To provide you with quick access to the latest version of this guide, we’ve also made it available on LegacyNet®.

Visit the secure site regularly at www.legacynet.com for the most current CommandMarkSM Sales Guide.

Non-Security Status Disclosure—The CommandMarkSM contract has not been approved or disapproved by

the Securities and Exchange Commission. The contract is not registered under the Securities Act of 1933 and

is being offered and sold in reliance on an exemption therein.

http://www.legacynet.com/

http://www.legacynet.com/


CommandMarkSM

flexible premium deferred fixed indexed annuities issued by PHL Variable Insurance Company

(PHLVIC), Hartford, CT.

Products distributed by

Legacy Marketing Group®

dba: Legacy Marketing Insurance Services (CA Only)

2090 Marina Avenue, Petaluma, CA 94954-6714

Policy Form No.: 11LIA, et al. Policy forms and numbers may vary, and products, riders, and strategies may not be

available in all jurisdictions. See current State Approval Matrix.

Riders are optional and have an additional cost. For exact terms and conditions, please refer to the riders.

“Standard & Poor’s®”, “S&P

®”, “S&P 500

®” and “Standard & Poor’s 500

TM” are trademarks of The McGraw-Hill

Companies, Inc. and have been licensed for use by PHL Variable Insurance Company. The Product is not sponsored,

endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the

advisability of purchasing the Product.

The Nasdaq-100®, Nasdaq-100 Index

®, and Nasdaq

® are trade or service marks of the Nasdaq Stock Market, Inc.

(which with its affiliates are the Corporations) and are licensed for use by PHL Variable Insurance Company. The

product(s) have not been passed on by the Corporations as to their legality or suitability. The product(s) are not

issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES

AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S).

The EURO STOXX 50® is the intellectual property (including registered trademarks) of STOXX Limited, Zurich,

Switzerland and/or its licensors (“Licensors”), which is used under license. The strategies based on the Index are in

no way sponsored, endorsed, sold or promoted by STOXX and its Licensors and neither of the Licensors shall have

any liability with respect thereto.

Guarantees are based on the claims-paying ability of the issuing company, PHL Variable Insurance

Company. Annuities are long-term investment vehicles particularly suited to retirement assets. Annuities

held within qualified plans do not provide any additional tax benefits. Early withdrawals may be subject to

surrender charges. Withdrawals are subject to ordinary income tax, and if taken prior to age 59½, a 10%

IRS penalty may also apply.

About Bonus Products—Crediting amounts and interest rates may be less for contracts with a premium bonus than

for similar non-bonus annuities.

The insurance products are:

Not insured by FDIC, NCUSIF, or any other state or federal agency that insures deposits;

Not a deposit or obligation of, underwritten or guaranteed by, the depository institution or any

affiliate;

Subject to surrender charges that could result in loss of principal.

For exact terms and conditions, please refer to the contract.


INTRODUCTION TO COMMANDMARKSM ANNUITIES

CommandMarkSM

Series fixed indexed annuities offer clients the perfect combination of sophistication and

simplicity. With innovative and diverse crediting rate options designed to give flexibility and control; high vesting

premium bonus options to boost earnings power; a competitive income rider to provide guaranteed, worry-free

income for life; and multiple liquidity options to help clients respond to unplanned financial needs,

CommandMarkSM

will help your clients take command of their retirement.

THINGS TO CONSIDER

Prior to recommending a CommandMarkSM annuity to your client, here are some things to consider:

1. Is the client over age 80?

2. Is the annuitant older than the maximum issue age?

3. Is the owner a non-profit organization or business?

4. Does the client have a terminal illness or diminished life expectancy?

5. Does the client reside in a nursing home, assisted living facility, or another country?

6. Does the client make less than $12,000 annually or have an income/expense ratio less than 120%?

7. Are the client’s liquid assets insufficient to cover expenses for one year?

8. Is the client planning to withdraw more than the penalty-free amount anytime prior to the end of the

surrender charge period?

9. Is the client replacing an existing annuity that will incur a surrender charge in excess of 4%?

10. Is the client planning to use the annuity for any illegal purpose?

If you answered “yes” to one or more of the above questions, CommandMarkSM may not be an appropriate selection

for your client. Call Marketing Field Support at 800-395-1053, Ext. 4002, to discuss a suitable product

recommendation.


COMMANDMARKSM HIGHLIGHTS

TOP FEATURES

Choice of 0%, 5%, 8%, or 12% vesting premium bonus (varies by state).

Choice of crediting rate strategies, including ground-breaking gold- and swap

rate-based strategies.

Optional highly competitive income rider.

Waiver of surrender charges upon confinement.

Competitive declared rates.

Convenient “checkbook” access.

ISSUE AGES

All product versions:

0–85, qualified and nonqualified.

0‒79, AK, CA, NC, and WA.

0–69, Inherited IRAs and Inherited Roth IRAs.

Based on the attained age of the oldest owner (or annuitant if the owner is an

entity). Owners and annuitants must meet the age requirements.

PREMIUM

Minimum: $3,000 qualified.

Minimum: $15,000 nonqualified.

Maximum: $1 million without prior Home Office approval.

Additional premium not allowed.

VESTING PREMIUM BONUS

Optional 5%, 8%, or 12% vesting premium bonus available, depending on the issue

state and product selected. See Page 6 for vesting schedule and details.

DEATH BENEFIT

The amount payable as a result of the death of an owner before the maturity date:

Years 1-3: Greater of the annuity value or surrender value.

Year 4+: Greater of the annuity value or surrender value. 100% of any bonus

amount is included in the annuity value, regardless of the portion vested at

that time.

MINIMUM GUARANTEED SURRENDER VALUE

87.5% (90% in AK, CA, IA, NC, and WA) of premium (excluding bonus) less

withdrawals and deductions, accumulated at the minimum guaranteed interest rate

between 1% and 3%.

SURRENDER PERIOD 10-year declining.

SURRENDER CHARGE SCHEDULE

Percentages vary depending on product selected. A market value adjustment

applies. Recovered surrender charges may apply upon full surrender.

CommandMarkSM: 12, 12, 12, 11, 10, 9, 8, 7, 6, 5, 0%

CommandMarkSM 8: 14, 14, 13, 12, 11, 9, 8, 7, 6, 5, 0%

CommandMarkSM 12: 15, 15, 14, 13, 12, 10, 9, 8, 7, 6, 0%

CommandMarkSM LT (all versions): 9.00, 8.25, 7.25, 6.50, 5.50, 4.50, 3.75,

2.75, 1.75, 0.75, 0%

CREDITING RATE STRATEGIES

Guaranteed Fixed Rate Strategy.

Point-to-Point With Cap Strategy.

Rising Interest Strategy (also known as the Point-to-Point With Multiplier

Strategy).

Monthly Averaging Blended Strategy.

Gold Strategy.


ACCESS TO ANNUITY VALUE See details on Page 9.

10% penalty-free withdrawals after Year 1.

“Checkbook” access.

Confinement Waiver.

Systematic Income.

Substantially Equal Periodic Payments (SEPP) starting Year 1.

Minimum required distributions (MRDs) starting Year 1.

CORNERSTONE GUARANTEES

Choice of crediting rate strategies.

Guaranteed access to premium.

Minimum interest guarantee.

PREMIUM BONUS

A vesting premium bonus equal to 5% of the total premium on CommandMarkSM LT 5, 8% of the total premium on

CommandMarkSM 8 and LT 8, and 12% of the total premium on CommandMarkSM 12, will be allocated automatically

according to the strategy selections requested on the application. The bonus is credited to the annuity and begins

earning interest on the issue date, but doesn’t begin vesting until the first day of Year 6. Vesting schedules vary by

product version:

VESTING PREMIUM BONUS SCHEDULE Contract Year 1–5 6 7 8 9 10 11 12 13 14 15

CommandMarkSM LT 5 0% 20% 40% 60% 80% 100%

CommandMarkSM 8

and

CommandMarkSM LT 8

0% 14% 28% 42% 56% 70% 84% 100%

CommandMarkSM 12 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Vested amounts, along with associated interest, are credited to the annuity value on the first day of the vesting year.

Once credited, these amounts are subject to applicable surrender charges and market value adjustment. Crediting

rates and interest rates may be less for contracts with a premium bonus than for similar non-bonus annuities.

Please note: the premium bonus vesting schedules for CommandMarkSM products may extend beyond the 10-year

surrender charge schedule.

CREDITING RATE STRATEGIES

With your guidance, clients can choose the crediting rate strategy or combination of strategies that best helps them

achieve their financial goals.

FIXED RATE STRATEGY

The Guaranteed Fixed Rate Strategy credits interest daily at a fixed rate that is guaranteed for 12 months. Rates are

declared by the Company and guaranteed for the entire period. Check the CommandMarkSM

Series Quick Reference

for current rates. Up to 100% of premium may be allocated to this strategy. Clients may transfer into or out of this

strategy at the end of the term period.


FIXED INDEXED STRATEGIES

These strategies offer clients the opportunity to link interest credited to a formula that tracks changes in the market

during a term period. Clients benefit from tax-deferred earnings and index-linked gains without eroding their

principal. Please note that values accessed before the end of the term period will not be credited interest.

1. Point-to-Point With Cap Strategy: This annual reset strategy is tied to the performance of the S&P 500®

Index, a leading stock market index that measures price changes of 500 widely held U.S. common stocks.

The Point-to-Point With Cap Strategy credits interest by taking the value of the index on the last day of the

one-year term period, comparing it with the value on the allocation date, and applying a participation rate

(currently 100%) and cap. Interest is locked in annually and will never be less than 0%. The minimum

declared cap is 1%.

2. Rising Interest Strategy: Also known as the Point-to-Point With Multiplier Strategy, this strategy measures

changes in the 10-Year U.S. Swap Rate as published by the Federal Reserve over a one-year term period to

determine the amount of interest credited to the annuity. The Swap Rate represents the borrowing rate

between the most credit-worthy U.S. financial institutions and large corporations.

Interest credited is determined by subtracting the Swap Rate at the beginning of the one-year term from the

Swap Rate at the end of the one-year term. The result is multiplied by the declared multiplier, and a cap is

applied. Interest credited is locked in annually and will never be less than 0%. The minimum declared cap

is 1%, and the minimum declared multiplier is 1.

3. Monthly Averaging Blended Strategy: Three indices—S&P 500® Index, Nasdaq-100

® Index, and EURO

STOXX 50®—are combined to create a blended crediting rate. At the end of the three-year term period, the

average three-year return of each index is weighted as follows:

Highest index average growth rate = 50% weight.

Second highest index average growth rate = 30% weight.

Third highest index average growth rate = 20% weight.

After the blended rate is calculated, a spread is applied. The maximum spread is 18%. The participation

rate for this strategy is currently 100%, and there is no cap on earnings. Though the average growth for

each index can be positive, zero, or negative, the final blended interest rate will never be less than zero.

4. Gold Strategy: Used as hedge against market uncertainty, this strategy measures changes in the price of

gold rather than an equity index to determine interest credited to the annuity. Strategy earnings are

determined by comparing the closing price of gold (as published in The Wall Street Journal London p.m.

fixing price GOLDLNPM) at the end of the one-year term period with the price at the beginning of the term

period. Premium allocated to this strategy will earn 100% of the gain in the price of gold, subject to a

predetermined cap. Interest is credited annually and will never be less than 0%. The minimum cap is 1%.

STRATEGY TERMINOLGY (Not all terms pertain to all strategies. Rates for each term period are

guaranteed for that term period only. Future rates are set by the Company and are subject to change.)

Cap—A predetermined maximum rate of interest that can be credited to the annuity. It is declared by the

Company at the beginning of the term period.


Multiplier—A predetermined number that is used in calculating interest before interest earnings are

credited to the annuity. It is declared by the Company at the beginning of the term period.

Participation Rate—The percentage of the index gains that will be credited to the annuity. A 100%

participation rate currently applies to all the CommandMarkSM indexed strategies.

Spread—A predetermined percentage that is deducted from calculated interest before interest earnings are

credited to the annuity. It is declared by the Company at the beginning of the term period.

Strategy—The method that is used to determine how interest is credited to the annuity.

Swap Rate—A fixed rate that is used between borrowing financial institutions. The Rising Interest

Strategy uses the U.S. 10-year Swap Rate, as published by the Federal Reserve.

Term Period—The length of time over which interest is calculated.

ALLOCATION DATE

The allocation date is the date declared by the Company for the allocation of each premium payment, transfer, or

renewal into the crediting rate strategy. It marks the beginning of the term period and is the date premium begins

earning interest.

There are currently four allocation dates: the 1st, 8

th, 15

th, and 22

nd of the month. Applications and premium must be

received in good order two business days prior to the allocation date. Otherwise, applications and premium are held

without interest until the next allocation date following the receipt of the application and premium.

RATE LOCKS

For premium from 1035 Exchanges and direct (qualified) transfers, interest rates, caps, spreads, and multipliers will

be locked in for 60 days from the date the Administrative Office receives the application and completed paperwork.

The client will receive the better of the following rates:

The rate in effect on the application-received date.

The rate in effect on the allocation date.

A rate lock does not apply for:

Cash-with-app cases (when cash and transfer monies are received for one application, all the money is

treated as a transfer).

Money-to-follow cases.

Premium received for 1035 Exchanges and direct transfers after the 60-day rate lock.

If the rate lock does not apply, the rate(s) in effect on the allocation date are used.

All premium issued together must be received within 60 days from the application receipt date. For multiple

transfers, subsequent premium must be received within 30 days of the first premium or two policies must be issued.

TRANSFERS AMONG STRATEGIES

Clients may transfer a minimum of $2,000 of the strategy value (or the full strategy value if less than $2,000) into

another available strategy at the end of any term period. If the client wishes to change strategies or allocations, he or


she must notify the Administrative Office at least seven days prior to the end of the term period. The transfer will be

effective as of the end of the term period.

RENEWALS AND ANNIVERSARIES

By default, if no new strategy is selected, funds will renew on the allocation date into the same strategy and term

period. If the same strategy is not available, or the new term period extends the contract beyond the maturity date,

funds will be allocated to the Guaranteed Fixed Rate Strategy.

ACCESS TO ANNUITY VALUE

CommandMarkSM

clients have multiple options for accessing their vested annuity value. As early as 14 days after

the contract is issued, clients may begin taking withdrawals. Withdrawals will be taken “pro rata” (proportionately)

from all strategies. Upon withdrawal, any unvested bonus amount and associated interest is reduced by the same

proportion that the annuity value is reduced for gross withdrawals.

The minimum withdrawal amount is $500; however withdrawal amounts for systematic withdrawals or MRDs that

are below the minimum withdrawal amount are allowed.

Early withdrawals may be subject to surrender charges. Withdrawals are subject to ordinary income tax, and if taken

prior to age 59½, a 10% IRS penalty tax may also apply.

PENALTY-FREE WITHDRAWALS

Up to 10% of the annuity value can be withdrawn each year after the first year without surrender charges or market

value adjustment (MVA).

Beginning in the first year, the minimum required distribution (MRD) associated with the contract may be

withdrawn without surrender charges or MVA, even if it is greater than the 10% penalty-free withdrawal amount.

“CHECKBOOK” ACCESS

Available upon request by the owner, the “checkbook” brings peace of mind and eliminates the need for forms and

mail time. Four drafts may be written per contract year. The minimum draft amount is $500, and the draft must be

made payable to the owner or a financial institution. The “checkbook” order form is available on LegacyNet®.

“Checkbooks” are not available for certain types of annuities. Monies withdrawn are taken proportionally from

currently selected strategies.

SUBSTANTIALLY EQUAL PERIODIC PAYMENTS (SEPP)

The SEPP option, provided for under IRC 72(q) and (t), allows for withdrawals before age 59½ without federal tax

penalties. Substantially equal periodic payments must be taken over at least a five-year period. Withdrawals that

exceed 10% of the annuity value in a given year are not subject to surrender charges or MVA. If terms of the SEPP

are modified in a way that disqualifies the SEPP, surrender charges may be recovered and MVA will apply. A 10%

penalty-free withdrawal may not also be taken when this option is elected. See the enrollment form for details.

Please note: This information reflects our understanding of the tax rules and regulations in effect at the time of

publication. Legacy Marketing Group® and PHL Variable Insurance Company and their representatives do not give

legal or tax advice and cannot guarantee the status of withdrawals. Clients should seek out independent tax advice

based on their individual needs.


SYSTEMATIC WITHDRAWALS

For clients who need regular access to their annuity value, systematic income is available on an annual, semiannual,

quarterly, or monthly basis. To capture earnings that are credited at the end of an index strategy term, annual

withdrawals are recommended since amounts withdrawn in the middle of a term period will not be eligible for any

index credits. Minimum required distributions, substantially equal periodic payments, or fixed amounts may be set

up as systematic withdrawals. Except for monthly income payments, which are only available electronically, clients

can elect to receive payments electronically or by check.

CONFINEMENT WAIVER

In most states, the owner may make a one-time withdrawal of up to 100% of the annuity value without surrender

charges (adjusted for MVA) if he or she is confined for at least 90 consecutive days to a:

Hospital.

Hospice facility.

Nursing home.

In the case of joint owners, only one owner must be confined. If the owner is an entity, the waiver will be based on

the confinement of the annuitant (or one annuitant in the case of joint annuitants). Any ownership change (or

annuitant change if the owner is an entity) after the contract is issued will cancel this benefit. The withdrawal is

payable as a lump sum.

The owner qualifies for a waiver of surrender charges under this benefit if all of the following conditions are

satisfied:

The owner has not been confined during the 12 months prior to contract issue, 12 months have elapsed

since contract issue, and confinement is a result of an injury or sickness that occurred after contract issue.

Confinement continues for at least 90 consecutive days.

A written request to exercise this benefit and written proof of confinement from a physician is received by

the Administrative Office during the confinement.

The owner is living at the time required documentation is received.

DEATH BENEFIT

The amount payable as a result of the death of an owner before the maturity date is the greater of the annuity value

or the surrender value. Beginning in Year 4, the unvested bonus amount along with associated interest is included in

the annuity value and becomes vested for the purposes of calculating the death benefit.

MATURITY DATE

This is the date payments are required to begin under a settlement option. The maturity date is the contract

anniversary following the oldest owner’s 105th

birthday.

ANNUITIZATION

Your client may convert the annuity into a guaranteed income stream without surrender charges at any time,

including the first contract year. This is a process known as “annuitization.” Several settlement options are available

once the client annuitizes. Annuity payouts will be based on the greater of the contract’s annuity value or surrender

value, adjusted for any applicable premium-related taxes. The annuity value includes premium and interest credited,

adjusted for any gross withdrawals or rider fees. See the contract for details.


SETTLEMENT OPTIONS

Upon annuitization or maturity, the owner or beneficiary (upon the owner’s death) may elect to receive payments of

the contract’s proceeds over a fixed period, in a fixed amount, or over the lifetime(s) of the designated person(s).

The current guaranteed income stream options are:

1. Life Annuity With Specified Period Certain: Fixed monthly payments guaranteed to be made for as long

as the annuitant lives. If the annuitant dies before the selected period certain is over, payments will continue

until the end of the period certain. Clients must elect a five-, 10-, or 20-year period certain at the time this

settlement option is elected.

2. Non-Refund Life Annuity: Fixed monthly payments guaranteed to be made while the annuitant is living

and ending with the last payment preceding the date of the annuitant’s death.

3. Joint and Survivorship Life Annuity: Fixed monthly payments guaranteed to be made for as long as

either the annuitant or the joint annuitant lives. When the first annuitant dies, payments will continue in an

amount equal to 100% of original payments. The joint annuitant must be designated at the time this option

is elected and must be at least 40 on his or her birthday nearest the contract’s maturity date.

4. Joint and Survivorship Life Annuity With 10-Year Period Certain: Fixed monthly payments

guaranteed to be made for a minimum of 10 years or as long as either the annuitant or the joint annuitant

lives. The joint annuitant must be designated at the time this option is elected and must be at least 40 on his

or her birthday nearest the contract’s maturity date.

5. Payments for a Specified Period: Equal income installment payments guaranteed to be made for a

specified period of years, regardless of whether the payee is living or deceased. Clients may select a period

certain in whole numbers of years from 10 to 30.

6. Payments of Specified Amount: Equal income installment payments guaranteed to be made for a fixed

amount over the payout period until the premium and interest are entirely paid. The minimum payout is

five years.

7. Installment Refund Life Annuity: Fixed monthly payments guaranteed to be made for as long as the

annuitant lives or, if longer, until the settlement option benefit amount is paid.

The amount used to determine annuity payouts is based on the greater of:

1. The annuity value plus any unvested bonus amounts adjusted for any applicable premium-related taxes,

fees, or assessments imposed by any federal, state, or municipal taxing authority.

2. The surrender value adjusted for any applicable premium-related taxes, fees, or assessments imposed by

any federal, state, or municipal taxing authority.

A settlement option may be elected by written request to the Administrative Office. If a settlement option is elected

by a beneficiary, the term “annuitant” shall refer to the beneficiary.

WAIVER OF SURRENDER CHARGES PROVISION

Your clients may elect to convert the contract into an income stream without surrender charges or MVA using the

Waiver of Surrender Charges Provision. Beginning in Year 2 and prior to the maturity date, the contract may be

exchanged via 1035 Exchange or direct transfer for a single premium immediate annuity (SPIA) of the Company’s


choice. The minimum payout is 10-year period certain or life. Under this option, any unvested premium bonus

amounts will become available after the eighth contract year for CommandMarkSM 8 and LT 5 and after the 10th

contract year for CommandMarkSM 12 and LT 8. This provision is provided by current company practice.

SURRENDER CHARGES

A surrender charge may be assessed for surrender or withdrawal in excess of the penalty-free amount. It is expressed

as a percentage of the amount withdrawn and varies by product version and contract year:

10-YEAR DECLINING SURRENDER CHARGE SCHEDULE Contract Year 1 2 3 4 5 6 7 8 9 10 11+

CommandMarkSM 12% 12% 12% 11% 10% 9% 8% 7% 6% 5% 0%

CommandMarkSM 8 14% 14% 13% 12% 11% 9% 8% 7% 6% 5% 0%

CommandMarkSM 12 15% 15% 14% 13% 12% 10% 9% 8% 7% 6% 0%

CommandMarkSM

LT, LT 5, and LT 8 9% 8.25% 7.25% 6.50% 5.50% 4.50% 3.75% 2.75% 1.75% 0.75% 0%

MARKET VALUE ADJUSTMENT

In addition to any surrender charge, a market value adjustment (MVA) applies when more than the penalty-free

amount is accessed in a contract year. The MVA is based on a formula that recognizes changes in the Constant

Maturity Treasury Rate over time. The adjustment, which applies to each premium only during the surrender charge

period, can be either positive or negative, and is limited to no more than interest earned on the contract. If the

Treasury Constant Maturity Yield has risen since the contract issue date, the MVA will be negative, resulting in a

charge. If the Treasury Constant Maturity Yield has decreased by more than the MVA bias (which varies by state)

since the contract issue date, the MVA will be positive, resulting in a credit.

MVA Example:

Let’s assume a client purchases a $100,000 CommandMarkSM annuity and makes a $20,300 withdrawal one

year after contract issue. Assume interest credited to the annuity is $3,000. The client exceeded the 10%

penalty-free withdrawal amount by $10,000.

Using a formula that recognizes changes in the Constant Maturity Treasury Rate over time, let’s also

assume an MVA Factor of 0.047.

Multiply the excess withdrawal by the MVA Factor.

o $10,000 x 0.047 = $470.

The MVA must be less than or equal to Annuity Value - Premium + Prior Gross Withdrawals and MVAs.

o $103,000 - $100,000 + $0 = $3,000.

Result: the $20,300 withdrawal in this example would result in a $470 market value adjustment.

RECOVERED SURRENDER CHARGES

Upon full surrender, surrender charges will be applied for penalty-free withdrawals taken during the previous

12 months.

INCOME RIDER

Income Command RiderSM

is an optional Guaranteed Minimum Withdrawal Benefit available with CommandMarkSM

annuities for an additional charge. This benefit guarantees income withdrawals for life without the need for

annuitization, allowing clients control over their assets and access to their annuity value.



features an 8% compound roll-up during the first 10 years if no payments under the rider

are taken. It also provides the potential to grow future income through its “step-up” feature. The rider must be

elected at contract issue and, unless the owner is an entity, the owner and annuitant must be the same person. Joint

owners must be spouses. For complete rider details, refer to the Income Command RiderSM

insert (PH1021).

CONTRACT SETUP SCENARIOS

The following chart provides general guidelines regarding death claim payments for nonqualified contracts only. It

does not cover all possible scenarios. Death is assumed to occur prior to the contract’s maturity date.

Owner Annuitant Death of Death Claim Payments

Individual Individual Owner

Death benefit is paid to beneficiary in lump sum or

settlement option under the 5-Year Rule.* If beneficiary

is owner’s surviving spouse, he or she may continue

the contract.

Individual Different

individual Annuitant Owner becomes annuitant.

Individual Joint (other than

owner) One annuitant Contract remains in force.

Individual Joint (other than

owner) Both annuitants Owner becomes the annuitant.

Individual Joint Owner

Death benefit is paid to beneficiary in lump sum or

settlement option under the 5-Year Rule.* If beneficiary

is owner’s surviving spouse, he or she may continue

the contract.

Joint spousal Individual or

joint Both owners

Death benefit paid to beneficiary in lump sum or

settlement option under the 5-Year Rule.*

Joint spousal Individual or

joint One owner

Death benefit paid to joint owner in lump sum or

settlement option. Spouse, as joint owner, may elect to

continue the contract.

Joint spousal Different joint

individuals One annuitant Contract remains in force.

Joint spousal Different joint

individuals Both annuitants Owners become the annuitants.

Joint spousal Different

individual Annuitant Owners become the annuitants.

Trust or

corporation

Individual or

joint One annuitant

The death benefit is paid to the beneficiary. If the trust

is the beneficiary and is not for the benefit of the

surviving spouse, the death benefit must be paid as a

lump sum within one year. If the beneficiary is the

owner’s surviving spouse, he or she may continue the

contract.

Neither PHL Variable Insurance Company nor its representatives give legal or tax advice. Each client’s situation is unique and should be

reviewed by his or her attorney or accountant prior to electing or changing owners, annuitants, or beneficiaries of a contract. Beneficiary

designations should be reviewed annually to ensure proceeds are paid to the intended recipient(s).

* 5-Year Rule: If a non-spouse beneficiary elects to take the death benefit as a settlement option, it must be for at least five years or over

the lifetime of the beneficiary. The election must be made within one year of the death. Spousal beneficiaries, including a trust for the

benefit of the surviving spouse (if allowed by applicable law), are not subject to the forced distribution 5-Year Rule or to the

requirement that they elect a settlement option within one year of death.


COMMISSIONS

Commission will be determined by the issue age of the older owner (or older annuitant if the owner is an entity).

The commission rate paid will be the rate in effect on the contract’s issue date. Visit LegacyNet® for the current

Compensation Schedule.

COMMISSION CHARGEBACKS

Commission paid on contracts that are cancelled during the free-look period and commission paid on premium

received within 12 months of full surrender will be charged back at 100%. Commissions paid on premiums received

within 12 months prior to death are charged back as follows:

COMMISSION CHARGEBACKS UPON DEATH Premium Month 1–6 7 8 9 10 11 12 13+

Chargeback Percentage 100% 50% 41.67% 33.33% 25% 16.67% 8.33% 0%

PHL VARIABLE INSURANCE COMPANY

CommandMarkSM

single premium deferred fixed indexed annuities are issued by PHL Variable Insurance Company,

headquartered in Hartford, CT. PHL Variable is a member of The Phoenix Companies, Inc. Founded in 1851,

Phoenix is a financially strong and stable company with a commitment to excellence. Phoenix is publicly traded on

the New York Stock Exchange under the symbol PNX. As of December 2010, it employed approximately 625

people and had annual revenues of $2.1 billion. Please refer to the Strength and Stability insert for more detailed

financial information, or visit Phoenix's website, www.phoenixwm.com.

SUPPORT AND RESOURCES

STATE-SPECIFIC REQUIREMENTS

Visit The Forms Store on the LegacyNet® secure site (access via www.legacynet.com) for all the state-specific

forms you need to write CommandMarkSM

business:

1. From the Legacy Service Center, click The Forms Store icon.

2. Under Company, select “Legacy—PHL Variable Ins. Co.”

3. Under Service Type, select “New Business.”

4. Under State, select the appropriate state.

5. Under Product Type, select “Annuities.”

6. Under Product Name, select the appropriate CommandMarkSM

product.

7. Click “Lookup.”

You’ll find the annuity application and all required forms and disclosures.

In addition to the latest forms and disclosures, you can use The Forms Store to find licensing and contracting,

policyholder services, and Legacy forms as well as marketing materials.

Need help locating the right form? Click the Online Help icon at the top of The Forms Store page for search

instructions and tips on viewing, printing, and e-mailing documents.

http://www.phoenixwm.com/


Don’t have a password? Visit the LegacyNet® public site at www.legacynet.com, click on the Register Now button

in the upper left-hand corner, and follow the instructions.

CLIENT BROCHURES

CommandMarkSM

client brochure (PH1019).

Six product inserts (PH1029, PH1030, PH1031, PH1036, PH1037, and PH1038) are available to

accompany this brochure. Please be sure your client receives only the correct insert for the product you

have recommended.

Four crediting rate strategy inserts (PH1022, PH1023, PH1024, and PH1025).


insert (PH1021).

PRODUCER TOOLS

In addition to The Forms Store, our LegacyNet® secure site offers:

Sales and marketing items:

o Preapproved ads.

o PowerPoint presentations.

o Current sales promotions.

Business items:

o Product-specific annuity training.

o Product availability.

o Interest rates and charges.

o State approvals.

o Commission and hierarchy information.

o Supplies.

o Status on New Business applications.

RESOURCES TO ANSWER YOUR QUESTIONS

Marketing and Distribution

Legacy Marketing Group®

2090 Marina Avenue

Petaluma, CA 94954-6714

Phone Number

800-395-1053

Marketing, Ext. 4002

Commissions, Ext. 6837

Advertising Compliance, Ext. 5808

Main Fax Number

800-211-5641

Administrative Services

Dell

777 Research Drive

Lincoln, NE 68521

Mailing Address

Dell

P.O. Box 81728

Lincoln, NE 68501

Phone Number

877-549-7663

Claims, #27

New Business, #46

Policyholder Services, #28


DEFINITIONS AND TERMS

Access—Surrender, transfer, withdrawal, rider deduction, payment of a death benefit, or election of a settlement

option.

Annuitant—Person(s) whose age and gender determine the amount of the settlement option payments. The

annuitant and owner need not be the same person, subject to IRS limitations.

Upon the death of an annuitant, any surviving joint annuitant will become the annuitant. If there is no surviving

annuitant and the owner is an individual, the owner will automatically become the annuitant (in the case of joint

owners, both owners will become the annuitants). If the owner is an entity (e.g., a trust or corporation), the older

annuitant’s attained age will determine such things as issue age, commissions, and maturity. Joint annuitants

must be spouses.

Annuity value—The sum of all strategy values. The annuity value is used to determine both the penalty-free

withdrawal amount and the surrender value.

Beneficiary—Person(s) designated by the owner to receive the death benefit. If the owner dies after the

maturity date, the beneficiary succeeds to the rights of the owner.

Effective Date—Date the annuity contract becomes effective.

Penalty-Free Withdrawals—Up to 10% of the annuity value that may be withdrawn each contract year after

the first without a surrender charge or MVA.

Issue Age—Attained age of the oldest owner on the effective date of the contract. If the owner is an entity, the

attained age of the oldest annuitant is used.

Market Value Adjustment—A positive or negative adjustment that is applied upon surrender or when more

than the contract’s penalty-free withdrawal amount is accessed. It is designed to share some of the investment

risk associated with the annuity between the policyholder and the Company.

Maturity Date—Date payments are required to begin under a settlement option. CommandMarkSM’s maturity

date is the contract anniversary following the 105th

birthday of the older owner (or older annuitant if the owner

is an entity). The maturity date is shown on the contract’s data page and cannot be changed.

Minimum Guaranteed Surrender Value—The minimum amount the contract will provide upon surrender or

death. Equals 87.50% (90% in AK, CA, IA, NC, and WA) of premium (minus withdrawals and any other

deductions and excluding any premium bonus amount) accumulated at the minimum guaranteed interest rate for

each strategy for the life of the contract.

Minimum Guaranteed Interest Rate—A rate between 1% and 3% that is used to calculate the minimum

guaranteed surrender value. The minimum guaranteed interest rate varies by state, issue date, and strategy. It is

declared monthly and is locked in for the life of the contract. See the CommandMarkSM Series Quick Reference

for the current minimum guaranteed interest rate.

Nonqualified—A contract funded with after-tax dollars.


Owner—Any person with an ownership interest in the contract. If more than one person owns the contract,

the owners must be spouses. Neither owner can be in a nursing home or have a terminal illness prior to

contract issue.

Qualified—For purposes of this contract, “qualified” is defined as a contract issued in connection with a tax-

qualified retirement arrangement:

o IRA, SEP IRA, Inherited IRA, Custodial IRA.

o Roth IRA, Inherited Roth IRA.

o 401(k)–unallocated only.

o Defined Benefit.

o Pension Plan–unallocated only.

o Profit Sharing Plan.

o Money Purchase.

o Keogh.

Settlement Option—Methods elected by the owner or beneficiary (upon the owner’s death) for receiving

payments of the contract’s proceeds.

Strategy Value—For each strategy, the strategy value is the sum of premium, vested premium bonus

amounts, and interest credited minus gross withdrawals, rider deductions, and amounts deducted for transfers

from the strategy.

Surrender Value—The greater of: (1) minimum guaranteed surrender value or (2) annuity value less any

surrender charges, recovered surrender charges, and applicable MVA.

THE MODEL LAW ON SUITABILITY IN ANNUITY TRANSACTIONS

There are currently two versions of the Model Law on Suitability in Annuity Transactions in play. As of 12/31/2010

about 40 states had adopted the 2006 version of the Model Law. On January 1, 2011, Iowa replaced the 2006 version

of the Model Law with the 2010 version. Wisconsin replaced it on May 1, 2010. LIMRA and ACLI expect rapid

adoption of the new version in 2011. Additionally, regardless of which Model Law is in effect in any particular

state, the state may have changed certain provisions of the Model. State law variations will either be spelled out in

this training document or, if the variations are significant, the training document you are reading may be a state-

specific version.*

Phoenix’s Annuity Suitability Questionnaire is fully compliant with each state’s suitability requirements by way of

state-specific forms. Phoenix may also ask for additional information that Phoenix feels is necessary to process a

case. Therefore, the criteria that Producers must consider in their evaluations consist of the questions on the Annuity

Suitability Questionnaire. Producers are not prohibited from asking or gathering further information that they may

feel they need in making a suitability determination providing there is no state or federal law prohibiting them from

doing so.

__________________

* The law does not apply to ERISA plans and non-qualified deferred compensation arrangements, 401(a), 401(k), 403(b), 408(k)

or 408(p) plans if established or maintained by an employer, government or church plans (414) or deferred compensation plan

of a state or local government or tax exempt organization (457) of the IRC, prepaid funeral contracts, and structured

settlements.


The following is a summary of legal requirements that apply to both versions of the Model Law:

Producers and Insurers must have reasonable grounds for believing that the recommendation to purchase or

exchange an annuity is suitable for the consumer on the basis of financial status, tax status, investment

objectives, investments, insurance, and other information considered reasonable by the Producer.

Producers must evaluate: (1) Whether the customer can truly afford to purchase the annuity based on their

financial situation and needs based on specific Suitability Information as defined in the regulation. For

example, if there was a medical emergency, does the customer have enough liquid assets or would they

have to take premature or excess withdrawals from the annuity?; (2) Whether the annuity is suitable as a

whole, i.e. whether an annuity in general is suitable, whether this particular annuity is suitable, whether the

underlying subaccounts and riders are suitable; (3) Whether the benefits of the purchase outweigh the

drawbacks.

Many states require the Producer to evaluate additional criteria for replacements, such as: (1) the payment

of a surrender charge on the existing product; (2) whether there is a new surrender schedule for the new

product; (3) loss of any existing benefit; (4) more expensive fees/charges; (5) product feature comparison

to ensure a benefit exists; and (6) whether the consumer has recently replaced the product they

are exchanging.

The law allows the purchase of a product which is not based on a Producer’s recommendation or an

insurer’s recommendation. However, Phoenix will not issue an annuity unless it is fully confident that

annuity is based on the Producer’s recommendation and meets Phoenix’s internal suitability requirements;

The law also contains other provisions concerning an insurer’s requirements that are not discussed here

such as an insurer’s obligation to adopt supervisory procedures under certain circumstances, penalties,

and recordkeeping.

QUESTION:

STATEMENT SELECT

1. Producers must have a reasonable basis for recommending the purchase of an

annuity but not an exchange. True False

2. Just because an annuity is the right product for a client does not mean every

annuity is the right product for a client. True False

3. When replacing an annuity, Producers should compare the features of both

products to determine if the recommendation is reasonable. True False

4. Phoenix’s Annuity Suitability Questionnaire contains the criteria required to be

evaluated according to state law. Therefore, Producers should not ask

additional questions.

True False

5. Sometimes there are no drawbacks at all to purchasing an annuity. True False

ANSWER:

1. False. Producers are required by law to have a reasonable basis for recommending both the purchase of an

annuity and an exchange.

2. True. An annuity may be the right product but annuities vary significantly in their structure, even within the

same type of annuity. For example, an index annuity that offers a bonus will generally have a longer surrender

charge period, higher charges, and less desirable caps and rates than a non-bonus product. They are appropriate

for those who need growth up front and cannot afford to wait for growth to take advantage of lower caps and

better rates over a longer time horizon.

3. True. Producers should always make a side-by-side comparison of features when considering replacing an

annuity to determine in what aspects the replacement benefits the customer and in what aspects the

replacement does not benefit the customer.


4. False. Producers should ask any questions and should not ignore comments made by clients which could lead

the Producer to important information regarding suitability. Producers know their customers best and since

suitability is determined by each individual’s needs, the facts of an individual’s life are critical in

understanding and creating financial solutions.

5. False. It is hard to conceive of any product in which there are no drawbacks. All Phoenix’s indexed products

contain surrender charges. Purchasing a product with a surrender charge and a surrender charge period is

always a disadvantage because assets are illiquid for a typically substantial period of time and the charges can

be significant, especially in the early years. The advantages must outweigh the drawbacks in order for the

product to be suitable.

ADDITIONAL REQUIREMENTS FOR THE 2010 SUITABILITY IN ANNUITY

TRANSACTIONS MODEL

Producers must have reasonable grounds for making a recommendation to the client based on the information

obtained, and there must be a reasonable basis to believe the following:

A. The Producer has reasonably informed the client of the features of the annuity, such as surrender charges,

surrender charge period, tax implications, mortality and expense fees, investment advisory fees, limitations

on interest returns, market risk, and all other insurance/investment components of the contract:

Note: Additionally, as explained in this training, Market Value Adjustment features are important features

for your client to understand. You should be clear that the index credits are subject to a negative Market

Value Adjustment if the client takes withdrawals beyond the penalty-free withdrawal amount or guaranteed

withdrawal amount if the client is purchasing an income rider. If your client has selected an income rider,

it’s critical you explain how the guaranteed annual benefit amount can be reduced or even terminated. You

should also fully explain the vesting schedule with respect to any bonus amount credited to the contract and

how it applies to both withdrawals, surrenders, and upon death.

B. The consumer would benefit from certain features of the annuity, such as an income rider or a death

benefit.

C. A Producer must evaluate the 12 criteria set forth in the regulation:

1. Age—An annuity is a long-term investment so age is an important consideration.

2. Annual Income—The client’s income should be able to support expenses and potential future

expenses, and the purchase of the annuity will not put them at a future financial disadvantage.

3. Financial situation and need, including the source of premium for the annuity—The source

of the premium of an annuity should be highly scrutinized, especially when dealing with

replacements. The purchase of an annuity should never put someone at a financial disadvantage

now or in the future. Note: Phoenix will not accept business if the source of the premium is from a

mortgage or reversed mortgage.

4. Financial Experience—What is the client’s experience level with investing?

5. Financial Objectives—The client’s financial objectives must match the product and riders

selected. If a person’s objectives are guaranteed growth and preserving principal, it is

inappropriate to allow them to select an indexed annuity with no guaranteed interest.

6. Intended Use of the Annuity—The way the product is going to be used must make sense and the

product should be the best-suited product for the client’s need. For example, someone only

looking to pass wealth on to their heirs who can qualify for life insurance medically should not

buy an annuity.


7. Financial Time Horizon—Annuities are long-term investment vehicles. Clients who will need to

access their investment during their surrender charge period should not purchase an annuity.

8. Existing assets—What are the client’s existing assets, including investment and life insurance

holdings?

9. Liquidity Needs and Liquid Net Worth—Annuities are illiquid products with typically long

surrender charge periods. A consumer should have plenty of liquid assets to cover any

emergencies or expenses that could conceivably arise in the future. The customer should not be in

a situation where they would need to access their annuity during the surrender charge period in the

event of a financial emergency. Producers should carefully evaluate the liquid assets remaining

AFTER the annuity purchase to determine this. Producers should look at current as well as

potential future expenses to determine if the remaining liquid assets are sufficient. For example,

Producers should discuss things like how old is the roof on the customer’s house, their heater,

their car, etc. to determine whether or not the customer would have to access the annuity if the

roof began leaking and the customer needed $8,000 to fix the roof, or the heater needed to be

replaced, or the car broke down, etc.

10. Risk Tolerance—The Producer should understand whether or not the customer is open to losing

principal to gain growth potential. The product should reflect the customer’s risk tolerance. A

conservative investor does not belong in a product where principal can be lost due to poor market

performance.

11. Tax status—What is the client’s tax status?

12. Other Products—Is the client’s portfolio balanced or is he or she over insured in one area?

Ownership of other insurance or investment products should be evaluated.

All replacements must evaluate whether or not what the client is losing offsets what the client is gaining in the new

product. Some examples are the evaluation of the surrender charge being paid, the new surrender charge, the new

surrender charge schedule, the loss of existing contract benefits such as a death benefit, the new fees, the new

product enhancements, etc. Note: Entering into a new surrender charge schedule is ALWAYS a disadvantage to a

client. It is important to understand and fully document what advantage outweighs that disadvantage when you

submit your Annuity Suitability Questionnaire. When documenting advantages we expect to see answers like “client

will experience $2,500 in additional income” and not vague answers like “more money.”

The 2010 Model law requires insurers to provide training on the suitability law and product-specific training.

Additionally, the state the Producer is licensed in may require the Producer to take a state-certified continuing

education class on the product in general. The 2010 Model Law also contains other provisions concerning insurer’s

requirements that are not discussed here, such as post-issue monitoring of sales, and Producer product and legal

training.

QUESTIONS 1‒3

1. What training must the Producer complete before the Producer submits an application to Phoenix?

(a) Any required state training on suitability in general.

(b) Product-specific training provided by Phoenix.

(c) Legal training regarding the suitability regulation applicable in my state.

(d) All of the above.

The correct answer is (d). The training you are completing now suffices as Phoenix’s product training and

legal training on suitability. Your state’s CE requirements must also be completed. All three training

sessions must be completed successfully prior to submitting an application.

2. The law requires a Producer to take, among other things, which of the following into account?

(a) Financial status.

(b) Risk tolerance.


(c) Investment objective.

(d) B and C but not A. If the product meets the client’s investment objective and the client is comfortable

with the risk, there is nothing else to consider.

(e) A, B, and C.

The correct answer is (e). The product could entirely meet a client’s investment objective and risk but be

totally inappropriate for the client from a financial standpoint. For example, assume a client needs income

but does not want to be in a product where she may lose principal due to market risk. The Producer chooses

one of Phoenix’s index products with an income rider. However, when obtaining the client’s financial

information, the Producer learns that the client’s remaining liquid assets are at $5,000. If the client had an

emergency, she would likely have to access the cash value in the annuity because $5,000 would not carry

her through a medical catastrophe or even a layoff in today’s economy. The client would likely be forced to

make an excess withdrawal from the annuity, subjecting herself to surrender penalties (which are the

highest in the early years) in the event of an emergency. She would also have to sacrifice a portion of her

annual benefit amount permanently and sacrifice a portion of her bonus premium previously applied to the

contract value. Therefore, the Producer should not recommend she purchase the product at this time.

3. Despite the Producer’s best efforts to convince Lucy Smith otherwise, Lucy insists on rolling over her IRA into

a new Phoenix product. She writes a letter to Phoenix explaining to them that she is aware of the heavy

surrender charge penalty on her existing product and does not care. Phoenix is required to:

(a) Accept the business. Phoenix is not legally on the hook since neither the Producer nor Phoenix

recommended the sale and because the client wrote a letter accepting responsibility.

(b) Deny the application.

(c) It is within Phoenix’s discretion to accept an unrecommended sale. However, Phoenix’s policy is that

it will not issue an annuity unless the Producer has recommended it and the application meets

Phoenix’s internal suitability standards.

The correct answer is (c). Although, the law does not apply to sales that are not recommended, Phoenix has

a business practice that it will not issue a case if Phoenix does not feel the product is suitable for the client.

PHOENIX’S SUITABILITY PROCESS

Phoenix is required to perform an appropriate suitability analysis on each annuity case submitted prior to its issue.

Once you submit the Annuity Suitability Questionnaire, Dell will first determine whether or not you have

successfully completed any training required by your state. Once confirmed, Dell will input and evaluate the data

collected. Dell is instructed to obtain information left blank on the Suitability Form or clarify any information

as needed.

Some criteria may result in an “Escalate” marker and must go to a second level of review, a review by Legacy

Marketing Group® Compliance. Legacy Compliance will either answer the question, or convene the Phoenix

Suitability Committee (“SC”), which consists of the Product Actuary, Product Attorney, Compliance Attorney,

AML/Risk Investigations Director, a Senior New Business Analyst, New Business Manager, and the Suitability

Officer. The SC meets daily to discuss any case that escalates beyond the New Business Manager’s authority.

The SC, or if applicable, the New Business Manager will review the case in its entirety to determine suitability.

Some specific questions that are considered are:

1. If the annuity is a replacement, why shouldn’t the customer stay in the existing product?

2. Why did the case escalate for review and what other factors about the case may counter balance that issue?

3. What are the advantages of this product for the customer and what specific need is that advantage meeting?

4. What are the disadvantages? For example, what benefit outweighs taking on a new surrender charge

schedule? What benefit outweighs paying a surrender charge? Are there other alternatives that can meet the


customer’s existing needs, like (a) annuitizing his or her current annuity, (b) holding his or her current

annuity until more liquid assets are available to him or her, or (c) holding that annuity until it becomes a

liquid asset itself when the surrender charge period ends?

Often the answers to these questions result in a conversation with the agent to obtain more information. However,

sometimes, the issue can be resolved by taking less premium. In those cases, our procedure is to consider the case

NIGO until the agent sends us verification, in writing that the customer would like to move forward. The amount of

premium Dell will accept is applied to the contract, and the remainder is returned within five business days of issue.

TRIGGERS

If the answer to a particular question results in an “Escalate” marker, it is often referred to as a “trigger” because the

marker triggers a higher level of review. If a case hits a trigger, it does not mean the case is unsuitable or should be

rejected. Applying triggers ensures that the most complicated cases are reviewed by those in the company with the

highest level of product sophistication.

We review the answers to every question on the Annuity Suitability Questionnaire. The following scenarios are

some examples of cases that should be heavily scrutinized:

Income is less than $20,000 or income is expected to decline for some reason.

The benefit being gained by the product does not match the customer’s investment objectives.

Customer’s liquid assets are not sufficient to weather a financial emergency, such as a medical emergency,

without needing access to the annuity.

Customers over age 65 who have less than $60,000 in liquid assets or expect a reduction in liquid assets.

Customers under the age of 65 with less than $25,000 in liquid assets.

Customers who do not expect to hold the annuity longer than the surrender charge period.

Customer is replacing an annuity that was just purchased 36 months ago.

Customer is paying a surrender charge with no real benefit, i.e. increased income that recoups the surrender

charge in a reasonable period of time.

Customer is terminally ill or residing in a nursing home.

You should know that Phoenix also has a post-issue monitoring program. Phoenix runs reports to identify trends that

may be problematic. Often times Phoenix may identify a need for more training or a change in procedure. However,

Phoenix may identify a trend in Producer behavior that is problematic. For example, the Producer may be employing

a “one size fits all” approach that would raise concerns that suitability was not being performed on an individualized

basis. Phoenix will take whatever action necessary to ensure the cases being submitted are suitable, including

terminating a problematic relationship.

QUESTIONS 4‒6:

Case Study: Laura Jones is 60 years old and her only retirement assets consist of $197,000 in an IRA/Indexed

Annuity at Company X. Even though Laura has been with Company X for five years, her surrender charge is still at

15%. Laura’s investment objective is lifetime income payout and ensuring her nest egg is not at risk from market

exposure.

You must evaluate whether or not it’s appropriate for Laura to leave her current contract to purchase a Phoenix

Indexed Annuity with Income 25 Rider and 8% bonus even though she will sacrifice 15% of her modest retirement

savings, which is about $29,000. You determine that Laura’s guaranteed income stream will be $22,162 per year.


4. How should you determine if the guaranteed income provided by the Phoenix rider is really of value to

Laura?

(a) Consider what Laura’s income stream will be if she annuitizes her current contract, thus avoiding

the surrender charge.

(b) If Laura prefers to remain somewhat liquid and annuitization is not an option, consider what

Laura’s income stream will be if she takes out the 10% free withdrawal of her current annuity each

year and how long it will last.

(c) Consider whether or not there is a real danger that Laura could outlive her retirement savings and

discuss with Laura whether or not it is worth it to her to sacrifice $29,000 for that guarantee.

(d) Calculate the difference between the guaranteed income under the Phoenix product and option A

and/or B to determine: (1) if Laura will have increased income with the Phoenix product; and (2)

if so, how long it will take Laura to recoup the cost of the surrender charge.

(e) All of the above.

The answer is (e). Each time you are evaluating whether or not a client should pay a surrender charge in

order to buy a Phoenix product, you must fully understand and document the actual financial benefit and

investment need purchasing the contract meets. In the case at hand, assume Laura does not want to become

100% illiquid and does not want to annuitize her current contract. Also assume that no index credits are

applied on either product for the sake of simple comparison. Her options are to stay in her contract, not pay

the surrender charge, and take a maximum of 10% of her contract value out per year, penalty free. The

benefit is that she will not sacrifice the $29,000 in account value. The drawback is that she will run out of

money in 10 years. Since Laura is only 60, it is likely that she could outlive her retirement savings.

Additionally, since her investment objective is lifetime income payout, this option does not meet her needs.

If Laura purchases the Phoenix annuity as described above, Laura will be able to take out $22,162 per year

penalty free. Her income will increase $2,462 per year ($22,162-$19,700). However, she is sacrificing 1.3

years of total income by paying the surrender charge on the current product. Additionally, since the income

increase is $2,462 per year, that increased income will recoup the surrender charge only that much per year

until the charge has fully been absorbed financially. That will take about 10 years. The benefits are that at

Laura’s age, she will likely live beyond age 70 and will benefit from that increased income for a period of

years, likely somewhere between eight and 18 years. Additionally, Laura would have run out of money in

year 10 under the current scenario. Therefore, a portion of the payment in year 10 and all payments beyond

that point is income that Laura would not have had but for the purchase of the guaranteed income rider.

Lastly, unlike annuitization, Laura’s investment will eventually become liquid in approximately 10 years,

which is a benefit that meets one of Laura’s investment objectives as well.

5. Which of the following change in facts would make this case potentially unsuitable?

(a) Laura is 82 and would have to live until 92 to recoup the surrender charge.

(b) Laura is fine with getting less income and being totally illiquid, as long as her payments are

guaranteed for life.

(c) A or B.

(d) A and B.

(e) None of the above.

The answer is (c). If Laura was 82, that increased income would not offset the surrender charge until Laura

was about 92. Laura is only better off financially if she lives past 92 and can benefit from the increased

guaranteed income. Since Laura will outlive her retirement at 92, she may want to pay for some assurance

that she will have guaranteed income. If Laura does not want to annuitize her current contract, or if there is

some other benefit that Phoenix product provides that meets an insurance or investment need, that the

current contract does not (i.e. death benefit), the Phoenix product could be suitable. But, if there is no other

reason to purchase the Phoenix product, this could be an unsuitable sale. Likewise, if Laura has no problem

living on the amount of money that the existing contract would provide in an annuity payment and has no

problem being illiquid, then the current contract can meet her investment objective of guaranteed lifetime

income payout and there is no reason to leave, much less any reason to pay a surrender charge. Under those

facts, Laura’s purchase of the Phoenix product would be unsuitable.


6. Jim Smith is 70 years old and now needs to convert his nest egg into an income stream. He is of modest

means. He has about $200,000 in a mutual fund that he wants to convert into guaranteed payments for life

and he does not want to be in the market any longer. He has about $250 in his checking account and

nothing in savings. How do you advise him?

(a) Determine how much he needs to have in an income stream to meet his daily needs.

(b) Determine how much he should place in a savings account for emergencies and invest what’s left

over in a liquid investment that protects from principal loss.

(c) Invest the entire $200,000 in an annuity with a guaranteed income stream. Since the mutual fund

has no surrender charges, this option is suitable. Additionally, it’s important to get the most

amount of annuity benefit that he can get for his money.

(d) Both A and B.

(e) Both A and C.

The correct answer is (d). It is always unsuitable to take 100% of a person’s liquid assets and put them in

an illiquid investment. It is critical that people have enough penalty-free money to weather a financial

storm or medical emergency without needing to access their annuity early, as annuities are long-term

investments and carry the highest penalties in the early years. A and C are not correct because while you do

need to know how much Jim needs to pay his bills each month, you don’t want Jim to chance that he won’t

have a financial emergency to get a larger benefit. Jim simply cannot afford to purchase a $200,000

annuity. The Producer should look at Jim’s expenses and determine the appropriate amount to be invested

in the annuity and the appropriate amount left as liquid assets.

PHOENIX’S POSITION ON SUITABILITY

Phoenix takes its suitability obligations very seriously. As noted, Phoenix does not accept business where a Producer

has not recommended its product or where a customer refuses to provide adequate information to perform an

appropriate suitability analysis. Phoenix relies heavily on Producer insight to detect thing things that cannot be seen

from a paper application. You are expected to know and understand Phoenix’s high standards for suitability and to

apply what you have learned in this training in every day practice.

Phoenix monitors post issue reports to identify trends that may indicate a line of cases that need additional scrutiny.

If Phoenix has questions, it expects that you will have maintained records (including your client sales file and all

documentation used in connection with the sale) demonstrating your compliance with these procedures for five

years.

Suitability compliance is in your best interest as well as Phoenix’s. We hope we have impressed upon you in this

training the importance of suitability to us. The integrity of both our business and that of our distribution requires

suitability to be a priority.

PRODUCT TRAINING VERIFICATION

Please close this document and return to Step 2 of “Steps To Complete Your Annuity Training” on LegacyNet®.

After clicking the link in Step 2, you will be taken to the Annuity Training Acknowledgement page. There you will

be asked to provide your name, Producer number, and e-mail address and to verify that you have viewed this

presentation by clicking “I Agree.”

After clicking “I Agree,” your completed acknowledgement will be submitted to our Administrative Office, and you

will receive an e-mail confirming receipt. Please retain that confirmation for your records. If you have questions or

need assistance, please call 800-395-1053, Ext. 4002.

Documents

CommandMarkSM Series Product Training - Wholesale Fixed Annuity