Method and system for establishing, monitoring, and reserving a guaranteed minimum value return on select investments

• US 7,778,907 B1
• Filed: 03/17/1998
• Issued: 08/17/2010
• Est. Priority Date: 03/18/1997
• Status: Expired due to Fees

• Current Assignee: MetLife Incorporated
• Original Assignee: Metropolitan Life Insurance Company (MetLife Incorporated)
• Inventors: Haskins, legal representative, Haskins, Charles R.
• Primary Examiner(s): Subramanian; Narayanswamy
• Application Number:
  US09/381,243
• Time in Patent Office: 4,536 Days
• Field of Search: 705 35- 37, 705/38, 705/39, 340/347, 364710-717
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

The present invention provides a method and system for assuring a minimal guaranteed return on long-term investments, such as mutual funds or variable annuities. The invention includes a method and system for pricing, administration, customer presentation, and reserving relating to the guaranteed minimum return assurance. In addition, the present invention includes a method and system for allowing individual investors to control and easily change their typical asset allocation strategies. In order to accomplish the minimum guaranteed return, the present invention also includes sophisticated projection techniques, such as Monte Carlo simulation of investment performance. The present invention also includes features that allow the tracking of payments and removal of overcontributions from selected accounts, use of reserving techniques, optimizing investment diversification, proposal, issue, and administration of variable annuity riders, such as guaranteed minimum variable income benefit riders and guaranteed minimum income benefit riders, linkable to guaranteed minimum death benefits, and establish a charge for the guarantee.

Claims

1. A computer implemented method for projecting an accumulated investment amount for a portfolio having a plurality of funds over a preselected time period comprising the steps of:

determining the total numbers of years in the preselected time period;

inputting initial and periodic contributions and fund allocations for the plurality of funds;

generating, by a computer, a projection random number starting point for an initial year in the preselected time period;

completing, and storing in a computer-readable medium, a projection method parameters file identifying a plurality of parameters including a standard deviation of return for the plurality of funds, an average yield for the plurality of funds, and a probability that the average yield for the plurality of funds will exceed a projected yield in any year;

generating, by said computer, a random number starting point for a subsequent year in the preselected time period based upon the random number starting point for the initial year; and

automatically performing, by said computer, the projection of the accumulated investment amount for the portfolio having the plurality of funds based on the total numbers of years in the preselected time period;

the initial and periodic contributions and fund allocations for the plurality of funds;

the random number starting points; and

the plurality of parameters identified in the projection method parameters file;

wherein the step of automatically performing a projection of the accumulation amount for the plurality of funds further comprises the steps of;

(a) inputting a number of scenarios and number of simulations;

(b) automatically generating a random number for a simulation;

(c) automatically generating a simulation result based at least on the random number;

(d) automatically repeating steps b and c a number of times equal to the number of simulations inputted less two simulations to generate an average yield for each of a plurality of funds; and

(e) automatically calculating the average projected yield for each of the plurality of funds by subtracting a service charge from the average yield for each of the plurality of funds.

2. The method of claim 1 wherein the plurality of funds comprises select funds.

3. The method of claim 1 wherein the plurality of funds comprises variable annuities.

4. The method of claim 1 further comprising the step of:

if the user interrupts the step of automatically performing a projection of the accumulation amount for the plurality of funds, automatically presenting completed projections.

5. The method of claim 1 further comprising the step of:

automatically prompting the user prior to performing the step of automatically calculating a projection completion time.

6. The method of claim 1 wherein the step of automatically performing a projection of the accumulation amount for the plurality of funds further comprises the steps of:

inputting the average yield for each of the plurality of funds;

automatically deducting a service charge; and

automatically calculating the average projected yield for each of the plurality of funds.

7. The method of claim 1 wherein the step of automatically performing a projection of the accumulation amount for the plurality of funds further comprises the steps of:

inputting data for the projection;

and automatically performing a distribution model.

8. The method of claim 7 wherein the step of automatically performing a distribution model further comprises the steps of:

(a) inputting a number of scenarios and number of simulations;

(b) automatically generating a random number for a first simulation;

(c) inputting projection method factors;

(d) automatically generating a first simulation result for a random distribution model;

(e) automatically generating a new random number from the first random number;

(f) automatically generating a new simulation result for the random distribution model;

(g) automatically repeating steps e and f a number of times equal to the number of simulations inputted less two simulations;

(h) automatically inputting the output of step g as the average yield for each of a plurality of funds;

(i) automatically deducting a service charge; and

(j) automatically calculating the average projected yield for each of the plurality of funds;

(k) automatically generating a first simulation result for the random distribution model for a new simulation; and

(l) automatically repeating steps e through j a number of times equal to the number of scenarios inputted less one scenario to produce outcomes for each of the plurality of scenarios.

9. The method of claim 7 wherein the random distribution simulation includes a Monte Carlo simulation.

10. The method of claim 7 further comprising the steps of:

automatically determining the accumulated investment amount for the preselected time period;

automatically discounting the accumulated investment amount by a predetermined reserve interest rate;

automatically discounting the accumulated investment amount using a reserve investment rate;

automatically tabulating the discounted accumulated investment amount less an account value for each of the plurality of funds;

automatically determining a present value of a future guarantee charge for the accumulated investment amount; and

automatically subtracting the present value of the future guarantee charge for the accumulated investment amount from the accumulated investment amount.

11. The method of claim 1 wherein the step of automatically performing a projection of the accumulation amount for the plurality of funds further comprises the steps of:

inputting data for the projection;

setting yield equal to the index performance for a predetermined number of simulations; and

automatically performing a distribution model for the number of simulations greater than the predetermined number.

12. The method of claim 11 further comprising the steps of:

inputting a predetermined index performance limit and a mix of selected funds;

automatically determining the accumulated investment amount for the preselected time period;

automatically discounting the accumulated investment amount by a predetermined reserve interest rate;

automatically discounting the accumulated investment amount using a reserve investment rate;

automatically tabulating the discounted accumulated investment amount less an account value for each of the plurality of funds;

automatically determining a present value of a future guarantee charge for the accumulated investment amount; and

automatically subtracting the present value of the future guarantee charge for the accumulated investment amount from the accumulated investment amount.

13. The method of claim 1 wherein the step of automatically performing a projection of the accumulation amount for the plurality of funds further comprising the steps of:

inputting an average annual change in index performance for each index fund and a standard deviation for the average annual change in index performance;

automatically performing a normal distribution random projection of annual index appreciation;

automatically deducting a predetermined percentage of annual yield from the projection of annual index appreciation;

automatically performing a distribution model to generate multiple accumulation amounts.

14. The method of claim 13 wherein the plurality of funds includes at least one index fund.