G. M. Kenney & Associates
A Registered Investment Advisory Firm 
3017 Douglas Blvd., Suite 120
Roseville, Ca. 95661
     
Date:    10/23/97 8:28 PM
     
     
To Whom It May Concern:
     
The biggest problem with equity indexed annuities is that the methods used to 
credit gain to the policyholder's contract are so complex that the vast 
majority of agents selling the product do not understand what they are 
selling. Of course, if the agents do not understand the gain crediting 
method, the consumer stands little chance of understanding how their 
investment will, or won't, grow. 
     
Most interest crediting methods involve the application of a participation 
rate to a interest credit mechanism. To level the playing field for the 
consumer, it might help to develop an "expected return measurement" which , 
in one number, tells the consumer what the combination of the participation 
rate and interest crediting mechanism is most likely to produce as a % of the 
S&P 500 (without dividends) gain. For example, is a 70% participation rate 
with a quarterly strike point averaging mechanism better or worse than a 60% 
participation with an annual strikepoint? As things are now, most agents are 
not capable of making the distinction. 
     
The competition for distribution reflects the prevailing ignorance over which 
gain component is better. Companies are competing for distributors using ever 
higher participation rates, even going to the absurd length of offering 110% 
participation rates. Of course, the key, and largely unknown question, is 
110% of what? Unfortunately, there are consumers being sold index annuities 
who are led to believe that the sole deciding factor is the participation 
rate.
     
If every index annuity carried an '"expected % return of the S&P 500" 
comparison number, at least the chicanery of participation rates and credit 
mechanisms would be reduced. As things stand now, far too many index 
annuities are being sold by agents who don't know/don't care what the 
realistic return expectations are, and, sadly, manufacturers are using market 
conduct ignorance/greed to sell index annuities whose investment potential 
they make seem far greater than what they really are.
     
With the S&P 500 index on a historic roll, the sins of market conduct in 
index annuity sales are being masked. The inevitable downturn in the market 
will, most likely, unmask the smoke and mirrors index products and the 
industry will once again, deservedly, be dragged through the muck. 

-- Glenn M. Kenney, President/CEO