Actuarial Guideline 49 (AG49), adopted in 2015, governs how indexed universal life (IUL) policies are illustrated. It restricts the maximum illustrated rate by requiring insurers to ground projections in a standardized, historically informed framework, rather than relying on unconstrained assumptions.
This tool examines historical IUL performance using the AG49 methodology. For a forward-looking, market-conditioned estimate of what IUL is economically capable of delivering under current market conditions, see the IUL Market-Conditioned Framework.
This tool extends that concept further. Using more than 60 years of S&P 500 data, it presents the full range and frequency of historical outcomes across all market environments, not a single assumed return.
Rather than assuming a single return, this analysis examines what the collar structure would have generated across historical market environments, and how often each outcome occurred, based on the selected cap.
The cap rate shown reflects current conditions. In reality, cap rates are dynamic and would have varied across historical periods, meaning actual credited results would differ from any static assumption.
Historical credited-rate results reflect the selected account multiplier and any selected account charge, but are before base policy charges, cost of insurance, surrender charges, loans, and other product-specific expenses.
Running historical rolling-period scenarios across 60+ years of market data
Cap rate
10.25%
6%18%
Account type
Some accounts charge an additional asset fee in exchange for higher upside potential. Standard has no fee.
Standard
Basic indexed account, no additional cost or leverage
Floor:Index participation: 100%
Historical periods
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Average annual return
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Maximum annual return
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Minimum annual return
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With this account type, the rider charge applies in all years including flat and slightly positive markets, which effectively lowers the floor below zero in those years. Over a full historical cycle, this cost in weaker years can offset some of the additional return earned in stronger years, which is reflected in the average return shown above.
Average return — based on regulatory illustration standard
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Historical Analysis
Confidence levels — how often each return occurred
Confidence level
Minimum CAGR
Frequency
Return over time — by policy start year
Each point represents the average annual return for a policy started in that year, held for the selected period. The green line is the overall average across all start years.
Return distribution
Understanding the Risk
Annual returns — S&P 500 vs IUL (last 25 years)
Volatility drag — average vs actual rate of return (based on selected period)
When returns are volatile, the average of your annual gains overstates what you actually earned. What matters is the compounded annual growth rate, the geometric mean or actual return, which accounts for the sequence of returns rather than treating each year independently. The spread between the two is volatility drag. Standard deviation and the average vs actual spread measure related but different things. Standard deviation measures how bumpy the ride is year to year. The spread is what that bumpiness costs you. It is the gap between what your average return suggests you earned and what you actually ended up with. The IUL collar significantly reduces that year-to-year bumpiness, which is why the gap shrinks to near zero. Whole life dividend rates carry the lowest standard deviation of all, reflecting the smoothing effect of the dividend determination process.
10-yr Treasury yield
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S&P 500 total return
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IUL collared (price-only, no dividends)
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Whole life (top rated carrier)
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Policy Simulation
Policy value & IRR — if you surrendered at each year
Using illustrated policy charges and the historical S&P 500 returns from the best, average, and worst periods identified above, this shows what a policy value and internal rate of return would have been if you surrendered at each policy year. Premiums of $100,000 per year for 7 years. Male, age 45, standard. Representative IUL illustration, issued by a highly rated carrier.
Computing policy scenarios...
Sequence-of-Returns Stress Test
Surrender IRR across thousands of resampled market histories
The scenarios above trace single historical paths. This resamples real 5-year runs of S&P 500 history (1928–2025), including the 1929–1933 crash and the 1949–1978 low-return stretch, into 2,500 synthetic futures, applies the cap, floor, and account type selected above and the illustrated policy charges, then shows the surrender internal rate of return (IRR), net of all costs, you would have walked away with at each policy year. It assumes nothing about future drift or volatility.
How to read it. Set a return hurdle with the slider: the annual return you want the policy to clear, such as your cost of funds or the rate an illustration assumes. The Probability of Success gauge shows the share of the 2,500 resampled futures whose IRR meets or beats that hurdle by the test year you select. Move the hurdle and the test year to see how the odds shift. The fan below shows the full spread of outcomes behind that single number, from the typical result down to the worst one in twenty.
Return hurdle
4.00%
0%7%
Cost structure
Test year
Cost structure swaps the policy charge schedule only. Cap, floor, and account stay on the controls above, so the change you see is the effect of cost alone, holding the index terms and funding constant.
Typical result (half above, half below)50% likely range90% likely rangeWorst 1 in 20
Probability of Success
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Chance of clearing your 4.00% hurdle
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Using this to sanity-check an illustration
An IUL illustration assumes one index credit, then nets out charges to a headline IRR. Use this to judge whether that IRR is realistic at the settings selected above. At the 10.25% cap and the selected account, a surrender IRR of 6% occurs in about 1 in 19 of the resampled 20-year histories and 7% in essentially none, while the worst 1-in-20 outcome sits at 3.14%. A higher expected IRR is always paired with a lower downside here, so weigh any projected figure against both its probability and that worst case, not the headline alone. And keep the two rates separate: the index credit is gross, the IRR is net of charges, so a high net IRR implies an even higher gross credit underneath.
How cost moves these results
Cost is the lever that matters most here. Every figure above is a collared return fighting a schedule of policy charges, so lowering that drag raises the whole distribution: a higher median, a higher worst 1-in-20, and a higher probability of success. All else equal, the policy with the lowest internal costs has the highest probability of success. A maximum-blend design (minimum basic coverage, maximum allowable term rider allocation, minimum commissionable target premium) and lower-commission products get there by carrying less load. These results reflect one insured's illustrated charges. An older or rated insured carries higher cost of insurance, which lowers every figure shown, though in a max-funded design like this the premium load and asset charges usually outweigh the age and rating effect. The cost structure control above shows this directly, same insured, same histories, only the charges change.
Accumulation-only view. This excludes policy behavior, like loans and distributions, that can have a material negative impact on future performance. Most importantly, participating (indexed) policy loans, which can produce negative arbitrage when the credited rate falls below the loan charge, as well as non-guaranteed cost-of-insurance increases and changes to caps, participation rates, or spreads. Actual policy performance will differ from what is shown here.
Historical credited-rate results reflect the selected account multiplier and any selected account charge, but are before base policy charges, cost of insurance, surrender charges, loans, and other product-specific expenses. Total returns and dividend rates do not reflect the net return to the policyholder. Actual net returns will vary based on policy design, premium funding, cost of insurance, and other charges. A higher gross rate does not necessarily indicate a higher net return. The internal rate of return (IRR) shown in the policy simulation reflects net returns after all illustrated policy charges and expenses.
S&P 500 price return excluding dividends. First segment start: Dec 31, 1960. Last period ending: Dec 31, 2025. 1-year point-to-point segments applied to every trading day per AG49 methodology. Past performance is not indicative of future results.
Whole life dividend rates reflect Massachusetts Mutual Life Insurance Company (MassMutual) historical declared dividends, gross of policyholder charges and the insurer's investment spread. Not all carriers state dividend rates on the same basis — some carriers report a dividend interest rate (DIR) that is net of investment spread, which will differ from a gross declared rate. All rates in the volatility and variance section are presented on a gross basis for the purpose of comparing statistical return characteristics — standard deviation and the spread between arithmetic and geometric mean — not absolute return levels. Actual net returns to policyholders will vary based on policy design, charges, funding pattern, and carrier pricing across all asset classes shown. Historical credited rate analysis is gross of policy charges. The policy simulation section reflects net returns after illustrated charges from a representative highly-rated IUL carrier. Past performance is not indicative of future results. This tool is provided for informational and educational purposes only and does not constitute investment advice, insurance illustrations, or projections of future performance.
