Opinion ID: 2781495
Heading Depth: 3
Heading Rank: 2

Heading: The Market Value Adjustment

Text: The Annuity includes a market value adjustment (“MVA”), a “positive or negative adjustment that may apply to [an annuity’s accumulation] value upon early withdrawal or surrender, based on the movement in an external index.” The MVA takes account of the capital gains or losses resulting from the sale of securities needed to fund early withdrawal or surrender requests. EquiTrust’s brochure provides the precise formula used to calculate the MVA, explains how to determine the variables in the formula, and offers examples of its application.7 Harrington alleges that the brochure fails to explain that the disclosed constant in the formula, which he refers to as a 6 In addition, because the bonus feature in the Annuity locks in value immediately, it may increase the amount paid to an annuitant’s beneficiaries more than would an alternative annuity. 7 The formula is: [(1+s)/(1+c+.005)]n/12-1, where s is the treasury rate when the annuity was purchased, c is the treasury rate when the annuity is surrendered, and n is the number of months until the end of the fourteen-year surrender-charge period. HARRINGTON V. EQUITRUST LIFE INS. CO. 11 “bias,”8 serves to decrease upward adjustments and increase downward ones. Harrington claims that this omission is fraudulent because the bias contradicts what he characterizes as the “stated purpose” of the MVA, increasing the accumulation value when interest rates are lower and decreasing it when interest rates are higher. The district court correctly rejected this argument. EquiTrust meticulously explains the MVA and provides examples of how it operates in various circumstances. See Kennedy, 2010 WL 4123994, at  (“Plaintiff complains that Defendant defined the other variables in the MVA/EIA formula, but failed to explain the 0.005 value. This is not fraud.”). More importantly, even if we assume that Harrington correctly divines the MVA’s implicit purpose, the bias does not violate it. Even with the bias, the MVA raises the accumulation value if interest rates decline and decreases it when they rise. To be sure, the increase is less and the decrease greater than it would be without the bias, but EquiTrust never promised anything different.