Lighthouse Financial Services Company — The decision package tabled at the second convening of Gate 1 on Jun 11, 2026, seeking release of the Stage 2 development tranche for Beacon Index Advantage. This is the package as it went to the Gate Review Board, including the record of what changed after the first convening was recycled on April 30, 2026, and including the dissenting analysis tabled alongside the recommendation.
Recommendation & the decision sought
Recommendation: release the Stage 2 tranche of $11,640,000 to develop Beacon Index Advantage for launch on March 6, 2028, subject to the conditions the Board considers necessary on the weaknesses identified in this package.
Prepared by C. Tyrrell, NPD Program Manager. Issued to the Board ten business days before the gate under the Governance Model §7.
Table of Contents
- Product Concept & Structure
- Target Market
- Competitive Position
- Distribution Plan & Written Commitments
- Volume Forecast
- Capital & Return Against Hurdle
- Development Cost & the Stage 2 Ask
- Sensitivities & the Downside Case
- Stage 2 Scope & Approach
- Regulatory Route
- Risk Position at Gate 1
- Assumptions on Which This Case Rests
1. Recommendation & Decision Sought
The Board is asked to release $11,640,000 to build, price and prepare for filing a fixed indexed annuity with an optional guaranteed lifetime withdrawal benefit rider, for launch on March 6, 2028. On the corrected capital charge the product returns 13.4% against an 11.0% hurdle — a margin of 240 basis points, which is positive but not comfortable, and this package does not present it as comfortable.
Three things about this recommendation should be read together. The return clears the hurdle. It clears it by less than the first version of this package claimed. And it depends on volume assumptions of which 90.8% are now supported by written channel commitments, leaving $17,000,000 of Year 1 premium resting on channel expansion that has not yet been secured.
2. What Changed Since the First Convening
Gate 1 was first convened on April 30, 2026 and recycled. Under the Gate Decision Framework the package was not scored, because two should-meet criteria were rated U — unscoreable on the evidence presented. The Board did not form a view on the product. It declined to form one on that evidence.
Change 1 — Distribution commitment: rated U, now evidenced
The first package built its volume forecast from internal channel modeling. No written commitment from any distribution partner was included, and the evidence standard does not accept a relationship manager's confidence in place of one.
Remediated: written Year 1 indications now held from three IMO partners totaling $168,000,000, or 90.8% of the Year 1 target — §7. The residual $17,000,000 gap is disclosed rather than closed, and is the subject of tabled dissent at §16.
Change 2 — Financial return: rated U, now recomputed
The return in the first package was computed on a capital charge that had been superseded. The output was of an admissible kind; its input was not current.
Remediated: recomputed on the current charge. The product IRR falls from 14.6% to 13.4%. The case still clears the hurdle, but by 240 basis points rather than 360.
3. Must-Meet Certification
All five Gate 1 must-meet criteria are certified. Each is answered by a named accountable party.
| Must-meet | Certified by | Status |
|---|---|---|
| Product can be filed in the assumed regulatory lane | B. Lindqvist, GC & CCO | Yes — non-registered, Compact route (§13) |
| A pricing basis exists that clears the hurdle on a current capital charge | N. Adeyemi, Chief Actuary | Yes — 13.4% vs 11.0% |
| The guarantee can be hedged with in-house capability | M. Delacroix, Director ALM & Hedging | Yes — with readiness plan due at Gate 2 |
| Written distribution appetite from at least three partners | R. Castellanos, Head of Distribution | Yes — three IMOs, $168,000,000 |
| Required capital available without displacing a committed use | J. Whitmore, CFO | Yes — $7,770,000 Year 1 |
4. Product Concept & Structure
Beacon Index Advantage is a single-premium deferred fixed indexed annuity. The contract credits interest linked to the performance of an external index subject to a cap, with principal protected against index loss. It is not a registered product: the contract owner has no direct exposure to a securities account and no negative index participation, which keeps the product outside securities registration and inside the state insurance filing lane (D-01).
4.1 Structure at launch
| Element | At launch |
|---|---|
| Premium | Single premium; minimum consistent with the existing annuity line |
| Surrender charge period | Seven years, declining |
| Crediting strategies | Three — fixed account, one-year point-to-point on the Calder Balanced 5 Index with a cap, and a one-year performance-triggered strategy (D-03, condition GC-01) |
| Guaranteed lifetime withdrawal benefit | Optional rider for an explicit charge, not embedded in the base contract (D-05) |
| Illustrated cap at pricing | 9.2% on the indexed point-to-point strategy |
5. Target Market
The product targets pre-retirees and early retirees between roughly 55 and 70 holding qualified and non-qualified savings, seeking principal protection with some participation in index growth, and — for the rider cohort — a contractual income floor they cannot outlive.
Average case size is modeled at $118,000, consistent with the carrier's existing annuity block. Rider election is modeled at 62.0%, which materially affects both pricing and hedging: the rider cohort is the source of the guarantee exposure and of most of the product's fee income.
6. Competitive Position
| Measure | Beacon Index Advantage | Peer set median | Floor agreed at this gate |
|---|---|---|---|
| Illustrated cap, 1-year point-to-point | 9.2% | 9.0% | 8.5% |
The product prices marginally above the peer median at current option costs. That margin is thin and it is not durable: the cap is funded by the option budget, and the option budget moves with rates and volatility between now and launch, twenty-one months out.
7. Distribution Plan & Written Commitments
Distribution is through existing independent marketing organization relationships. No new channel is being stood up (A-05).
| Partner | Relationship | Year 1 written indication |
|---|---|---|
| Northgate Financial Group | Existing, top-three producer on the current annuity line | Written |
| Sentinel Advisory Network | Existing | Written |
| Copperfield Insurance Marketing | Existing | Written |
| Combined Year 1 indication | $168,000,000 — 90.8% of the Year 1 target | |
These commitments are the direct remediation of the first convening (§2) and are the evidence behind condition GC-04. They are indications of intended production, not contractual minimums; no IMO commits to a volume it cannot withdraw from.
The unclosed gap is $17,000,000. The plan closes it through channel expansion during Stage 3 and Stage 4. That plan is not evidenced at this gate and is the subject of dissent at §16.
8. Volume Forecast
| Period | Premium | Policies at $118,000 average | Capital strain at 4.2% |
|---|---|---|---|
| Year 1 (2028) | $185,000,000 | 1,568 | $7,770,000 |
| Year 2 | $310,000,000 | 2,627 | $13,020,000 |
| Year 3 | $420,000,000 | 3,559 | $17,640,000 |
| Year 4 | $480,000,000 | 4,068 | $20,160,000 |
| Year 5 | $480,000,000 | 4,068 | $20,160,000 |
| Five-year total | $1,875,000,000 | 15,890 | $78,750,000 |
Year 1 is a partial year: launch is March 6, 2028, giving roughly ten selling months and 1,568 policies. The curve reflects the shape the carrier has observed on prior annuity launches — a slow first two quarters while producers are appointed and trained, then acceleration as the product enters standing recommendation sets.
9. Capital & Return Against Hurdle
New business consumes capital before it produces earnings. Strain is modeled at 4.2% of premium, requiring $7,770,000 in Year 1 and $78,750,000 across five years of sales.
The margin over hurdle is 240 basis points. On a product whose economics are driven by an option budget that moves with markets and by a rider cohort whose behavior is modeled rather than observed, that is a real but modest margin, and the Board should weigh it as such. The sensitivities at §11 are the more informative view.
10. Development Cost & the Stage 2 Ask
Total authorized program cost is $27,904,000 — a base of $25,600,000 plus a 9.0% gate contingency reserve of $2,304,000 held by the Board. Under the funding model, the Board is not being asked to commit that amount today.
| Released at | Stage | Amount | Status at this gate |
|---|---|---|---|
| Gate 0 | Stage 1 — Business Case | $2,180,000 | Spent; closed at $2,412,000 |
| Gate 1 — this decision | Stage 2 — Development | $11,640,000 | Requested |
| Gate 2 | Stage 3 — Testing & Validation | $7,450,000 | Not requested |
| Gate 3 | Stage 4 — Launch Readiness | $4,330,000 | Not requested |
Stage 1 closed $232,000 over its tranche. The overrun is the cost of the recycle loop and was met by an authorized contingency draw rather than absorbed into this request — folding it into the Stage 2 ask would have concealed the cost of the recycle inside development spend.
11. Sensitivities & the Downside Case
| Scenario | Effect | IRR | Against hurdle |
|---|---|---|---|
| Plan | As presented | 13.4% | Clears by 240 bps |
| Volumes 30% below plan | Fixed development cost spread over less premium; slower scale in servicing | 10.1% | Fails by 90 bps |
| Cap falls to the 8.5% floor | Competitive position moves from above median to below; volume risk rather than margin risk | Modeled through the volume sensitivity above | — |
| Rider election materially above 62.0% | More fee income, more guarantee exposure and more hedging cost | Broadly neutral to modestly positive | — |
12. Stage 2 Scope & Approach
Stage 2 runs Jun 15, 2026 to Mar 26, 2027 and delivers a product that is built, priced and fit to file. Its scope is bounded by what Gate 2 must be able to certify.
- Product design and contract forms — base contract and GLWB rider drafted, reviewed by outside counsel, ready for submission.
- Pricing — final pricing basis, assumption documentation, and the independent external review the Board is likely to require.
- Platform — configuration of the existing annuity administration platform (A-04, D-07). No new product-line system.
- Illustration and quoting — configuration of the incumbent engine for the three launch strategies (D-04).
- Hedging — target operating model, ISDA and counterparty onboarding begun (DEP-06).
- Filing preparation — Compact submission assembled; CA and FL prepared in parallel.
Stage 2 explicitly does not include filing submission, pilot selling, or advisor training. Those sit in Stages 3 and 4 behind gates that have not been passed.
13. Regulatory Route
The product is filed as an individual deferred non-variable annuity through the Interstate Insurance Product Regulation Commission — the Compact — giving a single submission against uniform standards for member states. States that are not Compact members are filed separately through SERFF.
| Route | Scope | Dependency |
|---|---|---|
| Compact submission | Member states — the substantial majority of the launch footprint | DEP-01 — the review clock is the regulator's, not ours |
| Separate SERFF filings | California, Florida | DEP-02 — independent review timelines (R-02) |
| New York — excluded | Not in launch scope | A-03 / D-02, condition GC-02 |
Suitability and best-interest obligations under the NAIC model regulation as adopted by each state drive advisor training and disclosure scope in Stage 4. They are a real cost of launch and are carried in the program budget rather than treated as a compliance afterthought.
14. Risk Position at Gate 1
| ID | Risk | Why it matters to this decision |
|---|---|---|
| R-03 | Option budget compresses; illustrated cap falls below the competitive floor | Directly attacks the volume forecast. Mitigated by fixing the floor at this gate (§6) |
| R-06 | Pricing assumptions unsupportable under external review | Would invalidate the return in §9. Argues for an independent review before Gate 2 |
| R-07 | Distribution partners deprioritize against competitor launches | Combines with the $17,000,000 uncommitted gap to produce the §11 downside |
| R-05 | Hedging readiness lags launch | Cannot sell a guarantee that cannot be hedged. Argues for a dated readiness plan at Gate 2 |
| R-01, R-02 | Filing review extends; non-Compact states approve late | Schedule risk against a launch date set by the distribution cycle |
| R-10 | Single credentialed pricing actuary on the critical path | Concentration in the one role the must-meet certification depends on |
15. Assumptions on Which This Case Rests
If any of these fails, the case does not merely weaken — it needs rebuilding.
- A-02 — the Compact accepts the product under existing uniform standards; no new standard is required.
- A-03 — New York is out of scope; no NY-specific build occurs.
- A-04 / D-07 — the existing administration platform is extended, not replaced.
- A-05 — distribution runs through existing IMO relationships; no new channel.
- A-06 — hedging is executed in-house by the Investments desk.
- A-07 — the rate environment stays within the pricing corridor used here.
- A-08 — no competing internal launch draws the same actuarial and IT capacity in 2027.
16. Dissent Tabled With This Package
The Gate Decision Framework requires that material analysis not supporting the recommendation is tabled with it, attributed, and not summarized away. Two items are tabled.
Dissent 1 — Distribution: the wholesaler plan is not funded to the volume forecast
Raised by the Distribution function, Jun 11, 2026.
The volume curve at §8 assumes 6 field wholesalers supporting the launch. Distribution can commit 4. The shortfall is not a resourcing detail: field wholesaler coverage is the principal driver of how quickly a new annuity enters producers' standing recommendation sets, and the Year 2 and Year 3 acceleration in the forecast assumes that entry happens on schedule.
Recorded as issue I-06. The Distribution view is that the forecast should be treated as achievable only if the coverage gap is closed before Stage 4, and that the $17,000,000 uncommitted Year 1 premium should be read alongside it rather than separately.
Dissent 2 — Risk: concentration in a single crediting strategy
Raised by the Chief Risk Officer as observer, Jun 11, 2026.
Reducing from five crediting strategies to three (D-03) was the right call on build cost, but it raises the likelihood that sales concentrate in the indexed point-to-point strategy. A concentrated book is a more concentrated hedging exposure than the pricing assumes, and the effect is not visible in the Year 1 numbers.
Recorded as risk R-12. The CRO does not oppose the recommendation and has not asked for it to be varied; the position is recorded so that the concentration is a known consequence of a decision rather than a discovery at Gate 5.
17. Scored Assessment & Outcome
Assessed against the Gate 1 criteria fixed at Gate 0. Full scoring is in the Gate Decision Framework §8.
| Tier | Result |
|---|---|
| Must-meet | 5 of 5 passed (§3) |
| Weighted should-meet score | 3.20 — conditions band (3.00–3.49) |
| Outcome | GO WITH CONDITIONS carried 4–0–1 |
| Abstention | B. Lindqvist, GC & CCO — pending the New York deferral memorandum, subsequently closed as GC-02 |
| Released | $11,640,000 — Stage 2 |
18. Conditions Issued
Four of the five conditions map directly onto criteria that scored 3 — the intended behavior of the framework, in which every weakness supporting a continuation decision leaves the room with an owner attached to it.
| ID | Condition | Owner | Due | Addresses |
|---|---|---|---|---|
| GC-01 | Reduce launch crediting strategies from five to three | D. Falkner | Closed Jul 21, 2026 | Feasibility; I-02 |
| GC-02 | Remove New York from launch scope; issue a deferral memorandum | A. Nkemelu | Closed Jul 3, 2026 | The abstention at §17 |
| GC-03 | Independent external actuarial peer review of GLWB pricing before Gate 2 | S. Ravichandran | Feb 26, 2027 | Return and competitive position; R-06 |
| GC-04 | Re-validate volumes with the three largest IMO partners | R. Castellanos | Closed Aug 14, 2026 | Distribution commitment; dissent 1 |
| GC-05 | Hedging readiness plan with ISDA milestones, presented at Gate 2 | M. Delacroix | Mar 12, 2027 | Feasibility; R-05 |
The reserve draw of $180,000 funding GC-03 was authorized by the Board at this gate under Governance Model §15.
19. Document Control
| Version | Date | Change |
|---|---|---|
| 1.0 | Apr 30, 2026 | Tabled at the first convening of Gate 1. Recycled — two criteria unscoreable. |
| 2.0 | Jun 11, 2026 | Retabled. Written channel commitments added (§7); return recomputed on the current capital charge (§9); competitive floor proposed (§6); dissent section added (§16). Carried GO WITH CONDITIONS. |
Prepared by C. Tyrrell, NPD Program Manager and Chair of the Gate Review Board. Related: Stage-Gate Governance Model · Gate Decision Framework · Gate 1 Recycle Memorandum · Gate Conditions Register.