Indexed Universal Life (IUL) Update: Index Growth Insights

The first quarter of 2025 has reminded investors—and IUL policyholders—just how vital market protection can be. Volatility returned to major indices, driven by geopolitical tensions, central bank uncertainty, and fears over new trade tariffs. For holders of Indexed Universal Life (IUL) insurance, understanding how these fluctuations impact policy performance is key to unlocking long-term value.

In this quarterly update, Capital for Life explores how global markets performed and what it means for your IUL strategy.

The Value of Index Performance in Your IUL Policy

IUL policies are uniquely structured to offer growth potential based on the performance of major market indices—with a crucial caveat: they include a 0% floor, which means you’re protected from stock market losses. This blend of upside participation and downside protection is what makes IUL such a powerful tool for wealth preservation and tax-efficient growth.

Let’s examine how the markets performed in Q1 2025—and what it means for your cash value accumulation.

S&P 500: Breaking Its Winning Streak

Q1 2025 Performance: -4.6%

The S&P 500, widely seen as the benchmark for U.S. equity performance, fell 4.6% in the first quarter—its worst quarter since 2022, breaking a streak of five consecutive quarterly gains.

This matters because the S&P 500 includes 17 of the world’s 20 most valuable companies, making it a core component in IUL strategies and retirement portfolios alike.

So, what happened?

• Investor sentiment weakened in March amid fears of “Tariff Day” (April 2), when new trade tariffs from the White House are set to take effect.
• Technology stocks faltered, with investors shaken by the rise of Chinese AI firm DeepSeek, which demonstrated the ability to rival U.S. giants like Nvidia with far less infrastructure.
• Earnings guidance weakened: According to FactSet, 68 of 107 S&P companies issued negative EPS guidance—led by the technology sector.

“A miserable March has capped off one of the worst quarters for the S&P 500 since 2022.”

— Matt Britzman, Senior Equity Analyst, Hargreaves Lansdown

What This Means for IUL Policyholders

If your IUL policy is tied to the S&P 500, no interest may be credited for Q1 due to the negative return. However, thanks to the policy’s 0% floor, your cash value will not decline. Over the long term, the S&P remains a strong driver of returns—up around 170% in the last 10 years—and continues to be a solid core index for IUL strategies.

Nasdaq Composite: Tech Sector Turbulence

Q1 2025 Performance: -10.4%

The Nasdaq Composite saw a steep decline in Q1, driven by the same tech-driven uncertainty. Even strong earnings were not enough to buoy valuations, leading to a pullback across the board.

IUL Impact

While the Nasdaq fell, policyholders are again shielded by the zero floor, avoiding any reduction in their accumulated values. This index is a newer entrant to international IUL policies, but over the long term should prove its worth.

EURO STOXX 50: A Bright Spot in Global Equities

Q1 2025 Performance: +7.7%

Europe’s EURO STOXX 50 posted healthy gains amid stable inflation, strong banking performance, and improved corporate earnings.

IUL Impact

If your IUL includes exposure to European equities, this quarter may have delivered a positive interest credit, contributing to cash value growth.

Hang Seng Index: Asia’s Tech Resurgence

Q1 2025 Performance: +15.3%

The Hang Seng Index surged over 15% in Q1, reflecting renewed investor confidence in Chinese technology firms and an improved macroeconomic backdrop in Asia.

IUL Impact

This was one of the top-performing indices for the quarter—boosting IUL cash values where it was selected by investors and offering a valuable geographical diversification angle.

Russell 2000: Small-Caps Under Pressure

Q1 2025 Performance: -9.8%

The Russell 2000—which tracks smaller U.S. companies—saw a significant drop amid credit tightening and market uncertainty.

IUL Impact

No crediting will apply for most strategies linked to this index. Again, the built-in 0% floor offers peace of mind for policyholders.

Final Thoughts: Why Index Protection Still Wins

Despite a turbulent quarter, IUL continues to offer a compelling balance: you participate in market growth when times are good and stay protected when markets drop. That’s precisely what happened in Q1 2025.

While some indices saw declines, others like the Hang Seng and EURO STOXX 50 delivered positive returns. This global diversity is essential to a modern IUL strategy, and the zero-floor safeguard proves its worth once again.

Next Steps: Optimise Your IUL Strategy Today

At Capital for Life, we help high-net-worth individuals design, fund, and manage Indexed Universal Life insurance policies that offer long-term tax-advantaged growth and legacy planning.

Contact us today to:

• Review your existing IUL policy
• Explore adding new global index options
• Maximise crediting potential in your cash value strategy

Capital for Life | Trusted. Independent. Global.

‍Disclaimer

This article is authored by Carlton Crabbe, Chief Executive Officer of Capital for Life, a specialist indexed universal life insurance broker and adviser. The information provided in this article is for educational and informational purposes only and should not be construed as financial or investment advice. While the author possesses expertise in the subject matter, readers are advised to consult a qualified financial advisor before making investment decisions or purchasing life insurance products.