Take the TOLI Challenge: In a Permanent Life Insurance Policy, the Cost of the Policy is Equal to the Premium – Yes or No?

The answer is an emphatic NO. Some permanent life insurance policies, specifically guaranteed universal life (GUL) and Whole Life (WL), have required premiums, though WL out of pocket premiums can be reduced by dividends, paid-up addition cash values or policy loans. But the premium paid is not the actual cost of the policy and finding the underlying costs on the policies is a challenge. For [...]

How Whole Life Dividends Are Calculated

  Near the end of last year we posted a blog reporting the 2019 dividend payouts for the big four mutual companies, all whose primary product line is whole life insurance. Dividends are a return of premium when carrier results exceed a very conservative projection for investments, income, and expenses.  Dividends are paid annually on participating whole life insurance and determined at the discretion of [...]

New Legislation Introduced in Congress Would Help Seniors and the Life Settlement Industry

A bill introduced in Congress could help spur sales of life insurance in the secondary market by allowing policyholders to use the proceeds from the sale of a life insurance policy to fund an account to be used for paying long-term care expenses on a tax-favored basis.  HR Bill 7203, introduced by U.S. Rep. Kenny Marchant of Texas, a Republican, and U.S. Rep. Brian Higgins [...]

The Big Four Carriers Announce Their Dividends for 2019

  For the last few years, we have tracked the dividends paid by four large mutual carriers whose main product offering is whole life.  These carriers are owned by their policyholders, not stockholders and operate with a long-term business view. Unlike most life insurance carriers, they sell their products through a career agency system – a dying breed.  Their dividend rate and payments are a [...]

How About Just Doing the Right Thing?

During an ITM TwentyFirst University webinar on trustee liability, I described a replacement case that came into our remediation department. A grantor with a whole life contract in his trust had decided to stop gifting. His agent advised him to complete a 1035 exchange of the cash value from the existing policy into a new current assumption policy. The exchange, with no other premium, would [...]

Mass Mutual Class Action Settlement Means Small Payout for Participating Policyholders

A class action lawsuit brought against Mass Mutual Life Insurance Company has resulted in preliminary approval of a $37.5 million payout. The payout benefits policyholders of Mass Mutual participating policies held between January 1st, 2001 and December 31st, 2016. A participating policy is one that receives dividends. ITM TwentyFirst has begun to receive notices of the payout that was agreed to in a document filed [...]

Dividends at The BIG 4 Carriers Mostly Down, But Are Interest Rates Finally Going Up?

A couple of weeks ago, we reported that Northwestern Mutual had declared its 2017 dividend and had not only lowered it but also increased some costs (see: Northwestern Mutual Dividend and Crediting Rates Drop, Expenses Rise). Northwestern Mutual was the first of the so-called “Big 4” mutual carriers to report. These A++ (AM Best)–rated companies are considered to be the gold standard among life insurance carriers. [...]

2016-11-29T09:06:44-05:00November 29th, 2016|General Interest, News, Whole Life|3 Comments

Northwestern Mutual Dividend and Crediting Rates Drop, Expenses Rise

Over the last two years, we have written extensively about the impact of the low interest rate environment on life insurance policy performance, primarily Current Assumption Universal Life policies. Many carriers have pointed to low interest rates as a primary cause for their cost of insurance (COI) increases in these policies. Anyone who has attended one of our webinars on life insurance policy subjects (see: [...]

Recent Court Case Identifies An Obvious Tax Liability: One TOLI Trustees Sometimes Miss

A recent US Tax Court Memo identifies the financial risk in unwittingly or intentionally mismanaging a life insurance policy. In 1987, a policy owner purchased a single premium variable life policy (since this was pre Code Section 7702A, it was not considered a modified endowment contract) with a payment of $87,500. The policy contract permitted the owner to take loans from the policy, allowing any [...]

Why Brexit Is Bad For Your Life Insurance Policy

The historic vote this week on a non-binding referendum to determine whether the United Kingdom should leave or remain in the European Union has made headlines. The 52–48% vote, with a participation rate of almost 72% of the electorate, was in favor of exit by a 4% margin. The fallout from this decision has been felt around the world, but how will it affect life [...]

A Decade of TOLI: The Changes and Challenges

In our last Blog post, we recapped the year in Trust Owned Life Insurance (TOLI) for 2015 (see: The Year in TOLI – 2015 Edition). As one of the pioneers of life insurance policy management in the United States, ITM TwentyFirst has the unique ability to participate in and track trends in the TOLI industry. Almost a decade ago, we surveyed our TOLI portfolio. In 2015, [...]

Life Insurance Illustration Assumptions…a Trustee’s Dilemma

In the early ‘80s when interest rates skyrocketed (Are you old enough to remember 18% mortgage rates?) the insurance industry created Universal Life insurance (UL), with sales illustrations based on “current assumptions,” which included the fixed rate being credited to the policy’s cash value at the time of the policy’s issue. As with all sales illustrations, the historically high “current” assumptions were projected over the [...]

Turning the Battleship Around…An Update

In my last blog, Turning the Battleship Around…Has it Started?, I wrote about Whole Life dividend trends and stated perhaps the dividend slide might be “leveling off and slowly trending upward.”  I based that thinking on the fact that of the “Big 4” Whole Life carriers—Northwestern Mutual, Mass Mutual, Guardian Life, and New York Life, three had “either maintained or increased their dividend rate,” which I [...]

Turning the Battleship Around…Has it Started?

One of the great challenges facing those of us who manage life insurance has been the long-term trend in interest rates. This is particularly true with Whole Life insurance. As the chart below shows, the drift in dividends has sloped downward for the last 28 years. And, today’s environment is especially challenging as we wallow in historically low interest rates for fixed investments. The cash [...]

2014-11-18T18:41:35-05:00November 18th, 2014|Policy Management, TOLI Administration, Whole Life|1 Comment

Life Insurers Adapting Investments to the Sustained Low Interest Rate Environment

Life insurance carriers have traditionally been a conservative lot when it comes to investing, with the vast majority of their investable assets in highly-rated bonds and a lower proportion in gold standard mortgages. The last few years have not been kind to anyone investing primarily in fixed investments, and that apparently includes life insurers.  According to an article in Investment News, a poll taken early [...]

2014-08-06T12:59:12-05:00August 6th, 2014|Life Insurance Investments, Whole Life|1 Comment