North American Builder Plus IUL 3

[DWPCL]

Oh crap....

 

[scagnt83]

oh crap...

Thats what I said when I saw the first big Cap drop on an NA annuity.

Early in my career, I bought into the whole "longer term annuities have better renewal rates" theory. Sold a 12y NA annuity with an 8% Cap on S&P. Last renewal notice I saw, it was around 3%. Nobody in that situation was happy, other than NA.

I dont expect IA carriers to keep Caps steady by any means. But I do expect them to stay in line with the overall market. The bonds NA purchased in y1 certainly did not have a decrease in rates after just 2 years. They lowered Caps because they could. Maybe after y5 or y10, sure, they are renewing bonds at much lower rates at that point.

NA decreased Caps more often and at higher % decreases than competitors I sold during the same time period. Pure teaser rates. Its how they operate. Why do IMOs push them? Comp and "good looking" illustrations. Same for agents who sell them over the long term after seeing the effects 5-10 years later.

(when I say IMOs push them, I mean the ones who actively promote/market their non-guaranteed high illustrating products as the best solution, not IMOs that simply offer NA as an option)

But NA has had some solid income rider solutions on IAs that were totally guaranteed. But if the solution is relient on Caps staying competitive, NA is not the carrier to trust.

Great American is the exact opposite of NA. Most stable Caps in the industry. I dont think I've seen them drop below 1% from the original Cap. Most are 0.5% lower at most. Plus they are now owned by Mass Mutual... giving them rock solid ratings too.

 

[ATM]

Sad what North American and Midland have done with this product. As noted it is designed to be the best illustration, not the best product.

The fixed participating loan is an illustration scam. NAIC illustration rules say that you cannot illustrate more than a .50% arbitrage between credited rates and loan interest rates. That is what every other company is doing and NA/MNL used to do to.

The fixed par loan at 5% allows a 5.5% crediting rate embedded in the illustration then adds in a non-guaranteed 2% bonus on top of that. So actual arb in the illustration is 2.5%.

IMO that is deceptive and goes against the intent of the NAIC rules. These companies in the past would never have done that. But their lead actuary left not too long ago and was replaced by a new actuary from Minn Life (A company I have never had much respect for because of things exactly like this.)

Too bad. They had product integrity. I own their products and have been quite happy with performance, but I would not buy this product or sell it.

 

[Allen Trent]

replaced by a new actuary from Minn Life (A company I have never had much respect for because of things exactly like this.)

Please explain. I have only seen Minn Life IUL the last 4-5 years & they claim to not do this & also don't have a bunch of closed blocks that they drop rates on.

 

[ATM]

Please explain. I have only seen Minn Life IUL the last 4-5 years & they claim to not do this & also don't have a bunch of closed blocks that they drop rates on.

I didn't say they have done this but they have always had little "gotchas" in their products that I have disliked.

Nobody has had this because the NAIC rules changes are so new. the fixed par rate loan is an illustration scam made to circumvent the .5% max arbitrage rules. It's about as bad as PacLife's magic multipliers.

What's funny is that Pac has gone way from those in its new products. Maybe because NA/MNLs old actuary went to PacLife!

 

[Gulliver]

Any opinion on Mutual of Omaha's IUL

 

[ATM]

Any opinion on Mutual of Omaha's IUL

Decent product but doesn't really perform well from what I have seen.

 

[CFP83]

Yes. But some have dropped much more than others. Big difference in keeping in line with the rate environment and dropping renewals because they used teaser rates to trick people into buying.

A NA policy bought 6 years ago would have seen a 7% cap reduction if memory serves me correctly. And one block saw an increase in expenses already.

And NA uses true teaser rates. They release a new IUL with high caps... and immediately reduce caps on inforce blocks. If you look at their renewal history and its timing, it is like clockwork. They illustrate a higher than average Cap/rate, then drop it a couple years later to below average rate.

Compare that to others, such as Penn, who give the same Cap/rate on renewals as they do to new issues. Caps are not as high as NA to start... but after 5 years they will be higher.

I regret ever selling NA or Midland IULs and FIAs (they do the same with teaser rates on their annuities). You couldnt pay me enough to sell NA or Midland policies again.

Man, talk about taking the words right out of my mouth.......
I will never sell Midland IUL's again, after making them one of my primary IUL carriers from around 2014 through 2021.
Outside of my personal life/di production I think you and I have shared with you before that I own an RIA.....so I am a fiduciary "all the time" and operate as an agent "some of the time". For 98% of policies that I have sold I am seeing these clients 1-2 times per year as they have AUM with the RIA. I have to explain to these clients why cap's have been reduced so much...interest rate environment ect ect. However I know that caps should not be as low as Midland has taken them. The CV4 IUL now has a cap rate of 7.8% (started off at 14.5%) while their currently marketed product is at 9.5%. So as I look at how many cap decreases that have taken place on policies I placed in 2015-2021, it's sad. So having a teaser rate to get the business, and then going and closing that block is the M.O., why else has there been over that time 6 different generations of their "accumulation focuses" IUL in the past 7 years!

Scagnt, after much research I have landed in the past year on Columbus Life for any future IUL sales. Like Penn, they treat all blocks of business the same in terms of cap rates.....they have as much "cap integrity" as you will find in the business, simply product design, and the ability to blend term to reduce commission/enhance policy performance. Current cap is at 10.5%, just reduced down from 11 on 12/31.

 

[scagnt83]

Man, talk about taking the words right out of my mouth.......
I will never sell Midland IUL's again, after making them one of my primary IUL carriers from around 2014 through 2020.
Outside of my insurance agency, I think you and I have talked about this before, I own an RIA.....so I am a fiduciary "all the time" and operate as an agent "some of the time". For 98% of policies that I have sold I am seeing these clients 1-2 times per year as they have AUM with the RIA. So as I look at how many cap decreases that have taken place on policies I placed in 2015-2020, it's sad....there has been over that time 6 different generations of their "accumulation focuses" IUL over that same period!

Scagnt, after much research I have landed in the past year on Columbus Life for any future IUL sales. Like Penn, they treat all blocks of business the same in terms of cap rates.....they have as much "cap integrity" as you will find in the business, simply product design, and the ability to blend term to reduce commission/enhance policy performance. Current cap is at 10.5%, just reduced down from 11 on 12/31.

Thanks for the info about Columbus Life. They are a bit under the radar sometimes, but have great ratings. Do you sell their WL too? What are your thoughts on it? Penn's WL was illustrating almost as good as their IUL before the new 7702 regs took effect.

Carriers like Sammons give the industry a bad name. I wont do business with National Western Life anymore for the same reason, teaser rates. But they screw you twice by taking 60 business days to transfer your funds. (company policy, written down on paper in a letter to my client... 60 BUSINESS DAYS)

 

[DHK]

Columbus Life doesn't have WL (anymore). Just various IUL products. Of course, they're owned by W&S and they have WL as well as Lafayette, of course.