North American Builder Plus IUL 3

[scagnt83]

So are you saying that all of your inforce policies have a lower cap rate than what is being marketed to new clients?
- are all your inforce policy with na/midland have the same cap rates or do they have different cap rates depending on the issue date?
- Any carrier you see that is keeping it consistent across the board?

I have a Penn Policy that's 8.50% with a 1% floor ... I see new brochures at 8.25% but the illustration software is showing 9% so not sure which one is current..

Regarding Midland/NA, they have different Cap rates depending on the product line. Midland releases a new IUL product apx every 2-3 years. New product has competitive rates. Old products see drops on renewal once the new product is out.

Also, the ECV product has different caps and renewals vs. the normal builder.

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All carriers have seen drops due to interest rates. Some are more steady than others. Penn, Columbus, AIG, Securian, Allianz all have had fairly strong renewal histories.

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You probably have the "Accumulation Builder Flex IUL", which is Penns old product.
They just released a new product after the 7702 updates. It is called just "Accumulation IUL".

The new Accumulation IUL has a 9% Cap on the 1% floor account. Old product is 8.5% or 8.25% range, its still sold in CA.

 

[ATM]

yep, chronic requires permanent impairment

It is carrier specific. Some require permanent others do not.

 

[scagnt83]

It is carrier specific. Some require permanent others do not.

He was answering a question about a specific product.

 

[CFP83]

He was answering a question about a specific product.

Thanks Scagnt, yes I was stating the Columbus Life's IUL requires permanent impairment.

So updating some items initially discussed in this thread:

• Penn's Mutual is at 10% on Accumulation IUL with 0% floor. Or 9% with 1% floor. We just converted a term case we wrote from 2016 into the Accumulation IUL product and blended in the "supplemental term" in order to juice the IRR on cash values and lower expenses/comp.
• Columbus is at 9.5% cap, 0% floor. 4.2% fixed account. This is their "linked rate" and applies to all IUL products both open and closed business.
• Not sure where Allianz is at currently.
• Haven't written Midland IUL in a couple years now, so I don't track where their "teaser" IUL caps currently are.

With high-yield money market's currently paying 4.5%, safe money options are looking nice right now.....5 year MYGA's will hit 6% any day now. Equity market's will most likely be sideways for the next year.....given both of these items most of our cases I have written are term. We will look to convert as IUL caps should EVENTUALLY rise to give us more spread over cash than they are now.

10 years ago IUL cap spread's over money market rates were at 14%!

 

[scagnt83]

Thanks Scagnt, yes I was stating the Columbus Life's IUL requires permanent impairment.

So updating some items initially discussed in this thread:

• Penn's Mutual is at 10% on Accumulation IUL with 0% floor. Or 9% with 1% floor. We just converted a term case we wrote from 2016 into the Accumulation IUL product and blended in the "supplemental term" in order to juice the IRR on cash values and lower expenses/comp.
• Columbus is at 9.5% cap, 0% floor. 4.2% fixed account. This is their "linked rate" and applies to all IUL products every offered, both open and closed business.
• Not sure where Allianz is at currently.
• Haven't written Midland IUL in a couple years now, so I don't even track where their "teaser" IUL caps currently are.

With high-yield money market's currently paying 4.5% safe money options are looking nice right now.....5 year MYGA's will hit 6% any day now. Equity market's will most likely be sideways for the next year.....given both of these items most of our cases I have written term, we will look to convert as IUL caps should EVENTUALLY rise to give us more spread over cash than they are now.

10 years ago IUL cap spread's over money market rates were at 14%!

To summarize. IUL is past its prime. I agree. Maybe it will rotate back soon once the bonds backing the various blocks mature.

Imo, WL is best positioned right now based on the current economy. Its not as competitive as the top IULs, but Guardian has the Index Rider on their WL, so you can switch between dividends and index gains. Not a bad option for the next 10 years imo.

 

[SamIam]

Regarding Midland/NA, they have different Cap rates depending on the product line. Midland releases a new IUL product apx every 2-3 years. New product has competitive rates. Old products see drops on renewal once the new product is out.

Also, the ECV product has different caps and renewals vs. the normal builder.

---

All carriers have seen drops due to interest rates. Some are more steady than others. Penn, Columbus, AIG, Securian, Allianz all have had fairly strong renewal histories.

---

You probably have the "Accumulation Builder Flex IUL", which is Penns old product.
They just released a new product after the 7702 updates. It is called just "Accumulation IUL".

The new Accumulation IUL has a 9% Cap on the 1% floor account. Old product is 8.5% or 8.25% range, its still sold in CA.

That is why I never will sell a mIdland product. I've told people about this and no one believes me.

 

[leo]

To summarize. IUL is past its prime. I agree. Maybe it will rotate back soon once the bonds backing the various blocks mature.

Imo, WL is best positioned right now based on the current economy. Its not as competitive as the top IULs, but Guardian has the Index Rider on their WL, so you can switch between dividends and index gains. Not a bad option for the next 10 years imo.

Sorry Kind of new can you explain what you mean IUL are pat their prime?

 

[scagnt83]

Sorry Kind of new can you explain what you mean IUL are pat their prime?

IUL Caps have decreased significantly over the past 10 years.

Both for new business, and in-force business.

Now the industry has shifted to "volatility control" indexes as the main index promoted. These are a benefit to the carrier, not the consumer.

Volatility Control is literally defined as limiting the ups and downs of the portfolio. They have a "target volatility rate".... ie: target gain/loss. Usually its 5%, some are 7%.

So carriers have traded the traditional index that consistently performs well over 5% long term, for indexes that are designed to return 5% annualized over the long term.

To keep the illustrations from looking lousy, they add multipliers and enhancements to the credited values. But usually those are not guaranteed... and the expenses on those multipliers and enhancements are never guaranteed... they can be increased same as normal internal IUL expenses can.

The IUL game became a race to have the best looking illustration. Many carriers are showing illustrations that will never come true. They are "buying business" and know they are going to reduce multipliers, lower Caps, & increase expenses in the future. Its already happened. That is why most IUL carriers create a new product every 2 years and stop sales of the old product.... so they can lower rates on the old product but keep sales high with the "new/better" product, only to lower it once they create a new product 2 years later. Its a shell game they are playing with the consumer.... and with ill informed agents.

Look for carriers that dont introduce a new product every 2 years. Look for carriers that use a "portfolio rate" for both old and new IUL policies. Ask about renewal histories.

In my opinion, there will be massive class action suits against IUL carriers and agents. Same thing happened with UL decades ago. Agents didnt fully understand how it worked, carriers didnt regulate illustrations properly, everyone had rose colored glasses on, consumers lost billions, carriers got their asses sued off, along with some agents.

Literally the same thing is happening right now. Race to the top for illustrations. Agents skimming over the very important fine print. Consumers think its going to make them rich with 20% gains each year.

Not too long ago I saw a video with an agent promoting a volatility control index with a 5% volatility target..... saying it was "designed for maximum performance"..... an index designed to return 5% is being called "designed for maximum performance". And carriers are doing nothing to stop it.

That is why I literally refuse to sell certain IUL carriers. Ive literally turned down clients because they were stuck on wanting 1 particular product that I know will end up in a class action eventually. Nope. They can find someone else.

Id guess we will see the first class action suit in the next 5-10 years. There is already a lot of individual litigation surrounding IULs going on right now.

 

[scagnt83]

For you agents using hybrid indexes and non-guaranteed multipliers..... how do you think the carrier can afford to pay 50%-100% more than what the index returned on a hybrid index.... when they are unable to do that on a traditional index....

The Option market for hybrid indexes is extremely illiquid. Nothing like the major indexes.

How do you think a carrier can buy options, in an illiquid market, and make 50% or 100% more than what the index actually returned?

My answer is.... they cant....

That is why the multipliers are not guaranteed, and why participation rates are not guaranteed.

They have zero intent, or ability, to keep them at that level long term.

 

[Allen Trent]

For you agents using hybrid indexes and non-guaranteed multipliers..... how do you think the carrier can afford to pay 50%-100% more than what the index returned on a hybrid index.... when they are unable to do that on a traditional index....

The Option market for hybrid indexes is extremely illiquid. Nothing like the major indexes.

How do you think a carrier can buy options, in an illiquid market, and make 50% or 100% more than what the index actually returned?

My answer is.... they cant....

That is why the multipliers are not guaranteed, and why participation rates are not guaranteed.

They have zero intent, or ability, to keep them at that level long term.

I love that you believe most agents understand options are utilized to attempt to get the upside returns. Most agents I ask just think the carrier puts the money in the index & somehow with pixy dust takes away the downside