It's kind of like what certain IUL carriers do when a new product comes the older policies get screwed at the benefit of new products
NY Life Div announcement
- Thread starter Lloyds of Lubbock
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It's kind of like what certain IUL carriers do when a new product comes the older policies get screwed at the benefit of new products
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- #12
Lloyds of Lubbock
Guru
- 714
Direct recognition companies have policy series with different loan rates.
The interest rates charged on a loan are written into the contract.
If you changed these rates the company would creating a material change to the contract and a policy would be subjected to a 7 pay test, which could cause a MEC.
The spreads of which they credit the dividend are not guaranteed and can be changed.
My brain is foggy these days I think Penn uses Direct rec with a variable loan rate....could be wrong.
The interest rates charged on a loan are written into the contract.
If you changed these rates the company would creating a material change to the contract and a policy would be subjected to a 7 pay test, which could cause a MEC.
The spreads of which they credit the dividend are not guaranteed and can be changed.
My brain is foggy these days I think Penn uses Direct rec with a variable loan rate....could be wrong.
- 11,278
Yes, Penn is direct recognition.
- 10,330
Buying business. Thats the name of the game.
Almost like a reverse ponzi scheme... the old buyers are subsidizing the new buyers.
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- 10,330
Exactly like that.
The irony, is Penn bashes other IUL carriers who do that with IUL. Their whole story is "we use a portfolio rate".
So they dont do it with IUL... but they do it with WL?
Maybe someone can come along and let us know what the dividend is on the old block.
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- 4,576
And even worse, many of the old buyers are funding the carriers initiatives & startups that don't make it. .IE: Mass Mutual giving up in Haven Life.
- 10,330
There is fallout to that for sure.
Mass just "consolidated" (reduced) their points of contact on the brokerage side.
They increased comp on DI.
Moved to a Target based comp system on WL.
(seems to be a wash but maybe I missed something)
Dividend stayed level... in an increasing rate environment. But none of them seem eager to make a big jump right now.
- 4,576
Actually makes sense to me. Most carriers only have 4 to 6% of their entire portfolio of bonds & mortgages come due each year. Factor in that rates today are not that far off from expiring ones from 15-20 years ago & you realize dividend rates will take a long time to come back up with so little of expiring money being able to be invested at any higher rates
Insurance companies also buy 30 year bonds with the first couple years interest payments stripped. Basically 30 year bond has 60 coupon payments, they will buy it with first 5 coupons missing. This lets them get a slightly higher yield on the 30 year bond in the long run. It also means when interest rates go up, they dont see any increase in additional income for several years.
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- #20
Lloyds of Lubbock
Guru
- 714
And even worse, many of the old buyers are funding the carriers initiatives & startups that don't make it. .IE: Mass Mutual giving up in Haven Life.
Insurance companies make investments sometimes they work out and sometimes they don't.
If the investments are profitable a portion of that profit goes back to the policyholders as that investment was seeded with policyholder money.
Haven Life did not work out....there may be 15 others that did.
When I was with Guardian they were very aggressive in buying dental networks. (still may be).
Dental was always very profitable and was was used to enhance the dividend.
It takes a long time to move interest rates in the General Account as Alan mentioned above.
If you have access to Vital Signs, the full report will show you bond durations.
Insurance companies make investments sometimes they work out and sometimes they don't.
If the investments are profitable a portion of that profit goes back to the policyholders as that investment was seeded with policyholder money.
Haven Life did not work out....there may be 15 others that did.
When I was with Guardian they were very aggressive in buying dental networks. (still may be).
Dental was always very profitable and was was used to enhance the dividend.
It takes a long time to move interest rates in the General Account as Alan mentioned above.
If you have access to Vital Signs, the full report will show you bond durations.
