Ohio National and Constellation

[Lloyds of Lubbock]

You keep pointing out that Mass policyholders were not shorted or denied dividends.

Nobody said that was the case. Actually in a way he did, squandering policyholder money seems to infer that..no?

I did not say that an MHC does not pay dividends.
What I did say is that upon the formation of the company when assets were moved the policyholders were not compensated and that is the reason that formation in NY is not allowed. Joe Belth spent many issues outlining this.

As far as Ohio National when they went to a MHC they closed the block of business and that blocks dividend payout suffered. The dividend interest rate on that block is 4% and if you think that is not going to happen again you are much more optimistic than me

 

[DHK]

The dividend interest rate on that block is 4% and if you think that is not going to happen again you are much more optimistic than me

The only material difference between then and now, is that mutual policyholders are going to be bought out of their ownership interest. How? I believe with a cash payout of some kind. We don't yet know what that is going to look like, but it's not going to be stock as the company (Constellation) isn't a publicly traded company.

So the biggest thing for current policyholders to keep their policies through the end of this year at a minimum. I've *heard* that there are many companies that are not allowing 1035 exchanges from Ohio National at this time - probably to help ensure that these policyholders get that compensation and they don't want to be a party as to why the policyholder didn't.

So that compensation - which I would hope would be distributed directly to the policy, but probably won't - *may* make up the difference in total performance?

I don't know.

I do know that Ohio National says they want to remain a whole life insurance company. Considering the nature of pension fund investing needing to do some "social good" investments that don't have to produce a return for a while (per Bryan Bloom, CPA who was a public pension plan administrator in Illinois)... there might be some other elements to this that might still be good for future policyholders.

I'm cautiously optimistic.

 

[Lloyds of Lubbock]

How can they make a direct payment into the policy?
If someone has a ten pay wont that cause a MEC?
Bobby Samuelson has a very interesting take on this.

We are getting calls from every wholesaler about 1035x policies.
Most of our block are ten pays and over 5 years old.

 

[DHK]

How can they make a direct payment into the policy?

I believe it would have to be considered a dividend payment into the policy. By doing it that way, it wouldn't (shouldn't) create a MEC because it "earned too much"?

 

[scagnt83]

I believe it would have to be considered a dividend payment into the policy. By doing it that way, it wouldn't (shouldn't) create a MEC because it "earned too much"?

Idk. Ive seen illustration scenarios that are fine with a lower dividend rate, but will MEC at a higher dividend rate. And vice versa.

In theory, CVAT testing should increase the DB in line with CV increase to an extent. But its intent is to prevent TEFRA/DEFRA violation, not MEC/TAMRA.

If they are still paying premiums on the policy could effect is as well in that situation. I think a fully paid-up policy would be able to take the large influx more than one still in premium payments.

 

[scagnt83]

You keep pointing out that Mass policyholders were not shorted or denied dividends.

Nobody said that was the case. Actually in a way he did, squandering policyholder money seems to infer that..no?

I did not say that an MHC does not pay dividends.
What I did say is that upon the formation of the company when assets were moved the policyholders were not compensated and that is the reason that formation in NY is not allowed. Joe Belth spent many issues outlining this.

As far as Ohio National when they went to a MHC they closed the block of business and that blocks dividend payout suffered. The dividend interest rate on that block is 4% and if you think that is not going to happen again you are much more optimistic than me

Lots going on in this thread, I missed that statement. (or maybe it was one of the articles I linked to)

That is good info to know about ON and the closed block.

I was never a huge fan of the company when compared to the alternatives. I have no doubt ON dividends are taking a nose dive.

 

[Lloyds of Lubbock]

Ohio's ten pay was priced right at the mec limits. A payment into the policy will most likely mec it, but we will see.
Our biggest problem with ohio is on financed policies, one large bank has reduced it's lending value to less than 50% which is causing margin calls on collateral.
Also term sheets are written with a clause regarding ratin gs, if they fall below a certain level the loan can be called.

 

[Allen Trent]

50% which is causing margin calls on collateral.

Wow. I bet that is in the small print somewhere. Wonder if E&O comes into play if producer encouraged Premium finance.

 

[pfg1]

Wow. I bet that is in the small print somewhere. Wonder if E&O comes into play if producer encouraged Premium finance.

Or encouraged them to liquidate their 401k to buy a WL policy. I can see lawsuits on the horizon, as the "plan" won't even be close to working. And with the 10pay or pay to 65, they will take a pounding to get out. We live in a sue happy world, I see it coming unfortunately.

 

[DHK]

Or encouraged them to liquidate their 401k to buy a WL policy. I can see lawsuits on the horizon, as the "plan" won't even be close to working. And with the 10pay or pay to 65, they will take a pounding to get out. We live in a sue happy world, I see it coming unfortunately.

I would then wonder how much they emphasized dividend performance of the policy.

The plan will work, but the dollar amounts would simply need adjusting (lowering). The math would still work better than having the money in an account where you cannot even calculate the amount of taxes you owe.