Ohio National - Demutualization

[david_lewis]

I think if you don't choose your option, there is a default.
Some of these policies are not so easy to replace.
Take a 10 pay 7 or 8 years old.
New product from Penn and NY Life are 25% more due to new reserving rates.
Guardian and Mass are closer to 50% more.
That is not even counting the fact that they are older.
Now take into account the 1035 money over and above the annual premium goes into PUA of which there is a sales charge.
This will probably cause the client to have a higher outlay on the new policy or pay for more years.
If you spreadsheet old vs new I will bet the crossover point is close to 15 years out.
Plus the client may be a bit salty you are making a new commission on him.
At the end of the day regardless of dividends a 10 pay is still a 10 pay and as much as you feel ON is treating the clients unfairly, it may be in their best interests to stay there

My 10-pay from Mass had a break-even point at year 5-6. It's all in the design. Lots of term blending and PUAs, and that crossover comes on very, very fast. Even if the dividend gets chopped down by 50%, the client should never be waiting 15 years. I've run illustrations with no dividends and had crossover come on at yr 9 simply due to the large amount of PUAs and term blending involved.

 

[Lloyds of Lubbock]

You are comparing a policy with a large non guaranteed element tpo a fully guaranteed all base contract.
Not exactly apples to apples.

 

[david_lewis]

You are comparing a policy with a large non guaranteed element tpo a fully guaranteed all base contract.
Not exactly apples to apples.

Seems like a Red Delicious vs a Granny Smith to me. They're both apples, even if they taste different.

Overused analogy aside, I don't know how many of ON's policies were blended WL. The ones I've seen are, and considering its popularity with the IBC crowd, methinx there are more than just a handful of policyholders with high cash value blended policies.

Big picture is, for some folks, getting out of their ON contract is going to be expensive. But, for others, it's not going to be too bad. Penn Mutual was mentioned earlier as an example. Mass too. Both of those companies offer the ability to blend, and if done correctly, there's enough PUAs being added that most of the contract is guaranteed and the added risk of the term portion is inconsequential. This is especially true for Penn, which forces the term to convert to PUAs on a schedule (with an option to accelerate the scheduled conversion). Honestly, I don't know why agents sell all base contracts anymore, other than the nice commissions.

 

[Lloyds of Lubbock]

First of all I was talking about a 10 pay.
If you know anything about Ohio National you would know, that their ten pay cannot be blended.
If you think you can take a ten pay that is 6-7 years old and 1035 it into another policy and that new policy catches up to the ONAT in 5-6 years please post an example.
If you are showing your clients 1035 into a max blended ten pay and going rpu (this will cause a mec) in 3-4 years to match the original guarantee, I dont think this will work
The term in a max blended policy is not inconsequential.
If you are showing these as apple to apple comparisons and casting aspersions on other agents you may want to be careful at who you are pointing a finger back.....as three fingers are pointed back at you

 

[Allen Trent]

max blended ten pay and going rpu

Plus, many carriers RPU non forfeiture option moves all cash values into the base policy. This means you have moved any & all PUAR from Dividend purchases & PUAR from purchases from accessible by partial surrender, to only accessible by loan like the base policy. No one in their right mind would do that unless back up against the wall with no other choices. Could even impact dividend crediting if carrier pays different dividend rate on base CV compared to PUAR CV

 

[Lloyds of Lubbock]

When you go rpu all values become base guarantees.
If I did not communicate correctly, I did not say someone should do this.
If you want to compare apples to apples, you have to compare guarantees to guarantees.
Many companies will go RPU on the base guarantee cash value and keep your adds.
If you reduce the face you are converting base to adds and those adds do have a guaranteed value.
If you can put a column in for total guaranteed cash value, probably a better picture.
Many clients will exchange their ONAT policy especially if it is financed.
On a limited pay policy that is seasoned it may not be so easy and the client will be giving things up to so this, suicide and incontestable clauses for one.

 

[Allen Trent]

When you go rpu all values become base guarantees.
If I did not communicate correctly, I did not say someone should do this.
If you want to compare apples to apples, you have to compare guarantees to guarantees.
Many companies will go RPU on the base guarantee cash value and keep your adds.
If you reduce the face you are converting base to adds and those adds do have a guaranteed value.
If you can put a column in for total guaranteed cash value, probably a better picture.
Many clients will exchange their ONAT policy especially if it is financed.
On a limited pay policy that is seasoned it may not be so easy and the client will be giving things up to so this, suicide and incontestable clauses for one.

No, you didn't miss communicate, I was just adding that as even more support to your point.

 

[Lloyds of Lubbock]

ok , Thanks

 

[david_lewis]

First of all I was talking about a 10 pay.
If you know anything about Ohio National you would know, that their ten pay cannot be blended.
If you think you can take a ten pay that is 6-7 years old and 1035 it into another policy and that new policy catches up to the ONAT in 5-6 years please post an example.
If you are showing your clients 1035 into a max blended ten pay and going rpu (this will cause a mec) in 3-4 years to match the original guarantee, I dont think this will work
The term in a max blended policy is not inconsequential.
If you are showing these as apple to apple comparisons and casting aspersions on other agents you may want to be careful at who you are pointing a finger back.....as three fingers are pointed back at you

You brought up the RPU thing, not me. As for the rest of it, feel free to argue with yourself.

No one is going to force policyholders to 1035 into another 10-pay. Most likely, agents will be recommending all sorts of policies, and my guess is not all of them will be WL.

The bigger picture is ON's demutualization, and what happens to those policyholders. My guess is a lot of agents will be replacing those policies, and Constellation will have a mess on its hands. Imagine if they had to enforce a 6-month delay on policy loans or surrenders because of a run on the insurance company. That hole will just keep getting deeper and deeper.

 

[walthamny]

I feel sorry for agents who chose profit partnership and deferred a part of their commissions. The deferred commissions avoided taxation and ONL has been crediting them about 10% a year. But now those assetts sit on the balance sheet of ONL. And if you terminate your contract, ONL will be paying you a pension after age 60 for life. Good luck on receiving them.