Pacific Life Policy Performed 22%

[scagnt83]

very true & agree.

But most agents I have heard explain IUL talk of it being ripe to have much higher cap & par rates because of the rising Treasury & Mortgage rates. Hell, even some wholesalers & carriers have alluded to that the last few years as Treasury & mortage rates were dropping for the reason for lower caps & par rates.

Agreed. Many believe rising rates will create increased Caps. Its marketed that way by agents and wholesalers.

Talk to an actuary at one of those carriers and see what they say... much more pessimistic sentiment.

Hope those agents didnt put that in writing for the client.... LOL

Most IULs out there have a 12-15 year Surrender Period. Good luck seeing any increase before its out of Surrender. Carrier knows they are trapped. Suitability on the new product will make it hard to justify taking a loss just because Caps did not increase.

 

[marindependent]

Its not a portfolio rate. They bought long term Bonds to back those contracts. Got to wait the 10 years for them to renew the Bonds at higher rates. Difference in Options pricing only goes so far. Bond rates are the main dictator of how much in Options the carrier can purchase.

And rising rates only make the Bonds they are holding worth less and less.

Well Said and this would be one of the two primary challenges that all Life Insurers Face in the current environment.

 

[REI_Velocity]

My pacific life policy performed 22%. My client is also loaning against the policy to arbitrage returns in outside investments. Life insurance is great.

Can you break down these numbers? Where are you getting 22% from?

 

[ATM]

Portfolio rates move like Aircraft carriers. they don't turn fast, but they turn.

As rates rise portfolio rates will rise too but always trail the direction of rates because of the current bonds in the portfolio will have been bought at different rates. New money is always added and new bonds purchased. That's why IUL looked especially good when rates are dropping. Old bonds at higher rates were in the portfolio.

As rates have bottomed and moved up, IUL doesn't look so good because the portfolio rate is lower than current rates, but catching up. Over time, if rate continue to rise or stay above the portfolio rate, caps and pars should increase as well as the portfolio adjusts toward the market current rate.

The real thing to me is that most agents think that IUL can perform like a Variable policy rather than as a fixed policy over time. Should probably be able to outperform traditional fixed rate products, but even that is not guaranteed. Likely but not a sure thing.

 

[scagnt83]

Can you break down these numbers? Where are you getting 22% from?

He got it from his personal policy, the index returns.

Not rare to see double digit numbers over the past decade with certain index options.

Pac Life IUL is a sh*t product though imo. Id never sell it.

 

[REI_Velocity]

He got it from his personal policy, the index returns.

Not rare to see double digit numbers over the past decade with certain index options.

Pac Life IUL is a sh*t product though imo. Id never sell it.

I assumed as much, but he posted a picture with his claim... I didn't see where he got it from those figures. I don't trust any IULs.

 

[scagnt83]

Portfolio rates move like Aircraft carriers. they don't turn fast, but they turn.

As rates rise portfolio rates will rise too but always trail the direction of rates because of the current bonds in the portfolio will have been bought at different rates. New money is always added and new bonds purchased. That's why IUL looked especially good when rates are dropping. Old bonds at higher rates were in the portfolio.

As rates have bottomed and moved up, IUL doesn't look so good because the portfolio rate is lower than current rates, but catching up. Over time, if rate continue to rise or stay above the portfolio rate, caps and pars should increase as well as the portfolio adjusts toward the market current rate.

The real thing to me is that most agents think that IUL can perform like a Variable policy rather than as a fixed policy over time. Should probably be able to outperform traditional fixed rate products, but even that is not guaranteed. Likely but not a sure thing.

You are using the term "portfolio rate" in a different way than what I am accustomed to hearing it.

A portfolio rate is applied to all policies, not just a single block of policies or product line.

A product that has a new business rate different than in-force business, is not using what most consider to be a portfolio rate.

A portfolio rate would have the same rates for new biz as for in-force.

Penn Mutual and Columbus Life are two that do this. I have had agents tell me Pac does this, but Ive seen other info that contradicts that.... plus its just an uber expensive product. Most IUL carriers do not use a portfolio rate.

 

[scagnt83]

I assumed as much, but he posted a picture with his claim... I didn't see where he got it from those figures. I don't trust any IULs.

Ah. Then I have no clue. Looking at the first post, what he posted certainly is not a 22% return.

 

[GSantos]

No doubt things change which is why the emphasis should be to make it abundantly clear to the customer what it is that they own. Otherwise, class action lawsuits are sure to follow. This is what led to Pacific Life deprecating the PDX1 and coming up with the PDX2 as a way to combat the stigma from the lawsuit. Now they guarantee a 2% alternate accumulated value so that even if the index does not perform you at least can be certain to be better off buying and holding rather than not buying the PDX2 at all. I also failed to mention that the cost of the multiplier declines to 3% starting Year 25. And the 5-year index option is contractually guaranteed at no less than a 15% cap. So the multiplier plus the 5-year index should translate into at least 5% returns and even if it doesn't, you still get the 2% minimum. I am not saying that it is the cure to all of life's problems, but it certainly would be helpful to a lot of people to learn all of the ins and outs on their own and either originate the contract on their own or find someone else who is willing to do it for them.

Another reason I don't think it is at all comparable to whole life, universal life, or variable universal life is that those products do not use options. As such, they do not have the asymmetric upside versus downside that an IUL can offer with very little interest earned on the general account. Also, VULs are taking on downside risk whereas IULs never take any downside from the stock market. I mentioned tokenization earlier because I believe that blockchain technology can greatly improve life insurance contracts. If anyone could pull up an NFT at any time they could easily detect that a policy had too much death benefit relative to cash value such that it will eventually cannibalize itself. By creating transparency in in-force policy illustrations, you not only increase the revolving door of business going to good agents, carriers, options, etc. You also create a competition for your premiums by pitting the insurance carriers against one another on a level playing field. If every contract is designed for max accumulation, then we will know quickly who the best of the best is. And if they increase charges to the max that will show in the quarterly statements. Wouldn't you like to have access to that kind of information? It would also benefit big banks to package all of the loans into one giant CLO that has all of its loans on the blockchain that anyone can audit.
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This sounds really cool would love to see how blockchain innovates the life insurance industry.

 

[Allen Trent]

Ah. Then I have no clue. Looking at the first post, what he posted certainly is not a 22% return.

It is 22% when using the beginning & ending values of the Cash after applying the multiplier factors to the index returns/changes. IE: $36,600 ending & $30,000 beginning = 22%. not showing the other parts of policy subtracting loads, fees, cost of insurance for that specific duration