Pacific Life Policy Performed 22%

[ejbarraza]

I never said the participation rate was not guaranteed.

I said the multiplier is not guaranteed. They can reduce it to 1x at will.

I am absolutely correct on both points. The multiplier options are a Fee that is directly deducted from the policy and can take it into the negative.

And multiplier of 1 is not a multiplier. Do the math.

But you're wrong in that the multiplier's leverage is currently 270% years 2-20 and is GUARANTEED at 170% minimum and after year 25 the fee for the multiplier drops to 3% and a minimum 130% leverage on whatever the underlying index performs. If it's completely voluntary why wouldn't you want that leverage available as a feature? Also, the volatility controlled indexes are GUARANTEED to be uncapped for life. Even with the net cost of the multiplier you would still come out ahead over the long-term especially after a bear market crash.

 

[ejbarraza]

Is this from the 5 yr pt to pt. In your other post showing the 5 year from 2009 to present posted 70-90% for a 5 year period, how does 100k become 370k in 5 years at annual averages of 15-18%. Still a great return, but wouldn't 100k become closer to $190k. Or are you saying the multipler on top of it would further drive it to $370k

Also, wouldn't the 5 yr average cost of the 5 yr pt to pt have an average deduction of 37% for the cost of the multiplier rider?

Lastly, if the insurance company could consistently turn 100k into $370k with all their billions in surplus, they would have zero need to have new policy sales to attract money that is very costly up front to acquire & to carry the liabilities & reserves of death claims. If this product design isn't more profitable to the carrier than a standard design of other carriers, I would think they would just go all in with their cash to hold the bonds & options in their own portfolio rather than using those financial benefits for the max gains of the consumer

If the underlying index moves up 100% then the 2.7 times multiplier is added on top of that you would net 270% after the $100k is subtracted $7.5k year 1 for the rider fee. If you dollar cost average every month for 5 years then yes you would be paying approximately $7.5k per year if you so choose. Ask the guy who earned "only" 84% if he would be willing to pay the 7.5% fee to nearly triple his return. Also, given that every month has been a positive with the worst month 3/2015 - 3/2020 yielding 50% (no leverage) even with the S&P up only 15%. When everyone is losing money in 2022, this policy would have been purring like a kitty with high double-digit monthly compounding NOT including any multipliers. You can argue with the logic, but you can't deny the historical crediting rates and the fact that they added the 5 year index and volatility controlled indexes to in-force policies to do right by customers instead of only making it available to new policyholders. I don't know what all the hate is about if it does not even affect you. They are the number 1 sellers of IUL for a good reason, they provide value to customers.

 

[ejbarraza]

Of course not, because that is the start of one of the longest bull markets in history (bolded).

That being said, at 28 and knowing the risks, maybe not a bad way to take a flyer on a portion of your portfolio. I wouldn't buy this thing since IUL will still perform more like a bond over the long term (in performance, not correlation) than a stock and I don't want my bonds to have this much risk.

How many examples do I need to show you that it has not performed like a bond since inception. Does a bond generate 32% yield with no leverage EVER? Or better yet the 110% yield using the 5 year index. With a modest fee can a bond generate 270% yield in 5 years? Of course not, but you refuse to believe what's right in front of you. In spite of the fact that there are policies in force that show a 10% return since 2009. Have bonds averaged that with minimal downside risk? The retort will probably something like this is cherrypicking datapoints from a 40 year bond bull market so that is going to come to an end and then you'll be sorry.

 

[Allen Trent]

How many examples do I need to show you that it has not performed like a bond since inception. Does a bond generate 32% yield with no leverage EVER? Or better yet the 110% yield using the 5 year index. With a modest fee can a bond generate 270% yield in 5 years? Of course not, but you refuse to believe what's right in front of you. In spite of the fact that there are policies in force that show a 10% return since 2009. Have bonds averaged that with minimal downside risk? The retort will probably something like this is cherrypicking datapoints from a 40 year bond bull market so that is going to come to an end and then you'll be sorry.

The main reason I dont believe this is realistic long term is that this money isnt being invested in a business or equities that can grow because of increased revenues, sales, share price.

It seems these returns are only possible for as long as the person on the other end of the financial instrument is willing to lose money. Last I knew, carriers invest almost solely in bonds & mortgages, then use the returns from those more conservative invesments to buy index options to offer the upside to an IUL or FIA. Last I read, sellers of options win 95% of the time. Buyers of options only win 5% of the time. So, how long will investment banks offer the options at the current pricing to allow for all these dollars to come out of nowhere to credit these multipliers. 7.5% charge only in the earlier decades doesnt seem like enough to offer 270% unless they know that will rarely, if ever happen. Where does the 270% lump sum of money come from? definitely not the carrier as they only made 5-8% annually

I guess my point is how is this sustainable for any of the parties to the financial side of the wizardry. Also, with these kinds of returns, with the level death benefit policies, the carrier will have little to no net amount at risk to assess COI charges. So, other than holding the assets so they can be invested in bonds & mortgages, where is the special sauce

 

[Tahoe Ray]

How many examples do I need to show you that it has not performed like a bond since inception. Does a bond generate 32% yield with no leverage EVER? Or better yet the 110% yield using the 5 year index. With a modest fee can a bond generate 270% yield in 5 years? Of course not, but you refuse to believe what's right in front of you. In spite of the fact that there are policies in force that show a 10% return since 2009. Have bonds averaged that with minimal downside risk? The retort will probably something like this is cherrypicking datapoints from a 40 year bond bull market so that is going to come to an end and then you'll be sorry.

As someone pointed out, if the insurance company could generate those returns with "minimal risk" they would just do it in their general account but guess what, they don't because they can't.

The historical crediting rates are hypothetical. The one index that you posted didn't even come out until Sept 2021.

These carriers just make up these indices, backtest them with the most favorable allocations, and post "historical" returns. They're the ones who cherry-pick, not me.

It's largely bullshit which you'll eventually find out.

P.S. I believe in IUL and that it can outperform other insurance products. But it's just that, an insurance product so it's stuck with insurance product returns which can have great years but over 20-30 years, the IRR is still going to be 4-6%, no matter what whiz-bang index the carrier claims to have.

 

[marindependent]

I would simply like to point out that this is one of the better post streams online about using Life Insurance for "investment" related purposes.

@Tahoe Ray @Allen Trent @scagnt83 @Lloyds of Lubbock among others - really terriric job on this. Thank you Guys. You have done this forum a real service.

For consumers that are considering these policies for purposes other than life insurance or if you are being told things that seem to good to be true - read this entire post and just try and understand some of the confusing terms and methodologies here.

 

[jboussea]

I would simply like to point out that this is one of the better post streams online about using Life Insurance for "investment" related purposes.

@Tahoe Ray @Allen Trent @scagnt83 @Lloyds of Lubbock among others - really terriric job on this. Thank you Guys. You have done this forum a real service.

For consumers that are considering these policies for purposes other than life insurance or if you are being told things that seem to good to be true - read this entire post and just try and understand some of the confusing terms and methodologies here.

I don't think those guys are saying you should never use IUL as something other than life insurance ... there is nothing wrong with purchasing a cash value IUL mainly for the cash value side of its benefits

 

[PrivClientSG]

As someone pointed out, if the insurance company could generate those returns with "minimal risk" they would just do it in their general account but guess what, they don't because they can't.

The historical crediting rates are hypothetical. The one index that you posted didn't even come out until Sept 2021.

These carriers just make up these indices, backtest them with the most favorable allocations, and post "historical" returns. They're the ones who cherry-pick, not me.

It's largely bullshit which you'll eventually find out.

P.S. I believe in IUL and that it can outperform other insurance products. But it's just that, an insurance product so it's stuck with insurance product returns which can have great years but over 20-30 years, the IRR is still going to be 4-6%, no matter what whiz-bang index the carrier claims to have.

I think you brought up some very good points. Thanks. While life insurance companies "would do" if they "could do" -- but, you're right, they can't! When people talk about the actual operations of a life insurance company, in the context of their general account, I've always found it interesting that while insurance companies collect premium dollars and invest those monies in their general account, it is the statutory reserves that are just as critical. Yes, we all know about compliance, governance, etc. -- but the statutory reserves, while there is a lot that can be done, these monies are either held in cash, or in readily/typical marketable securities that can be converted into cash reliably, easily, and on an immediate/short-term basis. Today we see companies with re-insurance agreements and treatises', shadow reserves, and so on. You have gross vs. net dividends, and the bifurcation of reserves.

What I found even more interesting is the statutory reserve method/approach. The non-statutory or excess, voluntary reserves is where insurance companies try to recapture some of that "lost" potential ROI. I say this because tweak, manipulate, fluff all you want -- but life insurance products at their core are just that, life insurance products. Aside from PPLI, and that is a discussion in and of itself -- life insurance products will always be just that, and will all perform as just that. I've often ranged that at 3% to 7%, but I have no problem with 4 to 6 either, LOL.

For me, it's a question of risk. 7 with risk, 6 with less, X guaranteed. No, not that simple. Anyway, thanks again!

 

[PrivClientSG]

BTW, I've seen countless assessments, analysis' and so forth, by leading insurance consultants, and I've never seen any life insurance product "perform" with these sexy ROR's. You can show me a variable policy, with monster ROR's on the sub-account(s), and massive amounts of cash accumulated -- but the various costs, and the mortality costs will prevent one from arriving in fantasy land.

The best I've seen is with PPLI and even at that there is a massive amount of discussion and due diligence warranted. Thanks.

 

[ejbarraza]

BTW, I've seen countless assessments, analysis' and so forth, by leading insurance consultants, and I've never seen any life insurance product "perform" with these sexy ROR's. You can show me a variable policy, with monster ROR's on the sub-account(s), and massive amounts of cash accumulated -- but the various costs, and the mortality costs will prevent one from arriving in fantasy land.

The best I've seen is with PPLI and even at that there is a massive amount of discussion and due diligence warranted. Thanks.

As someone pointed out, if the insurance company could generate those returns with "minimal risk" they would just do it in their general account but guess what, they don't because they can't.

The historical crediting rates are hypothetical. The one index that you posted didn't even come out until Sept 2021.

These carriers just make up these indices, backtest them with the most favorable allocations, and post "historical" returns. They're the ones who cherry-pick, not me.

It's largely bullshit which you'll eventually find out.

P.S. I believe in IUL and that it can outperform other insurance products. But it's just that, an insurance product so it's stuck with insurance product returns which can have great years but over 20-30 years, the IRR is still going to be 4-6%, no matter what whiz-bang index the carrier claims to have.

The actual rate of return of PDX2 during the COVID crash.