Life Insurance Economic / Trend Update. Life Insurance Industry Averages According to VitalSigns

Transcription

1 Life Insurance Economic / Trend Update 111 Virginia Street Richmond, VA Life Insurance Industry Averages According to VitalSigns Net Yield on Mean Invested Assets Total Investment Return Year Average 4.46% 4.70% 4.79% 4.43% Data for Year-End 2012 from the life insurance companies' statutory annual statements. 1

2 Life Insurance Industry Averages According to VitalSigns Expected Year Nominal Return International Stocks 7.25% U.S. Large Cap Stocks 7.25% Municipal Bonds 3.25% Corporate Bonds 4.25% Inflation 2.50% Illustrated returns reflect the J.P. Morgan Asset Management 2012 Long-term Capital Market Return Assumptions 16 Interest Rate History Moody s AAA Corporate Bond 1950 Present Aaa Corporate Bond 2

3 16 Interest Rate History Moody s AAA Corporate Bond 1950 Present Aaa Corporate Bond Life Insurance Crediting Rate Interest Rate History Moody s AAA Corporate Bond 1950 Present WL dominant UL introduced VUL introduced NLG introduced IUL introduced Aaa Corporate Bond Life Insurance Crediting Rate 3

4 Interest Rate Environment Going Forward Federal Reserve s current plan is to keep rates low until 2015 This means further downward pressure on life insurance crediting rates We expect interest rates to rise, eventually In a rising interest rate environment we expect life insurance crediting rates to lag the market Current environment leaves life insurance policy holders and advisors looking for alternatives Life Insurance Landscape Return Private Placement Variable Universal Life Indexed Universal Life Universal/ Whole Life No-Lapse Guarantee Term Risk 4

5 How We View the Market Fixed Income Supported products (NLG/WL/UL) What are the guarantees? How much do they cost? How are they hedged? Future: Guarantees are very expensive, new accounting and risk based capital rules, carriers selling blocks of business How We View the Market Equity Supported products (IUL/VUL/PPVUL) Is the product suitable? What are the investment options? How are we going to manage the risk? Future: A long term asset necessitates more than one asset class, potential for return, policy owner flexibility and control 5

6 Variable Universal Life Insurance 10 Year Annualized Model Return 60 / % 80 / % % Rates of Return are not guaranteed and are not intended to be predictions of risk or return. The performance data quoted represents past performance, which does not guarantee future results. Investment return and principal value will fluctuate so that your account value when redeemed may be worth more or less than the initial premium paid. Securities Offered Through M Holdings Securities, Inc., A Registered Broker/Dealer, Member FINRA/SIPC. BCG Companies is independently owned and operated. Other Considerations Low interest rates help address funding constraints and limitations Opportunities to fix underperforming products or address broken strategies Need to address impact of new tax legislation on client planning 12 6

7 For The Client, It s About Having an Advisor Team knowledgeable abouttheinsuranceenvironment the environment and available products Understanding funding strategies to match policy performance Outlining a service commitment and managing the policy Other Resources Advisors Guide to Life Insurance / Long Term Care M Financial Group / ABA s Real Property, Estate and Tax Law Section BCG Companies Keiter Other members of the Advisor Team 7

8 Thank you Questions? IMPORTANT DISCLOSURE This is a hypothetical illustration to show variable life insurance and is not indicative of the performance of any particular investment. Variable life insurance products are long-term investments and may not be suitable for all investors. An investment in variable life insurance is subject to fluctuating values of the underlying investment options and it entails risk, including the possible loss of principle. The performance of your account will vary and you may receive more or less than the amount invested. The policy values reflect current policy charges, current cost of insurance rates, current mortality and expense risk charges, average fund expenses and the stated hypothetical gross rate of return. The policy values are hypothetical for illustration purposes only and may not be used to project or predict investment results. Policy values will vary based on the actual performance of sub-account investments selected, actual insurance charges over the life of the plan and the timing of the premium payments. Please refer to the attached illustrations for illustrated values assuming maximum policy charges and a 0% return. Product guarantees are subject to the claims-paying ability of the issuing insurance company. Loans and partial withdrawals will decrease the death benefit and cash value and may be subject to policy limitations and income tax. Investors should consider the investment objectives, risks, charges and expenses of any variable life insurance product carefully before investing. This and other important information about the investment company is contained in each product's prospectus, which can be obtained by calling Please read it carefully before investing. This information has been taken from sources which we believe to be reliable, but there is no guarantee as to its accuracy. This material is intended for informational purposes p only and should not be construed as legal advice and is not intended to replace the advice of an attorney, tax advisor or plan provider. Pursuant to IRS Circular 230, M Holdings Securities, Inc. notifies you as follows: The information contained in this document is not intended to and cannot be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance products. Securities Offered through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC. BCG Companies is independently owned and operated. 8