Guardian and Northwestern Mutual. January 15, 2010

Transcription

1 2010 Whole Life Competition - The Guardian Advantage Guardian and Northwestern Mutual January 15, 2010! "#$ %& '('()***+, -'. /

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3 If you are competing Whole Life to Whole Life: Guardian s 2010 dividend interest crediting rate is 7%. Northwestern s rate is 6.15%. Guardian s whole life policies have lower premiums and higher 20 th Year IRRs on Total Cash Surrender Value than Northwestern. Guardian s premiums on 50/50 blends are significantly lower. Guardian offers the most robust product features (riders) that add significant value. There is more to the product than just dividend performance including Waiver of Premium with 5-Year Own Occupation Definition of Disability Accelerated Benefit Rider for terminal and permanent chronic illness. Guardian s loan rate is contractually better than Northwestern s If you are competing Product Portfolio to Product Portfolio: Guardian s offers a Secondary Guarantee Universal Life Guardian s regular Universal Life has a lower annual premium to carry and a portion of the death benefit can be accelerated for a terminal and chronic illness. Guardian s 20 Year Term is more competitive 2$ 0 / / 5*)*$ 0 3

4 / '. ; < / $1,000,000 Male age 40 Best Class Guardian Northwestern Mutual Guardian Advantage (Basis Points) Guardian Product Northwesten Mutual Product Cash Value IRR Year % % 2,109 L121 w/ EPUA* L-90 Year % % 267 L95** Estate CompLife** Year % -0.83% 136 L95 Estate CompLife Year % 3.58% 50 L99** Estate CompLife Death Benefit IRR Year % 33.74% 297 L121 Estate CompLife Year % 12.61% 53 L121 Estate CompLife Guardian Advantage Premium ($$) Lowest Base Premium $12,670 $16,000 $3,330 L121 Estate CompLife Natural Offset After Year L99 w/epua*** L-90 Dividend Interest Rate 7.00% 6.15% 85 =;( )/! )5) &'; >9*/?)""@*0 ' $ 1 ; AB7 )*":0 ==;9@?)"@5* 99?)@*B*0?)A***0 === ', ( 7?)""@*:/ '0 % 6 7)58*9: 4 / 5*)*2$ % 02$ 0 / ;32 0 4

5 Guardian has a suitable permanent cash value product for most competitive benchmarks. L95 for high early cash value, beginning in year 2, and early premium offset L99 for high 20 year IRR of Cash Value L121 for low base premium and high IRR of Death Benefit Achiever Gold and Executive Strategies Whole Life for high early cash value 10 Pay Whole Life and Limited Pay Whole Life for a shorter contractual premium commitment Single Pay Whole Life for one-time deposit opportunities such as a bonus or an inheritance 5

6 See The Results Using the Same Premium Outlay: Guardian s L99 with EPUA vs. Northwestern s L90* Male Age 40 Best Class $1,000,000 Guardian Northwestern Difference (%) Dividend Scale 7.0% 6.15% 85 Premium 17,750 17,750 0% Cash Value , ,141 6% , ,068 10% 30 1,207,988 1,120,461 8% Death Benefit 10 1,168,442 1,134,564 3% 20 1,559,159 1,488,192 5% 30 2,151,063 2,043,088 5% Difference (Basis Points) Cash Value IRR % -1.21% % 3.47% % 4.44% 42 Death Benefit IRR % 32.50% % 12.31% % 7.68% 27 Source: Company Illustrations (12//09) Values are based on the 2010 Dividend Scale and are not guaranteed. * The contractual premium for Guardian s L99 is payable to Age 99 while Northwestern s L90 is payable to Age 90. 6

7 Compare The Results of Blending with Term Insurance: Using Guardian s L121 and Northwestern s Adjustable CompLife with a 50/50 blend, Guardian s premium is 36% lower. Male Age 40 Best Class $1,000,000 Guardian Northwestern Difference (%) Divide nd Sca le 7.0% 6.15% 85 Premium 7,396 11,610-36% Cash Value 10 67, ,991-37% , ,753-41% , ,751-44% Death Benefit 10 1,000,000 1,000,000 0% 20 1,000,000 1,000,000 0% 30 1,000,000 1,288,893-22% Difference (Basis Points) Cash Value IRR % -1.49% % 3.31% % 4.36% -71 Death Benefit IRR % 37.75% % 12.52% % 7.49% 103 Source: Company Illustrations (12//09) Guardian s Option Q term rates are guaranteed for initial two policy years. The term additions may be converted during the first 10 years. Northwestern term rates in this illustration are guaranteed for 17 years. The guarantee may be extended to Age 70 by payment of appropriate premiums. The term additions are not convertible. 7

8 !"!#$ $%&' Guardian s L121 premium is 21% lower than NML s Adjustable Comp Life (Male age 40 best class $1 M) Add EPUA to match NML s premium Increases Cash Value (both Total Guaranteed Cash Value and Current Cash Value) and Death Benefit Improves IRR of Cash Value Include FDP/XL s custom columns Total Guaranteed Cash Value and IRRs on the EPUA. For this client, with annual EPUA contributions of $3,330, the IRR on EPUA Cash Value is at least 5% every year beginning in Year 11 (through age 100) based on 2010 the dividend scale). 8

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10 * + In addition to Guardian s strong illustrated values, Guardian s industryleading riders add value to the policy: Accelerated Death Benefit covering both chronic and terminal illness Guardian has no cap for terminal illness. NML has a $250,000 cap NML s accelerated death benefit offers no chronic illness benefit NML s accelerated death benefit is not available in 10 states including NY, NJ, CT and PA. Waiver of Premium riders define the initial period that total disability is considered the inability to perform substantially all of the duties of the insured s regular occupation Guardian s waiver has a 5-Year Own Occupation definition NML s waiver has a 2-Year Own Occupation definition '

11 * + Enhanced Guaranteed Insurability Option (EGIO) Guardian s rider gives the insured more opportunities to purchase insurance. Depending on issue age up to 8 option dates available - each to a maximum of $250,000. This benefit can be particularly useful when combined with waiver of premium. Client age 40 could have an additional $1,250,000 of face amount with all premiums waived. Maximum issue age is 50 with last exercise date at age 58. NML s rider has up to 7 option dates available to a maximum of $150,000 each. Maximum issue age is 38 with only one exercise date available Client age 40 would not be eligible for this rider. DuoGuard Rider, now offering a variety of options when exercised Powerful planning tool that gives the beneficiary upon the death of the insured, the ability to purchase coverage in the future under 3 scenarios (may be combined): Attained age, Original age or Single Premium Paid-up (attained age only). Evidence of insurability is required only at the time of issue of the rider (not at time of exercise). NML does not offer this rider ' 6 11

12 ', Cost of Benefit Terminal illness benefit Terminal illness benefit cap Chronic illness benefit Guardian Life None Yes None Yes Northwestern* None Yes $250,000 No % 6 0 ='; 3 />/ 0'. /. ; & 0 & / A>$ 0 ;!3 0 & / )5>$ 0 12

13 )- Waiver of Premium definition GIO. Number of exercise option dates available GIO last exercise age Guardian Life 5 year own occupation 8 dates/ $250,000 maximum per date 58 Northwestern 2 year own occupation 7 dates/ $150,000 maximum per date 40 DuoGuard EPUA loads Whole Life Term Rider blends -Convertibility Original age, Attained age, or Single premium 5% 10 years Not available 9% Not Convertible % 6 = 13

14 Guardian s lower loads on EPUA payments lead to more cash value immediately for same rider payment Guardian s load: 5% NML s load: 9% The difference is $400 on a $10,000 payment Guardian s lower modal factors lead to lower outlay for the same basic annual premium Guardian s GOM NML s similar option: )58*9: 14

15 #.. Lower cost of borrowing with Guardian s whole life policies. Guardian: Loan interest rate is guaranteed to be reduced from a fixed 8% to 5% at the later of age 65 or year 21. Loan spread is reduced to 10 basis points in later years. Northwestern Mutual: Choose fixed rate of 8% or a variable rate. The January 2010 variable loan interest rate is 5.63%. To switch from the variable rate to the fixed rate, the variable rate must be less than 8%. Loan spread is 55 basis points in all years. 7)58*9: 15

16 , /# Term blends Guardian typically recommends 50%/50% blends but allows a maximum whole life/term blend of 10%/90% with a term minimum of $25,000. NML allows a very low base face amount ($15,000 for Adjustable CompLife) and a term minimum of $10,000 For the same premium, Guardian can offer a greater percentage of base face amount - more guarantees. Impact on premium if dividend is reduced Guardian illustration is tested at 100 bp below current rate. No immediate impact on premium unless necessary to pay OYT cost. % 6 75**B: 16

17 * Use a third-party vendor such as Vital Signs that presents similar financial data side-by-side for hundreds of insurance carriers. A proprietary comparison may include ratios that are not industry standards. There are no industry standards for setting the annual dividend interest rate. Therefore, matching another carrier s dividend interest rates on a Guardian proposal is misleading. A lower mortality ratio is considered more favorable but is accurate only when comparing companies with a very similar block of business. Many factors impact the expense ratio including the ratio of new and recent sales to total inforce. The relative expense ratios do not take into account the differences in the mix of business. Comparison of historical IRRs must include the relative premium payments. Higher premiums relative to the same death benefit will naturally result in higher cash value IRRs. All things being equal, a higher premium will lead to lower IRRs for the death benefit. 17

18 /0 Both companies: Mutual companies operated to benefit policyholders Excellent historical dividend payments Strong company financials Competitive whole life products What sets Guardian apart? Riders and policy provisions that are guaranteed Lower contractual premiums on whole life Higher 20th Year IRRs on cash value assuming same outlay 18

19 Consider That The Market Is Demanding More Choice How do the other Guardian products stack up against Northwestern s?

20 123 5*(.<$ -?)******-! ; /. -/ +BDE Underwriting Class Best 2 nd Best 3 rd Best 4 th Best Guardian ,250 Northwestern Mutual 878 1,248 1,608 N/A 1 /.?5*>?"* /$ 0 '; $ / )* 0 % 6 '$ / 5**9 20

21 &# 4 '!'524, # "!- Ultra Life Gold Custom UL-Accum ulator Difference Crediting Rate: Tier 1** 5.35% 5.80% -45 Crediting Rate: Tier 2** N/A 4.15% Premium to 6,214 6, % Premium to Carry to A121 5,451 6, % % 6 7)58*9: ='; & >?5@***0; $ 0 == > 0'; )8*)85*)*0 1./ )?CA"9B F 1 50 ; 0 21

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