Whole Life Insurance has a Strong Risk Adjusted Return – Historical Evidence

 

Three years ago this past Friday we published one of the most significant blog posts on this web site. This post, and a successor post we published last year remain some of the most popular content we’ve created.

For those unfamiliar with the original article, it reported on real historical data provided by a whole life insurance policyholder who was fortunate enough to purchase a decently designed blended whole life insurance policy back in the early 90’s.

Keep ReadingWhole Life Insurance has a Strong Risk Adjusted Return – Historical Evidence

2015 Operational Cash Flow Growth for Whole Life Focused Life Insurers

We’ve reported on operational cash flow among life insurers in the past and note that we hold this metric in high regard for a multitude of reasons.

Our philosophy is that operational cash flow shows us true profitability of a life insurance company, especially among whole life focused insurers. Why is that? Well, it's primarily because life insurers have a unique income reducing option at their disposal with policyholder dividends.

Keep Reading2015 Operational Cash Flow Growth for Whole Life Focused Life Insurers

Myth: Indexed Universal Life Insurance has Stock Market Exposure – Case Study

When we discuss indexed universal life insurance with new potential clients, they commonly mention that they already have stock market exposure, so they see no need to gain additional exposure to the market.

I understand the impression they often have, but assuming that indexed universal life insurance gives you additional exposure to the market is a misunderstanding that could lead you to the wrong decision–many clients have expressed their gratitude in our willingness to pause and discuss the product more to ensure understanding.

Keep ReadingMyth: Indexed Universal Life Insurance has Stock Market Exposure – Case Study

Whole Life Insurance Five Year Investment Income Trend

Investment income is a huge profit driver for life insurance companies.

We've spent a lot of time analyzing and reporting on overall investment yield trends for life insurance companies, but that analysis only compares the raw yield insurers achieve on their managed asset pool.  It's possible that a declining yield simple indicates a de-risking strategy.

Investment income is not necessarily declining and the insurer is under no real financial trouble.  In fact, we've made this argument several times when discussing these trends and others.

So if we instead look at

Keep ReadingWhole Life Insurance Five Year Investment Income Trend

Five Reasons Whole Life Insurance is Better than a 529 Plan

 

The 529 Plan began to materialize in the mid 1990’s taking inspiration from prepaid tuition programs in the state of Michigan.

Since the initial formation it has become the dominate recommendation among financial gurus for college savings in the United States—despite President Obama’s suggestion that we end the tax free distribution 529 Plans enjoy during his 2015 State of the Union Address.

Despite the overwhelming support the financial media expresses for 529’s Americans still overwhelmingly choose basic savings accounts to save for college.

Keep ReadingFive Reasons Whole Life Insurance is Better than a 529 Plan

The Power of Whole Life Insurance in a Down Market

 

A few weeks ago a client of ours (we’ll call him Ted to protect his identity) reached out to us looking to take a policy loan from a whole life policy he owns.

A unique and, arguable rare, opportunity arrived on his door step (literally) and he needed cash. The interesting part of this story, though, is not that whole life cash values were available to him so that he could seize the opportunity but rather that he had plenty of other money he could have used instead.

There was just one problem,

Keep ReadingThe Power of Whole Life Insurance in a Down Market

Risk Adjusted Return for Life Insurance Assets – Whole Life Insurance

I personally take risk adjusted rate of return very seriously. My focus on it largely comes from the notion of taking calculated risks to achieve various levels of return. For example, one might make a killing placing his or her entire life’s savings into a pink sheet stock, but risk exposure relative to the anticipated return is likely extremely unattractive.

One of the elements we find so attractive about life insurance in your portfolio is the stellar risk adjusted rate of return. But how do various life insurers themselves rate when it comes to the return they achieve on their policyholders’ money and the risk they must shoulder to achieve it?

Keep ReadingRisk Adjusted Return for Life Insurance Assets – Whole Life Insurance