We've heard a lot recently about the fiscal cliff and the second dip, so recently I decided to spend a weekend reviewing stock market charts. Some of you might remember this guy from last year. Consider this part two.
Brandon Roberts
2013, The Estate Tax, and You
The Estate Tax is set for a nasty reset come the end of this year if Congress does not act to extend current legislation, or create new. We've steered clear of political discussions on the Insurance Pro Blog, and we still intend to do that. Today's discussion will attempt to be as objective on the topic as possible, and bring our perspective to the table about what a regression to a $1 million dollar exemption and a 55% top marginal rate will mean to you.
BREAKING NEWS: Prudential Financial Halts Contributions to Popular Variable Annuity Contracts
In a world that has seen more and more hurried announcements of product closures, Prudential Financial made a quick announcement at the end of August that it was stopping future contributions to it's Highest Daily Daily Lifetime 5, Six Plus, Seven, and Seven Plus contracts.
Modified Endowment Contract: Pro Blog Style
Modified Endowment Contract is frequently known as a condition where an insurance contract becomes “paid up” within 7 years. That's an okay understanding of a basic principle (it served me well for about 6 months and insured I didn't do anything really stupid when I was armed and dangerous as a new agent), but there's more to MEC's than just not making it paid up within 7 years.
What Northwestern Mutual’s Latest Conspicuous Investment Adds to the Cash Value Life Insurance Discussion
Northwestern Mutual is a large mutual life insurer well known for it's financial stability and smug career agency sales force. Another thing the “Quiet Company” is somewhat well known for within the industry is its not so quiet approach to brandishing about its latest investment moves.
A few weeks ago we learned that Northwestern now includes a $142.5 million dollar loan to Douglas Emmett, Inc. for its latest project: the Warner Center Towers.
On its face this may not seem like such a big deal. It's certainly not a huge investment on the behalf of Northwestern. $142.5 represents about a 10th of one percent of Northwestern Mutual's total general account. But one thing to be gleaned from this news is the diversity of investment exposure your money has when it sits in an insurance company's general account.
These sorts of investments are pretty typical for most insurance companies. In fact, one of the most astute comments I've ever heard from a fellow agent was, “These companies tend to run mini private equity firms inside a portion of their general account.”
Direct Recognition vs. Non Direct Recognition
The debate between direct recognition and non-direct recognition is a long-standing one. Be sure to review both of our earlier posts on these topics for more in-depth explanations.
So, which is the superior method of treating dividends when there’s an outstanding policy loan?
Are the “purests” correct when they point to non-direct recognition as the only way a company should approach whole life policy loans?
Or, does direct recognition have an advantage by “not subsidizing the policies with loans with the ones without them” as the companies that issue direct recognition contracts are quick to point out?
Whole Life Dividends: Direct Recognition
Picking up from where we left off last time on whole life dividends, direct recognition is the opposite strategy to non-direct recognition.
It’s the newer approach to handling the payment of dividends when a policy loan is outstanding, and it’s frequently championed as the feature that allows life insurers to pay higher dividends on non-collaterally assigned policy values (hereinafter, “non-loaned policy values” because its slightly shorter and how we generally refer to it).
Whole Life Dividends: Non Direct Recognition
In the interest in filling in some obvious knowledge gaps, we figured we’d do a quick piece on non-direct recognition. In fact, we’ve decided to do a series on dividend recognition this month. Hopefully, this will satisfy anyone who wandered upon our whole life dividend piece and walked away without a confident understanding of the concept.
Bill Gross: Stocks are Dead?
Bill Gross of PIMCO, the authority on bonds (or so they say) announced earlier this month that the days of investing in equities for the long run (you know the sales slogan of Merrill Lynch, Morgan Stanley, Edward Jones, and company) is over.
Now, does it surprise us that the head of the the largest bond fund in the world is suggesting stocks are toast insofar as they are a long term investment/savings strategy? Does it surprise you that a blog dedicated (at least in part) to alternative asset classes would be talking about it? Now that we have everyone's self interest out of the way, lets get into what's interesting about Bill Gross' comments in his proclamation.
The Business Insurance Zone Day 5: Life Insurance Loans
Life Insurance Loans are the one thing just about every agent who has cash value life insurance in their quiver can tell you about. And why? Because they're TAX FREE! But wait, there's more…
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Unfortunately, however, we're not about to tell you about what you get if you call within the next 15 minutes. No, instead we're about to let you down somewhat hard. The more to this story is the ugly side of life insurance policy loans. To be clear, this isn't some tirade against them as I've been known for some other slick life insurance trick. Nor is it a suggestion that you not use them. We simply need to set some ground rules to keep you all honest and out of trouble.
