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.”
002 What’u Know ‘Bout Cash Value Life Insurance?
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In this broadcast we discuss:
– Individual Life Insurance Sales are up so far 2012
– The NAIC approves Principle Based Reserves but nobody's talking about it
– A wayward advisor shows us his ignorance of cash value life insurance
– Mass Mutual buys Hartford's Retirement Plan Unit
Northwestern Mutual Poll reveals that Americans like life insurance
Now don't get too excited, I didn't say that Americans like life insurance “agents.”
If you’ve ever been in the life insurance industry or are currently in the industry there’s no doubt you’ve taken jabs about being a life insurance agent.
Some polling data I saw years ago placed life insurance agents among the least “respected” professions in the country—only being edged out by used car sales people and personal injury attorneys if I remember correctly.
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?
001 The Inaugural Broadcast of the Financial Procast
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In this inaugural episode of the Financial Procast, we discuss:
– Aviva Life USA–For Sale !
– MarketWatch Gets it Wrong on a Life Insurance Recommendation
– The Quiet Company makes another “Not So Quiet” investment
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.
September is Life Insurance Awareness Month
It’s September, well almost anyway, so you know what that means? Yep, it’s life insurance awareness month again.
We know that today is technically August 31st for all you obsessed with details, but we’re assuming that most of us will be enjoying the last hoorah of summer this weekend–which means we probably won’t be thinking about life insurance.
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.
