NU Online News Service, June 4, 2004, 5:41 p.m. EDT – U.S. banks relied more heavily on life insurance to beef up investment earnings in 2003.[@@]
The cash value of life insurance accounted for 13.1% of U.S. banks’ core, “Tier 1″ capital at the end of 2003, up from 11.2% a year earlier, according to The Todd Organization, Greensboro, N.C.
Bigger banks made more use of BOLI than smaller banks, and banks with more than $5 billion in assets ended 2003 holding 19.4% of their Tier 1 capital in the form of BOLI cash value.
The Todd Organization, an executive benefits firm that sells BOLI, has based those figures on an analysis of bank call reports filed with the Federal Deposit Insurance. Corp.
Banks with BOLI programs buy life insurance that covers certain key employees, then pay the premiums, book the annual growth in cash surrender value as income and use the policy proceeds to cover employee benefits costs, according to Massachusetts Mutual Life Insurance Company, Springfield, Mass.