The latest Full Disclosure life policy excerpts feature 72 survivorship universal, whole and variable life insurance policies. This is down from our previous survey conducted at the end of 2006 that featured 81 excerpts. The reason for the decline is that a number of companies are re-pricing policies as a result of implementing the new 2001 CSO mortality tables. Companies are required to adopt the new tables by 2009, so this process should accelerate further over the next year. Some are taking this opportunity to introduce completely new policies, perhaps prompting a policy design competitive “arms race” past 2009.
As far as recent survivorship sales trends are concerned, LIMRA reports sales were 1% higher in the first quarter of 2007 compared to that period in 2006. This result was due to a 19% increase in sales of variable survivorship products. LIMRA also noted that sales were about evenly split between accumulation-oriented products and those designed more for protection.
The Full Disclosure excerpts in this report feature illustrated values for whole, universal, indexed universal and variable life survivorship products. And while these charts are only slices of the Full Disclosure database, they will give you an idea of how these products perform on a prospective basis. Also included are charts for minimum long-term guarantee products. This increasingly popular use for flexible premium survivorship life provides minimum annual premiums to age 100 or beyond (lifetime) with little or no cash value at maturity, but with low guaranteed annual premiums.
In addition to the guaranteed premium charts, three others cover current illustrated values for variable, universal and whole survivorship life. These illustrated values are based on current interest or dividend crediting, expenses and, in the case of variable designs, a predetermined crediting rate. Full Disclosure applies the internal rate of return method to current illustrated accumulation values and current death benefits measured at policy durations of 30 years dependent on age combination. The IRR of cash values rises over time, as the IRR for the death benefits falls.
A careful analysis of the IRR measurements indicates which policies are designed (in an illustration at least) to build current cash values, guaranteed cash values, or death benefits. You will notice at the end of the SVL and SUL charts, there are columns showing how the policy would have performed under an increasing death benefit option. The cash value of an increasing death benefit policy, while not listed, would be lower because of the added costs of insurance. The whole life policies have naturally rising death benefits due to the paid-up additions dividend option.
The edition of Full Disclosure that includes the information in these excerpts was released in June with policy data current as of May 1, 2007. Standardized annual premiums are the same between universal and variable life illustrations, and the VL illustrations are based on a 10% gross rate of return with average subaccount expenses “netted out” of the projected values.
Because survivorship life products are designed for certain objectives, whether maximum cash accumulation or none at all, for example, we have summarized what each is designed for. Some have simplified underwriting, short-term values, living benefit riders, or many others. We not only examine a product’s premiums and illustrated values, but try to get to what it is designed to do best. That is the key to any successful comparison in this time of product specialization. The market is also adding new hybrid, index, and guaranteed premium variations (of flexible premium products) to the mix. Often, simply looking at the numbers doesn’t tell you enough.
Clearly, between sales and product development trends, survivorship life is becoming more entrenched after the back and forth over estate law changes. The way things are going in Washington, it looks as if the tax will be around for a long time. That’s good news for the producers and companies offering a “pennies on the dollar” solution for paying it.