The number of survivorship life products in the marketplace has decreased dramatically, which may not be news to you if you are accustomed to placing much of it on an ongoing basis. You may, however, be surprised to see how many fewer there are compared to only 12 months ago. At that time, we featured 45 survivorship universal life policies, 24 survivorship variable life policies, and 5 survivorship whole life policies, for a total of 74 policies. This time around, there are 31 SULs, 10 SVLs, and 5 SWLs for a total of only 46.
There are a few reasons for the decline and we expect future surveys to show more product availability. The biggest factor in the dropoff is the 2009 deadline for companies to adopt the new 2001 CSO mortality table. Some companies have not brought out new or repriced versions yet, but are planning on doing so in the future. Others, due to the change, eliminated policies they thought overlapped others in their portfolios. AIG, for example, used to offer 4 SUL policies. Today it has one to submit and it is not alone. Where specialization of products has been the norm until recently, perhaps the pendulum, in terms of product design and pricing, is swinging back to the Swiss Army ethos of having one, or a few, very flexible products.
Where the above is true of companies selling both types of flexible premium survivorship life plans, for variable varieties the state (or at least the perceived future state) of equity and other markets has investors fleeing to safety, naturally after the fact. This leads to more product consolidation and repricing in the short term, as well as a repositioning of SVL plans within company portfolios. We will see where we are in the beginning of next May when new product introductions are strongest. However, we don’t anticipate the number of these products rising to 2007 levels in the foreseeable future.
Full Disclosure software includes complete policy specifications and features, current and guaranteed costs and expenses, and a wide sampling of illustrations. The edition of Full Disclosure that includes the information in these excerpts was released in December. Policy data is current as of Nov. 1, 2008. While these charts are only slices of the Full Disclosure database, they give an idea of how these products perform on a prospective basis.
Three main charts feature illustrated values for whole, universal, indexed universal, and variable life survivorship products. These illustrated values are based on current interest or dividend crediting, expenses, and in the case of variable designs a predetermined crediting rate. In addition to the main illustration tables, there are charts featuring premiums for minimum long-term guarantee products. This increasingly popular use for flexible premium survivorship life provides minimum annual premiums to age 121 with little or no cash value at maturity, but with lower guaranteed annual premiums than ever.
Full Disclosure applies the internal rate of return method to current illustrated accumulation values and current death benefits measured at policy durations 30 years dependent on age combination. The IRR of cash values rise 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 each chart (SVL & SUL), 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 WL policies have naturally rising death benefits due to the paid-up additions dividend option.
Standardized annual premiums are the same between UL and VL illustrations, and issue classes are likewise the same across the 3 policy types. The VL illustrations are based on a 10% gross rate of return with average subaccount expenses “netted out” of the projected values. Going forward we will be addressing the relatively high assumed rate of return we have been using for VL policies. We have been reluctant to do so for a number of reasons, primarily that we would like values throughout the illustration period to better dramatize the differences between policies in terms of costs and overall efficiency in building values and death benefits. We’ll probably have to adjust assumed premium levels upwards to stay with this goal while cutting the assumed return to a more realistic level.
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 to get to what it is designed to do best. Often, simply looking at the numbers doesn’t tell enough.
Please see the footnotes at the bottom of each table that may reveal important differences between products, or in ways that they were illustrated by contributing insurers. As mentioned earlier, some of the policies in this report are not designed for cash value accumulation, but for minimum long-term guaranteed premiums. It is on that basis primarily that any comparison to other products should be done.
Survivorship Universal Life Product Design Objectives
AIG American General Life Elite Global Survivor
Elite Global Crediting Strategy (1-Year and 5-Year); Issue to Age 80
Allianz Life Survivor
Indexed UL; Flexible Guaranteed Death Benefits
Ameritas Life (UNIFI Co.) Excel Secondary Guarantee SUL
Guaranteed Death Benefits
Aviva Life & Annuity Indexed SUL
Indexed Policy; No-Lapse Guarantee to Lifetime; Various Sales Scenarios
Aviva – Bankers Life of NY Indexed SUL
Indexed Policy; No-Lapse Guarantee to Lifetime; Various Sales Scenarios
AXA Equitable Life Athena SUL III
Death Benefit Guarantees
Genworth Life Lifetime Provider (SM) SUL II
Death Benefit Guarantee to Age 121; Low Premium to Carry
Guardian Life EstateGuard SUL
Low Premium to Endow & Carry; Single Pay Sales; Accumulation Sales
ING “Security Life of Denver” SUL-GDB
Lifetime Death Benefit Guarantees
John Hancock Life (USA) Performance SUL 06
Minimum Premium to Carry; 10-Pay Endowment Solve; Lump Sum Death Benefit Solve
John Hancock Life (USA) Protection SUL-G
Lifetime Death Benefit Guarantee; Policy Protection Riders
Lincoln Benefit Life Legacy Secure SL
Age 121 Lifetime Death Benefit Guarantees
Lincoln National Life LifeGuarantee SUL
Lifetime Guaranteed Death Benefit; Maximum Death Benefits
Massachusetts Mutual Life SUL Guard
Lifetime Death Benefit Guarantee; Premium Allocation Options
MetLife Investors Legacy Advantage SUL
Death Benefit Guarantee; Current Assumption Sales
National Life NL Estate Provider
Flexibility; Various Sales Scenarios
New York Life SUL Lifetime Guarantee
Lifetime Guaranteed Death Benefit
Northwestern Mutual Life Survivorship UL
Premium Flexibility; Long Term Values
Nationwide Life Nationwide YourLife SUL
Low Cost Death Benefits; Lifetime Death Benefit Guarantee; Owner Directed Settlement Options
Pacific Life Estate Preserver III
Lifetime Death Benefit Guarantee; Return of Premium Option
Penn Mutual Life Estate Protection For Life
Full Death Benefit Guarantee; Large Assortment of Riders