In this video
we are going to talk about
proof of performance.
When it comes to whole life insurance
a reality that exists
that not many people want to talk about
is policies typically underperform.
Meaning people
open whole life insurance policies
they're interested in the cash value
they look at that illustration
and then the actual results
are just less and less
than what was projected
every single year
and people get disappointed
say whole life insurance stinks
why would anyone ever put money here?
And we can go on and on about that.
But at the same time
we do see whole life insurance policies
that actually deliver strong cash values
and people love their products
we talk about banks
corporations
wealthy individuals
positioning money there all the time
but where's the actual proof of performance?
Well if you work with our company
you have access to our actual
historical performance playlist
which goes through all policies
from 1975 up through 2021
that have lived the test of time
and not the projected performance
but the actual results.
Now why I say that
if you work with us
is that is something that
whenever I'm going through
specific companies
and providing data
from a compliance standpoint
we do have to be careful
as far as what we show
and what we don't show.
So with that said
we are going to provide
some historical
proof of performance today
on different life insurance carriers
providing data
that you may find very very interesting.
So in our last video
we talked about
the 4 major mutual companies
2022 dividend interest rates
and one of the big big selling points
I mentioned was point number 4
actual performance.
We have seen
or I have seen to be so consistent
whole life insurance products
that are properly designed
if it's not properly designed
this whole video goes out the window.
Whole life insurance products
with these 4 major mutual companies
that are properly designed
have delivered strong
internal rates of returns
to consumers
and this is a big reason why
banks, corporations
and wealthy individuals use them
and anyone can use them
it's not exclusive to this group.
The thing is
where's the proof of performance
that these guys see
that you can see?
Can anyone see it?
The answer is yes.
The thing is
if you're in the business
and you ever ask someone
an insurance company
for proof of performance
it's like pulling teeth
you'll either get no
sometimes they play dumb with you
and say oh do you mean
dividend interest rate history
like the dividend history
look at our illustration
or they start to bad mouth
some other life insurance company
it's like no no no no
a policy
that has simply lived the test of time
what did it actually produce?
So we've got policies
that actually date back to 1975
a Guardian policy
that one produced a
net internal rate of return
of just about 7.1%
but keep in mind
the policy was issued in 1975
and lived through a great dividend period
we've got the actual policy too
what I did was take all the data
and put it on Excel
and then actually just make it easier
from the dividend interest rate standpoint
and the annual internal rate of return.
So here we've got
an actual piece from
this is from a Blease report actually
you can find this online if you search it
we've got the full report
we've used it in past videos
a 20-year case study.
Now it's a little dated
it ranges from 1984 through 2004
it's on a 45-year-old individual
this is public information
people can find it if they look
both consumers
and those in the business.
It simply compares a number of carriers
the report or the study actually compared
more than just who we have listed here
and I reorganized it on the left
as far as the order
Mass, Guardian
New York and Life Northwestern Mutual
45-year-old individual
not a policy that is
or none of these policies
are apples-to-apples
and that's a big reason
I don't like this example
meaning when we look at
the annual premiums here
they're all different numbers
it was all based on a $250,000
whole life insurance policy
and the premium was based on
the insurance company's pricing
so no blends
nothing going into PUAs [Paid-up additions]
nothing that we would actually want to do
which makes a big difference
when I mentioned earlier
talking about design
but what you do see here
4 major mutuals
different premiums
actual cash values
and actual internal rates of return.
What do you notice?
All of them are well above 4%.
What do you notice
when you start to look at
other carriers below?
None of them are even at 4%.
Here you have National Life
which primarily focuses on IULs today
just about 4% with that
old whole life insurance product
but they didn't hit it
these are actual internal rates of return.
Now could be looking in this and say okay
this is a bit dated Steve
because it is
but this is one of the studies
I personally
I'm not a huge fan of this kind of stuff
because usually a company
is going to show this report
that looks the best on the report
meaning hey look at us
compared to the competition
I don't like that
what I like are standalone policies
here's one example
of a New York Life policy
this was actually someone who
is working with us
and he provided
his New York Life policies
he was kind enough to do that
we studied the historical payments
what he made each year
and then 17 years into it
he's added a healthy amount
of PUAs to the policy
his average IRR is just over 4%
that's net
and that was issued in 2003
this study was actually ran through 2020
so we've got to update it again
based on the in-force illustration
here's the present dividend rate
which now for 2021 and 2022
New York Life is at 5.8%
but still
this is the annualized IRR
we see that it's still performing
will be a little bit lower than this
but strong actual
cash value performance
difficult to find this kind of stuff out there
one of the major mutuals.
If you were to look at
I'm going to pull this up via the PDF
we had to do this one a little bit differently
because we had the statement
so this was a policy with
1 of your 4 major mutuals
the one company we cannot use actually
because they only work with career agents
not independent brokers
talk about them being Northwestern
simply because they've delivered
like you can't argue that they haven't
when you look at them.
Policy issue date 1989
okay what's nice about this
is we have the total cash value
this was run from 1989 through 2017
the actual study period here
total cash value $22,329
the premium he paid was $420 that's it
didn't add anything to PUAs
nothing fancy.
So what we did
we go through this thoroughly
in our historical performance case study
line by line
just to make it simple
what he averaged out over 20 years
we just aimed for that same cash value
of $22,300
we're just about a 4.63%
net internal rate of return
policy was issued pre-1990
so during a high dividend interest rate period
but still proof of performance.
If we look at more recent policies
we see the same thing
let me go back
here's actually an all base policy
that did not perform well at all
when we've seen
what I've noticed
and it's actually in the
company's dividend formulas
it's all companies formulas
when you get to look at them
when you have a product
with a higher base premium
I should just rephrase
if you're paying any amount of money
into a policy
the higher the base premium
the weaker the actual performance
typically is
because insurance companies
can adjust their dividends
but really there's 3 things behind
the actual performance of a policy
you have the company's
illustrated dividend rate
but then you also have mortality charges
and insurance expenses
all of which can be adjusted after the fact
so we go through this
thoroughly in our case study
but all that validated here
we've seen this with a number of companies
is a policy this was all base premium
but what was projected
compared to what actually happened
a world of difference
we've got the actual performance over here
this individual was very upset
how we obtained this policy
because you'll notice was issued in 2007
I was in college in 2007
I didn't write this policy
but he transferred it to us around 2017
2021 cash value is projected
to be $437,000
it actually hit $391,000
and there was a period of time with this policy
where the dividends actually had gone up
when it was initially illustrated
but the actual performance came down
I just can't explain that stuff typically
I had a hard time explaining that
you really got to dig in to understand
why is this happening
again we cover that
in our actual case study
which is not made public.
But there's a policy
that did not perform well
here's a policy we actually put in force
I wrote this in 2014 with the individual
I'm going to update this
fortunately the company's dividend rate
has remained the same
they just declared their
2022 dividend interest rate
their performance has been spot on
look at this
here's the annualized IRR
continuously increasing over time
which is beautiful
that's exactly what we want to see
but 6 years into it
he's already well ahead
of his break-even point
so here's a policy again
one of the major mutuals
this one is specific to Guardian
performing quite nicely
and we've got a lot with Guardian
that have done well.
Here is
let me get the next one
this was a fun case study
look at this thing
all these charts
so this is a policy
we actually put together
I put it in place 2016
right after I got married
and this one's been a ton of fun
I thoroughly enjoy
working with this individual
we tracked what the original plan was
a year over year
here's the original illustration
and then on the right
what actually happened
year over year
this is actually again with
one of the big 4
but you see the dividend rate
has come down
it's come down with all companies
but at the same time here's actual
annual internal rate of return
I got to run the updated one
but the dividend rate
has not changed for 2022
their insurance expenses
have not adjusted that much either
and this represents
what he's earning year over year
so this is in 2021
his cash value grew
a net internal rate of return growth 4.89%
this is exactly what happened
how we got this data
is every year when I run the actual
well when we have the actual review
it's based on an in-force illustration
I also reference the actual
policy statements that are sent to him
but I can download those online as well
so we cross-reference everything
pull the exact dividend
like that's what we've got
like that is what is actually happening
year over year
and then of course as time passes
we crunch the average
internal rate of return.
My point is
what we've seen to be the case
is when policies are designed well
with the top companies
we see strong internal rates of return
I haven't seen it elsewhere
and as I always mentioned
that is not a shot
at any other small company
or nothing like that
some companies
are very very proactive
in trying to collect that data
or striving to get there
and I appreciate that
once we have the data from other carriers
we'll offer them as well
but again the proof is there
and the reason why
is this is people's money going into a policy
where I saw so much
stress and remorse from people
and where people vent frustration
with whole life insurance
is when they get a policy
they are told or expecting
that it's going to deliver
and then it under-delivers
and they can't get straight answers
as to why
so this is technical stuff
we went over a simple version of it today
it's technical but here's the simple piece
this is why I'm so big on these guys as well.
When we see well-designed policies
I should say low premium policies
high PUA policies
with these companies
like we see the strong internal rate of return
so so consistent.
Back to my days working at the firm
where we design policies for corporations
which was an independent firm
not IMO
FMO nothing like that
which I've never worked for
when we designed policies
for corporations
they always always
use the 4 major mutual companies
those always came up in conversation
and again the reason for that
was not just because of the
projections looking good
it's based on actual data.
So I hope this one helped
this is always
one of my favorite topics to talk about
I really like going deep
as far as seeing the numbers
and picking policies apart
but I hope you enjoyed it.
If you did please hit the like button
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and we'll talk to you soon.
Hey guys Steve Parisi here
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