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Mack Financial Institutional Pricing Presentation


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Mack Financial Institutional Pricing Presentation

  1. 1. Why You Deserve It: Institutional Pricing for Life Insurance Products Paul Watko Mack Financial Group, Inc.
  2. 2. Life Insurance Products <ul><li>Due to the recent estate tax changes and the two year window it presents for ultra-high net worth (UHNW) individuals and families, there is heightened awareness and increased curiosity regarding the applicability of life insurance for estate planning and wealth transfer purposes. </li></ul><ul><li>Life insurance offers three unique benefits: </li></ul><ul><ul><li>Tax-free build-up of cash value </li></ul></ul><ul><ul><li>Income tax-free death benefits </li></ul></ul><ul><ul><li>The ability to remove large life insurance policies from an estate </li></ul></ul><ul><li>Access to life insurance policies priced specifically for the UHNW—“institutionally priced” versus “retail priced”—can enhance planning effectiveness and deliver significant value over time. </li></ul>
  3. 3. Institutionally Priced Products: Key Drivers <ul><li>Life insurance policies acquired by UHNW individuals reflect superior experience characteristics: </li></ul><ul><ul><li>Larger face amounts (i.e., death benefits) </li></ul></ul><ul><ul><li>Better persistency (i.e., remain in force for longer periods of time) </li></ul></ul><ul><ul><li>Better mortality experience (i.e., insureds live longer) </li></ul></ul>
  4. 4. Institutionally Priced Products: Key Features <ul><li>Products designed using superior face amount (death benefit), mortality (pool of insureds), and persistency experience offer a lower unit cost. </li></ul><ul><li>Clients and their advisors are better positioned to set credible expectations regarding performance and manage these expectations over the life of the product. </li></ul><ul><li>Proper due diligence and in-force management of the policies should be maintained throughout the life of the policy. </li></ul><ul><ul><li>This involves monitoring the policies to ensure their continued alignment with your objectives. </li></ul></ul>
  5. 5. Pricing: The Difference For Clients <ul><li>Projected illustrations at the time coverage is placed may or may not show the benefits of a pricing difference. Every situation is different (there is no such thing as a cookie cutter policy in the UHNW life insurance market). </li></ul><ul><li>You should discuss with your advisor the impact/advantage these differences have over time. </li></ul><ul><ul><li>Current policyholders receive the benefits of downward repricings (the policyholder actually receives the benefits of a lower priced product without having to buy a new product that would require new underwriting). </li></ul></ul><ul><ul><li>In one example there have been at least six downward repricings in the last ten years. </li></ul></ul>
  6. 6. Why Do You Deserve Better Products? <ul><li>UHNW experience is different than the retail market and represents a higher quality risk to the insurance companies: </li></ul><ul><ul><li>Better mortality (living longer due to healthier lifestyles and excellent access to healthcare) </li></ul></ul><ul><ul><li>Better persistency (better planning and resources to keep policies in force longer) and avoid policy lapses </li></ul></ul><ul><ul><li>Much larger average policy size (allowing for a lower unit cost) </li></ul></ul><ul><li>According to recent statistics: </li></ul><ul><ul><li>Mortality experience is 25% - 30% better than the general population </li></ul></ul><ul><ul><li>Lapse rate as much as 80% lower than the industry </li></ul></ul><ul><ul><li>The average size of your policy is five times greater than the retail marketplace </li></ul></ul>M Financial Group, a leading financial services design and distribution company, has segregated UHNW experience from the past three decades and utilizes the experience to develop institutionally priced products with Carriers
  7. 7. M Financial’s Superior Experience is Unparalleled in the Industry M mortality experience, actual death claims, is 28% less than the industry high net worth (face amounts greater than $1 million), which lowers cost of insurance charges in an M proprietary life product Mortality Experience Persistency Rates Average Policy Size M average face amount is more than seven times that of the industry, providing economies of scale which lower policy charges for M proprietary life products Even in the wake of the financial crisis, M lapse experience, policies that lapse or surrender, is superior to the industry, providing a longer time horizon for M Carriers to recoup initial expenses, which drives lower ongoing policy charges for M proprietary life products
  8. 8. Average Policy Size by Carrier Life Insurance Companies Issuing at Least 1,000 Cash Value Policies of $200,000 and Greater Source: A.M. Best (2009) Policies of $200,000+ During 2009 Insurance Company Corporate Group Number of Cash Value Policies Issued Average Face Amount per Policy ($000) 1 Lincoln Life & Annuity Company of NY Lincoln Financial Group 1,091 1,258 2 John Hancock Life Insurance Company USA Manulife Financial 27,907 1,104 3 Sun Life Assurance Company of CA (US) Sun Life Financial Group 1,743 1,085 4 John Hancock Life Insurance Company NY Manulife Financial 3,321 972 5 Sun Life Assurance Co of Canada USB Sun Life Financial Group 4,773 954 6 Security Life of Denver Insurance Co ING USA Life Group 5,749 794 7 Penn Insurance and Annuity Company Penn Mutual Group 2,059 787 8 Lincoln National Life Insurance Co Lincoln Financial Group 27,175 755 9 Allianz Life Insurance Co of NA Allianz Insurance Group 1,789 736 10 AXA Equitable Life Insurance Company AXA Financial Group 14,197 730 11 PHL Variable Insurance Company Phoenix Life Group 1,993 674 12 Minnesota Life Insurance Company Securian Financial Group 8,630 604 13 MetLife Investors USA Insurance Company Metropolitan Life and Affiliated Cos 22,244 580 14 Pacific Life Insurance Company Pacific Life Group 13,122 491 15 Principal Life Insurance Company Principal Life Group 11,155 478 16 Guardian Life Ins Co of America Guardian Life Group 25,845 440 17 Penn Mutual Life Insurance Company Penn Mutual Group 6,517 434 18 Hartford Life Insurance Company Hartford Life Group 1,577 416 19 RiverSource Life Insurance Company Ameriprise Financial Group 11,668 401 20 Federated Life Insurance Company Federated Life Insurance Company 2,304 400 21 Pruco Life Insurance Company Prudential of America Group 21,561 387 22 Protective Life Insurance Company Protective Life Corp 36,965 374 23 Aviva Life and Annuity Company of NY Aviva USA Group 1,878 367
  9. 9. Average Policy Size by Carrier (continued) M Financial Group maintains Partner level relationships with John Hancock, Lincoln Financial, Nationwide, Pacific Life, Prudential , and Sun Life Source: A.M. Best (2009) Policies of $200,000+ During 2009 Insurance Company Corporate Group Number of Cash Value Policies Issued Average Face Amount per Policy ($000) 24 Acacia Life Insurance Company UNIFI Companies 1,333 361 25 Nationwide Life Insurance Company Nationwide Life Group 2,880 360 26 Massachusetts Mutual Life Insurance Co MassMutual Financial Group 40,968 360 27 MONY Life Insurance Company of America AXA Financial Group 4,286 359 28 New York Life Insurance and Annuity Corp New York Life Group 26,240 359 29 West Coast Life Insurance Company Protective Life Corp 4,094 352 30 Ameritas Life Insurance Corp. UNIFI Companies 2,705 340 31 National Life Insurance Company National Life Group 3,898 329 32 Hartford Life and Annuity Insurance Co Hartford Life Group 28,449 321 33 Ohio National Life Assurance Corporation Ohio National Life Group 3,629 309 34 Aviva Life and Annuity Company Aviva USA Group 26,404 301 35 National Western Life Insurance Company National Western Life Insurance Company 8,213 292 36 Union Central Life Insurance Company UNIFI Companies 4,465 282 37 North American Company for L & H Ins Sammons Financial Group 6,015 253 38 Columbus Life Insurance Company Western & Southern Financial Group 1,362 252 39 Western Reserve Life Assurance Co of OH AEGON USA Group 26,540 237 40 Ohio National Life Insurance Company Ohio National Life Group 3,997 232 41 MTL Insurance Company MTL Insurance Company 3,256 220 42 American General Life Insurance Company AIG Life Group 10,916 215 43 Lafayette Life Insurance Company Western & Southern Financial Group 4,805 213 44 Northwestern Mutual Life Ins Co Northwestern Mutual Group 144,188 210 45 Midland National Life Insurance Company Sammons Financial Group 19,239 208
  10. 10. Insurance Companies Benefit From Institutionally Priced Products <ul><li>Carriers want to develop institutionally priced products specifically for the UHNW marketplace to generate more quality business, growth, and profits. </li></ul><ul><li>You deserve access to these better priced and better performing proprietary institutional products because: </li></ul><ul><ul><li>You create the value through superior experience </li></ul></ul><ul><ul><li>Your behavior and wealth creates this opportunity </li></ul></ul><ul><ul><li>You have the right to share in this value </li></ul></ul>
  11. 11. Conclusion <ul><li>The life insurance placement process should be attractive and convenient. </li></ul><ul><li>Working together with an experienced advisor will create the best results for you. </li></ul><ul><li>Make sure that your estate planning/life insurance strategies seek the best long-term policy performance. </li></ul>“ Do I want an advisor with access to life insurance products for people like me?” OR “ Do I want to participate in the pyramid model?”