Download Accumulation Builder IUL Accumulation / Lifetime Income Sale Index

Accumulation Builder
IUL Sales Ideas
Larry Fouts
Regional Life Specialist
Penn Mutual Life Insurance Company
600 Dresher Road, Horsham, PA 19044
All guarantees are based on the claims paying ability of the issuer. For Home Office and Producer Use Only. Not to be
Used with Existing or Prospective Customers.
Identifying the IUL Market
►Accumulation / Lifetime Income Sale
►Industry first introduced Indexed UL
in 1997
►More than 20 companies now offer
IUL products
►The growth of indexed annuities have
helped sales of indexed life products grow
in recent years
►Represents a little less than 10% of
all UL sales
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Identifying the IUL Market
► IUL Sales almost doubled between 2005 and 2006
Indexed Universal Life Sales By Year
(Annual Premium in Millions)
$400
$338.2
$350
$300
$250
$185.7
$200
$150
$100
$64.7 $62.4 $63.5
$85.7 $95.7 $93.5
$123.5
$50
$1998
1999 2000
2001
2002
2003
2004 2005
Source: Advantage Group Associates
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
2006
Accumulation Builder IUL
►Penn Mutual’s IUL Interest
Crediting Approach
● S&P 500 with Dividends Excluded
● Annual reset on Monthly Segments
● Illustrative rate reset each month
● Current crediting rate: 8.92%*
►1 yr Avg
10.36%
►5 yr Avg
8.10%
►10 yr Avg
8.59%
►20 yr Avg
8.92%
* As of 10/1/07
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
S&P 500 Index vs.
Other Indices Historical
►Total Returns
S&P 500 Index vs. Other Indices - Total Returns
Avg as of year end 2006
1 Year
10 Year
S&P 500
15.80%
8.42%
LB Aggregate
4.33%
6.24%
MSCI EAFE
26.86%
8.06%
DJ Industrial Average
19.05%
8.91%
DJ Wilshire 5000
15.87%
8.67%
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
20 Year
11.80%
7.35%
8.40%
N/A
11.63%
30 Year
12.47%
8.38%
12.83%
N/A
12.69%
S&P 500 Index vs.
Other Indices Historical
►Returns Without Dividends
S&P 500 Index vs. Other Indices - Returns Without Dividends
Avg as of year end 2006
1 Year
10 Year
20 Year
S&P 500
13.62%
6.71%
9.24%
LB Aggregate
-1.02%
0.31%
0.28%
MSCI EAFE
23.47%
5.75%
6.27%
DJ Industrial Average
16.29%
6.81%
9.87%
DJ Wilshire 5000
13.89%
7.07%
9.24%
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
30 Year
8.98%
0.10%
10.06%
8.76%
9.43%
Consider This…
Between 1984 and 2003, the S&P 500
Index1 grew by 12.98%. During that time,
the average investor, however, earned
only 3.51% while the average market
timer lost 3.29%.2
1The
S&P 500 Index is an unmanaged index of common stock performance,
considered to be representative of the stock market in general. Indexes do not have
sales charges and it is not possible to invest directly in an index. Past performance is
no guarantee of future results.
2DALBAR
Quantitative Analysis of Investor Behavior, 1984-2003.
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Accumulation Builder IUL
Key Features
► Premiums allocated between a fixed and indexed account
► Minimum 2% guaranteed interest floor on both accounts
► Indexed account has a competitive cap (14%) and a 100%
participation rate which is guaranteed
► Two Loan Options available (except NY)
► Annual reset of starting S&P value on index segments
► Overloan Protection Benefit available
► 9 Year Surrender Charge
► Rolling Targets in most states (except NY and NH)
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
The “CAP”
► Caps set based on the company’s earned ROR and the
cost of hedging the performance of the index
► Bonds “cover” product guarantees
► Leftover $$$ cover cost of hedging the
index performance
► Cost of hedging determined by market volatility
► More volatility = lower cap due to higher cost of hedge
► Lower earned rate = lower cap due to less $$$
available to hedge
► Reverse is true for lower volatility or higher earned rate
► Hedging strategy limits major cap movement up or down
► Index Annuity products need to aggressively
manage cap
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Accumulation Builder IUL
How the Indexed Account Works
► Annual reset of segment
► Indexed account earnings are locked-in
► In years of poor S&P 500 performance, a 2% floor
protects account value
Accumulation Builder IUL
Growth of $1,000 Policy Value
HYPOTHETICAL EXAMPLE
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
14%
$1,200
$1,140
+20%
1
2%
$1,163
10%
$1,285
14%
2%
$1,310
$1,494
$1,230
$955
S&P
Return
$1,077
$1,190
-10%
10%
-20%
28%
3
4
5
2
End of 1 year Segm ent
Investment Product Tied to S&P 500 Growth w/o Dividends
IUL Policy Value Growth
Note: Assumes no charges or fees on either product
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Probability of Doing
What we show!
Annually
3 yr
5 yr
10 yr
20 yr
Period
Period
Period
Period
5.0%
69.7%
92.5%
97.9%
100.0%
100.0%
6.0%
68.0%
84.2%
90.0%
99.6%
99.6%
7.0%
63.1%
78.4%
83.8%
99.2%
99.2%
8.0%
58.5%
68.5%
72.2%
97.5%
84.2%
9.0%
55.2%
56.0%
57.3%
71.0%
47.3%
10.0%
51.5%
29.5%
34.0%
25.3%
8.7%
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Accumulation Builder
IUL - IRR
Male Age 45, Preferred Plus
Maximum Non-Mec Premium 7% Illustration Rate
Policy
Year
IRR on CSV
Comparable After-Tax IRR with 35%
Tax Bracket
1
-33.34%
N/A
5
0.72%
0.10%
10
4.32%
5.83%
15
5.40%
7.29%
20
5.86%
7.91%
25
6.06%
8.18%
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Accumulation Builder IUL
► Accumulation / Lifetime Income Sale
► Index Account / Index Loan (except NY)
► 2% Minimum, 14% Current Cap, 100% Participation
► One-Year Point to Point Reset
► 12 Investment Segments to Catch Lightening
► Volatility is a “Friend”; Stay Invested
● If Market Tanks – Get 2%; Reset at Lower Point; Earn Interest
as it Climbs Back
● Balance to Other Aspects of Client’s Portfolio
► Strong IRR on CSV with Life Insurance Protection
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Sec 7702(A) Plan
Probability of Doing
What we show!
Annually
3 yr
5 yr
10 yr
20 yr
Period
Period
Period
Period
5.0%
69.7%
92.5%
97.9%
100.0%
100.0%
6.0%
68.0%
84.2%
90.0%
99.6%
99.6%
7.0%
63.1%
78.4%
83.8%
99.2%
99.2%
8.0%
58.5%
68.5%
72.2%
97.5%
84.2%
9.0%
55.2%
56.0%
57.3%
71.0%
47.3%
10.0%
51.5%
29.5%
34.0%
25.3%
8.7%
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Sec 7702(A) Plan
► A Tax-Free Retirement Income Benefit
●
The tax benefits of this personal retirement strategy are made possible by utilizing a cash value life
insurance policy. This is accomplished through a combination of withdrawals up to cost basis and
policy loans thereafter. Policy loans and withdrawals will reduce the death benefit. This assumes that
the policy remains in force and is not a modified endowment contract under IRC Section 7702A. If the
policy is lapsed or surrendered prior to the death of the insured, the policy loans in excess of the cost
basis will result in taxable income.
► Tax-Deferred Accumulation of Policy Values
●
Cancellation of a policy in the early years may have a significant impact on policy values. A detailed
illustration based on your specific facts and circumstances should be reviewed carefully before
purchase.
► Individual Ownership and Control
► Access to Funds Before age 59 ½ Without Penalty*
●
The tax benefits of this personal retirement strategy are made possible by utilizing a cash value life
insurance policy. This is accomplished through a combination of withdrawals up to cost basis and
policy loans thereafter. Policy loans and withdrawals will reduce the death benefit. This assumes that
the policy remains in force and is not a modified endowment contract under IRC Section 7702A. If the
policy is lapsed or surrendered prior to the death of the insured, the policy loans in excess of the cost
basis will result in taxable income.
► A Self-Completing Pre-Retirement Death Benefit***
●
Requires optional waiver of monthly deductions at an additional charge. The waiver of monthly
deduction agreement allows you to maintain your insurance protection during a period of disability by
waiving all monthly expenses and cost of insurance charges.
Please Note: Life insurance policies are subject to certain fees and expenses
which are not normally associated with other investment vehicles.
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Sec 7702(A) Plan
► Income Tax-Free Death Benefits
► Proper Beneficiary Designations that Can
Avoid Probate
► Possible Protection From Creditors
► Selectivity of Participants
► No Trust or Trustee Necessary
► No IRS Forms Required
Please Note: Life insurance policies are subject to certain fees and expenses
which are not normally associated with other investment vehicles.
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Sec 7702(A) Plan
►
Male Age 50 - $60,000 / YR, 10 Years, DB - $2,412,136
►
Target Premium - $41,009
Illustrated Interest Rate
7.0%
7.5%
8.0%
Annual Income
$65,590
$84,108
$104,310
$1,367,710
$1,923,240
$2,529,289
5.51%
6.73%
7.86%
$363,264
$524,850
$820,773
8.55%
10.00%
11.30%
Net Payments @ age 95
IRR@ age 95
Death Benefit @ age 95
Taxable Equivalent
(Hypothetical Equity)
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Web Story – Premium Choice
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Executive Bonus Plan
(with Leverage)
► Business Owner, Male Age 50
● $100,000 Tax Deductible Contribution yrs 1-10
► Taxable to Business Owner
● Paid via Policy loans yrs 2-11
► Net zero out of Pocket for Business Owner
► Tax Deferred Growth
► Income Tax Free Death Benefit
► Tax free Cash Flow - $140,000 Age 66-120
● Tax Equivalent 13.17%
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Exec Bonus Report
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Leveraged Life
►Male Age 50 – Sophisticated Investor
►Understands Margin Account
►Understands Put Option
►Pays Annual Premium, then borrows back
to provide Leverage
►Maximizes use of funds!
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Leveraged Life
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Leveraged Life
For Home Office and Producer Use Only. Not to be Used with Existing or Prospective Customers.
Accumulation Builder
IUL Sales Ideas
Dan Soderberg
Regional Life Specialist
Penn Mutual Life Insurance Company
600 Dresher Road, Horsham, PA 19044
All guarantees are based on the claims paying ability of the issuer. For Home Office and Producer Use Only. Not to be
Used with Existing or Prospective Customers.