Does Northwestern Really Outperform MassMutual?

[mikichan]

I've started underwriting with a MassMutual policy, but my agent at NMFN is telling me he thinks I am making the wrong decision in going with MM instead of NMFN. He says that MassMutual always out-illustrates NMFN, but their actual performance is significantly worse than NMFN .

When I was comparing policies, the MM policy was much better in terms of guaranteed cash value and death benefit, and the non-guaranteed dividends out-illustrated Northwestern after 30 years (Before 30 years, NMFN and MM are comparable. In the first 15 years, NMFN out-illustrates the MM policy).

Just a note, I am comparing apples and oranges - a traditional 65Life vs an overfunded blended 65Life -- exact same premium amount, less initial death benefit with NMFN.

Anyone had any experience with both?

Or if anyone had a MM or NMFN policy, did they outperform or underperform the original non-guaranteed illustrations?

My situation: I probably only need a small death benefit for the first 30 years. After 30 years, I'm much more interested in the policy as income (using the dividends only). I'm also planning to save up for a downpayment for a house in 2-3 years.

My NMFN agent said that the MM policy is much more inflexible, and has almost no cash value in the first few years, which doesn't mesh with my buy a house goal. In 2-3 years, I would have a few thousand in cash value from the overfunded NMFN policy available for loan, versus almost nothing in MM.

But after 30 years, the illustration isn't as good as MM's in terms of dividend income and cash value (death benefit beats MM's).

So anyway...please let me know if you think I"m making a mistake going with MassMutual over Northwestern.

 

[VolAgent]

Guaranteed is just that, guaranteed. If your NMFN agent is trying to tell you that Mass won't meet the guaranteed side, he is full of it. Kick him to the curb and/or report to the department of insurance as your leisure.

 

[mikichan]

Guaranteed is just that, guaranteed. If your NMFN agent is trying to tell you that Mass won't meet the guaranteed side, he is full of it. Kick him to the curb and/or report to the department of insurance as your leisure.

My NMFN agent isn't telling me that. He says the guaranteed values are important, but that it's a worse case scenario. The entire economy would have to go into nuclear meltdown before *only* either NMFN or MM would pay only the guarantees.

He was telling me that MM was full of it when it came to the non-guaranteed values. That they always aggressively illustrated the NG values, but underdeliver, while NMFN does the opposite.

So for example, if both had a guaranteed CV of $2000 and a non-guaranteed CV of $3000, the MM's actual CV would be something like 2900 while NMFN's would be something like 3300.

I was just wondering if anyone who had a MM or NMFN policy could verify -- does MM over promise and under-deliver? Or does NMFN under-promise and over-deliver?

 

[BNTRS]

So the main question is, can you rely on Massmutual to keep their dividend up or is the NML guy right, and NML will probably be more reliable in paying dividends.

Truth is, it's probably accurate to state that Massmutual will be a little herky-jerky concerning the dividend, they have a historical habit of doing this.

This being said, NML dude isn't being totally honest about performance from the sounds of it, and here's why.

NML usually does well with the cash performance in their policies. The wheels come off when you start talking about taking the money out. NML is a bad practitioner of Direct Recognition. Sure there are those here who will try to tell you otherwise, but don't fall prey to the slight of hand. Ask for a comparison of distributions. Mass will almost surely win this hand down.

Now, there's an important learning lesson here. It's not about the numbers on paper, neither NML nor Mass are going to hit those exact numbers. Mechanics are super important here.

Mass is a non-direct recognition company (at least 90% of the time, make sure you have a variable loan interest rate and NDR dividends on your policy, you most likely do).

You could blend Mass mutual as well, though it's a bit of a PITA.

The comment about flexibility is true. Mass is terribly annoying about this, NML has an advantage with respect to this. Of course, there are better companies than NML that offer better dividend provisions and better flexibility, so it's not wise for the NML agent to go down that road IMO.

As for the down payment. There's an interest spread you could take advantage of, but NML won't afford that spread to you. This is a much longer conversation, though.

 

[VolAgent]

Both illustrations are based upon the current dividend rate. That is the rate the board has currently declared. Right now, it appears that Mass is willing to sacrifice a top rating to pay a higher dividend, while NMFN has openly declared they will protect their rating which means sacrificing current dividends.

I would actually expect either one to out perform the illustration. This is some of the lowest dividends we have seen in decades, if ever. As to who is going to be paying higher dividends ten years from now, no one can tell you.

 

[mikichan]

...
Truth is, it's probably accurate to state that Massmutual will be a little herky-jerky concerning the dividend, they have a historical habit of doing this.

Hi BNTRS, what do you mean by being herky-jerky? The dividend interest rate history that the MM agent showed me seemed pretty steady (steadily downwards from 1987, but it seems like they are all like that).

...
NML usually does well with the cash performance in their policies. The wheels come off when you start talking about taking the money out. NML is a bad practitioner of Direct Recognition. Sure there are those here who will try to tell you otherwise, but don't fall prey to the slight of hand. Ask for a comparison of distributions. Mass will almost surely win this hand down.

I did ask NML agent about this, and he says that NML pays a higher dividend rate on the loaned balance, so there's no real difference?

...
The comment about flexibility is true. Mass is terribly annoying about this, NML has an advantage with respect to this. Of course, there are better companies than NML that offer better dividend provisions and better flexibility, so it's not wise for the NML agent to go down that road IMO.

Which companies? Can you recommend?

Thanks!

 

[Larry Tew]

I was just thinking that we were overdue for another friendly concerned consumer thread.

 

[mikichan]

I am now even more confused. My NML agent said not to focus so much on the guaranteed values. He showed me an illustration for a series swap (from an old, existing 90WL to an ACL with additional premiums, but based on my age 7 years ago). The guarantees are, again, lower than MM's, but the estimated cash value growth is much better, at a lower dividend scale than MM's illustration.

So is the NML agent right that I shouldn't be focusing so much on guaranteed values?

 

[BNTRS]

I am now even more confused. My NML agent said not to focus so much on the guaranteed values. He showed me an illustration for a series swap (from an old, existing 90WL to an ACL with additional premiums, but based on my age 7 years ago). The guarantees are, again, lower than MM's, but the estimated cash value growth is much better, at a lower dividend scale than MM's illustration.

So is the NML agent right that I shouldn't be focusing so much on guaranteed values?

Well of course not. If you did, then his product isn't the most favorable.

Hi BNTRS, what do you mean by being herky-jerky? The dividend interest rate history that the MM agent showed me seemed pretty steady (steadily downwards from 1987, but it seems like they are all like that).

From 2003 to 2012 Mass' div interest rate has been:

7.90%
7.50%
7.00%
7.40%
7.50%
7.90%
7.60%
7.00%
6.85%
7.00%

That may not seem like a big move, but those 50 bps+ moves are huge in the WL div interest rate world. Other's have made bigger moves NML chopped their div rate down 100 bps in 2008, bad times.

I did ask NML agent about this, and he says that NML pays a higher dividend rate on the loaned balance, so there's no real difference?

Hardly and this isn't completely true. It's only true if you're using the 8% fixed loan rate and there's still a negative spread between the loan rate and the div interest rate. If you choose the variable rate (and it's a lot lower) you get pummeled if you take a loan.

Which companies? Can you recommend?

Sure: Guardian, Ohio National, Penn Mutual, and Lafayette Life.

All flexible (Guardian and Penn are by far the most flexible, but ONL and LLIC are great as well) and better than NML for many reasons.

 

[DHK]

Do we want to remind everyone that a declared dividend is NOT the same as a "rate of return"?

Just because the company declares a 7% dividend does NOT mean that each policy will receive a 7% dividend on their cash values.

If your agent is saying that their dividend = rate of return... RUN! Your agent does not understand how whole life insurance dividends work.