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Old 01-19-2012, 03:10 PM   #21
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IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
Originally Posted by aus0417 View Post
I used the same exact premium for both.
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I'm not sure exactly what you mean here...I used a 50/50 split on base/PUA on Guardian WL...can you do more than that?
Oh yes, you can do much more than this. Additionally, which product?
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Old 01-19-2012, 03:49 PM   #22
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IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
Originally Posted by scagnt83 View Post
Common sense would dictate that it would fall to a degree.

Caps can be raised or lowered, but very seldom are. IULs are much different internally for an insurance company than IAs are.

Ever wonder why IUL caps are at 13% for Yearly P2P and IAs are at 2%?
This is because the Company makes money from IAs through arbitrage, mainly on Treasuries.

On IUL a direct portion of premiums received go towards policy expenses in addition to the GA & index options.
In other words, the companies main source of revenue from IULs is policy expenses, not arbitrage.

This is the reason the company can afford to give you 13% caps on IUL but only 2% on IAs. They arent trying to arbitrage the fixed holdings and therefore have a greater % to put towards the Indexed portion.



Indexed product caps are at a historical low.
IUL caps do have plenty of room to drop, but its unlikely it would be a significant drop.
"We don't lower our caps" is a common thing I hear from insurance companies and marketing organizations - fast forward 3 years, caps are lowered, clients stuck with what they've got.

There is no such thing as a free lunch. Companies are not generously giving out 13% caps without making up for it somewhere else.

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Old 01-19-2012, 03:54 PM   #23
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IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
Originally Posted by scagnt83 View Post
Here you go.

As I said earlier, 5.5% is 100%.
I've got some serious reservations here. The first thing that makes me nervous about these quoted probabilities is the 285 periods bit. I'm taking this to mean 285 is the sample space, that's pretty small to make an inverence like this.

If I run a quick Monte-Carlo on the S&P looking for probability of return over a 20 years period (and focusing on Geomtric mean) I find the following when using two samples spaces, one of 100 and one of 1000.

100 trials give me a probability of 93% for at least 5% over 20 years. certainly not bad, but no 100%

1000 trials gives me a probability of 87.4% for at least 5% return over 20 years.

As my sampel size increases, I get closer to a more realistic probability.

On top of this, my assumptions about the S&P account for total return, not index percentage change (diviends included).

There's a lot more methodology wise that it missing from this piece that would be nice to see.

Please do not take this as a move to tear down this product or advocate against it. This is certainly not my intention. It's simply pointing out that I'd be really uncomfortable using this to suggest the probabilities of certain returns.

To extend this a little further. What's the IRR on the guaranteed column of this IUL? If it isn't 5%, then the 100% probability for 5.5% claim is in contradiction with the illustration.

Of course, one my then question how Lincoln could have this sort of piece and use it. There probably is a methodology somewhere that would support this claim (it might still put them in hotwater, time will tell on that one). Proof that in marketing you don't have to be right, you just can't flat out lie.

This isn't magic, and illustrates well the point that small sample spaces can over or under predict results.

I'll also say that it would be interesting to analyse this based on the IUL crediting method. This would probably smooth things out quite a bit. For those who looked at the Monte-Carlo sim I did for the Insurance Pro Blog, you'll note that 5% came out at about a 93% probability. That simulation used a 30 year period. This highlights the randomness of the index.

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Last edited by BNTRS; 01-19-2012 at 03:58 PM.
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Old 01-19-2012, 04:36 PM   #24
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Originally Posted by BNTRS View Post
Oh yes, you can do much more than this. Additionally, which product?
WL 99...i'm not sure why the Guardian rep picked that product specifically (he ran the illustration, not me)
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Old 01-19-2012, 08:03 PM   #25
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IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
Originally Posted by scagnt83 View Post
Here you go.

As I said earlier, 5.5% is 100%.

Thought I would join the fun....

Here is the same probability chart for the P.M. product....6.5% rate has a 99% probability using 20 year historical average.
Attached Files
File Type: pdf illustration rate probabilities.pdf (111.2 KB, 52 views)
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Last edited by CFP83; 01-19-2012 at 08:52 PM.
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Old 01-19-2012, 08:21 PM   #26
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IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
I completely missed the fact that both of these pieces are internal marketing pieces for brokers and agents. Not for use with clients. Of course, I'm sure that's happening.

I was wondering what the hell they were thinking stating those kinds of probabilities, but if it's solely a piece to convince brokers and agents to sell their products, they are much more insulated than if they were using it as a marketing piece for sales material to general public.

Still, don't like it, and would run from it.
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Originally Posted by aus0417 View Post
WL 99...i'm not sure why the Guardian rep picked that product specifically (he ran the illustration, not me)
This is one of the pain in the ass features about Guardian. You tend to only be as strong with them as your brokerage guy.
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Last edited by BNTRS; 01-19-2012 at 08:22 PM. Reason: Posts merged
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Old 01-19-2012, 09:28 PM   #27
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IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
I agree showing a 6% illustrated rate is much more inline of what you could reasonably expect. To use a 20-year historical though is way too aggressive for any carrier. The most recent 10-years are the most relevant when looking at returns as they represent the most relevant market performance data. We are in unprecedented times, so to use lookbacks that correlate to returns that were dominant when VUL was prevalent is not realistic.





Originally Posted by VolAgent View Post
Thanks. Still impressive. 92.3% chance of seeing 7%. Illustrate at 6% and you should be completely safe and still illustrate well.

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Old 01-20-2012, 10:51 AM   #28
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Originally Posted by BNTRS View Post
I completely missed the fact that both of these pieces are internal marketing pieces for brokers and agents. Not for use with clients. Of course, I'm sure that's happening.

I was wondering what the hell they were thinking stating those kinds of probabilities, but if it's solely a piece to convince brokers and agents to sell their products, they are much more insulated than if they were using it as a marketing piece for sales material to general public.

Still, don't like it, and would run from it.
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This is one of the pain in the ass features about Guardian. You tend to only be as strong with them as your brokerage guy.
So, what should I ask him to do to maximize CV...max blend with term? AND max out the PUAs?

Can I get access to Guardian Software so that I don't have to request proposals from rep?
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Old 01-20-2012, 11:23 AM   #29
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IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
Originally Posted by aus0417 View Post
So, what should I ask him to do to maximize CV...max blend with term? AND max out the PUAs?

Can I get access to Guardian Software so that I don't have to request proposals from rep?
You should be able to download their software through their website.


Their 10 pay is a good choice. You can still add PUAs after year 10.


But for WL I would look to Ohio National. Better products. Solid company.
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Old 01-20-2012, 09:44 PM   #30
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IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
Originally Posted by scagnt83 View Post
You should be able to download their software through their website.


Their 10 pay is a good choice. You can still add PUAs after year 10.


But for WL I would look to Ohio National. Better products. Solid company.
You can only download the software if the GA you work through gives you access to it. You'd think this is a no-brainer as it's infinitely easier to let you have at it than to work making proposals for you, but apparently not everyone agrees with me.

I'll echo (in part) what Scagent said ONL is super strong in a lot of ways. Guardian is still very great, and the 10 pay is quite the product. If you're client is willing to give up some flexibility of outlay though, ONL's Prestige Max is a killer income generation product. And compare it's CSV and db in later years against other products. Even if you target a $1 CSV at age 121 compare more likely scenarios like age 95 or even 100, NDR at work can be a super benefit. The other issue, though is death benefit really has to be a secondary (or less) concern as there is no blending this product and as an HECV it looks pricey, but it's max funded outlay by design.
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Originally Posted by aus0417 View Post
So, what should I ask him to do to maximize CV...max blend with term? AND max out the PUAs?

Can I get access to Guardian Software so that I don't have to request proposals from rep?
And to answer your specific question, 10 Pay is the better product for cash and income. L99 is a good base WL product, but 10 pay can definitely beat it. You can blend a 1:10 ratio WL:term with Guardian's WL products. However, 10 Pay is a little different, and generally works out better if you have a higher base WL DB. There's no one good answer and it takes a little playing around to get the right design.

I'd say start with the planned outlay, and figure out the db that'll work with this outlay.

If you want to get more into specifics I'd be happy to give you ideas. If you're cool discussing publicly and want to give more details on age and planned outlay, I can help. Or, if you'd rather keep certain details less public, feel free to shoot me a PM. I can get you pointed in the right direction.
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Last edited by BNTRS; 01-20-2012 at 09:51 PM. Reason: Posts merged
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