Guardian Announces, And the Dividend Is...

[BNTRS]

Guardian announced a $795 million dollar dividend payout for next year. The largest dividend payment in their history. Like all of the mutuals they mentioned their strong financial position and dedication to their policy holders. However, there was something obviously missing from their release. Let's see if you can spot it:

Guardian Life Announces $795 Million Dividend to Policyholders in 2012 - Yahoo! Finance

|-----|Spoiler Alert|-----|

Looks like someone walked up to Midtown and conferred with New York Life and said, "you know, dodging the actual dividend rate might just be a good idea."

 

[VolAgent]

Guardian announced a $795 million dollar dividend payout for next year. The largest dividend payment in their history. Like all of the mutuals they mentioned their strong financial position and dedication to their policy holders. However, there was something obviously missing from their release. Let's see if you can spot it:

Guardian Life Announces $795 Million Dividend to Policyholders in 2012 - Yahoo! Finance

|-----|Spoiler Alert|-----|

Looks like someone walked up to Midtown and conferred with New York Life and said, "you know, dodging the actual dividend rate might just be a good idea."

Come on, you need a secret decoder ring to figure out what the dividend rate means anyway.

You are probably one of the smarter guys here about whole life. Can you tell us what the dividend rate really is, and how it relates to the cash value or premium?

 

[Larry Tew]

The interest rate used to calculate the dividend scale is only important when considering the mortality and expense spread. The number is meaningless to consumers, and SHOULD be meaningless to agents as a solo piece of data.

And even if one company has a richer dividend scale than another, what does that mean to the client? It still boils down to the specific product and that product's dividend design (early or deferred dividends, etc).

The interest rate used in the dividend scale is about as important as the crediting rate used on a UL. The rate is highlighted while the other pricing factors are discreetly manipulated to arrive at the final figure.

 

[BNTRS]

No argument out of me, but we know that looking at the dividend rate declared year over year gives us a relative anchor with which to assess the companies success or lack thereof.

 

[Larry Tew]

No argument out of me, but we know that looking at the dividend rate declared year over year gives us a relative anchor with which to assess the companies success or lack thereof.

If you mean "dividend interest rate, I don't see it that way, but I wouldn't argue the point either. It really isn't just one factor, but the sum of their parts that dictate a winning policy for a particular client.

When I joined Guardian in 1990 the dividend interest rate was 12%. Guardian had a large pot of money set aside for a potential negative tax ruling that was ultimately decided in their favor. They called that pot of money the "dividend stabilization reserve" and released those funds into the dividend calculation over a number of years.

They showed how they could use 12% in their dividend formula when their net yield on invested assets was several points lower.

We showed them the AM Best 20-Year Dividend Study.

We told clients all this stuff, and what did they say in response?

"That's nice."
"So?"
"What does all that really mean to me?"

 

[2insureyou]

Dividend interest rate is calculated differently from company to company. For example, at NML, it is a net interest rate of expenses... at Mass, it is a gross rate. I'm not sure what Guardian is off the top of my head.

It gets very confusing for the clients in discussing this, I think. Because one company pays, let's say, 7%, and another pays 7.5% (I know, no one is really paying that right now), does not mean the company paying 7.5% will actually perform better or pay a higher dividend at the end of the year.

 

[bluemarlin08]

The games companies play, why not full disclosure. At any rate, seems there will be downward trending in dividends for years to come.

 

[Chuckles21]

The games companies play, why not full disclosure. At any rate, seems there will be downward trending in dividends for years to come.

More than likely unfortunately with the way interest rates are staying so low. As others have mentioned the interest rate is only a piece of how the dividend is credited. I know for NML, this year, the majority of the dividend payout is actually due to M & E crediting.

 

[BNTRS]

Well it took a little digging but I got it 6.95% is the new dividend interest rate, meaning it increased modestly from 6.85%.

 

[2insureyou]

Well it took a little digging but I got it 6.95% is the new dividend interest rate, meaning it increased modestly from 6.85%.

Yup... just saw that internally on NML's intranet today about Guardian's dividend...