Penn Mutual Dividend Lawsuit

LostDollar

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I got a letter today from Penn Mutual in regard to a class action lawsuit.

I just scanned stuff, but if I'm understanding right, they were sued for not distributing enough dividends. There appears to be at least $120 million in play for distributions, attorney fees and other fees.
 
Almost everyone has been sued at one time. NMFN was sued for their dividend policy and settled. You can google them. They charged 8% loan interest rate for a long time even though interest rates had dropped.

Mine is 8%

I borrowed against my WL policy over a year ago
 
has NMFN ever been sued?

Yes, repeatedly and over many different issues. I recall an @ $85M lawsuit over annuity dividend shortages and a $90+M settlement over term and disability dividends just in the past few years.

I am also aware of several smaller cases brought by clients of specific agents but at least one was well into the millions in payments.

All insurers end up in court for one reason or another. We live in a litigious society. Some cases have merit and others are downright absurd, but if you sue you can almost always expect at least a settlement because lawsuits cost money, lot's of money and in many cases the insurer will simply settle because it is cheaper.
 
When you borrow you also get a dividend.
So your cost of borrowing is the interest rate plus the change in dividends.
I believe NML credits 7.25 on loaned money which is I believe, 235 basis points higher than their current div interest rate. Your net cost of borrowing is 5.65.
If a company changed its guaranteed loan rates, that would create a material change in the contract which would trigger a 7 pay test.
I could inforce policies to become a MEC.
They did not get sued for their loan rates.
If you want a lower rate take your policy to a bank and get a cash value collateralized loan.
 
Probably more than you think, in 2016 Penn paid out 60+million in dividends.
This represents more than a 150% of their annual payout.
For a company that is having surplus difficulties with NY State this may be a problem
 
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