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Participating life insurancefor Business Owners
Additional advantagesFixed income asset
Features of participating life insurance
Stable performance, low risk
Access to cash value
Low fees
Professionally managed
Diversified
Immediate estate
Tax-advantaged growth
Vesting
Bypass estate
Continue
Potential creditor protection
Immediate estate enhancement
Important note on immediate estate enhancement
Tax-advantaged growth
Yearly taxes on growth can reduce total asset value by almost half
Tax-advantaged growth
Tax-advantaged growth
Bypass estate
Potential creditor protection
• Especially valuable for business owners and professionals
• During lifetime, personally owned policies with named beneficiaries could prevent creditors from accessing policy values
• At death, benefit is paid directly to named beneficiaries• Creditors of the estate do not have an interest in the
policy benefits
Important note on potential creditor protection
Investment performance
Important note on dividend scale interest rate
London Life annual dividend scale interest rate
Investment performance
Important note on dividend scale interest rate
London Life dividend scale interest rate Average return: 8.7%. Standard deviation: 1.7%
Smoothed returns
Simplified example See data
Dividend scale interest rate
Low volatilityCurrent rate 5.9% rate for 2015
Historical performance for periods ending 2014
6.8% 10-year average, since 2005
7.7% 20-year average, since 1995
8.7% 30-year average, since 1985
7.4% 60-year average, since 1955
1.7% 30-year standard deviation, since 1985
Policyowner dividends
• Distributed every year since 1886• $783 million in 2014• Estimated dividends for 2015: $830 million
• For 2014, approximately, • 60% derived from investment performance• 30% from positive mortality experience• 10% from other factors such as positive expense and
tax experience
Example of client policy’s performance
Policy year
Cash surrender
value
Internal rate of return on
cash surrender
value
Required rate of return on other asset classes due
to tax
Total death
benefit
Internal rate of
return on death
Required rate of return on other asset
classes due to tax
1 $11,911 $782,464 3,029.86% 5,653.77%
5 116,545 973,909 78.53% 146.53%
10 278,683 1.97% 3.67% 1,185,993 27.30% 50.94%
15 485,085 3.15% 5.89% 1,360,369 14.94% 27.88%
20 754,721 3.77% 7.04% 1,600,069 10.13% 18.90%
30 1,183,452 4.15% 7.75% 1,945,043 6.51% 12.15%
40 1,748,203 4.10% 7.65% 2,351,658 5.07% 9.46%
45 2,064,148 4.00% 7.46% 2,579,949 4.63% 8.64%
All values before tax Important note on illustration examples Assumptions
Vesting
For guaranteed cash values and for dividends
Once credited, they are•Fully vested•Fully protected from downside market risk•Cannot be used or reduced except as authorized by the policyowner, or to pay premiums as per the policy
Access to cash value
Cash values• Guaranteed• Dividends• Accumulate over time
Access• Policy loans• Withdrawals• Leveraging
Low fees
• Benefit from synergies with London Life’s overall asset management
• Low investment expenses• In 2014, the participating account’s investment
expenses were 7.4 basis points, or 0.074%
Professionally managed
The participating account• Managed by London Life’s investment division• Broadly diversified• Managed as fixed income account• High quality investments• Detailed investment reports
Professionally managed
Private placements• Unique lending opportunities• Potential for higher returns than other fixed-income
investments• Same dedicated investment managers who manage
London Life’s assets• Actively managed
Professionally managed
Detailed investment reports
Total account Public bond holdings Private placement holdings
Mortgage holdings Equity holdings
46-5041
46-5042
46-5044
46-5043
46-5045
Diversified
Account compositionThis account composition is for total participating account assets.
As of December 31, 2014
Comparing life insurance vs. bonds
Bonds Life insurance Difference at death
Policy year
Bond Investme
ntAnnual growth
Tax due on
growthValue of bonds Premium
Total policy death
benefitCash value $ %
1 $25,000$1,000
$464$25,536
$25,000 $782,464 $486,911 $756,928 2,964%
5 $25,000$5,219
$2,422$133,271
$25,000 973,909 $491,545 $840,638 631%
10 $25,000$11,021
$5,115$281,453
$25,000 1,185,993 $528,683 $904,540 321%
15 $25,000$17,474
$8,109$446,213
$25,000 1,360,369 $610,085 $914,156 205%
20 $25,000$24,648
$11,439$629,405
$25,000 1,600,069 $754,721 $970,664 154%
30$30,471
$14,141$778,111
- 1,945,043 $1,183,452 $1,166,932 150%
40$37,670
$17,482$961,952
- 2,351,658 $1,748,203 $1,389,706 144%
45$41,884
$19,438$1,069,570
- 2,579,949 $2,064,148 $1,510,379 141%
Important note on illustration examples Assumptions
Comparing life insurance vs. bonds
Important note on illustration examples See data Assumptions
Important notes
• Immediate estate. This example is based on average illustrated permanent life insurance death benefit values from four of Canada’s largest life insurance companies. Values illustrated include guaranteed and non-guaranteed values. Actual results vary with age, gender, health, return provided in the policy and other factors.
• Illustration examples. Examples provided are not complete without the London Life illustration, including the cover page, reduced example and product features pages, all having the same date. Read each page carefully, as they contain important information about the policy. Values illustrated on slide 21 and slide 22 are based on London Life’s 2015 dividend scale.
• Dividend scale interest rate. The dividend scale interest rate is the interest rate used in determining the investment component of the dividend scale. It is only one factor that contributes to an individual policy’s performance.
• Potential creditor protection. In 2014, for example, 60 per cent of dividend value was derived from investment performance through the dividend scale interest rate. The actual cash value growth in any policy varies, based on a number of factors, such as type of product, product features, premium-paying period, issue age, rating, dividend option, the dividend scale and others. Performance data is provided for illustrative purposes only and represents past performance, which is not necessarily indicative of future performance. Creditor protection depends on court decisions and applicable legislation, which can be subject to change and can vary from each province; it can never be guaranteed. Clients should talk to their lawyer to find out more about the potential for creditor protection for their specific situation.
Assumptions
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