Dividends

Certainly customers are not going to be happy if they get a dividend considerably less than the dividend that has been illustrated.

That is a fact of life that we have to worry about and be concerned about.

1980 - PREMIUMS AND DIVIDENDS--PARTICIPATING INSURANCE, Society of Actuaries

  • Dividends paid on life insurance are, in effect, only an adjustment in the premium paid -- a price reduction. (p60)

1977 - Treasury - Blueprints for Basic Tax Reform

1978, DIVIDEND PHILOSOPHY, Society of Actuaries

"While we work to resolve the dividend issues, there are those who say that we are at best deciding what color to paint a dinosaur."
1982 Journal - American Academy of Actuaries

"Traditional plans are fairly simple in their structure. One can look at their premiums, their cash values and their dividends, if there happen to be any.  Universal life presents something of a paradox." Ben H. Mitchell
1981, UNIVERSAL LIFE, Society of Actuaries

"The assertion that dividends reflect "overall profit and loss" and "experience of other clients" is false."  THOMAS G. KABELE
1983, Society of Actuaries, UNIVERSAL LIFE AND INDETERMINATE PREMIUM PRODUCTS AND POLICYHOLDER DIVIDENDS

"II. REGULATORY REQUIREMENTS FOR LIFE INSURANCE ILLUSTRATIONS
The policy performance and features illustrated to the buyer have been an issue with regulators for at least a century. At the turn of the century, there was concern about the tontine dividends that companies illustrated to their customers. An outgrowth of the Armstrong Commission was the required annual distribution of dividends and the elimination of tontines based on survivorship." 
1991, Final Report of the Task Force for Research on Life Insurance Sales Illustrations, Society of Actuaries, page 143

"Hal Phillips (Calif.) asked whether it was appropriate to include the term "dividend" as a nonguaranteed element. He said the dividend was derived from nonguaranteed elements, so he saw this as a semantic problem." 
1994-4 NAIC Proceedings

Index Code : 1981-12
To: NAIC Life Insurance (C3) Subcommittee
<From: American Academy of Actuaries>
Date : June 2, 1981
Length : 12 pages beginning on page 144
Concerning : Dividend principles and practices

Background : This statement was presented at a meeting of the Task Force on Manipulation, Lapsation, Dividend Practices and Annuity Disclosure of NAIL Life Insurance (C3) Subcommittee as a status report of the activities of the Committee on Dividend Principles and Practices . This statement follows previous submissions on this subject to the NAIC ( see statements 1979-14, 1960-18, and 1980-32) .

1987 - AAA Journal ---

The Academy report, Dividend Recommendations and Interpretations (November 1985), describes this principle as the distribution of the aggregate divisible surplus among policies in the same proportion as the policies are considered to have contributed to divisible surplus . In a broad sense, the Contribution Principle underlies the essential equity implied by participating business ."

For this reason, mutual insurers need to accumulate a surplus to protect against such adverse contingencies as heavy losses or a decline in investment return. Any money left after paying all costs of operation is returned to the policyholders in the form of dividends. 


Fundamentals of Risk and Insurance, 1Oth Ed. Vaughn, p77

 

Hal Phillips (Calif.) asked whether it was appropriate to include the term "dividend" as a nonguaranteed element. He said the dividend was derived from nonguaranteed elements, so he saw this as a semantic problem.

  1994-4, NAIC Proceedings

 

There are many techniques used by companies to calculate policyholder dividends, but many companies use factor formula methods utilizing the statutory reserve as an input item in the calculation of the interest and mortality components."  (p23)

Statutory Valuation of Individual Life and Annuity Contracts | 5th Edition, Claire, Lombardi and Summers

 

"II. REGULATORY REQUIREMENTS FOR LIFE INSURANCE ILLUSTRATIONS
The policy performance and features illustrated to the buyer have been an issue with regulators for at least a century. At the turn of the century, there was concern about the tontine dividends that companies illustrated to their customers. An outgrowth of the Armstrong Commission was the required annual distribution of dividends and the elimination of tontines based on survivorship.  (p143)

1991-1992 - FINAL REPORT* OF THE TASK FORCE FOR RESEARCH ON LIFE INSURANCE SALES ILLUSTRATIONS  - 142p, Society of Actuaries

 

The History of Life Insurance in the United States to 1870: With an  Introduction to Its Development Abroad, Charles Kelley Knight, University of Pennsylvania, 1920

Manipulation, Lapsation, Dividend Practices and Annuity Task Force - NAIC

 

Wish List

  • Philosophies in the computation and dissemination of dividend illustrations, Society of Actuaries (Committee on Cost Comparison Methods and Related Issues (Special)), 85 pages, 1974