Irreplaceable Life - Executive Life

RALPH H. GOEBEL: We have an irreplaceable life type product that on the surface is a straight ordinary life policy.

  • You can also look at it as a type of Universal Life product where the fixed premium builds up at a relatively high interest rate such as ten percent.
  • Charges are deducted for mortality.
  • We are wrestling with how to reserve it and how to handle it for tax purposes.
  • Our present view is to consider the excess interest over that guaranteed as a dividend which is recycled for more premium.
  • We hold two reserves: a CRVM reserve based on the 1958 CSO at four percent and another for the cash value on surrender which is the difference between the fund accumulation at the ten percent rate and the fund accumulation at the guaranteed rate.
  • For tax purposes we add $19.00 a thousand to the CRVM reserve.
  • Does anybody have any thoughts on these procedures? 

1983 - SOA - Strategic Tax Planning, Society of Actuaries - 8p

  • 1984 0131 - GOV (Senate) - Tax Treatment of Life Insurance Products and Policyholders - [PDF-345p-GooglePlay]

Everyone is entitled to his opinion.

I think if I had done this session in 1977, the first year that Executive Life brought out the Irreplaceable Life contract with an 8% guaranteed cash value, your comments at that time would have been very similar to what they are today.

  • Not only did it have an 8% cash value but it was truly a no-load life insurance product: 100% of the money went into cash value.
  • Irreplaceable Life now pays 11-1/4% which is somewhat low in comparison to some Universal Life contracts that are being offered by the industry today.
  • However, last year we sold just a shade under 200 million dollars of Irreplaceable Life first year premium, and people who bought the contract at 8% this year were also credited with 11-1/4%.
  • I think the industry has moved more towards us than we towards them.

-- Frank Sieni (not a member of the Society, is Secretary/Treasurer of MSM Marketing Corporation.) 

1984 - SOA - Distribution Systems for Investment-oriented Products, Society of Actuaries - 22p