jump to navigation

Is Minnesota Life still the #1 EIUL? January 4, 2011

Posted by shaferfinancial in Finance, Uncategorized.
Tags: ,
trackback

As most of my readers know, I take a look annually at all the EIULs on the market to make a decision as to which ones are the best. For the last couple years the Minnesota Life EIUL has been by far the best. However, this year the gap closed.

First a discussion of the analysis; what is important to know and what isn’t really important.
Over the years I have been able to figure out what is critical and what is merely window dressing when it comes to EIULs.

First thing I look at is the financial stability of the companies as reflected in their comdex ratings.
This rating system is a composite of the major rating agencies and their comments. This is important not because the policies won’t be paid out [this has never happened in the last 100 years of life insurance policies], because their are systems in place to make sure they are paid out. But, what does happen is when a company has problems managing the reserves that back up the policies, they try to make up the losses by other means including dropping cap rates and increasing expenses to current policy holders. The result are products that don’t perform as they should because the companies are not managing their reserves as they should. Fortunately, we can avoid this by noting the ability of companies to manage their reserves in a stable manner. Hence I only sell products from companies that have high comdex ratings.

The second item I look at is the cap rate history. Cap rates on EIULs are in response to the overall interest rate environment. Many of my clients are very worried about the indexes and their returns. But, they should be more concerned about the interest rate environment because that is what really drives the performance of these products. Currently the interest rate environment is in a two generation low, so cap rates have come down. However, I take a look at the history of the cap rates in a more normal interest rate environment as well as the current one [unfortunately EIULs haven’t been around long enough to have experienced a high interest rate environment like the early 1980s] under the assumption that we will over time have a normal interest rate environment. This history gives me a good gauge on what the future performance might look like as well as what the companies are likely to do in different environments.

Next I assume nothing changes and analyze each product based on what the index has done over the last 20 years and what the current cap rates are.

Finally, I look at the various options on loans, and riders to see how these compare from company to company.

After looking at all this, I then offer the best one to my customers and a second choice for those who might want another company.

So, is Minnesota Life still number 1??????

Yes, by a nose to North American.

If everything stayed the same including the current interest rate environment for 30 years then the North American product would probably out-perform ML. However, since I think that is extremely unlikely, and the more likely event is a more normalized environment in the future then ML should out-perform NA given its higher cap rate history. ML is rated slightly higher on the comdex rating system. Expenses between the two are about the same. So if a customer preferred NA I would be more than happy to sell it to them and sleep fine.

Now remember, it is not just important to get the best product, but even more important to have it structured right for your situation. Seems from what people have shown me over the last few years most agents don’t structure them correctly.

Advertisements

Comments»

1. Joshua - January 5, 2011

Excellent review! Keep up the great work!

2. Weekend Links 1/9/2011 | The Investment Blog - January 9, 2011

[…] Is Minnesota Life still the #1 EIUL? @ Uncommon Financial Wisdom […]

3. Weekend Links 1/16/2011 | The Investment Blog - January 16, 2011

[…] Is Minnesota Life still the #1 EIUL? @ Uncommon Financial Wisdom [same as last week] […]

4. mdxc90 - October 14, 2011

Can you compare the expenses to Minnesota Life EIUL to other products. Specifically F&G Life-Choice. I am being told by my agent that the F&G is the only product that does not have a “per thousand” charge built-in.

shaferfinancial - October 14, 2011

The F & G EIUL product has about 30% more expenses inside it than the ML product according to my and a third party analysis.
This is not the only strike against it in my mind. It has a participating loan cap, which will effect overall performance long term.
Finally, its COMDEX [which is a combination of all the rating agencies analysis] is really low. For that last reason alone I do not consider selling it.
The overall performance is middle of the road. Hope this helps!

5. mdxc90 - October 17, 2011

Thank you. Are you talking specifically about the F&G Life-Choice product? I am being told that it is the only EIUL that does not have a “per thousand” charge.

6. shaferfinancial - October 17, 2011

Yes. F & G won’t tell anyone what the costs are and what category they fall in, so he could be telling the truth????
However it is easy to see what the total costs are by backing it out and that is how we understand it has so much more expenses inside than NA and ML. Also on top of other negatives it only sweeps money into their indexes every 3 months. Do you really want to purchase this product when there are so many better ones out there?

7. Steve Mills - October 27, 2011

How does the Midland National XL-CV3 IUL stack up against Minnesota Life and North American? I see that Sammons Financial Group owns both North American and Midland both of which have high A.M. Best ratings. The last Full Disclosure report I was able to find dated July 1, 2010 showed Midland as the tops in income distribution and cash value accumulation over both Minnesota & North American and I understand they have a good commission contract too. What is your thoughts on why Midland is not better than your top 2?

shaferfinancial - October 27, 2011

The Midland EIUL is a good performer. But it has more expenses inside than either ML or NA. Since North American is a sister company to Midland I see no reason to sell Midland when NA has lower expenses. It also does some commission things that encourage folks to not structure the policy as efficiently as it should be structured. Bottom line, good performer, but I prefer the other two to them.

8. zahnarzt-Roemer.de - July 7, 2013

I do not write a comment, however I looked at through a
few responses on this page Is Minnesota Life still the #1 EIUL?
| Uncommon Financial Wisdom. I do have 2
questions for you if you do not mind. Could it be simply me or do some of the comments come across like they are left
by brain dead individuals? 😛 And, if you are posting on other online social sites, I’d like to follow you. Could you list of every one of all your shared pages like your twitter feed, Facebook page or linkedin profile?


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: