Presentation on theme: "Catherine Larouche Product Manager, Whole Life March 2013"— Presentation transcript:
1 Catherine Larouche Product Manager, Whole Life March 2013 Performax GoldCatherine LaroucheProduct Manager, Whole LifeMarch 2013
2 Important information We've provided written material with this oral presentation to make it easier for you to take notes. Do not rely on the written material on its own because it may be incomplete or inaccurate without the additional context and information provided by the oral presentation.Because of this, and also because the presentation is of a technical nature designed for insurance professionals, the written material should not be redistributed. We have provided client-friendly material about many of our products and concepts on our advisor website atThis presentation is for educational purposes only. It should not be construed as legal, tax or accounting advice.This presentation doesn't bind Manulife to provide, or to continue to provide, any of the concepts or products described in the presentation. It also doesn't limit Manulife's ability to change any of the procedures that may be described in the presentation.If this presentation contains competitive information, we've made every effort to ensure its accuracy as of the date of the original oral presentation. We can't, however, guarantee the accuracy and, if you have any questions regarding this information, you should contact the competitor directly.This presentation is intended for insurance professionals and should not be shared with clients. It is designed to provide you with education and training to assist in your practice.Client friendly material is available on Repsource.The slides are provided for your convenience and may not provide sufficient information without the verbal explanation.We have made every effort to ensure the accuracy of this presentation but are not bound by it.In the case of competitive information, if you have questions about our competitors’ products, you should contact them for clarification.
3 Agenda Whole Life 101 Same objective – Different risk Base guaranteesBase model & luxury editionDividends and Performance CreditsSame objective – Different riskDoes current matter?Going forwardIllustration software changesProduct vs illustration rateCost for 15 years
4 Whole Life – base guarantees CancellationLeverageClaimPremium: level and guaranteedDeath Benefit vs Cash ValueClient gets one or the other, but not bothDeath BenefitCash Surrender ValueGuaranteed Death BenefitGuaranteed Cash ValueYEARS
5 Whole Life 101 Some whole life plans have a level death benefit CancellationLeverageClaimSome whole life plans have a level death benefit(base model)Don’t have to be participating to be Whole LifeDeath BenefitCash Surrender ValueGuaranteed Death BenefitGuaranteed Cash ValueYEARS
6 Whole Life 101 Others have a death benefit that increases over time (luxury edition)CancellationLeverageClaimThese plans are typically participatingNon-guaranteed Death BenefitDeath BenefitCash Surrender ValueGuaranteed Death BenefitGuaranteed Cash ValueYEARS
7 How do values grow beyond the guarantees? CancellationLeverageClaimIt all starts with a dollar amount credited back to the policy annuallyThis is the key to any growth in values, in excess of the guaranteesDividends (Par)Performance Credit (PGold)Death BenefitCash Surrender ValueGuaranteed Death BenefitGuaranteed Cash ValueYEARS
8 Whole Life – increase in values This dollar amount is used to purchase Paid-up insurance.PUI increases the Death Benefit and the amount that was used to purchase the insurance becomes cash value.CancellationLeverageClaimPaid-up insurance purchased with dividends/PC creditDeath BenefitCash Surrender ValueTotal Cash ValueGuaranteed Death BenefitGuaranteed Cash ValueYEARS
9 Participating Whole Life - dividends CancellationLeverageClaimIf there is more money in the Par Fund than what’s required to satisfy the guarantees, “surplus” becomes available and dividends may be distributed to policies.Death BenefitDividends – not guaranteed100% variableCash Surrender ValueGuaranteed Death BenefitGuaranteed Cash ValueYEARS
10 Factors that impact surplus - Par products Mortality – experience is better or worse than assumed in product pricingLapses – experience is better or worse than assumed in product pricingExpenses – higher or lower cost to administer the product that what was expectedTaxes, inflation, …Investment returns
11 Factors that impact surplus - Performax Gold Surplus does not apply to Performax GoldMortality – Experience is better or worse than assumed in product pricingLapses – Experience is better or worse than assumed in product pricingExpenses – Higher or lower cost to administer the product that what was expectedTaxes, inflation, …Investment returnsThe risks associated to mortality, lapses, expenses, and other factors are taken on by Manulife (shareholders) not the policyholders. Just like UL and Term.
12 Factors that impact surplus - Performax Gold Surplus does not apply to Performax GoldMortality – Experience is better or worse than assumed in product pricingLapses – Experience is better or worse than assumed in product pricingExpenses – Higher or lower cost to administer the product that what was expectedTaxes, inflation, …Investment returnsBut clients are still getting some value for it. It’s contractually guaranteed and part of the Performance Credit the policy receives annually.Investment returns - it’s the only variable factor left in the equation, and the contract shows how it will impact policy values.
13 Performax Gold – Performance Credit CancellationLeverageClaimPolicies will always receive a Performance Credit.Death BenefitMinimum guaranteed PCCash Surrender ValueGuaranteed Death BenefitGuaranteed Cash ValueYEARS
14 Performax Gold – Performance Credit CancellationLeverageClaimAnd another amount based on investment performanceVariable PC based on investment returnDeath BenefitMinimum guaranteed PCCash Surrender ValueGuaranteed Death BenefitGuaranteed Cash ValueYEARS
15 PGold vs others: same objective – increase values Death BenefitDeath BenefitPaid-Up insurancePaid-Up insuranceGuaranteed Death benefitGuaranteed Death BenefitPar Whole LifePerformax Gold
16 Different ways to get there – risk level DividendsPerformance CreditsMore riskLess riskPar Whole LifePerformax Gold
17 What does this mean for your clients? With Performax Gold, just like with a UL, it’s an investment risk discussionThe investment risk is borne by policyholders but in a deferred fashionThe investment conversation is a unique one:A forward looking questionWhat will returns be, on average, over the lifetime of your policyInvestment return will have more impact in the later policy years than in the earlier policy yearsIt’s a perfect opportunity to showcase what Performax Gold can do for them
18 PGold is well positioned to tackle today’s economic uncertainty Total Death Benefit$2,500,000$2,000,000$1,500,000$1,000,000$500,000$0464952555861646770737679828588919497100AGEMale 45 HS3 (NS), $500,000 base coverage, Cost for 15 years, PUI, 15 annual payments of $16,586
19 Strong long-term values and IRR Values at age 836%3.5% for10 years15 years20 yearsDB$1.25M$1.22M$1.16M$1.06MDB IRR5.26%5.19%5.02%4.72%CV$903K$882K$834K$752KCV IRR4.19%4.12%3.93%3.59%Male 45 HS3 (NS), $500,000 base coverage, Cost for 15 years, PUI, 15 annual payments of $16,586
20 So does “current” really matter? It doesn’tIt’s not an estimate or a guarantee of what the future holdsIt’s more a reflection of what happened in the pastBecause of smoothing of returnsBecause of surplus (par products)
21 Lessons learned from the (not so distant) past With Performax ParIf you were “conservatively” illustrating at current less 2% 10 years ago, your dividends are now being calculated using a rate that is 15 bps lower than your original illustrationIf you were “conservatively” illustrating at current less 1% 6 years ago, your dividends are now being calculated using a rate that is 50bps lower than your original illustration
22 Lessons learned from the (not so distant) past With one of the main par competitorsIf you were “conservatively” illustrating at current less 2% 10 years ago, your dividends are now being calculated using a rate that is 11bps lower than your original illustrationIf you were “conservatively” illustrating at current less 1% 5 years ago, your dividends are now being calculated using a rate that is 21bps lower than your original illustration
23 Gov of Canada – long term bonds benchmark Jan 2010Mar 2013
24 Fund mix67% Fixed Income65.3% Fixed Income81% Fixed Income
25 ObservationsIn their Dividend Scale announcements, companies are alluding to future decreases due to the sustained low interest rates environment.Even with participating whole life, investment returns have the largest impact on surplus, and as a result, dividends.Par funds allow previously accumulated surplus to be taken into account when determining the Dividend Interest Rate for the year.It’s just another form of smoothing. It doesn’t mean that Par funds get better investment returns than other funds, or that they are immune to low interest rates and market downturns.
26 What does this mean going forward? Significant downward pressure on fund yieldsConsider the asset mixWhat percentage of fixed income assets? 60%? 80%? 90%?Smoothing creates a lagFund yield: Smoothed returns will be slower to decrease but slower to increaseDividend Interest Rates: Previously accumulated surplus may help slow down the decrease, but are we depleting faster than we’re replenishing?Everyone is going in the same directionFor your clients: Set the right expectations, illustrate under different interest rate assumptions
27 Changes to our illustration software Changes to the “Rates” tab for Performax GoldIn January 2012, we changed the software to allow users to specify an illustration rate and gave them the ability to customize using the spreadsheet (like UL)With this new release, we’ve completely removed the “current” terminology, users will have to specify a rateThe default setting will now be 0%
28 Changes to the Rates tab in Diamond View The PC rate is now defaulted to 0%. Max is rate currently in effectThe “Current” terminology has been removed.Can specify a rate up to 8%
29 There is no magicIllustrating whole life should be about long term projectionsIllustrate Performax Gold and the competitors at a rate that, on average, could be reasonably expected over the next yearsWe’re all moving in the same direction, par or non-par, it doesn’t matter, investment performance has the greatest impact on values
30 Don’t be afraid to show the worst case scenario Death Benefit based on guaranteed valuesEstate AchieverSun Par ProtectorPerformax Gold$700,000$675,000$650,000PGold = 1.42%$600,000IRR at LETotal Death Benefit$550,000$500,000CL = 0.12%$450,000Sun = 0.01%$400,000414345474951535557596163656769717375777981838587899193959799AgeAnnual payment: Performax Gold $11,341 Estate Achiever $11, Par Protector $11,595Male 40 HS3 (NS), $500,000base coverage, Costs -to -100, Accum Account, Pay for life, illustrated at 0%
31 Death Benefit, M45 NS, PUI, $500K base, 10 payments of $28K Consider the product’s performance under different interest rate scenariosDeath Benefit, M45 NS, PUI, $500K base, 10 payments of $28KPerformax Gold Custom illustration rate:Years 1-5: 4.5%Years 6-12: Increasing by 25bps every yearYears 13 thereafter: 6.5%
32 Death Benefit, M45 NS, PUI, $500K base, 10 payments of $25.6K Performax Gold Custom illustration rate:Years 1-5: 5.15%Years 6-12: Increasing by 25bps every yearYears 13 thereafter: 7.15%
33 Unique Cost for 15 years duration Unique in the marketplace – our main competitors offer a 20 pay durationOffers competitive value, in no more than 15 payments, guaranteedMale 45 NSValues at LE (83)Performax Gold15-payEstate Achiever20-paySun Par ProtectorAnnual payment$11.7KNumber of payments1520Base coverage$350K$378K$337KDeath 6.5 / 7.15$994K$1.1M$1.3MIRR5.66%5.50%5.99%Death 5 / 5.15$679K$769K$725K4.41%4.17%3.97%65bps illustration rate difference for Sun
34 A different kind of Gold Product design that’s minimally impacted by returns in the early policy yearsPerformance and value in good and bad timesMost flexible illustration – Allows you to set the right client expectationsMinimum Guaranteed Performance Credit paid every year that will contribute to Death Benefit and Cash Value growthFull disclosure, no unknowns, more contractual guarantees than par products
35 Manulife Segregated Fund RESP details Now let’s look at the specific features of the new Manulife Segregated fund RESP product
36 Manulife introduces a Segregated Fund RESP! A new option to help your clients prepare for their children’s post-secondary education and achieve their financial goalsNo additional licensing will be required if already life licensedA new means of appealing to a broader market, including younger clientsWe are pleased to announce that a new Segregated Fund RESP is now available from Manulife InvestmentsThis provides an additional investment option to help your clients prepare for their children’s post-secondary education and achieve their financial goalsNo additional licensing will be required – if you are contracted to sell life insurance, you can now enter the segregated fund RESP market andIt is a new means of appealing to a broader market, including younger clients, that can provide you with ongoing opportunities to grow your total book of business
37 Manulife Segregated Fund RESP – Product features Selection of 7 segregated funds invested in underlying Manulife Mutual Funds75% Death Benefit Guarantee*75% Maturity Guarantee*Contract Maturity Date is Dec 31st of the 35th year (40th year for a Specified Plan) after the RESP Inception DateIndividual or Family PlanClient name onlyLife license is the only requirement to sell the productIt will offer a selection of 7 segregated funds invested in underlying Manulife Mutual FundsIt will have a 75% Death Benefit and 75% Maturity GuaranteeThe maturity date will be 35 years after the RESP inception dateThese plans can be set up as individual or family plansThis product will only be offered in Client name at launch, nominee name is not availableAnd only a life insurance license is required for advisors to offer the product*Reduced proportionally by withdrawals
38 Contract & deposit minimums and maximums No deposit is required if applying for the Canada Learning Bond and / or the Alberta Centennial Education Savings (ACES) GrantFund minimum = $100 per fund, per sales charge optionPre-authorized Credit (PAC) deposit minimum = $25/month, per fundNo minimum deposit is required if one is applying for the Canada Learning Bond and/or the Alberta Centennial Education Savings Grant.The fund minimum is $100, but a PAC can be set up with a minimum of $25 per month.The latest age to deposit is age 75 of the subscriber or the 31st year after inception of the plan and before the Student Beneficiary's 31st birthday (or 35th year for a Specified Plan) for a Family Plan.