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In Reply to: Re: nml in trouble posted by Curious on August 20, 2001 at 07:12:32:
: Where have you found such information TVO? I have had some interest in NML for roughly 6 months, and I'm wondering about this info?
: When computing one's return on your WL contract it computes to a return of 8.8% over a period of time (not shorter than 10-15 years). I must say, though, they're one of the most financially sound insurers. When the bought Frank Russell, an outlay of stock and cash, they also paid record dividends that year. On top of that, 20% of the dividends paid out in this country are represented by NML.
: Not to mention, they also received second place, just below USAA in rankings for life insurance companies.
: Yet, you are right about the contract, it is weighted toward life insurance. In fact, if you're not selling enough life policies, they can and will let you go. If you meet the minimums, then you're on your way to making buko bucks. I personally think they'd be better off if they didn't weight the sales so much to insurance, but instead worked on a balance of both.
: Whether they're ACL is UL, I don't know. I'm not wholly familiar with UL, but I do know about ACL. I also know they wanted nothing to do with the UL market place, even back in the early 80's, because the products were just not created right. Agents during that time were getting slaughtered by people searching for higher returns from UL's. Eventually, companies that offered UL filed for Chapter 7.
: Much of the pricing, as far as NML is concerned, is due to their strategic positioning. They don't take unnecessary risks. Their products are priced for the high-end CEO market, of which 30% of the countries CEO's are clients. They believe in pricing the product right, so as to be financially sound, not price competitive. This way they have adequate reserves for claims, but still can pay huge dividends.
: As they have been around for nearly 150 years, I doubt they're going anywhere. In fact, they're growing. They're adding a trust department or legal arm. Also, they've sold off some of their position in Baird and begun consolidation with NMIS. All of this has been done to position themselves better in the financial services industry.
: What has got me, though, is many agents grab the title CFP and so on, when many focus solely on life insurance. Now, they're products are very good and very secure, as well as providing one of the best returns, but I also enjoy the investment side of things, so I don't understand the need to push so much insurance.
: Looking forward to your reply.
8.8% is a dividend crediting rate it is not INTEREST. All life insurance companies have a proprietary formula they use in computing dividends. Dividends are to life insurance what special sauce is to hamburgers -- it's 1000 island dressing and katsuo and mayo in differeing amounts -- taste similar but it's not the same. In a life insurance policy dividends are comprised of net return on equity in the general account of the company ( responsible company will target a 6% to 7% ROE as that is conservative and SAFE and easily maintained by investing in bonds and real estate and private placements ), the other two factors are mortality savings ( how many people didnt die versus the amount we said would -- life insurance companies OVERESTIMATE mortality in whole life so they can GUARANTEE the CV and the DB -- the excess goes to reserves then policyholders ), and the last component of the dividend is savings from the operations of the company -- ie more streamlined and cost effective operations. All life insurance companies compute this differently -- it is their competitive advantage. Lastly dividends are a function of total face amount in force -- proportionately the more death benefit a company has in force the greater the dividends. Prudential is the larget life insurance companny in America -- they distributed $20,000,000,000 in dividends last year. They have the largest block of business. NML is growing their book -- no question but they no longer submit their historicals to AM Best one can only conclude that their costs of doing business, their mortality margins, and or their net ROE are getting worse -- not bad -- but not what they have historically been able to do.
You cannot show on an illustration a long term 8% ROR to a client -- because it might not happen, and it is misleading. It might be better -- it might not.
As for NML's term being priced for the CEO market -- please don't drink the cheese flavored kool-aid. ALL TERM insurance in a commodity. It all does the same -- NML charges more because they cannot afford to do otherwise. And contrary to what you are told by your GA -- they are not the market leader in the COLI marketplace. Corporate Owned Life Insurance products are not RETAIL products. When a Fortune 500 company buys life insurance to fund non-qualified executive compansation plans ( and they all do ) they do not buy street products -- they buy custom designed WHOLESALE products -- and these products are usually NO LOAD VUL type plans. NML is not a major player in that market. Security Life of Denver, Pacific Life, Hartford, MassMutual, John Hancock, New England, New York Life, AIG et. al are. NML's target market is the high networth family business owner, emerging affluent families, and estate planning market. Additionally, they do not compete well in the ULTRA HIGH NET WORTH market. They play in that market they are just not dominant.
Why should you believe me? Because I am a Top of the Table life insurance producer, who works this marketplace, and spent the first portion of my career with NML. I am CLU, ChFC, CFP, MSFS, MA, RIA. I research this stuff, and think independently.
NML's ratings are fine -- but remember life insurance companies PAY ratings agencies to rate them. NML will not go bankrupt. NML needs to do soemthings in order to compete -- but they have serious problems.
Any other questions?
BTB -- if you are with NML -- get educated -- talk to your competitors who are equally as strong and don't burden their agents with needless and excessive expenses. Most NML agents are broke, and not as wealth as you might think. But that is also true of the entire industry. it is a tough tough business, but ultimately very rewarding both personally and professionally.