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In Reply to: Re: Re: Re: Re: nml in trouble posted by tvo on August 20, 2001 at 15:02:40:
: if memory serves NYL's dividend crediting rate is 7.2%. NYL historically is not a company that sells thier dividend performance because it is something that they as a company have chosen not to do. Not because they are bad dividends but because they want to sell on other factors -- strength of company, versatility of insurance product, application in the overall financial picture et. al... .
: When you say you have back calculated the dividends you have done nothing of the sort -- what you have done is discovered the IRR of the policy -- the cash on cash return. When calculating dividends you must include the guaranteed cash, the paid up addtions cash value and the total death benefit. The 4% number you derived is nothing more than the guaranteed rate of interest on the policy.
: This might make it easier for you -- all whole life insurance is is discounted dollars purchased today for delivery in the future -- that's it nothing more nothing less. Substatively there is no difference between the cash surrender value of a life insurance policy ( WL -- not VUL )and the equity in a piece of real estate. CV is not a side account, or a pool where $$ is accumulated, it is the policyholders current equity in the company as a function of face amount. When you buy whole life insurance you are buying discounted dollars for delivery in the future -- its up to the client to decide if it is indeed valuable to have those dollars in the future.
TVO, Thank you for the response. I am uncomfortable in referring to what I derived as "internal rate of return" due to the additional earnings outside of the calculation. But "cash on cash" return seems a good way of stating it. My site actually refers to it as "earned dividends", to distinguish this component from the $160 annual premium rebate "dividend". It is not the guaranteed value I derived, though, but the non-guaranteed. I.e., it is a rate associated with the dividend earnings in my annual statements. Since dividends are not guaranteed, the rate I derived for cash-on-cash earnings can't be guaranteed either, right? I understand the need to include all components when comparing what other companies quote as "dividend rate". It just does not make sense to me to include guaranteed components within a non-guaranteed value, even if other companies do it. Does "dividend rate" have some precisely defined meaning outside what the two words would in themselves imply? The only "guaranteed" rate mentioned in my policy is the rate associated with the linear earnings on OPP purchases, which is 4% uncompounded and adjusted by a mortality table. This is the number I refer to as "linear increase in value". -- Rich |