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Yeah, a ton of suction does and not all suction is positive
How does Fed Rate cut affect IULs/WL?
- Thread starter HoosierLife
- Start date
Yeah, a ton of suction does and not all suction is positive
- 5,297
That joke really sucked, Allen.
Denzel Rodriguez
New Member
- 4
Personally I’ve already seen the big mutual life insurance companies specifically Mass Mutual and Guardian lowered their dividend rate before the outbreak even occurred. Mass mutual went from a 6.4 to 6.2 and guardian went from 5.85 to 5.65. I believe the low interest rate environment will stay the same for a long period of time like its been already and insurance companies are the first to take action to stay ahead of all the other industries in general. That’s my thought
You hit the nail on the head. I am truly glad that I backed off the FIA and IUL last year. Most of my fia clients have done so well (high part.rates and high caps), that I'm hoping this will just be the bad year, and if things take off again it will be a big boost for them next year, if the caps aren't lowered too much. IUL, of course, will be much worse, they will be screwed.
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Whole life dividend rates would be reduced for the same reason IUL caps will be reduced. The less yield on the general investment account will affect dividends and stock market call options.
As for as "getting back to normal"... what's normal?
I primarily follow Tom Hegna - not just for retirement income planning, but his economic perspective. (I'm not an economist by any stretch and he's not as "sensational" as Harry Dent.) Tom Hegna is "on record" that short-term interest rate increases are an anomaly and that the national debt can't handle much higher rates long-term.
As for as "getting back to normal"... what's normal?
I primarily follow Tom Hegna - not just for retirement income planning, but his economic perspective. (I'm not an economist by any stretch and he's not as "sensational" as Harry Dent.) Tom Hegna is "on record" that short-term interest rate increases are an anomaly and that the national debt can't handle much higher rates long-term.
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What are you seeing currently for cap & par rates on FIAs that isn't needed for income or income riders
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Bonds prices have been in a 40 year bull market, with yields in a corresponding 40 year bear market. We are about to add 4 to 5 trillion to our balance sheet in a very short period of time. I believe now that everyone and their mother is bemoaning the low interest rate environment, that rates are soon to start in the other direction.
As for insurance products, IUL's will be most affected if the market goes flat for ten to fifteen years.
Annuities are the product that is and will continue to be under the most pressure from low rates until bonds start to sell off.
I would expect yields to make one or two more pushes lower near term, and then a turn. Ten years from now we will be competing with bank CD's when they get back to 5%.
If this crash ushers in the prolonged period of deflation that a number of economists have been predicting, money supply will tighten, and interest rates will rise as cash becomes more dear.
Just as it was the smart move to be contrarian at the top of every stock market bubble, it is likely wise to be contrarian as rates approach zero. I know there are others who will disagree, but if the US were to allow negatives rates it will be short-lived.
As for insurance products, IUL's will be most affected if the market goes flat for ten to fifteen years.
Annuities are the product that is and will continue to be under the most pressure from low rates until bonds start to sell off.
I would expect yields to make one or two more pushes lower near term, and then a turn. Ten years from now we will be competing with bank CD's when they get back to 5%.
If this crash ushers in the prolonged period of deflation that a number of economists have been predicting, money supply will tighten, and interest rates will rise as cash becomes more dear.
Just as it was the smart move to be contrarian at the top of every stock market bubble, it is likely wise to be contrarian as rates approach zero. I know there are others who will disagree, but if the US were to allow negatives rates it will be short-lived.
Equitrust Market Value has a 12% cap and 100% part rate. Fixed rate is 2.25, which is also better than average. I can't remember off hand, but I think that the cap was higher several years ago, seems like it was 14 bid.
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Weren't they downgraded in recent months by AM Best or a different rating agency? Makes me nervous to wonder where they are coming up with the funds to buy such high cap & par rate for a FIA. Those cap & par rates are better than IUL currently & FIA tend to be much lower than IUL
I've sold that one, more than any other, for people that had a lot of extra money and wanted something safe, with a little better return. It's a 10 yr term, not a big commission 14-17 year bonus product, and has performed well. Don't worry about ratings, with all of this covid 19 stuff going on, you don't need to give yourself a headache.
