NML dividend falls

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Nov 7, 2008 3:47 pm

NML lowers its dividends by 100bps from 7.5 to 6.5. Pretty big jump if you ask me. This makes the contract alot less competitive vs some of the other mutual companies. For the second year now NML is not the highest dividend interest credit rate.


Any thoughts out there? 
 
Brian
Nov 8, 2008 10:59 am

Dividend rate is pretty much useless when it comes to comparing contracts.  When someone first purchases a par policy, they certainly don't get 6.5% or 7% or whatever the advertised rate is.  At the same time, someone who has owned a policy for many years may get a jump in their CSV that is higher than the advertised rate.  Just like investments:  past performance is no guarantee of future results.  If you as the advisor understand how to utilize a permanent death benefit for your clients, dividends and CSV is a bonus.  Therefore, illustration comparisons are pointless.

 
What it does reflect is the overall health and profitability of the company.  Does this dividend reduction mean NML is no longer a strong company?  No.  However if I were a rep or client of NML, I would be looking for answers.  That is a fairly large drop in dividend rate.  Who knows why it dropped, but I'd be interested in finding out.
Nov 8, 2008 8:06 pm

My first thought is that this shows their tremendous fiancial strength.  The primary driver of dividends is investment earnings.  The stock market dropped more than 30% this year and they still are able to pay significantly more than what is guaranteed in the contract.  That's pretty impressive.


Comparing dividend interest crediting rates between companies doesn't give you information that is all that meaningful because companies don't all calculate this in the same manner.  This means that is possible for a 7% from Company A to be better than 7.5% from Company B.


We know that it dropped because of what's happening in the economy.  What I don't know, and I agree with Deekay, is why the drop is so big.  Is this a concern?  I don't know.  It depends on the reason.  MassMutual, for example, also dropped.  However, they dropped 30-45 basis points and not 100.  What's the reason for the big difference?  I don't know. 


For what it's worth, MassMutual dropped from 7.9% to 7.6%.

Nov 8, 2008 8:37 pm
WiAdvisor:

NML lowers its dividends by 100bps from 7.5 to 6.5. Pretty big jump if you ask me. This makes the contract alot less competitive vs some of the other mutual companies. For the second year now NML is not the highest dividend interest credit rate.


Any thoughts out there? 
 
Brian
 
Why are you selling your policies based on the dividends?
 
Why aren't you selling your policies based on DEATH BENEFIT?
 
You're comparing insurance contract performance like you're comparing mutual fund performance.
 
You can't do that and expect to keep selling for the same company year after year (that is IF you want a long career with them).
 
Dividends are a FEATURE and a BENEFIT for keeping an insurance contract.  Isn't it great that cash values in whole life are going UP while everything else around is falling?
 
Perhaps you'll learn how to sell life insurance - for the fact that it's INSURANCE instead of all the little "bells and whistles" you're selling with it (including the dividends).
Nov 11, 2008 9:35 pm
Ominous:
WiAdvisor:

NML lowers its dividends by 100bps from 7.5 to 6.5. Pretty big jump if you ask me. This makes the contract alot less competitive vs some of the other mutual companies. For the second year now NML is not the highest dividend interest credit rate.


Any thoughts out there? 
 
Brian
 
Why are you selling your policies based on the dividends?
 
Why aren't you selling your policies based on DEATH BENEFIT?
 
You're comparing insurance contract performance like you're comparing mutual fund performance.
 
You can't do that and expect to keep selling for the same company year after year (that is IF you want a long career with them).
 
Dividends are a FEATURE and a BENEFIT for keeping an insurance contract.  Isn't it great that cash values in whole life are going UP while everything else around is falling?
 
Perhaps you'll learn how to sell life insurance - for the fact that it's INSURANCE instead of all the little "bells and whistles" you're selling with it (including the dividends).
 
Actually, not sure if the OP is with NML or not but their guys WIDELY "sell the dividend" and often use the WLI policy in lieu of a bond fund in portfolio allocations. Of course this is not the way it should be and I believe the SEC tries to regulate against "selling dividends" on anything but it's a widely used pitch at NML that is kept somewhat hush hush. While they cannot gtee next years dividend a lot of guys sell policies based on the history, now it looks like a lot will have some explaining to do...
Nov 12, 2008 8:53 am

look, no matter what anyone who has never worked or who is currently working at NML says, they sell the freaking dividend as a rate of return, period.  

Nov 12, 2008 11:53 am
theironhorse:

look, no matter what anyone who has never worked or who is currently working at NML says, they sell the freaking dividend as a rate of return, period.  

 
Obviously, these folks don't know what the hell they're talking about.  That is tantamount to malpractice if they quote the dividend rate as an actual rate of return.
Nov 12, 2008 2:04 pm
deekay:
Obviously, these folks don't know what the hell they're talking about. 
 
Well, based on what I've seen that's pretty accurate.
Nov 12, 2008 6:10 pm

yeah, that's the point.  the newbies don't know.  there are not many things more complicated than explaining the calculation of the dividend rate and exactly what that means to a policyholder in year 1 vs the policyholder in year 20.

the old (very old-as in back when illustrations showed whatever rate of return you chose) selling material showed the return(s) on stocks, bonds, cash and the 8.8 NML "rate."  lol