Insurance as an asset class – Did you know?

Permanent insurance has been a “go to” financial bunker for the past 100 years.

History and present-day performance numbers clearly state that a well-designed insurance policy from a high-quality insurance carrier is one of the best investments available now and for the foreseeable future.

Did you know: William A. Berridge, economist of the Metropolitan Life Insurance Company, stated in an article in the New York Times of May 14, 1933, that up to the end of 1932 none of the 12 largest life insurance companies, having three-fourths of the assets of all legal-reserve companies, had not received any loan from the Reconstruction Finance Corporation, the banks, or any other source.

Did you know: That During the Depression, life insurance fared much better than property and casualty. Life insurance was considered a safe investment for a family of limited means, and many insureds were able to take policy loans against their life insurance.

Did you know: In any financial depression the main source of difficulty for any financial institution arises from lack of ample liquidity. Ample liquidity to meet unusual demands without resort to unusual measures is a characteristic of present-day life insurance. Not only has the borrowing by companies been negligible but sales of securities at a loss or sacrifice have likewise been negligible. In other words, life insurance is built to withstand the most severe and continuing strain.

Did you know that: Bank Owned Life Insurance (BOLI) continues to be a popular investment choice for a variety of banks. As of December 31, 2020, 3,137 banks nationwide reported cash surrender values on their regulatory filings. 67.6% of banks nationwide with assets between $100 million and $1 billion currently own BOLI.

Did you know that: $184.6 billion of BOLI cash value is now on bank’s financials as of 12/31/20

  • Wells Fargo as $18.2 billion of life insurance and annuity cash values in its tier 1 capital. (Tier 1 capital is the safest capital in the bank)
  • As of 2010, JP Morgan had $10 billion, Bank of America $20.3 billion, PNC Bank $7.4 billion, and Mellon had $3.7 billion

Did you know that: Based on industry surveys², 75% of the Fortune 1000 companies finance their SERP (supplemental executive retirement plan) obligations with Company Owned Life Insurance (COLI) programs; of the 50 top banks and thrift institutions in the United States, 43 have implemented COLI programs.

  • Bank of America CEO Ken Lewis is guaranteed to $3.486 million a year as an annual retirement benefit beginning at age 60. The annual report shows $53.4 million in Ken’s SERP (A high-cash value life insurance policy)
  • AT&T Stephenson $41 million
  • Boeing CEO McNerney $34 million
  • Roberts at Comcast $232 million in a Split-Dollar Arrangement (yet another type of insurance-based plan)
  • Exxon’s Tillerson with $43 million
  • GE’s CEO with $52 million
  • IBM Palmisano with $28.8 million

The key point being that top executives don’t have 401(k) plans they use insurance as a better more secure retirement income plan.  A key reason is that distributions are done in the form of tax-exempt loans against their policy’s cash value and guarantee an inheritance for their family.

Banks and Fortune 1000 companies have invested heavily in permanent cash-value insurance contracts.

These same strategies are a valuable addition to any family or estate looking to maximize future income and liquidity to pay for life’s major medical events.

The BOLI and COLI information is from ForbesBooks SMART Retirement by Matt Zagula. More current information is available on these public companies’ annual reports.

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