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|Subject: Re: IUL credits *include* Dividends||Date: 9/24/2013 5:57 PM|
|Author: Rayvt||Number: 73280 of 74436|
Had a boring drive in the car, gave me a chance to ponder upon this.
The contention is that dividends are implicitly included in the IUL returns in the form of increased cap.
Stipulating that this is the case:
What that would mean is that the dividends for year T don't get credited in year T but in years T+1, T+2, etc. If a person closed their account at the end of year T, they would never get the benefit of the dividend. If a person opened an account at year T+1, then they *would* get the benefit of the dividends of year T.
That would be .. weird.
It is left unspecified just how the dividend is accounted for in the cap, so there's no way to verify that the benefit is actually received.
Aside from that, even if the cap is increased for year T+1, the benefit is only delivered if the index gain for T+1 is reached. If the gain is less than the old cap, then there is no benefit delivered. Also, the increased benefit is only that accounted for by the marginal increase in the cap -- like from 12% to 13%.
Tha all seems unlikely --- but the evidence would show up in the data.
So what would need to be show is:
* When the dividend of the index is increased and decreased, does the cap increase & decrease by a related amount in the next year?
* How frequently does the cap change? I would suspect that insurance ccompanies are reluctant to change the cap frequently.
* The only way the benefit of an increased dividend would be captured is if the index gain of year T+1 is larger than year T *and* the cap is increased *and* the index gain is larger than the old cap.
I can get data on S&P500 dividend yield. It jumps all over the place. Between 1960 and 1993 it ranged from 2.9% to 5.2%. If somebody can provide me with the caps of an IUL, we can compare and see where the ups and downs of the cap are in relation to the ups & downs of the dividends.
Extraordinary claims require extraordinary proof. In this case the IUL brochures say that dividends are excluded, so a claim to the contrary requires clear and convincing proof.
Not handwaving, not just-so stories -- numerical proof.
It's all balderdash. The claim is BS. If anyone can show data that supports the claim, THEN I'll retract my comment. But the data *has* to show the effect of the dividends. Counterfactuals won't do.
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