UnThreaded | Threaded | Whole Thread (25) | Ignore Thread Prev | Next
Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76421  
Subject: Re: IUL credits *include* Dividends Date: 9/23/2013 10:33 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
IULs returns that are calculated on indexes that have dividends, include dividends in the returns. If dividends were to increase on that index, the caps would increase,

This whole discussion is pointless and non-productive.

The credit that is applied to an IUL is quite clearly specified in the brochures and contracts. Point-to-point change in the index (price only, excluding dividends), "Any positive change from the previous year, up to the cap (which is subject to change on annual basis), is credited to the policy. If the total is negative, the indexed interest for that year will be zero."

This is what I implemented in my spreadsheet. I coded up the description of what the various IUL bochures from several different companies all said. In fact, I originally had it wrong and Dave corrected me, so I corrected the spreadsheet accordingly.

We can argue all we want about how the company sets the cap -- but that is immaterial. The policy gets the point-to-point annual change in the index, up to the cap. If the company feels magnanimous and sets to cap to 99%, the amount credited *still* excludes dividend -- because that's what the policy says.

=========
I tend to approach these things from an engineer's point of view. Check the inputs and the outputs. Is the output different depending on the presence or absense of input X?

Here's the way I would have questioned the actuary. Simple and succinct.
Situation: Suppose that on Jan 1, 1998 the S&P500 index was 1000, and on Jan 1 1999 the index was 1050. Today is Jan 2, 1999.
Q1: If the S&P had paid 1% dividend in 1998, what amount would be credited to the account?
Q2: If the S&P had paid 5% dividend in 1998, what amount would be credited to the account?

Everything I've read says that the answer is 5%, for both Q1 & Q2.
I believe Dave contends that answers would be 6% for Q1 and 10% for Q2.
What does Dave say?
What does Allianz's actuary say?
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (25) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement