2021 Premium Financing Vendor Survey

black twist pen on notebook

Despite the fact that this publication is called The Life Product Review, I occasionally take a detour into sales strategies focused on product, particularly premium financing. I’ve found that there’s a huge appetite for content on premium financing. Everyone has opinions about it – and I’ve not exactly been shy about mine, particularly my skepticism about financing arrangements predicated on a persistent and stable arbitrage between policy performance and the cost of the loan. But there is undoubtedly a role for premium financing in bridging the gap between a wealthy client’s current best use of capital and their need for permanent life insurance. That’s where premium financing can fit the bill marvelously.

But premium financing adds a layer of complexity to a normal life insurance sale that many agents feel uncomfortable (or unable) to manage on their own. They usually need help. And for that, they turn to a third-party specialist in premium financing. These firms partner with agents to structure, facilitate and (in many cases) manage the transaction for life. In exchange, they take a cut of the commissions – and the liabilities and obligations of the writing agent.

Consequently, I’m often asked to opine on particular premium financing shops. I’m not in a position to do that. I don’t sell life insurance and I don’t do any premium financing. All I see are the premium financing proposals that cross my desk courtesy of life insurance agents and brokerages. It’s a keyhole view of these firms. Most of the room is still missing.

So to fill in the gap, I decided to give these firms an opportunity to directly tell their story. I sent out a survey a couple of months ago and have been gradually receiving responses. As you can imagine, some firms didn’t reply or just flat out told me they weren’t going to fill it out, given my long-standing criticisms of premium financing.

Others graciously spent their time and effort in filling out the survey and, for that, I’m grateful. I’ve included their responses verbatim. Some of them raised the issue that, inevitably, there would be some “utter drivel,” as one person put it, in the responses. Of course. That’s unavoidable and I’m not in a position to validate their responses. But from what I can tell, the firms responded honestly and candidly. The answers are incredibly interesting and it’s easy to get a flavor for each firm just from their responses. It’s also fairly easy to get a pulse on what’s going on in the premium financing market.

And that was the goal. To my knowledge, there’s no other repository of information about premium financing partners. There’s no central hub to learn about them. So, given the clear need, this is a first pass at addressing it – and hopefully the firms that were holdouts will decide to fill out and submit the survey!

Each dropdown has a full survey response. Each firm formatted their responses slightly differently and I carried their formatting through without edits. FIRMS ARE LISTED ALPHABETICALLY. If you’re a premium financing vendor and you’d like to be included on the list, email me directly at bobby@lifeproductreview.com for the survey.

Cool Springs Financial

Firm Overview

Core Value Proposition

Cool Springs Financial is a 22+ year old boutique risk management solutions company based in Franklin/Cool Springs, Tennessee. We specialize in business solutions in the employee retention, executive bonus, buy-sell, key-person and debt protection areas as well as estate planning, income replacement and family protection for individuals. Our highest value proposition is our experience, through the years we have found enhancements for literally every component of a premium finance transaction transcending typical industry practices and the results are a few thousand satisfied clients. From the industry’s point of view, I am told that we have the highest 5 year+ persistency in the industry. From our clients’ perspectives, who are all accredited investors, they enjoy high performance products and structures that they have never seen before.

Firm Principals & Key Staff

Sam Watson – Co-founder, Chairman, President & CEO

David Carpenter – Co-founder, former CEO of Transamerica from 1978-1994

Simon Baitler – Co-founder, former Transamerica CAO from 1969-1989

Stacey Brown – Co-founder & CFO

Jim McGeary – Head of Premium Finance, formerly Wintrust Bank’s Chief Credit Officer

Historical & Current Volume

Loan Volume since Inception – $9 Billion+

2020 Premium Sold – $85.5 million

2020 Agents Placing Policies – 30

Financing Programs

Our top seller is the Prestige’™ Strategy. Corporations and their employees alike enjoy a structure that maximizes Death Benefit and future tax-free cash while minimizes/mitigating PS-58 cost. Individuals enjoy all but the last component.

Number two is the Y20 Platform utilized for estate planning. It is a financed MEC structured in a way that the insured may not contribute a penny to the transaction yet their beneficiaries receive 100% of the Death Benefit. All of our clients are delighted with the structure because they have had their collateral returned inside of nine years. Y20 has an optional charitable component for the philanthropic minded.

Lending Platforms

Key Lending Relationships

We have utilized all of the usual suspects from Wintrust to J.P. Morgan over the years. Credit Suisse was by far our largest lending relationship until they sold the platforms that we collaborated on.

Typical Loan Structures

Most of our loans are for 5 years and are usually renewed with similar terms. The vast majority of our loans are plain vanilla and have remained at the original lender. We have utilized caps and swaps in situations where the client demanded it, but we have found that it is rarely in the clients’ best interest to do so.

Loan Exit Arrangements

We don’t incorporate using a carrier policy loan into our structures, although we would utilize it if bank rates were significantly higher than the policy loan cost.

Carrier Relationships
Top Carriers by Volume

This has been a moving target. When we started 22 years ago the top carriers for us were American General, ING and General American. Last year it was Nationwide, Zurich and Penn Mutual.

Product Type by Volume

Indexed UL – 90%

Whole Life – 8%

Term – 2%

Q&A

What makes a great lending partner?

  1. Understanding the business with a long-term view and focused on the client’s objectives
  2. Competitive Terms – duration of loan, loan rate, limited personal guarantees, NO prepayment penalties and NO Demand Notes.
  3. Simplified Annual Premium Advance Flow
  4. Easy Renewal Process
  5. Offer our clients their lowest rates without any incentives to our firm

What makes a great carrier partner?

  1. Commitment to the Space
  2. Easy to work with
  3. A history for treating existing policyholders the same as new ones
  4. Maintaining a high financial rating.
  5. Solid Back Office Technology
  6. A Desire to Grow

What makes a great product for financing?

  1. Good Pricing
  2. A Zero to Low Cost ECV Rider
  3. Strong Performance Index’s i.e. Uncapped Indexs
  4. Solid Underwriting
  5. Fair Compensation          

What’s the biggest opportunity in premium financing for the industry and your firm?

Biggest opportunity for our industry and our firm is the business market.

What’s the biggest challenge in premium financing for the industry and your firm?

Good Indexed UL product capacity

If you’re selling Indexed UL, how has AG 49-A impacted your business?

AG49A had a dramatic impact at first implementation on illustrations and 7702 saved them. Illustrations are so disingenuous now that they really don’t represent much truth.

If you’re selling Indexed UL, how have your in-force designs held up as caps and illustrated rates have fallen?

Falling interest rates have helped offset falling caps and good uncapped indexes have been big winners for us. In 2019 & 2020 we offered Zurich’s Wealth Builder product utilizing the Uncapped NASDAQ-100 with a 7point Spread, the results were strong after the spread (2019 31% – 2020 40.7%) and with no bonuses or multipliers. But for the first time we are facing in-force challenges from one of our former carriers that were bought by a PE firm because they have lowered their caps below market. For the first time in 22 years, we will be replacing those policies in mass.

If you’re writing Whole Life, how have declining Dividend Interest Rates impacted your business, designs or product selection?

We like WL for MEC transactions and low loan rates have more than offset the declining Dividend rates.    

What do you think the impact of a persistently rising rate environment will be on the premium financing market, both in terms of in-force policies and the prospects for making new sales?

We expect rates to slowly rise in the distant future to between 4% – 5% and we are very comfortable with that. If rates were to rise dramatically at some point in the future then we would be looking for carriers to begin offering new money product. In 2007 when the Prime Rate was 8.25% we had no issues because most of what we sold were products with uncapped indexes or high caps.

Anything else you’d like to add? I believe the future for the life insurance industry could be better than ever if regulators would get out of the way and let more positive innovation occur. As for CSF, if the right kind of carrier and lending counter-parties remain engaged and don’t shrink capacity more, then I see our high-performance structures and well trained distribution team having a tremendous positive impact for hard working American people.     

Northstar Funding Partners

Firm Overview

Core Value Proposition (150 words or less)

EXPERIENCED

Over 3,000 placed policies. Average staff tenure close to 20 years. Continued operation through varied macro-environment crisis; industry changes and regulatory regimes.

Reputable

Established reputation for outstanding end-to-end service and absolute commitment to fair and honest dealing.

Focused

Only source of revenue and activity is the facilitation and long-term management of finance life insurance policies.

Independent

Closely held business, not affiliated with any carrier or source of distribution.

Firm Principals & Key Staff (no more than 5)

Kim Coulter, Founder & CEO

Dale Humphrey, President

Pam Coulter, Case Management; Post-Sale Administration

Pat Counter, Senior Case Designer; Information Systems

Historical & Current Volume

Loan Volume since Inception – $2b+

2020 Premium Sold – $150MM+

2020 Agents Placing Policies – 150+

Financing Programs

Lending Platforms

Key Lending Relationships

Global One Financial/Synovus Bank

Specialty, monoline lenders

AUM Money Center Bank

Typical Loan Structures

Fully collateralized, large-case traditional. CSV offset of 100%. Gap collateral via pre-vetted sources.

Fully collateralized, small-case traditional (minimum annual premium of $50,000). CSV offset of 100%. Annual out of pocket contribution other loan features generate an illustrated result that does not require gap collateral.

Loan Exit Arrangements

Illustrated using participating policy loans (required based on carrier compliance)

Hybrid arrangements – policy loans plus outside funds

Outside funds

Predetermined strategy (GRATs, side funds, etc.0

Carrier Relationships
Top Carriers by Volume

National Life Group

Allianz

Ameritas

Product Type by Volume

Fixed Index Universal Life

Whole Life

Q&A

From the perspective of a prospective producer, what are 3 things that differentiate your firm from your

competitors?

Vast experience – we have “been there, done that”.

Hands-on service throughout the entire tenure of the transaction

Unequaled risk management

What makes a great lending partner?

Competitive terms & conditions

Demonstrated persistency

Efficient, streamlined operations

Capability to facilitate varied forms of gap collateral

Manageable documentation and post-sale procedures

What makes a great carrier partner?

Competitive product

Clear and consistent guidelines relative to financed life insurance

Distribution support – loan platform acceptance and promotion

Dedicated staff and efficient processing

What makes a great product for financing?

Demonstrated history of product consistency relative to crediting, features and continual refinement

Optionality of early cash surrender value rider

Non-commissionable UL or term blend

Variety of loan options

Multi-strategy allocations

What’s the biggest opportunity in premium financing for the industry and your firm?

More due diligence, at the carrier level, as to vendors, arrangers, and facilitators. There have been many new entrants with limited experience and questionable business practices.

Wider carrier acceptance of carefully crafted emerging affluent client segments – non-jumbo case financing

Elimination of carrier generated loan modeling which is universally inaccurate and misleading

More product features as highlighted above including auto or policyholder elected index lock

Continued growth in the foreign national markets

What’s the biggest challenge in premium financing for the industry and your firm?

Escalating interest rates

Continued regulatory and industry changes that suppresses policy performance – beyond a degree of reasonableness

Complex lending structures that are created purely for marketing differentiation and offer no end-state customer benefit

Industry’s inability to recruit and develop a new generation of agents

If you’re selling Indexed UL, how has AG 49-A impacted your business?

Initially it did from a comparative standpoint – that is pre-AG 49A illustrations to post

Tailoring exit strategies and other designs have become more difficult although there appears to be some settling and acceptance – AG 49A is the “new normal”

If you’re selling Indexed UL, how have your in-force designs held up as caps and illustrated rates have fallen?

Interest rates have been relatively low for an extended period although depending on the loan design lower crediting rates have certainly altered the path of some transactions

If you’re writing Whole Life, how have declining Dividend Interest Rates impacted your business, designs or product selection?

Whole life requires a relatively high out of pocket contribution from the borrower/guarantor and the loan design is not predicated on arbitrage but the relatively low standard deviation of policy performance. Declining dividend has not had a material impact.

What do you think the impact of a persistently rising rate environment will be on the premium financing market, both in terms of in-force policies and the prospects for making new sales?

Depends on the scale and persistency of the increase. If “transitory” the impact will be mild. However, if we enter a period persistently higher rates loans will need to be adjusted via higher out of pocket contributions, alternate exit strategies and other risk mitigation tactics.

Anything else you’d like to add? (200 words or less)

There are increasing number of market participants who rely solely on ill-composed spreadsheets that are flagrantly inaccurate. End-state clients are using this output to make major decisions and more than likely the loans will be mis-managed may possibly be impaired – primarily due to the borrower’s/guarantor’s inability to post the required gap collateral. If this activity goes on unchecked the general industry will be tarnished and even the “good actors” will be negatively affected.

Passerelle Partners

Firm Overview

Core Value Proposition Passerelle Partners offer a platform to help advisors explore and execute premium financed strategies for their largest and most valued domestic and international clients.  We offer the advisory community unique access to market experience, case design, credit solutions, and portfolio management tools.  Our international experience is unique in the market as the team speaks six languages and has completed transactions with client exposure across 27 different countries.

Firm Principals & Key Staff Christopher Daniels, Fernando Pou – Managing Partners

Historical & Current Volume

Loan Volume since Inception – $1,400,000,000+ outstanding with $3,000,000+ in committed loan facilities

2020 Premium Sold –– undisclosed but the leading firm at Lion Street in 2020

2020 Agents Placing Policies – Passerelle closed business with 23 different advisors in 2020

Financing Programs

Lending Platforms

Key Lending Relationships – our book has loan exposure to 16 different institutions.  Our current new business is heavily concentrated with bulge bracket private banks and best in market transactional lenders.

Typical Loan Structures – Primary structure is a loan to an ILIT with limited or no personal recourse to the Grantor / financial sponsor.  It is rare that we have clients signing guarantees.  For clients not yet committed to estate planning we have utilized special purpose LLCs.  Credit lines are 1-5 years typically with the ability to lock, hedge, swap, and cap interest rates.

Loan Exit Arrangements – the primary exit strategy is a loan transfer to the insurance policy from the bank (cash value exit).  Our clients are prepared that the illustrated cash value exits may not be available and that they may/will need other assets.  Additionally, many clients do NOT plan on an exit strategy.  Most of the cash value exits we see in the market are not loan repayments but loan transfers.  The debt is now on the life insurance policy either though a fixed or participating loan which comes with its own set of risks versus those of the bank credit line.  If properly designed and structured the cash value growth can be sufficient to manage the debt far into the future under reasonable assumptions.  It’s a misconception that the earlier you can exit or repay the bank debt the better/less risky the plan.  In some cases, clients and their advisors opt to repay the loans from other assets for estate and tax purposes.

Carrier Relationships


Top Carriers by Volume –
Pacific Life, Nationwide, John Hancock, Allianz, Penn Mutual, Lincoln, Mass Mutual

Product Type by Volume – 70% IUL and 30% WL

Q&A

What makes a great lending partner?  Consistency and responsiveness.  We see a few unique structures but generally our goal is to drive the lowest loan spread matched with the client’s desired structure and collateral source.  We categorize our lenders as relationship and non-relationship with the distinction around whether the borrower is required to deposit assets at the lending institution.  In that case, the credit lines are all within 10-20 bps of each other.  We rely on the institutions mentioned above to drive an excellent client experience and meet their commitments on loan renewals.  We are not looking for new lenders that offer something similar.  We continue to go back to the lenders and bankers that we have had success and favorable client experiences over the last 20 years

What makes a great carrier partner?  Consistency and responsiveness.  Over 80% of our business is across the 7 carriers listed above.  We are not chasing the latest and best illustrating IUL available.  We want to know that the carrier will meet their indicative underwriting offers, know how to participate in “jumbo” cases, have a predictable Premium Finance loan approval process, and a platform to easily gather the information we needed within our in-force block.  On the last point, all carriers are far from equal.  We have some where the information is instantaneous and others that take 1-2 weeks and several people to provide what is needed (we will not name names 😊)

What makes a great product for financing?  Financing is already a complex strategy so whatever the product choice, it needs to be understandable.  Whole Life sounds like the simplest but that is not always the case and Indexed UL is over-simplified by most.  We look for:

  • Capacity – not product specific but can the carrier secure the face amount needed without reinsurance.  This is of particular importance in the Foreign National marketplace which is a significant part of our business
  • Fee Structure – what is the charge and expense make-up of the product, and is there added value to the client for that?
  • High Early Cash Value – though not often utilized by us, it is sometimes important to manage short term liquidity needs.  Often misunderstood is that the collateral high point is typically the same or higher when using these riders, as it will typically peak between years 6-10, while most riders focus on earlier years
  • Indexed Account Options – does the product offer multiple options that can optimize performance in a range of market environments.  Most prevalent at the moment are the proprietary volatility-controlled indices that offer higher participation rates and try to achieve a steadier 4-6% versus hitting the more traditional ‘capped out’ returns.  But a range of S&P500 based accounts helps with client comfort levels

What’s the biggest opportunity in premium financing for the industry and your firm?  Education.  PF is oversold to the masses, but we find that those managing the ultra-high net worth (family offices and institutions) have not been properly educated on the intricacies of how this can be an efficient way to secure large amount of life insurance with minimal impact to the balance sheet.

What’s the biggest challenge in premium financing for the industry and your firm?  Interest rates and market confusion.  First, the interest rate environment has been fantastic from the loan perspective but those same rates present serious challenges for the underlying insurance companies.  How will they react and how quickly will they adjust to rising rates?  Second, the influx of “PF experts” in our space has caused market confusion and consistent misinformation.  Just because rates are low doesn’t mean everyone should finance. 

If you’re selling Indexed UL, how has AG 49-A impacted your business?

The past year has certainly shifted the goalposts a little.  We are advocates of regulating the illustrative capabilities of indexed UL products, so as not to over-promise on performance.  However, the complexity of the guideline and the range of interpretations we have witnessed from different carriers has led to us having to re-think our approach slightly for sure.  The silver lining however is that the deeper conversations on the topic of the crediting methodology and indexed loans has led to educational opportunities, ultimately leaving the client in a improved position for their decision-making.

If you’re selling Indexed UL, how have your in-force designs held up as caps and illustrated rates have fallen?  We made adjustments over the years to the changing interest rate environment affecting caps, returns, and loan rates..  We use an in-house modeling system to stress illustrations (pre-sale) and track performance (post-sale) which our clients find helpful to stay on plan.  Insurance companies haven’t made this easy as almost all have different systems and software for new business and in-force illustrations.  The timing flaws in these systems make it complex.  This issue is not just for PF but all IUL and clients need to see various models and stress tests and then with the advisor’s guidance choose the model to track off and be aware of the flexibilities available to ‘fix it’ when off track.  Having partner advisors that we trust is also critical to this.  We are part of the solution but not the only agent participating and educating the client – we are very fortunate to be able to partner with some of the best advisors in the country.

If you’re writing Whole Life, how have declining Dividend Interest Rates impacted your business, designs or product selection?  Cleary WL models are behind plan if originally sold at “current” dividend over the last 10 years.  That said, it is much more easily quantifiable than IUL.  The question here is, how will dividends react to the assumed loan rate increases we have built into our models.  We are waiting to see illustrative impacts as 7702 updates are implemented across the WL providers.

What do you think the impact of a persistently rising rate environment will be on the premium financing market, both in terms of in-force policies and the prospects for making new sales?  It all comes down to the assumptions used in modeling and the likelihood of achieving a reasonable spread between the NET return in the product and the all-in cost of funds.  Even in a rising rate environment we are confident in our ability to make this structure attractive versus funding premiums in cash. 

Anything else you’d like to add? (200 words or less)

We are a partner to the advisors that engage us and avoid the aggregator/vendor title.  We are brought in as a subject matter expert to engage with clients and their teams to evaluate these strategies.  Our platform is unique in a few ways.  First, we have true international expertise.  Second, we are a relied upon, trusted, and approved counter party to several major institutions.  Third, advisors utilize us for business development and deal creation with client interfacing roles (not just back office).  Fourth, we have a consultative offering to evaluate existing insurance portfolios and existing credit lines. 

Rohe Levy & Associates

Firm Overview

Core Value Proposition (150 words or less)

                At Rohe Levy Financial and Insurance Services, Inc. we assist advisors to help design premium finance cases, sell premium finance cases, find the correct funding source, and administrate premium finance cases.

Firm Principals & Key Staff (no more than 5)

Rohe Levy

Gabbi Levy

Gloria Levy

Meaghan Kormondy

Historical & Current Volume

Loan Volume since Inception – 1.3b

2020 Premium Sold – 35m

2020 Agents Placing Policies – 31

2020 Policies Placed – 38

Financing Programs

                Traditional Premium finance lenders approved by carriers

Lending Platforms

Key Lending Relationships Wintrust and Private Banks

Typical Loan Structures 5 year note, libor based, no origination or exit fees

Loan Exit Arrangements Cash value, other assets sale, death

Carrier Relationships
Top Carriers by Volume
Pacific Life, Lincoln, Nationwide

Product Type by Volume IUL and Whole

Q&A

From the perspective of a prospective producer, what are 3 things that differentiate your firm from your competitors?

Responsiveness and turnaround time to proposals

Technology on our proposal and administration system to manage expectations

Tracking of policy growth and interest rate projections with many stress testing models

What makes a great lending partner?

Technology Platform

Turnaround time to term sheets and loan docs

What makes a great carrier partner?

Technology Platform

Willingness to discuss cases and find optimal solutions

What makes a great product for financing?

Upside potential

Ability to understand the mathematical calculations behind crediting so the product can be explained to clients and advisors

What’s the biggest opportunity in premium financing for the industry and your firm?

Growth in technology platforms within carriers and lenders

Current interest rate environment

Potential tax code changes on both income and estate taxes

What’s the biggest challenge in premium financing for the industry and your firm?

Aggressive of proposals due to a low interest rate environment and a strong market

If you’re selling Indexed UL, how has AG 49-A impacted your business?

AG 49 has made stress testing and modeling much more complex

If you’re selling Indexed UL, how have your in-force designs held up as caps and illustrated rates have fallen?

Inforce modeling has been complex as many policies have outperformed their AG 49 rate and that cannot be illustrated to clients.

If you’re writing Whole Life, how have declining Dividend Interest Rates impacted your business, designs or product selection?

Has not really impacted as interest rates have dropped lowering clients outlays on interest flows

What do you think the impact of a persistently rising rate environment will be on the premium financing market, both in terms of in-force policies and the prospects for making new sales?

I think it will be a good thing if interest rates rise.  Currently many premium finance cases are sold incorrectly and not stress tested and rising rates will expose many faulty designs.

Schechter

FIRM OVERVIEW

For over 80 years, Schechter and their multi-disciplined team consisting of JDs, CPAs, LLMs, CLUs, PFSs, CAPs, MBAs,

CFA® charterholders, CFP® practitioners, and CIMA® consultants have been quietly advising wealthy families on financial matters including institutional quality investment advisory services, private capital, and alternative investments, advanced life insurance planning, income and estate taxes, business succession and charitable planning. We have extensive experience placing large and complex transactions, such as Premium Financing for our clients and those of our Strategic Partners. Our real value to our partners is:

  • A sophisticated advanced design team of insurance, banking, and legal professionals that discuss, identify, research, and stress test each client’s specific objectives while advising on company structures, trusts, and estate planning issues.
  • Cobranded high-end marketing materials made available to strategic partners to help them open more business, shorten sale cycles, and provide confidence & credibility within their client and prospect base.
  • Being advisors for over 80 years, we sit in the same seat and therefore understand our strategic partners and their opportunities and challenges within the HNW and UHNW space.
  • Deep commitment to the client and significant investment in an experienced service team and technology; resulting in best-in-class ongoing policy and loan monitoring and management.

Firm Principals & Key Staff

Schechter has 78 teammates. Below are some key professionals involved with premium financing & strategic partnerships:

Marc Schechter, Chief Executive Officer
Alfredo Risi, Chief Operating Officer
Gregg Michael, Managing Director, Institutional Partnerships
Kevin Beauchamp, VP, Director of Strategic Partnerships
Joe Opiela, CFA®, Wealth Advisor, VP of Strategic Partnerships
Ilana Liss, Managing Director
Jordan Smith, JD, LLM, Vice President Advance Design
Andrew Dean, CFA®, CAIA®, Director of Insurance Services
Jon Brady, Banking & Premium Finance Manager
Jeff Vieder, Wealth Advisor
Jake Elias, CFP®, Senior Wealth Associate
Kevin Giganti, Insurance Design Manager

Historical & Current Volume

Loan Volume since inception – $220,000,000
2020 premium sold – $45,000,000
2020 agents placing policies – 6 internal advisors / 40 strategic partners (i.e. outside insurance/investment professionals)

FINANCING PROGRAMS

Lending Platforms

We build every loan customized to our client’s needs. We have a customized CRM built out to track our PF programs internally.

Key Lending Relationships

JPMorgan, Bank of New York, Wintrust, US Bank, Deutsche Bank, Wells Fargo, and a handful of others.

Typical Loan Structures

A typical loan structure is dependent on bank and client. We build every loan customized to the client’s needs. We structure loans anywhere between 1 – 5 years; usually with a floating rate plus a spread. Typically, the borrower is an LLC or an ILIT. We then assist most of our clients also buy a 10-year derivative to hedge interest rate risk with either a cap, forward, collar, or swap. Some banks also offer a fixed rate – so we do offer that to clients as well. We have generally found that it is usually better to go with a floating rate and then overlay a hedging strategy. However, this changes constantly due to the market, so it is very dependent on a deal-by-deal basis and the size & structure of the deal.

Loan Exit Arrangements

For the loan payoff, we would like to at least have the loan outstanding for 10-years which aligns with our interest rate hedge. It’s critical that we have a plan to payoff these loans prior to death, and we spend a considerable amount of time advising clients on the options – whether the source of cash is from the policy itself, a business exit, a sale of other assets, etc. If the economics after year 10 are still attractive, we will keep the loan outstanding, potentially buy another hedge (either before year 10 or after) and illustrate paying off somewhere around years 15-20 via a traditional policy loan.

Carrier Relationships

Top Carriers by Volume – Penn Mutual, Minnesota Life, Nationwide, Pacific Life, John Hancock
Product Type by Volume – Indexed Universal Life

Q&A

From the perspective of a prospective producer, what are 3 things that differentiate your firm from your competitors?

  • A sophisticated advanced design team of insurance, banking, and legal professionals that discuss, identify, research, and stress test each client’s specific objectives while advising on company structures, trusts, and estate planning issues
  • Co-branded high-end marketing materials made available to strategic partners to help them open more business, shorten sale cycles, and provide confidence & credibility within their client and prospect base
  • Being advisors for 80 years, we sit in the same seat and therefore understand our strategic partners and their opportunities and challenges within the HNW and UHNW space. Deep commitment to the client and significant investment in an experienced service team and technology; resulting in best-in-class ongoing policy and loan monitoring and management

What makes a great lending partner?

A great lending partner needs to be able to be flexible, offer attractive loan terms, and be able to offer the white-glove service that we provide to our clients internally. We need them to think “outside-the-box” and be able to work in conjunction with their credit department to understand the full picture of what we are trying to do on each case since the concepts can be quite advanced at times. The best partners are collaborative with us and feel like an extension of our team.

What makes a great carrier partner?

A great carrier partner is communicative and works in conjunction with our underwriting advocates to obtain the most optimal offer for the client possible. Understanding of complex ownership structures is valuable.  A strong established credit rating and attractive products are also important.

What makes a great product for financing?

There are a number of contractual elements and product specifications that make a product attractive for financing. In no particular order: policy and insurance charges, product design flexibility (death benefit reduction magnitude), policy loan terms, index account options, Mutual vs. Stock carrier status, treatment of existing IUL blocks of business (primarily in-force caps vs new business caps), availability of early cash value riders, and term blending options.

Our objective, in almost all programs, is to maximize the spread between net policy cash value return and borrowing costs over time. Maximizing the net policy return is a function of minimizing policy and insurance charges and selecting an index option that provides the highest expected return (while avoiding the heavier multiplier and bonus accounts).

What’s the biggest opportunity in premium financing for the industry and your firm?

For Our Firm – Educating clients and advisors on the concept of financing is the biggest opportunity our firm. Our clients are financing assets all day long (i.e. real estate, private business, etc.). They have not associated leverage with life insurance in the same way. There is no reason they shouldn’t. We focus on creating educational materials to help advise clients and their professional advisors. We have invested in many tools (marketing assets and technology (CRM)) to foster this education and provide extraordinary service. We look forward to sharing these resources with our strategic partners.

For the Industry – Educating clients and advisors on the concept of financing is also the biggest opportunity for the industry. Premium finance can be an optimal way to get large sums of money outside of an estate for the right candidate. There are advantageous ways to use estate planning, coupled with a premium finance program, that can be very attractive for high-net- worth clients. It can also be suitable for someone who likes the idea of a consistent return over a long-period of time, compared to other assets with similar risk/return profiles, and to able to take out policy loans during their lifetime for tax-free income. The industry has a big opportunity to approach the clients that fit these profiles to educate them why premium financing might be a great opportunity for them.

What’s the biggest challenge in premium financing for the industry and your firm?

For Our Firm – Since we build out each program as a customized strategy, the time that it takes to coordinate banking and carrier approval can take a considerable amount of time. The banks and carriers have relatively stringent rules, archaic operations, and don’t always understand the complexities of a case like we do. It can be difficult to make all these work in a timely manner for the client and that can be frustrating as some cases can take several months to close from start to finish.

For the Industry – Many carriers are struggling to handle these big premiums because there is not an attractive conservative return in the marketplace currently. Because of this, it has had many carriers limit business or turn away business altogether. Carriers also struggle to ensure that these policies aren’t constructed and then surrendered a few years later by an agent who might just be wanting a commission check. We have had many close discussions with carriers to help get by this objection. Many carriers have been “burned” in the past by some of these programs, and they can be reluctant to approve a case because many agents do not have understanding, resources, and/or capabilities to design and implement an appropriate program for their clients like we do.

If you’re selling Indexed UL, how has AG 49-A impacted your business?

AG49-A has not impacted our business materially. The illustrative projected limitations set forth by AG49A primarily impacted multiplier index accounts and indexed/participating policy loan solves. It did not impact “classic” index accounts with traditional loan solves – which comprise 95%+ of the IUL business that we have proposed and written.

If you’re selling Indexed UL, how have your in-force designs held up as caps and illustrated rates have fallen?

Every 1% reduction in cap rates results in a ~50 bp reduction in policy expected return on a non-levered basis. There is no question, lower caps reduce the expected returns of indexed universal life policies. That said, as caps have declined, so have interest/borrowing rates. Virtually all of our inforce designs and projections assumed increasing borrowing rates over time – many up to the 3-4% range relatively early in the program life. These same clients may be borrowing at 1.4-2.0% currently. So, while caps are lower, the expected “spread” between the net return in the policy and borrowing rates has not changed significantly.

If you’re writing Whole Life, how have declining Dividend Interest Rates impacted your business, designs or product selection?

Not applicable.

What do you think the impact of a persistently rising rate environment will be on the premium financing market, both in terms of in-force policies and the prospects for making new sales?

If interest rates rise, because we are hedging the majority of our clients, we know what our maximum exposure will be for at least the first 10 years typically. This helps ensure that our programs should succeed because we are usually at least break even by that time. We also believe that with higher interest rates, that over time, carriers should also increase their caps and dividend rates to remain competitive within the marketplace. While this may not happen overnight, we are confident in the policies that we are placing now because we educate the client, show stressed & worst-case scenarios, and take some precautions by hedging. By doing this, we have a good idea of what our exposure could be in the future and how we would go about altering the program in those types of market regimes with high-interest rates. We also pay close attention to the yield curve and use that as a baseline projection and add in extra conservatism in our rate hikes when showing a client. In terms of new sales, there may be a point and time where interest rates climb more than the caps/dividend rates increase. During that time, we probably would not sell premium financing due to the negative arbitrage, but overtime, we do believe the carriers will get competitive and increase their crediting rates which will then allow for the arbitrage on new business to be attractive again.

Anything else you’d like to add? (200 words or less)

While we are not the largest premium financing intermediary in the country, we believe we offer a superior platform than anyone else in the country. We offer the same set of analyst / legal / marketing / service / banking resources we make available to ourselves and our clients. We are constantly improving our offering to our strategic partners and are confident you and your clients will recognize how we differentiate from other premium finance intermediaries. Educate yourself on our full suite of support including custom designed financing solutions, deep sensitivity / scenario testing, co-branded marketing assets, advance design, legal & tax guidance, and ongoing policy & loan management.

Premium financing can be a great strategy if constructed carefully and correctly. It is not suitable for everyone, and we do great due diligence to ensure the program is a good fit for the client’s objectives. It’s critical to be completely transparent with the client and educate them on bad-case scenarios, collateral, rising interest rates, and all the “what-ifs”. We stress that these programs need to be reviewed on a regular basis and believe the Schechter’s full comprehensive offering is key to ensuring success over the long term. We plan to service these clients for decades to come, and it is imperative that clients work with a firm that will do so.

Succession Capital Alliance

Firm Overview

Core Value Proposition (150 words or less)

As an advisor to advisors, we offer advanced life insurance planning for high-net-worth clients, with a singular focus on maximizing the performance of each client’s life insurance assets. Through our proprietary and nationally recognized Capital Maximization Strategy℠ we help clients realize benefits far exceeding what they thought possible. Partnering with Succession Capital Alliance gives Advisor’s the support of a deeply experienced team and exclusive access to an extraordinarily effective program, our unmatched lending platform and carrier relationships that exists nowhere else in the industry.

Firm Principals & Key Staff (no more than 5)

Julian Movsesian             

Michael Rothman

Brian Whitmore

Adrina Movsesian

Michael Wurth

Historical & Current Volume

Loan Volume since Inception – $4.9 Billion

2020 Premium Sold – $458 Million

2020 Agents Placing Policies – 113 Advisors

2020 Policies Placed – 143

Financing Programs

Lending Platforms – SCA has an expansive lender platform. Each Lender we work with provides our team and clients with exclusive access to customized loan terms, volume pricing, and a dedicated servicing team. We expect all our lender partners to be responsive to clients changing needs and to provide flexibility with loan terms. Succession Capital Alliance is the only Premium Financing firm that renewed all their client’s loans during the 2008 financial meltdown.

Key Lending Relationships – Our gold-standard reputation has allowed us to establish an extensive network of top lenders and carriers with a sophisticated understanding of premium financing.

Typical Loan Structures – Each loan is customized to each client depending on the policy ownership, net worth and a myriad of other factors.We Negotiate for dedicated lender service teams to support our loans from inception to annual service.

Loan Exit Arrangements – Typically no prepayment penalties, or fees to exit loan.

Carrier Relationships – We work with insurance carriers that see the value of Premium Financing for their client’s.  We negotiate with our carriers to provide VIP contacts at every level of the underwriting and service process to provide second to none responsiveness to our clients’ needs now and in the future. SCA has co-branded Brochures with Pacific Life, Penn Mutual, Nationwidealong with a variety of sponsored carrier conferences dedicated to continue to educate the insurance industry about the power of Premium Financing.
Top Carriers by Volume
– Pacific Life, Penn Mutual, Nationwide, Mass Mutual, John Hancock

Product Type by Volume – 40% Whole Life and 60% Index Universal Life

Q&A

From the perspective of a prospective producer, what are 3 things that differentiate your firm from your competitors?

1. Customization – Every design that SCA puts together is customized to each client, there is no one size fits all solution.

2. Carrier & Lender Partners – Co-branded carrier brochures that give us unmatched credibility and a one-of-a-kind lending platform

3. Sales support – Julian Movsesian and Michael Rothman have closed more Premium Financing cases than anyone in the industry, they support the sales and renewal process better than anyone else.

What makes a great lending partner?

quick turnaround, responsiveness, flexibility, based on our size and reputation the lender gives us exclusive loan programs.

What makes a great carrier partner?

Sophisticated underwriting team, quick turnaround time and service, great products, support, concierge service, informative online portal.

What makes a great product for financing?

Flexibility, competitiveness, high internal retention.

What’s the biggest opportunity in premium financing for the industry and your firm?

To Leverage off inforce business, tax free retirement income designs, and estate planning under new tax laws. Along with low interest rates and a thriving stock market

What’s the biggest challenge in premium financing for the industry and your firm?

Managing product changes

If you’re selling Indexed UL, how has AG 49-A impacted your business?

We continue to successfully present to our clients only AG 49-A based compliant approved illustrations and premium financing spreadsheets.  We do not believe in using spreadsheets that attempt to circumvent the government rules on AG 49-A.  This is misleading to clients and violating insurance carriers’ rules.

AG 49-A has made our projections lower, but we have grown our business because clients need life insurance now more than ever.

If you’re selling Indexed UL, how have your in-force designs held up as caps and illustrated rates have fallen? We do not use hypothetical illustrations that some of our competitors are using that are not compliance approved. Most of our clients have outperformed the illustrated designs to this point but are aware that we can no longer project this higher performance, but we explain to clients that illustrations are not the full basis to why they are purchasing the product, but we explain why overall it is still beneficial.

If you’re writing Whole Life, how have declining Dividend Interest Rates impacted your business, designs or product selection?

We continue to implement large amounts of WL in our Premium Financing design and clients are aware that dividends have come down and may continue to, at the same time clients are benefiting from low loan rates but it comes down to clients understanding the overall picture and overall management of this process.

What do you think the impact of a persistently rising rate environment will be on the premium financing market, both in terms of in-force policies and the prospects for making new sales?

We do not use hypothetical situations.  SCA provides clients with comparisons of the original designs vs. actual performance.  We help the client understand how the indexed returns or dividend returns have performed vs. original projections.  For example, many IUL policies performance has exceeded the original projections.  By focusing the client on the current year values, we are able to help them understand that they are on track.  We explain the new AG 49-A rules that may slightly diminish the ability to project the original crediting rate.  Our goal is to helps clients see the benefit of the flexibility built into the policy/loan design.

Anything else you’d like to add? (200 words or less)

We have been at the fore front of this concept since the beginning, and we have done it in a way that respects both our relationships with carriers and lenders.  In this economic environment we continue to be the leader in this space, we have stood the test of time and will continue to.

Verite

Firm Overview

Core Value Proposition (150 words or less)

Vérité helps bridge the gap between life and wealth by connecting significant life insurance needs with efficient premium funding methods.  Having access to many independent lenders allows clients to maximize their wealth today while preserving their wealth for future generations. We collaborate with a national network of advisors throughout the country, helping their clients take control of their hard-earned assets while securing the life insurance they need.

We couple our deep knowledge and expertise of sophisticated Premium Finance techniques with a boutique level of service, ensuring each client benefits from a specialized, personalized, and high-end experience.

While we pride ourselves on being the Premium Finance experts for the insurance advisory community and their clients, it is our ability to bridge the complexities between premium financing life insurance and the planning our advisors are doing to preserve wealth that we take the most pride in. The choice between life and wealth doesn’t need to be so complex. Instead, we believe you can simultaneously empower wealth today while securing wealth for tomorrow.


Firm Principals & Key Staff (no more than 5)

Michael S. Seltzer – Principle

Matt Levesque – Case Design/ Marketing

Cathy Destito – Loan Underwriting

Frank Pragosa – Case Design/renewal maintenance

Iris Seltzer – Administrator

Historical & Current Volume

Loan Volume since Inception –

2020 Premium Sold –  

2020 Agents Placing Policies –

2020 Policies Placed –

Financing Programs

Lending Platforms

Key Lending Relationships

Wintrust

JP Morgan Chase

Northern Trust

Typical Loan Structures

Typically, 5-year commitments.

Variable rates (although we often quote fixed rates for comparison and upon request will explore caps).

Loan Exit Arrangements

Primary – Repay Loan with policy values

Secondary – Repay Loan with outside assets (liquidity event)

Secondary – Repay Loan at death with death benefit proceeds, with remaining proceeds going to the beneficiaries.

Our models are typically designed to exit the bank loan using policy values.

We have recently processed several death claims where the bank was still owed at the time of death. In these cases, death was unavoidably the exit. The insurance carrier first repaid the bank and then sent the remaining death benefit proceeds to the beneficiaries.

Subsequently we ran an “after-action” review comparing the actual results of the premium financing vs. the results if the clients had purchased the insurance and paid for it traditionally. In both cases premium financing resulted in a lower out-of-pocket cost basis, and a higher benefit paid to the families.

Carrier Relationships
Top Carriers by Volume

Symetra

Pacific Life

Nationwide

Allianz

Zurich

Product Type by Volume

Accumulation Indexed Universal Life (100%)

Q&A

From the perspective of a prospective producer, what are 3 things that differentiate your firm from your competitors?

Stress Testing.

We are going to be working with the producer and the client for many years on renewals (more to come on this), it is important that we set fair performance expectations and fully review risks within the transaction. Stress testing allows us to do this. We stress both the bank loan (increasing interest rates) and policy performance (reduced returns) demonstrating the impact poor performance could have on variables like outside collateral required and future cash value and death benefit projections.    

Communication/Availability – willingness to meet/ present to clients and outside advisors.

We pride ourselves on our communication. We will not leave you or your client in the dark, without a response.

We focus on educating all parties involved in the transaction. Premium finance can be complex, and we are happy to take the time to explain the moving pieces. We have built our reputation on committing the time to educate our advisors and their clients. We find this leads to a much higher success rate.  

Ongoing Annual Renewal Process – comparing where we are vs. what was originally projected.

Continued monitoring of the transaction.

Premium financed policies require maintenance, which includes, in part, regularly working with the lender and ensuring the policy is funded as designed each year.

We take this a step further and prepare a comparison each year detailing actual vs. projected performance and any changes or updates we’d recommend making to the transaction.

What makes a great lending partner?

High touch

Communicative

Competitive rate offerings

Referring us to their clients or advisors who need help

Process efficiency

Ability to think as a businessperson

What makes a great carrier partner?

Interested in learning how WE operate

Ability to refer advisors, help grow our practice

Partner on joint marketing ventures

Ability to think outside the box

Offer a competitive product

Competitive (in line with market) medical underwriting

Reputation (headline risk)

Legacy – how has the carrier treated in-force business and current customers

What makes a great product for financing?

A variety of index options – can we diversify the cash value?

Dollar cost averaging

Upside potential (index options, buy up options, multi-year segments)

Competitive loan and withdrawal options – how do we get the money out?

Low charges (holds up under lower return scenarios)

Ability to blend base and supplemental coverage

Overloan protection rider

What’s the biggest opportunity in premium financing for the industry and your firm?

Death Benefits

There’s headline news regarding pending taxes on the wealthy and we believe there’s an opportunity to leverage this timely conversation into the need for life insurance, and furthermore, that premium finance is the most efficient way, especially for the truly high net worth client to acquire the insurance and solve this problem for the demographic most impacted by these pending changes.

Premium Financed LIRPS

We recently financed policies on a young physician and his wife where the strategy is designed to provide family and practice death benefit coverage in the near-term and then emphasize cash value and tax-free distributions during retirement years. The strategy helps solve multiple needs for the couple and is flexible, meaning they can choose to emphasize death benefit or cash value as their circumstances change over time.

Rescuing underperforming policies

In-force policy review leading to 1035 exchange and replacement opportunities.

Given the long-term downward trend in interest rates most in-force policies are underperforming the as sold projections. A premium finance design including a year-1 1035 rollover can help rescue clients underperforming policies and put them back on track to provide their estate the proper amount of coverage. Seeding the transaction with a 1035 exchange can help to ease the collateral and cash flow requirements.

What’s the biggest challenge in premium financing for the industry and your firm?

The low interest rate environment and the effect on the carriers and products available. Of course, it is nice to borrow at these rates, however the impact rates have had on caps and future projections is challenging.

Rapidly changing product regulatory environment.

If you’re selling Indexed UL, how has AG 49-A impacted your business?

AG49A limited our ability to model high bonus solutions as the consumer illustration would lapse early and would not work under stressed scenarios. Despite our experience, and in-force block of these solutions outperforming the original projections we were forced to pivot and increased our exposure to low charge products which continued to illustrate under the new regulations.

Additionally, we had to focus on younger clients, as financing folks over age 60 (without 1035 exchange funds) was made nearly impossible in the product environment.

If you’re selling Indexed UL, how have your in-force designs held up as caps and illustrated rates have fallen?

Projected designs have been impacted due to decreased AG49A rates. We are also assuming lower returns than originally projected due to the cap drops.

Because we are also borrowing in the current environment, our loans have been renewing significantly lower than we forecasted (since we continue to apply an increasing curve to our models).  

While we have felt the pain of falling caps, we have also benefited from lower rates on the borrow.

Also, noteworthy, in-force policies allocated to equity indexes have experienced higher than projected returns over the past several years, outpacing our projected returns.

Therefore, our in-force designs have held up, and many are currently running ahead of projections (due to lower interest rates on the borrow and higher returns in the policies). The falling cap rates have impacted the future projections which have pulled back slightly. As an example, in certain cases we have modeled waiting an additional year or two to repay the loan with policy values.

If you’re writing Whole Life, how have declining Dividend Interest Rates impacted your business, designs or product selection?

We rarely finance whole life.

Typically, the IRR between paying the premium traditionally and finance are so close it becomes difficult to justify the financing.

What do you think the impact of a persistently rising rate environment will be on the premium financing market, both in terms of in-force policies and the prospects for making new sales?

We believe an uptick in interest rates would be good for the marketplace. A 10-year treasury trading closer to 2% (maybe even 3%) will provide some relief to the carriers and will ultimately (eventually) result in higher caps and upside in the products.

We are conservative in our loan projections, applying an increasing curve, which assumes interest rates will in fact increase. Our loan projections are prepared for increasing rates.

Currently, we are renewing interest rates are half of what we projected, so we have cushion in our loan designs for rising rates on the loan.

Anything else you’d like to add? (200 words or less)

Oversaturated market for financing vendors (nice timing, Bobby!)

Premium Finance is “hot” and so like everything else in the financial services business, many new entries to the market profess to have the necessary knowledge but don’t.  Unrealistic illustrations, assumptions etc. is leading to reputational risk for all.

We continue to vet the advisor; insist they allow us to present to their client and maintain some semblance of order and process.  This is the only way we can rest assured the cases are being presented correctly.  Few of our advisors present by themselves.