Ten Pay Whole Life

For producer use only. Not for use with general public. The Guardian Life Insurance Company of America, 7 Hanover Square, NY, NY 10004

1

Ten Pay Whole Life

Carol Conger Miller, CLU

Manager,Life Product Development and SupportOctober 2009

With brief introduction of Single Pay Whole Life


2

Disclosure

The information in this presentation is designed to be general in nature and for educational purposes only. The complete text, with nothing taken out of the context, is the only manner in which it should be used. . It should never be used as an argument for the replacement of any life insurance product. The Guardian Life Insurance Company of America, its subsidiaries, agents and employees do not give tax or legal advice.

Riders may incur an additional cost


4

Ten Pay Whole Life

Driving force for introducing product: Compete with New York Life’s Custom

Whole Life Compete with MassMutual’s 10 Pay

Whole Life Meet demand for guaranteed paid-up

policy Further diversify and deepen our WL

product portfolio.


5

Marketing Applications

Primary markets Supplemental retirement Gifts to juveniles Accelerated funding for executive benefits plans

Ideal clients Risk-averse individuals who want to guarantee 10

payments Clients looking for cash to supplement retirement. Clients interested in gifting life insurance Athletes, performers or investment bankers who

expect to have high income for a limited number of years.


6

Marketing Applications

Selling points Guaranteed paid-up (no riders needed) Guaranteed cash value begins in year 1 High cash value IRR* Substantial cash value build up without

MEC or material change (without EPUA) Compensation – similar to blend of

L99 and EPUA*Dividends are not guaranteed. They are declared annually by Guardian's Board of Directors.


7

CompetitivenessGuardian’s 10 Pay Whole Life outperforms New York Life and MassMutual – cash value and death benefit.

Company Guardian MassMutual New York LifePolicy 10 Pay WL Legacy 10 Custom WLIllustrated Dividend Scale 7.30% 7.10% 6.14%

Premium 40,870 40,360 44,560

Yr 1 CV as % of Prem 38% 38% 35%

Yr 10IRR CV 3.44% 1.84% 1.86%IRR DB 18.70% 17.23% 17.05%Yr 20IRR CV 5.09% 4.65% 4.61%IRR DB 9.04% 8.46% 8.43%

Male 45; Second Best Class; $1 Million

Source: Competitor data is taken from company illustrations. MassMutual figures assume 7.10% dividend scale; NY Life figures assume a 6.14% dividend scale. July 2009

Based on 2009 Dividend Scale, not guaranteed. Cash Value & Death Benefit are End-of-Year.


8

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

Yr 1 Yr 10 Yr 20

Guardian - 10 Pay WL

MassMutual - Legacy 10

New York Life - Custom WL

Competitiveness – Cash Value Accumulation

Male age 45, Second Best Class. Spend $40,870 all base premium. (Guardian’s initial DB, $1,000,000)

Based on 2009 Dividend Scale, not guaranteed.

End-of Year Cash Value Comparison


9

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Initial Yr 10 Yr 20

Guardian - 10 Pay WL

MassMutual - Legacy 10

New York Life - Custom WL

Competitiveness – Death BenefitMale age 45, Second Best Class. Spend $40,870 all base premium. (Guardian’s initial DB, $1,000,000)


End-of Year Death Benefit Comparison


10

Paid-Up Addition Rider considerations

New feature with this product – PUA Rider is called Lifetime Paid-Up Additions (LPUA). Allows PUA payments to continue after 10th year.

Base Premiums set close to the 10-year non-MEC premium

LPUA may be added without creating a MEC With Dividend Option Q large EPUA premiums can

be paid. (Option Q term rates are guaranteed for only 2 years.) Small LPUA premiums can be paid to support a

premium offset. (However $100/year for 10 years may create a MEC)

1035 Exchanges in many situations


11

Paid-Up Addition Rider considerations (continued)

Without Option Q, LPUA payments beyond year 10 will always create a MEC. May be OK to have a MEC if: No loans or distributions are anticipated Policy owned by a not-for-profit organization.

Note that other taxpayers in zero percent tax bracket are still subject to 10% penalty on distributions prior to the owner’s age 59 ½.

Client understands that cash value accumulation is tax-deferred, but distributions may be taxable.

Policy gains are minimal due to client’s age. Waiver of premium

PUA Waiver (Waiver of Specified Amount) waives premiums only through year 10.


12

Other New Features

GIO Rider 10 – Can be exercised one time at the end of year ten. Premium for GIO-10 is less than half the cost of

EGIO for L99. Male age 35, $100,000 -- $29 vs. $108.

Not practical to have premium paying rider after the base policy is paid-up. (Except LPUA)

Note: this may be an important consideration for juvenile policies. About half of policies at issue age 1 have a GIO rider. Some agencies almost always include it; other agencies almost never do.


13

GIO Example

Male Age 35, Second Best Class $250,000 -- Premium with GIO 7,370

Options at age 45 New Ten Pay Whole Life:

Premium of $7,370 purchases face amount of $178,317

Face amount of $250,000 costs $10,293 New L99: $250,000 costs $4,775


14

GIO Example – Continue L10 premium

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65

Age

Accum Prem

Cash Value

Death Benefit

In year 11 Purchase new L10 policy – same premium. Face Amount - $178,317



15

Juvenile Policies – Waiver of Premium

Waiver of premium options Regular Waiver of premium – available for juveniles age

5+. Definition of disability for a juvenile is inability to attend school full time outside the home. Will be added to rest of portfolio at a later date.

Applicant’s Waiver of Premium – on policies with insureds age 14 or younger. Covers death or disability of applicant.

Same features as “Combined Waiver” except does not automatically convert to regular waiver.

Option to convert to regular waiver. A policy cannot have both riders. PUA Waiver (Waiver of Specified Amount) is available only

if regular waiver of premium is selected. (Does not waive premiums beyond year 10)


16

Other riders available

Enhanced Accelerated Benefit Rider (EABR) ABR (no chronic illness benefit) available in

states where EABR is not available. RTR-10 SIO Rider Select Security Rider Exchange of Insureds Accidental Death Benefit


17

Enhanced Dividends for Paid-Up policies

Applies to 2001 CSO policies when they are fully paid-up (not reduced paid-up).

Can be illustrated now for new business and inforce cases.

Greatly improves illustrated values on Limited Pay Whole Life – and is key to 10 Pay Whole Life’s long-term performance Approximately $3 per thousand plus 20 bp for most

policies. (Varies by situation; less on rated cases) Limited Pay -- male age 35, Preferred NT, after age

65 base policy dividend is 18%-25% higher with new methodology.

Slightly improves maximum distribution solves for L99.


18

How it fits in our portfolioPremium relative to Ten Pay Whole Life depends on issue age. Male age 40, second best class. $1,000,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Ten Pay Whole Life Limited Pay WholeLife

Whole Life 95 Whole Life 99 Whole Life 121


19

How our portfolio meets objectives

Objective

Existing Product

L-65

Limited Pay WL

Base plus EPUA

L-10

20 Pay WL

Limited Pay WL

Base plus EPUA

0 20 25 30 35 40 45 50 55 60 65 70 75

Issue Ages

Answering field’s questions – Do we have L65? L20? Depending on the issue age, we have one or more ways to meet clients’ objectives.


20

Cash Value Accumulation Break-Even Points – “Money Stages” concept

Year

Increase in CV as % of

Annual Premium

CV as % of Cum

Premium

Increase in CV as % of

Annual Premium

CV as % of Cum

Premium1 38% 38% 38% 38%2 92% 65% 97% 67%3 95% 75% 103% 79%4 99% 81% 109% 87%5 103% 85% 116% 93%6 107% 89% 127% 98%7 111% 92% 138% 104%8 115% 95% 149% 110%9 120% 98% 162% 115%

10 124% 100% 172% 121%

Guaranteed Current

Even in the early years, the cash value increase exceeds the premium, both on a guaranteed and current basis. Male age 45, second best class, $1,000,000. Base premium $40,870.


Does not take into account time value of money. Premium is beginning of year; CV is end-of-year


21

Cash Value Accumulation Break-Even Points

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

1 2 3 4 5 6 7 8 9 10

CumulativePremiumGuaranteedCVNet CV


Does not take into account time value of money. Premium is beginning of year; CV is end-of-year


22

Comparing products

Comparisons show a combination of base premium and EPUA for 10 years to match 10 Pay WL premium.

No dividend banding on 10 Pay WL. Other products (L95, L99 and L121) have higher dividends at $1 million +. 10 Pay WL compares more favorably to

Guardian’s other products at $500,000 than at $1,000,000.

NY Life’s Custom Whole Life’s highest band is $100,000

MassMutual’s highest band is $1 million

Cash Value Accumulation looks great compared to other products plus EPUAMale age 40, second best class, $1,000,000 base face amount. Spend $34,400 for 10 years

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Year 10 Year 20 Year 25 Year 30

Ten Pay Whole Life

Limited Pay Whole Life

Whole Life 95

Whole Life 99

Whole Life 121


Death Benefit – Compare 10 Pay WL to other products with EPUA – DB rises more slowly

Male age 40, second best class, $1,000,000 base face amount. Spend $34,400 for 10 years.

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Initial Year 10 Year 20 Year 25 Year 30

Ten Pay Whole Life

Limited Pay Whole Life

Whole Life 95

Whole Life 99

Whole Life 121



25

Great vehicle to supplement retirement benefits

28,890

-

(68,384)

28,890

-

(64,832)

(80,000)

(60,000)

(40,000)

(20,000)

-

20,000

40,000

Outlay Years 1 to 10 Zero Outlay Years 11 to 30 Distribution Years 31 to 50

10 Pay WL

L99 with EPUA

Male age 35, second best class, $1,000,000 – Higher distributions when matching outlay for 10 years.



26

Total Guaranteed Cash Value

0

100,000

200,000

300,000

400,000

500,000

600,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31

10 Pay Whole Life

L99 with EPUA

Male age 35, $1,000,000 second best class – Higher total guaranteed cash value when matching outlay for 10 years.


27

What does $10,000 purchase?

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75

Age

Bas

e F

ace

Am

ou

nt

Male non-smoker class– Base face amount on 10 Pay WL purchased by $10,000 per year annual premium.


28

What does $10,000 purchase? Base face amount on 10 Pay WL purchased by $10,000 per year annual premium. Premiums for Preferred NT and Preferred Plus NT are the same.

Male Female

Preferred NT (if available) Nonsmoker

Preferred NT (if available) Nonsmoker

5 916,667 916,667 1,084,337 1,084,337

10 762,125 762,125 903,285 903,285

15 635,022 635,022 752,852 752,852

20 569,620 537,751 667,116 630,172

25 483,163 460,894 558,061 536,295

30 408,753 395,367 466,541 455,801

35 343,869 334,121 392,701 385,965

40 288,630 279,819 331,658 325,123

45 242,826 234,320 278,952 272,727

50 205,394 193,966 233,711 226,441

55 173,745 164,070 196,312 187,927

60 147,849 139,633 167,768 158,451

65 126,179 119,177 144,147 136,139

70 108,232 102,220 123,905 117,021

75 86,760 86,760 106,223 100,314


29

Juveniles – Cash Value Accumulation Comparison

Lock in guaranteed 10-pay without sacrificing cash value performance. Male age 5, match premium of $5,500 -- $500,000 base face amount

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Year 10 Year 20 Year 30 Year 40 Year 50

10 Pay Whole Life

Limited Pay WL

L95

L99

L121



30

Juveniles – Death Benefit Comparison

Death Benefit Male age 5, match premium of $5,500 -- $500,000 base face amount

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Year 10 Year 20 Year 30 Year 40 Year 50

10 Pay Whole Life

Limited Pay WL

L95

L99

L121



31

How does it compare with alternatives?

We have marketed “Life Paid-Up at Any Age” using a combination of L99 and EPUA Rider sufficient to pay up policy on a guaranteed basis.

10 Pay Whole Life is a less expensive way to guarantee a 10 pay. ($28,890 vs. $30,100 for male age 35, $1,000,000)

Much simpler for client to understand. Trade-off is less flexibility.


32

Guarantee a One-Pay Using Prepaid Premiums

Lock in the interest rate and avoid a Modified Endowment Contract.

Guaranteed interest rate of 4.75% for 10 years Example:

Annual premium: $10,000.00 Total amount due: $81,876.24 Discount: $18,123.76

Favorable taxation. Discount is taxable at the time the premium is actually applied.

Cost basis is greater than the after-tax outlay: $100,000. (10 x annual premium = Outlay plus discount.)

Since money cannot be withdrawn unless policy is surrendered, agent locks in renewal compensation.


33

Guarantee a One-Pay Using Prepaid Premiums

What if you’re starting with a lump sum amount rather than the premium?

How do you arrive at the annual premium?

Divide the lump sum by the factor: Total deposit: $100,000 10 year factor: 8.187624 Annual Premium: $12,213.56

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1 2 3 4 5 6 7 8 9 10

Total Cash Value – Policy Values Plus Prepayment Balance

Prepayment Value

Regular Policy Values

Prepayment value is not available for loans or withdrawals; if the policy is surrendered, the balance is subject to a penalty which is reflected above.

A single deposit of $100,000 has a short break-even point. Male age 35, second best class. Base premium $12,213.



35

10 Pay WL vs. L99 with EPUA

10 Pay WL has the following advantages Guaranteed paid-up in 10 years Higher Net Cash Value Higher Total Guaranteed Cash Value

L99 with EPUA has the following advantages Flexibility to pay premiums beyond year 10. More cash available for withdrawals if

premiums continue withdrawals benefit increases faster

If waiver of premium is added: potential for premiums to be waived for longer time.

If GIO is added: more option dates


36

Product Basics

Issue ages 0-75

Minimum face amount $25,000

Underwriting classes – same as other whole life Dividend Options – same as other whole life Regular series only. Pension Trust not available

at this time. Term conversions – allowed but no conversion

credits are applied. Does not replace any existing product – no formal

transition rules


37

State Approvals

Approved in all jurisdictions except for Maryland


38

Compensation

Comparable to a blend of L99 and EPUA FRs

Year 1 - 30.25% (22 LPCs) Supplemental comp: 13.75% for new FRs

Renewal = 70% on part A and B FTA/Broker:

Year 1 - 27.5% Years 2 to 4 - 7% Years 5 to 10 - 3%


39

General information

Illustrations currently available for download in version 49.5

Only one Navigator presentation available – Prepaid Premiums


40

Marketing Material


41

Single Premium Whole Life

Introduced September 2009


42

Introduction of Single Premium Whole Life

Ideal clients Beneficiaries exercising the DuoGuard Rider Annuity-Oriented Clients

Strong guaranteed return Strong dividend performance Same taxation as annuities on distributions;

unlike annuities, no income tax due at death. Non-profit organizations where MEC not a concern Recipients of a lump-sum payment (lottery,

inheritance, lawsuit)

Guaranteed single premium.


43

General Information

Similar to PUA compensation –Agent comp: 3.25%

No marketing material being prepared.

No original age exchanges allowed to this product.


44

Questions

Contact Life Product Support at 800-871-7780, Option 2

Ten Pay Whole Life

Documents

Transcript of Ten Pay Whole Life