VOLUME 47, THIRD QUARTER 2011

What’s Inside:

Is it Time for a Life Insurance Check-Up?

Will Uncertainty Lead to Opportunity?

Life Insurance in Today’s Economic Environment

Protecting Business and Personal Assets Using a Captive Insurance Company

Welcome New CFO

Education Calendar

HORAN Opens New Dayton Office

Metcut Client Spotlight

HORAN Title Sponsor of XU All for One Golf Outing

HORAN and M Financial Group Focus on Ethics

Visit our website for other newsletter issues and to view our seminar calendar.

www.horanassoc.com

Is it Time for a Life Insurance Check-Up?

By: Terence L. Horan, CLU, ChFC, President, CEO, Registered Representative

Terry Horan, President and CEO of HORAN, leads an energetic and focused team of professionals to deliver the most current and comprehensive health care and wealth management services.

Although you may review your financial goals and investments regularly, how often do you update your life insurance

coverage? As your financial and family situations change over time, your life insurance should be reviewed periodically to keep

up with those changes. The amount, type and the length of your life insurance needs will change during your lifetime.

You may want to consider the following questions to determine if you are due for a life insurance check-up:

• Are you recently married or divorced?• Have you recently started or sold a business?• Do you support anyone with special needs or an elderly family member?• Has there been a change in employment or salary?• Have any children left the household?• Do you have a term insurance policy that may be reaching the end of the level term period?• Do you have a policy with an outstanding loan?

In addition to reviewing your life insurance, it may be time to review your estate.

Estate planning is a process of identifying, prioritizing and achieving your family and charitable giving objectives. Since needs, desires and tax laws can change over time, your existing estate plan should also be reviewed periodically. As you review your objectives, consider the following:

• When was the last time your attorney reviewed your wills and trusts?• Does your attorney need to review or prepare any other legal documents such as a power of attorney or a living will?• If you own a closely-held business, when was the last time you reviewed your succession plan?• Have you estimated your estate liquidity needs for final expenses, legal and probate costs, any federal or state inheritance taxes, loan repayment and family income needs?

Continued on page 2

• If your estate may be subject to federal estate taxation, are you fully utilizing gifting strategies which can minimize estate tax shrinkage?

• Would your family benefit from an irrevocable life insurance trust to keep life insurance proceeds out of your taxable estate?

In addition to changes in your personal situation, if it has been more than five years since you purchased life insurance, the industry has also changed. New products have been developed. Prices have declined, but many policies still underperform in the current market because mortality rates within older policies were not adjusted.

The old “buy it and put it in the drawer” mentality no longer applies to life insurance. Data shows that many life insurance policies can be improved.

• The cost of life insurance may have declined since you purchased life insurance. Life expectancies are increasing making new life insurance policies less expensive.

• Many life insurance policies are underperforming.Due to years of low interest rates and uneven market performance resulting in reduced interest crediting rates, many older policies may not be performing as originally intended. Your policy should be reviewed to make sure it can be maintained at the current funding level.

• Funding strategies have changed. Innovative policy designs and funding techniques may be better suited for your financial situation.

• Not all products are created equally. Special lower-priced products have been created specifically for the high net worth marketplace based on favorable actuarial statistics for this group.

• Durations beyond age 100.Newer life insurance policies now carry a death benefit beyond age 100, but policies issued more than five years ago typically mature between ages 95 and 100. Significant taxable consequences can occur if you outlive the duration of your policy.

HORAN can provide an objective assessment of your life insurance program to assure that your life insurance is tailored to your financial goals and you are getting your money’s worth for the premium dollar expended.

Will Uncertainty Lead to Opportunity?

By: Mark A. Bennett, CFAPortfolio Manager & Principal

Mark A. Bennett, Portfolio Manager & Principal, is a senior strategist and advisor at HORAN Capital Advisors. Mark focuses on developing customized client portfolio strategies through in-depth security selection. He has extensive experience collaborating with high net worth and institutional clientele, characterized by managing portfolios throughout his career with an asset base of $1 billion.

The equity market decline experienced since late July was precipitated by concern about the growth prospects for U.S. and global economies. European debt issues and the downgrade of the long-term U.S. debt ratings have also weighed heavily on the market. The Federal Reserve delivered a clear message on August 9th that short-term interest rates would remain extraordinarily low and monetary policy exceptionally accommodative through 2013. We believe the economy is likely to continue on a slow growth trajectory; however, the risk of a recession has increased. We do not believe we are headed back into a late 2008, early 2009 liquidity crisis scenario, as U.S. banks and consumers have repaired their balance sheets.

While the debt ceiling crisis has passed, uncertainty remains as to how policy makers will deal with the long-term structural deficit in the U.S. What tax and spending solutions will be enacted? In addition, the development of a credible plan to deal with the sovereign debt issues facing Europe is needed.

Slower growth rates in both domestic and foreign economies will likely continue to constrain employment growth and cool commodity price pressures which have been a concern for profit expansion and consumer spending. The negative wealth effect from the housing malaise will likely continue to dampen consumer spending as well.

While record low interest rates offer paltry yields to investors, investments in companies with 3% dividends, rock solid balance sheets, global growth opportunities and selling at valuation levels not seen since the early 1990s, should prove rewarding. The FED’s indication of an extended period of low interest rates will likely have a continued positive impact on securities that offer higher yields such as dividend paying stocks, REITs, high yield bonds, global bonds and master limited partnerships.

If we can answer any additional investment questions, please do not hesitate to call on any of us at HORAN Capital Advisors.

Mark Bennett, Chartered Financial Analyst, is a Portfolio Manager & Principal at HORAN. He can be reached at 513.745.0707 or by email at MarkB@horancapitaladvisors.com.

Life Insurance in Today’s Volatile Economic EnvironmentBy: Susan DixonCase Design Specialist

Susan Dixon provides sales and marketing support, including analysis, evaluation of funding mechanisms and solutions for estate planning and executive compensation. Her 35-plus years of industry experience positions Susan

with working knowledge in the design of wealth transfer, business succession and non-qualified executive benefit plans.

Purchasing life insurance can be a complex and difficult process. From product selection to product performance, there are many factors to consider when buying life insurance. The ongoing volatility in the financial markets can create additional challenges.

Insurance is Risk Transfer, but What are the Risks?

Term insurance is the purest form of life insurance where the risk of death is transferred to the insurance company. The premium and death benefit are known and guaranteed. Policyholders have little uncertainty other than the future claims paying ability of the insurance company. There is also no upside for the policyholder if results are better than expected (e.g., no reduced premiums) and no flexibility to access value prior to death should needs change.

Over the past half century, the industry has developed new forms of insurance in which the policyholder shares some of the downside risk and upside potential with the insurance company. In participating Whole Life (WL) contracts, policyholders share in favorable mortality, interest, and expense results through policy dividends, which can be used to suspend premiums or increase the face amount. Since dividends are not guaranteed, policyholders also assume some downside risk. However, there is a guaranteed floor provided in the base contract.

In the 1990’s, Whole Life gave way to Universal Life (UL). With UL, the same risks and opportunities are shared with the policyholder, but they are “unbundled” and more transparent than the dividend calculations inherent in Whole Life. UL also includes a guaranteed floor for downside performance.

Variable Universal Life (VUL) takes the risk and opportunity sharing even further. VUL allows the policyholder to almost completely assume the entire investment risk (i.e., no guaranteed floor for investment earnings credited to the contract). In so doing, there is significant upside and downside potential to policy performance. In addition, since the account value of VUL is held in separate accounts, it is protected from the insurance company creditors. This degree of protection does not apply to policies invested in the insurance company’s general account with WL and UL.

Equity Index UL (IUL) is essentially a UL/VUL hybrid with a risk transfer profile that is a combination of the two products, i.e., equity market participation but with a guaranteed floor and usually a cap on earnings credited. No Lapse Guarantee Universal Life (NLG) has a guaranteed premium and death benefit. It acts much like term insurance but with the ability to guarantee coverage for life.

With all of the negative financial news in the media, it is easy to forget that fundamental insurance concepts still apply. Insurance is transfer of risks but also a transfer of opportunities. The risks/opportunities transferred vary depending on the type of policy. The appropriate product choice should always be based on your comfort with the risks/opportunities involved. In general, as you take on a greater share of the downside risk, you increase your share of the upside potential.

Considerations for Financial Flexibility

Another important consideration is the flexibility of the chosen product—that is, the ability to access value in the contract prior to death (i.e., cash value) should your needs change over time. Although insurance is a long term investment, having access to cash values can provide emergency cash or income if needed. Additionally, cash values can be used to fund a policy exchange into a product with better potential performance. Different product types can have significantly different levels of cash values and surrender charges.

Product Planning and Risk Mitigation

The current economic environment makes it even more critical that policyholders understand product type risks and opportunities, and plan accordingly at the time of purchase. For insurance that has already been purchased, inforce policy illustrations can provide an early warning as to whether adjustments in funding or death benefit, or even a policy replacement, may be necessary.

Life Insurance Company Due Care

Company financial strength is always an important consideration, but it is even more critical in today’s environment. An assessment of an insurer’s financial strength is essential but not simple. The primary and most reliable sources are the rating agencies. Rating agencies provide commentary and opinions about the ability of carriers to meet their obligations.

Due to the complexity of purchasing life insurance and the external factors impacting the life insurance industry, it is vital to partner with an advisor who understands the complexities of the landscape and the mechanics of the products available. Remember that life insurance can be tailored to meet your risk profile and can be an efficient tool for transferring and mitigating risks, especially in today’s environment.

Contact Susan Dixon today at 513.745.0707 or susand@horanassoc.com.

Protecting Business and Personal Assets Using a Captive Insurance CompanyBy: Leslie MillerVP, Market Development

Leslie Miller, VP Market Development, assists clients with a variety of alternate risk and funding solutions.

Successful business owners can now enjoy succesfully running their own insurance companies.

Setting up a captive insurance company allows business owners to protect business and personal assets through affordable and proven risk transfer techniques. Captive insurance companies are able to write insurance policies that reflect a company’s specific risk. An insured’s need for coverage does not always line up with the terms of the current insurance policy. Just look at all of the exclusions attached to your current policy. Or think back to a time when you thought the premium for a covered risk was out of line. The lack of consistently available, comprehensive, and well priced coverage is the usual impetus for setting up your own insurance company.

Although there are many types of captive insurance companies, in this region of the country, many employers are focusing on the Small Captive, which is governed by tax code IRC 831(b). Effectively, companies can purchase insurance policies from their Captives for up to $1.2 million annual premium. The premium becomes a tax deductible business expense and the captive pays taxes, at the capital gains rate, on investment income.

Properly structured, the shareholders of the captive insurance company can be in addition to the business owner, key employees or members of the family. Each scenario is customized to fit the business and financial needs of the ownership.

Complete turnkey approaches including reinsurance pools when needed, are available to minimize start up and operating costs as well as guide the novice insurance company CEO through all of the requirements. Additionally, private letter rulings, issued by the IRS, confirm the approval of the insurance company in advance of a go live date.

Think about your current situation. You can take a larger deductible or SIR and reduce the cost of your commercial insurance coverage and then insure that deductible/SIR in your captive. You can write all of the excluded coverage or all of the coverage subject to reduced limits in your captive. And you can assess all of your self-insured risk and determine whether you would be better served purchasing a policy from your captive.

HORAN Opens Office in Downtown Dayton

We are excited to announce the opening of our new Dayton office on the 25th floor of the Kettering Tower in downtown Dayton. This new location is the next step in HORAN’s expansion north, allowing us to better serve our clients and partners in the Greater Dayton region. This central location positions us well for doing business in the following counties: Northern Warren, Northern Butler, Montgomery, Miami, Greene, Clark, Champaign, Clinton, Darke, Shelby, and Auglaize.

The move to the Kettering Tower also allows us easy access to the Dayton Racquet Club where HORAN will host a quarterly education series and other events open to the community throughout the year. We look forward to seeing you in our new northern location!

HORAN Client Spotlight: Metcut CTL

As part of this year’s open enrollment, Metcut surprised employees with an ice cream social. HORAN helped dish out the fun!

Pictured from left to right: John Kahles (Metcut, CEO and Chairman), Terry Horan (HORAN, President and CEO), Anne Paulus (HORAN, Service Rep.), Julie Tople, CBC (HORAN, Account Manager), Dr. Philip Bretz (Metcut, President), Julie Highley, CBC (HORAN, Vice President), Gregg Uebelhor (Metcut, CFO and Corporate Vice President)

October 20 8:00 am-9:30 am Navigating Medicare

November 10 8:00 am-12:00 pm Comprehensive Fiduciary

Training Platform

November 10 6:00 pm-7:30 pm Navigating Medicare

Captive insurance companies can be domiciled in the United States or abroad. We are happy to help you select the most appropriate location in which to develop your next business venture.

For more information on captives, contact Leslie Miller at 513.745.0707 or lesliem@horanassoc.com

HORAN Title Sponsor of Xavier University ALL FOR ONE Golf Outing

For the eighth consecutive year, HORAN served as the title sponsor of Xavier University’s ALL FOR ONE Golf Outing at Kenwood Country Club. This year alone, the event raised over $140,000 for Xavier University athletes.

The ALL FOR ONE event supports all Xavier student athletes in their pursuit of academic and athletic excellence. The ALL FOR ONE Club has helped fund scholarships and enhanced travel opportunities for all teams, elevated several part time coaching positions to full time status, and improved strength and conditioning equipment to make XU athletes better prepared for competition. “This is the eighth year in a row we have been able to increase the total amount of money raised for Xavier,” said Terry Horan. “HORAN strongly believes in the mission of XU. I would like to thank all involved for their participation and continued support.”

In addition to sponsoring Xavier athletics, HORAN has been providing Xavier students with academic scholarship dollars totaling over $70,000. HORAN is proud to offer three $2,500 scholarship awards this year to students who currently attend Xavier University and will continue to in the fall 2012

semester.

HORAN Proudly Welcomes Kurt Krebs as Vice President and Chief Financial Officer

“Kurt is charged with all

fiscal management aspects

of the company,” states

Terry Horan, President

and CEO. “He will be an

excellent addition to our

team, especially with his

extensive experience working

with financial institutions,

advisors, and high net worth

clients.”

Kurt provides leadership and coordination of the company

administrative, business planning, accounting and budgeting

efforts as well as due diligence to create, coordinate and

evaluate the financial programs and supporting information

systems of the company to include budgeting, tax planning,

real estate and conservation of assets.

“I’m excited and honored to be joining the HORAN

community,” said Kurt. “The people at HORAN exemplify

professionalism and teamwork. I’m looking forward to a very

fruitful partnership.”

Prior to joining HORAN, Kurt worked as Line of Business CFO

at Fifth Third Bank, Audit Manager at Ernst & Young, and as a

Financial Analyst at Kraft Foods.

Kurt earned his Bachelor of Business Administration degree

in Accountancy from The University of Notre Dame and is a

designated Certified Public Accountant.

HORAN and M Financial Group Focus on Ethics

HORAN and affiliate organization, M Financial, recently

became members of The American College’s Center for

Ethics in Financial Services, the only organization dedicated

specifically to raising the level of ethical behavior in the

financial services industry.

HORAN and other M Member Firms are recognized leaders

in the wealth transfer, executive benefits, and wealth

management markets. Working with an American College’s

Center for Ethics in Financial Services firm provides the

assurance of working with true client advocates who must

adhere to a strict set of ethical, experience and quality

requirements and who can provide truly customized

approaches for specific needs.

“Strong ethical principles and corporate responsibility are of

paramount importance,” said Terry Horan, “We are excited

to partner with a like-minded organization in The American

College’s Center for Ethics in Financial Services.”

Corden Pharma ColoradoLegal Aid SocietyBonfiglioliIsaac M. Wise TempleTriumph Engineering

Please join us in welcoming our new corporate clients!

Matandy Steel and Metal Products, LLCSchwartz, Manes, Ruby & Slovin3G Graphic SolutionsBest One TireDayton Coating Technologies, LLCValley Interior Systems