Private Placement Life Insurance (PPLI)
• Established in US in ‘90’s
• Designed for High and Ultra Net Worth Clients
• Provides Compliant Tax Free Compounded Earnings
inside Life Insurance Policy (tax inefficient assets)
• Investments Managed by IM of Client’s Choice (wide
range of investments)
• Asset Protection
• Open Architecture, Full Disclosure
• No loads, efficient pricing
• Domestic or International
• Sticky Money
FOR INFORMATION ONLY AND NOT FOR PUBLIC USE
Introduction to Insurance and PPLI
TYPE OF INSURANCE NEED
TEMPORARY
TERM INSURANCE
• Temporary Protection
PERMANENT
WHOLE LIFE
UNIVERSAL LIFE
VARIABLE
UNIVERSAL LIFE
• No Cash Value
• Permanent
Protection
• Permanent
Protection
• Permanent
Protection
• Non-Renewable at
Older Ages
• Non-Transparent
Pricing
• Insurer Manages
Assets
• No Guaranteed ROR
• Availability &
Capacity Constraints
• Premium & Death
Benefit Flexibility
• 3-4% Guaranteed
ROR
• Cash Value (Tax
Deferral)
• Capacity
• Availability &
Capacity Constraints
• Premium & Death
Benefit Flexibility
• Premium & Death
Benefit Flexibility
• Potential Rate of
Return
• Moderately
Competitive Pricing
• Market Generated
Returns
FOR INFORMATION ONLY AND NOT FOR PUBLIC USE
PRIVATE
PLACEMENT LIFE
• Permanent Protection
• High Investment
Flexibility
• No Guaranteed ROR
• Highly Competitive
Pricing (transparent)
• Significant Capacity
• Premium & Death
Benefit Flexibility
Typical Domestic versus International Pricing
*BOY, Pricing may reflect expenses in first year or amortized in attempt to enhance early year
CSV’s
3
FOR INFORMATION ONLY AND NOT FOR PUBLIC USE
U.S. vs. Canadian PPLI
• Major Differences:
– Diversification rules IRC 817(h)
– Investor Control Rev. Rul. 2003-91
– Insurance Dedicated Funds (IDF)
– Definition of Life Insurance 7702(a) vs MTAR
– None applicable in Canada
FOR INFORMATION ONLY AND NOT FOR PUBLIC USE
Why Joint/Dual Compliant
• IRS: Long Reach of Uncle Sam
• Definition of Life Insurance 7702(a) vs MTAR, Exemption
Test Section 306
• FATCA
FOR INFORMATION ONLY AND NOT FOR PUBLIC USE
Fact Pattern
•
•
•
•
Male 55, non-smoker, standard risk
Premium $520,000 for 4 years
Interest rate 6%
US citizen living in Canada
Millions
Taxable Investment
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Policy Year
Taxable Investment
FOR INFORMATION ONLY AND NOT FOR PUBLIC USE
20
25
30
35
40
45
Millions
Domestic Policy
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Policy Year
Domestic Carrier Fund Value
Domestic Carrier Death Benefit
Taxable Investment
FOR INFORMATION ONLY AND NOT FOR PUBLIC USE
25
30
35
40
45
Millions
Dual Compliance vs Domestic Policy Comparison
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
30
35
40
Policy Year
PPLI Account Value
PPLI Death Benefit
Domestic Carrier Death Benefit
Domestic Carrier Taxable Fund Value
FOR INFORMATION ONLY AND NOT FOR PUBLIC USE
Taxable Investment
45
Summary
•
•
•
•
•
First of its kind
Compliant on both sides
No investor control or diversification requirements
No DAC tax
No State or Provincial premium taxes
FOR INFORMATION ONLY AND NOT FOR PUBLIC USE