Performax Gold
Catherine Larouche
Product Manager, Whole Life
March 2013
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Agenda
 Whole Life 101
 Base guarantees
 Base model & luxury edition
 Dividends and Performance Credits
 Same objective – Different risk
 Does current matter?
 Going forward
 Illustration software changes
 Product vs illustration rate
 Cost for 15 years
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Whole Life – base guarantees
Cancellation
Claim
Premium: level and guaranteed
Death Benefit
Client gets one or the other, but
not both
Guaranteed Death Benefit
YEARS
4
Cash Surrender Value
Death Benefit vs Cash Value
Leverage
Whole Life 101
Cancellation
Leverage
Claim
Death Benefit
Guaranteed Death Benefit
YEARS
5
Cash Surrender Value
Some whole life plans have a
level death benefit
(base model)
Whole Life 101
Claim
Others have a death benefit
that increases over time
Cancellation
Leverage
Non-guaranteed Death
Benefit
Guaranteed Death Benefit
YEARS
6
Cash Surrender Value
Death Benefit
(luxury edition)
How do values grow beyond the guarantees?
Cancellation
It all starts with a dollar amount
credited back to the policy annually
Dividends (Par)
Performance Credit (PGold)
Guaranteed Death Benefit
YEARS
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Leverage
Cash Surrender Value
Death Benefit
Claim
Whole Life – increase in values
Claim
This dollar amount is used to purchase
Paid-up insurance.
Death Benefit
Paid-up insurance
purchased with
dividends/PC credit
Guaranteed Death Benefit
YEARS
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Leverage
Cash Surrender Value
PUI increases the Death Benefit and the
amount that was used to purchase the
insurance becomes cash value.
Cancellation
Participating Whole Life - dividends
If there is more money in the Par Fund than
what’s required to satisfy the guarantees,
“surplus” becomes available and
dividends may be distributed to policies.
Dividends – not guaranteed
100% variable
Guaranteed Death Benefit
YEARS
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Cash Surrender Value
Death Benefit
Claim
Cancellation
Leverage
Factors that impact surplus - Par products
 Mortality – experience is better or worse than assumed in
product pricing
 Lapses – experience is better or worse than assumed in
product pricing
 Expenses – higher or lower cost to administer the product
that what was expected
 Taxes, inflation, …
 Investment returns
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Factors that impact surplus - Performax Gold
 Surplus does not apply to Performax Gold
 Mortality – Experience is better or worse than assumed in
The
risks associated to mortality,
product
pricing
lapses,
expenses, and other factors
 Lapses
– Experience is better or worse than assumed in
are taken on by Manulife
product pricing
(shareholders)
not the
 Expenses
– Higher or lower
costpolicyholders.
to administer the product
like UL and Term.
that what wasJust
expected
 Taxes, inflation, …
 Investment returns
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Factors that impact surplus - Performax Gold
 Surplus does not apply to Performax Gold
 Mortality – Experience is better or worse than assumed in
But clients
product
pricing are still getting some value
for it.
It’s contractually
and in
 Lapses
– Experience
is better orguaranteed
worse than assumed
part
of the Performance Credit the
product
pricing
receives
annually.
 Expenses –policy
Higher or
lower cost
to administer the product
that what was expected
 Taxes, inflation, …
Investment
returns - it’s the only variable
 Investment
returns
factor left in the equation, and the contract
shows how it will impact policy values.
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Performax Gold – Performance Credit
Cancellation
Leverage
Policies will always receive a
Performance Credit.
Minimum guaranteed PC
Guaranteed Death Benefit
YEARS
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Cash Surrender Value
Death Benefit
Claim
Performax Gold – Performance Credit
Cancellation
Claim
Leverage
Death Benefit
Minimum guaranteed PC
Guaranteed Death Benefit
YEARS
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Cash Surrender Value
And another amount based on
investment performance
PGold vs others: same objective – increase values
Death Benefit
Guaranteed Death benefit
Par Whole Life
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Death Benefit
Guaranteed Death Benefit
Performax Gold
Different ways to get there – risk level
Dividends
More risk
Par Whole Life
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Performance Credits
Less risk
Performax Gold
What does this mean for your clients?
 With Performax Gold, just like with a UL, it’s an investment
risk discussion
 The investment risk is borne by policyholders but in a
deferred fashion
 The investment conversation is a unique one:
 A forward looking question
 What will returns be, on average, over the lifetime of your policy
 Investment return will have more impact in the later policy years
than in the earlier policy years
 It’s a perfect opportunity to showcase what Performax
Gold can do for them
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PGold is well positioned to tackle today’s
economic uncertainty
Total Death Benefit
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 100
AGE
Male 45 HS3 (NS), $500,000 base coverage, Cost for 15 years, PUI, 15 annual payments of $16,586
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Strong long-term values and IRR
Values at age 83
All @ 6%
3.5% for
10 years
3.5% for
15 years
3.5% for
20 years
DB
$1.25M
$1.22M
$1.16M
$1.06M
DB IRR
5.26%
5.19%
5.02%
4.72%
CV
$903K
$882K
$834K
$752K
CV IRR
4.19%
4.12%
3.93%
3.59%
Male 45 HS3 (NS), $500,000 base coverage, Cost for 15 years, PUI, 15 annual payments of $16,586
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So does “current” really matter?
 It doesn’t
 It’s not an estimate or a guarantee of what the future holds
 It’s more a reflection of what happened in the past
 Because of smoothing of returns
 Because of surplus (par products)
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Lessons learned from the (not so distant) past
 With Performax Par
 If you were “conservatively” illustrating at current less 2% 10 years
ago, your dividends are now being calculated using a rate that is 15
bps lower than your original illustration
 If you were “conservatively” illustrating at current less 1% 6 years
ago, your dividends are now being calculated using a rate that is
50bps lower than your original illustration
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Lessons learned from the (not so distant) past
 With one of the main par competitors
 If you were “conservatively” illustrating at current less 2% 10 years
ago, your dividends are now being calculated using a rate that is
11bps lower than your original illustration
 If you were “conservatively” illustrating at current less 1% 5 years
ago, your dividends are now being calculated using a rate that is
21bps lower than your original illustration
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Gov of Canada – long term bonds benchmark
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Fund mix
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Observations
 In their Dividend Scale announcements, companies are
alluding to future decreases due to the sustained low
interest rates environment.
 Even with participating whole life, investment returns have
the largest impact on surplus, and as a result, dividends.
 Par funds allow previously accumulated surplus to be
taken into account when determining the Dividend Interest
Rate for the year.
 It’s just another form of smoothing. It doesn’t mean that Par
funds get better investment returns than other funds, or
that they are immune to low interest rates and market
downturns.
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What does this mean going forward?
 Significant downward pressure on fund yields
 Consider the asset mix
 What percentage of fixed income assets? 60%? 80%? 90%?
 Smoothing creates a lag
 Fund yield: Smoothed returns will be slower to decrease but slower
to increase
 Dividend Interest Rates: Previously accumulated surplus may help
slow down the decrease, but are we depleting faster than we’re
replenishing?
 Everyone is going in the same direction
 For your clients: Set the right expectations, illustrate
under different interest rate assumptions
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Changes to our illustration software
 Changes to the “Rates” tab for Performax Gold
 In January 2012, we changed the software to allow users
to specify an illustration rate and gave them the ability to
customize using the spreadsheet (like UL)
 With this new release, we’ve completely removed the
“current” terminology, users will have to specify a rate
 The default setting will now be 0%
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Changes to the Rates tab in Diamond View
The “Current”
terminology has
been removed.
The PC rate is
now defaulted to
0%. Max is rate
currently in effect
Can specify a rate
up to 8%
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There is no magic
 Illustrating whole life should be about long term projections
 Illustrate Performax Gold and the competitors at a rate
that, on average, could be reasonably expected over the
next 30-40 years
 We’re all moving in the same direction, par or non-par, it
doesn’t matter, investment performance has the greatest
impact on values
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Don’t be afraid to show the worst case scenario
Death Benefit based on guaranteed values
Estate Achiever
Sun Par Protector
Performax Gold
$700,000
$675,000
Total Death Benefit
$650,000
PGold = 1.42%
$600,000
IRR at LE
$550,000
$500,000
CL = 0.12%
$450,000
Sun = 0.01%
$400,000
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43
45
47
49
51
53
55
57
59
61
63
65
67
69
71
73
75
77
79
81
83 85
87
89
91
93
95
97
Age
Annual payment: Performax Gold $11,341
Estate Achiever
Male 40 HS3 (NS), $500,000base coverage, Costs -to -100, Accum Account, Pay for life, illustrated at 0%
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$11,330
Par Protector $11,595
99
Consider the product’s performance under
different interest rate scenarios
Death Benefit, M45 NS, PUI, $500K base, 10 payments of $28K
Performax Gold Custom illustration rate:
Years 1-5: 4.5%
Years 6-12: Increasing by 25bps every year
Years 13 thereafter: 6.5%
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Death Benefit, M45 NS, PUI, $500K base, 10 payments of $25.6K
Performax Gold Custom illustration rate:
Years 1-5: 5.15%
Years 6-12: Increasing by 25bps every year
Years 13 thereafter: 7.15%
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Unique Cost for 15 years duration
 Unique in the marketplace – our main competitors offer a
20 pay duration
 Offers competitive value, in no more than 15 payments,
guaranteed
Male 45 NS
Values at LE (83)
Performax Gold
15-pay
Estate Achiever
20-pay
Sun Par Protector
20-pay
$11.7K
$11.7K
$11.7K
15
20
20
Base coverage
$350K
$378K
$337K
Death benefit @ 6.5 / 7.15
$994K
$1.1M
$1.3M
IRR
5.66%
5.50%
5.99%
$679K
$769K
$725K
4.41%
4.17%
3.97%
Annual payment
Number of payments
Death benefit @ 5 / 5.15
IRR
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A different kind of Gold
 Product design that’s minimally impacted by returns in the
early policy years
 Performance and value in good and bad times
 Most flexible illustration – Allows you to set the right client
expectations
 Minimum Guaranteed Performance Credit paid every year
that will contribute to Death Benefit and Cash Value growth
 Full disclosure, no unknowns, more contractual
guarantees than par products
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Manulife Segregated Fund RESP details
Manulife introduces a Segregated Fund RESP!
 A new option to help your clients
prepare for their children’s postsecondary education and achieve
their financial goals
 No additional licensing will be
required if already life licensed
 A new means of appealing to a
broader market, including younger
clients
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Manulife Segregated Fund RESP –
Product features
1. Selection of 7 segregated funds invested in underlying
Manulife Mutual Funds
2. 75% Death Benefit Guarantee*
3. 75% Maturity Guarantee*
4. Contract Maturity Date is Dec 31st of the 35th year (40th
year for a Specified Plan) after the RESP Inception Date
5. Individual or Family Plan
6. Client name only
7. Life license is the only requirement to sell the product
*Reduced proportionally by withdrawals
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Contract & deposit minimums and maximums
Deposit minimums:
 No deposit is required if applying for the Canada
Learning Bond and / or the Alberta Centennial
Education Savings (ACES) Grant
 Fund minimum = $100 per fund, per sales
charge option
 Pre-authorized Credit (PAC) deposit minimum =
$25/month, per fund
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Thank you
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