Blunt, unfiltered truth about Indexed Universal Life

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Indexed universal life (IUL) is often sold using smoke-and-mirrors sales shams, but in this podcast we’ll expose the truth! Listen to this if you are a financial advisors or consumer who wants to see through the crap and make better decisions about whether IUL is good for you (or your client) or NOT.

For those of you who are new to my blog, my name is Sara. I am a CFA® charterholder and financial advisor marketing consultant. I have a newsletter in which I talk about financial advisor lead generation topics which is best described as “fun and irreverent.” 

IUL is NOT what it’s (usually) cracked up to be!

A few months ago I posted to LinkedIn something like, “How come IUL is just as complex as a derivative with floors, caps, call options, and participation rates, yet it’s not regulated by FINRA”. Like many of my posts it sparked quite an outrage. Indexed Universal Life (IUL) insurance is all too commonly sold by smoke-and-mirrors. If you see the IUL grifters on TikTok claiming an IUL policy is better than a 401k, or that is has upside potential with downside protection, a “can’t lost money asset”, or “privatized banking” you’ll know why the outrage is well deserved.

Today I have one of the insurance “good guys”, one of the more knowledgeable people in the field, Bobby Samuelson, to shed some light on IUL. Bobby is the President of Life Innovators and the Executive Editor of The Life Product Review.

So much to dig into here, where do we begin?

Let’s start by defining what Universal Life Insurance (not Indexed Universal Life – but plain old Universal Life Insurance) is.

• The policyholder pays a premium. These premiums are flexible – you can pay whatever you want between a minimum and maximum level.
• Policy charges come out every month.
• Whatever is left over earns an interest credit.
• That’s your liquid cash value available inside the product
• Every month this repeats

A life insurance illustration, which is what insurance agents use to sell the product, is just a mathematical depiction of this monthly cycle repeating over and over.

Okay…but what is Indexed Universal Life insurance?

Now…indexed universal life insurance is where a carrier takes a universal life product (as described above) and instead of paying a crediting rate to the policyholder (as they would in a fixed universal life policy), they take those earnings out of their general account and go out and buy call options.

Quick tutorial:

A call option gives you the option, but not the obligation, to buy an asset at a particular price specified in advance, within a certain time period. If the underlying asset that increased in price, the call option holder would likely exercise the call and realize a profit of the difference between the strike price you paid for the asset and the market value of the asset.

Now, back to our regularly scheduled programming:

In the Indexed Universal Life case described above, the call option gives exposure to a general index. The insurance company gives those index-linked credits to the policyholder, instead of the crediting rate if it were a universal life policy.

Wait!

What’s this now – call options??

There was a great article in ThinkAdvisor in 2015 that provided an example of how the options written on IUL work. Here’s my take on it, based off the progression described in the article.

How do call options work in a IUL policy?

IUL call options tutorial:

Suppose you have 100k cash value in your account on January 1^st.
The insurance company makes 5% on their general account. So, they invest $95,238 in their general account, which will give them the 100k they need to give back to you in a year (they earn 5% on the $95,238, $95,238*1.05 = $99,999). Let’s assume simple interest crediting, not monthly compounding, for the sake of argument.
So what do they do with the other ($100,000 – $95,238), or $4,762?
The invest it in call options to see if they can catch some market upside. See, because if the market goes up, then the insurance company is going to have to give you more than the $100,000 you have in there. There may be a cap, let’s say 10%, and a floor, let’s say 0%. If the market goes down, they don’t care – that’s on you. But if the market goes up, they are the ones liable to pay you.
So, they buy an “at the money” call option, that way if the market goes up, they will exercise it and recognize the difference between the strike price and the price of the market index. They will profit the difference between the strike price and the price of the market index, minus the cost of the option; and then credit that gain to the policy.
If the market goes down, they let the call expire worthless and all they have lost is the money they spent to buy the option.
They also sell an out of the money call and pocket the premium, so they offset some of the cost of the call option they just bought. However, consider that out of the money option are considerably less expensive than in the money ones. So they aren’t quite breaking even in terms of option cost; the closer to the money options they are buying are more expensive than the ones they are selling.
Anyways, the net cost of the two options (the one you bought and the one you sold), net of their premium costs, provides you with an amount that you divide into the $5,000 to determine how many sets of options, or spreads, you can buy. Let’s say the net cost is $20. You can buy 250 spreads.  
Now, let’s say the index that you bought the call option on, the S&P 500 index, did 20% that year. Well now the insurance company owes the policyholder $100,000*(1.20), or $120,000, which is $20,000 of earnings credited from the index exposure.
Let’s say the S&P Index that they wrote the option on stood at $100 on January 1^st. Now it’s at $120. The insurance company makes $20 for each spread, assuming the second call did not get exercised (the out of the money call). They bough 250 spreads, so they make $5,000 from their option position, falling short of the amount needed by $15,000.

-Source: Sara’s Grillo’s interpretation of knowledge imparted by ThinkAdvisor 2015 article, “How (and why) indexed universal life really works.”

All of this is to show that IUL isn’t a simple instrument. Agents and consumers have to understand the complexities of the derivates market (see tutorial above) to really grasp what is going on.

In addition to the call options, there is a cap and a floor set by the carrier for the crediting rate in an IUL policy. And THAT is where it starts to get even weirder and insurance agents go off the deep end.

Can you lose money in an IUL? Is it risky?

The fact that IUL provides exposures to an index, rather than a crediting rate, allows insurance agents to lose their minds.

They go crazy and paint it with BS statements like:

• Tax-free guaranteed income
• Can’t lose money asset
• Upside potential with downside protection
• Privatized banking
• Be your own bank

Remember that there is a floor to the crediting rate, but that doesn’t mean you can’t lose money. Remember the insurance policy has costs. If the rate credited does not exceed the policy costs, you will lose money. Or if the market index has a negative year, the call option is not exercised, and the policy just earns whatever minimum floor rate the insurance company specifies, the policy still loses money due to policy costs. You don’t earn a negative crediting rate, because of the floor, but the policy overall still loses money.

That’s a huge risk, right?

Then how come it’s sold as “can’t lose money asset” and other BS claims?

Here’s the truth about IUL.

It’s not structurally a dangerous product; insurance agents sell it irresponsibly.

-Bobby Samuelson

How so?

The illustrations are where it gets WACKO.

IUL illustrations and false performance expectations: a grande problemo

IUL is marketed with very high illustrated rates and high expected performance rates, and that is where things get dangerous. People will take out loans again their house or take money out of 401(k) with the expectation that the performance will be there, and many times it is not. We have seen scenarios where clients go into it expecting to earn 6-8% and the policy earns 3-4%.

As with any cash value life insurance product, there is the potential for the policy to lapse if the policyholder can not pay the premiums out of pocket. Or the cash value could decline from policy charges increasing by more than the policy earned that year, or market could perform badly, making it so the policyholder can’t pay the premium from cash value.

Here’s why that stinks.

Policy lapse results in phantom income tax on the entire amount of the capital gain in the policy, plus there is the disappointment of having an asset you counted on (maybe to retire) go to zero.

The issues lie in how IUL policies are shown to clients, in the illustrations. Aggressive illustrations depict aggressive performance expectations, and then the policy doesn’t perform well enough to overcome the policy charges.

Add in some leverage and POOF it’s a powder keg waiting to explode!

It gets even worse in the case of using leverage. Remember that policyholders can take a:

• Fixed rate policy loan
• Variable rate, floats with Moody’s Composite Bond Index
• Carrier declares the rate

In most IULs, the illustration shows the client taking a policy loan. This effectively collateralizes the cash value of the policy. The illustration assumes that if you take a loan out, and the carrier charges you let’s say 5% to take that loan out, they show that the illustrated performance on that loan you have taken out is actually 6-7%. It’s shown to be higher than the 5% loan.

Here’s the kicker: you have to beat the loan rate in order to keep it working. The illustration looks like it is always going to outperform the loan.

If you have a bad performance year and you have a policy loan, (and Bobby has seen situations where 95% of the value of the policy has been loaned out), the loan value goes higher than the account value. The policy can lapse leaving the client with a phantom income tax bill.

But the grifters on TikTok are illustrating scenarios like this and it’s super scary like a haunted house on Halloween.

How to help clients know if an IUL policy is for them or not

If your clients are considering IUL, follow this process to help them determine if Indexed Universal Life is for them or not.

#1 Focus on the product not the illustration

Help them understand what IUL is. Most people don’t really understand how the policy works because, as mentioned above, agents sell it as “magic.” You should also help them understand the benefits, not the illustrated performance, but the benefits of owning the product.

• A tax advantaged asset
• Death benefit
• Tax planning needs
• Cash value growth
• Cash value liquidity benefits

#2 Use a realistic (low) crediting rate in the illustration

The assumed interest rate in an illustration is what is driving the long term performance. Hone in on that assumption. There is a rate called the Maximum AG 49 rate. It’s not what the carrier is actually crediting; it’s just a way to convert the options strategy into an illustrated rate.

AG49 is a big problem when it comes to IUL marketing. So let’s pause here and talk about it.

What is AG49?

in 2015, the NAIC created AG49 (Actuarial Guideline 49) which allowed for the creation of a Benchmark Index Account (BIA).

According to Premier Brokerage Services:

“The BIA is a one-year point-to-point S&P 500 index account with an annual return cap, a 100% participation rate, and a 0% annual floor, using the S&P 500 price level only (no dividends on the underlying stocks). AG49 then defines a maximum illustrated annual index credited rate based upon an average 25-year lookback calculation.”

-Premier Brokerage Services

Why is AG49 a problem for insurance illustrations?

Remember that the carrier sets a cap, or the maximum credit you can earn.

• Let’s supposed for a minute the cap is 10%. The cap is likely to vary over the time period of the forecast, then how do you illustrate it?
• The fair market value of the cap is what the carrier paid the investment bank to buy the 10% cap. It would be logical to look at the fair market value of what the carrier spends for the cap. However, the industry needs a way to make IUL look better than traditional UL.
• So they apply the 10% cap to historical equity data. They then project out the performance for the next 50 years.

In other words, the illustrated rates are subjective. There is no long term history for these products. There is no actual backtest.

KEY POINT For advisors:

When you look at the illustration and you see an illustrated rate that is 5, 6, 7% based on the maximum AG 49 rate, which is the cap applied to the historical data, as an advisor you should ask for a much lower number, such as 2-4%.

This is such a key point, let me repeat it again:

When you look at the illustration and you see an illustrated rate that is 5, 6, 7% based on the maximum AG 49 rate, which is the cap applied to the historical data, as an advisor you should ask for a much lower number, such as 2-4%.

-Bobby Samuelson

#3 Try to ignore the illustration

The illustrations are a distraction. In general, the less you can rely on the illustration the better it will be (for all the reasons mentioned above).

Recommended reading for insurance agents

Whoaaaaa so that was alot. This stuff can get very technical and that is where the opacity/confusion comes in and makes the marketing very deceptive to the average person who isn’t familiar with all this stuff.

Here are some reading materials that Bobby recommends, whether you want to learn more about insurance, selling insurance, or specifically about Indexed Universal Life.

The Story of Life Insurance by Burton Hendrick

The Life Product Review – Bobby Samuelson

Society of Actuaries

LIFE180 – Chris Kirkpatrick

The IUL Experiment – Andy Panko

Sara’s upshot

Did we get you jacked up over exposing the truth about Indexed Universal Life?

If yes…

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The Transparency Movement is the future of the industry – we welcome anyone who believes in our values to join us.

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Thanks for reading. I hope you’ll at least join my weekly newsletter about financial advisor lead generation.

See you in the next one!

-Sara G

About Bobby Samuelson

Bobby co-founded Life Innovators in 2018 and has been President and CEO since its inception. Bobby was formerly Senior Vice President and Head of Life Insurance and Annuity Product Development and Pricing at Brighthouse Financial and Vice President of Life Product Development at MetLife. Prior to joining MetLife in 2013, Bobby was a consultant to life insurers, distributors and high-end agents. He is the third generation of his family to work in life insurance. He is also the Executive Editor of The Life Product Review since 2012. Bobby is a regular keynote speaker at corporate and industry events.

Transcript

0:00:00.6 SARA GRILLO: As ago, I post it to LinkedIn, something like, How come I… L is just as complex as a derivative with floors caps, call options and Participation Rates, yet it’s not regulated by FINRA, like many of my post, it sparked quite an outrage, and if you see some of these drifters on tiktok claiming that IU is better than a 401, that has upside potential. Downside protection, a can’t lose money, asset privatized banking, infinite banking, all of the crap that people are saying about it, you know why the outrage is well-deserved, but the good news is that we’re gonna bring some transparency to it. And today, I have one of the good insurance guys, one of the most knowledgeable people in the field, Bobby Samuelson, here with me. To shed some light on IL body is the President of Life innovators and the executive editor of the Life Product Review. Hey, Bobby, thanks for being here.

0:00:58.6 BOBBY SAMUELSON: Thanks for having me on. I’m excited to talk about index tools should be good, and this topic needs transparency, so I’m sure I have a great conversation about it.

0:01:07.6 SARA GRILLO: Awesome, so be… Let’s just start with a real quick definition, what is IUL?

0:01:12.8 BOBBY SAMUELSON: Yeah, so let’s actually take one step back and say What is universal life, because I think a lot of times we kind of get wrapped up in the different variations of universal life, and I think it’s good to start at the beginning and say, Okay, what actually is this product, and then then I’ll make the different variations make more sense, so universal it is a very simple product, I think if you’re a financial advisor and you’ve seen it out in the marketplace, it probably doesn’t look simple, but the actual math is very simple, and the way it works is you put a premium on, and the premiums are totally flexible, client can pay and really whatever they wanna pay down to some sort of a minimum or all the way up to the tax maximums, policy charges come out every month, whatever is left over, earns an interest credit, and then that creates your cash value, and every month the cycle repeats, you can pay premiums or not, policy charges are still coming out, whatever’s love over earns interest, and then you have this liquid cash value available inside the product and all a illustration is the…

0:02:05.5 BOBBY SAMUELSON: Which is what the financial advisors typically see is just a forward projection of this monthly cycle recurring over and over and over, over again. So the way the universal life policies are typically differentiated is by how that interest is being credited on the cash value, and so you have sort of traditional fixed Universal Life, which basically the carrier declares a crediting rate on that policy, then you have variable universal life, where you take the money and you actually invest it into insurance, dedicated mutual funds, and you get whatever investment returns you get, policy charges are still deducted, but the returns are kinda controlled by the funds themselves… The investments that you’re making, and then the last piece, which is the one we’re talking about today, is index, where the carrier effectively takes the universal life product, fixed you out, and instead of paying a crediting rate, they take that earnings, those earnings off their general account. They go out and they buy call options, and the call options provide index linked exposure to a one

0:03:02.5 SARA GRILLO: Second… I’m sorry, let’s just go back over what a call option is just because I… I, I’m so sorry for this baby. Okay, so let’s go back to the part where you said, and I… Well, is like a fixed UL and then let’s go back. Yeah.

0:03:17.5 BOBBY SAMUELSON: Well, so I’m gonna explain it later, and that was where I was gonna go, so I was gonna say, you may not know what a call option is, here’s kind of what it does, here’s the index credit, that’s how it does it. But yeah, I can go back to that. No, that’s no problem.

0:03:28.1 SARA GRILLO: Okay, you start with that point.

0:03:31.0 BOBBY SAMUELSON: Yeah, yeah, so where the fixed universal life product, you get a crediting rate declared by the insurance company and they’re supporting that with their general account assets with a variable universal life policy, the carrier takes the money, they invest it in the carrier with a variable universal life policy, you invest directly into funds, mutual funds, insurance, dedicated mutual funds that are held in a separate account, and so that’s the investment eternity is whatever it is, with index will, the carrier basically says, Alright, instead of paying the crediting rate to the policy holder, like we do in a fixed universal life policy, we’re actually gonna take that crediting rate, we’re gonna go out and we’re gonna buy call options, and all the call option is is expose exposure to the performance of an external index, and so by buying these call options, we now can give these index linked credits to the policy holder instead of the crediting rate in the universal life policy. So one of the key things to know right off of that is that universal life in IL are essentially the same product, the only difference is that with Universal Life, the carrier gives you the crediting rate, an index universal life, the carrier takes the credit in rate, goes to an investment bank, buys call options, and then that gives the client index linked exposure, so the fundamental math of fundamental mechanics, all the underlying financials are identical except for that last step where the carrier takes the credit rate, gives it to the Investment Bank, buys options and the options provide the index linked exposure, now, that’s also the part where it gets really complicated because I think when you look at all the stories about all what this thing does, how it work mentioned a downside protection, upside potential equity-like returns better than a 401…

0:05:15.0 BOBBY SAMUELSON: Nobody would say all that about just a regular old universal life policy, but the only difference been universal life and index to is that Options piece, that very last step, and what that does is create this kind of illusion and this veneer that IL is something fundamentally different that it’s an equity product, that it does all these magical things, and the reality is, all it is is really just a universal life policy or carrier, again, it takes a credit rate instead of giving it to the policy holder, gives it to an investment bank to provide Index link exposure. And that’s it. So fundamentally, that’s what index I is now, there’s lots of different discussions about how it’s illustrated and how it’s used and how it’s marketed, but in terms of the mechanical structural construct of the product, that is what that product is…

0:06:02.1 SARA GRILLO: Why is it dangerous? From a market perspective.

0:06:09.4 BOBBY SAMUELSON: It isn’t structurally, it isn’t dangerous, it is just the same as a fixed life insurance policy.

0:06:17.6 SARA GRILLO: Okay, let’s just go over that actually, what is the danger with any investments insurance products and so value insurance product… What is the danger there?

0:06:29.2 BOBBY SAMUELSON: Yeah, the dangerous policy labs, and the power of a whole life policy is it is a guaranteed premium with a guaranteed death, but if they guaranteed cash as it can’t ever lap, so there is really kind of no danger in a typical whole life product in terms of policy labs with the universal life, because the premiums are flexible, you can have a policy labs, you can have a situation where the policy charges increase or the credits aren’t good enough, and the cash how starts to decline and you end up kind of undulating the policy, not getting what you thought you were to get that first.

0:06:59.0 SARA GRILLO: If you can’t pay the premiums yourself…

0:07:02.6 BOBBY SAMUELSON: Correct, yeah, then you don’t have enough cash to cover their policy charges, and again, that monthly cycle repeats every month, there’s always a charge to be paid, and if there’s not enough account by the policy lapses.

0:07:14.0 SARA GRILLO: When what you do in that case… Let’s say that that happens. Let’s say that the S and P has it, like last year I had a bad year, and it’s not crediting enough to the cash account, and I have these flexible premiums, but my premium had gone up because the class from insurance had gone up. And so the company raised the premium rate on me… Yeah. What do I do?

0:07:36.5 BOBBY SAMUELSON: They actually wouldn’t raise the premium, I think this is one of the misconceptions here, is they would say, Hey, would you would not as a policy holder necessarily know that you need to pay more premiums, you would need to go through an annual review process with the agent to have them tell you, Hey, you’ve got a problem because the carrier just says, Oh, you planned to pay X, Y, Z premium, that’s all we’re gonna bill you for, unless you tell us to Billy something different. And so to your point, last year when the market goes down, you get a 0% credit in an ill… Let’s say policy charges still come out, the cash is gonna decline that year, so you mentioned earlier that one of the marketing pitches for ALS, you can’t lose money. That is absolutely not the case. You are guaranteed to lose money every time the market goes to… Every time the market goes down, you get a 0% credit, policy charges still come out of the account value, they can value will decline, you will lose money that year, and the amount of money you lose is gonna be exactly equal to the amount of policy charges coming out of the contract.

0:08:32.7 SARA GRILLO: Or it could not even be, it might not even be when the market declines, but just if the market has a year where my crediting rate does not overcome the policy charges than you think

0:08:46.1 BOBBY SAMUELSON: You… That is correct. I say you’re guaranteed to lose money when you have a 0% because you know that it can’t overcome it, but to your point, there’s this grey area where you might actually get a flat year or a negative year in terms of cash, your performance. If the credit isn’t big enough, if it’s a 1% credit or a 2% credit and your policy charges are greater than that, so that kinda leads to the other risk, which is so that’s potential policy labs, but the question of sort of disappointment is a different question, so when you look at how whole life in a lot of ways, and I, especially our marketed, they’re marketed with very high illustrated rates, very high performance expectations. And that’s where things get dangerous. It’s not that policy lapse is the biggest risk, the problem is that clients go in and you and I have seen crazy stuff, people borrowing money against their house, taking money out of 401Ks to buy IL, under the idea that this long-term performance will be there for them, their worst case scenario is probably not a policy lapse because they’re over-funding the contracts, and the idea that the charges will need Upolu…

0:09:47.1 BOBBY SAMUELSON: It’s pretty remote. The problem for them is that they went into this deal thinking they were gonna hurt and ET 788%, and they actually end up earning 3 E45%, and that… Is that now their whole financial plans… Erectus Earl. Yeah, you have a short fall. And so this kinda leads to the real issue, which is the danger back to your question with IL is not a policy structure, the policy structure is sound, the policy structure works, the policy structure will work anyway you want it to, like a universal life policy would… The problem, if a danger is on the illustrations and the way that these things are being illustrated in the performance being shown to clients, that is where the issues are. And that’s, again, if you think about all the ways that these products are being marketed on talk and whatever else, it all relates back ultimately to this aggressive illustrated performance being shown to clients, which creates aggressive expectations of future performance that they may not get, and if they don’t get it to your point, they’ll have a shortfall, they won’t get what they thought they were gonna get if they’ve applied leverage, they won’t be the leverage, that’s what

0:10:51.7 SARA GRILLO: The tool… Can you just talk about that? ’cause I think that’s not well understood by finding…

0:10:55.9 BOBBY SAMUELSON: Yeah, so there’s really two types of leverage that people typically illustrate applying to these contracts, the simplest one is simply policy loans, and so in every… All out there, the primary illustration that you see is when the client takes a policy loan, they are effectively collateralized the cash pay, so think about taking out a home equity line on your house, it’s the same concept. With a home equity line to collateralized your house. And then the house, hopefully appreciates irrespective of the fact that it… As collateral against it, same deal with Anil, you’re collateralized your cash value, you’re taking that loan. And what the illustration assumes is that if you take a loan out and that carrier charges you, let’s say 5% to take that loan out, they show that the illustrated performance on that loan that you’ve taken out is actually sector 7%. It’s something higher than the 5% that you’ve taken out, and so you have this concept, again, to use the helo example, if you take a home equity line, Imagine forever taking home equity lines off of your house that works as long as the house appreciates faster than the interest rate on the helo increases, same problem, or saying the issue shows up in an L where you take the loans out, you apply leverage, ’cause now you’re borrowing money, you have to beat the loan rate in order to keep this working, and so the illustration looks like it’s gonna always outperform a loan, you can take money out forever, the policy equity grows even though you’re taking money out of it, it’s this magical phenomenon where if you look, for example, like take the 4% rule.

0:12:28.4 BOBBY SAMUELSON: If you apply the 4% rule, that logic of, Okay, I’ve got a million dollars, I can take 4% every year. If you look at that, look at Il illustrations through the lens of that, most live illustrations show eight to 12% withdrawal rates on a balance because of this arbitrage being illustrated in the contract, and it’s a ton of leverage. So back to your question, What happens if you get a bad year… Well, if you don’t have any policy loans and you get a bad year to your point, 00% credit policy charges come out your account by… You will get by a little bit, but if you have a policy loan, and I see a lot of situations where 95% of the value in the policy has been loaned out through income streams, you have one bad year and that policy lapses because the loan value goes higher than the account by you, so come, you get a policy lab, and at that moment, the client gets stuck with a phantom income tax bill for all of the gains in the contract that they have pulled out, and all they really need is just one, maybe two years of Zero Percent credits, and that’s the leverage I’m talking about is if it’s an unlevered contract, 0% the year, just causes your account late dip, but if You’ve levered up, you’ve taken all these policy loans, now you are incredibly sensitive to any variation in performance.

0:13:41.1 BOBBY SAMUELSON: And that will cause the policy to potentially laps, and again, you get stuck with the fan of income tax bill, so that’s the main type of leverage that I see on index to illustrations and all the tiktok stuff. All the used IL for retirement income, all uses this strategy, that’s the core of that strategy is this loan and this arbitrage in this long-term illustrated performance

0:14:01.0 SARA GRILLO: Is the long… Typically, fixed or variable.

0:14:04.5 BOBBY SAMUELSON: It depends. So they’re basically three types alone, you can take it, you can have a fixed rate, which is what I described, simplicity 5% rate, you can have a variable rate where the rate floats with the Moody’s composite Bond Index, and so that’ll move up and down a bit last year, we’ve seen obviously a huge increase in those rates being charged as interest rates have come up, and then the third way is that carriers can declare the rate that they charge on the loan, and so they don’t directly link it to the Moody’s composite. They don’t guarantee it at a certain rate, they just simply set the rate however they wanna set it, and they’ve gotta manage their own internal dynamics on what rate they wanna use, but they might declare a new loan rate every year, every six months or every two years, however they wanna do it. It just depends on the company. And by the way, there’s no right or wrong answer, all these loan structures have different times where you’d rather be in one versus the other, personally, I think the declared rate loans are actually the best way to manage a policy in the long run, but there are advantages and disadvantages to all the structures.

0:15:02.4 SARA GRILLO: Okay, Bobby. So let’s just suppose that I’m Mr. And Mrs. Financial advisor, and let’s just even suppose I’m a fee-only advisor just for the purpose of simplicity, I do not sell insurance, I don’t get compensated for insurance, I can accept commissions if someone needs term life, I refer them to the insurance agent down the street. So one of my clients comes in and says, I was in my country club and there was Mr. Mrs. Insurance agent that was putting this in turn solely in front of me, so excited. We could go to Bermuda, okay. So like, What do I do with that plan? I’m sitting here looking at the illustration body, what do I do? How do I know? How do I see through the illustration… And dispel this myth.

0:15:51.7 BOBBY SAMUELSON: So again, I think it all starts with helping the client understand what the product is, and I’ve talked to… I don’t sell insurance, I’ve never sold insurance, but a lot of people find me on the internet and they call me clients, end users finding the internet and they say, Hey, I bought this IL or I’m considering this UL or any type of policy. What is it? And I always, always start with the same explanation, every permanent life insurance policy works the same way, premiums come in, charges come out, whatever’s left over earns interest, that’s your cash value, if clients don’t understand that and if advisors don’t understand that, the rest of the conversation is extremely difficult, because what that allows you to do then to say, Okay, I’m looking at a bunch of numbers on a page, I see that the client puts in 100, 000 in the first year, and they only have 80000 of account by you. What do I know right off the bat that there were 20000 worth of policy charges that came out, because we know the formula premium in charges out interest earned is actually probably more than 20000, 22000 or so, ’cause they’ve gotta earn interest on whatever is left over, so you have to know, that’s what’s going on.

0:16:53.1 BOBBY SAMUELSON: That’s number one, and then the second thing I’d say is, Alright, so knowing that that’s how the policy actually works, then we know that there’s no magic going on, I’m here. The only thing happening on this illustration is the Assumed interest rate is what’s driving the long-term performance, and so we need to hone right in on that a student interest rate assumption, and so on an illustration, you should be able to see exactly what the Assumed interest rate is for the future long-term projections that’s being used, and that’d be the thing

0:17:19.3 SARA GRILLO: In what you call the credit in grades.

0:17:21.6 BOBBY SAMUELSON: Correct, correct. Yeah, so crediting rate is a universal life, Assumed interest rate is probably a better term for IL because the carrier, there’s discretion when the UL… The carrier sets the crediting rate, and that’s what you’ll straight, You’ll trade less if you want to, but with IL, there’s this maximum age 49 rate, and you can kind of take a rate anywhere in between, and maximum 8249 is meant to be a guard rail, so it’s not what the carrier is actually crediting, it’s just a way to convert the option strategy essentially into an illustrated rate. It’s wildly subject.

0:17:53.4 SARA GRILLO: No. Okay, hold on a second. Yeah. Does this age 40? It was nine implied rates. Yes, that is not necessarily equal to what he gets illustrated a… What is it based on?

0:18:17.0 BOBBY SAMUELSON: Okay. So here’s what it’s based on. So again, you think back to the logic, this is a universal life and I all or the say the only difference is that with a UL, you get the crediting rate, you illustrate the credit rate with IL, the credit Oregon about the options, and the options give you exposure to the indicate

0:18:36.0 SARA GRILLO: Index. So this is not… By the way, everybody, this is not a direct investment into the index, this is correct. Exposure to the index, say, by the way, is it a total return or price only index is…

0:18:50.3 BOBBY SAMUELSON: These are almost all price…

0:18:52.1 SARA GRILLO: Okay, so the S and P price on the index. And let’s say that the S and P does 9% that year, EP is the implied crediting rate. 9%.

0:19:10.5 BOBBY SAMUELSON: Yes. If the cap on the cap is what the carrier set, so they set the credit in rate for UL, they set the cap for IL, and the way that they determine the cat, which is the maximum credit you can earn, the way that they set the cap-based on index performance, where this or the cat is by taking that credit rate and buying options, so if options become expensive, the cat

0:19:33.5 SARA GRILLO: Must do and options become expensive when it’s a volatile market… Correct. To more expensive options, which would mean the cap is lower probably right, ’cause the insurer’s gonna take their share and the AG 49 rate is gonna be lower.

0:19:50.8 BOBBY SAMUELSON: Correct, correct. So that’s the dynamic. So the cap, you would expect the cat to change regularly because option prices change all the time, so the carriers earnings are pretty stable, but the option price… They’re always changing. So you expect this cap to move around quite a bit. So the way that these things are illustrated is a problem is that how do you illustrate the value of the cat… The carrier sets a 10% capital, say, What’s the value of the 10% cap that you should show on the illustration for the next 50 years?

0:20:18.0 SARA GRILLO: Well, they put 10%… No.

0:20:19.9 BOBBY SAMUELSON: Well, you would… Now they don’t. So they say, Okay, because you’re not gonna hit the 10% every year in the S and P, so that would be too high, but the guaranteed minimum is zero, that would be too low. So you basically have two options for how to illustrate it, one option, the logical option, the way that I think every financial advisor who’s listening to this would say, Oh, this is how they should be illustrated. As you say, Well, the fair market value of the 10% cap is what the carrier paid the investment bank to buy the 10% cap. So how much did that option strategy cost to provide the 10% cap, and that is equal to the crediting rate that you would earn on universal life policy, because remember, it’s the exact same thing or just instead of paying the policy holder there, paying the investment bank, so the logical way to illustrate, and IL is to look back to what the carrier spins, the fair market value that’s in percent cap. That is not how 04ers because that would make I and L illustrate the same. And all the sexy ways to use IL in a lot of ways wouldn’t work, if you land IL illustrated the same, you have to…

0:21:25.6 BOBBY SAMUELSON: The industry has built a way to illustrate a you better than you all, and so the simple way they do it is I say, Okay, let’s say the carrier has declared a 10% cap, let’s go and apply that to historical equity data. So let’s say it’s a temperate cap on the S and P. We’re gonna look back to the 1950s to see what the S and P performance was. We’re gonna apply the 10% cap to historical S and P data, and that is where the illustrated rate comes from, so they are taking historical S and P returns into the calculation to value the 10% cap, and then they project that for the next 50 years, does that make sense? Yeah, and so that’s where it… So again, back to your question, the only advisor is looking at an illustration… Again, in my mind, two things. This is how the policy works. This is the illustrated rate being used for the ledger, and what I’d say is, if the illustrated rate is at the maximum age, 49 rates are 5 and a half, 6, 6%, whatever it is. You wanna see much lower returns to get a feel for what is more realistic…

0:22:29.7 SARA GRILLO: Okay, by… Hold on a second, I have to go over this point again, can you just say that differently because this is very important…

0:22:38.2 BOBBY SAMUELSON: Yeah, yeah, so the illustrated rates are totally subjective, there is no long-term history for these products, there is no actual back test, it’s just a hypothetical back test, and so when you look at that illustration and you see an old traded rate, that’s five and a half 6-65% based on the Ag, 49 maximum rate, which like we just talked about, is the cap applied to the historical data, as in an advisor, what you should ask for is to see much lower numbers because they are a…

0:23:05.4 SARA GRILLO: Other than five and a half, six. Excuse exactly.

0:23:09.0 BOBBY SAMUELSON: Because you wanna see a more realistic picture of long-term performance live for a different way, this fee-only advisor that we’re theorizing here probably has a good view of what they think long-term bond yields are gonna be in long-term stock-held are gonna be and the client certainly, as a part of their planning conversation, we probably have a planning conversation and say, Hey, what should we assume for your portfolio about long-term future stocks and bonds… Right, I would assume that that’s part of the planning conversation, so if you illustrate an IU with a 10% cat at the maximum age 49 rate, and you are assuming the past equity returns are gonna be identical to future equity turns and the past S and P total returns, which is a driver of the price returns, the total returns are about 12-15% since the mid-1950s.

0:23:54.2 SARA GRILLO: But that is a total return… Not a price return.

0:23:57.5 BOBBY SAMUELSON: Correct, but if you think about it from a planning standpoint, you have a client who’s saying, I’m buying a Vanguard mutual fund, the mutual fund, it is a Total Return Fund, so if I’m an advisor and I’ve had a planning conversation with a client about long… Their long-term equity assumption, I’m not talking about price returns, I’m talking about total returns, right, even though the index product is only on price returns, right. So here’s the question, if you’re a financial advisor and you’re looking to that 6% illustrated rate in the IU with a 10% cap to your point on a price index, and you’re also assuming as a financial advisor long-term equity returns of 6%. If you hold the S and P straight up and total returns, those two assumptions are not the same, the assumption that goes into the 60% rate, you see in the IL illustration is only past equity returns, which are 125% total returns. So here’s the simple thing, if you’re an advisor and you’re illustrating out 12-15% for your client’s equity portfolio, then you can feel good about the 6% illustrated rate in UL, but if you have a lower equity return assumption, 8, 6, 7%, whatever it is, then you cannot illustrate 6% in IL, you need to illustrate four or three and a half or two, because fundamentally I is a much less risky, much less higher attorney asset then holding the equities directly.

0:25:13.7 BOBBY SAMUELSON: And so that’s the big thing is in Fred advisor is basically just being able to have a conversation with the client and say, Look, there’s no magic here. And this illustrated rate is what’s driving all this future performance, we advisor and client, we decided we were gonna use a long-term inhale percent equity return assumption for your planning purposes. This is illustrating it six, that’s based on a 125% historical ether return, we need to lower that illustrated right down to four or three and a half, or four and a half, and then if you still think this policy makes sense, then maybe we should do it maybe you can talk to your advisor about it, but if the deal doesn’t work at 4%, then this does not fit with your financial plan. Does that make sense? And so that’s the conversation advisors need to have is not, Oh wow, look at the illustration, look out Great, this looks… It’s, let’s talk about your expectations of the future, let’s talk about what this product actually does, and it may be a fit, but it probably… But if it isn’t a fit, a 4% illustrated rate, then it’s not a fetter, it has to at for three and a half or four and a half, it can’t just work at six…

0:26:19.9 BOBBY SAMUELSON: To your point earlier, a lot of what I see being marketed out there is very aggressively illustrated products, and that’s the whole appeal is the IL trader performance, and that’s where the advisor first thing they gotta do is tone that back to…

0:26:32.6 SARA GRILLO: That’s how the agent sell the product, they sell it off the illustration.

0:26:37.2 BOBBY SAMUELSON: Yeah, that’s right, that’s right. And if you’re a family advisor, you’ve gotta tone that down and make sure the product is a fit regardless of the old treated performance.

0:26:46.7 SARA GRILLO: No, we also might have some insurance agents that are listening to this, what would you say to them, what if they’re saying, Well, Bobby, I have to earn a living here and I’m competing against financial advisors who can go… Say the S and P does 15% year on year. How can I compete? Bobby, I’m gonna be illustrating IL at 35%. I have a wife and a mortgage and kids, and how can they survive and you doing this with honesty and integrity.

0:27:22.6 BOBBY SAMUELSON: If the industry is gonna sell 3 billion of AUL, and if tomorrow all the maximum militant rates on these products went down to 4% and sales went down to 300 million, then we would know that people were buying IL primarily for the illustration, not for the product itself. And that would be a huge problem. I don’t think that would happen. I think IL properly sold is a compelling value proposition. You’re talking about a tax preferred assets, you’re talking because of its death benefit protection, so there’s clearly death benefit planning needs, there are tax planning considerations, you can do it in a life insurance policy, the death benefit tax, meaning the… Then there’s the cash value, growth and the stability of the growth and the sort of downside protection, upside potential story, none of these things have anything to do with the long-term performance of the product, the reality is, every agent knows… Literally have Hagen knows that illustrations are not projections of future performance, everybody knows that, but they all sell as a… Illustrations are projections in the future performance, and that is where we have a problem, so what I’d say to guys, and I talk to people selling on you all the time, and what I say is this, the less you can sell off of the illustration and the more you can sell off of the death benefit, the tax benefits, and the cash by you liquidity benefits and return profile benefits, the more sustainable, the more resilient your sales practices will be, and I think the more the product you’re gonna sell…

0:28:51.7 BOBBY SAMUELSON: Illustrations are a distraction. We gotta sell what the product actually does and how it works, and that’s the best way to say I will and look, there’s nothing to hide. The product is a good product, it does what it’s supposed to do. The easiest, properly… Yeah, when it’s properly illustrated, it does what it’s supposed to do. The problem is a lot of the sales are not being properly illustrated because regulators gave agents, they let them illustrate the rates too high, and that drives the narrative too much, and so even if those rates are achievable, even a client to actually get those rates… That shouldn’t be the reason for the purchase, and I think unfortunately, too often that is the reason for the purchase.

0:29:32.2 SARA GRILLO: Do you think the agents who are selling it actually understand a lot of the technicalities that you just went over.

0:29:40.0 BOBBY SAMUELSON: It depends on what age you’re talking about, there’s definitely a crew of sophisticated agents who have sold this for years, and I think understand with a pretty high level of depth how this thing works, and they’ve bought into it, that’s maybe 3% of the agents to sell this product. I think the other 97% of agents to sell this product are doing it because they see the old traded performance, they see people making a lot of money selling it, they understand the basic positioning, which is none of these things that I’m about to say are true but what they say is, you can’t lose money, you’re gonna perform better than equities, you’re this this, this the super safe insurance company, long-term history of performance, none of these things are actually… Maybe the insurance company of pies, but the rest of it is not true. And so tax free guaranteed in, and I’ve heard that story for that… Ulta, incorrect. And so I think a lot of times when you look at Il and why it’s being sold, there’s a narrative, and that narrative doesn’t really match up to reality, but there is in a lot of cases, but there is a real narrative that really does do the product justice, and that really can benefit clients, it just isn’t nearly as sexy of some of this other stuff that we see on tithes, the gap between the real benefits of the product and what’s being shown out of the marketplace.

0:30:59.1 BOBBY SAMUELSON: And again, I think the vast majority of that comes back to illustrated performance and aggressively illustrated scenarios for clients that they get attracted to.

0:31:07.3 SARA GRILLO: Clients don’t understand it, some advisors don’t understand it, some agents don’t, it… This is where the industry gets a bad name, and I say that in the hopes that myself included, all of us that are listening to this, can strive for more transparency, more clarity, and a much stronger understanding of this and all other complex products, because this is where people lose faith in us.

0:31:33.3 BOBBY SAMUELSON: Yeah, well, and… Look, we’ve seen this movie before. So when you kind of stretch back and look over history, UL was popular in the 80s because it illustrated very aggressively, people thought they were buying a cheap product, what they didn’t realize was if interest rates go down, their premiums must go up, that’s not what the agents told them that’s not what the expectation was, but that is how the product actually works, so again, even with UL in the 80s, there’s a difference between the marketing story and the illustration story and how the product actually works. Then we had L in the 90s, what was happening with that company agents were illustrating ultra high rates, very cheap premiums, clients that understand that if their equities didn’t perform, the policy could be imperiled, and yet that’s what happened. So those are two big black eyes for the industry, an advantage in premium whole life, even before universal, a similar phenomenon. So we’ve always… In life insurance had this problem of people talking about insurance as an investment, which they are legally not supposed to do, and positioning it as an investment and talking about it in ways that are completely inappropriate based really on illustrated performance and the fact of what the product actually does, and actually, there’s a great book about this, it’s called the story of life insurance by Burton Hendrick, and he talks about the insurance industry in the US in the 1800s, and guess what? Same phenomenon was going on, there was this concept of a canteen whole life that illustrated the best returns, everybody got into them, it turned into a huge scandal, and so we have had this constant issue in life insurance forever, and I is just the latest flavor of it, of a product that’s being positioned and sold as an investment and being touted as having X, Y, Z performance…

0:33:17.0 BOBBY SAMUELSON: Well, it still was a fundamentally sound product, it’s just different than what’s being positioned to market, and that gap is what causes black eyes for the industry, and like you said, we’re setting ourselves up for this with UL, and we’ve done it plenty of times in the past, to… This is not the first time.

0:33:31.2 SARA GRILLO: Okay, what resources have you availed yourself of, they can provide us with more knowledge and transparency as a fee-only advisors or the advisors that are listening to this.

0:33:43.1 BOBBY SAMUELSON: Yeah, yeah, well, I’m not an agent, just again, just to be clear, and so in a lot of ways, my resources are not the resources that an agent would use, I build insurance products with insurance companies, I write about all the issues we’re talking about. And so

0:33:56.9 SARA GRILLO: We… Hold on a sec, I’m sorry. You write about these issues. Oh yeah. Is this blog able to be consumed by the public…

0:34:06.9 BOBBY SAMUELSON: No, I charge for it, and it’s a technical weekly newsletter on anything and everything going on in the life insurance space, and so it’s written for high-end insurance professionals, high-end financial advisors who really wanna understand what their clients are being sold. So I do have a lot, I do have RAs that sign up, it’s written for insurance company executives as they’re thinking about developing products, it’s written for brokerages, and so it really is… It’s a technical deep dive. And look, I wish I could say there are a lot of other great resources out there to learn about all these issues, and the reality is nobody wants to write about life insurance, it seems except for me, and so in terms of product issues, and so I’d say my newsletter to the Lieber IE is the best known and best subscribed technical product industry resource covering what’s actually happening in the marketplace. And outside of what I do, charms, a great life insurance, especially on the annuity side, the Society of actuaries has stuff on their website you can read, but again, very technical and geared towards the actuarial side. There are some other folks who I think there are some other bloggers, Chris Patrick, I think it’s done a good job of talking about um…

0:35:17.4 BOBBY SAMUELSON: There’s some pro-IL folks who I think I actually do a good job there, but there are some that do it the right way, and I think do a good job of trying to get rid of the misinformation, so I say Look around, but if you want real technical product-oriented stuff, that’s what my newsletter does, and again, it’s the only off… That’s the only thing out there that covers it the way that I do.

0:35:36.6 SARA GRILLO: If you talk to a real high-end advisor who works with families that have a ton of wealth, like 50 million and above family offices, etcetera, they’re having their clients in 40000 a year, premium products.

0:35:51.8 BOBBY SAMUELSON: If not way more than that. Yeah.

0:35:53.3 SARA GRILLO: They have to grasp the high details that you’re talking about, they have to be experts or they have to work with somebody who is an Asian. And trust that that person is gonna give them a fair deal, which is scary as

0:36:08.8 BOBBY SAMUELSON: Back… And that’s what I see most of the time. I meet very, very few people. So my background is I started… My dad’s an agent, my granddad is an agent, and I started at a brokerage firm working exclusively with ultra high end… We had very ultra-hi. And agents and their clients, we had a unit that I worked in at this firm that only dealt with premiums above 250000 a year, and we were slam… I’ve seen cases with 5 million year premiums, 3 million year premium seem on a pretty regular basis too, but here’s the thing that I think is really important, Sarada, lot of people don’t get… The higher up you go in the market, the more trust matters, and what I see is a lot of family offices, a lot of RAs, a lot of estate planning attorneys, referring a trusted insurance advisor in and the client saying, Hey, I trust the use advisors. These advisors certify this guy, I’m gonna trust him too, and I’m gonna do whatever he tells me, so there’s an inverse relationship between the number of questions you typically get about a deal and the client’s network, the lower…

0:37:18.6 BOBBY SAMUELSON: The client’s not worth… That’s where I’ve found some very sophisticated buyers who really took their time to understand the product and content, there’s a canal who subscribes my newsletter, who bought a life insurance policy, went on a two-year quest to understand it and ended up becoming an agent and subscribing to my newsletter, as a result of that, he went, but he’s a lower net worth guy, on the flip side, I’ve seen billionaires just sign the dotted line and do the deal, and they don’t even ask any questions. And so what I’d say to your point, it’s like, these advisors who are at the top and working with larger clients, you must do your due diligence, you have to do not assume that even if this agent comes with great referrals, even if this agent has a long track record, even playing off of the guy for years, do not assume that the insurance proposal he’s putting in front of your client is the one that best fits that client, do not make that as there are great agents out there, and they are… Our agents out there who do stuff that I don’t think is that great, and it is really hard to tell the difference, and so you actually look at what they’re putting in front of clients, and that is where the rubber hits the road, and so yeah, I completely agree with you, folks in a position to advise high it with clients, you don’t need to become an expert, but you need to be conversant in life insurance, and you need to say a truism here, and it looks so good to be true.

0:38:37.4 BOBBY SAMUELSON: Not it probably is. It definitely is, and you have to look at that on Indira proposals being shown to clients and screen, because if you don’t… What we’re seeing right now is a lot of class actual lawsuits, a lot of very nasty situations, class actions on one side to a lot of individual lawsuits that are very nasty situations with very high net worth people who bought stuff they didn’t understand and got hosed and now they’re looking for blood

0:39:01.5 SARA GRILLO: Test for them too, it’s just a sad situation all around.

0:39:08.3 BOBBY SAMUELSON: Yeah, it is, it’s sad all around, but it’s becoming increasingly common, there were certain types of deals that worked for the last 10 years and are not working right now, and those deals… That’s where the problem comes in. And that’s happening more often that people think…

0:39:24.8 SARA GRILLO: Well, I also… Everyone listening, I also want to mention the Andy panos doing, it’s called the ill experiment. Well, you’ve seen the website and… Yeah, the Andy actually bought an IU policy and he’s taking us with him on his journey, he has a whole website that goes over all the documents that he got when he bought it and… It’s absolutely phenomenal.

0:39:50.2 BOBBY SAMUELSON: I love it. I think Andy is doing a great service to everyone by going through this himself, and my prediction is in the long run that… Ali’s gonna look a lot like it. If he bought a U-L, I think I’ll be happy with it. But it’s not gonna be the stock market in

0:40:07.4 SARA GRILLO: Yellow, what I just mentioned it, and Andy’s been on my podcast before, and we’re colleagues, but I’m mentioning this because it’s inspiring in the sense that he’s really doing the work, and I just would encourage everybody to follow that, example.

0:40:37.6 BOBBY SAMUELSON: Yeah, I agree. And look, that’s what I do with my newsletter, I do the work, I read the filings are the illustrations, I talked to insurance company executives, I talk… Agents call me all the time. You gotta do the work. And I don’t have a real job. My job is just products, and so if you’re an agent or you’re an advisor, it’s really hard for you to stay on top of all these issues, and so I think Andy is doing a good job of putting some stuff out there, but again… And that’s my goal with like Pieter IE is my job is to look into all this stuff and then communicate it in the way that people can understand it, that’s what

0:41:09.3 SARA GRILLO: I do. They find that publication.

0:41:12.0 BOBBY SAMUELSON: Yeah, it’s called, it’s called the Life Product Review. You just go to www, lifetou, 350 articles on there. And so if you sign up, you get access to all of them, they’re all about 3000 words of pot, so carve out a couple of weeks and have at it, boy.

0:41:28.5 SARA GRILLO: Okay, awesome. Well, Bobby, thank you for all that you’re doing. And like I said, I think we should all be honest, transparency journey for the good of the clients through the industry, and to just have integrity with what we do, all of us advisors, agents, marketing vendors like me, everybody really, that is involved with this in any way, so thank you so much for being here. And Bobby, how would you like people to contact you if they

0:41:53.3 BOBBY SAMUELSON: Go to my website, like I said, life product review dot com. That’s the best way to find me. Thank you and thank you for what you’re doing to… We need more transparency and I appreciate what you’re doing. 0:42:03.8 SARA GRILLO: Well, you’re very welcome and I need to do a lot more, so I would love to just believe that we’re just getting started with this. I agree. Thank sir. Alright, everybody, so Thanks, Bobby again, and everybody, please subscribe and review this show, just a reminder that nothing in this podcast can be interpreted as a product, insurance or investment recommendation of any sort, nothing in this podcast can be interpreted as legal or compliance advice, or any recommendations specific to your or your client’s personal situations, please consult a consultant, advisor or attorney.

Disclosures

Grillo Investment Management, LLC does not guarantee any specific level of performance, the success of any strategy that Grillo Investment Management, LLC may use, or the success of any program.

Grillo Investment Management, LLC will strive to maintain current information however it may become out of date. Grillo Investment Management, LLC is under no obligation to advise users of subsequent changes to statements or information contained herein. This information is general in nature; for specific advice applicable to your current situation please contact a consultant or advisor.

Transcript may differ from original recording

Sources

Allstate. What is Universal Life Insurance? https://www.allstate.com/resources/life-insurance/universal-life-insurance

Fernando, Jason. (31 March, 2023) What is a Call Option and How to ouse it with example. Investopedia. https://www.investopedia.com/terms/c/calloption.asp

Martin, Tom. (2015, April 6^th). ThinkAdvisor. How (and why) indexed universal life really works. https://www.thinkadvisor.com/2015/04/06/how-and-why-indexed-universal-life-really-works/

Pfeifer, Timothy C. (2015, September 11th) Actuarial Guideline 49: What You Need to Know. Premier Brokerage Services. https://premierbrokerage.com/actuarial-guideline-49-what-you-need-to-know/