Transcript Premium Financing

Premium Financing
A service provided by
BAKER ASSOCIATES
What is Premium Financing?

Premium Financing is a method for
individuals to fund a life insurance policy
without using liquid assets.
How does it work?
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Borrower applies for life insurance policy
Baker Associates will fight for best
possible underwriting offer
Borrower applies for premium financing
through a third party lender
Third party lender
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Sets interest rate and payment schedule
for loan
Requires collateral
Life insurance policy
 Additional assets
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Baker Associates works with several
carriers and banking facilities
Third party lenders
FEATURES
CITIBANK
Individual, trust,
corp or partnership
UBS
Trust, partnership,
corp, individual
CMS/AIG
Trust, partnership,
corp; not individual
Minimum
loan amount
N/A
$50 million premium minimum
$100,000 premium minimum
Maturity
Up to 7 year commitment
Upfront Fee
.375-1%
170-250 basis points
over LIBOR index
Hedge products to
fix rate available
Can reserve or
payout of cash flow
Total payout stream
approved upfront
Client
Interest Rate
Fixed Rate
Available
Interest Payment
Annual Advances
Commercial lending
platform in July 05
No set up fees
LIBOR + 175,000
Fixed up to 5 if collateral
muni bonds/treasuries
1 year; annual requalify financial u/w
No
170-250 basis points
over LIBOR index
Rate fixed for 1 year
Must pay interest
upfront each year
Each premium financing
reapproved annually
Collateral
Advance Rate
90% on CSVLI;
70-90% on investment acct
90% on CSVLI
Preferred Carrier
None/Travelers favored
Members only; include
AIG, MassMutual, ManuLife
Commission
Sharing
N/A
10% to CMS unless CMS does
in person client meetings, then 50/50
Support
Third party lenders
FEATURES
Client
Minimum
loan amount
Maturity
Upfront Fee
Interest Rate
Fixed Rate
Available
Interest Payment
Annual Advances
ROYAL BANK
of SCOTLAND
Individual, trust,
corp or partnership
MELLON
WELLS FARGO
ING
Individual, trust,
corp or partnership
Individual, trust,
corp or partnership
Individual, trust,
corp or partnership
$500,000
$500,000
$1,000,000
$1 million
Up to 15 year commitment
No
170-250 over
Libor/Prime Index
Up to 10 year commitment
No
Up to 5 year commitment
.5% - 1.5% p.a.
100-170 basis points
over LIBOR index
Hedge products
available to fix rates
Can reserve or
payout of cash flow
Total payout stream
approved upfront
Up to 10 year commitment
No
170-250 basis points
over LIBOR/Prime Index
Hedge products
available to fix rates
Can reserve or
payout of cash flow
Total payout stream
approved upfront
Yes for over $5 million only
80% on CSVLI;
70% on investment acct
90% on CSVLI;
75-85% on investment acct
100% CSVLI ING;
50%-75% investment acct
Yes
Can reserve or
payout of cash flow
Total payout stream
approved upfront
Collateral
Advance Rate
Preferred Carrier
New York Life; Prudential
Commission
Sharing
10% to NIW
Support
Case design,
shop reinsurance
teleconferences, in person
meeting possible, great
accessibilty,
responsiveness, timely
follow up
170-250 over Libor/Prime Index
None; may use PacLife,
ManuLife, ING,JP, NYL
A % earned will
be shared with Mellon
Case design,
input on carriers, reinsurance
teleconferences, in person
possible
Can reserve or
payout of cash flow
Total payout stream
approved upfront
ING in majority position
with other carriers
N/A
N/A
Recent merge, process
flows
being determined
Possible Client
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High net worth client
Large insurance need
Assets highly productive or illiquid
Reluctant to free up premium dollars
Client Eligibility
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$5,000,000 Net Worth minimum
$100,000 minimum annual loan (premium)
Ability to post additional collateral if
needed
Borrower must be an entity (Trust/
Corporation)
Individuals eligible in CA and NY
BAKER ASSOCIATES
Borrower
(Trust)
(A)
(E)
Broker
(G)
(C)
Insurance
Company
Baker
Associates
(D)
(G)
(F)
Bank
(Lender)
(B)
(A) Borrower requests services from broker
(B) Broker engages Baker Associates
(C) Baker Associates develops insurance program
(D) Baker Associates presents to Bank
(E) Bank makes offer and documents loan
(F) Bank secures collateral
(G) Death Benefit satisfies outstanding loan with
balance paid to the Borrower
Concerns
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Interest rate risk
Collateral requirements
Potential loan maturity
Unrealistic market expectations
Most of these concerns are mitigated by
proper structuring of the life insurance
policy and loan.
Benefits
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Reduced out-of-pocket cost for life
insurance coverage
Minimal or no impact on current
investment portfolio
Attractive interest crediting rates on
borrowed funds
Effective gift tax considerations
Example of Benefits
Term
Insurance
Premium Finance
Client
Age
Total Costs for
20 years*
Total Costs for 20
years*
1st year out
of pocket
costs
Saving to acquire
Permanent Insurance
w/Premium Financing
45
$249,300
$117,448
$46,675
$131,852
55
$595,300
$193,267
$62,500
$402,033
65
$1,959,300
$665,360
$95,750
$1,293,940
*Based on preferred non-smoker rate; interest on premium loan capitalized.
Baker Associates’ Services
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Collection of required information for
insurance policy
Case design and illustration
Tenacious underwriting for client
Assist you in explaining options to client
Negotiate to provide the best financing
available for your client
What carriers participate?
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Through Baker Associates you can access
this special program with one of these top
insurance carriers:
John Hancock/ Manulife
 American General
 MONY/AXA
 Jefferson Pilot
 Lincoln Life
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Contact Baker Associates
Gary M Baker: [email protected]
Frank Azar:
[email protected]
Lori Calloway: [email protected]
Lisa Sauer:
[email protected]
888-899-6599
www.bakco.com
7502 E Pinnacle Peak Rd, Ste 116B
Scottsdale, AZ 85255
BAKER
ASSOCIATES