Is ICOLI Worth the Effort?

Insurance company owned life insurance (ICOLI) can provide an increase in retained yield on a given investment. Usually, the pickup is more than +150bps per year.

How does ICOLI increase retained investment yield? ICOLI is given favorable tax treatment. ICOLI grows tax-deferred, fund reallocations are made tax-free, and investment gains can be converted to tax-free proceeds.

What can you invest in? ICOLI offers a diverse fund lineup that provides you the flexibility to construct an asset allocation strategy designed to deliver meaningful long-term performance. If desired, your existing allocations to equity investments can often be mirrored inside of the ICOLI wrapper.

What does the NAIC or my rating agency say? ICOLI carries a lower risk-based capital charge than many investments, 5% for P&C carriers and 0% for life and health carriers. Both the NAIC and your ratings agency are familiar with ICOLI.

Who else uses ICOLI? Most carriers with over $1B in surplus hold ICOLI and many carriers with less than $1B in surplus have also uncovered the performance enhancing effects of ICOLI.

So, is ICOLI worth the effort? Carriers have invested billions inside of ICOLI for a reason. It’s simple to obtain, it’s easy to understand, most of their investments are available within, the RBC charge is less, and most importantly there are significant tax-advantages for investments wrapped in ICOLI.

Call me to explore ICOLI for your company.

 

Would you like to explore how ICOLI can affect your company’s portfolio returns? Please reach out or schedule a call via this link.

 

Who is MBS?

MBS is a highly specialized corporate consulting firm with more than $13 billion dollars of our clients’ corporate investments. We manage over 225 corporate ICOLI and nonqualified plans.  Importantly, we do not replace your current investment advisors.

Jacob Bosacki, JD
Senior Consultant
(920) 819-4365
Jacob.Bosacki@mbsfin.com

Disclaimer:

Variable Universal Life insurance combines the protection and tax advantages of life insurance with the investment potential of a comprehensive selection of variable investment options. The insurance component provides death benefit coverage and the variable component gives you the flexibility to potentially increase the policy’s cash value.

The materials are designed to convey accurate and authoritative information concerning the subject matter covered. However, they are provided with the understanding that Mullin Barens Sanford Financial does not engage in the practice of law, or give tax, legal or accounting advice. For advice in these areas, please consult your appropriate advisors.

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