MassMutual keeps payout at 7% for '13

Nov 4, 2012 @ 12:01 am

By Darla Mercado

Dividend-paying whole-life insurance is starting to shine amid abysmal rates for fixed-income investments.

Massachusetts Mutual Life Insurance Co. last week said that its board approved a $1.39 billion dividend payout for next year, up more than 4% compared with the payment announced last year. Although the total dollar amount is up, the mutual insurer's policyholders will get a dividend interest rate of 7%, unchanged from the previous year.

That rate is beating a number of fixed-income investments these days. The 10-year Treasury, for example, is yielding about 1.7%.

A combination of factors is fueling MassMutual's record-level payouts.

Sales of life insurance year-to-date through the third quarter reached $200 million, reflecting a 27% increase from the comparable period in 2011, said John Chandler, chief marketing officer at MassMutual.

Revenue from other affiliates, such as Baring Asset Management Ltd., also has contributed to dividend payouts, he said.

However, it also helps that the insurer is an investor in long-dated bonds.

“A lot of people compare this [7%] rate to short-term rates, but you can't do that,” Mr. Chandler said. “We're talking about going back decades and buying long-term bonds, which gives us a strong performance record.”

Some buyers are turning to whole-life insurance as a safe harbor, driving interest in 10- and 20-pay products, policies that are paid off within 10 and 20 years, respectively, Mr. Chandler said.

“It's a place to invest in your primary benefit and to build up cash value,” he said. “It also gives buyers flexibility to take policy loans.”

Indeed, some clients are taking advantage of that flexibility and using their cash value to pay children's college tuition bills or for supplemental income in retirement, Mr. Chandler said.

dmercado@investmentnews.com Twitter: @darla_mercado

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Why the bionic adviser is the wave of the future

The bionic adviser is the way of the future. We spoke with Simon Roy of Jemstep to get his insights on how technology will continue to impact the industry.

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

Wealth management firms struggle with lower fees, fewer new clients

Advisers in North America earned less from clients last year and saw a decline in average fees, according to a new report by PriceMetrix.

These investors are allowed to put $500K into a Roth IRA at once

The HEART Act permits rolling all or part of life-insurance and combat-related-fatality payouts directly into the tax-free retirement plan, but few take advantage.

Labor's Alexander Acosta and SEC's Jay Clayton tell lawmakers they will work together on fiduciary rule

In separate appearances before Senate panels, the regulators stressed the cooperation that Republican legislators and opponents of the DOL fiduciary rule are demanding.

Brian Block denies cooking the books at Schorsch REIT

Former CFO claims everything he did was 'appropriate' and 'correct.'

Interns will take on several roles at advisory firms this summer

College students are helping with client prep, firm visioning and long-term projects, among other duties.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print