Improve earnings with BOLI for Banks and Credit Unions.
 Improve Earnings.
Your most valuable asset is people, not bricks and mortar or even loans and deposits. That’s why it’s essential to have a balanced total compensation program. However, the costs associated with providing competitive benefits can have a major effect on the income statement and balance sheet. Bank Owned Life Insurance (BOLI) is an ideal tool for offsetting and recovering the costs associated with executive employee benefits. A well-designed BOLI program can even help you enhance benefits without adding to your bottom line.
As part of an overall asset/liability management strategy, BOLI can improve earnings and bring your balance sheet in line, giving your stakeholders the greatest value. At IZALE, our expertise in BOLI goes beyond the basic, to a deeper level of understanding how macro trends affect BOLI, and how that, in turn, affects what’s right for your bank or credit union. That knowledge, combined with our access to a variety of carriers and products, allows us to provide customized planning and individualized service. And with tens of millions and dozens in BOLI placements, we have the experience that ensures the best result for your institution. |
DownloadsBank-Owned Life Insurance (BOLI) Product Brief (pdf)
Business-Owned Life Insurance (BOLI) Product Brief (pdf) Bank of Toulon's Complete Testimonial Joint Case Opportunity
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A BOLI Testimonial
What stood out the most for me was that IZALE provided an executive benefit plan that gave us the ability to meet both our short term and long term goals. Giving our bank additional leverage we did not previously realize we could have was enlightening. BOLI was something in the old days thought of as a way to pay for the re-placement of the executive, like “key man insurance.” Today it has expanded to serve our bank as an incentive for employee retention.
~ Doug Parrott, President & CEO, State Bank of Toulon
Strategic Uses of BOLI
Asset Growth and Earnings:
- Attract, Retain and Reward: Any part of earnings on BOLI can be allocated toward a program to reward key people.
- Enhance Earnings: Any earnings not allocated toward specific programs for key people are retained to offset to existing benefit plan expenses (i.e., group health insurance, group life/LTD insurance, retirement plans, etc.).
Net Insurance:
- Supplemental Life Insurance (SLI): BOLI "net insurance"--death benefit proceeds in excess of recorded policy asset value--can be allocated to the insured person's designated beneficiaries. BOLI is a far more efficient way to offer a SLI benefit than using Group Term Life Insurance (GTLI)--no ongoing expense and lower tax costs for the insured person.
- Key Person Protection: The time, expense and potential lost profits from replacing a key person can quickly add up. BOLI "net insurance" serves to protect the organization against the death of the insured individual.
- Cost Recovery: BOLI "net insurance" helps recover the cost of providing benefits, and replenishes cash reserves for succeeding management.
No other asset can provide these benefits within the same structure, and the strategic uses are not mutually exclusive!
©Scott Richardson Click to Enlarge. For more information call 630-883-0596
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©Scott Richardson Click to Enlarge. For more information call 630-883-0596
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Common Objections - IZALE's Responses:
We don't want to profit from the death of an employee.
We don't like the long-term nature of the asset.
It's just another high-commissioned, permanent insurance product.
- You don’t have to. The death benefit gain can be used to supplement the employee's benefits, providing his or her designated beneficiary with a valuable benefit at no additional cost.
- You probably won’t. Tens of thousands of dollars will be spent over the insured employee's working life on benefits such as health insurance and retirement plan contributions. The death benefit gain may or may not recover that entire cost. In addition, the insured person is often a key employee. Replacing a key employee costs money and takes time. Many client relationships--and profits--are at risk.
- BOLI is designed to maximize cash surrender value--recordable asset value--growth. This means policies are structured to provide the minimum death benefit gain relative to cash value while still being considered life insurance.
We don't like the long-term nature of the asset.
- BOLI holding periods can be 30-40 years or more, but it is the only asset class that matches well with long-term employee benefit expenses.
- It’s natural to think this holding period exposes your institution to interest rate risk, but there’s a difference. The interest crediting rate is reset annually based on the carrier's portfolio (or separate account) performance. Such performance generally lags a little behind market changes (because carrier investments average 7- to 10-year duration), but it does move in the same direction
- When it moves, unlike traditional fixed-income assets, there is no mark-to-market risk.
- BOLI can be surrendered at any time without charges. (Proceeds may be subjected to income tax and penalties.)
It's just another high-commissioned, permanent insurance product.
- If the carrier promises 100% surrender value at issue, how much commission can be paid?
- BOLI was specially designed (and priced) for financial institutions. This includes no loads and no surrender charges. BOLI bears little resemblance to traditional retail life insurance policies.
- Annual expenses within a typical BOLI policy includes only 50-65 basis points for commissions and servicing fees. Compare that to the expenses and fees for bond portfolio.
Contact us today to learn more about our BOLI devices or call us at 855-492-5334.