Coronavirus Shakes the World Markets - BOLI Provides Stable, Predictable Earnings

by R. Scott Richardson, JD, CLU, ChFC Founder & CEO IZALE Financial Group

As world economies are shaken by the Coronavirus, 
 

• The Federal Reserve March 3, 2020 announced an emergency rate cut of 50bps. Are there more to come? Less earnings on Fed Funds.
• Today, the 10-year UST fell BELOW 1%. Well-below its all-time low.
• The 5-year UST is below that at about 0.75%.
• Our clients are sharing that their corporate bond yields have fallen to below 2.25%.
  

The only silver lining is that you should have some gains in the bond portfolio. But now what? Unless you have a robust loan pipeline, where do you go with maturing bonds or to invest the cash from loan payments?
 
Bank-Owned Life Insurance or BOLI is used by over 4,000 financial institutions with over $180 BILLION of capital invested in it. What makes BOLI so attractive?
 

• Guaranteed minimum crediting rates of 1% - 4%. You are reading that correctly.
• Current yields (after cost of insurance) of 2.75% - 3.5%, depending on purchase size and insured demographics. Tax-effect that, and it compares with some new loan rates.
• No mark-to-market risk. With general account or hybrid account BOLI, a change in market rates has zero impact on the balance sheet value.
• There are even products with an “index” crediting rate that could deliver far more yield than traditional BOLI.

 
Call or email us today. Let’s talk about the vital role that BOLI can play on your balance sheet and let us help you with the next BOLI purchase.