To: Lou Kreisberg - Eagle River
From: MI=
Sent: Tue 4/9/2013 6:36:12 PM
Subject: Re: PPPVUL Product Information
Thank you
Sent from my iPlionc
On Apr 9, 2013, at 2:07 PM, Lou Kreisberg - Eagle River
wrote:
Jeffrey-
As a follow up to our discussions, I wanted to share additional information on the
Evergreen PPVUL policy with you.
Summary information regarding a $1 billion investment in two different policies is
attached. The first is a $500 million 7702(a) compliant policy (Kingswood), and the
second is a $500 million 7702(g) compliant policy (Cedarwood). You'll see that
breakeven is achieved in the year following issuance. By year 20, the after-tax value of
the Evergreen policies exceeds taxable account performance by $1.4 billion ($3.8 billion
vs. $2.4 billion). By year 30, the Evergreen policies outperform the taxable account by
$3 billion ($7.4 billion vs. $3.4 billion).
The above numbers assume the following fees and charges.
Upfront fees consist of the following:
Upfront charges: $11.5 million (2% on first $100 million, 1.5% on next $100
million, 1% thereafter). Note consists of approximately $500,000 in legal fees
with the balance allocated between the party arranging for the insured lives and
a sales charge
Issue fee: $3.9 million ($300 per life)
DAC tax: $7 million (70 bps)
Ongoing fees consist of the following:
Cost of insurance: charged at standard rates based on the age/sex of underlying
insureds
M&E fee: 65 bps per annum
Administrative fee: $100 per life
Our attorneys at Mayer Brown have handled the legal work associated with the
structure. In order to provide an overview of the review and analysis performed to date,
I attach a legal summary containing the following:
1) Summary of Legal Opinions: Provides an overview of tax, insurable interest and
ERISA opinions that will be provided at closing. The opinions are not yet written,
but this reflects the scope
EFTA_R1_00797281
EFTA02142189
2) 7702(g) Opinion Overview: Provides an overview of the legal opinion which will
be provided in connection with the Cedarwood 7702(g) product and the relevant
legal analysis
2) Wal-Mart Case: Provides an overview of a well-known case that concerned the
issues that arose when Wal-Mart purchased life insurance policies (commonly
referred to as janitor insurance) on the lives of its employees. The memo
explains how the Evergreen programs do not violate the legal principles
described in that case, including insurable interest considerations
3) Recovery Statutes: Explains why the risk is remote that an insured or his estate
could bring a successful claim under a recovery statute
4) STOLI: Provides an overview of Stranger Owned Life Insurance and its relevance
to insurable interest laws. The memo explains how Evergreen is not STOLI and
does not violate STOLI legislation
5) Public Policy and Insurable Interest: Provides a summary of the conclusions in
the prior three memos with respect to insurable interest and public policy
considerations)
I think you'll find there are no comparable products in the marketable that allow for the
acquisition of such a sizable amount of insurance, except for the standard 7702(g)
policies. The Cedarwood 7702(g) product does offer a major structural advantage to its
competitors in that it allows for annual distributions over the life of the policy.
As I mentioned, Withers is familiar with the structure, and Jim Brockway has spent the
most time on it. We look forward to discussing the above in more detail and are, of
course, happy to answer any questions or provide more information.
Regards,
Louis
<Legal Summary Materials 4-2O13.pdf
<Cedanvood & Kingswood Combined Payout 4-8-I3.pdf>
EFTA_R1_00797282
EFTA02142190