Jun 9, 2017
Is your bank earning 6% on excess capital?
A typical bank-owned life insurance
(BOLI) transaction today would result in a tax equivalent yield in excess of 6% (depending on carrier, product type and premium amount).
How is that possible? A BOLI purchase is estimated to result in the following after-tax equivalent returns.
||Tax Equivalent Yield
Actual results will reflect timing of the transaction, premium size and the demographics of the insured group.
- Life of plan IRR: 3.80%
- Tax equivalent yield: 6.33%
- Assumes a 40% tax bracket
- Assumes a purchase in excess of $25M
BOLI has consistently provided comparatively high tax equivalent returns compared to alternative investments.
Owners of BOLI typically provide excellent feedback and acknowledge that the asset is one of the top performing assets on the bank’s balance sheet.
BOLI can be purchased to fund a specific employee benefit, or more frequently, can be used as a cost offset to broad-based employee benefit expenses, such as health care, 401(k) match, profit sharing, etc.
For more information on potentially increasing your bank's returns with BOLI, contact Newport Group Vice President Scott Bethune at (336) 369-2270 or firstname.lastname@example.org