Increasing yields and acquiring key person coverage

Situation:

A $4 billion credit union wanted to earn more on its cash and short-term investments, and protect itself from an unexpected passing of its key executives.

 

Action Steps:

After considering several options, the board decided to fund institutionally-designed Credit Union-Owned Life Insurance (CUOLI) policies, designed and placed by Grant, Hinkle & Jacobs, with ultra-high cash values, insuring the lives of its executives. The program uses two different types of polices – both with principal guarantees.

 

Results:

The credit union is now receiving:

  • A 5% annual net rate of return on cash from the fixed policy and a 6% (average) return from the floating rate policy, without sacrificing safety or liquidity.
  • Yields that increase as interest rates rise.
  • Additional key-person death benefit protection on the CEO, CFO, and CCO that will be paid to the organization.
  • The ability to contribute more in the future to these polices, if desired.
  • Compliance with FASB ASU 2016-01.