|
Insurance Abstract
A computer-aided method including: generating output with a computer
system by processing input data and thereby producing at least one
of the group including: an illustration including a party without
an insurable interest in a life insured by a COLI (corporate-owned
life insurance) policy, wherein the party receives an assignment
of an interest in a policy benefit, a performance report of a transaction
that corresponds to the assignment, and a forecast of at least one
of earnings and cash flow of an assignor of the interest in the
policy, and a forecast of cash flow of the party that receives the
assignment, the forecasts using transaction experience data. In
the method, the transaction may include a contribution of the policy
to a Special Purpose Entity (SPE), the SPE having at least two investor/owners;
the SPE performance report includes performance data corresponding
to the owner of the policy; and the processing may include further
producing at least one of the group including: a performance report
of the transaction that includes performance data corresponding
to at least one owner of the SPE, a forecast of a balance sheet
of the SPE, a forecast of an income statement of the SPE, and a
forecast of a cash flow statement of the SPE.
Insurance Claims
1. A computer-aided method including: generating output with a computer
system by processing input data and thereby producing at least one
of the group including: an illustration including a party without
an insurable interest in a life insured by a COLI (corporate-owned
life insurance) policy, wherein the party receives an assignment
of an interest in a policy benefit, a performance report of a transaction
that corresponds to the assignment, and a forecast of at least one
of earnings and cash flow of an assignor of the interest in the
policy, and a forecast of cash flow of the party that receives the
assignment, the forecasts using transaction experience data.
2. The method of claim 1, wherein the producing includes producing
at least two of the group.
3. The method of claim 1, wherein the producing includes producing
three of the group.
4. The method of claim 1, wherein: the transaction includes a contribution
of the policy to a Special Purpose Entity (SPE), the SPE having
at least two investor/owners; the SPE performance report includes
performance data corresponding to the owner of the policy; and the
processing includes further producing at least one of the group
including: a performance report of the transaction that includes
performance data corresponding to at least one owner of the SPE,
a forecast of a balance sheet of the SPE, a forecast of an income
statement of the SPE, and a forecast of a cash flow statement of
the SPE.
5. The method of claim 4, wherein the further producing includes
producing at least two of the group.
6. The method of claim 4, wherein the further producing includes
producing at least three of the group.
7. The method of claim 4, wherein the further producing includes
producing four of the group.
8. A computer-aided method including: generating output with a
computer system by processing input data and thereby producing an
illustration including a party without an insurable interest in
a life insured by a COLI (corporate-owned life insurance) policy,
wherein the party receives an assignment of an interest in a policy
benefit.
9. The method of claim 8, wherein the policy has a net amount at
risk; and further including determining the interest by the computer
system with reference to net amount at risk.
10. The method of claim 9, wherein the interest is not more than
the net amount at risk.
11. The method of claim 8, wherein the data includes an insured
life's age and life expectancy, and targeted rate of return to the
party; and further including computing a premium amount to pay for
the interest, the premium amount included in the illustration.
12. The method of claim 8, wherein the data includes an insured
life's age and life expectancy; and further including computing,
with the computer system, a projected rate of return, the rate of
return included in the illustration.
13. The method of claim 8, wherein the data includes an insured
life's age and life expectancy, the interest, and a targeted rate
of return to the party; and further including computing, with the
computer system, a premium amount that is included in the illustration.
14. The method of claim 8, wherein the data includes an insured
life's age and life expectancy, the interest, and a premium; and
further including computing, with the computer system, a projected
rate of return that is included in the illustration.
15. The method of claim 8, wherein the processing includes selecting
at least one mortality table or life expectancy table for a computation
corresponding to the illustration.
16. The method of claim 8, wherein the processing includes selecting
of mortality tables or life expectancy tables for computations corresponding
to the illustration.
17. The method of claim 8, further including accessing a selection
of mortality tables or life expectancy tables in carrying out said
producing of the illustration.
18. The method of claim 8, further including computing, with the
computer system, a purchase price payable by a buyer of the policy,
the computing of the purchase price carried out without underwriting.
19. The method of claim 8, further including computing, with the
computer system, an internal rate of return ("IRR") of
the policy, the computing of the IRR being devoid of underwriting,
in a transaction corresponding to the illustration.
20. The method of claim 10, further including computing, with the
computer system, internal rate of return ("IRR") of the
policy, the computing of the IRR being devoid of underwriting, in
a transaction corresponding to the illustration.
21. A computer-aided method including: generating output with a
computer system by processing input data and thereby producing a
performance report of a transaction wherein a party, without an
insurable interest in a life insured by a COLI (corporate-owned
life insurance) policy, receives an assignment of an interest in
a benefit of the policy.
22. The method of claim 21, wherein the policy has a net amount
at risk; and further including determining the interest by the computer
system with reference to net amount at risk.
23. The method of claim 21, wherein the interest is not more than
the net amount at risk.
24. The method of claim 21, wherein the processing includes selecting
at least one mortality table or life expectancy table for a computation
corresponding to the report.
25. The method of claim 21, wherein the processing includes selecting
of mortality tables or life expectancy tables for computations corresponding
to the report.
26. The method of claim 21, further including providing accessing
a selection of mortality tables or life expectancy tables in carrying
out said producing of the report.
27. The method of claim 21, further including computing, with the
computer system, at least one of a mortality or life expectancy
table based on at least two years of experience in the transaction.
28. The method of claim 21, further including providing, with the
computer system, a selection of mortality tables or life expectancy
tables in said producing the transaction report.
29. A computer-aided method including: generating output with a
computer system by processing input data and thereby producing at
least one forecast of a transaction wherein a party, without an
insurable interest in a life insured by a COLI (corporate-owned
life insurance) policy, receives an assignment of an interest in
a benefit of the policy.
30. The method of claim 29, wherein said at least one forecast
includes a forecast of at least one of earnings and cash flow of
an assignor of the interest in the policy, and a forecast of cash
flow of the party that receives the assignment, the forecasts using
transaction experience data.
31. The method of claim 30, wherein the policy has a net amount
at risk; and further including determining the interest by the computer
system with reference to net amount at risk.
32. The method of claim 31, wherein the interest is not more than
the net amount at risk.
33. The method of claim 30, wherein the data includes an insured
life's age and life expectancy, and further including computing,
with the computer system, a projected rate of return, the rate of
return that is included in one of said forecasts.
34. The method of claim 30, wherein the data includes an insured
life's age and life expectancy, interest, and a premium; and further
including computing, with the computer system, a projected rate
of return that is included in one of said forecasts.
35. The method of claim 30, wherein the processing includes selecting
at least one mortality table or life expectancy table for a computation
corresponding to one of said forecasts.
36. The method of claim 30, wherein the processing includes selecting
of mortality tables or life expectancy tables for computations corresponding
to one of said forecasts.
37. The method of claim 30, further including accessing a selection
of mortality tables or life expectancy tables in the providing of
one of said forecasts
38. The method of claim 30, further including providing, with the
computer system, a selection of mortality tables or life expectancy
tables in the providing of one of said forecasts
39. The method of claim 30, further including providing, with the
computer system, a selection of a mortality table life or expectancy
table in the providing of one of said forecasts
40. The method of claim 29, further including computing, with the
computer system, the internal rate of return ("IRR") of
the party from a contribution to an SPE receiving a policy, the
computing of the IRR being devoid of underwriting, in the providing
said at least one forecast.
41. The method of claim 30, further including computing, with the
computer system, the internal rate of return ("IRR") of
the party from a contribution to an SPE receiving a policy, the
computing of the IRR being devoid of underwriting, in the providing
one of said forecasts.
42. A computer-aided method including: generating output with a
computer system by processing input data and thereby producing an
illustration including a party without an insurable interest in
a life insured by a COLI (corporate-owned life insurance) policy,
wherein the party receives an ownership interest in an SPE receiving
a contribution of the policy.
43. The method of claim 42, wherein the policy has a net amount
at risk; and further including determining the interest by the computer
system with reference to net amount at risk.
44. The method of claim 43, wherein the interest is not more than
the net amount at risk.
45. The method of claim 42, wherein the data includes an insured
life's age and life expectancy, and a targeted rate of return to
the party; and further including computing a premium amount to pay
for the interest, the premium amount included in the illustration.
46. The method of claim 42, wherein the data includes an insured
life's age and life expectancy; and further including computing,
with the computer system, a projected rate of return that is included
in the illustration.
47. The method of claim 42, wherein the policy is a modified endowment
contract (MEC).
48. The method of claim 42, wherein the illustration includes a
contribution of the policy to the SPE.
49. The method of claim 48, wherein the policy is a modified endowment
contract (MEC).
50. The method of claim 49, wherein the illustration includes a
party, without an insurable interest in the life, with an interest
in the SPE.
51. The method of claim 50, wherein the processing includes determining
a special allocation of SPE revenues to an investor in the SPE
52. The method of claim 49, wherein the processing includes determining
a special allocation of SPE principal to an investor in the SPE.
53. The method of claim 50, wherein the policy has a net amount
at risk; and further including determining an investor's contribution
to the SPE by the computer system with reference to net amount at
risk of the policy.
54. The method of claim 53, wherein the reference amount is not
more than the net amount at risk.
55. The method of claim 42, wherein the data includes an insured
life's age and life expectancy, the interest, and a targeted rate
of return to the party and further including computing a premium
amount that is included in the illustration.
56. The method of claim 55, wherein the policy is a modified endowment
contract (MEC) policy, and wherein the processing includes computing
a capital contribution to the SPE.
57. The method of claim 56, wherein the computing includes computing
a special allocation of income to at least one owner of the SPE,
the special allocation corresponding to an SPE ownership agreement.
58. The method of claim 42, wherein the processing includes computing
an amount of SPE principal contribution by a non-COLI owner corresponding
to the policy.
59. The method of claim 58, wherein the illustration includes the
party without an insurable interest in a life insured by at least
one other COLI policy, wherein the party receives an ownership interest
in an SPE receiving a contribution of the at least one other policy.
60. The method of claim 42, wherein the processing includes selecting
at least one mortality table or life expectancy table for a computation
corresponding to the illustration.
61. The method of claim 42, wherein the processing includes selecting
of mortality tables or life expectancy tables for computations corresponding
to the illustration.
62. The method of claim 42, wherein the processing includes accessing
mortality tables to form a projected age at death for the insured
life, and producing, from the projected age, a time of projected
terminal value or values of at least one investor in the SPE.
63. The method of claim 42, wherein the processing includes determining
sensitivity of the SPE to different rates of death.
64. The method of claim 42, further including accessing a selection
of mortality tables or life expectancy tables in said producing
the illustration.
65. The method of claim 42, further including computing data, with
the computer system, by using at least one mortality table or life
expectancy table in a computation used to produce the illustration.
66. The method of claim 49, further including computing data, with
the computer system, by using at least one mortality table or life
expectancy table in a computation used to produce the illustration.
67. A computer-aided method including: generating output with a
computer system by processing input data and thereby producing a
performance report of a transaction wherein a party, without an
insurable interest in a life insured by a COLI (corporate-owned
life insurance) policy, receives an ownership interest in an SPE
receiving a contribution of the policy.
68. The method of claim 67, wherein the report includes a contribution
of the policy to the SPE.
69. The method of claim 67, wherein the policy is a modified endowment
contract (MEC).
70. The method of claim 67, wherein the report includes a party,
without an insurable interest in the life, with an interest in the
SPE.
71. The method of claim 67, wherein the processing includes determining
a special allocation of SPE revenues to an investor in the SPE.
72. The method of claim 67 wherein the processing includes determining
a special allocation of SPE principal to an investor in the SPE.
73. The method of claim 67, wherein the processing includes selecting
at least one mortality table or life expectancy table for a corresponding
to the report.
74. The method of claim 67, wherein the processing includes selecting
of mortality tables or life expectancy tables for computations corresponding
to the report.
75. The method of claim 67, further including accessing a selection
of mortality tables or life expectancy tables in said producing
the report.
76. The method of claim 67, further including computing, with the
computer system, at least one of a mortality or life expectancy
table based on at least two years of experience in said producing
the report.
77. The method of claim 67, further including computing, with the
computer system, at least one of a mortality or life expectancy
table based on at least two years of experience in said producing
the report.
78. The method of claim 67, further including providing, with the
computer system, a selection of mortality tables or life expectancy
tables in said producing the report.
79. A computer-aided method including: generating output with a
computer system by processing input data and thereby producing a
forecast of a transaction wherein a party, without an insurable
interest in a life insured by a COLI (corporate-owned life insurance)
policy, receives an ownership interest in an SPE receiving a contribution
of the policy, the forecast including a forecast of at least one
of earnings and cash flow of the SPE receiving the policy, the forecasts
using transaction experience data.
80. The method of claim 79, wherein the data includes an insured
life's age and life expectancy, and further including computing,
with the computer system, a projected rate of return that is included
in the forecast.
81. The method of claim 79, wherein the forecast includes a contribution
of the policy to the SPE.
82. The method of claim 79, wherein the policy is a modified endowment
contract (MEC).
83. The method of claim 79, wherein the forecast includes a party,
without an insurable interest in the life, with an interest in the
SPE.
84. The method of claim 79, wherein the processing includes determining
a special allocation of SPE revenues to an investor in the SPE.
85. The method of claim 79, wherein the processing includes determining
a special allocation of SPE principal to an investor in the SPE.
86. The method of claim 79, wherein the processing includes selecting
at least one mortality table or life expectancy table for a corresponding
to the forecast.
87. The method of claim 79, wherein the processing includes selecting
of mortality tables or life expectancy tables for computations corresponding
to the forecast.
88. The method of claim 79, wherein the processing includes using
mortality tables to project ages at death for the at least one insured
life in producing a time of projected terminal value or values for
the owner and an investor in the SPE, and thereby forecasting sensitivity
of the SPE to different rates of death.
89. The method of claim 79, further including accessing a selection
of mortality tables or life expectancy tables in said providing
the forecast.
90. The method of claim 79, further including providing, with the
computer system, a selection of mortality tables or life expectancy
tables in said providing the forecast.
91. The method of claim 82, further including providing, with the
computer system, a selection of mortality tables or life expectancy
tables in said providing the forecast.
92. The method of claim 79, further including providing, with the
computer system, a selection of a mortality table life or expectancy
table in said providing the forecast.
93. The method of claim 82, further including providing, with the
computer system, a selection of a mortality table life or expectancy
table in said providing the forecast.
94. The method of claim 21, wherein the report includes a change
in at least one of a right or an option with respect to the policy
and subsequent to the assignment.
95. The method of claim 94, wherein the change is a change in a
right.
96. The method of claim 94, wherein the change is a change in an
option.
97. The method of claim 94, wherein the change is triggered by
a premium obligation that is in arrears and within a grace period
of the policy.
98. The method of claim 94, wherein the change is triggered by
a premium obligation that is in arrears and past a grace period
of the policy.
99. The method of claim 94, wherein the change is triggered by
a premium that is unpaid as of at least one point in time specified
in an agreement implementing the assignment agreement.
100. A method of claim 95, wherein the interest is a death benefit
amount and the report includes a ratio of the interest and a net
amount at risk corresponding to the policy.
101. The method of claim 100, wherein the processing includes forming
a comparison of the ratio to a trigger ratio.
102. The method of claim 101, wherein the trigger ratio is determined
by at least one of the assignment or an agreement between the party
and an owner of the policy.
103. The method of claim 102, wherein the report includes a notice
of an option of to purchase the policy, the notice corresponding
to the trigger ratio.
104. The method of claim 94, wherein the report reflects that a
premium obligation is in arrears and within a grace period of the
policy.
105. The method of claim 94, wherein the report reflects that a
premium obligation is in arrears and past the policy grace period.
106. The method of claim 94, wherein the report reflects that a
premium is unpaid as of at least one point in time specified in
an assignment agreement.
107. The method of claim 106, wherein the report includes a notice
to the party and to an owner of the policy that the party's interest
in the policy has terminated.
108. The method of claim 94, wherein an agreement implementing
the assignment includes a stop loss provision with respect to the
party with an assigned interest.
109. The method of claim 108, wherein the stop loss is a determined
by the life surviving past at least one point time specified in
the agreement.
110. The method of claim 108, wherein the report includes a notice
that the stop loss provision has been met.
111. The method of claim 94, wherein the report includes a notice
that the life has survived past at least one point in time.
112. The method of claim 94, wherein a policy assignment agreement
gives a right of first refusal to purchase the policy.
113. The method of claim 94, wherein a policy assignment agreement
gives a right of first refusal to purchase the policy with the assigned
interest, according to a predetermined price or to a formula to
compute the price.
114. The method of claim 94, wherein the right of first refusal
to purchase arises from the policy owner's notice of the intent
to sell or surrender the policy.
115. A method of claim 94, wherein the report includes a notice
that a right of first refusal has been triggered.
116. A method of claim 115, wherein the interest is adjusted or
terminated if the life survives past at least one point in time.
117. A method of claim 116, wherein the report is a notice that
the assigned interest has been adjusted or terminated.
Insurance Description
I. TECHNICAL FIELD
[0001] The technical field is computers and data processing systems.
Depending on the implementation, there is apparatus, a method for
use and method for making, and corresponding products produced thereby,
as well as data structures, computer-readable media tangibly embodying
program instructions, manufactures, and necessary intermediates
of the foregoing, each pertaining to digital aspects of corporate-owned
life insurance settlement.
II. DISCLOSURE
[0002] In the area of said technical field, representatively, consider
a computer system (illustratively representing, for the sake of
brevity, methods, articles of manufacture, transmitter, receiver,
network implementations, etc.) structured to aid managing, in whole
or part, an embodiment a corporate-owned life insurance settlement.
The computer system can, for example, be structured (e.g., including
programmed) to carry out the steps of: processing input data and
thereby producing at least one of the group including: an illustration
including a party without an insurable interest in a life insured
by a COLI (corporate-owned life insurance) policy, wherein the party
receives an assignment of an interest in a policy benefit, a performance
report of a transaction that corresponds to the assignment, and
a forecast of at least one of earnings and cash flow of an assignor
of the interest in the policy, and a forecast of cash flow of the
party that receives the assignment, the forecasts using transaction
experience data. In the method, the transaction may include a contribution
of the policy to a Special Purpose Entity (SPE), the SPE having
at least two investor/owners; the SPE performance report includes
performance data corresponding to the owner of the policy; and the
processing may include further producing at least one of the group
including: a performance report of the transaction that includes
performance data corresponding to at least one owner of the SPE,
a forecast of a balance sheet of the SPE, a forecast of an income
statement of the SPE, and a forecast of a cash flow statement of
the SPE.
III. BRIEF DESCRIPTION OF THE DRAWINGS
[0003] FIG. 1 is a block diagram of an exemplary computer system,
linked to a system administrator's computer system which in turn,
is linked to computer system(s) of one or more of the following:
a Settlement Investor (which may be a trust or partnership to aggregate
policies), a Broker-Consultant, a Life Insurance Carrier or other
Underwriter(s), an Actuarial Consultant(s), the COLI Owner, and
a System Administrator.
[0004] FIG. 2A is a block diagram illustrating an overall view
of a representative embodiment of the Transfer Module.
[0005] FIG. 2B is a block diagram illustrating an overall view
of a representative embodiment of the Administrative Module.
[0006] FIG. 3A is a listing and an overall view of the data collected
and processed with respect to a COLI life insurance contract
[0007] FIG. 3B is a listing and overall view of the representative
data collected and processed with respect to an insured life in
a COLI program.
[0008] FIG. 3C is a listing and overall view of the representative
data collected and processed with respect to deceased life previously
insured by a COLI program.
[0009] FIG. 3D is a listing and overall view of the representative
data collected and processed with respect to an owner of a COLI
policy or policies.
[0010] FIG. 3E is a listing and overall view of the representative
data collected and processed with respect to a settlement investor
participating in a split ownership plan for COLI.
[0011] FIG. 3F is a listing and overall view of the representative
data collected and processed with respect to a policy included as
a part of a split ownership plan for COLI.
[0012] FIG. 3G is a listing and overall view of the representative
data collected and processed with respect to miscellaneous sources
of information included as a part of a split ownership plan for
COLI.
[0013] FIG. 3H is a listing and overall view of the representative
data collected and processed with respect to SOP and SPE plan structures.
[0014] FIG. 4A is a block diagram illustrating the process of creating
investor criteria to be used to identify qualified acquisitions
of COLI policies.
[0015] FIG. 4B is a block diagram continued from FIG. 4A.
[0016] FIG. 5A is a block diagram illustrating the computation
of a SPE proposal and storing the same in the computer memory.
[0017] FIG. 5B is a block diagram illustrating the computation
of a sale proposal and the storing of the same in the computer memory.
[0018] FIG. 5C is a block diagram illustrating the computation
of a SOP proposal and the storing of the same in the computer memory.
[0019] FIG. 6A is a block diagram illustrating the recording of
plan specific mortality experience and updating the system's mortality
rate table and a plan specific mortality rate table.
[0020] FIG. 6B is a block diagram illustrating the computation
of Life Expectancy ("LE") for a selected mortality rate
table and rounding of values to whole integers.
[0021] FIG. 7 is a block diagram with the steps to compute a COLI
plan base case projection.
[0022] FIG. 8A is a block diagram illustrating the computation
of a proposal illustration for a SOP under a given set of assumptions.
[0023] FIG. 8B is a block diagram illustrating the computation
of a proposal illustration for a SPE under a given set of assumptions.
[0024] FIG. 9 is a block diagram illustrating the process of capturing
and tracking deaths for plans that enter into an SOP assignment
or an SPE contribution of a policy.
[0025] FIG. 10A is a block diagram illustrating the process of
updating system tailored mortality tables using experience of SOP
and SPE plans.
[0026] FIG. 10B is a block diagram illustrating the process to
compute life expectancy.
[0027] FIG. 11A is a block diagram illustrating the process to
record data and structure at a plan's inception.
[0028] FIG. 11B is a block diagram illustrating the process to
report the status of purchased policies.
[0029] FIG. 11C is a block diagram illustrating the process to
report the status of a SOP program.
[0030] FIG. 11D is a block diagram illustrating a continuation
of the process to report the status of a SOP program.
[0031] FIG. 11E is a block diagram illustrating a continuation
of the process to report the status of a SOP program.
[0032] FIG. 11F is a block diagram illustrating the process to
report the status of a SPE plan.
[0033] FIG. 12A is a block diagram illustrating the process to
initiate of forecast portion of the system.
[0034] FIG. 12B is a block diagram illustrating the process to
forecast the performance of purchased policies.
[0035] FIG. 12C is a block diagram illustrating the process to
forecast the performance of a SOP program.
[0036] FIG. 12D is a block diagram illustrating the process to
forecast the performance of a SPE plan.
IV. MODES
[0037] The accompanying drawings illustrate embodiments intended
to illustrate and exemplify in a teaching manner.
[0038] As used herein, the term "computer" generally
refers to hardware or hardware in combination with one or more program(s),
such as can be implemented in software. Computer aspects can be
implemented on general purpose computers or specialized devices,
and can operate electrically, optically, or in any other fashion.
A computer as used herein can be viewed as at least one computer
having all functionality or as multiple computers with functionality
separated to collectively cooperate to bring about the functionality.
Note that the Figures herein teach with respect to a computer system,
but it should be explicitly understood that such system may, depending
on the embodiment preferred, be parsed into one system for illustrations,
one system for reports, and one for forecasts; and parsed otherwise,
e.g., with one entity communicating via its respective computer
system. Logic flow can represent signal processing, such as digital
data processing, communication, or as evident from the context hereinafter.
Logic flow or "logic means" can be implemented in discrete
circuits, programmed computer, or the equivalent. Computer-readable
media, as used herein can comprise at least one of a RAM, a ROM,
A disk, an ASIC, and a PROM. Industrial or technical applicability
is clear from the description, and is also indicated below.
[0039] As used herein, "embodiment" should not be construed
as the sole manner, but rather as an illustrative teaching, much
as though teaching mathematical addition does not require setting
out every numerical combination to convey the concept extending
beyond the teaching examples. And just as in teaching addition by
examples, rather than by a table of permutations of numbers, it
should be understood that the teaching herein embraces all combinations
from any embodiment incorporated into another, etc. so as to utilize
the full breadth of the teaching herein. Note that mention herein
to an embodiment to teach with respect to one statutory class of
invention is intended to correspondingly teach another class of
invention, so for example, a method (e.g., of using) is explicitly
intended to comprehend method of making, apparatus, data signals
(including necessary intermediates such as trigger signals and transmission/reception
signals), a program on a disk or other computer-readable media,
and corresponding articles of manufacture, etc.
[0040] By way of the following prophetic teaching, there can be
computer support, as in a data processing system, for implementing
parts of, or from, a financial product or instrument to accomplish
certain financial objectives to and advance such as efficiency and/or
security, over said manual systems and corresponding problems, and
automated variants having limitations regarding management of corresponding
computer resources. A management system of such a system can comprehend
a menu or other means for human/machine interaction so as to carry
out the functionality of an embodiment.
[0041] In one embodiment, there can be a computerized system that
uses historical or current data, policy terms, and/or industry data
to project the future actuarial and corresponding financial performance
of certain life contracts on insured lives and/or groups of insured
lives within a Corporate Owned Life Insurance ("COLI")
plan held by a business. (For purposes of this application, COLI
shall be a life insurance policy held by a business or not-for-profit
organization. A business entity can be a "C" corporation,
a "Subchapter S" corporation, a limited liability corporation
or LLC, a partnership, a trust, or other business entity.) Based
on the information displayed in the system projections, settlement
investors can make informed investments in COLI contracts.
[0042] In another embodiment, there can be a computerized system
that uses mortality tables ("COIs") to compute the Life
Expectancy ("LE") for a group or groups of lives insured
under a COLI program. The more a settlement investor has confidence
in the LE used by the system (instead or relying on the carrier
or other third party's assumption), the more confidence the settlement
investor has in achieving its projected system returns.
[0043] In another embodiment, there can be a computerized system
that models the financial benefits to the COLI owner and the settlement
investor that arises from a Split Ownership Plan ("SOP").
A SOP occurs when a COLI owner collaterally assigns a portion of
the death proceeds of its policies to a settlement investor. The
assignment does not change the legal title to the contract As part
of the assignment agreement, the settlement investor is obligated
to pay some or all of the premium obligation due on the policy.
Generally, the value of the assignment is a function of the net
amount at risk in a policy over the remaining LE. The amount of
annual premium payments from the settlement investor is determined
by the assignment value, the LE and investment return objectives
of the settlement investor.
[0044] In addition, an embodiment occurs when the computerized
system aggregates a group or groups of policies in an SOP program
and prepares aggregate the financial projections for both of the
participants in the SOP--the COLI owner and the settlement investor.
[0045] Also, the system can be used to prepare a comparison of
alternative bids, where more than one settlement investor makes
an offer.
[0046] Another embodiment includes a computer system administering
policies subject to a SOP and administering purchased policies from
a settlement transfer. As may be desired, part of the system administrative
process can be made to develop insured group specific mortality
tables from mortality experience of SOP policies and policies owned
by settlement investors. In addition, the system design accepts
third party mortality tables with--the expectation of embedding
COLI experience tables from actuarial sources. System access to
said mortality tables will enable existing settlement investors
to update projected investment returns from purchases and SOPs as
well as provide ever increasing accurate mortality input for future
purchases or SOP transactions. A further embodiment of the system's
tracking and reporting capability permits broker(s) for settlements
and/or SOPs to align their compensation with that of the settlement
investor(s) and receive their compensation in whole or in part via
the distribution of death proceeds and/or annual policy charges.
[0047] For a business with a COLI plan that is no longer relevant
and/or profitable, such embodiments create an exit strategy that
previously not available. Where desired, an embodiment can be made
to model multiple sales, SOPs and policy retention scenarios thereby
enabling a COLI owner to design, select, and implement its preferred
exit strategy. Also, as may be desired, an embodiment can enable
a settlement investor in COLI purchases and/or SOPs to create an
actuarial estimate of the cash flow from a group of COLI policies
and/or SOPs. With performance expectations defined by the system,
as may be preferred, the settlement investors can determine a premium
to pay and stay within the boundaries of their desired rate of return
on their COLI acquisition. Similarly, using performance expectations,
the system can compute the amount of premium contributions that
the settlement investor is prepared to pay under a SOP assignment.
[0048] Also, an embodiment can address the situation where a COLI
program involves policies which are classified as Modified Endowment
Contracts ("MEC") by the Internal Revenue Code. The typical
MEC contract calls for a single premium payable and has high ratio
of policy cash value divided by policy gross face. Said differently,
the policy net amount at risk is small in comparison to the policy
cash value. MEC policies are taxed differently than regular contracts.
For a corporate policy owner, a policy surrender or sale triggers
a 10% penalty tax in addition to the normal corporate tax on surrender
gains. Policy withdrawals are treated as taxable income to the extent
that the policy cash value exceeds the tax basis of the policy.
Banks and Savings & Loans are the principle owners of COLI in
the MEC form (Bank Owned Life Insurance or "BOLI").
[0049] An embodiment can compute an expected mortality date of
each member of a group of insured lives without individual underwriting.
For each COLI plan, the system may project mortality using original
group census data and the deaths of plan participants since inception.
Depending on the group size and period the COLI plan has existed,
the system may be asked to prepare a companion projection of a mortality
using one or more mortality tables embedded in the system. Based
on the number of lives insured in the COLI plan, the length of time
that the plan has been in existence, and the death experience in
the COLI plan, the projected individual plan mortality may be supplemented
with the mortality from the system's embedded mortality tables.
With actuarially sound mortality forecasts, settlement investors
can price a COLI purchase (or identify acceptable SOP terms). In
fact, the more COLI policies settlement investors buy (or contract
under SOPs) via this system, the law of large numbers will increase
the probability that their purchased policy holdings will perform--in
the aggregate--as predicted.
[0050] The system can be important to the COLI owner. Normally,
after a number of years COLI's cash value is much greater than its
tax basis. In this instance, a policy's surrender will generate
a gain taxed at ordinary income tax rates. The book ("GAAP")
surrender gains pre-tax is zero. Under GAAP, a policy's book basis
equals the policy's cash surrender value. Since the companies rarely
accrue for a tax on the policy cash value build-up, any tax due
on a surrender becomes a book current period expense. This GAAP
tax expense often stops the COLI owner's policy surrender consideration.
Public companies are pressured to sustain and increase their book
earnings. As a consequence, typically they avoid elective transactions
which trigger a charge to their income statement. This situation
is referred to as the COLI "GAAP Trap" by the applicant.
[0051] Where a COLI owner is a taxpayer, it will be rare (if ever)
that a sale generate sufficient revenue to make the transaction
worthwhile. Outright sale opportunities will arise from COLI owners
who are in a tax net operating loss position or are otherwise tax
exempt. These COLI owners are motivated by current cash--and typically
are not concerned with GAAP earnings. According tax exempt or COLI
owners in a NOL, need to determine if they can sell one or more
of their policies for an amount in excess of the surrender value
(net of policy loans and accrued interest). An embodiment of the
system computes a rate of return on the policy at a LE selected
from the system. The policy owner can use that rate to compare to
current settlement market rates to determine if a sale is possible.
Next, using an investor target rate of return, system will compute
the addition income presumably payable by a settlement investor.
Similarly, the settlement investor can use the system to computer
the amount payable with a selected LE and target return.
[0052] From the COLI owner's perspective, the system can enable
settlement investors to bid with confidence for its policy acquisition(s).
An otherwise illiquid asset now has a defined market where the COLI
owner can obtain a price greater than what the policy underwriter
will pay i.e., the cash surrender value. Almost as important, they
will know which assets are eligible for sale both from the market's
perspective and their own internal perspective.
[0053] Where a SOP structure is under consideration, the COLI owner
will want a projection of share of death proceeds in each year the
SOP is in force. The system can generate forecast(s) of expected
allocated death proceeds and dates due the COLI owner. Each year
this report can be re-issued to reflect the new age of the insured
life and any changes to mortality assumptions. Also, system projections
can reflect periodic book income, cash flow, book assets and liabilities
of the COLI owner during its participation in a SOP transaction.
With this system's data and forecasts, the COLI owner can make a
fully informed decision regarding a proposed SOP and carefully track
the results after executing the transaction.
[0054] Also, an embodiment can address the situation where a COLI
program involves policies which are classified as Modified Endowment
Contracts ("MEC") by the Internal Revenue Code. The typical
MEC contract calls for a first year one time premium payment and
has high ratio of policy cash value to policy gross face. Said differently,
the policy net amount at risk is small in comparison to the policy
cash value. MEC policies are taxed differently than regular life
insurance contracts. For a corporate policy owner, a policy surrender
or sale triggers a 10% penalty tax in addition to the normal corporate
tax on surrender gains. Policy withdrawals are treated as taxable
income to the extent that the policy cash value exceeds the tax
basis of the policy. Banks and Savings & Loans are the principle
owners of COLI in the MEC form (Bank Owned Life Insurance or "BOLI").
[0055] To implement a SOP like transaction for BOLI (a "SOP-MEC"),
a Special Purpose Entity ("SPE") is created. The typical
business form of the SPE is a partnership. At inception, the bank
contributes its BOLI and the settlement investor contributes bonds
(or other property including cash) to the SPE. Pursuant to the SPE
governing agreement, the typical allocation of income is for the
settlement investor to receive the BOLI death proceeds and the bank
to receive the income from the bonds (or other property). The return
of corpus to the SPE participants is also specified by the SPE agreement.
The bank is to receive the policy cash value at death and the investor
is to receive the bond principal at its maturity. An embodiment
provides a determination of the appropriate amount of investment
by the settlement investor to achieve its financial goals and the
corresponding consequences to the bank from participation in the
SPE.
[0056] Due to its unique array of benefits to the COLI owner and
to the settlement investor, SOP will dominate future investments
in existing COLI. The system can prepare post-SOP projections of
book income, balance sheet values, cash flow, and expected rates
of return for the COLI owner and the settlement investor. Factors
in this computation can include--pre SOP COLI projections, Life
Expectancy ("LE") for each insured life under the SOP,
settlement investor's premium obligations and the settlement investor's
share of death proceeds under the SOP. Again, these projections
can be updated periodically to reflect refinements in LE, changes
in the policy owner's financial attributes, and changes in the policy
crediting and loan rates. With the above data and projections generated
by the system, the settlement investor can also make an informed
decision before entering into a SOP and carefully track the results
after executing the transaction.
[0057] A further embodiment, as may or may not be desired in a
given application, is the capability to administer the policies
purchased by the settlement investor and/or policies held under
a SOP. Prior hereto, settlement purchases were thought to be limited
to small numbers of underwritten policies. Also, SOPs have heretofore
not been offered to COLI owners. With pension plans and other institutional
investors entering the settlement market as investors, it is useful
to accurately account for the assets and/or intangible rights held
and to properly report book income, book asset values, and cash
flows. One embodiment herein includes the capability to track and
to report policy book values and income as well as cash flow. In
addition, the system design includes income tax reporting. Also,
the system can aggregates policies and SOP interests held by a settlement
investor. If a COLI plan has been sub-divided and bought by different
settlement investors, the system can report the separate parts to
the respective settlement investors. If a policy(s) is placed in
a SOP(s), the system can provide the separate ownership interests
with accurate accounting of the tax consequences, cash flow, and
GAAP financials.
[0058] The system duplicates the same above array of benefits for
an owner of BOLI and the settlement investor participating in an
SPE which implements the SOP-MEC process.
[0059] In any of the administration embodiments herein, there can
be a mortality tracking system to update mortality experience for
each purchased COLI plan and for each group of plan policies administered
by the system. That update experience can be aggregated for all
COLI and BOLI or by plans using the system. In turn, actuarial consultants
can be use the updated experience to modify the embedded mortality
tables and thereby create proprietary mortality experience for the
system.
[0060] As may be desired, an embodiment can be made to have the
capability of reporting historical performance starting with the
date of purchase (or the date of entering into a SOP or SPE) to
the current reporting period and comparing actual results to original
projections. An embodiment can also provide future projections using
original mortality assumptions and as many new mortality assumptions
as may be specified by the program user. These illustration capabilities
are new management and reporting tools for institutional acquisitions
of SOP rights or SPE interests. The reports and illustrations are
produced by the means herein disclosed.
[0061] More particularly, there can be a computerized system and
method to accumulate mortality data and to forecast mortality for
selected groups of lives. The mortality data can be provided electronically
to settlement investors as a part of the process to enable them
to price one or more life insurance contracts without individual
underwriting. The system should provide a high degree of accuracy
with respect to projected mortality for a group of lives, e.g.,
enabling settlement investors to purchase COLI policies without
individual underwriting of the respective insured lives. Further,
the system can provide the COLI owner minimum sale price breakpoints
specific to that companies financial situation and COLI holdings.
The system can create a market for COLI that previously did not
exist and a means to optimize the results to the COLI owner.
[0062] In addition, there can be a computerized system and method,
as described in the previous paragraph, that can provide a high
degree of accuracy with respect to projected mortality for a life
or group of lives. Predictable mortality will enable settlement
investors to enter into a SPE investment, a purchase, or a SOP transaction
without individual underwriting of the respective insured lives.
Further, the system can provide the COLI owner accurate projections
of cash flows, book income (or loss) and rates of return from the
transaction(s). Similarly, the system can provide settlement investor(s)
with equivalently reliable forecasts of cash flow, earnings and
rates of return from the same transaction(s). So doing, the system
creates a new and previously unavailable route for the COLI owner
to escape the GAAP Trap, preserve tax free gains at death of the
insured, and assure neutral or positive book income until the anticipated
death of the insured life.
[0063] The benefits of the SOP program for the settlement investor
are even more pronounced. By contributing only a periodic premium
to gain the right to be paid a portion of the death benefit of a
COLI policy, the settlement investor is able to minimize or reduce
its capital commitment, manage its cash flows, and enjoy a high
level of confidence in the projected rate of return. Accordingly,
the system can create a new market for a subdivisions a COLI policy--a
market that previously did not exist. The system can also provide
a means to informed choices by the COLI owner and settlement investor.
This portion of the computerized system is discussed below under
System Proposal Module.
[0064] Also more particularly, there can be an administrative computerized
system and method to report the ongoing performance of:
[0065] plan sales to participants;
[0066] the assignment of a SOP interest to the settlement investor;
or
[0067] a SPE entity to its creators and owners.
[0068] Administration can include periodic accounting and reporting
of plan assets, fund transfers, accounting and reporting of death
benefit proceeds, forecasting of future plan performance of an existing
program, tracking mortality experience and updating mortality expectations
and/or accounting and reporting of net amount at risk ratio. Also,
administration can include computing and reporting of a change in
rights pursuant to an endorsement (i.e. assignment) agreement. Changes
in rights can include a termination of the agreement, options to
purchase the policy subject to the endorsement, or a re-constitution
of rights arising from the passage of time. Also, the system can
provide for subdivision of a plan and reporting to the separate
parties with owner interests in the plan policies. System capabilities
can include computing the correct division of death proceeds and/or
annual premiums where multiple parties have an interest therein.
In addition, proper administration is useful so as to correctly
credit split premium payments and administering the receipt and
correct distribution of death proceeds. This portion of the computerized
system is discussed below under System Administrative Module.
[0069] This system facilitates the aggregation of multiple COLI
purchases, assignment of interests, or SPEs and accordingly eliminates
plan administration from being a barrier to owning large numbers
of policies for many settlement investors. Further the system design
includes the capacity to receive program reports and forecasts from
an external COLI policy administrative systems. The system can also
provide means for vendor compensation to be paid in whole or in
part when death benefit's are paid or alternatively, at plan inception.
Additionally, the system can facilitate a broker-consultant's compensation
to be paid on an annual basis via administrative fees or policy
charges. Today, broker-consultant compensation is paid up front
as a one time commission from the settlement investors purchase
price. Reducing and deferring broker-consultant fees can improve
the transaction performance for both the COLI owner and the settlement
investor. Further, a broker-consultant with access to the system
will be at a competitive advantage to broker-consultants without
the system.
[0070] System Proposal Module--Mortality
[0071] This system can be designed to provide settlement investors
with accurate mortality forecasts, enabling them to bid on COLI
purchases and COLI owners to entertain bids, e.g., without the need
to again underwrite their insured employees. To accomplish such
goals, data is gathered from a variety of sources, preferably electronically
transferred to the computer storage systems, processed, and returned
to settlement investors and COLI owners to permit informed decision
making.
[0072] The process can begin with the input of census and mortality
data for a COLI plan. Also, an electronic copy of the life insurance
contract with its terms can be entered into the system. The COLI
owner also can submit company specific financial information to
be used by the system. Such data can include cost of capital, marginal
state and federal income tax rates, combined effective income tax
rate, alternative minimum tax, net operating loss carryover, and
any other relevant financial information. This information permits
the system to compute the minimum price or other data to avoid the
"GAAP Trap" on a policy sale or to achieve a targeted
return on a sale. So doing, the COLI owner can identify the policies
to offer for sale and the minimum price to avoid a charge to corporate
earnings or to realize a particular gain.
[0073] In one embodiment, actuarial advisor(s) can provide historical
mortality experience in electronic format for inclusion in the system
data base. The mortality experience tables can be sorted by age/sex
cells as well as by participant income levels or other population
attribute. Mortality in COLI tends to be at a rate less than the
average mortality of the population of all life insurance buyers.
The COLI specific mortality tables can be used by the system to
project mortality for a group of COLI insured lives.
[0074] Also, using the COLI plan census and actual mortality experience
data received from the COLI owner, the system can create a specific
mortality projection for the COLI group. While either the standardized
COLI mortality tables or plan mortality projections may suffice
for computing life expectancy for age/sex cells in a COLI census,
a weighted average mortality projection prepared by the system may
create a more accurate projection. Basically, plans with few insured
lives and/or little mortality experience will tend to produce less
reliable actual mortality experience. Mortality projections from
such plans can heavily weight embedded mortality tables when preparing
their forecasts.
System Proposal Module--Investor Criteria
System Proposal Module--Transaction Structures
System Proposal Module--Base Cases
System Proposal Module--Proposals
[0075] Settlement investors can electronically receive the census
data of the COLI policies the COLI owner has offered for sale and
the corresponding mortality projections. Census data includes each
policy's cash value, face value, crediting rate(s), premium amount,
policy loans, company retained death benefit accrued policy loan
interest, and policy options. Settlement investor bids can be received
by the system and processed into a bid format whereby the system
computes projected cash flow and GAAP financial consequences of
the bids. Where more than one bid is received, the system can prepare
a comparative bid analysis for electronic or other transmittal to
the COLI owner. This electronic worksheet permits the COLI owner
to efficiently compare the bid(s) and even subdivide the bid(s)
by age/sex cells among multiple bidders to maximize sale proceeds.
[0076] Once the COLI owner selects the settlement investor(s) offer,
the system can prepare closing reports for both a settlement investor
and a COLI owner. Also, a notice of the policy transfer can be prepared
for the life insurance company.
[0077] The system's ability to generate accurate mortality forecasts
can be important to the Split Ownership Module as it is for the
Purchase Module above. Using forecasted mortality of an insured
life and the financial attributes of the relevant life insurance
contract, it is possible subdivide a policy into parts with different
rights and obligations for a COLI owner and for a settlement investor.
This process is not unlike a landowner who divides a parcel of real
estate into two lots--one to be retained and a second lot to transfer
to another party. In this instance, the COLI owner collaterally
assigns part of the policy death proceeds to the settlement investor.
In exchange, the settlement investor agrees to make periodic payments
(i.e. premiums) to the carrier issuing the policy. While there are
endless combinations of this structure, the anticipated prototype
of the Split Ownership ("SO") structure will be: TABLE-US-00001
Party Obligation Benefit Settlement Investor Cost of Insurance ("COI")
FACE less Cash Value at Death COLI Owner Premium less COIs, but
Cash Value at Death Not less than zero
Also, in the prototype transaction any policy loan debt interest
obligations will remain with the COLI Owner.
[0078] In a SO transaction, the settlement investor is not required
to make a significant capital investment to buy the policy. Instead,
the investor makes periodic (e.g., annual) payments equal to some
part the COI charges within a policy to compensate an underwriter
for the risk of death of the insured. Typically the settlement investor's
assigned portion of the death benefit is expected to be the "net
amount at risk" portion of the policy gross face. In essence,
the settlement investor carves out of the policy those attributes
which look very much like a term life contract.
[0079] Under a SOP, the COLI owner continues to be the policy owner.
The owner's partial assignment of part of the death proceeds is
via a collateral assignment; a conveyance similar to a lien but
which is not a sale. The COLI owner continues to hold the legal
title to the policy even though certain rights have been assigned.
The policy owner retains rights and title to the policy cash value,
the owner records cash value changes as income (or loss), and the
owner receives the cash value at the death of the insured as tax
free proceeds.
[0080] The system can model the Split Ownership structure and reflect
the financial consequences of a SOP both to the settlement investor
and to the COLI owner. More particularly, the system can prepare
forecasts and historical reports of transaction effects on:
[0081] Cash flows;
[0082] GAAP Income (or loss);
[0083] Book financials; and/or
[0084] Income tax (or loss).
[0085] For a settlement investor, the system can project the expected
internal rate of return from its participation in a SOP. Included
among the system variables to compute the above projections and
reports are--system generated mortality rates, user designated policy
crediting or growth rates, policy COIs, policy loads, policy loans,
and the contract face amount (and/or benefit formula).
[0086] With policy data recorded in the system, an embodiment can
compute the tax basis for that policy. Normally prior to entering
into a SOP, a COLI owner will want to withdraw policy cash value
equal to or less than tax basis of the life insurance contract.
Any distribution from a policy in excess of tax basis will be taxed
as ordinary income to the owner. Distributions less than or equal
to tax basis are unrestricted after-tax cash. Where policy loans
are in place, a distribution can be used either to reduce or retire
the policy loan debt. The system can reflect policy withdrawals
and debt repayments when creating the forecasts and historical reports
noted above. In addition, the system can provide projections and
reports that include any policy loans that remain after the policy
partial withdrawal of cash value.
[0087] System Administrative Module
[0088] After the sale or a SOP transaction, administration of the
policies can be important to institutional investors. The administration
can be performed by a computer system such as the one embodied herein.
[0089] Administration can include scheduling premium due dates
and other payments, if any, on COLI policies. Periodically (e.g.,
annually, quarterly) reporting death benefits, tax and book basis
of the COLI plans, comparison of past projections to actual policy
performances, projection of future plan performance and historical
performance reporting. The system can also maintain a record of
separate owner interests in death proceeds as well as parties' obligations
to pay portions of premiums. In order to obtain employee consents,
many companies promised to pay insured participants a modest company
paid death benefit. Because the company death benefit promise is
separate from the COLI policy, a COLI owner can retain an interest
in a sold policy equal to (or a fraction of) the company paid death
benefit and have the investor remit that amount to the seller upon
death of the insured employee. So doing, the employer's death benefit
payout is offset by its collection of a portion of the death proceeds.
Where this situation is encountered, it can be important to maintain
a record of the retained death benefit interest and assure that
the carrier makes that separate death benefit payment to the COLI
owner (i.e., the seller).
[0090] Another system administrative feature can be used to enable
tracking and reporting of a unique new contract designed to pay
a predetermined amount to a settlement investor should an insured
life survive beyond his actuarial projected date of death. Such
contracts can be referred to as a "Survival Date Policy"
or "SDP" insurance. Where applicable, this embodiment
tracks the SDP date for each person and creates periodic reports
of policies (with their policy attributes) with SDP dates that are
pending and SDP dates that have past. Similarly, the system can
track death proceeds, if any, assigned to the SDP underwriter and
create policy administrative reports for the SDP underwriter with
respect to its assigned policies.
[0091] Also as may be desired, the administration system can track
actual mortality experience for each plan and make one or more comparisons
to prior mortality projections. These actual vs. projected mortality
reports can be submitted electronically to a consulting actuary
to be used to determine if the embedded mortality tables should
be updated. In so doing, over time, the mortality tables within
the system will become very accurate. Settlement investors will
become more and more confident that in the aggregate their policy
holding periods (or SO agreement periods) will be as first forecasted
by the system.
[0092] Accordingly, one of many ways of considering this teaching
is as a system and process linking an external computer with a system
of one or more parties of interest such as a COLI or BOLI owner,
a Settlement Investor, a System Administrator, a Broker-Consultant,
a Life Insurance Carrier or other Underwriter(s), an Actuarial Consultant,
an External COLI/BOLI Reporting System,a SPE, or a Death Tracking
Service in providing processes, projections and information to enable
the purchase and the sale of one or more COLI policies, an assignment
or endorsement of a part of one or more policies via a SOP, or the
transfer of one or more MEC policies to a SPE via a transfer previously
described as a SPE. There can be a system and process linking an
external computer with a system of one or more parties of interest
such as a COLI or BOLI owner, a Settlement Investor, a System Administrator,
a Broker-Consultant, a Life Insurance Carrier or other Underwriter,
an Actuarial Consultant, an External COLI/ BOLI Reporting System,
a SPE,or a Death Tracking Service to provide processes and information
to provide efficient and effective administration of large numbers
of COLI policies and/or plans purchased or subject to a SOP or SPE.
There can be a system creating historical and projected mortality
for each COLI or BOLI program submitted, updating mortality data
for policies included in a plan, and/or aggregating mortality experience
and forecasts, e.g., by user defined criteria.
[0093] Referring now to the drawings, and initially FIG. 1, there
is set forth a system architecture diagram according to a representative
embodiment. A computer system 100 is coupled by a computer-to-computer
communication device, such as, for example, an internet server 108
to a system administrator's computer system 110. In the diagram,
the administrator's system also serves as the conduit for data transfers
to and from other parties of interest, including, an owner of a
COLI plan 112, a broker-consultant's computer 114, a settlement
investor's computer 116, a life insurance underwriter's computer
118, an actuarial firm computer 120, an external policy reporting
and administration system computer 122, the computer of a death
tracking service vendor 124 and the SPE's computer 126. The system
administrator's connection to these other computers will most likely
be via an internet server, or an intranet server or modem might
also be possible in certain circumstances.
[0094] Separate and equally viable embodiments would link computers
112,114,116,118, 120, 122,124 and 126 directly to computer 100 in
addition to or instead of using computer 110 as a conduit.
[0095] According to an embodiment, the computer system 100 is operated
by the system administrator for the benefit of parties to the SOP
transaction--the COLI owner and the settlement investor. Accordingly,
the computer system 100 is external to the computer systems at 110,
112, 114, 116, 118, 120, 122, 124 and 126. The computer system 100
is programmed to receive, process, and store plan event data. This
data is then used to prepare historical performance computations
and various measures of financial performance. The computer system
100 also uses event data to certain financial relationships which,
by prior agreement, give rise to rights or the loss of rights of
either the COLI owner 112 or the settlement investor 116.
[0096] Also, the computer system 100 facilitates the matching of
the separate interests of the COLI owner 112 and the settlement
investor 114 by illustrating the financial consequences of a policy
endorsement--cash flow and book earnings to the SOP and SPE plan
participants.
[0097] Under SOP or SPE there is no individual underwriting of
the insured lives in a COLI plan prior to the transaction date.
Accordingly, a determination of future mortality and/or life expectancy
is very important. The computer system 100 is designed to accumulate
mortality experience (including experience of plans prior to the
SOP endorsement event). The computer system 100 is designed to create
a plan specific mortality tables and a mortality table using the
mortality experience of all plans administered through the computer
system 100. Also, the computer system 100 accepts pre-existing mortality
tables from an actuarial firm for future use and/or conversion to
life expectancy tables. Examples of such tables include the Milliman
USA 2001 Ultimate Tables and the 1994 Group Annuity Mortality Table.
With multiple mortality tables at the disposal of the system administrator,
it is possible to prepare as many illustrations as needed to permit
the COLI owner 112 and the settlement investor 116 (and the broker-consultant
114) to gain an understanding of the probable outcome of a SOP endorsement
transaction. Further, once a SOP or SPE program is in place, the
same mortality tables will permit a dependable measurement of progress
and a periodic updating of forecasts of future performance with
an ever increasing degree of accuracy.
[0098] Typically, the computer system 100 comprise of a processor,
such as an Intel PENTIUM.TM., memory 2 (e.g. a RAM memory and secondary
memory devices such as a UBS jump drive, a CD-ROM drive, etc.) an
input device (such as a keyboard 103 with a mouse and/or trackball)
an output device (such as a printer 104 or a computer monitor 106)
and an internet server device 108 to transmit and to receive data
and other communications via the internet (a modem is an alternative
transmission device). The computer system 100 also includes an operating
system such as, for example, the Microsoft Windows XP operating
system. Also, the computer system 100 includes 2 modules: a Proposal
Module 102A and an Administrative Module 102B. The first module
is programmed to produce illustrations to be used for decision making
prior to executing an SOP or SPE agreement. Also, the Proposal Module
102A creates a base case illustration at the time a SOP or SPE is
formed. A base case illustration is a management tool for the future
to compare against actual results. The Administrative Module 102B
is designed for both periodic plan reporting, including financial
reporting and death tracking, and periodic forecasting using the
current plan status as the platform for a future performance forecast.
[0099] FIG. 2A and 2B are block diagrams showing the software components
1 as they structure the functionality of the present embodiment.
Certain software components control the operation of and provide
the functionality to computer system 100. The current embodiment
of the present embodiment at FIG. 2A includes five separate process
systems which can run simultaneously or separately: Investor Criteria
Process 4, Alternative Transaction Structures Process 5, Mortality
Projection Alternatives Process 6, Illustrating Base Cases Process
7, and Illustrating Proposals Process 8. Also, the current embodiment
of the present embodiment at FIG. 2B includes five separate process
systems which can run simultaneously or separately: Process to Track
Death Proceeds 9, Process to Track Mortality 12, Process to Report
Performance 14, and Process to Forecast Performance 16.
[0100] In general, information transfers to and from computer system
100 and system administrator 110 (or alternatively between computer
system 100 and systems 110, 112, 114, 116, 118, 120, 122, 124, and
126). In the current embodiment, the system administrator 110 is
the transferor and recipient of all information to and from computer
system 100. (Alternatively, all external systems could be in direct
communication with computer system 100.) Accordingly, Plan Administrator
110 collects and transmits to computer system 100, information such
as carrier policy data, insured life data, previously insured deceased
life data, COLI owner data, settlement investor data, plan structure
data, death tracking report data, prior COLI plan death experience
data, third party actuarial mortality table data, other investment
data for a SPE, and data in the form of illustrations, reports or
forecasts prepared by an external administrative system. Upon receiving
information, computer system 100 stores the information in memory
2 according to the data structures of the present embodiment. This
allows the computer system 100 to read information from memory 2
for use in the various system processes.
[0101] Each of the nine system processes--Investor Criteria Process
4, Alternative Transaction Structures Process 5, Mortality Projection
Alternatives Process 6, Illustrating Base Cases Process 7, Illustrating
Proposals Process 8, Process to Track Death Proceeds 9, Process
to Track Mortality 12, Process to Report Performance 14, and Process
to Forecast Performance 16--generates reports reflecting its computations,
data sorts, and data processing. To facilitate distribution of reports,
the system administrator 110 codes report distributions as to which
system should receive which report. Also, the coding can designate
a report to be automatically remitted to one more system or only
be remitted by command of the system administrator. Accordingly,
The Plan Administrator 110 electronically receives and stores each
illustration, updated mortality table, report and forecast and its
system electronically re-sends its electronic file receipts to an
owner of a COLI plan 112, a broker-consultant's computer 114, a
settlement investor's computer 116, a life insurance underwriter's
computer 118, an actuarial firm computer 120, an external policy
reporting and administration system computer 122, the computer of
a death tracking service vendor 124 and the SPE's computer 126.
Files are forward automatically or per instruction of the system
administrator, per the coding entered at system administrator 110.
[0102] FIG. 3A sets forth in columnar form carrier policy data
received by system administrator 110 from one more of the following:
the COLI Owner System 112, the Broker-Consultant System 114, the
Life Insurance Underwriter System 118, and/or External Administrative
System 122. System administrator 110 electronically conveys the
data to Computer System 100 Memory 2.
[0103] FIG. 3B reflects in columnar form the insured life data
received by system administrator 110 from one more of the following:
the COLI Owner System 112, the Broker-Consultant System 114, the
Life Insurance Underwriter System 118, and/or External Administrative
System 122. System administrator 110 electronically conveys the
data to Computer System 100 Memory 2.
[0104] FIG. 3C reflects in columnar form the deceased life data
for a COLI, prior to an SOP or SPE, that is received by system administrator
110 from one more of the following: the COLI Owner System 112, the
Broker-Consultant System 114, the Life Insurance Underwriter System
118, and/or External Administrative System 122. System administrator
110 electronically conveys the data to Computer System 100, Memory
2.
[0105] FIG. 3D reflects in columnar form the COLI owner data potentially
relevant to a SOP or SPE transaction. This information is received
from the COLI Owner System 112. System administrator 110 electronically
conveys the data to Computer System 100, Memory 2.
[0106] FIG. 3E reflects in columnar form the settlement investor
data, including investor preferences such as sex of insured, age
of insured, type of structure (Sale, SOP or SPE), policy form, and
mortality table. This information is received from the Settlement
Investor System 116. System administrator 110 electronically conveys
the data to Computer System 100, Memory 2.
[0107] FIG. 3F reflects in columnar form the policy external data
received in the form of period report of insured life policy values,
a forecast of future cash flows and/or earnings or a policy illustration.
The data also includes the identity of the insured lives, the policy
owner, the carrier, the policy, policy elections, and policy MEC
status. This information is received by system administrator 110
from one more of the following: the COLI Owner System 112, the Broker-Consultant
System 114, the Life Insurance Underwriter System 118, and/or External
Administrative System 122. System administrator 110 electronically
conveys the data to Computer System 100 Memory 2.
[0108] FIG. 3G reflects in columnar form data of the separate structures
for a SOP and a SPE. Among the list of data items is the rate of
return targets for an investor, duration of the programs or insured
life inclusion in a plan, fees arising from the transaction, among
other important items. This information is received by system administrator
110 from one more of the following: the System Administrator 110,
the COLI Owner System 112, the Broker-Consultant System 114, the
Life Insurance Underwriter System 118, SPE System 126 and/or External
Administrative System 122. System administrator 110 electronically
conveys the data to Computer System 100 Memory 2.
[0109] FIG. 3H reflects in columnar forms data from Death Tracking
Services 124, death data received from the COLI Owner 112, mortality
table data received from Actuarial Firm 120, SPE other investment
data received from SPE 126, policy forecast or reports received
from an External Administrative System 122. System administrator
110 electronically conveys the data to Computer System 100, Memory
2.
[0110] FIG. 4 (collectively FIGS. 4A-4B) is a block diagram of
the Investor Criteria Process 4 portion of the computer system 100.
The steps in the process determine a data set of investor criteria
for entering into a SOP or SPE transaction. These steps record the
investor's willingness to enter into a purchase, a SOP, and/or SPE.
Other data includes choice of mortality table for an illustration,
target internal rate of return ("IRR") accounting election
under FASB Technical Bulletin 85-4-1 and in selecting settlement
lives, life expectancy, age and/or sex criteria.
[0111] FIG. 5 (collectively FIGS. 5A-5D) is a block diagram of
the Alternative Transaction Structures Process 5 portion of the
computer system 100. The steps in the system are designed to determine
the plan structure selection for an investor user. First, the system
steps identify which type of plan is to be considered--a sale, a
SOP or a SPE. For a sale, the system determines which policies meet
the target return requirements of the investor and the maximum price
to be paid using that constraint. For a SOP, the system calls up
the systems embedded plan structure choices and determines if new
structure alternates are to be added to the Computer System 100
Memory 2. If changes are required, a notice is automatically prepared
and sent to the system administrator. From the system choices of
structures, the investor selects the structure to be used in the
next illustration. The same steps are performed for a SPE structure.
[0112] FIG. 6 (collectively FIGS. 6A-6B) is a block diagram of
the Mortality Projection Alternatives Process 6 portion of the computer
system 100. These steps of the system compute the mortality table
based on all mortality data collected from plans as their data is
entered into the system. Also, there are steps to compute plan specific
mortality tables using plan experience data. Also, there are steps
to convert a mortality table to a table of life expectancy to be
used in other system computations.
[0113] FIG. 7 is a block diagram of the Base Case Illustration
Process 7 portion of the computer system 100. These steps of the
system compute an illustration at the inception of a SOP program.
The illustration includes the financial performance for both the
policy owner and the settlement investor participating in the endorsement
transaction.
[0114] FIG. 8 (collectively FIGS. 8A-8B) is a block diagram of
the Proposal Illustration Process 8 portion of the computer system
100. These steps of the system compute an illustration for either
a SOP or a SPE program. Also, the system steps permit the user to
compute multiple illustrations and compare one to the other. The
illustration includes the financial performance for both the policy
owner and the settlement investor participating in the SOP or SPE
transactions.
[0115] FIG. 9 is a block diagram of the Process to Track Deaths
9 portion of the computer system 100. These steps of the system
aggregate death reports from Death Tracking Service 124, the COLI
Owner 112, and the Life Insurance Underwriter 118 to identify deaths
of all plans recorded in the system. Reports of deaths incurred
but not yet paid and deaths claims paid are prepared for distribution
by the System Administrator 110. Similarly the system steps prepare
confirmation death reports for distribution to COLI Owners 112,
Life Insurance Underwriters 118, Settlement Investors 116 and SPEs
126. Electronic distribution of this information enables accurate
and efficient control of the process of collecting death process
for the benefit of the plans.
[0116] FIG. 12 (collectively FIGS. 12A-12B) is a block diagram
of the Process to Track Mortality portion of the computer system
100. These steps of the system are similar to FIG. 6. These steps,
however, add plan mortality experience to the system after plan
inception. The additions apply both to the system aggregate mortality
table and separate plan tables. As time passes, then, these mortality
tables become more and more accurate for use in reports and forecasts.
[0117] FIG. 14 (collectively FIGS. 14A-14F) is a block diagram
of the Process to Report Performance 14 portion of the computer
system 100. This portion of the system computes periodic performance
reports for all plan types; purchase, SOP or SPE. The first steps
identify a new plan and create a plan inception data file including
but limited to the census of insured lives, the deceased previously
insured, investor criteria, plan structure elements, owner attributes,
base case illustration, life expectancy table and other pertinent
information. Next, for of the three types of plans, the system provides
periodic reports on the rates of returns on deceased lives, comparison
of life expectancy to actual experience, and policy values. Additional
steps are performed for a SOP. The computer system 100 computes
a net amount at risk ("NAAR") ratio to determine if a
settlement investor has an option to purchase the endorsed policy.
The system provides notice to both the Settlement Investor 116 and
the COLI Owner 112 if their premium obligations are in arrears and/or
past the policy grace period. Also, the system will notify the Settlement
Investor 116 when its interest in the policy expires or is forfeited.
Finally, the system provides electronic notice to the Settlement
Investor 116 has an option to first right of refusal option to exercise
[0118] FIG. 16 (collectively FIGS. 16A-16E) is a block diagram
of the Process to Forecast Performance 16 portion of the computer
system 100. These steps of the system compute a forecast for either
a SOP or a SPE program. These system steps parallel those in FIG.
8, but begin at different point in time and make available changes
to plan structure, mortality assumptions, and other assumptions.
The forecasts include the financial performance for both the policy
owner and the settlement investor participating in the SOP or SPE
transactions.
[0119] For the foregoing embodiments or any aspect thereof, there
can be a computer-readable media tangibly embodying a program of
instructions executable by a computer to perform the steps of: generating
output with a computer system by processing input data and thereby
producing at least one of the group including: an illustration including
a party without an insurable interest in a life insured by a COLI
(corporate-owned life insurance) policy, wherein the party receives
an assignment of an interest in a policy benefit, a performance
report of a transaction that corresponds to the assignment, and
a forecast of at least one of earnings and cash flow of an assignor
of the interest in the policy, and a forecast of cash flow of the
party that receives the assignment, the forecasts using transaction
experience data. In the method, the transaction may include a contribution
of the policy to a Special Purpose Entity (SPE), the SPE having
at least two investor/owners; the SPE performance report includes
performance data corresponding to the owner of the policy; and the
processing may include further producing at least one of the group
including: a performance report of the transaction that includes
performance data corresponding to at least one owner of the SPE,
a forecast of a balance sheet of the SPE, a forecast of an income
statement of the SPE, and a forecast of a cash flow statement of
the SPE. This is representative of program instructions corresponding
to other embodiments herein. The media can comprise at least one
of a RAM, a ROM, a disk, an ASIC, and a PROM.
[0120] From a different perspective, in understanding the robust
nature of the embodiments herein, consider an electronic transmission
apparatus handling communications (signals) to facilitate in whole,
or implement in part, an embodiment herein. Still another perspective
is that of an electronic receiver apparatus handling communications
(signals) to facilitate in whole, or implement in part, an embodiment
herein. Viewed as a transmission system cooperating with a receiver
system, respective computer systems can convey signals to enable
a system as a whole to carry out the functionality illustrated herein.
[0121] In sum, appreciation is requested for the robust range of
possibilities flowing from the core teaching herein. More broadly,
however, the terms and expressions which have been employed herein
are used as terms of teaching and not of limitation, and there is
no intention, in the use of such terms and expressions, of excluding
equivalents of the features shown and described, or portions thereof,
it being recognized that various modifications are possible within
the scope of the embodiments contemplated and suggested herein.
Further, various embodiments are as described and suggested herein.
Although the disclosure herein has been described with reference
to specific embodiments, the disclosures are intended to be illustrative
and are not intended to be limiting. Various modifications and applications
may occur to those skilled in the art without departing from the
true spirit and scope defined in the appended claims.
[0122] Thus, although only a few exemplary embodiments have been
described in detail above, those skilled in the art will readily
appreciate that many modifications are possible in the exemplary
embodiments without materially departing from the novel teachings
and advantages herein. Accordingly, all such modifications are intended
to be included within the scope defined by claims. In the claims,
means-plus-function claims are intended to cover the structures
described herein as performing the recited function and not only
structural equivalents, but also equivalent structures. Thus, although
a nail and a screw may not be structural equivalents in that a nail
employs a cylindrical surface to secure wooden parts together, whereas
a screw employs a helical surface, in the environment fastening
wooden parts, a nail and a screw may be equivalent structures. |