Non-Participating Whole Life Insurance
A part of the return earned on the company
portfolio is paid to the policy owner. The
policy owner receives a return in only one
way if the policy is a nonparticipating
whole life policy.
Non-participating
policies do not provide dividends, but rather
only a guaranteed cash value. The amount is
stipulated within the contract at issue, and if
the policy owner pays the stipulated premium,
the guaranteed cash value is the only return
earned. If the policy happens to be profitable
to the insurance company, the profits will be
paid to shareholders of the stock in the life
insurance company and not to the policy owners.
Demutualization
Demutualization offers another opportunity to earn a
return in a whole life policy.
On November 6, 1986,
Union Mutual, a mutual life insurance company,
became UNUM Corp., a publicly traded Delaware
corporation with a public offering of 22 million
shares of common stock at an initial offering price
of $25.50 per share.
On July 22, 1992, Equitable Life Assurance Society
went public with stock selling at $9 per share. The
stock doubled in price in 6 months and tripled in
little more than 1 year. In December 2000 it was
bought out by AXA, a French International insurance
company, at the equivalent of over $110 per share.
By virtue of their ownership rights in the mutual
company, policy owners were entitled to receive cash
or stock from the new company. The demutualization
process is a difficult one. It is almost impossible
to predict what success a company will have, or what
value the policy owners will receive in exchange
for their ownership rights when a company demutualized.
Demutualization and
Non-Participating Whole Life Insurance