Equitable Life’s Board of Directors approved a change in the dividend scale from 6.35% to 6.2% to reflect the downward pressure experienced in the participating account due to the low interest environment. The new rate is in effect from July 1,2019 to June 30, 2020.
Equitable Life Approved a New Dividend Scale Effective July 1, 2019
Late last week, Equitable Life’s Board of Directors approved a change in the dividend scale from 6.35% to 6.2% to reflect the downward pressure experienced in the participating account due to the low interest environment. The new rate is in effect from July 1,2019 to June 30, 2020.
Total dividend payments to policyholders from July 1,2019 to June 30,2020 are expected to increase from $38.4 million compared to $29.8 million in 2018/2019.
How Participating Whole Life Insurance (PAR) Policy Owners are Affected
The par account is a separate pool of assets specific to the insurance company’s participating life insurance line of business and is comprised of investments in real estate and commercial mortgages, government bonds, corporate bonds, private fixed income and equities. Investment returns are correlated to the prime rate. All premiums for the participating life insurance are deposited into this account and any investment earnings offset by any outstanding claims, taxes, expenses are passed back as a dividend to the policy holders and reinvested. Overall, as illustrated on the graph, the dividend scale tends to be less volatile than the actual interest rate and equity market.
The table below summarizes the dividend scale of ADVICO’s insurance providers. It is anticipated that Canada Life and Great West Life will be updating their dividend scale end of June.
Prime Lending Rate & Bank of Canada Updates
The impact of interest rates on next year’s dividend scale is not something than can be easily predict; however, the current economic uncertainty, recent equity market returns, and the ongoing low interest rate environment continue to be an important consideration when we determine the dividend scale.
Advico has a strong working relationship with their existing insurance providers and believe that their diversified asset mix and prudent risk management practices means low volatility, increased stability and long-term growth for policy holders.
If you have questions about dividends on your participating policy, please contact your Advico Advisor or visit https://equitable.ca/en/already-a-client/dividend-information.aspx.