• An introduction that succinctly discusses the changes that have occured in the life insurance marketplace.
• In-force ledgers of the existing policy with different funding options or goals.
• A one-page spreadsheet analysis of the "in-force" ledgers showing the Internal Rate of Return (IRR) fo the death benefit and assumed cash values at various intervals, the number of years that the policy will stay in-force under current assumptions, and the number of years the policy is guaranteed* to stay in-force.

If appropriate, the report may include optional policy alternatives, but only if there is a distinct client advantage.

• The first is the interest rate return on the underlying investment that provides the cash value in the policy. In Universal Life (UL) and Whole Life (WL) policies this investment account is in Insurance Company-directed investments which generally consist of bonds with some real estate assets. In Variable and Variable Universal Life (VUL) policies the cash value is invested in separate accounts with the asset class chosen by the policyowner.
• The second factor is the expenses in the policy, including the acquisition costs (commissions, underwriting expenses, etc.)
• And the third factor is the actual morality charges within the policy.

Of the three factors noted, the one that most affects the actual performance of the policy versus that projected in the sales illustration is the interest rate obtained. The actual expenses and mortality charges used in the original illustrations are easier to project and predict than the investment return. In all illustrations there is an assumed projection and a guaranteed projection. The assumed projection is a "best guess" of what will occur in the policy going forward using the current assumptions for expense, mortality and investment return. The guaranteed projection uses only those factors that are guaranteed when it projects the outcome. If the actual current interest rate that is obtained in the policy is less than the projected rate, the policy will not perform as well as expected.

Over the course of the last 24 years, the interest rates on Universal Life policies for the most part have dropped. In 1984 when the Universal Life policy was introduced to the market the current interest rate was almost 12%; sincethat time the current rate has dropped to the point where, in 2005, the current rate was below 4.5%. We have seen an increase in crediting rates during the last couple of years.

Although Whole Life policies operate differently then Universal Life policies, the underlying investment returns will be similar. However, in a WL policy the dividends represent a "return on premium" that is dependent on not just the investment returns but also the "gains" in the mortality and expenses (the actual experience is less costly than what was illustrated.)

In Variable Life and Variable Universal Life policies, the investment returns depend on the performance of the separate accounts chosen by the policy-owner. The separate accounts are managed by fund managers, similar to many open ended funds, and can invest in a mix of stocks, bonds or other products based on the can investment and risk tolerance of the underlying fund. In some instance the anticipated returns in these policies have lagged. The drag caused by the lower returns in the life insurance policies purchased causes actual cash values to be lower than the original illustrated values. If investment returns lag for an extended period of time, the policy may lapse, or at least a higher premium will need to be contributed for the policy to reach the original goals.