Category: universal life insurance

John Hancock’s High Performance Protection UL

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July 28, 2016

5:55 PM

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2016, current assumption UL or CAUL, John Hancock Life Insurance Company, universal life insurance


John Hancock recently sent out to life insurance agents and brokers an impressive comparison of its “Protection UL”, Universal Life product crediting rates compared eight other carriers, as well as a comparison of those rates 5 years ago.  Protection UL, a current assumption UL or CAUL, is currently crediting 5.05%.  The other carriers were much lower: two in the low 4% range, two the low 3% range and four carriers are at 3.00%. Back in 2011 John Hancock was crediting “Protection UL” at 5.20%.  Three carriers back then were in the 5% range; the fall off to current levels of all eight competing carriers since 2011 has been significant.  The continued narrative to justify these low rates and ongoing decreases has been the interest rate environment.  John Hancock uses the performance of its institutional investments to enable a better outcome.

The Castle Geyser, Upper Geyser Park, 1874, Thomas Moran, source Wikemedia Commons

 

Yet in evaluating cash value accumulation and policy values besides crediting rates there is cost of insurance (COI) to consider.  That’s harder to track, but this very useful article takes to task Banner/William Penn, AXA, Transamerica and Voya Financial for their huge rate hikes to COI in 2015.  Was that necessary?  John Hancock had better priorities.

Carriers clearly have other options, which protect rather than harm consumers. John Hancock, for instance, took a huge write-down in 2008-2009 that affected shareholders rather than clients. And since then, the company has been a prolific innovator of products and services that manage both interest and mortality risk. The latest example: John Hancock’s “Protection” series of policies, which offers a reduction of COI charges. This approach shows carriers can succeed by putting their clients’ needs above shareholder interests when necessary.

Having been so convinced, I made John Hancock’s “Protection UL” my recommended UL product.  There remains a lingering concern about the challenges to their long-term care insurance policy performance.

Keep in mind COI is a vital component to cash value accumulation for Indexed Universal Life (IUL) as well.  It’s much harder for agents and consumers to follow the trail of a company’s track record for cost of insurance charges, but it’s of a vital importance when choosing a UL or IUL, any products with non-guaranteed elements.

 

 

Sean Drummey

The Level Above Term Life Insurance

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July 15, 2016

4:45 PM

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2016, guaranteed universal life, GUL, No Lapse Guaranteed Universal Life, term life vs universal life, whole life vs guaranteed universal life

What is the best type of life insurance term or permanent? It depends on the individual’s situation, but certainly term life insurance and one permanent product called Guaranteed Universal Life (GUL) are straightforward and similar in concept. A Guaranteed UL, also called no-lapse Universal Life, like term has a fixed premium for a set period of time, up to an age 120+ lifetime guarantee.  Of all the permanent life insurance products, Guaranteed Universal Life offers the lowest cost death benefit.  Pay on time and coverage is guaranteed, and the premium is guaranteed never to go up. All you need to figure out what time period is best and affordable. The only real debate between term and guaranteed UL is the comparative cost for the length of coverage.  For example:

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$250,000 coverage, Male, age 48, super preferred, monthly premiums:

$25.06     10 year term
$29.51     15 year term
$37.99     20 year term
$58.22     25  year term
$63.29     30  year term
$172.21   age 90 Guaranteed UL
$213.25   age 120 Guaranteed UL

In this example, as in most cases, 30 year term covers is less expensive than coverage to age 90. The higher premium is a function of the odds of outliving the policy. Check out the Social Security actuarial life table for life expectancy for your age.  This table gives the life expectancy of a 48 year old males as 31.61 years. If you want a more individualized life expectancy try here.

Historical

Universal Life (UL), also called Current Assumption Universal Life (CAUL), has been around since the 1980’s. UL products promised higher cash value accumulation than whole life insurance, but did have a lifetime coverage guarantee.  Many of the those UL products sold in the 80’s and 90’s under performed.  When cash value sinks to zero in a UL policy will lapse, or terminate, unless bolstered by ever higher premiums.  As a result consumers lost confidence in the death benefit protection of Universal Life.  In the early 2000’s the life insurance industry responded by adding a “no-lapse guarantee” or  “secondary guarantee”, typically a lifetime guarantee, as a line of UL products. These Guaranteed Universal Life (GUL) products, a.k.a. Universal Life with Secondary Guarantees (ULSG), have done quite well in the life insurance market, since they offer a lifetime coverage guarantee for substantially less than whole life. Most consumers, especially those in their 60’s and 70’s, for estate planning purposes are interested in low cost lifetime death benefits guarantees, not cash value accumulation. In recent years the Great Recession and regulatory changes winnowed down the number of carriers offering GUL products, but there are still multiple carriers who offer them, giving the consumer a wide range of competitively priced options.

update with revised quotes: 01/09/2023

Term Conversion to Indexed Universal Life (IUL)

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January 10, 2014

2:42 PM

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Buick_Convertible_1949

This week I was drawn by a client inquiry into analyzing the merits of converting a term policy into permanent.  A term policy’s ace in the hole is its conversion privileges.  Health conditions may arise as the decades go by. No matter how much one’s health may have changed for the worse, if still within the conversion period, a policy owner can convert all or part of the term policy to permanent without evidence of insurability at the original rate classification.  Be sure to ask about conversion when shopping for term.  It’s the second most important consideration after lowest premium.

For the American General term policy I was reviewing, they currently offered term conversion to either an Indexed Universal Life and a whole life product.  The indexed universal life product “AG Extend IUL” offers a no lapse guarantee rider to age 100.  That’s really great news for American General term policy holders: fixed premium and coverage guarantee to age 100. It would be better to have one to age 120 and beyond, but a lengthy guarantee is much better than not one of all.  It’s one step above the 5 to 25 year no lapse for other Indexed UL or current assumption UL products.

One of the problems with Indexed Universal Life is uncertainty on how it will perform over time.  Illustration shows non guaranteed projections, and they are very speculative in both the interest rate given, and how it’s shown at that rate for all years. An agent would be tempted to show the maximum interest rate allowed by the software. Carriers based those rates based on historical averages, as in the S & P 500 over the last 30 years. So an illustration may shows the S & P 500 annual point-to-point at 7.75% or 8.00% in all years.  Yes, each and every year.   The S & P certainly doesn’t perform like that in real life.  In all years for a 45 year old that projects a positive return, each and every year, for 75 years.   I run my IUL illustration a 5%. It’s more conservative projection but still a very uncertain projection because actual performance of the indexed may vary considerably and the carrier can change cap rates, participation rates and policy charges.

That’s why a lengthy guarantee on an Indexed UL like is “AG Extend IUL” is valuable.  Set the premium to the age 100 guarantee and then down the road the policy holder can evaluate actual performance and make changes accordingly to save on premiums if that age 100 guarantee is no longer necessary. So for example, start an Indexed UL at age 54 with premiums that guarantee coverage to age 100. Then when 75 year old  and in declining health, request an inforce illustration, and project how much premium the policy will need to have coverage to age 85.

If a Guaranteed Universal Life product is offered for conversion, generally that’s a better option to take, especially for those in their 60’s or 70’s.  If only a current assumption UL or Indexed UL is offered, funding it adequately, setting the premium high for plenty of cushion for cash value accumulation is well advised.  Have the agent show illustrations with coverage cash value to endow, or worth the face amount, at age 100.  Those run at target or $1 at age 100 might have more appealing premiums but might end up being underfunded for the long haul.

 

 

American General’s new Guaranteed UL has very good rates

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October 18, 2013

4:53 PM

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2013, 55 year old, 55 years old, 56 year old, Age 55, Age 56, American General Life Insurance Company, lapse protection guarantee, lapse protection rider, lifetime guaranteed death benefit, lifetime no-lapse guarantee, No-lapse guarantee, universal life policies with secondary guarantees

Guaranteed Universal Life, GUL, for life insurance coverage is a great low cost alternative to Whole Life with fixed rates and coverage available to age 120 and beyond.

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Looking over quotes for a client in his early 50’s, I found American General’s new Guaranteed UL, called “AG Secure Lifetime GUL II” has very competitive low rates.   Doing my latest revisions this week on permanent life sample quotes for 54 years old, 55 years old and 56 years old, American General has the lowest rates for female preferred best for $500k, $1m and $2m, and for male at preferred best $500k.  That is not a complete survey, it does not include for example the preferred rate classification, or age rates for those in their 60’s and 70’s, but it is an indicator that American General is now very competitive for certain face amounts and rate classifications and should be part of any comparison for permanent life insurance, no-lapse guaranteed Universal Life.  This product also builds guaranteed cash value and has a option surrender the policy after 20 years and with a guarantee to receive back 50% of the premiums paid.

Cash Value Life Insurance Choices

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September 25, 2013

10:40 AM

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Age 120 guarantee, Cash Value, cash value life insurance, cost of insurance, Increasing death benefit, IUL, lapse guarantee, No Lapse Guaranteed Universal Life, No-lapse guarantee, par whole life, Whole Life, whole live vs indexed universal life

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Whole Life: life insurance participating, or par

  • Dividends
  • Builds Cash Value
  • Guaranteed Cash Value Accumulation
  • Endow, worth face amount in cash, at age 100 or age 121
  • Increasing face amount
  • Cash dividends option, after a period of years
  • Paid Up Insurance
  • Cash value protects policy if payments are missed
  • Coverage guaranteed to age 100 or age 121

Pros: Since it builds on top of guaranteed cash value, par whole life has highest potential for cash value accumulation, flexible to changing circumstances; good to start for children, in 20’s, 30’s or upper income
Cons: much more expensive than Universal Life (UL) or Indexed Universal Life (IUL)

Indexed Universal Life:  IUL

  • Builds Cash value, higher upside potential with index crediting then current assumption UL
  • some guaranteed cash value accumulation, not all years
  • Flexible on payments
  • Option for increasing face amount, option B
  • Cash value protects policy if payments are missed
  • Policy lapses with zero cash value

Pros: less expensive than Whole Life, flexible to changing circumstances
Cons: if underfunded and or performs poorly can lapse without additional premium; higher cost of insurance charges than UL, periodic review is advisable, more complex, more choices to make than current assumption UL

Universal Life: UL, current assumption UL

  • Builds Cash value
  • Flexible on payments
  • Option for increasing face amount, option B
  • Cash value protects policy if payments are missed
  • Policy lapses with zero cash value

Pros: less expensive than Indexed UL, flexible to changing circumstances, lower cost of insurance charges than Indexed UL
Cons: if underfunded and or poor interest credited can lapse without additional premium

Whole Life: non-participating, non-par

  • guaranteed cash value accumulation

Pros:  fixed premium, guaranteed cash value accumulation, endow at age 100 or age 120; good for final expense
Cons: level death benefit; cash surrender value matter little compared to death benefit

Guaranteed Indexed Universal Life: GIUL

  • cash value accumulation, generally not in 80’s and older

Pros:  lifetime guarantee, or set guarantee year
Cons: lower casher value accumulation than Indexed UL

Guaranteed Universal Life:  Guaranteed UL, GUL,  no lapse guarantee UL

  • Little to no cash value accumulation

Pros: least expensive lifetime guarantee age 120+, also least expensive setting guarantee to age 90, 95, 100, 105, 110 or whatever length desired;  ability to structure longer guarantees, and at older ages than term life, for example 30 year guarantee at age 59
Cons: missed premium payments lapse policy, little to no cash value accumulation
Return of Premium Term:   ROP term

  • guaranteed cash value accumulation
  • reduced paid up insurance with some carriers

Pros:  At the end of the term you get all your premiums back; builds cash value, mostly in the last years of the term period
Cons:  death benefit same as term if you pass away, cash value not included; more expensive than term, especially after mid 40’s

Cash value life insurance vs. term and invest the difference: is that the only choice?

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August 12, 2013

4:14 PM

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1 year point-to-point, 20 year term, cash benefit, Cash Value, cash value insurance policy, chronic care benefit, hybrid life insurance policies, hybrid long term care insurance and life insurance, In Your 20's or 30's, Indemnity Benefit, indexed life insurance, Indexed Universal Life, life insurance and long term care, life LTC hybrids, Lincoln Life, Lincoln National Life, Lincoln National Life Insurance Company, long term care life insurance hybrid with return of premium, preferred rate, reduced paid up life insurance, Return of Premium Term, Return of Premium Term, ROP term, S&P 500, SBLI, SBLI of Massachusetts, Universal Life

Last week Seeking Alpha posted an article where a 38 year old man, presumably an investment broker, passed on his life insurance agent’s advice for a permanent life insurance product with a $5,000 annual premium, and instead choose term coverage for $600 a year. He took cash value life insurance to task with the self-serving advice to buying term and investing the difference.

OK.  No real argument there. At age 38, or for that matter for any working age person, term offers more bang for the buck, and that’s the most affordable way to replace lost income and thus protect a spouse or dependents.  But did this gentleman get enough coverage?

Term: How much and how long
He’s to spend $600 a year in premium.  Let’s review the most competitive rates and see what $600 a year buys.  A male preferred non-tobacco with SBLI (Savings Bank Life Insurance of Massachusetts), $800,000 of 20 year term is $596 a year. 25 year term $525,000 face amount is $600.75 a year with SBLI.  The rule of thumb is had 7 to 10 time one’s annual salary in life insurance. If he has children, there’s a college fund to consider.  Whether this individual got sufficient coverage depends on how much he makes, but keep in mind the goal is to get an adequate amount, and if affordable extend coverage to retirement age or to a point the children would be expected to have finished their secondary or post secondary education: age 22 or age 26.

Term and Permanent:  Two Plans – Two Purposes
Term verses permanent life insurance is a fallacious argument, as if it’s either one or the other. You can set up two policies: one term to replace lost income during your working years and a permanent for estate planning and to build cash value.  For this 38 year old, instead of a $800k 20 year term, how about a $100,000 of permanent life insurance and $700,000 in term?  A $100,000 Indexed Universal Life “Lincoln LifeReserve Indexed UL Accumulator” with Lincoln National, increasing face amount, targeted to endow at age 100, is $1,511 annual for male, age 38, preferred. That quote assumes 5% interest on S & P 500 index, annual point-to-point. At 5% that projects $33,803 cash surrender value and a $133,803 death benefit after 20 years.  Add a $700,000 20 year term with SBLI for $529 annual, that comes to $2,040 annual total cost for the two plans, and the Indexed UL is a very flexible premium, up or down depending on index returns or personal finances. This way after 20 years this person, now in his late 50’s, doesn’t have to encounter much more expensive choices in establishing permanent coverage for estate planning and with the right plan a chronic care or LTC rider in case LTC is needed.

There is also return of premium (ROP) term.  $800,000 20 year ROP term is $3,072 annual with American General for a 38 year old male at preferred.  In 20 years that guarantees $61,440 cash back or $170,218 in paid up life insurance.  After 20 years that paid up life insurance might be an appealing choice.  You could do a mix of ROP term and regular level term to lower that cost.

Please contact me for a free and confidential quote.  Many more options available.

sean's profile picLicensed Agent:  Sean Drummey
phone:  (910) 328-0447
email:    spdrummey@gmail.com

James Gandolfini’s estate tax and the role of life insurance

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August 7, 2013

10:46 AM

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James_Gandolfini

James Gandolfini, actor extraordinaire of The Sopranos, who died recently of a heart attack at age 51 apparently has left his heirs subject to a sizable estate tax.  Tax experts noted that they will likely end up owing a significant amount partly due to his residing in New York.  State estate taxes vary considerably depending on which state you reside in.

I was struck by this comment in one analysis as to the very practical role of life insurance in estate planning.

At a minimum, an irrevocable trust should have been set up for Mr. Gandolfini to use to pay insurance premiums toward a life insurance policy that would have covered expected estate taxes, Mr. Wolfe said.

Gandolfini did set up a $7 million life policy for his son in a irrevocable life insurance trust (ILIT).  To give the benefit of doubt, he may of set up others. Life insurance is not required to be in the public domain of probate. One lesson to come out of this is to add life insurance regularly especially when remarrying and having children.  Insurability, the ability to obtain coverage, can be an issue when adding life insurance later in life. Fully underwritten life insurance involves a blood test, and depending on age and coverage amount, an EKG and medical records. In Gandolfini’s case at his age in the absence of identifiable heart disease his rate classification probably would have depended almost entirely on his weight according to the carrier’s build chart.

Estate planning with minor children makes term life insurance an option.  There’s 10, 15, 20, 25 or 30 year term depending on the age of the child and how far it is prudent to carry the coverage out.  Term is inexpensive and conversion allows on to exchange the term into a permanent policy without proof of insurabilty during the term period.

For permanent life insurance the first and foremost estate planning tool is Guaranteed No-Lapse Universal Life locking in coverage to age 120 or beyond.   For other situations and goals the options include current assumption Universal Life, Indexed UL or on the upper cash value and benefit end a Whole Life plan.

AARP life insurance simply much more expensive

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June 14, 2013

12:00 PM

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10 year term, 2013, 66 years old, 67 years old, full underwriting, guaranteed acceptance Whole Life, guaranteed issue whole life, guaranteed universal life, In your 50's, In your 60's, In your 70's, life insurance quotes, no blood test, No Lapse Guaranteed Universal Life, no physical exam, Permanent Life Insurance, preferred rate, Simplified issue whole life, standard non tobacco rates, Term Life Insurance, Underwriting, universal life policies with secondary guarantees, whole life vs. universal life

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I first posted about AARP’s high priced life insurance program two years ago. Has there been any reform to that profit mill taking advantage of seniors?  No.  AARP member options are only among the most expensive.

AARP now promotes “The AARP Life Insurance From New York Life” on a separate website.  It’s “exclusively for AARP members.” Their mission statement: “To help make it simpler for AARP members to apply for affordable life insurance protection, AARP selected New York Life to provide a life insurance program just for its members.”  (italics mine)

simple = more expensive

The AARP New York Life insurance web page has three choices, all of them no physical exam, i.e. paramed exam.  Simple.  Higher priced simplicity.

Are you in good, average or even slightly below average health?  Focus on fully underwritten life insurance requiring a paramed exam. It’s free, at home or wherever you choose at your convenience, takes about 20 minutes and saves you a considerable amount of money.

Best value in rapidly descending order:

  1. full underwriting:      paramed exam
  2. simplified issue:      no paramed exam
  3. guaranteed issue:   no health questions

Unsure if qualified for fully underwritten coverage?  Find out. You’d be surprised. Type 2 diabetics with good control can get standard rates. Always check first before applying. Even if a simplified issue product is advisable, shop around for the lowest prices. There are much better deals than those offered through AARP.

Doubly more expensive permanent

For example, $25,000 permanent coverage female 66 years old, monthly premiums

$70.00     Transamerica at preferred non-tobacco, GUL*, age 121
$74.00     Transamerica at standard non-tobacco, GUL*, age 121
$127.52    AARP Life Insurance program from New York Life, age 121

Why would an organization, supposedly acting in its members best interest, not promote fully underwritten life insurance options?  How about: ease of issue, faster turn around, lower labor costs, higher premiums, higher profits.

Term:  At your age?

Term is to replace lost income or to cover a debt like a mortgage. If there is a shorter duration need, term life insurance might be suitable, but generally retirees should get permanent life insurance for estate planning and final expenses, not term.  Outlive the term period, and there’s zero benefit.  If for some reason term is needed, get fully underwritten coverage. No physical exam term is much more expensive. The AARP program term rates are five-year age bands: e.g., 65-69, 70-74.  Tiered rate term insurance is an inferior product and much more expensive. Level premium term is the best. The rate is the same for the entire term period.

Please contact me for a free and confidential quote.  Many more options available.

sean's profile picLicensed Agent:  Sean Drummey
phone: (910) 328-0447
email: spdrummey@gmail.com

* Guaranteed Universal Life (GUL), also called no-lapse Guaranteed Universal Life, look for lifetime no-lapse guarantee level premium to age 120 or age 121; three major life carriers have GUL products starting at $25,000.

Product and carrier details:
Transamerica Life Insurance Company: “TransACE”
Genworth Life Insurance Company: “Colony Term”

quotes 6/14/2013, rates subject to change

AIG pays back TARP funds and its effect on American General Life Insurance Company

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January 7, 2013

1:42 PM

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Conversion, guaranteed universal life, indexed life insurance, Indexed Universal Life, IUL, No Lapse Guaranteed Universal Life, no lapse universal life, No-lapse guarantee, Universal Life, universal life insurance

I saw one of AIG’s “Thank You America” commercials this weekend, and that’s how I found out that AIG had paid back in full their TARP bail out money.  That’s good news for American General Life Insurance Company.  I’ve been an agent for American General for over a decade, well before they were acquired by AIG back in 2001.

American General’s independent ratings have declined since AIG’s liquidity crisis 2008 and now have stabilized.  2008 exposed the ratings system to be very flawed, and since the rating system has not been reformed, it is a tenuous means to judge a carrier.  From a life insurance agent’s point of view, to recommend a carrier is in part observing a life insurance company’s price and product changes, underwriting practices and rules for term conversion. It’s also telling how much interest they are crediting on current policy holder’s permanent plans.

There is also a distinction between recommending a life product that’s guaranteed, and those that are non guaranteed, that depend on crediting interest to the policy for cash value.  A guaranteed no-lapse universal life, G-UL, is very straight forward, as opposed to a performance based product like indexed universal life, IUL, or a traditional UL.  Term or return of premium term has a guaranteed level rate for a fixed period of time, but conversion options to a permanent plan without evidence of insurability is another key consideration, especially since so many people run into health problems in the 10, 20 or 30 years after their policy is taken out.

I will take a wait and see approach to American General.   They can prove their worth by proportionately crediting of their UL policy holders and expanding conversion options.

Survivorship Universal Life: age 105 versus age 120

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June 26, 2012

12:58 PM

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Age 105, Age 120 guarantee, American General Life Insurance Company, guaranteed universal life, Joint survivor guaranteed universal life, Protective Life Insurance Company, Prudential, Prudential life insurance, Whole Life, whole life insurance, whole life vs. universal life

Protective Life is reintroducing their life insurance survivorship product “Protective Survivor UL” which will replace “Protective Centennial Survivor GUL”.

Survivorship, or second-to-die life insurance is for couples for estate planning purposes.  It is much less expensive than taking out two policies, and can provide coverage even if one of the couple has health problems and is uninsurable.  Guaranteed Universal Life is far less expensive than traditional whole life insurance.

Notable is the trend of certain carriers away from lifetime guarantees.  Though lifetime is available, Protective Survivor UL is competitive to age 105 and lesser ages.   Given the projected rise in the number of centenarians in the coming decades, selecting coverage to age 120 is advisable, since there are still multiple carriers like Prudential and American General that offer these lifetime guarantees at competitive rates.