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Liberty National
Life Insurance Company
TMK1104 0409
TMK1104 0409
“Working the Contract”There are those who say they “work their contract.” • This is distasteful terminology because of what it implies: if
something is not expressly prohibited by a rule, it must be OK, even if not profitable - because “I only worked the contract.” Such an attitude will disappear as those who do it are not retained.
Our primary business purpose:• Fair benefits for our customers, • Fair, outstanding compensation for our Agents and
Managers. • Fair profits for our Shareholders
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“Every decision we make at TMK must be
good for 3 parties:
• It must be good for the Customers,
• It must be good for the Agents and Managers,
• It must be good for the Shareholders.
• If any one of these three things is missing, we don’t do it.”
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YOUR RESPONSIBILITY
We expect a certain level of responsibility and intelligence from every person at Liberty National.
As such, understanding requires any manager or Agent to think of both the letter and SPIRIT of our rules.
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A. TRAINING for Long-term Agent Retention:
The following things are unacceptable and will be dealt with
harshly, beyond charge-backs:
• BMs and UMs allowing Agents to sell family members in order to achieve
Production and Recruiting Bonuses.
• BMs and UMs allowing Agents to sell their friends in order to achieve Production and Recruiting Bonuses.
• BMs and UMs allowing Agents to sell other Agents in order to achieve Production and Recruiting Bonuses.
• BMs and UMs allowing Agents to sell the UM/BM in order to achieve Production and Recruiting Bonuses.
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• “Project 100” PROSPECTING is only intended to be a tool to enable an agent to network to get sponsorship referrals through family and friends, NOT to write family and friends.
• Allowing new agents to write family, friends or our employees misses the entire objective and purpose of training – they are not being taught prospecting skills for long-term survival. If UMs teach agents to sell family and friends, they are teaching the agent how to FAIL, since there is such a limited number of these people.
• No one should be more concerned with achieving a bonus than they are of the Agent’s success. When the UM teaches an Agent how to seek sponsorship referrals and then sells those instead, the Agent is shown how to generate an unlimited number of prospects, selling our products for an entire career, rather than only during an “introduction” using poor methods.
• The reality of the situation is that the trainer is weak when these methods are used. They are simply trying to write business by any method to “look good,” and does not deserve the position to which we have entrusted our company’s responsibility.
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B. Good PERSISTENCY is REQUIRED for Long-term Business Retention:
• In any type of commissioned sales industry there is a great amount of overall turnover in the first year of service. When an salesperson is taught to sell through family and friends, rather than to non-related prospects, the managers involved do a great disservice because if the new Agent does not stay neither does much of the business sold to their family and friends - negatively impacting long-term persistency rates.
• Good persistency is required for a company to recover its advanced costs spent in acquiring the business: advanced commissions, advanced bonuses and advanced expenses. Obviously, a manager who promotes poor persistency practices either doesn’t understand how we make money or does not care about the company’s profitability. Neither is good for our company’s persistency and welfare.
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Not-Takens:Bank Budget Life
1st Q 2nd Q 3rd Q 4th Q2007 6.2% 6.9% 9.2% 11.6%
2008 12.7% 14.0% 17.0% 16.2%
2009 15.4% 11.4%
1st Q Change = 2.5 times Higher
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4th Mo QOB:Bank Budget Life
1st Q 2nd Q 3rd Q 4th Q2006 80.1% 77.4% 79.0% 81.4%
2007 80.2% 68.1% 76.0% 76.4%
2008 73.5% 72.3% 62.7% 62.2%
2009 65.3%
Change - 14.8 - 5.1 - 16.3 - 19.2
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Cumulative Persistency:Bank Budget Life
• Year 4th Mo 13th Mo • 2003 82.5% 61.5%• 2004 81.3% 61.0% • 2005 80.6% 59.3% • 2006 79.3% 57.1% • 2007 77.2% 54.4% • 2008 66.0% 43.4%
Change - 16.5 - 18.1
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TMK1104 0409
The Importance of Good DCN, Persistency and QOB Rates
• Good persistency is the key to your success.
• Here are some basic calculations, simple enough for anyone to understand the importance of good persistency.
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All Agents Active and TerminatedDNC 0-.24
Premium Cumulative Prem Cumul %*** Dec/Can/Ntk From 10/26/08 thru 2/25/09 *** Total Paid 4th mo 3 QOBDCN Rate Submitted Submitted Prem Subm Declines Cancels Not-takens Can/Dec/Ntk by 6/25/09 QOB Rate Roll
0.00 2,845,062.76 2,845,062.76 0.12 0.00 0.00 130.44 130.44 2,095,225.16 0.74 ---0.01 370,755.08 3,215,817.84 0.14 1,382.52 1,121.76 1,523.16 4,027.44 316,065.28 0.85 ---0.02 235,961.12 3,451,778.96 0.15 1,988.00 786.24 2,170.32 4,944.56 179,409.60 0.76 0.750.03 636,431.10 4,088,210.06 0.17 5,596.36 5,271.64 7,615.32 18,483.32 500,219.70 0.79 0.800.04 554,175.37 4,642,385.43 0.20 4,161.40 10,691.56 7,241.28 22,094.24 424,985.13 0.77 0.770.05 438,186.25 5,080,571.68 0.22 4,931.28 8,090.08 8,883.00 21,904.36 306,368.17 0.70 0.760.06 540,124.26 5,620,695.94 0.24 6,068.76 14,229.84 11,935.92 32,234.52 389,610.82 0.72 0.730.07 710,384.75 6,331,080.69 0.27 8,196.72 18,608.69 22,579.44 49,384.85 510,989.26 0.72 0.710.08 646,423.25 6,977,503.94 0.30 10,094.64 20,180.64 21,346.44 51,621.72 468,937.61 0.73 0.720.09 490,364.99 7,467,868.93 0.32 7,222.80 13,871.63 23,385.72 44,480.15 343,209.12 0.70 0.720.10 477,607.34 7,945,476.27 0.34 12,679.20 22,164.44 12,616.68 47,460.32 316,791.14 0.66 0.700.11 541,967.84 8,487,444.11 0.36 7,900.08 26,039.28 26,037.12 59,976.48 367,534.20 0.68 0.680.12 481,086.04 8,968,530.15 0.38 5,926.80 16,557.88 35,414.64 57,899.32 326,146.92 0.68 0.670.13 455,340.78 9,423,870.93 0.40 10,930.68 22,663.80 25,725.24 59,319.72 305,690.54 0.67 0.680.14 492,176.08 9,916,047.01 0.42 11,533.92 29,057.52 29,057.28 69,648.72 312,918.88 0.64 0.660.15 519,490.93 10,435,537.94 0.44 7,950.84 30,723.48 38,698.20 77,372.52 348,609.29 0.67 0.660.16 454,726.14 10,890,264.08 0.46 13,557.48 22,790.92 36,183.96 72,532.36 253,309.70 0.56 0.620.17 443,563.90 11,333,827.98 0.48 11,593.08 30,702.00 32,898.24 75,193.32 284,491.66 0.64 0.630.18 387,615.44 11,721,443.42 0.50 8,975.16 35,105.19 25,611.31 69,691.66 213,724.18 0.55 0.580.19 474,921.55 12,196,364.97 0.52 12,270.60 46,044.72 32,134.44 90,449.76 283,400.47 0.60 0.600.20 342,407.28 12,538,772.25 0.53 8,302.08 34,036.48 26,142.84 68,481.40 179,358.00 0.52 0.560.21 360,716.24 12,899,488.49 0.55 15,363.96 28,470.12 32,107.56 75,941.64 218,537.88 0.61 0.580.22 388,466.96 13,287,955.45 0.57 5,897.76 33,223.56 46,713.48 85,834.80 207,634.84 0.53 0.550.23 335,481.62 13,623,437.07 0.58 6,923.12 35,304.72 34,761.36 76,989.20 175,972.50 0.52 0.560.24 343,691.82 13,967,128.89 0.59 10,783.20 41,011.68 30,341.76 82,136.64 180,224.42 0.52 0.53
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All Agents Active and TerminatedDCN .25-.50
Premium Cumulative Prem Cumul %*** Dec/Can/Ntk From 10/26/08 thru 2/25/09 *** Total Paid 4th mo 3 QOBDCN Rate Submitted Submitted Prem Subm Declines Cancels Not-takens Can/Dec/Ntk by 6/25/09 QOB Rate Roll
0.25 516,545.34 14,483,674.23 0.62 14,896.88 60,200.04 54,374.52 129,471.44 243,520.70 0.47 0.470.26 247,855.92 14,731,530.15 0.63 7,183.20 38,281.00 18,946.56 64,410.76 109,878.16 0.44 0.460.27 410,336.92 15,141,867.07 0.64 8,129.40 56,532.96 45,959.04 110,621.40 174,751.20 0.43 0.450.28 330,209.17 15,472,076.24 0.66 13,515.24 35,355.12 43,848.36 92,718.72 166,561.49 0.50 0.460.29 288,427.60 15,760,503.84 0.67 6,704.56 46,646.36 30,450.84 83,801.76 128,855.64 0.45 0.460.30 244,004.93 16,004,508.77 0.68 7,165.20 31,374.41 34,873.08 73,412.69 121,795.20 0.50 0.480.31 121,473.36 16,125,982.13 0.69 9,695.52 19,111.20 8,952.00 37,758.72 56,513.52 0.47 0.470.32 198,904.37 16,324,886.50 0.70 3,343.80 23,226.36 36,961.68 63,531.84 87,189.53 0.44 0.470.33 255,256.88 16,580,143.38 0.71 9,466.44 31,099.20 43,704.72 84,270.36 81,972.48 0.32 0.390.34 288,607.38 16,868,750.76 0.72 7,885.20 48,683.16 41,529.00 98,097.36 106,805.98 0.37 0.370.35 251,888.61 17,120,639.37 0.73 12,026.28 40,183.56 35,840.64 88,050.48 95,474.61 0.38 0.360.36 261,034.58 17,381,673.95 0.74 11,503.68 48,681.24 33,571.80 93,756.72 88,164.74 0.34 0.360.37 206,371.12 17,588,045.07 0.75 9,462.36 39,653.24 27,311.40 76,427.00 77,818.64 0.38 0.360.38 140,809.44 17,728,854.51 0.76 7,625.04 24,110.04 21,632.88 53,367.96 45,906.48 0.33 0.350.39 281,291.84 18,010,146.35 0.77 14,671.32 40,217.02 54,761.40 109,649.74 96,332.58 0.34 0.350.40 149,496.64 18,159,642.99 0.77 2,725.48 25,934.76 30,976.92 59,637.16 44,779.44 0.30 0.330.41 123,015.74 18,282,658.73 0.78 4,452.60 29,937.00 16,137.24 50,526.84 42,185.82 0.34 0.330.42 111,576.60 18,394,235.33 0.78 3,798.92 21,433.40 21,785.28 47,017.60 35,380.40 0.32 0.320.43 111,627.28 18,505,862.61 0.79 6,047.88 19,133.56 22,739.64 47,921.08 34,569.52 0.31 0.320.44 202,178.74 18,708,041.35 0.80 6,734.52 36,007.44 46,475.88 89,217.84 62,170.90 0.31 0.310.45 152,156.68 18,860,198.03 0.80 3,085.68 39,474.20 25,777.44 68,337.32 33,077.00 0.22 0.280.46 110,389.12 18,970,587.15 0.81 4,151.28 27,860.08 18,800.76 50,812.12 28,635.56 0.26 0.270.47 154,433.50 19,125,020.65 0.81 5,397.24 40,087.26 27,270.48 72,754.98 33,123.36 0.21 0.230.48 109,055.56 19,234,076.21 0.82 6,150.60 24,768.96 21,397.32 52,316.88 34,070.28 0.31 0.260.49 65,347.88 19,299,424.09 0.82 6,380.48 14,871.36 10,868.88 32,120.72 19,750.80 0.30 0.26
0.50+ 4,176,352.40 23,475,776.49 1.00 140,421.62 1,224,005.44 1,691,353.56 3,055,780.62 581,944.70 0.14 0.15
Total 9,508,647.60 332,620.42 2,086,868.37 2,466,301.32 4,885,790.11 2,631,228.73 0.280.51
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Consider LNL’s costs that we advance in order to acquire our
premium written:• To illustrate, we’ll use our most popular
individually-sold product, < $50K Whole Life.
• We’ll use maximum BB commission, Production Bonus, Lead Account, and Z Account rates from all levels
• – Then we’ll add the cost of our field employee benefits and expenses.
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• Agent
• 65% Annual Premium Commission • 40% Annual Production Bonus• 15% Lead Account
• 120% AP Annual Sub-total
• + UM
• 40% Annual Premium Commission• 24% Annual AP Production Bonus (60% of Agent’s 40%)
• 64% AP Annual Sub-total
• + BM
• 16% Annual Premium Commission• 16% Annual Production Bonus (40% of Agent’s 40%)• 8% Annual Z Account
• 40% Annual Sub-total
+ HO
• 6% Annual AP HO Expenses• 12% Annual AP Field Employee Benefits
• 18% Annual Home Office Total
= Total 242% Annual Cost of the First Year’s AP, without claim costs, profit margins or recruiting bonuses considered.
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On Bad QOBs, we CANNOT make money
1st Yr AP submitted: $1,000,000
15% 13th Mo. QOB: x 15%
2nd Yr Premium Retained = $150,000
Advanced Commissions, Z Account, Lead Account
Production Bonuses and Other Expenses
= 242% of 1st Yr AP
$1,000,000 x 242% = $2.42 Million Advanced Costs
Divided by: $150,000 Retained to earn back Costs
= 16.13 years to recover before we make
profits if all of it stayed in force, which it won’t
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On Good QOBs, we CAN make money
1st Yr AP submitted: $1,000,000
85% 13th Mo. QOB: x 85%
2nd Yr Premium Retained = $850,000
Advanced Commissions, Z Account, Lead Account
Production Bonuses and Other Expenses
= 242% of 1st yr AP
$1,000,000 x 242% = $2.42 Million Advanced Costs
Divided by: $850,000 Retained to earn back Costs
= 2.9 years to recover before we make
profits if all of it stayed in force, which it won’t
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TMK1104 0409
“Every decision we make at TMK must be
good for 3 parties:
• It must be good for the Customers,
• It must be good for the Agents and Managers,
• It must be good for the Shareholders.
• If any one of these three things is missing, we don’t do it.”
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“Working the Contract”
• Every Agent, UM and BM will continue to be held accountable to practice correct business methods – in fact, even more closely to ensure good persistency.
• Those who “work their contract” to the detriment of LNL will be unlucky, because we will make sure we make a profit from everyone - if necessary, independent of any manager or Agent who is not profitable.
