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PREMIUM FINANCING DONE RIGHT

lifeeducationalseries

!Retaining Capital through Premium Finance

Introduction: The Missed Opportunity !Affluent individuals and their advisers understand the power of leverage - the power of retaining use of our own assets for investment purposes and leveraging a lender’s capital. Aurora Capital (ACA) applies this strategy to a different asset class - life insurance. The ACA strategy provides advisers with the tools to allow their clients to obtain significant cash-flow savings. !ACA Premium Finance Program !As a CFP Board certified CE educator and CA DOI educator on Retaining Capital Through Premium Finance, ACA assists advisers across the country. ACA educates advisers on the power of premium finance, how to obtain the most desirable loan rates, terms, strategy sheets for point-of-sale and the highest level of back office support, including annual servicing. In addition, ACA presents its premium finance strategy in a variety of methods - including the only Fee-Only premium finance strategy in the Country. This strategy allows Fee-Only advisers to capitalize on the power that premium finance can bring to their practice. !Our Consulting Services !ACA works closely with the advisor in case design, case structuring, and annual renewals. ACA either charges a fee for the structuring or shares in a portion of the case compensation - depending on ACA involvement in the case. !Our goal is to educate advisers on the mechanics and benefits of life insurance premium financing. As an industry educator, we are held to the highest level of standards. !!

USING THE POWER OF THE ACA PROGRAMS IN YOUR FINANCIAL PLANS !Thousands of advisers across the country are underutilizing premium finance in their practice. They either do not understand the intricacies of a custom tailored premium finance strategy, or are unaware to the current marketplace for premium finance. Partnering with ACA, advisers can maximize the potential that premium finance can bring to their practice. !!Fee-Only Program In addition to servicing hundreds of advisers across the country in traditional commission-based premium finance, ACA has pioneered a Fee-Only approach. In this approach, ACA removes the commission from the underlying insurance chassis, creating an inherently more cost-effective approach, maximizing policy cash value accumulation potential and death benefit protection. ACA charges a fee for this structure, typically accruing this fee into the credit facility. ACA Members receive their portion of this fee pursuant to their Engagement Agreement.

The only firm in the country to offer a true Fee-Only

approach to premium finance


Premium Finance Criteria: ✓ Needs and wants permanent life insurance coverage ✓ Age 25 to 85 ✓ Has a minimum net worth of $5,000,000 ✓ Has liquid assets to post for collateral or can obtain a letter of credit on non-liquid assets (exit strategy) ✓ Understands interest rate risk ✓ Appreciates the value of leverage

Insurance Chassis We Finance ACA assists producers in financing a wide array of insurance chassis, including indexed universal life, guaranteed universal life, whole life, term conversions, in-force financing and our fee-only insurance design concepts.

YrAnnual Finance

PremiumCumulative Financed

Premium

Annual Interest Rate (30 Day LIBOR +

Spread) Annual Interest Cost

1 $ 700,000 $ 700,000 2.00% $ 14,000

2 $ 700,000 $ 1,400,000 2.25% $ 31,500

3 $ 700,000 $ 2,100,000 2.50% $ 52,500

4 $ 700,000 $ 2,800,000 2.75% $ 77,000

5 $ 700,000 $ 3,500,000 3.00% $ 105,000

6 $ 3,500,000 3.25% $ 113,750

Example Loan Structure:

Determining Borrowing Rates ACA determines borrowing rates from a variety of factors, including but not limited to: total credit facility, interest payment preferences, collateral type, insurance chassis design, exit strategy and client’s level of liquidity. Our clients are able to achieve floating rate options (at low as 150bps), fixed rate options and a variety of interest rate hedging strategies (priced real-time).

The above structure assumes a floating rate (30 day LIBOR + a fixed spread). ACA provides a wide array of options to hedge against a rising rate environment - from true bank fixed rates, swap rates to interest rate caps. ACA provides the option to capitalize a portion of the interest, reducing client out-of-pocket expense.

!Retaining Capital through Premium Finance !

About Us ACA is at the forefront of the premium finance industry. As a CA DOI educator and CFP© Board educator, teaching courses on Retaining Capital Through Premium Finance and Retaining Capital Through Premium Finance - A Fee-Only Approach, advisers and their clients can rest assured that ACA will provide them the highest level of service and cutting edge industry knowledge. ACA is the first premium finance consulting firm to provide advisers and their clients with true Fee-Only premium finance, as seen published in our article in LifeHealthPro entitled How to Remove the Greed from Premium Finance.

Los Angeles OfficeUS Bank Tower

633 West Fifth Street28th Floor

Los Angeles, CA 90071

Scottsdale OfficeFashion Square

7150 E Camelback RoadSuite #444

Scottsdale, AZ 85251

San Diego Office Emerald Plaza

402 West Broadway Suite #400

San Diego, CA 92101

Aurora Capital Alliance is built upon a solid foundation of trusted advisors with decades of experience. Our proprietary software and planning concepts propel ACA to the leading edge of the industry, working with advisors across the nation. !Our Services

• Working with advisors across the country • Proprietary planning concepts and financing software • Creative funding solutions • Case design support • Annual renewal support • Pre-approval process • Scenario scripts & point-of-sale material for advisors

http://www.lifehealthpro.com/2014/03/20/how-to-remove-greed-from-premium-financing

http://www.lifehealthpro.com/2014/03/20/how-to-remove-greed-from-premium-financing


Disclosures!!Copyright © 2014 Aurora Capital Alliance, Inc. This material is for producer use only. Not for use with the public. This material was not intended or written to be used, and cannot be used to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of pro cuts, services, and/or concepts addressed in the material.

Aurora Capital Alliance, Inc. 402 West Broadway

Suite #400 San Diego, CA 92101

ph. 888.389.PLAN ph. 619.595.4832 fax. 858.541.1101

email. [email protected] web. www.AuroraCapitalAlliance.com









San Diego, CA 92101 (Preferred Mailing

Address)

!Legacy Preservation with Life Insurance Premium Financing

\

Gift Lend Borrow

Pay Gift Taxes Grantor Loan Bank Financing

❖ Write a check for premiums!❖ Gift tax owed based upon

amount applied towards life insurance premium!

❖ No interest rate risk!❖ Predictable!❖ If structured properly, heirs

receive 100% of death benefit

❖ Loans made to trust to cover the premium plus annual interest !

❖ Gift taxes may apply!❖ Loan interest based upon AFR

rates!❖ Interest rate risk!❖ Unpredictable cash flow

❖ Borrow funds from lender!❖ Interest may be paid or

accrued!❖ Typically paid to annual gift tax

exclusion limits!❖ Fixed rate options!❖ Client retains capital for

investment opportunities!❖ No need to liquidate assets for

insurance premiums

The Value of Retained Capital For clients in the affluent marketplace, life insurance may offer various tax benefits, protection for loved ones and tax-fee liquidity to assist heirs in paying estate taxes. As part of a comprehensive wealth plan, life insurance plays a key role. However, when coupled with Aurora Capital’s unique financing program, life insurance can provide one of the only methods of providing liquidity while minimizing gift tax consequences and preserving our client’s cash flow. A large life insurance policy that meets the needs of our clients will often necessitate large premiums and require a disciplined payments strategy. Premium financing offers our clients predictable cash flow and cash flow savings, known as retained capital, while minimizing gift tax exposure. Here are the three main strategies for funding large life insurance policies:

Life Insurance Premium Financing: The Winning Strategy For our clients, borrowing strategically can align perfectly with their financial plan. It allows clients to be flexible with their cash flows, retain capital for investment opportunities and maximize the returns on their life insurance portfolio. One the need for the insurance is established, Aurora engages both client and advisor in a thorough analysis of the above funding methods. If premium financing provides the client the most benefit given their unique financial plan, then Aurora assists in the funding of the policy and reviews the plan on an annual basis. !When properly designed, life insurance in general provides clients an opportunity to invest in a secondary asset class with preferential tax treatment, wealth protection, liquidity and the ability to transfer wealth seamlessly from one generation to the next.

!ph. 619.595.4832 fax. 858.541.1101


Aurora Capital Alliance, Inc. 402 West Broadway Fourth Floor San Diego, CA 92101

Legacy Preservation with Life Insurance Premium Financing

A Diagram of the Life Insurance Premium Financing Strategy

Why Finance Life Insurance Premiums? Life insurance premium financing offers clients in the affluent marketplace the ability to purchase large life insurance policies without having to write full premium checks. This cash flow savings, know as retained capital, is the secret behind the life insurance premium financing strategy. Additionally, life insurance premium financing allows client to avoid many gift tax consequences of the other two funding strategies. Our team of professionals assist clients in analyzing the various funding methods available. As a managing aggregator for a number of insurance carriers and banks across the country, as well as a prolific educator in the advanced life markets space, Aurora Capital is well-suited to evaluate your specific financial circumstances and needs.


Fourth Floor San Diego, CA 92101

ph. 619.595.4832 fax. 858.541.1101


Disclosures!!Copyright © 2014 Aurora Capital Alliance, Inc. This material was not intended or written to be used, and cannot be used to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of pro cuts, services, and/or concepts addressed in the material.

!Asset-Backed Employee Benefits

A Fresh Approach to Employee Benefits !Employee benefits play an important role in the lives of employees as well as their families. For that reason, the benefits you offer can be a deciding factor for a potential employee’s decision to work in your business. Yet, knowing where to start compiling a comprehensive benefits program for your business can be overwhelming. !With this in mind,the Asset-Backed Employee Benefits Strategy (ABEB) maximizes employee retention while increasing productivity and minimizing expenses to the corporation. The ABEB strategy is unique - it deploys a leveraged strategy with the most reputable insurance carriers to provide employees three important benefits: !• Living benefits (disability and chronic illness) • Retirement benefits • Life insurance benefits (for employee and corporation

pursuant to a vesting schedule) The Power of the ABEB Strategy !For these three main benefits, the cost to the corporation is minimal. The ABEB strategy is a comprehensive plan, ACAs partnership with some of the largest institutional lenders in the world allows the corporation to borrow funds to pay for these employee benefits. !For corporations that qualify, the ABEB Strategy can be in place to finance what would otherwise be an out-of-pocket expense to the corporation, thereby freeing up capital while providing an increased suite of employee benefits. Our turn-key strategy offers employee benefits housed within a financed life insurance chassis, providing protection for the employee as well as the corporation. !The vesting schedule deployed in each of our strategies encourages employee retention and productivity while still minimizing out of pocket costs to the corporation. !! !!

One Solution to the Employee Benefits Dilemma !By financing life insurance premiums on a number of key-employees, the corporation can offer employees a suite of benefits they would otherwise not achieve. Financing allows the corporation to minimize out-of-pocket expense by the corporation and eliminates the need for the employees to contribute to the plan. Aurora Capital deploys the ABEB Strategy for corporations of all sizes through its partnerships with some of largest and most reputable insurance carriers and lending institutions in the world. !The ABEB Strategy Enhances Your Existing Employee Benefits Program !As a program designed to replace or enhance your existing employee-benefits program, the ABEB strategy can be deployed seamlessly. As a turn-key strategy, Aurora Capital facilitates the implementation process from start to finish. This includes guaranteed underwriting with insurance carriers, structuring of all financials by our partner lending institutions and the drafting of any trust documents.

Made possible by relationships with some of the largest insurance carriers and lending institutions in the world.

!Asset-Backed Employee Benefits

Living Benefits

• Disability coverage

• Long-term care

• Chronic & terminal illness

Retirement Benefits

• Tax-free distributions

• Indexed fund growth with guaranteed returns !

Life Insurance Benefits

• Determined by corporate desired vesting schedule

• Up to 10 times annual salary

The Strategy That Maximizes Employee Benefits Our strategy applies to key-employees, corporate buy/sell and cross-purchase arrangements for corporations with annual revenue in excess of $5MM. This high-level strategy is reserved exclusively for clients of Aurora Capital. These benefits, all in one plan:

Yr

Portfolio Annual Financed Premium

Annual Out-of-Pocket to Coporation

Portfolio Cash Surrender Value (Can be used for

Living Benefits & Retirement)

Portfolio Life Insurance Death

Benefit (Net of Loan)!

Portfolio Death Benefit to

Employees with Vesting

Portfolio Death Benefit to

Corporation with Vesting

1 $ 2,000,000 $ 0 $ 1,825,005 $ 9,008,000 $ 900,800 $ 8,107,200

2 $ 2,000,000 $ 0 $ 3,998,004 $ 9,818,720 $ 1,963,744 $ 7,854,976

3 $ 2,000,000 $ 0 $ 6,058,004 $ 10,702,405 $ 3,210,721 $ 7,491,683

4 $ 2,000,000 $ 0 $ 8,158,004 $ 11,665,621 $ 4,666,248 $ 6,999,373

5 $ 2,000,000 $ 0 $ 10,258,004 $ 12,715,527 $ 6,357,764 $ 6,357,764

6 $ 0 $ 11,058,004 $ 13,859,925 $ 6,929,962 $ 6,929,962

Example, U-Corp U-Corp has 50 key-employees. Through Aurora Capital, they deploy the ABEB Strategy. Each employee is underwritten on a guaranteed-issue basis and obtains an asset-backed life insurance chassis. The chassis are financed as a whole on behalf of the corporation and are now part of the corporations overall employee benefit package, providing all of the three main benefits listed above. Details below:

The structure above is for illustrative purposes only.

Asset-Backed Employee Benefits









San Diego, CA 92101 (Preferred Mailing

Address)

Asset-Backed Employee Benefits

Disclosures!!Copyright © 2014 Aurora Capital Alliance, Inc. This material was not intended or written to be used, and cannot be used to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of pro cuts, services, and/or concepts addressed in the material.


Suite #400 San Diego, CA 92101

ph. 619.595.4832 fax. 858.541.1101


About Us ACA is at the forefront of the advanced financial markets industry as a CA DOI educator and CFP© Board educator, teaching courses on Retaining Capital Through Premium Finance and Retaining Capital Through Premium Finance - A Fee-Only Approach, advisers, clients and corporations can rest assured that ACA will provide the highest level of service and cutting edge industry knowledge. ACA is the exclusive provider of the Asset-Backed Employee Benefits Strategy and is made possible through ACA relationships with the largest and most reputable insurance carriers and lending institutions in the world.

Aurora Capital Alliance is built upon a solid foundation of trusted advisors with decades of experience. Our proprietary software and planning concepts propel ACA to the leading edge of the industry, assisting advisors and corporations across the country. Our experienced staff seamlessly implements the ABEB strategy for our partner corporations without effecting daily operations. !Our Services

• Assisting advisors and corporations across the country • Proprietary planning concepts and financing software • Creative funding solutions and exclusive provider of the ABEB strategy • Educator for California Department of Insurance and CFP Board Nationally !

the most trusted partner to maximize your …...benefits program for your business can be...

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