Balance Sheet Enhancement

Vanbridge offers balance sheet enhancement strategies that can strengthen companies’ financial positions while also attracting, retaining and motivating top-tier talent through competitive executive benefits.

Corporate Owned Life Insurance

Corporate owned life insurance (COLI) may offer significant tax advantages for non-qualified and executive benefits planning.

Many companies offer non-qualified executive benefits, such as deferred compensation. The liabilities resulting from these plans may grow substantially within a short period. To offset the impact, many companies chose to informally fund their benefit programs with COLI.

Tax deferred growth*
Tax-free reallocation*
Tax-free death proceeds*
Balance cash flow with obligations
Tax efficient distributions
Increasing after-tax returns
Enhancing shareholder value
Favorable accounting and P&L treatment

*IRC §§7702 and 817, Rev. Rul 82-54, IRC 1010, IRC §7702A and 72

Bank Owned Life Insurance

Bank Owned Life Insurance (BOLI) is a commonly utilized investment on the balance sheet of banks that produces tax-exempt, non-interest income while also providing a death benefit component on any key employee lives that are insured. BOLI is priced and structured for institutional use only and has many differences from traditional life insurance policies. Additionally, BOLI can be used as a funding mechanism to offset other employee benefit programs instituted by the Bank as a strategic means of attracting and retaining key contributors to the organization. Like other assets, BOLI needs to be monitored to ensure it is still appropriate and performing according to expectations.

Capital guarantees
Minimal credit risk

Insurance Company Owned Life (ICOLI)

Provides access to higher-yielding, alternative assets in a tax-efficient structure. Typically, it is a variable life product – therefore the premium is invested in a separate account and may be invested in a variety of alternative investment strategies through an insurance dedicated fund (“IDF”) or sub-account with a chosen asset manager.

ICOLI is informal funding and may be an offset for employee and executive benefit obligations.
Potential Favorable Risk-Based and Rating Agency Capital Treatment
IDFs and Subaccounts provide simplified accounting and allow for tax-free rebalancing
Access to general account portfolios to produce attractive/stable current yield
Gains and losses in Cash Surrender Values flow-through income, similar to “Trading” securities. Gains are “realized” tax-free as miscellaneous non-operating income
Elimination of Deferred Tax Liabilities. Because iCOLI CSV changes are “realized” tax-free
ICOLI is an “other than invested asset” for insurers with fair market value accounting
Under SSAP 21(6) ICOLI is classified as an admitted asset
ICOLI is considered “other than invested asset” which carries an NAIC charge of 5% (P&C) and 0.8% (Life Insurance).

Please consult with your tax, legal and regulatory council based upon your specific situation.