Bank Owned Life Insurance (BOLI) - Ambassador Financial Group

AmbassadorAlert | 3rd Quarter | 2012
Bank Owned Life Insurance (BOLI):
Update and review of current market conditions
Today’s low interest rate environment is here to stay with the Fed telling us they are “on hold” until May, 2015.
And with it, banks, thrifts, credit unions, insurance companies, asset managers, and so on, are finding
a scarcity of good assets in which to invest. One alternative we like is bank owned life insurance. So we have
gone into the archives and asked Rob Galbreath, President of the Galbreath Group, to update his article on
the topic. Perhaps now is the time to consider this investment option. — Jim Gillen, Managing Director
Bank Owned Life Insurance (BOLI) is now approaching its 30-year anniversary. Once considered an “outside
of the box” strategy, BOLI has proven to be a valuable source of non-interest income. Well-constructed
BOLI portfolios have produced stable, predictable, and reasonable returns for many years, and thus,
considered by many banks to be a valuable asset in today’s low rate environment.
Regulatory scrutiny has increased for every area in the bank and BOLI is no exception. The guidelines are
clear and have not changed much in the past few years. However, we do see an increase in the level
of enforcement. Specific BOLI investment policies need to be in place and approved annually by the board
of directors. All methods of reporting, including asset value and carrier credit ratings, should be reviewed
to ensure they fully comply with regulatory guidelines.
BOLI can be divided into two distinct categories: general account, considered a conservative strategy that
essentially lays off risk (price, investment, credit, etc.) to the carrier; and, separate account, a more complex
strategy in which the bank retains investment and price risk.
The BOLI market continues to grow as banks look for safe, conservative places to put money. We see many
first time purchasers, and existing clients increasing their BOLI holdings. General account BOLI with a highly
rated life insurance carrier is considered a conservative strategy where the purchaser is essentially laying
off risk (investment, price, credit, interest rate) to the carrier. It has produced excellent long-term results.
— Robert B. Galbreath, President, The Galbreath Group
AmbassadorAlert | 3rd Quarter | 2012 Bank Owned Life Insurance (BOLI): Update and review of current market conditions | 1

The Ambassador Team:
1605 North Cedar Crest Blvd.
Suite 508
Allentown, PA 18104
866.240.3898 (toll-free)
610.351.1633
4330 East West Highway
Suite 305
Bethesda, MD 20814
866.240.3898 (toll-free)
240.207.2306
Joshua A. Albright, CFA
Senior Vice President,
Fixed Income Trading
Allen R. Collins
Managing Director,
Chief Compliance Officer
Arnold G. Danielson
Chairman, Danielson
Associates
David G. Danielson
President
Danielson, a division
of Ambassador
Jacob Eisen
Managing Director
Ryan G. Epler
Senior Vice President,
Fixed Income Trading
Tad Gage
Managing Director
Heidi Geist
Administrative Assistant
James R. Gillen
Managing Director,
Business Development
Belle Gutschick
Administrative Assistant,
Danielson Associates
Robert J. Pachence, Jr.
Managing Director
John D. Putman
Vice President,
Danielson Associates
Michael Rasmussen
Managing Director,
Investment Banking
Matthew T. Resch, CFA
Managing Director
Eric R. Tesche
Managing Director
Mark B. Trinkle
Senior Vice President,
Fixed Income Trading
John S. Walker, Ph.D., CFA
Director of Research &
Chief Economist
The information presented is for informational purposes only. This is not an offer or solicitation to purchase or sell any security through Ambassador Financial Group, Inc.,
a current member of FINRA/SIPC. For more information contact us at 610.351.1633. © 2012 Ambassador Financial Group, Inc.