Understanding Life Insurance Dividend Payout Announcements

This is about the time of the year when all the major mutual insurance companies announce their annual dividend rate or payout. I just got an email from Ohio National about theirs (which is being reduced by 50 basis points) and I've been hearing about other companies and their announcements. What is a dividend from a mutual insurance company? A dividend is sharing in the profitability of the insurance company. As a participating policyholder, you are entitled to dividends if a dividend is declared.

What are the major components that make up the dividend?

There are three major factors:

  1. General investment account performance

  2. Mortality claims processed (if better or worse than actuarily projected)

  3. Overhead operating expenses