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Profile - United Presidential Life: celebrating 25 years in Kokomo.

On the approach to Kokomo from the southwest on Indiana 26, a large sign proudly marks the future site of United Presidential Life Insurance Co.'s new corporate headquarters. Scheduled for completion in 1991, the 100,000-square-foot facility ill be nearly three times larger than UPI's current home on Southway Boulevard. The expansion is more than physical, however.

Celebrating its 25th anniversary his ear, he company already is adding staff, developing new products and increasing its capital base, says President Don Wilhelm. "We're in a growth mode.'

UPI's ambitious plans for the future are a reflection of its past. Founded in 1965 through a public offering and Wilhelm's Metropolitan Securities Corp., its $5.5 million capitalization was the largest for any Indiana-formed life insurance company.

Although UPI's first product was a whole life endowment policy, the growth pattern began in the early 1970s when it switched gears to term insurance. "We focused on term insurance primarily as a result of tax changes,' Wilhelm explains. It provided some attractive benefits to employees in the form of employer-paid premiums, so we became very aggressive in that market.'

In an era of 'buy term and invest the difference," UPI prospered, Wilhelm says. its base of employees grew to 50 by 1974, requiring a move into the brokerage market in which independent agents instead of company employees sold UPI policies. We started with a captive sales force but discovered very early that, even with substantial resources, it was hard to compete,' Wilheim explains. That's why we decided to go into brokerage.'

With its transition into brokerage, UPI began to build its reputation for rapid policy issuance, says Executive Vice President Art Stonebraker. Because independent agents will sell products that pay quickly and without added costs, UPI streamlined its issuance procedure so that a policy--and the commission--gets to the agent a week after it is sold. Most of the larger life insurance companies take a month or more to issue a policy, Stonebraker notes. "Our products perform better in the market because they don't have all the built-in expenses to the customer,' he says. And the agent makes more money.'

The relationship UPI has with its agents goes beyond quick commissions, Wilhelm points out. it makes an effort to respond to questions and needs with an almost paternal concern. You're not always going to be top with commission or product, but if you can maintain good service, that will do more to cement a relationship with an agent than anything else,' Wilhelm reasons.

Today, UPI is nearly 100 percent brokerage, with approximately 8,000 independent agents operating throughout the country. its core product, however, is no longer term insurance. The company shifted gears again in 1981 to focus on universal life insurance.

Universal life was a market we'd been watching,' Wilhelm remembers. it had been developed a couple years earlier by a company on the West Coast, and we were intrigued by the concept. It had a lot of flexibility: the buyer pays a lump sum contribution or ongoing premiums, interest is credited to the account and the cost of the premium is charged to the account.

But the revolutionary part of it was that it offered a complete breakdown of benefits to the buyer on an annual basis--how much they contributed, how much interest had been credited, the cost of insurance and existing value. in the past, cash-value policies had been sort of a mystery to the buyer.'

Hesitating only briefly, UPI entered the universal market in 1981 shortly after the product cleared several regulatory hurdles. The success was immediate, with UPI's annualized new premium skyrocketing from $800,000 to $3 million, Wilhelm says.

Part of the growth is attributed to UPI's introduction of the industry's first back-loaded policy, which contains no charges to the buyer, if held for its full term. "We had that market to ourselves for the first couple years,' Wilhelm says.

The advent of universal life also brought a partnership with Evanston, Ill.- based Washington National Corp. 'In order to get the product on the street, we had to have additional capital,' Wilhelm explains. Washington National in 1981 purchased 23.5 percent of UPI's unissued stock, providing a more than $3 million capital infusion.

Subsequent capital contributions brought Washington National's ownership of UPI to 41 percent, and in 1986, a complete acquisition was finalized. 'It's allowed us to more aggressively write business," Wilheim says. "Our capital surplus has increased to around $56 million and our statutory assets to $560 million."

More than two-thirds of those assets UPI is keeping in government and municipal bonds, with only I percent in stocks. Short-term cash represents about 6 percent of its portfolio. And, despite real-estate problems in some parts of the United States, UPI has increased its commercial mortgage holdings to 16 percent. We're spreading out geographically in commercial mortgages, but at least 75 percent of our portfolio is in indiana," Wilhelm says. "The area we finance--from $1 million to $3 million--seems to be experiencing a strong demand."

Stonebraker says that UPI's core product also holds inherent diversification. Part of the beauty of universal life is that it covers a wide spectrum of investment choices for the consumer," he explains. Because of the current volatility and uncertainty in the stock market, there is more appeal to guaranteed values and tax deferment that only a life insurance policy can offer."

The company's regional commitment and emphasis on the bond market has helped it to avoid the volatility experienced by some larger insurance organizations. it provides the company with an average annual yield of about 10 percent to 20 percent. Although some companies may average a higher return, UPI refuses to put its greatest emphasis on life insurance's investment qualities. Life insurance is protection first," maintains Wilhelm.

Although UPI remains committed to the basics, its ambitious growth has required some changes--especially in the area of technology. Due to the complexity of options available through universal life, computerization was necessary to survive, Wihelm says. "A new product used to be just another sheet in the rate book, but now it requires a substantial investment in software, both internally and externally," he says. The business is more scientific than when we started, and will become even more so in the future. We're an industry that is surviving on technology."

Technological costs and regulatory changes also require more judicious product development, Wilhelm adds. 'It's more costly to put a product out now, so you have to be a little more cautious and test the market thoroughly to see if there will be a good reception," he says. And even with that you're not always right."

But that doesn't mean UPI isn't developing new products. Several new policies will be introduced later this year, and its core products are being enhanced, Wilhelm says. We're constantly looking at the market for new product ideas, and some are developed around suggestions from our key agents. We're very sensitive to their needs.'

Although priding itself on innovation, UPI also knows a good product when it sees one. We're innovators, but to some extent we're also reactors," Wilhelm explains. We're not reluctant to capitalize on someone else's idea if we feel it will work in our market.'

Products aren't all that is changing at UPI. According to Wilheim, even though UPI is licensed in 45 states, five or six states represent the majority of policy sales. So, the company is adding to its marketing staff to increase regional production. " We need to develop business more intensively in areas where we are relatively weak," Wilhelm says. And because we think of ourselves as a marketing organization, we want people that are attuned to that philosophy."

By adding staff in other areas, UPI plans to increase employment from the current 165 to more than 250 by 1995. Along with assistance in building the new headquarters, Washington National will further enhance UPI's expansion with additional capital. 'Our goal is to hit $100 million in new premium within the next five years," Wilhelm says. "We're currently at $35 million, so that's a quantum leap."
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Title Annotation:Insurance; United Presidential Life Insurance Co.
Author:Nelson, Eric
Publication:Indiana Business Magazine
Article Type:company profile
Date:Oct 1, 1990
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