Life Insurance Policies To Fund Oklahoma State Athletics

bdan2002 · March 2, 2007

This came over our higher education listserv

March 1, 2007

OKLAHOMA CITY (AP) - Using an idea from billionaire donor Boone Pickens, Oklahoma State will purchase $10 million life insurance policies for 25 of its supporters in a unique fundraising program for the athletic department.

Oklahoma State athletic director Mike Holder said he believes the "Gift of a Lifetime" program is the largest such use of life insurance ever by a college athletic department. The university will pay the insurance premiums for the selected donors, with the athletics department being listed as the beneficiary.

The money from the policies will be used to endow athletic scholarships and pay for facilities and operations, Holder said.

"We believe we're the first university athletic department to get it done," said Larry Reece, the executive director of major gifts and development. "We've been told that this has been done with some churches, and successfully done."

Reece said at least one other school had contacted Oklahoma State to inquire about the program.

"We really believe it will change and secure the future for Oklahoma State," Reece said.

Texas Tech athletic director Gerald Myers said he had spoken with Oklahoma State officials about the idea in the past six months, and had also run it past people in the insurance business and others at the University of Texas. He hadn't come to any conclusions yet and said "we don't have any plans going on at this point."

"That's why I'm gathering information, to see if we might consider it," Myers said. "It's not something I can say we're going to do, but I have looked into it."

When reached after business hours Thursday, NCAA spokeswoman Gail Dent said she would have to check with departments that had already closed in order to determine whether any other schools had similar programs.

Reece expressed gratitude to the 55 individuals who agreed to take physicals and go through the process to try to qualify for the insurance plans. He said most of the 25 in the initial pool are donors and season-ticket holders. All are between the ages of 65 and 85.

Reece said the school would have to pay $20 million in insurance premiums, which it borrowed on credit.

The school is in the midst of a vast upgrade to its athletic facilities sparked by Pickens' $165 million donation in January 2006 - the largest gift ever to an NCAA athletics program. The proposed athletic village will include new facilities for baseball, softball, track, soccer, tennis and equestrian at a price of at least $300 million. That total includes completion of an upgrade to the football stadium, which is named after Pickens.

"Our initial discussions with Boone on this subject quickly shifted from a 'what if?' to a 'why not?' conversation," Holder said. "One thing led to another and we sought guidance of top insurance experts to research the idea.

"This program is evidence of our loyal supporters' willingness to embrace new ways to help their university by leaving a lasting legacy that will benefit OSU Cowboys and Cowgirls for generations to come."

Holder noted that Oklahoma State's athletic department still faces a projected budget deficit, since Pickens' gift and the insurance plan are aimed at long-term stability.

Pickens, the founder of Dallas-based energy investment fund BP Capital, has given more than $250 million to Oklahoma State, his alma mater, in recent years.

Alumnus Sherman Smith pledged $20 million in January toward the building of a $50 million indoor practice facility. Groundbreaking is expected this year.

The university has also begun a $114.5 fundraising initiative to endow all 229 of its athletic scholarships.

NT80 · March 2, 2007

Oklahoma State will purchase $10 million life insurance policies for 25 of its supporters in a unique fundraising program for the athletic department.

Wouldn't you be concerned if you were one of these 25 supporters and the OSU AD offered to let Eddie Sutton drive you home?

Edited March 2, 2007 by NT80

Stan R · March 2, 2007

This is a great idea! Then you'll have the inevitable next programs for donors over 70 years old:

1.) OSU donor triathilon and red bull drinking contest

2.) OSU donor "cageless" shark diving event

3.) OSU donor sky diving and free base jumping event

4.) ???

BonfireBrian · March 2, 2007

This is a great idea! Mr. Pickens impresses me more all the time.

UNTLifer · March 2, 2007

This is a great idea! Then you'll have the inevitable next programs for donors over 70 years old:
1.) OSU donor triathilon and red bull drinking contest
2.) OSU donor "cageless" shark diving event
3.) OSU donor sky diving and free base jumping event
4.) ???

"Here, tie these horns on you head and go running off through the woods. If you hear gunfire, stand still."

drex · March 2, 2007

We did this in the mid 80's....we had about 15 people with life insurance policies with North Texas Athletics as the beneficiary. Then, the grim reaper ( Helwig ) showed up and crushed the program.

GrandGreen · March 2, 2007

Would someone with more insurance knowledge than me explain how this could work? The basis of insurance is that the Insurance company is always going to charge enough in premiums to insure that payouts on a macro basis are always going to be less than the premiums and any profits from investment of those premiums. Therefore if OSU is paying the premiums how can they possible benefit, unless like some have joked they make sure the insured depart before the actuarial tables indicate?

nortx9 · March 2, 2007

Would someone with more insurance knowledge than me explain how this could work? The basis of insurance is that the Insurance company is always going to charge enough in premiums to insure that payouts on a macro basis are always going to be less than the premiums and any profits from investment of those premiums. Therefore if OSU is paying the premiums how can they possible benefit, unless like some have joked they make sure the insured depart before the actuarial tables indicate?

Pickens owns the insurance company! He would not make anything if they borrowed the $20mm money and invested it for 10 years, and keep in mind he is trying to start a "financing paradigm shift" to convince many other schools to do it too....just the way OSU does it, just the way they are all coming to them right now to find out how. And to your point, the premiums will have to be huge on those actuarial tables for such few people at that age, unless subsidized by all of the Small Joe policyholders. So all of you whole life and universal life holders, and fixed rate annuities better cash out now, cause the ROI from company investments is going to fund these new mega programs, your premium per thousand just went up, and your "vanishing premium" is never gonna happen, and that nest egg they promised you (even if 4% would do that!) will shortly be an annual negative return as the investment profits and premium overcharges are channeled into these programs as subsidies.

Mad Hatter · March 2, 2007

Pickens owns the insurance company! He would not make anything if they borrowed the $20mm money and invested it for 10 years, and keep in mind he is trying to start a "financing paradigm shift" to convince many other schools to do it too....just the way OSU does it, just the way they are all coming to them right now to find out how. And to your point, the premiums will have to be huge on those actuarial tables for such few people at that age, unless subsidized by all of the Small Joe policyholders. So all of you whole life and universal life holders, and fixed rate annuities better cash out now, cause the ROI from company investments is going to fund these new mega programs, your premium per thousand just went up, and your "vanishing premium" is never gonna happen, and that nest egg they promised you (even if 4% would do that!) will shortly be an annual negative return as the investment profits and premium overcharges are channeled into these programs as subsidies.

The sky is falling! The sky is falling!

$10mm Life Insurance polices are not uncommon for a Life Insurance company. Depending on someone's age they can pay out a fraction of the Death Benefit and have the Benefit guaranteed. It has to do with the law of large numbers, and the time value of money.

nortx9 · March 2, 2007

The sky is falling! The sky is falling!
$10mm Life Insurance polices are not uncommon for a Life Insurance company. Depending on someone's age they can pay out a fraction of the Death Benefit and have the Benefit guaranteed. It has to do with the law of large numbers, and the time value of money.
I can see it now....at graduation ceremonies for universities, after you get the diploma, you stop by the insurance table to pick up your form to fill out as a return donation to the university as your legacy to the perpetual fundraising... and the best part is that (after just a few blokes kick off), the Legacy Fundraising Program self-funds the premium of every future graduate....you never pay a dime....all you have to do is just fill out the form, answer a few med questions and...voila, the universitity just self funded its fundraising year over year with a projected annual benefit rate based on how fast the actuarial tables say the odds are. Hey , you really don't even have to graduate you can just be a fanatic fan, and best part is with the family rider option, wife and kids can sign up too. Awwweeeesoommmmee!

Mad Hatter · March 2, 2007

Quite a few charities and Churches work this way. (Almost like Key-Man coverage on the Donors) Once people actually start to die, the organization will be set, but no one really wants to root for the death of a donor............or do they? :ph34r: