Ratings Updates

Entries for June 2011

There were no ratings changes of note this month among the major life insurance companies reflecting the continued improvements in financial strength generally.

Here are a few other items you may find of interest:

·         While financial weakness has apparently abated, new accounting standards are looming as US standards and International standards are merged.  The deadline has been extended for implementation.  Best’s reports the cost to US life insurers to implement the merged standards will be in excess of $1 billion.

·         Rating agency Fitch is now saying that life insurers may dodge problems with commercial mortgages because their portfolios are performing significantly better than banks and thrifts.

·         The hot sales area today is combination products – up 62% last year.  These products combine life insurance with long-term care or other additional benefits.  Their popularity rises from consumers seeking more affordable alternatives to stand-alone LTCI.

·         The SEC (not the football conference) is looking into potential conflicts within variable annuities providing living benefits such as GMWB (Guaranteed Minimum Withdrawal Benefits) where the life insurer manages the underlying investments and would be conflicted in how to manage the investments with a mind to protecting the profitability of the benefits provided.

We remain actively engaged in interesting issues for clients seeking an objective opinion about life insurance matters.  A recent review – an existing whole policy was being challenged for replacement by a variable policy and the illustrations were dramatically different.  When we did our analysis, including present valuing the premium flows against the emerging cash values and death benefits (adjusted for likelihood of death), the policies were almost identical.  The decision then came down to which policy structure best fit the objectives of the client.  The variable policy “looked” much  better.  However, the whole life policy was the best fit and was actually a comparable value under the client’s assumptions.

If you need an objective review please give us a call at 205.414.9955.  We are eager to help.