"We have all learned that rating agencies opinions aren't worth as much as the stock that we have all placed in them."
Please no offense intended, but they have more creditbility here than "I'm just saying".
The insurance industry for the most part because of conservative investing across the board, should weather this economic situation much the same as they had during the world wars and the depression.
Because of their size, with most of their investments, they have the ability to wait.. and wait.. and wait. And most carriers haven't taken on a portfoilio that would put them under.
That said, they will experience a lower performance in the future, as will everything else. While I seemed gung ho, I'm not nearly as bad as some others I have spoken with who are all excited about dividends. Dividends will go down, as will other things in our financial world. Will they go away? Not likely. Future dividends might be lower as well simply because there is nothing out there to buy that pays a high interest rate and offers the desired security at the same time. For the near future, high quality will not pay what it did a decade ago. So dividends should go down all other aspects unchanged simply by the fact that the market is dried up for high quality, higher payout conservative investments.
You've cited AIG as an example, but really, does losing their AAA rating really mean they aren't going to pay a claim? They took a hit, must clean up the house and get back on track. It will probably mean selling off some parts of the company. Something carriers do in good and bad times. It will take them some time, but at the end of this, they should be back up there.
"We have all learned that rating agencies opinions aren't worth as much as the stock that we have all placed in them."
Please no offense intended, but they have more creditbility here than "I'm just saying".
You've cited AIG as an example, but really, does losing their AAA rating really mean they aren't going to pay a claim? They took a hit, must clean up the house and get back on track. It will probably mean selling off some parts of the company. Something carriers do in good and bad times. It will take them some time, but at the end of this, they should be back up there.
The citing of AIG is not whether they can pay a claim or not, but whether they can make bond pymts going fwd. Of course with Uncle Sam kicking in, the use of AIG might have been a bad example. But the point was that bonds do get downgraded, (from inv grade to junk), and in fact some can become worthless due to bankruptcies. We were discussing the underlying investment portfolios of ins cos, remember. And this is whether the conservative approach of mutual or stock companies really pans out. It will if they own the right stuff, but many haven't because they listened to some of the rating companies and opinions that were flawed. Enuf on this thread from me.
I'm just sayin... So you either missed or didn't like the attempt at humor by the statement... so be it.
"So you either missed or didn't like the attempt at humor by the statement"
Yea, I guess I didn't see the humour. You must be Dennis Miller funny.
I understand downgrades, but it just seemed as if you've made your statements in a vacum. Everyone will experience to a certain degree an adjustment to their portfoilios. The conservative nature of alot of the bigs (not all) BEFORE things went in the s hitter, should pan out OK when the dust settles.
They were belt and suspender guys before the economic downturn, so chances are better than good they'll be OK since most operate in that mode anyway. Remember, you guys make fun of the low returns on whole life in an up market. That's because they are conservative investors. Shoe's on the other investment foot right now and they look better than most.
You also have to understand that not all junk bonds are that "junky". I've sold a great "junk bond" fund for years. Even the best companies issue junk bonds. Junk isn't necessarily bad. It's unsecured risk.
What established major companies do you feel are going to have their AAA bonds reduced to B or lower? What does your crystal ball say?
"So you either missed or didn't like the attempt at humor by the statement"
Yea, I guess I didn't see the humour. You must be Dennis Miller funny.
You also have to understand that not all junk bonds are that "junky". I've sold a great "junk bond" fund for years. Even the best companies issue junk bonds. Junk isn't necessarily bad. It's unsecured risk.
What established major companies do you feel are going to have their AAA bonds reduced to B or lower? What does your crystal ball say?
Well, I will tell you which AAA co(s) will be downgraded to junk, right after you tell me the Sueprfecta in the 5th race at Santa Anita for tonight. Kind of the same thing, wouldn't you agree. Let's try this one... place your left hand on your keyboard, and tell me the letters that your index finger and middle finger are on, in that order... Then you will be close. BTW, it would be much easier to point out those that have been downgraded in the past year, which are plentiful.
About that junk bond fund that you have sold for years... what has worked for years isn't gettin it today. Discounts for junk are much steeper in a tight credit environment than the times we knew a year ago and beyond. I used to buy subprime mtgs for 50-60-70 cents on the dollar. The same thing today I will pay 20-25... (just as an example). So in these times, low quality (high risk) takes a hit.. For this same reason just today, a division of Cablevision Syst Corp. (cable tv), had a 750 mln bond issue. Coupon of 8.5, 5 yr term, but the bonds sold @ 88.88, for a yield tm of 11.375%. Or conversly, if you owned some of those bonds heretofore, and paid par for them, they are now worth 12% less in principal due to the illiquidity of the mkt and quality of the issuer. Co is rated B-1.
Regarding the bond fund issue... I just took one at random, Vanguard High Yield - ([COLOR=#07519a]VWEHX[/COLOR]), no load fund. Had you invested 10K into the fund 1 yr ago today, you would have 7642 today. As quality and liquidity erode, so does share value. Will it come back...? Sure, as long as liquidity and quality continue to improve. The minute that either of them go south, and they usually go together, then the price will drop even more. At the bottom of the mkt, really just 3 weeks ago, the value of the 10K investment was just over 6K. Can you say R-I-S-K...?
Dennis Miller, nah, I wish... Of course, my sense of humor is pretty wierd at times. My vocab isn't as broad as his... and not nearly as quick a wit.
Simply put, I believe every type of life insurance has a purpose for somebody. I just hope I have what will work best for the person I come across. I mean for some people, credit life IS the best they can do, so it has a purpose, even though I don't sell it.
We get caught up in which is better than the other when really they all work for somebody sometime. While I can golf with one club, I prefer to use the entire bag.
"Whoa Nellie..." can you name the mutual carrier that is following your theory? Most of the mutuals I've dealt with have less than 3% in the "market", and of their mortgage investments a very small percentage at risk. Commerical real estate is not part of the mortgage crisis by the way. That side of the coin is still growing.
Beep..beep..beep.. Update for L Gilmore:
Just now listening to CNBC and they are discussing the effects of defaulted CMBS (comm'l mtg backed securitites) on the value of Merrill Lynch, (gtrly loss of 15.3 bil), which is now dragging down B of A... Cause: largely due to defaulted and devalued CMBS.
Circuit City filing Bk and now liquidating ALL stores, and the devestating effects of these centers where CC is the anchor tenant, and the impact on the holders of the CMBS; very negative.
Sears - KMart merged companies, and the impending likelihood of going Ch 7, out of biz, and the effects that this would have on the underlying shopping center properties and debt holders of these mtgs; very negative.
Not trying to poke it in your eye, just an update on this former convo that we had... and seemed to have a diff of opinion. Knowledge is power, as we all know...
But weren't we talking about mutual LIFE companies portfoilios? I didn't know BofA and Merril Lynch were mutual life cos? When did that happen?
I think you might be casting a wide net.. no? I don't think the commerical mortgage buyers at any of the mutuals were in the same room as the merril guys...
I thought I addressed this through the commentary of the rating firms who reviewed NYL (my policy) presence in these markets and still reaffirmed their ratings as their exposure wasn't as great as others.
Never meant to say all of anything is perfect. Something's shitty somewhere, but apparently Merrils commercial is far shittier than nyl's commerical.. no? One's been bought and still needs a bailout, the other turned the offer down. Are they then the same?
Yep, I'm just sayin... that was it... D@ng, for a whole life guy you catch on quick... tehe...
What we were talking about is that each and everyone of these ins cos, stock, mutual, fraternal or mixed, doesn't matter... is invested in some of the same things. The main diff between Merrill and any mutual company is two things... Merrill is public, mutuals are private, and ML is in the midst of a buyout that isn't going very well... B of A is now having a come to J'esus over the way these securities have been devalued between Sept 15 and Jan 15. Sank like a rock.
There are stock ins cos that have hidden the fact of some of these same MBS... and other off balance sheet liabilities, so I understand... and no telling what mutual cos have in pandoras box. We simply don't know exept that they are calling x% investment grade and x% non inv grade bonds... What does that mean...? Not what it should mean, I can tell you that.
So the whole point was, ML was in great shape... until they had to go to confession. My contention is that most if not all of the ins cos have exposure to the CMBS. This sector has been considered to be at less risk than the MBS, meaning res mtgs, but apparently this isn't so.
So IMO there are more cos than we know that have the sickness... and time will tell which ones they are. I hope none of the biggies and I sincerely hope that it doesn't damage the industry but I wouldn't want to bet all that much change on the outcome.
That is the significance... and I'm just sayin.... and what I'm sayin is CMBS sector as an investment is toxic trash. Don't want to get any of that on you... willingly.
Some of the largest holders of CMBS have been the large mutual insurance companies, you start losing anchor tenants and watch what happens, seen it happen in the late 80's and it won't be pretty.
"Term insurance is like wetting the bed. It gives temporary relief, but sooner or later, you have to get up and do something about it."
I sell tons of Term with the intent of converting it partially or fully later to No Lapse UL now that I've started the client relationship with the initial Term sale. Some of my smarter (and wealthier) clients start off with a combination of the two, agreeing that they have both temporary and permanent needs.
There have been many thoughtful and useful posts on this subject. I sell mostly whole life and some term. As has been previously posted, I advise my clients that with mortgages and other debt some term is needed. Statistically it will not be used but sometimes it is.
With whole life insurance it is always paid off if kept in force. Buying whole life insurance when young or a convertible term is extremely wise. A large amount of whole life insurance can be bought at a low cost while young and healthy. When older and unhealthy a small amount of insurance is very costly.
"All life insurance is term"... more correctly put, "All life insurance is YRT". Other "term" setups are essentially "crippled whole life" and an overpayment on the YRT premiums in the early years to supplement the shortfall in later years (and generate profit for the insurers)
When a Term 20 or Term 30 are lapsed before the end of the level term period, the premium overpayment accumulation is forfeited by the policy-holder (become additional profits for the insurer). Fact is that the percentage of T20 or T30 that are kept to the end of the level period is indeed low.
Term-20 or Term-30 with ROP are merely added cash cows for the insurers and an even greater rip off for consumers.
Mind you, there is a place for "term"; it is best suited for defined period and defined single needs. Full stop.
Last edited by Ami : 01-25-2009 at 03:05 AM.
Reason: typo
If the cash value insurance concept is so fantastic... I would like to know where I can purchase cash value homeowners and cash value auto insurance...?
I see no difference of casualty ins, the cost of pure risk of the potential event or economic loss, to that of life insurance, and the death of the insured being equal to the house burning down, speaking purely economics not emotions. Due to inflation, costs of home and auto ins gets more expensive which emulates that of advancing age of a persons life... Why do we not get priced out of home or auto ins...? Higher cost of insurace but purcasing with inflated dollars, so maybe the cost isn't so much greater, really. Cash value must be the answer there too, huh...? Or maybe not. If one is so much greater for life, why not for casualty too...?
I totally agree, which is why I sell "Term to Age 121" No Lapse UL for those who want permanent coverage...and let them save their own money rather than buying overpriced Whole Life.
Well except the GIANT GAPING HOLE in his summary. We all DIE. We don't just quietly pass away. We all DIE. I know hundreds (probably more likfe thousands) of people that have homes. I know of probably 2 that have total losses on the home.
Re: Whole Life Insurance
Yea, I guess I didn't see the humour. You must be Dennis Miller funny. 
Linear Mode
