Ratings Updates

Entries for October 2011

No material ratings changes this month though Swiss Re, one of the industry’s largest reinsurers, was upgraded by S&P from A+ to AA-.

Other news:

·         An article this week in the Wall Street Journal raised questions about reserve adequacy and an industry debate about reserve standards for a form of universal life insurance designed to provide guaranteed premium rates for term-like coverage over extended periods of time.  Local company Protective Life was one of three companies highlighted as using reserving practices that were under scrutiny by regulators.  At the extremes in the debate would be the requirement to hold additional reserves to back those policies, restricting the amount of available capital and, hence, the overall financial health of the company.  Informal conversations with Protective indicate there is no major concern even if the additional reserves are required of them.

·         The White House eliminated the CLASS Act which was intended to provide long term care insurance as being unfeasible.  This move should prove interesting in the debate about health care but will also provide stimulus for practitioners to accelerate discussions of privately owned long-term care solutions.

·         Conning Research has published a paper highlighting the challenges facing the industry including an extended period of low interest rates (as we have commented in the past) and the long term implications of the downgrade in our sovereign debt.

·         Index annuities seem to be a hot item, especially in the wirehouses, offering guaranteed minimum returns and some participation in the market.

·         Sales in the Life Settlement industry dropped about 50% in 2010, following a 36% drop in 2009, reflecting the continued challenges facing them.

We continue to have the opportunity to help our clients work through some challenging questions about the best use of existing life insurance policies, finding unique value opportunities not always readily obvious.  Please call us at 205.414.9955 if we can be of help to you with concerns for any of your clients’ life insurance assets.