Ratings Updates

Entries for February 2011

There were no significant changes in ratings for the top life insurance companies last month, reflecting a calm in the financial condition of most companies. There are clouds on the horizon, not so much as to stability as to how the score will be kept.
·         President Obama has proposed changes in taxation including provisions that impact corporate-owned policies as well as the dividends-received deduction that avoids double taxation of corporate earnings in variable life and annuity contracts. The lobbying has begun - we will see what the outcome is.
·         In addition there are numerous changes proposed in the fundamentals of life insurance accounting that will change how earnings are reported. Though final rules are still in the future, many believe the new rules will make it more difficult to understand the financial reporting due to significant variability in how the assumptions are developed to create the reserves, etc. How new business is accounted for is also on the table, which could affect the capital structure and impact how much new business a company can handle. As with all proposed changes we will watch and see what the final outcomes are and then assess their impact.
Other news items you may find of interest:
·         New life insurance sales were up 4% for the year in 2010. Whole Life and Universal Life were the strong performers.
·         Long Term Care: 
      ·         Rates vary significantly among companies writing this coverage according to the American Association for Long Term Care insurance - as much as 40%. It pays to shop around.
      ·         Guardian is the latest company of note to withdraw from the long term care market.
      ·         New York Life made a strong announcement of their commitment to long term care.

·         Several companies have increased prices and others are in the process for their universal life products with secondary (no-lapse) guarantees, including second-to-die products. If you are considering such products you may want to try to decide sooner rather than later because the price increases can be significant. As always, looking for alternative company offerings can help secure favorable prices but long term stability of the company is an important variable to keep in mind.