First AIG now Hartford & Met wow…Let’s just hope Met & HIG ratings are not impacted.

we had a metlife corporate bond yielding 9% yesterday.   my how things have changed

I have enough on the books to get my attention. I’ll need to get up with someone at home office or the insurance companies to talk me through how clients are protected in a worse case scenario. One would think the investments are worth what they are worth and that the insurance part (which usually doesn’t get used but that is why you buy a VA to start with) is the only thing in question. It’s a big question though…

The investments are fine.  The only issue is the guarantee which is only as good as the claims paying ability of the company. 

Yes, investments are all in separately managed accounts so they’re with the mutual fund companies.  Creditors have no claim to these.  The guarantees are the only ones that are as good as the promise the company makes.  Now, VA companies generally have this fraternity thing going on where they bail each other out for the good of the entire VA market.  Exception is AIG who got bailed out the the US govt.  Hartford got a capital infusion from Allianz.  If these two fail (i.e. not get bailed out), then just forget about the entire economy in general cause we won’t have any.

Not much to worry about on the MET side, I won't comment on the HIG side.  I've got a vested interest in knowing the answer to this one...I'm a former MS broker who moved to MET a few years back, and have about $20MM in client assets in MET VA's.

The company is sound, just dragged down in sympathy with the other financials and insurers (We can thank Harry Reid for the insurance part).  The specific answer to the question though is that the guarantees are covered by reinsurance, market hedges, product design, and ultimately, state guarantee funds...  Just as we saw in the case of AIG, the guarantees, regardless of the Fed. bailout or not, are never in doubt, a fact that state and federal regulators are making clear to producers nationally (to prevent replacement of AIG policies).

Hope that helps.

“The specific answer to the question though is that the guarantees are covered by reinsurance, market hedges, product design, and ultimately, state guarantee funds”

I think MET will be ok, however Allianz just purchase a chunk of Hartford. So that is good and bad. Good because Allianz is huge and appears not to have the troubles of AIG. Bad because of the obvious, that Hartford needed to sell some of itself(to stay alive?)

I think the anti-annuity theme is how can we trust anything to be there down the road. For example, Met is running a 7 year fixed annuity at 6.35%. That on the surface sounds great. Client asks is it guaranteed. You say, by Met. They scratch their head.

I think MET will be ok, however Allianz just purchase a chunk of Hartford. So that is good and bad. Good because Allianz is huge and appears not to have the troubles of AIG. Bad because of the obvious, that Hartford needed to sell some of itself(to stay alive?)

Under the agreement, Allianz has purchased preferred shares of $750 million, at $31 per share, of convertible to common stock, and $1.75 billion of 10% junior subordinated debentures. The debentures are callable by The Hartford at par beginning ten years after issuance.



Additionally, Allianz SE has also received warrants, which entitle it to purchase $1.75 billion of common stock at an exercise price of $25.32 per share. The warrants expire in seven years.



The Hartford, Connecticut-based company’s Chairman and CEO Ramani Ayer said, “We are pleased to have Allianz, one of the world’s leading insurers and financial services providers, as a key investor in The Hartford. This investment strengthens our capital position and enhances our ability to weather volatile markets while we vigorously compete in our businesses.”



Do companies who are doing real well normally ask for money from competitors?

Interesting.  I had lunch with a guy from Lincoln today and asked him about the Hartford situation.  He said that we are just now finding out how bad some of these insurance companies are.  He said he had some friends wholesaling for Hartford and they were clueless about the deal.  They all had no idea how much exposure HIG had to the sub prime mess. 

spiff-i would question how the hartford wholesaler, who likely worked at a different fund company or insurance firm 3 years ago has any relevant info he didn’t hear from a talking head occupying the ladder rung just above him.  even if it came directly from the ceo, we know how well their reassurances have turned out.  i am not saying hartford is in trouble, but the local wholesaler is the last person who would have any clue as to their TRUE underlying financial position.

spiff-i would question how the hartford wholesaler, who likely worked at a different fund company or insurance firm 3 years ago has any relevant info he didn’t hear from a talking head occupying the ladder rung just above him.  even if it came directly from the ceo, we know how well their reassurances have turned out.  i am not saying hartford is in trouble, but the local wholesaler is the last person who would have any clue as to their TRUE underlying financial position.

I am fearful of Lincoln right now.  Their bonds have been getting hammered pretty badly lately which indicates something might be taking place.  On top of that, I am not sure I would trust the wholesalers anymore than I would our Wachovia complex manager…In my book, they are both on the same level, which is just about zero right now…