Bankers Life EIA's
26 RepliesJump to last post
Anon, thank you. Didn’t even think of that, check out the Weiss ratings here:
Be careful with that link. You have to make sure that you are looking at the correct company. Bankers Life Insurance Company of America (Texas) that is rated E in that link is not the same company as Bankers Life (Illinois). I don’t know if they are affiliated or not, but my guess is “no.” Anyway, it wouldn’t be much more comforting to know that Weiss has them rated “D”. Unlike other rating services, Weiss ratings can be looked at like school grades. An “A” rating from Weiss is a great rating. An A rating from A.M. Best isn’t so hot.S&P just downgraded Bankers Life.
There is a very simple way to resolve this question. One must compare apples to apples, and with investments that means controling for the amount of variance (risk) in each one. There are many different ways to do this, from the Sharpe ratio to the M**2.To calculate this risk adjusted returns for an EIA you basically have a distribution that is truncated on the left and the right sides of the tails. The bottom is typically set at something like 3% (minus the fees) and the top is usually something like .85(index ceiling). The index ceiling is typically around 10%. All you need to do ius write a simple algothrym calculating what the EIA's truncated yeild is (over some time period) adjusted for its truncated variance, and now you can compare apples with apples. L:et me put this in option terminology. An EIA is like an investment w/ an OTM long put and an OTM short call.
You know, I think I liked Anon’s answer better :).
I’m just kidding MV. But seriously, would you argue that with a 60+ year old client?