As retained asset accounts (RAA’s) come under scrutiny from regulators & legislators, changes will be made. In the meantime, the National Association of Insurance Commissioner’s (NAIC) has posted a guide to Retained Asset Accounts & Life Insurance - What Consumers Need to Know About Life Insurance Benefit Payment Options. This guide includes a description of Retained Asset Accounts, Key Questions and other information. The link is:

http://www.naic.org/documents/consumer_alert_raa.htm

Tony Steuer
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance

The National Underwriter has a good follow-up article discussing what steps the National Association of Insurance Commissioners is taking on the issue of the life insurance companies and notifications & policies regarding the payment of death benefits. Visit:

http://www.lifeandhealthinsurancenews.com/News/2010/8/Pages/NAIC-Chimes-in-on-Retained-Assets.aspx

Tony Steuer
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance

One of the hottest topics in the life insurance area right now is that of the issue of Life Insurance Companies putting death benefits payable to beneficiaries into interest bearing checking accounts rather than paying out the proceeds. There have been a number of articles this week on this issue along with investigations, etc. The following is a summary of the issues and links to some of the articles. Please note that there are always at least two sides to an issue and not always a clear cut “right answer”.

Some of the articles play off the fact that life insurance companies are making money off of soldier’s deaths. Which is a partial truth in that there are other issues of concern and that these policies are not specifically aimed at soldiers, they apply to all insured’s and beneficiaries. The matter to pay attention to you is your particular situation with your company and your policy. Make your own judgement and do what’s right for you. This issue is being stretched in many directions.

The basic issue is that some life insurance companies are informing families of military personnel in particular and other beneficiaries in general that policy payouts “death benefits” are placed in an interest-bearing account. The companies retain the funds in corporate accounts and do not place the cash in banks insured by the Federal Deposit Insurance Corporation (FDIC). The companies issue a checkbook to the family and pay interest on the funds. The issues are that the companies are allegedly earning a higher rate of interest than they are paying out, that the balance is not covered by the FDIC and that these are not real checks. Some companies have also been accused of misleading beneficiaries by having the checks issued with a bank’s name on the check while still retaining the funds. A key to consider and that is mentioned at the bottom of this long posting is that insurance company assets are covered by State Guaranty Associations - visit The National Organization of Life and Health Insurance Guaranty Associations (NOLHGA)- www.nolhga.com for more information.

Keep in mind each company has their own policy. This is not true of all companies.

The benefit of having this checkbook approach is that it gives a beneficiary time to think about what to with the money rather receiving a check and then having to do something with it. Individuals in times of emotional stress are open to being taken advantage of and not just by insurance companies.

This is from the blog at http://www.lifehappens.org/blog/p,268/: For many companies the automatic settlement is to put the money in an interest-bearing checking account, but if the beneficiaries select a check for the proceeds, it is paid out as soon as the paperwork is processed and approved, sometimes in a matter of days. And in fact, most beneficiaries do request a lump-sum payout.


Bloomberg has also chimed in with a couple of articles on this - the first is titled: Beneficiaries Can Bank Proceeds, Bypass Life Insurer Accounts (7/29/2010)- which is similar to most of the other articles - http://www.bloomberg.com/news/print/2010-07-29/beneficiaries-can-cash-proceeds-bypass-life-insurer-checking-accounts.html

A question that has popped up is while insurance companies are under fire - why isn’t the advisory council who oversees life insurance for military service members under scrutiny - shouldn’t they have caught this. Apparently, they don’t attend the meetings - oops. - Bloomberg posted an article on 8/6/2010 that addresses this and is of a stronger opinion titled “Making a Profit on Soldier’s Death Benefits” - Why are large life insurance companies profiting from billions of dollars they hold on behalf of the families of fallen military service members? The U.S. Veterans Affairs Dept. and the National Association of Insurance Commissioners say they are reviewing military life insurance arrangements. A half-dozen members of President Barack Obama's Cabinet sit on an advisory council overseeing life insurance for military service-members. The last time the council met, in November, none of the Cabinet members attended the annual meeting. Aides accustomed to handling the issue for their agencies go as representatives. The bottom line: Congress and the Administration are calling for an overhaul of life insurers' military death benefit practices. http://www.businessweek.com/print/magazine/content/10_33/b4191031729834.htm

AM Best has added an article on this titled: US House Bill Would Increase Life Insurers' Retained-Asset Disclosures (8/2/2010) - Investigations by the New York attorney general and the U.S. Department of Veterans Affairs into life insurers' retained-asset accounts has drawn some action from congressional lawmakers. Just before members of the House of Representatives left for the summer recess, a bill was introduced that would require further financial counseling and disclosure information for policy recipients, in addition to calling for the VA to issue regular reports to Congress.

New York Attorney General Andrew Cuomo promised an investigation, immediately issuing subpoenas to life insurers. He
started with Prudential and MetLife, then expanding it to several other companies, including New York Life Group, Genworth
Financial Inc., Unum Insurance Group and Axa Financial Group.

"We did get the subpoena," said Michael Arcaro, spokesman of Axa Equitable, parent company for the concerned affiliate,
MONY Life Insurance Co. "We are committed to cooperating fully with our regulators to gather information about retention
accounts." Similar compliance promises came from other life insurers. "We will cooperate to the fullest extent with this request, but we strongly disagree with the characterization of these accounts by the N.Y. [attorney general] and other media coverage," said Unum Insurance Group spokeswoman M.C. Guenther. In a rebuttal of accusations released by Unum (NYSE: UNM), the company says: "No beneficiary who has received payment by a retained asset account has ever been denied their full benefits due. In fact, with the interest earned on these accounts, most beneficiaries earn more than the full benefit amount. ... We guarantee a set interest rate (currently 1%) regardless of the performance of our investments, meaning the beneficiary has no investment risk." The company further points out, in response to criticism that the accounts are not FDIC-insured, that these funds are backed by state guaranty associations."We received the subpoena on Friday, and we're reviewing it now," said Tom Topinka, a spokesman for Genworth Financial He said Genworth beneficiaries are given dispersal options. Nine in 10 choose a lump-sum check, he said. Almost all of the others choose some form of retained-asset account. About 1%, he said, don't send the paperwork back to choose a dispersal method, so their funds are held in an account. "It's always been about choice," Topinka said. New York Life gives five options, the most popular of which is the lump sum chosen by more than 70%, according to a company spokesman. AM Best Article: http://www3.ambest.com/frames/FrameServer.asp?Site=news&Tab=1&RefNum=140286&AltSrc=104

AM Best has also posted another article (8/5/2010) with a response from the ACLI (American Council of Life Insurer’s) titled: ACLI: Life Insurer Profit on Death Benefit Accounts Is Good for All Insurance Customers. U.S. life insurers' profit on retained asset accounts but that benefits all insurance consumers, say representatives from the industry's main trade group. A state insurance commissioner, meanwhile, says his department hasn't received any complaints about these now-controversial death benefit accounts.

Jack Dolan, the ACLI's vice president of media relations, said his group, as a matter of policy, doesn't talk about lawsuits
involving members.However, it believes these accounts "greatly benefit beneficiaries, and that is our clear understanding from those who have used" them, he said. Once they're reviewed "by all parties that have expressed interest" in them, they will come up with the same conclusion. "We are not shying away from the fact that life insurers are also benefiting in some way," he said.

New Jersey Insurance Commissioner Tom Considine said a review within his department has failed to turn up a single
complaint regarding these accounts. "We have people that have worked here 42 years," he said. Considine described them as a tried-and-true settlement option that has been around for 30 years. He said there have been department discussions around better disclosure requirements regarding the FDIC. "Maybe something that says bear in mind there is no FDIC coverage for checks included in this checkbook, however there is state guaranty insurance coverage," Considine said.
RAAs in New Jersey would have $500,000 of coverage through the state guaranty fund, Considine said. He became familiar
with the product on a tangential basis during a 17-year career at MetLife."I've learned a lot more about it in the past week since Prudential is the largest domestic company regulated by this department," he said. "I wanted to make sure that this department has handled retained asset accounts in a consistent way since their inception 30 years ago."
This article can be found at:
http://www3.ambest.com/frames/FrameServer.asp?Site=news&Tab=1&RefNum=140335&AltSrc=104



Tony Steuer
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance

The life settlement marketplace as previously discussed in this blog continues to be an industry with question marks and intrigue. Federal and State Regulators along lawmakers are continuing to monitor, track and gain oversight over these transactions. The regulation has started and most State Insurance Departments have adopted a version of the National Association of Insurance Commissioner’s (NAIC) Model Act on Life Settlements. Which is a good start - however there is a long way to go.

To refresh: a life settlement is a transaction in which a life insurance policy is sold to a third party - a very basic definition. This third party then takes over payment of the premiums. Typically, this will involve a policy that has been in-force for a time and then is sold to either another individual or entity that has no insurable interest for the insured. There are also Stranger Initiated Life Insurance policies (also known as STOLI) which are obtained solely for the purpose of being sold to a third party with no insurable interest.

On July 22, 2010 — the Securities and Exchange Commission (SEC.) released a staff report recommending that life settlements be clearly defined as securities so that the investors in these transactions are protected under the federal securities laws. The SEC, states that investors in individual life settlements, would benefit from the application of baseline standards of conduct to market participants. The report is on the SEC Website at: http://www.sec.gov/news/studies/2010/lifesettlements-report.pdf

In July, the Government Accountability Office (GAO) also issued a report that expressed regulatory concerns. They also reviewed the fact that despite their potential benefits, life settlements can have unintended consequences for policy owners, such as unexpected tax liabilities. Also, policy owners commonly rely on intermediaries to help them, and some intermediaries may engage in abusive practices. The GAO report addresses how the life settlement market is organized and regulated, and what challenges policy owners, investors, and others face in connection with life settlements. GAO reviewed and analyzed studies on life settlements and applicable state and federal laws; surveyed insurance regulators and life settlement providers; and interviewed relevant market participants, state and federal regulators, trade associations, and market observers.

What GAO Found: The life settlement market is organized largely as an informal network of intermediaries facilitating the sale of life insurance policies by owners to third-party investors. Policy owners may sell policies directly to investors in some cases, but owners and investors commonly use intermediaries. Life settlement brokers represent policy owners for a fee or commission and may solicit bids for policies from multiple life settlement providers with the goal of obtaining the best price. Life settlement providers buy life insurance policies for investors or for their own accounts. No comprehensive data exist on market size, but estimates indicate it grew rapidly from its inception around 1998 until the recent financial crisis. Estimates of the total face value of policies settled in 2008 ranged from around $9 billion to $12 billion.

State and federal regulators oversee various aspects of the life settlement market. Life settlements typically comprise two transactions: the sale of a policy by its owner to a provider, and the sale of a policy by the provider to an investor. As of February 2010, 38 states had insurance laws specifically to regulate life settlements. State insurance regulators focus on regulating life settlements to protect policy owners by imposing licensing, disclosure, and other requirements on brokers and providers. The Securities and Exchange Commission (SEC), where its jurisdiction permits, and state securities regulators regulate investments in life settlements to protect investors. One type of policy (variable life) is considered a security; thus, settlements involving these policies are under SEC jurisdiction. SEC also asserted jurisdiction over certain investments in life settlements involving nonvariable, or traditional, life insurance policies, but their status as securities is unclear because of conflicting circuit court decisions. All but two states regulate investments in life settlements as securities under their securities laws.

Inconsistencies in the regulation of life settlements may pose challenges. Policy owners in some states may be afforded less protection than owners in other states and face greater challenges obtaining information to protect their interests. Twelve states and the District of Columbia do not have laws specifically governing life settlements, and disclosure requirements can differ among the other states. Policy owners also could complete a life settlement without knowing how much they paid brokers or whether they received a fair price, unless such information was provided voluntarily. Some investors may face challenges obtaining adequate information about life settlement investments. Because of conflicting court decisions and differences in state laws, individuals in different states with the same investments may be afforded different regulatory protections. Some life settlement brokers and providers may face challenges because of inconsistencies in laws across states. GAO developed a framework for assessing proposals for modernizing the financial regulatory system, two elements of which are consistent consumer and investor protection and consistent financial oversight for similar institutions and products. These two elements have not been fully achieved under the current regulatory structure of the life settlement market.

The GAO recommended that Congress may wish to consider taking steps to help ensure that policy owners involved in life settlements are provided a consistent and minimum level of protection. SEC agreed with our matter for congressional consideration, and the National Association of Insurance Commissioners did not agree or disagree with it but raised related concerns.

The GAO report can be found at: http://www.gao.gov/new.items/d10775.pdf

Given all of these issues and concerns, it seems wise to be very careful with life settlements and if you are considering being involved with a life settlement, make sure that you fully understand all of the issues and work with a qualified advisor with experience in this are and who does have any bias (skin in the game).

Tony Steuer
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance

In another good sign for the life insurance, two of the four major rating services - Moody’s and A.M. Best have both revised their outlook on the life insurance to stable from negative.

The Moody’s report titled: "Financial Flexibility of U.S. Life Insurers Improves as Debt and Equity Markets Recover: 1Q10 versus 1Q09." details U.S. Life Insurer's Improved Financial Flexibility. Numerous year-over-year comparisons underscore the dramatic improvement in the financial condition of the U.S. life insurance industry, says Moody's Investors Service in a new report. These favorable indicators are in line with the decision Moody's made last month to change its outlook on the industry to stable from negative.Moody's says almost all of the 19 U.S. life companies tracked in this report posted positive operating earnings and net income during the first quarter of 2010. In all, the group's operating income increased $9 billion over first quarter 2009; its net income increased $11 billion. The report can found on their web site at www.moodys.com

The AM Best press release titled “A.M. Best Revises Rating Outlook to Stable for U.S. Life Insurance Companies is dated July 15, 2010. The first paragraph follows: Since the fourth quarter of 2008, A.M. Best Co. has taken a preponderance of negative rating actions on U.S. life and annuity companies as the industry’s operating performance deteriorated and company balance sheets weathered the effects of the global financial crisis. Through these actions, A.M. Best has largely factored in the potential impact of macroeconomic issues such as the troubled real estate sector, high unemployment, low interest rates, muted consumer spending, European sovereign debt crisis and rising credit defaults. Although 2009 saw life/health
companies experience their highest level of financial impairments since 1999, A.M. Best believes the industry’s current capitalization is adequate and can withstand the impact of additional stress scenarios that incorporate ongoing elevated impairments and modest overall economic growth at current rating levels. As such, A.M. Best has revised its rating outlook for the U.S.life/annuity sector to stable from negative. Visit www.ambest.com for more details.

Tony Steuer
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance

Life Insurance is a long term proposition - even with a term policy, you are usually engaging in a contract that will last for ten or more years. With a permanent/cash value life insurance policy, you are looking at decades, so reviewing and understanding the Financial Strength Ratings of a life insurance company is critical (click here to go a page with links to all rating services)

A.M. Best, which has been in the business of rating life insurance companies for over 100 years (a long time themselves), released a list recently of 11 Life Insurance Companies that have received an A.M. Best Credit rating of ‘A’ or better for 75 years or more. The companies listed are: Aviva Life and Annuity Company, Country Life Insurance Company, Genworth Life & Annuity Insurance Company, Metropolitan Life Insurance Company, New York Life Insurance Company, Northwestern Mutual Life Insurance Company, Penn Mutual Life Insurance Company, Principal Life Insurance Company, Prudential Insurance Company of America, Standard Insurance Company and Western & Southern Life Insurance Company (visit www.ambest.com for more information).

Please note that this is not a recommendation for these companies or against any other company - just simply a list of companies that reached an achievement worth noting. It’s important to review other rating services and current financials before purchasing a life insurance policy.


Tony Steuer
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance

Over the last few years, a new type of life insurance marketplace has emerged known mostly as the “secondary marketplace”. The transactions can have many names, though for the most part fall under the term “life settlement”. The premise is deceptively simple whereby a policy owner sells their policy to another party. As with any type of financial arrangement, this concept has been pushed to many different extremes - some of which have now been banned. This is a very tricky transaction for which there are lots of factors to consider which I’ll try to cover in this blog in the future. The main thing to be aware of is that if you don’t understand this type of transaction, you should stay away from it. If you do decide to pursue it, you should read up on it and learn what it’s about - a good place to start is with your State Insurance Department - links to the various State Web Sites are on this page (click here)

An example of what can happen is illustrated in this story from the Wall Street Journal: Lawyer's Heirs Fight Insurers in $56 Million Policy Intrigue
http://online.wsj.com/article/SB10001424052748704247904575240201550608376.html?mod=WSJ_latestheadlines

Life is truly stranger than fiction....


Tony Steuer
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance

Yesterday, the U.S. Senate passed their version of the Financial Overhaul bill that will now be reconciled with the U.S. House of Representatives version. The bills covers a number of issues including the creation of an Office of National Insurance within the U.S. Treasury Department. The Senate version would have this office monitor the industry (specially in terms of insurers that would pose a systemic risk to the U.S. economy. This Office would not be a new regulator, however the Office would recommend ways to modernize insurance regulation. The House version is similar.

The fact that a new regulator is not being created is important as it recognizes the fact that the current regulatory system for insurance companies is effective - click here for information on my website and links to various State Insurance Department and the National Association of Insurance Commissioners - http://www.tonysteuer.com/Resources/Resources/Regulatory.htm).

If you have a concern about the stability of your Life Insurance Company, there are links to the various ratings agencies on this page - http://www.tonysteuer.com/Resources/Resources/Rating_Services.htm

There is also The National Organization of Life and Health Insurance Guaranty Associations (NOLHGA)- www.nolhga.com - which is a voluntary association composed of the life and health insurance guaranty associations of all 50 states, the District of Columbia, and Puerto Rico. NOLHGA was founded in 1983 when the life and health insurance industry decided there was a need for a more efficient mechanism for coordinating and resolving the often complex issues resulting from the insolvency of an insurer licensed to do business in multiple states.



Tony Steuer
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance

In another encouraging report released this week by Moody’s Investor’s Service, the life insurance industry outlook has been returned to stable from negative. There are particular companies that continue to face issues, however, for the majority of companies, the outlook is favorable. Further information can be found on my site at http://www.tonysteuer.com/Resources/Resources/Rating_Services.htm

Moody's Industry Report, "U.S. Life Insurance: Outlook Returns to Stable," is available on www.moodys.com. Their opinion reflects that more favorable economic and capital market trends signal the stabilization of life insurers' business and financial prospects, said Moody's Investors Service. Elevated stock prices have buoyed life insurers' variable annuity and asset-based businesses, moderating corporate defaults and bond rating transitions will continue to assist profits and regulatory capital levels, while the gradual improvement in U.S. employment and consumer spending is expected to create more demand for life insurance products.

Life insurers will be showing improved investment income, operating income, and net profits, leading to stronger internal capital generation, said the rating agency. Moody's said that the likelihood of a downside stress scenario occurring and its adverse impact on the life industry - which had underpinned the negative outlook since October 2008 - are diminished now, given the improving environment and the significant additional capital and liquidity buffers raised by the industry in recent quarters.

"Although we expect the economic recovery to remain sluggish and vulnerable to global market disturbances, we believe that the underlying trends indicate stability for the financial prospects and credit profile of the U.S. life insurers over the medium-term," said Laura Bazer, a Moody's Vice President and Senior Credit Officer, who wrote the new Moody's report that discusses the revised outlook. "U.S. life insurers are simply in a much better position now than they were a year ago to weather a second downturn, should one occur," said Moody's Bazer.

Areas of weakness and concern for the industry remain, however. In particular, Moody's expects life insurers to face higher-than-average asset losses in 2010-11, particularly from real estate -related assets (i.e., commercial mortgage loans, commercial mortgage-backed and residential mortgage-backed securities). "Moody's has increased its expected loss projections for the hard-hit real estate sector due to continuing asset performance deterioration," Moody's Bazer commented, "however, these losses will remain manageable for insurers as their operating earnings and capital generation continue to improve."

At present, about one-third of Moody's rated life insurance issuers have negative outlooks, following a significant number of downgrades in 2008-09. Many company outlooks should return to stable over the coming months, at a pace determined by each company's credit profile and the expected impact of the on-going trends and risks on the companies.



Tony Steuer
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance

In a report released last week, Fitch Rating services noted that the U.S. insurance industry raised $38.6 billion in capital in 2009 through the first quarter of 2010. Generally, Fitch views the industry's capital raises as a positive factor in the rating process, because it addressed concerns regarding companies' capitalization, liquidity position, and overall financial flexibility. The industry raised the majority of this capital in the second quarter of 2009 as the capital markets showed the first signs of opening after being essentially closed for the latter part of 2008 into the first quarter of 2009. Of this capital, approximately 78% was in the form of fixed income securities, the majority of which were senior notes and 22% was common equity.

Life insurers led the capital raising efforts for the industry with $26 billion, or 68% of the total amount, raised by all insurers. When Fitch includes multi-line insurers with large life operations, this total climbs to $32.7 billion, or 85% of the total. The capital position of the U.S. life insurers was more adversely impacted during the financial crisis over the past two years compared to non-life insurers primarily due to greater investment risk and higher asset leverage, which drove greater investment losses, and secondarily from higher reserves requirements from variable annuity guarantees.

Fitch expects the life insurance industry's average 2010 financial leverage (excluding accumulated other comprehensive income [AOCI]) to increase modestly given new issuances in 2010 is partially offset by equity growth from improved net income a primary result of easing realized investment losses. The life insurance industry's financial leverage was relatively unchanged in 2009 at 23.3% compared with 2008 at 23%, although up from 2007 levels at 20.9%. Fitch also expects the average interest coverage ratio (as measured by operating EBIT / interest expense, where EBIT is earnings excluding realized gains and losses and before interest and taxes) for life insurers may improve in 2010 relative to 2009 but remain below historical levels. The combination of lower operating earnings and higher interest expense put pressure on the life industry's average 2009 coverage, which was 11 times (x)to 12x, similarly to 2008, but much lower than 2007 at 14x to 15x.

Fitch's special report 'Capital Raised in U.S. Insurance Sector: Dominated by Life Insurers' is available by clicking on the link or at 'www.fitchratings.com' under the following headers:

Sectors >> Insurance >> Research



Tony Steuer
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance

The life insurance industry outlook continues to improve. During the financial “downturn” - well, that’s a mild term - there was concern and deservedly so, about the financial strength of some life insurance companies. As the economy continues to improve, so does the financial strength of life insurance companies as previously mentioned in this blog. Information on the various rating companies can be found on this site at http://www.tonysteuer.com/Resources/Resources/Rating_Services.htm

A new report from Moody’s Investor Services further confirms this. This report titled “Moody's: U.S. Life Insurers' Capital Rebound Bolsters Credit Profile” can be found at Moody’s web site www.moodys.com . A review of the YE 2009 statutory statements of rated U.S. life insurers confirms a distinct capital rebound from the prior year, Moody's Investors Service says in a new report. The improvement was driven by capital contributions, industry-friendly regulatory and accounting changes, and stronger earnings, uplifted by a resurgent equities market. "Looking at 2010," says the report's author, Senior Vice President Scott Robinson, "we expect the industry to benefit from a better credit environment, although there may be some pressures on capital from commercial real estate and non-agency RMBS investments, especially in a downside stress scenario." "Nevertheless," the analyst states, "continued capital generation through organic earnings, on top of the currently robust capitalization, makes it more likely that a number of companies could see their ratings outlooks move back to stable from negative."

The life industry's increase in capital and surplus during 2009 was driven primarily by operating income surging up to $41 billion from 2008's $9 billion loss, largely because of the recovering stock market, which bolstered earnings in both group and individual annuity operations. Most companies reported materially better regulatory capitalization, both in terms of the absolute amount of regulatory capital and the National Association of Insurance Commissioners’ Risk Based Capital (or NAIC RBC) ratio. Overall, the median NAIC RBC ratio went up 35 points to 429%. Downplaying the significance of the improvement in the NAIC RBC ratio, the analyst points out that much of the increase is due to a weakening of regulatory capital standards. "Although the industry's reinforced capital position is significant," Mr. Robinson says, "certain life companies will be more vulnerable to downside events and thus will have a greater need to maintain their capital cushion rather than returning any "excess" to shareholders later in 2010."

Please contact my office if you wish to discuss the impact on you and your life insurance (or your client’s life insurance).

Tony Steuer
California Life and Disability Insurance Analyst
Author: Question and Answer on Life Insurance

Life Insurance Company ratings are a critical component in monitoring a life insurance policy. Life insurance policies are long term contracts so it’s important to know the likelihood that a company will still be in existence when needed. Fitch Ratings is one of the four major rating services (information and links for the rating services can be found on this site at http://www.tonysteuer.com/Resources/Resources/Rating_Services.htm

Fitch recently released a report that discusses the methodology used for their Insurer Financial Strength Ratings (IFS). This report is useful in understanding what goes into a rating for a life insurance company from Fitch. This report can be found on Fitch’s web site at http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=506285

Tony Steuer
California Life and Disability Insurance Analyst
Author: Question and Answer on Life Insurance

It’s important to monitor any life insurance policy with full reviews at least every three years. Conning Research has released a study showing that Life Insurer Profitability is down. What this means is that if Life Insurance Companies are making less money, your policy performance may be less than projected. Companies may need to increase their cost of insurance and expense charges. The press release follows:

HARTFORD, Conn., March 16 /PRNewswire/ -- Life insurers' 2009 results underscore the need to better analyze and understand their expense base, and to take actions on a more consistent basis, according to a new study by Conning Research & Consulting. "Life insurer profitability has been squeezed by declining premiums and low investment yields," said Terence Martin, analyst at Conning Research & Consulting. "Of course, in this environment, expense analysis and control are of paramount importance to senior management. Yet our analysis indicates that those insurers who focus on expense management consistently through up and down markets are the consistent high performers."

The Conning Research study, "Life Insurance Expenses: Breaking Through the Edge of Efficiency" explores individual life insurance expenses, analyzes how much economies of scale and product mix influence a company's efficiency, and how much is more directly under the influence of management.

"Life Insurance Expenses: Breaking Through the Edge of Efficiency" is available for purchase from Conning Research & Consulting by calling (888) 707-1177 or by visiting the company's web site at www.conningresearch.com.

Visit my website at www.tonysteuer.com to learn more about Life Insurance Policy Evaluations.

Tony Steuer
California Life and Disability Insurance Analyst
Author: Questions and Answers on Life Insurance

A.M. Best has released a new report: "Life/Annuity Review & Preview 2010: Life Insurers Take Stock and Lay Groundwork for Recovery.

In the report, A.M. Best indicates that they are continuing their negative outlook on the life/health industry. The life insurance industry so far has survived the financial crisis-bruised certainly-but generally healthier than its financial services peers. The industry's asset side and capital strength was most notably affected. While capital measures have stabilized, A.M. Best believes that challenges remain that are driven by macroeconomic issues. Additionally, other less obvious trends may have greater, longer-term negative effects on insurers.

Among the issues addressed: Investments-Insurers' investment portfolios have yet to generate the full measure of expected losses, based on GAAP financial data and results of A.M. Best's industry survey. This view reflects concerns regarding sustainability of any positive economic trends, as well as the potential for volatile equity markets and the investment risk within commercial real estate. Life Reinsurance-A.M. Best's outlook for this segment is stable as reinsurers generally have been less affected by the financial crisis and have not underwritten the same level of risk as the direct writers. Individual Life-Precipitous sales declines have been exacerbated by some larger participants in this market having had to limit new business due to capital constraints and reserve funding issues. Individual Annuities-A.M. Best views the near-term prospects for overall individual annuity sales as limited given narrowing corporate bond spreads, generally "in-the-money" book of variable annuities industry-wide and less competitive choices for these products. Accounting & Regulatory-A.M. Best believes that many of the initiatives to provide near-term capital relief for the industry have removed some of the conservatism inherent in reserve and risk-based capital requirements. A.M. Best also is concerned with weak life insurance sales and in-force growth as well as the industry's overall shift to less creditworthy products. Sustainability of operating performance, stabilization of investment portfolios and some growth in absolute statutory capital levels will be required as precursors to a rating outlook change to stable. Access a copy of this special report. BestWeek subscribers can download a PDF copy of all special reports as well as the associated spreadsheet data. Non-subscribers can access an excerpt of each special report and purchase individual reports and spreadsheet data. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

Source: Investment Weekly News

Moody's Rating Services has released a report on Life Insurers 2009 Fourth Quarter Results - which finds that that Life Insurance Companies are stronger than a year ago.

New York, February 24, 2010 -- In general, quarterly operating earnings of U.S. life insurers have been stabilizing or improving during 2009, and -- despite some variability -- the fourth quarter affirmed that trend, Moody's Investors Service says in a new report.

There are several reasons for the industry's healthier financial condition. The rating agency cites a crucial external one -- the less volatile and higher levels of the equity markets, which have taken much of the pressure off GAAP and statutory earnings. Also, companies have been actively adjusting the risk profiles of their variable annuity products, both through re-pricing and product design changes.

Life insurance sales, which declined by record levels in the early part of 2009, have stabilized and — in some cases — have begun to increase. Annuity sales in the fourth quarter either held steady with the third quarter of 2009 or saw a small pick-up.

"In general, Q4 2009 results were in line with our expectations and the guidance provided by the insurers," states Vice President Ann Perry, the report's author. She explains that several companies posted stronger Q4 versus Q3 2009 net income (Genworth, Hartford, MetLife, Protective, Prudential, Torchmark), driven by a combination of lower investment losses and stronger operating earnings. Almost all companies posted stronger net income for Q4 2009 compared with Q4 2008.

"The industry's earnings improvement since early 2009 is an encouraging sign that the very worst in investment losses is likely over," Ms. Perry says. In addition, she thinks that it demonstrates business lines are stabilizing and that they are positioned for future growth. "However," the analyst adds, "we believe that returns on equity will be less robust going forward and that the rate of future earnings growth will be less than the industry has experienced in the past."

Despite the improved performance in Q4 2009 results, Moody's continues to maintain its negative outlook for the sector; it expects a gradual and uneven recovery — one hobbled by the weak economy and by constrained internal capital generation at the life companies.

Although investment losses are showing signs of leveling off or declining in certain sectors, such as corporate bonds and alternative investments, the rating agency points out that losses in commercial real estate-related investments are now increasing. "Although we expect investment losses to decline from the extremely high levels of 2008 and 2009," Ms. Perry states, "they are likely to remain well above the historical average throughout 2010."

The report is titled "Moody's Comments on U.S. Life Insurers' Q4 2009 Earnings."

Tony Steuer, CLU - Life Insurance Consultant

It appears that the Life Insurance sector will continue to have some issues to contend with in 2010. Fitch Ratings has just released a report titled: 2010 Rating Outlook Negative for U.S. Life Insurance Sector. Fitch Ratings continued to have a negative rating outlook for the U.S. Life insurance market. Factors contributing to this outlook include: operating fundamentals that remain under pressure, the fragile nature of the economic recovery, further expected deterioration in the commercial real estate market, and lower coverage metrics. Still, Fitch Ratings expects that the heightened level of rating downgrades experienced in 2009 will moderate materially in 2010. Please click here to go the Fitch Website for the full report.

It’s always important when obtaining a new policy or reviewing a current policy to check ratings with all rating services and review any other applicable financials for the life insurance company. For more information to meet your situation, please visit my website at www.tonysteuer.com

Tony Steuer, CLU - Life Insurance Consultant

Author: Questions & Answers on Life Insurance

Last week, A.M. Best Company issued a special report outlining its views on the investment environment for U.S. life/health insurers titled, “Mixed Signals: Has the Economy Begun Its Recovery?” A.M. Best believes that, despite signs of economic recovery, financial institutions’ loan portfolios have yet to generate the full measure of expected losses, and that same potential holds true for U.S. life/health companies.

A.M. Best states that as we enter 2010, it appears the deepest U.S. recession in decades is showing some signs of improvement. A.M. Best accepts the consensus view of respected economists surveyed in a report from the National Association for Business Economics, which states the U.S. economic recovery has begun. Credit spreads have narrowed
considerably for most asset classes, especially corporate bonds, non-housing related asset-backed securities and
agency mortgage-backed securities.

However, even though some pressure on life insurers’ invested assets has alleviated, A.M. Best is maintaining its
negative rating outlook on the life/health industry, given its perspective on the credit cycle and the potential
negative impact on life insurance companies’ asset portfolios. A.M. Best’s view reflects concern regarding the
sustainability of the positive trends (i.e., the shape of the economic recovery), as well as the potential for volatile
equity markets and headline investment risk within commercial real estate as the credit cycle unwinds.

A.M. Best believes economic growth is likely to be moderate and that it will be several years before the economy
returns to “normal.” This belief is underpinned by the fact that unemployment is expected to remain at elevated
levels; there is continued potential for further deterioration in financial institutions’ loan portfolios; and there is
limited flexibility with respect to interest rates as they are at historical lows.

To order the report, please visit the A.M. Best Web Site at www.ambest.com


Tony Steuer, CLU - Life Insurance Consultant

Author: Questions & Answers on Life Insurance

With all the mergers and changes in the life insurance industry, it can be a challenge to locate a lost policy. The following are a couple of ways to look for a policy:

1) The National Association of Insurance Commissioners offers a free resource on their site (www.naic.org)
which recommends the following steps:

• If you have the life insurance policy, find the full legal name of the insurance company that issued the policy, along with the company's mailing address and phone number. If the phone number is no longer active, you should contact the insurance department in the insurance company's home state. That insurance department will have records of the company's current name, mergers, and other changes, so that you will know which company to contact. NAIC provides a map with links to state insurance departments, at • http://www.naic.org/state_web_map.htm
• If you do not have the insurance policy, perhaps you know the company's name, and the state where the policy was purchased. If so, then use the same map linked above to locate that state's insurance department, which will have records of the company's current name, mergers, and other changes, so that you will know which company to contact.
• NAIC also provides a short questionnaire (https://eapps.naic.org/orphanedpolicy/) that can help you determine which state insurance department to contact for assistance.

PLEASE NOTE THAT STATE INSURANCE DEPARTMENTS DO NOT HAVE RECORDS OF SPECIFIC INSURANCE POLICIES. HOWEVER, THEN CAN ASSIST YOU IN LOCATING THE APPROPRIATE INSURANCE COMPANY, AND/OR BY REFERRING YOU TO A LIFE INSURANCE POLICY LOCATOR.

2) The Medical Information Bureau (MIB) also has a policy locator service (which they charge a fee for) on their web site at http://www.mibsolutions.com/lost-life-insurance/ - their web site states that that this is effective about 30% of the time.

Of course, there’s always Google. Do your own research before you pay. And good hunting.

Tony Steuer, CLU - Life Insurance Consultant

Author: Questions & Answers on Life Insurance