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Moody's does a stress test on life insurers, concluding a long period of low interest rates...

Moody's does a stress test on life insurers, concluding a long period of low interest rates "would subject (them) to substantial losses and could result in rating downgrades." Portfolios currently yielding an adequate 5-6% could drop below that figure, threatening policy benefits and profit margins.
Comments (4)
  • Native Texan
    , contributor
    Comments (-724) | Send Message
     
    Well, so much for LNC and HIG, which I was thinking about buying. Is CNO considered a "life insurer"?
    19 Aug 2011, 11:13 AM Reply Like
  • Robin Heiderscheit
    , contributor
    Comments (1825) | Send Message
     
    I am a perfectly good example of what Moody's is talking about. I bought an AXA Equitable annuity in 2002. The guaranteed minimum death benefit goes up 6.5% per year. I was 38 when I bought it. Using a $1 as my purchase price they are guaranteeing that at age 62 it will be worth $4. The current value of the assets today? $1.25. If you assume a 4% return going forward the actual value of the assets at age 62 would be like $2.

     

    I know they purchased some interest rate collars but I think the large life insurers are still dead on shorts, even at the current prices.
    19 Aug 2011, 11:59 AM Reply Like
  • youngman442002
    , contributor
    Comments (5131) | Send Message
     
    I have 5 life policy's...I am cashing out on three of them.....I will keep two...but I think I can do better on my own...I have...and at least I know what I have in my portfolio....mostly gold and silver right now...and that is good stuff Maynard..not some shopping center in Kansas City that gets flash mobbed every week
    19 Aug 2011, 12:24 PM Reply Like
  • Financial Insights
    , contributor
    Comments (945) | Send Message
     
    It says in the report it will only have a significant effect if interest rates are kept low for 5 more years. If that happens life insurers' shrinking profit margins will be the least of our problems.
    22 Aug 2011, 10:10 AM Reply Like
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