billp37

Cramer's Mad Money - Obama's Google Search (11/24/08)

Cramer's thursday November 13, 2008 commentary on annuity insurance companies has been echoed in a11/24/2008 email from Ted Geoca [MaxOut Savings]

"Insurance Companies

We have received a number of questions on the insurance companies’ financial problems.? The problems with the insurance companies appear to be the result of selling annuity contracts with guarantees attached to them.? Now that the stock market has plunged, some companies are in financial trouble and need to raise capital.? When I listened to the Hartford Insurance 3rd quarter earnings conference call the other day, I was amazed at how many times Wall Street analysts used the words “do not understand” in regards to their finances and annuity problems.? Subsequent to the conference all, the stock quickly sold off from $20 to under $10 per share then to under $5.? This has resulted in the absurd situation of Hartford buying a very small bank in Florida for $10 million so they could qualify for the TARP government bailout money.? Lincoln National Life and Genworth Financial Insurance Company quickly followed suit so they could get Federal bailout money as well.?



We believe that some insurance company annuity guarantees will fail and customers will have losses.? We believe that most of the problems in the insurance companies reside in the annuity units.? Most insurance companies are regulated by the states.? If we have a failure of an insurance company, state regulators will move in quickly to protect policy holders in other units such as life and property casualty.? When AIG had problems recently, the Federal Reserve stepped in with a bailout of over $100 billion.? If that had not occurred, the states would have stepped in to protect the policy holders of the insurance units from the mistakes made in the financial and derivatives units.? The bottom line is that if your insurance company fails, the states will move in to protect the policy holders.? Where annuities could have a problem is that the money could be restricted from withdrawal and any guarantees could be lost.? If an insurance company fails, your assets with the life insurance firm could be guaranteed up to a maximum of $100,000 protection; this applies to the cash value.? The guarantee does not include annuity guarantees with the policy.? Therefore, only the present value of a variable annuity is protected and only up to $100,000."

Sandia National Laboratories buys annuities from Prudential for its retirees. Some at SNL are getting worried. Perhaps for some good reasons.

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