Editorial Comment from Jonathan A Shaw, CLU ChFC
 I have just returned from a national marketing meeting and thought you would enjoy reading about some of the information I received. Attending this conference, were almost all of the companies that we normally mention on our term or permanent spreadsheets. It was one of the most dreadful meetings I have ever attended, since each company was expected to discuss their current financial situation. This went on for about 12 hours! I can't ever remember a meeting like this and I have no idea why I had to suffer through this mind-numbing experience. To add insult to injury, companies whom we know have very strong financials, didn't want to be left out and made it a point to drag us through the entire minutia of their pristine financials. I hope all of you appreciate the hit I took for you. If you will read the next few paragraphs, I assure you, that you'll have a great summary of what I learned. You can consume this information in a few minutes, what it took me 12 hours to digest!
First of all, let me tell you, our industry is very strong and thriving! Most of our companies have used this financial crisis to reexamine their holdings and to shore up any troubled areas they may have had. When reviewing a life insurance company's financial position usually you are evaluating their surplus position. To over-simplify this, the surplus is the difference between the assets and liabilities, part of the liabilities are the reserves, which are held to pay future claims. When the surplus drops below zero, the company has to use it reserves to run the business, and is technically insolvent because it's can't then pay all of it's future claims. To avoid this, the NAIC came up with a formula to track the value of surplus called "Risk Based Capital" or "RBC" for short. Let me try and explain simply RBC. However there are better explanations on the web, so Google it or go to this link: http://www.naic.org/documents/committees_e_capad_RBCoverview.pdf
RBC uses a ranking system, which gives more points for the highest rated corporate bonds, best quality real estate and mortgages and assigns lower points to assets on the other end of the spectrum; junk bonds, bad real estate and mortgages in default. When a company's RBC scores 70 - 100, their state steps in to reorganize the company.
The NAIC first introduced RBC about a dozen years ago; it was a result of the debacle, which included Mutual Benefit Life Insurance Company. Mutual Benefit and several other life insurance companies were carrying junk mortgages and over leveraged real estate on their books at inflated values. The NAIC determined that it was dangerous for companies to count toxic assets at full value for surplus purposes. Obviously, the value of the assets, if they were needed immediately to pay claims, wouldn't create enough cash to pay the claims due.
Since then, our carriers have kept a constant watch on their RBC. Remember, companies are only required to have an RBC score of 100 to be solvent. To begin with, carriers thought they only needed a score of 200 to show the rating companies they were very solvent. The trend a dozen years ago was to try and maintain an RBC of 200. However, life insurance carriers have competed for the very highest ratings because they are aware that "flights to quality" inevitably mean more business for them. The mantra carried over these 12 hours of meetings that I attended, the companies want to maintain a 350 RBC or higher. The relevance of a 350 RBC?- This is what is expected by S&P to maintain an AA rating.
And after 12 hours of meetings, guess what? Every carrier that we represent has an RBC of 350 or more. (Seems like we could have shortened the meetings by about 11 hours and 45 minutes, down to about 15 minutes, explained this and gone off to play golf!)
FYI, It is easy to look up a company's RBC. Just type into Google, the name of the company + RBC + 2009. You will find plenty of articles about where the company's RBC stands today. For example when I typed in: Genworth + RBC + 2009, I found an article with this information in it:
Our consolidated U.S. life insurance companies will end 2008 with an anticipated risk based capital ratio (RBC) in the range of 420-450 percent ahead of expectations. Genworth targets its RBC ratio at the 350 percent level and our current capital levels are approximately $600-850 million above that target.
Give this a try with your favorite company or if a policyholder calls you, maybe you can assure them that our industry is strong. Please, call me if I can help you and I hope you appreciate that I sat through 12 hours of companies financials, just so you wouldn't have to! Okay! Now go out and write some business!!! | |
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New! Jon's $100 Million Club
Qualifications Based On Death Benefit on Term Cases!
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Get an additional 10% Commision When You Submit A New Application With ING In The month Of April
"Hazardous Duty Pay"
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Nationally known speaker, Ms. Terri Getman, JD, CLU, ChFC, AEP.
Shaw American always wants to bring our producers the best, so we are offering another one of our great Continuing Education Programs. Shaw American is lucky enough to have Ms. Getman who has been the leading Advanced Underwriting attorney with Prudential for over 20 years. Ms. Getman has addressed groups of financial planners and attorneys worldwide. Ms. Getman has spoken to over 100,000 producers and with her expertise in Estate, Business and Tax Planning, has helped place over One Billion dollars of life insurance in force with Prudential. Don't miss this unique opportunity.
When: Wednesday April 15, 2009
Time: Lunch 11:30 Class 12:00-2:00
Where: Standard Country Club
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New Campaign! New Campaign! "Jon's $100 Million Club"
Due to overwhelming response to our Rollover Campaign, Jon Shaw is now offering a once in a lifetime opportunity to qualify for the same great prizes based on TERM Face Amount!! To qualify all you need is $10 Million of Face Amount and you have 365 days to do it! It's that easy! |
Extended Until June 30, 2009!
All you need is $10,000 of Rollover or Target Premium and you will be qualified for the "Fabulous Prize Level". With $50,000 of Rollover or Target Premium you can you take a Day/4 Night Royal Caribbean Cruise which includes airfare! |
Did you know?
You can save postage by faxing applications and delivery requirements that do not have premium attached. This will allow for faster service and less money for postage. Also, for your convenience Shaw American provides you with Business Reply Envelopes that you can use to send everything that can not be faxed. Just click on the link above to email our supply person and we will be glad to get these right to you! |
Shaw American's New Annuity Quote Engine
Please check out our annuity quote engine. You can check out all of our carriers with the most current interest rates and product information.
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