Is Your Pension/Annuity Safe?

[JK]

FWIW -

The World's largest insurance company that manages/guarantees pensions and annuities is American International Group (AIG).

Currently they are in a cashflow crunch/meltdown.

Specifically, because their credit worthiness of their assets have been cut by S&P and Moody's (large derivative exposure/pending write-offs), AIG needs an IMMEDIATE cash infusion, or it will default on its obligations, thus having to declare bankruptcy.

In short, if AIG doesn't get bailed out, this week, your pension or annuity may not get paid. And the amount of cash infusion in question approaches $100.0B.

In summary, this crisis has immediate ramifications and consequencies to many MOA members.

JMHO

J.K.

P.S. More info: http://www.nytimes.com/2008/09/16/business/16aig.html?pagewanted=2&_r=1&ref=business

P.P.S. Same's true for AIG life insurance policies being in jeopardy.

 

[sjbmw]

The scramble to save AIG is on. The treasury bailing out an insurance company. What's the world coming to?

Oh yeah, credit default swaps. The "Financial weapons of mass destruction".

Got pension?


http://www.nytimes.com/2008/09/16/opinion/16lewitt.html?_r=1&partner=rssnyt&emc=rss&oref=slogin


Late Monday, A.I.G. was downgraded by the major credit rating agencies (which inexplicably still retain an enormous amount of power in the marketplace despite having gutted their credibility with unreliable ratings for mortgage-backed securities during the housing boom). This credit downgrade could require A.I.G. to post billions of dollars of additional collateral for its mortgage derivative contracts.

Fat chance. That’s collateral A.I.G. does not have. There is therefore a substantial possibility that A.I.G. will be unable to meet its obligations and be forced into liquidation. A side effect: Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression.

 

[Bud]

Mine is guaranteed by the Illinois Constitution. If the State of Illinois goes bust, then I'm on the street.

 

[JK]

The scramble to save AIG is on. The treasury bailing out an insurance company. What's the world coming to?

Oh yeah, credit default swaps. The "Financial weapons of mass destruction".

Got pension?


http://www.nytimes.com/2008/09/16/opinion/16lewitt.html?_r=1&partner=rssnyt&emc=rss&oref=slogin


Late Monday, A.I.G. was downgraded by the major credit rating agencies (which inexplicably still retain an enormous amount of power in the marketplace despite having gutted their credibility with unreliable ratings for mortgage-backed securities during the housing boom). This credit downgrade could require A.I.G. to post billions of dollars of additional collateral for its mortgage derivative contracts.

Fat chance. That’s collateral A.I.G. does not have. There is therefore a substantial possibility that A.I.G. will be unable to meet its obligations and be forced into liquidation. A side effect: Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression.

Hi SJ -

Words like contagion, tsunami, and hystemic are being bantered about for the current global Market meltdown.

Basically, when someone gives you a peice of paper, it's the full faith and confidence that someone else will exchange a tangible commodity of equal value that keeps our world's financial system afloat.

Sadly, it's the sudden realization that "honest" brokers aren't, that causes the proverbial train to fall off the tracks.

In the current case, it's a shame that our global train has been caught on such a high trestle, while traveling at such a breakneck speed.

J.K.

 

[hlothery]

Why would anyone in our time have just one egg ? Being invested in one country ? Being invested in one market ? Involved one investment vehicle ? Or even being trained in one profession ?

Wait a minute........I only have one bike!

 

[Rpbump]

USN Retired plus Social Security for at least a few years.

 

[Bud]

Why would anyone in our time have just one egg ? Being invested in one country ? Being invested in one market ? Involved one investment vehicle ? Or even being trained in one profession ?

I know why I have only one wife.

 

[petepeterson]

So why invest in stocks with no certain future.....Makes no sence to me... The little man puts in a dollar so someone else can make a dollar...

There are safe ways to secure a future for retirement... You might want to just go to a casino every payday and gamble alittle,,, same as the stock market.......... Don't forget the more democrats we elect the more entitlements we will get ...............Pete

 

[ultracyclist]

wait a minute folks

When a life insurance goes bust a number of things happen.
First and foremost, the the protection of the policy holder is paramount. The state insurance commissioners work out a plan. Essentially, financially healthy insurance companies will buy at a discount the various blocks of life, health, and annuity business.

In some cases the policy holder may have to accept some concessions in order to maintain the level of coverage, but the level of coverage is protected. For example, in exchange for maintaining the coverage and cash values with the take over carrier, the take over carrier will stipulate that the policy holder keep the contract with the new company for a minimum of 5 years. In this way the consumer has the coverage, the takeover carrier has a predictable cash flow to recover costs, and the insurance commissioners are happy that it all worked out.

Now property and casualty insurance is a different topic, and I do not know much about those lines.

Generally, the state where the life insurance is domicilied, the insurance commissioner of that state calls the shots in the rehab or take-over.

I am waiting for a European or Arab financial consortium to enter the fray.

Let's all take a deep breath on this one.

 

[john1691]

Looks like we the Tax Payers will be bailing out the Fat Cats once again.........If the government would just stay out of the real estate, insurance, financial markets to begin with, the market would make smaller adjustments all along, rather than have finances guarenteed by the Fed and then have a huge bail out because in looking for huge payouts, the top management make risky business decisions. Anybody know what AIG's top guys made in salary and bonuses last year and the year before? Any chance they'll give it back?

 

[JK]

AIG $85.0 B Federal Takeover

When a life insurance goes bust a number of things happen.
First and foremost, the the protection of the policy holder is paramount. The state insurance commissioners work out a plan. Essentially, financially healthy insurance companies will buy at a discount the various blocks of life, health, and annuity business.

In some cases the policy holder may have to accept some concessions in order to maintain the level of coverage, but the level of coverage is protected. For example, in exchange for maintaining the coverage and cash values with the take over carrier, the take over carrier will stipulate that the policy holder keep the contract with the new company for a minimum of 5 years. In this way the consumer has the coverage, the takeover carrier has a predictable cash flow to recover costs, and the insurance commissioners are happy that it all worked out.

Now property and casualty insurance is a different topic, and I do not know much about those lines.

Generally, the state where the life insurance is domicilied, the insurance commissioner of that state calls the shots in the rehab or take-over.

I am waiting for a European or Arab financial consortium to enter the fray.

Let's all take a deep breath on this one.

FWIW -

Uncle Sugar dug deep this afternoon and nationalized the Insurance Industry by "buying" an 80% stake in American Insurance Group (AIG) in exchange for an $85.0B, two-year "loan."

Coupled with the Fannie and Freddie ($200.0B) bailout last weekend, and I'd say the Federal printing press will be working overtime in the years to come as Washington Mutual (WM) is the next Wall Street entity on the Treasury's chopping/shopping block.

At $285.0B, this recent Federal shopping spree will take future drunken sailors to task.


J.K.

 

[JK]

Pathetic Pun

Is the MOA nest egg safe ?

As long as it's implanted in a surrogate and fed a lot of B-12.

Get the picture? It's Ultra "sound."

J.K.

 

[greenwald]

Mine is guaranteed by the Illinois Constitution. If the State of Illinois goes bust, then I'm on the street.

In a 'similar boat' to the north of you. Perhaps we could revive vaudeville if it comes to that.

Pension mailed from the State of WI, who manages the fifth largest pension fund ($79+ Billion) in the nation.

But while we enjoyed a 7+ % raise this May on our pension checks, our investments are undoubtably taking a thrashing in the markets....time will tell. Probability of a raise next spring? Not good.

Billions of dollars of wealth wiped out overnight worldwide by a nervous Wall Street.

Makes me worry, not so much for myself, but for our children.

 

[RJM2096]

Up a creek wthout a paddle.

They will get bailed out, their current executives will get massive bonuses, and the retirees will get their annnuties which have been ravaged by inflation because of the massive money the goverment will print to pay for these bailouts. Are we screwed or what?

Economist said we do not need a manufacturing economy bcause we have a finiancial economy...how long did that last? Anyone want to train to be a teller?

 

[hlothery]

Billions of dollars of wealth wiped out overnight worldwide by a nervous Wall Street.

.

And will be, similarly, restored within the next few years. Don't panic........stay the course.

 

[JK]

And will be, similarly, restored within the next few years. Don't panic........stay the course.

Obviously, you're not an AIG investor. Or WM fan. either.

J.K.

P.S. http://www.bloomberg.com/apps/news?pid=20601087&sid=aptzSDlRtrTk&refer=home

 

[Threeteas]

Where's the surprise in any of this?
The stock markets of the world are large gambling dens. For there to be winners, there have to be losers. Ups and downs.

I keep seeing posts of doom and gloom, JK. No posts on solutions though.
If you want to establish the finacial sector as "your thing", perhaps a little more than cut and paste news would help. FWIW IMHO!

PS. It's a good topic and worthy of further monitoring.

 

[jaherbst]

Regulation

How many executives from AIG will run now with their "golden parachutes"? These are in millions of dollars. They will be rewarded for AIG's failure???? It happens everytime a company fails or is bought out. Same thing at Fanny and Freddie MAE is happening. The past Federal Director of Fanny Mae is now Barack Obama's campain finance director.

We need to go back to Federal regulation of our Airlines, Banks, Insurance, Investment Co. etc. Look what deregulation has done for us these past thirty years beginning with the Airlines, Phone Companys, Banks, and the finance companies in general. I am tired of the government bailing out all of the above with my tax money while the people in charge run with there multimillion dollar severance packages. Why are we rewarding bad management? Who is responsible for putting the company there in the first place? Please put them in jail before you use my hard earned taxes for bailout!

The company I worked for last went bankrupt and the President was paid a bonus of $29,000,000.00 dollars and got to keep his job to reorganize the airline while employees took a forty percent pay cut and over 4000 Mechanics lost there jobs while others are on long time layoff. Yes we do need regulation because of the greed.

 

[JK]

Simple Solutions

Where's the surprise in any of this?
The stock markets of the world are large gambling dens. For there to be winners, there have to be losers. Ups and downs.

I keep seeing posts of doom and gloom, JK. No posts on solutions though.
If you want to establish the finacial sector as "your thing", perhaps a little more than cut and paste news would help. FWIW IMHO!

PS. It's a good topic and worthy of further monitoring.

Solutions??? -

Let's see, "electronic markets/computer trading/transfers," "unregulated derivative creation/leverage," Glass-Steagall Act repeal," "gold standard decoupling," are a good place to start when untangling this Gordian Knot.

Or a swift swing of the sword to quickly cut through this naughty knot.

Instead of the smoke and mirrors of financial flim-flammery and the fraud of social engineering, refocus our National attention on actually making and manufacturing stuff with a good old Puritan work ethic.

But then again, who reads the warnings of Ayn Rand these days, anyway?

J.K.

P.S. Eye-wash isn't a simple solution...

 

[Threeteas]

Solutions??? -

Let's see, "electronic markets/computer trading/transfers," "unregulated derivative creation/leverage," Glass-Steagall Act repeal," "gold standard decoupling," are a good place to start when untangling this Gordian Knot.

Or a swift swing of the sword to quickly cut through this naughty knot.

Instead of the smoke and mirrors of financial flim-flammery and the fraud of social engineering, refocus our National attention on actually making and manufacturing stuff with a good old Puritan work ethic.

But then again, who reads the warnings of Ayn Rand these days, anyway?

J.K.

P.S. Eye-wash isn't a simple solution...

The USA can't afford to make things, because it's cheaper to buy them in and who'd want to buy more expensive versions of what can be bought cheaply?
Granted, this then beggars the question of what can the US use to create the wealth to buy the cheaper produced goods?
Perhaps use credit?
Oooeeer, isn't that a problem too?


On a personal note...lot's of credit to you for using, 'flim-flammery'.