“Look, Bruce!”, my 85 year old mother-in-law exclaimed, waving a letter over her head. “My annuity is now up to $85,000. I just can’t withdraw my money for 6 months. I don’t need it now anyway, though”. That got my attention. Why couldn’t she withdraw? Turns out, Standard Life of Indiana, her annuity company had sent her a second letter. That letter informed all policy holders Standard Life was now under an “Order of Rehabilitation” with the state of Indiana. The letter went on to assure policy holders that all annuity contract terms would be honored except “partial and full surrenders clauses”. This is kind of like a bank holiday for an insurance company.
For more information policy holders were referred to the website: www.standardlifeofIndiana.com. On the website the first question in the FAQ section is “What happened to Standard Life Insurance Company?” — a good, if not particularly encouraging starting point. Other questions address issues such as financial condition and safety. The answers were reassuring but vague and short on specifics.
The court filed “Order of Rehabilitation” document is more direct. Basically, Indiana state Insurance Commissioner Jim Atterholt and his appointees now have control of Standard Life of Indiana. All power formerly vested to the directors, officers and managers now resides with the State Commissioner. For those who would like to see the court filed document go here. The rehab action is essential so as to prevent a run on the company while the state figures out just what the assets are worth. A minimum of six months is needed and that time period may be extended.
Standard Life of Indiana may have been a good company at one time. However, It was acquired in the 1990’s by Capital Assurance Corporation, a private company. Obviously, they made investment mistakes and were caught in last years slump. I don’t know what the outcome will be for Standard Life’s 40,000 policy holders such as my mother-in-law. It is probably safe to say that after the bad investments are written down and the legal and other state fees are assessed policy holders will take a significant haircut.
Now, I do not know a lot about annuities and the Standard Life of Indiana action is not new (the court document was filed December 18, 2008). I do know that funds invested in fixed annuities and whole life policies go into the companies’ balance sheet and will take a hit along with the balance sheet.
The purpose of this article is to alert fixed annuity and whole life policy holders: You cannot assume you 100% safe. The products are only as good as the company and its investments. Annuities and life insurance is often sold to financially unsophisticated and/or elderly people. Even with state regulation, the potential for abuse in these non-transparent investments is present
I would be careful with all fixed annuity and whole life products, especially those held by AIG affiliates (AIG), and large annuity providers such as Genworth (GNW), Hartford (HIG) and Allstate (ALL).
It is not easy to find the financial standing of many annuity and whole life holders. Some, such as Standard Life of Indiana, are privately held. Others are large company subsidiaries (with different names) or international firms such as Allianze or Aviva. Many large banks with shaky balance sheets hold annuity money. The rating firms gradings have been over optimistic in the past. Those sophisticated in financial analysis may be able to track this stuff down but the vast majority of annuity and whole life policy holders are clueless.
Disclosure: No positions in any of the above mentioned companies
For more information policy holders were referred to the website: www.standardlifeofIndiana.com. On the website the first question in the FAQ section is “What happened to Standard Life Insurance Company?” — a good, if not particularly encouraging starting point. Other questions address issues such as financial condition and safety. The answers were reassuring but vague and short on specifics.
The court filed “Order of Rehabilitation” document is more direct. Basically, Indiana state Insurance Commissioner Jim Atterholt and his appointees now have control of Standard Life of Indiana. All power formerly vested to the directors, officers and managers now resides with the State Commissioner. For those who would like to see the court filed document go here. The rehab action is essential so as to prevent a run on the company while the state figures out just what the assets are worth. A minimum of six months is needed and that time period may be extended.
Standard Life of Indiana may have been a good company at one time. However, It was acquired in the 1990’s by Capital Assurance Corporation, a private company. Obviously, they made investment mistakes and were caught in last years slump. I don’t know what the outcome will be for Standard Life’s 40,000 policy holders such as my mother-in-law. It is probably safe to say that after the bad investments are written down and the legal and other state fees are assessed policy holders will take a significant haircut.
Now, I do not know a lot about annuities and the Standard Life of Indiana action is not new (the court document was filed December 18, 2008). I do know that funds invested in fixed annuities and whole life policies go into the companies’ balance sheet and will take a hit along with the balance sheet.
The purpose of this article is to alert fixed annuity and whole life policy holders: You cannot assume you 100% safe. The products are only as good as the company and its investments. Annuities and life insurance is often sold to financially unsophisticated and/or elderly people. Even with state regulation, the potential for abuse in these non-transparent investments is present
I would be careful with all fixed annuity and whole life products, especially those held by AIG affiliates (AIG), and large annuity providers such as Genworth (GNW), Hartford (HIG) and Allstate (ALL).
It is not easy to find the financial standing of many annuity and whole life holders. Some, such as Standard Life of Indiana, are privately held. Others are large company subsidiaries (with different names) or international firms such as Allianze or Aviva. Many large banks with shaky balance sheets hold annuity money. The rating firms gradings have been over optimistic in the past. Those sophisticated in financial analysis may be able to track this stuff down but the vast majority of annuity and whole life policy holders are clueless.
Disclosure: No positions in any of the above mentioned companies
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