MetLife Getting No Love From the Market
I thought my buddy was joking last week when he told me “MetLife is at $11.50!” Are you kidding?! No, he wasn’t. And only a few weeks before that, MetLife had been downgraded by one of the ratings agencies. What’s going on? Even a casual observer of the industry can recognize MetLife is the best run company in the sector, and as a market leader outclasses just about every other company in the insurance business. The answer is, I think, that most analysts simply do not understand the insurance business and are not willing to put in the time and effort to dig deep under the hood, and simply follow the herd mentality when it comes to looking at the financial services sector.
At an insurance conference sponsored by JP Morgan last week, few of the speakers were positive on the industry, although there were some notable exceptions. One of the fellows running the meeting; I didn’t catch his full name (he’s referred to as “Jimmy”, I believe), did distinguish MetLife as one of the bright spots in the industry. I’ve excerpted a short segment of the conference call, FYI:
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At the conference, MetLife executives Eric Steigerwalt and John Rosenthal presented a nice powerpoint showing in great detail why the company is so well positioned, and the analysts and ratings agencies are just missing the boat when it comes to rating their company. Listen to this short clip from Eric Steigerwalt; of course he’s in a room full of friends and colleagues so must be cordial, but I think the undertone is “hey guys, you just don’t have a clue!”:
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Flight to Quality Bodes Well for Insurance Advisors
It wasn’t so long ago when few people wanted to listen to boring insurance salesfolk talk about their boring products and pokey rates of return. In a truly unfortunate way, and hindsight being 20/20, of course, the state of the market is driving people to once again see their insurance advisor as their only true “trusted advisor.”
Insurance and Financial Advisor writer Keith L. Martin writes in this article how industry executives are forecasting a strong 2009 as consumers drive back to quality and stability and away from fortune-telling. This, of course, means now more than ever the insurance advisor is well-positioned to get back to the kitchen table and talk to people about the fundamentals of financial planning. Martin quotes K. Rone Baldwin, executive vice-president and chief operating officer for The Guardian as saying:
“This environment plays to our industry’s strengths. The guarantees and protection we offer are more attractive than ever in the current environment. There is the opportunity for insurers to differentiate themselves as a place of safety in a world more concerned with risk than ever before.”
AALU Director of Policy and Public Affairs
Sarah Spear, Director of Policy and Public Affairs for the American Association of Life Underwriters (AALU), points out that two-thirds of American households already own a life insurance policy or annuity contract. Spear continued:
“We need Washington, D.C., to know that we are a solution to a problem versus the problem,” she said. “We want a seat at the table, not to be on the menu. Insurance advisors are the ones people turn to in times of crisis to be sure they are OK.”
How right you are Sarah!
Employers to Pay for Employees’ COBRA Continuation Coverage
Law firm Holland + Knight attorney Maria D. Lumb reports in the firm’s Financial Institutions Alert of February 27, 2009 that the American Recovery and Reinvestment Act of 2009 makes some significant changes to the COBRA rules- most significantly that effective 2/17/09, employers are required to pick up 65% of a terminated employees’ monthly costs for coverage for up to nine months.
The American Recovery and Reinvestment Act of 2009 imposes new requirements on employers providing COBRA continuation coverage. Employers must act quickly to comply with the new requirements, which became effective February 17, 2009. Most notably, employers will be required to provide a 65 percent subsidy on premiums for COBRA continuation coverage to eligible COBRA continuation coverage recipients for up to nine months. In connection with the subsidy, new rules regarding notice to eligible individuals and COBRA coverage elections apply for COBRA continuation coverage, effective February 17, 2009.
It also looks like there’s an opportunity for employees who failed to timely elect COBRA continuation coverage to sign up for benefits via the “Special Election” provision. An involuntarily terminated employee has 60 days from when they receive the “special election” notice to elect COBRA continuation benefits, even if the employee had initially failed to so do.
Thanks to Holland + Knight for this insightful analysis of an important new provision of the law.
Promises. Guarantees. John Hancock.
This insert came with a client’s monthly annuity statement. I wanted to pass it as further evidence, again, of the insurance industries’ commitment to and understanding of its role as the bedrock of American financial stability. Companies like John Hancock, and MetLife, and Prudential, and New York Life, and the Equitable, and Guardian, and the Hartford and NorthWestern Mutual and Pacific Life; dozens and dozens of more companies which have withstood 100 years, 125 years, 150 years of economic upheaval and uncertainty. And still solid and protecting the core values upon which this nation was built.
There’s a lot of negative things which can be said about the industry, make no mistake about that, but there’s no denying that life insurance and annuities and the insurers and agents have served this country well throughout wars and depression and terrorist attacks. The historical social commitment of the industry is remarkable, and today, for example, New York Life and MetLife are funding at the New York Blood Center research into solving the genetic riddle of certain types of cancers. And they’re close to finding a marker for prostate cancer, from what I understand. In any event, the point is that nowadays people ride buses to work and on the way take notice of whether their bank is still there from one day to the next. The banking industry is not the bedrock of financial security for America, and it’s sure not Wall Street. Only the insurance industry has proven itself in this fashion for more than 150 years. Whatever company your work for, whether it’s John Hancock or AXA/Equitable or New York Life or MetLife or Prudential or Pac Life or Lincoln or Mass Mutual or Guardian; carry with you into the field and on your appointments the belief in your industry and the products and services you provide. Without life insurance, there are no promises, and no guarantees, and no United States of America.
Promises. Guarantees. John Hancock.
Long Term Care Actual Costs Devastatingly Real
I was on an appointment with an advisor who was showing the client his company brochure about Long Term Care and the high cost of nursing home care. A beautiful 6 color glossy brochure, of course. The brochure said something like “the average cost of nursing home care in the New York area is between $275 and $350 per day (or something like). Being an actual elder law practitioner where part of my business involves paying nursing costs every month for some people, I knew those figures were far too low for New York city, but I was there to advise on some estate planning issues, and didn’t want to add my two-cents when I wasn’t asked to do so, and it was his client.
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P.L. 109-171, Deficit Reduction Act of 2005
The Deficit Reduction Act of 2005 (which was actually enacted in early 2006), is the most recent piece of legislation to significantly change the Medicaid rules. Most importantly, the “look back” period for the transfer of assets was extended from 3 years to 5, and the starting point for determining the period of Medicaid ineligibility now begins at the time when the Medicaid application is submitted, or when the person enters the nursing home, whichever is later. Prior to DRA 2005, the period of ineligibility started at the time the assets were transferred. These two items combined radically reduce the ability of people to divest themselves of wealth and then receive government assistance to pay for nursing home care.
The use of annuities for Medicaid planning purposes was virtually gutted, and this one-time “ace in the hole” technique is now rarely useful.
However, planning opportunities still do exist, but each case has to be looked at individually.
As always, do not take any action with respect to Medicaid planning without speaking to an attorney. There are a ton of minefields in this area to trip over, and one wrong step can mean disaster.
Linda Thompson Must Read Advisors’ Cafe!
Well I’m glad to see that the SEC’s top enforcement official, Linda Thompson, resigned from her post at the SEC, as I recommended she do the other day after the House hearings, in order to maintain her personal and professional self-respect and dignity. It was the right and honorable thing to do. Good for you, Linda!
Of course, maybe she got a better job offer . . ..
Rep. Gary Ackerman Rips SEC Chiefs a New One!!
Representative Gary Ackerman (from Queens!), is screaming at the SEC panel right to their faces that they have their heads up their a55es and they’re just sitting looking like a bunch of fools!! Oh this is just great!! Deaf, dumb and blind he calls them.
Uh oh. SEC Acting General Counsel Andy Vollmer just says he’s relying on Executive Privilege, but no one from the Department of Justice to authorized him to do this. This guy’s getting himself in deep water.
These guys need to start looking for someone to write their resumes; missed the interview with the SEC head. Perhaps it’s on You Tube. Congress is not letting these guys stay at the helm, that’s for certain. It seems to me as a matter of self-respect and being able to show your face in public with some dignity, the only course of action is to resign.
FINRA is in Bed with the Industry!
This fellow Harry Markopolos, who originally discovered the Madoff ponzi scheme ten years ago and continually threw the evidence up to the SEC, is now testifying on how he discovered the fraud, etc. He’s taking the top SEC and the entire organization to task for being a bunch of buffoons whose competency and abilities are more suited to being behind a cash register. By the way this fellow is speaking and answering questions, there’s no doubt his credibility is impeccable. And he’s also slamming FINRA too as being in bed with the industry, and any notion of FINRA actually regulating the industry in a way to protect the consumer and the country is laughable and simply not believable. FINRA is good at going after individual brokers and small fry who can’t fight back (like you!), but as far as regulating large broker-dealers, FINRA is scared of their own shadow and led by stooges!
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Same-sex Spouse Entitled to Inherit Estate Ahead of Brothers
A couple of months ago I wrote on my Advisors’ Cafe blog about the Insurance Department’s interpretation of Gov. Paterson’s directive to New York State agencies that same-sex marriages performed in other jurisdictions must be recognized in New York.
Add to that a ruling which came down yesterday from Surrogate Glen out of New York County, wherein Surrogate Glen ruled that a surviving homosexual spouse of a decedent was the decedent’s only “distributee” under New York law. The decedent died leaving his surviving same-sex spouse (they were married in Canada), and three brothers. For the past 2,000 years, the brothers would be the decedent’s distributees and entitled to inherit the decedent’s estate. Now, the brothers are all out, and the surviving spouse inherits the decedent’s estate. The case is Estate of Ranftle, and the decision is reprinted in the New York Law Journal of Tuesday, February 2, 2009 on page 27.
It does not appear this was a contested issue. I don’t know if the decedent’s brothers were given notice and the opportunity to submit opposing papers for the Court’s consideration, and/or whether they were given the opportunity, but decided not to get involved. It’s a short decision, not one which fleshed out all of the cases and historical evolution of the law on this point, and is not going to be considered binding precedent if and when the same-sex marriage issue comes up under other circumstances, except if the case comes up before Surrogate Glen. It’s only going to be when there is a lot of money on the table for the family to fight over, and everyone has their own lawyers to submit reams of papers and get to the Appellate Court, that the issue will become binding across New York. But for now, it’s likely that most New York City surrogate court judges are going to follow Surrogate Glen’s lead here.
Also, for federal tax purposes the unlimited marital deduction is not allowed (because of the Defense of Marriage Act (DOMA)); unclear on the state side.
This decision, while probably not unexpected, is nevertheless important because it represents the first step in the New York Surrogate’s Court foray into this area. The reason though that its precedental value is minimal is because the Surrogate didn’t have to, it appears, decide between two (or more) parties contesting the issue. When there is no “actual case or controversy” before the court, a decision is always subject to challenge for that reason alone. For same-sex couples, the Ranftle decision definitely provides some comfort and eases (perhaps) the complexities of planning. A myriad of issues remain unresolved, however. Not only must the federal estate tax implications still be planned for, but what if the decedent owned property in another state? For example, New York County decides the decedent’s same-sex spouse is entitled to inherit the decedent’s estate. Period; end of the issue in New York. However, what if the decedent owned property located in another state, one which does not recognize same-sex marriages? As you know, the process of “ancillary probate” applies to property located in a state other than the one which has jurisdiction over the decedent’s estate. Will the surrogate in another state which is antagonistic towards gay rights accept a New York court’s direction that the same-sex spouse is the decedent’s sole distributee, or has any rights to the decedent’s property located in a state where same-sex marriages are not recognized? Who knows? Within twenty years one of these cases, or similar, will makes its way to the Supreme Court, and then we’ll know for sure.