3/30/09 - Life Insurance Companies getting HAMMERED

Discussion in 'Stocks' started by ByLoSellHi, Mar 30, 2009.

  1. Someone made the call a while ago, and look at the massive, sector-wide sell off today.

    Lincoln National is getting crushed.
     
  2. lrm21

    lrm21

    I was hoping to hang on to AFL.

    Any thoughts as too why.
     
  3. This article talks about the problems at AIG and also the life insurers, but this one sentence speaks volumes:


    AIG crisis could be the tip of an insurance iceberg
    The company's situation reflects problems throughout the life insurance industry as investments suffer. Further strain could bring about a second financial crisis.
    By Ralph Vartabedian and Tom Hamburger
    March 30, 2009

    ...


    http://www.latimes.com/news/nationworld/nation/la-na-aig30-2009mar30,0,1747696.story

    All these companies pretty much depend on their investment portfolio to sustain their capital ratios. I do believe insurance is regulated on a state by state basis, but they have to keep x % of cash to meet a certain % of their liabilities (as not everyone who is insured is going to die at one time), but a huge portion of their assets is invested in equity and bond markets at any give time.
     
  4. Look at the performance of Japanese life insurance companies during the 1990-2003 bear run - that is the fate that lies in store for life insurers in the west. Fairfax and maybe Berkshire I would exempt from this.
     
  5. It's more than just their assets. Their liabilities also have increased, because the annuities they kept selling a) are floored; b) need to be discounted using a much lower rate.

    Along with CRE (commercial real estate), the insurance sector is the one, I think, where we haven't seen all the pain yet.
     
  6. I'm not sure even a single sector has seen all the pain yet.