Bernie Markley and Associates specializes in planning for your financial future. In uncertain financial times it is essential to have an expert on your side who can help you chart a course to financial freedom and security. For over twenty years, Bernie Markley has helped his neighbors in Illinois and Indiana with life insurance, retirement investment accounts, and safe money strategic planning that minimizes risks and maximizes returns.
Through catastrophic world wars, corporate scandals, financial depressions, and natural disasters over which we have no control, the Life Insurance Industry has always protected consumers lie no other type of financial institution in history. No beneficiary in America has ever failed to receive the full death benefit from a life insurance policy, nor has any Fixed Index Annuity contract holder ever lost a penny of principal in their FIA contract due to insurance company insolvency.
The Five Pillars of Safety:
Legal reserve system
The insurance industry has gone to great lengths to assure the safety of annuity investments and to establish consumer confidence. An insurance company must be able to handle the unexpected, hence the institution of the legal reserve system. The reserve system specifies a dollar amount that the insurance companies must keep in reserve, and this solvency ratio can be likened to a client saving cash for a rainy day. Insurance companies invest these reserve funds in investment grade bonds, US treasury bills, and government backed securities in order to provide these underlying guarantees. Insurance companies avoid or manage risk. In short, they do not take risks.
State guaranty funds
The purpose of state guaranty associations is to provide a mechanism for the prompt payment of covered claims of an insolvent insurer. (Note: no one has ever lost a penny of their principal in a fixed index annuity, nor has anyone in America ever failed to receive the full death benefit on a life insurance claim). This safeguard exists so that a catastrophic financial loss to certain contract and policyholders may be avoided. These guaranty associations make assessments to obtain the funds to pay claims if an insurer becomes insolvent.
The definition of reinsurance is insurance purchased by an insurer. In many states the Department of Insurance requires insurance companies to reinsure one another before they can offer their products in that state.
Basically, reinsurance companies can absorb some of the capital strain associated with writing fixed annuity business, including both statutory reserve strain and target capital strain.
As you may already know, many insurance companies are not domiciled in the United States. Rather, several insurance carriers with North American headquarters located in the United States are part of a larger parent company. There are numerous examples, but let’s look at two – Allianz Life Insurance Company and Aviva Life and Annuity.
Allianz’s parent company is Allianz SE, which is headquartered in Germany. Allianz SE has more than 75 million customers in about 70 countries, employing 150,000 people worldwide. Allianz SE has generated more than $64 billion dollars in equity-index annuity sales, and is the 14th largest corporation in the world and the 3rd largest money manager. Allianz’s solvency ratio is 161% (meaning that for every dollar on deposit, they have $1.61 in reserve – vastly different from the banking industry, where reserves are always less than deposits – hence the need for FDIC).
Aviva plc is the 5th largest insurance group in the world with $573.8 billion in funds under management, 50 million customers and 54,000 employees worldwide. Aviva has been delivering on it’s promises for more than 300 years, since 1696. Over the years Aviva has insured Sir Winston Churchhill, Queen Victoria, and turned down Napoleon Bonaparte. The rest is history.
These examples simply demonstrate that insurance carriers have parent companies with deep pockets to ensure safety to their consumers’ diverse portfolios.
Strict regulatory investment practices
The basis of the regulatory investment practice is to show how financially stable one company can be with its investments. They base that stability upon their solvency, which is the company’s assets over liability. This allows the company to meet all obligations as a client’s financial payout becomes due. The results are based upon a rating that shows just how stable a company really is, usually based upon AM Best or S&P 500 standards.
An annuity should be defined as a safe and secure compounded growth instrument, guaranteed on a tax-advantaged basis with the ability to capture stock market-like returns without the risk to principal or prior gains.
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