Home Topics in Depth Economics U.S. insurers sense opportunity in unwanted pension plans

  • PiedPiper (1183 posts)
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    U.S. insurers sense opportunity in unwanted pension plans

    U.S. insurers are buying corporate pension plans at a record clip as rising interest rates and all-time high stock-market values give companies the perfect excuse to offload them.

    Calculating they can make more money from selling companies an annuity to cover the cost of the pension plans and then invest the proceeds in bonds and other securities, insurers are competing to persuade corporate America to sell them their pension risk.

    These deals, known as pension risk transfers, have been around for at least 90 years, but they can be limited by a Catch 22: in good times, corporate leaders feel less of a need to rid their companies of pension burdens, and in bad times it is more expensive to do so.


    The problem for companies looking to offload is that the pension plans must be fully-funded before they can sell them. GM, for example, had to inject more than $2.8 billion into its pension before closing a 2012 transfer to Prudential. It also paid Prudential a $2.1 billion fee for taking on the assets.

    GM’s current U.S. pension plan that is still held by the company is underfunded by $7.2 billion.

    Surging stock markets and rising interest rates are making it easier for companies to replenish their pension plans but there are still gaps. The average corporate pension fund was 82 percent underfunded as of Jan. 31, according to Mercer Investment Consulting.. ..cont’d




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    "..... Two faces; one for love and another for the DMV".   --  Between The Two, by poet Kenji Liu

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13 replies
  • leftcoastmountains (3078 posts)
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    1. Interesting.

    #CalExit #Trumpdoesn'tpaytaxeswhyshouldwe
  • snot (983 posts)
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    2. Also, how are the purchasers regulated?

    Are they essentially buying pools of cash to play with, and if their investments don’t pan out, oops, too bad for the pensioners?

    If GM wants to default, at least it has some assets that might stand behind its obligations.  What does/did AIG have?

    Even if the purchasers are regulated w/ regard to their regular insurance activities (and we know they’re probably not adequately regulated w/ regard to their credit derivatives activities), do the same regulations apply w/ respect to their investments of pension funds?

    I don’t know the answers.

      1% “To Do” list:

    1.  Control banking; 2.  Control communications (including “news” media); 3.  Control the government; 4.  Control education ; ....

    • PiedPiper (1183 posts)
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      3. Oops! Yes that was my question as well….is it all a plan to

      create a ‘crisis’ that will leave pensioners with nothing?


      "..... Two faces; one for love and another for the DMV".   --  Between The Two, by poet Kenji Liu

      • glinda (2182 posts)
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        10. Stealing. That is all plain and simple. What could possibly go wrong?


        Animals know more than we do. - Native American proverb
  • slipslidingaway (194 posts)
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    4. Yes interesting as mentioned above, reaching the age of looking for a secure ..

    investment and cash flow, insurance companies appear to be all over the map with their products. Annuities, indexed universal life, be your own banker products etc. insurance companies seem to have all the solutions. In addition you can buy state and fed pensions from those who need to cash out their pension policies.

    Heck we have already tapped into revolving consumer debt, home equity lines of credit, student debt and now insurance companies appear to have the solution for many of our problems.

    MetLife just stopped selling retail insurance products and we had a short timeframe to convert a policy that we thought we had another three years to convert. MetLife sent out a notice a month before the deadline, although when you search this “merger” was in the works for more than a year.

    So I cannot help but think, is there is another bubble building in this industry?


    • FanBoy (7985 posts)
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      5. that would be my guess

      • slipslidingaway (194 posts)
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        6. When it appears everyone is flocking in a certain direction,

        instincts are to look elsewhere???

        Maybe it is just that we have come of age and are more aware of these products, but I am always skeptical of a “good thing” and too much leverage/commitment.

        In the late 90’s stocks were at an all time high, commodities were at a decades low. Which might be the better investment?  I remember watching Peter Lynch, head of Magellan Funds, telling people on CNBC to just hold on, he did that for well over a year. As if we all have the same the goals/timeframes. No particular grudge, cashed out in early 2000, thanks to some sites on the web with a reference to an old Edwards and Magee book, but I remember watching as everyone was encouraged to hold on. Some say you cannot time the market, but big money leaves tracks, they cannot accumulate or distribute large sums of money without leaving a trace.

        Lynch never distinguished between a thirty year old and a sixty year old, just told everyone to hang on! Capital preservation plays a role at some point, especially when portfolios were seeing double digit returns, that is just not sustainable.

        So what is going on in the insurance world now, I do wonder?




    • FanBoy (7985 posts)
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      7. That's what they do. looking around for info about metlife, i also

      see that shopping malls predicted to be another target of the vultures as well



      and note the article takes the death of retail for granted:  “the inevitable death of retail” = goodbye public life.  everyone into their private cubicles to be ruled via big brother aka internet


      • slipslidingaway (194 posts)
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        8. Unfortunately, and even without the death of large shopping malls, those of us

        older folks can remember the days when spontaneous conversations took place in all sorts of areas because we did not have a device to distract us, so we started a conversation with a stranger!  Public life has been dying for awhile, the good comes with the bad, as the saying goes. And in speaking with insurance companies about Medigap policies, well plan F will be discontinued in certain states in 2020, the plan will not be taken away (if it was you might be able to purchase a plan without medical records) but there will not be any new enrollees making the pool of insured people smaller, older and with more HC needs. So what happens to the premium?

        In my mind they simply come up with a new plan, Plan G will be coming soon in many states, I cannot help but wonder what the game might be, increased premiums is my guess. Will try and post something in the elder forum about this over the weekend, but I cannot imagine why these private insurance carriers change the policies slightly and phase out other policies that people have subscribed to years ago and switching a plan requires a med review, unless the plan was phased out, but they are clever stating you can keep the policy with a shrinking pool of insured people. So I agree with Don McCanne MD, stop the madness and let us pool our resources and become a productive nation in a global economy.

        Been totally distracted with other issues such as this…we need to find a policy by the end of the month, my husband’s retiree plan was supposed to be the secondary insurance, but hell they changed the rules.

        The pre-existing clause under the ACA does not translate to those transitioning to Medicare because of a disability, you might be at a large disadvantage. Learn something new every day and every day it becomes more apparent, well at least to me, that we need to have one insurance pool in regards to HC and stop segmenting people into classes if we want to collectively be a productive nation.

        Sorry for the rant, did you see the latest tweet? Distractions while we face real challenges that plays a role not only in our HC but also in our finances, what fun!

        Disabled on Medicare may not be eligible for Medigap


        “Federal law requires companies to sell Medigap plans to any Medicare beneficiary aged 65 or older within six months of signing up for Part B, which covers doctor visits and other outpatient services. If they sign up during this guaranteed open enrollment, they cannot be charged higher premiums due to their medical conditions.

        But Congress left it to states to determine whether Medigap plans are sold to the more than 9 million people younger than 65 years old who qualify for Medicare because of a disability…”




        • FanBoy (7985 posts)
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          9. Yes, I remember when our old 'shopping street' composed of individual

          stores was subsumed by the mall and big individual stores just outside it that you had to drive to; not saying malls were the sin qua non of public life — more one of its last gasps —

          but they were something; you interacted with the salespeople, cashiers, passers-by etc.  with on-line you interact — maybe — with the delivery person.

          as for medicare, the extra plans and gap plans are mostly in the service of privatization and exhaustion of medicare, and particularly with the pharma pieces.  again, it’s been an inch by inch thing — steal removal of bits from standard medicare and — wowser! new shiny extras! (that cost more and funnel more to corps).

          haven’t had the time to burrow down to bedrock like I did with social security, but that is my impression of what’s been going on with medicare anyway.  and medicare is more complicated than SS — more complicated initially, more players and interest groups = more ways to rig it.

          • slipslidingaway (194 posts)
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            11. Local businesses have pretty fallen to the big corporations, neighborhoods have

            diminished and has the interaction with people, oh I guess it is progress.?

            Medicare appears to be much more complex and honestly to do this on your own I can imagine quite daunting. Yesterday signed up for the only plan my husband could pick, a month short of 65 and will try to switch during the “guaranteed issue” period before they want medical records and deny insurance or charge a much higher rate.  In some states there might not be a policy you can buy. Medicare told us the guaranteed issue period is not a law, just a guideline :(

            So hard to receive a definitive answer!


            • FanBoy (7985 posts)
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              12. funding cuts to admin are one reason it's hard to get an answer; it's

              deliberate and part of the ‘chipping away’ that’s been going on for decades.

              I kind of knew the boomers wouldn’t inherit

              but it was such an out-there belief at the time you don’t trust your own intuition

              • slipslidingaway (194 posts)
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                13. Trust your own intuition IMO, now whether we force the issue or

                ultimately take a back seat with our opinion is another question. I feel bad for those trying to navigate the system without “trusted support” whether that be family or a close friend.