Mutual of America Fixed Annuity

Other, higher rated companies show a bit lower rate, under 5% in many cases. I believe it was stated here that no insurance company in the US has failed in the last 100(?) years, or something to that regard. JOE

Multiple insurance companies fail every year. Reliance Insurance was a large one that failed in 2001. Go to

and see failures listed bytype of insurer.

To the best of my knowledge, other than the debacle in California a few years ago with a company that was "floating" life policies, there has NOT been a company the "failed" since life insurance began.

It is true that not every company has survived the years, but in EVERY CASE, the policies were taken over by other companies, so that the PolicyOwner suffered no LOSS.

In the case of the California company, ONLY THOSE POLICOWNERS THAT SURRENDERED POLICIES suffered a loss (as provided in the contract), PLUS they did NOT receive the "high interest earnings" that they had been promised (not in writing).

Those polcyowners that stayed the course received EVERYTHING that was promised (in the contract) plus a guaranteed interest(and in some cases even more).

Although the individual companies may have failed, and their STOCKHOLDERS may have suffered, there has NEVER been a Policyowner who did not receive everything that the CONTRACT promised, Cal Lester CLU

Nice site. The big failure I remember (not quite as large, but same ballpark), was 1991 ELNY - Executive Life of New York - failing in sympathy with the Executive Life (California) failure.

So how much should one trust insurance company ratings? They don't seem incredibly reliable, but what else is there to go on?

Mark Freeland snipped-for-privacy@sbcglobal.net

The ELNY policy holders were contractually promised access to their money. They were given a choice - take a fraction of the money, or give up that access for years. They did not get everything that the CONTRACT provided.

Mark Freeland snipped-for-privacy@sbcglobal.net

Mark, it was my impression, that ALL of the policies of EXECUTIVE LIFE, were taken over by finacially stable companies. The policyholders were given the option of allowing thier Annuities/Life policies to function as intended, and at maturity, would be provided what had been in the policy. Some (many) polcyholders chose to surrender thier contracts because the interest being offered was To Low. Those policholders suffered losses.

It occured almost 20 years ago, so I just might slightly incorrect ! ! ! ! ! ! ! ! ! ! Cal Lester CLU

>

I belive that is correct.

Not so. They were given the option of doing a 1035 exchange to a new contract, that would function according to the terms of that new contract, which were substantially more onerous. It pushed out the maturity date, it started a new period of withdrawal penalties (even if they ELNY contracts had been held long enough that there were no surrender penalties remaining), it provided rate floors that were lower than the floors on the ELNY policies.

See above, e.g. a forced exchange from a 4% floor policy to a 3% floor policy.

There's no "slightly incorrect" for an absolute statement that no policy holder ever got less than the original contract provided. Once there is even the slightest breach, one cannot laud the industry with "don't worry, be happy". It's like saying that there's never been a money market fund that's broken a buck. There has been (though not at the retail level), which proves that the risk is real.

That's the point here. Quantify the risk, don't deny it. How does one assess that risk?

FYI:

("Is Your Annuity Safe" - check the section on rehab, which mentions cases where contract withdrawal provisions were violated, payments cut *post maturity*, rates reduced below floors, etc.) Mark Freeland snipped-for-privacy@sbcglobal.net

Mark

Maybe I was unclear in my other post. This rating doesn't look too bad to me, but I wouldn't go below it.

There is a lot of controversy about Northwestern Mutual on the web, I think about its sales practices?

D

Looks interesting, but obscure - not in NetFlix's inventory.

Next post, you clarified:

I'm inclined to agree. I've been looking for listing by rating of different insurance companies, and at least based on familiarity and size, it seems that companies rated at or above Mutual of America seem fine, and ones rated below are somewhat (or very) questionable.

Two bits of trivia about Mutual of America, one possibly slightly relevant (I'm thinking ethics here), one a curiosity. It has at least one Nobel prize winner on its board (peace prize), and it sponsored Bill Moyer's PBS series for at least a decade (showing how little impact those corporate sponsorship messages make :-)

(Moyer's citing Mutual of America)

In terms of market, it positions itself as an alternative to TIAA-CREF, and is structured as a mutual company (which should allow it to offer somewhat higher returns than corporations that must make profits for shareholders). It is a Fortune 1000 company, FWIW.

I did a little searching. It seems that in the late '90s, it was under fire for pushing annuities at people who shouldn't have been buying, or something like that. (In the 90s, a lot of big insurance companies got caught doing that, or selling variable life as investments; lots of settlements.)

Mark Freeland snipped-for-privacy@sbcglobal.net

Northwestern mutual has been more recently accused of selling variable Life insurance as a tax-free growth strategy (circa 2003) without proper disclosure. They agents would also "promise" returns. That's a HUGE no-no.

They would entice people to buy large policies ($1Mil +) and overpay the premiums so that the cash value would build up. The policy owner could then take up to 90% of the appreciated cash value back in the form of a loan. Because it was a loan, it was not taxable and the remaining 10% cash value was supposed to appreciate fast enough to cover the cost of insurance and the loan interest. Excessive fees, rising loan interest rates, and a number of other factors caused the

10% CV to be insufficient and policy owners were forced to dump in more premiums to sustain the policies. They got angry and complained.

Back on topic, here is a little more detailed financial outlook for Mutual of America:

In my cursory search, I did find some items alleging these (2003) selling problems; but without finding matching settlement news items, I wasn't going to automatically take the allegations as true (which differs from credible - the fact that NASD instituted a probe says they were credible). Here's an article I had run across that describes the same overpay/borrow scheme as in your post:

(followup - agents' denial) I'm not denying the accusation; I'm just stating that I haven't found a settlement, though it is four years after the accusations (and six years after NASD started an investigation on it.) Also, that I haven't looked very hard.

Thanks! The data seem to confirm some of the things I had seen as well as provide more insight - that it is respectably profitable (and doing much better than the industry as a whole with its underlying investments - though beta is higher - it dos better than average in good years, poorer than average in bad ones), that it focuses on group plans (as does TIAA-CREF). It is almost exclusively focused on annuities (don't know whether that is good or bad).

I expect I'll be contacting them. One thing that doesn't thrill me about their policy (though this is true of most policies in the industry), is that it can't be renewed past age 90. (Some go at least to age 95.)

On a purely planning note - what suggestions do people have for dealing with tax on annuities? I believe they become taxable when inherited (obviously before annuitization - usually nothing to inherit if annuitization has begun). Few people annuitize (somewhere around 1-2% of policies), so does one gradually bleed the policy over time (sort of like taking MRDs, to spread the income over years), or take a lump sum, or leave it in the estate, or ...?

Mark Freeland snipped-for-privacy@sbcglobal.net

On Apr 18, 3:17 pm, "Mark Freeland" wrote: > In my cursory search, I did find some items alleging these (2003) selling

Mark, I haven't dug too deeply into the matter either. I was just reporting the accusations that I THINK darkness was referring to. I do not know the NASDs findings nor do I know if NW was really guilty. Actually, the scheme that NW was accused of is quite a well known ploy and before now I have never heard of it being attributed to any one company (ie Northwestern Mutual).

An NASD background check of the company shows VERY limited info. They have been cited for "Regulatory Events" but that could be the result of a minor and unrelated infraction. I do know they were fined for not reporting customer complaints to the NASD a few years back. That alone would have triggered a "regulatory event."

Mark, it will partially depend on the yet unknown facts. An annuity does bypass probate, but is included in the taxable estate for estate tax purposes. Even if the client is taking an income stream, the remaining account balance is included. If the client dies, unannuitized, with a $500k annuity, the $500k is added to his total estate.

If the estate is smaller than the exemption amount at death, or the estate tax is repealed (unlikely), then taxability won't be an issue. There are also all manner of trusts to avoid estate taxation that are at your disposal (CRUTs, CRATs, NIMCRUTS, ILITs, etc, etc). If the estate is subject to estate taxation then it is possible the heir could be left holding a large tax bill and a somewhat illiquid asset with which to pay said bill. Death benefit options and products with short (or no) surrender periods will help alleviate this potential problem.

Annuities are as diverse and varied as snowflakes. It will depend on the provisions of Mutual of America and the specific details of your case.