Graham Osborn Posted March 26, 2016 Share Posted March 26, 2016 Recently I met a MassMutual agent at a networking event who tried to sell me a whole life insurance policy. The dividends were "not guaranteed, but had been paid every year for 150 years." I started reading on mutual insurance companies and found that they have few formal disclosure requirements and limited accountability to anyone except management itself and the BOD. In addition there have been some fairly extravagant scandals of CEO pay over at Liberty Mutual that remind me a bit of what happened at ENE/ VRX/ UDF/ etc. One claim the agent made was "MassMutual has never had an unprofitable year since its inception 150 years ago." This led me to believe MICs may not be following GAAP for their internal controls. During the financial crisis a great many publically traded insurers were forced to write down the value of crappy assets and take big charges to earnings from the surplus account. Although some MICs manage portfolios nearing the trillion-dollar mark, it occurred to me there was little incentive for them to make such writedowns. And of course there have been more minor incidents like the Bernie Madoff investment by a MassMutual subsidiary. My question is: how likely is it that these MICs are sitting on hundreds of billions in crappy assets that were never written down - charges that will hit the future dividends of cash value policyholders? After two mammoth bear markets in the past two decades and with a potential third in the offing, it seems to me like this pool of future cash flows may be headed the way of the dinosaur - also known as the 401k :) Any thoughts or industry insights? Link to comment Share on other sites More sharing options...
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