Execs chide carriers for 'stupid' behavior

Egregious risk taking in the name of impressive earnings has led to massive losses in the insurance industry, and now carriers need to think realistically about their pricing models and investments, executives said at a conference today.
NOV 13, 2008
Egregious risk taking in the name of impressive earnings has led to massive losses in the insurance industry, and now carriers need to think realistically about their pricing models and investments, executives said at a conference today. Carriers that once successfully invested in mortgage-backed securities and signed on many policyholders for guaranteed products are now paying the price, with dented balance sheets and reduced capital, the executives said at the 19th annual Executive Conference for the Life Insurance Industry in New York. Accounting firm Ernst & Young LLP and law firm Dewey & LeBoeuf LLP, both in New York, sponsored the event. “Clearly now is the time for government and the financial industry to work together to find ways to head off a potential spiral into chronic old age poverty,” said Christopher “Kip” Condron, president and chief executive of Axa Financial Inc. in New York. He also chided companies for being too ambitious when it comes to signing on variable annuity holders. Mr. Condron also told executives that although there were many opportunities for growth in variable annuity sales, as Americans had about $3 trillion in 401(k)s, but insurers needed to weigh their risk management capabilities as they take on these additional customers. “In my view, the most vulnerable life insurers may be those with the biggest appetites for growth—those willing to borrow from future earnings to make today’s growth targets perhaps by using overly optimistic assumptions in pricing the investment and longevity risks these products and riders present,” he said. Business leaders are becoming fixated on increasing earnings and short-term profitability, at the expense of customers and policyholders, scolded Gary C. Bhojwani, president and CEO of Allianz Life Insurance Co. of North America in Minneapolis. “We don’t operate in a quarter-to-quarter business, we operate in three- to five-year increments,” he said. “When you create stupid thresholds, you get stupid behavior.”

Latest News

Merrill lands four advisor teams as May recruiting data shows firm's two-way churn
Merrill lands four advisor teams as May recruiting data shows firm's two-way churn

Merrill's latest hires span Colorado to Louisiana, even as industry-wide recruiting data suggests the firm is losing almost as many advisors as it gains.

Fund manager sues Kandeo, alleges $100 million FinSocial loss
Fund manager sues Kandeo, alleges $100 million FinSocial loss

The $36 million buy allegedly hid inflated books and a $50 million diversion.

Advisor gets $200,000 from Ameriprise in 'emotional distress' lawsuit
Advisor gets $200,000 from Ameriprise in 'emotional distress' lawsuit

“An award citing emotional distress is very unusual,” an industry executive said.

Workplace financial education linked to stronger financial habits, but participation remains low
Workplace financial education linked to stronger financial habits, but participation remains low

New EBRI research found workers who participated in employer financial education reported higher confidence, literacy and financial satisfaction.

The rise of the super advisor: How AI is redefining competitive advantage in wealth management
The rise of the super advisor: How AI is redefining competitive advantage in wealth management

Beyond operational excellence, the winning advisors of the future are the ones who can reach across multiple disciplines without discarding specialist skills.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income