Annuity Collapse: EDU #2625

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Speaker B: This is the Retirement and IRA show coming to you from beautiful Northern Colorado. Join us as certified financial planner Jim Saulnier as well as Colorado State University finance instructor and certified financial planner Chris Stein. Team you about IRAs 401ks, annuities, Social Security, pension plans and estate planning in a fun and enjoyable show. Whether you are listening live in Colorado or streaming from their website or itunes podcast, Jim and Chris want you to know that they're available to help you plan for your retirement. Just visit their website@jimhelps.com that's Jim H E L P S.com and click the Meet the Team button on the homepage. You can now here's Jim and Chris with today's show.

Speaker C: Well hello and welcome to the Retirement and Ira Show Edu edition for this week. This week is still within the month of June 2026. Uh, so that means another annuity related topic to honor National Annuity Awareness Month which is June every year. Today's show is going to be based or has been prompted by um, news article that was actually sent to us by several listeners when the news um, hit the wire if you will, back in March or May. May ish. So it's pretty recent. Only about a month ago. Um, the article we're gonna kind of walkthrough that describes the issue is simply titled she paid an Insurance Co. $99,000 to generate retirement income for life. Then it collapsed. And the subheading risks are mounting in the life insurance industry and experts are concerned state regulators aren't protecting policyholders. So some of you out there who didn't email us may have seen this. It was uh, reported in several uh, news outlets. This one, this article we're going to include in the show notes a link to it. This one happened to be NBC News but it's kind of been talked about in a variety of areas because it's kind of a big deal when an insurance company quote collapses because as you all know, the, uh, promises made by an insurance company, their ability to fulfill those promises is subject to the ability for them to pay those promises. Because those promises are financial.

Speaker D: Right?

Speaker C: Those promises are dollars based on the policy that you own with that insurance company. And there's ramifications when an insurance company gets into trouble. So that's essentially the essence of this article. Jim's going to walk it through us, walk us through it today. But it fits nicely with the National Annuity Awareness Month because this person is subject to the article bought an annuity. Bought an annuity for retirement income, which is something we talk about fairly regularly on the show here, particularly during the month of June. So, Jim, uh, welcome, uh, you're still in Ohio, so hopefully things are still going well there and I've set things up and you can now walk us through that article.

Speaker E: Yeah. And welcome, folks. Welcome to the Retirement and IRA show. And this is the EDU version. And as Chris said, It's June, June 23rd, actually, as we record this. So it's National Annuity Awareness Month. And I thank the, the people who sent me this article and I wanted to address it because the article itself, it's nice. It is, I think, bringing to light things that we have been wanting on this show for, for, I would say, years. The article, I wish, talked a little bit deeper about some of the ways and background of this insurance company and ways this woman probably didn't lose, like the title says. And it could have dove a little bit deeper into some of those things. And that's what I want to get into. And I want to begin by saying I do not fault at all the woman who bought this annuity. She put $99,000 in an annuity. It's not a lot of money, but to her it might have been a million dollars. We don't know anything about her. I fault the agent. The agent should be beaten with a wet noodle. I would be a little more harsher. But this is a recorded podcast. I fought the agent, though, for utilizing an insurance company with a questionable background or ratings to begin with, financial strength, ratings, and then utilizing it for a lifetime stream of guaranteed income. I think a lot can be learned from this article that I hope to teach you about state guarantee funds, what's protected, what isn't, but also things to look for and to utilize AI nowadays more than ever, on trying to research financial strengths and histories of any annuities that you don't recognize. The name of the insurance company on, and even if you do recognize the name might be useful to have AI research the ratings of that insurance company or the history of it just for giggles. Back when this all happened, AI didn't really exist. It's only three years old. So this woman couldn't do a lot of that. And that's why I fault the agent because the agent clearly didn't do any research and I feel he or, uh, she is more responsible than the woman. The woman was probably just following the advice of the agent. But there's a lot of missing information in the article. So I wanted to go back and do a little bit of research. So I did rely strongly on a very disciplined prompt put into chat GPT to quickly do some research for me. I also had access to a couple of industry articles that gleaned a little bit of background on this company. And I didn't tell chat that I knew some things. And I was pleased to see that it picked up on some of the information that these industry articles were talking about that went deeper than this consumer article. So a couple of things that I want to begin with before we get into the article. And since we're going to link to the article, I doubt I'm going to do this. The typical way of reading verbatim the entire article. Uh, I was pleased to see the article picked up on Tom Gober, a gentleman that I had referenced many times. The gentleman who partly created the old TSR ratio that we spoke favorably about for years, which unfortunately was eventually shut down by the very regulators who, in my opinion, dropped the ball in this case big time. Uh, we have to throw them under the bus as well. And the article does do that, and so does Tom Goldber. I think the insurance regulators. Keep in mind, folks, the federal government does not regulate insurance companies. Fifty different people do because each state, and there's 50 states last time I counted, have their own insurance regulator, in this case Connecticut. And at the end of the article they talk. God, Chris, jump to the end of the article. I don't have it open in front of me. Which state are they referencing? Um, that they call out another state at the end of the article, um, that they're worried about or is doing something.

Speaker C: They mentioned Vermont at the end of the article.

Speaker E: Okay. And I thought there might have actually been another state in there as well.

Speaker C: They mentioned Iowa. Iowa comes up as well. So they mentioned a few other states that are looking into other companies or related companies.

Speaker E: And it, uh, might have been Vermont that approved other matters Similar to what was approved for this company. Yeah. So the regulators also are a day late and a dollar short or whatever that saying is, and they're behind the eight ball. And it's you as the vanguard, the people who are out there. Whether you ever purchase a lifetime stream of guaranteed income to help support shortages in your minimum dignity floor, that's going to be up to you and the older you to decide. But it's not to say you will never. As the people who geek out on this come across someone who, who is contemplating purchasing a lifetime stream of guaranteed income, perhaps a woman, similar to the woman in this article. And you might have told her, hey, whoa, whoa, whoa, time out. Let's look at this company a little bit more before you do this. So with you in the forefront, I'm trying to give you a little bit of information, a little bit of understanding of what's happening here, how I don't think this woman is in the hole at all long term. But one of the things we have often said short term, Chris, when it comes to state guarantee funds, especially when you compare it to say, FDIC insurance, and I know we didn't rehearse this, we didn't script this, we didn't talk about this. I'm just going to see if Chris can pick up on this. One of the things I said is the state guarantee funds may make you whole, but it may also take, what

Speaker C: take a really long time for it all to work through the regulators and the court system, because the courts are involved with this as well. Whereas FDIC insurance, if you have trouble at your local bank that has FDIC insurance, FDIC dives in there and gets things solved within a matter of days, just generally. And it's with the intent, you know, the specific purpose, to help maintain trust in the banking system. And if people, you know, had to wait months and months to get access to their bank monies, they wouldn't think so much about, uh, the benefits of FDIC insurance. But the state guarantee funds, when they're working through, when they're rehabilitating or reorganizing or whatever word is used in that particular state, uh, the insurance company who has stumbled and fell flat its face, uh, that is a lengthy process and it does not resolve within just a few days.

Speaker E: Exactly. And that's where I was going and Chris picked right up on, I think this woman will be made whole. I just don't think it's going to happen quick.

Speaker C: But not everyone will be just happening in her case because of the limited dollars uh, at risk or at play here, but others will definitely be affected. It is highly unlikely that everyone makes it out of this hole.

Speaker E: Correct. When I, again, I'm not faulting this woman at all. So no nasty Grams, if you think I'm throwing her under the boat, I'm not. I'm throwing the agent. And they don't reference the agent here at all. I'm, um, throwing the regulators because they deserve to be thrown under the bus. The big takeaway though is I think the article, especially the headlines and how they reference private equity ownership and quote Tom Goldber, who I respect deeply. He is a. I met him once personally. He probably doesn't remember meeting me. Spoke to him several times over the phone. He probably still doesn't remember meeting me or uh, talking to me. But then when he was involved in the TSR ratio, which again got closed down by the regulators for a variety of reasons, I learned so much for the two years I was in that program of his. Though he is a forensic accountant, he helped dig everything out after the housing crash. He just. If you're a forensic account and you geek out on numbers and, and, and spreadsheets and filing statements of, of companies, it's amazing what this man would look at and do and teach us. And I talked a few times on prior podcast episodes of Mr. Goldber and the TSR ratio. But what I was learning and it was he who through the TSR ratio brought to my attention. He's like the canary in the coal mine that's screaming, you know, let me out of here, let me out of here. I can't breathe, I can't breath. Nobody understands canary. So it stays in there until it dies. But he has been screaming for a long time that a lot of these private equity owned insurance companies are doing hokey things in Bermuda and the Cayman Islands and they're filling their books with questionable debts, private equity debts, private credit debts. I've said for years folks, private equity didn't wake up one day and say, gee, what are we going to do with our hundreds of millions if not billions of dollars? Wow. I always wanted to help Americans retire. Let's buy an insurance company and help Americans retire because we've got nothing better to do. If you really think that's why private equity is buying insurance companies because they truly want to help American retire, please read this article because this woman ain't being helped. If you are buying a multi year guaranteed annuity, we just said this, maybe that's going to mature in three years, four years, five years, I'm a little bit more relaxed. If you purchase a MYGA from a private equity owned insurance company, personally, at our firm we would never sell below an A rating. So we sometimes go to A minus. Yes, but never into the B's. And this company, as I'll read to you in a second, is knee deep in B rating. I wouldn't, uh, recommend buying any type of insurance policy, MYGA or not, from any company rated with a B. This person did, and I don't fault her. She probably didn't even know to look up the ratings. Today. With AI and a good prompt and the deep thinking research feature of Chat or whatever program you use, you don't want some quick assessment. You want it to really get out there and think and research. You can find ratings histories in seconds. This woman didn't have that capability. You do. Okay, you probably never heard of PHL Variable Life. So I want to give you a little bit of background on the company so you kind of have an idea of where it came from. So again, I did this research with the help of ChatGPT and a very disciplined prompt. It matches much of what I read in the industry articles on this. So I feel fairly confident what I'm about to describe is true. But it may not be perfect. Chat's not perfect, even the industry articles aren't perfect. And Lord knows neither are, um, me and Chris. But I think we on the target, if not the bullseye. From what I have found, PHL Variable, which is the insurance company that went under PHL Variable Insurance Company was connected to an older company in, uh, the Phoenix Insurance family, PHL Variable. It wasn't a brand new insurance company that private equity created out of thin air, but they definitely got involved and took over and purchased an existing company. Because Phoenix itself, Phoenix Life, the original, the mothership, many, many years ago, goes all the way back to the late 1800s. That's a long time, Chris.

Speaker C: That's a long time. And I, uh. Did they not get in some trouble themselves? This original mothership company?

Speaker E: Uh, they. Well, yeah, let me finish the story.

Speaker C: The name sounds familiar, but go ahead.

Speaker E: Okay. It may not be the same one. I'm sure there's other Phoenixes out there, but Phoenix Life itself. And again, folks, I am reading the notes I have. I never do this, so you'll see a little bit of hesitancy in my speaking. I'm trying to make sure I follow the diligent notes that I have here. Again, I believe this is fairly accurate. May not be 100% accurate. But it traces its, its, its beginning back to a company called Phoenix life in the 1800s. And for a long time, long time, 50, 60, 80 years, it was a traditional life insurance company, the kind that we like today when we talk about the, a generally mutually owned companies that we would feel comfortable using for single premium, immediate annuities. So it traces itself all the way back there. But eventually Phoenix itself became a public company and PHL Variable Insurance Company was under the mothership, which was at the time, at the time a public company. Okay. The ownership changed meaningfully in 2016 when a company named Nassau Ray R E, you pronounce it Ray and it stands for reinsurance. Nassau just happens to be where, Chris?

Speaker C: The Bahamas.

Speaker E: Bahamas. Now you're starting to see that tie that I keep warning people about. Bermuda, Cayman Islands, the Bahamas. Um, Retirement Income Journal. The gentleman who edits that calls it the Bermuda Triangle. And he's been similar to Tom Goldber screaming about what's happening. Okay, so NASA Ray acquired the Phoenix companies, all of them combined. NASA Ray was created and launched by Golden Gate Capital, a private equity firm. So Golden Gate Capital creates Nassau re Nassau Ray turns around and buys the Phoenix companies. So PHL Variable, the company that ran into trouble, moved from the old Phoenix, the old insurance company, the old stodgy, sell some life insurance insurance company of the 1800s and eventually moves its way through the 1930s, 40s, 50s, so on and so forth. Eventually is now under the NASA Ray, Golden Gate Capital world. Then in 2021, PHL variable again the company at uh, issue here was separated out from Nassau Insurance and moved to a Golden Gate, which is the private equity company, a Golden Gate related holding company. So again, for those of you, if you are trying to help people understand if private equity owns an insurance company, the private equity company themselves are under no obligation to bail out that insurance company. Keep that in mind. They do not have to bail them up and Golden Gate Capital did not. So you have Golden Gate Capital involved in this. And this is important because when PHL collapsed, Golden Gate Capital was related, was connected to it. Some, I think one or two news reports put it as Apollo, but I cannot find any credible information and I asked chat three times, it can't find credible information that Apollo Asset Management, the company that owns um, Athene, which is another huge, huge, huge, huge private equity owned insurance company and is not part of this, but an article or two that I read was saying that Apollo owned PHL Variable. I can't find that. I think it's Golden Gate Capital okay. In May of 2024, the Connecticut, uh, Insurance Commission ended up placing PHL variable in rehabilitation. That's not liquidation yet. It's, whoa, it's like life save. It's, it's um. When I had my stroke, I was, had the operation. Afterwards I was in um, what do they call that, Chris, the unit you're in icu. What does that stand for again?

Speaker C: Intensive Care Unit.

Speaker E: Intensive care unit. So PHL is essentially in ICU in 2024. And this is just a legal process. We're now the state of Connecticut because that's where the insurance company is registered from. So Connecticut, there's 50 state insurance companies regulating this. If they were licensed in all 50 states, I don't know how many states PHL ultimately was licensed in. But if it's licensed in a particular state, that state insurance regulator is also involved. But the person who leads the rehabilitation or liquidation is the insurance commissioner in the state that the insurance company is domiciled. In this case Connecticut. And Connecticut had the ability to support and must approve things, as you'll see later in the story that PHL did. Okay, so when you're in rehabilitation, the idea is to kind of freeze everything and look and see if there's a way to come in and maybe sell the insurance company to a stronger backer, figure out what's going on. And it's only then Connecticut says as they started going into the books did they realize, oh, uh, is a lot worse than we thought. And then Connecticut later indicated that, uh, a pure rehabilitation is not going to be, excuse me, not going to be feasible and that they would have to do a complete liquidation. So it's only later that people could get in and start looking at the books did they realize this company is, is insolvent and it's going to fail. A, uh, lot you'll read in the article, a brief mention and a lot of the articles talk about a 450 million dollar reinsurance deal with a wholly owned subsidiary that did not pan out as the cause. I think that's a big cause, but I don't think it's the only cause. I think there was a lot of issues with PHL before that, but Golden Gate, as private equity often does, does reinsurance deals with wholly owned subsidiaries based in Bermuda or the Cayman Islands. This is what Tom Goldber is screaming about and no one seems to be listening. And that was later proven to be totally worthless. But there were other issues. According to phl, they're claiming, uh, this one you got everybody think back, Chris this all started around 2019-2020-2021-2022. What was happening? Who do you think, what do you think took the fall, in PHL's opinion?

Speaker C: Well, I would suspect that they're going to somehow try to blame the effects of COVID and the disruption.

Speaker E: Exactly. Covid caused it, not us. We're innocent. They said that so many people died during COVID Their mortality tables that were backing a lot of the universal life policies they sold, um, fell through and they couldn't cover their claims. So they're going to blame Covid and as well, low interest rates. It's kind of like my dog ate it. Or if teachers are listening. There must be excuses that you always hear, um, from the kids on why their homework isn't done. They just have that same excuse. I don't know what it'll be. Uh, according to welcome back, Kata, uh, Epstein's mom had numerous reasons on why his work was never done. So you'll start to read articles also. That said a lot of PHL's problems came about because of COVID and low interest rates. I think a well capitalized firm could have weathered that as 99.99% of insurance companies did. Uh, so I don't think it was quite that. I think there's more to the story than meets the eyes. And I don't know if we'll ever get the truth as the um, regulators and whoever they have forensic accountants on their staff go through the books. But the point of the matter is there's not much assets there at all. But one of the things to keep in mind in the research I did is I wanted to know what the ratings history of this company was. Was it an A, uh, A plus, A minus A plus plus company at one time? No. And that's where I start to fault the agent. Even if the agent didn't quite understand the ownership structure back then, there was no AI to research a lot of this quickly and easily and accurately if you had a proper prompt, of course, and used a deep thinking feature. But he could have. Or, uh, she could have got the ratings history. So back in 2010 it was just rated in the B's. Am best had it at B plus, um, S P had it at uh, BB minus. I hate all these ratings. And Moody's had it at large B small b small a1. It's ridiculous. Just look at the first freaking letter. It's B. And in my opinion the it begins with a B. It's bad and stay away from it. And a C rated that's what's. I don't know if this is a. A negative word that begins with C, but Chris will think of one. Stay away from that. It had always, from what we can find, be in the B ratings. But in 2019, AM Best downgraded it to just plain old B From all of a sudden, you know this B, B, B, B, B, B, B plus. All this by 2019 it was downgraded. I believe that's right around the time Chris. Okay, 10 years ago she bought the annuity. So that would have been in 2016.

Speaker C: Uh-huh.

Speaker E: It was B rated. Back then it was BB or in three years later it was downgraded. Here's going to be one of my suggestions. You all do. As the vanguard, if someone is going to buy an annuity, especially from one of these questionable companies, they should utilize AI once a year to bring them up to date on if there's any downgrades on any insurance, not just annuities. If you have health insurance, homeowners insurance, auto insurance, there's tons of different insurance companies out there. Some I never even freaking heard of. Create a wonderful prompt and tell AI to or do a Gentic AI and have it set up to run it every 6 months or 12 months automatically. Run research and tell me if any of my insurance companies. Here are the 4, 5, 8, 10, 12 insurance companies I somehow, some way have insurance with. Keep me up to date on any upgrades, any downgrades, any items of concern that I should know. And maybe this woman, if something like that existed or if the agent, as I'm going to share with you in a minute from a different article already a large broker dealer who sold a lot of these annuities is being sued by policyholders because they did not bring to policyholders attention these downgrades. And it's been a shot across the bow of a lot because this was a variable annuity company. Variable annuities are, uh, generally, uh, often must be sold by broker dealers because a variable annuity is regulated as security. We talked about this recently. So it had to be sold from a broker dealer whose registered rep was also a licensed insurance agent so they could sell annuities. So the policyholders are suing the broker dealer, saying, hey, you never brought to our attention that there was a downgrade and you should have. Uh, and the BD is saying, well, you know, we really weren't in a fiduciary relationship. It's not our responsibility to tell you that the courts worked that out. I have a feeling the Policyholders have a good case there, but I have no idea. I'm not an attorney. At the point is, nobody told this woman, I don't believe you're buying an annuity for a lifetime stream of guaranteed income from a B rated company. And nobody told her, three years later, hey, this company, which was pretty crappily rated when you bought it three years ago, has been downgraded. We might kind of want to look at this annuity. I'm, um, not just throwing annuities under the bus. I'm trying to get you to understand insurance companies. And I think it is the policy holders hate to say responsibility because it's really the agent's responsibility, but it's the policyholders good financial practice to at least research the health of the insurance companies. You are relying on. And don't rely on the agents or the brokers to be monitoring this because they're going to claim they don't have to because they're not in a fiduciary relationship with you. So it's wise to utilize AI. AI is dumbest today that it'll ever be tomorrow. Be smarter and so on and so forth. It's only going to get better, better and better. And agentic AI, I don't quite know exactly how it works, but it can be set up to do things automatically and an excellent prompt. There are now AI websites that help you write professional prompts. So it's not one or two sentences, it's two or three pages of very explicit instructions and you can create a prompt and just put the insurance companies in and voila, every six months or 12 months, you'll get a wonderful update on the health of this insurance company. I think it's a great thing that you all should be doing. Okay, so this is everything that I found out and I wanted to know all this because I sat there reading this article saying, I never heard of this company. Why the heck did you buy a lifetime stream of income from a company I never even freaking heard of? She didn't do any research. It's not her fault. But the agent telling you, I got no proof on this. They were selling the commission and that's all they got was a commission and they moved on. Okay, so anything you want to add, Chris, to that little bit of background?

Speaker C: No, I think that sets the stage, gives us a little context for what's going to be contained in the article here. Um, I didn't get. I was able to skim it. I didn't get to read the whole thing prior to us recording so you'll be supplying most of the meats. Plus, obviously I didn't have time to interact with chat analyzing the article, so we'll rely mostly on what you're saying, but I'll certainly chime in as things come to mind.

Speaker E: Okay, couple of things that I'm not clear of. Is this a variable annuity or, uh, was it a fixed annuity? And she's claiming she purchased it for lifetime income, but the article makes no mention of. Of what she was receiving for income, just that she put $99,000 into it. And the article gives a strong indication or tries to lead you to believe this woman lost all her money and how horrible it is. And annuities are terrible. Insurance companies are terrible, and they should all be burned at the stake. Like Joan Zach, not Joan's Arc. Joan. Joan of Arc. Um, and I caution people on that, because if this is a variable annuity, and a gentleman I'm about to quote in this article is quoted in another article I'll try to get to today, I don't know if I'll have enough time where he was pointing out the same thing. Hey, if this is a variable annuity, this woman, her account is okay, but at the same time it's not.

Speaker C: Well, what are we getting that might have been there is still subject to correct. Yeah, uh, issues.

Speaker E: So we talked about this, I think, on the first show this season for National Annuity Awareness Month. When you buy a fixed annuity, which most income annuities, most annuitized, uh, verb annuities are going to be on a fixed annuity chassis. When you buy those kinds of annuities, you don't. You give up access to your money. It's gone. It's the insurance companies. But when you own a variable annuity, your account balance in the annuity, if this woman did put 99,000 into it, your account balance is protected from the sense it's not the insurance company's asset. Never was, never will be. Now, could someone from the insurance company or some hacker get in and steal it? Sure, because it actually is a separate account. But an insurance company can go under and your account balance is protected. In fact, that's what's pointed out in the LPL lawsuit. They sold variable annuities to this PHL company, which leads me to believe this woman has a variable annuity. I also don't think the variable annuity was in payout phase. I think it was a deferred variable annuity. I don't even think it had an income rider. I don't think the woman quite understood what she purchased because the article makes no mention of an income rider or an income benefit. When you purchase an annuity, an annuitized annuity, you wouldn't sit there and say, I have $99,000 in my annuity. You might say, I put $99,000 into it and the insurance company was paying me 10,000 a year for the rest of my life. I'm making that $10,000 number up. But it wasn't described that way. And the lawsuit against LPL was clear. You sold variable annuities to phl, and PHL was called PHL Variable Insurance Company. This is an important context. The article begins aggressive, and I skipped some. So go and read the article. Aggressive companies affiliated with private equity firms and asset managers have been snapping up insurance companies and in some cases engaging in highly complex deals that can imperil policyholders. Such deals resulted in a bigger hole faced by PHL policyholders. Document show. I have no problem with that and I'm glad it's in there. Gee, who has been screaming for about the last four or five years with a slight Bostonian accent that this is really concerning him after he started learning from people like Tom Goldber what the hell is going on. I'm glad that is in there because I have no problem with what was said. People like Benjamin, the woman who bought the, uh. Her name was Anne Benjamin. It is in here, her photos in here, Everything you can see. It seems like a lovely lady. People like Benjamin have almost no way to know whether the money they pay into their premiums is being placed at risk. The details of such arrangements are buried in annual financial statements. It's the responsibility of state regulators to ensure the money is protected and the insurers themselves are financially sound. Again. I like that. I think AI is going to make things easier for people like Ms. Benjamin and state regulators. But it is 100 correct. And it's what Tom Goldberg has been saying. And it's one of the reasons I liked the TSR ratio, which the regulators turned around and closed out because Goldber was actually going out. There was an annual filing that always came out like the following year or two later. And he explained why it's an annual filing that is obscure, that only if you were a forensic accountant you would even know. Insurers have to come out with this document he taught us in the tsr. And it was that document which was horrendous when he showed it to us. But certain sections and lines and columns he was looking at would give him the information he needed. All these regulatory filings, this one included, and I can't remember the name of that document. This is your regulators protecting you folks telling the show, you're going to make this public. The hell do you do with it? Mr. Goldberg would say, who even knows to look except him? So he has been screaming about this shenanigans. The article continues. The collapse of PHL illustrates how state regulators are failing to protect consumers, experts say. I think one of those experts is Mr. Goldberg. But here's the person I wanted to get to. The regulators are not just a little bit wrong, says Larry. Oh, Lord, help me out here. Chris, go to page one. Um, R, Y, B K A Rebecca Ribka.

Speaker C: Ribka.

Speaker E: Vodka.

Speaker C: Ribka or Ribka.

Speaker E: One of those Ribka. Oh, I thought you said vodka. Um, no, says Larry. See, people going to yell at me for butchering the name. I'm going to get another nasty email.

Speaker C: It means little Larry in many Slavic languages.

Speaker E: Larry, I'm going to get your name wrong.

Speaker A: Larry.

Speaker C: Larry, Little fish. Call him Larry. Little Fish.

Speaker E: Larry Little Fish. Anyways, Larry, we'll call him Larry. Founder of Valmarch Financial Group in Ohio. I've utilized Valmock in the past a few times. Valmont helps evaluate and look at insurance companies. Not to the extent that the TSR ratio did, But I give Mr. Larry, uh, credit. He continues to say the regulators. He's talking about the regulators. They are so far off, it's catastrophic. The thing that he also points out, and I wish I had the article open. I'm going to try to open the article as we talk. I'd like to get his quote on LPL. So the key that he pointed out,

Speaker C: uh, with pH,

Speaker E: say who? Where?

Speaker C: Get his quote on who

Speaker E: on the lawsuit against lpl.

Speaker C: Okay.

Speaker E: Okay, here it is, Larry. We can't pronounce his last name. This is now coming from an industry article on the lawsuit against LPL for selling PHL variable annuities and not informing their policyholders that the ratings had been downgraded of this insurance company. And again, LPL is claiming they didn't have to. And the lawsuit is claiming you should have. This is going to be interesting to see how the courts rule on this.

Speaker C: Yeah.

Speaker E: Larry Ripka, or whatever his name is, president and CEO of Valmont Financial Group, said the facts surrounding the case remain important. If. And he's talking about the annuities soldiers. If this is in fact a variable annuity and the assets were held in a separate account, the client should still be X. Should still be able to access those funds. Not now. He's talking about. I didn't read the whole article. Eventually they'll be able to get the accounts. There's nobody at the insurance company now to be able to help them. Separate accounts are not restricted, nor are there any losses. Now, I think that's a little bit misleading, that quote, because a, ah, different article I read on this pointed out the obvious. If you have separate accounts at a variable annuity and that insurance company is now bankrupt and in liquidation and you want to reallocate, how are you going to do that? Most do not have online trading capabilities. You got to call your agent. The agent has to call the insurance company. The insurance company has to make the changes. What if there's no one to call? That was the point. They could be suffering losses if their investments are dropping, they could be growing right now. If their investments are rising. The article continues. Ripker, this is the LPL article said the more significant issue is whether advisors had a continuing responsibility to monitor and communicate concerns about the insurer itself. He continues, quote, if, however, these were fixed annuities or the variable annuity was allocated to the general account, and that's a key distinction, some variable annuities allow you to invest in the fixed account of the insurance company and get whatever interest rate they're paying. That's what he was trying to say. If this was in fact for this woman or, excuse me, not for this woman. He's talking about all of the LPL plaintiffs now in this lawsuit against lpl. If they were variable annuities, they're okay. Granted, the investments might be going up and down and they're not going to be able to access the dollars until this gets cleared up. And they're not going to be able to reallocate. Perhaps, but their money is not part of the bankruptcy and liquidation proceedings. But if it's a, uh, fixed annuity and it's part of the general account, or it's a variable annuity and they invested it voluntarily inside the general account, then yes, he continues, if, however, this was a fixed annuity or the annuity was allocated to the general account, the pleadings he's talking about, the pleadings of lpl, raise an interesting question about the ongoing duty to continue advising the client regarding the company's deteriorating condition. What does that mean in English? If you're in the general account, you now can, I hate to say lose. Chris is right. If you are below the state guarantee amounts, you could lose. But it also changes the math here. What is the Responsibility to someone who puts you in an account at the fixed account. Would LPL be held any more liable or not? It's important again to remember the article on this woman does not indicate if she owned a variable annuity or not, because she might not have suffered any loss. If the variable account continues to rise while all this is. Is being worked out.

Speaker C: Yeah, one would think that the way she's talking in the article, the part that I looked at, she made it clear that she's lost out in some way. So she may very well. They. I looked and PHL did sell fixed indexed annuities as well, so that might be what she had, which doesn't have the separate account status like a variable annuity. Um, so we just. It was. It's too bad. The article, I think, was a little thin. It would be nice to have known that key piece of information. What type of annuity did she hold? Because it does matter.

Speaker E: It absolutely does matter. And the article never got into it, and that's unfortunate. The one thing that I want to highlight and then get to some more research that I did in Connecticut, and then I used New York also as an example, is, is this woman, even if it was a fixed annuity and part of the general account, so it's not held separate, it is now subject to the creditors and bankruptcy proceedings of PHL Variable. Is she still going to lose out? And there was a sentence in here that unfortunately I'm having a hard time finding. Perhaps Chris can do a quick search, look for the sentence. Oh, I found it. So the article continues after quoting Tom Goldber. And I wouldn't actually, maybe I will read, um, Tom's quote. Tom is quoted in the article. And again, read the entire article, folks. I'm skipping over it to cover certain things. The failure of PHL is the perfect example of what happens when an insurance company hides a black hole on its balance sheet, said Tom Goldber, a former examiner for the Mississippi Insurance Department who is now, like I said, a forensic accountant who was recently invited to brief members of the U.S. senate Committee on Health, Education, labor and Pensions about his growing concerns on life insurance practices. This is like the third or fourth time Mr. Gobert has been invited to Washington to talk to them about his opinion. Tom Gober continues, once you can finally see it, in other words, when you know where to look and you start to see the problem. Tom continues, the hole is so big that it's often too late. So even as you start looking at all of this stuff, it becomes too late. The article continues in an insurance company failure, there is no backstop equivalent to the FDIC insurance. Instead, private entities. I don't really think I would put them as private entities. They're run by the states. I. I just don't like that word private. They're state entities who fully tell you. They're called guarantee associations and guaranteed accounts, and they fully tell you on their websites they're not. What, Chris?

Speaker C: They're not technically guaranteed.

Speaker E: Not guaranteed. So. Talk about an Orwellian term. Anyways, private entities known as state guarantee associations collect money from insurers to pay. Excuse me. To cover policyholder losses. The associations limit the payouts, meaning policyholders can receive far less than they invested were promised. DHL policyholder, payouts, for example, are limited to 250, up to 500,000, depending on which state they live in. That is true. I believe some states are even less than 250. Connecticut officials said this month that policyholders. This is the sentence I do not like.

Speaker A: Uh-huh.

Speaker E: I, I like the fact that it. It's scary and it's going to get people's attention, but I don't like the fact that it's. It is not explained well.

Speaker C: Yeah.

Speaker E: Connecticut officials said this month that policyholders are likely to receive 34 to 57% of their claims from PHL in a liquidation of the company. If you didn't understand insurance, Kris, you would believe, oh, my God, this woman's only going to get a third to maybe half of what she put in. That's horrible way of putting it, because the state guarantee fund makes up the difference. And one of the reasons it takes so long to get through the State Guarantee association is they have to first figure out how much in assets are left, what can be liquidated, what money is coming from the insurance company, which can be used after paying for taxes and wages of employees. It can then be used to make policyholders whole. And it's just misleading. But to say, hey, I think we're going to get enough to cover 34 to 57% of policyholder claims, then the state guarantee funds can make up the differences, but also up to limits. Up to the limits? Yes, up to the limits. But the author didn't point out the woman put 99,000 in. I'm not even sure what state she lives in. The lowest I have ever seen protection of is $100,000. And I don't know if that state still is at 100,000. Um, Google Real quickly what New Jersey's protection is, Chris. It used to be 100,000 did they raise?

Speaker C: I think they've realigned it to be similar to the FDIC and most. And remember FDIC used to be 100. So I think, um.

Speaker E: But I'll check, just Google it real quick. So my point is, I think this woman, irrespective of what state she's in, is eventually going to be made whole or as whole as can be possible. If it's a variable annuity, though, as the gentleman from Valmont, Larry, whose last name I can't pronounce is right, that money is protected, it's safe, but it's in investments and those investors could be going up or down and she might not be able to access the money certainly while this insurance company is in receivership and she might not be able to reallocate and make changes. So yes, if the markets tank, she's in trouble. And a thing to remember about state guarantee funds, folks, they only protect money that's at risk of insurers. Insolvency, not market risk. When you buy a variable annuity, your sub accounts, your money is invested. If it drops because the market is tanking, state guarantee funds do not make you whole. Not unbearable annuities on market losses. They only make you whole on any promise tied to the insolvency of, of the insurance company. A variable annuity. The investments within a variable annuity are not a liability of the insurance company, so they have no bearing on that it is an investment risk. And the state guarantee funds do not protect the sub accounts of Varal annuities. So this is a double edged sword. They're not going to lose the dollars in the sub accounts of the Varel annuity to the creditors of PHL variable, assuming they're in the varial account and not the fixed account like Larry said. But also state guarantee funds are not going to protect this woman if that's in fact the type of annuity she has. It's unclear. They're not going to protect any market losses she might suffer while all this is happening. And she can until she can get access to her sub accounts. Now, hopefully sub account access is online. She can access it even though the insurance company is insolvent. Maybe it's still up the website, I don't know. I don't know how advanced PHL variable was and we don't even know if she has a variable account. If she has a fixed account, I think her 99 will be protected. It's just going to take forever to get it.

Speaker C: Yeah.

Speaker E: What did you find on New Jersey? Are there Any hundred thousand dollar limit state left.

Speaker C: So New Jersey, um, it ranges depending on the account, the policy type. So there is one that's 100,000, but that only applies to life insurance cash surrender value. So annuities that are cash surrender or withdrawal style, up to 250annuities that are in payout status, the present value up to 500 grand. Life insurance death benefits are much higher. So it varies depending on the type of policy, but all above what her exposure appears to be.

Speaker E: And that's. I like the fact that the article is bringing again to attention. We talked about a different company in the, in the past. Um, and I can't remember and I don't want to say what I think it was. And Barron's magazine, y', all, I'm sure many of you reading also read Barron's. I read it every week. Not maybe the whole thing, but I do look at it comes in digitally now for me and I look to see if there's anything interesting in Barron's. Barron's magazine did, did a wonderful uh, article on private equity and their concerns that they found. And we talked about those insurers I think last year, about a year and a half ago. So I like that this article is kind of getting people's attention, but it could have added a little bit more clarity because some of the people who emailed me were beside themselves and now scared to buy an annuity. And I'm just trying to calm them to say, hey, I think this woman's going to be okay. And you have to kind of what, what is happening is, is eye opening. And Chris is right. There are going to be people who have the fixed annuity who might have put in more than their state guarantee protection amounts and they might lose. But this particular woman I don't feel is ultimately going to lose much, if anything, once this can all be ironed out. And again, we don't know what kind of payout she has. So as I wrap up, I want to go and talk a little bit, read the whole article. I'm not going to do my typical walk through the old article. I now want to talk about the state guarantee associations because I've often done that, but I never added enough clarity. So I thought I would use Connecticut since Connecticut is the state where it was located and it's the insurance regulator who is handling the liquidation. And then I chose New York because New York has some of the toughest insurance regulatory laws ever. And I thought I would look at New York as well. You can do a similar Research on your own state website. I relied on chat and I specifically when I researched Connecticut said do not go anywhere except the state of Connecticut's own state guarantee fund website. Find all information from there. And I did the same thing with New York and I would do the same if I were you in whatever state you live in, if you're worried. To try to get people to understand what happens when an insurance company goes under. We're not talking on the variable side. All these websites will tell you variable is not going to be protected. It's not part of the, the liquidation value. So your account is quote unquote protected from that standpoint. But market losses, while all this is being worked out, if you can't get in and make trades or whatever, market losses are not protected. Only items that were at the risk of the insurer, not the risk of the market is protected.

Speaker C: So just one of the things, just a heads up, Jim, you've only got five minutes before you have to head to your other meeting.

Speaker E: Is it five? I want to stop at ten to five. Is that five minutes?

Speaker C: That is five minutes.

Speaker E: Okay, so we're going to stop here then and continue next week. This become a two part show. I'm going to get into a little bit more on state guarantee funds, especially with payout annuities because we still don't know if this is a payout annuity or not.

Speaker C: Uh-huh.

Speaker E: And how insurance companies handle it. Excuse me, how state guarantee funds handle it. Because I don't want people, Chris, to read this. Annuities are on thin ice to begin with. And again, this, in my opinion, I fault the regulators, I fault private equity in the games they're playing. I fault the agent, I do not fault the person who bought this. But, uh, my fear is articles like this that don't clearly explain. This woman is probably not going to lose anything short of the time it may take to keep her whole. Do a disservice. Articles that don't go on to explain the protections that you can get, the protections that can apply to payout annuities, which are the annuities that we tend to favor. Nor did it go out and say, hey, this was a crap ass, low rated insurance company to begin with. You shouldn't buy insurance or lifetime streams of income or anything from an insurance company rated with a B. If it begins with a B, it's bad, get the hell out. Or C or a D or an F. It didn't. And I think it's because fear sells and it's just Going to further people's disgust and fear of buying annuities rather than explaining, hey, things were done wrong by the regulators, they were done wrong by the insurance company. They were done wrong by the agent, not by the person who bought it. She didn't know any better. So read this article. We're going to help you avoid the mistakes that this woman made. And gee, here's how AI can nowadays help you. So if your advisor is recommending you purchase an annuity from XYZ Insurance company, here's how you can insure and protect yourself. Here's, you know, a prompt, a sample prompt for you to use to check the ratings of this insurance company. Here's a sample prompt you can use for the state you live in to find out what protections you would have with the estimated dollar values you're going to put into your annuity. There's nothing in this article to make people understand, yeah, you're going to be in the ocean, you're going to be swimming. There's jellyfish in there, there's sharks in there, there's barracudas in there. There's a lot of crap in the ocean that can cause you harm. But here's how you can protect yourself. And that's my issue with the article. And some of the people who wrote to us, Chris, were so. I'm never buying nudes. You read this. Fine, you can have that attitude. But there are a lot of highly rated A plus plus rated carriers who came out of um. This is why this Covid and mortality tables and low interest rates. That's the excuse. That's the Epstein's letter or my dog aided excuse. It was the crap ass stuff being done behind the scenes in my opinion with private equity and what they were doing with this insurance company and the $450 million reinsurance deal that fell flat on its face that turned out to be worthless. It's that crap like Tom Goldber was saying. And by time you find out, it's often too late. And the regulators who should be watching all this and I think if anyone, if you're the vanguard, if anyone is coming to you, hey, I'm thinking of buying this annuity research not only the ratings of the insurance company with private, with AI research the history like I did and research at all. If private equity or investment manager companies own this insurance company in any way, shape or form and then if you are buying a lifetime guaranteed stream of income, I would back off. I'm sorry, I just would. And it may be fine right now, but I'm not worried about right now. I'm going to be passing this firm on hopefully to junior employees. I don't want to leave them a headache. In 30 years when I'm 80 or dead or both, I could be dead in my 80s. I don't want them having to deal with insurance companies going belly up on lifetime streams of income. I don't want our clients having to deal with it. And that's why we will not touch with a 10 foot pole any lifetime streams of guaranteed income by a private equity owned insurance company. And if someone is buying a multi year guaranteed annuity, we'd be a little more lenient but never a uh, B rated at all. A B rated but we would be a little bit more lenient if the dollars going in were well below or equal to the value of the state guarantee protection amount. But also keep in mind, and we'll get into this next week but a little teaser, state guarantee funds will protect interest not so much on a fi. I'll explain FIA as well next week. So if your state guarantee protection amount uh, is 250 and you're putting 250 in but the annuity is paying, I'm ah, making these numbers up 5%. You're going to keep it for five years. Any inch. Anything above 250 is not protected. So you might want to put a little bit less in to make sure the compounding of 5% over the next X number of years that you're going to keep the myga don't exceed 250 or 500 whatever your state guarantee amount is. So do keep that in mind as well. Oftentimes people say well I won't put more than $250,000 in but you're going to want to protect the interest as well. Okay, so we'll pick up where we left off next week. I don't know if we'll finish it all next week. So eventually I do want to talk about jointly owned annuities. So maybe next week we'll finish this Chris and get to jointly owned annuities.

Speaker C: Okay, that sounds good. Well we'll put a link to this, uh, like I said, it's been mentioned a number of different news sources but I think the lead on was the NBC reporter. So we'll put a link to this NBC article in um, the show Notes if you're interested in looking at it and we'll talk about the state guarantee funds next week. We appreciate everybody for listening uh, to the show and uh, you take care Jim. You Have a nice evening wherever you're headed and for everybody else, we'll be back with you next week with a brand new show.

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Speaker D: This podcast episode includes a discussion on annuities, which are insurance products that involve fees, expenses and investment risk, including the possible loss of principal for variable annuities. Annuities often have complex features. Surrender charges and holding period requirements and withdrawals may be subject to taxes and penalties. Any references to protection, benefits or lifetime income generally refer to fixed insurance products, not securities or investment products. Guarantees are backed by the financial strength and claims paying ability of the issuing insurance company. This content is for informational purposes only and should not be considered investment advice or a recommendation to purchase any specific product. For additional information regarding annuities, please consult a qualified financial professional to determine what may be appropriate for your individual situation.