Wednesday, March 12, 2014

How Safe is Your Insurance Company?

Martin Weiss explains his strategy for rating insurance companies and shares his outlook of the entire insurance industry for 2014.

TERRY SAVAGE:  I am Terry Savage from Money Show.com.  How safe is your insurance company, the one that stands behind your life insurance or maybe the annuities you have in your retirement plan or other insurance products.  There is one man to ask if you want to know how safe an insurance company is, our guest, Martin Weiss, Founder of the Weiss Research Ratings now at Weiss Watchdog.com.  Martin Weiss, we go back a long way.  You were the first guy to say wait, the Standard & Poor’s and Moody’s ratings do not do the job.  What is it that you know?

MARTIN WEISS:  We do not know anything that they do not know.  We do not have any more information.  We are not smarter than they are.  What separates us from Moody’s S&P and Fitch is that they continue to accept tens of thousands of dollars for the ratings that they issue to the companies from those same companies and that model has not changed nor has ours.  From the very beginning, our philosophy is we do not accept a dime from any company we rate for those ratings and we never will.  We are completely without conflicts of interest and 100% independent.

TERRY SAVAGE:  Thirty years ago or more, you blew the whistle on a company that went under, an insurance company.  Everybody else had it highly rated.

MARTIN WEISS:  Executive Life plus Fidelity Bankers Life, Mutual Benefit Life and many others who went bankrupt.

TERRY SAVAGE:  All right.  People think well the State Insurance Guarantee Fund will step in if my insurance company goes under, true or false.

MARTIN WEISS:  False, because unlike the FDIC they are not prefunded.  They have to raise the funds after the fact and guess what, when major companies go bankrupt, they do not have enough money.  That is what happened in the early 1990s.  Six million policyholders were trapped in a moratorium where trillions of dollars of their assets were frozen. 

TERRY SAVAGE:  All right, let’s fast forward to 2009, AIG and insurance companies called into question, where are we today?

MARTIN WEISS:  Well, the same thing happened in 2009.  The companies, Moody’s S&P, Fitch and so forth gave Lehman Brothers, Bear Stearns, Washington Mutual, banks, major investment banks and insurance companies stellar ratings, not only months before they failed but right up to the day they failed. 

TERRY SAVAGE:  Oh my gosh!  Let’s look at 2014, how are we?  What shape is the insurance industry in generally?

MARTIN WEISS:  In general, the insurance industry is not as bad financially as it was when major insurance companies went under, but there are still a lot of significant pockets of weakness, but you know every cycle is different.  In the early 1990s, it was insurance companies.  Then in 2008 and 2009, it was the huge investment banks and banks.  Now, it is stepped up to an even higher level.  The debt of the United States government is becoming more and more shaky, which is why the Weiss Ratings a few years ago decided to issue sovereign debt ratings. 

TERRY SAVAGE:  Where do you rate the U.S. government today?

MARTIN WEISS:  C minus. 

TERRY SAVAGE:  C minus. 

MARTIN WEISS:  Which in our book is actually not as bad as it sounds, it is a fair.  It is half way between strong and weak.

TERRY SAVAGE:  Let’s tell people where they can go to get your ratings at Weiss Watchdog.com.

MARTIN WEISS:  Weiss Watchdog.com.

TERRY SAVAGE:  What do you offer there?

MARTIN WEISS:  Your rating instantly and if you add your stocks, your banks, your insurance companies or whatever to your “portfolio”, we will send you an update as soon as the rating is upgraded or downgraded.

TERRY SAVAGE:  The cost for all this?

MARTIN WEISS:  Zero.

TERRY SAVAGE:  Weiss Watchdog.com that is something for you to watch.  I am Terry Zavitz from Money Show.com. 

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