We will talk pensions, 401Ks, and other kinds of retirement equity WE THE PEOPLE have been guaranteed either by LEGAL contract or by reasonable expectation of LEGAL STOCK AND BOND MARKET ACTIVITY. We discussed in detail the concerns over our Social Security and Medicare Trusts with the $20 trillion national debt from subpriming our US Treasury bond and state municipal bond market----the SS Trust could simply be called 'JUNK BONDS' at this point.
The pension system was always questionable in how it operated. It seems Wall Street planned to use those savings for the Robber Baron decades we have these few decades and pensions were usually used as a negotiation AWAY from higher real-time wages. ALWAYS GO WITH THE REAL-TIME WAGE INCREASES because this kind of pension system will always be used as fodder. We have watched from CLINTON/BUSH/OBAMA as pension funding was ignored or left too underfunded to be viable. That underfunding was of course done for just this reason----THAT IS TOO MUCH LIABILITY FOR NATIONAL, STATE, OR LOCAL GOVERNMENTS TO SUPPORT! That is what public sector employees like fire, police, and teachers are hearing today. The second avenue for labor pensions is below----the UNION PENSION INSURANCE FUND.....Pension Benefit Guaranty Corporation. As soon as Congress created this platform during those decades of BAINS CAPITAL hostile takeovers to send our US corporations into bankruptcy just to shed these labor benefits----labor should have known those pensions would be gone. As with labor negotiating wage reductions these few years today we have the same tactic where those most vested are pushed to vote against the newly hired in order to save their own wages and benefits. DEATH BY A HUNDRED CUTS-----pensions are deliberately being dismantled.
Those citizens not liking labor unions and saying GOOD RIDDANCE to these benefits need to think what aging today into a societal structure becoming too expensive for even prime-time career employees to afford. We are watching as the protections FDR and social democracy put into place as safety nets for our elderly-----as with all NEW DEAL PROGRAMS is looted and dismantled. If we care about the same thing happening to Social Security we should demand US Rule of Law protections of contractually guaranteed pensions for union and non-union workers.
IF 99% OF AMERICAN PEOPLE ARE SENT TO POVERTY WHO WILL BE CONSUMING A PRODUCT FROM OUR COMMUNITY REDEVELOPMENT?
'Last year, 150 (27 percent) multi-employer pension funds were determined to be in “critical” condition, which means they were less than 65 percent funded and faced the possibility of insolvency within the next five years, according to the U.S. Department of Labor'.
I think labor unions have backed Clinton because they think these benefits are going to be protected when they are not.
With this coming economic crash that insolvency will come faster than a decade.....we are talking hundreds of millions of seniors heading into retirement.
GAO: Union Pension Insurance Fund ‘Likely To Be Insolvent’ Within Decade
By Barbara Hollingsworth | February 24, 2015 | 3:18 PM EST
(CNSNews.com) – Despite recent congressional action, the Pension Benefit Guaranty Corporation’s (PBGC) multi-employer pension insurance program is “likely to be insolvent by the year 2024,” according to the Government Accountability Office’s (GAO) latest list of 30 “High Risk” government programs.PBGC collects premiums set by Congress from employers to insure the pension benefits of more than 44 million American workers and retirees currently covered under defined benefit plans.
The agency’s “single-employer program protects about 33.6 million workers and retirees in about 27,600 pension plans,” according to the PBGC website. “The multi-employer program protects 10.4 million workers and retirees in about 1,500 pension plans” set up by collective bargaining, usually for union workers in one industry, including the airline, construction, entertainment, mining, retail, and trucking industries.
Although PBGC has one of the largest financial portfolios of any federal corporation, it “estimated that its exposure to future losses for underfunded plans was $184 billion” – or more than twice its $89 billion in assets, GAO reported.
“At the end of fiscal year 2014, PBGC’s net accumulated financial deficit was $61.8 billion—an increase of over $26 billion from the end of fiscal year 2013,” according to the report. In 2000, PBGC was $10 billion in the black.
Last year, 150 (27 percent) multi-employer pension funds were determined to be in “critical” condition, which means they were less than 65 percent funded and faced the possibility of insolvency within the next five years, according to the U.S. Department of Labor.
Another 85 (14 percent) were classified as “endangered” because they were less than 80 percent funded and faced a significant shortfall within the next seven years.
According to a Sept. 2014 study by Boston College’s Center for Retirement Research, many union pension plans that “were once thought to be secure” are in jeopardy due to declining union membership and expanded retiree benefits.
The study identified two of the biggest union pension funds currently in trouble: the United Mine Workers of America 1974 Pension Fund and the Teamsters Central States pension fund.
However, PBGC, the federal agency that insures present and future retirees against the risk that their pension funds could become insolvent, is itself at risk of going belly up.
The agency “continues to face the ongoing threat of losses from the termination of underfunded [pension] funds, while grappling with a steady decline in the defined benefit pension system,” the GAO reported.
“With each passing year, fewer employers are sponsoring defined benefit plans and the sources of funds to finance future claims are becoming increasingly inadequate. As a result, PBGC’s long-term financial future remains tenuous,” the report warned.
After PBGC estimated that its multi-employer insurance fund would be “exhausted” by 2022, Congress passed the Multiemployer Pension Reform Act of 2014 (MPRA) as an amendment to the $1.1 trillion omnibus spending bill to address the long-term viability of the program, which GAO says “faces an immediate and critical challenge.”
MPRA doubled 2015 premiums for participants in multi-employer pension plans and made a number of technical modifications to the program, including the creation of a “critical and declining status” category for pension funds that are projected to be insolvent within the next 15 years.
The legislation allows trustees of pension funds in that category to temporarily or permanently reduce current or future benefits after demonstrating that they have made all reasonable efforts to avoid insolvency. Benefits cannot be reduced for retirees over the age of 80, and cannot fall beneath $12,870 annually for a retiree with 30 years of service.
However, PBGC officials “predicted that the changes will only forestall insolvency of the program by an additional 2 years,” the GAO noted.
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As with all stock market and bond investments these few decades following the deregulation of banking----the lack of revenue in these benefit funds has more to do with pension funds used as fodder in crashing economies as in 2008 when pension funds were moved from a safer investment in the bond market to being connected with the worst of failing Wall Street banks just being used to prop these criminal banks to get a few billion more. The idea that the BULL after the BEAR brings back those loses is not true----you start over from that low position making gains that then again are lost in the next crash.
The second thing that happened during CLINTON/BUSH/OBAMA was the corporate bankruptcy settlement placing a monetary contribution figure by corporations into these pension funds were NOT CONTRIBUTED. There has been no oversight and accountability to assure corporations contributed their legal fund requirements and guess what? CORPORATIONS DIDN'T MAKE THESE CONTRIBUTIONS. This is why the union pension funds are heading for insolvency. Below we see one union trying to address shortfalls by protecting senior members at the expense of younger members AND NONE OF THIS IS NECESSARY. Simply auditing corporate contributions and investment strategies for corruption will make those pension funds FLUSH FOR COMING RETIREES. Do you hear national labor union leaders saying this? Clinton will dismantle these benefits and Bernie would have saved them and national union leaders went with Hillary knowing this.
Teamsters’ Pension Fund Warns 400,000 of Cuts
By MARY WILLIAMS WALSHOCT. 6, 2015
Kenneth Feinberg will receive comments from people affected by a reorganization of the Central States Pension Fund. Credit Drew Angerer for The New York Times
A prominent Teamsters pension fund, one of the largest, has filed for reorganization under a new federal law and has sent letters to more than 400,000 members warning that their benefits must be cut.
Any reorganization of the decades-old Central States Pension Fund would take months and would probably be a brutal battle as workers, retirees, union leaders and employers all seek to protect competing interests. It is a multiemployer plan, the type led jointly by a union and a number of companies, that has caused consternation for many years, because if it failed, it could wipe out a federal insurance program that now pays the benefits of tens of thousands of retirees.
If the reorganization ultimately proves successful, however, it could serve as a model for other retirement plans with similar, seemingly intractable financial problems.
Cutting retirees’ pensions has generally been illegal, except under the most dire circumstances. But the executive director of the Central States fund, Thomas Nyhan, said that reducing payouts to make the money last longer was the only realistic way of avoiding a devastating collapse in the next few years.
“What we’re asking is to let us tap the brakes a little now, and let us avoid insolvency,” he said. “The longer we wait to act, the larger the benefit reductions will have to be.”
He said the Central States fund had been hit by powerful outside forces — the deregulation of the trucking industry, declining union membership, two big stock crashes and the aging of the population — and it was currently paying out $3.46 in pension benefits to retirees for every dollar it received in employer contributions.
“That math will never work,” Mr. Nyhan said. He said the fund was projected to run out of money in 10 to 15 years, an almost unthinkable outcome for a pension fund that became a political and financial powerhouse in the 1960s, when trucking boomed with the construction of the interstate highway system. Central States became famous back then for financing the construction of hotels and casinos in Las Vegas.
In 1982, the Teamsters were barred from investing their retirees’ money because of the union’s ties to organized crime. Under a federal consent decree, the fund’s investment duties were shifted to a group of large banks, where they have remained. The restructuring plan would not change that.
In the coming months, the Treasury Department will review the Central States restructuring plan, to make sure it complies with the new law. It will also receive comments from affected people through a special master, Kenneth Feinberg, who has been retained by the Treasury to iron out conflicts that have come up in other special circumstances, such as the dispute over whether workers at bailed-out companies could receive contractual bonuses.
The Treasury is expected to decide whether to approve the proposal by next May. If it does, Central States’ roughly 407,000 members will then vote on it. Those facing large cuts would be unlikely to vote in favor of the restructuring. But others might see it as an acceptable way to make their pension plan viable over the long term. Active workers will continue to accrue benefits, for example, and Mr. Nyhan said his projections showed that the restructuring could make the pension fund last for 50 more years.
Mr. Nyhan acknowledged that the process would be emotionally charged. Even if a majority votes no, however, the law requires the Treasury Department to impose the changes, once it approves them, because the Central States fund is so large that it qualifies as “systemically important.” That means that if it collapsed, it could take down the multiemployer wing of the Pension Benefit Guaranty Corporation, jeopardizing the retirees who currently get their pensions through the program. (The federal insurance program for single-employer pensions would not be affected by a possible failure of the multiemployer program.)
In the past, multiemployer pension plans were popular because they gave small companies the chance to offer traditional pensions, and they permitted workers to move from job to job, taking their benefits with them. About 10 million Americans participate in multiemployer pension plans, many of them in sectors like trucking, construction and retailing, where unions are a powerful presence.
“What we’re asking is to let us tap the brakes a little now, and let us avoid insolvency,” said Thomas Nyhan, the executive director of the Central States fund. Credit Zach Gibson/The New York Times
Such pension plans were also said to be financially stronger than single-employer pension plans, because if one company went out of business, others would keep contributing to the pooled trust fund that paid the benefits. Both types were insured by the federal government’s pension insurance program, but companies taking part in multiemployer plans paid much smaller premiums and the coverage was very limited — no more than $12,870 per year, compared to around $54,120 a year for a single-employer pension.
Many Teamsters have earned pensions that exceed the multiemployer insurance limit and would be hit hard if the Central States fund failed.
But in recent years, some multiemployer plans ran into severe trouble as more and more participating companies went bankrupt, leaving growing numbers of “orphaned” workers and retirees for the surviving companies in the pool to cover. Companies in the more troubled plans said lenders would no longer give them credit. Last December, Congress enacted the Multiemployer Pension Reform Act of 2014, which set up a legal framework for distressed pension plans to restructure.
According to a summary provided by the Central States pension fund, its restructuring plan would work by slowing the rate at which active Teamsters will build up their benefits in the coming years, and by lowering the payouts to current retirees, with certain exceptions.
Retirees who are 80 or older will not have their pensions cut, and those over 75 will receive smaller cuts than younger retirees. Disability pensions will continue to be paid in full.
A group of about 48,000 workers and retirees who earned their benefits by working at United Parcel Service will continue to have their pensions paid in full, thanks to labor contracts between the Teamsters and the company. UPS was for many years the largest employer in the Central States pension fund, but it withdrew from the fund in December 2007 after making one large final payment. After the stock market crash the following year, UPS and the Teamsters negotiated a separate agreement calling for UPS to shelter those workers from any cuts the Central States pension fund might have to make.
The group that seems exposed to the largest pension cuts consists of about 43,400 “orphans,” or retirees still in the pension fund, even though their former employers no longer exist. Their pensions will be cut to 110 percent of what they would get from the Pension Benefit Guaranty Corporation, or at most, $14,158.
Active workers will not lose any of the benefits they have earned up until now. But in their coming years of work, they will accrue benefits at the rate of 0.75 percent of the contributions their employers pay into the fund. In the past, their accrual rate was 1 percent.
The restructuring will also abolish a rule that bars pensioners from returning to the work force to supplement their reduced pensions.
The president of the International Brotherhood of Teamsters, James P. Hoffa, wrote to Mr. Nyhan last month, saying the new restructuring law “creates the false illusion of participatory democracy,” because it required a vote “that can simply be ignored.” Although Mr. Hoffa is president of the union, he has no say over the pension fund, which is run by a group of trustees from the companies and the union.
“Participants and beneficiaries get to vote, but their vote only counts if they vote to cut their own pensions,” Mr. Hoffa said. “The people who conceived that cynical scheme should be ashamed.” He said he preferred legislation introduced by Senator Bernie Sanders of Vermont, which if enacted would close tax loopholes and redirect the money to supporting troubled multiemployer pension plans.
Mr. Nyhan said he liked Senator Sanders’s proposal too, but recalled that a similar bill was introduced in 2010, when Democratic Party lawmakers controlled Congress, but was never approved. He said he thought it was even less likely that today’s fiscally hawkish, Republican-controlled Congress would enact such a bill. It was not safe to wait and see if the Sanders bill would pass, he said, because the passage of time made the insolvency more likely.
“The easy thing for my board to do would be ignore the problem,” he said. “We just don’t think this is the responsible thing to do.”
“We need either less liabilities or more money, and Congress is telling us we’re not getting more money,” he said.
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Here we see the push towards protecting corporations from paying their contractually guaranteed financial commitment to these pension funds. Our local and state government did the same hiding debt obligations to these pension funds DEBT OBLIGATION BONDS have this past decade been reported over and over and over and over to be filled with fraud and corruption. This is where pensions went from being neglected and used as fodder to being pushed into what we know was an IMPLODING BOND MARKET. This article from 2012 already shows this movement into the bond market----Congress passed these laws allowing this to occur even as in 2010 Congress passed the laws allowing our US Treasury and state municipal bond markets to be subprimed and sold globally----and the FED and Wall Street created vehicles for corporations to load themselves with corporate bond debt just to leverage the bond market into collapse.
'Next year, pension funds will appear to be better funded, even if they are not. Congress voted this year to allow funds to discount their obligations using a 15-year average of bond yields, meaning they can use a higher rate and so report lower obligations'.
Think what will happen to these pensions tied to a collapsing bond market and then think what happens when this economic crash sends lower-tiered US corporations into bankruptcy just to enfold them into multi-national corporations which will then end IPO listings and go private.
NO BUILDING FROM BEAR TO BULL FOR THESE PENSION FUNDS NEXT DECADE.
All of Maryland pols voted for these bond obligation policies and Maryland and Baltimore has tied its pension benefits heavily to this collapsing bond market just to shed them----ask Sarbanes, Cummings, Cardin, Mikulski or any of Maryland's 1% Wall Street players.
Private Pension Plans, Even at Big Companies, May Be Underfunded
Off the Charts
By FLOYD NORRIS JULY 20, 2012
AFTER years of poor investment returns, the pension funds of the United States’ largest companies are further behind than they have ever been.
The companies in the Standard & Poor’s 500 collectively reported that at the end of their most recent fiscal years, their pension plans had obligations of $1.68 trillion and assets of just $1.32 trillion. The difference of $355 billion was the largest ever, S.& P. said in a report.
Of the 500 companies, 338 have defined-benefit pension plans, and only 18 are fully funded. Seven companies reported that their plans were underfunded by more than $10 billion, with the largest negative figure, $21.6 billion, reported by General Electric.
The other companies with more than $10 billion in underfunding were AT&T, Boeing, Exxon Mobil, Ford Motor, I.B.M. and Lockheed Martin. JPMorgan Chase had the largest amount of overfunding, $1.6 billion.
The main cause of the underfunding at many companies does not appear to be a failure to make contributions to the plans. Instead, it reflects the fact that investment markets have not performed well for a sustained period.
As the accompanying charts show, over the last 15 years, the S.& P. 500 rose at an annual rate of less than 5 percent, even with dividends reinvested. Not since 1945 had a 15-year period been so bleak for the stock market. The Barclays Capital U.S. Aggregate Bond Index, which includes all investment grade bonds, returned 6.3 percent, but that, too, was lower than it had been for a long time.
Virtually all pension funds had assumed returns would be better, leaving them underfunded when their investments failed to perform as expected.
The prolonged poor performance of stocks has led some companies to move away from them. Seven years ago, S.& P. said, stocks made up 65 percent of pension-fund assets and bonds made up 29 percent, with the remaining assets in real estate and other investments, like private equity funds. By last year, stocks were down to 48 percent and bonds up to 41 percent.
The stock market’s poor performance has also convinced some companies that they no longer want to take the risk of guaranteeing pension payments.
Many have closed their pension plans to newer employees and stopped accruing benefits for workers already in them. Instead, they have pushed employees into defined-contribution plans, in which the worker, not the employer, bears the risk of poor investment performance.
Determining whether pension funds have adequate funding is, to some extent, a work of art. Companies estimate what they will owe in the future, and then discount that number based on how long it will be until they have to pay it and the interest rate at which their pension-plan investments could grow. The discount rate used can have a significant effect.
For example, if a company estimated it would owe $1 million in 10 years and used an 8 percent discount rate, the current obligation would be $434,000. If it chose a 3 percent rate instead, the current obligation would be $737,000.
Next year, pension funds will appear to be better funded, even if they are not. Congress voted this year to allow funds to discount their obligations using a 15-year average of bond yields, meaning they can use a higher rate and so report lower obligations.
General Electric announced on Friday that it would slash its pension contributions as a result of the new law, and many other companies are expected to do the same.
Because such contributions are tax-deductible, lower deductions may mean higher tax bills, which would increase government revenue, at least for a few years.
Of course, markets will do whatever they will do, regardless of the assumptions pension-fund sponsors make. In the long run, contributing less now may simply mean companies have to contribute more later.
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Corporations have moved from defined to contribution pension plans because they want employees to PUT SKIN IN THE GAME. What that means is employees will put their own income into what we all know to be a criminal Wall Street market and lose not only that corporate donation to pension but their own money. Look below to see these new contribution pensions are not covered by the Pension Benefit Guaranty Corporation PBGC.
Here we see the Federal government does insure these pension policies saying workers will receive the amount contracted. What happens when the Federal government has $20 trillion in national debt from bond market fraud? Does it claim in court the inability to pay?
The second issue in this planned shredding of our pension benefits is this---WHICH INSURANCE PROVIDER IS TIED TO THESE INSURANCE PLANS FOR PENSIONS?
The coming economic crash will take out many US corporations because most have tied themselves heavily to the collapsing bond market PRETENDING they thought the bond market was safe because for centuries it was---until these several years of the FED, Wall Street, and Congress subpriming our bond market.
We had PIMCO owner sell that global municipal bond corporation a few years ago and now it is limping towards this coming bond market crash----it was central in subpriming globally our US bonds. Below we see what could be the next AIG----many of these Life Insurance corporations will be taken out in this crash but we see an executive transition OUT -----just as the economic crash is ready to hit. They will say----the current CEO was not in charge of bad investments.
'AXA Equitable Life Insurance Company (NY, NY)'.
AXA Equitable Life Insurance Company
Key Developments
AXA Equitable Life Insurance Company Announces Resignation of Henri De Castries as Chairman and Chief Executive Officer
Sep 1 16AXA Equitable Life Insurance Company announced that Henri de Castries resigned as Chairman and Chief Executive Officer of effective September 1, 2016. In connection with his resignation from company, Mr. de Castries is also resigning from the Board of Directors of the company .
Does the federal government insure pension benefits?
Answer:The federal government insures certain pension benefits. Specifically, it insures defined benefit plans (but not other types of retirement plans) through the Pension Benefit Guaranty Corporation (PBGC), a federal agency created by ERISA.
A defined benefit plan is a qualified employer pension plan that promises to pay a specific monthly benefit at retirement. Although the PBGC insures most defined benefit plans, it doesn't insure defined contribution plans. Defined contribution plan participants have individual accounts, and these plans don't promise to pay a specific dollar amount to participants. Examples of defined contribution plans include 401(k) plans and profit-sharing plans.
To find out if your defined benefit plan is insured by the PBGC, ask your employer or plan administrator. In general, though, your defined benefit plan will be covered unless it meets an exception. Plans not covered include those belonging to professional service corporations (e.g., doctors and lawyers) with fewer than 26 employees, church groups, and state and local governments.
If your employer's pension plan is to be terminated, you'll receive notification from your plan administrator and/or the PBGC. If the PBGC takes over the pension plan because your employer doesn't have enough money to pay benefits owed, the PBGC will review the plan's records and estimate what benefits each person will receive.
The PBGC guarantees that you'll receive basic pension benefits up to a certain annual amount. This amount may be lower than what you would normally have received from your plan. For plans ending in 2014, the maximum annual amount is $59,318.16 (or $4,943.18 per month) for a worker who retires at age 65. (If you begin receiving payments before age 65 or if your pension includes benefits for a survivor or other beneficiary, the maximum amount is lower.)
Types of benefits guaranteed include the following:
Pension benefits at normal retirement age
Most early retirement benefits
Disability benefits for disabilities that occurred before the plan was terminated
Certain benefits for survivors of plan participants
Information provided has been prepared from sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Data and information is not intended for solicitation or trading purposes. Please consult your tax and legal advisors regarding your individual situation. Neither AXA Equitable nor any of the data provided by AXA Equitable or its content providers, such as Broadridge Investor Communication Solutions, Inc., shall be liable for any errors or delays in the content, or for the actions taken in reliance therein. By accessing the AXA Equitable website, a user agrees to abide by the terms and conditions of the site including not redistributing the information found therein.
Please be advised that this materials is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transactions(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent advisor.
AXA Equitable Life Insurance Company (NY, NY). Securities are offered through AXA Advisors, LLC, NY, NY 212-314-4600 (member FINRA / SIPC). AXA Equitable and AXA Advisors are affiliated companies, do not provide legal or tax advice and are not affiliated with Broadridge Investor Communication Solutions, Inc.
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'The Retirement Benefits Group (RBG), a division of AXA Advisors LLC, became one of the nation's leading providers of retirement plans for educators. The RBG continues to flourish with its genesis in New Jersey, servicing over 85,000 clients in over 580 public schools who are saving for retirement and expanding into full financial strategies. We are proud that our clients have accumulated over 4.1 billion in retirement assets'
AXA Equitable Ratings
Average Rating: 1.30 out of 5
Based On: 6 Reviews
Number Of Comments: 20
AXA Equitable Reports
Reported Losses: $127,755.68
Average Reported Losses: $21,292.61
Most Recent AXA Equitable Complaints
Is AXA Equitable a Scam, Rip Off, or Fraud? WARN OTHER CONSUMERS By Sharing
Unearned sales charges
On: November 27, 2015
By: Dave
Reported Loss = $2,455.68
In my experience, Doug Wood (and likely his immediate superiors) acts in his best short-term interests and not in those of his clients (at least not mine). In September 2006 I opened a John Hancock 529 plan for my son. At that time there were three share classes; A, B and C. A had an upfront sales charge and B and C did not. I chose Class B shares so as to avoid the sales charge.
Just over 9 years later, in October 2015, I made an additional $70,000 contribution to the same account. On my October 2015 statement I saw a $2,455.68 sales charge. How could I get a sales charge when I specifically selected an investment without one? I found out that two years earlier my account had been converted to Class A shares and Class A shares had a sales charge.
I called Doug, the adviser on the account, and explained I didn’t understand I’d be charged an upfront sales charge on additional contributions (why would I when I wasn’t charged one on my initial contribution) and that I wanted to either rescind my contribution or change it to a share class that didn’t have an upfront sales charge. Previously I had contacted John Hancock and they said they would be able to do such a change if Doug and AXA instructed them to. Doug informed me it would be impossible because I made a legally binding trade and there was nothing I could do to get out of it. I let him know that even if that was the case, it was a mistake on my part and I’d appreciate it if they’d correct the mistake.
He told me it wasn’t possible and they were going to keep the sales charge despite the fact they didn’t perform any services (I never spoke to Doug or anyone else at AXA prior to making the October 2015 contribution). I told Doug I’d like to speak with his supervisor and he said he’d get back to me the name of whom I should speak with but he never did. Instead he sent me an email saying that he’s “spoken to a variety of people on this issue” and “our hands are tied”. In other words, he won’t put me in contact with any superiors, they’re going to keep my money even though they didn’t do anything in exchange for it, and they don’t care about me as a client.
It seems strange that I have over $140K in a 529 plan that will stay there for at least 8 more years and am paying over 1% in service fees yet they feel it better to keep $2,455 and lose my account. Doesn’t he think that if I have $140K to put in a 10 year old child’s account that I likely have much more and could be a valuable client? Either Doug’s not sharp enough to pick up on that or he and his bosses really want the $2,455.
In either case, if you’re looking for a financial adviser to look out for your best interests and someone who treats you with a long-term view I’d stay away from Doug and his AXA office.
AXA Advisors, LLC – 2050 Main Street Suite 520 Irvine, CA 92614 United States |
949-833-5849
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Remember in 2008 when we heard that AIG was being brought to bankruptcy with a bailout from WE THE PEOPLE----and the major problem was of course it was used to INSURE WITH CREDIT DEFAULT SWAPS-----a subprime mortgage loan market everyone knew was subprimed and collapsing.
Below we see the same thing. AFLAC and Travelers, and Progressive are listed as these insurers against this coming crash. PROGRESSIVELY GETTING RICHER IT LOOKS! Above we spoke about a AXA looking shady and shaky----I speak of TRANSAMERICA here in Baltimore as that other source of insurance -----these bond deals in Baltimore and Maryland no doubt are tied to this insurer and we will likely see all these US corporations fail.
These crash-proof plans are always sold to the top tier investors----our main street insurance holdings or in this case the insuring of our Federal pension funds---as with state and local pension funds are looking to be at risk.
A COLLAPSING BOND MARKET with insurance corporations 68.4% invested in bonds
'Asset Classes
The insurance industry invests colossal amounts across a range of asset classes. In 2012, U.S. insurers held $5.4 trillion in assets, a 2.3 percent increase from the previous year. The largest asset type is bonds, totaling $3.7 trillion, or 68.4 percent of total assets. The next two largest asset types are common stock ($589 billion) and first-lien mortgages ($351 billion). Other investments include preferred stock, real estate, derivatives and contract loans'.
Insurance Stocks for a Stock Market Crash
If the market crashes, these three insurance stocks could help you weather the storm.
Matthew Frankel
(TMFMathGuy)
May 15, 2015 at 1:11PM
Insurance companies have a unique business model that can, theoretically, perform well no matter what the market is doing. Essentially, insurers collect insurance premiums from their customers and then invest those premiums and pocket the gains. One major characteristic of crash-resistant companies is that they provide services that are needed in any economic environment. During crashes or recessions, people still need to insure their cars, homes, and other possessions, so insurance companies can still count on having money to invest and generate gains. Further, insurers invest the premiums they collect in relatively safe assets -- mostly investment-grade corporate bonds, municipal bonds, and Treasuries.
So, during bad times, insurance companies' products are still in demand, and their investments can be counted on to provide steady income. Let's take a look at which insurance companies are best-positioned to deliver market-beating performance, even if the stock market crashes.
What to look for in "crash-proof" companies
First of all, there is no such thing as a completely crash-proof company. All companies have the potential to be affected by adverse economic conditions. That said, some companies are more crash-resistant than others, so they tend to outperform their peers and the overall market during hard times.
Let's go over some general criteria for crash-resistant stocks. Then we'll discuss how these apply to some insurance stocks.
3 solid insurance stocks for a crash
With the above criteria in mind, here are three insurance stocks I feel would do well in a stock market crash. Bear in mind that this isn't an exhaustive list, and not all of the above criteria apply to each stock.
1. Progressive (NYSE:PGR)Progressive specializes in auto insurance, and it has a market-leading position in motorcycle insurance. Despite the fact that it sells just one type of insurance, I believe there's good reason to believe Progressive is a crash-resistant insurance company.
First, Progressive has a conservative financial policy, preferring to keep its debt levels low (below 30% of capital) and instead leverage its surplus. And its superior technology and marketing capabilities give the company an edge over its peers. After all, Progressive's advertising campaigns are becoming even more recognizable than the GEICO gecko.
Additionally, Progressive's historical performance speaks for itself. Most insurance companies simply break even on their underwriting income and make all of their money from investing. In fact, the industry average underwriting margin over the past decade has been a paltry 1.4%. Progressive has averaged a 7.9% margin from underwriting revenue alone, giving it a strong edge over peers if things go sour. This has contributed to Progressive's 17.8% average return on equity during that time period -- which, keep in mind, included one of the worst recessions in history.
2. Aflac (NYSE:AFL)Aflac could be an especially good stock to own in the event of a U.S. stock market crash. Many investors don't realize it, but nearly three-fourths (72%) of Aflac's revenue comes from Japan.
One of Aflac's strengths is its leading position in the supplemental life and health insurance businesses. The company has agreements with 90% of Japanese banks to sell its products, and it has a vast network of more than 14,500 sales agencies that also sell Aflac's insurance.
Aflac has produced 32 consecutive years of dividend increases, and it has produced an ROE of more than 16% throughout the past decade. This number would have been significantly higher if not for the weaker Japanese yen -- though this actually gives U.S. investors another opportunity to profit if the yen begins to strengthen.
However, bear in mind that the company's large Japanese exposure also has some negative aspects. For example, Aflac is significantly more volatile than the other two insurers I mention, thanks to the added variable of USD-yen fluctuations. And although Aflac isn't quite as vulnerable to a U.S. recession, economic weakness in Japan could do serious damage. Nevertheless, I feel that the long-term reward potential justifies the risks.
3. Travelers (NYSE:TRV) -- Travelers is a property-casualty insurance company with a diverse mix of products. About 61% of Traveler's revenue comes from business and international insurance products, such as workers compensation insurance and commercial property and auto insurance. Another 30% comes from personal insurance products such as homeowner and auto insurance, and the other 9% comes from bond and specialty insurance products. This kind of diversification is a valuable asset when there's weakness in any single area of the insurance business.
Furthermore, Travelers has expanded its international presence (Canada) in recent years and maintains a very low debt-to-capital ratio of 21.8%.
It's also worth mentioning that for all three of these companies, as well as other insurers, investment income could increase significantly if interest rates begin to rise later this year, as most experts are predicting. Most insurance companies primarily invest in "safe," fixed-income securities, and they could see their investment income soar if yields rise.
Finally, as far as performance during the last crash is concerned, consider that all three of these stocks outperformed the S&P in 2008.
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Here we see where our state municipal bonds are tied for insurance and we see this was yet another looting of our local revenue as these global Wall Street insurance corporations were allowed by take our revenue and run. As this says it was just another way for state and local pols to HIDE DEBT. Remember Greece was brought down severely and into the hands of the World Bank and IMF because of these same HIDING ACTIONS by its pols and banks----well, HERE WE GO IN AMERICA----same Wall Street frauds with the same political corruption.
Whereas the Federal Pension Guaranty was connected to labor union and Federal employee union pensions---these municipal bond insurers are tied to our state and local employee unions. So, Erhlich,O'Malley, and now Hogan have allowed our pension funds not only to be used as fodder for Wall Street---but these bond obligation debts and insurance that hides debt will place Maryland and Baltimore citizen taxpayers and pension-holders in a double-whammy. All that leverage was no doubt used to expand a few global corporations overseas.
ASK ANY MARYLAND OR BALTIMORE POL----ANY MARYLAND STATE'S ATTORNEY----ANY STATE TREASURER, COMPTROLLER---THEY KNOW THESE ARE ALL RIGGED AND FULL OF FRAUD.
'The insurance giants grew even fatter and happier, and the governments, backed by the insurers' guarantees, were able to borrow in the financial markets at lower rates than would have been possible any other way'.
Note this was written in 2009.
Finance
Is Municipal Bond Insurance Dead?
It's like a page out of the Brothers Grimm. Once upon a time -- and not so very long ago -- there were four giants....
by Penelope Lemov | December 31, 2009
It's like a page out of the Brothers Grimm. Once upon a time -- and not so very long ago -- there were four giants. Their names were AMBAC, MBIA, FSA and FGIC. If those names don't sound very frightening to you, it's probably because these giants were insurance companies. They collected money from state and local governments that wanted to issue bonds, in exchange for a promise that the companies would bail out the governments should they prove unable to pay their IOUs to the investors. Since that rarely happened, the insurers raked in huge amounts of money and hardly ever had to give any of it away. It was a great deal for everyone. The insurance giants grew even fatter and happier, and the governments, backed by the insurers' guarantees, were able to borrow in the financial markets at lower rates than would have been possible any other way.
Then one day the giants got greedy. Or bored. Or thought they had a better idea. They expanded their business by insuring a much different financial instrument: collateralized securities tied to subprime mortgages on individual homes. The principle was essentially the same -- the insurance companies got paid handsomely to guarantee the mortgage debt against that rainy day when the borrowers couldn't meet their obligations. But the insurance giants seemed to forget that, while governments can raise taxes or scale back programs to stay solvent, homeowners don't have that option. They can't always scrape together money to pay their bills, especially if they lose their jobs or were unwise enough to sign a mortgage they couldn't afford.
This tale has a grim (or perhaps Grimm) ending. Not just for the bond insurers, who had to leave the business altogether, but for the municipal market as a whole. Bond insurance played a key role in making the market work. The insurers themselves had triple-A credit ratings. When they insured a bond, the government that issued it got the benefit of those high ratings. That was true for large states and localities and it was equally true for small agencies and tiny special districts -- the bond insurers leveled the playing field. "As long as everybody had a triple-A rating," says J. Ben Watkins, who heads up Florida's Division of Bond Finance, "everything traded freely." But not now. Without insurance, some issuers who don't merit triple-A status on their own have to scramble to borrow money at affordable rates. Some creative but less costly bonds are no longer available to any issuer, and some recently created markets have shut down altogether.
Prior to the meltdown, more than half of all municipal bonds were sold with bond insurance. "With insurance, those bonds had been relatively easy to sell," says Eric Johansen, debt manager for Portland, Oregon. "Now that they don't have that as an option, it's more of a challenge."
"We're back to the future," says Watkins. "We're doing business like we did 20 years ago, where credit matters and so does financial management."
One can scarcely overestimate the impact of the bond insurance meltdown on states and localities. Many of them, having purchased what they thought was iron-clad insurance protection, went beyond the conventional form of borrowing by issuing auction-rate or variable-rate debt. These bonds were keyed to short-term interest rates. The rates were reset at weekly auctions and were usually well below long-term rates -- that's what made them so attractive to state and local agencies that issued them. But in early 2008, the auction market collapsed just as investors began to worry about the financial health of the bond insurers who had guaranteed the debt. The collapse exposed governments to penalty rates of 12 percent or more -- a huge increase in costs at the worst possible time. Aurora, Colorado, faced a jump in interest rates on some of its debt from 3.5 percent all the way to 14 percent.
The collapse also exposed some issuers to demands that they repay the bonds sooner rather than later. In Texas, for example, Harris County's stadium bonds faced balloon payments on $117 million in variable-rate debt. The public authority that issued the bonds found itself obliged to pay off the debt in five years instead of 23 years.
In the period since the collapse, governments that issued variable-rate bonds have been trying to work their way out of the problem. Many have been able to refinance their debt as long-term fixed-rate bonds. Variable-rate bonds scarcely exist in the muni bond market any more. "Most issuers who would ordinarily go to variable-rate are going to fixed-rate now," Johansen says.
Watkins' finance office in Florida handles bond issuance for the whole state, from large, general obligation bonds to smaller deals for special districts. The general obligation bonds are still highly marketable. They have strong credit ratings and simple structures -- long-term, fixed-rate debt based on the full faith and credit of the state. But riskier public debt is another story.
Recently, for example, Florida International University, a public institution, offered a bond that, instead of the full faith and credit of the state, had to be covered by student fees. In the old days, the Bond Finance Division would have bought insurance for this type of bond and sold it competitively -- that is, it would have let investment banks or other underwriters bid to handle the issue, and would have awarded the deal to the lowest bidder. Instead, the Finance Division negotiated with the underwriters, something it would prefer not to do. It is generally conceded that negotiated deals, which long carried the stigma of corrupt "pay to play" politics, are still open to more opportunity for mischief than simple competitive bidding is. Nevertheless, as head of the division, Watkins is resigned to the change. "It's one of the ways we have adapted to the new world," he says.
Unusual as it may seem, through all this, the municipal bond market hasn't lacked for activity. In fact, this past November, state and local issuers floated more than $37 billion in debt, the third most active November in the market's history. The Bond Buyer reports that when the deals are counted up, 2009 will be a $400 billion year.
The action at the moment, however, isn't due to the market solving its long-term problems. Rather, investors, desperately seeking safety, are choosing muni bonds over other investments, and that's keeping interest rates low and making it easier for states and localities to issue debt. In particular, it helps issuers stuck with troubled variable-rate bonds to refinance at fixed rates.
But the bond insurance business, crucial to government issuers in the long run, is a shell of its former self. Currently, there are only two carriers writing policies, and they currently are providing insurance for fewer than 10 percent of the municipal bonds coming to market, a far cry from the days when half of the bonds issued were insured. Efforts are being undertaken to revive bond insurance, including a proposal by the National League of Cities that would create a publicly owned insurance entity.
"Looking back to the first quarter of 2008, when the auction-rate market and insurers went in the tank and everything ground to a halt, we're getting better slowly," Johansen says. "But we're not back to markets that are as robust as they were before all this happened."
The pension system was always questionable in how it operated. It seems Wall Street planned to use those savings for the Robber Baron decades we have these few decades and pensions were usually used as a negotiation AWAY from higher real-time wages. ALWAYS GO WITH THE REAL-TIME WAGE INCREASES because this kind of pension system will always be used as fodder. We have watched from CLINTON/BUSH/OBAMA as pension funding was ignored or left too underfunded to be viable. That underfunding was of course done for just this reason----THAT IS TOO MUCH LIABILITY FOR NATIONAL, STATE, OR LOCAL GOVERNMENTS TO SUPPORT! That is what public sector employees like fire, police, and teachers are hearing today. The second avenue for labor pensions is below----the UNION PENSION INSURANCE FUND.....Pension Benefit Guaranty Corporation. As soon as Congress created this platform during those decades of BAINS CAPITAL hostile takeovers to send our US corporations into bankruptcy just to shed these labor benefits----labor should have known those pensions would be gone. As with labor negotiating wage reductions these few years today we have the same tactic where those most vested are pushed to vote against the newly hired in order to save their own wages and benefits. DEATH BY A HUNDRED CUTS-----pensions are deliberately being dismantled.
Those citizens not liking labor unions and saying GOOD RIDDANCE to these benefits need to think what aging today into a societal structure becoming too expensive for even prime-time career employees to afford. We are watching as the protections FDR and social democracy put into place as safety nets for our elderly-----as with all NEW DEAL PROGRAMS is looted and dismantled. If we care about the same thing happening to Social Security we should demand US Rule of Law protections of contractually guaranteed pensions for union and non-union workers.
IF 99% OF AMERICAN PEOPLE ARE SENT TO POVERTY WHO WILL BE CONSUMING A PRODUCT FROM OUR COMMUNITY REDEVELOPMENT?
'Last year, 150 (27 percent) multi-employer pension funds were determined to be in “critical” condition, which means they were less than 65 percent funded and faced the possibility of insolvency within the next five years, according to the U.S. Department of Labor'.
I think labor unions have backed Clinton because they think these benefits are going to be protected when they are not.
With this coming economic crash that insolvency will come faster than a decade.....we are talking hundreds of millions of seniors heading into retirement.
GAO: Union Pension Insurance Fund ‘Likely To Be Insolvent’ Within Decade
By Barbara Hollingsworth | February 24, 2015 | 3:18 PM EST
(CNSNews.com) – Despite recent congressional action, the Pension Benefit Guaranty Corporation’s (PBGC) multi-employer pension insurance program is “likely to be insolvent by the year 2024,” according to the Government Accountability Office’s (GAO) latest list of 30 “High Risk” government programs.PBGC collects premiums set by Congress from employers to insure the pension benefits of more than 44 million American workers and retirees currently covered under defined benefit plans.
The agency’s “single-employer program protects about 33.6 million workers and retirees in about 27,600 pension plans,” according to the PBGC website. “The multi-employer program protects 10.4 million workers and retirees in about 1,500 pension plans” set up by collective bargaining, usually for union workers in one industry, including the airline, construction, entertainment, mining, retail, and trucking industries.
Although PBGC has one of the largest financial portfolios of any federal corporation, it “estimated that its exposure to future losses for underfunded plans was $184 billion” – or more than twice its $89 billion in assets, GAO reported.
“At the end of fiscal year 2014, PBGC’s net accumulated financial deficit was $61.8 billion—an increase of over $26 billion from the end of fiscal year 2013,” according to the report. In 2000, PBGC was $10 billion in the black.
Last year, 150 (27 percent) multi-employer pension funds were determined to be in “critical” condition, which means they were less than 65 percent funded and faced the possibility of insolvency within the next five years, according to the U.S. Department of Labor.
Another 85 (14 percent) were classified as “endangered” because they were less than 80 percent funded and faced a significant shortfall within the next seven years.
According to a Sept. 2014 study by Boston College’s Center for Retirement Research, many union pension plans that “were once thought to be secure” are in jeopardy due to declining union membership and expanded retiree benefits.
The study identified two of the biggest union pension funds currently in trouble: the United Mine Workers of America 1974 Pension Fund and the Teamsters Central States pension fund.
However, PBGC, the federal agency that insures present and future retirees against the risk that their pension funds could become insolvent, is itself at risk of going belly up.
The agency “continues to face the ongoing threat of losses from the termination of underfunded [pension] funds, while grappling with a steady decline in the defined benefit pension system,” the GAO reported.
“With each passing year, fewer employers are sponsoring defined benefit plans and the sources of funds to finance future claims are becoming increasingly inadequate. As a result, PBGC’s long-term financial future remains tenuous,” the report warned.
After PBGC estimated that its multi-employer insurance fund would be “exhausted” by 2022, Congress passed the Multiemployer Pension Reform Act of 2014 (MPRA) as an amendment to the $1.1 trillion omnibus spending bill to address the long-term viability of the program, which GAO says “faces an immediate and critical challenge.”
MPRA doubled 2015 premiums for participants in multi-employer pension plans and made a number of technical modifications to the program, including the creation of a “critical and declining status” category for pension funds that are projected to be insolvent within the next 15 years.
The legislation allows trustees of pension funds in that category to temporarily or permanently reduce current or future benefits after demonstrating that they have made all reasonable efforts to avoid insolvency. Benefits cannot be reduced for retirees over the age of 80, and cannot fall beneath $12,870 annually for a retiree with 30 years of service.
However, PBGC officials “predicted that the changes will only forestall insolvency of the program by an additional 2 years,” the GAO noted.
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As with all stock market and bond investments these few decades following the deregulation of banking----the lack of revenue in these benefit funds has more to do with pension funds used as fodder in crashing economies as in 2008 when pension funds were moved from a safer investment in the bond market to being connected with the worst of failing Wall Street banks just being used to prop these criminal banks to get a few billion more. The idea that the BULL after the BEAR brings back those loses is not true----you start over from that low position making gains that then again are lost in the next crash.
The second thing that happened during CLINTON/BUSH/OBAMA was the corporate bankruptcy settlement placing a monetary contribution figure by corporations into these pension funds were NOT CONTRIBUTED. There has been no oversight and accountability to assure corporations contributed their legal fund requirements and guess what? CORPORATIONS DIDN'T MAKE THESE CONTRIBUTIONS. This is why the union pension funds are heading for insolvency. Below we see one union trying to address shortfalls by protecting senior members at the expense of younger members AND NONE OF THIS IS NECESSARY. Simply auditing corporate contributions and investment strategies for corruption will make those pension funds FLUSH FOR COMING RETIREES. Do you hear national labor union leaders saying this? Clinton will dismantle these benefits and Bernie would have saved them and national union leaders went with Hillary knowing this.
Teamsters’ Pension Fund Warns 400,000 of Cuts
By MARY WILLIAMS WALSHOCT. 6, 2015
Kenneth Feinberg will receive comments from people affected by a reorganization of the Central States Pension Fund. Credit Drew Angerer for The New York Times
A prominent Teamsters pension fund, one of the largest, has filed for reorganization under a new federal law and has sent letters to more than 400,000 members warning that their benefits must be cut.
Any reorganization of the decades-old Central States Pension Fund would take months and would probably be a brutal battle as workers, retirees, union leaders and employers all seek to protect competing interests. It is a multiemployer plan, the type led jointly by a union and a number of companies, that has caused consternation for many years, because if it failed, it could wipe out a federal insurance program that now pays the benefits of tens of thousands of retirees.
If the reorganization ultimately proves successful, however, it could serve as a model for other retirement plans with similar, seemingly intractable financial problems.
Cutting retirees’ pensions has generally been illegal, except under the most dire circumstances. But the executive director of the Central States fund, Thomas Nyhan, said that reducing payouts to make the money last longer was the only realistic way of avoiding a devastating collapse in the next few years.
“What we’re asking is to let us tap the brakes a little now, and let us avoid insolvency,” he said. “The longer we wait to act, the larger the benefit reductions will have to be.”
He said the Central States fund had been hit by powerful outside forces — the deregulation of the trucking industry, declining union membership, two big stock crashes and the aging of the population — and it was currently paying out $3.46 in pension benefits to retirees for every dollar it received in employer contributions.
“That math will never work,” Mr. Nyhan said. He said the fund was projected to run out of money in 10 to 15 years, an almost unthinkable outcome for a pension fund that became a political and financial powerhouse in the 1960s, when trucking boomed with the construction of the interstate highway system. Central States became famous back then for financing the construction of hotels and casinos in Las Vegas.
In 1982, the Teamsters were barred from investing their retirees’ money because of the union’s ties to organized crime. Under a federal consent decree, the fund’s investment duties were shifted to a group of large banks, where they have remained. The restructuring plan would not change that.
In the coming months, the Treasury Department will review the Central States restructuring plan, to make sure it complies with the new law. It will also receive comments from affected people through a special master, Kenneth Feinberg, who has been retained by the Treasury to iron out conflicts that have come up in other special circumstances, such as the dispute over whether workers at bailed-out companies could receive contractual bonuses.
The Treasury is expected to decide whether to approve the proposal by next May. If it does, Central States’ roughly 407,000 members will then vote on it. Those facing large cuts would be unlikely to vote in favor of the restructuring. But others might see it as an acceptable way to make their pension plan viable over the long term. Active workers will continue to accrue benefits, for example, and Mr. Nyhan said his projections showed that the restructuring could make the pension fund last for 50 more years.
Mr. Nyhan acknowledged that the process would be emotionally charged. Even if a majority votes no, however, the law requires the Treasury Department to impose the changes, once it approves them, because the Central States fund is so large that it qualifies as “systemically important.” That means that if it collapsed, it could take down the multiemployer wing of the Pension Benefit Guaranty Corporation, jeopardizing the retirees who currently get their pensions through the program. (The federal insurance program for single-employer pensions would not be affected by a possible failure of the multiemployer program.)
In the past, multiemployer pension plans were popular because they gave small companies the chance to offer traditional pensions, and they permitted workers to move from job to job, taking their benefits with them. About 10 million Americans participate in multiemployer pension plans, many of them in sectors like trucking, construction and retailing, where unions are a powerful presence.
“What we’re asking is to let us tap the brakes a little now, and let us avoid insolvency,” said Thomas Nyhan, the executive director of the Central States fund. Credit Zach Gibson/The New York Times
Such pension plans were also said to be financially stronger than single-employer pension plans, because if one company went out of business, others would keep contributing to the pooled trust fund that paid the benefits. Both types were insured by the federal government’s pension insurance program, but companies taking part in multiemployer plans paid much smaller premiums and the coverage was very limited — no more than $12,870 per year, compared to around $54,120 a year for a single-employer pension.
Many Teamsters have earned pensions that exceed the multiemployer insurance limit and would be hit hard if the Central States fund failed.
But in recent years, some multiemployer plans ran into severe trouble as more and more participating companies went bankrupt, leaving growing numbers of “orphaned” workers and retirees for the surviving companies in the pool to cover. Companies in the more troubled plans said lenders would no longer give them credit. Last December, Congress enacted the Multiemployer Pension Reform Act of 2014, which set up a legal framework for distressed pension plans to restructure.
According to a summary provided by the Central States pension fund, its restructuring plan would work by slowing the rate at which active Teamsters will build up their benefits in the coming years, and by lowering the payouts to current retirees, with certain exceptions.
Retirees who are 80 or older will not have their pensions cut, and those over 75 will receive smaller cuts than younger retirees. Disability pensions will continue to be paid in full.
A group of about 48,000 workers and retirees who earned their benefits by working at United Parcel Service will continue to have their pensions paid in full, thanks to labor contracts between the Teamsters and the company. UPS was for many years the largest employer in the Central States pension fund, but it withdrew from the fund in December 2007 after making one large final payment. After the stock market crash the following year, UPS and the Teamsters negotiated a separate agreement calling for UPS to shelter those workers from any cuts the Central States pension fund might have to make.
The group that seems exposed to the largest pension cuts consists of about 43,400 “orphans,” or retirees still in the pension fund, even though their former employers no longer exist. Their pensions will be cut to 110 percent of what they would get from the Pension Benefit Guaranty Corporation, or at most, $14,158.
Active workers will not lose any of the benefits they have earned up until now. But in their coming years of work, they will accrue benefits at the rate of 0.75 percent of the contributions their employers pay into the fund. In the past, their accrual rate was 1 percent.
The restructuring will also abolish a rule that bars pensioners from returning to the work force to supplement their reduced pensions.
The president of the International Brotherhood of Teamsters, James P. Hoffa, wrote to Mr. Nyhan last month, saying the new restructuring law “creates the false illusion of participatory democracy,” because it required a vote “that can simply be ignored.” Although Mr. Hoffa is president of the union, he has no say over the pension fund, which is run by a group of trustees from the companies and the union.
“Participants and beneficiaries get to vote, but their vote only counts if they vote to cut their own pensions,” Mr. Hoffa said. “The people who conceived that cynical scheme should be ashamed.” He said he preferred legislation introduced by Senator Bernie Sanders of Vermont, which if enacted would close tax loopholes and redirect the money to supporting troubled multiemployer pension plans.
Mr. Nyhan said he liked Senator Sanders’s proposal too, but recalled that a similar bill was introduced in 2010, when Democratic Party lawmakers controlled Congress, but was never approved. He said he thought it was even less likely that today’s fiscally hawkish, Republican-controlled Congress would enact such a bill. It was not safe to wait and see if the Sanders bill would pass, he said, because the passage of time made the insolvency more likely.
“The easy thing for my board to do would be ignore the problem,” he said. “We just don’t think this is the responsible thing to do.”
“We need either less liabilities or more money, and Congress is telling us we’re not getting more money,” he said.
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Here we see the push towards protecting corporations from paying their contractually guaranteed financial commitment to these pension funds. Our local and state government did the same hiding debt obligations to these pension funds DEBT OBLIGATION BONDS have this past decade been reported over and over and over and over to be filled with fraud and corruption. This is where pensions went from being neglected and used as fodder to being pushed into what we know was an IMPLODING BOND MARKET. This article from 2012 already shows this movement into the bond market----Congress passed these laws allowing this to occur even as in 2010 Congress passed the laws allowing our US Treasury and state municipal bond markets to be subprimed and sold globally----and the FED and Wall Street created vehicles for corporations to load themselves with corporate bond debt just to leverage the bond market into collapse.
'Next year, pension funds will appear to be better funded, even if they are not. Congress voted this year to allow funds to discount their obligations using a 15-year average of bond yields, meaning they can use a higher rate and so report lower obligations'.
Think what will happen to these pensions tied to a collapsing bond market and then think what happens when this economic crash sends lower-tiered US corporations into bankruptcy just to enfold them into multi-national corporations which will then end IPO listings and go private.
NO BUILDING FROM BEAR TO BULL FOR THESE PENSION FUNDS NEXT DECADE.
All of Maryland pols voted for these bond obligation policies and Maryland and Baltimore has tied its pension benefits heavily to this collapsing bond market just to shed them----ask Sarbanes, Cummings, Cardin, Mikulski or any of Maryland's 1% Wall Street players.
Private Pension Plans, Even at Big Companies, May Be Underfunded
Off the Charts
By FLOYD NORRIS JULY 20, 2012
AFTER years of poor investment returns, the pension funds of the United States’ largest companies are further behind than they have ever been.
The companies in the Standard & Poor’s 500 collectively reported that at the end of their most recent fiscal years, their pension plans had obligations of $1.68 trillion and assets of just $1.32 trillion. The difference of $355 billion was the largest ever, S.& P. said in a report.
Of the 500 companies, 338 have defined-benefit pension plans, and only 18 are fully funded. Seven companies reported that their plans were underfunded by more than $10 billion, with the largest negative figure, $21.6 billion, reported by General Electric.
The other companies with more than $10 billion in underfunding were AT&T, Boeing, Exxon Mobil, Ford Motor, I.B.M. and Lockheed Martin. JPMorgan Chase had the largest amount of overfunding, $1.6 billion.
The main cause of the underfunding at many companies does not appear to be a failure to make contributions to the plans. Instead, it reflects the fact that investment markets have not performed well for a sustained period.
As the accompanying charts show, over the last 15 years, the S.& P. 500 rose at an annual rate of less than 5 percent, even with dividends reinvested. Not since 1945 had a 15-year period been so bleak for the stock market. The Barclays Capital U.S. Aggregate Bond Index, which includes all investment grade bonds, returned 6.3 percent, but that, too, was lower than it had been for a long time.
Virtually all pension funds had assumed returns would be better, leaving them underfunded when their investments failed to perform as expected.
The prolonged poor performance of stocks has led some companies to move away from them. Seven years ago, S.& P. said, stocks made up 65 percent of pension-fund assets and bonds made up 29 percent, with the remaining assets in real estate and other investments, like private equity funds. By last year, stocks were down to 48 percent and bonds up to 41 percent.
The stock market’s poor performance has also convinced some companies that they no longer want to take the risk of guaranteeing pension payments.
Many have closed their pension plans to newer employees and stopped accruing benefits for workers already in them. Instead, they have pushed employees into defined-contribution plans, in which the worker, not the employer, bears the risk of poor investment performance.
Determining whether pension funds have adequate funding is, to some extent, a work of art. Companies estimate what they will owe in the future, and then discount that number based on how long it will be until they have to pay it and the interest rate at which their pension-plan investments could grow. The discount rate used can have a significant effect.
For example, if a company estimated it would owe $1 million in 10 years and used an 8 percent discount rate, the current obligation would be $434,000. If it chose a 3 percent rate instead, the current obligation would be $737,000.
Next year, pension funds will appear to be better funded, even if they are not. Congress voted this year to allow funds to discount their obligations using a 15-year average of bond yields, meaning they can use a higher rate and so report lower obligations.
General Electric announced on Friday that it would slash its pension contributions as a result of the new law, and many other companies are expected to do the same.
Because such contributions are tax-deductible, lower deductions may mean higher tax bills, which would increase government revenue, at least for a few years.
Of course, markets will do whatever they will do, regardless of the assumptions pension-fund sponsors make. In the long run, contributing less now may simply mean companies have to contribute more later.
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Corporations have moved from defined to contribution pension plans because they want employees to PUT SKIN IN THE GAME. What that means is employees will put their own income into what we all know to be a criminal Wall Street market and lose not only that corporate donation to pension but their own money. Look below to see these new contribution pensions are not covered by the Pension Benefit Guaranty Corporation PBGC.
Here we see the Federal government does insure these pension policies saying workers will receive the amount contracted. What happens when the Federal government has $20 trillion in national debt from bond market fraud? Does it claim in court the inability to pay?
The second issue in this planned shredding of our pension benefits is this---WHICH INSURANCE PROVIDER IS TIED TO THESE INSURANCE PLANS FOR PENSIONS?
The coming economic crash will take out many US corporations because most have tied themselves heavily to the collapsing bond market PRETENDING they thought the bond market was safe because for centuries it was---until these several years of the FED, Wall Street, and Congress subpriming our bond market.
We had PIMCO owner sell that global municipal bond corporation a few years ago and now it is limping towards this coming bond market crash----it was central in subpriming globally our US bonds. Below we see what could be the next AIG----many of these Life Insurance corporations will be taken out in this crash but we see an executive transition OUT -----just as the economic crash is ready to hit. They will say----the current CEO was not in charge of bad investments.
'AXA Equitable Life Insurance Company (NY, NY)'.
AXA Equitable Life Insurance Company
Key Developments
AXA Equitable Life Insurance Company Announces Resignation of Henri De Castries as Chairman and Chief Executive Officer
Sep 1 16AXA Equitable Life Insurance Company announced that Henri de Castries resigned as Chairman and Chief Executive Officer of effective September 1, 2016. In connection with his resignation from company, Mr. de Castries is also resigning from the Board of Directors of the company .
Does the federal government insure pension benefits?
Answer:The federal government insures certain pension benefits. Specifically, it insures defined benefit plans (but not other types of retirement plans) through the Pension Benefit Guaranty Corporation (PBGC), a federal agency created by ERISA.
A defined benefit plan is a qualified employer pension plan that promises to pay a specific monthly benefit at retirement. Although the PBGC insures most defined benefit plans, it doesn't insure defined contribution plans. Defined contribution plan participants have individual accounts, and these plans don't promise to pay a specific dollar amount to participants. Examples of defined contribution plans include 401(k) plans and profit-sharing plans.
To find out if your defined benefit plan is insured by the PBGC, ask your employer or plan administrator. In general, though, your defined benefit plan will be covered unless it meets an exception. Plans not covered include those belonging to professional service corporations (e.g., doctors and lawyers) with fewer than 26 employees, church groups, and state and local governments.
If your employer's pension plan is to be terminated, you'll receive notification from your plan administrator and/or the PBGC. If the PBGC takes over the pension plan because your employer doesn't have enough money to pay benefits owed, the PBGC will review the plan's records and estimate what benefits each person will receive.
The PBGC guarantees that you'll receive basic pension benefits up to a certain annual amount. This amount may be lower than what you would normally have received from your plan. For plans ending in 2014, the maximum annual amount is $59,318.16 (or $4,943.18 per month) for a worker who retires at age 65. (If you begin receiving payments before age 65 or if your pension includes benefits for a survivor or other beneficiary, the maximum amount is lower.)
Types of benefits guaranteed include the following:
Pension benefits at normal retirement age
Most early retirement benefits
Disability benefits for disabilities that occurred before the plan was terminated
Certain benefits for survivors of plan participants
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Please be advised that this materials is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transactions(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent advisor.
AXA Equitable Life Insurance Company (NY, NY). Securities are offered through AXA Advisors, LLC, NY, NY 212-314-4600 (member FINRA / SIPC). AXA Equitable and AXA Advisors are affiliated companies, do not provide legal or tax advice and are not affiliated with Broadridge Investor Communication Solutions, Inc.
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'The Retirement Benefits Group (RBG), a division of AXA Advisors LLC, became one of the nation's leading providers of retirement plans for educators. The RBG continues to flourish with its genesis in New Jersey, servicing over 85,000 clients in over 580 public schools who are saving for retirement and expanding into full financial strategies. We are proud that our clients have accumulated over 4.1 billion in retirement assets'
AXA Equitable Ratings
Average Rating: 1.30 out of 5
Based On: 6 Reviews
Number Of Comments: 20
AXA Equitable Reports
Reported Losses: $127,755.68
Average Reported Losses: $21,292.61
Most Recent AXA Equitable Complaints
Is AXA Equitable a Scam, Rip Off, or Fraud? WARN OTHER CONSUMERS By Sharing
Unearned sales charges
On: November 27, 2015
By: Dave
Reported Loss = $2,455.68
In my experience, Doug Wood (and likely his immediate superiors) acts in his best short-term interests and not in those of his clients (at least not mine). In September 2006 I opened a John Hancock 529 plan for my son. At that time there were three share classes; A, B and C. A had an upfront sales charge and B and C did not. I chose Class B shares so as to avoid the sales charge.
Just over 9 years later, in October 2015, I made an additional $70,000 contribution to the same account. On my October 2015 statement I saw a $2,455.68 sales charge. How could I get a sales charge when I specifically selected an investment without one? I found out that two years earlier my account had been converted to Class A shares and Class A shares had a sales charge.
I called Doug, the adviser on the account, and explained I didn’t understand I’d be charged an upfront sales charge on additional contributions (why would I when I wasn’t charged one on my initial contribution) and that I wanted to either rescind my contribution or change it to a share class that didn’t have an upfront sales charge. Previously I had contacted John Hancock and they said they would be able to do such a change if Doug and AXA instructed them to. Doug informed me it would be impossible because I made a legally binding trade and there was nothing I could do to get out of it. I let him know that even if that was the case, it was a mistake on my part and I’d appreciate it if they’d correct the mistake.
He told me it wasn’t possible and they were going to keep the sales charge despite the fact they didn’t perform any services (I never spoke to Doug or anyone else at AXA prior to making the October 2015 contribution). I told Doug I’d like to speak with his supervisor and he said he’d get back to me the name of whom I should speak with but he never did. Instead he sent me an email saying that he’s “spoken to a variety of people on this issue” and “our hands are tied”. In other words, he won’t put me in contact with any superiors, they’re going to keep my money even though they didn’t do anything in exchange for it, and they don’t care about me as a client.
It seems strange that I have over $140K in a 529 plan that will stay there for at least 8 more years and am paying over 1% in service fees yet they feel it better to keep $2,455 and lose my account. Doesn’t he think that if I have $140K to put in a 10 year old child’s account that I likely have much more and could be a valuable client? Either Doug’s not sharp enough to pick up on that or he and his bosses really want the $2,455.
In either case, if you’re looking for a financial adviser to look out for your best interests and someone who treats you with a long-term view I’d stay away from Doug and his AXA office.
AXA Advisors, LLC – 2050 Main Street Suite 520 Irvine, CA 92614 United States |
949-833-5849
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Remember in 2008 when we heard that AIG was being brought to bankruptcy with a bailout from WE THE PEOPLE----and the major problem was of course it was used to INSURE WITH CREDIT DEFAULT SWAPS-----a subprime mortgage loan market everyone knew was subprimed and collapsing.
Below we see the same thing. AFLAC and Travelers, and Progressive are listed as these insurers against this coming crash. PROGRESSIVELY GETTING RICHER IT LOOKS! Above we spoke about a AXA looking shady and shaky----I speak of TRANSAMERICA here in Baltimore as that other source of insurance -----these bond deals in Baltimore and Maryland no doubt are tied to this insurer and we will likely see all these US corporations fail.
These crash-proof plans are always sold to the top tier investors----our main street insurance holdings or in this case the insuring of our Federal pension funds---as with state and local pension funds are looking to be at risk.
A COLLAPSING BOND MARKET with insurance corporations 68.4% invested in bonds
'Asset Classes
The insurance industry invests colossal amounts across a range of asset classes. In 2012, U.S. insurers held $5.4 trillion in assets, a 2.3 percent increase from the previous year. The largest asset type is bonds, totaling $3.7 trillion, or 68.4 percent of total assets. The next two largest asset types are common stock ($589 billion) and first-lien mortgages ($351 billion). Other investments include preferred stock, real estate, derivatives and contract loans'.
Insurance Stocks for a Stock Market Crash
If the market crashes, these three insurance stocks could help you weather the storm.
Matthew Frankel
(TMFMathGuy)
May 15, 2015 at 1:11PM
Insurance companies have a unique business model that can, theoretically, perform well no matter what the market is doing. Essentially, insurers collect insurance premiums from their customers and then invest those premiums and pocket the gains. One major characteristic of crash-resistant companies is that they provide services that are needed in any economic environment. During crashes or recessions, people still need to insure their cars, homes, and other possessions, so insurance companies can still count on having money to invest and generate gains. Further, insurers invest the premiums they collect in relatively safe assets -- mostly investment-grade corporate bonds, municipal bonds, and Treasuries.
So, during bad times, insurance companies' products are still in demand, and their investments can be counted on to provide steady income. Let's take a look at which insurance companies are best-positioned to deliver market-beating performance, even if the stock market crashes.
What to look for in "crash-proof" companies
First of all, there is no such thing as a completely crash-proof company. All companies have the potential to be affected by adverse economic conditions. That said, some companies are more crash-resistant than others, so they tend to outperform their peers and the overall market during hard times.
Let's go over some general criteria for crash-resistant stocks. Then we'll discuss how these apply to some insurance stocks.
- Low debt: Companies with high debt loads tend to struggle more during tough times. Debt costs money, and when earnings drop in a recession or a crash, companies with lots of debt may struggle to pay it back.
- Diverse revenue stream: Companies that have a variety of revenue sources tend to do better than those that depend on a single source of revenue. The most crash-resistant insurers offer many different insurance products and operate in many geographical regions, so weakness in a single business unit or region will not bring down the entire company.
- Competitive advantage: In short, a competitive advantage -- what Warren Buffett refers to as a "wide moat" -- is something that allows a company to perform better than its peers. This could be an innovative product, great brand recognition, or simple economies of scale.
- Dividends: Companies with strong dividend histories tend to perform well in recessions. In tough times, a dividend can help create a "price floor," and this is especially true if the market perceives the dividend as safe.
- History of crash-resistance: One of the best ways to gauge how well a company would perform in a crash is to see how well it did in the last crash. While past performance doesn't guarantee future results, it's a good indicator of the potential damage a crash could cause.
3 solid insurance stocks for a crash
With the above criteria in mind, here are three insurance stocks I feel would do well in a stock market crash. Bear in mind that this isn't an exhaustive list, and not all of the above criteria apply to each stock.
1. Progressive (NYSE:PGR)Progressive specializes in auto insurance, and it has a market-leading position in motorcycle insurance. Despite the fact that it sells just one type of insurance, I believe there's good reason to believe Progressive is a crash-resistant insurance company.
First, Progressive has a conservative financial policy, preferring to keep its debt levels low (below 30% of capital) and instead leverage its surplus. And its superior technology and marketing capabilities give the company an edge over its peers. After all, Progressive's advertising campaigns are becoming even more recognizable than the GEICO gecko.
Additionally, Progressive's historical performance speaks for itself. Most insurance companies simply break even on their underwriting income and make all of their money from investing. In fact, the industry average underwriting margin over the past decade has been a paltry 1.4%. Progressive has averaged a 7.9% margin from underwriting revenue alone, giving it a strong edge over peers if things go sour. This has contributed to Progressive's 17.8% average return on equity during that time period -- which, keep in mind, included one of the worst recessions in history.
2. Aflac (NYSE:AFL)Aflac could be an especially good stock to own in the event of a U.S. stock market crash. Many investors don't realize it, but nearly three-fourths (72%) of Aflac's revenue comes from Japan.
One of Aflac's strengths is its leading position in the supplemental life and health insurance businesses. The company has agreements with 90% of Japanese banks to sell its products, and it has a vast network of more than 14,500 sales agencies that also sell Aflac's insurance.
Aflac has produced 32 consecutive years of dividend increases, and it has produced an ROE of more than 16% throughout the past decade. This number would have been significantly higher if not for the weaker Japanese yen -- though this actually gives U.S. investors another opportunity to profit if the yen begins to strengthen.
However, bear in mind that the company's large Japanese exposure also has some negative aspects. For example, Aflac is significantly more volatile than the other two insurers I mention, thanks to the added variable of USD-yen fluctuations. And although Aflac isn't quite as vulnerable to a U.S. recession, economic weakness in Japan could do serious damage. Nevertheless, I feel that the long-term reward potential justifies the risks.
3. Travelers (NYSE:TRV) -- Travelers is a property-casualty insurance company with a diverse mix of products. About 61% of Traveler's revenue comes from business and international insurance products, such as workers compensation insurance and commercial property and auto insurance. Another 30% comes from personal insurance products such as homeowner and auto insurance, and the other 9% comes from bond and specialty insurance products. This kind of diversification is a valuable asset when there's weakness in any single area of the insurance business.
Furthermore, Travelers has expanded its international presence (Canada) in recent years and maintains a very low debt-to-capital ratio of 21.8%.
It's also worth mentioning that for all three of these companies, as well as other insurers, investment income could increase significantly if interest rates begin to rise later this year, as most experts are predicting. Most insurance companies primarily invest in "safe," fixed-income securities, and they could see their investment income soar if yields rise.
Finally, as far as performance during the last crash is concerned, consider that all three of these stocks outperformed the S&P in 2008.
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Here we see where our state municipal bonds are tied for insurance and we see this was yet another looting of our local revenue as these global Wall Street insurance corporations were allowed by take our revenue and run. As this says it was just another way for state and local pols to HIDE DEBT. Remember Greece was brought down severely and into the hands of the World Bank and IMF because of these same HIDING ACTIONS by its pols and banks----well, HERE WE GO IN AMERICA----same Wall Street frauds with the same political corruption.
Whereas the Federal Pension Guaranty was connected to labor union and Federal employee union pensions---these municipal bond insurers are tied to our state and local employee unions. So, Erhlich,O'Malley, and now Hogan have allowed our pension funds not only to be used as fodder for Wall Street---but these bond obligation debts and insurance that hides debt will place Maryland and Baltimore citizen taxpayers and pension-holders in a double-whammy. All that leverage was no doubt used to expand a few global corporations overseas.
ASK ANY MARYLAND OR BALTIMORE POL----ANY MARYLAND STATE'S ATTORNEY----ANY STATE TREASURER, COMPTROLLER---THEY KNOW THESE ARE ALL RIGGED AND FULL OF FRAUD.
'The insurance giants grew even fatter and happier, and the governments, backed by the insurers' guarantees, were able to borrow in the financial markets at lower rates than would have been possible any other way'.
Note this was written in 2009.
Finance
Is Municipal Bond Insurance Dead?
It's like a page out of the Brothers Grimm. Once upon a time -- and not so very long ago -- there were four giants....
by Penelope Lemov | December 31, 2009
It's like a page out of the Brothers Grimm. Once upon a time -- and not so very long ago -- there were four giants. Their names were AMBAC, MBIA, FSA and FGIC. If those names don't sound very frightening to you, it's probably because these giants were insurance companies. They collected money from state and local governments that wanted to issue bonds, in exchange for a promise that the companies would bail out the governments should they prove unable to pay their IOUs to the investors. Since that rarely happened, the insurers raked in huge amounts of money and hardly ever had to give any of it away. It was a great deal for everyone. The insurance giants grew even fatter and happier, and the governments, backed by the insurers' guarantees, were able to borrow in the financial markets at lower rates than would have been possible any other way.
Then one day the giants got greedy. Or bored. Or thought they had a better idea. They expanded their business by insuring a much different financial instrument: collateralized securities tied to subprime mortgages on individual homes. The principle was essentially the same -- the insurance companies got paid handsomely to guarantee the mortgage debt against that rainy day when the borrowers couldn't meet their obligations. But the insurance giants seemed to forget that, while governments can raise taxes or scale back programs to stay solvent, homeowners don't have that option. They can't always scrape together money to pay their bills, especially if they lose their jobs or were unwise enough to sign a mortgage they couldn't afford.
This tale has a grim (or perhaps Grimm) ending. Not just for the bond insurers, who had to leave the business altogether, but for the municipal market as a whole. Bond insurance played a key role in making the market work. The insurers themselves had triple-A credit ratings. When they insured a bond, the government that issued it got the benefit of those high ratings. That was true for large states and localities and it was equally true for small agencies and tiny special districts -- the bond insurers leveled the playing field. "As long as everybody had a triple-A rating," says J. Ben Watkins, who heads up Florida's Division of Bond Finance, "everything traded freely." But not now. Without insurance, some issuers who don't merit triple-A status on their own have to scramble to borrow money at affordable rates. Some creative but less costly bonds are no longer available to any issuer, and some recently created markets have shut down altogether.
Prior to the meltdown, more than half of all municipal bonds were sold with bond insurance. "With insurance, those bonds had been relatively easy to sell," says Eric Johansen, debt manager for Portland, Oregon. "Now that they don't have that as an option, it's more of a challenge."
"We're back to the future," says Watkins. "We're doing business like we did 20 years ago, where credit matters and so does financial management."
One can scarcely overestimate the impact of the bond insurance meltdown on states and localities. Many of them, having purchased what they thought was iron-clad insurance protection, went beyond the conventional form of borrowing by issuing auction-rate or variable-rate debt. These bonds were keyed to short-term interest rates. The rates were reset at weekly auctions and were usually well below long-term rates -- that's what made them so attractive to state and local agencies that issued them. But in early 2008, the auction market collapsed just as investors began to worry about the financial health of the bond insurers who had guaranteed the debt. The collapse exposed governments to penalty rates of 12 percent or more -- a huge increase in costs at the worst possible time. Aurora, Colorado, faced a jump in interest rates on some of its debt from 3.5 percent all the way to 14 percent.
The collapse also exposed some issuers to demands that they repay the bonds sooner rather than later. In Texas, for example, Harris County's stadium bonds faced balloon payments on $117 million in variable-rate debt. The public authority that issued the bonds found itself obliged to pay off the debt in five years instead of 23 years.
In the period since the collapse, governments that issued variable-rate bonds have been trying to work their way out of the problem. Many have been able to refinance their debt as long-term fixed-rate bonds. Variable-rate bonds scarcely exist in the muni bond market any more. "Most issuers who would ordinarily go to variable-rate are going to fixed-rate now," Johansen says.
Watkins' finance office in Florida handles bond issuance for the whole state, from large, general obligation bonds to smaller deals for special districts. The general obligation bonds are still highly marketable. They have strong credit ratings and simple structures -- long-term, fixed-rate debt based on the full faith and credit of the state. But riskier public debt is another story.
Recently, for example, Florida International University, a public institution, offered a bond that, instead of the full faith and credit of the state, had to be covered by student fees. In the old days, the Bond Finance Division would have bought insurance for this type of bond and sold it competitively -- that is, it would have let investment banks or other underwriters bid to handle the issue, and would have awarded the deal to the lowest bidder. Instead, the Finance Division negotiated with the underwriters, something it would prefer not to do. It is generally conceded that negotiated deals, which long carried the stigma of corrupt "pay to play" politics, are still open to more opportunity for mischief than simple competitive bidding is. Nevertheless, as head of the division, Watkins is resigned to the change. "It's one of the ways we have adapted to the new world," he says.
Unusual as it may seem, through all this, the municipal bond market hasn't lacked for activity. In fact, this past November, state and local issuers floated more than $37 billion in debt, the third most active November in the market's history. The Bond Buyer reports that when the deals are counted up, 2009 will be a $400 billion year.
The action at the moment, however, isn't due to the market solving its long-term problems. Rather, investors, desperately seeking safety, are choosing muni bonds over other investments, and that's keeping interest rates low and making it easier for states and localities to issue debt. In particular, it helps issuers stuck with troubled variable-rate bonds to refinance at fixed rates.
But the bond insurance business, crucial to government issuers in the long run, is a shell of its former self. Currently, there are only two carriers writing policies, and they currently are providing insurance for fewer than 10 percent of the municipal bonds coming to market, a far cry from the days when half of the bonds issued were insured. Efforts are being undertaken to revive bond insurance, including a proposal by the National League of Cities that would create a publicly owned insurance entity.
"Looking back to the first quarter of 2008, when the auction-rate market and insurers went in the tank and everything ground to a halt, we're getting better slowly," Johansen says. "But we're not back to markets that are as robust as they were before all this happened."
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