Episode Transcript
[00:00:00] Speaker A: Hello and welcome everyone to the Annuity Straight Talk podcast, episode number 165.
My name is Brian Andersen, founder and creator of AnnuityStraightTalk.com answering all your questions about retirement planning. Here to make things easier for you, here to make you a smart consumer, make sure you don't make mistakes and fall for the garbage sales pitch that of the majority of the guys out there selling are just not that smart. There's a lot of really good people and I do my best to be one of those guys. Please like subscribe or comment on any of your favorite podcast platforms or on YouTube, send it to friends, share the information. It's helped a lot of people and we're here to help as many as possible. So big topic today. Story that came up to me about six weeks ago. This is critically important because safety is of paramount concern with annuities. I don't want to argue with anyone, but I hate being right about these things. There has been one of the smaller companies that's been a prominent player in a lot of the mygas and the income products, Sentinel Security, Life. I never dealt with them. They were B plus rated. And this is a good lesson for everybody. It's time to be extremely picky and I'm going to be very stringent with who I select and continue to do that going forward. If you want to get the highest rate, go somewhere else.
If I don't think it's a safe bet to put money, a lot of people, oh, I got a, I got a MiG at 5 point. Well, I want one at 5.35, not 5.30. 5.35. Oh well, that's an A minus private equity led company. Go for it if you want, but do it with someone else. Rates going up in the past couple of years it was, we got a lot of rate shoppers. It's like, no, I want a little bit better here, want better there. But you got to look at all the elements, choosing the best. My God, all these podcasts information is all on the website.
So ask me where it is, what to look for. I could probably point you in the right direction. One of the problems with getting a lot of podcasts is some people don't know where to start. I have added several companies that I didn't previously sell for because of higher myga rates income products. I still kind of stay within a more narrow window to stay competitive, but for the most part I stuck with companies that I knew very well or had a good track record. There were times when I couldn't offer the highest payouts or do this or that. And I just. It's a company I don't like. I don't want that company. I don't like the way they manage everything. Back in the beginning of December, I think, December 2nd, Sentinel Security Life was shut down and barred from doing new business. Now policyholders can continue to access their contracts and do all that stuff, but they're based in the state of Utah. The state insurance commissioner took a look at them, said, I don't like the, like the way those assets look. I'll get into a little bit of why that's the case. But the investment portfolio didn't look right, looked too risky, and they put a stop to new sales. Who, who knows what's going to happen now? Of course the company is going to appeal the decision, say, no, we're just fine, but who knows? And I do hope it works out for everybody involved. But I mean, is that really the type of thing you want to deal with when you're going into retirement? It's like, oh, I picked this insurance company and then, oh, merry Christmas, the company shut down. Who knows what's going to happen? So these guys have been very competitive with mygas and income contracts for several years. The strength rating was B plus. I never touched it.
What I've heard and what the report suggests, that customer service is very, is terrible. And so I've talked about why that's important. And then on top of all that, oh yeah, like I said, merry Christmas, your company's locked down. Great. It was not hard for me to disregard the option, but I talked to a lot of people, said, well, I'm going to go with it. Do you have a problem with it? I wouldn't sell it. I don't want the liability of that because I don't have to hold anybody's hand through this. I've received two calls from people, hey, I bought this. What should I do? Ask the guy you bought it from. Well, he doesn't know anything. I don't know anything either, and it's not my job to figure that out. So hoping it works out. Maybe it does. It could get ugly. We'll see.
So a lot of other online annuity websites posted Sentinel's rates and products.
Suppose those guys might have some explaining to do. But I'm trying to tell everybody, like, this is a level above everything else. I'm gonna keep it honest and I'm gonna keep it high quality. There were a lot of what I've heard, a lot. When you go into these companies that are maybe a little lower rated. And I talked to a couple, just maybe in the last month or two. Well, we're gonna go ahead with this. Myga. They did a MYGA index annuity split. I like that idea. For some people, in their case, it worked really well. Well, we're gonna go with this company. I've never heard of them. I was like, well, it's a B plus company. Why would you do that? Well, they are paying one tenth of a percent more than everybody else. The agent said there's a state guarantee fund that will cover the losses. Well, we're not supposed to use that. And I'm going to share my screen because I'm going to show everybody, right. We're not supposed to use that to sell annuities. So go to the newsletter page right here. I don't even like to talk about it, but I will. I mean, I can talk about it and type in state guarantee, State insurance guarantee funds. This article right here talks about what they do, what they're about. Okay, I've got other articles. What if an insurance company goes bankrupt? What if an insurance company fails? A newsletter and a podcast. I think it's a ridiculous claim and I think I said it here. No person, including a member insurance agent or affiliate of a member insurer may make published blah, blah, blah, which uses the existence of the Insurance Guarantee association of the state for the purpose of sales, solicitation or inducement to purchase any form of insurance. So we're not supposed to say, oh, yeah, go ahead, you're fine. Because the state guarantee, because they work differently in every state, who knows what they are? And the one example that I have a company going down in 1990, the state guarantee funds didn't get involved for 23 years until 2013. So take it for what it's worth, right? So the problem is what Carrie Pechter, my friend at the Retirement Income Journal has called the Bermuda Triangle for insurers where they're using offshore reinsurance companies.
Basically, they skirt regulations that require them to disclose all their assets. So they have less transparency than others. They're taking more risk with the assets. I heard somewhere that Sentinel was doing aircraft leasing. And I don't know if that's true, but that's a really risky business. Insurance companies don't do that. Right. So if you want a good resource, here's on the screen is Kerry's website, the Retirement Income Journal. There's a lot of stuff that's available publicly, but if you subscribe, you get more of it. It's more of an advisor focus. But I do have some clients who like to listen to what he has to say. Incredible amount of work he's done in the past 15 or 20 years. I consider him a very solid source, a good friend and he's got it right here. So what happens is a lot of these companies, maybe a big global private equity firm, came in and bought a tiny insurance company. They wanted access to the insurance company's assets and then they jack rates on mygas and income products because they get more assets. Well, it's private equity, they're into chasing yield and chasing risk.
So then they put their reinsurance, they reinsure themselves in the Cayman Islands and they are basically allowed to by doing that, they got holding companies in Bermuda. Hold the assets, invest them elsewhere. Riskier stuff. There's one story of an insurance company buying shares in a soccer team in Europe. But the most solid insurance companies, the good ones, have more than 90%, maybe 95% of their assets in high graded bonds and extremely well diversified at that. Reserves on top of it, all that stuff. And then the 5 or 10%, that's not in bonds, they'll do real estate, some stocks, all that stuff. I think talk to one guy, investment manager for an insurance company said yeah, 3 to, 3 to 4% in stocks is all they do. That's what you want. So are these companies going 30, 40% risk? It's possible, but that's the issue. You got a bunch of companies that are just trying to come in and get the insurance company assets. They slap a new name on it. Kind of catchy. But you can see right here on the web page, this is US Life Insurance with private capital backed reinsurers in the Cayman Islands. MetLife, Principal, Augustar, American Equity, Everlake, Fidelity and Guarantee, Silac, Equitrust, PHL Variable, that one's in a lot of trouble right now to speed up. And ibexis. A lot of those are names that come out of nowhere in the last few years with big rates. And I said I'm not touching them. You do what you want with your own money. But I'm sitting here telling you like I want a deal that helps me sleep at night, right? So a reliable source within one major insurance company on the investment side of things said that a lot of these companies were without a doubt, I mean that's what the numbers are, without a doubt, losing money on their MYGA business. Well, that's not a very good deal. And the only reason they can keep from losing money is to take more risk with the investments. Well in the past few years markets have been really strong around the world and that's going to cover up a lot of that riskier management management stuff. But that's not always going to be the case.
And in a couple of cases I mean I think Kerry's got a story about Prudential and what was this? Probably right up here, isn't it? Yeah. Prudential and Bright House bet on a pistachio farm in California. One billion in loans between Prudential Bright House Life and US Bank Bright Houses MetLife.
So three ways. I mean something like that going down is not going to kill Prudential but some of these things are weaving themselves into the insurance business and that's not the traditional use. So I'm going to stay away from all these companies. I have been in the past. I don't like being right about this. I hope nobody is financially harmed from it. But it's a dicey situation. Private equity led companies have products all over the place. I stay away from them all the time. Okay. Fiend's one of those big companies that private equity led. They got a monster firm behind them. But that's one of the issue like there it's like I'm just going to say because you're not. You can get the same thing somewhere else. Why not be safe when you do it? You guys should pay attention to this because it is a big deal. I'm going to be extremely strict with who I will do business with going forward. This is a cautionary tale. Sentinel Security Life. We'll see what happens. And I've got a doozy of a story that involves Sentinel Security. It's not really doesn't have anything to do with the company. It just happens to be an interesting fraud case in Arizona that I'm gonna. I cannot wait to tell the story but we've got to settle it and try to get. We've got to get some good results for the people involved. It's kind of a sad story but they're going to be fine. And I think we got what we need to get their money back from them. But lost a lot of money from some scummy agents that were lying on the application. Fraud could be some jail time. Who knows. But this is going to be interesting development anyway. Greed has no place with annuities. None. If you want an extra few basis points go ahead.
Don't come back to me and ask to help. Right. If any of the companies that I've sold get into this trouble. I don't think they will. I did my research ahead of time before I said, yeah, I'll go do that. But if any of that happens, I absolutely, I will tell the story. I'll be front and center. I'll get all the information possible.
But not everybody's going to do that. So I'm going to keep. I'm going to stay out of it if I can, and I'm going to keep you out of it if I can as well. So this has been episode 165 time to be picky about what company you choose. Appreciate you guys joining me again. Share it with your friends. Like subscribe or comment on any of your favorite podcast platforms or on YouTube or on the webpage as well so other people can see it and maybe get some insight from what you have to say. I love feedback. So you guys have a great day. I appreciate you getting a hold of me. My name is Brian Anderson and I'll see you next week. Okay, thanks. Bye.
[00:11:56] Speaker B: You have been listening to Annuity Straight Talk.
The proceeding information is for informational and educational purposes only and does not represent tax, legal or investment advice.
Reviews and expressed by guests on this program are their own and do not necessarily reflect the views of Annuity Straight Talk or its partners.
No information presented today should be acted upon without meeting with a qualified and licensed professional.
It is important that you read all insurance contract disclosures carefully before making a purchase decision guarantee. These are based on the financial strength and claims paying ability of the insurance company.
