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Is my insurance policy safe?
Major U.S. life insurers like MetLife, Prudential Financial and Hartford Financial Services Group are reeling from third-quarter losses as a result of market turmoil and declines from investments. How can consumers tell if their policies are safe? Here are answers to some basic questions about the safety of life insurance policies:
How do I know if my insurer is financially strong?
The only practical way is to check insurers' “financial strength” ratings with rating companies like A.M. Best, Moody's, Standard & Poor's and Fitch, said Glenn Daily, a financial planner in New York.
The Hartford, Prudential and MetLife remain secure places to buy insurance, according to A.M. Best. All their life insurance subsidiaries are rated from A to A+; the highest rating is A++.
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Timing the next rush to gold
Is Britain a buy?
Is your insurance safe?
“Anything below an A- at A.M. Best makes me wonder if I should be dealing with that company,” Daily said.
Anything B+ or above is considered secure, said Stefan Holzberger, assistant vice president at A.M. Best, based in Oldwick, New Jersey. Ratings of B through E indicate financial problems.
The entire life-insurance industry has a negative outlook now, Holzberger said, and lower ratings may be expected for the next 12 to 24 months.
I'm worried about my insurance company and don't want to wait to see what happens. Can I move my policy to another company?
Switching insurers is a mistake, especially with policies like whole life and universal life that have cash value, Daily said, because changing companies will mean you lose money.
When the catastrophe hits, it is already too late, said David Schiff, editor of Schiff's Insurance Observer, a newsletter. Customers need to buy from a strong company in the first place, he said. “If a company isn't there to pay a claim,” Schiff said, “you're getting nothing.”
What happens if my life insurance company goes out of business?
In the event of a bankruptcy, policyholders are covered by the rules of the state in which they reside or, if living outside the United States, where they bought the policy.
All 50 U.S. states have life insurance guaranty associations that provide a minimum of $100,000 in cash value and $300,000 in death benefits on all policies. Some states offer higher coverage.
For more information, go to the Web site of the National Organization of Life & Health Insurance Guaranty Associations at www.nolhga.com.
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The British economy contracted by 0.5 percent in the three months through September, ending a string of 16 years without a negative quarter and almost certainly indicating that an economic losing streak has begun.
Mervyn King, the governor of the Bank of England, said as much, and even if he had kept his own counsel, the same message is clear from the plunge in stocks and the pound.
From their peaks earlier this year, the FTSE-100 index lost as much as 40 percent of its value, leaving it close to a 12-year low, and the pound was down more than 20 percent at a five-year low. That double-whammy meant that dollar-based investors could pick up British stocks for well under half of what they cost a very short time ago, and history suggests that they should.
King's statement late last month - “it seems likely that the U.K. economy is entering a recession” - ignited a fresh wave of selling in stocks and sterling, but investors might have been better off taking it as a buy signal. A rule of thumb during bear markets is that by the time a recession is acknowledged by a country's leaders or in news headlines, the worst of the selling is over and a reversal is due.
That is how several veterans of the British markets see things; they contend that the twin sell-offs have provided a solid opportunity to buy shares of excellent companies at bargain prices. Valuations account for just about any negative developments, but nothing positive, that the economy is likely to encounter, they say.
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Today in Your Money
Timing the next rush to gold
Is Britain a buy?
Is your insurance safe?
“Everyone is expecting this recession to be unusually long and deep, and that's almost certainly right,” said Alan Brown, group chief investment officer for Schroder Investment Management. But even if the downturn runs twice as long as the postwar average of one year, and corporate earnings fall 50 percent from their peak instead of the usual 25 percent or so, he added, British stocks would trade at a “hardly demanding” price-earnings multiple of 13. As for the pound, Brown thinks it has gone from “very overvalued to cheap.”
That leaves foreign (in this context, non-sterling-based) investors with two chances to win. If the pound recovers, they can profit even if stocks go nowhere. If the pound remains depressed, it could underpin the stock market.
Max King, a strategist at Investec Asset Management, pointed out that a cheaper currency is often very good for business, especially for exporters or companies with extensive overseas operations.
“The market has largely ignored the benefit to U.K. companies of the fall in sterling,” King said. He highlighted research at the London Business School showing that stock markets in countries with devalued currencies tend to outperform other markets by more than the amounts by which their currencies fall.
To make the most of the weakness in sterling, he would focus on exporters that have the bulk of their production in Britain or multinationals with heavy foreign earnings. He declined to recommend individual stocks, but he offered the jet engine manufacturer Rolls-Royce and the drug maker GlaxoSmithKline as respective examples of the two types of companies.
Tony Dalwood, head of public equity at SVG Investment Managers, is a fan of Glaxo and another large pharmaceutical company, AstraZeneca. He finds both “very cheap.”
Another favorite of his is Vodafone, the mobile phone service provider, which owns nearly half of Verizon Wireless in the United States.
Dalwood said he was “beginning to allocate resources to companies with more U.S. exposure” as a currency and macroeconomic play. He expects that “the U.S. will lead the globe out of recession” and that investors will take a circuitous but low-cost route into the market by buying shares of British companies with strong American activities.
There is no guarantee that buying British stocks will be profitable in the short run, he acknowledged. Just because they are cheap does not mean they won't get cheaper. But while many shareholders raise the prospect of a prolonged recession to justify selling, Dalwood says he thinks that the decision is more emotional than rational and that investors who can make a three-to-five-year commitment will be glad they bought now.
“Greed has driven bubbles on the way up,” he said, “and fear is driving one the other way.”
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When there seems to be nowhere to turn, investors often turn to gold. The unprecedented volatility in stocks and uncertainty about the world economy and financial system should make this an ideal time to own gold.
Conditions apparently are so tough, however, that the value of this traditional refuge has been sinking along with everything else.
From Oct. 8 to Oct. 22, a period when markets in many assets went haywire, gold fell about $260 an ounce, or close to 30 percent, to $680. After a mild recovery, gold for current delivery closed at $731.20 on Thursday on the New York Mercantile Exchange.
The relationship between gold and calamity was intact earlier in the year as the bear market gathered force. Investors liked gold well enough when the investment bank Bear Stearns collapsed in mid-March to send the price of the metal to an all-time high - near $1,050.
The repeated failures of financial institutions during the past couple of months, along with other distressing events, have produced gold price rallies, often sharp ones, but they have quickly fizzled out. The decline last month has left gold trading with a loss of about 10 percent for the year.
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Timing the next rush to gold
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Shareholders in mining companies would gladly take that. The PHLX Gold/Silver Sector Index, a benchmark for the sector, lost nearly two-thirds of its value this year before rebounding slightly in the past couple of weeks. As seems to be the case with stocks of all sorts, investors sold mining shares with little regard for corporate fundamentals.
One reason for the decline in all things gilded may be the gloom engulfing emerging economies. Demand for gold from Chinese and Indian consumers soared during the boom times, but as forecasts for economic growth are ratcheted down, so are price targets for gold. Inflation expectations have diminished markedly, too, as prices of other commodities, mainly crude oil and related products, have plummeted even more than the price of gold.
A more significant source of weakness, in the opinion of analysts and strategists, is forced selling of the metal by hedge fund managers. These investors travel in packs, piling into many of the same trades and using borrowed money to do it. Gold, other commodities and foreign currencies have been favorite investments of theirs, but with markets volatile and access to credit severely curtailed, the funds have had to reduce their exposure.
“What is dominating gold right now is not fundamentals but position liquidation,” said Rebecca Patterson, global head of foreign exchange and commodities for J.P. Morgan Private Bank. “People who desperately need cash are selling whatever they can to get it. That's dwarfing buying interest.”
There is still plenty of that, even if the wave of selling is greater. People who have cash - the wealthy private clients that use her bank's services - have shown “an incredible amount of buying interest in gold” during the past couple of months, she said.
One sign of the nervousness is that the typical client does not just want to hold gold on paper but instead “wants to see a numbered gold bar in his or her name,” Patterson said. “That usually only happens when investors are really frightened about the world.”
That such palpable fear is unable to overcome the effect that the forced selling is having on the price of gold is causing exasperation for bulls. As John Hathaway, senior managing director of Tocqueville Asset Management, said in a recent report, “If these horrific financial market developments have been insufficient to drive gold to new highs, what will it take?”
He answered his question by fast-forwarding to the post-credit crunch world and enumerating the consequences of the various emergency measures taken by policy makers to try to minimize the damage. “The socialization of credit in the U.S.” could result in higher inflation, a weaker dollar and even a downgrading of Treasury debt, he warned. Those developments would probably push gold higher eventually.
What Hathaway finds more imminently bullish is a supply shortage in gold that is being obscured by a glut of paper equivalents, like futures contracts, which hedge fund managers and other speculators have dumped on the market.
“Gold trading steadily at $2,500 is not unthinkable,” he said.
Maybe not to him, but Patterson is not giving serious thought to gold at any quadruple-digit price for the time being.
“It's not going to go back up to $1,000 easily,” she said. But she does not expect the decline to continue much longer, either. The next significant move will be higher, she predicted.
“We're starting to get to levels where, even if we have some down-side risk, prices are attractive enough to consider starting to build long positions,” Patterson advised. She finds it more likely that gold will be higher a year from now than lower.

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Is my insurance policy safe?
Major U.S. life insurers like MetLife, Prudential Financial and Hartford Financial Services Group are reeling from third-quarter losses as a result of market turmoil and declines from investments. How can consumers tell if their policies are safe? Here are answers to some basic questions about the safety of life insurance policies:
How do I know if my insurer is financially strong?
The only practical way is to check insurers' “financial strength” ratings with rating companies like A.M. Best, Moody's, Standard & Poor's and Fitch, said Glenn Daily, a financial planner in New York.
The Hartford, Prudential and MetLife remain secure places to buy insurance, according to A.M. Best. All their life insurance subsidiaries are rated from A to A+; the highest rating is A++.
Today in Your Money
Timing the next rush to gold
Is Britain a buy?
Is your insurance safe?
“Anything below an A- at A.M. Best makes me wonder if I should be dealing with that company,” Daily said.
Anything B+ or above is considered secure, said Stefan Holzberger, assistant vice president at A.M. Best, based in Oldwick, New Jersey. Ratings of B through E indicate financial problems.
The entire life-insurance industry has a negative outlook now, Holzberger said, and lower ratings may be expected for the next 12 to 24 months.
I'm worried about my insurance company and don't want to wait to see what happens. Can I move my policy to another company?
Switching insurers is a mistake, especially with policies like whole life and universal life that have cash value, Daily said, because changing companies will mean you lose money.
When the catastrophe hits, it is already too late, said David Schiff, editor of Schiff's Insurance Observer, a newsletter. Customers need to buy from a strong company in the first place, he said. “If a company isn't there to pay a claim,” Schiff said, “you're getting nothing.”
What happens if my life insurance company goes out of business?
In the event of a bankruptcy, policyholders are covered by the rules of the state in which they reside or, if living outside the United States, where they bought the policy.
All 50 U.S. states have life insurance guaranty associations that provide a minimum of $100,000 in cash value and $300,000 in death benefits on all policies. Some states offer higher coverage.
For more information, go to the Web site of the National Organization of Life & Health Insurance Guaranty Associations at www.nolhga.com.
–>

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The British economy contracted by 0.5 percent in the three months through September, ending a string of 16 years without a negative quarter and almost certainly indicating that an economic losing streak has begun.
Mervyn King, the governor of the Bank of England, said as much, and even if he had kept his own counsel, the same message is clear from the plunge in stocks and the pound.
From their peaks earlier this year, the FTSE-100 index lost as much as 40 percent of its value, leaving it close to a 12-year low, and the pound was down more than 20 percent at a five-year low. That double-whammy meant that dollar-based investors could pick up British stocks for well under half of what they cost a very short time ago, and history suggests that they should.
King's statement late last month - “it seems likely that the U.K. economy is entering a recession” - ignited a fresh wave of selling in stocks and sterling, but investors might have been better off taking it as a buy signal. A rule of thumb during bear markets is that by the time a recession is acknowledged by a country's leaders or in news headlines, the worst of the selling is over and a reversal is due.
That is how several veterans of the British markets see things; they contend that the twin sell-offs have provided a solid opportunity to buy shares of excellent companies at bargain prices. Valuations account for just about any negative developments, but nothing positive, that the economy is likely to encounter, they say.
Multimedia
Graphic» View
Today in Your Money
Timing the next rush to gold
Is Britain a buy?
Is your insurance safe?
“Everyone is expecting this recession to be unusually long and deep, and that's almost certainly right,” said Alan Brown, group chief investment officer for Schroder Investment Management. But even if the downturn runs twice as long as the postwar average of one year, and corporate earnings fall 50 percent from their peak instead of the usual 25 percent or so, he added, British stocks would trade at a “hardly demanding” price-earnings multiple of 13. As for the pound, Brown thinks it has gone from “very overvalued to cheap.”
That leaves foreign (in this context, non-sterling-based) investors with two chances to win. If the pound recovers, they can profit even if stocks go nowhere. If the pound remains depressed, it could underpin the stock market.
Max King, a strategist at Investec Asset Management, pointed out that a cheaper currency is often very good for business, especially for exporters or companies with extensive overseas operations.
“The market has largely ignored the benefit to U.K. companies of the fall in sterling,” King said. He highlighted research at the London Business School showing that stock markets in countries with devalued currencies tend to outperform other markets by more than the amounts by which their currencies fall.
To make the most of the weakness in sterling, he would focus on exporters that have the bulk of their production in Britain or multinationals with heavy foreign earnings. He declined to recommend individual stocks, but he offered the jet engine manufacturer Rolls-Royce and the drug maker GlaxoSmithKline as respective examples of the two types of companies.
Tony Dalwood, head of public equity at SVG Investment Managers, is a fan of Glaxo and another large pharmaceutical company, AstraZeneca. He finds both “very cheap.”
Another favorite of his is Vodafone, the mobile phone service provider, which owns nearly half of Verizon Wireless in the United States.
Dalwood said he was “beginning to allocate resources to companies with more U.S. exposure” as a currency and macroeconomic play. He expects that “the U.S. will lead the globe out of recession” and that investors will take a circuitous but low-cost route into the market by buying shares of British companies with strong American activities.
There is no guarantee that buying British stocks will be profitable in the short run, he acknowledged. Just because they are cheap does not mean they won't get cheaper. But while many shareholders raise the prospect of a prolonged recession to justify selling, Dalwood says he thinks that the decision is more emotional than rational and that investors who can make a three-to-five-year commitment will be glad they bought now.
“Greed has driven bubbles on the way up,” he said, “and fear is driving one the other way.”
–>