Archive - April 9, 2009

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Life Insurance Companies Likely to Join the Bailout Rolls
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HEADLINE: This Recession Has Been Bad

Life Insurance Companies Likely to Join the Bailout Rolls

Life insurance companies, normally thought of as bastions of stability, have come under greater scrutiny from concern that their holdings of mortgage-backed securities and aggressive annuity guarantees may put their financial stability at risk. Where can you go to determine the strength of your insurer?

According to a report in yesterday’s Wall Street Journal, the Treasury Department will soon announce that TARP funds will be made available to insurance companies that own banks.

Although life insurers are closely regulated, there’s growing evidence that some insurers hold significant amounts of low-rated mortgage-backed debt. Financial Planning magazine cites data indicating that of

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HEADLINE: This Recession Has Been Bad

The Recession has been bad

Above is a chart that compares the S&P 500 earnings performance during the current economic recession (the red line) to that of the tech bubble recession (the gold line) and the average recession dating back to 1936 (the blue line). As you might expect, the current decline in earnings has been significantly worse than during the average recession, and is now worse than during the bursting of the tech bubble.

Note that earnings bottom out and start to improve near the 18 month mark during both the average recession and during the recession of 2001-2002. How far into the current …

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