Financial Update: Current Economic Conditions
Last Updated (Wednesday, 17 September 2008)
Dear Friends,
As the financial climate on Wall Street continues to deteriorate, we wanted to take just a moment to address some of your growing concerns. The recent collapse of Lehman Brothers and then the subsequent Fed bailout of AIG this week has many concerned about their financial prospects. We would like to offer some comfort and encouragement to our clients regarding these recent developments.
If you are a client of ours, most if not all of your assets are already separate from the securities industry, banking industry, and stock market industry. And while these industries are facing some real challenges, the insurance industry is just fine. These troubled banking industries are regulated by the Fed, which happens to be one of the primary reasons for the problem. The insurance industry on the other hand is regulated on a state level.
There has been some concern regarding insurance policies with AIG. The policies that are with AIG are actually insured by American General. AIG is the parent company, with American General as a subsidiary of AIG. The parent company dollars and the insurance dollars are segregated from each other, and cannot be accessed by the parent company. So despite these troubled companies best efforts to get out of the mess their derivatives have created, they are unable to access the dollars from the insurance sides of the company. Insurance policies owners are safe from the problems of the parent company.
Insurance companies, regulated by the states, have always taken a conservative approach to their investment portfolios. Unlike securities, banking, and stock market, the insurance industry has avoided derivatives that have caused this financial crisis.
While the financial climate is unsettling, you may rest assured that you have appropriately prepared. The insurance industry is doing fine, and is not subjected to the same type of collapse occurring in other industries. We suggest that you review some of the economic discussions that Hank Brock has written dating back to March and April of this year. Below is link to these two articles for you to review.
Sincerely,
Brock and Associates, LLC
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