Relieved to Have Survived a Dangerous Year, ACLI Members Look Ahead

Relieved to Have Survived a Dangerous Year, ACLI Members Look Ahead Ronald J Panko

Patrick S. Baird, chief executive officer of Aegon USA, expressed relief last week at the general session of the American Council of Life Insurers' annual convention that his one-year term as ACLI chairman was behind him. Many executives attending the Chicago event were no doubt relieved that they and their companies had emerged intact from the Great Recession of the past 12 months.

The year certainly tested the ACLI leadership. Frank Keating, its president and CEO, related the many actions he and his team took to work with federal officials to provide some level of support for affected life companies.

"The thing that concerned us, because we did not have an FDIC behind us, we have a system of guaranty funds in the states, if there were a run on life insurance companies. . . what would that do to us as an industry? Because we were state-regulated, we were very concerned, if not alarmed, that the Fed, the FDIC, perhaps the SEC, obviously the Treasury Department, might have a high level of ignorance and not appreciate that individual companies within our industry may not be systemic, but we as an industry are."

Keating recounted how he and his ACLI team visited Christopher Cox, then chairman of the U.S. Securities and Exchange Commission, to talk about how fair-value accounting regulations were causing insurers to raise capital when it couldn't easily be raised. They met with Federal Reserve Chairman Ben Bernanke to say that if the Troubled Asset Relief Program passed, "we wanted to make sure the industry was part of TARP." And when ACLI representatives met with Henry Paulson, then the treasury secretary, to ask for access to some of the TARP funds for some companies, Paulson suggested that insurers qualify for TARP by buying thrift banks. "That seemed silly, but that is what the industry did," Keating said.

So with the worst hopefully over, many at the conference addressed vital future issues:

Gary Hughes, ACLI executive vice president and general counsel, on why the council seeks more of a federal regulatory presence, even a Federal Insurance Office:

"More and more of what we call the franchise issues of our business are decided in Washington rather than in state capitols. Tax issues are always critically important to us. Far too often, it's the industry carrying the freight on making the arguments on those issues, and we wish that our regulators would weigh in, but they typically don't. So one of the aspects of having a federal charter that is very important was the ability of having a regulator weigh in on some of these national issues, most notably federal tax policies. . . Some insurance presence in Washington may be even more important than that."

Nicholas Sargen, senior vice president and chief investment officer for Western and Southern Financial Group on life insurer investment issues:

"What's important to realize is that the huge sell-off in the financial markets that took place in September through early March was really pricing in two extreme outcomes: one, that the financial system was on the verge of collapse, and two, that we were just headed for a recession, but potentially a depression. So what has happened in the meantime to trigger the reversal is neither of these outcomes is now likely."

Jennifer Archie, partner, law firm of Latham & Watkins LLP, on the impact of social media outlets (such as Facebook and Twitter) on the life industry:

"Leads developed through social networking sites convert very readily to sales, or at least at a higher level than leads generated through e-mail and other forms of marketing. It turns out that social networking sites have become a leading, if not the leading source for information about a company's products, even over a company's own Web site, particularly . . . for people between the ages of 25 and 49. If you think about it, social networking sites are a media where people post about their most important life events -- births, marriages and all the things that relate very directly to their insurance needs."

Jody Strakosch, national director of Institutional Business-Strategic Alliances, MetLife, on how the industry and policymakers are approaching the idea of introducing automatic annuitization of assets into defined-contribution workplace retirement plans, primarily 401(k)s:

"We have seen such positive impact from the auto enrollment, auto escalation. Why not bring this idea of auto income into the 401(k) marketplace? Right now, predominantly participants do take the lump sum, and this would be a way of converting a portion of their balance . . . perhaps as much as 50%, and turning that into a lifetime income stream."

Portions of the video interviews with Strakosch, Archie, Hughes and Sargen will soon be available in an episode of BestDay Video, and audio of the interview with Keating, is available at www.bestdayaudio.com.

(By Ron Panko, senior associate editor, Best's Review: [email protected])

(c) 2009 A.M. Best Company, Inc. Patrick S. Baird, chief executive officer of Aegon USA, expressed relief last week at the general session of the American Council of Life Insurers' annual convention that his one-year term as ACLI chairman was behind him. The year certainly tested the ACLI leadership.