One of the advisors I spoke with this week actually surprised me.  Twice.  The first time was admitting that he worked with Washington National.  For those of you unfamiliar with this not quite household name, it is the company that has risen from the ashes of Conseco.  As we continued to talk, he mentioned the second surprise:  He is selling their equity indexed UL product, and, astoundingly, the issue of the company's financials "never comes up".

This guy must be one hell of a salesman.

On a separate but related topic, I was recently invited to Beta-test the new upgrades that are coming to VitalSigns, the carrier financial ratings reporting service that most of us use for thumbnail sketches of a carrier's current financial condition.  The Beta version is quite a bit more robust, and has greater ability to show trends over time that can help really understand what may be going on behind the scenes at a carrier.

Maybe I should take a look at the history of Washington National using the Beta version?  Great idea!  The tale the reports tell is one of a carrier on the ropes (no surprise there).  Falling ratings from almost all the major rating firms over the last five years, a Comdex of 52 (click here for an explanation of the Comdex rating if you need one), double digit lapse ratios and a very modest amount of new premium written each year.

Of course, there is always more to the story.  As in a ratio that the NAIC uses to help evaluate a carrier's ability to meet their obligations - Risk Based Capital.  For a bit of background on RBC ratios, click here.  As an example of why it may be important to look beyond the ratings tom something like an RBC ratio is ING.  Rated A by A.M. Best and with a Comdex of 79, they appear to be a less than attractive carrier to some.  Their RBC ratio of 470% (September 2010), however, is off the charts compared to the guideline set by the NAIC (200%).  The Washington National RBC ratio, by comparison, is 332%, also well above the minimum standard set by the NAIC.

In my mind, the question becomes one of how to place all of this information in context?  The Comdex and other financial ratings agencies indicate that Washington National may be at risk, but their RBC ratio appears adequate?  The background information on RBC ratios referenced above even discusses the issue of false positives and negatives.  In the case of Washington National and the Conseco block of business, a look at recent policy holder experience shows policies being charged guaranteed maximum M&E and guaranteed minimum interest.  Clearly not the behavior of a financially stable insurer from my perspective.

The moral of the story is clear - doing our own research is a critical skill if we want to keep our clients out of trouble.  For now, feel free to use the VitalSigns service in the Utilities section of our web site, and keep a look out for the update coming soon!  Send me an email if you need the user name password to gain access to that section of the site.

Talk to you in May.  One third of the year already in the books.  Yikes!