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Subject:  Re: Variable Annuities beware of broken promises Date:  6/25/2013  5:01 PM
Author:  aj485 Number:  72514 of 78166

The industry claims that so far they have always been able to rescue any failing company--usually a stronger company acquires the assets and contracts of the failing company--and make good on their contracts.

Assuming that 'make good on ther contracts' means that the original terms of the annuity contract were honored, the claim that the industry is making is false. Executive Life failed when their junk bond portfolio collapsed in 1991. Now, 15% of annuity holders have had their payouts cut, some by more than 50%:

Mrs. Lawley, whose payout has been reduced to 47 percent of its original value, is one of 62 Pennsylvania residents who will lose a total $32 million in annuity policy payments in the Executive Life case. Nationwide, about 1,500 policyholders will lose a total of $920 million, highlighting potential weaknesses in the risk-free guarantee that many insurance companies emphasize when marketing annuities.

The annuity industry is based on people trading large sums of nonrefundable cash immediately or over an extended period of time in exchange for the promise of pre-defined monthly payments for the rest of their lives or for a specified period of time.

But Executive Life Insurance Co. fell on hard times in 1991 when its parent company -- Executive Life Insurance Co., Los Angeles -- collap