About six months ago Nochi Dankner put Clal Bituach Insurance Company on sale, and to improve its chances commissioned an outside, independent audit of how much the company was worth. The result was that that the stock exchange valuation of Clal Bituach was 30% under its actuarial worth. On the basis of this analysis and the probable sale of the company, I invested in this stock. Bad move.
A deeper look at the analysis shows that they used old American actuarial mortality tables, and oh boy! we Israelis tend to live longer than Americans. Recalculating the future payout obligations of the insurance company shows that the market was right, insurance companies are - in Israel, in America and in general, in actuarial trouble. Only another Black Death epidemy can save them. Nochi was unable to sell the company and I am bleeding rivers of losses. One has to do its own research and never believe in independent analysts.
7 comments:
" Only another Black Death epidemy can save them."
:) Wrong. That sort of epidemics hits the young ones first.
No salvation I'm afraid for the losses.
Well, teo, the avian influenza virus can be engineered to attack only old folks. Insurance companies will be only too happy to finance the research.
Was this related to the payment of annuities? Straight life insurance is a bet by the insurance company that you will NOT die until some predicted later date (by which time they will have accumulated enough premiums and earnings on invested premiums that they can pay off the bet). If you live LONGER (as you say Israelis are), they get to keep collecting premiums and earnings for a longer period and make MORE money. So I don't understand your comment.
K
Their actuarial tables say that they will have to pay for a certain period of time, say from 65 to 85 years old and they collect money to cover that period. If people suddenly starts to die younger, the insurance company wins because they have to pay back less money. If people live longer, they have to pay back more and they are in a deficit. The money they collected is not enough. All insurance is based on this type of bets, on statistics.
Well insurance/private pensions system is based on collecting as much as possible from as many as possible and giving back as little as possible.
For decades many people payed. So that the smart boys could have nice buildings rented in order to fill them with hordes of beautiful girls. And enough remained to buy palaces, private planes, yachts etc
Now of course we discover they either spent or lost the money entrusted to them. At least a large part of them anyway. It was a ponzi scheme which worked perfectly for a time, exactly the way the mathematic model predicts.
Now because killing off the clients is impossible the only option is not to pay them. And this is happening already.
The states are going to be brought to cover some part of the losses so that the pensioners don't starve.
Beautiful, even perfect business model if I might say.
You take the money and spend it with the girls. And after send the investors to the public sector when they demand some part of their supposed investment.
:) :) :) LOL
The guys who invented the private pension system were real geniuses.
Evil ones but still geniuses.
So you are referring to annuities, which pay when you are living, and not life insurance, which pays when you are dead.
K
Yes. Pensions.
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