As usual, follow the money, and in this case, there’s a lot.
5 thoughts on “Warren Buffett”
That is actually disheartening.
“… Deirdre McCloskey and her bubbly, one-of-the-girls style.” Heh.
When Buffet bought Northern Natural Gas after the Enron collapse and moved it back to Omaha where it started, his minions lowered the salary ranges for most jobs. If memory serves, it was a cut of about 20 to 25%.
The author of this article has some facts wrong. The beneficiary of a life insurance policey receives the proceeds income tax free. The payout itself is added to the value of the decedent’s estate. Thus a million dollar payout to someone outside the estate actually adds a million dollars to the estate of the decedent even though the proceeds may have gone to a party outside of the estate. Don’t argue with me I sell life insurance, among other products, for a living. This is basic stuff you have to know to obtain and keep your insurance license.
That doesn’t change the calculus for Buffett, since, yes, life insurance is used for estate planning. The only twist is that the planner has to plan for enough insurance to cover the estate tax on the life insurance.
If it makes any difference the life insurance industry is headed off a cliff. The reasons are twofold. Yields on bonds are in the toilet and as yields head up again, bond prices will fall and trash the balance sheets of many life insurers.
Second, there is the increasing popularity of viatical settlements among the elderly. Many, many older Americans are selling their life insurance policies to investors for a lump sum hugely discounted from the actual value of the payout. Most life insurance carriers never accounted for this behavior when premiums were set and the policies were sold many years before. In fact, those carriers were expecting nearly all policies never to pay because nearly all policy holders cancel before they die. Now they don’t because of the viatical settlement industry.
You have a perfect storm approaching in the next five to ten years: balance sheets trashed by diving bond prices combined with huge, unanticipated payouts. Bye bye life insurance companies.
That is actually disheartening.
“… Deirdre McCloskey and her bubbly, one-of-the-girls style.” Heh.
When Buffet bought Northern Natural Gas after the Enron collapse and moved it back to Omaha where it started, his minions lowered the salary ranges for most jobs. If memory serves, it was a cut of about 20 to 25%.
The author of this article has some facts wrong. The beneficiary of a life insurance policey receives the proceeds income tax free. The payout itself is added to the value of the decedent’s estate. Thus a million dollar payout to someone outside the estate actually adds a million dollars to the estate of the decedent even though the proceeds may have gone to a party outside of the estate. Don’t argue with me I sell life insurance, among other products, for a living. This is basic stuff you have to know to obtain and keep your insurance license.
That doesn’t change the calculus for Buffett, since, yes, life insurance is used for estate planning. The only twist is that the planner has to plan for enough insurance to cover the estate tax on the life insurance.
If it makes any difference the life insurance industry is headed off a cliff. The reasons are twofold. Yields on bonds are in the toilet and as yields head up again, bond prices will fall and trash the balance sheets of many life insurers.
Second, there is the increasing popularity of viatical settlements among the elderly. Many, many older Americans are selling their life insurance policies to investors for a lump sum hugely discounted from the actual value of the payout. Most life insurance carriers never accounted for this behavior when premiums were set and the policies were sold many years before. In fact, those carriers were expecting nearly all policies never to pay because nearly all policy holders cancel before they die. Now they don’t because of the viatical settlement industry.
You have a perfect storm approaching in the next five to ten years: balance sheets trashed by diving bond prices combined with huge, unanticipated payouts. Bye bye life insurance companies.