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Retirement Security Not at Risk With
Missouri Department of Insurance's Supervision of General American

Absent from the headlines and press accounts announcing that General American Life Insurance was under 'administrative supervision' by the Missouri Department of Insurance was the news that retirement security was not at risk.

The Missouri Department of Insurance (MDI) has reported that General American's crisis of confidence is limited to money market investors, not stable value funds or other retirement investment vehicles. MDI asserts that "General American's 300,000 policyholders and annuity holders are not at risk based upon what we know of the company -- and we know a lot."

As reported, General American could not meet the demands for $6.8 billion in investment contracts, largely held by money market funds that were redeemable within seven days. Once rating agencies downgraded the company's financial strength, many money market funds began to redeem them since the company's new rating was below their investment guidelines. The resulting liquidity crunch, reports MDI's Randy McConnell, was from General American's mismatch of short-term liabilities against longer-term investments that could not be sold quickly enough to meet investors' redemptions.

Importantly, MDI's supervision gives the company time to liquidate its investments to honor the money markets' redemptions in a way that should not threaten investors including stable value investors who may be reminded of past insurance company failures. McConnell emphasized that General American's woes are different from past failures saying, "Supervision is much different from placing it in receivership, in which the state takes over a failed company." The company has not failed and MDI predicts that a buyer will be announced shortly.

For updates on General American and other issues, check the Association's MEMBERS' Log In at www.stablevalue.org.

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