Unfortunately, it’s not the euphoria of a win in Vegas. Rather, it refers to the number of contract holders that have pulled the utilization trigger on their annuity living benefit guarantees. And it’s on the rise. Coupled with past hedging concerns, the number of contracts now in the money has people worried, and is a major reason for the recent TARP announcement. So what due diligence are you taking to properly place your client’s money? We turned to Louis Hughes, CFP, Investment Centers of America, for help. No surprise, Hughes is going far beyond the rating agencies when looking into a carrier’s solvency.

“We do look at credit quality from the rating agencies. And we look at where the company is at that particular time. But more importantly, we look at the way the company has been trending; meaning, what’s happened in the recent past? Has there been a downgrade or series of downgrades even though it still has solid ratings? We also subscribe to rating reports we trust, like Weiss. And we get out on the Internet. If we see a company has strong ratings but has been unprofitable for a number of years, that raises a red flag. We obviously want to know how well the company handles claims, but we want to know specifics about how — and how well — the company is capitalized.”