Junk Bonds

  • 1994 – AP – Fraine’s Neglected Findings: Was Hickman Wrong?, by Martin S. Fridson, Financial Analysts Journal, Vol. 50, No. 5 (Sep. – Oct., 1994), pp. 43-53 (11 pages) – JSTOR
    • NBER, Study
  • I found it interesting that a number of small stock companies are using somewhat low-grade investments to determine their future investment yield.
  • I wonder whether this is a trend, and whether they take the default risk into consideration.

—  Charles Picard

1985 – SOA – Actuarial Pricing Assumptions in a Volatile Environment, Society of Actuaries – 32p 

  • Another area of concern relating to solvency is investments by insurers.
  • Recently, some states have expressed concern over investment by life insurance companies in high yield / high risk obligations, referred to as “junk bonds.”

—  John Washburn, Director of Insurance for the State of Illinois and Vice President of the NAIC 

1987 0701 and 0729 and 1014 – GOV (House) – Developments In State Insurance Regulation – [PDF-511p-GooglePlay,  VIDEO-?]

  • Let me share a very personal experience.
    • Two years ago, I had occasion to address a group of insurance salesmen, and I had become somewhat concerned about the higher risks assumed by insurance companies, particularly longer-term interest rate guarantees covered by junk bonds.
    • I made the mistake or maybe the courageous statement that some insurance companies, if they continue, are likely to get themselves into trouble.
    • I named a number of insurance companies, among them Executive Life and Presidential Life and others, as owners of a high percentage of junk bonds.
    • After my presentation, I was deluged with objections by salespeople. How dare you undermine the image of our industry!
    • The next morning I got a call from the president of one of the large insurance companies calling me to task, asking me to come in because he wanted to persuade me that all was well.

—  Dr. William Freund – Chief Economist Emeritus, New York Stock Exchange

1991 – SOA – Major Issues Facing the Economy,  The Insurance Industry and Actuaries in the Years Ahead, Society of Actuaries – 12p 

  • 1991 0717 and 0724 – GOV (House) – Life Insurance Solvency Issues, (CSPAN) – Insurance Insolvencies, (NAIC) – The Impact of Junk Bonds, Real Estate and Mortgages on the Life Insurance Industry – Cardiss Collins (D-IL)  —   [BonkNote]