In the 1960s and 70s the nation’s largest keyboard company Baldwin Piano & Organ Company began expanding into banking and insurance eventually creating a large conglomerate of financial services companies. In 1977 Baldwin merged with United Corp., an investment company, and became Baldwin-United Corp.
Unfortunately for buyers, these contracts proved to be unsustainable and directly contributed to the bankruptcy of Baldwin-United in 1983. In fact, the $9 billion in liabilities of Baldwin-United exceeded the combined debt of the four previous largest bankruptcies up to that point.
In the 1983 the states of Indiana and Arkansas took over the majority of Baldwin-United’s assets and began the long process of rehabilitating the two insurance carriers and distributing assets to policyholders.
According to a recent Wall Street Journal article companies
“betting they can wring more profit from annuity contracts” than traditional insurance companies.
Another article in Bloomberg Business Week quotes Benjamin Lawsky, New York State superintendent of financial services
“Their focus is on maximizing their immediate financial returns, rather than ensuring that promised retirement benefits are there at the end of the day for policyholders,”
Important questions to ask about insurance companies you are considering doing business with.
- Are they controlled by outside entities that don’t have an insurance background or experience?
- Do they offer products with features and rates that are far above what the competition is offering?
The lessons from the past should be kept in mind.
Properly managed insurance companies are among the safest places for your retirement dollars even in the example of Baldwin-United the state guaranty associations made the policyholders whole. This process is time consuming so it wise to research companies you are considering.
Great article about annuity carriers and the importance of knowing the carrier you deal with. In fact, this could be more important than the ratings in some cases. Today, the annuity industry has seen more hedge funds and private equity firms buying up annuity carriers.
What was the peanalty for withdrawl from the Baldwin United annuities during the frozen period?
No withdrawals are allowed when a company goes into receivership until the guarantee association and insurance commissioners complete its reorganization. See this old article Baldwin-united Policyholders May Finally Get Money