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0dteSPYFDs t1_j25frsg wrote

Reply to comment by robbinhood69 in Progressive: The Valuation Enigma by 2ndSifter

  1. Not a scam. Insurers adhere to both GAAP and SAP principles which have different ways of valuing assets. Under SAP principles, insurers also have to have a certain amount of their investments in fixed income to ensure policyholder surplus and is reflected as "synthetic GIC".
  2. You clearly do not have any idea how diversification, or insurance works. Reinsurance is essentially to avoid large losses and spread risk. There are specific company's who specialize in reinsurance like Lloyd's of London, SwissRe, MunichRe, GenRe and GallagherRe to name a few. It's not "all insurance companies". Spreading risk between different ocean cargo vessels a few hundred years ago is how Lloyd's was established as the first insurer, which is essentially the same principle as reinsurance.
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robbinhood69 t1_j25ygpa wrote

idc if moody's and S&P think Synthetic GIC is okay, that shit is impossible to find information on and promises guaranteed yields

it promised guaranteed yields during a time of 0 FFR

oh gee i wonder how this is possible. Anytime anyone offers guaranteed yields and it is not jerome powell himself it is a fucking scam

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gucciflipflops337 t1_j25z59e wrote

Why type so many words just to say “I’m a fucking idiot and don’t have any idea what I’m talking about”.

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0dteSPYFDs t1_j2626la wrote

Right? Why even try to argue when you clearly have zero understanding of complex financial concepts. It’s fucking complicated, but not black magic, with a sprinkle of fraud mixed in. I don’t expect anyone, except for specific niches of industry professionals to understand the inner workings of it.

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robbinhood69 t1_j261lui wrote

why not attack hte substance of hwat i'm saying brody

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gucciflipflops337 t1_j261qsf wrote

Because there is no substance to what you’re saying. You’re saying something is a scam when you have no idea what it actually is. Despite someone trying to explain it to you

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robbinhood69 t1_j2629kq wrote

what good reason is there to wrap instruments in an instrument called a synthetic GIC ?

Even homeboy said "oh they are required to hold fixed income and that's why they put it in GIC" but GIC is not just fixed income shit

it's a way for them to get around legislation so that it's technically "fixed income" but it's backed by shit that is not fixed income

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gucciflipflops337 t1_j262twh wrote

Clearly you cannot comprehend the explanation that has been given to you. You’re dead set on it being a “scam” or some type of scheme.

Go look up the definition for dunning Kruger and you’ll find your answer

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0dteSPYFDs t1_j260ivp wrote

> A synthetic GIC includes an asset ownership component and a contractual component that is intended to be valued at book value. The associated assets backing the contract’s book value are owned and held in the name of the plan or the plan’s trustee. Such associated assets typically consist of a diversified fixed income portfolio, including but not limited to treasury, government, mortgage, and/or corporate securities of high average credit quality. To support the book value obligation, the contract-holder relies first on any associated assets and then, to the extent those assets are insufficient, the financial backing of the wrap issuer. Wrap contracts can be issued by banks, insurance companies, or other financial institutions.

Again, you clearly don’t know what you’re talking about lol

Even if the combined yield in a hypothetical synthetic GIC portfolio was 0 (they weren’t) and insurers expect that portion of their investment portfolio to be lower, rates simply increase for policy holders. It’s not magic and they all abide by the same rules.

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robbinhood69 t1_j261j00 wrote

why bother wrapping those instruments in a product at all when these insurers hold those instruments by themselves ?

there's no good reason to wrap the instrument and have someone else be responsible for it i mean wtf

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0dteSPYFDs t1_j262kvg wrote

To ensure adherence to the plan and have a 3rd party guaranteeing the first party’s assets, or lack thereof. Again, it’s the same concepts of compliance and risk management. This is done to avoid contagions like the 2008 GFC.

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