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Berkshire Hathaway Group
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Message from Warren Buffett
Annuities
We at Berkshire Hathaway Group (BHG) are taking a new approach to life insurance. Our goal is to provide simple, easy-to-understand products directly to consumers. When you buy an annuity from us, your terms will be fixed. You will be able to understand how the value of your policy will be calculated not only this year, but also every year that your policy is in force with us. You will be getting your policy from a company that has the highest possible ratings from Standard and Poor's (AAA) and A.M. Best (A ++). Annuities in the State of New York will be issued by First Berkshire Hathaway Life Insurance Company, which is not yet rated, and will be guaranteed by Berkshire Hathaway Life Insurance Company of Nebraska. And of course, by selling directly to consumers, we are able to put more of every dollar you invest with us to work for you. Low costs are the only way to offer high value to customers. At BHG, our goal is to attain the lowest costs in the industry.
Life insurance can be a complicated business. Like many investments, getting abnormally high returns on an insurance policy requires you to take some form of risk. High returns can be obtained by investing in a risky class of asset, by buying from a company with poor credit ratings, or by buying from a company that is very aggressive with its assumptions. Aggressive assumptions can hurt consumers in a variety of ways, and they are not always immediately apparent. The most common way this happens is when a company shows how the value of a policy will grow based upon “current assumptions”, which may remain current for only a short time.
Take a Single Premium Deferred Annuity, for example. Typically, a consumer will be guaranteed a very high first-year rate of return. This is called a “teaser rate”. While you will get the high rate of interest for the first year your policy is in force, you are at the company’s mercy as to what that rate will be in the future. Certainly, it will be the goal of the company that sold you the policy to recoup its investment in acquiring the policy, and that will be done by adjusting the rate at which your policy is credited in future years. Similarly, if the company invests in risky assets that go bad, a lower rate might be applied to your policy, or worse, your policy may not perform at all.
You can find an agent you trust to look at all the options embedded in a typical policy and to help you make a decision that is right for you. This has a cost associated with it as well, in the form of commission, which can be very high (often 5-7% for annuities and 100% of your first year premium in life insurance).
Now there is another choice: you can buy annuity products from Berkshire Hathaway Life Insurance Company of Nebraska. There will be no sales commissions and our products fully guarantee how your future payments will be arrived at the day you buy your policy. We are currently offering two annuity products, a Single Premium Immediate Annuity (SPIA), also known as Single Premium Lifetime Annuity, and a Single Premium Deferred Annuity (SPDA). All of our products are easily understood, sold directly, and guaranteed in terms of how their “mechanics” work. They are also designed to give you the maximum value that can be obtained with assured safety.
I hope you find this product (and our web-site) user-friendly and straightforward. If you have any questions or comments on how we can improve what we are doing, you can reach Berkshire Hathaway Group at
[email protected] or by calling us at (800) 786-6426. We’d be happy to hear from you.
We look forward to serving you. Thanks for visiting our web-site.
Warren E. Buffett
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