Putting the Church’s “Rainy Day Fund” In Perspective

[Analytics]

@smac97 has tried to justify the size of the Church’s reserves by saying things like:

“Unlike you and me, the Church will exist in perpetuity, so it's stewards have to think about much longer prospects.  If we are to survive the "lean years," we need to prepare now.”

“The Church is building a portfolio so that it continue to do "50 years from now" what it is doing today.”

https://www.mormondialogue.org/topic/74976-the-church-as-the-5th-largest-private-landholder-in-us/page/5/

He has also said:

“I think few of us are situated to speak intelligently or competently about good wealth management.”

 https://www.mormondialogue.org/topic/75040-update-on-church-finances/

On that last point I agree, but good “wealth management” isn't the issue. The objective is to speak competently about the church’s current and projected income, current and projected expenses, and the sum-total of the risks it faces. Dealing with these issues isn’t wealth management; it is enterprise risk management. In my professional life, I am considered an expert on that topic and in that context, I regularly deal with numbers on the magnitude of the Church’s reserves.

To put the numbers into perspective, in the next few posts I’m going to make a comparison between the Church and Northwestern Mutual Insurance Company (NM). NM is currently ranked #97 on the Fortune 500, ranks #1 on Fortune’s list of “World’s Most Admired Companies” in the insurance industry, and gets the highest possible financial strength rankings possible from A.M. Best, Fitch Ratings, and Moody’s Investors service. Like the Church, NM plans on prospering in perpetuity, and everything it does is based on meetings its obligations to policyholders and ensuring its continuing financial strength.

The Church actually owns a few insurance companies. In the comparisons I make in the next few posts, I’ll be referring only to the Church proper, and will bracket all of its commercial entities as components of its investment profile.

The statistics about NM are taken from the following resources:

https://www.northwesternmutual.com/who-we-are/

https://www.northwesternmutual.com/2021-annual-report/detailed-financial-results/

https://www.northwesternmutual.com/assets/pdf/financial-reports/results/consolidated-financial-statements.pdf

To be continued...

Edited January 12, 2023 by Analytics

[Analytics]

Overview:

The Church has about 6 million members who participate in the religion, and perhaps 20,000 full-time employees. It builds and maintains temples and chapels for its members who operate 31,400 congregations on a volunteer basis, administers a missionary program for its volunteer missionary force, owns a group of universities and colleges that it heavily subsidizes, runs seminary and institute programs that are staffed by paid instructors, and maintains and populates the world’s largest genealogical library. It also has a conference center and several visitor centers, and administers LDS Charities.

NM has entered into over 4.9 million contracts that are currently in force with individuals for their insurance needs. Each one of those contracts is a significant liability and risk to NM. Typical contracts include paying a widow $500,000 if their spouse dies, paying somebody $4,000 a month if they become disabled and continuing those monthly payments until age 65 or until the disability ends, paying somebody an annuity worth $6,000 a month every month until they die, or paying for somebody’s long-term care bill (which could be $10,000 a month) until they recover or die, for up to 5 years. These 4.9+ million contracts represent huge commitments on the part of the insurance company. NM also has about 6,700 employees.

 

Ownership Structure

The Church is a corporate sole and/or a public non-profit. 100% of its “profits” are used to increase the financial strength of the Church.

NM is a mutual insurance company that is owned by its policyholders. Some of its profits are paid back to the policyholders in the form of dividends, and the rest is used to strengthen the company for future generations of policyholders.

 

Risk Profile

The Church has no debt and is extremely flexible in terms of its finances. It is set up to limit expenses to about 90% of its tithing revenue on a year-by-year basis and doesn’t enter into obligations it doesn’t think it can pay for with future tithing revenue. While it does pay perhaps $500 million a year to members in fast-offering benefits that are financed by passing through fast-offering contributions it receives in addition to tithing, these benefits aren’t guaranteed and are scaled up or down according to fast offering revenue. It’s possible, and perhaps likely, that as time goes by, a smaller and smaller percentage of members will pay tithing and that both total tithing revenue and average tithing paid per member will decrease. It is possible it will resist decreasing its services in the face of decreasing tithing revenue, but ultimately the Church doesn’t need a lot of money to perform its basic functions. It can and does build much less expensive chapels in Africa than it builds in Utah.

NM is legally bound to pay the benefits stated in its 4.9+ million insurance contracts that are currently in force. It finances these contracts by both aggregating risk and by prefunding risk—a large chunk of premiums received in the early years of a policy are saved to pay for benefits that are more likely to be paid in later years. The total amount of life insurance protection it has in place is over $2.1 trillion. In addition it has hundreds of billions of contractually guaranteed benefits for annuities, disability insurance, and long-term care insurance. Because of the nature of these contracts, if there are changes in investment returns, mortality, or morbidity that cost it money, its only flexibility is to change the dividend scale, (and in the case of long-term care insurance, it can raise premium rates). Otherwise, it is on the hook for what it has promised.

continued...

Edited January 12, 2023 by Analytics

[Analytics]

Income

The Church takes in perhaps $7 billion a year in tithing revenue, plus perhaps $500 million a year in fast-offering revenue that is passed-through in fast-offering benefits.

NM received about $22.7 billion in premium revenue in 2021.

 

Paid Benefits and Expenses

The Church probably pays a couple billion a year on buildings and building maintenance per year, another couple of billion on church education, and a few hundred million a year on the missionary program, and another few hundred million on overhead and everything else. Something like that. Much of this is scalable (e.g. depending upon tithing revenue it can accelerate or decelerate building projects. If its membership grows in third-world countries with low tithing revenue, it can build inexpensive chapes there).

In 2021, NM paid policyholders about $12 billion in benefits, and an additional $6.5 billion in dividends. It spent $4 billion on commissions and operating expenses, and 1.1 billion in taxes.

 

Liabilities

The Church has effectively no liabilities.

At the end of 2021, NM had about $297 billion in liabilities. What does that mean? Actuarial calculations demonstrate that under moderately adverse conditions, $297 billion, plus earned interest on the $297 billion, plus future premiums, should be sufficient to pay for all of the policy benefits promised in the 4.9+ million contracts that are currently in force.

To be continued...

[Analytics]

Rainy Day Funds

We know that including its for-profit business and real estate portfolio, the Church’s “rainy day fund” is somewhere between $100 billion and $200 billion (or whatever you think its secret reports happen to say).

Compare the risks the Church is facing to the risks NM is facing. The Church has very few legal obligations and can scale its operations so that it lives within its means. Joseph Smith didn't need billions of dollars to start the Church, and Russel M. Nelson can figure out a way to continue to operate the Church on less than its tithing income. That formula has worked for 60 years, and there is no reason to think it will suddenly stop working now.

In contrast, NM is legally obligated to pay insurance benefits to millions of policyholders that could theoretically be in the trillions. Remember, NM receives top scores for its financial strength and is the most admired insurance company in the United States.

How big should NM's rainy-day fund be so that given the significant risks it carries, it can maintain its superlatively high financial strength ratings?

As-of December 31, 2021, NM’s rainy-day fund (in insurance parlance its “surplus plus AVR”) was $37 billion.

This gets back to my original point about the size of the Church’s rainy-day fund being obscene. If Northwestern Mutual, one of the largest and most admired and most financially secure companies in the world only needs a rainy-day fund of $37 billion to ensure its ability to fulfill trillions of dollars in contractual obligations to nearly 5 million policyholders, why does the Church need several times that amount in order to continue to provide an infrastructure for church operations that function on a voluntary basis?

The truth is that from a professional enterprise risk management perspective, it doesn’t.

Edited January 12, 2023 by Analytics

[Hamba Tuhan]

24 minutes ago, Analytics said:

The truth is that from a professional enterprise risk management perspective, it doesn’t.

The disconnect, it would seem to me, is that Church leaders and many (most?) Church members don't see this issue 'from a professional enterprise risk management perspective'. Instead, they genuinely believe that the Church is the Kingdom of God on the earth and will 'fill North and South America -- it will fill the world'. That's a somewhat different 'perspective'.

Personally, I would be thrilled for the Church to have $200 trillion. I want there to be no material limits or restrictions whatsoever on what we can accomplish.

[CA Steve]

2 minutes ago, Hamba Tuhan said:

The disconnect, it would seem to me, is that Church leaders and many (most?) Church members don't see this issue 'from a professional enterprise risk management perspective'. Instead, they genuinely believe that the Church is the Kingdom of God on the earth and will 'fill North and South America -- it will fill the world'. That's a somewhat different 'perspective'.

Personally, I would be thrilled for the Church to have $200 trillion. I want there to be no material limits or restrictions whatsoever on what we can accomplish.

200 trillion would be awesome! Just think how many great and spacious buildings we could build!

[Analytics]

27 minutes ago, Hamba Tuhan said:

The disconnect, it would seem to me, is that Church leaders and many (most?) Church members don't see this issue 'from a professional enterprise risk management perspective'. Instead, they genuinely believe that the Church is the Kingdom of God on the earth and will 'fill North and South America -- it will fill the world'. That's a somewhat different 'perspective'.

If the Church's ultimate objective is to acquire all of the world's material wealth...

...then it should pay taxes on its income like any other corporation that is in the business of acquiring material wealth.

27 minutes ago, Hamba Tuhan said:

Personally, I would be thrilled for the Church to have $200 trillion....

It seems there are two basic responses to my thoughts on the topic:

1. The Church isn't motivated by the desire to accumulate wealth--it's just competently practicing "good wealth management."
2. Yes, the Church is in the business of expanding its business empire until it eventually owns the world. Isn't that wonderful!

Edited January 12, 2023 by Analytics

[CV75]

1 hour ago, Analytics said:

@smac97 has tried to justify the size of the Church’s reserves by saying things like:

“Unlike you and me, the Church will exist in perpetuity, so it's stewards have to think about much longer prospects.  If we are to survive the "lean years," we need to prepare now.”

“The Church is building a portfolio so that it continue to do "50 years from now" what it is doing today.”

https://www.mormondialogue.org/topic/74976-the-church-as-the-5th-largest-private-landholder-in-us/page/5/

He has also said:

“I think few of us are situated to speak intelligently or competently about good wealth management.”

 https://www.mormondialogue.org/topic/75040-update-on-church-finances/

On that last point I agree, but good “wealth management” isn't the issue. The objective is to speak competently about the church’s current and projected income, current and projected expenses, and the sum-total of the risks it faces. Dealing with these issues isn’t wealth management; it is enterprise risk management. In my professional life, I am considered an expert on that topic and in that context, I regularly deal with numbers on the magnitude of the Church’s reserves.

To put the numbers into perspective, in the next few posts I’m going to make a comparison between the Church and Northwestern Mutual Insurance Company (NM). NM is currently ranked #97 on the Fortune 500, ranks #1 on Fortune’s list of “World’s Most Admired Companies” in the insurance industry, and gets the highest possible financial strength rankings possible from A.M. Best, Fitch Ratings, and Moody’s Investors service. Like the Church, NM plans on prospering in perpetuity, and everything it does is based on meetings its obligations to policyholders and ensuring its continuing financial strength.

The Church actually owns a few insurance companies. In the comparisons I make in the next few posts, I’ll be referring only to the Church proper, and will bracket all of its commercial entities as components of its investment profile.

The statistics about NM are taken from the following resources:

https://www.northwesternmutual.com/who-we-are/

https://www.northwesternmutual.com/2021-annual-report/detailed-financial-results/

https://www.northwesternmutual.com/assets/pdf/financial-reports/results/consolidated-financial-statements.pdf

To be continued...

Sounds like you have an interesting job. What is the message you would like to get across in relation to the Gospel (the message consisting of what benefits your life and would benefit others reading your analysis)?

[Hamba Tuhan]

8 minutes ago, Analytics said:

If the Church's ultimate objective is to acquire all of the world's material wealth...

...then it should pay taxes on its income like any other corporation that is in the business of acquiring material wealth.

You are certainly free to lobby for changes that would tax a faith group as a 'corporation' just because it has been successful in acquiring resources. 

Quote

Yes, the Church is in the business of expanding its business empire until it eventually owns the world. Isn't that wonderful!

I would obviously alter this statement thus: 'Yes, the Church is in the business of expanding its religious empire until it eventually owns the world. Isn't that wonderful!' That describes my position aptly.

Edited January 12, 2023 by Hamba Tuhan

[helix]

1 hour ago, Analytics said:

The Church takes in perhaps $7 billion a year in tithing revenue, plus perhaps $500 million a year in fast-offering revenue that is passed-through in fast-offering benefits.

Nobody knows this information. This is all conjecture.  Two months ago this was pointed out to you, with citations why.  You ignored it.  When you doubled down on $7 billion, you refused to provide any evidence this number is anything more than conjecture:   https://www.mormondialogue.org/topic/74905-60-minutes-australia-cooking-the-book-of-mormon/page/11/

And here we are again.

It's like you've got your tires stuck in mud, you floor the gas pedal insisting it will work, and it just spins.  Then two months later, you floor the gas pedal, and you're still spinning in mud.

1 hour ago, Analytics said:

This gets back to my original point about the size of the Church’s rainy-day fund being obscene. If Northwestern Mutual, one of the largest and most admired and most financially secure companies in the world only needs a rainy-day fund of $37 billion

Since you are asserting upper bounds, and then trying to assert the church's fund is far beyond this upper bound, let me give you another example.

I know of a fund that covers 5.4 million people. The fund is $1.2 trillion in size. That's another upper bound. Can you name that fund?

[Teancum]

1 hour ago, Hamba Tuhan said:

The disconnect, it would seem to me, is that Church leaders and many (most?) Church members don't see this issue 'from a professional enterprise risk management perspective'. Instead, they genuinely believe that the Church is the Kingdom of God on the earth and will 'fill North and South America -- it will fill the world'. That's a somewhat different 'perspective'.

Personally, I would be thrilled for the Church to have $200 trillion. I want there to be no material limits or restrictions whatsoever on what we can accomplish.

I would not be surprised that the church leaders really on professional similar to enterprise risk managers or other strategic planners.

So you would be happy if the church had $200 trillion so it has no material limits on what it can accomplish?  What is it you envision being accomplished?  What is it accomplishing now with the EPA wealth?

[Hamba Tuhan]

6 minutes ago, Teancum said:

I would not be surprised that the church leaders [rely] on professional[s] similar to enterprise risk managers or other strategic planners.

Almost certainly, but that doesn't mean that the Church's goals have to match those of other entities.

Quote

So you would be happy if the church had $200 trillion so it has no material limits on what it can accomplish?

Yes. Even more if possible!

Quote

What is it you envision being accomplished?

I sincerely doubt my vision is adequate. Joseph Smith in 1834: 'Brethren I have been very much edified and instructed in your testimonies here tonight, but I want to say to you before the Lord, that you know no more concerning the destinies of this Church and kingdom than a babe upon its mother's lap. You don't comprehend it'.

I'm happy for the Lord Himself to direct the work of the Church, and on His own timetable. In a priesthood leadership training meeting here about eight years ago, Elder Bednar told us that the Lord had only just finished laying the foundation of the Restoration, and that it was time to go to and build the global church He intends. He then warned us not to mistake the foundation for the eventual edifice.

But I suspect it involves millions more chapels, tens of thousands more temples, millions more bishop's storehouses, tens of millions more wells and vaccinations, etc. And that's just extrapolating from our tiny footprint now.

Quote

What is it accomplishing now with the EPA wealth?

No clue. Possibly nothing other than growth. Like I wrote above, I trust the Lord's timing. This is the same God who spent more than a millennium carefully laying the groundwork for the Restoration to occur.

[LoudmouthMormon]

I'm a fan of context and perspective.  So thank you for a useful, roughly comparable in many ways, comparison between a religious institution currently doing well, and a for-profit business currently doing well.  As I've followed your comments on the subject over some time, I'm still thinking your motivations here continue to be driven by envy and jealousy, as you lust after the church's riches while telling yourself it's on behalf of others.  You have demonstrated you don't see a functional difference between sound money management principles where productive assets are purchased and investments in productive companies are made, and Scrooge McDuck hoarding his massive hoards of nonproductive assets, rolling around in his piles of gold.  For these reasons, I don't find many of your mindset or opinions useful or valid.   All that said, you obviously have more knowledge about this stuff than I do, so if you'd be willing to answer a few questions, I'll continue to reason with you.

2 hours ago, Analytics said:

The Church has effectively no liabilities.

At the end of 2021, NM had about $297 billion in liabilities.

Why does a company, whose sole function is to take premiums and pay claims, have billions in debt?  Why don't they invest their premiums in safe investments, pay their operating expenses out of the profit, and not have any debt?  I know debt as part of the structure is a common feature for companies, but I don't know why.  I do have a degree in finance, but I didn't understand the professor's explanation when I asked, so I'm asking you.   From what I remember, my professor mumbled things about managing tax burdens and funding opportunities they couldn't otherwise fund.  Didn't make sense to me.  NM's job is to predict risk, price accordingly, cash checks, and write checks.  You don't need billions in debt to do that.

 

2 hours ago, Analytics said:

That formula has worked for 60 years, and there is no reason to think it will suddenly stop working now.

So, what happened 61 years ago?  And why are we certain it won't happen again? No really - what's the difference between someone saying "it's worked for 60 years", and "it fails about once every 65 years"?  Humans are notorious for short attention spans, and forgetting history, especially uncomfortable history 

Your use of the word "suddenly" gives away your bias here.  Nobody is justifying the church's actions with a melodramatic "tomorrow the sun won't come up" scenario.  Economic cycles happen over years and decades.  Booms and busts are things.  Expansion and contraction are things.  Regulatory landscapes, cultural passions and hatreds, beliefs, all come and go.  The church and NM are both party to such things.  I've lost the links to time, but I've read where the church's last 60 years of financial discipline came as a result of a period of lacking it.  From Joseph's banking and business failures to the great depression, things sucked for the church financially until somewhere around the '40's or '50's.  Have you read enough financial church history to know to what I'm referring? 

No really, again, why is it a bad thing to lay up stores against the season based on a 200 year view?  Why the assumption that 60 is good enough?

 

2 hours ago, Analytics said:

my original point about the size of the Church’s rainy-day fund being obscene.

Obscene.  Hoarding.  Yeah, we've followed your characterizations.  You're a smart person and good at reasoning, but when it comes to opining, I'm still thinking you're just full of sour grapes.  Mind your own business.  Go start your own church and do it right.  You really don't look good in pastel blue.

 

My overall response to you continues to be:

 

Edited January 13, 2023 by LoudmouthMormon

[Teancum]

14 hours ago, Hamba Tuhan said:

Almost certainly, but that doesn't mean that the Church's goals have to match those of other entities.

Yes. Even more if possible!

I sincerely doubt my vision is adequate. Joseph Smith in 1834: 'Brethren I have been very much edified and instructed in your testimonies here tonight, but I want to say to you before the Lord, that you know no more concerning the destinies of this Church and kingdom than a babe upon its mother's lap. You don't comprehend it'.

I'm happy for the Lord Himself to direct the work of the Church, and on His own timetable. In a priesthood leadership training meeting here about eight years ago, Elder Bednar told us that the Lord had only just finished laying the foundation of the Restoration, and that it was time to go to and build the global church He intends. He then warned us not to mistake the foundation for the eventual edifice.

But I suspect it involves millions more chapels, tens of thousands more temples, millions more bishop's storehouses, tens of millions more wells and vaccinations, etc. And that's just extrapolating from our tiny footprint now.

No clue. Possibly nothing other than growth. Like I wrote above, I trust the Lord's timing. This is the same God who spent more than a millennium carefully laying the groundwork for the Restoration to occur.

Thank you.  Your comments give me a lot of insight into the mind of those who are true believers (which I do not mean is a disparaging way). There was a time I likely would have felt the same.

[Teancum]

14 hours ago, LoudmouthMormon said:

I'm a fan of context and perspective.  So thank you for a useful, roughly comparable in many ways, comparison between a religious institution currently doing well, and a for-profit business currently doing well.  As I've followed your comments on the subject over some time, I'm still thinking your motivations here continue to be driven by envy and jealousy, as you lust after the church's riches while telling yourself it's on behalf of others.  You have demonstrated you don't see a functional difference between sound money management principles where productive assets are purchased and investments in productive companies are made, and Scrooge McDuck hoarding his massive hoards of nonproductive assets, rolling around in his piles of gold.  For these reasons, I don't find many of your mindset or opinions useful or valid.   All that said, you obviously have more knowledge about this stuff than I do, so if you'd be willing to answer a few questions, I'll continue to reason with you.

 

Nie ad hominem attack and deflection on needing to deal with the very well thought out post that @Analyticsput together.

14 hours ago, LoudmouthMormon said:

Why does a company, whose sole function is to take premiums and pay claims, have billions in debt?  Why don't they invest their premiums in safe investments, pay their operating expenses out of the profit, and not have any debt?  I know debt as part of the structure is a common feature for companies, but I don't know why.  I do have a degree in finance, but I didn't understand the professor's explanation when I asked, so I'm asking you.   From what I remember, my professor mumbled things about managing tax burdens and funding opportunities they couldn't otherwise fund.  Didn't make sense to me.  NM's job is to predict risk, price accordingly, cash checks, and write checks.  You don't need billions in debt to do that.

THe liability is liability for future payments to those who have the insurance.  It is an obligation of the insurance company.  Maybe we can dismiss your dismissal since you seem to not have much financial do your really have a degree in finance?) savvy to ask such a basis question that was already answered in the posts. NM has reserves. $37 billion.  But its obligations to the contracts it has sold is far beyond that. That was the main point being made in comparison and contrast to that of the church that has NO liabilities at all but has a massive reserve fund.

14 hours ago, LoudmouthMormon said:

 

So, what happened 61 years ago?  And why are we certain it won't happen again? No really - what's the difference between someone saying "it's worked for 60 years", and "it fails about once every 65 years"?  Humans are notorious for short attention spans, and forgetting history, especially uncomfortable history 

Your use of the word "suddenly" gives away your bias here.  Nobody is justifying the church's actions with a melodramatic "tomorrow the sun won't come up" scenario.  Economic cycles happen over years and decades.  Booms and busts are things.  Expansion and contraction are things.  Regulatory landscapes, cultural passions and hatreds, beliefs, all come and go.  The church and NM are both party to such things.  I've lost the links to time, but I've read where the church's last 60 years of financial discipline came as a result of a period of lacking it.  From Joseph's banking and business failures to the great depression, things sucked for the church financially until somewhere around the '40's or '50's.  Have you read enough financial church history to know to what I'm referring? 

No really, again, why is it a bad thing to lay up stores against the season based on a 200 year view?  Why the assumption that 60 is good enough?

 

Obscene.  Hoarding.  Yeah, we've followed your characterizations.  You're a smart person and good at reasoning, but when it comes to opining, I'm still thinking you're just full of sour grapes.  Mind your own business.  Go start your own church and do it right.  You really don't look good in pastel blue.

 

My overall response to you continues to be:

 

The rest is just bolviation.

[Analytics]

15 hours ago, LoudmouthMormon said:

As I've followed your comments on the subject over some time, I'm still thinking your motivations here continue to be driven by envy and jealousy, as you lust after the church's riches while telling yourself it's on behalf of others.

Your gift of discernment is malfunctioning. Are there any unresolved sins in your past or current bad habits that you need to clear up with your bishop?

15 hours ago, LoudmouthMormon said:

 You have demonstrated you don't see a functional difference between sound money management principles where productive assets are purchased and investments in productive companies are made, and Scrooge McDuck hoarding his massive hoards of nonproductive assets, rolling around in his piles of gold.

You've completely missed the point. In terms of "money management principles," the Church's approach to capital allocation reflects best practices. I've never denied that, but that has nothing to do with any point I've ever made. Where the Church fails in having any type of vision or strategy for what to do with its money. It uses most of its income to purchase income-producing assets. It does this because it has no vision of doing something better with the money. What real-world benefit does the Church get for this? Nothing, beyond the thrill of having it. Hamba Tuhan gets that thrill, and I suspect that at least a few people in the Church hierarchy do as well.

It's that attitude of accumulating wealth for no purpose other than having it that I compare to Scrooge McDuck. 

15 hours ago, LoudmouthMormon said:

Why does a company, whose sole function is to take premiums and pay claims, have billions in debt?  Why don't they invest their premiums in safe investments, pay their operating expenses out of the profit, and not have any debt?

I think you are misunderstanding NM's balance sheet. From a simplistic perspective, NM has about $335 billion in assets, 4.9 million insurance contracts it is legally obligated to honor, and zero in debt. The questions insurers face regarding this include:

1. How much of the $335 billion must be set aside to pay for future claims?
2. How much of the $335 billion should be set aside for a "rainy day fund" so that the company can weather great depressions, world wars, etc.
3. How should all of that be reflected on the company's balance sheet?
4. Given its contractual obligations, is $335 billion enough to even be considered solvent?

Here are the answers:

1. NM's actuaries have determined that the answer to question #1 is $297 billion. This doesn't mean that it thinks it will only pay $297 billion on claims for its 4.9 million policies--it will certainly pay much more than that. What it means is that $297 billion, plus future premiums on the policies that remain in force, plus investment income, will be enough to pay claims under moderately adverse conditions.
    
2. They decided that they need $37 billion in additional assets for a "rainy day fund" so they can withstand they types of events it has survived in the past: great depressions, world wars, financial crises, etc.
    
3. The $297 billion it needs to set aside to pay future claims are a liability on its balance sheet (and bear the unfortunate name "reserves"--reserves conjures up a vision of money that is set aside. But in insurance accounting, reserves are a liability, not an asset). The remaining assets (i.e. the rainy day fund) are called "surplus" in insurance accounting, and is functionally equivalent to "owners equity" in basic accounting.
    
4. If the actual market value of the company's assets is greater than $297 billion, the company is solvent. If the market value of assets is less than $297 billion, the company is insolvent. Regulators require a minimum level of surplus beyond the reserves, and strong companies such as NM hold several times the minimum required capital.

15 hours ago, LoudmouthMormon said:

I know debt as part of the structure is a common feature for companies, but I don't know why.  I do have a degree in finance, but I didn't understand the professor's explanation when I asked, so I'm asking you.   From what I remember, my professor mumbled things about managing tax burdens and funding opportunities they couldn't otherwise fund.  Didn't make sense to me.

Is he simply talking about the tradeoffs between financing companies by issuing equity vs. issuing debt, and how owners can increase their expected returns if the company is leveraged with debt?

15 hours ago, LoudmouthMormon said:

NM's job is to predict risk, price accordingly, cash checks, and write checks.  You don't need billions in debt to do that.

One quibble here. Its primary job is to take on risk, not merely predict it.

Depending upon what a company does, it will need a lot of money to get into business. A manufacture can't get going without purchasing raw materials and factories. Airlines can't get going without first having planes. For insurance companies, it can't get going unless it already has sufficient assets to fund its initial surplus. Initially, the money comes from either issuing equity or issuing debt. Its equity can then grow by retaining profits or by issuing more equity or by issuing more debt. There are tradeoffs between debt and equity. If the current owners are bullish about their company's prospects, they won't want to dilute their ownership stake by issuing more equity, so if they need money they'd prefer to issue debt. If they issue debt, they have to pay back the loan with a fixed amount of interest, but they get unlimited upside on the profits that they anticipate the loan will allow them to achieve.

15 hours ago, LoudmouthMormon said:

So, what happened 61 years ago?  And why are we certain it won't happen again? No really - what's the difference between someone saying "it's worked for 60 years", and "it fails about once every 65 years"?  Humans are notorious for short attention spans, and forgetting history, especially uncomfortable history 

The big event I'm referring to is in 1963 when N. Eldon Tanner was called to the First Presidency and implemented the Church's current discipline of forecasting the next year's tithing, and then limiting expenses to 90% of that. The Church's ethos of never taking on debt, living on less then its annual tithing revenue, and investing the balance "for a rainy day" began in 1963. The truth is the Church needed higher reserves back then, and this was a solid, professional way to build up the reserves to a prudent level. The problem is that once the reserves became too high (and yes, that is a thing), it failed to make a course correction.

15 hours ago, LoudmouthMormon said:

Your use of the word "suddenly" gives away your bias here.  Nobody is justifying the church's actions with a melodramatic "tomorrow the sun won't come up" scenario.  Economic cycles happen over years and decades.  Booms and busts are things.  Expansion and contraction are things.  Regulatory landscapes, cultural passions and hatreds, beliefs, all come and go.  The church and NM are both party to such things.  I've lost the links to time, but I've read where the church's last 60 years of financial discipline came as a result of a period of lacking it.  From Joseph's banking and business failures to the great depression, things sucked for the church financially until somewhere around the '40's or '50's.  Have you read enough financial church history to know to what I'm referring? 

The Church was running on a deficit for multiple years up until 1963 when Tanner took the reins. 

15 hours ago, LoudmouthMormon said:

No really, again, why is it a bad thing to lay up stores against the season based on a 200 year view?  Why the assumption that 60 is good enough?

Ten billion in reserves is a solid number that would ensure the Church, if properly run, could thrive for a thousand years.

Edited January 13, 2023 by Analytics

[Mark Beesley]

What an absolutely insane waste of effort, trying to apply temporal, worldly and secular financial accounting principles to the Kingdom of God on Earth.  The Lord has asserted His right of ownership to this planet.   Psalms 24:1, The Earth is the Lord’s and the fulness thereof.  Every molecule of every bit of wealth existing on this planet exists because of the grace of God. The breath of life on which men rely that they might labor and “create” wealth is a gift from God, and the product of our minds and hands belong rightfully to Him.  (See the Parable of the Talents.)
 

But God is generous, and grants us enjoyment of His creations. He patiently, and with some amusement, allows secular authorities to pretend or imagine that they have some power.  Nevertheless, I, the Lord, render unto Cæsar the things which are Cæsar’s. D&C 63:26. Thus, the Church pays taxes as required by law.  But the Church is under no obligation, moral or otherwise, to conduct its financial affairs in a way that does not offend the unbelievers. God, who knows the beginning from the end, is in an infinitely better and more reliable position to know what levels of asset reserves His Church should maintain, particularly in these highly unsettled times. What fool would presume to counsel the Lord otherwise?!?

I began this post characterizing these criticisms of Church finances as insane. That was a generous characterization.

Edited January 13, 2023 by Mark Beesley

[Analytics]

16 hours ago, CV75 said:

Sounds like you have an interesting job. What is the message you would like to get across in relation to the Gospel (the message consisting of what benefits your life and would benefit others reading your analysis)?

I do.

I think the takeaway is that we can infer from the Church's actions that the refrain to "Lay not up for yourselves treasures upon earth, where moth and rust and market crashes doth corrupt, and where thieves break through and steal" is no longer applicable in the 21st century, and that prudence dictates that we should all do our best to build up significant savings.

I also think an important gospel takeaway is to recognize that since the second commandment was given in the Garden of Eden, commandments have had irreconcilable contradictions and that we need to choose which ones to obey and which ones to break. The Church now asks its members to given 10% of their income to the Church and to have their own prudent savings. For those of us lucky enough to have the financial resources to pay a full tithing and to fully fund retirement accounts and emergency funds, good for us! For the rest of us, we should follow the Church's example and make personal savings our top priority, even if it means not paying tithing. 

[Mark Beesley]

4 minutes ago, Analytics said:

I do.

I think the takeaway is that we can infer from the Church's actions that the refrain to "Lay not up for yourselves treasures upon earth, where moth and rust and market crashes doth corrupt, and where thieves break through and steal" is no longer applicable in the 21st century, and that prudence dictates that we should all do our best to build up significant savings.

I also think an important gospel takeaway is to recognize that since the second commandment was given in the Garden of Eden, commandments have had irreconcilable contradictions and that we need to choose which ones to obey and which ones to break. The Church now asks its members to given 10% of their income to the Church and to have their own prudent savings. For those of us lucky enough to have the financial resources to pay a full tithing and to fully fund retirement accounts and emergency funds, good for us! For the rest of us, we should follow the Church's example and make personal savings our top priority, even if it means not paying tithing. 

Someone might benefit from a deeper understanding of last year’s youth theme.

[Analytics]

16 hours ago, helix said:

Nobody knows this information. This is all conjecture.  Two months ago this was pointed out to you, with citations why.  You ignored it.  When you doubled down on $7 billion, you refused to provide any evidence this number is anything more than conjecture:   https://www.mormondialogue.org/topic/74905-60-minutes-australia-cooking-the-book-of-mormon/page/11/

And here we are again.

It's like you've got your tires stuck in mud, you floor the gas pedal insisting it will work, and it just spins.  Then two months later, you floor the gas pedal, and you're still spinning in mud.

In one sense it's conjecture, but in my opinion this is the most reasonable and credible estimate I've seen. We can make intelligent, educated guesses about such things. Whether the actual number is $7 billion or $12 billion has no bearing on my actual point.

16 hours ago, helix said:

Since you are asserting upper bounds, and then trying to assert the church's fund is far beyond this upper bound, let me give you another example.

I know of a fund that covers 5.4 million people. The fund is $1.2 trillion in size. That's another upper bound. Can you name that fund?

I presume you are talking about Norway's Sovereign Wealth Fund. When you consider the actual benefits Norwegians get through government benefits that are partially supported by this fund, it really isn't that large. They get fully paid healthcare, fully paid disability insurance, fully paid long-term care insurance, and very generous pensions.

I would have no problem with the Church having $x,x00 billion in assets if the Church provided benefits to members or to society that was commensurate with the size of the fund. But they don't. 

It's the combination of having a ton of money and no plan to use it to provide any value to anybody that conjures up visions of Scrooge McDuck.

Edited January 13, 2023 by Analytics

[Mark Beesley]

3 minutes ago, Analytics said:

In one sense it's conjecture, but in my opinion this is the most reasonable and credible estimate I've seen. We can make intelligent, educated guesses about such things. Whether the actual number is $7 billion or $12 billion has no bearing on my actual point.

I presume you are talking about Norway's Sovereign Wealth Fund. When you consider the actual benefits Norwegians get through government benefits that are partially supported by this fund, it really isn't that large. They get fully paid healthcare, fully paid disability insurance, fully paid long-term care insurance, and very generous pensions.

I would have no problem with the Church having $x,y,000 billion in assets if the Church provided benefits to members or to society that was commensurate with the size of the fund. But they don't. 

It's the combination of having a ton of money and no plan to use it to provide any value to anybody that conjures up visions of Scrooge McDuck.

What value do you place on the worth of a soul?

[Analytics]

1 hour ago, Teancum said:

 

Nie ad hominem attack and deflection on needing to deal with the very well thought out post that @Analyticsput together.

THe liability is liability for future payments to those who have the insurance.  It is an obligation of the insurance company.  Maybe we can dismiss your dismissal since you seem to not have much financial do your really have a degree in finance?) savvy to ask such a basis question that was already answered in the posts. NM has reserves. $37 billion. 

Just to keep the terminology straight, in insurance parlance NM has $297 billion in reserves and $37 billion in surplus.

The Church's "reserves" (i.e. its "rainy-day fund") is functionally equivalent to NM's surplus. In both cases, it is extra money for unforeseen or unlikely emergencies.  

Edited January 13, 2023 by Analytics

[Analytics]

1 minute ago, Mark Beesley said:

What value do you place on the worth of a soul?

I think souls are worth more than the value of EPA's assets. That is why I think people should follow the Church's example and build up their own savings as much as possible. 

[Mark Beesley]

2 minutes ago, Analytics said:

I think souls are worth more than the value of EPA's assets. That is why I think people should follow the Church's example and build up their own savings as much as possible. 

Both sentences of your reply illustrate the issue. Your tendency is to lean unto your own understanding. Review last year’s youth theme, again.

[MiserereNobis]

15 hours ago, Hamba Tuhan said:

I'm happy for the Lord Himself to direct the work of the Church, and on His own timetable. In a priesthood leadership training meeting here about eight years ago, Elder Bednar told us that the Lord had only just finished laying the foundation of the Restoration, and that it was time to go to and build the global church He intends. He then warned us not to mistake the foundation for the eventual edifice.

But I suspect it involves millions more chapels, tens of thousands more temples, millions more bishop's storehouses, tens of millions more wells and vaccinations, etc. And that's just extrapolating from our tiny footprint now.

No clue. Possibly nothing other than growth. Like I wrote above, I trust the Lord's timing. This is the same God who spent more than a millennium carefully laying the groundwork for the Restoration to occur.

This seems to imply that you believe the second coming of Christ is quite far into the future, since it will take time to go from a "tiny footprint now" to "tens of thousands of more temples" etc. Is this correct? I ask because I've also read posters here say that the prophecies are being fulfilled and the second coming is going to happen shortly.

I know you (your church) believes in the millennial reign of Christ, so I suppose the second coming could happen shortly and during that reign tens of thousands of temples could be built, but that seems to presuppose that the financial world will look similar after the second coming as it does now. Maybe it's my own biases, but I have a hard time reconciling the stock market, where the LDS billions are held, with a millennial reign of Christ. Are people going to be investing/gambling on the market while Christ rules the world? Are there going to be bull and bear markets? Will companies go bankrupt while others flourish? Heck, are we going to have regular jobs and pensions and retirements? It kinda reminds me of that one time Ahab (under his actual name Ahab) said he believed that in the celestial kingdom we will still be doing our laundry.

I guess if that's the case your church will make a ton of money, because an omniscient Christ will have the best insider information for trades. Or will the SEC regulators ban him from acting on his omniscience?

A general question for all: do you believe the investment people for your church pray for and receive revelation on when to buy and sell stock? Is the wealth of your church a piece of evidence that your church is run by Christ?