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Goldman Sachs has reached an agreement to sell US$5 billion of perpetual preferred stock to Berkshire Hathaway in a private offering and will sell at least $2.5 billion in common equity in a public offering.

The preferred stock has a dividend of 10% and is callable at any time at a 10% premium. In conjunction with this offering, Berkshire Hathaway will also receive warrants to purchase $5 billion of common stock with a strike price of $115 per share, which are exercisable at any time for a five-year term.

“We are pleased that given our longstanding relationship, Warren Buffett, arguably the world’s most admired and successful investor, has decided to make such a significant investment in Goldman Sachs. We view it as a strong validation of our client franchise and future prospects,” says Lloyd Blankfein, Goldman’s chairman and CEO. “This investment will further bolster our strong capitalization and liquidity position.”

“Goldman Sachs is an exceptional institution,” says Warren Buffett, chairman and chief executive of Berkshire Hathaway, who is also the world’s richest person. “It has an unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance.”

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The announcement comes two days after Goldman Sachs and Morgan Stanley were granted approval by the U.S. Federal Reserve Board of Governors to become federal bank holding companies. They were previously investment banks.

On Monday, Goldman’s main rival, Morgan Stanley, agreed to sell up to 20% of itself to Mitsubishi UFJ Financial Group, which is Japan’s largest bank.

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Collaboration Needed to Save Pensions, Healthcare: Report

The world is aging at an unprecedented rate, thus undermining the financial sustainability of not only traditional pension systems, but also conventional healthcare systems. A report argues that urgent action in many countries around the globe is required to meet these challenges.

The World Economic Forum’s report, The Future of Pensions and Healthcare in a Rapidly Ageing World–Scenarios to 2030, indicates that new forms of collaboration between key stakeholders—individuals, financial institutions, healthcare providers, employers and governments—will be critical to finance the ongoing well-being of current and future generations in a sustainable manner.

“The aging of our societies is one of the most profound challenges that the world is facing today,” says Klaus Schwab, founder and executive chairman of the World Economic Forum. “New solutions are required to afford adequate and accessible retirement and healthcare services for the world’s aging population in 2030 and beyond.”

The report takes a different approach to the analysis, describing three scenarios to 2030.

The Winners and the Rest, the first scenario, is a world in which global economic growth delays the financial consequences of the emerging demographic crisis. Despite growing liabilities from aging populations, most governments are able to maintain scaled-back versions of existing social security systems, which they do as a matter of political expediency.

We Are in This Together, the second scenario, is a world distinguished by a concerted effort on behalf of leaders and electorates to rein in growing inequality and reassert the idea of collective responsibility and accountability for social services.

You Are on Your Own, the final scenario, is a world in which an economic recession is prolonged in the early 2010s, causing fiscal difficulties for most state-funded pension and health systems. Individual responsibility is forced upon many people by the failure of existing social security systems under extreme financial pressure.

To download a copy of the report from the World Economic Forum’s website, click here.

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Boomer Coalition Created

Eleven non-profit financial associations representing more than 200,000 financial services professionals around the world have formed a coalition to help baby boomers better understand and address the financial challenges they’ll face in retirement.

“Unfortunately the boomer generation as a whole has not planned well for what is likely to be a lengthy retirement for most of them,” says Philip E. Harriman, past president of the Million Dollar Round Table and spokesperson for the coalition, called the Partnership for Retirement Education and Planning (PREP).

The PREP members are working to better educate their members on the unique challenges facing the baby boomer generation, providing members with communication tools and resources to help them communicate with boomers, and encouraging them to conduct community service education targeted at boomers, regardless of their financial status.

Harriman says boomers face challenges no previous generation has encountered, including pension terminations, a surge in healthcare costs, uncertainty about government programs, decreased personal savings rates and significantly increased life expectancy.

The eleven members of PREP are currently: the Million Dollar Round Table (MDRT), the National Association of Insurance and Financial Advisors (NAIFA) and the Society of Financial Service Professionals (FSP), the American Council of Life Insurers (ACLI), Association for Advanced Life Underwriting (AALU), Association of Health Insurance Advisors (AHIA), GAMA International, Insurance Marketplace Standards Association (IMSA), Life and Health Insurance Foundation for Education (LIFE), National Association of Independent Life Brokerage Agencies (NAILBA), and Women in Insurance and Financial Services (WIFS).

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Mercer Launches LAD Solutions

Mercer’s health and benefits business has launched a specialty consulting practice in the United States focused on life, accident and disability (LAD) solutions for employers with 5,000 or more workers.

LAD was introduced as a pilot program in the northeast in 2006 and saved more than 30 of the company’s clients over US$40 million.

Based upon that success, the program is now being rolled out nationally.

Mercer’s consultants will work with employers to help them reduce costs, upgrade plan designs, and streamline administration in order for them to get the full value of their life, accident or disability plan.

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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