Swiss Re placed on negative watch by S&P

Swiss Re placed on watch negative: "Swiss Re placed on watch negative
2009-02-05

Standard & Poor's Ratings Services today said it placed its 'AA-' long-term counterparty credit and insurer financial strength ratings on Zurich-based global reinsurer Swiss Reinsurance Co. (Swiss Re) and its core affiliates on CreditWatch with negative implications.

'The CreditWatch placement comes in response to Swiss Re's disclosure that it incurred substantial additional asset write-downs during the fourth quarter of 2008, which will necessitate an increase in capital,' said Standard & Poor's credit analyst Peter Grant. 'Both the magnitude of the additional write-downs and the resulting need to raise capital are outside of our expectations.'

We expect to be able to resolve the CreditWatch within the next two weeks. In resolving the CreditWatch, we will focus on evaluating the impact we believe today's announcement will have on the group's competitive position, earnings, capitalisation, and financial flexibility (defined as its level of access to capital relative to its needs). Based on available information, we currently do not expect to lower the ratings by more than one notch (i.e., to below 'A+')."

Source: Another Financial Portal

AIG AIG Sells Bank, Credit Card Assets in Thailand

AIG Sells Bank, Credit Card Assets in Thailand: "BANGKOK, Thailand, Feb 05, 2009 (A. M. Best via COMTEX) -- AIG | Quote | Chart | News | PowerRating -- American International Group Inc. has agreed to sell banking and credit card assets in Thailand to bank of Ayudhya Public Co. Ltd. for US$58.7 million, plus the repayment of loans to AIG totaling US$477 million.

Under the agreement, AIG [18540] will sell a 99.5% stake in AIG Retail Bank Public Co. Ltd. and all of AIG Card (Thailand) Co. Ltd. to Bank of Ayudhya. Subject to Bank of Ayudhya shareholder and Bank of Thailand regulatory approval, the deal is expected to close in April 2009.

According to AIG, the combined assets of the two companies will boost Bank of Ayudhya's assets by 32 billion baht (US$915.6 million) to about 777 billion baht. The bank's retail loans will increase by 14% and it will gain about 220,000 credit cards in force, AIG said."

Source: Trading Markets

Swiss Re turns to Buffett for Help

Swiss Re turns to Warren Buffett for help: "ZURICH (AFP) — The world's biggest reinsurer Swiss Re turned to Wall Street sage Warren Buffett for fresh funds on Thursday after massive losses while Zurich Financial earnings plunged due to the global financial crisis .

The insurance sector woes dealt another blow to Switzerland's prized status as a major world financial centre, already under pressure after colossal losses and writedowns incurred by the country's biggest banks, UBS and Credit Suisse.

Swiss Re on Thursday warned of one billion Swiss francs (860 million dollars, 672 million euros) in net losses for 2008.

The reinsurer said it had obtained 3.0 billion Swiss francs from Buffett's investment vehicle Berkshire Hathaway as it sought to avoid a downgrade in its credit rating -- a move which would increase its funding costs.

Swiss Re shares tumbled as a result, with the stock down 26.5 percent at 22.18 francs in afternoon trade while the overall Swiss Market Index was off 3.01 percent.

The US billionaire investor could hold 'over 20 percent' of the reinsurer under certain conditions, said Swiss Re chief financial officer George Quinn."

Source: AFP

Aon Benfield's Aidan Pope resigns; to Join Guy Carpenter

Pope swaps Aon Benfield for Guy Carpenter: According to The Insurance Insider, the former head of Benfield’s Latin America and Caribbean team Aidan Pope, who subsequently became co-head of Aon Benfield's Latin America and Caribbean team, has left the firm in the wake of its merger with Aon to join rival Guy Carpenter,.

Pope – whose team arranged the reinsurance programme for the World Bank-sponsored Caribbean Catastrophe Risk Insurance Facility – will be based in the firm’s Miami office."

Source: The Insurance Insider

Zurich profits fall 47%

Zurich profits fall 47% to $3bn: "LONDON—Zurich Financial Services Group earned $3 billion in net income in 2008, a decrease of 47% from its profits in the previous year.

“It is no surprise that Zurich’s results were impacted by the ongoing financial crisis,” James Schiro, the Switzerland-based insurer’s chief executive officer said during a presentation in London. “We are pleased with our performance during this period of adversity. When you look at these results in the context of today’s environment, our strategy is working.”

General insurance gross premiums and policy fees rose 4% to $37.20 billion last year. Management fees and other revenues at Zurich’s Farmers Management Services unit rose 8% to $2.5 billion."

Source: Business Insurance

Aspen’s profit slides on hurricane losses

Aspen’s profit slides on hurricane losses: "HAMILTON, Bermuda—Aspen Insurance Holdings Ltd. has reported a net profit of $103.8 million for 2008, down 78.8% compared with 2007.

Aspen said its property reinsurance arm posted a combined ratio of 91.1% for 2008, compared with 72.6% for 2007. Last year was impacted by losses of $128.3 million from Hurricanes Gustav and Ike.

“We enter 2009 with a strong capital position and expanded product range, despite difficult underwriting and investment conditions in 2008,” said Chris O’Kane, chief executive officer of Aspen. “Global economic stress will continue to provide challenges, but current signs are that rates are firming across many sectors and business flows remain strong,” he added."

Source: Business Insurance

Greenberg: ACE well placed to profit from 'flight to quality'

The Royal Gazette: "Greenberg: Ace well placed to profit from 'flight to quality'NEW YORK (Bloomberg) — Shares of business insurer Ace Ltd. rose two percent yesterday after chief executive officer Evan Greenberg said the firm will grow amid an economic slowdown that is weakening rivals.

Ace climbed 87 cents, or XX percent, to $43.64 in New York Stock Exchange composite trading after earlier reaching $45.14. The insurer on Tuesday reported fourth-quarter operating profit of $1.87 a share, matching the estimate of 17 analysts surveyed by Bloomberg.

Greenberg is looking to pick up customers from ailing rivals after sidestepping the mortgage-related investments that led to losses last year at American International Group Inc. and XL Capital Ltd. Ace, which sells insurance and reinsurance, bucked an industry trend in December when Standard & Poor's said it may upgrade the insurer on the prospect that it can take business from competitors.

'We believe opportunity is growing as a result of the flight to quality to a company like Ace,' Greenberg said in a conference call with analysts and investors yesterday. 'We are continuing to invest in people and infrastructure to grow our presence in lines of business globally where we see an opportunity for Ace to grow share at reasonable terms.'

Premiums from policies sold in the quarter rose eight percent to $3.05 billion, driven by growth in life insurance and reinsurance business and non-US accounts. Excluding fluctuations in currencies, policy sales rose 13 percent.

Ace has fallen about 26 percent in the past year, beating the 50 percent decline in the 175-member Bloomberg World Insurance Index. Investment losses are causing commercial insurers to pare back on price cuts that have been a constant in the US since 2004. Commercial insurance rates in the US fell 6.4 percent in the fourth quarter from the same period a year earlier, the smallest decline since 2006, according to a survey by the Council of Insurance Agents and Brokers."

Source: The Royal Gazette

AIG unit took added Subprime risks in sideline business: report

AIG unit took added risks in sideline business: report: "(Reuters) - American International Group Inc's (NYSE:AIG - News) AIG Investments unit, which managed money for AIG's own insurance companies and outside investors, took on additional risks in its securities lending business, the Wall Street Journal said, citing current and former employees.

In running the securities-lending business, AIG Investments bought tens of billions of dollars in subprime mortgage bonds, according to the paper.

At one point AIG Investments was putting about $70 billion into subprime mortgage bonds and other higher-risk assets, the paper said citing, people familiar with the matter."

Source: Yahoo! Finance

Catlin Forms US General Aviation Underwriting Partnership

Catlin forms US underwriting partnership: "Catlin Group, the international specialty property/casualty insurer and reinsurer, has said that W. Brown & Associates Insurance Services will underwrite general aviation insurance for US clients nationwide on behalf of Catlin US, its US subsidiary.

W. Brown & Associates was established in 1987 and is one of the largest underwriting managers in the United States specialising in aviation insurance. Its products are offered through a network of more than 800 independent agents and brokers.

Among the types of general aviation coverages to be underwritten by W. Brown & Associates on behalf of Catlin US are hull, liability, aircraft products liability, airport liability, ground-based-liability and non-owned aircraft liability. The coverage will be written on behalf of Catlin Insurance Company Inc, which is rated 'A' (Excellent), Category XV, by A.M. Best Company. The agreement is effective on 8 April 2009."

Source: Insurance Times

Capacity Woes Pressure D&O Reinsurance - Guy Carp

Capacity Woes Pressure D&O "The January 1, 2009 directors and officers (D&O) reinsurance renewal was challenging for cedents. The ongoing financial catastrophe complicated the effort, which was exacerbated by revelations of the alleged Madoff investments Ponzi scheme in mid-December - just as renewals were completing. Increased loss activity and a shortage of reinsurance capacity factored into the renewal, as well. Coupled with the depressed primary marketplace conditions over the past several years, reinsurers largely held terms at expiring levels.

While primary rates are flattening or moving upward by the month and positive judicial trends exist in securities class action, reinsurers are using larger margins as they price programs compared to last year. Reduced investment income potential and the extreme volatility of the stock market over the past two quarters are behind this trend. As a result, treaties for existing portfolios renewed approximately at expiring economic terms.

Capacity

Reinsurance capacity was the primary concern through the fourth quarter of 2008 and at the January 1, 2009 renewal. Several reinsurers all but exited the D&O market and capacity was implicitly reduced by cedents’ increasingly stringent market security standards. No new reinsurers have entered the D&O space. This lack of capacity was evident with start-up facilities in particular, as terms for support are tighter than those for existing carriers. That being said, terms are similar to those offered to the 2001 and 2002 class of D&O carriers, and these terms are expected to improve over time.

Despite the tightening of capacity, reinsurance coverage has not been restricted and is available for most classes of business from the current panel of reinsurers. The Financial Institutions (FI) and Fortune 1000 segments, of course, have had a number of high-profile claims, with activity expected to increase in a recessionary environment across all insureds. But, insurers were still able to secure reinsurance coverage, and ceding commissions largely stayed at expiring levels. This is because reinsurers have selected the cedents they want to support and will continue to ride the market cycle with them in anticipation of price increases in 2009. Excess of loss (XOL) treaty pricing is moving based on actual and potential loss history.

Pricing

The reinsurance market for both proportional and non-proportional coverage was fairly steady. All quota share program ceding commissions renewed as expiring. Private, Not for Profit, and International XOL programs that were flat-rated showed an average increase of 8.9 percent. Higher rate increases were purely loss-driven.

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While the reinsurance market had minimal increases and new capacity was difficult to find, the situation for primary insurers was much different with respect to capacity. The impairment of a major competitor in 2008 changed the market’s landscape dramatically. Firms in the D&O space pursued numerous opportunities to capitalize on this situation. As noted above, new facilities were started, and existing carriers sought to increase capacity or broaden their appetites.

Traditionally, an increase in capacity would mean a further softening of the marketplace, but this did not occur on a large-scale basis. Rates for the fourth quarter were flat to up slightly for commercial accounts. Accounts with FI exposure or with loss histories were charged significantly higher prices for their D&O programs. The discipline of the primary marketplace can be attributed to the greater use of analytical tools to monitor portfolio profitability, a heightened awareness of the riskiness of an insured, and insurance companies having their own constraints and cost of capital increases.

Outlook for 2009

Moving into 2009, we would expect the pressure on ceding commissions to continue through the first two quarters, possibly longer. The nature of those commission movements, however, will depend on how quickly primary market prices increase (if they do at all), the magnitude of market share shifts, and the ultimate depth of the current recession. The FI sector will continue to bear the brunt of primary price increases, particularly large banks, investment advisors and community banks. Finally, carriers writing D&O for non-profit organizations may experience a surge in claims in the near future as a result of the Madoff investment scandal.

Notably, treaty restrictions have eased over the course of the January 1, 2009 renewals but could become tougher. It will depend largely on loss history and the nature of the risks that a particular cedent is trying to transfer.

Despite the challenges that D&O carriers face in 2009, there are positive factors in this product line that suggest an optimistic outcome. As the economic environment continues to worsen, insurers will try to push through greater rate increases. Several recent judicial decisions have made it harder for plaintiffs to bring securities lawsuits, as pleading standards have increased. Additionally, the value of claims could decline, since the overall stock market capitalization has continued to decrease year over year. Finally, due to the demands of both reinsurance and insurance management, greater accountability exists as everyone seeks to manage their exposure in this environment."

Source: Guy Carpenter

Newline Syndicate 1218 Announces Foley as New Active Underwriter and CUO

Newline Announces New Active Underwriter and Chief Underwriting Officer: "STAMFORD, Conn.--(BUSINESS WIRE)--Newline Underwriting Management Limited, a unit of Odyssey Re Holdings Corp., announced today that Philip T. Foley will be appointed Active Underwriter of Newline Syndicate 1218 at Lloyd's. Mr. Foley will also serve as Chief Underwriting Officer of Newline Insurance Company Limited.

Brian D Young, Chief Executive Officer of Global Insurance and London Market for OdysseyRe, commented, “We are excited to have Phil Foley join our London operations and assume the Active Underwriter role at Syndicate 1218. Phil brings a wealth of experience and a solid reputation in the Casualty markets we focus on at Newline. His leadership will help drive our operations in the years ahead.”

The Newline Syndicate and Company operations focus primarily on specialized lines in the non-U.S. casualty classes. Together with the London-based reinsurance branch operations of Odyssey America Reinsurance Corporation, they form the London Market Division of Odyssey Re Holdings Corp. Carl Overy is the Chief Executive Officer of OdysseyRe’s London Market Division."

Source: BusinessWire