Moody's Downgrades Swiss Re Ratings

Moody's Downgrades Swiss Re Ratings (Senior to Aa3); Ratings on Review Down: "Moody's Investors Service downgraded the insurance financial strength (IFSR) and debt ratings of Swiss Re and associated companies. (IFSR and senior debt ratings to Aa3. See debt list below for more details.). The ratings have been placed on review for further possible downgrade. Short-term ratings of Prime-1 were affirmed.

These rating actions follow the recent announcement by Swiss Re that it expects to report a net loss for the full year 2008 of around CHF1bn and a reduction in shareholders' equity by 17-21% compared to Q3 2008. These results will rapidly accelerate the deterioration in key financial metrics that had already occurred during the course of 2008 and had led to the assignment of a negative outlook to Swiss Re's long-term ratings in November 2008, Moody's said. The review for possible further downgrade reflects concerns over whether the Group's future credit profile is likely to remain consistent with the expectations for an Aa-rated entity.

Moody's said that Swiss Re's earnings for 2008 will contrast poorly with a number of reinsurance peers, notwithstanding the good performance from its core reinsurance activities with an expected full year P&C combined ratio of 97.4% (95.6% excluding unwind of discount) and a Life & Health benefit ratio for the full year of approximately 85.5%. The estimated reduction in shareholders' equity during 2008 has led to a meaningful reduction in capital surplus, although the Group's economic capital adequacy ratio is above the Group's target range of 175-200%. Key capital, profitability and financial flexibility metrics have deteriorated meaningfully when compared to 2007.

Moody's notes the Group's proposed capital preservation and capital raising measures including the payment of only a nominal dividend, a CHF3bn investment by Berkshire Hathaway via a convertible perpetual capital instrument, and a potential up to CHF2bn rights issue. However, the potential remains for further capital erosion in light of the nature of Swiss Re's investment and legacy portfolios, the latter containing non-core activities which have been discontinued including structured credit default swaps and trading activities written within the former Financial Products division.

In addition to prospective capital adequacy, profitability, financial flexibility, and liquidity, the rating review will consider the likely impact of the Group's financial results on its future market position and franchise strength. In the event of a downgrade, the rating agency said that it does not currently believe that the rating movement would likely be greater than one notch."

Source: Moody's

AWAC Q4 Down 83.9% While Full Year Net Income Down 60.8%

Allied World: "PEMBROKE, Bermuda, -- Allied World Assurance Company Holdings, Ltd today reported net income of $19.9 million, or $0.39 per diluted share, for the fourth quarter of 2008 compared to net income of $123.0 million, or $2.01 per diluted share, for the fourth quarter of 2007. Net income for the year ended December 31, 2008 was $183.6 million, or 3.59 per diluted share, compared to net income of $469.2 million, or $7.53 per diluted share, for the year ended December 31, 2007.

The company reported record operating income of $141.1 million, or $2.80 per diluted share, for the fourth quarter of 2008 compared to operating income of $118.1 million, or $1.93 per diluted share, for the fourth quarter of 2007. Operating income for the year ended December 31, 2008 was $455.1 million, or $8.90 per diluted share, compared to operating income of $476.0 million, or $7.64 per diluted share, for the year ended December 31, 2007.

President and Chief Executive Officer Scott Carmilani commented, 'Allied World has emerged from 2008 as an even stronger company despite it being a very difficult year for insurance companies and the financial sector as a whole. While not immune to the impact of the catastrophe losses for the year, we still managed to generate a very impressive 20.6% operating ROE for 2008 and ended the year with over $2.4 billion in shareholders' equity, up 8% from year end 2007. In the fourth quarter, we achieved record operating income driven by strong investment income, favorable reserve development and a meaningful contribution from our recently acquired Darwin business."

Source: Allied World Press Release

Beazley Considers Raising Additional Equity

Regulatory News Story: "Following speculation in the news media, the Board of Directors of Beazley announced today that it is considering "a potential equity fundraising" in order to "develop growth opportunities in the current market."

The statement went on to say that "there can be no guarantee that the Company will proceed with the capital raising."

Source: Beazley

RIMS Unveils Topics for 2009 Conference

RIMS Unveils Topics for 2009 Conference: "The Risk and Insurance Management Society (RIMS) announced its “Hot Topic” sessions to be presented at RIMS 2009 Annual Conference & Exhibition on April 19 – 23 in Orlando.

Hot Topic sessions include:

* Navigating the Financial Tsunami will lead attendees through recommendations to help their organizations prepare for economic recovery.

* Five Questions to Ask Before Switching Insurance Companies will help attendees examine the effectiveness of their insurance portfolios.

* Insurance Coverage for Subprime Mortgage Lawsuits will educate attendees on how to defend their organizations against mortgage litigation.

* D&O Insurance During the Economic Crisis will show attendees how to stay a step ahead of the economic crisis.

In addition to the Hot Topic sessions, the conference will boast more than 400 industry experts who will lead 120 sessions on a variety of topics such as captives, claims management, disaster recovery, ERM, finance, globalization, legislation and regulatory issues, loss control and other critical risk management issues."

Source: DAILYINSURER

Pacific Life Re Completes Longevity Reinsurance Transaction

Pacific Life Re Completes Longevity Reinsurance Transaction: "Pacific Life Re Limited ('Pacific Life Re') announced the completion of a longevity only reinsurance transaction with Abbey Life Assurance Company Limited ('Abbey Life') relating to a portfolio of in-payment annuities with underlying liabilities of GBP 1.5 billion. Pacific Life Re was one of two participating reinsurers and Abbey Life was advised by Barlow Lyde & Gilbert LLP ('BLG').

David Howell, CEO of Pacific Life Re commented:
'Reinsurance solutions of this type, involving the transfer of pure longevity risk, require substantial technical expertise and careful structuring. Few have been concluded to date and the scale of this transaction makes it truly exceptional. This highlights the key role well-executed reinsurance solutions can play in helping insurers manage risk and capital associated with their annuity business.'"

Source: MarketWatch

Aon Reports 4Q Net Income Down 95%; Fiscal Year Nett Income for 2008 Up 71%

Global Media Relations - News Releases: "Aon Corporation today reported results for
the fourth quarter and full year ended December 31, 2008.

4Q Summary:
Net income dropped 95% to $10 million or $0.03 per share, compared to $207 million or $0.64 per share for the prior year quarter, primarily due to an expected $116 million after-tax loss on the disposition of the remaining property and casualty insurance businesses that are now included in discontinued operations, an increase in restructuring-related costs, and costs related to the Benfield merger.

Net income from continuing operations decreased 35% to $123 million or $0.43 per share, compared to $188 million or $0.58 per share for the prior year quarter. Net income from continuing operations per share, excluding certain items, increased 19% to $0.81 compared to $0.68 for the prior year quarter. Certain items that impacted fourth quarter results and comparisons with the prior year quarter are detailed in the reconciliation of non-GAAP measures on page 12 of this press release.

2008 Full Year Summary:
Total revenue for 2008 increased 4% to $7.6 billion with organic revenue growth of 2%. Risk
and Insurance Brokerage Services total revenue increased 5% to $6.2 billion with organic
revenue growth in commissions and fees of 2%. Consulting total revenue was similar to the prior
year with organic revenue growth in commissions and fees of 3%.

Net income for 2008 increased 71% to $1.5 billion compared to $864 million for the prior year.
Net income from continuing operations decreased 6% to $621 million compared to $662 million
for the prior year."

Source: Aon Corporation

AIG shares dip below $1.

AIG shares dip below USD 1: NEW YORK (Bloomberg) — American International Group Inc., once the world's largest insurer, fell below $1, crossing the threshold at which shares may be delisted by the New York Stock Exchange if they fail to recover.

That's less than half the price on September 17, the day after AIG agreed to turn over a majority stake to the US to avoid collapse.

The New York Stock Exchange may start delisting proceedings for companies whose 30-day average price falls below $1. The process may be halted if the stock slide reverses or a company does a reverse split to boost the share price."

Source: The Royal Gazette

White Mountains Reports Adjusted Book Value Drop of 20% for the Year

White Mountains Reports Adjusted Book Value Per Share of $353: "White Mountains Insurance Group, Ltd. reported an adjusted book value per share of $353 at December 31, 2008, a decrease of 20% for the year, including dividends. Adjusted book value per share decreased by 8% in the fourth quarter, excluding the $22 per share reduction resulting from the completion in October of the exchange transaction with Berkshire Hathaway.

Ray Barrette, Chairman and CEO, commented, 'The global financial crisis had a significant impact on White Mountains' results in the fourth quarter. We incurred large losses in our equity portfolio and Life Re business, which were partially offset by strong underwriting results and a significant tax benefit from our capital structure. We have taken several steps to protect our capital from further deterioration, including reduced exposure to equities and property catastrophes. White Mountains' overall capital adequacy remains strong and supportive of our ratings.'

Adjusted comprehensive net loss in the fourth quarter of 2008 was $323 million, compared to adjusted comprehensive net income of $127 million in the fourth quarter of last year. Adjusted comprehensive net loss in 2008 was $749 million, compared to adjusted comprehensive net income of $481 million in 2007.

Net loss in the fourth quarter was $213 million, compared to net income of $101 million in the fourth quarter of last year. Net loss in 2008 was $555 million, compared to net income of $407 million in 2007."

Source: Yahoo Finance

Market reform must not stop, says Aon chief

Market reform must not stop, says Aon chief: "Build on the tactical victories of the past four years to achieve the greater goal or the London Market will lose its place on the global stage was the message from Peter Harmer, Chief Executive, Aon UK and Chairman, London Market Reform Group to the participants at the Insurance Institute of London’s lecture yesterday.

“Reform is about ensuring London is a competitive part of a global insurance industry. I see the task of driving this sort of change – both internally and across the market – as the defining challenge of this era in the market’s history,” he said.

Completing projects

He congratulated the London market on the strides made in the reform project since 2004, praising Willis for its work in e-Policies in shaving between five and seven days off the process. He cited the progress in adopting the Electronic Claims File and the signing of the IMR Agreement as particular successes.

But, he said, the point was to keep going to finish what had been started. This will involve increasing the scope of electronic claims filing to as close to 100% as possible, moving to full e-Accounting and full implementation of e-Policies.

“The move to the use of structured data is where the real prize lies,” he told the audience.

Full speed ahead

The tasks thus far have been straightforward, from eliminating the physical transfer of claims files to reducing the number of “vans trundling up and down the A2”. But he argued that the underlying cultural battle has yet to be won.

“There are areas of legacy thinking still prevalent in this market that I think we need to break through,” he said. “Make no mistake what is going on here in the global industry. We’re not the only ones who have moved towards the belief that an open, global, electronic market place is the vision of the future.”

He warned that if London market doesn’t keep up, it will succumb to competition from Dubai, Qatar, China and elsewhere, adding, “This is our opportunity to stay ahead of the game.”

He envisaged an insurance world five years from now where regulatory focus would be intense and globalised and sophisticated clients would demand a more flexible and efficient service offering. A world where there might be “efficient large brokers and some small specialists who provide a niche offering” leading to an increased emphasis on cost control in firms and a more commoditised market place. The efficiencies required for such a world would place emphasis on “information management throughout the chain and reduced tolerance on paper”.

“Be in no doubt,” he said, “London market reform is global reform in all but name."

Source: Lloyds

Swiss Re announcement surprises analysts

Swiss Re announcement surprises analysts: "ZURICH, Switzerland—Swiss Reinsurance Co.’s expected 1 billion Swiss francs ($853 million) loss, significant erosion in shareholder equity and plans to raise up to 5 billion Swiss francs in capital have rating agencies pondering downgrades and analysts sorting out the damage to the reinsurance giant.

Swiss Re on Thursday announced the expected loss, along with an unexpected 4 billion Swiss francs to 5 billion Swiss francs ($3.41 billion to $4.27 billion) decrease in shareholder equity in the fourth quarter. The Zurich, Switzerland-based reinsurer also said Warren Buffett’s Berkshire Hathaway Inc., which already owns a stake in Swiss Re, will invest 3 billion Swiss francs ($2.59 billion) in the company in the form of convertible notes.

The reinsurer also plans to raise an additional 2 billion Swiss francs ($1.71 billion) in the market.

As added protection, Swiss Re plans to purchase from Berkshire a 5 billion Swiss francs loss reserve reinsurance cover for its property/casualty reserves.

Despite these measures, Swiss Re’s stock dove nearly 30% on Thursday and continued its fall Friday.

Analysts contend that Swiss Re’s problems appear to be related to investments, with its reinsurance business remaining healthy. While the size of the reinsurers’ loss was not completely unexpected, there were other surprises, sources said."

Aon Closes US Defined Benefit Pension Scheme

Aon closes US pension scheme: "Aon has pulled the plug on its US defined benefit pension scheme to 12,000 staff as it struggles in the economic downturn.

Chief executive Greg Case wrote to staff explaining that the reduction in interest rates and 40% drop in stock market has increased the company’s pension liabilities.

Case described it as “one of the hardest decisions we have had to make”.

The defined benefit scheme – in which the company makes a payout based on the final salary of the employee – closed the scheme to new entrants five years ago, but now it also applies to the 6,000 remaining memebers.

The scheme will not affect staff working for Aon UK, but does apply to those working for the US parent company based in the UK."

Source: Insurance Times

Tokio Marine Reports USD 1.7 Billion in Impairments on Securities

Tokio Marine Reports 155 Billion Yen in Impairments on Securities: "TOKYO, Feb 06, 2009 (A. M. Best via COMTEX) -- Tokio Marine Holdings Inc. [85100] reported an impairment loss of 155.1 billion yen (US$1.7 billion) on securities on a consolidated basis for the first three quarters of the 2008 fiscal year, which ends March 2009.

The nonlife insurance group posted 123.4 billion yen in impairment losses on securities for the third quarter of 2008. In the first half of the 2008 fiscal year, impairment losses on securities were 31.6 billion yen.

Stock prices plunged more than 30% in the April to December period of 2008, widening valuation losses on securities investments, the insurer said.

Tokio Marine said it projected impairment losses of 29.6 billion yen in connection with monetary receivables bought which was included as 'other investment expenses' in its consolidated income statement."

Source: AM Best's via Trading Markets

Catlin results expected to be 'ugly' - analysts

Catlin FY results expected to be 'ugly' - analysts: "Catlin's full year results will be 'ugly', according to insurance analysts at Citi.

'2008 results are expected to be ugly due to mark-to-market investment losses and claims from hurricanes Gustav and Ike,' said Citi analyst Trevor May in a note to investors, adding that he believes Catlin will report loss of $95m for 2008.

May added that he will be looking as to whether Catlin raises its estimates of a $200m loss from US hurricanes Ike and Gustav - particularly in the light of a wave of Bermudian (re)insurers raising their loss estmates. May says that he expects around $230m of losses from the hurricanes, which hammered the Gulf of Mexico coast.

He added that Catlin's capital position may be a concern for investors."

Source: Reinsurance

Howden hires former HSBC F.I. head Gilham

Howden hires former HSBC Insurance boss: "Lloyd's broker Howden has confirmed that Patrick Gilham will be joining the business in early May as a member of the senior leadership team. Gilham was formerly managing director of the financial institutions practice at HSBC Insurance Brokers.

Tim Coles, Howden’s chief executive in the UK, said: “Patrick is a prominent and respected figure in the financial institutions market with extensive experience and a reputation for being highly driven and tenacious – characteristics that are prized here at Howden. We already have a strong presence in this sector and Patrick’s expertise and relationships both in the UK and overseas will help us to take our capabilities to the next level. He will undoubtedly prove to be an outstanding addition to our team."

Source: Insurance Times

Lloyd's announces new appointments to its Council and Franchise Board

Lloyd's announces new appointments to its Council and Franchise Board: "Lloyd's announces new appointments to its Council and Franchise Board

Lloyd’s today announced the following appointments to its Council and Franchise Board:

* Lord Levene was re-elected as Chairman of Lloyd’s;
* Andreas Prindl was elected as a Deputy Chairman, and Ewen Gilmour and Graham White were re-elected as Deputy Chairmen of Lloyd’s;
* Sir Robert Finch has been appointed as a nominated member of Council for a three-year term, commencing 1 January, 2009, following Bill Knight’s retirement from the Council on 31 December, 2008; and
* The new members of Council are Aprilgrange Limited (represented by Martin Hudson) and Michael Deeny, who have been elected for three-year terms, commencing 1 February, 2009 as a corporate ‘C’ external member and as an individual member respectively.

Alongside the appointments to its Council, Lloyd’s also announced changes to its Franchise Board. David Shipley, non-executive Chairman of Managing Agency Partners Limited, has been appointed as a market connected non-executive director of the Franchise Board for a three-year term, commencing 1 January, following his service as a member of council. He replaces Edward Creasy, who retired after six years service on 31 December, 2008. Roy Brown, an independent non-executive director, also retired after six years service on 31 December, 2008. "

Source: Lloyd's

Best places Swiss Re ratings under review

Best places Swiss Re ratings under review: "OLDWICK, N.J.—A.M. Best Co. placed Swiss Reinsurance Co.'s A+ financial strength rating under review with negative implications Thursday, citing its announcement of an expected 1 billion Swiss franc ($861.6 million) loss for 2008, and an expected 4 billion Swiss franc to 5 billion Swiss franc ($3.45 billion to $4.31 billion) erosion in its shareholder's equity in the fourth quarter.

Oldwick, N.J.-based Best also placed Swiss Re's aa- issuer credit ratings under review with negative implications.

Best said in its announcement that the fourth-quarter net loss was primarily because of mark-to-market losses in income that were partially offset by profitable underwriting results.

Its decline in shareholders' equity resulted from the net loss during the quarter, unrealized capital losses on investments and the impact of exchange rate fluctuations, said Best."

Source: Business Insurance

Hartford reveals $2.7bn loss for 'most challenging year in the company's history'

Hartford reveals $2.7bn loss for 'most challenging year in the company's history' Hartford Financial Services Group today reported a loss of $2.7bn for 2008, just 12 months after announcing a $2.9bn profit for the previous year.

Ramani Ayer, chairman and chief executive officer of The Hartford, described 2008 as 'the most challenging year in the company's near 200-year history'.

For the fourth quarter of 2008 The Hartford recorded a loss of $806m, down from a profit of $595m a year before. Hurricanes Ike and Gustav, combined with investment losses caused by the global economic crisis, contributed largely to the Hartford's disappointing figures.

'The capital markets proved to be especially challenging during the latter half of 2008, particularly affecting our equity-based businesses and investment performance,' said Ayer.

The Hartford plans to reduce its quarterly dividend to $0.05, saving the company around $350m annually in a bid to improve its financial position.

The firm plans to make prioritise capital preservation and risk mitigation in the coming year. However, Ayer revealed that 2009 still promises to be a difficult period."

Source: Reactions