CNA Swings to 4Q Loss

CNA Financial swings to 4Q loss, misses estimates: "CNA Financial Corp. said Monday it posted a loss in the fourth quarter, hurt by heavy investment losses.

CNA Financial (nyse: CNA - news - people ), which 90 percent of is owned by Loews Corp. (nyse: LTR - news - people ), reported a net loss of $336 million, or $1.31 per share, in the October-December period. That compares with a profit of $164 million, or 60 cents per share, a year earlier.

The loss stems from $253 million of net realized investment losses, and $419 million of bond losses.

The commercial insurer also posted an operating loss of $21 million, or 15 cents per share. Operating income, which insurers emphasize because they say it better represents the health of an underwriter's business, excludes investment gains and losses.

That missed analysts' average profit estimate of 30 cents per share, according to Thomson Reuters."

Source: Forbes.com

Report: Latin America is ACE's Fastest-Growing Region in 2008

Report: Latin America is Ace’s Fastest-Growing Region in 2008: "BN Americas reports that Latin America was the fastest-growing region in terms of net premiums for Zurich-based insurance and reinsurance group Ace, outpacing Asia and other regions, where performance was mixed. Although exact numbers have not been released, Ace CEO Evan Greenberg reportedly stated that Ace’s property and casualty and accident and health premiums each grew by double digits in Latin America in 2008.

Ace entered the Peruvian and Brazilian reinsurance markets in 2008, and Ace Latin America now has operations in Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Panama, Puerto Rico and Peru. In the newly opened Brazilian reinsurance market, the firm has obtained occasional and admitted reinsurer status and awaits approval of its application to operate as a local reinsurer."

Source: InsureReinsure

Re(insurers) Buying Into Hurricane Futures

Re(insurers) Buying Into Hurricane Futures: "The future of catastrophe exposure management for insurers could be the futures market, not the status quo of reinsurance capacity, and that future might be closer than you think.

That seems to be the message coming out of the Chicago Mercantile Exchange, where hurricane futures trading began in 2007, as well as from the European Climate Exchange, where hurricane futures are also traded.

'This thing is starting to look real,' said Neil Eckert, CEO of the European Climate Exchange, during a session at the 5th Annual Insurance Linked Securities Summit in New York at the end of January.

But to check to see if this message approximates fact, we must investigate whether the big buyers in such a market--insurers and reinsurers--are actually playing. As Eckert himself admitted under cross-examination from his audience, getting momentum on such a market is like the age-old question of the chicken and the egg. Large (re)insurers have told him they want to wait on the market until trading traffic picks up, but volume won't increase until these buyers plunge into the market.

'We're slowly turning the corner on that,' said Felix Carabello in an interview with Risk & Insurance®. Carabello is director of alternative investments at the CME and has experienced the chicken-and-egg issue when he was introducing past innovative markets, like weather products.

So he knows that for these markets to take off, 'The chickens have to get together.'

It appears it would behoove (re)insurers to get together. According to Eckert's calculations, insurers are tapping into only about 5 percent of capacity available in the capital markets.

The current situation does not appear tenable. Just check out the Jan. 27 announcement by State Farm that it was no longer writing property coverage in Florida.

'What that told us,' Carabello said, 'is the traditional insurance business model, of aggregating and warehousing risk, that is a model that is potentially running its course.'"

Source and Full Article: Risk & Insurance Online

Why Chaucer has Plenty of Suitors

Why Chaucer has plenty of suitors: "Interest in acquiring Chaucer is mounting, with more potential suitors lining up. Today, the Lloyd’s insurer issued a statement confirming that it had received a number of approaches, in addition to the one made by Novae Group two weeks ago.

Chaucer has not confirmed the identity of the interested parties, other than Novae, but there is speculation that Brit may be one of them. Amlin has also been touted as a possible buyer (Amlin attempted to buy Chaucer four years ago), and a Bermuda-based insurer cannot be ruled out.

Why the interest in Chaucer? The group’s share price has plummeted, losing about 60% of its value over the past 12 months. It is currently trading at a 30% discount to its net tangible assets, making it attractively priced for potential buyers."

Source and Full Article: Insurance Times

AIG's Bench Strength Tested As Execs Depart

AIG's Bench Strength Tested As Execs Depart: "American International Group Inc.'s depth of talent has allowed it to weather the departure of a number of senior executives since its financial crisis began last September, but an increase of defections in recent weeks is clouding its future, said people in the insurance industry who work with AIG and industry observers.

The loss of top managers may raise enough questions among clients that it could threaten the health of its core commercial operations, around which Chairman and Chief Executive Officer Edward Liddy intends to reorganize the company, said Stewart Johnson, of the insurance merger and acquisitions advisory firm PhiloSmith.

'Usually, with businesses like this, there's a key guy,' Johnson said. 'The key is not only knowledge of the business, but the relationships. Without the key guy, it gets much more difficult. Yeah, other people worked with him, and those other people remain at AIG, but when you take out the first-string quarterback, that doesn't make it easier to win.'

AIG's Commercial Group has seen the leadership of key assets decapitated as chief executives suddenly depart, in some cases trailing other key executives.

In December, Kevin Kelley, long-time chairman and chief executive of AIG powerhouse Lexington Insurance Co., suddenly left to become chief executive at Ironshore Inc., taking with him Shaun Kelly, Lexington?s president and chief operating officer, to head Ironshore's U.S operations. Within weeks they were joined by six other top executives from AIG commercial businesses.

'There is no question that there is a level of departures, and that level has been increasing' Yes, they are bleeding, but the level of blood flow is hard to assess,' said A.M. Best analyst Joyce Sharaf.

Sharaf said AIG may not suffer a crippling business loss even if it continues to lose key executives.

'It's a little too early to be able to make a connection between a loss of business and employee departures,' she said."

Source and Full Article: AM Best via Trading Markets

Bids Blowing In for Chaucer

Bids blowing in for hurricane insurer Chaucer: "Chaucer is whipping up its own storm, getting takeover bids from several parties.

It was already the subject of a nil-premium, all-share offer from larger rival Novae - an unsolicited offer for which Chaucer had expressed only lukewarm support.

Today it said it has received 'a number' of other approaches that could lead to a deal, though they haven't gone so far as formal bids yet.

Chaucer also wants to raise £75 million from investors via a share placing - money it says it needs to keep writing business to take advantage of rising premiums.

It is issuing shares at 40p each to raise the funds. The shares are down from a year high of 104p to 40¼p today, which values the company at £140million.

Chaucer said: 'The company has been holding discussions with each of the parties who have made these approaches and the Chaucer board will be meeting later today to consider the proposals put to it.'"

Source: Mail Online

Ariel Re denies Chaucer interest

Ariel Re denies Chaucer interest: "According to Post Online, Bermudian reinsurer Ariel Re has denied that it is talks with Lloyd's (re)insurer Chaucer.

'We have never had talks with Chaucer,' said Ariel Re's chairman and chief executive Don Kramer in an exclusive interview with Reinsurance.

Ariel Holdings already owns a Lloyds syndicate - Atrium Holdings."

Source: Post Online

W.R. Berkley Profit Plunges

W.R. Berkley Q4 Profit Plunges: "Insurance holding company W.R. Berkley Corp. Monday reported a plunge in its fourth-quarter profit, reflecting lower premiums earned as well as losses from unrealized investment and currency translation, compared to a gain in the earlier year.

The Greenwich, Connecticut-based company's quarterly net income plunged to $40.33 million or $0.24 per share from $184.12 million or $0.97 per share in the previous year.

On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.78 per share for the quarter. Analysts' estimates typically exclude special items.

Premiums earned for the quarter decreased to $1.035 billion from $1.161 billion in the earlier year. Net premiums written were $888.45 million, compared to $1.051 billion last year.

Net operating income for the period was down to $103.36 million or $0.62 per share from $183.21 million or $0.97 per share in the prior year.

Total revenues declined to $1.078 billion from $1.4 billion a year ago. Six Wall Street analysts expected revenues of $1.19 billion for the period."

Source: RTTNews

Ex Wellington CEO Prebensen Leaves Catlin for Close Brothers

Prebensen named new chief at Close Brothers: "Close Brothers said on Monday it had appointed Preben Prebensen to be its chief executive, ending a search begun last September when Colin Keogh announced he was stepping down. He had held the position at the merchant bank since November 2002.

Mr Prebensen will take up the role on April 1, after leaving Catlin Group, the Lloyd’s of London speciality insurance group where he is currently chief investment officer.

Although Mr Prebensen’s last job as chief executive of a public company – Wellington Underwriting – ended when he sold the business to Catlin, Close said he had not been hired with a mandate to sell the bank. The bank’s future has been the subject of speculation since a bid approach failed to turn into a firm offer and profits fell sharply."

Source: FT.com

Is The Saffir-Simpson Scale Still Relevant?

Is The Saffir-Simpson Scale Still Relevant: "Since the release of the Saffir-Simpson Scale in the late 1960’s, it has been considered the “standard” in how hurricanes have been categorized. It is my personal opinion that the Saffir-Simpson Scale is no longer relevant due to new technologies and the fact that the estimated levels of destruction rarely match the actual destruction observed from hurricanes over the past decade.

The use of the Saffir-Simpson Scale, along with other meteorological “beliefs”, must be put aside and replaced by factual and verifiable research.

An interview conducted by Ms. Debi Iacovelli in 1991 with Dr. Robert Simpson revealed the co-author’s thoughts on the hurricane scale carrying his name. In the interview, Dr. Simpson stated that “It's [the Saffir-Simpson Scale] been misinterpreted, misused in a lot of places.” He also added “The scale as devised, expresses what the extreme conditions can be expected from a hurricane of a certain type and a certain category.”

This means with a Category 3 hurricane the extreme level of damage and destruction should be “[s]ome structural damage to small residences and utility buildings with a minor amount of curtain-wall failures. Mobile homes are destroyed.” Yet time and time again, post storm observations prove that a Category 3 hurricane is capable of causing extensive and widespread damages to structures.

Hurricane Ivan (2004) was listed as a Category 3 hurricane, yet the level of damage and destruction equaled a Category 5 on the Saffir-Simpson Scale. In fact, if you read the expected level of damage for a Category 5 hurricane, it states that “Massive evacuation of residential areas may be required.” Obviously the Saffir-Simpson Scale infers that massive evacuation isn’t necessary for any hurricane below a Category 5. Tell that to the people that died in Hurricane Katrina (2005) and it was listed as a Category 3 hurricane.

Another factor on why the Saffir-Simpson Scale should not be used is the differences between it and the Beaufort Wind Scale. The Beaufort Wind Scale is still used extensively throughout the world and has been accepted by the World Meteorological Organization and the National Weather Service. The Beaufort Wind Scale is contained in the Federal Meteorological Handbook Number 1, Surface Weather Observations, considered the “bible” for surface observations.

Time and time again, we see that the Beaufort Wind Scale (BWS) is more accurate than the Saffir-Simpson Scale. The BWS lists winds from 55 to 63 miles per hour capable of uprooting trees and causing considerable structural damage.” Conversely, the Saffir-Simpson Scale states that winds must be stronger than 96 miles per hour to uproot trees and stronger than 110 miles per hour to cause considerable structural damages. Why the disconnect?"

Source and Full Article: Property Insurance Coverage Law Blog

LIU scoops AIG's Switzerland Casualty Manager Holborn

Liberty grabs AIG senior casualty manager Liberty International Underwriters Europe (LIU Europe), a division of Liberty Mutual Group, has said that Christopher Holborn has been appointed casualty manager for its Continental European business, covering LIU Europe’s Continental European offices.

Holborn comes from AIG, where he was casualty manager for Switzerland

Reporting to Gerard van Loon, managing director of LIU Europe's Continental European operations, Mr. Holborn will be based in Zurich and will take responsibility for growing LIU Europe's casualty lines business in Spain, Germany, France, The Netherlands and Switzerland.

Source: Reinsurance Magazine

Australian Insurer Shares Slump as Analysts Say Fires Could Cost $500 million

Insurer shares slump after bushfires: "As insurers assess the damage of the weekend's devastating bushfires, which analysts say could hit $500 million, their shares are being sold off.

Suncorp's shares plunged 30% to $5.02 in midday trade after Australia's third-largest general insurer sold new shares at a discount and following the weekend's bushfires which killed at least 108 people and destroyed 750 homes.

Shares in Insurance Australia Group, which along with Suncorp accounts for about 70% of the nation's property insurance market, lost 9.2% to $3.25 after the company said it is not yet able to say how much claims will be for the wildfires in Victoria.

'IAG is within its budget for these kind of events while Suncorp is already through it and into its reinsurance cover,' said Arjan Van Veen, an analyst at Credit Suisse. 'Logic suggests this shouldn't affect IAG's share price, but the market isn't always logical.'

Australia's worst bushfires on record burnt more than 300,000 hectares of land across southern Victoria, destroying 750 homes, authorities said. Credit Suisse's Van Veen said the fire storm may have caused more than $500 million in property damage."

Source: The Age

Willow Re Cat Bond Officially in Default

Willow Re catastrophe bond default - A.M. Best downgrades as well : "Willow Re has officially defaulted on it’s payment which was due on the 2nd February. They had a 5 day grace period to come up with the payment (which lapsed over the weekend) but now A.M. Best reports that they haven’t managed to come up with the full interest payment due. Willow Re intends to pay about 95% of the scheduled payment says Allstate, who issued the bond.

A.M. Best have now downgraded the catastrophe bonds notes to ‘D’, just as Standard & Poor’s did earlier this week. A.M. Best say they remain concerned about the future for Willow Re and are unsure it will generate sufficient cash to pay interest payments in the future."

Source: Artemis

Hartford could be forced to sell its property/casualty operations, analyst warns

Hartford could be forced to sell its property/casualty operations, analyst warns: "Hartford could be forced to sell its property/casualty operations, analyst warns

Hartford Financial Services Group could be forced to sell its property/casualty operations after announcing losses of $2.7bn for 2008, an equity analyst has declared. The analyst believes the loss has left The Hartford 'significantly undercapitalised', despite the company's claims that it is well capitalised.

The firm, which made a $2.9bn profit for 2007, has seen its capital eroded as a result of large investment losses caused by the global financial crisis and catastrophe losses from hurricanes Gustav and Ike.

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'.

Alan Devlin, equity analyst at Atlantic Equities, believes the Hartford will have to raise at least $1.5bn in capital in 2009.

'Given the combination of weaker than expected earnings, net realised losses, lower interest rates and Yen strengthening, Hartford ended 2008 with $1.3bn less capital than it predicted at its analyst day on December 5,' he said in a research note.

'This has left Hartford in a precarious position. Its year-end risk based capital ratio was 385%, which Hartford considers to be 'well capitalised', but which every other life insurer would consider to be undercapitalized."

Source: Reactions

Florida's Hurricane Cat Fund in Jeopardy

Florida's Hurricane Cat Fund in Jeopardy: "Months before hurricane season, Florida faces an unprecedented threat to its fragile home insurance market. The threat comes from the state's primary tool to prevent such mishap: the Florida Hurricane Catastrophe Fund.

In an effort to stop rate increases, Gov. Charlie Crist and lawmakers two years ago doubled the size of the fund to sell $29 billion in storm protection to Florida insurers, at prices far below the private market. But since last fall, Cat Fund advisers have warned that Florida cannot borrow enough money to make good on its promise to pay hurricane claims. The shortfall is an estimated $18 billion.

Now, two key financial rating agencies, A.M. Best and Demotech, say the state must shore up the fund or they will be forced to downgrade the financial ratings of dozens of insurance companies that rely on state coverage. If that happens, millions of policies could immediately be deemed worthless, triggering banks to invalidate mortgages that require qualified insurance coverage.

The gap in the Cat Fund appeared during hurricane season last year. Lawmakers in 2007 sought to thwart post-Katrina insurance rate hikes by doubling the fund to add $12 billion of hurricane risk. Florida did not have the cash to pay such losses; lawmakers presumed the state could borrow the money if there was a hurricane.

That borrowing ability evaporated last year with the global credit crisis. Fund underwriters estimate Florida could raise at most $10.6 billion - more than $18 billion short of the fund's full liability.

To straddle part of the gap last year, the Cat Fund paid billionaire Warren Buffet $224 million for the option to borrow $4 billion if needed. This year, with financial conditions even worse, Buffett has said no."

Source and Article: The Ledger

NY Insurance Dept Proposes Changes to Reinsurance Credit Regulation

NY Insurance Dept Proposes Changes to Reinsurance Credit Regulation"The New York Insurance Department has proposed a revision to Regulation No. 20 (121 NYCRR 125) – Credit for Reinsurance from Unauthorized Insurers. The Department has published a summary of the proposed amendment, and the Notice of Proposed Rule Making notes that comments will be accepted until 45 days after the publication of the Notice.

According to Reinsurance Focus it "has confirmed with the Department that the comment period closes February 9, 2009. The amendment proposes to apply principle-based credit risk management standards to all licensed ceded insurers, and provides an alternative credit for reinsurance ceded to unauthorized reinsurers, which adjusts the credit that the ceding insurer may take on its financial statement based upon the financial strength of the unauthorized assuming reinsurer. The financial strength determination is based upon ratings by Standard & Poor’s, Moody’s Investor Services, Fitch Ratings, A.M. Best Company or any other rating agency recognized by the Securities Valuation Office of the NAIC."

Source: Reinsurance Focus

Worst Australian Wildfires In History Kill 84

Worst Australian Wildfires In History Kill 84: "KINGLAKE, Australia (AFP)--At least 84 people were killed and entire towns razed in the worst wildfire disaster in Australian history, described by Prime Minister Kevin Rudd as 'hell in all its fury.'

People died in their cars as they attempted to escape the inferno - smoldering wrecks on roads outside this town told a tale of horror - while others were burnt to death in their homes.

The toll looked set to rise further as medics treated badly burned survivors and emergency crews made it through to more than 700 houses destroyed by the fires, some of which have been blamed on arsonists.

Thousands of survivors jammed community halls, schools and other makeshift accommodation as troops and firefighters battled to control huge blazes fed by tinder-box conditions after a once-in-a-century heatwave.

'Hell in all its fury has visited the good people of Victoria in the last 24 hours. Many good people lie dead, many injured,' Rudd told reporters, deploying army units to help 3,000 firefighters battling the flames.

The number of dead rose steadily throughout Sunday as rescue crews reached townships that bore the brunt of the most intense firestorm northwest of Melbourne, which survivors likened to a nuclear bomb.

The previous highest death toll in Australian wildfires was 75 people killed in Victoria and neighboring South Australia in 1983 on what became known as Ash Wednesday."

Source: Lloyd's.com