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AIG May Face Bankruptcy, Evaluating Alternatives: "American International Group Inc. said today that it's weighing 'potential new alternatives' with the Federal Reserve Bank of New York in response to its continued struggles, according to a MarketWatch report.
'We continue to work with the Federal Reserve Bank of New York to evaluate potential new alternatives for addressing AIG's financial challenges,' company spokesman Joseph Norton said in a statement. 'We will provide a complete update when we report financial results in the near future.'
AIG's issued its statement after CNBC reported that the company will report a $60 billion loss next Monday, and is seeking further governmental support. According to the New York Times, under the U.S. Federal TARP program, the government has already lent A.I.G. $150 billion.
The insurer’s massive losses are due to writedowns on commercial real estate and other assets, CNBC reported. AIG's board will meet Sunday to work out an agreement with the government, the news outlet said.
Additionally, the loss may trigger more ratings downgrades, which would leave AIG needing to raise more collateral, according to CNBC's David Faber. The law firm of Weil, Gotshal & Manges is preparing a bankruptcy filing for AIG, but that outcome is unlikely, he said.
The talks with the government include the possibility of additional funds for the insurer and trading debt for equity, a source familiar with the matter told Reuters."
Source: Insurance Networking News
24 February 2009
Allstate not seen to be the 'next AIG'
Allstate not seen to be the 'next AIG': "Embattled US insurer Allstate will nt be the next major insurer to fall, an expert has said.
David Flandro, a member of Guy Carpenter's global business intelligent unit, told this year's ARC Congress in London that he didn't think Allstate would be next insurer to go - despite recording a heavy erosion of capital amid massive investment losses at the end of last year.
'Despite the fact that it lost 45% of its capital at June 30th 2008 at the end of the year, Allstate doesn't have the exposure from credit derivatives that AIG did,' he said. 'If anything, this is more of a 'pure vanilla' loss, compared to what happened at AIG.'
However, Allstate's path towards full security may be less solid than some of its competitors, Flandro said.
'Allstate will have a tougher time with a smaller capital base,' he said."
Source: Reinsurance Magazine
David Flandro, a member of Guy Carpenter's global business intelligent unit, told this year's ARC Congress in London that he didn't think Allstate would be next insurer to go - despite recording a heavy erosion of capital amid massive investment losses at the end of last year.
'Despite the fact that it lost 45% of its capital at June 30th 2008 at the end of the year, Allstate doesn't have the exposure from credit derivatives that AIG did,' he said. 'If anything, this is more of a 'pure vanilla' loss, compared to what happened at AIG.'
However, Allstate's path towards full security may be less solid than some of its competitors, Flandro said.
'Allstate will have a tougher time with a smaller capital base,' he said."
Source: Reinsurance Magazine
AIG looking at alternatives for government loan
AIG looking at alternatives for government loan: "Beleaguered insurer American International Group Inc. is looking to alter its $150 billion government loan while it continues to look for buyers for some of its operations, according to published reports.
Under a proposed plan, the government's primary loan to AIG totaling $60 billion would be repaid with a combination of debt, equity, cash and stakes in operating businesses, according to a report in The Wall Street Journal. The Journal, citing anonymous sources familiar with the discussions, said the sides have been working to revamp the loan since December.
AIG spokeswoman Christina Pretto declined to provide specifics about potential changes to the company's government loans, but did acknowledge the company is reviewing alternatives with the government ahead of releasing its fourth-quarter results.
'We continue to work with the U.S. government to evaluate potential new alternatives for addressing AIG's financial challenges,' Pretto said Tuesday. 'We will provide a complete update when we report financial results in the near future.'
It is expected AIG will report fourth-quarter results in the coming week.
The Federal Reserve Bank of New York, which is handling the government loan, declined to comment."
Source: Yahoo!
Under a proposed plan, the government's primary loan to AIG totaling $60 billion would be repaid with a combination of debt, equity, cash and stakes in operating businesses, according to a report in The Wall Street Journal. The Journal, citing anonymous sources familiar with the discussions, said the sides have been working to revamp the loan since December.
AIG spokeswoman Christina Pretto declined to provide specifics about potential changes to the company's government loans, but did acknowledge the company is reviewing alternatives with the government ahead of releasing its fourth-quarter results.
'We continue to work with the U.S. government to evaluate potential new alternatives for addressing AIG's financial challenges,' Pretto said Tuesday. 'We will provide a complete update when we report financial results in the near future.'
It is expected AIG will report fourth-quarter results in the coming week.
The Federal Reserve Bank of New York, which is handling the government loan, declined to comment."
Source: Yahoo!
Silverman to Head Hiscox Inland Insurance for U.S. Market
Silverman to Head Hiscox Inland Marine Insurance for U.S. Market: "Hiscox is now offering inland marine insurance to the U.S. market and has hired Steve Silverman to lead this initiative. Hiscox said it will be underwriting both individual risks inland marine risks and programs.
Steve Silverman, vice president, joined Hiscox from American International Group's Lexington Insurance, where he was most recently assistant vice president and product line manager for Inland Marine and Specialty Property business in the U.S. and Canada. Prior to joining Lexington, Silverman spent most of his career with Aetna Casualty & Surety in a variety of property and inland marine roles.
He is joined by Randi Glazer, assistant vice president, who joins Hiscox from the Fireman's Fund Insurance Co., where she was the Inland Marine manager for the New York region. During the course of her career Glazer has held property and inland marine underwriting positions with primary and facultative reinsurers including CNA, Chubb, Swiss Re America and the Catlin Group."
Source: Insurance Journal
Steve Silverman, vice president, joined Hiscox from American International Group's Lexington Insurance, where he was most recently assistant vice president and product line manager for Inland Marine and Specialty Property business in the U.S. and Canada. Prior to joining Lexington, Silverman spent most of his career with Aetna Casualty & Surety in a variety of property and inland marine roles.
He is joined by Randi Glazer, assistant vice president, who joins Hiscox from the Fireman's Fund Insurance Co., where she was the Inland Marine manager for the New York region. During the course of her career Glazer has held property and inland marine underwriting positions with primary and facultative reinsurers including CNA, Chubb, Swiss Re America and the Catlin Group."
Source: Insurance Journal
AIG gets bids from MetLife, Axa for life unit-report
AIG gets bids from MetLife, Axa for life unit-report: "American International Group Inc (AIG.N) received bids from MetLife Inc (MET.N) and Axa SA (AXAF.PA) for its American Life Insurance Co unit, Bloomberg reported on Tuesday, citing people familiar with the situation.
MetLife made a preliminary offer of $11.2 billion for the life insurer, a price that may drop to about $8 billion because of a deterioration in the unit's financial condition, the people told the agency.
A rival bid from Axa excludes operations in Japan, the unit's biggest market, the people told the agency.
Axa declined to comment on the report, while AIG and MetLife could not be immediately reached for comment by Reuters."
Source: Reuters
MetLife made a preliminary offer of $11.2 billion for the life insurer, a price that may drop to about $8 billion because of a deterioration in the unit's financial condition, the people told the agency.
A rival bid from Axa excludes operations in Japan, the unit's biggest market, the people told the agency.
Axa declined to comment on the report, while AIG and MetLife could not be immediately reached for comment by Reuters."
Source: Reuters
Validus ramps up underwriting after AIG raid
Validus ramps up underwriting after AIG raid: "Bermudian (re)insurer Validus said that it is to create a new global technical lines team, after hiring three senior underwriters and two engineers from stricken US insurer AIG.
The new team, which will be part of Validus' division Validus Underwriting Risk Services, will underwrite risks in the US, UK, and Asia.
For the US, Kudret Oztap, was a senior energy underwriter at AIG, will be responsible for the US business. He has also worked for Ace.
In the UK, energy underwriters Stephen Sykes and Stephen Tresadern have been appointed senior vice presidents of Validus' Underwriting Risk Services and global technical lines division.Sykes is a former vice president for oil and petrochemical risks at AIG's UK division and senior writer for energy at Gerling Insurance Aervices. Tresadern was the former corporate manager, energy at AIG UK. He has also held underwriting positions at Hannover Re, Wellington Underwriting Agencies and AE Grant Underwriting Agencies. Both will be based in London.
And for Asia, Validus has hired Ash Khan is the former president for global marine and energy and AIG's Pacific Rim operation, where he ovesaw underwriting in Southeast Asia, China, the Far East and Australasia."
Source: Post Online
The new team, which will be part of Validus' division Validus Underwriting Risk Services, will underwrite risks in the US, UK, and Asia.
For the US, Kudret Oztap, was a senior energy underwriter at AIG, will be responsible for the US business. He has also worked for Ace.
In the UK, energy underwriters Stephen Sykes and Stephen Tresadern have been appointed senior vice presidents of Validus' Underwriting Risk Services and global technical lines division.Sykes is a former vice president for oil and petrochemical risks at AIG's UK division and senior writer for energy at Gerling Insurance Aervices. Tresadern was the former corporate manager, energy at AIG UK. He has also held underwriting positions at Hannover Re, Wellington Underwriting Agencies and AE Grant Underwriting Agencies. Both will be based in London.
And for Asia, Validus has hired Ash Khan is the former president for global marine and energy and AIG's Pacific Rim operation, where he ovesaw underwriting in Southeast Asia, China, the Far East and Australasia."
Source: Post Online
Guy Carpenter Receives Gates Foundation Grant to Create Microinsurance Facility
Guy Carpenter Receives Gates Foundation Grant to Create Microinsurance Facility: "Global reinsurance specialist Guy Carpenter Co., LLC has been awarded a grant by the Microinsurance Innovation Facility to develop a reinsurance facility for microinsurance and microfinance company operations (MFIs).
MIF, a partnership between the International Labour Organization and the Bill Melinda Gates Foundation, promotes insurance coverage in developing countries for low-income people who otherwise would not have access to commercial coverage.
With this grant, Guy Carpenter will create the infrastructure for a multi-line microreinsurance risk-pooling facility to provide risk transfer solutions for MFIs. This will enable them to access the global commercial risk and reinsurance marketplace and to obtain cost-effective, efficient coverage that would be difficult for them to obtain independently on the open market.
The facility is designed to help MFIs improve their institutional stability, increase product capacity and penetration, stimulate product innovation, and access invaluable commercial market expertise. The goal of the facility is to structure efficient reinsurance products that are both affordable for microinsurers and profitable for reinsurers."
Source: Insurance Journal
MIF, a partnership between the International Labour Organization and the Bill Melinda Gates Foundation, promotes insurance coverage in developing countries for low-income people who otherwise would not have access to commercial coverage.
With this grant, Guy Carpenter will create the infrastructure for a multi-line microreinsurance risk-pooling facility to provide risk transfer solutions for MFIs. This will enable them to access the global commercial risk and reinsurance marketplace and to obtain cost-effective, efficient coverage that would be difficult for them to obtain independently on the open market.
The facility is designed to help MFIs improve their institutional stability, increase product capacity and penetration, stimulate product innovation, and access invaluable commercial market expertise. The goal of the facility is to structure efficient reinsurance products that are both affordable for microinsurers and profitable for reinsurers."
Source: Insurance Journal
Broker legacy issues initiative launched
Broker legacy issues initiative launched: "ARC, the UK trade body for legacy management professionals, has announced it is launching an initaitve to explore the question of broker legacy issues in order to better identify the current concerns of the legacy sector and where potential solutions, if required, may lie.
ARC chairman Paul Corver, said: “The question of broker legacy issues is one which has gained considerable attention in the legacy sector in recent years. However, it is still far from clear whether there are any systemic factors at play which could be addressed by some form of combined broker and legacy sector initiative. Accordingly, ARC is undertaking an information gathering exercise designed to put more ‘meat on the bones’ regarding such concerns and what this means in practical reality.”"
Source: Reinsurance
ARC chairman Paul Corver, said: “The question of broker legacy issues is one which has gained considerable attention in the legacy sector in recent years. However, it is still far from clear whether there are any systemic factors at play which could be addressed by some form of combined broker and legacy sector initiative. Accordingly, ARC is undertaking an information gathering exercise designed to put more ‘meat on the bones’ regarding such concerns and what this means in practical reality.”"
Source: Reinsurance
Greenlight Re posts $121m loss for 2008
Greenlight Re posts $121m loss for 2008 - 1 February 2009: "Cayman Islands-based reinsurance firm Greenlight Re has announced a $121m loss for 2008, compared with net income of $35m in 2007. The firm reported a $31m net loss for the fourth quarter, compared with net income of $29m in the fourth quarter of 2007.
The combined ratio for 2008 was 96.5%, up from 92.2% in 2007. Gross premiums written increased to $162m in 2008, up from $127m in 2007.
Greenlight made a net investment loss of $126m, a 17.6% loss for the year, compared with net investment income of $28m in 2007, a 5.9% gain. In the fourth quarter of 2008 the net investment loss was $33m, a loss of 5.3% on the investment portfolio."
Source: Reactions
The combined ratio for 2008 was 96.5%, up from 92.2% in 2007. Gross premiums written increased to $162m in 2008, up from $127m in 2007.
Greenlight made a net investment loss of $126m, a 17.6% loss for the year, compared with net investment income of $28m in 2007, a 5.9% gain. In the fourth quarter of 2008 the net investment loss was $33m, a loss of 5.3% on the investment portfolio."
Source: Reactions
Swiss Re's New Sigma Study Explores Scenario Planning for Insurers
Swiss Re's New Sigma Study Explores Scenario Planning for Insurers: "Insurers are increasingly using scenario analysis to evaluate multiple risks, but the industry could do more to fully exploit state-of-the-art approaches, according to Swiss Re's new sigma study.
Scenario analysis helps insurers make business decisions by considering a number of potential future developments, allowing them to manage a broad range of often interrelated risks. Scenario analysis is used in areas such as strategic planning, risk management and underwriting.
'Events like the financial crisis will accelerate the adoption of these approaches and encourage insurers to use state-of-the-art scenario analysis to evaluate risks,' said Swiss Re economist Kurt Karl.
Common uses of scenarios in insurance
Insurers face a number of risks, such as natural catastrophes, mortality risks and investment volatility. These risks often interact in complex ways.
In the case of a pandemic, for example, thousands of people may lose their lives, resulting in a sharp increase in life insurance claims. In addition, as people shop, work and travel less to avoid becoming infected, businesses may suffer, causing corporate bond defaults to rise. A related impact on the business landscape is faltering share prices. Because insurers have to price and manage these risks, they need a deep understanding of the risks and how they interact.
'The insurance industry, unlike some other industries, tends to focus on unlikely events,' said Kurt Karl. 'They use models provided by regulatory authorities or their own in-house models, which are then 'shocked' with a wide range of scenarios to evaluate tail risk. The better models take into account the benefits of diversifying insurance and asset risks.'
Building a scenario
In order to illustrate how scenario analysis works, the study suggests how an insurer might evaluate a complex scenario like a pandemic. Medical experts are needed to understand how pandemics spread and to help determine infection, mortality and morbidity rates. Economists are needed to assess the impact on different parts of the economy and capital markets. Underwriters are needed to gauge the costs to various insurance lines.
When the analysis is complete, insurers must then review mitigation strategies: Is additional reinsurance required? Should more restrictive clauses be imposed on, for example, business interruption insurance? Kurt Karl notes: 'Insurers must also evaluate how a pandemic would impact asset returns. One must be prepared to de-risk the asset portfolio quickly, if the risk of a severe pandemic escalates.'"
Source: PR Newswire
Scenario analysis helps insurers make business decisions by considering a number of potential future developments, allowing them to manage a broad range of often interrelated risks. Scenario analysis is used in areas such as strategic planning, risk management and underwriting.
'Events like the financial crisis will accelerate the adoption of these approaches and encourage insurers to use state-of-the-art scenario analysis to evaluate risks,' said Swiss Re economist Kurt Karl.
Common uses of scenarios in insurance
Insurers face a number of risks, such as natural catastrophes, mortality risks and investment volatility. These risks often interact in complex ways.
In the case of a pandemic, for example, thousands of people may lose their lives, resulting in a sharp increase in life insurance claims. In addition, as people shop, work and travel less to avoid becoming infected, businesses may suffer, causing corporate bond defaults to rise. A related impact on the business landscape is faltering share prices. Because insurers have to price and manage these risks, they need a deep understanding of the risks and how they interact.
'The insurance industry, unlike some other industries, tends to focus on unlikely events,' said Kurt Karl. 'They use models provided by regulatory authorities or their own in-house models, which are then 'shocked' with a wide range of scenarios to evaluate tail risk. The better models take into account the benefits of diversifying insurance and asset risks.'
Building a scenario
In order to illustrate how scenario analysis works, the study suggests how an insurer might evaluate a complex scenario like a pandemic. Medical experts are needed to understand how pandemics spread and to help determine infection, mortality and morbidity rates. Economists are needed to assess the impact on different parts of the economy and capital markets. Underwriters are needed to gauge the costs to various insurance lines.
When the analysis is complete, insurers must then review mitigation strategies: Is additional reinsurance required? Should more restrictive clauses be imposed on, for example, business interruption insurance? Kurt Karl notes: 'Insurers must also evaluate how a pandemic would impact asset returns. One must be prepared to de-risk the asset portfolio quickly, if the risk of a severe pandemic escalates.'"
Source: PR Newswire
Buffett's letter will be released Saturday
Buffett's letter will be released Saturday: "Billionaire Warren Buffett will explain in his annual letter Saturday how the current economic turmoil affected his company over the past year, and the revered investor will likely point out a few lessons of the recession.
Buffett's Berkshire Hathaway Inc. shareholder letters are one of the best-read business documents released each year, and many companies use quotes from Buffett's writings in their own reports.
Spokeswoman Carrie Kizer said Monday that Buffett's letter and Berkshire's 2008 annual report will be posted online at www.berkshirehathaway.com on Saturday morning.
Investors will be interested to learn more about long-term derivatives Berkshire holds that are tied to the value of stock market indexes, and to read Buffett's views on the economy. Buffett usually devotes several pages of his letter to his view on a business or social issue.
Berkshire's Class A shares remain the most expensive U.S. stock, but they have declined significantly since setting a high of $151,650 in December 2007. That came after an exceptionally profitable quarter that was helped by a $2 billion investment gain.
On Monday, Berkshire's Class A stock hit a new five-year low at $73,500 before recovering to close at $75,600, down 1.8 percent from Friday."
Source: www.jconline.com
Buffett's Berkshire Hathaway Inc. shareholder letters are one of the best-read business documents released each year, and many companies use quotes from Buffett's writings in their own reports.
Spokeswoman Carrie Kizer said Monday that Buffett's letter and Berkshire's 2008 annual report will be posted online at www.berkshirehathaway.com on Saturday morning.
Investors will be interested to learn more about long-term derivatives Berkshire holds that are tied to the value of stock market indexes, and to read Buffett's views on the economy. Buffett usually devotes several pages of his letter to his view on a business or social issue.
Berkshire's Class A shares remain the most expensive U.S. stock, but they have declined significantly since setting a high of $151,650 in December 2007. That came after an exceptionally profitable quarter that was helped by a $2 billion investment gain.
On Monday, Berkshire's Class A stock hit a new five-year low at $73,500 before recovering to close at $75,600, down 1.8 percent from Friday."
Source: www.jconline.com
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