.JPG){kind=logo}
Starr International Hires Charles H. Dangelo: "Starr International Company, Inc. (Starr International) announced today that Charles H. Dangelo will join Starr Indemnity & Liability Company (SILC), its wholly owned subsidiary, as President and Chief Executive Officer.
SILC offers customized property and casualty insurance products and accompanying loss control, claims management, administrative and reinsurance services.
“We will look to take advantage of current market conditions to become an important force within the P & C industry in the coming years,” said Maurice R. “Hank” Greenberg, Chairman of Starr International. “Chuck will assist us in developing the business in a deliberate and professional manner, and his decades of his experience will help Starr accelerate its growth” added Mr. Greenberg.
In addition to his role at SILC, Mr. D’Angelo will also serve as President and CEO of Starr Excess Lines Insurance Company and Director and Chairman of Starr Insurance & Reinsurance Ltd., which are also subsidiaries of Starr International.
Prior to joining Starr, Mr. Dangelo served as Chief Reinsurance Officer and President of AIG Global Risk Management at American International Group, Inc. (AIG). Prior to his tenure at AIG, he had 25 years of insurance industry experience in underwriting and managing large, complex risks for major accounts. He is a graduate of the University of Illinois and a Fellow of the Casualty Actuarial Society.
Starr Indemnity & Liability Company (SILC) is a wholly-owned subsidiary of Starr International Company, Inc. (SICO), a private investment holding company incorporated in Panama in 1943. Among other things, SILC currently participates in quota-share reinsurance programs managed by a group of specialized insurance agency subsidiaries of Starr Underwriting Agencies, LLC (SUA), a subsidiary of C.V. Starr & Co., Inc."
Source: BusinessWire
02 March 2009
AIG CEO Won't Rule Out Needing Another Bailout
AIG CEO Won't Rule Out Needing Another Bailout: "American International Group CEO Edward Liddy told CNBC that the big insurer is far more stable and secure than it was last fall but acknowledged that it's 'difficult to say' if AIG will need even more money from the government in the future.
Liddy's remarks came on the same day the AIG posted a record breaking $61.7 billion loss for the fourth quarter and said it will get another $30 billion from the government on top of the $150 billion it's already received.
When asked if the latest rescue package would finally resolve AIG's [AIG 0.48 0.06 (+13.64%) ] problems, Liddy offered no guarantees.
“It really depends on what happens to the capital markets from here,” he said. “Back in September we had a liquidity crisis of unbelievably large proportions, and that’s been stabilized. Our cash liquidity is fine right now, but now because the capital markets are in such a freefall we’re fighting another issue, which is do we have enough equity to support the debt that we have.”
Liddy attributed the company's huge loss to severe credit market deterioration. Liddy says AIG plans to pay back taxpayers, and the company is going through a major overhaul to do so.
'Clearly with the sale or disposition of AIA and ALICO (American Life Insurance Company), that’s a large chunk of our world-wide life business, (so) we’ll get a lot smaller,' he said. 'We’d like to take up to 20 percent of our property casualty business public, give it a separate brand name, a separate identity...That’s what we have to do in order to pay back the taxpayer.”"
Source: CNBC.com
Liddy's remarks came on the same day the AIG posted a record breaking $61.7 billion loss for the fourth quarter and said it will get another $30 billion from the government on top of the $150 billion it's already received.
When asked if the latest rescue package would finally resolve AIG's [AIG 0.48 0.06 (+13.64%) ] problems, Liddy offered no guarantees.
“It really depends on what happens to the capital markets from here,” he said. “Back in September we had a liquidity crisis of unbelievably large proportions, and that’s been stabilized. Our cash liquidity is fine right now, but now because the capital markets are in such a freefall we’re fighting another issue, which is do we have enough equity to support the debt that we have.”
Liddy attributed the company's huge loss to severe credit market deterioration. Liddy says AIG plans to pay back taxpayers, and the company is going through a major overhaul to do so.
'Clearly with the sale or disposition of AIA and ALICO (American Life Insurance Company), that’s a large chunk of our world-wide life business, (so) we’ll get a lot smaller,' he said. 'We’d like to take up to 20 percent of our property casualty business public, give it a separate brand name, a separate identity...That’s what we have to do in order to pay back the taxpayer.”"
Source: CNBC.com
AIG ratings affirmed on new bailout plan
AIG ratings affirmed on new bailout plan: "Ratings agencies reacted positively Monday to the news of American International Group Inc.’s revised bailout package, which includes an additional $30 billion of available federal assistance, an easing of earlier loan terms and a restructuring of the embattled company.
Standard & Poor’s Corp. affirmed is A+ financial strength and counterparty credit ratings on New York-based AIG’s insurance subsidiaries, as well as its A-/A-1 counterparty credit rating on the parent company.
In addition, Moody’s Investors Service Inc. affirmed the insurance financial strength rating of AIG's core property/casualty operations, including AIG Commercial Insurance (Aa3, negative), AIG U.K. Ltd. (A1, negative) and AIG General Insurance (Taiwan) Co. Ltd. (A3 negative).
Fitch Ratings Inc. said that the U.S. government’s support for AIG overrides the effects of AIG’s $61.7 billion fourth-quarter loss for most of the company’s subsidiaries. AIG announced the loss and the revised bailout plan Monday."
Source: Business Insurance
Standard & Poor’s Corp. affirmed is A+ financial strength and counterparty credit ratings on New York-based AIG’s insurance subsidiaries, as well as its A-/A-1 counterparty credit rating on the parent company.
In addition, Moody’s Investors Service Inc. affirmed the insurance financial strength rating of AIG's core property/casualty operations, including AIG Commercial Insurance (Aa3, negative), AIG U.K. Ltd. (A1, negative) and AIG General Insurance (Taiwan) Co. Ltd. (A3 negative).
Fitch Ratings Inc. said that the U.S. government’s support for AIG overrides the effects of AIG’s $61.7 billion fourth-quarter loss for most of the company’s subsidiaries. AIG announced the loss and the revised bailout plan Monday."
Source: Business Insurance
Moody's assesses Max-IPC merger
Moody's assesses Max-IPC merger: "Moody's says the prospective merger between Max Capital and IPC Holdings should further enhance Max Capital's business profile in the international property-catastrophe reinsurance segment and will expand the group's total capital base to over $3 billion, a level that is more commensurate with several of its Bermuda-based peers. Moody's added that the stock-for-stock transaction will help to reduce Max Capital's consolidated financial leverage profile (e.g. debt and debt equivalents as a percentage of total capital) as a result of IPC Holdings' modest leverage, while also incrementally enhancing overall asset quality through the reduction in the company's higher-risk alternative investments relative to total capital.
However, Moody's Investors Service has affirmed the A3 insurance financial strength rating of Max Bermuda, as well as the Baa2 issuer rating of Max Capital Group and the Baa2 senior unsecured debt rating of Max USA Holdings Ltd (guaranteed by Max Capital) following the company's announcement today of a definitive agreement to merge with IPC Holdings."
Source: Global Reinsurance
However, Moody's Investors Service has affirmed the A3 insurance financial strength rating of Max Bermuda, as well as the Baa2 issuer rating of Max Capital Group and the Baa2 senior unsecured debt rating of Max USA Holdings Ltd (guaranteed by Max Capital) following the company's announcement today of a definitive agreement to merge with IPC Holdings."
Source: Global Reinsurance
Hardy to launch new Bermuda unit in May
Hardy Plans to Launch New Bermuda Unite in May: "Hardy Underwriting Bermuda Ltd. intends to start writing business from a unit based on the Island by May this year.
Chief executive officer Barbara Merry told The Royal Gazette that the new Hardy Bermuda Ltd. operation would employ five or six people and would help to boost the company's reinsurance business in particular."
Source: The Royal Gazette
Chief executive officer Barbara Merry told The Royal Gazette that the new Hardy Bermuda Ltd. operation would employ five or six people and would help to boost the company's reinsurance business in particular."
Source: The Royal Gazette
Argus about to appoint a COO
Argus about to appoint a COO: "Argus Group Holdings Ltd. is about to appoint a chief operating officer — a new role designed to strengthen senior management in running a company that has grown in size and complexity in recent years.
Chief executive officer Gerald Simons said Argus had grown from a company that operated solely in Bermuda to one with units in different jurisdictions and an international clientele.
'Business is becoming more challenging the world over,' Mr. Simons said. 'The company will be much stronger for creating this new position. It adds strength at the top and it will mean there will be a better flow of information to the board.'
The new COO will be a third top-level executive with group-wide responsibilities to assist Mr. Simons and chief financial Officer David Pugh."
Source: The Royal Gazette
Chief executive officer Gerald Simons said Argus had grown from a company that operated solely in Bermuda to one with units in different jurisdictions and an international clientele.
'Business is becoming more challenging the world over,' Mr. Simons said. 'The company will be much stronger for creating this new position. It adds strength at the top and it will mean there will be a better flow of information to the board.'
The new COO will be a third top-level executive with group-wide responsibilities to assist Mr. Simons and chief financial Officer David Pugh."
Source: The Royal Gazette
AIG to Form AIU Holdings; Separate BoD and Brand from AIG
AIG to Form AIU Holdings: "American International Group, Inc. (AIG) today announced that it intends to form a General Insurance holding company, including its Commercial Insurance Group, Foreign General unit, and other property and casualty operations, to be called AIU Holdings, Inc., with a board of directors, management team and brand distinct from AIG. The establishment of AIU Holdings, Inc. will assist AIG in preparing for the potential sale of a minority stake in the business, which ultimately may include a public offering of shares, depending on market conditions.
Kristian P. Moor, currently President and CEO, AIG Property Casualty Group, will be President of AIU Holdings, Inc. Nicholas C. Walsh, currently President and CEO, AIU, will be Vice Chairman of AIU Holdings, Inc. A chairman will be named at a later date. John Q. Doyle, currently President and CEO, AIG Commercial Insurance, will assist in the formation of AIU Holdings, Inc. by assuming additional responsibility for the Domestic Personal Lines Division.
“AIG is executing one of the most extensive corporate restructuring programs in history,” said Edward Liddy, Chairman and Chief Executive Officer, AIG. “The formation of AIU Holdings, Inc. will help protect and enhance the value of these key businesses, and position them for the future as more independently run, transparent companies.”
When formed, AIU Holdings, Inc. will be a unique leading franchise with more than 44,000 employees and 500 products and services serving 40 million commercial and individual customers in 130 countries and jurisdictions."
Source: Yahoo! Finance
Kristian P. Moor, currently President and CEO, AIG Property Casualty Group, will be President of AIU Holdings, Inc. Nicholas C. Walsh, currently President and CEO, AIU, will be Vice Chairman of AIU Holdings, Inc. A chairman will be named at a later date. John Q. Doyle, currently President and CEO, AIG Commercial Insurance, will assist in the formation of AIU Holdings, Inc. by assuming additional responsibility for the Domestic Personal Lines Division.
“AIG is executing one of the most extensive corporate restructuring programs in history,” said Edward Liddy, Chairman and Chief Executive Officer, AIG. “The formation of AIU Holdings, Inc. will help protect and enhance the value of these key businesses, and position them for the future as more independently run, transparent companies.”
When formed, AIU Holdings, Inc. will be a unique leading franchise with more than 44,000 employees and 500 products and services serving 40 million commercial and individual customers in 130 countries and jurisdictions."
Source: Yahoo! Finance
Fitch cuts AIG hybrid ratings on payment risks
Fitch cuts AIG hybrid ratings on payment risks : "Fitch Ratings affirmed some of its credit ratings on American International Group (AIG.N) on Monday but downgraded its hybrid bonds on the risk that payments may be deferred.
The U.S. Treasury and Federal Reserve said on Monday that ailing insurer AIG will get up to $30 billion more from U.S. taxpayers as part of a new government rescue bid.
The joint announcement came just minutes before AIG reported that it had lost $61.7 billion in the fourth quarter.
Fitch said U.S. government support remains firmly in place for AIG despite the loss and said the latest support was intended to promote AIG's return to financial stability.
However, the rating agency said it saw risks of payment deferral on AIG's hybrid securities and downgraded the junior subordinated and preferred securities by five notches to BB."
Source: Reuters
The U.S. Treasury and Federal Reserve said on Monday that ailing insurer AIG will get up to $30 billion more from U.S. taxpayers as part of a new government rescue bid.
The joint announcement came just minutes before AIG reported that it had lost $61.7 billion in the fourth quarter.
Fitch said U.S. government support remains firmly in place for AIG despite the loss and said the latest support was intended to promote AIG's return to financial stability.
However, the rating agency said it saw risks of payment deferral on AIG's hybrid securities and downgraded the junior subordinated and preferred securities by five notches to BB."
Source: Reuters
Guy Carpenter to Acquire Collins
Guy Carpenter to Acquire Collins: "Guy Carpenter & Company, LLC, the world’s leading risk and reinsurance specialist, has agreed to acquire John B. Collins Associates, Inc. (Collins), a privately-held company and the seventh largest reinsurance intermediary in the world.
The acquisition will further strengthen Guy Carpenter’s position in the North American reinsurance marketplace and support its strategy to continue to diversify through targeted acquisitions. The strength of Collins’ business in crop, Florida property and regional specialty lines further enhances Guy Carpenter’s existing capabilities. In addition, Collins’ medical malpractice business will complement Guy Carpenter’s existing professional liability platform.
“I am very excited by the prospect of acquiring an organization with such an impressive track record of growth,” said Peter Zaffino, President and Chief Executive Officer of Guy Carpenter. “Combining the specialty expertise of Collins with our existing platform will deliver better solutions for our respective clients and create more opportunities for future growth.”
John Collins, Chairman and founder of Collins, said, “The combination of our respective capabilities will benefit both our clients and our organization. We share a common philosophy and commitment to delivering highly valued reinsurance solutions to clients. I look forward to joining our efforts and building on what the Collins business has accomplished over the past 20 years.”
Following the closing of the transaction, Mr. Collins will serve as Vice Chairman of Guy Carpenter and Patrick Denzer, Chief Executive Officer of Collins, will serve as Chairman of Guy Carpenter Americas.
It is expected that the transaction will close early in the second quarter of 2009, following receipt of regulatory approvals and satisfaction of other closing conditions."
Source: BusinessWire
The acquisition will further strengthen Guy Carpenter’s position in the North American reinsurance marketplace and support its strategy to continue to diversify through targeted acquisitions. The strength of Collins’ business in crop, Florida property and regional specialty lines further enhances Guy Carpenter’s existing capabilities. In addition, Collins’ medical malpractice business will complement Guy Carpenter’s existing professional liability platform.
“I am very excited by the prospect of acquiring an organization with such an impressive track record of growth,” said Peter Zaffino, President and Chief Executive Officer of Guy Carpenter. “Combining the specialty expertise of Collins with our existing platform will deliver better solutions for our respective clients and create more opportunities for future growth.”
John Collins, Chairman and founder of Collins, said, “The combination of our respective capabilities will benefit both our clients and our organization. We share a common philosophy and commitment to delivering highly valued reinsurance solutions to clients. I look forward to joining our efforts and building on what the Collins business has accomplished over the past 20 years.”
Following the closing of the transaction, Mr. Collins will serve as Vice Chairman of Guy Carpenter and Patrick Denzer, Chief Executive Officer of Collins, will serve as Chairman of Guy Carpenter Americas.
It is expected that the transaction will close early in the second quarter of 2009, following receipt of regulatory approvals and satisfaction of other closing conditions."
Source: BusinessWire
IPC and Max Capital Agree to Combine
IPC Holdings and Max Capital Group Agree to Combine: "IPC Holdings, Ltd. and Max Capital Group Ltd. announced today that the boards of directors of both IPC and Max have unanimously approved a definitive amalgamation agreement. The combined entity will operate under the name of Max Capital Group Ltd. (“Max Capital Group”).
Under the terms of the definitive amalgamation agreement, holders of Max common stock will each receive, at a fixed exchange ratio, 0.6429 IPC shares for each Max share. Upon closing of the tax-free, stock-for-stock merger, IPC shareholders will own approximately 58% of the combined company on a fully diluted basis (with Max shareholders owning approximately 42%). Completion of the transaction is contingent upon customary closing conditions, including the approvals of shareholders and various regulatory approvals and notices. The transaction is expected to close in the third quarter of 2009.
W. Marston (Marty) Becker, Chairman and Chief Executive Officer of Max, and James P. Bryce, President and Chief Executive Officer of IPC, issued a joint statement. “We believe the combination of our companies will create a stronger, more diversified global underwriting franchise. IPC and Max have complementary businesses with very little overlap. The new platform will increase the global scale of each company and further enhance our collective ability to capitalize on attractive opportunities in the property-casualty marketplace, and thereby build long-term value for all our shareholders. From a financial perspective, based on results at December 31, 2008, this transaction creates a stronger capitalized company, with shareholders’ equity of over $3 billion and total assets of approximately $10 billion. We expect that the combined entity will have less volatile underwriting results than either of its individual components, as well as more flexibility to efficiently manage capital.”
Organization Structure, Management and Board
Upon closing of the transaction, the holding company will be renamed from IPC Holdings Ltd. to Max Capital Group Ltd. The combined company, Max Capital Group, will serve as the Bermuda-based holding company for the existing global specialty insurance and reinsurance operating subsidiaries of Max and for IPCRe Limited, the existing Bermuda-based property-catastrophe reinsurance subsidiary of IPC. IPCRe Limited will be renamed Max IPC Re Ltd.
Following the close of the transaction, Marty Becker will be the President and Chief Executive Officer of Max Capital Group. Jim Bryce will commence a long contemplated retirement as of June 30, 2009, although he will continue in a non-executive role as Chairman of Max IPC Re (IPC and Max’s renamed reinsurance platform), and will be active in client relations and marketing. “We are pleased that Jim will have an important role at Max IPC Re, which will strongly benefit from his 35 years of property-catastrophe underwriting expertise, his reputation in the market, and his strong client relationships,” commented Marty Becker. If the transaction has not closed by June 30, 2009, IPC’s Chief Financial Officer, John Weale, will become acting Chief Executive Officer of IPC following Jim Bryce’s retirement and pending the closing of the transaction."
Source: Yahoo! Finance
Under the terms of the definitive amalgamation agreement, holders of Max common stock will each receive, at a fixed exchange ratio, 0.6429 IPC shares for each Max share. Upon closing of the tax-free, stock-for-stock merger, IPC shareholders will own approximately 58% of the combined company on a fully diluted basis (with Max shareholders owning approximately 42%). Completion of the transaction is contingent upon customary closing conditions, including the approvals of shareholders and various regulatory approvals and notices. The transaction is expected to close in the third quarter of 2009.
W. Marston (Marty) Becker, Chairman and Chief Executive Officer of Max, and James P. Bryce, President and Chief Executive Officer of IPC, issued a joint statement. “We believe the combination of our companies will create a stronger, more diversified global underwriting franchise. IPC and Max have complementary businesses with very little overlap. The new platform will increase the global scale of each company and further enhance our collective ability to capitalize on attractive opportunities in the property-casualty marketplace, and thereby build long-term value for all our shareholders. From a financial perspective, based on results at December 31, 2008, this transaction creates a stronger capitalized company, with shareholders’ equity of over $3 billion and total assets of approximately $10 billion. We expect that the combined entity will have less volatile underwriting results than either of its individual components, as well as more flexibility to efficiently manage capital.”
Organization Structure, Management and Board
Upon closing of the transaction, the holding company will be renamed from IPC Holdings Ltd. to Max Capital Group Ltd. The combined company, Max Capital Group, will serve as the Bermuda-based holding company for the existing global specialty insurance and reinsurance operating subsidiaries of Max and for IPCRe Limited, the existing Bermuda-based property-catastrophe reinsurance subsidiary of IPC. IPCRe Limited will be renamed Max IPC Re Ltd.
Following the close of the transaction, Marty Becker will be the President and Chief Executive Officer of Max Capital Group. Jim Bryce will commence a long contemplated retirement as of June 30, 2009, although he will continue in a non-executive role as Chairman of Max IPC Re (IPC and Max’s renamed reinsurance platform), and will be active in client relations and marketing. “We are pleased that Jim will have an important role at Max IPC Re, which will strongly benefit from his 35 years of property-catastrophe underwriting expertise, his reputation in the market, and his strong client relationships,” commented Marty Becker. If the transaction has not closed by June 30, 2009, IPC’s Chief Financial Officer, John Weale, will become acting Chief Executive Officer of IPC following Jim Bryce’s retirement and pending the closing of the transaction."
Source: Yahoo! Finance
XL appoints new offshore energy underwriter
XL appoints new offshore energy underwriter: "XL Insurance, the global insurance operations of XL Capital said it has appointed Elliot Lyes as offshore energy underwriter with global responsibility for XL Insurance's Offshore Operational account.
Marina Moore will continue to be responsible for Global Offshore Construction.
They will both report into Colin Sprott, chief underwriting officer for XL Insurance's Global Marine & Offshore Energy team.
Commenting on the appointment Colin Sprott said: 'We have a wealth of talent within our Offshore Energy group and with his industry experience Elliot is well-placed to lead the offshore operational business. We are also extremely fortunate to have somebody of Marina's expertise and global leadership capability in our team. 'Between them Marina and Elliot have approximately 30 years experience of energy underwriting and we are confident that our clients will continue to benefit from their underwriting expertise and industry knowledge.'"
Source: Reinsurance
Marina Moore will continue to be responsible for Global Offshore Construction.
They will both report into Colin Sprott, chief underwriting officer for XL Insurance's Global Marine & Offshore Energy team.
Commenting on the appointment Colin Sprott said: 'We have a wealth of talent within our Offshore Energy group and with his industry experience Elliot is well-placed to lead the offshore operational business. We are also extremely fortunate to have somebody of Marina's expertise and global leadership capability in our team. 'Between them Marina and Elliot have approximately 30 years experience of energy underwriting and we are confident that our clients will continue to benefit from their underwriting expertise and industry knowledge.'"
Source: Reinsurance
AIG board OKs revised bailout plan; May Spin-off P+C Unit
AIG board OKs revised bailout plan: According to Business Insurance, "AIG's board on Sunday approved a new rescue package that also includes more lenient terms on an existing government investment in its preferred shares and a lower interest rate on a government credit line, two sources familiar with the matter said.
This would be the third time the government has had to step up to save AIG, once the biggest insurer by market value, whose global reach may have made it too big to fail.
The rejigged bailout, which changes the terms of an earlier $150 billion rescue, is also the latest example of how federal regulators are having to revamp aid for top financial institutions as the global financial crisis deepens."
POTENTIAL SPIN OFF
This would be the third time the government has had to step up to save AIG, once the biggest insurer by market value, whose global reach may have made it too big to fail.
The rejigged bailout, which changes the terms of an earlier $150 billion rescue, is also the latest example of how federal regulators are having to revamp aid for top financial institutions as the global financial crisis deepens."
POTENTIAL SPIN OFF
The Business Insurance article expands that AIG "now now plans to spin off up to 20%of the property casualty business in an initial public offering, said a person with direct knowledge of the plans.
The business would be renamed to differentiate it from AIG and have its own board of directors."
Source: Business InsuranceAIG Restructuring Chief Reynolds Has Tough Job in Tough Market
AIG Restructuring Chief Reynolds Has Tough Job in Tough Market: "Paula Rosput Reynolds has a job that would daunt some of the most experienced Wall Street veterans -- restructuring American International Group Inc. by selling assets in the midst of a severe credit crunch.
Reynolds, 52, was appointed AIG's chief restructuring officer in October, just after what was once the world's largest insurer was saved from collapse by a federal package that had swelled to $150 billion in November.
Reynolds is running dozens of simultaneous auctions around the world as she tries to shed about two-thirds of AIG, including insurance companies, consumer lenders, asset management units and an aircraft-leasing business.
Now, in part because those assets aren't selling as well as AIG had hoped, the government is again having to revamp the rescue package, sweetening its terms so it can remain viable.
Selling assets amid tight credit markets has been a tough task even for Reynolds, who as CEO of auto insurer Safeco Corp., oversaw its sale at a 51-percent premium in April last year."
Source: Insurance Journal
Reynolds, 52, was appointed AIG's chief restructuring officer in October, just after what was once the world's largest insurer was saved from collapse by a federal package that had swelled to $150 billion in November.
Reynolds is running dozens of simultaneous auctions around the world as she tries to shed about two-thirds of AIG, including insurance companies, consumer lenders, asset management units and an aircraft-leasing business.
Now, in part because those assets aren't selling as well as AIG had hoped, the government is again having to revamp the rescue package, sweetening its terms so it can remain viable.
Selling assets amid tight credit markets has been a tough task even for Reynolds, who as CEO of auto insurer Safeco Corp., oversaw its sale at a 51-percent premium in April last year."
Source: Insurance Journal
More aid for AIG cheaper than a collapse-source
More aid for AIG cheaper than a collapse-source: "Pumping $30 billion more of U.S. taxpayer funds into embattled insurance giant American International Group Inc. (AIG.N) is ultimately cheaper than letting it collapse and endanger the broader economy, a person familiar with the matter said on Sunday night.
The U.S. government will announce the latest cash infusion for AIG on Monday morning, along with a series of other measures that are designed to better position it to sell some assets and try to find a route toward long-term viability.
The source, who spoke on condition of anonymity, said AIG posed a significant systemic risk for the U.S. financial system and as long as that was the case there might be a need for continued government aid."
Source: Reuters
The U.S. government will announce the latest cash infusion for AIG on Monday morning, along with a series of other measures that are designed to better position it to sell some assets and try to find a route toward long-term viability.
The source, who spoke on condition of anonymity, said AIG posed a significant systemic risk for the U.S. financial system and as long as that was the case there might be a need for continued government aid."
Source: Reuters
AIG hammers out its third bail-out deal
AIG hammers out its third bail-out deal: "After another weekend of tense negotiations, AIG and its government saviours must hope that it is third time lucky for the troubled US insurer.
The latest federal bail-out to be announced on Monday – the third time Washington has had to rescue AIG since it nearly collapsed in September – is likely to be the last roll of the dice for a company that was once the envy of the financial world.
The plan – a de facto break-up of the insurer – is both more radical and more sophisticated than the ones that preceded it in September and November.
The logic behind the rescue, which AIG and its adviser Blackstone have been discussing with the US Treasury and the Federal Reserve for weeks, is simple: in spite of being ruined by soured bets on credit derivatives, AIG has a number of profitable insurance assets.
“AIG is a great insurance company with a hedge fund attached. The problem is the hedge fund, not the insurance company,” said a person close to the situation.
But with capital markets frozen, insurance companies suffering huge losses and the ticking time-bomb of huge liabilities on its balance sheet, AIG did not have either the time or the funds to sell assets and repay the $60bn (£41.9bn) loan made by the government three months ago.
As a result, it has been forced to give the government the two most valuable assets it has left.
Under the plan, AIG will place American International Assurance (AIA) – its prized Asian operations – and its international life insurance business American Life Insurance Company (Alico) into two trusts.
The government will own about 70-75 per cent in each in preferred shares that would carry an interest payment of about 5 per cent. Final details were yet to be hammered out last night.
If the businesses are sold or listed on the stock market, the government would use the proceeds to repay taxpayers for the $100bn-plus they have put into AIG.
In addition, the company will issue bonds backed by about $10bn-$15bn in cashflow from its US life insurance operation and sell them to the government.
In return, the authorities, which already own an 80 per cent holding in AIG, will cancel most or all of the $37bn the insurer has drawn from the $60bn credit line.
Meanwhile, he government will also reduce the interest rate on future draw-downs from the facility to the London interbank offered rate. The move should save AIG, which currently pays Libor plus 3 per cent, about $1bn a year.
To stave off the need for yet another emergency rescue, the authorities have agreed to provide a $30bn standby equity facility, promising to buy preferred shares in AIG if it needs more capital.
This could be politically thorny because the government is likely to pledge not to increase its 80 per cent holding in AIG even if it injects more capital.
To further ease AIG’s troubles, which are expected to become apparent on Monday when it reports a $60bn loss in the fourth quarter, the government will tweak the terms of its $40bn investment in preferred shares."
Source: FT.com
The latest federal bail-out to be announced on Monday – the third time Washington has had to rescue AIG since it nearly collapsed in September – is likely to be the last roll of the dice for a company that was once the envy of the financial world.
The plan – a de facto break-up of the insurer – is both more radical and more sophisticated than the ones that preceded it in September and November.
The logic behind the rescue, which AIG and its adviser Blackstone have been discussing with the US Treasury and the Federal Reserve for weeks, is simple: in spite of being ruined by soured bets on credit derivatives, AIG has a number of profitable insurance assets.
“AIG is a great insurance company with a hedge fund attached. The problem is the hedge fund, not the insurance company,” said a person close to the situation.
But with capital markets frozen, insurance companies suffering huge losses and the ticking time-bomb of huge liabilities on its balance sheet, AIG did not have either the time or the funds to sell assets and repay the $60bn (£41.9bn) loan made by the government three months ago.
As a result, it has been forced to give the government the two most valuable assets it has left.
Under the plan, AIG will place American International Assurance (AIA) – its prized Asian operations – and its international life insurance business American Life Insurance Company (Alico) into two trusts.
The government will own about 70-75 per cent in each in preferred shares that would carry an interest payment of about 5 per cent. Final details were yet to be hammered out last night.
If the businesses are sold or listed on the stock market, the government would use the proceeds to repay taxpayers for the $100bn-plus they have put into AIG.
In addition, the company will issue bonds backed by about $10bn-$15bn in cashflow from its US life insurance operation and sell them to the government.
In return, the authorities, which already own an 80 per cent holding in AIG, will cancel most or all of the $37bn the insurer has drawn from the $60bn credit line.
Meanwhile, he government will also reduce the interest rate on future draw-downs from the facility to the London interbank offered rate. The move should save AIG, which currently pays Libor plus 3 per cent, about $1bn a year.
To stave off the need for yet another emergency rescue, the authorities have agreed to provide a $30bn standby equity facility, promising to buy preferred shares in AIG if it needs more capital.
This could be politically thorny because the government is likely to pledge not to increase its 80 per cent holding in AIG even if it injects more capital.
To further ease AIG’s troubles, which are expected to become apparent on Monday when it reports a $60bn loss in the fourth quarter, the government will tweak the terms of its $40bn investment in preferred shares."
Source: FT.com
AIG's progress on asset sales
AIG's progress on asset sales : "American International Group Inc (AIG.N) has said it plans to sell assets to pay back the U.S. government after a massive rescue, but the insurer has had little success in disposing of businesses so far.
AIG planned to sell all assets except its U.S. property and casualty business, foreign general insurance and an ownership interest in some foreign life operations.
Some of the deals the insurer has announced:
DATE PROPERTY BUYER PRICE
Sep 29 London airport stake GIP Not known
Nov 26 Unibanco AIG Seguros/ Unibanco/ Not known
AIG Brasil - crossholdings AIG
Dec 1 AIG Private Bank Aabar Investments $254 mln
Dec 3 TMV interest Tenaska Not known
Dec 22 Hartford Steam Munich Re $742 mln
Jan 13 AIG Life of Canada BMO Financial Group $308 mln
Jan 19 Commodity index UBS Up to $150 mln
Feb 5 AIG Retail Bank/Card (Thai) Bank of Ayudhya $58.7 mln
Feb 13 AIGFP's energy/infra assets Not known $60.5 mln
Some major properties AIG had on the market:
PROPERTY PRICE ESTIMATE STATUS**
American International Assurance $15-$20 bln* U.S. may take stake
(AIG's flagship life insurer for SE Asia)
American Life Insurance Co $8-11.2 bln** U.S. may take stake
(Unit operates in more than 50 countries)
Aircraft lessor ILFC $7.5 bln*** Auction ongoing
U.S. auto insurance $2 bln** Not known
Tokyo's Otemachi building $1 bln** Auction ongoing
Asset management business $500 mln** Auction ongoing
* Analyst estimates
** Based on sources familiar with the matter, media reports
*** Book value as of Sept. 30"
Source: Reuters
AIG planned to sell all assets except its U.S. property and casualty business, foreign general insurance and an ownership interest in some foreign life operations.
Some of the deals the insurer has announced:
DATE PROPERTY BUYER PRICE
Sep 29 London airport stake GIP Not known
Nov 26 Unibanco AIG Seguros/ Unibanco/ Not known
AIG Brasil - crossholdings AIG
Dec 1 AIG Private Bank Aabar Investments $254 mln
Dec 3 TMV interest Tenaska Not known
Dec 22 Hartford Steam Munich Re $742 mln
Jan 13 AIG Life of Canada BMO Financial Group $308 mln
Jan 19 Commodity index UBS Up to $150 mln
Feb 5 AIG Retail Bank/Card (Thai) Bank of Ayudhya $58.7 mln
Feb 13 AIGFP's energy/infra assets Not known $60.5 mln
Some major properties AIG had on the market:
PROPERTY PRICE ESTIMATE STATUS**
American International Assurance $15-$20 bln* U.S. may take stake
(AIG's flagship life insurer for SE Asia)
American Life Insurance Co $8-11.2 bln** U.S. may take stake
(Unit operates in more than 50 countries)
Aircraft lessor ILFC $7.5 bln*** Auction ongoing
U.S. auto insurance $2 bln** Not known
Tokyo's Otemachi building $1 bln** Auction ongoing
Asset management business $500 mln** Auction ongoing
* Analyst estimates
** Based on sources familiar with the matter, media reports
*** Book value as of Sept. 30"
Source: Reuters
Excerpts from Warren Buffett's annual letter
Excerpts from Warren Buffett's annual letter: "Revered investor Warren Buffett released his annual letter to Berkshire Hathaway Inc. shareholders Saturday morning. The Berkshire chairman recounted a painful year he and vice chairman Charlie Munger oversaw for the Omaha-based company, but Buffett also offered a hopeful view of the nation's future. The full letter is available online at http://www.berkshirehathaway.com.
Here's a sample of what Buffett had to say on a variety of topics:
------
THE ECONOMY
Buffett wrote he's certain 'the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond -- but that conclusion does not tell us whether the stock market will rise or fall.'
Buffett included a chart showing that 2008 was the worst year for a key metric for Berkshire and the performance of the S&P 500 stock index. Berkshire's book value -- assets minus liabilities -- declined 9.6 percent, and the S&P 500 fell 37 percent last year.
'The period was devastating as well for corporate and municipal bonds, real estate and commodities,' Buffett wrote. 'By yearend, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.
'As the year progressed, a series of life-threatening problems within many of the world's great financial institutions was unveiled. This led to a dysfunctional credit market that in important respects soon turned nonfunctional.
'The watchword throughout the country became the creed I saw on restaurant walls when I was young: 'In God we trust; all others pay cash.''
------
THE FUTURE
'Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 21.5 percent prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15 percent and 25 percent for many years. America has had no shortage of challenges.
'Without fail, however, we've overcome them. In the face of those obstacles -- and many others -- the real standard of living for Americans improved nearly sevenfold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived.
'Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead.'
------
HIS OWN MISTAKES
Buffett wrote he 'did some dumb things in investments' in 2008.
'Last year I made a major mistake of commission (and maybe more; this one sticks out). Without urging from Charlie or anyone else, I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year.
'I still believe the odds are good that oil sells far higher in the future than the current $40-$50 price. But so far I have been dead wrong. Even if prices should rise, moreover, the terrible timing of my purchase has cost Berkshire several billion dollars.
'I made some other already-recognizable errors as well. They were smaller, but unfortunately not that small. During 2008, I spent $244 million for shares of two Irish banks that appeared cheap to me. At yearend we wrote these holdings down to market: $27 million, for an 89 percent loss. Since then, the two stocks have declined even further.
'The tennis crowd would call my mistakes 'unforced errors.''
------
GOVERNMENT BAILOUTS
'In poker terms, the Treasury and the Fed have gone 'all in.' Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel.
'These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone's guess, though one likely consequence is an onslaught of inflation.
'Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won't leave willingly.
'Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown. Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.'
------
HOME BUYING:
'Home ownership is a wonderful thing. My family and I have enjoyed my present home for 50 years, with more to come. But enjoyment and utility should be the primary motives for purchase, not profit or refi possibilities. And the home purchased ought to fit the income of the purchaser.
'The present housing debacle should teach home buyers, lenders, brokers and government some simple lessons that will ensure stability in the future. Home purchases should involve an honest-to-God down payment of at least 10 percent and monthly payments that can be comfortably handled by the borrower's income. That income should be carefully verified.
'Putting people into homes, though a desirable goal, shouldn't be our country's primary objective. Keeping them in their homes should be the ambition.'
------
INVESTING MODELS:
'The stupefying losses in mortgage-related securities came in large part because of flawed, history-based models used by salesmen, rating agencies and investors. These parties looked at loss experience over periods when home prices rose only moderately and speculation in houses was negligible.
'They then made this experience a yardstick for evaluating future losses. They blissfully ignored the fact that house prices had recently skyrocketed, loan practices had deteriorated and many buyers had opted for houses they couldn't afford. In short, universe 'past' and universe 'current' had very different characteristics. But lenders, government and media largely failed to recognize this all-important fact.
'Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the symbols. Our advice: Beware of geeks bearing formulas.'"
Source: BusinessWeek
Here's a sample of what Buffett had to say on a variety of topics:
------
THE ECONOMY
Buffett wrote he's certain 'the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond -- but that conclusion does not tell us whether the stock market will rise or fall.'
Buffett included a chart showing that 2008 was the worst year for a key metric for Berkshire and the performance of the S&P 500 stock index. Berkshire's book value -- assets minus liabilities -- declined 9.6 percent, and the S&P 500 fell 37 percent last year.
'The period was devastating as well for corporate and municipal bonds, real estate and commodities,' Buffett wrote. 'By yearend, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.
'As the year progressed, a series of life-threatening problems within many of the world's great financial institutions was unveiled. This led to a dysfunctional credit market that in important respects soon turned nonfunctional.
'The watchword throughout the country became the creed I saw on restaurant walls when I was young: 'In God we trust; all others pay cash.''
------
THE FUTURE
'Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 21.5 percent prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15 percent and 25 percent for many years. America has had no shortage of challenges.
'Without fail, however, we've overcome them. In the face of those obstacles -- and many others -- the real standard of living for Americans improved nearly sevenfold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived.
'Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead.'
------
HIS OWN MISTAKES
Buffett wrote he 'did some dumb things in investments' in 2008.
'Last year I made a major mistake of commission (and maybe more; this one sticks out). Without urging from Charlie or anyone else, I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year.
'I still believe the odds are good that oil sells far higher in the future than the current $40-$50 price. But so far I have been dead wrong. Even if prices should rise, moreover, the terrible timing of my purchase has cost Berkshire several billion dollars.
'I made some other already-recognizable errors as well. They were smaller, but unfortunately not that small. During 2008, I spent $244 million for shares of two Irish banks that appeared cheap to me. At yearend we wrote these holdings down to market: $27 million, for an 89 percent loss. Since then, the two stocks have declined even further.
'The tennis crowd would call my mistakes 'unforced errors.''
------
GOVERNMENT BAILOUTS
'In poker terms, the Treasury and the Fed have gone 'all in.' Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel.
'These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone's guess, though one likely consequence is an onslaught of inflation.
'Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won't leave willingly.
'Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown. Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.'
------
HOME BUYING:
'Home ownership is a wonderful thing. My family and I have enjoyed my present home for 50 years, with more to come. But enjoyment and utility should be the primary motives for purchase, not profit or refi possibilities. And the home purchased ought to fit the income of the purchaser.
'The present housing debacle should teach home buyers, lenders, brokers and government some simple lessons that will ensure stability in the future. Home purchases should involve an honest-to-God down payment of at least 10 percent and monthly payments that can be comfortably handled by the borrower's income. That income should be carefully verified.
'Putting people into homes, though a desirable goal, shouldn't be our country's primary objective. Keeping them in their homes should be the ambition.'
------
INVESTING MODELS:
'The stupefying losses in mortgage-related securities came in large part because of flawed, history-based models used by salesmen, rating agencies and investors. These parties looked at loss experience over periods when home prices rose only moderately and speculation in houses was negligible.
'They then made this experience a yardstick for evaluating future losses. They blissfully ignored the fact that house prices had recently skyrocketed, loan practices had deteriorated and many buyers had opted for houses they couldn't afford. In short, universe 'past' and universe 'current' had very different characteristics. But lenders, government and media largely failed to recognize this all-important fact.
'Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the symbols. Our advice: Beware of geeks bearing formulas.'"
Source: BusinessWeek
Ajit Jain may succeed Buffett at Berkshire
Ajit Jain may succeed Buffett in Berkshire Hathaway: "Legendary investor Warren Buffett has blamed himself for making certain 'dumb' investment decisions last year and has hinted at India-born Ajit Jain becoming the possible successor for his businesses.
Warning that the downturn could well continue for a longer time, Buffett has said the economy would be in shambles throughout 2009.
'During 2008, I did some dumb things in investments. I made at least one major mistake of commission and several lesser ones that also hurt.
'Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action,' the much revered investor wrote in his annual letter to the shareholders.
Showering praise on Jain, who handles the reinsurance division, Buffett noted that there is no one like him and added that his business is 'never the same'.
'Ajit came to Berkshire in 1986. Very quickly, I realised that we had acquired an extraordinary talent. So I did the logical thing: I wrote his parents in New Delhi and asked if they had another one like him at home.
'Of course, I knew the answer before writing. There isn't anyone like Ajit,' Buffett said."
Source: The Economic Times (India Times)
Warning that the downturn could well continue for a longer time, Buffett has said the economy would be in shambles throughout 2009.
'During 2008, I did some dumb things in investments. I made at least one major mistake of commission and several lesser ones that also hurt.
'Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action,' the much revered investor wrote in his annual letter to the shareholders.
Showering praise on Jain, who handles the reinsurance division, Buffett noted that there is no one like him and added that his business is 'never the same'.
'Ajit came to Berkshire in 1986. Very quickly, I realised that we had acquired an extraordinary talent. So I did the logical thing: I wrote his parents in New Delhi and asked if they had another one like him at home.
'Of course, I knew the answer before writing. There isn't anyone like Ajit,' Buffett said."
Source: The Economic Times (India Times)
Berkshire has worst year; Buffett still optimistic
Berkshire has worst year; Buffett still optimistic: "Warren Buffett remains optimistic about the prospects for his company and the nation even though Berkshire Hathaway Inc. turned in its worst performance in 2008 and the widely-followed investor says the economy will likely remain a mess beyond this year.
Buffett used his annual letter Saturday to reassure shareholders that the Omaha-based insurance and investment company has the financial strength needed to withstand the current turmoil and improve after the worst showing of Buffett's 44 years as chairman and CEO.
Buffett wrote he's certain 'the economy will be in shambles throughout 2009 - and, for that matter, probably well beyond - but that conclusion does not tell us whether the stock market will rise or fall.'
In between the news of Berkshire's sharply lower profit and a thorough explanation of its largely unrealized $7.5 billion investment and derivative losses, Buffett offered a hopeful view of the nation's future.
He said America has faced bigger economic challenges in the past, including two World Wars and the Great Depression.
'Though the path has not been smooth, our economic system has worked extraordinarily well over time,' Buffett wrote. 'It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead.'
Buffett's letter appeared to mollify the concerns of many who follow the company, but it's not yet clear whether that will help Berkshire's Class A stock extend its rebound from the new five-year low it set last Monday at $73,500. On Friday, it closed up $250 at $78,600.
'If anything, I feel better than I did before I read it,' Morningstar analyst Bill Bergman said. Berkshire's results could have easily been worse, he said.
But Buffett estimates Berkshire's book value - assets minus liabilities - declined 9.6 percent to $70,530 per share in 2008 - the biggest drop since he took control of the company in 1965. Berkshire's book value declined only one other time under Buffett, and that was a 6.2 percent drop in 2001 when insurance losses related to the Sept. 11 terrorist attacks hurt results.
Berkshire's Class A shares remain the most expensive U.S. stock, but they fell nearly 32 percent in 2008 and have declined 48 percent since setting a high of $151,650 in December 2007. That high came after an exceptionally profitable quarter that was helped by a $2 billion investment gain."
Source: Kansas City Star
Buffett used his annual letter Saturday to reassure shareholders that the Omaha-based insurance and investment company has the financial strength needed to withstand the current turmoil and improve after the worst showing of Buffett's 44 years as chairman and CEO.
Buffett wrote he's certain 'the economy will be in shambles throughout 2009 - and, for that matter, probably well beyond - but that conclusion does not tell us whether the stock market will rise or fall.'
In between the news of Berkshire's sharply lower profit and a thorough explanation of its largely unrealized $7.5 billion investment and derivative losses, Buffett offered a hopeful view of the nation's future.
He said America has faced bigger economic challenges in the past, including two World Wars and the Great Depression.
'Though the path has not been smooth, our economic system has worked extraordinarily well over time,' Buffett wrote. 'It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead.'
Buffett's letter appeared to mollify the concerns of many who follow the company, but it's not yet clear whether that will help Berkshire's Class A stock extend its rebound from the new five-year low it set last Monday at $73,500. On Friday, it closed up $250 at $78,600.
'If anything, I feel better than I did before I read it,' Morningstar analyst Bill Bergman said. Berkshire's results could have easily been worse, he said.
But Buffett estimates Berkshire's book value - assets minus liabilities - declined 9.6 percent to $70,530 per share in 2008 - the biggest drop since he took control of the company in 1965. Berkshire's book value declined only one other time under Buffett, and that was a 6.2 percent drop in 2001 when insurance losses related to the Sept. 11 terrorist attacks hurt results.
Berkshire's Class A shares remain the most expensive U.S. stock, but they fell nearly 32 percent in 2008 and have declined 48 percent since setting a high of $151,650 in December 2007. That high came after an exceptionally profitable quarter that was helped by a $2 billion investment gain."
Source: Kansas City Star
AIG may be split into three: FT
AIG may be split into three parts says Financial Times: "American International Group Inc. could be split into at least three separate government-controlled divisions in an effort to save the business, according to a report yesterday by the Financial Times.
Earlier this week, reports surfaced that New York-based AIG may be asking for its fourth loan from the federal government just days before it is expected to report a fourth-quarter loss.
Once one of the world's largest insurers, AIG has already received $150 billion in loans from the government. In return the government has taken an 80 percent stake in the insurer.
Under the new proposed plan, the government would swap its 80 percent stake for even bigger pieces of three units that would be split off from the company, according to the FT report citing anonymous people.
Those units would be AIG's Asian operations, its international life insurance business and its US personal lines business. A fourth unit made up of AIG's other businesses and troubled assets could be created as well or sold off in pieces, according to the FT report.
AIG's other major operations include its US life insurance business, international property and casualty insurance unit, and its aircraft leasing business.
In return for the break-up, the government would relax the terms, or cancel, a portion of the $60 billion loan that was at the centre of AIG's $150 billion rescue package, the newspaper said. Details of the plan could come on Monday, when AIG is expected to report a $60 billion fourth-quarter loss, the FT said.
AIG spokeswoman Christina Pretto declined to provide specifics about a potential break-up of the company or losses, but did acknowledge the insurer is reviewing alternatives with the government ahead of releasing its fourth-quarter results.
'We continue to work with the US government to evaluate potential new alternatives for addressing AIG's financial challenges,' Pretto said yesterday. 'We will provide a complete update when we report financial results in the near future.'"
Source: The Royal Gazette
Earlier this week, reports surfaced that New York-based AIG may be asking for its fourth loan from the federal government just days before it is expected to report a fourth-quarter loss.
Once one of the world's largest insurers, AIG has already received $150 billion in loans from the government. In return the government has taken an 80 percent stake in the insurer.
Under the new proposed plan, the government would swap its 80 percent stake for even bigger pieces of three units that would be split off from the company, according to the FT report citing anonymous people.
Those units would be AIG's Asian operations, its international life insurance business and its US personal lines business. A fourth unit made up of AIG's other businesses and troubled assets could be created as well or sold off in pieces, according to the FT report.
AIG's other major operations include its US life insurance business, international property and casualty insurance unit, and its aircraft leasing business.
In return for the break-up, the government would relax the terms, or cancel, a portion of the $60 billion loan that was at the centre of AIG's $150 billion rescue package, the newspaper said. Details of the plan could come on Monday, when AIG is expected to report a $60 billion fourth-quarter loss, the FT said.
AIG spokeswoman Christina Pretto declined to provide specifics about a potential break-up of the company or losses, but did acknowledge the insurer is reviewing alternatives with the government ahead of releasing its fourth-quarter results.
'We continue to work with the US government to evaluate potential new alternatives for addressing AIG's financial challenges,' Pretto said yesterday. 'We will provide a complete update when we report financial results in the near future.'"
Source: The Royal Gazette
Hiscox makes management changes
Hiscox makes management changes: "Hiscox has said that Charles Dupplin, currently chairman of Hiscox's art and private client division and director of mergers and acquisitions, will succeed Rob Childs as chief executive of Hiscox Bermuda. Charles will take up this new role in April 2009, subject to regulatory approval.
As previously announced, Childs will return to the UK towards the end of April 2009. He will continue in his roles as group director of underwriting and chairman of Hiscox USA. He will also serve as an internal non-executive of Hiscox Bermuda.
Robert Read will assume overall responsibility for art and private client underwriting. Charles will retain his responsibilities as director of mergers and acquisitions for the group."
Source: Post Online
As previously announced, Childs will return to the UK towards the end of April 2009. He will continue in his roles as group director of underwriting and chairman of Hiscox USA. He will also serve as an internal non-executive of Hiscox Bermuda.
Robert Read will assume overall responsibility for art and private client underwriting. Charles will retain his responsibilities as director of mergers and acquisitions for the group."
Source: Post Online
Hardy raising £40m to chase profits
Hardy passes hat for £40m to chase profits: "Ships and planes insurer Hardy Underwriting is seeking £40million from shareholders to take advantage of rising rates across the industry.
The group made record profits of £23million in 2008, it said today, and reckons it can push this higher if it has the finances available to write more business.
Chairman David Mann says these are 'exciting times' for Hardy.
'Our business model has served us well through what has been a most turbulent year. An effect of the global financial crisis should be to hasten the return of harder market conditions. Hardy has been preparing for this for over two years,' he says.
Aviation and marine insurance costs in particular are rising sharply."
Source: Mail Online
The group made record profits of £23million in 2008, it said today, and reckons it can push this higher if it has the finances available to write more business.
Chairman David Mann says these are 'exciting times' for Hardy.
'Our business model has served us well through what has been a most turbulent year. An effect of the global financial crisis should be to hasten the return of harder market conditions. Hardy has been preparing for this for over two years,' he says.
Aviation and marine insurance costs in particular are rising sharply."
Source: Mail Online
Takaful market resilient, but facing risks
Takaful market resilient, but facing risks: "Gulf Islamic financial institutions and takaful companies are feeling the repercussions of the current global financial market disruption less than most of their conventional counterparts because Sharia law prohibits interest-based financial products, according to a new report by Standard & Poor's Ratings Services.
'IFIs didn't invest in the structured products that have hampered many conventional banks' financial profiles and performance,' said Standard & Poor's credit analyst Mohamed Damak in the report, titled Rated Gulf Islamic Financial Institutions And Takaful Companies Have Shown Resilience To Global Market Dislocation, But They Are Not Risk Immune. 'And most IFIs should be equipped to weather the financial downturn and keep the effects on their financial profiles at manageable levels.'
We expect takaful and retakaful insurers to continue to resist the toughening market environment. We attribute their resilience to sufficient liquidity flows--in part due to reportedly higher new business--to service normal claims levels, and to capital adequacy, which, despite being affected in the current climate, remains supportive of the ratings across the sector.
Still, Standard & Poor's notes the squeeze that market conditions are putting on many Islamic banks and takaful insurance companies."
Source: Global Reinsurance
'IFIs didn't invest in the structured products that have hampered many conventional banks' financial profiles and performance,' said Standard & Poor's credit analyst Mohamed Damak in the report, titled Rated Gulf Islamic Financial Institutions And Takaful Companies Have Shown Resilience To Global Market Dislocation, But They Are Not Risk Immune. 'And most IFIs should be equipped to weather the financial downturn and keep the effects on their financial profiles at manageable levels.'
We expect takaful and retakaful insurers to continue to resist the toughening market environment. We attribute their resilience to sufficient liquidity flows--in part due to reportedly higher new business--to service normal claims levels, and to capital adequacy, which, despite being affected in the current climate, remains supportive of the ratings across the sector.
Still, Standard & Poor's notes the squeeze that market conditions are putting on many Islamic banks and takaful insurance companies."
Source: Global Reinsurance
Allianz reports loss, dragged down by Dresdner sale
Allianz reports loss, dragged down by Dresdner sale: "Allianz S.E. reported Thursday a net loss of €2.44 billion ($3.11 billion) in 2008, compared to a net profit of €7.96 billion ($10.15 billion) last year, dragged down by the loss on its sale Dresdner Bank to Commerzbank.
Net income from Allianz’ continued business amounted to €4 billion, compared with €7.3 billion ($9.3 billion) in the previous year, the company said. Allianz took a charge of €6.4 billion ($8.2 billion) on the Dresdner Bank sale last year, leading to a net loss of €2.44 billion for the group, Allianz said.
“Allianz remains solid, a financially stable partner for customers, shareholders and employees,” said Michael Diekmann, chief executive officer of Allianz, in a statement.
Germany’s largest insurer reported an operating profit of €7.4 billion ($9.4 billion), compared with €10.3 billion ($13.1 billion) in a record result in 2007, he said."
Source: Business Insurance
Net income from Allianz’ continued business amounted to €4 billion, compared with €7.3 billion ($9.3 billion) in the previous year, the company said. Allianz took a charge of €6.4 billion ($8.2 billion) on the Dresdner Bank sale last year, leading to a net loss of €2.44 billion for the group, Allianz said.
“Allianz remains solid, a financially stable partner for customers, shareholders and employees,” said Michael Diekmann, chief executive officer of Allianz, in a statement.
Germany’s largest insurer reported an operating profit of €7.4 billion ($9.4 billion), compared with €10.3 billion ($13.1 billion) in a record result in 2007, he said."
Source: Business Insurance
Swiss Re to close variable annuities and pensions business - EXCLUSIVE - Professional Pensions
Swiss Re to close variable annuities and pensions business: "Swiss Re is shutting down its variable annuities and pensions business in a bid to scale back its retirement-related activities.
It is understood 11 London employees, seven New York staff and four contactors are part of the team, which is headed by Richard Farr.
Swiss Re confirmed all 18 posts are at risk of redundancy and said it was currently undertaking the appropriate consultations with the permanent staff concerned.
It said key structuring staff could be transferred to its life & health division and key people dealing with pricing, modelling and hedging capabilities might be retained within the asset management division.
Swiss Re spokesman Tim Dickenson said: 'We continually adjust our core activities and ensure we dedicate our capital to businesses with the highest risk-adjusted earnings potential.
'Retirement-related activities are facing challenging market environment, and we expect this to persist into 2010/11. Profitability of these businesses will be reduced by various factors, including the higher costs of hedging financial market risk.'"
Source: Professional Pensions
It is understood 11 London employees, seven New York staff and four contactors are part of the team, which is headed by Richard Farr.
Swiss Re confirmed all 18 posts are at risk of redundancy and said it was currently undertaking the appropriate consultations with the permanent staff concerned.
It said key structuring staff could be transferred to its life & health division and key people dealing with pricing, modelling and hedging capabilities might be retained within the asset management division.
Swiss Re spokesman Tim Dickenson said: 'We continually adjust our core activities and ensure we dedicate our capital to businesses with the highest risk-adjusted earnings potential.
'Retirement-related activities are facing challenging market environment, and we expect this to persist into 2010/11. Profitability of these businesses will be reduced by various factors, including the higher costs of hedging financial market risk.'"
Source: Professional Pensions
ING to appoint Patrick Flynn as Chief Financial Officer
ING to appoint Patrick Flynn as Chief Financial Officer: "ING announced today that the Supervisory Board intends to nominate Patrick Flynn (1960, Irish) for appointment to the Executive Board at the annual General Meeting of Shareholders of 27 April 2009. Upon appointment Patrick Flynn will become the new Chief Financial Officer of ING.
Patrick Flynn is currently Chief Financial Officer of HSBC’s global Insurance business, based in London. Previously he served as CFO for HSBC’s banking and insurance operations in South America from 2002-2006."
Source: PR-CANADA.net
Patrick Flynn is currently Chief Financial Officer of HSBC’s global Insurance business, based in London. Previously he served as CFO for HSBC’s banking and insurance operations in South America from 2002-2006."
Source: PR-CANADA.net
A.M. Best Downgrades Swiss Re
A.M. Best Downgrades Ratings of Swiss Reinsurance Company Limited and Its Subsidiaries: "OLDWICK, N.J. - (Business Wire) A.M. Best Co. has downgraded the financial strength rating (FSR) to A (Excellent) from A+ (Superior) and issuer credit ratings (ICR) to “a+” from “aa-” of Swiss Reinsurance Company Limited (Swiss Re) (Switzerland) and its subsidiaries. Concurrently, A.M. Best has downgraded the ratings for all debt issued by Swiss Re and its subsidiaries. All ratings have been removed from under review with negative implications and assigned a stable outlook. (See link below for a detailed listing of the companies and ratings.)
The rating actions reflect A.M. Best’s opinion—based on its quantitative and qualitative assessment of risk capital—that Swiss Re’s overall risk-adjusted capitalization does not have sufficient cushion to weather more negative effects of the continuing turmoil in the financial markets and other unexpected events. In the determination of the overall risk-adjusted capitalization, A.M. Best considered a significant level of capital credit from the new convertible perpetual securities as well as the capital relief derived from the loss reserve adverse development reinsurance cover, both provided by Berkshire Hathaway Inc. (Berkshire Hathaway) (Omaha, NE). On February 5, 2009, Berkshire Hathaway agreed to invest CHF 3.0 billion in Swiss Re in the form of a 12% convertible perpetual financial instrument (convertible perpetual securities) and to provide a CHF 5.0 billion loss reserve adverse development reinsurance cover (ADC) for Swiss Re’s property/casualty loss reserves as of December 31, 2008. The convertible perpetual securities are subject to stockholders’ approval, and the ADC is subject to regulatory approval."
Source: Earth Times
The rating actions reflect A.M. Best’s opinion—based on its quantitative and qualitative assessment of risk capital—that Swiss Re’s overall risk-adjusted capitalization does not have sufficient cushion to weather more negative effects of the continuing turmoil in the financial markets and other unexpected events. In the determination of the overall risk-adjusted capitalization, A.M. Best considered a significant level of capital credit from the new convertible perpetual securities as well as the capital relief derived from the loss reserve adverse development reinsurance cover, both provided by Berkshire Hathaway Inc. (Berkshire Hathaway) (Omaha, NE). On February 5, 2009, Berkshire Hathaway agreed to invest CHF 3.0 billion in Swiss Re in the form of a 12% convertible perpetual financial instrument (convertible perpetual securities) and to provide a CHF 5.0 billion loss reserve adverse development reinsurance cover (ADC) for Swiss Re’s property/casualty loss reserves as of December 31, 2008. The convertible perpetual securities are subject to stockholders’ approval, and the ADC is subject to regulatory approval."
Source: Earth Times
Cat bond market set to bounce back
Cat bond market set to bounce back: "French insurance company Scor sold a $200 million catastrophe (cat) bond last week, ending the six-month hiatus in cat bond issuance caused by the collapse of Lehman Brothers and the general malaise in financial markets.
This was swiftly followed by an announcement that US-based insurer Chubb had placed a $150 million cat bond, and sources suggest another three or four are in the pipeline.
“This is the beginning of what should be a pretty strong first half of the year,” said Bill Dubinsky at Swiss Re in New York.
Dubinsky said deals had dried up towards the end of 2008 as potential sponsors saw a large gap between cat bond prices in the secondary market and rates for retrocessional insurance (reinsurance for reinsurers). This was largely a result of distressed hedge funds trying to sell their cat bond investments. But he noted that hedge funds now make up around 5-10% of the market, compared with 15-20% last year, and the market still has strong support from specialised investment managers.
We could see 2009 cat bond issuance in line with 2007’s figure for non-investment grade issuance, and certainly better than that of 2008,” Dubinsky said. In 2007, $7.72 billion of natural catastrophe bonds were issued, of which $5.72 billion was non-investment grade.
Lehman had acted as the ‘total return swap counterparty’ on four cat bonds, effectively guaranteeing the collateral pool backing each bond. But the investment bank’s bankruptcy in September meant the bonds were left without such a guarantee.
Moreover, the value of the assets that Lehman had invested in was also declining. One bond, the Allstate-sponsored Willow Re, defaulted on coupon payments to investors at the start of February and ratings given to the other three are nearly at rock-bottom.
David Harrison, credit analyst at Standard and Poor’s (S&P) in London, said Lehman’s demise contributed to the six-month lull, as proponents had to devise ways to reassure investors they would not be exposed to similar risks. But he noted: “The market may have contracted anyway because of the broader financial market conditions.”
Scor’s Atlas V bond is understood to provide investors with frequent updates on the size of the collateral pool and uses US government-backed debt obligations as the underlying securities. As important as the choice of securities in the collateral pool is the matching of the maturity of the securities with the cat bond’s maturity – as this effectively eliminates interest rate risk as a potential cause of default. The total return swap counterparty, Deutsche Bank, also promises to constantly top up the collateral should the underlying securities fall in value.
“Bond structures are moving to a point where there’s greater transparency and clarity to investors,” Harrison said."
Source: Environmental Finance
This was swiftly followed by an announcement that US-based insurer Chubb had placed a $150 million cat bond, and sources suggest another three or four are in the pipeline.
“This is the beginning of what should be a pretty strong first half of the year,” said Bill Dubinsky at Swiss Re in New York.
Dubinsky said deals had dried up towards the end of 2008 as potential sponsors saw a large gap between cat bond prices in the secondary market and rates for retrocessional insurance (reinsurance for reinsurers). This was largely a result of distressed hedge funds trying to sell their cat bond investments. But he noted that hedge funds now make up around 5-10% of the market, compared with 15-20% last year, and the market still has strong support from specialised investment managers.
We could see 2009 cat bond issuance in line with 2007’s figure for non-investment grade issuance, and certainly better than that of 2008,” Dubinsky said. In 2007, $7.72 billion of natural catastrophe bonds were issued, of which $5.72 billion was non-investment grade.
Lehman had acted as the ‘total return swap counterparty’ on four cat bonds, effectively guaranteeing the collateral pool backing each bond. But the investment bank’s bankruptcy in September meant the bonds were left without such a guarantee.
Moreover, the value of the assets that Lehman had invested in was also declining. One bond, the Allstate-sponsored Willow Re, defaulted on coupon payments to investors at the start of February and ratings given to the other three are nearly at rock-bottom.
David Harrison, credit analyst at Standard and Poor’s (S&P) in London, said Lehman’s demise contributed to the six-month lull, as proponents had to devise ways to reassure investors they would not be exposed to similar risks. But he noted: “The market may have contracted anyway because of the broader financial market conditions.”
Scor’s Atlas V bond is understood to provide investors with frequent updates on the size of the collateral pool and uses US government-backed debt obligations as the underlying securities. As important as the choice of securities in the collateral pool is the matching of the maturity of the securities with the cat bond’s maturity – as this effectively eliminates interest rate risk as a potential cause of default. The total return swap counterparty, Deutsche Bank, also promises to constantly top up the collateral should the underlying securities fall in value.
“Bond structures are moving to a point where there’s greater transparency and clarity to investors,” Harrison said."
Source: Environmental Finance
Bankruptcy Experts Discuss AIG's Legal Options
Bankruptcy Experts Discuss AIG's Legal Options: "Amid speculation that American International Group Inc. may consider filing for bankruptcy protection as the company's stock price continues to slide, opening at 48 cents a share on Feb. 27, bankruptcy experts say if the insurer were to file, it could become the biggest and most expensive in U.S. legal history.
"The size of this is almost incomprehensible," said Patrick Carothers, a partner with Pittsburgh law firm of Thorp Reed & Armstrong's bankruptcy and financial restructuring group.
Carothers said the massive scope of AIG ? a global corporation with tens of billions of dollars in assets in highly regulated businesses ? could be a brake on thoughts of letting the company go into bankruptcy. Even more compelling for federal officials, he said, would be the widespread impact on financial markets worldwide.
"The issue is, has the government gotten to the position where they realize that putting more money into AIG doesn't matter?" he said. "And if they have, then can they brace themselves for the financial freefall that an AIG bankruptcy could bring about? I think that?s what the people in the back rooms are thinking about right now."
Responding to a blizzard of media speculation, AIG (NYSE: AIG | Quote | Chart | News | PowerRating) has acknowledged it is negotiating ?potential new alternatives for addressing AIG?s financial challenges? with federal officials."
Source: Trading Markets
"The size of this is almost incomprehensible," said Patrick Carothers, a partner with Pittsburgh law firm of Thorp Reed & Armstrong's bankruptcy and financial restructuring group.
Carothers said the massive scope of AIG ? a global corporation with tens of billions of dollars in assets in highly regulated businesses ? could be a brake on thoughts of letting the company go into bankruptcy. Even more compelling for federal officials, he said, would be the widespread impact on financial markets worldwide.
"The issue is, has the government gotten to the position where they realize that putting more money into AIG doesn't matter?" he said. "And if they have, then can they brace themselves for the financial freefall that an AIG bankruptcy could bring about? I think that?s what the people in the back rooms are thinking about right now."
Responding to a blizzard of media speculation, AIG (NYSE: AIG | Quote | Chart | News | PowerRating) has acknowledged it is negotiating ?potential new alternatives for addressing AIG?s financial challenges? with federal officials."
Source: Trading Markets
AIG sends execs to China to discuss unit sale -CIRC
AIG sends execs to China to discuss unit sale -CIRC: "American International Group (AIG.N) has sent senior executives to China to discuss the sale of its Hong Kong-based AIA unit, a top official with China's insurance regulator said on Thursday.
But Chinese firms' potential bids for the embattled U.S. insurer's Asian life insurance unit would be solely a corporate decision, saidLi Kemu, vice chairman of the China Insurance Regulatory Commission.
'As a regulator, we care more about risks, or whether AIA's business in China is stable,' Li told reporters."
Source: Reuters
But Chinese firms' potential bids for the embattled U.S. insurer's Asian life insurance unit would be solely a corporate decision, saidLi Kemu, vice chairman of the China Insurance Regulatory Commission.
'As a regulator, we care more about risks, or whether AIA's business in China is stable,' Li told reporters."
Source: Reuters
Subscribe to:
Posts (Atom)
Posts
