Insurance

ILFC separatists should consider GMAC lesson

12 May 2008

Remember GMAC? GM sold 51% of the finance unit when the carmaking operations seemed to be dragging down its credit ratings and pushing up its funding costs. Now GMAC s US mortgage exposures are weighing it down. Any enthusiasts for separating ILFC from AIG should take note.

AIG earnings report is opaque – but scale of loss is clear

8 May 2008

The US insurer is raising a whopping $12.5bn of new capital, suggesting much of its $7.8bn firstquarter net loss may turn out to be real. But that comes after it bought back nearly $2bn of shares, raised the dividend and said its core business is working well. Go figure.

Flowers should flash the cash to Friends Provident

1 Apr 2008

The buyout boss s dealmaking record is chequered which makes it tough for the stricken UK insurer to take his £3.5bn offer seriously. If Flowers proves he can follow through helped by his new Chinese running partner he may get a better hearing.

AIG’s $20bn executive nest egg hatches discord

31 Mar 2008

The insurer s massive incentive plan surely motivated employees. It also created conflicts of interest. Intertwining the fortunes of AIG and its executives may have created wealth, but it ensured an acrimonious split.

Swiss Life thumbs its nose at credit crunch

27 Mar 2008

The Swiss life insurer has delivered strong profits, doubled its dividend and stuck by steep growth targets. That sets it apart from the financial peers laid low by subprime. Some of the optimism may be bravado. But it helps that Swiss Life was forced to be cautious early.

Will Wilbur whip Warren in monoline war?

29 Feb 2008

Messrs Ross and Buffett are both pushing into the bond insurance business. Buffett s offer to reinsure monolines muni business at exorbitant rates only roiled Berkshire Assurance s rivals. Ross s investment in Assured Guaranty could be a more effective play for market share.

How did a firing offence become AIG’s business strategy?

29 Feb 2008

Banks dismiss traders for selling far outofthemoney puts. Those positions can potentially wipe a firm out. The credit exposures AIG just marked down by $11.2bn look pretty similar. Insurers say they manage fattail risks better than traders. It s not clear they do.

AIG’s $4.9bn burp bodes ill for the CDO market

11 Feb 2008

The loss doesn t threaten the insurer s capital. But a spanking from its auditor over valuations tarnishes its reputation. Worse, it looks to have taken a hit on CDOs previously thought to be less affected by subprime woes. That could mean the pain is spreading.

Has Buffett finally called a bottom for something?

23 Jan 2008

Well, maybe. Berkshire Hathaway s 3% stake in Swiss Re, bought on the open market, looks like a vote of confidence in the stock. But as usual with Buffett, other investors shouldn t take too much comfort. With a separate reinsurance deal, the wily investor has other angles too.

Ping An attempts to buck global trend

21 Jan 2008

Western markets are faltering, but China s secondlargest insurer plans to raise a $20bn warchest. The company s shareholders may not be happy, but there is an opportunity. Cashrich companies from the East can swoop like sovereign funds on weakened Western targets.

Fortis pays for Chinese big brother

29 Nov 2007

The battered BelgoDutch bank is giving Ping An a board seat even though it isn't injecting new capital. That said, the Chinese insurer's purchase of E1.8bn of shares in the market probably helped stop Fortis stock falling even further after its badly received carveup of ABN Amro.

Hedging sub-prime exposure is almost impossible

20 Nov 2007

Swiss Re has paid a $1.4bn price for providing protection against mortgage losses to an unnamed institution via two credit default swaps. But such disasters are likely to be rare. Few took advantage of these hedging strategies when they were on offer. Now they're no longer available.

Resolution battle adds to scars of former mutuals

12 Nov 2007

First Friends Provident, now Standard Life, have lost out in the auction for the UK insurer. Failure has damaged both. Sure, they were never going to find rival bidder Hugh Osmond a pushover. But in biting off more than they could chew, they appear to be following a wellworn script for former mutuals.

Grumpy old men keep creeping out of retirement

5 Nov 2007

Hank Greenberg is the latest deposed boss to rattle the cage of his former employer, AIG. Who s next? Sandy Weill? Jack Welch? It s easy to see why these former CEO superstars would want back in the game. Investors shouldn t hold their breath for a geriatric rescue.

Generali deserves its activist assault

25 Oct 2007

In attacking the Italian insurance giant, activist investor Algebris has taken on a huge target. Generali is at the centre of the Italian financial world. But it is more vulnerable than it first appears, particularly over its corporate governance.

Osmond won’t win Resolution with sub-market bid

27 Sep 2007

Offers below market price rarely win. There s little reason to think that the entrepreneur s lowball offer for the insurer will either. Sure, Resolution s alternative, a merger with Friends Provident, looks easy to beat. But Osmond will need to be more generous to do so.

Resolution lowers Osmond threat to Friends deal

10 Sep 2007

The entrepreneur s 16% holding no longer looks like a blocking stake now the insurer has cut to 50% the investor support it needs. Osmond could still stymy the merger with a rival bid. But at least, by polishing its credentials, Resolution has argued for a high price.

Rivals should be able to top Resolution’s bid for Friends

14 Aug 2007

Its offer is 15% below fair value. No wonder other bidders like Swiss Re and Zurich are said to be interested. But there's no need to rush into a bidding war: Resolution may pull out. And though Friends is cheap, not all its businesses are attractive.

Aviva’s new boss tries velvet revolution

9 Aug 2007

Andrew Moss didn t have the option of a brutal shakeup. He was associated with the strategy which left the UK insurer in the doldrums. But in decrying big deals and focusing on Aviva s loose ends, he is going a long way to changing tack. That could help the firm's shares.

Osmond should spell out plans for Resolution

27 Jul 2007

The entrepreneur may well have some ideas to create more value for Resolution than its £8.6bn nilpremium merger with Friends Provident. But Osmond needs to say what these are especially since it isn t obvious he wants to take over Resolution or could even afford to.