Which (brand name) Insurance Company will be the first one to default ?

Oct 10, 2008

  1. SportsNut
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    With the banks and financials having the difficulties that they are obviously having... and certainly insurance cos have invested gazillions of dollars for income... and no doubt have some of the same toxic debt securities on their balance sheets... And with the coming or current recession both premium and investment income will fall for most/all these companies....

    Who will be the first company of any substance, to fail...?

    Is it... MetLife, OR Aflac, OR...????? (No insider info implied)

    **(AIG aside, because they didn't fail. They just have a new 80% partner onboard) .
     
    Last edited: Oct 10, 2008
  2. patch36
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    Re: Which (brand name) Insurance Co will be the first one to default...?

    I don't think any of them will, but there will be more consolidation and fewer companies out there as the giants eat up everyone else. The economy of scale thing, I guess.
     
    patch36, Oct 10, 2008
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  3. Charpress
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    Re: Which (brand name) Insurance Co will be the first one to default...?

    And a lot of us will end up looking like Patch's roadkill avatar.

    People don't necessarily buy products and investments when they start to worry about whether they are going to still have a job and where the next meal is coming from.

    Aviva sent out an email today that disputes some news stories that appeared in Britain yesterday that apparently imply they are having problems.

    A few days ago, I got an email from Aviva saying they will no longer accept apps with their index strategy that pays on the basis of which index did best for the year. If S&P did best, then 50% of your index goes there. If the DJ came in second, then 30% goes there, and finally 20% goes into whatever came in third. "Bet on the race after the race is run". That was a sweet strategy to sell people since they didn't have to do anything.

    I think Aviva is plenty strong, but it goes to show the nervousness going around.
     
  4. SportsNut
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    Re: Which (brand name) Insurance Co will be the first one to default...?

    That is a key point about the job stability or losses. This will be a game changer if the slow down is as dramatic as it could be. Layoff's are in the works in a BIG way, and the R is going to set in fo sho...

    I never liked the above investment strategy... investing into something after it has had a big run-up... Isn't that what analysts are for, to spot the trends on the front end...? nvesting after the horses have left the barn has ALWAYS lacked substance... with few exceptions. (Fidelity Magellan comes to mind).

    But I guess that is moot since they have abandoned the strategy, at least from a marketing standpoint for new monies.
     
  5. CHUMPS FROM OXFORD
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    Re: Which (brand name) Insurance Co will be the first one to default...?

    Won't be Met. Cash cow. Just raised some more. Most of their assets are safe. Mutual Funds have been buying them in the last few days.
     
  6. thereaper
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    Re: Which (brand name) Insurance Co will be the first one to default...?

    Could be Prudential, they do have a real estate division. Or maybe Protective Life they're in need of capital.
     
  7. moonlightandmargaritas
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    moonlightandmargaritas Guru

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  8. CHUMPS FROM OXFORD
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    Re: Which (brand name) Insurance Co will be the first one to default...?

    I think Pru is OK too. Remember that insurance is much more regulated than banking. AIG's insurance book of business is fine. Of course...it will be bought out...
     
  9. djs
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    Re: Which (brand name) Insurance Co will be the first one to default...?

    It's actually very hard to say. It all has to do with where the reserves are parked, and I actually bet a lot of insurance companies own a lot of mortgage backed securities.

    In general, my guess is that reserves will take a bit of a pounding, though probably not for a while. This will cause some insurance companies to have to stop writing some lines of business in some states.

    Since it is unlikely most larger insurance companies were leveraged with mortgages (except AIG), but rather they were a component of reserves, it doesn't have the same impact.

    Basically, insurance companies tend not to borrow money from one security to go buy more, and then borrow from that to go buy even more. If they don't have a house of cards, the structure doesn't collapse when the bottom card gets knocked out.

    Doesn't mean they are off the hook, they still probably owned a lot of these investments, but they were the cash in the deal, not the borrower.

    AIG will keep the core insurance business, divest everything else. They will have a decent rate increase in the not to distant future. I'm curious to see what this does with 21st Century rates which they just bought.



    Dan
     
    djs, Oct 10, 2008
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  10. SportsNut
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    Re: Which (brand name) Insurance Co will be the first one to default...?


    Hmmmm. Your statement doesn't ring true with what is actually happening. Met has approached Hartford to discuss merger talks... Now why would a company that is a cash cow want to talk merger...?

    "Oct. 9, 2008 (Reuters) — Life insurer MetLife Inc recently approached life and property insurer Hartford Financial Services Group Inc about a merger transaction, The Wall Street Journal said citing people familiar with the discussions."

    "MetLife, the latest big U.S. insurer to struggle with the credit crisis, said on Wednesday it sold 75 million shares at $26.50 per share, raising nearly $2 billion."

    NewsDaily: Metlife, Hartford held merger talks: report