Posted On: October 11, 2006, 1:12 pm CDT

Posted By: Tom

For public companies, the "profits" flow out in dividends to investors, including pension plans, individuals, etc. If investors can get a 10% rate of return from something else, that's where they will go. If investment capital is diverted elsewhere, then where do you think the surplus or reinsurance capital comes from?

If you are sitting on the fiduciary committee of a pension plan, what do you think your PERSONAL liability might be if you deliberately leave your investments in an industry which is frequently subjected to catastrophic loss plus the vagaries of politicized rate setting - at only a 5% rate of return, if you can get as much or more in a less risky investment?

Do you think executives just sit around and say "gee, let's try for a 10% ROE just for the fun of it?"