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Why don’t we just turn the property and casualty market over to the Government? The games they play in the Florida market place acting like Citizens is not an insurance company? These politicians and government officials need to back out of the insurance industry. They are simply benefiting their wallets. The loan to AIG is another example. Why don’t we just turn P&C into the NFIP..
Strong financial backing of AIG used to be a key-selling point.. (or the only point at times) Sorry but it looks like AIG is doomed..
Friends , the government did the right thing this time for a change, AIG will not likely be able to repay the loan & the Fed know that , its just softening the collapse of the giant & spreading the time span over 2 years to give the other players the time to replace the business before AIG crash is moved out of the way.
These weasels have been in trouble since the Eliot Spitzer days with under the table deals with fine folks like Marsh Mac. They have for years dominated the market and got their finger in too many pies and it rightly needs to be broken up into many pieces and all of the ones responsible for this debacle needs to be out on the street or in jail.
Cowabunga, man. Who ever thought the day would happen when you didn’t have to haggle with AIG?
This article puts on display the ignorance of the JP Morgan analyst, Zurich and the broker mentioned as they clearly do not understand that AIG’s Commercial Insurance Group’s (whom they are undoubtedly referencing) capital position remains completely intact, unimpaired and the largest in the insurance industry. AIG’s woes are those of the parent, not the insurance subsidiaries.
Would you buy a car that you knew had been sunk in salt water/ I too do not want to see AIG go by the way side, but the reality of it is that they will. The Aig we knew a weel ago isnt the Aig we will know next year. The company has no chouice , but to unbundle itself to save the stockholders. The 85b, dont forget, is only a loan to help pay current due liabilities. That doesnt fix the problem and they are going to get the money from the subs. For sure. Lets hope another A carrier picks up the commercial division so we can still have a good solid place to access good products for our clients.
Although there John….. If the parent company has problems, the trickle down effect on all the other companies will continue. Ratings issues, customer concerns, these dyas it does not take much to try and sell another market over an AIG product.
The $85b is, I think, a credit line, the existence of which should cause the rating agencies to return AIG at least part way to their former ratings. That would curtail the immediate need for cash collateralization of their derivative obligations. Now they can liquidate without having to do so at fire sale prices. Point is, they probably don’t need to use much of the $85b, at least not right away. (If they did use it all, the interest would be over $800 million per month.)
By the way, the loan from the subs is off the table.
BIG TROUBLE!
Remember, I think they also had more than $200 million in Fifth Third Bank?
BANGALORE (Reuters) – Cincinnati Financial Corp, a U.S. Midwestern property and casualty insurer, said its exposure to troubled institutions like Lehman Brothers Holdings Inc and government-sponsored enterprises will hurt its 2008 results.
However, analysts do not expect the charges related to the exposure to hurt the company significantly in the coming quarters.
Cincinnati said it had sold most of the $24 million of Lehman preferred stock and debt securities held at June 30, and expects to take a related charge of $9 million in third quarter.
Lehman Brothers, once an investment banking giant, filed for bankruptcy protection on Monday after trying to finance too many risky assets with too little capital.
Cincinnati, which still holds securities of American International Group Inc worth about $81 million as of September 15, sees an impairment charge of about $50 million from securities related to the mortgage giants Fannie Mae and Freddie Mac.
If you’re smart – then you better start moving business from these carriers too!!
BIG TROUBLE ON THE HORIZON !! ??
Shares of State Auto Financial Corp. fell sharply Monday after an analyst downgraded the insurance company’s stock, calling it overpriced after steep gains last week.
Cincinnati, which still holds securities of American International Group Inc worth about $81 million as of September 15, sees an impairment charge of about $50 million from securities related to the mortgage giants Fannie Mae and Freddie Mac.
Cincinnati said it had sold most of the $24 million of Lehman preferred stock and debt securities held at June 30, and expects to take a related charge of $9 million in third quarter.
United Fire & Casualty Co. (UFCS) projected up to $20 million in third-quarter pretax losses from hurricanes Gustav and Ike and added a default by Lehman Brothers Holdings Inc. (LEHMQ) would cut earnings by another $4 million.
Standard & Poor’s Ratings Services it has lowered its outlook on Selective Insurance Group Inc. and its subsidiaries to negative from stable, citing concerns that recent profitability has not been as strong as the ratings agency expected at the current rating level, as well as the decline in capital adequacy since the end of 2006 and relative to peers.
Folks, you’re listening too much to the news hype and ignoring past performance – First of all – AIG has the money to back their obligations – they just didnt have the liquid assets that were being requested. I am sure AIG will sell the necessary to quickly fulfill their obligation to the Feds. Sure it will change some of their holdings – but it will not touch their P & C business as that is their US core business.
I am surprised so many think its good for large businesses to crumble – those are the ones that dont understand economics and what it would do and is doing to the entire world’s economy – which is why the Feds offered to assist.
Perhaps AIG was too bull headed and relied on the housing / mortgage market too much – but I believe they will come back smelling even better than they did a few years ago.