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.
I am a broker and have had several calls from senior management from other carriers smelling blood in the water and wanting AIG business. I find it interesting that when I marketed the very same business over the years that they now want, they were not interested. Yes, as an agent, I have a obligation to my client and have been and will continue to provide options. However, I will not throw AIG under the bus as they have been a business partner for several years and I see them continiung to be in that same role. AIG is going to look a lot different in the next 6 to 12 months, but their insurance side is strong and will continue to write business. They will know who their friends are, and they will remember.
I agree with you 100% Client Advocate. It’s easy to call one another Partners when times are good for both, but when one side gets dropped to its knees, the hardest part isn’t necessarily for that side to get back up, it’s the conviction, loyalty, and mettle their Partner displays by standing shoulder to shoulder and saying lean on me for awhile until you’re back up. We expect it out of our Clients and Carriers, so why should they not expect it from us. Those that cut and run do so solely out of fear.
I think it was Oprah who said: Your friends are not those who will ride with you in the limo when times are good – Your friends ARE those who will ride with you on the bus when times are bad.
That said, insurance agents and insureds have choices to ride the bus or the limo – and most will probably choose the limo.
I whole-heartedly concur. Nothing is more offensive to me than to have the vultures circling the dead meat when they didn’t want it when it was alive.
As foolish as it might be, longevity and loyalty should count for something; besides, I believe the issue will blow over sooner rather than later. Why make more work for yourself.
I agree that business should not be moved and it’s our jobs to explain to insured that they are safe. I really believe on the ones that are wanting coverage moved they will have a shock when it comes to the difference in premium and coverage. Especially if they have any coastal properties.
I would like to see a survey that shows how many people actually move their business?
These are interesting comments and it’s interesting to hear companies are soliciting AIG business. I am a commercial lines underwriter at a large surplus lines company and we are fielding calls from our brokers wanting to move business to us. Our response? No mid-term moves, just as it always is. We’ll consider anyone coming up for renewal or that is currently bare just as always.
Unless AIG drops below a B+, we will not be considering any of their business just because our brokers are afraid of an E&O situation. It’s a pretty knee-jerk reaction to move business when they are still A rated by AM Best.
Memories – I am a Florida Agent so I’m probably treated like a red headed step-child with hookworms.
Buttt- I’ve defended A+ carriers that were F- in 11 months (only to lose most of that business to direct writers when others were out of capacity – or just greedy)
And, I’ve watched A rated carriers go to C+ – moved the business and watched them
‘remember’ when they came back.
Have also depended on ‘Stable’ long term relationships and watched them
‘wipe out entire books of package (property lite) business’ without blinking and without warning. All in the name of ratings. I say its about a 50/50 bet — put it all on the pass line – but don’t depend on anything.
Hello,
AIG is BANKRUPT and if you think they will remember you when you are down think again. You owe it to your clients to protect their interest not AIGs. This is a good reason not to mix insurance with others businesses.
Interesting comments. Our whole country is bankrupt, we just haven’t figured it out yet. Too much debt all the way around. The government, consumers, businesses. A painful correction is in progress and some of the plates may keep spinning, but alot of big ones have fallen already. Pay off your debts and have a cash reserve and if possible get your hands on some hard assets.
If nothing worse happens you will still sleep better at night.
I suspect the reason some carriers are showing new interest in the AIG book is that they hope the renewals may have more attractive pricing and terms and conditions than the expiring AIG programs.
If they thought AIG’s expiring pricing was already below a level they would consider prudent, or that no matter what they offered AIG would get last look and undercut anything they would be willing to offer, why would they waste their time and yours quoting the business?
So long as they told me politely that I had a deal that was too good to be true I have no problem with renewed interested in the accounts. Those that were rude – well that’s a different matter.
Those of you that think that AIG’s insurance operations will be fine are living in a dream world. Their management team is not calling the shots any more and the fire sale is starting. It will not look the same and while loyalty is honorable, don’t get burned for it. While the insurance people didn’t cause this meltdown, their management betrayed their ownership, employees, clients and distribution system and the insurance people are paying the price for it (along with the taxpayers). There will be a lot of pressure on the Feds to get good money for the assets to minimize the cost to taxpayers to pay for this unfortunate but necessary bailout.
It is fine to say “I am hanging with AIG during these troubled times.” My fear would be, as an agency owner, considering my clients well being first. If I continue to place business with a “govt. controlled entity”, how will I provide decent service? How sure am I that $85 Billion is enough? What if we continue to place business and the numbers grow and the deal is not working for anyone? After the initial fire sale of AIG assets, I worry that my E&O would be tapped for continuing to place business with a company who’s parent company is totally illiquid,(not insolvent) per Hank. My additional concern is taking a hit and not being paid commissions for the work. I might “slide” business elsewhere until things work themselves out. Just protecting my clients so MY AGENCY will be here in the future!
Listen… These are crazy times. AIG dropping like this never even entered our minds less than a year ago. And like the others I admire your loyalty….
But you really have to be kidding me.
AIG is not AIG anymore. Their rating is dropping and due to many many umbrella concerns you have to think about moving it.
And to the supposed E&S commentor earlier? Please. I never met a rep from and E&S carrier who would turn down an opportunity like this.
We need to get very real…this is the situation. AIG got greedy on the financial side and got stung. The deserve to lose the business. And your customers deserve to be with a company that has a strong financial backing.
Bottom line is :
If you dont move your clients and AIG goes down and your client has a loss that goes unpaid as a result, you get hit. Bank on it. Been there done that.
If you do move them and Aig ins division survives as Aig( which i doubt) they will remeber and punish you for it even though you had nothing to do with the real reason Aig got into trouble.
If you dont move the account and Aig ins is sold to say Liberty mutual or one of the other national carriers, dont worry you will mean nothing to them at all and you will not readily get a contract.
Sooo, do what is in the best interest of your client because they are your income stream.
Lastly anyone willing to believe the partent company can get into trouble but the parts of the whole are in great shape and will survive tells me people believe what they want to believe. You can bank on it, 50/50 chance this thing works out.
I truly hope Aig survives because thety are an important part of the ins network willing to write risk.
P.S.- Those other carriers are in dream worlds. They pick and choose risk without risk. . Aig took risks. Big difference in companies.
This company is getting ready for a FIRE SALE without question. The interest on the loan is more than 25 million a day! Lets see how long they can keep paying that interest along with the other debt.
I think the reality is that nobody really knows what is going to happen to AIG. They want to sell certain assets and keep others. The market may end up dictating to them what is bought and sold. They owe an incredible sum each month and they will have to take what the market provides them.
Employees will begin to receive offers from competitors. Clients will receive offers from incumbent agents or agents looking to win new business. If employees see clients leaving they may opt for new offers. If employees leave their service can slip, which may drive others to flee.
I am wondering if losing business will hurt them financially. Of course less revenue means less income but then again, less business means a reduction in assets right? Don’t they need to delever anyway?
Are you people for real? Their reserves can’t be touched folks. AIG is in business to stay. They’re just short on operating cash, thanks to some greedy Gonifs who got involved in this sub-prime crap. I’m not moving business, and I’m even buying their stock! AIG is worldwide and backed by the US economy. Uncle Sam, ain’t gonna let it fail.
A good stream of opinions on the topic. I have looked at this issue hard on behalf of my business and clients. If you look at AIG’s financial statements, you realize AIG is truly a remarkable company with over $1 trillion in assets (good long-term assets) and operating internationally in over 130 countries, well beyond their next largest competitor. They are a unique machine built by Hank with momentum up until recently. AIG parent is short-term cash strapped, not insolvent (FAR from it). Remember, AIG invested in relatively secure mortage-backed derivatives, just like most financial companies. These were not junk bonds. Traders stopped buying these instruments a year ago due to default rates. As such, AIG is having big (paper loss) write downs due to GAAP accounting rules which is finally taking a toll on their short-term cash-position. They may get to write alot of this back into their results if the derivatives market comes back from $0 in the next year or so. US economy (specifically mortgage defaults) are driving this issue. Without the ability to sell these derivatives and the price of stocks/bonds going down, they need short-term cash in a hurry and don’t want a fire sale of good assets to get it. AIG is a good company with great underwriting (Commercial ins. at 93 combined ratio). The $85 billion is a line of credit to allow AIG time to properly get the best price for their asset sale (2 years total), so no fire sale needed. If you truly think the government is running and dictating AIG assets for sale (and wants to own/run it), then I can’t help your logic. AIG is no typical P&C company (look at their annual statements). If AIG defaults after 2 years, then yes, we own what’s left. However, with $1T in good assets and very profitable insurance operations (for the most part), if they can’t ante up what they borrow against the $85B, I would be absolutely shocked. Bottomline, I need AIG for what they can do in the marketplace, and AIG needs me to not be reactionary right now. It is far too early to start moving business when there is no immediate need to do so. You have time to see how things turn out and decisions to be made/announced by AIG in the coming month or two. Don’t be another knee-jerk reaction to sensational news without a proper understanding of what AIG brings and can bring to the table going-forward. DO your own research from AIG’s own filed documents. My opinion.
Every State Board of Insurance is watching AIG and their financial strength is better than Aetna & United from what I can see so far. It is my understanding that the parent company can not “take” for than a dividend share – in addition the newest Standard & Poor’s & AM Best ratings still held many of the subsidary companies at an A Excellent rating not an A- like the parent compnay.
Selling &/or advising Policy holders to be smart and look at their options, fees, etc… is ethical. Most AIG insurance companies are the best in the world – still today. Assisting people retain affordable plans with reputable insurance companies (AIG or not) is our is our responsibility.
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.
I am a broker and have had several calls from senior management from other carriers smelling blood in the water and wanting AIG business. I find it interesting that when I marketed the very same business over the years that they now want, they were not interested. Yes, as an agent, I have a obligation to my client and have been and will continue to provide options. However, I will not throw AIG under the bus as they have been a business partner for several years and I see them continiung to be in that same role. AIG is going to look a lot different in the next 6 to 12 months, but their insurance side is strong and will continue to write business. They will know who their friends are, and they will remember.
Well put CA and I concur.
I agree with you 100% Client Advocate. It’s easy to call one another Partners when times are good for both, but when one side gets dropped to its knees, the hardest part isn’t necessarily for that side to get back up, it’s the conviction, loyalty, and mettle their Partner displays by standing shoulder to shoulder and saying lean on me for awhile until you’re back up. We expect it out of our Clients and Carriers, so why should they not expect it from us. Those that cut and run do so solely out of fear.
I think it was Oprah who said: Your friends are not those who will ride with you in the limo when times are good – Your friends ARE those who will ride with you on the bus when times are bad.
That said, insurance agents and insureds have choices to ride the bus or the limo – and most will probably choose the limo.
I whole-heartedly concur. Nothing is more offensive to me than to have the vultures circling the dead meat when they didn’t want it when it was alive.
As foolish as it might be, longevity and loyalty should count for something; besides, I believe the issue will blow over sooner rather than later. Why make more work for yourself.
I agree that business should not be moved and it’s our jobs to explain to insured that they are safe. I really believe on the ones that are wanting coverage moved they will have a shock when it comes to the difference in premium and coverage. Especially if they have any coastal properties.
I would like to see a survey that shows how many people actually move their business?
These are interesting comments and it’s interesting to hear companies are soliciting AIG business. I am a commercial lines underwriter at a large surplus lines company and we are fielding calls from our brokers wanting to move business to us. Our response? No mid-term moves, just as it always is. We’ll consider anyone coming up for renewal or that is currently bare just as always.
Unless AIG drops below a B+, we will not be considering any of their business just because our brokers are afraid of an E&O situation. It’s a pretty knee-jerk reaction to move business when they are still A rated by AM Best.
Memories – I am a Florida Agent so I’m probably treated like a red headed step-child with hookworms.
Buttt- I’ve defended A+ carriers that were F- in 11 months (only to lose most of that business to direct writers when others were out of capacity – or just greedy)
And, I’ve watched A rated carriers go to C+ – moved the business and watched them
‘remember’ when they came back.
Have also depended on ‘Stable’ long term relationships and watched them
‘wipe out entire books of package (property lite) business’ without blinking and without warning. All in the name of ratings. I say its about a 50/50 bet — put it all on the pass line – but don’t depend on anything.
Hello,
AIG is BANKRUPT and if you think they will remember you when you are down think again. You owe it to your clients to protect their interest not AIGs. This is a good reason not to mix insurance with others businesses.
Interesting comments. Our whole country is bankrupt, we just haven’t figured it out yet. Too much debt all the way around. The government, consumers, businesses. A painful correction is in progress and some of the plates may keep spinning, but alot of big ones have fallen already. Pay off your debts and have a cash reserve and if possible get your hands on some hard assets.
If nothing worse happens you will still sleep better at night.
I suspect the reason some carriers are showing new interest in the AIG book is that they hope the renewals may have more attractive pricing and terms and conditions than the expiring AIG programs.
If they thought AIG’s expiring pricing was already below a level they would consider prudent, or that no matter what they offered AIG would get last look and undercut anything they would be willing to offer, why would they waste their time and yours quoting the business?
So long as they told me politely that I had a deal that was too good to be true I have no problem with renewed interested in the accounts. Those that were rude – well that’s a different matter.
Those of you that think that AIG’s insurance operations will be fine are living in a dream world. Their management team is not calling the shots any more and the fire sale is starting. It will not look the same and while loyalty is honorable, don’t get burned for it. While the insurance people didn’t cause this meltdown, their management betrayed their ownership, employees, clients and distribution system and the insurance people are paying the price for it (along with the taxpayers). There will be a lot of pressure on the Feds to get good money for the assets to minimize the cost to taxpayers to pay for this unfortunate but necessary bailout.
It is fine to say “I am hanging with AIG during these troubled times.” My fear would be, as an agency owner, considering my clients well being first. If I continue to place business with a “govt. controlled entity”, how will I provide decent service? How sure am I that $85 Billion is enough? What if we continue to place business and the numbers grow and the deal is not working for anyone? After the initial fire sale of AIG assets, I worry that my E&O would be tapped for continuing to place business with a company who’s parent company is totally illiquid,(not insolvent) per Hank. My additional concern is taking a hit and not being paid commissions for the work. I might “slide” business elsewhere until things work themselves out. Just protecting my clients so MY AGENCY will be here in the future!
Listen… These are crazy times. AIG dropping like this never even entered our minds less than a year ago. And like the others I admire your loyalty….
But you really have to be kidding me.
AIG is not AIG anymore. Their rating is dropping and due to many many umbrella concerns you have to think about moving it.
And to the supposed E&S commentor earlier? Please. I never met a rep from and E&S carrier who would turn down an opportunity like this.
We need to get very real…this is the situation. AIG got greedy on the financial side and got stung. The deserve to lose the business. And your customers deserve to be with a company that has a strong financial backing.
Bottom line is :
If you dont move your clients and AIG goes down and your client has a loss that goes unpaid as a result, you get hit. Bank on it. Been there done that.
If you do move them and Aig ins division survives as Aig( which i doubt) they will remeber and punish you for it even though you had nothing to do with the real reason Aig got into trouble.
If you dont move the account and Aig ins is sold to say Liberty mutual or one of the other national carriers, dont worry you will mean nothing to them at all and you will not readily get a contract.
Sooo, do what is in the best interest of your client because they are your income stream.
Lastly anyone willing to believe the partent company can get into trouble but the parts of the whole are in great shape and will survive tells me people believe what they want to believe. You can bank on it, 50/50 chance this thing works out.
I truly hope Aig survives because thety are an important part of the ins network willing to write risk.
P.S.- Those other carriers are in dream worlds. They pick and choose risk without risk. . Aig took risks. Big difference in companies.
This company is getting ready for a FIRE SALE without question. The interest on the loan is more than 25 million a day! Lets see how long they can keep paying that interest along with the other debt.
I think the reality is that nobody really knows what is going to happen to AIG. They want to sell certain assets and keep others. The market may end up dictating to them what is bought and sold. They owe an incredible sum each month and they will have to take what the market provides them.
Employees will begin to receive offers from competitors. Clients will receive offers from incumbent agents or agents looking to win new business. If employees see clients leaving they may opt for new offers. If employees leave their service can slip, which may drive others to flee.
This can get really ugly, quick!!
I am wondering if losing business will hurt them financially. Of course less revenue means less income but then again, less business means a reduction in assets right? Don’t they need to delever anyway?
Are you people for real? Their reserves can’t be touched folks. AIG is in business to stay. They’re just short on operating cash, thanks to some greedy Gonifs who got involved in this sub-prime crap. I’m not moving business, and I’m even buying their stock! AIG is worldwide and backed by the US economy. Uncle Sam, ain’t gonna let it fail.
A good stream of opinions on the topic. I have looked at this issue hard on behalf of my business and clients. If you look at AIG’s financial statements, you realize AIG is truly a remarkable company with over $1 trillion in assets (good long-term assets) and operating internationally in over 130 countries, well beyond their next largest competitor. They are a unique machine built by Hank with momentum up until recently. AIG parent is short-term cash strapped, not insolvent (FAR from it). Remember, AIG invested in relatively secure mortage-backed derivatives, just like most financial companies. These were not junk bonds. Traders stopped buying these instruments a year ago due to default rates. As such, AIG is having big (paper loss) write downs due to GAAP accounting rules which is finally taking a toll on their short-term cash-position. They may get to write alot of this back into their results if the derivatives market comes back from $0 in the next year or so. US economy (specifically mortgage defaults) are driving this issue. Without the ability to sell these derivatives and the price of stocks/bonds going down, they need short-term cash in a hurry and don’t want a fire sale of good assets to get it. AIG is a good company with great underwriting (Commercial ins. at 93 combined ratio). The $85 billion is a line of credit to allow AIG time to properly get the best price for their asset sale (2 years total), so no fire sale needed. If you truly think the government is running and dictating AIG assets for sale (and wants to own/run it), then I can’t help your logic. AIG is no typical P&C company (look at their annual statements). If AIG defaults after 2 years, then yes, we own what’s left. However, with $1T in good assets and very profitable insurance operations (for the most part), if they can’t ante up what they borrow against the $85B, I would be absolutely shocked. Bottomline, I need AIG for what they can do in the marketplace, and AIG needs me to not be reactionary right now. It is far too early to start moving business when there is no immediate need to do so. You have time to see how things turn out and decisions to be made/announced by AIG in the coming month or two. Don’t be another knee-jerk reaction to sensational news without a proper understanding of what AIG brings and can bring to the table going-forward. DO your own research from AIG’s own filed documents. My opinion.
Every State Board of Insurance is watching AIG and their financial strength is better than Aetna & United from what I can see so far. It is my understanding that the parent company can not “take” for than a dividend share – in addition the newest Standard & Poor’s & AM Best ratings still held many of the subsidary companies at an A Excellent rating not an A- like the parent compnay.
Selling &/or advising Policy holders to be smart and look at their options, fees, etc… is ethical. Most AIG insurance companies are the best in the world – still today. Assisting people retain affordable plans with reputable insurance companies (AIG or not) is our is our responsibility.