About 5/6ths (83%) of the reserve strengthening comes from the immediate prior accident year on the balance sheet (2016). Hopefully for AIG’s sake; i.e. stockholders sake, Dupperault (sp?) appoints someone to more closely monitor pricing activities by actuaries and the front-line underwriters in Commercial. The bulk of reserve movements in financials come from the two most recent accident years. But 83% from 2016 is a bit high, indicating lax price controls and poor management, er, ex-management?
Cat losses are cat losses; i.e. they are unexpected but some should be expected. I know that sounds like the late Professor Irwin Corey; i.e. The World’s Foremost Authority. But the ‘if not for Cat Losses’ attempt at excusing bad results is old and tired, IMO. These days, IT capabilities should enable actuaries and accountants to report cat premium components separately, and spread the annual cat premiums over 4 quarters according to the relative risk levels, so as to re-state quarterly results on a more equitable basis; e.g. 25%, 20%, 40%, and 15% for Qs 1-4, seeing that freeze losses occur more often in Q1 than Q4, and hurricanes occur more often in Q3. Even though current accounting conventions would remain in place, the restated cat premium allocations could be included by ‘smarter than the average polar bear insurance analysts’ in their quarterly analyses as an addendum to the income statement.
Smart management inside AIG may be banking on interest rate increases after the implementation of the Tax Law changes and other EOs that roll back regulations that have been hindering GDP growth to under 3% for the last 8 years. With that, they can tolerate CR > 100%.
Pre-emptive explanation to liberals who may be tempted to point out a single Q of GDP growth (= 3.1%?) under BHO discredits my post; I used 8 years as a WHOLE, and would also use WHOLE individual years to stress my point.
S&P rightly states their rating inaction is justified by their prior downgrade of AIG.
However, I wish they would STRIVE to find cat premium components in property rates (should be on file with the state regulatory offices, or directly available from AIG) to also exclude them when they publish their tired, lame, lazy ‘excluding cat losses’ re-stated loss ratios and CRs. In other words, they exclude cat losses from the numerators of profitability ratios, so they shoudl exclude cat premiums from the denominators…. and it’s not hard to do with modern IT capabilities. Maybe they’re just not as smart and creative as a ‘slightly smarter than the average polar bear’?
About 5/6ths (83%) of the reserve strengthening comes from the immediate prior accident year on the balance sheet (2016). Hopefully for AIG’s sake; i.e. stockholders sake, Dupperault (sp?) appoints someone to more closely monitor pricing activities by actuaries and the front-line underwriters in Commercial. The bulk of reserve movements in financials come from the two most recent accident years. But 83% from 2016 is a bit high, indicating lax price controls and poor management, er, ex-management?
Cat losses are cat losses; i.e. they are unexpected but some should be expected. I know that sounds like the late Professor Irwin Corey; i.e. The World’s Foremost Authority. But the ‘if not for Cat Losses’ attempt at excusing bad results is old and tired, IMO. These days, IT capabilities should enable actuaries and accountants to report cat premium components separately, and spread the annual cat premiums over 4 quarters according to the relative risk levels, so as to re-state quarterly results on a more equitable basis; e.g. 25%, 20%, 40%, and 15% for Qs 1-4, seeing that freeze losses occur more often in Q1 than Q4, and hurricanes occur more often in Q3. Even though current accounting conventions would remain in place, the restated cat premium allocations could be included by ‘smarter than the average polar bear insurance analysts’ in their quarterly analyses as an addendum to the income statement.
So even after the reserve development and Cat loss they put up a 102.4…but no talks of increasing rate?
Smart management inside AIG may be banking on interest rate increases after the implementation of the Tax Law changes and other EOs that roll back regulations that have been hindering GDP growth to under 3% for the last 8 years. With that, they can tolerate CR > 100%.
Pre-emptive explanation to liberals who may be tempted to point out a single Q of GDP growth (= 3.1%?) under BHO discredits my post; I used 8 years as a WHOLE, and would also use WHOLE individual years to stress my point.
S&P rightly states their rating inaction is justified by their prior downgrade of AIG.
However, I wish they would STRIVE to find cat premium components in property rates (should be on file with the state regulatory offices, or directly available from AIG) to also exclude them when they publish their tired, lame, lazy ‘excluding cat losses’ re-stated loss ratios and CRs. In other words, they exclude cat losses from the numerators of profitability ratios, so they shoudl exclude cat premiums from the denominators…. and it’s not hard to do with modern IT capabilities. Maybe they’re just not as smart and creative as a ‘slightly smarter than the average polar bear’?