All articles by Stafford Thomas
Stafford Thomas
New York Life proves itself worthy of AAA rating
Left with the coveted AAA rating are a mere handful: New York Life (NYL), Northwestern Mutual and TIAA-CREFThe Aaa rating by Moodys in March, followed by AAA from S&P in June and Fitch in October vindicated the confidence NYL expressed in its financial stability following an internally conducted stress test in February 2006.The US largest mutual insurer has now reiterated its confidence against the background of the World Health Organisations recent declaration of the swine flu (H1N1) outbreak as a pandemic.NYLs assurance follows re-stress testing its surplus and asset valuation reserve under the same three catastrophic scenarios used in 2006: A major pandemic; A decade-long low interest rate environment; and A stock market drop of 40 percent.When we constructed the catastrophic scenarios three years ago we believed it was extremely remote that two of them might occur simultaneously Now this is a real possibility and we know New York Life can handle the challenge, commented Ted Mathas, NYLs chairman, president and CEO.On the added threat posed by the pandemic he commented: Our company is well aware of the risks associated with pandemics.The 1918 flu pandemic, which claimed millions of lives around the world, was the single biggest event in our companys 164-year history, in terms of death claims. It far surpassed the World Wars and other disasters in its devastating human cost.He continued that in the latest stress test NYL used its historical records of the 1918 pandemic
AIG’s outstanding-debt mountain
Precisely how much does American International Group (AIG) still have to repay the US government?It is a question that is the source of much confusion which the beleaguered insurer has acted to put to an end with the release of up-to-date Government Accountability Office (GOA) data.The answer to the AIG repayment question is that it remains a vast sum, totalling $83.6 billion, the largest portion of which comprises preferred equity capital of $44.8 billion invested in AIG by the US Treasury Department through its Troubled Asset Relief Program (TARP).This total comprises an initial $41.6 billion invested under the TARP and $3.2 billion of an additional $29.835 billion available to it under the TARP.The balance of the $83.6 billion comprises $38.6 billion in loans, interest and fees under a revolving $60 billion, five-year credit facility extended to AIG by the Federal Reserve Bank of New York (FRBNY).This debt is set to fall significantly as the result of an agreement between AIG and the FRBNY under which AIG will issue to the FRBNY preferred interests in special purpose vehicles holding equity in certain AIG subsidiaries in exchange for a reduction in the outstanding debt under the FRBNY facility.When these transactions close, AIGs debt to the FRBNY will be reduced by a total of $25 billion.Repayable debt is only part of the assistance extended to AIG which at present totals $120.7 billion.The additional sum of $37.1 billion comprises loans extended to two special financing entities created by the FRBNY in the last quarter of 2008, Maiden Lane II and Maiden Lane III.Maiden Lane II received $19.5 billion to purchase residential mortgage-backed securities held in connection with AIGs securities lending programme
Mortgage payment insurers take £60m hit
Following discussions initiated by the FSA with relevant trade bodies and some insurers, market participants have agreed to: Refund increases by no later than June 2010 in premiums and reverse any reductions in cover for customers who have experienced these changes to their policy in 2009; Offer to reinstate policies where a customer had cancelled it within two months of an increase in premium or reduction in cover made during 2009; Freeze premiums and cover for existing customers for at least the remainder of this year; Amend MPPI contracts to ensure that all customers are made aware of the circumstances in which firms have the right to vary premiums and cover; and Notify customers in writing, giving at least two months notice, explain the basis on which the premium may be increased andor cover decreased after 1 January 2010.Commenting positively on the FSAs actions Lucy Widenka, consumer advocacy group Which?s personal finance campaigner, said: Were pleased that the FSA has taken action against firms who have effectively been selling people umbrellas then trying to take them away at the first sign of rain.The FSA noted that the MPPI refund is a unique solution to a specific set of FSA concerns and does not set a precedent
Premature death stalks US’ uninsured millions
As the debate focused on the mooted creation of a of a government-backed health insurance plan in the US rages on, a study undertaken by Harvard University has greatly strengthened the argument of proponents of federal involvement.
Veteran banker takes over the hot seat at The Hartford
McGee, 55, steps into the positions Ayer had held since February 1997 at a time when the insurer is still repairing damage done by the worst financial setback in its 199-year history.Commenting on McGees appointment, Michael Morris, The Hartfords presiding director, said: Liams strong track record of success in leading large, complex financial services organisations makes him the ideal person to build on The Hartfords strong foundation.McGee undoubtedly comes with a solid track record, including until recently holding the position of president of the Consumer and Small Business Bank for Bank of America (BofA) where he ran a business serving 50 million households and small businesses through a distribution network including 6,100 branches and the US largest online banking service.In his position at BofA McGee was also responsible for products and services including deposits, debit and integrated solutions for small business and mass affluent customers as well as overseeing the banks technology and delivery in some 30 countries.McGee, who joined BofA in 1990, also led the integration of a number of US banks acquired by BofA including FleetBoston (2003), MBNA (2006) and La Salle (2009).In 2008 The Hartford reported revenue of $9.2 billion and a net loss of $2.75 billion
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ING continues along disposal trail
Marking another step in its rationalisation strategy, Dutch bancassurer ING Group is to sell its 51 percent equity stakes in ING Australia and ING New Zealand to its joint venture (JV) partner Australia and New Zealand Banking Group (ANZ) The Dutch bancassurer estimates that the 1.1 billion ($1.5 billion) cash deal will result in it realising a net profit of 300 million and the freeing up of 900 million capital.This transaction is another important step in executing our Back to Basics strategy, commented INGs CEO Jan Hommen The sale of our insurance and wealth management operations in Australia and New Zealand is further proof of our determination to simplify the organisation by focusing on fewer, strong franchises that form a coherent group.The JV between ING and ANZ dates back to the merger of their insurance and wealth management operations in Australia and New Zealand in 2002
Legislation in US comes thick and fast
US insurance regulatory body the National Association of Insurance Commissioners (NAIC) has given its approval to the Reinsurance Regulatory Modernization Act of 2009, a proposed federal bill to be submitted to Congress that would reform reinsurance regulation by states.
US insurers hit by legislative avalanche
This year has seen unprecedented insurance-related activity in US state legislatures, adding further to the already colossal task insurers face keeping track of change. For insurers operating on a multi-state basisthis will make the proposed alternative of regulation by a single Federal body even more appealing
UK at risk of killing the golden goose
Though it is home to the worlds third-largest insurance industry, the UK will have to take a long, hard look at its tax regime if it intends to remain competitive globally. If it does not, warns the Association of BritishInsurers, there is a very real danger of an exodus of insurance companies and industry executives
UK pension reform takes a turn for the worse
Success of sweeping reform of the UKs pension landscape heralded by the passing of the 2008 Pensions Act and due for implementation in 2012 is under threat, warns the Association of British Insurers (ABI).