Next up: Life Insurers
This is as strong an argument for receivership/recapitalization as I’ve seen. The otherwise healthy life Insurance business is getting dragged through the muck by the collapsing banking and brokerage industries:
“The tumbling financial markets are dragging down the life-insurance industry, an important cog in the U.S. economy, as mounting losses weaken the companies’ capital and erode investor confidence.
A dozen life insurers have pending applications for aid from the government’s $700 billion Troubled Asset Relief Program, and the industry is expecting an answer to its request for a bank-style bailout in the coming weeks. The government so far hasn’t said whether insurers will be eligible for the program.
Life insurers have taken a beating in recent weeks. The Dow Jones Wilshire U.S. Life Insurance Index has fallen 59% since the beginning of the year, leaving it down 82% since its May 2007 all-time high. The Dow Jones Industrial Average has lost 21% year to date, off 51% since its October 2007 record.”
The longer we dawdle . . .
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Source:
The Next Big Bailout Decision: Insurers
SCOTT PATTERSON and LESLIE SCISM
WSJ, MARCH 12, 2009
http://online.wsj.com/article/SB123681439092901753.html
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March 12th, 2009 at 8:23 am
Let’s make a distinction. Are they in financial trouble or is it just that their stocks need a boost? Are the actuaries they use a part of the sales team and taking advice from lobbyists about the best assumptions to use for projections? Are they going to stiff a few widows and orphans just to make a point about needing free money from Uncle Stupid? Hey insurance companies, you want cash? Get on your knees and earn it.
March 12th, 2009 at 8:23 am
My impression was that life insurers were taking a beating on their CRE exposure. Let’s keep propping up asset prices to save them!
Who’ll open the bidding for an empty tower in lovely downtown Miami?
Whoodathunk that annunities and life insurance of all things were relatively unsafe? When the tide goes out…
March 12th, 2009 at 8:26 am
I keep looking at this wondering where the silver lining is..
http://www.msnbc.msn.com/id/29651062/
Treasury seeks $100 billion to aid ailing nations
The Europeans have told us they will approach the recession their way, and they will not be throwing more buckets of money at the problem…the Germans have told Eastern Europe they will not bail them out…so what are we going to do…? It appears that we will bail the world out economically…good luck with that thinking…
Also, it appears that we will no longer be the world’s policeman.
http://www.foxnews.com/story/0,2933,508952,00.html
China Demands End of U.S. Navy Surveillance
Whether this is a good thing or not, I am sure people have opinions…but it appears to me at least that we will give the Chinese what they want, and I think our demise as a world player will be faster than most think…we’ve had our moment in the sun, and it is setting. I do find it interesting that they picked on Obama in his first hundred days.
Sorry this is OT…but it interested me when I read these two things this morning…long day ahead at the salt mine…
March 12th, 2009 at 8:29 am
The lunacy of the state-level regulators is the first thing that needs to change. Why are New Hampshire’s auto insurance issues so different from Vermont’s?
You want to cut government spending? Turn fifty regulators into one.
March 12th, 2009 at 8:39 am
Retail sales ex-autos up .7%. I told you so. The malls were packed. It must really suck when the economy doesn’t follow the script. It makes it a lot harder to get free money from Uncle Stupid. I turned on CNBC to get the breaking number. Surprisingly, they appear to be ignoring it. The overall of -.1% including autos is the one being pushed. Time to change the channel.
March 12th, 2009 at 8:41 am
OT – Feb foreclosures are up substantially which makes CITI’s good results in Feb even more incredible since banks loose on virtually every foreclosure now and 40-50% losses are common in bubble states. Pandit has done an unbelievable job turning CITI around in the worst possible circumstances, can’t wait to see the blowout 1Q profits leave the street in shock & awe!
http://www.foxbusiness.com/story/foreclosures-hit-record-level-february/
March 12th, 2009 at 8:47 am
It is shocking to me, seeing how Geithner and company are playing this “What Elephant?!” game as the world financial system worsens.
This is a serious mistake, and its going to make things a lot worse. Now the only question is now long it will take for their bloated egos to acknowledge the mistake, and move to do what must be done; which is to purge management of these screwed up banks, and clear their balance sheets.
In the meantime, I am short the stock market.
March 12th, 2009 at 8:54 am
The life insurers were doomed from the get go. They offer products that guarantee investment returns. This is a guarantee that they could never meet should the inevitable happen. So, the question is the same as before: who will pay for the stupidity of the purchasers and providers of these products? I can guarantee you that the answer to that question is the same as before: you, the taxpayer. This administration is hell bent on placing the mistakes of the private sector onto the balance sheet of the public in the name of avoiding systemic risk…as if we aren’t experiencing that now anyway in water torture fashion. I see nothing that tells me they won’t find a way to get government aid to this sector whatever the Congress thinks. Obama/Geithner/Summers are tarpaholics.
March 12th, 2009 at 9:00 am
The world… didn’t all follow Mr. Bush with the urgency of “weapons of mass destruction”… so why should the world follow the urgency of Mr. Obie’s call for stimuli and throwing massive amounts of money at this not so great business cycle. They have gone through rough times before, what’s so hard to do it again. European countries have stabalizers and safety nets like UI, and health care… and job retraining… why not let them work their magic.
Plus the world and China have every write to demand and expect more from Obie and Dark Gater, they hold large portions of the US debt. And the world should expect the country that lead the world into the Great Recession.. should do what it takes to get the world out of it… that includes bail-out for those Eastern Europe countries… why should the Europeans be solely responsible?
March 12th, 2009 at 9:09 am
VennData, The reason New Hampshire has higher auto insurance rates, is due to the fact that you do not need insurance to register your car for the road. You can see why the rates would be higher here compared to our neighbor Vermont. People have mentioned the higher retail sales number, could that be due to the increase in fuel prices over the last month or so. I’m in the business of selling to retail stores and my wholesale numbers tell me their sales are hurting. I talk to retailers nationwide on a daily basis and for most, business stinks.
March 12th, 2009 at 9:11 am
@ dead hobo-
I m not sure you can believe what Pandit says or any CEO who is in a dire position with their balance sheet and stock valuation- they are trying to game their survival.
March 12th, 2009 at 9:27 am
In this era of low interest rates, low or negative stock market returns, and collapsing real estate values, can there be a worse business than selling annuities and insurance products? Maybe running pension funds but not much else. To think that these folks are simply lining up for a handout is to not understand the seriousness of the present crisis.
I also find it interesting that anyone who has peeked under the tent is not pounding the table for nationalization or recapitalization or whatever. Makes me think the we the stench inside could be life threatening.
March 12th, 2009 at 9:31 am
I can’t see a compelling reason to bail these guys out. They’re supposed to be the ass-masters of risk and they can’t pay their annuities?
If you open this can of worms, then you slide down the slippery slope of bailing out PBGC, private pensions, hedge funds that manage private pensions… so on and so forth.
No, a line has to be drawn. You can argue about where it should have been drawn, but these are clearly not candidates for TARP money.
March 12th, 2009 at 9:38 am
I work for a mutual Insurer which has no shareholders to worry about. We have 14 billion in surplus and it is amazing how much of our Real Estate is valued very close to our purrchase price. We have a commercial Building in Walnut Creek Ca we bought in 1982 and it is valued 5% higher than we purchased it.
I believe we might be the last standing AAA company but it amazes me how poorly some of the other company’s are run. Dividend Scales for the life insurance products will be hoorible two or three years from now for the poorly run companies.
March 12th, 2009 at 9:39 am
dead hobo Says:
March 12th, 2009 at 8:39 am
Retail sales ex-autos up .7%. I told you so. The malls were packed. It must really suck when the economy doesn’t follow the script.
———————–
It must really suck when you are wrong, too:
Sales at automobile dealers and parts stores slumped 4.3 percent, the most since October.
Other categories showing decreased demand included building material stores, grocery stores and restaurants and bars.
A jump in receipts at service stations as gasoline prices rebounded led gainers. Filling station sales climbed 3.4 percent.
Excluding gas, retail sales decreased 0.4 percent.
March 12th, 2009 at 9:39 am
Pensions would quickly follow. Even the prepaid funeral fund here in IL is in trouble. The state treasurer is withholding the details on that right now.
Hynes won’t release records of pre-need funeral trust
http://www.sj-r.com/state/x1683619686/Hynes-wont-release-audit-review-of-pre-need-funeral-trust
If you can’t trust your funeral fund’s safety, wow. It must be co-mingled with the rest of IL’s money problems.
But seriously, the pension fund market losses and their non-realized CRE and RE losses are gonna wipe us all out as taxpayers.
Have a nice rally.
March 12th, 2009 at 9:49 am
Let’s have a real close look at these companies balance sheets to decide if they are simply jumping on the bandwagon for ‘bailout’ money that they wish to use instead of their own.
What is their cash position? On balance sheet and off?
March 12th, 2009 at 9:53 am
@rktbrkr re: Citi – I’d caution not to get too excited about Pandit’s comments the other day. He was very careful to talk about operating profits. Chargeoffs/toxic asset writedowns, etc are going to be below the operating line and won’t be taken until the end of the month when the auditors push them.
March 12th, 2009 at 10:00 am
http://www.nmfn.com/tn/aboutus–fi_invschedules
Here is the public record on all of our marks. smarter folks than me can dissect them.
Will
March 12th, 2009 at 10:31 am
AndrewShaw Says: March 12th, 2009 at 9:39 am
Andrew,
if you’re really interested, you should get a copy of Illinois’ Comprehensive Annual Financial Report.
http://trs.illinois.gov/subsections/pubs/cafr/cafr.htm
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Illinois+Comprehensive+Annual+Financial+Report
March 12th, 2009 at 10:45 am
How much of that retail sales was due to 50-70% off “deals”? Hey, it’s a small silver lining that we should take but, let’s get real. People are not going to simply stop going out altogether (unless the Mad Max scenario presents itself, which it won’t) and change their habits overnight, especially when there are so many “great deals” out there (Americans LOVE, I mean, LOVE a “perceived” good deal, or “free lunch”, shall we say)? Habits are deeply engrained and many people in this country wouldn’t know what to do with their time if they didn’t wander around stores looking for crap they don’t need. Denial and habits run deep. Me-thinks the canary in the coal mine here is credit card blow ups coming to strip mall near you.
March 12th, 2009 at 11:46 am
Mannwich Says:
at 10:45 am
How much of that retail sales was due to 50-70% off “deals”?
Uh-yuh!
Macy’s sale this week, bought a $525 Calvin Klein wool/cashmere suit, 2 dress shirts, 2 ties, belt, 9 prs socks and a Totes umbrella: TOTAL w/tax = $194.45
No wonder “the malls are packed”.
March 12th, 2009 at 11:51 am
Noteworthy – don’t believe any of those Macy’s sale items were manufactured in the good ol’ U. S. of A.
However, I did spend an additional $45 on alterations which are done by Columbian immigrant tailors.
March 12th, 2009 at 5:30 pm
Does the list of those looking for a handout ever end?