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HomeLet’s Not Forget About Insurance Exposures
Posted by Larry Doyle on February 20th, 2009 11:47 AM |
While the markets and media are focusing predominantly on the banks and their capitalization needs, there are significant problems throughout the insurance industry as well. The primary exposures within insurance companies causing concerns lie within their commercial real estate holdings.
We have yet to see the actual defaults and foreclosures on a large swath of the commercial real estate market, but they are out there and they are coming. Let’s review the insurance industry along with some personal finance tips from an interview I had on my weekly No Quarter Radio program with an expert in these spaces, Sean D’Arcy. A lot of what Sean highlighted during his interview on January 11th is happening currently and likely will occur in the weeks and months ahead!!
You can listen to the archived audio of the January 11th interview on No Quarter Radio. In addition, I transcribed the interview in my piece “Got Insurance? 529 Plans? Financial Planning? Read On . . .”
LD
Got Insurance? 529 Plans? Financial Aid? Read On . . .
Posted by Larry Doyle on January 13th, 2009 5:10 PM |
At the request of numerous readers, I am offering a transcript review of my interview this past Sunday evening with insurance and financial planning expert, Sean D’Arcy. Additionally, if you’d like to listen to this interview in its entirety, just click on the Play button below for the audio recording. Once the playback has started, you can fast forward or rewind to any portion of the show by clicking at any point along the play bar. Archived programs are also available as a podcast from iTunes.
As a disclaimer, the opinions offered are Sean’s alone. The transcription is mine. I have no vested financial interest in Sean’s business or any of the views or companies mentioned. The purpose of providing this recap is strictly as a public service. To the extent that you find this material beneficial, my mission is accomplished. If you find this material helpful, please forward it along. If we grow our audience in the process that would be great!
Sean is a self-employed independent insurance and financial planning executive. He is a graduate of Columbia ’81.
LD: Sean, can you address how the insurance industry is regulated?
SD: The insurance industry is regulated by 50 separate state insurance offices. Each of those offices is responsible for the oversight of insurance business done within their state. Some states are very disciplined in this process, for example New York has very strong oversight. Other states are clearly lacking in the professional expertise to properly oversee insurance business within their state. Each state insurance commissioner is appointed by the respective governors. Each state insurance office is funded by a tax on the premiums written in that state. For example, New York imposes a 4% tax on each policy written in the state. An emergency fund is also put in place to address potential funding problems with individual companies.
Market Musings on a Monday
Posted by Larry Doyle on January 12th, 2009 10:05 PM |
With so many cross-currents in our economy and markets, it is little wonder that people feel overwhelmed and disoriented. The powers-that-be in Washington are in a period of transition with plenty of backroom dealing going on from both a political and economic standpoint. The financial markets remain challenged from a liquidity and valuation standpoint. Against these backdrops, I hope readers are becoming more comfortable with my analysis of the economy, the markets, and the world of finance at large. Let’s dive into the issues and topics I find most compelling.
Earnings and Outlooks
On the equity front, the bottom line — that being earnings — is ultimately what drives prices. Time and time again we will hear analysts and money managers “talk their positions.” These individuals are either blinded by the big picture or talking the party line. In our piece on January 8th, “Time, Why You Punish Me?” I stated that “earnings expectations truly concern me.”
Fast forward to today and we see that Citigroup is leaking information into the market that their Q4 2008 earnings will be significantly worse than expected. Initially, Citi’s Q4 2008 earnings (why do we still use that term? They have not made money in so long. Wouldn’t it be better to merely call them losses and save ourselves the headache?) were expected to be -$4 billion. Citi is now leaking to the market that earnings will more likely be -$6 billion and that is only because they are recognizing a gain of $4 billion on the sale of a German retail banking business. Thus, ex that sale, Citi had a $10 billion operating loss for the Q4 2008.
