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Unintended consquences.... no hard market?


ubuy2wron
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CNBC commented this AM that competitiors to AIG were complaining that AIG was currently guilty of aggressive pricing because of its govt. backing. Has the bail-out delayed the hard mkt we hoped for. Some posters here are insurance industry participants any anectodal observations would be appreciated re the pricing trends in the industry

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Who at AIG is thinking long term right now? My guess is morale is bad and people are simply trying to keep things 'looking' good for as long as possible. Assuming AIG is playing for market share and not long term profitability, the question I have is how long would it be until we know if they have been underpricing in their P&C business?

 

Second issue this raises is who would want to buy the AIG pieces if there was a decent chance underwriting discipline was not happening?

 

The next 6 months will be interesting as we continue to learn who has been swimming naked!

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My understanding is that AIG is pricing quite aggressively for the bigger books of business, which was their bread and butter in the not too distant past. Still, they are losing business because of it so it would not appear that all of the buyers out there are taking advantage of the fire-sale...they are losing business. My disclaimer is that this is a narrow view and should not be construed to be a universal truth. It would be instructive to get other narrow views on this to see if we can determine a trend.

 

-Crip

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On the longer tail business, won't it take some time before poor underwriting shows up?  I find it hard to believe that anyone would really be looking more than 6-9 months out at AIG.  So, in my mind they really don't care if they write bad business...the gov't would just throw in a few more billion.  No biggie. 

 

On one hand, other insurance companies would love competing against a failing insurance company but on the other hand, if the US gov't is backing stopping that failing insurance company and they are giving you the cheapest price, why not place it with AIG?

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Long time ago my coy bought a competitor who had 2-3 major books on which they were loosing $; the books were there for scale & market share reasons, & the companies knew it. 3 days after the acquisition date we had calls to aggressively drop rates or they'd walk away.

 

We wouldn't play & 'fired them'; gave them 60 days to find another vendor, & used the $ to fully repay our acquisition debt.

Today I'm often on the other side of the table.

 

Its seen as being something of a 'public service' to hardball AIGs rates aggressively downward. There's little credibility attached to the quotes; but they are accepted because its dirt cheap, & the fed is a better counterparty than anyone else.  Recent quotes suggest that they are UW for premium, so expect surprizes to start showing up in 9-18 months.

 

SD

   

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