First-half profits for insurers down 57.4%

First-half profits for insurers down 57.4%

Posted On: Sept. 30, 2008 2:56 PM CST

The U.S. property/casualty insurance industry's aftertax profits fell 57.4% to $13.9 billion during the first six months of 2008 compared with the same period last year, the Insurance Services Office Inc. and the Property Casualty Insurers Assn. of America reported Tuesday.

Net written premiums dropped 0.6% to $221.9 billion in the first six months of the year. Policyholder surplus decreased nearly 2.5% to an estimated $505 billion as of June 30.

Insurers were battered by both underwriting losses and a decrease in investment income. Underwriting losses reached $5.6 billion during the first half of this year compared with $14.5 billion in net underwriting gains during the same period a year earlier. Insurers' net investment gains—the combination of net investment income and realized capital gains or losses—fell 18.4% to $24.8 billion in the first half of the year, and the combined ratio deteriorated more than nine points to 102.1%.

"The sharp decline in profitability is primarily attributable to a spillover of the housing and credit bubble collapse into the mortgage and financial guarantee segments of the property/casualty insurance industry," said Robert P. Hartwig, president of the New York-based Insurance Information Institute, in an analysis accompanying the report.

Mass. relaxes health assessment rules

Mass. relaxes health assessment rules

Posted On: Oct. 01, 2008 2:11 PM CST

BOSTON—Massachusetts health care regulators agreed Tuesday to ease and delay proposed regulations that would have subjected more employers to large financial assessments to help fund coverage for uninsured state residents.

Under a 2007 rule, employers with at least 11 employees are exempt from a $295 annual per employee assessment if at least 25% of full-time employees are enrolled in their group health plans or if they pay at least 33% of the premium for individual coverage for employees within 90 days of their start date.

In July, the Massachusetts Division of Health Care Finance and Policy proposed tightening that rule so employers would have had to pass both tests to avoid the assessment.

That change in the Fair Share Contribution rule would have had its greatest impact on employers that have long waiting periods before new employees are eligible for coverage.

But the final rule assures that many employers, generally smaller firms, will continue to be exempt from the $295 assessment.

Under one change, employers with between 11 and 50 employees still will only have to pass the enrollment test or the premium test to be exempt from the assessment. The earlier proposed requirement that both the enrollment and premium tests be passed would have applied to employers with at least 11 employees.

Employers with more than 50 employees, though, will still have to pass both tests. But under a new safe harbor provision, an employer that does not pay at least 33% of the premium for individual coverage can still pass if at least 75% of full-time employees are enrolled in the employer's health insurance plans.

Additionally, the new rules won't go into effect until Jan. 1, 2009; regulators earlier proposed an Oct. 1, 2008, effective date.

Business groups, especially those representing smaller employers, welcome the rule changes.

"Small employers are breathing a sigh of relief as the latest proposal to take more money out of their pockets has been put on ice," Bill Vernon, state director of the National Federation of Independent Business/Massachusetts in Boston, said in a statement.

RIMS releases 2008 salary survey


Posted On: Sept. 30, 2008 2:28 PM CST

NEW YORK—The average base salary for a chief risk officer or vp of risk management is $170,683 according to a survey by the New York-based Risk & Insurance Management Society Inc.

According to the survey of U.S.-based companies, the base salary for directors of insurance and risk management is $118,200; the base salary for insurance managers is $93,200; and the base salary for a risk management analyst is $64,100.

The 2008 Risk Management Compensation Survey outlines the base salary and incentive data for 11 industry-specific jobs. This was the fifth time RIMS has put out a compensation survey and the first time it featured the salaries of chief risk officers/vps of risk management—the highest-paid risk management position surveyed.

The survey is intended to help "risk practitioners to advance their careers," said W. Michael McDonald, a member of the RIMS board of directors and vp of risk management at Quality Distribution Inc., in a statement. "The survey can also provide employers a benchmark for compensation levels to help attract and retain qualified risk management professionals."

Online surveys were completed by 2,180 RIMS members at 1,490 organizations between the beginning of May and the end of June 2008.

JPMorgan Chase buying Washington Mutual's assets for $1.9 billion after FDIC seizes bank

WaMu becomes biggest bank to fail in US history
Friday September 26, 4:00 pm ET 
By Madlen Read, AP Business Writer

JPMorgan Chase buying Washington Mutual's assets for $1.9 billion after FDIC seizes bank

NEW YORK (AP) -- As the debate over a $700 billion bank bailout rages on in Washington, one of the nation's largest banks -- Washington Mutual Inc. -- has collapsed under the weight of its enormous bad bets on the mortgage market.

The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.

Seattle-based WaMu, which was founded in 1889, is the largest bank to fail by far in the country's history. Its $307 billion in assets eclipse those of Continental Illinois National Bank, which failed in 1984 with $40 billion in assets; adjusted for 2008 dollars, its assets totaled $67.7 billion. IndyMac, seized in July, had $32 billion in assets.

One positive is that the sale of WaMu's assets to JPMorgan Chase prevents the thrift's collapse from depleting the FDIC's insurance fund. But that detail is likely to give only marginal solace to Americans facing tighter lending and watching their stock portfolios plunge in the wake of the nation's most momentous financial crisis since the Great Depression.

Because of WaMu's souring mortgages and other risky debt, JPMorgan plans to write down WaMu's loan portfolio by about $31 billion -- a figure that could change if the government goes through with its bailout plan and JPMorgan decides to take advantage of it.

"We're in favor of what the government is doing, but we're not relying on what the government is doing. We would've done it anyway," JPMorgan's Chief Executive Jamie Dimon said in a conference call Thursday night, referring to the acquisition. Dimon said he does not know if JPMorgan will take advantage of the bailout.

WaMu is JPMorgan Chase's second acquisition this year of a major financial institution hobbled by losing bets on mortgages. In March, JPMorgan bought the investment bank Bear Stearns Cos. for about $1.4 billion, plus another $900 million in stock ahead of the deal to secure it.

JPMorgan Chase is now the second-largest bank in the United States after Bank of America Corp., which recently bought Merrill Lynch in a flurry of events that included Lehman Brothers Holdings Inc. going bankrupt and American International Group Inc., the world's largest insurer, getting taken over by the government.

JPMorgan also said Thursday it plans to sell $8 billion in common stock to raise capital. Its stock rose in midday trading Friday on the New York Stock Exchange, gaining $1.90, or 4.37 percent, to $45.36.

The downfall of WaMu has been widely anticipated for some time because of the company's heavy mortgage-related losses. As investors grew nervous about the bank's health, its stock price plummeted 95 percent from a 52-week high of $36.47 to its close of $1.69 Thursday. On Wednesday, it suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse.

WaMu "was under severe liquidity pressure," FDIC Chairman Sheila Bair told reporters in a conference call.

"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," Bair said in a statement. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."

Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were also reportedly possible suitors. WaMu was believed to be talking to private equity firms as well.

The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which led a $7 billion cash infusion in the bank this spring, on the sidelines empty handed.

WaMu ran into trouble after it got caught up in the once-booming subprime mortgage business. Troubles then spread to other parts of WaMu's home loan portfolio, namely its "option" adjustable-rate mortgage loans. Option ARM loans offer very low introductory payments and let borrowers defer some interest payments until later years. The bank stopped originating those loans in June.

Problems in WaMu's home loan business began to surface in 2006, when the bank reported that the division lost $48 million, compared with net income of about $1 billion in 2005.

At the start of 2007, following the release of the company's annual financial report, then-CEO Kerry Killinger said the bank had prepared for a slowdown in its housing business by sharply reducing its subprime mortgage lending and servicing of loans. Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and CEO of Independence Community Bank, replaced Killinger earlier this month.

As more borrowers became delinquent on their mortgages, WaMu worked to help troubled customers refinance their loans as a way to avoid default and foreclosure, committing $2 billion to the effort last April. But that proved to be too little, too late.

At the same time, fears of growing credit problems kept investors from purchasing debt backed by those loans, drying up a source of cash flow for banks that made subprime loans.

In December, WaMu said it would shutter its subprime lending business and reduce expenses with layoffs and a dividend cut.

The bank in July reported a $3 billion second-quarter loss -- the biggest in its history -- as it boosted its reserves to more than $8 billion to cover losses on bad loans. Over the last three quarters, it added $10.9 billion to its loan-loss provisions.

JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu's banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.

JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states, and that it plans to close less than 10 percent of the two companies' branches.

The WaMu acquisition would add 50 cents per share to JPMorgan's earnings in 2009, the bank said, adding that it expects to have pretax merger costs of approximately $1.5 billion while achieving pretax savings of approximately $1.5 billion by 2010.

"This is a definite win for JPMorgan," said Sebastian Hindman, an analyst at SNL Financial, who said JPMorgan should be able to shoulder the $31 billion writedown to WaMu's portfolio.

AP Business Writers Marcy Gordon in Washington and Sara Lepro in New York contributed to this report.

Current Financial Crisis Has Executives Weighing Risk Management Practices over Liquidity and Other Issues, According to Joint CFO Research/Towers Perrin Survey

Current Financial Crisis Has Executives Weighing Risk Management Practices over Liquidity and Other Issues, According to Joint CFO Research/Towers Perrin Survey

Banks' Risk Management Practices Seen as Main Factor in Current Economic Climate, but Most Finance Leaders Say Downturn Will Not Hamper Their Firms' Financial Results

STAMFORD, Conn.--(BUSINESS WIRE)--The financial crisis gripping the United States has senior finance executives more likely to be concerned about their firms' risk management practices (72%) than they are about such issues as accessing both long-term debt financing (65%) and short-term financing (61%), relationships with their financial institutions (59%), pension plan asset allocation (40%) or their ability to secure equity financing (40%), according to a CFO Research Services study conducted in conjunction with global professional services firm Towers Perrin.

"The majority of reports have characterized the crisis as a financial crisis, and clearly on one level it is, because companies' access to capital  whether they are in the financial sector or otherwise  is severely strained right now, and the end is not yet in sight," said Prakash Shimpi, Towers Perrin Principal and head of the firm's Enterprise Risk Management practice. "On another level, however, this crisis exposes material gaps in risk management  particularly operational risk  and the companies surveyed acknowledge that they will need to retool their risk management practices.

Further, the economic woes have 55% of respondents saying their companies are likely to change risk management practices at their companies at either the board or the employee level, or both.

"CFOs and their teams are making decisions in the wake of this crisis that will affect not only their own companies, but the economy as a whole," said Celina Rogers, Director of Research at CFO Research Services. "The results of this survey show that senior finance executives are certainly concerned about funding their companies in the short term, but the long-term consequences of the crisis  its effect on companies' ability to carry out strategic plans, and its risk management implications  are also first-order issues to emerge from this crisis."

Additionally, while the majority (62%) acknowledged that the crisis would dampen profit expectations and leave a potentially lasting dent in the world economy, only 4% said they feared a major negative impact on their financial results, according to the survey, which was conducted last week, coinciding with reports of Secretary of the Treasury Henry Paulson's efforts to create a proposed $700 billion financial services industry rescue package.

Respondents: Banks' Risk Management Practices Main Factor in Current Crisis

When asked which items contributed to the current financial crisis, respondents as a whole blame risk management practices at banks (62%), followed by the increased complexity of financial instruments (59%) and financial market speculators (57%). Additionally, 24% said that fair-value accounting requirements were a major contributor to the crisis.

However, when broken out by sector (financial services versus nonfinancial services companies), the findings tell a somewhat split story:

  • Among CFOs at financial services companies, 78% cite the complexity of financial instruments as being responsible for the current economic environment, while 53% viewed banks' risk management practices as a reason for the downturn  the same percentage that viewed financial market speculators and irresponsible homebuyers as contributors to the crisis.
  • Turning to nonfinancial services firms, 66% of their CFOs saw the banks' risk management practices as a chief cause of the current economic situation, followed by financial market speculators (58%) and the increased complexity of financial instruments (53%).

Changes Likely in Areas Tied to Funding & Long-term Investment Plans

When it comes to making changes as the result of the financial turmoil, 49% said they are likely to alter their cash management practices, and a similar percentage is likely to change long-term investment strategy  both of which tie to funding. On the other hand, slightly more than one-quarter (26%) said that they were considering changing relationships with customers and suppliers, and even fewer (15%) said that they were likely to change their incentive packages.

"Despite the evident impact of the current financial crisis on liquidity and consumer confidence, the one agenda a majority of CFOs agree upon is that they plan to put their risk management practices under a microscope, and that this investigation will in many instances reach all levels of the organization, from the board down, and from the shop floor up," said Patrick Finegan, Towers Perrin Principal and senior consultant in the firm's Enterprise Risk Management practice, underscoring the fact that most survey respondents say they will probably make changes to risk management practices in their companies.

Among some of the other key findings:

  • Despite the current concerted lobbying efforts of several U.S. auto manufacturers, a slight majority (52%) of respondents said they would be surprised by a large-scale bailout of the U.S. auto industry. However, 62% said they would be surprised by a large-scale bailout of one or more U.S. airlines.
  • Fifty-nine percent of respondents believe that the consolidation among financial services companies spurred by the current financial crisis will harm U.S. companies.

"If we ranked this crisis using the scale for hurricanes, we are in the midst of a Class Five perfect storm," added Mr. Finegan. "The primary quest of finance executives, given the survey responses, is to get a better grip on the conditions that can expose a company or the economy  to such a storm, measure the potential combined impact on short- and long-term financing needs, and then stock the balance sheet with the right mix and amount of provisions to weather the storm better than their competitors."

About This Survey

The survey, "Senior Finance Executives on the Current Financial Turmoil," was conducted by CFO Research, and launched Friday, Sept. 19, in the immediate aftermath of the developments on Wall Street and a federal bailout of the world's largest insurer, and just days after the government bailout of Fannie Mae and Freddie Mac. In the following days, 125 survey responses from CFOs and other senior finance executives from a wide range of industries across the United States were secured and tabulated. More than half of respondents come from companies with more than $500 million in annual revenue.

About CFO Research Services

CFO Research Services is the sponsored research group within CFO Publishing Corporation, which produces CFO magazine in the United States, Europe, Asia and China. CFO Publishing is part of The Economist Group.

About Towers Perrin

Towers Perrin is a global professional services firm that helps organizations improve performance through effective people, risk and financial management. The firm provides innovative solutions in the areas of human capital strategy, program design and management, and in the areas of risk and capital management, insurance and reinsurance intermediary services, and actuarial consulting. Towers Perrin has offices and alliance partners in the United States, Canada, Europe, Asia, Latin America, South Africa, Australia and New Zealand. More information is available at

College welcomes new chaplain

Published Date: 29 September 2008
Monday, 3pm - A NEW chaplain, who will work at Grantham and Stamford Colleges, received a warm Grantham welcome on Thursday.
Peter Weeks was welcomed to Grantham College by the Bishop of Grimsby The Rt Rev David Rossdale, representatives from Lincolnshire Chaplaincy Services and Churches Together, staff and students from both colleges and the Mayoresses of Grantham and Stamford Couns Avril Williams and Maureen Jalili.

His appointment marks the start of a new partnership between the colleges, which have never employed an on-site chaplain before.

Australian-born Peter has degrees in economics and psychology and was an actuary for a multi-national insurance company before achieving his Certificate in Theology.

He said: "I am looking forward to building strong links between both colleges, local faith leaders and respective wider communities in Grantham and Stamford."

Diabetes Life Insurance Quote

Diabetes life insurance quotes are a harder to come by than life insurance quotes for a healthy person, but the availability and cost will depend on the individual's current health and the severity of their medical condition. As can be expected, there are few companies who are willing to accept a client with the disease, so it takes persistence to find a policy. Online brokers are a big help in closing that gap, and a few of them are actually specialists in obtaining coverage for people seeking it. A diabetes insurance quote is almost nonexistent for an adult who is seeking coverage after having battled diabetes since childhood. On the other hand, someone who has just been diagnosed with the disease is a riddle to the company offering the policy. 

The best profile in the view of a company offering a coverage for someone with this specific condition is a patient who has had the problem for a couple of years, and there is proof the disease is under control. The broker will get information from the person seeking a diabetes life insurance quote, and send him or her an application for a policy. The applicant will be visited by a nurse practitioner who will get a blood and urine sample and get a detailed medical history. A report from the applicant's doctor is requested, and when all this data is together, it is given to the insurance carriers who will then offer diabetes life insurance quotes. 

After several policy offers are received, a choice must be made. Premiums for someone whose medical condition is under control will be offered a diabetes life insurance quote that is on par with a healthy applicant. However, if the illness is out of control, the premiums offered may be two or three times the standard premiums, or simply refused. Another possibility for a person whose condition is under control is a policy with the stipulation that the policy must be in force for at least three years to pay its face value. If the insured dies before that time, the family will only receive the premiums paid plus interest. Obviously, it is a good idea to get diabetes life insurance quotes while the disease is under control.

For the person seeking coverage, who has had the disease since childhood, it is more difficult to find an insurer, and the expense will be higher. Brokers will still work with the applicant to try to find companies who will offer diabetes life insurance quotes, but the choices will be fewer and premiums several times higher. Since life policies are intended to take care of the family left behind, it is such an important matter that most adult heads of households will try to find a diabetes life insurance quote for a policy at just about any cost. In Jesus' time, the concept of being insured was unheard of, but with Jesus at hand, they had no need of a paid policy. "And Jesus went about all the cities and villages, teaching in their synagogues, and preaching the gospel of the kingdom, and healing every sickness and every disease among the people." (Matthew 9:25)