ALL THE TIME.
Comprised of 15 analysts, our Equity Research team is in constant contact with management of both public and private companies to keep our clients abreast of industry trends and new developments. Our boutique model of “all insurance, all the time” allows our dedicated five person sales team to respond to our client’s needs quickly and provide timely access to senior research analysts.
AJIT JAIN DOES BIGGEST DEAL YET = $10B FROM AIG. CAPITAL ARBITRAGE IS KEY ELEMENT OF DEAL
AIG recently announced a $10B ‘mega-reserve’ transaction with Berkshire Hathaway’s NICO, ($25B xs $25B for U.S. casualty long-tail business). A major purpose of this deal appears to be capital release (we believe at $2-3B). AIG also expects to take a “material”, unquantified reserve charge in Q4 (we expect ~$3.6B). The whole transaction will essentially give AIG a fresh start with AY 2016 forward for its U.S. Cml Ins business. For Berkshire, the transaction provides another block of float, which will likely put the overall float to $100B+. Given the recent deals (HIG & AIG), we would not be surprised if there were more deals to come. See our full report
NEAR TERM TOPIC TO WATCH: HIGHER INTEREST RATES & U.S. TAX REFORM
With Republicans in control of 2 branches of the U.S. government, we kick off the new year with our thoughts on the potential near term impacts of the fiscal, tax and monetary policies on the (re)insurance market. For 2017, the two items we are watching include: (1) higher interest rates impact on BVs & investment income, changes to cost of equity/ capital, and alternative capital/ ILS market ; and, (2) tax reform. As there is a lot of uncertainty on how tax reform might impact offshore underwriters, we introduce the D&P “tax risk index” to provide some context. See IBNR #1, 2017
Q3:17 Mortgage Insurance Earnings Preview
MI Stock performance was positive in the third quarter, with the exception of a brief dip on hurricane-related concerns in early September, and we believe that third quarter results will support a continued positive outlook for the group. We are projecting $73B of new insurance for the industry in Q3:17, keeping the MIs on pace for a possible $250B of NIW in 2017. In addition, although we have entered the seasonally-challenged period of the year, we expect credit trends to remain positive, with ongoing year/year new notice improvement at the legacy players and the prospect for addtional favorable reserve development at MGIC and perhaps others. See our full preview.