1) I like PartnerRe — they invest in their people; they limit their risks; they keep their balance sheet strong. So it was with pleasure when I saw they had bought back the majority of some of their their junior debt at 50+ cents on the dollar. Good move.
2) The short-term performance model for financial stocks recommends insurance brokers and reinsurers here. No surprise, because both of them face little risk on the asset side of the balance sheet. For insurance brokers, short–term performance favors BRO, AOC, and EHTH. For reinsurers, short-term performance favors VR, RNR, GLRE, and AWH. Personally, I would consider BRO and AWH. Very soundly run firms.
3) There are troubles with life insurers as noted in this WSJ piece. Personal notes: I applied to be chief investment officer of Shenandoah Life in 2003. They told me they needed to get more out of their asset portfolio. I gave them some free consulting — I told them that their portfolio was fine, but that they had too many lines of business, and their expenses were too high.
Penn Treaty (spit, spit) — I know some of the management there; they were dealt a bad hand. I fault the state insurance department of Pennsylvania for not taking them over four years ago, and allowing a reserve credit for a reinsurance treaty that did not pass risk.
As for Conseco and Genworth, it is just another demonstration of how long term care insurance is not an underwritable liability. There is too much freedom for policyholders to influence benefits paid.
Then there are the equity-sensitive insurers, like Hartford, Lincoln National, and Phoenix. They will have a very high beta versus the market, because they are on the cusp. Sad place to be.
4) Why are we trying to reassure China regarding their purchases of US Government debt? As a government, they made efforts to push their exports on the US, and had to take back US debt, because it seemed to be the best store of value, or at least, the most liquid. Personally, I do not see any reason to kowtow. They are not our problem; we are their problem. Let China figure out that they have been playing ina rigged casino. They still don’t have many places to park spare funds.
