Tuesday, 10 March 2009

Jack Degnan Speaks Part II

Talking about the market, Mr. Degnan predicted that "2009 will see dramatic hardening across all lines, all sectors" because of deteriorated combined ratios, investment return, rate reductions and poor yields in the market. Chubb CSI saw Q4 rate increases, the first in 18 quarters.

Countervailing measures are there:
  • forecasts like the above seem rational, but the insurance industry doesn't act rationally
  • the economic implosion reduces exposures and it's hard to raise the top line when demand shrinks

Speaking of the credit crisis, Mr. Degnan thought the "hyperbolic forecasts" of big losses were way overblown. Citing high dismissal rates and other measures he discussed in Chubb's last earnings call, Mr. Degnan thought the $10, 15 20b numbers are overblown. Was he subtly asking Advisen to revise its forecast?

In the Q&A he was asked about direct distribution and said it had been seriously reviewed at Chubb but Chubb is "strongly committed" to working with brokers who provide a significant "value add".

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