Missour Insurance

RO 1990 NEAR THEIR dark, the landscape is covered with fallen idols Finance USA - Corporate Takeover-hungry artists and investment bankers and spendthrifts of savings and loans boxes. Now, a new candidate emerges from an unlikely quarter: insurers, with its $ 1.9 trillion in assets. Once the utmost caution synonymous with financial policy, insurers, experts in risk management, are themselves in danger. Although the crisis has been building for a period of ten years, he has almost unnoticed until recent years.

1988. After a consumer revolt over rising prices and annotations, California Proposition 103 voters to launch the automobile and property insurers to help reduce the rate of 20 per cent. The reluctance of spreads. Within one year of more than 14000 national accounts are the state legislature to control the industry, with virtually no federal ordinance.

1989. An actuary’s nightmare: Hurricane Hugo, the earthquake in San Francisco and other cases of force majeure, the insurer will cost $ 7.6 billion, the worst year for claims arising from natural disasters aux Etats - Unis. More than 80 accidents property and life insurance companies insolvent.

1990. In June, the traveler Corporation, the company invented the automobile insurance during the year 1897, it ceases to announce the sale of automobile and homeowners policies in nine countries. For larger insurers, which are more Irish consumers.

In the meantime, a subcommittee of Congress, after the publication of its report on the rising number of bankruptcies among the damage and accidents, and revolves around life and health insurance. Many companies in this industry, which controls 72 percent of insurance funds, are in most areas of the troubled financial markets. These giants investors have committed to $ 278.9 billion on real estate and mortgages and factories of $ 50.7 billion-Junk Bonds.

On Friday, OCT. 5, alarm bells sounded throughout the country in the insurance business capital, Hartford, Conn. passenger was reported $ 650 million added to reserves against possible losses on mortgage and real estate, and - even more disaster - it was cutting quarterly dividends on the one hand, thirdly, the first cut in dividends from companies in history. Assekuranz analysts, some of them were pushed recommends the company as reserves the right to purchase were outraged. Moody’s Investor Service and Standard & Poor’s downgraded immediately above $ 1 billion passengers’ debts.

The following Monday morning, Columbus Day, passengers, “Early Morning Meeting in Manhattan’s Waldorf-Astoria Hotel in an effort to rally 100 analysts and institutional investors on its side. Edward H. Budd, 57 years, president of the passengers and the incarnation of anonymity so far the leaders who are traditional elements of insurance courses, self-confident Strode put in place on the podium in the Hall of Jade . In his backhand, ageing C.E.O. wearing a red pin in the form of a roof, Travelers’ Corporate symbol. The former secretary has acknowledged that passengers had been preparing for the first year of loss end in the past. (In fact, three weeks later, the company announced $ 499.3 million net loss for the third quarter.) But Budd’s tone was optimistic. The dividend was reduced a conservative step, it says that passengers are far from being the worst case in a maroden industry, was the first to recognise that the current economic slowdown and money for future growth.

If Budd opens the question session, but it was knocked by the hostility of the public. General brushes alongside his spots carefully, analysts asked specifics Travelers’ investment portfolio.

Budd, with Allan D. Schuster, the head of passengers Realty Investment Company, set reluctantly, so much more than 20 per cent or 3.5 billion dollars by the company $ 17.2 billion mortgage portfolio was lower, and $ 275 million in value of loans were 90 days dragging their feet. Next down, Budd, sonnante and nervous, showed that investment losses his company had costs of $ 2 per share in 1989 and likely another $ 2.60 per share until the end of 1990.

At 10:20 AM, Ed Budd has shaken the session adjourned. In the next few hours, travellers’ stock dropped $ 2, Regal facilities, a decline of nearly one third of their value in two trading days. The shares of other insurance companies and fell.

Gloria L. Vogel, an industry analyst Bear, Stearns & Company, at the end of meeting, Rice said: “The management has lost its credibility on Wall Street. We do not know what coming next.” John B. Neff , Portfolio manager of the Fund, Windsor, said that 5.3 million passengers, complains: “I have never seen such a level of concern about the quality of their heritage.

In an interview, a week after the meeting, Budd profession surprise on the seriousness of Wall Street’s response. “Before we decided to cut and increase the dividend reserve,” he said, “we went through a very thorough process of evaluating all our options.” Thanks to its real estate establishments caught in a weak market, accounting measures seemed the only solution. “Our external options,” he said, “are very limited.