AIG that controversial survivor of the sub-prime mortgage crisis is about to release earnings. Last quarter investors realized the impact of Hurricane Sandy. Will the Bear Case Scenario hold up. Here’s a few points to ponder.
P&C insurance companies are infamous for under-reserving for losses and hoping investment returns skate them on side. AIG is also subject to the same temptations. Couple this with a yield driven propensity to invest in municipals with higher yields and much higher risk.
P&C And Life Insurance are radically different lines of business and operate to their own unique dynamics. While they may look diversified they also open the house to global risk driven by global financial factors. If you believe interest rates will rise this is not the place for your money.
AIG continues to operate in mortgage insurance. A stumble in the housing market will only create losses and bring back investor nightmares.
George Gutowski writes from a caveat emptor perspective.