Actuarial tidbits

Stuff I should have posted already:

Onward and upward

  • First, David Flandro of Guy Carpenter gives us the chart above to explain the supposed undervaluation of insurance stocks. A lot of insurers are selling below book value. In theory, that should be difficult because one could buy the company, liquidate it and profit. This chart shows that price-to-book is strongly correlated with consensus ROE estimates for 2011. The companies at the lower left of the chart have meager ROE prospects, thus they are priced low. Flandro points out that severe underpricing means the prospects for future profits can be bleak, and the odds of an insurer being under-reserved are higher.
  • Wildfires in Colorado left the state strapped for cash. Fortunately the state has an insurer to raid. The story is a bit vague, so this might be a loan. Usually, though, states treat the insurance operations they run as a piggy bank.
  • The top 10 health insurers control 45% of the market, according to the NAIC. Most economists will tell you that is highly competitive. I have heard the situation may be different in individual states.
  • State pension plans are in a “death spiral.” Pensions & Investments passes along Bloomberg’s good cheer.
  • Strictly personal: I will be attending the Casualty Loss Reserving Seminar in Orlando early next week. I will be giving one of the intermediate instructional lectures on Tuesday. If you are there, look me up.
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