Insurance for the winter

After years of fight, day by eating the property insurance industry in the last big disaster frequent in 2008 was a ray of the cold. In recent days, including a 20 major Chinese Chanxiangongsi fiscal 2008 operating data in the first half of the documents in the financial sector strategy Chanxiangongsi spreading. The 20 companies in mainland China currently operating 44 Chanxiangongsi fiscal occupy more than 97% market share. According to the reporters part of the relevant insurance companies to verify the above-mentioned documents referred to in the data without a finalized, but in fact very close to the level. If all of this, these companies are in the first half of 2008, total losses over 15,000,000,000 yuan. One of the Chinese insurance joint with the earth's net assets is even negative. Comprehensive cost more than the rate of 100% In recent years, with the white-hot competition in the market, the Chinese property insurance industry pricing and gradually lower the rate. For a meal of the day by the industry, the weather of the year for the operation and will not be exposed. However, it took place in February 2008 in the South and the snow disaster in May of Wenchuan earthquake, the property insurance industry has become a collective bad. The emergence of these two disasters, the entire property insurance industry had to swallow the bitter fruits of the early price war. A few months ago, according to a reporter's visit to a major fiscal Chanxiangongsi the person in charge, in 2008 China will become the property insurance industry's biggest ever be an acid test. Newspaper reporter obtained the information, in the first half of 2008, the property insurance market recorded an underwriting loss of the collective. With the rate of pay rose 70%, industry-wide cost of a comprehensive rate exceeded 100%. In this interval of time, not only has an underwriting loss of the past often referred to the market regulator in the field of commercial vehicle insurance, non-marine insurance, accident insurance two conventional health insurance benefits also increased competition with no major disasters An underwriting profit. Among them, the risk of non-payment of water rates as high as 90% more than the cost of a comprehensive rate as high as 130 percent, is the highest in the first half of the insurance. Health and accident insurance costs of the integrated rate of more than 100%. In the field of non-marine insurance, as disasters, People's Insurance, Pacific Insurance, Ping An of the three giants of the payment rate has reached near 100%. To be able to continue to bring fiscal Chanxiangongsi underwriting profit to pay only the strong and dangerous marine insurance (comprehensive cost rates were 92% and 70%). However, even in the field of marine insurance, life Insurance and the State Wing of the payment rate is still more than 100%. Motor vehicle insurance in the industry still accounted for in a pivotal position in 20 companies overall 132,000,000,000 yuan in premium income, strong cross-risk auto insurance business and the share of 23% and 48% of the total as high as 71%. For most of the newly established insurance companies in the near term, auto insurance is still early to seize market share of the weapon, complete with the exception of auto insurance so the balance of auto insurance, an insurance-day, the life Insurance, Wing On insurance, state insurance, Bohai five insurance companies still in the vehicle insurance accounted for more than 80 per cent. Vehicle insurance accounted for only less than 60 percent of Huaan with both China and Thailand in recent years, specializing in risk management. The different types of structures, as a direct result of the company as well as a comprehensive cost-rate payment rate. Vehicle Insurance higher proportion in recent years, large-scale expansion of the Chinese joint, the National Insurance and life balance of payments in the first half of auto insurance rates were more than 75 percent, far exceeding the industry standard. It is worth mentioning that the country life Insurance, the payment rate is high, the cost of its rate level as a result of big-scale business expansion but have not yet been well controlled, up to 75%. This also led to the company's comprehensive cost of auto insurance rates as high as 170 percent or so, the highly competitive field of higher auto insurance business. Even while the overall industry profits to pay the strong risk, there are still 8 suffered an underwriting loss of the company, the National Insurance life 138 percent of the cost of a comprehensive rate is still the industry's highest value. During the start-up high-cost access to business by the way, almost in recent years has become the main domestic emerging markets quickly to seize market share in the only way. Compared to the same period last year, the National Insurance life soon after the establishment of the financial Chanxiangongsi in the first half of 2008 recorded an astonishing 8275 percent year-on-year increase premiums, and won 1.8 percent market share, its total capital 2,461,000,000 yuan Fee income has leapt up into the top ten industries. In the first half of 2008, and the National Insurance picked up the pace of life there are the Bank of insurance, insurance in the Bohai Sea, the state has an insurance and insurance, and its 99% -683% year-on-year premiums far higher than the same growth rate is only two percent of the The average industry growth rate, but the cost of an integrated, without exception, the rate is high. Nine companies to increase the line of fire
Compared to 20 or 30 at every turn the long-term life insurance policy, the insurance contract period of the fiscal year was not much profit transfers Chanxiangongsi wrist. In the first half of 2008, capital markets and downs, first joined the stock market in the near future financial Chanxiangongsi not only in the underwriting profit of background, experience the pain of misfortunes never come singly. As an investment target of the match, despite the national debt and the debt rate as the index of the last round of rate hikes were up 2.29 percent and 4.20 percent, but is reflected in the financial Chanxiangongsi financial statements, is the investment of assets shrink dramatically. Documents referred to in the preceding 20 companies, only changes in fair value of a profit and loss, Fukui will be up to a total of 4.5 billion, the data with an underwriting loss of 8.0 billion in the same order of magnitude. The subjects, and the land of the People's Insurance giant lost the most, namely 2,000,000,000 yuan and 10 billion; China and Thailand, Cheonan, Taibao will record a positive. Documents show that in accordance with the underwriting profits and changes in fair value gains, investment income, capital surplus changes add up to four subjects, and less new equity premium manner, taking into account the depreciation of the assets for sale, the company's 20 Actual losses have been as high as 15.3 billion. According to the data, corresponding to the same period, the total share capital in 20 companies in 17 earnings per share (EPS) is negative, which Huaan, the earth and a loss of up to the Chinese joint, earnings per share were -2.35 yuan -- -0.71 Yuan and 0.78 yuan. At a time when earnings per share recorded in the three companies, two (China and Thailand and Tianan) through the first half of 2008 to complete the act of capital. The insurance industry is often a need for operating profit for several years before the industry, the huge pre-investment, shareholders are required to cast a large sum of money, the insurance market in the near future with both the deterioration of the investment market, but also makes financial Chanxiangongsi enhanced Kim's desire for equity. According to statistics reporter, in the first half of 2008 when the property insurance market to increase active period, the life Insurance, Bank of China Insurance, Pacific Insurance, Wing, Cheonan, state, bring peace and stability, balance, such as China and Thailand 9 by the company Capital, the cumulative increase in the share capital of 10,238,000,000 yuan, the total share capital of 36,012,000,000 yuan from the beginning of the year increased to 46,251,000,000 yuan. Has been approved by the issuance of Taibao price for 2 yuan per share, Wing per share to 1.46 yuan, the National Insurance and life insurance of the Bank of China were 1 yuan and 1 Hong Kong dollars. To Wing On, for example, Wing On this wave of capital cases fairly representative. February 25, 2008, the China Insurance Regulatory Commission to change the registered capital of Wing On insurance for the approval of 1,663,200,000 yuan. The original shareholders and new shareholders a total of 1,336,200,000 yuan for capital injection. Prior to that, subject to changes in accounting standards and other factors, up to one-time reserve of 881,000,000 yuan into the reasons for Jukui Wing. According to the company in 2007 at the end of the 3 unaudited data, the total assets of 25.6 billion and liabilities 3,230,000,000 yuan and net assets of about -6.7 billion, net assets per share -2.16 yuan, the main business revenue 39.9 Billion, operating profit 128,250,000 yuan of investment, the actual loss of 903,000,000 yuan. According to these statistics, the injection of fresh blood, even though the first half of 2008, Wing once again recorded a loss of 0.08 yuan per share, but its net assets per share reached 1.06 yuan. In fact, by the end of 2008, 6 of this paper document statistics, the need to increase property insurance companies and seems to be more than a few above. In 20 companies, with the exception of China and Thailand and Hua's net assets per share were up to 2.75 yuan and 2.73 yuan, as well as the Big Three market and the Wing, there were 12 companies in net assets per share between 0-1 million . The Chinese joint land and the number is more negative net assets. According to the same period of business data, or as a result of negative net assets of the two pre-expansion has been fierce in the first half of 2008, a marked slowdown in the pace of business. One of China's joint market share from the same period of last year's 9.6 percent decline to 8.1 percent, 4.7 percent down to earth from 4.0 percent. The resulting lack of solvency problems, the China Insurance Regulatory Commission has to take action. The latter in late July of the National Work Conference on Insurance Supervision announced, "According to preliminary estimates show that as at the end of in June 2008, the solvency of the insurance company for less than 12, the beginning of this year increased 2, in which individual companies serious solvency Inadequate. "
In the same month, the China Insurance Regulatory Commission to the Department of insurance made a big underground "on the practical situation to improve the solvency of the notice" letter, the company Zhejiang, Shanghai, Jiangsu, Jiangxi, and other five provinces, cities and non-auto insurance business was ordered to Halt. In the above-mentioned meeting, the China Insurance Regulatory Commission said that the rapid development stage in the emergence of less solvent companies, it is necessary to urge the company to limit the size of the business, reinsurance strengthen and optimize the structure of the business, and other measures to improve the solvency, as well as through the listing by Kuogu funding, such as Subordinated Debt issued to raise capital to ease the pressure on under-solvency; improving solvency is not actively taking inadequate measures, resulting in lack of long-term solvency of the company, to take operational restrictions, restrictions on branch-based grant, restrictions Dividends to shareholders, restrictions on executives pay, restrictions on the use of funding channels, adjust the head and managers, etc., ordered to take effective measures to improve the solvency; solvency for the serious impact of even less than the normal operation of the company, it is necessary to step up monitoring , And in particular strengthen the monitoring of branch cash flow, as well as the rate of implementation of the authenticity of the data and the supervision and inspection; on the individual's cash flow difficulties, it is necessary to formulate plans for the disposal of the risks, to take timely measures to deal with.

Asian stocks soar after US rally; Nikkei up 13 pct

Tokyo Stock Exchange workers smile as they watch a stock price board shortly after the opening bell of Tuesday's trading at the exchange in Tokyo on October 14, 2008. Japan's Nikkei index soared more than 11 percent in early trade following rallies in the global stock market, with the benchmark index jumping 936.68 points, or 11.32 percent, to 9,213.11 as of 9:35 a.m. (0035 GMT) Tuesday.
HONG KONG - Japan's stock market soared in early trading Tuesday, leading a second-day rally in Asian stocks after Wall Street staged a dramatic comeback from its worst week ever.
Sparked by global efforts to fix the world's crippled financial system, Tokyo's benchmark Nikkei 225 index jumped 1,079 points, or 13 percent, to 9,355. The Japanese financial markets were playing catch-up because they were closed Monday for a public holiday.
In Australia, the S&P/ASX200 index traded more than 5 percent higher after the government announced plans to inject 10.4 billion Australian dollars ($7.4 billion) to strengthen the country's economy.
Markets in South Korea, Singapore, New Zealand and Taiwan also climbed 5 percent or more.
The advance came after the Dow Jones industrial averages on Monday gained more than 11 percent — its biggest one-day rally since 1933.
Traders reacted with relief moves by the U.S. government to inject capital into major banks and get lending flowing again among companies. That followed signals that European governments were putting up nearly $2 trillion to safeguard their own banks.
"The governments are ensuring that no matter what happens they're not going to allow another major institution to fail," said Nicole Sze, an investment analyst at asset manager Bank Julius Baer & Co. in Singapore. "What's happened in the last 48 years is an extremely positive development. ... You're seeing a reversal of the panic selling, and we think a temporary bottom has been found."
In Europe on Monday, Germany's DAX ended up 518.14 points, or 11.4 percent, at 5,062.45, while France's CAC-40 finished 355.01 points, or 11.2 percent, higher at 3,531.50.
Britain's FTSE 100 gained 324.84 points, or 8.3 percent, to 4,256.90, despite some hefty falls in the banks that have accepted government help. The strong showing follows sharp falls in stock indexes worldwide last week, and as interbank interest rates remain abnormally high.
Despite Monday's sharp share price gains, investors remain skeptical that the stock markets are out of the woods. It's too early to tell if the banking measures outlined Monday will actually work or how the recent carnage in financial markets will play out in the global economy.
"I'm not convinced yet. It's a bit of a waiting game," said David Jones, chief markets strategist at IG Index.
The latest coordinated move emerged before European trading began, when top central banks — including the U.S. Federal Reserve and the European Central Bank — unveiled new measures to thaw frozen credit markets and bolster funding to banks. They joined the Bank of England and the Swiss National Bank in saying they would provide unlimited U.S. dollar funds to financial institutions. The Bank of Japan said it was considering similar measures.
The banks' action came after leaders of the 15 countries using the euro said Sunday they would guarantee new bank debt until the end of 2009, allow governments to help banks by buying preferred shares, and vowed to rescue important failing banks through emergency recapitalization.
The key is whether the flurry of activity can actually ease conditions in the credit markets. Despite the coordinated interest rate reductions announced last Wednesday, and massive liquidity boosts, the rates at which banks lend to each other continued to rise. That means banks were afraid to lend to each other, and raises the chance that they and other businesses won't get the credit they need to operate.
The London interbank offered rate, or Libor, for three-month dollar loans fell 0.07 percent to 4.75 percent, while the similar rate in euros, or Euribor, dipped only 0.063 to 5.318 percent. The rate remains well above the euro zone's benchmark rate of 3.75 percent set by the ECB, meaning the credit freeze is far over. Usually Euribor is much closer to the ECB rate.
"There's been nothing dramatic but there are some modest improvements in rates and spreads," said Neil Mackinnon, chief economist at ECU Group.
Latin America shares have been hammered by the recent global sell-off, but rebounded sharply on Monday. Brazil's Ibovespa stock index rose 14.7 percent to close at 40,829, regaining ground after losing 20 percent of its value last week.
Mexico's IPC index meanwhile gained 11 percent to close at 22,096, while Chile's benchmark IPSA index jumped 12.5 percent to 2,364 and Peru's IGBVL index rose 13.7 percent to 8,668. Exchanges in Argentina and Colombia were closed for a national holiday.

Luxury goods feel chill of recession in China

A German sports car on display at a luxury goods fair held in Shanghai on October 10 2008. Spending patterns of the well-heeled have not been spared the ongoing financial crisis. [China Daily]
SHANGHAI: The country's luxury goods market has not been spared the financial crisis that is spreading from the West, a consumer fair has shown.
Spending patterns at a luxury goods fair in Shanghai this year have shown that buyers are tightening purse strings and not paying for astronomically priced luxury items as readily as before, vendors have said.
Considered one of the country's top fairs offering luxury goods, the three-day event that started on Oct 10 is said to draw many leading brands from across the world to entice well-heeled buyers.
Instead, lower grade items are reportedly turning out to be more attractive this year.
"Most orders went to low- and middle-level products, while the most expensive item, a diamond necklace valued at 7 million yuan ($1.03 million), is still on display," said a brand manager of a Swiss jewelry company, who did not want to give her name.
"The global financial crisis will undoubtedly cripple the purchasing power of the wealthy," she said.
A Singapore sculpture dealer said the company only sold a 30,000 yuan piece during the exhibition, although many people had previously inquired about its goods.
"Although the situation for the domestic market is still not clear, luxury consumption will certainly be affected by the global economic crisis," said Liu Zheng, an analyst of the luxury goods industry.
Luxury spending is said to have made China one of the sector's largest markets, despite it still being a developing country.
"One of the most influential factors for luxury consumption in China are those of the young generation, who show great enthusiasm for famous brands," Liu said.
"Previous surveys have shown that many consumers of luxury goods are young office workers, whose purchasing power for the items is extremely unstable," he said.
"It is the group that is much better off than them that luxury goods are geared toward."
It is therefore "not surprising" to find that, in any economic downturn, such a group of consumers will be the first to stop buying, Liu said.
A number of the city's residents are already making significant changes to their lifestyle, beyond splurging on luxury goods, to face possible financial risks.
"We are spending too much," said Xu Ying, a Shanghai office worker who has canceled a shopping tour to Europe this Christmas with her husband.
"We go there every year, but now the prices are too high. So we must cut down on a great deal of unnecessary expenditure," she said.

BAIL-OUT FEARS HIT MONEY MARKETS

Money markets seized up once more yesterday amid deepening uncertainty about whether Congress will approve the Bush administration's $700bn financial rescue plan and whether revised proposals would succeed in restoring confidence.
The rates that banks charge each other soared as investors sought the safety of short-dated US government debt – and US officials struggled to address mounting objections to the rescue plan in Congress and beyond.
Ben Bernanke, Federal Reserve chairman, argued against suggestions that the scheme would pay too much for distressed assets, and the head of the Congressional Budget Office warned lawmakers of possible “chaos” if Congress does nothing.
“You would have a financial market meltdown that would cause very severe dislocations . . . maybe on the magnitude of the Great Depression,” said Peter Orszag, the CBO chief.
The flight to safety drove the yield on three-month Treasury bills below 0.5 per cent, down from 1.45 per cent just two days before. The benchmark three-month London Interbank Offered Rate jumped 26.5 basis points to 3.476 per cent.
New data showed existing home prices suffered a record drop in August, weakening the US dollar and deepening concern over a rising tide of home foreclosures and loan defaults.
“A confluence of fiscal pain has all hit at the same time,” said William O'Donnell, strategist at UBS, highlighting “the swirling uncertainty over the Treasury rescue package” as well as after-effects from the collapse of Lehman Brothers and a traditional repatriation of funds due to the Japanese half year.
Although Democratic and Republican leaders, including the party's presidential nominees, have called for a bipartisan effort to address the financial crisis, they have all also expressed deep misgivings about the current proposal.
In a poll by the Los Angeles Times and Bloomberg, 55 per cent of respondents said they did not believe taxpayer dollars should go to rescue financial groups. John McCain, the Republican presidential nominee, refused to commit to supporting it.

FEWER AMERICANS EAT ON THE GO

Signs are growing that frugal American consumers are staying at home for breakfast, extending a trend that has hit evening sales at US restaurant chains.
General Mills, whose brands include Cheerios cereals and Yoplait yoghurt, estimated yesterday that total US breakfast cereal sales rose about 5 per cent in June to August from a year ago. Its US sales of breakfast cereals rose 10 per cent, while its yoghurt sales were 19 per cent higher.
Ken Powell, chief executive, said the company's products, which also include Progresso soup and home baking brands, have in general benefited from a shift away from eating out in the evening.

But the increased sales of cereal and yoghurt were consistent with the hypothesis that the same thing is happening in the morning, he said.
Until recently Americans have increasingly eaten breakfast on the way to work, and the trend has supported the growth of breakfast offerings from fast-food restaurants such as McDonalds and from Starbucks and other shops that sell coffee.
Early this year Jamba Juice, a chain built around the sale of fresh fruit “smoothies”, began to offer food as well. It said the baked goods sector was the “fastest growing day part” in the quick service restaurant business.
But David Palmer, a consumer goods analyst at UBS Equity Research, observed in a note to clients: “US restaurant breakfast traffic was flat in the June quarter for the first time since 2004.”
This trend could benefit not just General Mills but also its cereal rival, Kellogg's, he said.
Mr Powell said General Mills' yoghurt sales also seemed to be benefiting from a growing readiness to save money by making a “brown bag” lunch at home rather than eating out.
“Generally we are reading and seeing a shift to dinner [at home], and the percentage of consumers who brown-bag and bring their own lunch is also going up a bit,” he said.
General Mills also reported strong growth in sales of its soup brand. Progresso sales were up 9 per cent in the quarter.
Its rival Campbell's has also seen strong soup sales this year.

China cuts benchmark interest rate for first time since dotcom bust

China's central bank cut the country's benchmark interest rate for the first time in more than six years last night, in the face of global financial turmoil and signs of a slowing domestic economy.
The People's Bank of China lowered the one-year lending rate by 27 basis points, to 7.2 per cent per annum, after years of gradual rises aimed at fighting inflation and reining in what some saw as an overheating economy.
The PBoC also said it would reduce the amount that smaller domestic banks must hold in reserve with the central bank by one percentage point to 16.5 per cent from September 25, freeing up funds for those banks to lend. That will be the first drop in the reserve rate requirement since 1999 but does not extend to the country's five largest banks or the postal bank.
“This is a response to global events and shows policymakers are more worried about the export machine grinding to a halt in the face of global worries,” said Ben Simpfendorfer, chief China economist for RBS.
“But this is probably insurance rather than signalling serious concern over domestic worries and we should not overplay this decision.”
China's consumer price inflation fell to 4.9 per cent last month, its lowest level in 14 months, after peaking at a 12-year high of 8.7 per cent in February.
In announcing the cuts, the central bank did not mention the global credit crisis but said the moves were intended to “solve prominent problems in the current economic operation” and “ensure steady, rapid and sustained development”.
However, Stephen Green, Standard Chartered's head of China research, said: “The timing likely has something to do with the Asian equity market sell-off today [Monday], on the back of the Lehman collapse and fears of more financial contagion in the US.”

Kill or cure for the Wall Street malaise

The world has not ended. The international economy has not yet collapsed. But one thing is now quite clear: the banking system as we know it has failed.
Following the disappearance of Bear Stearns in March, and now the bankruptcy of Lehman Brothers and the surprise plans for Bank of America to absorb Merrill Lynch, three of Wall Street's five big independent investment banks have disappeared inside six months. After an astonishing weekend it is too early to predict the future shape of investment banking with confidence, but business as usual is not one of the possibilities.
Lehman is entering bankruptcy because the US Treasury refused to subsidise a rescue. That is a change of policy after Bear Stearns and a stark contrast to the nationalisation of Fannie Mae and Freddie Mac. It is emphatically a courageous call. The Bear Stearns bail-out was motivated, and probably justified, by the fear that a collapse of Bear would wreck the entire financial system, so interconnected was the bank with its peers.
Those concerns also apply to Lehman Brothers. But the US government does not have limitless resources; even if it did, the challenge in a serious financial panic is for the government to choose the right place to draw the line. Allow a Fannie Mae to collapse, and the US economy might well collapse with it. Yet bailing out anyone who asks nicely is a recipe for promoting (even more) recklessness and yet another crisis in the future.
So while the Treasury's decision is hugely risky, that risk may pay off. An important distinction between Lehman and Bear is that, while Bear failed suddenly, Lehman Brothers has been struggling for months. Those exposed to its failure have had time to hedge their risks and tidy up their transactions, so the financial system, rocky as it is, may be able to handle the unwinding of Lehman's financial contracts in an orderly fashion. If so, the decision by Hank Paulson, the Treasury secretary, will be seen as the moment when investors and bankers had at last to take responsibility for their own risky decisions.
That is the potential reward for courage. Still, it is rather early to pronounce the tough love policy a success. Wall Street has not seen the bankruptcy of an investment bank since Drexel Burnham Lambert in 1990, and the sector's interconnectedness through the credit derivatives market has since grown beyond recognition. These are uncharted waters.
The immediate market reaction has been restrained. Equities fell when markets opened yesterday, with some European bank stocks particularly hard hit. The gold price rallied and the cost of insuring against defaults by big banks has shot up. Yet panic would be too strong a word to describe this – the US authorities will be hoping that it is the return of realism.
If the markets survive the immediate aftermath of the disappearance of Lehman Brothers, that will be a big step away from the precipice. The likely takeover of Merrill Lynch is another one. While it may seem disturbing that the “thundering herd” feels vulnerable enough to seek a stable at the Bank of America, the truth is that, with Lehman gone, attention would have turned next to Merrill. Whatever influenced John Thain, Merrill's chief executive, he has proved himself more pragmatic and more flexible than Dick Fuld, the chairman and chief executive of Lehman. In finding shelter he has helped to create a welcome firebreak against panic.
The future of Goldman Sachs and Morgan Stanley, the last two independent investment banks, is now an open question. Goldman has survived not because of a fundamental difference between it and Bear, Lehman and Merrill, but because it took more successful bets. Investors may be happy to bet that the run of success will continue, but regulators may not: expect capital requirements to be tightened.
There will now be renewed calls for more regulation, and understandably so. But it is naive to think that the right regulatory response is obvious. From poor governance to flawed incentives, incompetent risk management to foolish strategies, the failures of the financial system have been so widespread as to render a coherent regulatory riposte impossible. The likely outcome is that tight capital requirements will be forced to serve as a catch-all response to risk. If so, the banking sys- tem will look more like that of the 1960s – a low-risk, low-return utility business. The ambitious and the avaricious will no doubt seek more ex- citing hunting grounds with hedge funds and private equity groups.
For now, the Treasury's calculated risk looks better judged than those of a banking system intoxicated by bail-outs. Yet even well-judged gambles often fail.