Declarations

Dear Shareholders

“It will be interesting to see if Buffett himself has learned lessons he might not have learned in his long career. … Berkshire got hit in four ways. Falling stock prices, the put options, increased economic sensitivity through subsidiaries such as Marmon, and a tough year for (insurance) catastrophe losses.”

—Bill Bergman, a senior equity analyst at Morningstar Inc. and former economist at the Federal Reserve Bank of Chicago, commenting on Warren Buffett’s expected annual letter to Berkshire Hathaway Inc. shareholders. The annual letter is one of the most eagerly awaited in the career of the 78-year-old billionaire, the second-richest American, according to Forbes magazine. Berkshire Hathaway, Buffett’s insurance and investment company, is in the midst of one of its worst stretches since he took over the company in 1965. (Reuters)

Cutting Coverage

“[Small business owners] are facing all these challenges today: rents are rising, financing hard to get. Things are daunting to them, but one thing they have to think of is the whole issue of being underinsured.”

—Loretta Worters, vice president for communications of the Insurance Information Institute, a New York-based trade group, said insurance may seem like a lower financial priority for some small business owners right now. Yet while insurance coverage is an expense that many small business owners might be tempted to cut back on or even forgo as they try to cut costs during the recession, spring floods aren’t too far off in the future, to be followed inevitably by tornadoes and the hurricane season. And there are the more mundane disasters that can also threaten a business – fire, theft, power outages, even someone being injured on the premises, she said.

Better in Stormy Conditions

“When you think about these dynamics, it makes sense that property and liability insurance is a different market.”

—Ty Leverty, assistant professor of finance in the Tippie College of Business and an insurance expert and the Tippie College’s Tristar risk management fellow, noting that when bad financial news is released, the stocks of property and liability insurers take their hits along with life insurance companies and other businesses in the financial services sector, yet solid, well-managed property and liability companies usually bounce back the next day. Property and liability stocks hold mostly short-term assets to match their mostly short-term, low risk policies, minimizing their exposure to the crisis, he said.

Realigning AIG

“AIG is executing one of the most extensive corporate restructuring programs in history.”

—Edward Liddy, chairman and CEO of AIG, commenting on the company’s decision to form a general insurance holding company, including AIG’s Commercial Insurance Group, Foreign General unit, and other property and casualty operations. The holding company will be called AIU Holdings Inc. and will have a board of directors, management team and brand distinct from AIG.

Topics Property AIG