Savings Experiment: Snow Removal
Why Your 2012 Tax Bill May Jump By $8,000
When the government stepped in to begin bailing out financial institutions, it impeded the growth prospects of the best run companies and disrupted the smooth operation of markets. John Finnegan, CEO of Chubb (CB), called the intervention "troubling," as it essentially took weakened companies out of the acquisition market.Finnegan wrote in his annual letter to shareholders, "The opportunities for financially strong companies to absorb the business of weakened competitors were initially compelling." This is the natural result of a disproportionately depressed capital base in the reinsurance business. He continued, "This is as it should be in a free market unimpeded by federal intervention. But the willingness of the federal government to prop up weakened competitors by artificially injecting capital is troubling."
With outside capital used ostensibly to restore stability to the global financial system, many insurance companies, which could have been acquired at substantial discounts, were pushed out of reach. Specifically, the statement appears to be targeted at the government's "rescue" of American International Group (AIG), which carried a price tag of $182.3 billion.
The effective recasting of the competitive landscape by government intervention following the financial crisis, according to Finnegan's letter, is going to be "exacerbated by the likelihood that catastrophe losses will increase this year to levels more in line with historical experience." First quarter cat losses have already reached 50% of last year's total, and the wind begins to blow in the Gulf of Mexico, according to conventional thinking, on June 1, 2010, when hurricane season begins.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
