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Monday Morning Headlines June 23, 2014

Fitch expects US P&C underwriting profit in 2014
The U.S. property and casualty insurance industry will turn an underwriting profit this year, but could still see its net income decline overall, rating agency Fitch is predicting. Lower investment income and a slowdown in the momentum for rate increases is weighing on insurers’ results, and catastrophe losses so far are trending slightly higher. That makes it hard for the industry to match last year’s results, which Fitch said were the best underwriting profits since 2007.

Lew takes IRS hit at FSOC hearing
Republican lawmakers blasted the Financial Stability Oversight Council during a recent congressional hearing, criticizing the agency for its lack of transparency and demanding access to its meetings. Representative Scott Garrett accused the FSOC of picking winners and losers through its designations of systemically important financial institutions, and said the council amounts to a super regulator. Treasury Secretary Jacob Lew defended the FSOC, contending that lawmakers do not have the right to attend every meeting held by the federal government’s executive branch.

NAIC may reject global capital rules for insurers
The NAIC is threatening to reject a proposal that would impose new international capital rules on insurance companies, arguing that the timeline for implementing those rules is too short. The International Association of Insurance Supervisors wants to apply the regulations within the next three years. But the NAIC says it would place too much of an immediate burden on policyholders.

Validus marches into US insurance market with Western World acquisition
Bermuda-based reinsurer Validus is expanding its presence in the primary insurance market, striking a deal to acquire excess and surplus lines writer Western World Insurance. Validus will pay $690 million for the company, which it says was the key missing piece in its growth strategy. This is just the latest move by a Bermuda company into the specialty insurance business. Arch Capital, AXIS and Argo Group are all among those devoting more resources to the sector.

M&A insurance provides sweet spot in soft market
A resurgence of deal activity around the world is boosting the market for M&A insurance. High demand for the products, which can include warranty coverage and tax liability and litigation insurance, has made M&A insurance one of industry’s the fastest-growing commercial lines. That growth is luring more insurers into the business, especially as pricing momentum for other primary and commercial lines start to fade.

AIG aims for calmer, more profitable era under incoming CEO Hancock
Six years after its near-collapse, insurance giant American International Group is once again a stable company. But as CEO Bob Benmosche prepares to pass the torch to his successor, Peter Hancock, there is still much work to be done to restore investors’ trust. Hancock will have to boost profits from AIG’s property and casualty unit and handle extra regulatory scrutiny from the federal government. His biggest challenge, though, could be convincing life insurance head Jay Wintrob to stay with the company just months after beating him out for the CEO position.

Incumbent insurance commissioner wins another term in Oklahoma
John Doak will serve another term as Oklahoma Insurance Commissioner after more than three-fourths of voters backed his reelection bid. The incumbent beat out first-time challenger Bill Viner in the state’s Republican primary. Since no Democrat ran for the office, Doak is guaranteed another four years in office.

Insurance M&A deal volume up 20% YOY through mid-June
Dealmaking in the insurance industry is on the rise, with M&A announcements through mid-June up by 20% compared with last year. Insurers have agreed to 160 deals through June 20, with most coming during the first quarter. Brokers Arthur J. Gallagher and AssuredPartners are the most active dealmakers, announcing 12 and 11 acquisitions, respectively. Among insurance underwriters, the largest transaction is Dai-ichi Life’s $5.58 billion play for Protective Life.


Five-Point feature on key insurance headlines including underwriting earnings forecast (97.3% Combined Ratio for 2014) as well as the impact of the Mergers & Acquisition market place.