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AIG crisis could be the tip of an insurance iceberg
The company's situation reflects problems throughout the life insurance industry as investments suffer. Further strain could bring about a second financial crisis.
By Ralph Vartabedian and Tom Hamburger, Los Angeles Times

When insurance giant American International Group Inc. imploded last fall, the firm's problems were quickly blamed not on its core insurance business but on an obscure operation that traded exotic mortgage securities.

But as the economic crisis deepens, it has become clear that AIG's problems extend across most of its business lines, including its massive life insurance and retirement services operations, which reported a staggering $18-billion quarterly loss this month.

The company's situation is emblematic of problems across the life insurance industry, which is suffering deep losses on investments that underlie policies for millions of American families.

So far, some of the biggest companies have suffered sharp drops in their stock prices, and many of them are asking for federal assistance.

Industry conditions last year were the worst in memory and are expected to grow deeper this year amid credit rating downgrades, declining revenue and investment losses, according to credit rating firm A.M. Best Co.

The worst-case scenario is that a second financial crisis is looming if these life insurance companies come under too much stress.

I suppose with a baby boom there may be an accompanying funeral boom.

by Magnifico on Mon Mar 30th, 2009 at 04:51:26 PM EST
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