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What's New AIU Holdings Advances Toward Operating Independence
March 12, 2009 Early last week AIG released their 4th quarter financial results and outlined a new strategy to stabilize the business and protect the value of their franchise. We thought that this would be a useful time to update you on our current thinking regarding AIG. In simple terms, we continue to support AIG for the following reasons:
We've attached two press releases (one from AIG and one from the Treasury/Federal Reserve) to give you more information about AIG's restructuring. As always, we will continue to monitor the situation carefully and are prepared to replace AIG in the unlikely event that becomes necessary. If you have any questions, please do not hesitate to call us. Jeremy R. Hitzig, CFA, CPCU Chief Executive Officer Distinguished Programs Group LLC tel (212) 297-3109 fax (212) 297-3132 www.distinguished.com 9/29/2008 Last Friday we updated you on the Federal Reserve's agreement to provide the AIG parent company with $85 billion in liquidity. This week we want to share with you what we learned in a teleconference with several of AIG's senior executives. They are working on identifying the assets that will be sold to reduce their debt to the government and hope to announce which ones those will be in the next week or so. They reiterated that the core insurance companies that support some of our various programs are not for sale. These insurance companies have capital and surplus of $26.7 billion, up 50% since 2005. 84% of this capital and surplus is invested in US Treasuries, municipal bonds, and high grade corporate bonds rated "A" or better. The states that regulate them are primarily Delaware, New York, Illinois, California and Pennsylvania. For the most part the regulators prohibit insurance companies from issuing dividends in any year of more than 10% of policyholder surplus (i.e. the maximum dividend AIG's insurance companies could dividend out at this time would be $2.6 billion). It is interesting to note that the earnings of these companies have exceeded $2.6 billion each year for the last few years, so the maximum dividends they can pay to their parent are currently covered by their annual earnings. At $26.7 billion in capital and surplus, these companies have at least double the 2007 year-end surplus of Chubb, Everest, Philadelphia, Tower, Travelers, and Zurich to name a few carriers that often compete with our programs. In addition the AIG insurance companies continue to have an "A" rating from A.M. Best, they continue to be fully supported by all of the top brokers, and the New York State Insurance Department has taken the unprecedented step of notifying the public that they have no concerns regarding their solvency or claims paying ability.
Our new business numbers this week have started to return to normal which means that most brokers have concluded that AIG's quotes should be compared to your other alternatives solely on the basis of breadth of coverage, competitiveness of price, and speed and responsiveness of service. Both AIG and ourselves are deeply appreciative of this support and pledge going-forward that will continue to be as responsive, aggressive, and innovative in meeting your needs and those of your clients. 9/19/2008 Wednesday brought a big sigh of relief as news spread of the Federal Reserve's rescue of AIG. The deal includes a two-year $85 billion loan and has given the Fed an 80% ownership stake in the company. The government has appointed an insurance company veteran, former Allstate CEO Edward Liddy, as the new Chief Executive of AIG. His mission is to organize an orderly sale of assets to repay the loan and stabilize the company. In addition to the U.S. Property & Casualty business, AIG owns a diverse array of assets, including life & annuities businesses, international P&C operations and an aircraft leasing division among many others. The Fed's agreement has stabilized AIG in the short-term. The events of this week also brought confirmation that despite any financial distress at the parent company, the insurance operations remain robustly capitalized, strongly rated, independent and regulated in the interest of policyholders. The insurance businesses are currently rated "A" by A.M. Best. In addition, the parent company ratings were actually upgraded yesterday morning by S&P and Fitch. The major brokers including Marsh and Aon have also clearly articulated their positions that AIG remains a healthy market and have instructed their brokers to continue business as usual.
We are continuing to monitor the situation carefully and have developed our contingency plans in the unlikely chance that they need to be executed. We have great confidence in continuing our relationship with AIG for the foreseeable future.
The attached link has AIG's latest "talking points" to assist you in any conversations you may have with your customers. 9/16/2008 Distinguished Programs has been monitoring AIG's developments carefully over the last few days and wanted to share with you some additional information about AIG and our action plan. On Monday AIG continued to explore a variety of options to raise the cash necessary to satisfy their short to medium term needs. New York Governor Paterson approved a $20 billion financing agreement that enables the parent company to exchange longer term (and therefore less liquid) assets for shorter term assets that were being held by the insurance company subsidiaries. Notwithstanding this, the parent company was downgraded by both S&P and Moody's yesterday reflecting the rating agencies concerns about AIG's ability to raise enough additional capital to satisfy their short term cash needs. In addition, the asset exchange forced A.M. Best to review the insurance companies operations with the result that they too were downgraded (from "A+" to "A"). Despite these developments, and as you will see from this AIG communication (click to view), AIG Commercial Insurance is a separate, independent and highly regulated subsidiary. AIGCI continues to have a very strong financial position, claims paying ability and "A" (Excellent) rating by A.M. Best. In addition, we anticipate that AIG will shortly announce a series of measures to bring more certainty to the overall corporate situation.
You should know that we are prepared for any outcome and have contingency plans in place should it be necessary to replace AIG. We will update you again in the next day or so. In the meantime, should you have any questions, please do not hesitate to call me directly at (212) 297-3150. Distinguished Programs Launches Insurance Program for New York City Brick & Brownstone Building Owners 10/31/2007 October 31, 2007, New York, NY ?Distinguished Programs (www.distinguished.com), a program developer that specializes in products for the real estate industry, is introducing the Brick & Brownstone Insurance Program ?a comprehensive property and liability package for condominiums, cooperatives, brownstones, row housing and apartment buildings. Underwritten by member companies of AIG, the program is available to building owners in Manhattan, Queens and Brooklyn through agents and brokers. According to Carla Vel, Distinguished Programs President and COO, "The Brick & Brownstone Program fills a void in the marketplace. There are markets out there; but there is a shortage of A-rated admitted carriers who want to write smaller properties, are comfortable in urban areas and willing to deliver the quick turnaround New Yorkers expect. We've designed our coverages, processing and service standards to meet the needs of New Yorkers ?the most demanding buyers in the country." The Brick & Brownstone Program is geared for owner- or tenant-occupied masonry buildings, with or without mercantile. The competitively-priced property and liability package includes equipment breakdown and options for deductibles, earthquake, flood, crime, D&O, water damage and business income. Three-year policies are also available. Distinguished Programs has created a dedicated
business unit that will focus on New York brick and brownstone
buildings. The new unit will be headed up by Doug Legters. Distinguished Programs provides a broad range of insurance products to the residential and commercial real estate industry, including: property, general liability, high-limits umbrella and directors & officers liability, through a nationwide network of independent agents and brokers. The firm has offices in New York, Ohio, Illinois, California, Colorado and Rhode Island. Its operating units also include ReSource Pro, a back-office support and remote staffing operation in Qingdao, China, and Saranac Insurance Company, a reinsurer based in Barbados. New Senior Housing Program by
Distinguished Programs
With our new Independent Living & Active Retirement Program,
we can help you write buildings for 55+ baby boomers that also provide
services such as housekeeping, transportation and meals. For independent
living situations, our product provides Property & Liability,
and even optional Directors & Officers liability, Crime and
a $5 Million limit Umbrella. (The Umbrella excludes transportation
exposures.) Visit our Senior Housing homepage
or contact your underwriter for more information. Distinguished
Programs Rolls Out New Streamlined Online CHIP Application
Distinguished Programs has streamlined the City Homes Insurance Program application process! With our new CHIP online application, we do not require additional applications or supplements and only require an electronic signature (unless auto or commercial exposures exist) . The online application also guarantees a 48 hour or less turnaround on your quote. CHIP is available in Albany, Alexandria, Baltimore, Boston, Chicago, Denver, Los Angeles, Milwaukee, Minneapolis, New York City, Pittsburgh, Philadelphia, Portland, San Francisco, Seattle, St. Louis, Troy and Washington D.C. See our CHIP webpage to learn more about the program, check out our CHIP brochure in PDF, or submit your Online CHIP Application now.
Distinguished Programs Adds Breach of Contract Coverage to D&O Program
Insuring Affordable Housing
Find out how Distinguished Programs is working with independent agent Kyle McKinney to capitalize on the affordable housing industry - a niche that represents billions of dollars in commercial real estate values. Click here to read the article in Agent & Broker Magazine. Learn more about Distinguished Program's "market level" insurance coverage for low-to-moderate income, privately-owned, multi-family housing where more than 20% of the rental income is government subsidized. This all-risk property, liability and umbrella protection is designed specifically for the needs these property owners face. One of the key features is the Business Income portion of the policy. Unlike a standard property form, it covers loss of both rents and government subsidies. The program is underwritten by standard, A-rated carriers and is available to independent agents and brokers in 46 states. Click here for the Affordable Housing brochure. Media Contacts:
Click here for the Affordable Housing brochure.
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