Insurance Nomination law w.e.f. 1 Sep 09

With effect from 1 Sep 09, changes in the Insurance Act have made it easier to nominate your beneficiaries to receive the life insurance proceeds. The above are pages extracted from the LIA Guide to Nomination which is available at
http://www.lia.org.sg/ftpsite/guide/NOB_Guide_Sep09Eng.pdf

One important point to note is that a will executed after the date of the nomination may revoke all earlier nominations.

If in doubt, always seek professional legal advice. :)

Re-branding of AIG

Extract from a 23/3/09 Reuters article By Lilla Zuill.

Quote
A spokesman said the company had decided to replace the large AIG sign -- outside the entrance to its property-casualty offices -- as part of its plan to change that operation's name to AIU Holdings Ltd.

The AIG name has become even more tarnished in the past week, after a scandal erupted over bonuses to executives of a controversial financial products unit that caused much of the $100 billion in losses over the past year.

A rebranding to distance the giant insurer's sprawling operations across 130 countries away from the AIG name are likely to continue.

"I think the AIG name is so thoroughly wounded and disgraced that we're probably going to have to change it," Liddy told a U.S. House of Representatives subcommittee last Wednesday.

Since AIG's bailout last September, other of the company's businesses have also rebranded, in most cases returning to earlier names.
Unquote

The AIG name used to carry a lot of brand equity. It has since become pariah, with many of its units disassociating from it and dropping the use of its name. In Singapore, AHA (American Home Assurance Compnay) has decided to use its own registered name, without any more reference to its parent AIG, or rather AIU Holdings Ltd.

My view is that they should use a totally unrelated name altogether; much like the renaming of Citiraya to Centillion Environment and Recycling" here in Singapore. Now, how many people in Singapore would remember that Centillion was actually Citiraya?

Public Anger & AIG's future

(Above picture taken from Time magazine (Mar 30 2009 issue).

How will AIG conduct its insurance businesses in the face of widespread outrage and outcry?

Will individuals and companies, whether within USA or without, want to take up any more insurance policies with AIG, although a GLC ("government-linked company", as such companies are referred to in Singapore) now?

Maybe they will, if as one Peter Gumbel (a Time magazine correspondent based in Paris), writing in a commentary, suggested, "An agreement that every firm receiving taxpayers' money should pay its employees the same as other public sector workers, such as teachers. That would assuage public fury, and provide an incentive for banks and insurers in question to sort out their problems fast."

"AIG = Arrogance, Incompetence, Greed"

The waves of public anger swept both the U.S. Senate and House of Representatives as AIG's excesses brought not only distaste but incredulity as the whole world watch how the Americans conduct their businesses in supposedly "complete transparency", how these corporate geniuses used the American taxpayers' money to make 73 overnight millionaires out of extremely greedy, extremely reckless traders who brought the world's biggest insurance company to its knees within a few short years.

It is akin to having 73 Nick Leesons in one company. Nick Leeson, Rogue Trader, lost more than a billion USD and bankrupted the hundred-year-old Barings Bank, whereas these traders probably lost a trillion $, a thousand times more. He went to jail and frankly, so should they!

And all of them are probably Brits! Who knows - they might have picked up a trick or two from Leeson's autobiography "Rogue Trader".

"Fire those execs"

When the AIG execs went for a posh retreat costing US$440,000, then Democratic Presidential candidate Barack Obama said, "Fire those execs". Well, now they plan to pay US$450,000,000 to these non-performing execs who caused AIG to lose US$61,000,000,000 in the last quarter of 2008, and yet, the Obama Administration can only wring their hands and say the bonus payouts are contractual.

They have been questioning why they should reward bad performers. When a company posted the biggest loss ever in the U.S. corporate history, and yet its execs are going to be rewarded with millions, something must be seriously wrong with their corporate employment contracts and their Board of Directors who seemingly don't mind dishing out such lucrative contracts without demanding sterling performances.

I would have thought the obvious solution to this whole sorry affair would be to close down the London-based division which almost bankrupt AIG, and fire all these execs for their lousy performance, instead of pouring good taxpayers' money after bad.

Obama promises Change You Can Believe In. Have any fundamental changes been made, really?

In God we trust; all others pay cash

Even the world's top investor made "dumb" mistakes, like buying an oil & gas stock at its peak, and a couple of banking stocks which tanked. The difference is that he readily admitted and apologised to his shareholders for his errors of omissions. He didn't make excuses about the "unsatisfactory performance" or used past successes to excuse himself.

In fact, considering the difficult circumstances, he did alright, making a US$5 billion profit in 2008, instead of huge crippling losses by the top U.S. banks and motor companies.

Nevertheless, as with the plunge of stock markets worldwide, his Berkshire Hathaway share price got battered down 47% from a 52-week high of US$147,000 (there appears a gaping error on this in the ABC News article above) to $78,600 a share (last done on 27 Feb 09).

Sale of AIA?

So Bank of China and HSBC have declined to bid for 49% stake in AIA, a USD20 billion unit with operations in Asia, including Hongkong and Singapore. The sale could potentially fetch about US$10 billion. 3 bidders are left ; Prudential, Manulife and Temasek.

Now, who would pay top dollar for a 49% non-controlling stake in a company in a fire sale by a parent company in dire straits. In the 4th quarter of 2008 alone, AIG lost USD60 billion! So, even if the sale of AIA fetches $10 billion, it is hardly enough to stem the massive bleeding of AIG, unless confidence in AIG is somehow miraculously restored, and well, I just don't see it happening.

When people buy insurance, they basically want to transfer their risks to the insurer in order to have peace of mind (for individuals) or manage business risks (for companies). Who would then want to buy insurance from an insurer which is facing an uncertain future? And so long as AIG cannot bring in new business premiums, it will continue to bleed profusely.

So, in the scenario that AIG finally goes under, its 51% stake in AIA would then be put up for auction again - that I presume should be on the minds of would-be buyers of AIA.

In the event that there are no buyers, AIG will try to float the various components of AIA in IPOs probably in Singapore, Hongkong and Japan. Will the small and institutional investors then dare to bite? Well, the saga continues ...

Investment Losses

Any of us who have delved into investments would likely have made losses at some point in time. I have certainly made substantial losses in my personal investments, running into 5 digits (small change to some, but not inconsequential to yours truly).

Having made losses, we ought then to take heart and learn from the mistakes but very often, we go into a denial mode, unwilling to admit that we had made huge errors of judgment, but instead, justify to ourselves that, just because we had made some very good investments in the past and present, that means, hey, we are totally immune from making any stupid mistakes now and in the future, and well, the present loss is just a paper loss.

Well, the auditors (not even those creative types) would certainly call a spade a spade. Were it not so, the world's biggest banks and institutions could have basked in their past glories, instead of "going on their knees" to beg for government bailouts.

$50 billion is surely not a small sum. It is enough to build 10 integrated resorts, or 10 MRT lines - Singapore's first MRT line (the East-West line) costs just $5 billion. The CIA World FactBook estimates Singapore's GDP at $193 billion in 2008. So, $50 billion is roughly equivalent to the total value of all final goods and services produced by the entire nation over a period of 3 months. And that's a lot of blood, sweat and tears.

Many Americans are familiar with jokes advising them not to trust their politicians and lawyers. I just googled and readily found this one:

A quote attributed to one of America's founders, John Adams (the 2nd President of USA), in the play 1776: "I have come to the conclusion that one useless man is called a disgrace, two men are called a law firm, and three or more become a Congress."

And that was 200 years ago when Americans were supposedly more God-fearing, honest and upright.

Well, now the world should learn never to trust American bankers and their genius accountants, who readily cook their books and manage to hide super-huge losses right under the supposedly sharp noses of shrewd, hard-nosed and discerning sovereign investors, as well as "independent" auditors not worth the fat fees they charge, not to mention the "independent financial advisers" engaged to conduct due diligence prior to pumping huge dollars into these "troubled assets" (trust the Americans, or rather George Walker Bush & team, to come up with such cock-and-bull euphemisms).

As one mayoress of a small Norwegian town which lost millions of their town council funds investing in CDOs and structured deposits, ruefully said, "Never trust a man in Armani suits coming to sell you super-duper too-good-to-be-true investment products", or something to that effect (from the 'House of Cards' TV show produced by CNBC; catch the preview at http://www.cnbc.com/id/15840232?video=1024219334). Because of these losses, the town have had to close down a few schools and old folks' homes, and retrench a few firemen.

As Ron Weasley in those Harry Potter books would say, "Bloody Hell!" to the Americans and their unbridled greed!

Flawed Genes & Heart Diseases

Modern computing technology and the combined resources of more than 18 countries worldwide has made it possible to map all the human genes, and analyze and sequence the human DNA.

The successful mapping of the human genome will lead to a quantum leap in medical science and treatment.

It will also lead to changes in the way life insurance business is done.

The above article makes it possible to "predict" those at higher risks of getting heart diseases. This may lead to "anti-selection" as those who are aware of their greater risks will want to get themselves insured. Conversely, life insurance companies may wish to exclude such risks via medical screening exams.

All these will happen when the costs of screening are made affordable, again with advances in technology.

New 7-year IOU by Singapore Gov't

The main buyers of SGS (Singapore Gov't Securities or bonds, or IOUs, in fact) are traditionally banks and life insurance companies, who need to invest their client's savings and policy premiums in very safe instruments, in order to maintain a minimum capital adequacy ratio, set by the MAS, whilst earning a modest interest rate in order to pay operating expenses, guaranteed interests and policy cash values.

This new issue comes with a coupon (interest) rate of 2.875% p.a., thus setting the maximum return for bank deposits or short-term non-participating endowment policies, like the recent one sold by a local insurer, which offered a fixed return of 2.0% p.a. for a 2-year plan.

Some are more equal?

When you are rich, your lawyers and doctors certainly act fast.

Without doubt, all the arrangements must have already been made to harvest (for lack of a better word indeed!) the organs of a doomed man.

So, did the rich manage to jump ahead of all others in the long queue for organs, or was he judged the best suited in terms of age, and compatibility?

Given a theoretically longer life expectancy, a younger person is supposed to benefit more from such a transplant and should be given priority.

From Todayonline, "According to past reports, Mr Tang — who had undergone a triple-bypass operation in October 2007 — was not eligible for a cadaveric kidney because of his many ailments, such as heart problems, asthma, sleep apnoea, depression, anxiety and panic attacks."

With a plethora of health problems, one might wonder whether this new organ is going to benefit much. It may buy him a better quality of life, but let's hope that some more deserving person out there had not been "robbed" of a new lease of life.