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.