Market Panic Over Coronavirus Isn’t Warranted, Says Allianz CEO

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Markets are overreacting to the threat of the rapidly spreading coronavirus and the global economy will only see a short-term impact, said the head of Allianz SE, Europe’s biggest insurer.

Chief Executive Officer Oliver Baete said the firm was more concerned about the safety of its clients than any impact to its business, in an interview with Bloomberg Television’s Anna Edwards in London. He compared the virus with a “strong flu,” saying it hadn’t yet become a pandemic.

“There’s a lot of panic at that moment that’s not warranted,” said Baete. “Short-term economic activity will contract and it will have an impact on global GDP, but it’s not like the world will end tomorrow.”

Heightened fears surrounding coronavirus have roiled financial markets, with Asian stocks falling Wednesday after a rout on Wall Street. The U.S. Centers for Disease Control and Prevention warned Americans to prepare for a potential outbreak at home, while mounting cases across the Middle East, Europe and Asia sparked concern the outbreak is widening into a pandemic.

Allianz’s biggest potential risk would be from any bankruptcies in Europe spurred by the virus’s spread, due to its credit insurance coverage in the region, said Baete. While that business isn’t large in Asia, the firm has been cutting such exposure in China for the past two months, he said.

“The issue that may affect us is if you have massive bankruptcies in small and medium size companies, because we have the world market leader in credit insurance,” Baete said in a separate interview.

Baete has relied on cost cuts, inflows at Allianz’s asset management unit and smaller deals to lift profits as low interest rates and squeezed fees weigh on the industry. That’s recently been paying off, with the insurer managing to stop four straight quarters of bleeding assets at key investment arm Allianz Global Investors in the final three months of 2019.

Allianz recently bought two businesses in the U.K. — the general insurance business of Legal & General Group Plc and the 51% of LV General Insurance Group that it didn’t already own. Baete said that the firm doesn’t need to carry out any major acquisitions thanks to the health of its earnings.

“There is consolidation and there will be consolidation coming particularly with weaker participants,” Baete said. “Whether we will play a role, will depend on where the prices are and whether we can create value out of it. We have no urge to merge or to do anything.”

— With assistance by Anna Edwards

Source: Bloomberg

World isn’t ready for coronavirus outbreak, says Canadian WHO expert

By Laura Osman


OTTAWA _ The world is not ready for the global spread of the novel coronavirus, according to the renowned Canadian epidemiologist who led a team of experts to China to study the virus on behalf of the World Health Organization.

Dr. Bruce Aylward returned from a two-week mission to China, including the city of Wuhan where the spread of the coronavirus began, urging other countries to get ready for a potential outbreak within their own borders as soon as possible.

“This virus will show up,” he warned at a briefing Tuesday.

“This is going to come soon, potentially. You’ve got to be shifting to readiness, rapid-response thinking.”

Aylward led a team of 25 world experts, who operated independently of the WHO and their associated institutions.

There are more than 80,000 confirmed cases of the virus worldwide and 2,700 people are known to have died from it, the vast majority of them in China.

The team found that countries should be looking to China for expertise in how to manage and treat the illness now known as COVID-19, noting that country has taken an aggressive approach to testing, containing and treating people who contract the coronavirus.

China has all but locked down whole cities of millions of people in an attempt to keep COVID-19 from spreading and has instituted door-to-door checks of people’s temperatures to find sick people and order them into mass treatment centres.

Despite the massive outbreak in China, Aylward said China has seen some success repressing the spread of the virus, with the number of new confirmed cases on the decline.

But he warned the spread of the virus to other countries seems inevitable, and they will need to tackle it with the goal of tracing every case and stopping chains of transmission.

He urged all countries to make sure hospitals increase their bed capacities and have enough ventilators for the very sick. He said they should also prepare to quarantine large numbers of people who come into contact with those who have confirmed cases of the disease.

“There’s nothing on that list that countries can’t do,” he said.

Canada’s Health Minister Patty Hajdu said Tuesday that Canada is already ahead of many countries because it has a pandemic plan in place and federal authorities have been co-ordinating with provincial health care providers about the COVID-19 response for months now.

Still, Canada has so far been focused on containing sick people coming in from abroad and must now start to prepare for the possibility of local spread.

“As it appears that containment is less and less likely to be successful globally, we turn our attention to our domestic preparedness,” Hajdu said.

The health minister had a warning of her own, for all Canadians.

“It’s important for Canadians to realize that this may cause disruptions in their lives. It might mean that if someone is ill in their family that people may have to be isolated, that businesses may have to have contingency plans,” she said.

Aylward’s final report, which includes findings about how the disease is transmitted, has not yet been released. It had been submitted to the WHO and Chinese authorities, who will be responsible for releasing it to the public

Life insurers leery about covering Canadians with new coronavirus

By Tom Blackwell | National Post

It’s not just doctors, public health experts and scientists who are struggling to figure out how much of a threat the novel coronavirus poses.

Like SARS and the pandemic flu before it, the newly emerged infection is presenting some unique challenges to Canada’s life insurance industry — and patients who might want to buy a policy.

Some companies say they would outright deny coverage to anyone who has contracted the disease, while others would insist potential clients be certified disease-free for at least three months, according to a new survey of the industry.

Their responses underscore what seems to be a growing reality in an era of globalization and mass travel. The novel coronavirus is the latest in a group of at least three other respiratory illnesses that have arisen and spread to varying extents in the last decade and a half.

Insurers don’t necessarily believe COVID-19 — the infection’s official name — is a particularly lethal bug, they’re just unsure about its true nature as a health hazard, says insurance broker Lorne Marr, who put together the report.


Fairfax president Rivett retiring; company earns record US$2 billion in 2019

TORONTO _ The president of Fairfax Financial Holdings Ltd. is retiring after 17 years with the company.

However, Paul Rivett will remain chairman of certain Fairfax investees, including Recipe Unlimited and Fairfax Africa.

Chairman and chief executive Prem Watsa says Rivett has been “instrumental in our success.”

The announcement came as the holding company involved in property and casualty insurance and reinsurance said it swung to a US$672-million profit in the fourth quarter, compared with a US$477.6 million loss a year earlier. Net premiums increased 5.5 per cent to US$3.2 billion.

For the full year, Fairfax earned a record US$2 billion or US$69.79 per diluted share for the period ended Dec. 31, up from US$376 million or US$11.65 per share in 2018.

Aon: Over the last decade, natural catastrophes have resulted in global economic losses of USD2.98 trillion

The development of new insurance schemes, such as parametric insurance, insurance risk pools, or catastrophe bonds, will be important new ways to improve risk mitigation in the most vulnerable areas.

LONDONFeb. 5, 2020 /CNW/ — Aon plc (NYSE:AON), the leading global professional services firm providing a broad range of risk, retirement and health solutions, today brings together leaders across the private and public sector for its inaugural “Collaborating to close the protection gap” conference in London.

The event is designed to generate discussion on how the global finance and insurance industry can work more effectively with governments, humanitarian and non-governmental organisations. As losses from natural catastrophes continue to reach record levels, the goal is to close the gap between the insured and uninsured to protect global communities and build scalable solutions through shared experiences.

The conference is hosted by Aon in partnership with the City of London, The British Red Cross, ClimateWise, Insurance Development Forum, AXA XL, Pool Re, MSAmlin and Renaissance Re at London’s Guildhall. Speakers include Cyrus Ardalan, Chairman – International Finance Facility for Immunisation; Lord Bilimoria, Vice President – CBI; Greg Case, CEO, Aon plc; Marisa Drew, CEO – Credit Suisse Impact Investment and Advisory; Nick Dyer, Director General for Economic Development and International at the UK Department for International Development; Dr. Abbas Gullet, former Secretary General – Kenyan Red Cross; David Lomas, Managing Director – BlackRock; Julian Richardson, Insurance Specialist – Department for International Trade and William Russell, Lord Mayor of the City of London.

Today’s event opened with a video message from The Prince of Wales:

Greg Case, CEO, Aon plc, said: “The protection gap places an immense financial strain on governments, businesses, communities and individuals. Yet, financial impact is only one aspect of the toll these disasters inflict. We also must consider the profoundly troubling humanitarian and social impact – lives lost, communities compromised and businesses, as well as individual livelihoods, disrupted.

“Considering the magnitude of the challenge, a solution is beyond the ability of any individual, organization or even sector. We have absolute conviction, though, that, collectively, we can make a difference. Our hope is that we will forge a shared commitment to new ways of collaborating that will allow us to build resilience at scale.”

Aon’s Weather, Climate & Catastrophe Insight: 2019 Annual report found that 2019 was another year of devastating natural disasters around the globe with economic losses of USD232 billion. Only USD71 billion of this was covered by insurance, leaving the protection gap – the portion of economic losses not covered by insurance – of 69 percent. Over the last decade, natural catastrophes resulted in economic losses of USD2.98 trillion and insured losses of USD845 billion, creating a protection gap of 72%.

The decade also highlighted the significant protection gap that persists in developing and emerging countries. No part of the world was more vulnerable to this topic than in Asia, where just 12 percent of economic losses – USD151 billion out of USD1.23 trillion – were covered by insurance. In Latin America and Africa insurance take-up rates were in the low single-digits, meaning that virtually all losses were uninsured and local populations were entirely dependent on federal or international financial support for recovery.

The development of new insurance schemes, such as parametric insurance, insurance risk pools, or catastrophe bonds, will be important new ways to improve risk mitigation in the most vulnerable areas.

Simon Meldrum, Innovative Finance Specialist, British Red Cross, added: “Our vision is of a world where every community is resilient to the impact of the climate crisis, both today and in the future. With a presence in almost every country in the world, we see first-hand the humanitarian impact of increasingly volatile weather. We are also one of the biggest organisations in the world responding to natural disasters and people in crisis. In addition, we are working in disaster risk reduction through our Climate Centre and other specialists across the Red Cross. We are now starting to explore new ways of working with private sector partners and pilot some exciting initiatives such as insurance linked securities or catastrophe bonds because we believe that cross-sector collaboration with governments, the insurance sector and non-governmental organisations will be critical to shifting the dial in the humanitarian response.”

About Aon

Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

SOURCE Aon plc

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Buyers move to used vehicles as new autos hit record prices

By Tom Krisher


DETROIT _ The average sale price of a new vehicle hit a record of just over $39,000 late last year, a figure that chased many buyers out of the market and into used vehicles, which could set a sales record.

The shift to used, aided by millions of late-model vehicles coming off two- and three-year leases, is good for consumers who can get well-equipped cars, trucks and SUVs for far less than new ones. But it could be bad for automakers, with many industry analysts expecting new-vehicle sales to fall in 2020.

Consumers bought an estimated 40.4 million used vehicles last year, likely passing the old record of 40.2 million set in 2018, according to figures from the auto pricing site. Edmunds, which provides content to The Associated Press, won’t call it a record until final numbers arrive sometime in mid-February.

At the same time, new-vehicle sales dropped 1.3% to just over 17 million last year, and some industry analysts are predicting they’ll fall into the mid-16 millions this year.

“This affordability issue is sort of scaring consumers away” from new vehicles, said Charlie Chesbrough, senior economist at Cox Automotive, which includes Kelley Blue Book. “You have this sort of competition out there of used vehicles that is offering an alternative to people who are looking for value.”

Chesbrough expects new-vehicle sales to fall to 16.6 million this year, while Standard & Poors analyst Nishit Madlani predicts 16.4 million  “amid a wave of used autos hitting the market and high sticker prices on new cars.” S&P sees a further decline to 16.3 million for the following two years.

If a buyer with good credit bought an average new vehicle for $39,000 and put $2,000 down, they would borrow $37,000. That sum, at about 6% interest for six years, would bring a monthly payment of just over $600.

Since many lenders limit auto buyers to a payment of 15% of their income, the lowest-income buyer who could afford the average price would have to make over $48,000 per year, said Matt Dundas, finance director for Carvana, an online used-vehicle sales company.

“That’s approaching the U.S. median household income of just over $60,000, and even then, you’re still right up against lender limits,” Dundas said.  “ideally, the average person wouldn’t be right up against the line,” he said.

The lower prices make late-model used vehicles more attractive. Last year, Edmunds estimated the average used vehicle cost $20,533. A 3-year-old one cost an average of $22,571. Borrowing $20,000 for six years would cost an average buyer about a $340 monthly payment.

Price isn’t the only reason buying used is becoming more attractive. Automakers, dealers and sites like Carvana offer used vehicles with warranties and maintenance records, sometimes calling them “certified pre-owned.”

“I think we’re making it not as scary to buy a used car,” Dundas said. “It’s in great shape, it’s clean and I’m dealing with a legitimate company,” he said.

A record 2.8 million certified pre-owned vehicles were sold last year, according to Cox.

Aundrya Richardson, an emergency dispatcher in the Atlanta area, could have afforded a new car but knew she shouldn’t spend more than $30,000 while trying to recover from financial problems. She decided in early January to buy a silver 2016 Toyota Corolla with 25,000 miles on it from Carvana for about $15,000.

“I’m going to look for something that’s lower but still a reliable vehicle,” she said.  “I wasn’t really in a position to be super-picky. Maybe I’ll get what I want next time.”

As demand falls, the industry could be forced to increase incentives such as cash rebates and low-interest financing, and ultimately that could bring new vehicle prices down.

The average new vehicle sales price, including taxes, fees and automaker incentives, hit a record of $39,028 last November, according to Cox. But as demand from individual buyers ebbed in December, dealer discounts grew to 7% of the sticker price, the highest level since the financial crisis in July of 2009. That drove the average price down slightly to $38,948, according to Cox.

Richard Bazzy, owner of three Pittsburgh-area Ford dealerships, said automakers like Ford are going to have to keep up low interest loans and cash offers to keep new vehicle sales strong.

Still, there are forces working against lower new-vehicle prices. People are still buying SUVs and trucks, which accounted for 69% of U.S. sales last year. Trucks and SUVs generally are more expensive than cars, so that drives up the average sale price.

Also, people still want the latest safety and infotainment technology, says Chesbrough, and they are willing to spend to get it. Automakers are differentiating their new vehicles from even 2-year-old ones by adding more driver assist and safety features as well as bigger navigation screens and other technology, he said.

“All of that is going to force these vehicle prices to continue to creep up,” Chesbrough said.

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