Well the Dow Jones average dropped below 8000 yesterday. That is bad news enough but insurance stocks seem to be taking a worse than average beating. Tidbits from today:

• The Hartford dropped to $6 today – they were at $12 on Monday from $97.03 in Oct  – they have a market cap at 1.8 billion now

• Travelers is down to $35 on Monday it was $41.88 and on Oct 17 they were at $51.87

• C N A is at $9.49 – Monday at $12.77 – October $40.51

• AIG is at $1.66 today was at $2.08 on Monday was at $63.27 in October – the bailout package is $150 Billion and climbing

• XL is at $4.46 today – Monday they were at $6.14 – in October they were at $77.01 per share.

• Chubb is at $44.63 today – Monday at $49.60 – October 17 at $53.49 -

I will report back next week with hopefully better news. (though I don’t expect it to be much better)

The new $150 billion bailout package – the largest government loan ever to one company – restructures the deal to provide easier terms for AIG. The new deal announced Monday was roundly praised by AIG insiders, Hank Greenberg and now CEO Ed Liddy – as reported in the WSJ:

“This is a much better arrangement for us,” said Chief Executive Edward Liddy. He said the revised deal gave AIG “more breathing room” and “more time if we need it” to pursue its previously disclosed plan to sell off major units to help repay the government.

The dismal earnings underline the fact that the new bailout plan doesn’t completely eliminate the threats AIG faces. If financial conditions were to worsen, the company could be forced to take billions more in losses and have to go back to the government for additional financing.

AIG has had no success making any of those sales. Mr. Liddy said on a conference call that the company would announce “several key dispositions” by the end of the year. Competitors meanwhile are eagerly trying to snap up AIG’s customers and employees, putting added pressure on the company to complete the sales.

AIG’s shareholders were critical of the initial government deal and have pushed for improved terms for the insurer. “It’s a better outcome, overall,” said Maurice R. “Hank” Greenberg, the former AIG chief executive who heads a firm that is AIG’s largest shareholder and also has a substantial personal stake. “It’s progress.”

The deal takes some pressure off of AIG by dropping the interest rate on a central part of the government package — a $60 billion loan — from above 10% to closer to 6%. On the other hand, AIG also will have to pay 10% interest in exchange for a $40 billion infusion of capital from the Treasury Department, creating a significant new burden on the company.

The revised deal also creates two new entities, largely funded by up to $52.5 billion in government money, which will essentially take on the risk from some of AIG’s most toxic assets, including some of the credit derivatives.[click here to read the rest of the story]

AIG head exec, Edward Liddy, has vowed to not let the crown jewel go to the auction block. Commercial Insurance is not up for sale. According to BusinessWeek:

But the $52 billion business may be losing its luster. Customers are nervous about AIG’s future, and competitors are rushing to capitalize on AIG’s battered reputation amid an $85 billion federal bailout following massive subprime losses, and an additional infusion of $38 billion from the Federal Reserve Bank of New York to cover the company’s other obligations. Industry headhunters say competitors are courting top AIG underwriters, who play a critical role in the relationship-driven industry.

The battle has already morphed into a price war. Insurance brokers whose clients’ policies came up for renewal on Oct. 1 say AIG slashed premium rates by as much as 50% on key accounts, though the company says rates have not changed materially overall. Rivals are offering discounts of up to 20% to woo people away. Within the industry, AIG’s air of desperation is palpable. “Competitors smell blood,” says Cliff Gallant, an analyst with Keefe, Bruyette & Woods (KBW), “and they are trying to steal that business as quickly as they can.” For full article click HERE

At least someone sees some real value in AIG’s operations. Hank Greenberg wrote Edward Liddy, Chairman and CEO of AIG, a letter on Monday of this week stating that he would like to make an offer on certain assets that may be up for liquidation. Quoting from the letter itself that was posted by the Wall Street Journal it reads:

Dear Ed,

As you are aware, for a considerable period of time, I have tried to
discuss with AIG management and the Board ways in which I
could be of assistance, including trying to develop a private sector
alternative to a government takeover and otherwise assisting the
Company preserving, as much as possible, the value for
shareholders that had been built up over the four decades prior to
the last three years, As you are also aware, AIG has declined my
assistance and refused to meet with me even to provide me with
the information that would be necessary to try to assist the
company on my own.

I now understand that the company has begun to liquidate itself
by selling assets in privately negotiated transactions without
transparency and without providing the opportunity for the
participation of alternative purchasers that would be required to
obtain the best possible price for shareholders, I would have
thought that the interest that I and the Starr Companies had
previously expressed in possibly purchasing assets that the
company might decide to sell would have caused the company to
contact me, That obviously has not happened. Accordingly, I want
to formally request all opportullity to submit an offer on any
assets that the company intends to sell. It is, of course, clear that
you have a fiduciary duty to obtain the best possible price for the
benefit of the shareholders and creditors in any sale of assets and
that you cannot do so by ignoring offers from qualified potential
purchasers.

I look forward to hearing from you or your representative.

With regards.
Sincerely,

Hank

Copy of Letter from Hank Greenberg on CV Starr & Co. letterhead