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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Joseph G. who wrote (30165)	7/23/1998 5:21:00 PM
From: Knighty Tin	Read Replies (4) \| Respond to of 132070

Joe, Like other financial services firms, the printing of lots of money and lowering of interest rates has benefitted them greatly. They are leveraged on rates (not only does all of their underwriting require interest rate assumptions, but their assets are mostly very long term bonds and brain-dead mortgages) so lower rates has made them temporarily rich. My feeling is that this easy money has made them even more inefficient and even more careless as investors. As a person who has worked for insurance companies, it is difficult to believe that they could become even worse investors, but I think that is happening. So, as soon as the insurance tide turns, they are almost certain casualties. However, there is reason for concern even before we see higher rates. The easy money has attracted competition and that has lowered the prices of policies. This is especially true in specialty lines, such as muni bond insurance. Since the cos have not lost big in the past, I fear they are lowering underwriting standards, especially as they lose contracts to competitors. So, I think this is a double-edged sword hanging over these very pricey companies. MB