Koloman
04-04-2009, 11:03 AM
Given the current credibility of financial rating schemes, I wonder if there will be any questions on this paper hahaha.
Exam 7 Question: ABC insurance company is rated A+ but XYZ is rated A. Given this information, and given that your company is looking at an acquisition of one of the two, which insurance company is better?
Answer: If you said ABC you are wrong, if you said XYZ you are wrong. Given that both companies were rated highly by A.M. Best they are likely to appear successful due to heavy investment in mortgage backed securities and are also likely to have been bailed out by their respective governments. Therefore, both companies are to be avoided.
Exam 7 Question: ABC insurance company is rated A+ but XYZ is rated A. Given this information, and given that your company is looking at an acquisition of one of the two, which insurance company is better?
Answer: If you said ABC you are wrong, if you said XYZ you are wrong. Given that both companies were rated highly by A.M. Best they are likely to appear successful due to heavy investment in mortgage backed securities and are also likely to have been bailed out by their respective governments. Therefore, both companies are to be avoided.