AIG

[johnny storm]

Originally Posted by Harry

My question too. Did he do his analysis based on Schedule P data? That would seem pretty weak for an actuary.

Schedule P is the best data you can get for most companies, if you're limited to publicly available data (i.e., you're not the consulting actuary). And, there's value in it, in particularly because the company has very little ability to manipulate that data (compared to what goes into the 10-K or other disclosures, which are easy to massage, if you want to).

Basically, for most companies your options are

A) Trust management to be accurate and honest
B) Do the best you can with Schedule P

Given the number of times this company has re-stated items and for other reasons that are pretty well covered in this thread, some people (including me) find it hard to go with option A.

There's a lot of valuable data in Schedule P. It's certainly far less than what you would want to have if you were making your own internal analysis, but unless you've tried it, don't assume you can't do some pretty valuable work with just what's there.

[Loner]

Originally Posted by Irish Blues

No, you're missing the point. Actuaries fit trends to data all the time. We can fit 4-point trends, 8-point trends, 12-point trends, or 23-point trends ... but the n-point trend we end up selecting is the one that we believe best fits (A) past historical data, and (B) our expectation of the future. Further, the trend we fit is supposed to reflect adjustments in the data that are necessary for various reasons [such as reinsurance]. Stanley has yet to mention that Bault chose the wrong 9 points [well, at least until you just suggested it]; he/she/it started off with "choosing a 9-point trend was incorrect" and then lobbed on a few general statements that lack any support beyond "I think it's true, therefore it must be true."

Sorry, but I'm not buying that. Hell, I haven't even seen anything to suggest that there's actual proof that the data was corrupted because of material changes in reinsurance and/or accounting. Show me that, and we've got something to discuss. [Which will almost assuredly start with "now show me that Bault didn't account for those changes properly."]

Bault laid out his assumptions for everyone to see; Stanley has yet to show (A) Bault was incorrect [and no, for the 126th time, "I think it was wrong" doesn't constitute proof], or (B) what Bault should have done. Of course, I don't actually expect Stanley to do either (A) or (B) much less do another analysis to provide a different take on AIG's reserve position [because I suspect it would show just how badly flawed Stanley's own take is] ... but hey, to each his/her/its own.

SHE* merely expressed skepticism. Stop tilting at windmills that aren't there. You're saying since she doesn't accept a particular alternative hypothesis, she's saying a different alternative hypothesis is true and her failure to propose one means she's wrong. No. All she's saying is she's not convinced the null hypothesis is false.

And in actuarial work we frequently make assumptions that amount to little more than flipping a coin. But when either side changes the answer significantly, we have to question how confident we are in the final answer. What's the confidence interval around that $11 billion? $1 billion? $15 billion?


*BTW for someone who devotes such bulldog tenacity in dismantling perceived arguments, you've either missed that Stanley is a female, or you're deliberately beeing an *******. Given the inclusion of "it" I suspect the latter. Grow the hell up and learn some manners.

Sorry, Loner - but when your comments degenerate into this

Originally Posted by Loner

*BTW for someone who devotes such bulldog tenacity in dismantling perceived arguments, you've either missed that Stanley is a female, or you're deliberately beeing an *******. Given the inclusion of "it" I suspect the latter. Grow the hell up and learn some manners.

I quit paying attention ... especially considering I've used "he/she/it" on multiple occasions. As such, whatever you had to say doesn't merit a response. Do feel free to express more [mock] outrage, though. I'm sure we'll all get a kick out of it.

[Loner]

Originally Posted by Irish Blues

Sorry, Loner - but when your comments degenerate into this



I quit paying attention ... especially considering I've used "he/she/it" on multiple occasions. As such, whatever you had to say doesn't merit a response. Do feel free to express more [mock] outrage, though. I'm sure we'll all get a kick out of it.

I fail to see how your having a history of *******ry negates my point.

[Harry]

Originally Posted by johnny storm

Schedule P is the best data you can get for most companies, if you're limited to publicly available data (i.e., you're not the consulting actuary). And, there's value in it, in particularly because the company has very little ability to manipulate that data (compared to what goes into the 10-K or other disclosures, which are easy to massage, if you want to).

Basically, for most companies your options are

A) Trust management to be accurate and honest
B) Do the best you can with Schedule P

Given the number of times this company has re-stated items and for other reasons that are pretty well covered in this thread, some people (including me) find it hard to go with option A.

There's a lot of valuable data in Schedule P. It's certainly far less than what you would want to have if you were making your own internal analysis, but unless you've tried it, don't assume you can't do some pretty valuable work with just what's there.

If you don't think I've tried it, you'd be wrong. A reserve analysis based on Sched P barely scrapes the surface of a true reserve analysis. That's why unqualified Wall St analysts (not saying that Bault is unqualified) rely on it as their primary tool, and reserving actuaries use it as a last resort.

[johnny storm]

Originally Posted by Harry

A reserve analysis based on Sched P barely scrapes the surface of a true reserve analysis.

True, but then an outsider has no capacity to perform a "true reserve analysis" - you can't get the data to do so. And you're not trying to accomplish the same thing regardless.

Originally Posted by Harry

That's why unqualified Wall St analysts (not saying that Bault is unqualified) rely on it as their primary tool

Unquestionably false. The reason they rely on it is because there's no better data that's publicly available for the company. Many would/could do a better analysis if you gave them the inside data. Of course, the SEC would take both you and them to prison for doing so, which is why this doesn't happen.

[Harry]

Originally Posted by johnny storm

True, but then an outsider has no capacity to perform a "true reserve analysis" - you can't get the data to do so. And you're not trying to accomplish the same thing regardless.



Unquestionably false. The reason they rely on it is because there's no better data that's publicly available for the company. Many would/could do a better analysis if you gave them the inside data. Of course, the SEC would take both you and them to prison for doing so, which is why this doesn't happen.

True. I exaggerated a little. But that is also why those analyses shouldn't be given much weight. Without that inside knowledge, there is no way to account for how the company reacted over the years - reserve strengthening, changing books of business, changing retentions, etc. For a small monoline company, sure, Schedule P might be ok. Might be ok. For AIG? No way.

[Gene Yuss]

AIG Statement in Response to Bernstein Research Report of November 30, 2009

On November 30, 2009, Bernstein Research issued a report stating that AIG’s non-life insurance loss reserves were deficient. Just seven months ago, in April 2009, Bernstein issued a report stating that AIG’s reserves were redundant. AIG does not comment on analyst reports. However, to the extent that Bernstein’s analysis was based on information from Schedule P to AIG’s domestic property casualty insurance company Annual Statutory Financial Statements, AIG included the following cautionary language in Schedule P to such statements with respect to the use of Schedule P data: “It is not possible for any person to accurately determine the adequacy of the Company’s loss and loss expense reserves using the Company’s Schedule P data as the sole source.” AIG also noted that the 2008 calendar year data reported in Schedule P is particularly distorted as a result of the restructuring of certain foreign operations previously conducted as branches of domestic companies.

[Beach Bum]

Originally Posted by Gene Yuss

AIG Statement in Response to Bernstein Research Report of November 30, 2009

...AIG also noted that the 2008 calendar year data reported in Schedule P is particularly distorted as a result of the restructuring of certain foreign operations previously conducted as branches of domestic companies.

Bernstein took a 1-yr Volume Weighted Average across the lines for its LDF selections. It makes perfect sense now.

Originally Posted by Loner

I fail to see how your having a history of *******ry negates my point.

Your resorting to name calling speaks volumes about your inability to actually mount a coherent argument.