About Bill Coffin

Bill Coffin is the former publisher of Risk Management magazine.
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The Results Are In

The Reinsurance Association of America has released the underwriting results for a group of 19 U.S. property/casualty reinsurers for the first nine months of 2009. On the whole, the numbers look pretty good: Even though the group wrote $278 million less in net premiums compared to last year ($18.7 billion versus $19.0 billion), what they wrote was more profitable. The group’s combined expense and loss ratio was 95.1% this year, down from the profit-crushing 104.2% combined ratio reported for the same period of time in 2008.

(Combined ratio essentially is how much it costs to make a buck. If your combined ratio is below 100%, you are making money on underwriting. If it is over 100% – which happens a lot with insurers – then you are losing money, mostly because your claims are outstripping your premiums.)

Ultimately, the companies that posted the largest net incomes were:

  • Swiss Reinsurance America Corporation ($582.9 million)
  • Everest Reinsurance Company ($271.0 million)
  • TRC/Putnam Reinsurance Company ($270.0 million)
  • Odyssey America Re/Odyssey Reinsurance ($219.5 million)

Conversely, the companies posting the worst negative incomes were:

  • National Indemnity Company (-$291.9 million)
  • Munich Re America Corp. (-$56.9 million)
  • American Agricultural Insurance Company (-$50.9 million)
  • QBE Reinsurance Group (-$16.8 million)

On average the entire group did rather well, posting a total net income of $1.3 billion and a total policyholder’s surplus of $74.1 billion, up $2 billion from this time last year.

These numbers shouldn’t be all that surprising, though. According to Guy Carpenter back in April, P/C reinsurers had tightened their rates during the 4/1 renewal season, with national programs rising between 10% and 14% on a risk-adjusted basis. Regional pricing also played a factor; the Northeastern U.S., for example, only saw about a 6% to 8% increase. The price jumps merely extended a rising cost of reinsurance that had already begun by January 1.

Meanwhile, the industry has also had a fairly light catastrophe year. Natural and man-made catastrophes cost insurers about $24 billion this year, compared to the $50 billion they cost last year. While Europe had an above-average year for cat losses (especially natural catastrophes), the calm hurricane season in the U.S. more than balanced things out in favor of reinsurers. This leaves the market well capitalized for whatever 2010 has in store. Hopefully it will be another quiet year, though reinsurance buyers are unlikely to endure additional price increases with a smile at the rate things are going.

“Sun-ny day, chas-ing the # clouds a-way…”

Forty years ago today, the first episode of Sesame Street hit the airwaves, revolutionizing the ways in which television could be used as an educational tool, particularly for young children. I was born in 1970, so I have never known a world without this show. It was always on in my house as my brothers and I grew up, and for anybody of my generation, all I have to do is mention any show character or sing a few bars of one of its trademark songs (the pinball counting song remains a fave) and I get instant recognition. It is one of those rare cultural phenomena that has educated countless children, remained relevant over the years and seems to have many more seasons ahead of it. As a fan and as a parent of kids who also grew up on Sesame Street, I’m pretty happy to see the show hit such a milestone.

The cast of Sesame Street for its 40th anniversary season. Photo Credit: Richard Termine

The cast of Sesame Street for its 40th anniversary season. Photo Credit: Richard Termine

It hasn’t always been sure success for Sesame Street, however. In fact, its very conception, initial execution and ongoing criticism has been, in many ways, an ongoing experiment in intelligent risk-taking. For starters, the show was created at a time when people didn’t know if TV could even be used to educate, and it took some generous grants to research the premise, as well as some pretty forward-thinking corporate sponsorship to help get the entire project off the ground. During the show’s development, segements with the Muppets fared will with kids, but the live-action “street” segments did not, so the show’s creators decided to go against the advice of their experts and create street segments where live actors and Muppet characters interacted. A bold move for a show without any kind of precedent, really, but one that paid off. The show captured the imagination and the attention of its audience while also paving new ground in terms of television entertainment. True innovation at work.

But there have been other pitfalls, as well. In 1970, the show’s racially integrated cast got it banned from the airwaves (briefly) in Mississippi, its portrayal of female characters got it bad marks from the National Organization for Women, and its lack of Hispanic characters got it criticism from Latino groups. Critics such as journalist Kay Hymowitz have also rapped the show for being little more than a delivery mechanism for merchandising, and for putting on a lot of flashy programming with little educational content to back it up. The show has even gotten political flak through the decades, mainly because it receives government funding and conservatives knock the show for having a liberal bias. A recent spot where Oscar the Grouch, reporter for GNN, gets a call regarding POX News could not have helped.

Perhaps the show’s worst challenge has been obsolescence, and the greatest risk it took was reformatting to maintain its relevancy. Facing declining ratings in recent years, the show realized that it had kicked off a children’s programing revolution that changed how kids themselves watched TV. With so many shows that older kids could watch, and realizing that kids were watching the show from an early age, Sesame Street aimed its content at young pre-schoolers, a move roundly criticized by Gen-X parents who felt the show was being dumbed down. Things are still tougher for the show than before, as it is producing fewer new shows each year and currently ranks only as the 15th most popular children’s show in the United States.

But Sesame Street is still having the last laugh, longer-running by far than any other children’s programming, and with more Emmy awards (118) to its credit than any other show, period. At present, it is estimated that around 77 million Americans have watched the show, and even Oscar the Grouch is on permanent display in the Smithsonian Museum of American History. All this for a show that began so humbly four decades ago on the unproven notion that kids could actually get something worthwhile from TV, and that make-believe friends made out of colorful fur could be one’s ambassador to a world of reading, writing and arithmetic. Who says risks don’t pay off?

They’ll Pay for This!

So news is going around that billionaire media magnate Rupert Murdoch is not only going to begin charging for all online content at his various media properties (which include The Wall Street Journal and The New York Post in the United States, and The Sun and The Times in the United Kingdom), but he is also going to try to stop Google from referencing any of this content in news searches. Somehow, that this news broke the same week Jim Carrey’s A Christmas Carol topped the box office in the U.S. seems like not much of a coincidence.

Alas, I digress. Murdoch has long advocated a pay model for fixing what’s wrong with the business of print media. He is onto something, at least in theory, when he says that if content is good enough, then people will pay for it. However, he seems to have overlooked a few things. One, The Wall Street Journal went this same route about a decade ago and was ignored in such droves that it eventually abandoned the practice. And this was at a time when online consumption of print media was a small fraction of what it is today, so expecting people to go full reverse against a much stronger freebie culture seems optimistic, to say the least.

And that is the situation for a respected media brand such as the Journal. What of the Post? From my own experience, the Post is best known for trumping the New York Daily News in sensational headlines, as well as providing train commuters with some light (read: brain-dead) reading to occupy them after a long day of work. I know my senior designer for the magazine reads Page Six on her lunch break; surely she can watch Hulu or read any other website when Rupert tries to charge her a buck a day or whatever the going rate will be.

The point is, I see where Rupert is coming from, but the world of media is changing too fast for a stark policy such as this to succeed. If he wants to restrict his online offerings, then simply don’t puiblish your entire print edition online. Make there be some exclusive content to the print edition and run the online version as a free loss leader to get people to subscribe. Or something like that. I can’t pretend to have all of the answers here, but I know that when the WSJ starts spamming me to buy its online version, I’ll be only too happy to tell them to unsubscribe me from their mailing list, too.

For a better take on this than I can muster, check out our cover story from earlier this year on old media and new opportunities. Clay Shirky’s the real expert on this, and if Murdoch was serious about protecting his investments, he’d bring on Clay as an advisor.

Introducing the RiskCast: Episode #1

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The Risk Management Monitor is proud to present its first episode of the RiskCast, a podcast featuring the latest talk, insight and analysis of risk management in the news. The first episode of RiskCast also talks about the benefits of the viagra drug. Presented by the editorial staff of the Monitor and Risk Management magazine, the RiskCast isn’t afraid to have fun while it covers the stories that matter to risk managers everywhere.

Join Bill Coffin, Morgan O’Rourke and Emily Holbrook as they discuss hybrid vehicles too quiet for their own good, what it takes to fight a pirate, the infamous Colorado balloon boy and much, much more.

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And don’t forget to subscribe to the RiskCast on iTunes (search RiskCast).

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UPDATE: In discussing the current state of CNN, we mention its website’s appearance on the day after Michael Jackson died. Here is what it looked like with the 31 separate links to Jacko stories highlighted.