Mr. Newsome: There were a couple of companies — the most notable would be AIG (AIG) — that were right in the middle of the financial problems. They were heavily invested in credit derivatives and the like, and were using too much leverage, but most property-casualty companies were more bystanders to the problems. They are bond investors and typically attempt to be pretty conservative bond investors overall, but with the extraordinary selloff of high- grade bonds in general in the market, they suffered pretty steep declines in their books.
TWST: Has most of the pain been identified at this point, or are there still
some unknowns in the equation?
Mr. Newsome: I don't know if it's as much the unknowns, because that suggests
that there are investments that you really don't know about and that's always
possible on a company-by-company basis, but for the most part, I think the issue
is that nobody knows what's going to happen in the fixed income market on a day-
to-day basis. And these companies have a lot of bonds and as the fixed income
market deteriorates, so do the book values of these companies.
Tickers included in this excerpt: AIG, TRV, ACE
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