The Globe ran a piece on an upcoming insurance pow-wow in Toronto:
“The irony of the way insurance works, as opposed to the way banking works, is that it’s not always clear that capital is the relevant solution,” he said. “It’s often not, because insurance companies get into trouble in different ways.”
For example, insurance companies wouldn’t experience a ‘run’ on deposits, Mr. McGavick said, when reserves may not be able to cover mass customer withdrawals in the same way a bank would.
This seems like an odd remark to me, because while bank runs may be rooted in capital problems, they are made possible by liquidity problems – this is the old illiquid vs. insolvent distinction that I frequently mentioned during the Credit Crunch and which is well illustrated by the Panic of 1907.
Anyway, the Geneva Association produced an analysis titled Variable Annuities — An Analysis of Financial Stability, which references (among other things):
Key Financial Stability Issues in Insurance, released in July 2010, comprises analytical work carried out on specific issues that had been raised by regulatory and supervisory counterparts in areas such as investment management, liquidity management, limits of insurability, crisis resolution mechanisms in insurance and the confused concept of an “insurance run” (supposedly akin to a bank run).
and Key Financial Stability Issues in Insurance, which is quite interesting, but which the dorks have copy-protected so I can’t copy-paste the good parts.
Capital is virtually irrelevant during a bank run (although loss of capital might trigger the run); capital is actually more important in the insurance game. While it is quite true that Segregated Fund owners can’t take their money and run – eliminating much of the need for liquidity – a lack of capital will have severe effects on the viability of the operation – as Manulife very nearly found out during the crisis.
DGS.PR.A was confirmed at Pfd-3 by DBRS:
The net asset value (NAV) of the Company has increased steadily since the last rating confirmation in April 2013. As of April 3, 2014, the downside protection available to the Preferred Shares is approximately 46.9% and the dividend coverage ratio is approximately 1.1 times. The Pfd-3 rating of the Preferred Shares is based primarily on the downside protection available and the additional protection provided by an asset coverage test, which does not permit any distributions to holders of the Class A Shares if the NAV of the Company falls below $15.
It was a good day for the Canadian preferred share market, with PerpetualDiscounts winning 16bp, FixedResets gaining 3bp and DeemedRetractibles up 13bp. Volatility was minimal. Volume … was peculiar. Very little breadth, but quite a lot of depth! A very high proportion of the volume leaders have been called for redemption.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1875 % | 2,407.4 |
| FixedFloater | 4.70 % | 4.24 % | 32,743 | 17.96 | 1 | -0.2465 % | 3,656.4 |
| Floater | 3.02 % | 3.15 % | 50,422 | 19.38 | 4 | 0.1875 % | 2,599.3 |
| OpRet | 4.36 % | -4.39 % | 36,175 | 0.12 | 2 | -0.0388 % | 2,693.2 |
| SplitShare | 4.81 % | 4.38 % | 60,411 | 4.24 | 5 | -0.1112 % | 3,083.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0388 % | 2,462.6 |
| Perpetual-Premium | 5.55 % | -6.02 % | 107,298 | 0.09 | 13 | 0.0272 % | 2,384.9 |
| Perpetual-Discount | 5.41 % | 5.39 % | 115,531 | 14.65 | 23 | 0.1591 % | 2,488.7 |
| FixedReset | 4.68 % | 3.64 % | 195,270 | 4.34 | 79 | 0.0347 % | 2,530.7 |
| Deemed-Retractible | 5.02 % | -0.54 % | 146,596 | 0.16 | 42 | 0.1331 % | 2,495.2 |
| FloatingReset | 2.64 % | 2.41 % | 182,485 | 4.26 | 5 | 0.0159 % | 2,481.7 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.F | FixedReset | 1.23 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.10 Bid-YTW : 4.25 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TD.PR.G | FixedReset | 338,738 | Called for Redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 24.97 Bid-YTW : 5.44 % |
| BNS.PR.T | FixedReset | 315,839 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 4.93 % |
| CM.PR.L | FixedReset | 244,798 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 5.27 % |
| TRP.PR.E | FixedReset | 223,516 | Desjardins crossed blocks of 23,900 and 50,800, both at 25.42. TD crossed 40,000 and RBC crossed 100,000, all at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-04-17 Maturity Price : 23.26 Evaluated at bid price : 25.41 Bid-YTW : 3.86 % |
| ENB.PF.A | FixedReset | 182,613 | Nesbitt crossed 30,00 at 25.37. TD bought 25,000 from anonymous and crossed blocks of 77,000 and 13,500, all at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-04-17 Maturity Price : 23.24 Evaluated at bid price : 25.36 Bid-YTW : 4.18 % |
| FTS.PR.E | OpRet | 177,950 | Nesbitt crossed 175,000 at 25.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-01 Maturity Price : 25.50 Evaluated at bid price : 25.95 Bid-YTW : -4.39 % |
| NA.PR.S | FixedReset | 172,080 | RBC crossed blocks of 100,000 and 30,000, both at 25.43. TD crossed 40,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-05-15 Maturity Price : 25.00 Evaluated at bid price : 25.43 Bid-YTW : 3.67 % |
| TD.PR.E | FixedReset | 155,319 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 5.09 % |
| MFC.PR.L | FixedReset | 142,354 | RBC crossed 120,900 at 24.85. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.85 Bid-YTW : 4.01 % |
| RY.PR.I | FixedReset | 114,223 | Scotia crossed 50,000 at 25.60. RBC crossed 50,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-02-24 Maturity Price : 25.00 Evaluated at bid price : 25.60 Bid-YTW : 3.11 % |
| VNR.PR.A | FixedReset | 111,594 | RBC crossed 100,500 at 25.37; Scotia crossed 10,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-15 Maturity Price : 25.00 Evaluated at bid price : 25.36 Bid-YTW : 3.93 % |
| ELF.PR.H | Perpetual-Discount | 102,208 | RBC crossed 100,000 at 24.50. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-04-17 Maturity Price : 24.01 Evaluated at bid price : 24.41 Bid-YTW : 5.65 % |
| There were 17 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CIU.PR.C | FixedReset | Quote: 20.82 – 21.32 Spot Rate : 0.5000 Average : 0.3521 YTW SCENARIO |
| POW.PR.B | Perpetual-Discount | Quote: 24.32 – 24.67 Spot Rate : 0.3500 Average : 0.2323 YTW SCENARIO |
| PWF.PR.P | FixedReset | Quote: 23.89 – 24.22 Spot Rate : 0.3300 Average : 0.2261 YTW SCENARIO |
| CGI.PR.D | SplitShare | Quote: 24.77 – 25.08 Spot Rate : 0.3100 Average : 0.2096 YTW SCENARIO |
| ENB.PR.H | FixedReset | Quote: 23.64 – 23.97 Spot Rate : 0.3300 Average : 0.2445 YTW SCENARIO |
| POW.PR.D | Perpetual-Discount | Quote: 23.27 – 23.58 Spot Rate : 0.3100 Average : 0.2320 YTW SCENARIO |