Declarations

The Party’s Over

“That party is over. … It’s a certainty that insurance industry profit margins, including ours, will fall significantly in 2008. Prices are down, and exposures inexorably rise … So be prepared for lower insurance earnings during the next few years.”

—Berkshire Hathaway Inc.’s Warren Buffett, in his annual letter to Berkshire shareholders, said insurance earnings may remain under pressure in 2008, after a second straight year without major insured catastrophes. According to a Reuters news report, Berkshire had been able to boost insurance premiums following Hurricane Katrina in 2005, as weaker rivals reduced their storm exposures, but rates have since come under pressure.

A ‘Second Great Displacement’

“Because of the scope of damage to New Orleans’ housing stock, much of which is still not recovered, there is insufficient housing here to place all New Orleans citizens needing to be relocated from trailers.”

—In a letter to President Bush, New Orleans Mayor Ray Nagin said a plan to move people living in trailers to apartments and hotels because of concerns about formaldehyde fumes will not work and will lead to a “second great displacement” of New Orleans residents, the Associated Press reported. The Centers for Disease Control and Prevention has said that formaldehyde fumes from 519 trailers and mobile homes tested in Mississippi and Louisiana were, on average, about five times what people are exposed to in most modern homes. The Federal Emergency Management Agency recently announced plans to get everyone out and into hotels, motels, apartments and other temporary housing by the summer, when the heat and stuffy air could worsen dangerous levels of formaldehyde fumes found in the trailers.

They Will Be Held Accountable

“The investing public must be able to trust and rely upon corporate management to provide accurate information in their public filings. … As these convictions demonstrate, executives who violate the criminal laws by deceiving investors or aiding in that deception will be held accountable.”

—Connecticut Assistant Attorney General Alice S. Fisher, comments after a federal court jury in Hartford, Conn., found four former General Re Corp. executives and one former American International Group executive guilty of corporate fraud and conspiracy charges stemming from allegations that the five helped cook AIG’s books in an effort to boost its stock price. According to the office of the U.S. Attorney for the District of Connecticut, the four Gen Re executives convicted were former CEO Ronald E. Ferguson, former CFO Elizabeth A. Monrad, and former senior vice presidents Christopher P. Garand and Robert D. Graham. Also convicted was former AIG vice president of reinsurance Christian M. Milton. The defendants stood accused of taking part in a scheme of using reinsurance deals to inflate AIG’s loss reserves by roughly $500 million between 2000 and 2001.