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Today's big stories

The world’s biggest insurers are starting to get a sense of just how much coronavirus will cost
Our analysts explain why inflation hasn’t picked up despite unprecedented financial support – Read Now
Speaking of which, the European Central Bank left the eurozone’s key interest rate unchanged

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The Most Annoying Sound In The World

What’s Going On Here?

Lloyd’s of London may feel it’s got more in common with Dumb and Dumber than just its lead character’s name: the world’s largest insurance market revealed a first-half loss on Thursday that could spell big costs ahead for insurers and insured worldwide.

What Does This Mean?

Lloyd’s – also not to be confused with the British bank of the same name – is an odd fish in the insurance world. The historic marketplace’s 90 “syndicate members” insure people and businesses, including other insurance companies via “reinsurance”. Its broad span therefore makes it a good barometer for the insurance industry as a whole – and that barometer’s currently reading “high pressure”. Over the last six months, Lloyd’s made a $530 million loss before tax, largely due to $3 billion of coronavirus-related payouts in the period. What’s more, it expects to fork out another $3 billion throughout the rest of 2020.

Why Should I Care?

The bigger picture: So you’re telling me there’s a chance…
Back in March, Lloyd’s estimated insurance companies around the world – excluding life insurers – would end up on the hook for more than $100 billion in coronavirus claims due to disruptions to travel, events, and trade. But they’re not taking it lying down: UK financial authorities are currently contesting insurers’ avowed lack of liability for certain pandemic-related claims which typically apply only in cases of physical damage. The outcome could lead to higher costs (or savings) for insurers everywhere...

Zooming in: Our pets’ heads are falling off!
The key measure of an insurance company’s profitability is its “combined ratio”. This shows losses and expenses as a percentage of revenue from premiums, revealing how good an insurer is at profitably selling policies. The Lloyd’s ratio was 110% in the last six months compared to 98.8% the same time last year, when the firm made a $3 million profit. Insurers trying to recoup their 2020 losses by charging more for protection could make your travel, health, business – and, yes, parakeet – insurance more expensive.

Get covered: Three things investors look at before buying insurance stocks.

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2/3 Premium

Out Of Puff

What’s Going On Here?

With central banks around the world doing “whatever it takes” to support economic growth, why are there so few signs of runaway inflation? Our analysts explain what’s going on – and what it means for your investments.

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3/3

Parallel Parker

What’s Going On Here?

The eurozone’s just like the US, only with fewer superheroes – and while both economies have stubbornly low inflation, as of Thursday both are keeping key interest rates unchanged.

What Does This Mean?

The European Central Bank (ECB to its friends) thinks things are getting better in the eurozone, but the economic outlook’s still incredibly uncertain; it therefore left its $1.6 trillion emergency bond-buying program and sub-zero interest rates frozen in place on Thursday. Both help make money cheaper to borrow – and should therefore encourage more spending, in turn boosting the prices of goods and services (a.k.a. inflation). The same’s true Stateside, only the US central bank is committed to unlimited bond buying alongside record-low rates. Despite both economies reopening, however, business and consumer spending has failed to push inflation back to target levels.

Why Should I Care?

For markets: With great power…
Lowering rates further seems an obvious way to boost inflation. But if the last decade’s any guide, there’s no guarantee that’d actually work – and the unintended consequences could cause more harm than good (tweet this). Lower rates hurt commercial banks’ profits – and if they’re struggling then they’ll be less forthcoming with loans for struggling businesses. The ECB’s low-rate-and-wait approach appears to tacitly echo the US Federal Reserve’s new plan: it’s happy to let inflation eventually overshoot its target so long as it averages 2% over time – the generally accepted indication of “stable” price growth.

The bigger picture: Greenback Goblins.
The flip side of the recently weakening US dollar is the euro’s relative strength. That helps eurozone businesses’ cash go further abroad, sure – particularly in the US, where the euro’s value in dollars exceeded $1.20 last week for the first time since 2018. But rising imports usually leads to less demand for local products, which could hamper eurozone inflation further.

Grin and bear it: How to invest in a low-rate environment.

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💬 Quote of the day

“If your dreams do not scare you, they are not big enough.”

– Ellen Johnson Sirleaf (a former president of Liberia)

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📆 Wake me up when before September ends

There’s plenty coming up this month to suit investors (and budding investors) of all kinds. Don’t miss out:

💸 Level Up with Finimize – 8am New York Time / 1pm UK Time, September 11th (free to attend)
🎙 Finimize Live: The Crowdfund Revolution – 8am New York Time / 1pm UK Time, September 15th
📈 Playing It Safe: Portfolio Breakdown – 11am New York Time / 4pm UK Time, September 15th
👨‍🎨 How to Start Buying Art – 2.30pm New York Time / 7.30pm UK Time, September 16th
🙋‍♀️ Women & Money – 5.30pm Perth Time / 10am UK Time, September 23rd

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The hunt for the next miracle cure is spurring a spree of acquisitions
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Read or Listen

📚 What we're reading

What wink-and-nudge cards say about modern-day policing (Vice)
This inspirational astrophysicist couldn’t get the magnets out of his nose (The Outline)
To colonize space or not to colonize (Nautilus)

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Finimize - 😷 Coronavirus hurts insurers

Today's big stories

The Most Annoying Sound In The World

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Out Of Puff

💰 What would you do with an extra $352?

Parallel Parker

What’s Going On Here?

What Does This Mean?

Why Should I Care?

📆 Wake me up when before September ends

💊 Investment opportunities in pharma

Older messages

🤢 Tesla's 30% crash

✈️ Morgan Stanley’s first-class upgrade

👶 Breathe, US jobs, breathe...

💰 Here's a reward for your curiosity...

🤑 Zoom's still smashing it

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