Moody's Talks - Focus on Finance

Bob Garofalo and Laura Bazer of the Insurance team explain the drivers behind all the M&A transactions in the life insurance industry, and what they mean for credit when the buyers are private-equity firms. Plus, Donald Robertson of the Banking team and Jasper Cooper of the Insurance team answer questions about Archegos and the recent cyber attack on insurer CNA.Inside this episode:Donald Robertson of the Banking team and Jasper Cooper of the Insurance team answer questions about Archegos and the recent cyber attack on insurer CNA (begins at 2:11)Bob Garofalo and Laura Bazer of the Insurance team explain the drivers behind all the M&A transactions in the life insurance industry, and what they mean for credit when the buyers are private-equity firms (begins at 6:39)Related content:Banks – Global: Archegos default highlights credit-negative risk opacity in banks’ prime brokerage activities - Credit Suisse and Nomura reported the possibility of incurring significant losses associated with a hedge fund defaultCNA Financial Corporation: Cybersecurity attack disrupts systems including webpage - The cyberattack could increase CNA's expenses and its reputational and regulatory risks, but its profitability and solid capital position mitigate risks. Its ratings are unchanged.Life Insurance – US: Companies transform business models via M&A, prepare for post-COVID world - Disruptions in life insurers' business models causing the sector to focus on what mattersLife Insurance – US: PE-driven M&A: good for life insurance sellers, less so for remaining policyholders - Robust PE capital markets provide strategic solutions for sellers, but policyholders and creditors can be exposed to greater financial risk under new PE owner.

Fresh off the Asset Management team’s virtual conference, Rory Callagy highlights how asset managers are finding growth – sometimes through acquisitions – in ESG, alternative investments and software solutions. Plus Antonello Aquino of the Banking team discusses the growing environmental risks African banks confront. Inside this episode:Rory Callagy highlights how asset managers are finding growth – sometimes through acquisitions – in ESG, alternative investments and software solutions. (begins at 2:17)Antonello Aquino of the Banking team discusses the growing environmental risks African banks confront. (begins at 8:11)Related content:  Asset Management Week - Available On-Demand​​ - Explore highlights of this 4-day event covering topics such as ESG and its impact on credit, active asset management, rise of M&A, and much more.​Moody's Asset Management Week – Recap: Asset managers scale up to gain edge in ESG, technology, alternative investments - In a fragmented, growth-challenged industry, scale is helping firms obtain technology, expertise and products – including ESG and alternatives – that give them a competitive advantage.Banks – Africa: Banks begin to take stock of intensifying environmental threats - African banks face climate change risk through large loans extended to environmentally sensitive sectors and through the government bonds they hold on their balance sheets 

In a special episode of our Focus on Finance podcast series, Stephen Long, Louise Lundberg and Eugene Tarzimanov of the Banking team join host Carolyn Henson to discuss the prospects for banks around the globe as government economic support measures start to unwind and banks brace for a substantial rise in loan defaults. Many economies are set to rebound this year but banks must factor in continuing uncertainty over the future course of the pandemic.Related content:Banking System Outlook - South Africa:  Weak economy, deteriorating loan quality and profitability drive our negative outlookBanking System Outlook Update – Mexico: Negative outlook on prolonged recovery and deteriorating government supportBanking System Outlook Update – Japan: Long-running structural challenges in a weak economy drive negative outlookBanking System Outlook Update – India: Potential weakening of government ability to provide support drives negative outlookBanking System Outlook Update – Germany: Outlook for German banks remains negative

With cyber risk on the rise, Lesley Ritter of the Cyber Risk team and Megan Fox, Michael Dion and Rokhaya Cisse of the Financial Institutions team discuss our survey and findings on banks’, insurers’ and asset managers’ preparedness for a cyberattack. Related content:Cyber Risk – Global: 2021 Outlook – Cyber vulnerabilities in software supply chains, rising cost of ransomware will be key risksCross-Sector – Global: Credit implications of cyber risk will hinge on business disruptions, reputational effectsCyber Risk – Global: Sunburst attack on public and private entities raises credit risks as extent of breach unfoldsBanks – North America: Cybersecurity strength rests on governance and preventionInsurers, Insurance Brokers and Asset Managers - Global: Survey signals cybersecurity strength, with some differences across sectors, regions.Insurance – US: Surge in ransomware claims drives cyber insurance prices higherP&C Insurance — Global: Battling hidden cyber exposures, insurers position for growing opportunity

Brandan Holmes of the Insurance team and James Leaton of the ESG team discuss why global regulators are zeroing in on financial sector climate risks. Plus, the Asset Management team’s Steve Tu talks about how and why US ESG investments are surging in popularity, and Francisco Uriostegui discusses the benefits and challenges for Mexican pension funds of incorporating ESG screening into investment decisions.Inside the episode:Brandan Holmes of the Insurance team and James Leaton of the ESG team discuss why global regulators are zeroing in on financial sector climate risks.  (begins at)Steve Tu of the Asset Management team talks about how and why US ESG investments are surging in popularity, and Francisco Uriostegui discusses the benefits and challenges for Mexican pension funds of incorporating ESG screening into investment decisions. (begins at)Asset Management Week - Register today!Join Moody’s the week of March 22nd for 4 days of in-depth discussion as we look to answer the question – How are asset managers allocating their capital and efforts to invest in the future growth and competitiveness?Related content:ESG – Global: 2021 outlook – Stimulus, transparency and policy alignment to amplify ESG trend  - As the global economy recovers from the coronavirus pandemic, ESG issues will assume greater importance in the actions of policymakers, regulators, investors and corporate decisionmakers.Insurance – Global: Global insurance regulators increase focus on climate risk  - Regulators around the world are encouraging the insurance industry to improve its understanding of, and ability to manage, the financial risks related to climate change.Allianz, AXA, Swiss Re, Munich Re, Zurich: Retreat from coal reduces liability and stranded asset risk, a credit positive  - Major European (re)insurers are limiting their investment and underwriting exposure to coal. This protects them against climate change liability risk, and the risk of asset stranding.Financial Institutions – Europe: BoE climate change stress tests will reinforce risk management for banks and insurers - Climate change stress tests are credit positive as they will help banks and insurers understand the consequences of climate change for their business, and support their risk management.Insurance – Global: The impact of environmental, social and governance risks on insurance ratings - In this report we explore the environmental, social and governance risks that insurers face, and explain how we incorporate them into our insurance ratings.Funds & Asset Management – US: ESG investment outperformance overcomes investor hesitancy, a key barrier to growth - Environmental, social and governance themed investments have become one of the best performing investment categories in recent years, paving the way for continued growth of this strategy.Asset Managers – Global: Beyond passive, ESG investing is the next growth frontier for asset managers  - ESG is a unique growth opportunity for asset managers because it promises to deliver value in a more holistic manner, getting beyond investment outperformance which is a zero sum game.Funds & Asset Management – Mexico: ESG factors improve risk analysis, but adoption will take time with market limitations - ESG investing could provide useful framework to pension asset managers, but significant changes will be gradual given fewer investment options in the local market and legacy portfolios.

Donald Robertson and Fadi Massih of the Securities and Exchanges team size up the implications that the recent social media-powered short squeeze has for US retail brokers, market makers, clearinghouses and exchanges. Plus, Swen Metzler spotlights German banks’ pressing need to rein in costs, and Alka Anbarasu tells us which Indian banks will win the race to go digital.Inside this episode:Swen Metzler spotlights German banks’ pressing need to rein in costs, and Alka Anbarasu tells us which Indian banks will win the race to go digital (begins at 3:01).Donald Robertson and Fadi Massih of the Securities and Exchanges team size up the implications that the recent social media-powered short squeeze has for US retail brokers, market makers, clearinghouses and exchanges (begins at 12:04). Related content:Banks – Germany: Large cost cuts are needed to stay profitable - German banks' high costs make them among the least profitable in Europe. That will need to change in face of further declining revenues.Banks – India: SBI, large private sector banks stand to gain from digitalization accelerated by pandemic - As social distancing measures boost demand for digital financial services, large banks capable of accelerating digitalization are well positioned to benefit.Securities & Exchanges – US: Retail trader short-squeeze has substantial market infrastructure implications - Recent market events and volatility have opened the prospect that authorities may propose changes to the US financial market infrastructure. We explore some possible proposals. 

A dwindling number of workers in developed economies will support a growing share of retirees, and growth and profitability are declining for banks, insurers and asset managers. Young Kim of the Insurance team and Tomoya Suzuki of the Banking team examine how South Korea’s insurers and Japan’s regional banks are turning demographics into opportunities, while Dean Ungar of the Asset Management team zeroes in on US asset managers’ future.Inside this episode:Young Kim of the Insurance team and Tomoya Suzuki of the Banking team examine how South Korea’s insurers and Japan’s regional banks are turning demographics into opportunities. (begins at 2:35)Dean Ungar of the Asset Management team zeroes in on US asset managers’ future. (begins at 11:35)Related content:Insurers – South Korea: Aging population a key challenge despite some opportunities - Insurers face rising risks from a growing weakness in mainstream products, along with higher competition in longevity products, which could weaken their underwriting discipline.Regional banks – Japan: Population aging and coronavirus-driven digitization can create opportunities - Banks can benefit from growing demand for services related to population aging, while increasing adoption of digital banking services will enable banks to cut costs by using technology.Sovereigns – Global: Ageing-related credit pressure to rise in 2030s in advanced economies- Absent measures that raise productivity growth or reduce spending, the fastest-ageing economies face a weakening in economic and fiscal strength. Asset Managers — US: Demographic trends point to future struggle to grow assets under management - Working-age population growth is slowing dramatically, the elderly population will grow significantly and live longer, and younger generations will be less wealthy.  

Lan Wang of the Banking team and Lillian Li of the Credit Strategy & Research team discuss why China’s move to open up its domestic financial markets to foreign securities firms potentially benefits all parties, despite operational hurdles. Plus, Marina Cremonese of the Asset Management team joins Lan to talk about the future for asset managers seeking to grow their businesses in China. Inside this episode:Lan Wang of the Banking team and Lillian Li of the Credit Strategy & Research team discuss why China’s move to open up its domestic financial markets to foreign securities firms potentially benefits all parties, despite operational hurdles. (begins at 1:48)Marina Cremonese of the Asset Management team joins Lan to talk about the future for asset managers seeking to grow their businesses in China. (begins at 9:54)Related content:Securities & Exchanges – China: Market opening to foreign companies is good news, but constraints remain - Removal of foreign ownership limit is a significant move for industry liberalization and will create new opportunities for foreign firms, but there remains substantial hurdles for entrants.Credit Conditions – Global: COVID-19 will quicken shift to tripolar economy, with widespread negative  - The continued move toward a tripolar economy with the US, China and the EU as its pillars will have credit ramifications for a broad range of industries and countries.Asset Management – Cross Region: Foreign asset managers will need to play long game to succeed in China - Foreign asset managers entering the Chinese market will need to invest significantly and accept that it will take time to achieve profitable growth.      

Donald Robertson and Ana Arsov of the Banking team explain how the lessons global investment banks learned from the financial crisis better prepared them to withstand coronavirus stresses, and how strong capital markets revenue buffered the large loan-loss provisions they booked during 2020. Plus, Mark Wasden and Bruno Baretta of the Banking team explore how coronavirus effects are driving the negative outlook for most global finance companies.Inside this episode:Mark Wasden and Bruno Baretta of the Banking team explore how coronavirus effects are driving the negative outlook for most global finance companies (begins at 2:13).Donald Robertson and Ana Arsov of the Banking team explain how the lessons global investment banks learned from the financial crisis better prepared them to withstand coronavirus stresses, and how strong capital markets revenue buffered the large loan-loss provisions they booked during 2020 (begins at 9:19).Related content:Finance Companies - Global: 2021 outlook is negative (Slides) - Our outlook for finance companies globally is negative to reflect ongoing effects of the coronavirus pandemic, though several subsectors have been more resilient through adverse conditions.Asset Management Companies (AMCs) – China: AMCs' participation in bank restructuring reinforces their policy role but weakens standalone credit profile - Aside from acquiring and disposing bad loans, AMCs are performing a growing range of functions to facilitate the restructuring of distressed banks.Global Investment Banks: 2021 outlook stable as diverse businesses, strong capital, liquidity and funding ease pandemic-related asset quality pressure (Slides) - Diverse, profitable businesses along with strengthened capital and liquidity will shield the global investment banks against pandemic-related asset quality deterioration in 2021.

Laura Bazer and Dominic Simpson of the Insurance team and Greg Bauer and Sophia Lee of the Banking team discuss how a fragile economic recovery, low interest rates and uncertainty about renewal of government support measures are among the drivers of negative outlooks for global banks, life insurers and reinsurers (begins at 1:55). P&C insurers will benefit in the difficult operating environment from lower auto claims, strong capital, and the mandatory nature of certain products.Inside this episode:Life insurance, reinsurance and P&C insurance 2021 Outlook (begins at 1:55)Banking 2021 Outlook (begins at 11:20)Related content:Banks – Global 2021 Outlook - Global banks entered the coronavirus crisis with strong balance sheets but still face substantial risk in 2021. Ongoing low interest rates, digitalization and ESG compliance will continue toReinsurance – Global 2021 Outlook - Uncertainty around coronavirus-related losses, along with low interest rates, shrinking reserve releases and more expensive retrocessional coverage will weaken reinsurers’ profitability.P&C Insurance – Global 2021 Outlook - 2021 Outlook stable on strong capital, commercial prices (Slides)Life Insurance – Global 2021 Outlook - Ultralow interest rates underpin our negative outlook; Covid-19 mortality and related economic fallout have hurt profitability and investments less than we expected