They’re making sure that at renewal AIG puts the best program on the table in terms of coverage, price, and financial security.

McDONALD: E.G., how has the AIG situation changed your life?

LASSITER: What a world of talk. I think it’s all still to play out. We don’t have quite the crystal ball to see with clarity what they’re going to look like when all of the timbers have fallen and everybody knows what’s going to happen. We don’t know whether they’re going to be a viable entity going forward with their P&C operations intact or will they have been sold separately.
Our take is that they have been unable to sell this, anything so far, maybe not so surprising because there’s no credit out there as you alluded to. Therefore people – the worst time you can sell something is when you’re being forced to. So they’re probably not getting primo quotes. Nobody is putting things on the table they really like. How long is it going to take them to do that and what is it going to look like when it’s over?
We are seeing some movement in the D&O as you mentioned, in not just accounts but in people. That’s going to have some impact there. We are not yet seeing anybody in any other product lines. We do expect it. Our take is as Tony said earlier, that they may not have enough assets, the $122 billion may not cover their total financial obligation. There’s just so much to play out. We forecast it was going to be at least midyear 2009 before we would have with greater clarity and understanding of what AIG’s future is.

McDONALD: Tony, I’d like to ask you to answer the question a little more broadly because of your company. You play in the admitted, specialty, you’re in international markets.

MARKEL: Right.

McDONALD: Well AIG is in all those markets. What does it mean to you?

MARKEL: Well you would think logically that the wounding of the 800 pound gorilla in all of our specialty markets would certainly signal more movement of rate back up, the stopping of the erosion of the rate fall. But in fact and I think this is a shor-term phenomena, the AIG problems have exacerbated the rate fall. Because I think Chris would agree with me, they are even more aggressive now than they have been over the last three or four years in an effort to retain business. They are dramatically in my estimation, humble opinion, they are dramatically eroding what was already very questionable pricing in order to make sure that business does not walk out the door.
Most of the producers that I talk to, and again dealing in the short run here where we’ve already said that we have not seen any visible change in pricing, as a matter of fact it continues to go down. Most of the producers are taking some comfort in their view of AIG. They’re also saying look, I’d like to delver my book a little bit because I’ve got all this AIG business. So if you can come in within five or 10 points, percentage points of AIG I’ll give serious consideration to moving it because I’ve got too much business in AIG.

LASSITER: You should do that, Tony.

MARKEL: Thank you. But the fact of the matter is that when AIG comes in and nobody can get anywhere close to them, nobody is moving business. Chris talked about increase activity, E.G. talked about increased activity and we’re seeing the same thing. But basically right now it’s talk and a lot of practice. We practice enough. So I’m anxious to see this thing – I can’t believe that as this thing plays out with AIG as E.G. said, their ability to sell, to pay back this government loan and now speaking as a shareholder of AIG since the government owns 80% of a major competitor which is not another particularly great subject for me, but they’re going to have the issue of everybody knows they’ve got to sell. Due diligence, as a potential buyer I’m not sure I’m young enough to ferret my way through some of those issues in order to get comfortable with the price, and credit, in terms of the ability to raise capital to make acquisitions of some of their subsidiaries, given as Dan said, the lockup of the capital markets.
They’re all going to manifest themselves in the fact that AIG is going to have a tough time realizing the value that they legitimately probably had in their subsidiaries which is going to add pressure. Right now we’re just waiting for the reality to start feeding out. When the dominant player worldwide in every one of these specialty markets is significantly wounded as it is, and it may survive but it’s certainly going to look a hell of a lot different than it has, it would suggest that the market should consolidate and stop what has been suicidal pricing and we’re not seeing it. I think ultimately it will.

TREANOR: Let me pick up on something that E.G. said which I think is germane with AIG. They’ve got a host of issues that they’re grappling with. To me their biggest issue is talent. E.G. talked about teams leaving. They’ve done a good job of holding on to talent but people are looking and people are leaving. If they lose their key talent in my estimation it’s game over. We are a people business – perhaps poorly managed as Tony mentioned earlier – but if