What’s SoftBank up to?; AIG’s bad earnings

Receiving Wide Coverage

What’s the plan?: Analysts are scratching their heads over why SoftBank wants to invest $10 billion to buy a third of Swiss Re, one of the world’s biggest reinsurance companies. But “when you think about what it could be trying to build in the background, it starts to make frighteningly good sense,” the Heard on the Street column says.

Tomohiro Ohsumi/Bloomberg

“Swiss Re could give it insight into one important way of selling life insurance: namely the digital life insurance it creates for others to sell, its only obvious consumer product right now,” it says. “SoftBank may be interested in becoming a backer of financial-services infrastructure on mobile phones. Think of something like iTunes, but for banking — and more sophisticated.”

“Further down the line, there could be strategic benefits for SoftBank,” agrees the Financial Times. “People close to the Japanese company say Swiss Re’s data would be a significant attraction. Reinsurance companies are notorious collectors and hoarders of information, which they use to try to find an advantage when pricing policies.” However, it noted, “it is not clear how SoftBank would gain access to Swiss Re’s data if it is just a minority shareholder.”

Big hit: American International Group reported a fourth quarter loss of $6.66 billion, more than double the prior year’s $3.04 billion loss for the same period. The insurance company took a one-time $6.7 billion hit from U.S. tax reform plus bigger than expected losses from the California wildfires. Wall Street Journal, Financial Times

Still worried: The recent drop in cybercurrency prices hasn’t stopped international finance officials from issuing warning bells about potential dangers. The latest to do so is Yves Mersch, a member of the European Central Bank’s executive board. “Even if virtual currencies are not money, central banks should still be aware of the potential risks they pose for price stability and financial stability,” he said.

But plummeting prices haven’t dampened interest in the sector at America’s universities, where several top schools “have added or are rushing to add classes” about bitcoin and the blockchain. Carnegie Mellon, Cornell, Duke, MIT and others have recently added graduate courses on the subject, “illustrating the fascination with the technology across several academic fields, and the assumption that it will outlast the current speculative price bubble.”

Wall Street Journal

Not on board: Sen. Rand Paul, R-Kentucky, says he’s “a no” vote on Marvin Goodfriend joining the Federal Reserve’s board of governors, which could put the nomination in jeopardy. While the Senate Banking Committee approved the Carnegie Mellon University economist’s nomination on Thursday along party lines, he has yet to attract any Democrat support, so he needs every Republican vote he can get. Paul said he is troubled by Goodfriend’s past support for inserting a magnetic strip on bank notes to be able to track them as they move in and out of banks.

Trading on Twitter: TD Ameritrade will let customers initialize trades over Twitter, “the latest attempt by the discount brokerage to attract digitally savvy and younger investors.”

“We have to go to where our customers are,” said Sunayna Tuteja, director of emerging technology and innovation at the company. “A lot of people consume their news on Twitter” and the new offering “is about making trading more accessible and easier.”

Financial Times

Green shoots?: European banks, which have lagged their American counterparts for several years, weighed down by negative interest rates and bad loans, may finally be starting to turn the corner. Fourth quarter results released by Italy’s UniCredit, France’s Société Générale and Germany’s Commerzbank on Thursday “offered a rare glimmer of hope” for the sector.

Keep your money at home: Recent fines against Alipay and Tencent for cross-border foreign exchange payments show that the two financial technology giants “have been caught up in Beijing’s war on capital flight,” the paper reports. The two companies were recently fined $95,000 each for the breaches. Alipay, for example, was penalized for sending money to U.S.-based Uber even though the rides took place in China.

Quotable

“There was some gentle ribbing from my colleagues when I began giving talks on Bitcoin. But within a few months, I was being invited to Basel to talk with central bankers, and the joking from my colleagues stopped after that.” — David Yermack, a business and law professor at New York University who teaches a course on cybercurrencies.