jh :At the moment I’m waiting and when I see the new prices I’ll think about changing, but otherwise I’ll stick with AMI (out of loyalty and a sense of doing the right thing).

So… you’re going to wait and see whether they continue to undercharge for risk before deciding whether to keep your business with them. Are you sure that “loyalty” is the motivation here?

Yes AMI rely on your continued support, in much the same way as any bank relies on depositor confidence or even a Ponzi scheme relies on increasing numbers of (foolish) punters. The question you have to ask yourself is whether you actually have confidence that AMI have learnt from ChCh. If you believe so, then carry on with AMI – after all, the government may step in to bail them out again [Moral hazard – a game any NZ company can play]. If not, look elsewhere.

Here’s a theory: vote share is increasing with government spending, without limit, on anything remotely plausible. If correct, then English’s decision to present the worst possible scenario and going along with calling it a bailout makes sense: being seen to spend $1 billion more gets you more votes on election day come November, more than if you’d announced you will probably spend nothing.

I have no idea why this theory might be true, but I nevertheless suspect it is.

IMO, the Government should have killed AMI. Transfer its balance sheet to a special purpose entity set up for this alone. Liquidate all other assets (whether it be selling individual assets or portfolios) and fund the SPV to cover the ChCh mortgages. AMI has been run into the ground by the current management and its really hard to see what value they (and the AMI brand) actually have any more, despite Blamforth’s protestations.

How anyone could ever believe that AMI could be a going concern is beyond me. The management has shown an inability to manage risk and its balance sheet as a prudent insurer. That’s bad enough for any company, but for a business that is meant to live and breathe risk management, it borders on gross negligence.

I would also say they are insolvent, yar.

BUT, I wanted to make the case as broad as possible – so that if certain arguments are raised in favour of say the idea of a “bank run”, the assumptions behind that are a bit more transparent.