Costs have come down. Credit Suisse First Boston Corp. Today, thanks to direct marketing and burgeoning Internet sales, expenses are projected to fall to between 8 and 12 percent. Consolidations are taking some capacity out of the crowded market. Nevertheless, the mergers haven't come nearly fast enough to solve the capital overhang problem. A growing number of share repurchase programs are also chipping away at the capital surplus.
Most equity analysts applaud the repurchases.
But once again the numbers are too small to eliminate a significant amount of excess capital. Not everyone is thrilled, however, at the efforts of the insurers to reduce their capital to bolster margins. Best estimates that insurers' equity holdings make up 48 percent of the surplus. Insurers traditionally balked at buying back shares, because cash stockpiles have been one of the few ways to ride our momentous, claims-churning disasters. Some insurance companies may even have to raise additional capital to cover their year-2000 policy risks, nor to mention their own computer glitches, in the next year.