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Encyclopedia > Underwriter

In banking, underwriting is the detailed credit analysis preceding the granting of a loan, based on credit information furnished by the borrower, such as employment history, salary, and financial statements; publicly available information, such as the borrower's credit history, which is detailed in a credit report; and the lender's evaluation of the borrower's credit needs and ability to pay. Underwriting can also refer to the purchase of corporate bonds, commercial paper, U.S. Treasury securities, municipal general obligation bonds by a commercial bank or dealer bank for its own account, or for resale to investors. Bank underwriting of corporate securities is carried out through separate holding company affiliates, called Securities affiliates, or Section 20 affiliates. For other uses, see Bank (disambiguation). ... The term credit can have several meanings in different contexts. ... It has been suggested that Lenders be merged into this article or section. ... Historical financial statement Financial statements (or financial reports) are a record of a business financial flows and levels. ... A credit report summarizes historical financial information collected to determine an individuals or an entitys credit worthiness; that is, the means and willingness to repay an indebtedness. ... Bonds can refer to: A financial bond (including a junk bond or a zero-coupon bond) Barry Bonds A chemical bond (including the ionic bond, covalent bond, coordinate covalent bond, metallic bond, hydrogen bond, Carbon-carbon bond, Disulfide bond and Glycosidic bond) This is a disambiguation page — a navigational aid... Commercial paper is a short-term unsecured debt trading as a security issued by large banks and corporations. ... A commercial bank is a type of financial intermediary and a type of bank. ... In accountancy, an account is a label for recording a quantity of almost anything. ...

Contents


Securities underwriting

Securities underwriting is a way of placing a newly issued security, such as stocks or bonds, with investors. A syndicate of banks (the lead-managers), underwrite the transaction, which means they have taken on the risk of distributing the securities. Should they not be able to find enough investors, then they end up holding some securities themselves. Underwriters make their income from the price difference, or underwriting spread, between the price they pay the issuer and what they collect from investors or from broker-dealers who buy portions of the offering. When a dealer bank purchases Treasury securities in a quarterly Treasury bond auction, it acts as underwriter and distributor. Treasury Securities purchased by a primary dealer are held in a dealer bank's trading account assets portfolio, and often resold to other banks, and to private investors. Security is a type of transferable interest representing financial value. ... The Underwriting spread is the money difference between the amount paid by the underwriting group in a new issue of securities and the price at which securities are offered for sale to the public. ... Trading account assets refer to a separate account managed by banks that buy (underwriting) U.S. government securities and other securities for their own trading account or for resale at a profit to other banks and to the public, rather than for investment in the banks own investment portfolio. ...


League tables

Underwriting activity reported in Thomson Financial League Tables ([1]) (numbers in $ billion) (number of issues in parenthesis): Thomson Financials standard league tables are rankings of Investment Banks in terms of the dollar volume of deals they work on. ...


Global Debt, Equity & Equity-related

Year Underwriting Activity Source
2004 5,693 (20,066) Q4 2004 report
2003 5,326 (19,706 Q4 2003 report
2002 4,257 (14,070) Q4 2002 report
2001 4,112 (NA) Q4 2002 report

Insurance underwriting

Underwriting may also refer to insurance; insurance underwriters figure out how risky it is to insure people and businesses. They also decide how much coverage they should receive and how much they should pay for it. Underwriting involves measuring risk exposure and determining the premium with which to insure that risk. Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of potential financial loss. ...


Each insurance company uses its own set of underwriting guidelines in order to determine whether or not the company should accept a proposal. In life insurance this decision process sometimes requires that applicants provide further medical evidence. The underwriters can decide to make a counteroffer in which the premiums have been loaded, or in which various exclusions have been stipulated, which restrict the circumstances under which a claim would be paid. Some companies use automated underwriting systems to encode these rules, and reduce the amount of manual work in processing proposals; some such systems are available from reinsurers. Reinsurance refers to the situations where insurance companies insure against losses they may incur. ...


A leading underwriter is insurance broker Lloyd's of London. Lloyd’s Building, London (with the blue cranes). ...


Other

Underwriting may also refer to financial sponsorship of a venture. Sponsorship can refer to several concepts: A sponsors support of an event, activity, person, or organization. ...


See also

To meet Wikipedias quality standards, this article or section may require cleanup. ... Thomson Financials standard league tables are rankings of Investment Banks in terms of the dollar volume of deals they work on. ...

External links

  • Underwriting

  Results from FactBites:
 
Insurance underwriters (1880 words)
Underwriters are needed to identify and calculate the risk of loss from policyholders, establish appropriate premium rates, and write policies that cover this risk.
Most underwriters are based in the insurance company’s home office, but some, mainly in the property and casualty area, work out of regional branch offices of the insurance company.
Underwriters are needed particularly in the area of product development, where they assess risks and set the premiums for new lines of insurance.
Underwriter -- A complete definition (1358 words)
Underwriters usually maintain a secondary market in the securities they issue, which means they agree to purchase or sell securities out of their own inventories in order to keep the price of the securities from swinging wildly.
Underwriters often mitigate this risk by forming a syndicate whose members each share a portion of the shares in return for a portion of the fee.
Underwriters work hard to determine the “right” price for an offering, but sometimes they “leave money on the table.” For example, if XYZ Company prices its 10-million-share IPO at $15 per share but the shares trade at $30 two days after the IPO, this suggests that the underwriter probably underestimated the demand for the issue.
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