Cross-line subsidies don't just transfer profits from strong lines to weak ones - they amplify earnings volatility and destabilize the entire portfolio. When the subsidizing lines hit a downturn, the true financial exposure is revealed all at once.
Liquidity stress after large events does not just drain cash—it introduces earnings volatility that distorts quarterly results, undermines investor confidence, and forces management into value-destroying asset sales at precisely the wrong point in the cycle.