Yes, a surge in the demand for annuities will likely require a...

Yes, a surge in the demand for annuities will likely require a capital injection, but the corresponding book growth will then entail a surge in profits. Therefore, shorting CGF on that basis doesn’t make sense.

On the other hand, a sharp decline in asset values not accompanied by a devaluation of annuity liabilities (as could be the case in the event of large-scale defaults in the bond portfolio) would force CGF to raise capital without a simultaneous increase in earnings.

But, if that is the rationale for shorting, there are much smarter ways of doing it. For instance, one could buy protection on a credit index using credit default swaps: by doing that, the shorters would at least know what it is exactly that they’re shorting (whereas the details of CGF’s bond portfolio aren’t public).

Or they could just buy out-of-the-money put options on an equity index.

Don’t you think?