Steve Wevodau

Increase in bank failures threatens insurance fund - Steve Wevodau

steven0815 — Sun, 08 Mar 2009 15:37:38 +0000

FDIC chief warns cash might be exhausted if agency can’t hike fees

Sunday, March 8, 2009 3:59 AM

By Marcy Gordon

ASSOCIATED PRESS

Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., knows it is a burden on banks to raise the fees the agency imposes, but she says it is necessary to keep the deposit-insurance fund solvent as bank failures rise.

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J. SCOTT APPLEWHITE | ASSOCIATED PRESS

WASHINGTON — The head of the Federal Deposit Insurance Corp. has warned that the fund insuring Americans’ bank deposits could be wiped out this year unless the agency gets the money it is seeking in new fees from U.S. banks and thrifts.FDIC Chairman Sheila Bair acknowledged, in a letter to bank CEOs, that the increased fees and hefty emergency premium that the agency recently voted to levy will impose a “significant expense” on banks, especially amid a recession and financial crisis when their earnings are under pressure.

“We also recognize that assessments reduce the funds that banks can lend in their communities to help revitalize the economy,” Bair wrote.

But given the accelerating bank failures that have been depleting the deposit-insurance fund, she said, it “could become insolvent this year.”

“Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative,” Bair wrote in the letter dated Monday to the chief executives of the nation’s 8,305 federally insured banks and thrifts.

The industry, especially smaller community banks, has said the new insurance fees will place an extra burden on a struggling sector. A federal banking regulator said last week the new premiums will unfairly burden smaller banks that didn’t contribute to the financial crisis through reckless lending.

As loan defaults have soared, reflecting the ravages of rising unemployment and sliding home prices, bank failures have risen and sapped billions out of the fund, which insures regular accounts up to $250,000. The fund has its lowest balance in nearly a quarter-century: $18.9 billion as of Dec. 31, compared with $52.4 billion at the end of 2007.

The FDIC now expects that bank failures will cost the insurance fund around $65 billion through 2013, up from an earlier estimate of $40 billion. This year, 17 banks have collapsed so far, compared with 25 in all of 2008, including two of the biggest savings and loans, Washington Mutual and IndyMac Bank.

The new insurance fees are meant to raise $27 billion this year to replenish the fund.

Bair said the plan protects not only bank depositors but also taxpayers because it probably means that the FDIC won’t have to go to the Treasury Department and tap public money to replenish the insurance fund.

Bair has not ruled out a short-term Treasury Department loan, but she said she doesn’t expect to take the more drastic action of using the FDIC’s $30 billion long-term credit line with the department; that has never been done.

The FDIC plan imposes new charges on a battered industry while the Obama administration is seeking to pump as much as $750 billion in additional federal aid into ailing banks under its financial-rescue plan. The FDIC, as a regulatory agency that is to protect the insurance fund, acts independently of the administration.

Willis Group Reports Fourth Quarter and Full Year 2008 Results

Steve9982 — Sun, 15 Feb 2009 10:47:34 +0000

Posted by Steven Wevodau

NEW YORK–(BUSINESS WIRE)–Willis Group Holdings Limited (NYSE: WSH - News):

28 Percent Growth in Reported Commissions and Fees; 6 Percent Organic Growth in Commissions and Fees for Fourth Quarter 2008

12 Percent Growth in Reported Commissions and Fees; 4 Percent Organic Growth in Commissions and Fees in 2008

2008 GAAP EPS $2.05; Adjusted EPS $2.56 ($2.83, excluding Foreign Exchange Impact)

2008 GAAP Operating Margin 17.8 Percent; Adjusted Operating Margin 21.2 Percent (23.1 Percent excluding Foreign Exchange Impact)

Company Announces $500 million of Long-Term Senior Unsecured Debt; Will Further Reduce Outstanding Interim Bridge Loan to $250 million

Willis Group Holdings Limited (NYSE: WSH - News), the global insurance broker, today reported results for the quarter and year ended December 31, 2008.

“Despite unprecedented economic turmoil, Willis closed the year with strong results. Fourth quarter organic revenue growth of 6 percent was our highest over the past two years,” said Joe Plumeri, Chairman and Chief Executive Officer, Willis Group Holdings. “Our acquisition of HRH is proving to be a financial and strategic win with high client and producer retention and early delivery of synergies.”

“Our disciplined approach to expense management intensified as we saw the economic downturn accelerate throughout the year. This discipline along with strong growth in the Global and International segments — a validation of our geographic diversity — and the continued benefits from our Shaping our Future initiatives enabled us to deliver impressive results for this quarter and the year,” said Plumeri. “We are also especially pleased to be able to reduce and refinance the majority of our bridge financing in a very challenging credit environment.”

Fourth Quarter 2008 Financial Results

Reported net income for the quarter ended December 31, 2008 was $62 million, or $0.37 per diluted share, compared with $95 million, or $0.66 per diluted share, in the same period a year ago, and was significantly affected by the acquisition of Hilb Rogal & Hobbs Company (HRH), foreign currency translation and certain other non-operating items. The acquisition of HRH was completed on October 1, 2008, and its results of operations have been included in reported results from that day forward, including revenues of $182 million and operating expenses of $141 million. The impact of the acquisition of HRH (including interest costs and amortization) reduced earnings per diluted share by approximately $0.03 in the fourth quarter of 2008.

The results for the fourth quarter 2008 were impacted by HRH integration costs totaling $4 million and other non-operating items, and, excluding these items, which are reviewed in detail later in this release, and a net gain on disposal of operations, adjusted earnings per diluted share were $0.37 in the fourth quarter 2008 compared with $0.64 in the fourth quarter 2007, a decrease of 42 percent.

The results for the fourth quarter 2008 were also significantly impacted by foreign currency translation, which reduced earnings per diluted share by $0.26 compared with the fourth quarter 2007, primarily the result of the significant strengthening of the US dollar relative to the British pound. The majority of the impact of foreign currency translation was the result of the quarterly retranslation of the UK pension plan ($0.18 per diluted share).

Total reported revenues for the quarter ended December 31, 2008 were $799 million compared with $639 million for the same period last year, an increase of 25 percent, primarily due to the HRH acquisition. The effect of foreign currency decreased reported revenues by 9 percent.

Organic growth in commissions and fees was 6 percent in the fourth quarter 2008 compared with the fourth quarter 2007. This reflected net new business won of 9 percent offset by a negative 3 percent impact from declining premium rates tempered by other market factors, such as higher commission rates, higher insured values and changes in limits and exposures. Steady, strong client retention levels and momentum from Shaping our Future growth initiatives, such as Shaping our Future Marketing and Client Profitability, also contributed to organic growth.

The International business segment contributed a strong 11 percent organic growth in commissions and fees in the fourth quarter 2008 compared with the same period in 2007. There was continued strength in Australia, Latin America, China and Europe, especially Spain, Italy and Denmark.

The North America segment reported a 4 percent decline in organic commissions and fees compared with fourth quarter 2007, reflecting soft insurance market conditions as well as increased weakness in the US economy.

The Global segment, which comprises Global Specialties and Reinsurance, recorded 9 percent organic growth in commissions and fees in the fourth quarter 2008 compared with fourth quarter 2007. Global Specialties had positive organic growth in commissions and fees across many specialty businesses. Reinsurance reported positive organic growth in commissions and fees with strong growth in specialties and international reinsurance operations somewhat muted by reduced US revenues due to declining rates and higher retentions by the primary carriers in 2008.

Reported operating margin was 17.0 percent for the quarter ended December 31, 2008 compared with 23.6 percent for the same period last year. Excluding certain items, adjusted operating margin was 16.8 percent for the quarter ended December 31, 2008 compared with 23.3 percent a year ago. Foreign exchange movements had a negative 490 basis point impact on the operating margin in the fourth quarter 2008. Initial dilution from the HRH acquisition reduced operating margin by approximately 300 basis points. We recognized synergies from the HRH acquisition ($16 million in the quarter) and benefits from the ongoing expense review, while continuing to reinvest growth in strategic hires and key initiatives. On a comparable basis, operating margin was 24.7 percent in the fourth quarter 2008 and 23.3 percent in the corresponding period in 2007.

Full Year 2008 Financial Results

Reported net income for the year ended December 31, 2008 was $303 million, or $2.05 per diluted share, compared with $409 million, or $2.78 per diluted share, a year ago. The results for the year ended December 31, 2008 were significantly impacted by pre-tax charges totaling $92 million for the 2008 expense review, HRH integration costs, and foreign currency translation.

Excluding certain items, which are reviewed in detail later in this release, and a net gain on disposal of operations, adjusted earnings per diluted share were $2.56 for the year ended December 31, 2008, compared to $2.77 a year ago, a decrease of 8 percent. The acquisition of HRH was approximately $0.07 per share dilutive for the full year 2008.

The results for the full year 2008 were also significantly impacted by foreign currency movements, which reduced earnings per diluted share by $0.27 compared with the same period last year, primarily the result of the significant strengthening of the US dollar relative to the British pound. The majority of the foreign exchange impact was the result of the quarterly retranslation of the UK pension plan ($0.28 per diluted share).

Total reported revenues for the year ended December 31, 2008 were $2.834 billion compared with $2.578 billion for the same period last year, an increase of 10 percent, primarily reflecting the HRH acquisition. The effect of foreign currency translation increased reported revenues by 1 percent for the full year 2008 compared with 2007.

Organic growth in commissions and fees was 4 percent for the year ended December 31, 2008 compared with the same period in 2007. This growth was attributed to net new business won of 6 percent offset by a negative 2 percent impact from declining premium rates tempered by other market factors such as higher commission rates, higher insured values and changes in limits and exposures.

Reported operating margin was 17.8 percent for the year ended December 31, 2008, compared to 24.0 percent for the same period last year. Excluding certain items, adjusted operating margin was 21.2 percent for the year ended December 31, 2008, compared to 24.0 percent for the same period last year. The impact of foreign currency movements reduced operating margin by approximately 190 basis points for the year ended December 31, 2008. Initial dilution from the HRH acquisition reduced operating margin by approximately 90 basis points. On a comparable basis, operating margin was 24.0 percent in both 2008 and 2007.

Tax

The effective underlying tax rate for year ended December 31, 2008 was 26.0 percent, excluding the tax effects of the disposal of the London headquarters, disposal of operations and the benefit of the release of tax provisions relating to the resolution of prior period tax positions.

Capital

The Board of Directors declared a regular quarterly cash dividend on the Company’s common stock of $0.26 per share, an annual rate of $1.04 per share. The dividend is payable on April 13, 2009 to shareholders of record on March 31, 2009.

As at December 31, 2008, cash and cash equivalents totaled $176 million, total debt was $2.650 billion comprised of $1.2 billion of senior notes, a $700 million term loan and a $750 million bridge loan. Total stockholders’ equity was $1.845 billion. On December 31, 2008, the Company purchased a further 5 percent of Gras Savoye & Cie for approximately $41 million, increasing its voting ownership to 48 percent. The Company has an existing $1 billion buy back authorization, with $925 million available for repurchase.

On February 10, 2009, the Company entered into an agreement pursuant to which Goldman Sachs Mezzanine Partners will provide the Company $500 million of long-term debt financing through the purchase of 12.875 percent Senior Unsecured Notes due 2016. The transaction is subject to customary closing conditions and is expected to close during the first quarter of 2009. The net proceeds of the financing will be used to repay a substantial portion of the Company’s existing interim credit facility.¹

Outlook

We cannot predict the potential impact of the uncertainty of the global economy on current insurance pricing or on potential changes in the buying decisions of clients with any degree of certainty. Therefore, the Company is suspending its practice of providing annual earnings guidance.

“In these uncertain economic times, we continue to manage the business to maximize our opportunities to succeed in any environment,” Plumeri said. “We enter 2009 with a solid game plan as we continue to execute on Shaping our Future, the integration of HRH and our ongoing expense review. With the new financing, we strengthen the balance sheet with long-term capital and enhance our financial flexibility.”

Conference Call and Web Cast

A conference call to discuss fourth quarter 2008 results will be held on Thursday, February 12, 2009, at 8:00 AM Eastern Time. To participate in the live teleconference, please dial (866) 617-1526 (domestic) or +1 (210) 795-0624 (international) with a pass code of “Willis”. The live audio web cast (which will be listen-only) may be accessed at www.willis.com. This call will be available by replay starting at approximately 10:00 AM Eastern Time, and through March 11, 2009 at 11:00 PM Eastern Time, by calling (800) 756-1819 (domestic) or +1 (203) 369-3011 (international) with no pass code, or by accessing the website.

Willis Group Holdings Limited is a leading global insurance broker, developing and delivering professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 20,000 Associates serving clients in some 190 countries. Additional information on Willis may be found at www.willis.com.

¹ The sale of the notes described above has not been registered under the Securities Act of 1933, as amended, and the notes may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.

Forward-Looking Statements

We have included in this document ‘‘forward-looking statements’’ within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. These forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts, included in this document that address activities, events or developments that we expect or anticipate may occur in the future, including such things as the potential benefits of the business combination transaction involving Willis and HRH, our outlook and guidance regarding future adjusted operating margin and adjusted earnings per diluted share, future capital expenditures, expected growth in commissions and fees, business strategies, competitive strengths, goals, the anticipated benefits of new initiatives, growth of our business and operations, plans, and references to future successes are forward-looking statements. Also, when we use the words such as ‘‘anticipate’’, ‘‘believe’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘plan’’, ‘‘probably’’, or similar expressions, we are making forward-looking statements.

There are important uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained in this document, including regional, national or global political, economic, business, competitive, market and regulatory conditions and the following:

our ability to achieve the expected cost savings, synergies and other strategic benefits as a result of the acquisition of HRH or the amount of time it may take to achieve such cost savings, synergies and benefits expected due to the integration of HRH with our operations,
our ability to continue to manage our indebtedness,
our ability to implement and realize anticipated benefits of the Shaping our Future initiative and other new initiatives,
our ability to retain existing clients and attract new business, and our ability to retain key employees,
changes in commercial property and casualty markets, or changes in premiums and availability of insurance products due to a catastrophic event such as a hurricane,
volatility or declines in other insurance markets and the premiums on which our commissions are based,
impact of competition,
the timing or ability to carry out share repurchases or take other steps to manage our capital,
fluctuations in exchange and interest rates that could affect expenses and revenue,
rating agency actions that could inhibit ability to borrow funds or the pricing thereof,
domestic and foreign legislative and regulatory changes affecting both our ability to operate and client demand,
potential costs and difficulties in complying with a wide variety of foreign laws and regulations, given the global scope of our operations,
changes in the tax or accounting treatment of our operations,
our exposure to potential liabilities arising from errors and omissions claims against us,
the results of regulatory investigations, legal proceedings and other contingencies, and
the timing of any exercise of put and call arrangements with associated companies.

The foregoing list of factors is not exhaustive and new factors may emerge from time to time that could also affect actual performance and results. For additional factors see also Part I, Item 1A ‘‘Risk Factors’’ included in Willis’s Form 10-K for the year ended December 31, 2007 and Item 1A of HRH’s Form 10-K for the year ended December 31, 2007, and similar sections of each company’s most recent quarterly report on Form 10-Q.. Copies of said 10-Ks and 10-Qs are available online at http://www.sec.gov or on request from the applicable company.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved.

Our forward-looking statements speak only as of the date made and we will not update these forward-looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this document may not occur, and we caution you against unduly relying on these forward-looking statements.

This press release includes supplemental financial information which may contain references to non-GAAP financial measures as defined in Regulation G of SEC rules. Consistent with Regulation G, a reconciliation of this supplemental financial information to our generally accepted accounting principles (GAAP) information is in the note disclosures that follow. We present such non-GAAP supplemental financial information, as we believe such information is of interest to the investment community because it provides additional meaningful methods of evaluating certain aspects of the Company’s operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis. This supplemental financial information should be viewed in addition to, not in lieu of, the Company’s condensed consolidated income statements for the three months and year ended December 31, 2008 and balance sheet as at that date.


WILLIS GROUP HOLDINGS LIMITED CONDENSED CONSOLIDATED INCOME STATEMENTS (in millions, except per share data) (unaudited)

	Three months ended December 31,						Year ended December 31,
	2008			2007			2008			2007
Revenues
Commissions and fees	$	782		$	610		$	2,751		$	2,463
Investment income		17			24			81			96
Other income		-			5			2			19
Total Revenues		799			639			2,834			2,578
Expenses
Salaries and benefits		444			359			1,642			1,448
Other operating expenses		184			119			605			460
Depreciation expense		13			13			54			52
Amortization of intangible assets		24			4			36			14
Net loss / (gain) on disposal of London headquarters		1			(5	)		(7	)		(14	)
Net gain on disposal of operations		(3	)		(2	)		-			(2	)
Total Expenses		663			488			2,330			1,958
Operating Income		136			151			504			620
Interest expense		36			18			105			66
Income before Income Taxes, Interest in Earnings of Associates and Minority Interest		100			133			399			554
Income taxes		23			28			97			144
Income before Interest in Earnings of Associates and Minority Interest		77			105			302			410
Interest in earnings of associates, net of tax		(7	)		(4	)		22			16
Minority interest, net of tax		(8	)		(6	)		(21	)		(17	)
Net Income	$	62		$	95		$	303		$	409

Earnings per Share
- Basic	$	0.37		$	0.66		$	2.05		$	2.82
- Diluted	$	0.37		$	0.66		$	2.05		$	2.78

Average Number of Shares Outstanding
- Basic		166			143			148			145
- Diluted		167			145			148			147


WILLIS GROUP HOLDINGS LIMITED SUMMARY DRAFT BALANCE SHEETS (in millions) (unaudited)

	December 31, 2008		December 31, 2007
Assets
Cash & cash equivalents	$	176	$	200
Fiduciary funds—restricted		1,854		1,520
Short-term investments		20		40
Accounts receivable, net		9,131		8,241
Deferred tax assets		76		21
Fixed assets, net		312		315
Goodwill and intangibles, net		3,957		1,726
Investments in associates		273		193
Pension benefits asset		111		404
Other assets		492		309
Total Assets	$	16,402	$	12,969
Liabilities and Stockholders’ Equity
Accounts payable	$	10,314	$	9,265
Deferred revenue and accrued expenses		471		388
Deferred tax liabilities		21		26
Income taxes payable		18		43
Short-term debt		785		-
Long-term debt		1,865		1,250
Liability for pension benefits		208		43
Other liabilities		825		559
Total Liabilities		14,507		11,574
Minority interest		50		48
Total stockholders’ equity		1,845		1,347
Total Liabilities and Stockholders’ Equity	$	16,402	$	12,969

WILLIS GROUP HOLDINGS LIMITED

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions) (unaudited)

1. Definitions of Non-GAAP Financial Measures

We believe that investors’ understanding of the Company’s performance is enhanced by our disclosure of the following non-GAAP financial measures. Our method of calculating these measures may differ from those used by other companies and therefore comparability may be limited.

Organic commissions and fees growth

Organic commissions and fees growth excludes: the impact of foreign currency translation, the first twelve months of net commission and fee revenues generated from acquisitions, and net commission and fee revenues related to operations disposed of in each period presented.

Adjusted operating income and adjusted net income

Our results have been impacted by the charges related to the 2008 expense review and costs associated with the acquisition of HRH, together with net gains/losses on disposal of operations. We believe that excluding these items from operating income and net income as applicable, along with the GAAP measures, provides a more complete and consistent comparative analysis of our results of operations.

2. Analysis of Commissions and Fees

Organic growth in commissions and fees is defined as growth in commissions and fees excluding the impact of foreign currency translation and acquisitions and disposals. The percentage change in reported commissions and fees is the most directly comparable GAAP measure, and the following tables reconcile this change to organic growth in commissions and fees by business unit for the three months and year ended December 31, 2008:


	Three months ended December 31,			Change attributable to
	2008	2007 ^(a)	% Change	Foreign currency translation	Acquisitions and disposals	Organic commissions and fees Growth ^(b)
Global	$ 157	$ 142	11%	(8)%	10%	9%
North America	353	193	83%	(1)%	88%	(4)%
International	272	275	(1)%	(12)%	0%	11%
Commissions and fees	$ 782	$ 610	28%	(9)%	31%	6%

a) With effect from January 1, 2008, gains on the disposal of intangible assets, which were previously reported within ‘Commissions and fees’ are now reported separately as ‘Other income.’ As a result of this change, $5 million previously reported within North America’s commissions and fees in fourth quarter 2007 is now reported within other income. There was no impact on organic commissions and fees growth as originally reported for the quarter ended December 31, 2007.

b) The Company has changed the methodology for the calculation of organic growth in commissions and fees. Previously, organic growth included growth from acquisitions from the date of acquisition. Under the new method, the first twelve months of commissions and fees generated from acquisitions are excluded from organic growth in commissions and fees.

2. Analysis of Commissions and Fees (continued)


	Year ended December 31,			Change attributable to
	2008	2007 ^(a)	% Change	Foreign currency translation	Acquisitions and disposals	Organic commissions and fees Growth ^(b)
Global	$ 784	$ 750	5%	0%	3%	2%
North America	912	751	21%	0%	22%	(1)%
International	1,055	962	10%	1%	0%	9%
Commissions and fees	$ 2,751	$ 2,463	12%	1%	7%	4%

3. 2008 Expense Review

The Company is conducting a thorough review of all businesses to identify additional opportunities to rationalize its expense base. Consequently, the Company incurred a pre-tax charge of $92 million ($66 million or $0.45 per diluted share after tax) in the year ended December 31, 2008 for contract buyouts, severance and other costs as analyzed in the following table:


	Three months ended December 31, 2008	Year ended December 31, 2008
	Pre-tax	Pre-tax
Salaries and benefits – severance (a)	$ -	$ 24
Salaries and benefits – other (b)	-	42
Other operating expenses (primarily relating to property and systems rationalization)	(3)	26
	$ (3)	$ 92

a) Severance costs relate to approximately 350 positions through the year ended December 31, 2008 which have been eliminated.

b) Other salaries and benefits costs relate primarily to contract buyouts.

4. Adjusted Operating Income

Adjusted operating income is defined as operating income excluding integration costs associated with the acquisition of HRH, net gains/losses on disposal of operations and the charges related to the 2008 expense review. Operating income is the most directly comparable GAAP measure, and the following tables reconcile adjusted operating income to operating income for the three months and year ended December 31, 2008 and 2007:


	Three months ended December 31,
	2008		2007		% Change
Operating Income, GAAP basis	$	136	$	151	(10)%
Excluding:
HRH integration costs (a)		4		-
Other operating expenses (primarily relating to property and systems rationalization)		(3)		-
Net gain on disposal of operations		(3)		(2)

Adjusted Operating Income	$	134	$	149	(10)%
Operating Margin, GAAP basis, or Operating Income as a percentage of Total Revenues		17.0%		23.6%
Adjusted Operating Margin, or Adjusted Operating Income as a percentage of Total Revenues		16.8%		23.3%


	Year ended December 31,
	2008		2007		% Change
Operating Income, GAAP basis	$	504	$	620	(19)%
Excluding:
HRH integration costs (a)		5		-
Salaries and benefits – severance (b)		24		-
Salaries and benefits – other (c)		42		-
Net gain on disposal of operations		-		(2)
Other operating expenses (primarily relating to property and systems rationalization)		26		-

Adjusted Operating Income	$	601	$	618	(3)%
Operating Margin, GAAP basis, or Operating Income as a percentage of Total Revenues		17.8%		24.0%
Adjusted Operating Margin, or Adjusted Operating Income as a percentage of Total Revenues		21.2%		24.0%

a) HRH integration costs include $2 million severance costs.

b) Severance costs relate to approximately 350 positions which have been eliminated as part of the 2008 expense review. Severance costs also arise in the normal course of business and these charges (pre-tax) amounted to $nil in the fourth quarter 2008 ($nil in 2007) and $2 million in the year ended December 31, 2008 ($2 million in 2007).

c) Other salaries and benefits costs relate primarily to contract buyouts.

WILLIS GROUP HOLDINGS LIMITED

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions, except per share data) (unaudited)

5. Adjusted Net Income

Adjusted net income is defined as net income excluding financing and integration costs associated with the acquisition of HRH, net gains/losses on disposal of operations and the charges related to the 2008 expense review. Net income is the most directly comparable GAAP measure, and the following tables reconcile adjusted net income to net income for the three months and year ended December 31, 2008 and 2007:


	Three months ended December 31,								Per diluted share Three months ended December 31,
	2008			2007			% Change		2008			2007			% Change
Net Income, GAAP basis	$	62		$	95		(35	)%	$	0.37		$	0.66		(44	)%

Excluding:
HRH integration costs, net of tax ($1)		3			-					0.02			-
Other operating expenses (primarily relating to property and systems rationalization), net of tax ($1)		(2	)		-					(0.01	)		-
Net gain on disposal of operations, net of tax ($1)		(2	)		(2	)				(0.01	)		(0.02	)

Adjusted Net Income	$	61		$	93		(34	)%	$	0.37		$	0.64		(42	)%

Diluted shares outstanding, GAAP basis		167			145


	Year ended December 31,							Per diluted share Year ended December 31,
	2008		2007			% Change		2008		2007			% Change
Net Income, GAAP basis	$	303	$	409		(26	)%	$	2.05	$	2.78		(26	)%

Excluding:
HRH financing (pre-close) and integration costs, net of tax ($4) (a)		10		-					0.07		-
Net gain on disposal of operations, net of tax		-		(2	)				-		(0.01	)
Salaries and benefits – severance, net of tax ($7) (b)		17		-					0.11		-
Salaries and benefits – other, net of tax ($12) (c)		30		-					0.20		-
Other operating expenses (primarily relating to property and systems rationalization), net of tax ($7)		19		-					0.13		-

Adjusted Net Income	$	379	$	407		(7	)%	$	2.56	$	2.77		(8	)%

Diluted shares outstanding, GAAP basis		148		147

a) HRH integration costs include $2 million severance costs.

c) Other salaries and benefits costs relate primarily to contract buyouts.


WILLIS GROUP HOLDINGS LIMITED SUPPLEMENTAL FINANCIAL INFORMATION (in millions, except per share data) (unaudited)

	2007															2008
	Q1			Q2			Q3			Q4			FY			Q1			Q2			Q3			Q4			FY
Revenues
Commissions and fees	$	711		$	600		$	542		$	610		$	2,463		$	772		$	641		$	556		$	782		$	2,751
Investment income		24			23			25			24			96			22			20			22			17			81
Other income ^(a)		4			3			7			5			19			1			-			1			-			2
Total Revenues		739			626			574			639			2,578			795			661			579			799			2,834
Expenses
Salaries and benefits		377			360			352			359			1,448			411			428			359			444			1,642
Other operating expenses		111			114			116			119			460			149			141			131			184			605
Depreciation expense		13			13			13			13			52			13			14			14			13			54
Amortization of intangible assets		3			4			3			4			14			3			3			6			24			36
Net (gain) / loss on disposal of London headquarters		(3	)		(3	)		(3	)		(5	)		(14	)		(6	)		(2	)		-			1			(7	)
Net (gain) / loss on disposal of operations		-			-			-			(2	)		(2	)		-			-			3			(3	)		-
Total Expenses		501			488			481			488			1,958			570			584			513			663			2,330
Operating Income		238			138			93			151			620			225			77			66			136			504
Operating Income margin		32.2%			22.0%			16.2%			23.6%			24.0%			28.3%			11.6%			11.4%			17.0%			17.8%
Interest expense		12			19			17			18			66			16			21			32			36			105

Income before Income Taxes, Interest in Earnings of Associates and Minority Interest		226			119			76			133			554			209			56			34			100			399
Income taxes		68			36			12			28			144			60			12			2			23			97

Income before Interest in Earnings of Associates and Minority Interest		158			83			64			105			410			149			44			32			77			302
Interest in earnings of associates, net of tax		19			(4	)		5			(4	)		16			26			(3	)		6			(7	)		22
Minority interest, net of tax		(8	)		(1	)		(2	)		(6	)		(17	)		(9	)		(2	)		(2	)		(8	)		(21	)
Net Income	$	169		$	78		$	67		$	95		$	409		$	166		$	39		$	36		$	62		$	303

Earnings per Share
- Diluted	$	1.10		$	0.54		$	0.46		$	0.66		$	2.78		$	1.16		$	0.27		$	0.25		$	0.37		$	2.05
Average Number of Shares Outstanding
- Diluted		154			145			145			145			147			143			142			142			167			148

a) Other income represents the gains on the disposal of intangible assets, including books of business. This income was previously recorded within commissions and fees.


WILLIS GROUP HOLDINGS LIMITED SEGMENTAL SUPPLEMENTAL FINANCIAL INFORMATION (in millions) (unaudited)

	2007									2008
	Q1	Q2		Q3		Q4		FY		Q1		Q2		Q3		Q4		FY
Commissions and Fees ^{(a) (e)}
Global	261	186		161		142		750		277		191		159		157		784
North America	184	194		180		193		751		191		193		175		353		912
International	266	220		201		275		962		304		257		222		272		1,055
Total Commissions and Fees	711	600		542		610		2,463		772		641		556		782		2,751
Total Revenues
Global	272	197		173		154		796		285		199		167		163		814
North America	193	202		190		201		786		196		197		179		357		929
International	274	227		211		284		996		314		265		233		279		1,091
Total Revenues	739	626		574		639		2,578		795		661		579		799		2,834
Operating Income ^{(b) (c) (e)}
Global	122	55		36		11		224		132		60		29		19		240
North America	27	44		32		49		152		27		31		18		67		143
International	87	43		27		94		251		104		57		38		107		306
Corporate and Other ^(d)	2	(4	)	(2	)	(3	)	(7	)	(38	)	(71	)	(19	)	(57	)	(185)
Total Operating Income	238	138		93		151		620		225		77		66		136		504
Organic Commissions and Fees Growth ^(e)
Global	3%	(1)%		2%		(7)%		0%		2%		0%		(2)%		9%		2%
North America	7%	6%		2%		(7)%		1%		3%		(1)%		(2)%		(4)%		(1)%
International	8%	7%		7%		9%		8%		5%		10%		10%		11%		9%
Total Organic Commissions and Fees Growth	6%	4%		4%		0%		3%		3%		3%		2%		6%		4%
Operating Margin ^{(b) (c) (e)}
Global	44.9%	27.9%		20.8%		7.1%		28.1%		46.3%		30.2%		17.4%		11.7%		29.5%
North America	14.0%	21.8%		16.8%		24.4%		19.3%		13.8%		15.7%		10.1%		18.8%		15.4%
International	31.8%	18.9%		12.8%		33.1%		25.2%		33.1%		21.5%		16.3%		38.4%		28.0%
Total Operating Margin	32.2%	22.0%		16.2%		23.6%		24.0%		28.3%		11.6%		11.4%		17.0%		17.8%

a) With effect from January 1, 2008, gains on the disposal of intangible assets, which were previously reported within ‘Commissions and fees,’ are now reported separately as ‘Other income.’ As a result of this change, $17 million previously reported within North America’s commissions and fees and $2 million previously reported within International in full year 2007, are now reported within other income. There was no impact on organic commissions and fees growth as originally reported for the three months and year ended December 31, 2008.

b) Also with effect from January 1, 2008, the Company changed its basis of segmental allocation for central costs. In particular, all accounting adjustments for hedging transactions are now held at the Corporate level, together with certain legal costs. As a result of this change, an additional $1 million net operating loss for full year 2007, previously reported within Corporate, has been allocated to the operating segments.

c) The Company does not hold business segment management accountable for managing foreign exchange exposure on the retranslation of the UK pension plan asset. Historically, a relatively stable exchange rate environment had led to foreign exchange on the UK pension plan asset having no material impact on segment operating income and margin. However, following significant exchange rate movements in 2008, the Company decided that, effective October 1, 2008, foreign exchange on the pension plan asset would be excluded from segment operating income and reported within Corporate and Other.

d) Corporate and Other includes the costs of the holding company, foreign exchange hedging activities and foreign exchange on the UK pension plan asset, amortization of intangible assets, net gains and losses on disposal of operations, certain legal costs, and, in the year ended December 31, 2008, the $92 million charge for the 2008 expense review ($33 million in first quarter, $62 million in second quarter and a $3m foreign exchange gain in fourth quarter 2008) and integration costs associated with the acquisition of HRH..

e) Prior periods restated to conform to current period presentation.

Contact:

Willis Group Holdings Limited
Investors:
Kerry K. Calaiaro, 212-915-8084
kerry.calaiaro@willis.com
or
Media:
Valerie Di Maria, 212-915-8272
valerie.dimaria@willis.com
or
Will Thoretz, 212-915-8251
will.thoretz@willis.com

Source: Willis Group Holdings Limited

Multiplied Media announces availability of Poynt local search application for the BlackBerry Storm - Posted by Steven Wevodau

Steve9982 — Sun, 15 Feb 2009 10:45:36 +0000

CALGARY, Feb. 12 /PRNewswire-FirstCall/ - Multiplied Media Corporation (TSX:V MMC), an award-winning, Calgary-based, provider of local search services, is pleased to announce the availability of its Poynt local search application for the BlackBerry® Storm(TM) smartphone from Research In Motion (RIM) (NASDAQ: RIMM, TSX: RIM). The application takes full advantage of the BlackBerry Storm smartphone’s touch-screen, providing a unique and immersive touch experience.Poynt is known for its comprehensive coverage of business listing and movie information as well as its ease of use and outstanding graphical user interface. The overwhelming response in pre-release testing was that Poynt offers a great touch-screen experience on the BlackBerry Storm. The independent beta users also commended the speed with which they received GPS locates, the relative ease of navigation and the ability to view movie trailers.

“We have received a tremendous number of requests from BlackBerry Storm owners to provide support for Poynt on their device,” said Andrew Osis, CEO, Multiplied Media. “We’re extremely proud of the product that we’re releasing and believe it has been worth the wait. From the initial response we’ve received, it appears our users agree.”

Poynt is a convenient and timesaving service that connects consumers to local businesses and theaters at the moment they want to buy or acquire products or services. By entering search terms, the consumer is able to find businesses and movies near their location, get phone and address information as well as enhanced additional features such as accessing movie reviews and trailers, and purchasing movie tickets.

    Poynt for the BlackBerry Storm smartphone includes such rich features as:

    -   Cellsite locates - Cellsite locates allow Poynt to quickly access a
        user's general location while awaiting a GPS lock.
    -   GPS - the GPS functionality has been optimized to provide faster
        accurate locates. Poynt for the BlackBerry Storm smartphone also
        provides GPS access to users on the Verizon network.
    -   Enhanced User Interface - Poynt's UI was developed specifically for
        the BlackBerry Storm to provide users with a true touch-screen
        experience.
    -   Mapping Integration - Poynt is fully integrated with both
        BlackBerry® Maps and Google Maps, with turn-by-turn directions
        provided through Google Maps.
    -   Address Book Integration - Users can add frequently accessed listings
        to their BlackBerry® Address Book, providing convenience for future
        lookups.
    -   Share Search Results - Integration with BlackBerry® Email allows
        users to easily share listings with friends and colleagues.
    -   Movie Module - Users can plan their night at the movies by seeing
        what is playing near them, watching trailers, viewing showtimes,
        reading reviews, cast and synopsis, and purchasing tickets.
    -   Theater Details - Users can get information on seating layouts,
        wheelchair accessibility and number of screens.
    -   Add to Calendar Option - Users have the ability to add movie search
        results to their BlackBerry® Calendar by date and showtime, as well
        as invite friends to join them. Ticket purchase links are also
        included.

Poynt’s application is also available for other BlackBerry smartphone models and takes advantage of their robust capabilities including locates by GPS* and IP detection, click-to-call, click-to-map and click-to-view-website.

Poynt is a free program** and is available to BlackBerry smartphone owners in Canada and the United States. To download Poynt, visit http://m.mypoynt.com from your BlackBerry® Browser.

    *  Requires a GPS-enabled BlackBerry smartphone.
    ** Wireless charges may apply. Please check with your wireless service
         provider.

    About Multiplied Media Corporation
    ----------------------------------

Multiplied Media (www.multiplied.com) has developed the award-winning application Poynt (www.mypoynt.com), the multimedia local search service available over Microsoft’s Windows Live Messenger, AOL’s AIM instant messaging network and BlackBerry smartphones. Through agreements with Yellow Pages Group in Canada, Idearc Media (SuperPages.com) in the United States and t-info and Infobel in Europe, Poynt simplifies finding and connecting with businesses, retailers and events wherever and whenever it is most convenient for the consumer. Headquartered in Calgary, AB, Canada, Multiplied Media trades on the TSX Venture Exchange under the symbol MMC.

    Neither TSX Venture Exchange nor its Regulation Services Provider (as
    that term is defined in the policies of the TSX Venture Exchange) accepts
    responsibility for the adequacy or accuracy of this release.

The BlackBerry and RIM families of related marks, images and symbols are the exclusive properties and trademarks of Research In Motion Limited.

Source: Multiplied Media Corporation

Buffett donates Berkshire stock to 2 charities - posted by Steven Wevodau

Steve9982 — Tue, 27 Jan 2009 13:56:04 +0000

By Josh Funk, AP Business Writer

Warren Buffett donates Berkshire stock worth nearly $3.6 million to 2 unnamed charities

OMAHA, Neb. (AP) — Billionaire Warren Buffett has donated stock in his company worth a total of nearly $3.6 million to two unnamed charities.Buffett disclosed the donations of Berkshire Hathaway Inc. stock in a Securities and Exchange Commission filing Monday.

One donation of 676 Class B shares was made in September and a donation of 595 Class B shares was made in December. Class B shares sold for $2,822 Monday afternoon.

Buffett did not immediately respond to questions about the donations e-mailed to his Omaha office.

Buffett has previously said all of his Berkshire stock will go to charities over time.

After these latest donations, Buffett held 2,018,997 Class B Berkshire shares and 350,000 Class A shares, which were selling for $85,500.

GEICO Has Good News for Job Hunters; They’re Hiring

Steve9982 — Mon, 26 Jan 2009 12:56:32 +0000

Posted by Steven Wevodau

WASHINGTON–(BUSINESS WIRE)–Despite the current economy, layoffs and high unemployment rates, GEICO has some very good news: the company is actively recruiting and plans to hire 870 new associates for positions in 19 different states in the first quarter alone.

According to Geri Lanier, assistant vice president of human resources, “In a tough job market, customer service positions remain very stable. While other companies are cutting back, we are hiring. We have actually increased our starting salaries by 2.5 per cent for our line positions. We’re encouraging applicants to act quickly because we want to fill these positions in the first quarter of 2009.”

In the past two years, GEICO has added 1,942 jobs companywide and received many accolades including being named a “Best Place to Launch Your Career” by BusinessWeek and a “Top Entry-Level and Top Intern Employer” by CollegeGrad.com.

Debra Blake, who was recently promoted to a customer service supervisor in the company’s Virginia Beach, Va., office, said, “GEICO has great company culture, outstanding benefits, and career paths to fit any lifestyle. GEICO has also provided me with all the tools I need to climb the ladder of success and shape my career.”

“This is a great time to build a career with GEICO,” said Jan Stewart, vice president of human resources. “We expect continued growth in 2009 and are looking for well-qualified associates who want to grow with GEICO and be part of our success.

“We are pleased to announce that because of GEICO’s continued growth, we’re hiring for customer service, claims, sales, and auto damage adjuster positions in all of the companies regional offices and service centers,” Stewart continued. “The company’s corporate office, located near Washington, D.C., is also recruiting for qualified information technology professionals, actuaries and analysts.”

To view job openings or to submit an application online, go to www.geico.jobs. Online career videos are also available at www.youtube.com/jobsatgeico.

GEICO (Government Employees Insurance Company) is the third-largest private passenger auto insurer in the United States based on the latest 12 months of written premium. It provides auto insurance coverage for nearly 8.5 million policyholders and insures more than 14.4 million vehicles.

As a member of the Berkshire Hathaway group of companies, GEICO is rated A++ for financial stability by A.M. Best Company and ranks at the top of several national customer satisfaction surveys. For more information, go to http://www.geico.com.

Contacts

GEICO Communications
301-986-3271

ING sees loss, job 7,000 cuts, gives state risky assets - posted by Steven Wevodau

Steve9982 — Mon, 26 Jan 2009 12:54:57 +0000

AMSTERDAM, Netherlands - Bank and insurer ING Group NV said Monday it will book a large fourth quarter loss, cut 7,000 jobs and change its CEO. It also said the Dutch government will take ownership of most of euro27.7 billion (US$35.8 billion) in troubled U.S. mortgage-backed securities.

There was no immediate word on whether the job cuts would impact ING Canada (TSX:IIC0, the roup’s Canadian subsidiary.

In a statement published Monday, the company estimated its “underlying net result,” - an unaudited and nonstandard measure - will be euro3.3 billion when it reports earnings on Feb. 18.

Under the complex deal with the Dutch state, the government will assume 80 per cent of risk and payments from the portfolio, in exchange for an annual payment to ING of about euro600 million.

The securities derive from “Alt-A” mortgages, which are from prime borrowers, but don’t conform to typical mortgage terms - for instance, some documentation may be missing, or the property might be a vacation home.

“Market prices for these securities have become depressed as liquidity dried up, which had an impact on ING’s results and equity far in excess of reasonably expected credit losses,” the company said.

For ING, the benefits of the deal include further deleveraging of its balance sheet. It said its Tier-1 ratio - the measure commonly used to rate a bank’s strength - will improve to 9.5 per cent from 9.1 per cent.

That ratio was boosted from 6.5 per cent to eight per cent in October, when ING received a euro10 billion investment lifeline from the Dutch state.

Shares rose 13 per cent to euro5.96 in early trading in Amsterdam as solvency fears eased.

ING said Monday’s deal frees up resources so that it can lend euro25 billion in the Netherlands, of which euro10 billion will be eligible for state guarantees under a program introduced by the government last year.

ING said in the fourth quarter “market conditions deteriorated sharply, making it the worst quarter for equity and credit markets in over half a century.”

It suffered euro2 billion in impairments and losses on stocks, bonds and real estate.

Provisions against bad loans rose by euro600 million. It didn’t give details of the performance of its insurance arm.

The job cuts represent five per cent of the company’s total work force.

The company said CEO Michel Tilmant’s abrupt departure should be seen “in light of the extraordinary developments over the past few months and given his personal condition.”

Tilmant, 56, is not known to have any health issues. The company could not immediately be reached to elaborate.

ING said Tilmant will remain an adviser to the company until Aug. 1.

The company nominated its own supervisory board chairman, Jan Hommen as Tilmant’s replacement, pending approval at the company’s annual meeting on April 27. Executive board member Eric Boyer will fulfill the CEO’s duties until then.

Hommen is a former chief financial officer of Royal Philips Electronics NV who left the company after being passed over for the chief executive job in 2005. He is also a former CFO of the Aluminum Company of America, Alcoa.

Insurers continue to slash jobs during lean times - posted by Steven Wevodau

Steve9982 — Sun, 25 Jan 2009 17:19:50 +0000

Genworth Financial recently cut 14% of its global work force

By Darla Mercado
January 25, 2009

Major insurers trimmed their payrolls last year, and accelerated the cuts after their shares plummeted in November.Of the 14,457 insurance positions eliminated last year, 5,459 jobs were sliced in November, according to data from Challenger Gray & Christmas Inc., a Chicago-based outplacement firm.

Overall, American businesses cut 1.22 million jobs last year.

“In insurance, we’re seeing more layoffs in areas like underwriting because the business levels are down,” said John Challenger, its chief executive.

“Some insurers have losses, and that’s putting intense pressure on their balance sheets,” he said. “If revenues are reduced, they try to cut down the work force so it’s in proportion to their business levels.”

Although there have been layoffs in the health and property/casualty sectors, life insurance companies have been the hardest hit.

The cutbacks continue this year. Companies making cuts include ING Groep NV of Amsterdam, Netherlands, which eliminated 750 positions across the board about two weeks ago and Genworth Financial Inc. of Richmond, Va., which slashed about 1,000 employees — roughly 14% of its global work force.

THINNING THEIR RANKS

Other insurers that are thinning their ranks include Cigna Corp. in Philadelphia, which let go 1,100 people at the start of the year, and The Hartford (Conn.) Financial Services Group Inc., which dismissed 500 employees in November.Analysts said that the number of eliminated posts is a sign of a battered industry that is trying to pick itself up in lean times. Insurers’ fourth-quarter and full-year results will be out soon and will reflect the damage carriers incurred in the fall.

“They’re looking for ways to align their cost structure with the realities of how much money they’ll make over the next year to two years,” said Joel Levine, senior vice president of the life insurance group at Moody’s Investors Service in New York.

“I don’t think it means anything specific to the insurers,” he added. “But in the face of declining earnings, investment losses will go up, and from a capital-raising/financial-flexibility standpoint, it’s hard to raise money.”

Rather than merely keep an eye on which companies are making job cuts, analysts recommended that observers note which departments are facing the eliminations.

Companies that are tightening their belts are reducing the amount they spend on information technology and back-office functions, making the IT department a “natural area to look for layoffs,” Mr. Levine said.

On the other hand, the elimination of salespeople would be a dramatic move, he noted. However, cuts of lackluster salespeople and distribution staff are likely, Mr. Challenger said.

He added that while carriers are suffering the way many financial firms are, the pain in the insurance sector is not nearly as bad as in the banking sector, which has been facing a rocky period of mergers and job cuts.

ING is among the carriers that cut positions across all lines of business, but spokesman Dana Ripley noted that the company has fought to minimize the impact on jobs that require interaction with customers and that are related to distribution.

“For now, we hope that these reductions are sufficient, but you know as well as anyone that if the economy doesn’t stabilize, we’ll have to revisit the subject,” Mr. Ripley said.

Still, some expect layoff levels to improve as the year goes on, particularly if insurers are able to use the $350 billion of federal funds in the second distribution of the Troubled Asset Relief Program to help bolster their balance sheets.

“I’m more optimistic that once we hit the summer, we’ll start to see improvements, fewer layoffs and more stabilization,” Mr. Challenger noted. “I think the TARP will help the situation for insurance companies as the books have big losses that the carriers can’t recognize.”

E-mail Darla Mercado at dmercado@investmentnews.com.

Prospects bleak for laid-off insurance work force

Steve9982 — Sat, 24 Jan 2009 14:07:39 +0000

Posted by Steven Wevodau

By Megan Loiselle
Wausau Daily Herald

Local employment staffing professionals say laid-off Wausau Insurance employees could face a tough job market if they decide to stay in central Wisconsin.

Liberty Mutual Insurance Co., which has owned Wausau Insurance for a decade, announced Thursday that it is eliminating the Wausau brand and cutting some jobs. The company employs almost 1,400 people in Marathon County, Liberty spokesman Brad Zweck said.

On Friday, Zweck again declined to say how many jobs will be cut, referring instead to his earlier statements.

“We expect that there will be little net job loss overall. The vast majority of employees will stay with Liberty Mutual,” he said Thursday.

Others will go to work for brokers who sell insurance to medium-size companies, Zweck said. Those who don’t keep their jobs will be given severance packages and assistance seeking new employment.

If laid-off workers are looking for other insurance-related jobs in the area, a few companies do have posted openings.

Sentry Insurance has openings in finance, customer service and actuarial sciences at their Stevens Point location, according to its Web site, www.sentry.com.

And Church Mutual Insurance Company in Merrill has one posting for a job in risk management on its Web site, www.churchmutual.com.

Laurie Prochnow, president of Management Recruiters in Wausau, said companies still are hiring on the management and professional levels but opportunities could be difficult to find locally.

Many of the openings are in specialized fields rather than general clerical positions, said Lisa Westphal, owner of Management Recruiters in Wausau.

“Realistically, it’s not a good time,” said Kathy Croker, business development specialist at Manpower Staffing Agency of Wausau. “From what we understand, for one job opening, employers are receiving 50 to 100 resumes.”

With companies continuing to downsize, Croker said finding a new job in the area is not going to happen instantly.

“They may need to look elsewhere and that’s unfortunate,” Croker said.

Representatives at the Job Center of Wisconsin in Wausau and the Wisconsin Department of Workforce Development said they had not received any reports of layoffs at Wausau Insurance.

Marsh & McLennan sets 20-cent quarterly dividend - posted by Steven Wevodau

Steve9982 — Sat, 24 Jan 2009 14:05:44 +0000

Marsh & McLennan declares quarterly dividend of 20 cents, payable Feb. 17

Friday January 23, 2009, 6:38 pm EST

NEW YORK (AP) — Marsh & McLennan Cos. declared a quarterly dividend of 20 cents.

The consultancy group said it will pay the dividend on Feb. 17 to shareholders of record Jan. 30.

Is State Street’s Demise a Self-Fulfilling Prophecy?

Steve9982 — Fri, 23 Jan 2009 16:52:01 +0000

Posted by Steven Wevodau

State Street’s (STT) losses accompanied by their initial statements reminds me very much of MBI and ABK when they first began to crack followed by their impending crash. Two statements from STT’s announcement that are striking are as follows:

Comment about capital levels: “State Street evaluates the market from time to time. Following recent discussions with investors, State Street has determined not to raise equity capital in this turbulent market.”
Statement that losses have improved: “Since year end the unrealized after-tax losses in the investment portfolio have improved $400 million to $5.9 billion as of Friday, January 16, 2009.”

The first statement seems to be management saying that they are aware of the problem and have conducted due diligence ($3.6 billion in additional mark-to-market losses didn’t occur out of nowhere), and only then decided that they are amply capitalized.

The second statement is STT’s way of saying, “it isn’t all that bad”. For the record, BK used language similar language when it described securities write-downs in its 4th quarter report:

We believe that the actual incurred loss will ultimately be materially lower based on current assumptions.

Similar to STT, we have two quotes from MBIA’s quarter report (October 25, 2007) when the stock was at $47.

The decline was due to a pre-tax net loss of $352.4 million, or $1.80 per share, that the Company recorded in the third quarter on financial instruments at fair value (”marked-to-market”) and foreign exchange. The loss was a consequence of wider spreads affecting the valuation of the Company’s structured credit derivatives portfolio. Compared with the previous quarter, spreads widened significantly on Commercial Mortgage-Backed Securities (CMBS) collateral and on other asset-backed collateral in the Company’s structured credit derivatives portfolio. The Company believes that the “mark-to-market” loss does not reflect material credit impairment.

Also, a statement from Gary Dunton, MBIA Chairman and Chief Executive Officer,

We remain comfortable that our insured credit derivatives portfolio will not result in material credit losses. More important, wider spreads contributed to a substantially better pricing environment for our insurance and asset/liability management products.

Here too, we have MBI stating that losses are only mark to market, and over the long term, the increased volatility will only strengthen their business. The obvious end was that credit spreads continued to widen, mark to market losses, although they aren’t real yet, DO MATTER, and MBI was ill prepared to handle the situation.

The above situation of mark to market losses, write downs, and the need to increase capital has obviously been common among traditional banks, but I think the comparison of STT to the mortgage insurers is more applicable.

During 2007, ABK and MBI were recording record revenues and their “annuity” type business plan was growing. STT, although its assets under custodial management have decreased, has seen an increase in customers for its primary business, and has been a beneficiary of the move to ETFs. However, both were been burned by their inability to manage their secondary business (but not an upfront revenue generator) of gauging risks and potential effects.

Like the insurers before them, STT has gone on the offensive to differentiate themselves from traditional banks, but the more than doubling of their losses has telegraphed to the market that they are more than just a financial trust company collecting fees for custodial services and not immune from the crisis.

The obvious question becomes STT‘s survival. Fellow trusts BK and NTRS, who came out with healthier reports, will most likely aggressively go after STT’s custodial business. Also, STT may see a serious exit of deposits from their low risk money market accounts if the clients sense a danger of NAV levels less than $1.00 par.

On the positive side, and this is a big positive, STT’s custodial customers have a vested interest in STT staying solvent and a fully functioning company. For large institutional clients, a switch of trust companies will inevitability lead to increased expenses as the two sides work out compatibility issues. In this environment, financial firms aren’t willing to face increased expenses that aren’t definitively necessary.

To conclude, STT in all likelihood is well capitalized to survive its current losses, but like MBI and ABK, it has exposed itself to numerous dangerous fronts that could lead to its demise a lot quicker than anticipated.

Disclosure: no positions

SOURCE: SeekingAlpha