Steve Wevodau

Survival Kit for a Credit-Starved Market - posted by Steven Wevodau

Unless you’ve been on hiatus to Borneo, or in a coma, you know credit markets are damaged and we’re sliding into a global recession. The former didn’t cause the latter (entirely), but if one doesn’t get fixed the other will get worse.

The bear market blood bath has been costly to one’s pocketbook, sleep and sense of humor. Sadder yet, was the incredible wealth destruction caused by a casino mentality and egregious executive strategies of a “modern” western banking system. Way to go guys!

To label a “derivative” or “credit default swap” as a creative financial product is an understatement. I can live with the fact our insurance industry is actually the bond market dressed in drag. But it’s irksome as hell knowing some investment bankers are really devils in Armani suits!

It just goes to show not everyone with an MBA or PhD after their name is a guarantee of righteousness. What’s an investor to do?

It’s impossible to know how long this nonsense will be with us, but survival skills are handy when the bear’s hot breath lingers. As the rules of engagement change, so must attitude and tactics.

Investors need to be pragmatic not dogmatic. Here are a few ideas from our playbook along with two slick investment analysis tools we use to keep out of harm’s way. Think of it as common sense meets guerilla warfare.

Take a good hard look at the macro picture: We hear lots of folks comparing potential of this recession to the Great Depression of the 30’s. Indeed there are some similarities; bursting asset bubbles tainted by creative hubris and cheap capital, wreaking sloth and surfeit upon the masses.

Why not compare it to the fall of the Byzantine Empire too? The only difference between the Dark Ages and now (besides a lack of constitutional law and many years) is they didn’t have computers.

It pains our sensibilities to see executives compensated with TARP funds or know that guys like Dick Fuld (Lehman Bros.) and Gerry Killinger (WAMU) got paid big bucks to trash their businesses. There is something fundamentally wrong in rewarding an emperor for incompetence.

Yet, casting blame entirely on Wall Street hot-shots and their boards is an exercise in futility. Sure, they profited immensely from their “ingenuity”, but as we’ve learned, some structured products fall farther from the tree than others.

Learn From History: Recessions happen and for a variety of reasons. In 1973, stagflation reared its ugly head, thanks to OPEC quadrupling oil prices and an expensive Vietnam War budget. Federal Funds Overnight rates (FFO) Sept. ’73: 10.78%

1980-82 came on the wake of a revolution in Iran (new regime was very inconsistent with oil exports). In the US inflation was rampant and monetary policy was tight. FFO rates June ’81: 19.10%

In 1990-1991, industrial production slowed as high labor costs pushed jobs overseas, rising unemployment here. Budget deficits (from Gulf War) ushered in sluggish GDP. FFO rates Dec. ’91: 4.43%

2001-2003 began with excess capacity (and high inventory levels), then sucker-punched by 9-11 and numerous accounting scandals: FFO rates Dec. ’03: 0.98%

2007- ?: Ghosts of easy credit (2001- ‘06) return to haunt viciously. Massive leverage became massive problem as lenders & borrowers took considerable license with their balance sheets. Learning curves are steep, but this one’s a doozy. FFO rates Nov. ’08: 0.38%

In most recessions, profits and earnings contract, which is normal. Top-line growth (sales) shrinks and cost-cutting is what helps the bottom line. What makes this recession so different?

Business has been cost cutting for years and they are now hacking at the bones (i.e. jobs). Also, credit is scarce and companies can’t borrow which means they can’t grow the enterprise, let alone maintain it.

Good News: Cheap oil prices help tremendously in that they don’t add an extra “tax” to the economy. OPEC doesn’t look to be in any position to raise prices unilaterally, because demand has fallen off a cliff. Sure, they could cut production, but these guys have cheated on quotas for years. The only real near-term catalysts to push oil prices higher would be geo-political issues or a man made catastrophic event (i.e. terrorism).

Bad News: The unemployment situation isn’t cheerful and anecdotal evidence suggests it will get worse. We aren’t economists, but it wouldn’t surprise us to see 8.5% or more unemployment by second half of 2009. And, if those spoiled labor unions don’t pull their heads out of their you-know-where, it could go much higher.

The political process in this country needs a slap upside-the-head too. We’re glad to see Obama getting face time (announcing key posts in administration), but he’s gonna have to hit the ground running.

In contrast, VP Joe Biden’s Dec. 23 interview talking up the Obama stimulus package was dreadful. He did not say anything we don’t already know, and he offered a very dour view going forward. Perhaps the Obama team is trying to lower expectations?

Then, during the same interview, Biden proceeded to extol the virtues of their massive stimulus plan, which will involve incredible amounts of new spending by government. This, he claimed, would help the middle class pull the economy out of its funk. He was vague on the details except to promise there would be no pork attached to these funds. Gee, thanks for the clarity Joe.

Mr. Biden will never be a threat to win a Pulitzer, but now that his tasseled loafer has finally managed to wiggle its way into the Executive Branch of Government, he should at least make an effort to be on the same page as his boss. We preferred Joe as a piece of furniture in the Senate.

The American people are desperate for leadership and if New Deal policies are the best ideas these folks can come up with, nothing will get fixed. It’s bad enough that Republicans couldn’t write meaningful legislation while they ran the store, but listening to blowhards like Sen. Chris Dodd, Rep. Barney Frank and Biden try to talk themselves out of a paper-bag doesn’t help matters much either.

How these guys managed to become chairmen or senior members of powerful banking, finance and foreign policy committees is beyond us.

Worse News: The thought of Joe Biden becoming President! Seriously though, the credit markets are still in very bad shape. Banks have been hoarding the cash received from Uncle Sam and they are not lending!

In addition, there are still billions of dollars in Auction Rate Preferred Securities floating around unredeemed (auctions have failed since February). LIBOR rates may have come down, but as long as these ARPS remain frozen, it’s difficult to see credit markets functioning normally anytime soon. The Fed may have orchestrated low rates, but the blood is not getting to the muscles that need it most.

Look at the Management Team: Good management is the difference between a decent competitor and a great one. In a slowing economy, even the best run companies are forced to adapt a new game plan. Every industry has different issues and we start by reading the management’s discussion and analysis section of a company’s 10-Q and 10-K filings for clues.

Some managers articulate better than others, but these days, consistency helps a lot. In a slowdown, everybody feels the earnings pinch. It’s easy to understand high raw material costs affecting a whole group, but if one company says “Hey, we had an inventory problem and this is how we plan to fix it” and a competitor says “Well, sales were impacted by rainy weather and fewer selling days in the period”, which story should you believe?

That depends on the industry and business cycle, but better managed companies don’t gloss over an earnings miss by blaming the calendar or precipitation (tornadoes and hurricanes excepted).

Learn to read financial statements: You’d be surprised how many active investors buy stocks with little or no knowledge of the “numbers”. Sure, they look at price ratios, return on equity, etc., but in some cases, it doesn’t tell the whole story.

Back in the old days when Jack Welch ran GE, we were constantly amazed how the company always met their numbers each quarter. Given such diverse and disparate units (appliances, plastics, aircraft engines, financing, etc.), this would seem tough to pull off on a regular basis.

How did ‘ol Jack do it? Did he dip into the pension fund? We wouldn’t know nor are we accusing GE of monkey business, but the point here is that managers have many legal methods to “massage” an earnings report.

If you really want to put your finger on the pulse of an industry and health of its players, look first at earnings quality and the cash-flow components used to create them. In a credit starved market such as this, we believe company managers are shifting their priorities from revenue growth to capital preservation.

Balance Sheet: We see several trends emerging in corporate balance-sheets these days.

• Current assets are taking longer to be converted into cash
• Accounts receivables are rising faster than sales
• Rising pre-paid expenses (these don’t get turned into cash)
• Huge jumps in accounts payable

What does this mean? Customers are not paying promptly either because they don’t want to or can’t. Larger amounts of non-operating “assets” are being thrown into the broom closet and companies are stretching out their payments to vendors.

Income & Cash Flow Statement: Non-cash accounting adjustments or “fluff” is on the rise too. Some noticeable signs of late:

• Accelerated depreciation without any significant change in capacity
• Heavy reliance on changes in inventory, accounts receivable, deferred taxes, bad-debt allowances, etc.

Thus, we are seeing more and more earnings reports propped up by balance sheet maneuvering rather than actual cash-flows generated from operations. As managers pull more levers to build their numbers, investors need to keep a close eye on the cash.

Trust your instincts, but think outside the box: We use two powerful analysis methods to divine earnings quality and cash-flow.

1. The Dual Cash Flow Method
2. Accrual Ratio Analysis

Dual Cash-flow analysis tracks changes in the relationships of key reported financial data over a period of time. The DCF screen we built is based on the innovative research of Harry Ernst and Jeff Fotta (1995).

DCF is designed to compare the difference (or spread) between operating cash-flows and balance sheet cash flows. By separating real cash produced by operations from “cash-flow” generated via accounting adjustments, we get a good idea of the earnings quality.

• We like to see operating cash-flows rising and balance sheet cash-flows declining

Equally effective is a novel accrual analysis method developed by Richard Sloane more than a decade ago. The accrual ratio helps verify the trends in non-cash contributions to the earnings.

• Rising accruals indicate a heavier reliance on non-cash assets to boost earnings
• Declining accruals suggest better quality earnings

When combined, these two unconventional methodologies provide remarkably accurate and predictive analysis. Companies recently displaying healthy or improving earnings quality include tech titan International Business Machines (IBM) and household products maker Colgate Palmolive (CL).

A few names not passing muster lately are Nike (NKE) and Dryships (DRYS).

Managing risk in a crazy environment like this requires an awareness of the macro issues and the proper tools to identify opportunities and avoid calamity.

We have long argued that the “quality” of earnings is more important than the amount of earnings produced. Thanks to keen-eyed folks like Ernst, Fotta and Sloane, an investor’s chances of survival increase dramatically.

Note: Seeking Alpha contributing author Mark Barath wrote an interesting piece on Sloane’s accrual research and it’s a good read.

Disclosure: Author is currently long CL.

Tags: Credit-starved market, Insurance News, Steve Wevodau Credit-starved market, Steven Wevodau Credit-starved market

US Home Prices Plunge Record 18.0 Pct In Oct -S&P - Steven Wevodau

By Julie Haviv

NEW YORK, Dec 30 (Reuters) - Prices of U.S. single-family homes in October plunged a record 18.0 percent from a year earlier, according to the Standard & Poor’s/Case-Shiller Home Price Indices released on Tuesday that indicated a U.S. housing market in the throes of a deep recession.

The battered U.S. housing market is critical to the U.S. economy, with a wide-ranging impact from the construction industry to the sale of appliances and furniture. After hurting economic growth for multiple quarters, a continued deterioration could prolong a turnaround for the world’s largest economy, which has been in a recession since late last year.

The composite index of 20 metropolitan areas fell 2.2 percent in October from September. The price drops, both on a year-over-year and month-over-month basis, came in worse than expectations based on a Reuters survey of economists.

S&P said its composite index of 10 metropolitan areas declined 2.1 percent in October from September for a 19.1 percent year-over-year drop, also a record.

“The bear market continues; home prices are back to their March, 2004 levels.” David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s, said in a statement.

As of October 2008, the 10-City Composite Home Price Index is down 25.0 percent from its mid-2006 peak, and the 20-City Composite Home Price Index is down 23.4 percent, he said.

The U.S. housing market is in the worst downturn since the Great Depression as a huge supply of unsold homes, tighter lending standards and record foreclosures push down home prices.

Economists believe the U.S. housing market will not begin to recover until home prices fall far enough to stimulate demand, which has dropped off precipitously as potential buyers stay sidelined.

Data through October 2008 showed continued broad based declines in the prices of existing single family homes across the United States, with 14 of the 20 metro areas showing record rates of annual decline and 14 now reporting declines in excess of 10 percent versus October 2007.

Tags: home prices, Insurance News, Steve Wevodau home prices, Steven Wevodau home prices

Congress To Examine Madoff Case Next Week

POSTED BY STEVE WEVODAU

By Rachelle Younglai

WASHINGTON (Reuters) - Lawmakers will take their first close look next Monday at financier Bernard Madoff’s alleged $50 billion fraud and why the Securities and Exchange Commission failed to discover the scandal.

Information gleaned from the hearing will help guide Congress as it attempts to reform laws regulating the U.S. financial system, said Rep. Paul Kanjorski, a Pennsylvania Democrat and chairman of the House capital markets subcommittee.

“Madoff’s actions have further weakened the already battered investor confidence in our securities markets,” Kanjorski said in a statement on Monday.

Madoff, a former Wall Street fund manager, is accused of running a $50 billion fraud that ensnared investors and charities around the world, according to authorities.

Critics say the SEC missed warning signs and failed to uncover the scandal until Madoff’s sons went to the authorities and told them he confessed to the fraud. SEC Chairman Christopher Cox has asked an internal watchdog to probe the investor protection agency’s conduct in the case.

Kanjorski said the Congressional hearing will examine if the SEC had enough staff and budget to police the markets.

“These proceedings will help us to discern whether or not the SEC had the resources needed to get the job done, how such a sizable scheme could have evaded detection for so long, and what new safeguards we need to put in place to protect investors,” the lawmaker said.

Kanjorski did not identify who will testify at the hearing, scheduled for the day before the new Congress convenes. President-elect Barack Obama will be sworn into office on January 20.

The Madoff scandal, Kanjorski added, “provides a glaring example” of why Congress must launch the biggest reform of financial markets regulation since the Great Depression. Other lawmakers, including Senate Banking Committee Chairman Christopher Dodd, have said they want to streamline and improve the tangled U.S. regulatory structure that oversees banks and financial services.

Madoff is accused of running a giant Ponzi scheme, where he paid off early investors with money from later investors. He faces a criminal fraud charge filed by the U.S. Justice Department and a civil lawsuit filed by the SEC.

A federal judge in New York City recently set a December 31 deadline for Madoff to give the SEC a verified written accounting of his firm’s records, bank accounts and other investments.

In addition to the federal lawsuits, a New York City investor who said she gave Madoff $2 million to manage sued the SEC and is seeking $1.7 million in damages from the federal agency.

(Editing by Phil Berlowitz)

Tags: Bernard Madoff, Civil Lawsuit, SEC, Steve Wevodau SEC, Steven Wevodau SEC, U.S. Justice Department

400 Insurance Professionals Join InsuranceCampus.org The First Month Of Operation

POSTED BY STEVEN WEVODAU

Cleveland, OH - 12/30/08

• “Who will organize all the data and information as it grows? You will!”
• “We are the web.
• “Web 2.0 is linking people in a way we have never seen before.”

These are just a few of the points made in a new video by Michael Welsch, Assistant Professor of Cultural Anthropology at Kansas State University and posted on InsuranceCampus.org by member Rick Morgan.  

“The conclusions perfectly reinforces the positive response to the interactivity capabilities now available at InsuranceCampus.org” said Walt Podgurski, CEO of Insurance Broadcasting.  

“The shift to this type of media seems to us, if not inevitable, at least a major future force to plan for. The user-generated nature of the medium which puts the user in total control of who and what they engage with is an improved model in many ways, and may be the best way to manage the power and vast quantity of digital content available.” 

Insurance Broadcasting and InsuranceCampus.org wants to thank the 400 industry professionals that have embraced this new tool since it was created on November 1st and invite those who are interested, or just curious, to visit the website. There are no charges or fees and most of the applications can be accessed before deciding to join. 

InsuranceBroadcasting.Com is a next generation media organization facilitating the exchange of information between insurance industry professionals utilizing the improvements available from emerging technology to deliver meaningful information. www.insurancebroadcasting.com  

Insurance Campus.org will soon be the largest insurance networking site on the Internet. What distinguishes this model is the “user-generated” nature of the content. Members create their own profile, groups, posts, blogs, photos, videos, and more. www.insurancecampus.org

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Dick Kovacevich on Banks and This Financial Crisis - Steven Wevodau

The Jan 2009 issue of The Commonwealth has a fascinating speech by Dick Kovacevich, Chairman of Wells Fargo (WFC). Most interesting is how quickly the banking sector grew.

Wells Fargo started as a business in 1852, and Norwest, where I worked before merging with Wells Fargo, started in 1873. By 1950, our combined assets were less than $3 billion…By 1985, both companies together were still only about $50 billion. Today, they are $610 billion. When our merger with Wachovia (WB) is completed, we will be nearly $1.5 billion. So what happened…that caused this unprecedented growth? … deregulation, new technologies, non-bank competition, and industry consolidation.

The banking sector is a rarity–despite multiple mergers, competition continues to be fierce. The internet banks, especially ING Direct, keep threatening the big players. Consumers owe (in the abstract) more to ING and other internet bankers than we realize.

The 1980s was a very difficult time for our economy. We had 16 percent inflation, 20 percent interest rates, double-digit unemployment and a severe recession.

Mr. Kovacevich differentiates between an economic crisis and a financial crisis. He says the 1980s was worse than today’s crisis, because it was a full-blown economic crisis. Today, however, we have more of a financial crisis than an economic crisis:

We’re probably in a recession; we’ll be in one until early next year, but we’ve still got 6.1 percent unemployment, not 14 percent. We have 2 or 3 percent inflation, not 20 percent. We have interest rates at record lows, not at 20 percent…[So] It is a more serious financial crisis…We [the financial sector] really caused this crisis.

His willingness to accept blame should earn points. It’s nice to see a Chairman of a major banking company speaking so frankly. He ends with a positive note:

I wouldn’t want to bet against all the regulators and all the governments of the world — this is a coordinated effort. If you want to bet against them, go right ahead, but I wouldn’t. They’ll get this thing fixed.

Very reassuring words from Wells Fargo’s chairman.

Bonus: In the same issue of The Commonwealth, Meg Whitman, former CEO of eBay (EBAY), talks about California’s budget:

Revenues have got to be greater than costs. This is one of the real laws of business. Otherwise, we go bankrupt. We need to change the structural way our budget is being done.

Although I live in California and consider myself a fairly comprehensive reader, I have no idea what’s really going on with my state’s budget. Last I heard, the Democrats were trying to call taxes “costs” to push through a budget over Republican objections. Come state election time, I may just vote against all the incumbents.

Disclosure: I own shares of Wells Fargo. Warren Buffett’s Berkshire Hathaway (BRK.A) also holds WFC shares.

Tags: Financial Crisis, Insurance News, Steve Wevodau Financial Crisis, Steven Wevodau Financial Crisis

Catastrophe Losses Make 2008 One of Costliest Years On Record, According to Guy Carpenter Briefing

POSTED BY STEVEN WEVODAU

NEW YORK - (Business Wire) Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist, today published 2008 Catastrophe Update, a briefing about the catastrophe reinsurance marketplace in 2008. The briefing, available on www.GCCapitalIdeas.com, Guy Carpenter’s new intellectual capital website, states that the high frequency and severity of Atlantic hurricanes in 2008, coupled with other weather-related and man-made losses, placed the year among the costliest on record for insured catastrophe losses.

“The record-setting Atlantic hurricane season – especially Ike and Gustav – is the big story and the primary driver of insured losses in 2008,” said Chris Klein, Global Head of Business Intelligence, Guy Carpenter. “At the same time, one should not overlook the role that other events, such as the China earthquake, California wildfires, and man-made catastrophes, played in making this an especially active year.”

The ten-year moving average of insured catastrophe losses costs continued to rise in 2008, increasing by 7 percent over 2007 – from $35.5 billion to $38 billion. Overall, the 2008 hurricane season produced a record number of consecutive storms striking the United States, ranking as one of the most active seasons in the 64 years since comprehensive records began. Other notable storms of 2008 included Hurricane Dolly in Texas, Tropical Storm Fay in Florida, and Tropical Storm Hanna in the Carolinas.

Other noteworthy weather-related events in 2008 included Windstorm Emma – causing insured losses of $1.3 billion – which affected northern and eastern regions of Europe, with Germany the hardest hit. The year’s largest and most costly earthquake hit the Chinese province of Sichuan in May, killing more than 85,000 people. Though only a fraction of the loss is insured, it is likely to represent one of the highest insured losses in China’s history.

In the United States, in addition to hurricane activity, flooding and wildfires triggered significant losses in 2008. May and June storms in the Midwest led to severe flooding, inundating up to 40,000 homes and businesses. Insurance Services Office’s (ISO) Property Claim Services® (PCS) unit estimates insured losses from the floods at $725 million. Wildfires in Southern California, meanwhile, destroyed around 980 homes, triggering an EQECAT-estimated total property loss of up to $500 million.

The year 2008 was also an unusually active year for man-made catastrophe losses. Losses in the mining, energy, and steel industries were particularly large in 2008. Claims were exacerbated by the impact of record high commodity prices on business interruption cover.

Guy Carpenter’s new intellectual capital website, www.GCCapitalIdeas.com, leverages blog technology, including Real Simple Syndication (RSS) feeds, as well as searchable category tags, to deliver Guy Carpenter’s latest research as soon as it is available. In addition, articles can be delivered directly to BlackBerry® devices and other personal digital assistants (PDAs).

About Guy Carpenter

Guy Carpenter & Company, LLC is the world’s leading risk and reinsurance specialist and a part of the Marsh & McLennan Companies. With 50 offices worldwide, Guy Carpenter creates and executes reinsurance solutions and delivers capital market solutions* for clients across the globe. The firm’s full breadth of services includes line of business expertise in Agriculture; Aviation; Casualty Clash; Construction and Engineering; Excess and Umbrella; Life, Accident and Health; Marine; Medical; Political Risk and Trade Credit; Professional Liability; Property; Retrocessional Reinsurance; Surety; Terrorism and Workers Compensation. GCFac® is Guy Carpenter’s dedicated global facultative reinsurance unit that provides placement strategies, timely market access and centralized management of facultative reinsurance solutions. In addition, Guy Carpenter’s Instrat® unit utilizes industry-leading quantitative skills and modeling tools that optimize the reinsurance decision-making process and help make the firm’s clients more successful. Guy Carpenter’s website address is www.guycarp.com.

* Advice on securities or investments in the European Union is provided through GC Securities Ltd., authorized and regulated in the UK by the Financial Services Authority. Securities or investments, as applicable, are offered in the United States through GC Securities, which is a division of MMC Securities Corp., a US registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Reinsurance products are placed through qualified affiliates of Guy Carpenter & Company, LLC. MMC Securities Corp., GC Securities Ltd. and Guy Carpenter & Company, LLC are affiliates owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any security, financial instrument, reinsurance or insurance product.

Guy Carpenter
Alexis Levenson, 917-937-3264
alexis.levenson@guycarp.com
or
DeMartine Group
Joanne Lessner, 203-221-2790
jlessner@demartinegroup.com

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Economic Stress Taking Toll on Peoples’ Health - Steven Wevodau

AARP Survey Finds Financial Stress Causing Health Problems for Nearly 20% of 45 plus Population

CHICAGO, Dec. 30 /PRNewswire-USNewswire/ — The latest victim of the economic recession could be your health. According to a recent AARP survey, one in five adults ages 45 and older are suffering health problems due to financial stress. The survey details the health care problems and challenges many Americans are facing because of the current economic situation.

“Right now people are increasingly concerned about their jobs, retirement savings and simply being able to provide for their families and it’s taking a major toll on their health,” said Bob Gallo, AARP Illinois Senior State Director. “It’s a harsh irony that worrying about being able to afford health care is actually causing health problems.”

Key findings from the AARP survey, Impact of Economy on Health Behaviors, include:

• 20% of people 45 and older reported health problems due to financial stress
• About one fifth, 22%, have delayed seeing a doctor due to cost
• 16% had to use retirement savings or other savings to pay for medical care
• 21% have cut back on other expenses in order to afford their medical care
• One in six, 16%, are not confident they will be able to afford health care in the coming year

The survey also found that health problems due to financial stress is having a greater affect on individuals 45-54 and 55-64, than on those ages 65 and older (22% and 25% vs. 13%, respectively).

Mounting health care costs are contributing to the financial woes felt by many. Over the last five years health insurance premiums for families have increased by 65 percent. The average cost of health insurance for an American family now exceeds the yearly income of a minimum wage worker. According to the Kaiser Family Foundation, insurance premiums have increased 119 percent from 1999 to 2008, while workers’ earnings have risen just 29 percent.

“Clearly rising health care costs during difficult financial times is a major cause for concern for many people,” added Gallo. “In Illinois, AARP will work side by side with state lawmakers to address the growing health care crisis.”

In Illinois, AARP is advocating for health care quality measures to establish needed reforms in the insurance industry, helping to ensure people are not denied coverage because of pre-existing health conditions, their age or other factors. AARP will also press for the expansion of health insurance through Medicaid to cover people between the ages of 50-64. At the national level, AARP is working on several measures to ensure health care is affordable and accessible.

The full survey can be found at the following link: http://www.aarp.org/research/health/carefinancing/healthcosts_08.html

Tags: AARP, Economic Stress, Insurance News, Steve Wevodau Economic Stress, Steven Wevodau Economic Stress

BERNIE CASH STASH

POSTED BY STEVEN WEVODAU

By LAURA ITALIANO

Investigators believe that Bernard Madoff has stuffed hundreds of millions of dollars in Ponzi profits into offshore tax havens from which they could prove tricky to recover.

In the weeks since his Dec. 11 arrest, forensic accountants have been scouring Madoff’s books as federal officials ready an indictment against the hated hedge-funder, who remains under house arrest in his $7 million Upper East Side penthouse.

The accountants believe Madoff regularly sent bundles of money to offshore accounts in the Caribbean and Europe, the Observer newspaper in London reported yesterday.

Madoff, 70, has been ordered by a Manhattan fed eral judge to provide to the Securities and Exchange Commission by New Year’s Eve a detailed list of all of his assets - in cluding investments, loans, lines of credit, business interests and brokerage accounts.

But tracking what happened to the estimated $50 billion Madoff is accused of making off with is already promising to be one of the longest and most complicated financial investigations on record, the Observer noted.

And should Madoff prove less than forthcoming regarding his offshore accounts, investigators could be in for an even tougher time.

The tax havens are designed under local laws to be nearly impervious to subpoenas or other investigative inquiries, making it notoriously tough for US officials to seize or even see what’s there.

Still, officials promised they’ll be dogged in their pursuit.

“We will trace funds wherever the trail goes,” the Observer quoted Stephen Harbeck, chief executive of the Securities Investor Protection Corp., the receiver of Madoff’s now-defunct fund, as saying.

The paper quoted a “senior source” as saying, “There are accounts at New York Mellon Bank that we have been looking at that appear to have sent and received money from offshore locations.”

Tags: Bernard Madoff, Steve Wevodau Insurance News, Steven Wevodau Insurance News

Best Sees No Rating Change for Munich Re from HSB Acquisition

POSTED BY STEVEN WEVODAU

A.M. Best Co. has commented that the financial strength rating (FSR) and issuer credit ratings (ICR) of Munich Reinsurance Company and its subsidiaries are unchanged following its agreement to acquire specialty insurer HSB Group, Inc. from the American International Group (See IJ web site - http://www.insurancejournal.com/news/national/2008/12/22/96512.htm).

Tags: HSB Acquisition, Munich Re, Steve Wevodau Munich Re, Steven Wevodau Munich Re

Unusual tools to combat economic woes - Steven Wevodau

By Rachel Beck, AP Business Writer

Tags: economic woes, Insurance News, Steve Wevodau economic woes, Steven Wevodau economic woes