Steven Wevodau
FDIC chief warns cash might be exhausted if agency can’t hike fees
Sunday, March 8, 2009 3:59 AM
ASSOCIATED PRESS
J. SCOTT APPLEWHITE | 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.
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.
Tags: Steven Wevodau
POSTED BY STEVEN WEVODAU
Bull Trap: A false signal indicating that a declining trend in a stock or index has reversed and is heading upwards when, in fact, the security will continue to decline.
Is the Ultimate Bull Trap Being Set?
Longtime students of the market will tell you that the crowd is usually wrong at extremes. Judging by what I see, hear and read in the media, the current consensus is:
- Stocks bottomed on November 20th-21st;
- An economic recovery will begin in the second half of 2009;
- Corporate bonds are a buy;
- Stocks are cheap;
- The stock market is now discounting all the bad news - which is surely a sign that the worst is likely behind us.
Even though I was looking for a low in the S&P 500 around 750 (it bottomed around 740 on November 21st, only to close at 800 the same day), I continue to believe that was a low point, but not the low point for this bear market.
My firm was a large buyer of mortgage-backed securities during the Wall Street de-leveraging, and we’ve been rewarded with handsome gains - although we began to take some profits on Friday, where appropriate.
Stocks have rallied even more (S&P at 931) and could possibly make a run at 1,000- 1,100 - particularly if “performance anxiety” sets in among those portfolio managers afraid to miss the rally. As an absolute-return investor, I am not afraid: I have the luxury of having missed the big move down from nearly 1,600. The managers subject to performance anxiety are the same ones who managed to get to a market benchmark - only to get tattooed.
Corporate bond spreads have tightened during a slow holiday season, as have spreads in CMBS (commercial mortgage-backed securities). Corporate spreads may or may not tighten further; I believe there will be a wave of issuance at every level - government, emerging markets, corporations, municipalities, etc.
Treasury yields have also crashed, as the Fed has taken the federal funds target rate to a range of 0-0.25%. By manipulating interest rates to zero, the Fed is badly punishing savers. You can sit in cash and earn zero - or you can be forced out onto the risk spectrum, just so you can keep up with inflation or your benchmark.
Forcing money into risky assets is perhaps the most dangerous experiment ever, and we have no idea how it will end. I expect it to end poorly - with hyper-inflation. The funneling of assets into risk is masking the deteriorating fundamentals and giving the appearance of a market that’s already bottomed. But this is sleight of hand - an illusion.
The Fed is setting up the ultimate bull trap - a trap that, when sprung, will leave only sellers standing. And we could see that happen by the end of the first quarter, or the beginning of the second.
Why is the Federal Reserve Punishing Prudence?
Prudent: Wise in handling practical matters; exercising good judgment of common sense. Careful in regard to owns own interests; provident. Careful about one’s conduct; circumspect.
-Webster’s Dictionary
Prudent Man Rule: An investment standard adopted by some US states to govern the action of those responsible for investing money for other people. The fiduciary is required to act as a prudent man or woman would in regards to investing monies of others.
-Bloomberg Financial
Ever since 1995, the Federal Reserve and other authorities have been assisting in the birth of the largest debt bubble in our nation’s history. The money supply has grown exponentially, weak businesses have been formed (and have failed), the consumer is leveraged up to his eyeballs, regulation is poor, and savings have dried up. Furthermore:
- The brokerage/investment banking industry has been pummeled beyond recognition;
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Lifelines have been given to everyone from poorly run banks to poorly run auto manufacturers;
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Esoteric securities have been “relocated” from the balance sheets of reckless banks and brokers to the US Treasury, FDIC and Federal Reserve.
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Investors worldwide watched $30 trillion of stock market equity disappear in the past year;
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Home prices have cratered by better than 25%;
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Unemployment on every front is rising;
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Tax receipts are down, and state governments are suffering;
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The debt market – except that artificially supported by the government — is closed.
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Earnings estimates for the S&P 500 are down 60% year-over-year.
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Stocks (using the Dow as a proxy) are at the same level they were 10 years ago.
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Industrial production around the globe is imploding.
I could go on and on and on and on, but there’s really no point. I could show 25 graphs or more of what is wrong with America’s economy, and, for that matter, with much of the broader global economy and global markets.
Here’s the magic question: If there’s so much bad news, is it fully discounted in prices? And if so, why are the Fed, FDIC and the Treasury Department so desperate to drive interest rates down to zero, buy troubled assets, and ruin what used to be an efficient debt market in mortgage-backed securities, corporate bonds and preferred stock?
There seem to be 2 distinct markets that have developed for debt: The one that the US government stands behind (with all of our money), and the one that exists in the “free market.”
Before I show a few examples of why prudence is being penalized — and why I believe it will a deadly trap for those that fall in it – allow me to share with you the most recent release from the Federal Open Market Committee, to give you a sense of their desperation.
FOMC Statement, December 16, 2008
The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.
The focus of the Committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.
The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.
I believe that what I’m witnessing in the financial markets is distasteful, dangerous and socialistic. Think for a moment about where the Fed is heading with their policies. It’s the opposite of a free market, totally alien to laissez-faire - in fact, it seems to have been borrowed wholesale from Ayn Rand’s Atlas Shrugged.
Taking all of the new programs and bailouts paid for by “We the People” into account, the following questions become urgent:
- Shouldn’t the consumer, after decades of over-consumption, be allowed to digest that over-indebtedness and save, rather than be encouraged to take risk?
- Shouldn’t companies, no matter what state they reside in, from a political point of view, if run poorly, be allowed to fail or forced to restructure?
- Should taxpayer money be used to make up for the mishaps at financial institutions worldwide be allowed to wallow in their own mistakes?
- Shouldn’t free markets be “free”?
- When did socialism make its way to our shores?
- How do we choose who’s bailed out - and who loses?
- Shouldn’t we place blame on the politicians, bureaucrats and other “decision makers,” and put skilled people who know how to run businesses in place?
- Shouldn’t investors, led blindly down the primrose path of “buy and hold, diversify, and don’t open your brokerage statement except once every 10 years” be allowed to follow the Prudent Man Rule?
Again, there are many questions to be asked, many with answers that no one wants to put in print. When will people stand up and scream “I’m mad as hell and I’m not going to take this anymore!”
Once the rally in equities and credit ends, we will realize that the patient has only been injected with adrenaline, as opposed to being allowed to recuperate through good old-fashioned bed rest.
Risk-taking in a laissez-faire world should be replaced with risk aversion. Consumers who over-consumed should be allowed to strengthen their balance sheets for the next cycle and increase their savings. Companies that have been kept afloat, bailed out, nationalized, stuck in conservatorship — that have become part of my national portfolio, whether I like it or not – should, unless it actually poses systemic risk (which I am not at all in favor of), fail. Period.
Here’s what the government has purchased for our national portfolio. Lovely.
After all, where’s my bailout?
A Few Examples of the Not-So-Free-Market
Click to enlarge
The picture above is of 30-year Fannie Mae (FNM) 4.5% mortgage pools. Note the recent 13% spike, as the Fed announced that it would be buying MBS in order to stabilize the mortgage market. In a free market, these securities would be many points lower; however, because there is an artificial bid (yep, with our money), investors are forced to look elsewhere, toward risky assets.
The chart above may be confusing, but it’s actually rather simple: It’s the screen our Head Trader and I look at all day in the land of mortgage-backed securities.
If you focus on the middle section, you’ll note that 7% Freddie Mac (FRE) (FGLMC) pools trade at the same price as Freddie Mac 6% pools and lower in price than 6.5% pools. This is yet another example of how the markets have become so disorderly and difficult to trade.
For the icing on the cake, feast your eyes on what the Prudent Man would invest in during times of rebuilding one’s balance sheets: Treasury bills.
Yes - cash is now officially trash. If you buy 1-month Treasury bills, you’re rewarded with a yield of a gigantic 0.02% per year. That’s right - 2 basis points per year. I suppose people with more than enough money can keep it invested for an entire year and make nothing - or they can succumb to the pressure of “I can’t make zero forever if I hope to retire.”
Now, imagine that you’re a professional money manager who’s paid 1% annually to invest other people’s money. If you feel that being prudent is to sit on cash and attempt to charge a fee, the math is simple: 0.02% per year minus any reasonable fee is a negative return. This is forcing many people out onto the risk spectrum at precisely the wrong moment - when risks are at their highest ever.
While I have taken some profits, as I mentioned earlier, I remain rather fully invested in higher-coupon mortgage-backed securities, which I feel have a low chance of being refinanced and will provide an adequate (4-6%) return while we wait for the dust to clear. Why Will the Bull Trap Hurt So Many Investors?
You got to know when to hold em, know when to fold em,
Know when to walk away and know when to run.
You never count your money when you’re sittin at the table.
There’ll be time enough for countin’ when the dealing’s done.
-Kenny Rogers, “The Gambler”
Markets are clearly driven by fear and greed. At Atlantic Advisors, we operate without regard for market benchmarks; instead we ask ourselves: “In the absence of a benchmark, what would you buy?” This means buying only those securities we believe have the best risk/reward profile, and steering away from those that aren’t attractive - even if they’re part of the benchmark.
Most money managers are driven by “beating the benchmark” - no matter how imprudent it may be to do so. Like Kenny Rogers sang in “The Gambler”, you have to know when to hold ‘em and know when to fold ‘em. Knowing when to “fold ‘em” — or play ‘em close to the vest – while everyone around you is partying is perhaps the most difficult task we face as investors.
I am fully aware of the Fed’s goal to both save the system and force everyone out onto the risk spectrum, but I have seen this play before. I believe very strongly that investors who believe they must be invested in risky assets at the expense of prudence will live to regret their decision.
As for stocks: When I consider the risk/reward ratio, with equities at 22 times earnings (using 931 S&P 500 and $42 in earnings in 2009), I cringe when I hear people say that stocks are cheap.
What about municipal bonds? Pundits are declaring municipals cheap relative to Treasury bonds. Treasuries aren’t a good barometer, since they’re being manipulated lower in yield. With insurers like MBIA (MBI) and Ambac (ABK) faltering, little if any research available on the nearly 50,000 issuers out there, and new downgrades coming in like Noah’s flood, I cringe at the idea they’re attractive.
As for junk bonds: With new issuance at zero (a whopping one new issue was completed in the fourth quarter of 2009), they may seem cheap relative to Treasuries. But with the window for new money issuance closed, and money scarce, who will the buyers be? Expect a record high default rate in junk bonds in 2009-2010.
As for preferred stocks, I’m cautious there as well: I wouldn’t be surprised to see Uncle Sam step in to tell banks that they can pay neither common nor preferred dividends. Such is life under socialism.
In sum, I think many investors are being forced into taking risk so as to avoid a zero return, when they would actually prefer to play it safe. Again, I remain conservatively invested, with a trading attitude towards the best-of-breed companies and sectors - those who don’t need federal assistance to survive.
Tags: Insurance News, Steve Wevodau, Steven Wevodau
By CHRISTOPHER S. RUGABER AP Economics Writer
WASHINGTON (AP) - A trio of reports due Tuesday are expected to paint a bleak picture of the nation’s housing market and the broader economy, as the deepening recession sends more companies lining up for a piece of the government’s $700 billion bailout fund.
Wall Street expects the gross domestic product, the country’s total output of goods and services, fell at an annual rate of 0.5 percent in the July-September quarter. That would match the estimate for GDP made a month ago, but economists believe that small drop will be followed by a much larger plunge in the current October-December quarter.
The National Association of Realtors is expected to report that sales of existing homes in the U.S. for November fell 1.6 percent to a seasonally adjusted annual rate of 4.9 million units, according to the median forecast of economists surveyed by Thomson Reuters.
And new home sales data from the Commerce Department are expected to dip 3 percent to 420,000 units in November. October’s new home sales were the lowest in nearly 18 years.
Builders such as Centex Corp., Pulte Homes Inc. and Hovnanian Enterprises Inc. have been caught with a glut of unsold properties over the past year as mortgages became harder to get and sales slowed. Developers have slashed prices, but many buyers remain on the sidelines, waiting and watching for bigger discounts.
Barney Frank, chairman of the House Financial Services Committee, said Monday he is preparing legislation to require that some of the bailout money be spent for specific purposes, such as stemming foreclosures and reducing mortgage rates. Frank is pushing to get the second half of the $700 billion rescue fund released next month, before President-elect Barack Obama is inaugurated.
Frank’s bill would impose tighter restrictions on the second $350 billion, such as requiring banks to report on their new lending every quarter and toughening limits on executive compensation. Many U.S. banks have received federal capital in an effort to stimulate lending.
“I don’t want to wait until Obama,” the Massachusetts Democrat said in a phone interview. “I think we can do it now.”
A spokeswoman for Obama did not return a call for comment Monday.
Last week, the Bush administration used the final piece of the initial $350 billion to provide loans to automakers General Motors Corp. and Chrysler LLC. The Treasury Department has earmarked $250 billion to buy stock in banks and provided $40 billion in capital to insurance giant American International Group Inc.
Lawmakers have criticized Treasury for not using any of the initial $350 billion to prevent additional home foreclosures. Up to 2.25 million Americans could lose their homes to foreclosure this year, Federal Reserve chairman Ben Bernanke has warned.
Frank said his legislation would include a version of a plan, supported by Federal Deposit Insurance Corp. Chairman Sheila Bair, to spend $24 billion to give lenders financial incentives to modify more loans and help more borrowers keep their homes. Bair has estimated it could prevent 1.5 million foreclosures.
His proposal also would include a measure, under consideration by Treasury, to use government-controlled mortgage companies Fannie Mae and Freddie Mac to reduce mortgage rates to 4.5 percent or lower to stimulate more home buying.
Frank also wants to revamp the Hope for Homeowners program, which was launched Oct. 1. It was intended to let 400,000 troubled homeowners swap risky loans for conventional 30-year fixed-rate loans with lower rates. The early results have been disappointing, with only 312 applications so far, and officials are looking at ways to expand the program’s use.
Meanwhile, financial industry groups are pushing to use the bailout fund to help a wider array of companies, including automotive financing companies such as GMAC Financial Services. GMAC is 51 percent owned by Cerberus Capital Management LP, a private equity firm; General Motors owns the rest.
GMAC, which provides financing for GM vehicle and dealer loans along with home mortgages, is having trouble finding adequate support from its bondholders for a debt transaction that would allow it to become a bank holding company and gain eligibility for bailout money.
Commercial real estate developers said Monday they also are petitioning the government for support from the $700 billion rescue fund. The Real Estate Roundtable said an estimated $400 billion of commercial real estate mortgages will come due by the end of 2009 without adequate refinancing options.
Industry officials said thousands of office buildings, hotels, shopping centers and other commercial buildings could be headed into foreclosure or bankruptcy unless the government provides support.
Jeffrey D. DeBoer, president of the Real Estate Roundtable, said the industry has written to federal officials asking to be included in a new $200 billion loan program being run by the Federal Reserve, with support from the financial bailout program, to bolster the market for credit card debt, auto loans and student loans.
Treasury spokeswoman Brookly McLaughlin said no final decisions had been made yet on the request from commercial developers. But she noted that Treasury Secretary Henry Paulson, when he announced the effort to help the credit card, auto and student-loan markets, said the new lending facility could be expanded and specifically mentioned providing assistance for “commercial mortgage-backed securities.”
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AP Economics Writer Martin Crutsinger and Real Estate Writer Alan Zibel contributed to this report.
Tags: Bailout Fund, Steve Wevodau, Steven Wevodau
POSTED BY STEVEN WEVODAU
A growing number of companies are sending workers a grim holiday message: Head for the unemployment line.
Aetna Inc., Cooper Tire & Rubber Co. and Western Digital Corp. said Wednesday they would cut a combined 4,900 jobs. And Eastman Chemical Co. said it would cut an unspecified number as it tries to slash costs by $100 million in 2009.
The announcements came a day before the government is expected to report that jobless claims remain near their highest point in 26 years. Economists surveyed by Thomson Reuters project that 558,000 workers filed new claims last week.
The downturn has spread far beyond the housing and banking businesses where it began, battering workers in nearly every sector of the economy. Cooper Tire said Wednesday it would cut 1,400 jobs. Western Digital, which makes computer hard drives, said it plans to cut 2,500. Aetna, the third-largest U.S. health insurer, said it is cutting 1,000 jobs — 2.8 percent of its work force — to reduce costs and focus on growing areas.
The reports came one day after drug maker Bristol-Myers Squibb said it will eliminate 800 jobs by the end of this year.
“Things are changing so rapidly, and deteriorating so rapidly, that firms don’t have a choice,” said Nariman Behravesh, chief economist of IHS Global Insight. “It looks like the economy is in somewhat of a free fall.”
Falling sales are squeezing companies’ cash just as tighter credit makes it harder for them to borrow to fund operations, Behravesh said. The combination means this time, some companies can’t afford to wait until after the holidays to cut jobs.
Elizabeth Teschler, 22, was told Monday that she and the other part-timer at the five-person executive search firm where she’d worked for four months would be laid off. It was the second job loss in a year for Teschler, who graduated from Emerson College last December and has moved in with her family near Los Angeles to save money.
Unsure of how she’ll pay the $600 in student loans, credit card and car insurance bills each month, Teschler said she’s thinking of going back to school.
“I don’t know how I would pay for that, but at least it would postpone my student loans and be a way to acquire affordable health insurance,” she said.
Many people with jobs are so fearful about their employment security that families are reducing spending, giving retailers one of the worst holiday shopping seasons in decades.
Electronics retailer Best Buy Co. said this week that it faced “the most challenging consumer environment in its history” and would offer buyouts to all 4,000 of its headquarters employee.
“We believe that the environment for consumer spending is likely to get worse before it gets better,” said Chief Executive Brad Anderson.
“We need to prepare our organization to operate in a wide range of potential macroeconomic scenarios in the coming year,” he said.
Its rival Circuit City Stores Inc. filed for Chapter 11 bankruptcy protection last month. Retailer KB Toys filed for bankruptcy protection Thursday.
The recession that began last December could last though the third quarter of 2009, said Aaron Smith, a senior economist with Moody’s economy.com. Unemployment will likely continue to climb into early 2010, he said, even though the economy could start growing again in the fourth quarter next year.
“Businesses are hesitant to start hiring” after a deep downturn, Smith said. He estimated about 5 million jobs will be lost by the end of next year, with the unemployment rate reaching nearly 9 percent.
Last week, Bank of America Corp. said it expects to cut 30,000 to 35,000 jobs over the next three years as it faces a deteriorating economic environment and tries to absorb Merrill Lynch & Co.
Even companies that make escapist products that have weathered past recessions are feeling the pinch.
Midway Games Inc., maker of the popular “Mortal Kombat” video game series, said this week it will cut its head count by 180 people, or 25 percent of its work force, close a studio in Texas and halt development of “noncore” games.
Book publisher Macmillan said this week it’s eliminating 64 positions, nearly 4 percent of its work force. Las Vegas Sands Corp. has said it is cutting more than 200 workers from its Venetian and Palazzo casino hotels on the Las Vegas Strip as part of an effort to save $100 million annually. The cuts represent about 2 percent of its 10,000-person work force.
The unemployment rate rose to a 15-year high of 6.7 percent in November, and economists say it could exceed 8 percent before the downturn ends. About 10.3 million people are unemployed.
Every industry except education and health services shed jobs in November. More cuts are all but guaranteed, as companies that have made broad announcements about cutbacks release hard numbers.
Palm Inc. said in November it would cut $20 million in expenses by the fiscal fourth quarter, partly by reducing U.S. staff, though it has not said how many jobs will be lost. General Electric Co. has said it will significantly reduce its GE Capital business through job cuts, but has provided no more detail.
Delta Air Lines Inc. has said it will offer voluntary severance packages to the majority of the 75,000 employees of its combined operations with Northwest as it reduces its capacity by somewhere between 6 and 9 percent in 2009.
As sales and corporate tax revenue fall, even previously safe jobs in state and county government look shaky.
Faced with shortfalls, states around the country are wrestling with which cuts to make. Arizona and New Jersey are each facing budget shortfalls estimated at more than $1 billion for the fiscal year.
Kentucky has discussed closing some of its state parks if the economy gets worse. Vermont plans to close four highway rest stops, cutting the 10 “travel representatives” who staff the buildings from 7 a.m. to 11 p.m., doing everything from cleaning toilets to giving directions.
Tags: Steve Wevodau, Steven Wevodau
POSTED BY STEVEN WEVODAU
GUANGZHOU, China, Dec. 18 /PRNewswire-Asia-FirstCall/ — CNinsure Inc., (Nasdaq:
CISG -
News), a leading independent insurance intermediary company operating in China, today announced the results of its annual general meeting of shareholders held in Guangzhou on December 18.At the annual general meeting, the share repurchase program proposed by the Company was adopted by the shareholders. Pursuant to the program, CNinsure is authorized but not obligated to repurchase up to US$20 million worth of its own American Depositary Shares (”ADSs”) by December 31st, 2009. The repurchases will be made from time to time on the open market or in negotiated transactions in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, subject to market conditions, the trading price of ADSs and other factors.
In addition, shareholders approved the amendments to the Company’s Articles of Association which authorizes the Board to approve and execute future repurchase of its own shares.
The company’s proposal related to the amendments of the 2007 Share Incentive Plan (”Plan”) was also adopted at the meeting. Under the amended 2007 Share Incentive Plan, the maximum number of ordinary shares reserved for future issuance pursuant to the Plan is 15% of the total ordinary shares outstanding after the closing of the Company’s initial public offering. Meanwhile, the Board was authorized to adjust the exercise prices of outstanding options, and decide all other matters in connection with the Plan, including but not limited to the cancellation or redemption of the outstanding awards.
For more information regarding these resolutions, please review the 2008 Annual General Meeting Notice available at the company’s website: http://www.corpasia.net/us/CISG/irwebsite/ .
About CNinsure Inc.
CNinsure is a leading independent intermediary company operating in China. CNinsure’s distribution channel reaches many of China’s most economically developed regions and affluent cities. The Company distributes a wide variety of property and casualty and life insurance products underwritten by domestic and foreign insurance companies operating in China, and provides insurance claims adjusting as well as other insurance-related services.
Forward-looking Statements
This press release contains statements of a forward-looking nature. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward- looking statements by terminology such as “will,” “expects,” “believes,” “anticipates,” “intends,” “estimates” and similar statements. Among other things, the management’s quotations contain forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about CNinsure and the industry. Potential risks and uncertainties include, but are not limited to, those relating to CNinsure’s limited operating history, especially its limited experience in selling life insurance products, its ability to attract and retain productive agents, especially entrepreneurial agents, its ability to maintain existing and develop new business relationships with insurance companies, its ability to execute its growth strategy, its ability to adapt to the evolving regulatory environment in Chinese insurance industry, and its ability to compete effectively against its competitors. All information provided in this press release is as of December 18, 2008, and CNinsure undertakes no obligation to update any forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although CNinsure believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results. Further information regarding risks and uncertainties faced by CNinsure is included in CNinsure’s filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F.
Source: CNinsure Inc.
Tags: CNinsure, Steve Wevodau, Steve Wevodau CNinsure, Steven Wevodau, Steven Wevodau CNinsure
The PMI Group, Inc. receives $51.6 million from sale of PMI Asia
WALNUT CREEK, Calif., Dec. 17 /PRNewswire-FirstCall/ — The PMI Group, Inc. (NYSE: PMI - News; the Company) announced today the completion of an all-cash sale of its Asia operations (PMI Asia) to QBE Lenders’ Mortgage Insurance Limited (formerly PMI Australia), a subsidiary of QBE Insurance Group Limited (”QBE”), Australia’s largest international general insurance and reinsurance group. The pre-tax sale proceeds of U.S. $51.6 million will be paid to The PMI Group, Inc., our holding company. The sale of PMI Asia and PMI Australia to QBE are part of multiple initiatives taken by PMI in 2008 to focus on its core U.S. mortgage insurance operations and enhance the Company’s capital and liquidity.
On August 14, 2008, PMI and QBE announced an agreement in principle for the sale of PMI Asia, based in Hong Kong. As disclosed in the Company’s SEC filing on December 4, 2008, the amended purchase price was based on 92.5 percent of PMI Asia’s net tangible asset value under U.S. GAAP as of June 30, 2008 of $55.7 million.
Credit Suisse acted as financial advisor to The PMI Group, Inc. Allens Arthur Robinson provided legal advice to The PMI Group, Inc.
The PMI Group, Inc.
The PMI Group, Inc. (NYSE:PMI - News), headquartered in Walnut Creek, CA, provides innovative credit, capital, and risk transfer solutions that expand homeownership and fund essential services for our customers and the communities they serve. Through its wholly and partially owned subsidiaries, PMI offers residential mortgage insurance and credit enhancement products. For more information: http://www.pmigroup.com.
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Source: The PMI Group, Inc.
Tags: PMI Group, Steve Wevodau, Steve Wevodau PMI Group, Steven Wevodau, Steven Wevodau PMI Group
POSTED BY STEVEN WEVODAU
FARMINGTON, Conn., Dec. 18 /PRNewswire/ — Darwin Professional Underwriters, a member company of Allied World Assurance Company Holdings, Ltd AWH, announces significant enhancements to its Miscellaneous Medical Facility medical professional liability coverage. With this launch, Darwin expanded its appetite to include a wide variety of classes within the rapidly growing miscellaneous medical facility market, including (but not limited to) residential care/group homes, outpatient rehab, treatment centers, home health and hospice care, outpatient and behavioral care, imaging centers, laboratories, medical transport services, medical equipment, staffing services and pharmacies.
These latest developments highlight Darwin’s commitment to providing its producing partners with comprehensive, innovative products in new and expanding markets. The revised, incident-sensitive form offers numerous features including defense expenses outside the limits for most coverages, affirmative coverage for sexual misconduct and for punitive damages (most favorable venue,) and employment practices liability insurance (defense inside the limits).
“Our simple streamlined application process only asks questions that are appropriate to the exposures associated with the specific class of business being quoted,” said Cindy Oard, Senior Vice President, Health Care Practice Leader. “In most cases, our underwriters will be able to respond with a quote within 48 hours of receiving a complete submission with our newly designed application.”
“Our underwriters have spent years working with the miscellaneous medical facilities market. They understand that these facilities are specific business classes with unique exposures and coverage needs,” said Sue Chmieleski, Senior Vice President, Health Care Product and Risk Management Lead. “In addition to our underwriting talent, enhanced policy, and greatly expanded appetite, we can provide Darwin’s superior risk management services to these types of facilities - free of charge as part of our coverage.”
In the industry, smaller miscellaneous medical facilities do not typically receive risk management services and are not always aware of alternatives to manage and help mitigate risk. “We believe that every medical organization (no matter how large or small) should have access to our complimentary risk management services,” said Chmieleski.
About Darwin and Allied World Assurance Company
Darwin, a Farmington, CT-based specialty insurance group focused on the professional liability insurance market, underwrites errors and omissions liability insurance, medical malpractice liability insurance and other specialty coverages. Darwin member companies (Darwin National Assurance and Darwin Select Insurance) are subsidiaries of Allied World Assurance Company Holdings, Ltd, a global provider of innovative property, casualty and specialty insurance and reinsurance solutions, offering superior client service through offices in Bermuda, the United States and Europe. Allied World’s insurance and reinsurance subsidiaries are rated A (Excellent) by A.M. Best Company. For further information on Darwin and Allied World, please visit our websites at www.darwinpro.com and www.awac.com.
Cautionary Statement Regarding Forward-Looking Statements
Any forward-looking statements made in this press release reflect Allied World’s current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, which may cause actual results to differ materially from those set forth in these statements. For example, Allied World’s forward-looking statements could be affected by the ability to recognize the benefits of the Darwin Professional Underwriters, Inc. acquisition; pricing and policy term trends; increased competition; the impact of acts of terrorism and acts of war; greater frequency or severity of unpredictable catastrophic events; investigations of market practices and related settlement terms; negative rating agency actions; the adequacy of Allied World’s loss reserves; Allied World or its subsidiaries becoming subject to significant income taxes in the United States or elsewhere; changes in regulations or tax laws; changes in the availability, cost or quality of reinsurance or retrocessional coverage; adverse general economic conditions; and judicial, legislative, political and other governmental developments, as well as management’s response to these factors, and other factors identified in Allied World’s filings with the U.S. Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. Allied World is under no obligation (and expressly disclaim any such obligation) to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise.
SOURCE Allied World Assurance Company Holdings, Ltd
Tags: Darwin Professional Underwriters, Steve Wevodau, Steve Wevodau Darwin Professional Underwriters, Steven Wevodau, Steven Wevodau Darwin Professional Underwriters
NEW YORK, Dec. 18 /PRNewswire-FirstCall/ — XL Insurance, the global insurance operations of XL Capital Ltd XL, today announced the opening of a new regional office in Atlanta, Georgia.. Located in the Buckhead District at 3525 Piedmont Road, 7 Piedmont Center, the new office will provide insurance agents, brokers and their clients in the area with local access to XL Insurance’s property, casualty, professional and specialty insurance coverages both in the US and abroad.
According to Gary Bakalar, XL Insurance’s Regional Executive, “Atlanta is an important economic center for the Southeast of the US and home to many Fortune 1000 and 500 companies. These businesses require access to domestic and international risk management expertise. Now, with our new Buckhead location, we can offer them a closer, more convenient way to access XL Insurance’s resources to support their risk management programs.”
Diann Jones, XL Insurance’s Business Development Director for the Southeast, who will be based in the new office, said: “Atlanta and the surrounding region are home to many diverse industries, from service firms and financial institutions to manufacturing and global shipping companies. Fortunately, XL Insurance’s product portfolio is as diverse as the region’s economic profile. For XL Insurance, this diversity offers significant business opportunities. For our clients, I believe they will see how our global underwriting platform, industry-specific expertise and client commitment can be advantageous for their risk management efforts.”
At XL Insurance’s new office, Ms. Jones is joined by Senior Property Underwriter Kevin Holmes, Senior Claims Counsel Matthew Ford and XL Global Asset Protection Services’ (XL GAPS) Regional Account Leader Joseph Lynch, who manages risk engineering services for XL Insurance and other businesses in the area.
The Atlanta office is one of more than 20 XL Insurance offices throughout North America including Toronto, Montreal, Dallas, Houston, Los Angeles, San Francisco, Chicago, Hartford, New York, Boston and Exton, Pennsylvania. The XL Insurance companies provide more than 60 products in the property, casualty, professional liability and specialty insurance lines, such as marine and offshore energy, environmental, fine art and aviation coverages.
“XL Insurance” is the global brand used by member insurers of the XL Capital Ltd group of companies. More information about XL Insurance is available at www.xlinsurance.com. Through its operating subsidiaries, XL Capital Ltd is a leading provider of global insurance and reinsurance coverages and services to industrial, commercial and professional service firms, insurance companies, and other enterprises on a worldwide basis. More information about XL Capital Ltd is available at www.xlcapital.com.
SOURCE XL Insurance
Tags: Steve Wevodau, Steve Wevodau XL Insurance, Steven Wevodau, Steven Wevodau XL Insurance, XL Insurance
POSTED BY STEVEN WEVODAU
A former insurance executive was sentenced to two years in prison Tuesday for a scheme that prosecutors said allowed the American International Group to manipulate its financial statements through a sham reinsurance deal eight years ago.
Ronald Ferguson, a former chief executive of General Re Corp., a reinsurance unit of Warren Buffett’s Berkshire Hathaway Inc., is the first of five defendants convicted in the fraud to hear his sentence.
The case is not linked to AIG’s mortgage-related losses that led to a near collapse of the company in September and a federal bailout.
In February, a federal jury in Connecticut found all five defendants guilty of conspiracy, securities fraud, making false statements to regulators and mail fraud. Buffett was not charged in the case.
The other four defendants, who also face the possibility of lengthy prison terms, are not expected to be sentenced until next year. All five have been free on bail pending sentencing.
“This transaction was designed to cook the books of AIG. He had many opportunities to step in and stop the deal but he did not,” U.S. District Judge Christopher Droney said of Ferguson in his remarks to the court.
Ferguson must pay a $200,000 fine and undergo two years of supervised release when the sentence ends. Sentencing guidelines were far harsher, calling for life in prison, the judge said, but he chose a lighter sentence because of Ferguson’s “history” and “character.”
“This case is a tragedy especially for Ronald Ferguson. We will never know why such a good man did such a bad thing,” Droney added.
Defense lawyers previously said their clients did not believe they acted improperly in participating in the reinsurance deal at the center of the case and that they intend to appeal their convictions.
Reinsurance is a practice of insurers transferring parts of their risk portfolios to other parties.
At trial, prosecutors said the defendants structured a sham reinsurance transaction with a phony paper trail to make it appear as though General Re had solicited reinsurance from AIG when the parties knew AIG wanted the transaction to manipulate its financial statements.
(Reporting by Ted Lorson and Martha Graybow; Editing by Jason Szep and Frances Kerry)
Source: Insurance Journal
Tags: General Re, Steve Wevodau, Steven Wevodau
University of Utah researchers have developed an automobile ignition key that prevents teenagers from talking on cell phones or sending text messages while driving.
The inventors are hoping the insurance industry will back the safety technology as worthy of premium discounts for its users.
The university has obtained provisional patents and licensed the invention - Key2SafeDriving - to a private company that hopes to see it on the market within six months at a cost of less than $50 per key plus a yet-undetermined monthly service fee.
“The key to safe driving is to avoid distraction,” says Xuesong Zhou, an assistant professor of civil and environmental engineering who co-invented the system with Wally Curry, a University of Utah graduate now practicing medicine in Hays, Kan. “We want to provide a simple, cost-effective solution to improve driving safety.”
Zhou notes that “at any given time, about 6 percent of travelers on the road are talking on a cell phone while driving. Also at any given time, 10 percent of teenagers who are driving are talking or texting.” Studies have shown drivers using cell phones are about four times more likely to get in a crash than other drivers.
“As a parent, you want to improve driving safety for your teenagers,” he says. “You also want to reduce your insurance costs for your teen drivers. Using our system you can prove that teen drivers are not talking while driving, which can significantly reduce the risk of getting into a car accident.”
If things go as planned, the Key2SafeDriving system won’t be sold directly to consumers by a manufacturer, but instead the technology may be licensed to cell phone service providers to include in their service plans, says Ronn Hartman, managing partner of Accendo LC. The Kaysville, Utah, company provides early stage business consulting and “seed funding.” It has licensed the Key2SafeDriving technology from the University of Utah and is working to manufacture and commercialize it.
Hartman envisions gaining automobile and insurance industry backing so that Key2SafeDriving data on cell phone use (or non-use) while driving can be compiled into a “safety score” and sent monthly to insurance companies, which then would provide discounts to motorists with good scores. The score also could include data recorded via Global Positioning System (GPS) satellites on the driver’s speeding, rapid braking or running of lights, which are calculated by comparing the driver’s position with a database of maps, speed limits, stop lights and so on.
How Key2SafeDriving Works
The system includes a device that encloses a car key - one for each teen driver or family member. The device connects wirelessly with each key user’s cell phone via either Bluetooth or RFID (radio-frequency identification) technologies.
To turn on the engine, the driver must either slide the key out or push a button to release it. Then the device sends a signal to the driver’s cell phone, placing it in “driving mode” and displaying a “stop” sign on the phone’s display screen.
While in driving mode, teen drivers cannot use their cell phones to talk or send text messages, except for calling 911 or other numbers pre-approved by the parents - most likely the parents’ own cell numbers.
Incoming calls and texts are automatically answered with a message saying, “I am driving now. I will call you later when I arrive at the destination safely.”
When the engine is turned off, the driver slides the key back into the device, which sends a “car stopped” signal to the cell phone, returning it to normal communication mode.
The device can’t be “tricked” by turning the phone off and on again because the phone will receive the “driving mode” signal whenever the car key is extended.
Adult drivers cannot text or use a handheld cell phone, but the Key2SafeDriving system does allow them to talk using a hands-free cell phone - even though studies by University of Utah psychologists indicate hands-free phones are just as distracting as handheld phones.
Curry agrees that driving while talking on any cell phone “is not safe,” but he says the inventors have to face the practical issue of whether adults would buy a product to completely block their cell phone use while driving.
Limiting some cell calls by adults “is a step in the right direction,” he says.
Zhou says the goal for adults is to improve safety by encouraging them to reduce the time they spend talking while driving. The encouragement could come in the form of insurance discounts by insurers, who would receive monthly scores from Key2SafeDriving showing how well an adult driver avoided talking while driving.
An Invention is Born
The new invention began with Curry, a Salt Lake City native who graduated from the University of Utah with an accounting degree and premedical training in 1993. He returned from the Medical College of Wisconsin for his surgical residency in urology at University Hospital during 1998-2003. He now is a urologist in Hays, Kan.
His concern with driving-while-talking began because, as a doctor, “the hospital is calling me all the time on my cell phone when I’m driving.”
One day while driving home, he saw a teenage girl texting while driving, making him worry about his 12- and 14-year-old daughters, who are approaching driving age.
“I thought, this is crazy, there has got to be something to stop this, because not only is she putting people at risk, but so was I,” Curry says. “It struck me pretty hard that something should be done.”
Curry’s initial idea was a GPS system to detect a moving cell phone and disable it when it moved at driving speeds. Meanwhile, someone else developed a similar system based on the same idea. But it cannot distinguish if the cell phone user is driving a car or is a passenger in a moving car, bus or train - a problem overcome by Key2SafeDriving.
In early 2008, Curry called Larry Reaveley, a civil engineering professor at the University of Utah, who suggested Curry contact Zhou, a specialist in “intelligent” transportation systems. Zhou and Curry then came up with the idea of blocking cell phone usage via a vehicle ignition key.
Zhou, a native of Liuzhou, China, joined the University of Utah faculty in early 2007. He received his Ph.D. degree from the University of Maryland in 2004. He has worked for a California company that sold a product that provides traffic information to motorists using GPS satellites.
The video and additional information about Key2SafeDriving are available at: http://www.Key2SafeDriving.net
Sources:
University of Utah College of Engineering
http://www.coe.utah.edu
key2safedriving@accendolc.com
Tags: Steve Wevodau, Steven Wevodau
