Steve Wevodau

Constellation Energy CEO Shattuck makes case for MidAmerican deal to employees

POSTED BY STEVEN WEVODAU

Baltimore Business Journal - by Robert J. Terry Staff

Constellation Energy CEO Mayo A. Shattuck III urged employees of the Baltimore Fortune 500 company to support its planned merger with MidAmerican Energy Holdings Co., a Warren Buffett-owned firm that struck a deal in September to buy Constellation (NYSE: CEG) for $4.7 billion.

In a letter filed Tuesday with the U.S. Securities and Exchange Commission, Shattuck said the union “is in the best near- and long-term interest of Constellation Energy and our many stakeholders.” Billionaire investor Buffett and his holding company, Berkshire Hathaway (NYSE: BRK.A, BRK.B), “has repeatedly demonstrated its commitment to this partnership,” Shattuck added, and the $26.50-per-share offer is “fair, reasonable and the best alternative … given the seismic changes in the economy and the energy sector during the past several months.”

Here is Shattuck’s letter in its entirety:

Dear Colleague,

Today we announced that we filed a definitive proxy statement with the U.S. Securities and Exchange Commission for our pending merger with MidAmerican Energy Holdings Company, and announced that a shareholder vote will be held on Dec. 23, 2008.

As you may know, our shareholders include hundreds of large institutions such as mutual funds and banks, as well as thousands of individual investors. This, of course, includes many current and former Constellation Energy employees, with a large concentration of BGE employees and retirees in Maryland.

It is my view, and that of our management committee and board of directors, that the merger with MidAmerican is in the best near- and long-term interest of Constellation Energy and our many stakeholders. I urge all of you holding shares to carefully review and consider the proxy materials that will be mailed to your homes in the days ahead. I believe that when you review the facts and weigh the pros and cons, you’ll agree this merger is right for our company, and I’d like to share with you some of the reasons why.

MidAmerican, a member of Warren Buffett’s Berkshire Hathaway family, has repeatedly demonstrated its commitment to this partnership. It invested $1 billion in Constellation Energy in September during one of the worst liquidity crises in financial market history, and more recently entered into agreements which provide Constellation Energy with up to $350 million of additional liquidity resources. These commitments are helping us weather the unprecedented collapse of global credit markets.

Since the announcement of the merger, it has become even more apparent that MidAmerican’s $26.50-per-share offer is fair, reasonable and the best alternative for shareholders, given the seismic changes in the economy and energy sector during the past several months. The decline in valuation is by no means limited to our company, as the shares of many of our merchant peers are down 60 percent to 80 percent this year. MidAmerican’s offer accurately reflects the realities of today’s economy and the pessimism on Wall Street.

The long-term prospects for the merger are encouraging. MidAmerican has promised that Constellation Energy and BGE will operate autonomously. The headquarters of both companies will remain in Baltimore, and local management will continue to make day-to-day decisions. MidAmerican has made a commitment in its filing with the Maryland Public Service Commission to delay and reduce proposed electric and gas distribution rate increases for BGE customers, and it has pledged that it will be a partner in developing new power generation in our home state. Finally, MidAmerican has promised that it will initiate no workforce reductions at BGE as a result of the merger through January 2012 … if ever. These are exceptionally strong commitments, particularly in today’s challenging economic environment.

In the weeks leading up to the Dec. 23 shareholder meeting, we’ll provide you with additional information about the voting process, post updates to our employee merger site on myConstellation, as well as our external merger Web site, constellationmidamerican.com, and do our best to answer your questions. We very much want you to be an ambassador for what we believe is an excellent partnership.

Regards,

Mayo

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Minnesota banks saw profits hit in Q3

POSTED BY STEVEN WEVODAU

Minneapolis / St. Paul Business Journal - by Jennifer Niemela Staff Writer

Minnesota’s banks have seen their profits more than halved in one year, according to third-quarter data released Tuesday by the Federal Deposit Insurance Corp.

Net income for the first nine months of 2008 was $443 million for Minnesota’s 410 commercial banks, compared to $980 million for the first nine months of 2007.

While about two-thirds of the Twin Cities’ 119 banks were profitable in the third quarter, seven Twin Cities banks lost more than $2 million in the third quarter.

The biggest loser was BankFirst, based in Minneapolis, which lost $9.1 million for the quarter on assets of $320 million, bringing its total losses for the first nine months of 2008 to $77.5 million.

Next was Inter Savings Bank, based in Maple Grove, which lost $7.8 million on assets of $858 million. The bank, which does business as Interbank and is one of the state’s largest savings and loans, agreed earlier this month to be sold to Richmond, Va.-based Genworth Financial Inc. Interbank has been hit hard by the housing crisis. Its profits have been on a downward spiral for the past year. It lost $3.5 million in the second quarter and $5.2 million in the first quarter.

The loses were from a combination of write-downs or loses on sales of properties, as well as increased allowances for future losses, said Fred Stelter, president and CEO of Interbank. “You just keep plowing through this stuff and in the process we’ve taken some hits, but our goal is maintain our well-capitalized position,” Stelter said.

Mainstreet Bank, of Forest Lake, lost $5.6 million on assets of $463.6 million. It has downsized its pool of lenders in recent months. The loss is from loan loss provisions, said Karen Greisinger, a spokeswoman for the bank. Mainstreet officials expect the bank to profitable by the first quarter of 2009.

First Minnesota Bank in Minnetonka lost $3.9 million on assets of $345.2 million.

American Bank of St. Paul in St. Paul, lost $2.8 million on assets of $673.7 million. The bank lost money its preferred stock holdings in Fannie Mae and Freddie Mac, said John Kimball, its president.

Riverview Community Bank in Otsego, and Citizens State Bank in Hudson each also lost more than $2 million for the third quarter.

AnchorBank, based in Madison, Wis., which has several branches in the western-Wisconsin portion of the Twin Cities metro area, lost $21.8 million and had that state’s second-steepest losses. AnchorBank is different from Wayzata-based Anchor Bank, which was profitable this quarter.

On a brighter note, the metro area’s biggest loser of the second quarter 2008, M&I Bank, which lost $388 million on assets of $57.7 billion, was profitable this quarter. M&I, which is based in Milwaukee but has a growing Twin Cities presence, this quarter was Wisconsin’s most profitable bank with income of $78.6 million on assets of $56.9 billion.

Biggest losers, metro area banks, Q3 2008

• BankFirst Minneapolis:
Assets: $319 million; Losses -$9.1 million
• InterBank Maple Grove
Assets: $858 million; Losses: -$7.8 million
• Mainstreet Bank Forest Lake
Assets: $463.6 million; Losses: -$5.6 million
• First Minnesota Bank Minnetonka
Assets: $345.2 million; Losses: -$3.9 million
• American Bank of St. Paul St. Paul
Assets: $673.7 million; Losses: -$2.8 million
• Riverview Community Bank Otsego
Assets: $131.7 million; Losses: -$2.5 million
• Citizens State Bank Hudson
Assets: $193.3 million; Losses: -$2.3 million
Source: FDIC

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AIG to pay retention bonuses to executives

POSTED BY STEVEN WEVODAU

By Greg Farrell in New York

One day after announcing strict limits on salaries and bonuses for its top tier of executives, AIG revealed that some of those executives will receive millions in “retention bonuses” next year.

In a regulatory filing on Wednesday, the insurance group disclosed that Jay Wintrob, an executive vice-president, had put off receiving the first instalment of his $3m retention bonus from December to April 2009.

He will receive the second instalment, originally scheduled to be paid out in December 2009, in April 2010. David Herzog, AIG’s chief financial officer, also opted for the later payment schedule.

The retention bonuses for 130 key executives were disclosed by AIG in September, after the US government rescued the firm from bankruptcy by purchasing 79.9 per cent of the company for $85bn. After the government takeover, Edward Liddy, the former Allstate chairman, was named chief executive and AIG offered retention bonuses to Mr Wintrob, head of AIG’s retirement services division, among others.

In October, AIG’s management was embarrassed by the disclosure that the company spent $440,000 on a weekend retreat in California for senior performers.

The company announced on Tuesday that Mr Liddy would be paid a salary of $1 for 2008 and 2009, and that Paula Rosput Reynolds, who joined AIG as chief restructuring officer in October, would receive no salary or bonus for 2008.

The company said the other five members of AIG’s seven-member leadership group would not receive annual bonuses for 2008 or salary increases through 2009.

AIG also said that the company’s senior partners, about 60 executives, would not earn long-term performance awards in 2008, not earn salary increases in 2009, and that the group’s annual bonuses would be limited.

An AIG spokesman said on Wednesday that retention bonuses were different from the annual bonuses included in Tuesday’s statement. In September, Mr Liddy pledged to sell off significant portions of AIG’s international operations in order to pay back the government loan. The company said at the time that retention bonuses would be necessary to maintain continuity and value at various AIG units.

“Retention bonuses are a better alternative for the repricing of option awards so long as they are reasonable, fully disclosed and truly needed to retain talent,” said Richard Ferlauto, director of corporate governance and pension investment at the American (NYSE:AIG) Federation of State, County and Municipal Employees union.

“But in this market we don’t see much clamour for executives who made big bets, cannot make risk and were paid more than they are worth,” he added.

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ACE Europe Appoints Director of Scotland

POSTED BY STEVEN WEVODAU

LONDON–(BUSINESS WIRE)–ACE Europe (ACE)(NYSE:ACE - News) has announced the appointment of Colin McKellar as Director of Scotland, based in its Glasgow office.

Colin will assume full management responsibility for all Property & Casualty (P&C) and Accident & Health (A&H) product lines in Scotland. Colin has worked with ACE in the UK for five years in a number of management positions and has 30 years experience of working in the Scottish insurance market.

Commenting on his appointment Colin said: “It is an exciting time to return to Scotland with ACE. The financial strength of the ACE Group and our product range makes for a very compelling proposition for our customers and our selected broker partners.”

Pat Drinan, National Distribution and Development Director UK & Ireland commented: “I am delighted to have someone of Colin’s calibre and experience leading our business in Scotland. ACE has a strong team in Scotland and Colin’s involvement will help to build on their achievements to date. Colin’s appointment enhances ACE’s profile in Scotland and signals our continuing commitment to this region.”

ACE

Part of the ACE Group of Companies, ACE European Group comprises the operations of ACE Europe, ACE Global Markets and ACE Tempest Re Group. ACE Europe provides a range of tailored Property and Casualty, Accident and Health and Personal Lines solutions for a diverse range of clients. ACE Global Markets (AGM) is ACE’s specialty international business, underwriting through ACE’s Lloyd’s Syndicate 2488 and ACE European Group Limited. Specialty lines include excess and surplus lines business, Marine, Aviation, Energy and Political Risk as well as Property, Financial Lines and Accident and Health. Additional information on ACE European Group can be found at www.aceeuropeangroup.com.

The ACE Group of Companies is a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited (NYSE: ACE - News), the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at: www.acelimited.com

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What Would Warren Do?

This article is part of a series related to Beginning Investing.

Or better yet - what is the Oracle up to in this market, and can you do the same?

Warren Buffett has already told the world what he’s doing in this frightful market. The Oracle of Omaha proudly proclaimed that he’s “been buying American stocks” with his personal funds.

But it should also be noted that Buffett has been putting his investors’ money on the line as well. After sitting on piles of cash for several years and lamenting the lack of attractive opportunities, Buffett has made several key acquisitions through his investment conglomerate, Berkshire Hathaway, culminating in a flurry of late- September and early-October deals.

In just a two-week span, Buffett picked up Constellation Energy for the relative bargain price of $4.7 billion. He bought $5 billion in preferred stock from Goldman Sachs, receiving a fat 10% yield. And he purchased $3 billion in preferred shares of GE, also yielding 10%.

This doesn’t mean Buffett is saying go out and buy Goldman or GE (GE) stock. In fact, there are plenty of reasons why you shouldn’t try to follow his lead, not the least of which is the fact that Berkshire gets deals that individuals simply can’t.

But that’s not the point. The opportunity here is to pick up some valuable investing wisdom from the greatest practitioner alive. In this spirit, here’s what I think you can learn from Buffett’s moves:

Be Greedy When Others Are Fearful

It’s the most famous of all Buffett-isms: “Be fearful when others are greedy and greedy when others are fearful.” Today there’s ample evidence that people are scared, as fund investors have been redeeming record amounts of money from their stock portfolios.

By contrast, Buffett is putting his money to work. Berkshire’s cash balance, by my estimate, is at its lowest level in recent memory.

Now, this doesn’t mean the market will turn around tomorrow. But Buffett’s point is that this is not the time to flee U.S. stocks. In fact, now is a great time to be looking for shares of high-quality firms that have been beaten down to affordable levels.

For examples of attractively priced industry leaders, see the suggestions to the right.

Don’t Be Hobbled by Past Mistakes

Buffett’s investment in Goldman Sachs (GS) was surprising to many, given his frequent digs at Wall Street’s casino culture and a problematic investment he made in Salomon Brothers.

In 1987, Buffett bought a stake in Salomon to ward off a hostile takeover, but the firm nearly collapsed amid a bond bid-rigging scandal a few years later, and Buffett had to step in as interim chairman.

Although the investment eventually worked out - Salomon was bought by Travelers, which merged with Citicorp to form Citigroup (C) - it’s safe to say that it was a longer and harder road than he had anticipated.

Still, Buffett understood that investment banking, for all its recent woes, is an attractive business if managed properly. The group of top-tier firms is fairly small, and it would be hard for a new competitor to break into the business, which gives Goldman Sachs tremendous bargaining power over its customers.

There’s an important lesson in this for individual investors. Just because many financial stocks in your portfolio have imploded recently, it doesn’t mean you should sell out of this sector entirely - or turn your back on these stocks for good.

Don’t Fall in Love With Your Stocks

Buffett is famous for having said that his favorite holding period is “forever.” But he will sell a stock he loves if conditions warrant. For example, late last year, as crude-oil prices were approaching $100 a barrel, Buffett jettisoned his stake in PetroChina (PTR).

Why? After multiplying more than fivefold since he bought it a few years earlier, PetroChina shares had reached fair value, so he sold. Since he cashed out, PetroChina shares have been cut in half.

Chalk this up to a lesson the Oracle learned in the late ’90s. As he admitted in 2003, “…I made a big mistake in not selling several of our larger holdings during the Great Bubble.”

Buffett similarly made what may be one of his best decisions when he sold Berkshire Hathaway’s long-held stake in Freddie Mac (FRE) in 2000. He’s never written about exactly why, but he noted presciently at his 2001 annual shareholder meeting that Freddie Mac’s “risk profile had changed.”

Keep Your Powder Dry

While the rest of the world gorged on cheap credit, Buffett maintained Berkshire’s conservative profile. This hindered his returns when times were good, but having lots of cash on hand enabled Buffett to snap up once-in-a-lifetime deals, like Constellation Energy (CEG).

Buffett, who owns several utilities, jumped on Constellation in September after its shares tumbled from around $60 to his purchase price of $26.50 in a mere matter of days. The result: He nabbed a company that produces nearly $1 billion in earnings a year for less than $5 billion.

Now, you may not be in a position to keep $40 billion in the bank. But as Buffett showed, it’s smart to have some cash on hand for opportunistic purchases. What’s more, there’s nothing wrong with being disciplined enough to turn your back on stocks that you’re not 100% confident in. That’s sage advice.

Why He’s Warren Buffett — and You’re Not

If investing were as simple as mimicking Warren Buffett, then all you’d have to do to retire rich would be to download a free copy of the Berkshire Hathaway annual shareholder letter and shadow the Oracle’s moves.

Given that you’re reading this article instead of relaxing at your seaside villa, it’s clear copying Buffett is no easy task. So as you marvel at the Sage, keep the following in mind:

Warren Can Strike Deals You Can’t

Buffett’s reputation and Berkshire’s financial heft are enormous advantages that regular investors simply don’t share. Take his recent investment in Goldman Sachs (GS). It was made in preferred stock that was offered only to Berkshire and pays a 10% fixed yield.

That’s twice what Uncle Sam is initially earning on the preferred shares it got from Goldman in exchange for injecting capital into the bank. But chalk that up to the Buffett premium. Firms want the Oracle to invest in them for his seal of approval.

Berkshire’s purchase of Constellation Energy offers a great example. Constellation’s shares had fallen 75% from their highs because the market was worried about the financial health of the company’s energy-trading operations.

If you or I bought the stock at that level, we would have been making a bet that Constellation would pull through. But we would not have been able to affect the odds. However, Berkshire’s financial strength and Buffett’s name assured Constellation’s survival, making the investment more valuable as soon as Warren bought the company.

Warren Is Smarter Than You Are

Many casual observers assume that Buffett simply buys great companies and hangs on to them. Simple, right? But the real key to Buffett’s success is far more complicated.

Buffett has created enormous value for Berkshire by buying all kinds of securities, from common stock and preferred shares to currencies, distressed debt and options.

He has also made money through merger arbitrage and fixed-income arbitrage. These are all areas that only the most sophisticated investor should dabble in.

Why Mimic Warren When You Can Hire Him?

Your best bet for benefiting from Buffett’s wisdom is the most obvious: Buy Berkshire Hathaway (BRK.B) stock.

It’s really an investment company. But unlike a fund, it doesn’t charge annual management fees. Buffett has deployed a lot of cash into attractive deals lately, which should add value for years to come.

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Lincoln Financial Advisors Hires Rieke to Cultivate Kansas City Presence

PHILADELPHIA, Nov. 26 /PRNewswire-FirstCall/ — Lincoln Financial Advisors announced today that Gregory M. Rieke, CLU, has been named Managing Principal of the Kansas City Regional Planning Office, which is located in Overland Park, Kan.
(Logo: http://www.newscom.com/cgi-bin/prnh/20050830/LFLOGO )
Rieke will be responsible for recruiting, coaching and developing Lincoln-affiliated financial planners throughout the Kansas City region, which includes Omaha, Neb., Springfield, Mo., Des Moines, Iowa and Scottsbluff, Neb.
“I’m excited to have a person of Greg’s caliber leading the Kansas City multi-state region and look forward to leveraging his 30-plus years of leadership in financial services. With his expertise, Lincoln will continue to be the firm of choice for financial professionals who are looking for the freedom and affiliation flexibility to significantly grow their practice,” said Edwin R. Kerley, CFP, CLU, ChFC, Managing Director of the Heartland Mountain West Regional Planning Group for Lincoln Financial Advisors.
Prior to joining Lincoln, Rieke served in a number of senior management, recruiting and training positions in firms in Kansas City including Legacy Financial Group and United Missouri Bancshares, Inc.
“We remained committed to growing our national network of high quality advisors to at least 10,000 by 2010, and it is highly-skilled professionals like Greg who will enable us to achieve that goal,” said David Berkowitz, senior vice president and head of Lincoln Financial Advisors.
About Lincoln Financial Advisors
Lincoln Financial Advisors Corp. (LFA) is the financial planning division of Lincoln Financial Group, and is a member of both FINRA and SIPC. Lincoln Financial Advisors professionals offer planning and advisory services, retirement services, life products, annuities, investments, and trust services to affluent individuals, business owners, and families.
About Lincoln Financial Group
Lincoln Financial Group, headquartered in the Philadelphia region, is the marketing name for Lincoln National Corporation (NYSE: LNC - News) and its affiliates. Through its affiliated companies, Lincoln Financial Group offers: annuities; life, group life and disability insurance; 401(k) and 403(b) plans; savings plans; mutual funds; managed accounts; institutional investments; and comprehensive financial planning and advisory services. Affiliates also include: Delaware Investments, the marketing name for Delaware Management Holdings, Inc. and its subsidiaries; and Lincoln UK. For more information, including a copy of our most recent SEC reports containing our balance sheets, please visit www.lincolnfinancial.com.

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First American CoreLogic Releases Fourth Quarter 2008 Core Mortgage Risk Monitor(TM)

–Core Mortgage Risk Index 54 Percent Higher Compared to 2002 Base Year as Economic Conditions Drive Geographic Expansion of Risk–
SANTA ANA, Calif., Nov. 26 /PRNewswire-FirstCall/ — First American CoreLogic, a member of The First American Corporation (NYSE: FAF - News) family of companies, America’s largest provider of advanced property and ownership information, analytics and services, today released the latest issue of its Core Mortgage Risk Monitor (CMRM). The CMRM forecasts delinquency risk for the real estate and mortgage industry, providing a barometer on the areas that are the most and least risky in terms of homeowners facing foreclosures due to mortgage default.
According to the study, the likelihood that homeowners will default on their mortgages increased by 12 percent from a year ago and is up 54 percent from early 2002. The full report, including the 10 highest risk markets and the 10 lowest risk markets, is available at www.facorelogic.com/newsroom/newsroom.jsp.
Core Mortgage Risk Index - Q4 2008
“The rate of home price decline, an important factor in assessing likely delinquency risk, has stabilized at around 11 percent, with almost zero acceleration in either direction,” said Mark Fleming, chief economist with First American CoreLogic. “Because this rate is not increasing, home price declines are not raising the national risk index further at this time, but they’re not reducing the risk either. While the risk index has been driven upward throughout 2007 and 2008 primarily by the acceleration of declines in home prices, there is now a geographic expansion of risk driven by fundamental economic conditions. Flat or declining wages and increasing job losses are beginning to affect the index more heavily in many markets.”
California tops the list with seven of the eight riskiest markets, including the top three–Riverside/San Bernardino, Los Angeles and Sacramento. Florida is second on the list with one city–Miami–in the top 10 and several other cities, including Fort Myers and Port St. Lucie, also having high risk factors. Dayton, Ohio, is the least risky market, according to the CMRM. Indianapolis; Austin, Texas; Omaha, Neb.; and Wichita, Kan., are also among the five least risky markets.
The Core Mortgage Risk Monitor is a quarterly report that provides an economic forecast, analysis and commentary on the relative risk of residential mortgage loan delinquencies due to fraud propensity and collateral risk, house price dynamics and the health of the local market economy. The Core Mortgage Risk Monitor tracks risk in 381 metropolitan markets across the United States representing more than 89 percent of the United States. The Core Mortgage Risk Index (CMRI) is the basis for the forecast. An elevated CMRI signals the increased potential for financially disruptive and costly economic consequences for consumers, their local community and the mortgage industry.
About First American CoreLogic
First American CoreLogic, a member of The First American Corporation (NYSE: FAF - News) family of companies, is the largest provider of real estate, property and ownership data and advanced analytics for information on foreclosures, delinquencies, median home prices, home price indices, home valuations, sales activity and mortgage loan originations. The market-specific data covers 7,620 ZIP codes, 958 Core Based Statistical Areas (CBSA) and 3,050 counties located in all 50 states and the District of Columbia. This data represents 99 percent of the United States population, 140 million (97 percent) of all properties, more than 50 million active mortgages and $2 trillion in loan-level, non-agency mortgage securities. First American CoreLogic’s products and services enable customers to better manage mortgage risk, protect against fraud, acquire and retain customers, manage credit risk, mitigate loss, decrease mortgage transaction cycle time, more accurately value properties and determine real estate trends and market performance. More information about First American CoreLogic can be found at www.facorelogic.com.
About First American
The First American Corporation (NYSE: FAF - News) is a FORTUNE 500® company that traces its history to 1889. With revenues of approximately $8.2 billion in 2007, it is America’s largest provider of business information. First American combines advanced analytics with its vast data resources to supply businesses and consumers with valuable information products to support the major economic events of people’s lives, such as getting a job, renting an apartment, buying a car or house, securing a mortgage and opening or buying a business. The First American Family of Companies, many of which command leading market share positions in their respective industries, operate within five primary business segments, including: Title Insurance and Services, Specialty Insurance, Information and Outsourcing Solutions, Data and Analytic Solutions, and Risk Mitigation and Business Solutions. More information about the company and an archive of its press releases can be found at www.firstam.com

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Philadelphia Insurance Companies Is Committed to the Non-Profit Industry

Philadelphia Insurance Companies Announces 16th Annual Turkey Trot
BALA CYNWYD, Pa., Nov. 26 /PRNewswire/ — Philadelphia Insurance Companies (Nasdaq: PHLY - News) are proud to sponsor the 16th Annual Turkey Trot, Thursday November 27. The Turkey Trot 5 mile run, a Maguire family tradition, will attract more than 800 runners and walkers on Thanksgiving morning at the Forbidden Trail in Fairmont Park, Chestnut Hill, PA. Race day registration begins at 7:30 a.m.; the 5 mile run is scheduled to start at 9:00 a.m., Rain or Shine! All event proceeds will benefit Face to Face Inc., a social service organization dedicated to the health, well-being and stability of the Germantown community. “Philadelphia Insurance Companies supports the mission of Face to Face Inc. We are committed to helping our non-profit partners by providing financial security to ensure their continued community service mission,” said Jamie Maguire, President & CEO.
In operation since 1962, PHLY designs, markets, and underwrites commercial property/casualty and professional liability insurance products incorporating value added coverage’s and services for select industries. The Company, whose commercial lines insurance subsidiaries are rated A+ (Superior) by A.M. Best Company and A1 for insurance financial strength by Moody’s Investors Services, is nationally recognized as a member of Ward’s Top 50, Forbes’ Platinum 400 list of America’s Best Big Companies and Forbes’ 100 Best Mid-Cap Stocks in America. The organization has 47 offices strategically located across the United States to provide superior service.

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AIG Got Enough Yet?

By Mark Vickery
We start to see more articulation regarding the reconstruction of insurance and financial mammoth American International Group, Inc. (NYSE: AIG - News) this morning with the announcement of how $40 billion of its total $150 billion bailout plan will be utilized.
For its $40 billion, the U.S. government gets preferred stock with a 10% interest rate, and ‘warrants to purchase about 53.8 million shares of common stock, or about 2 percent of outstanding shares,’ according to the AP this morning.
Also, the Federal Reserve loan of $85 billion to AIG in late September — which some identify as the moment Wall Street began to panic about the credit crisis — will be reduced to a maximum capacity of ‘only’ $60 billion.
OK, can we only start hearing from now on about how AIG is successfully putting itself back together with all this scratch? That would be great.
American International Group, Inc.’s numbers haven’t been impressing anybody this year. Aside from tremendous triple-digit negative earnings surprises, analysts continue to rain down earnings estimates for the company’s 4th quarter (ends 12/08), fiscal 2008 and fiscal 2009. AIG also has a -1200% upside potential for its December quarter.

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AIG restricts exec compensation, CEO gets a dollar

AIG adopts exec compensation, bonus restrictions, CEO Liddy gets $1 annual salary for 2 years

CHARLOTTE, N.C. (AP) — American International Group Inc. said Tuesday it is limiting how much it pays its top executives, including granting a $1 salary for this year and the same for 2009 to its Chief Executive Edward Liddy.

The decision is one of many broader moves made by the troubled New York-based insurer, which has been under pressure to restrict executive pay since accepting billions in government assistance to save it from collapse. AIG has received about $150 billion so far, more than any other company.

It was once the world’s largest insurer with customers around the globe, and regulators feared the possible effect an AIG collapse would have had on the world’s financial system.

The company said there will be no 2008 annual bonuses and no salary increases through 2009 for AIG’s top seven officers and no salary increases through 2009 for the 50 next-highest AIG executives. In addition to his $1 a year salary, Liddy will be getting an unspecified amount of stock.

“We believe these actions demonstrate that we are focused on overcoming our financial challenges so AIG can return value to taxpayers and shareholders,” Liddy said in a statement.

AIG shares were unchanged at $1.77 in Tuesday trading.

The announcement comes after New York Attorney General Andrew Cuomo sent a letter to Liddy earlier this month saying AIG should be “completely transparent” about its compensation plans for 2008.

In mid-September, the Federal Reserve said it would offer two loans totaling $123 billion to AIG to help the insurer stave off bankruptcy. AIG was later allowed to access another $20.9 billion through the Fed’s “commercial paper” program. And earlier this month, the government announced new financial assistance to the company.

On Tuesday, Cuomo applauded AIG’s decision to limit executive pay, and said other companies receiving federal bailout money should follow suit.

“It is only fair that top executives, who benefit the most when firms do well, should also bear the burden of the difficult economic consequences their firms now face,” Cuomo said. “The government is not writing blank checks to these companies.”

In a letter to Cuomo on Tuesday, Liddy said AIG is “extremely grateful” for the support it has received from American taxpayers, and said the company does “recognize the obligation we have to use that support to help AIG recover, contribute to the economy and repay taxpayers.”

Like other insurers, AIG has been slammed by deterioration in the credit markets amid concerns that complex, structured investments it insures will increasingly default. Its problems did not come from its traditional insurance subsidiaries, but instead from its financial services operations, and primarily its insurance of mortgage-backed securities and other risky debt against default.

AIG said no taxpayer dollars will be used for any annual bonuses or future cash performance awards for AIG’s top management positions.

Liddy, who joined the company in mid-September, will not receive an annual bonus this year or next, although he may be eligible for a special bonus for “extraordinary performance” payable in 2010, the company said.

When asked to comment on Liddy’s decision to take a $1 annual salary for the next two years, and be paid instead with equity grants, Cuomo expressed admiration.

“He’s putting his money where his mouth is,” he said. “If he performs, God bless him.”

It wasn’t immediately clear how much stock Liddy stands to get, but AIG spokesman Peter Tulupman more information would be disclosed in an regulatory filing with the Securities and Exchange Commission.

Earlier this month, AIG ended 14 voluntary deferred compensation programs, resulting in $500 million of payouts due in the first quarter of 2009.

The company said it made the move to prevent employees from having to leave to collect deferred pay. The old plans had been set up so that employees could defer pay voluntarily and collect it when they left AIG, no matter the reason.

Several struggling financial institutions have announced in recent weeks that they are canceling bonuses for top executives, including Goldman Sachs, the Swiss bank UBS and the British bank Barclays.

Cuomo has praised those moves and suggested that other Wall Street institutions should follow suit, especially those receiving federal bailout money.

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