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2024-08-27 | Bloomberg | Canadian Second-Quarter Profits Fell 0.8% on Factories Decline | Canadian corporate profits fell 0.8 percent in the second quarter, led by manufacturers. Operating profits fell to C$72.2 billion ($68.6 billion) in the April-June period from C$72.8 billion in the previous quarter, Statistics Canada said today in Ottawa. Profits were up 1.4 percent from the second quarter of 2012. Ten of 22 industries reported lower earnings in the quarter, Statistics Canada said. Profits of non-financial companies fell 3.9 percent to C$51.1 billion in the quarter, led by a 16.6 percent drop for manufacturers. Financial companies posted a 7.6 percent rise to C$21.1 billion, led by life and health insurance companies. To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net ; Christopher Wellisz at cwellisz@bloomberg.net |
2024-05-21 | Bloomberg | Texas Lieutenant Governor, Speaker Set $80.6 Billion Budget Plan | Texas legislative leaders agreed to an $80.6 billion two-year spending plan that cuts expenses from current levels while relying on $1.2 billion of additional tax revenue tied to an improving economy. A 10-member conference committee, along with Lieutenant GovernorDavid Dewhurst and House Speaker Joe Straus, reconciled the House of Representatives and Senate versions of a budget for the 2012-2013 biennium. Final approval still hinges on passage of several bills including financing of public schools and universities, Dewhurst said in a statement. The overall spending plan reflects at least $15 billion in cuts compared with current levels in the fiscal year that ends Aug. 31, Dewhurst said. The agreement reached with the Senate yesterday “funds nursing homes, our public schools and universities, and provides financial aid for college students while keeping substantial revenue in reserves and avoiding any new taxes,” Straus said in a statement. Democrats including Representative Garnet Coleman of Houston criticized the budget for not spending enough to keep up with Texas ’s population growth. “It’s the most irresponsible budget I’ve ever seen,” Coleman said in an interview. Texas’s budget outlook brightened when Comptroller Susan Combs estimated May 17 that the state would have $1.2 billion more in general revenue than previously forecast for the two years beginning in September, mostly because of higher sales tax collections. The budget doesn’t include use of the main reserve fund , which is being tapped to fill a $3 billion gap for the current year. Education Lobbying Lobbying by superintendents and other public school advocates helped limit reductions in education spending, said Dominic Giarratani, a lobbyist for the Texas Association of School Boards. “It’s still a mess,” he said. “Our schools are adding 80,000 students each year and our operations are being under-funded by $4 billion.” Texas ranks 44th in public school spending per student, according to Raise Your Hand Texas, a nonprofit school advocacy group in Austin that has run television ads by actor Tommy Lee Jones and former AT&T Inc. Chief Executive Officer Ed Whitacre urging use of the Rainy Day fund. Jones and Whitacre are native Texans. Republicans hold 101 of 150 seats in the House and 19 of 31 Senate seats, while Governor Rick Perry has pressed legislators to save the Rainy Day fund for more difficult times and limit spending. Medicaid Shortfall The budget assumes funding for the Medicaid insurance program for low-income citizens will run out by March 2013, forcing the next Legislature to fill a gap of as much as $4.8 billion for four or five months, said Anne Dunkelberg, associate director of the Center for Public Policy Priorities, an Austin- based research group that lobbies for the poor. Federal and state Medicaid spending in Texas in 2010 topped $21 billion for 3.5 million people, or about 14 percent of the state’s population of 25 million, she said. Texas should adopt both spending cuts and “revenue enhancements” to solve long-term budget pressures, Standard & Poor’s said in a February report. Perry and the Republican-led legislature have rejected consideration of new taxes or ending business-tax exemptions, citing the need for schools and state agencies to operate more efficiently. Lawmakers are attempting to finish their work by May 30, the last day the Legislature may meet under Texas law unless Perry calls a special session. To contact the reporter on this story: David Mildenberg in New York at dmildenberg@bloomberg.net To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net |
2024-10-15 | Bloomberg | ECB Oversight, FDIC Bank-Failure Path, Norway: Compliance | The U.K. reached a draft deal with its European Union partners to lift its objections to turning the European Central Bank into a supervisor, according to two EU officials, in a move that paves the way for the end of over a year of negotiations on the proposals. Ambassadors for the EU’s 28 nations agreed yesterday to put final adoption of the law on the agenda of today’s meeting of finance ministers in Luxembourg , according to the officials, who spoke on condition of anonymity because the decision isn’t public. Once that takes place, the legislation can be published by the EU, beginning a 12-month countdown for the ECB to fully take on its new role. European Central Bank Executive Board member Joerg Asmussen said he’s “very, very confident” that EU finance ministers will sign off on the bill today. Britain blocked approval of the law last month on concerns that safeguards to prevent the U.K. from being marginalized in meetings of the European Banking Authority could be unwound. The U.K. lifted its reservations yesterday after receiving support for a declaration stating that voting rules agreed on for the EBA will be respected, a U.K. official confirmed. EU leaders said last year that the ECB should be given oversight powers over euro-area lenders as a first step in building a banking union that would break the links between banks and sovereigns, and so boost confidence in the bloc’s financial system. Compliance Policy FDIC Says China Among Countries Near Deals on Bank-Failure Path China , Switzerland, Germany and Japan are among nations close to reaching arrangements with U.S. regulators to ease the dismantling of failed banks, said Federal Deposit Insurance Corp. Chairman Martin J. Gruenberg. U.S. regulators are working with German and Swiss counterparts on joint white papers similar to agreements already in place with the U.K. for how banks governed by multiple jurisdictions could be unwound by their host nations, Gruenberg said in remarks prepared for a speech Oct. 13 in Washington. The FDIC will secure memorandums of understanding on bank resolutions with China and Japan soon, he said. The 2010 Dodd-Frank Act empowered the FDIC to seize a firm and dismantle it if regulators think a bankruptcy would pose a significant threat to the financial system. This resolution authority hasn’t been tested, and Gruenberg said his agency will disclose a full description of its approach by year-end -- opening the idea to public comment. Germany and Switzerland share the U.S. preference for a so-called single point of entry, in which the host nation takes over a failed bank’s holding company, imposes losses on shareholders and lets healthy subsidiaries stay open. The approach depends on long-term debt held in the parent to absorb losses and capitalize a healthy bridge company, Gruenberg said. The agency is consulting with the Federal Reserve on a future rule to set a minimum. U.S. regulators will run simulation exercises with U.K. counterparts this year and in 2014, Gruenberg said. Art Murton, the FDIC official in charge of planning for resolutions, and Bank of England Deputy Governor Paul Tucker said on Oct. 12 that the U.S. system is ready to handle a big-bank collapse. Norway Tightens Bank Rules Measuring Losses in Event of Default Norway will tell its banks to base their capital ratios on bigger loss assumptions in the event of a default. The Finance Ministry in Oslo said Oct. 13 banks in Scandinavia’s richest economy per capita will need to raise their loss-given-default floor on mortgage assets to 20 percent from 10 percent, according to a statement on its website. The rules will become effective from January and banks will also need to ensure their subsidiaries follow the new requirement, the ministry said. The outgoing government of Prime Minister Jens Stoltenberg is tightening bank standards as it hands over power to a Conservative-led coalition that has discussed easing lending caps. Norway’s financial regulator has argued in favor of stricter rules amid concern the nation’s housing market is overheating. The Financial Supervisory Authority is also working on going through the banks’ models, in part with a view to increasing the lowest loss probabilities used. Authorities in Norway have struggled to stabilize the housing market after near record-low borrowing rates fueled credit growth in western Europe’s biggest oil producer. Compliance Action Billionaire Cohen’s Paintings May Fetch $60 Million at Auction Billionaire hedge-fund manager Steven A. Cohen, whose firm is facing huge fines for securities fraud, will sell three paintings from his art collection at auction in New York next month. The group will include two pieces by Andy Warhol and a Gerhard Richter, according to the New York Times. Cohen’s $9 billion net worth includes an art collection valued at about $750 million, according to Bloomberg’s Billionaires Index. Cohen’s SAC Capital Advisors LP is accused in a grand jury indictment of insider trading. Last week, the company was told it would have to pay $1.8 billion and admit wrongdoing to resolve securities-fraud charges. Cohen has already agreed to pay $600 million. His three works will be offered at Sotheby’s (BID) contemporary art sale on Nov. 13. Warhol’s 1963 “Liz #1 (Early Colored Liz)” is estimated at $20 million to $30 million. His “5 Deaths on Turquoise (Turquoise Disaster),” also from 1963, is valued at $7 million to $10 million. Sotheby’s showed the paintings as part of its exhibition at the Katara Art Center in Doha last week. The Richter is a 1986, 10-by-8-foot abstract painting titled “A. B. Courbet,” according to a person familiar with the matter. It is estimated at $15 million to $20 million. Cohen actively buys and sells in the art market. He will face fierce competition from 12 other Warhols at the November evening sales, led at Sotheby’s by the large 1963 canvas “Silver Car Crash (Double Disaster),” estimated at more than $60 million. Christie’s seven lots on Nov. 12 include Warhol’s 1962 painting of an oversized Coke bottle, estimated at $40 million to $60 million. Ping An Securities Fined 51.1 Million Yuan by CSRC for Wanfu IPO Ping An Securities Co. was fined by the China Securities Regulatory Commission for its managing of the public offering of Wanfu Biotechnology (Hunan) Agricultural Development Co. (300268) Wanfu Biotectnology (Hunan) is a maker and seller of processed rice products. The company received a 51.1M yuan fine, while 25.55M yuan income from the public offering is to be forfeited. In addition, the Commission suspended the company’s sponsorship qualification for three months. The company is controlled by Ping An Group. Courts Ex-Madoff Workers Seen Choosing Bets on Freedom Over Plea Deals Five former employees of Bernard L. Madoff on trial over allegations they aided in his $17 billion fraud probably scrapped plea talks involving harsh prison terms to gamble for total exoneration from a jury, ex-prosecutors said. The U.S. had little reason to offer the group leniency in exchange for testimony against others, since Madoff and his top aides had already pleaded guilty, said Philip Hilder, a former federal prosecutor in Houston who represents defendants accused of white-collar crimes. Opening statements may begin as soon as today, after U.S. District Judge Laura Taylor Swain in Manhattan completes jury selection that started a week ago. Jurors will hear what may become the fullest account of how Madoff carried out the biggest Ponzi scheme in U.S. history. The former employees, all of whom have pleaded not guilty, are Annette Bongiorno, Madoff’s personal secretary, who worked with him for 40 years and helped recruit investors; Joann Crupi, a manager of large accounts at Madoff’s investment firm; Daniel Bonventre, operations chief; and computer programmers Jerome O’Hara and George Perez. The five stand out for opting to challenge the strength of the government’s evidence after prosecutors secured guilty pleas from their bosses, an uncommon strategy in white-collar cases. Three of the five were offered plea agreements that were turned down, and two had talks with prosecutors that failed to lead to formal offers, according to two people familiar with the matter who asked not to be identified because they weren’t authorized to discuss the negotiations. The absence of plea deals could be because there are no more big players for the remaining defendants to testify against, or because they don’t know enough about the fraud, experts said. Madoff, 75, admitted to federal agents in December 2008 that his company was a sham. He pleaded guilty to 11 counts and was sentenced to 150 years in prison. The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan). For more, click here. Libor Splits U.K. Judges as Barclays Case Goes to Appeals Court Judge Jeremy Cooke told lawyers assembled in his London courtroom last February he wouldn’t allow Indian property company Unitech Ltd. (UT) to add accusations of Libor-rigging to its lawsuit against Deutsche Bank AG. Realizing he’d contradicted another judge in the U.K.’s only other Libor lawsuit, Cooke explained he disagreed with his colleague. Months earlier, Judge Julian Flaux had given Guardian Care Homes permission to link its swap losses to Barclays Plc (BARC) ’s Libor fixing. The Court of Appeal will decide who was right in the rare judicial split following a hearing scheduled to begin yesterday in London. If the court adopts Flaux’s approach to alleged victims, it could open the door to more suits against lenders accused of manipulating the London interbank offered rate, the baseline for about $300 trillion of contracts worldwide. Regulatory probes across the globe into banks’ attempts to manipulate interest-rate benchmarks have led to fines and settlements totaling about $2.6 billion for Barclays, Royal Bank of Scotland Group Plc (RBS) , UBS AG (UBSN) and ICAP Plc. (IAP) E-mails released in the investigations show traders tried to influence rates to boost trading profits. The Deutsche Bank and Barclays cases are at face value similar -- both began as claims that banks sold their clients unsuitable interest-rate swaps. Unitech and Guardian sought to add Libor allegations to those suits. While the appeal court won’t resolve either case, it will determine whether victims can void contracts linked to Libor, or just seek compensation for losses. The Barclays, Deutsche Bank appeal is scheduled to last four days. Yesterday was set aside for judges to read the documents. Public hearings begin today. The cases are Graiseley Properties Ltd. & Ors v. Barclays Bank Plc, High Court of Justice, Queen’s Bench Division , Commercial Court, 12-1259; and Deutsche Bank AG (DBK) & Ors v. Unitech Global Limited & Anr, High Court of Justice, Queen’s Bench Division, Commercial Court, 11-1199 (X1Q6M1JRB282). Interviews/Panels FBR’s Miller Says U.S. Won’t Default on Bond Payments Paul Miller, managing director at FBR Capital Markets, discussed the possibility of a U.S. debt default and ratings downgrade. He spoke from Arlington, Virginia, with Guy Johnson and Hans Nichols on Bloomberg Television’s “The Pulse.” For the video, click here. EU Stress-Test Backstops Must Be Nationally Funded, Finland Says Backstops for banks failing next year’s European Union stress tests should be built without money from the euro region’s permanent rescue fund, Finland’s Finance Minister Jutta Urpilainen said. “The banks’ owners and investors will be the first ones in line to bear the burden, and after that we’ll need national backstops for possible recapitalizations,” she said in an interview in Luxembourg yesterday. For the European Stability Mechanism, “our stance is that only when there is common supervision and the slate is wiped clean for the banking union, that’s when a joint fiscal backstop can exist.” The European Central Bank is slated to take over supervision of all euro-area banks next year, after a transition period in which regulators will assess the quality of banks’ assets and their resilience to shocks. Euro-area nations are now sparring over what kind of financing options need to be in place to deal with potential capital shortfalls that are uncovered. Deutsche Bank’s Jain Says FX Rigging Allegations Eroding Trust Deutsche Bank AG Co-Chief Executive Anshu Jain, whose company is the world’s biggest trader of currencies, said allegations that traders rigged those markets have further eroded trust in the financial industry. The Federal Bureau of Investigation, which was already looking into alleged manipulation of the London interbank offered rate, or Libor, is in the early stages of a probe into the $5.3 trillion-a-day currency market, a person familiar with the matter, who asked not to be identified because the inquiry is confidential, told Bloomberg News on Oct. 11. “Issues like Libor manipulation, allegations of foreign-exchange manipulation, this is sapping at the very core of what we are trying to do,” Jain, 50, said during a panel discussion at the annual meeting of the Institute of International Finance in Washington last week. He said the problem calls for “long-term reform.” Authorities in the U.K., Switzerland, the European Union and the U.S. are investigating whether traders manipulated foreign-exchange prices. U.K. regulators are focusing on an electronic chat room used by currency traders at financial companies, the Wall Street Journal reported on its website, citing people familiar with the matter. The investigation has found a group of traders who used names such as “The Cartel,” “The Bandits’ Club,” and “The Dream Team,” according to the Wall Street Journal. Comings and Goings Barclays Says Hector Sants to Take Temporary Leave of Absence Barclays Plc said its head of compliance and government, Hector Sants, is to take a temporary leave of absence because of “exhaustion and stress.” Sants, 57, plans to return to work at Britain’s second-largest bank by assets next year, a spokesman for London-based Barclays said by telephone today. The company declined to say who will fill in for Sants. Barclays hired Sants, the former chief executive officer of the Financial Services Authority, in December after the lender was fined 290 million pounds ($462 million) by regulators last year for submitting false London and euro interbank offered rates. He reports to CEO Antony Jenkins , who is seeking to overhaul the culture of the bank following scandals including wrongly sold loan insurance. Sants’s leave comes after Lloyds Banking Group Plc CEO Antonio Horta-Osorio returned from a nine-week absence for exhaustion in 2011. To contact the reporter on this story: Carla Main in Jersey City, New Jersey at cmain2@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net . |
2024-08-20 | Bloomberg | U.S. Supports Circumcision Abroad, Should Do Same at Home | The U.S. government is justifiably proud of its leadership abroad funding male circumcision as a way to prevent HIV infections. The president’s AIDS relief program boasts of having provided more than 1 million circumcisions in 14 African countries. The record of government support for male circumcision within the U.S., however, is nothing to crow about. More and more states (18 so far) are dropping Medicaid coverage for routine infant male circumcision, contributing to a decline in rates from 79 percent throughout the 1970s to 55 percent in 2010. This has occurred even as evidence of the medical benefits of the procedure has stacked up. The Medicaid cutbacks are driven by budget pressure, which has also caused some private insurers to stop coverage. These are penny-wise, pound-foolish decisions. In an analysis published Monday, researchers at the Johns Hopkins University School of Medicine conclude that every infant circumcision that is not performed results in $313 in extra health-care expenses even after accounting for the procedure’s cost of about $291. This is a conservative figure that does not include the cost of procedures for the 10 percent to 15 percent of men who, uncircumcised as babies, will require the surgery later in life, at greater cost, for medical conditions such as phimosis, a tightening of the foreskin that can close the opening of the penis. The risks of complications are about seven times greater for adult than infant circumcisions. Male circumcision is an ancient practice that appeared independently in a number of disparate cultures. Only in recent decades have its medical benefits been known. It has been established for years that circumcising baby boys reduces their incidence of urinary tract infections when they are infants. Evidence was strong that the practice protected against penile cancer. More recently, three randomized controlled trials in Africa demonstrated that circumcision reduces a man’s chances of becoming infected with HIV, herpes and human papillomavirus (HPV), which causes penile cancer in men. In one study, female partners of circumcised men had a lower risk of HPV, which causes cervical cancer in women, and two other sexually transmitted diseases. Activists opposed to circumcision argue that it constitutes mutilation. They had a point when the procedure served only ritualistic purposes. The evidence is overwhelming now, however, that the surgery has medical benefits, making it not so different from removal of a worrisome mole. Opponents also claim circumcision reduces sexual function and satisfaction. Until the trials in Africa, in which mature boys and men were circumcised, no one had tested that proposition scientifically. In the Kenyan trial , 64 percent of the circumcised men reported their penis was “much more sensitive” and 54 percent said they had a “much” easier time achieving orgasm. In the Ugandan trial , 57 percent of female partners of circumcised men reported no change in sexual satisfaction and 40 percent reported an improvement. Of course, parents should not be coerced to circumcise their sons, but the procedure should at least be covered by insurance, including Medicaid, which pays for a third of circumcisions done in U.S. hospitals. When a procedure isn’t covered, a layperson will often assume there’s no medical benefit and forgo it. Federal Medicaid regulations should be amended to include infant circumcision among the services state plans must cover. Physicians should also encourage infant circumcision. The American Academy of Pediatrics, which is reconsidering its position , could play a positive role. The group recommended against circumcision in 1971 because of a lack of sufficient evidence of benefit at the time. As that research began to emerge, the group in 1999 adopted a position of neither support nor discouragement, which it reaffirmed in 2005. Since then, the data have clearly made the case for support. The academy needs to update its stand accordingly. Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View editorials, columns and op-ed articles. Today’s highlights: the editors on why the municipal-bond market is safe; Margaret Carlson on “legitimate rape” and Paul Ryan ; Jeffrey Goldberg on how the White House views new warnings from Israel ; Peter Orszag on the false promise that competition can fix Medicare; William Pesek on Asia ’s challenge in limiting smoking ; Ramesh Ponnuru on partisan rancor ; William Silber on Paul Volcker’s early fight against inflation. To contact the Bloomberg View editorial board: view@bloomberg.net . |
2024-09-20 | Bloomberg | Prudential Financial Got Systemic Risk Label in 7-2 Vote | Prudential Financial Inc. (PRU) , the second-largest U.S. life insurer, was designated systemically important in a 7-to-2 vote by a council of regulators charged with preventing another crisis. Edward DeMarco, acting director of the Federal Housing Finance Agency , and Roy Woodall, a former Kentucky insurance regulator, opposed the designation, the U.S. Financial Stability Oversight Council said today in a document explaining the vote. The council, led by Treasury Secretary Jacob J. Lew, initially proposed Prudential’s designation in June by the same margin. The insurer challenged the decision, prompting this week’s affirmation. “While exposures to Prudential may be small relative to the capital of its individual counterparties, aggregate exposures are significant enough that they could amplify the risk of contagion among other financial institutions if Prudential were to experience material financial distress,” the council said. Under FSOC rules, at least seven votes were needed to sustain the ruling. Prudential was the first company to challenge an FSOC designation and joins American International Group Inc. (AIG) and General Electric Co.’s finance unit in being labeled a non-bank systemically important financial institution. Neither AIG nor GE contested the decision. Prudential yesterday disclosed that it lost its appeal, without stating the vote tally. Cordray’s Role The council also voted 9-0 to ratify actions related to Prudential while council member Richard Cordray was a recess appointee as Consumer Financial Protection Bureau director. Regulators on the council have discussed whether Cordray’s actions as a recess appointee could be challenged by companies designated systemically important and subjected to scrutiny by the Federal Reserve. “The council is confident in the validity of its previous actions, and took this action out of an abundance of caution, in response to a challenge Prudential made to the validity of certain council actions,” Treasury spokeswoman Suzanne Elio said in an e-mailed statement today. President Barack Obama made Cordray a recess appointment, bypassing Senate confirmation, in January 2012. Cordray was confirmed by the Senate in July of this year and released a “notice of ratification” on Aug. 27 saying he thinks the actions he took as a recess appointee “were legally authorized and entirely proper.” Leverage, Liquidity The Dodd-Frank Act authorized the council to designate companies that it determines could pose a threat to stability if they were to fail, subjecting them to increased oversight. The Fed can impose tighter capital, leverage and liquidity rules, and demand measures including stress-testing and wind-down plans. Fed Chairman Ben S. Bernanke is also on the FSOC. “No large financial institution has more than a de minimus amount of its equity capital exposed to Prudential,” DeMarco said in his dissent. The FSOC’s analysis of the Newark , New Jersey-based insurer’s balance sheet “does not fully take account of the stability of Prudential’s liabilities, the quality of its assets, or the strength of its equity capital.” Woodall, the council’s independent member with insurance expertise, said the FSOC didn’t sufficiently support the conclusion that distress at Prudential could pose a threat to financial stability. Prudential said yesterday it has 30 days to appeal the designation in federal court. “We are currently reviewing the rationale for the determination and our options,” the insurer said in a statement. ‘Fundamental Gaps’ Jim Donelon, president of the National Association of Insurance Commissioners and Louisiana insurance commissioner, said he was “deeply troubled by the implications” of the council’s decision on Prudential and that it “shows fundamental gaps in FSOC’s understanding of the business of insurance or the regulatory regime that governs it.” MetLife Inc., the largest U.S. life insurer, has said it’s been moved to the last stage of review to be designated systemically important. To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomberg.net ; Ian Katz in Washington at ikatz2@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-07-16 | Bloomberg | Treasuries Hold Gain as Bernanke May Emphasize Slowdown | Treasury yields extended last week’s decline after Germany’s top court said it will take more than eight weeks to rule on the euro-area’s bailout fund, holding up crisis resolution efforts and boosting demand for safer assets. Benchmark 10-year yields were about four basis points from a record low amid speculation Federal Reserve Chairman Ben S. Bernanke will highlight the need for low borrowing costs to spur the economy when he speaks tomorrow. U.S. retail sales rose for the first time in three month in June, economists forecast before a report today. “Investors are focused on holding high-quality bonds, like Treasuries, as policy makers focus on accommodative policy and because of the problems in Europe,” said Piet Lammens, head of research at KBC Bank NV in Brussels. “What Bernanke says this week will be closely watched. We need to see a stronger indication that more stimulus is coming before the Treasury yields can make new lows.” The benchmark U.S. 10-year yield fell one basis point, or 0.01 percentage point, to 1.48 percent at 6:45 a.m. in New York, according to Bloomberg Bond Trader prices. The 1.75 percent note due in May 2022 rose 2/32, or 63 cents per $1,000 face amount, to 102 14/32. The yield dropped six basis points last week and reached an all-time low of 1.4387 percent on June 1. German Ruling The Federal Constitutional Court in Karlsruhe will issue a ruling on bids to halt Germany ’s participation in the European Stability Mechanism and the fiscal treaty on Sept. 12, it said today in an e-mailed statement. That’s more than two months after it held a hearing on the measures on July 10. The delay may compound efforts to resolve the 2 1/2-year- old crisis as European leaders disagree over the details of bailout conditions, bank rescues and burden-sharing. Bernanke is scheduled to testify before the Senate Banking Committee tomorrow, discussing the outlook for the economy and monetary policy. He will speak before the House Financial Services Committee the following day. “There’s a flight to quality,” said Kevin Yang, head of bond investment in Taipei at Hontai Life Insurance Co., which has $6 billion in assets. “The Fed will maintain a low- interest-rate environment.” ‘Price Strength’ Treasury 10-year futures expiring in September advanced 0.1 percent to 134 22/32. Futures are “bullish” while they trade above a support level at 134, Richard Adcock , head of fixed-income technical strategy in London , wrote in an e-mailed note. This indicates “further price strength,” he said. A break above the record high of 134 31/32 reached on June 1 “will be the next bullish development,” he wrote, saying the next target level would be 135 28/32. The Fed under Bernanke bought $2.3 trillion of Treasury and mortgage-related debt to stimulate the economy. The central bank decided in June to extend a policy known as Operation Twist , where it sells short-term securities and uses the proceeds to buy longer-term debt, to $667 billion from $400 billion. The Fed is scheduled to buy as much as $2 billion of Treasuries maturing from August 2022 to February 2031 today as part of the plan, according to the Fed Bank of New York ’s website. Bernanke has also pledged to keep the central bank’s target for overnight bank lending at almost zero through at least late 2014. U.S. retail sales rose 0.2 percent last month, after dropping 0.2 percent in May, according to a Bloomberg News survey of economists before the Commerce Department report. Too Expensive The decline in yield made Treasuries too expensive for Roger Bridges at Tyndall Investment Management Ltd. “I wouldn’t buy them,” said Bridges, who oversees the equivalent of $15.3 billion of debt as the Sydney-based head of fixed income at Tyndall, a unit of Nikko Asset Management Co. The term premium , a model created by the Fed that includes expectations for interest rates , growth and inflation, showed Treasuries were the most expensive ever last week. The gauge fell to a negative 0.9617 percent, a record low. Vanguard Group Inc., whose $148.2 billion of Treasuries makes it the largest private owner of U.S. debt , says the nation has until 2016 to contain its borrowings before bond investors revolt and drive up interest rates. “In the absence of a long-term credible plan, we are somewhere around four years away on where the markets are going to say ‘enough is enough,’” said Robert Auwaerter, head of the Valley Forge , Pennsylvania-based Vanguard’s fixed-income group since 2003 and who this year was inducted into the Fixed Income Analysts Society Inc.’s Hall of Fame. The U.S. has avoided the turbulence rocking Europe , where five nations have sought bailouts as their borrowing costs soared because investors boycotted their bonds. Instead, they have sought U.S. assets as a haven because of the dollar’s status as the world’s primary reserve currency, pushing note yields to record lows even though the amount of public debt outstanding has grown to $15.9 trillion from less than $9 trillion in 2007. To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net ; Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net |
2024-03-23 | Bloomberg | Munich Re Falls After Scrapping 2011 Profit Target on Japan | Munich Re, the world’s largest reinsurer, fell as much as 3.1 percent in Frankfurt trading after scrapping its 2011 profit target on claims from the quake and tsunami in Japan. The shares dropped 1.2 percent to 108.70 euros at 5:05 p.m. They have declined 6.6 percent since March 10, the day before the record earthquake and tsunami hit Japan. Claims from Japan will reach about 1.5 billion euros ($2.1 billion), bringing losses from major natural catastrophes in the first quarter to more than 2.5 billion euros, “far exceeding the volume to be expected for this period,” the reinsurer said in a statement yesterday. “That means the profit target for 2011 of around 2.4 billion euros is no longer achievable.” Munich Re, which expects the highest claims among Europe ’s biggest reinsurers, on March 10 reiterated the full-year profit goal after disasters including the earthquake in New Zealand and Cyclone Yasi in Australia cost it about A$1.5 billion ($1.5 billion) in the first two months of the year. It said at the time that the target could only be reached, “if random losses in the further course of the year remain below expectations.” The next day the 9.0-magnitude earthquake hit Japan, triggering a tsunami and leaving more than 9,000 people confirmed dead. The Japanese government today estimated the damage at as much as 25 trillion yen ($309 billion), or almost four times the impact of Hurricane Katrina on the U.S. in 2005. Estimated Impact Catastrophe modeling firm Eqecat said on March 16 that insurers and reinsurers will probably have losses of $12 billion to $25 billion from the Japan earthquake and tsunami. Modeler AIR Worldwide had estimated insured losses of as much as 2.8 trillion yen ($35 billion) from the quake alone. Munich Re ’s preliminary claims figure is after retrocession and before tax, the company said. Reinsurers, which help protect primary carriers such as Allianz SE and Axa SA against the cost of major claims from disasters such as hurricanes and earthquakes, limit their own risks by selling parts of them to other reinsurers in a process known as retrocession. The reinsurer will shelve a plan to buy back 500 million euros of its own shares by the annual shareholders meeting in 2012, spokesman Michael Able said by telephone today. Munich Re will stick to a plan to buy back as much as 1 billion euros of stock before next month’s annual shareholder meeting, he said, adding that the company will also keep its proposal to raise the 2010 dividend by 50 cents to 6.25 euros a share. Swiss Re Claims Hannover Re , the world’s third-biggest reinsurer, estimated its claims from the earthquake and tsunami in Japan at about 250 million. The Hanover, Germany-based company’s shares lost 1.6 percent, bringing the decline since March 10 to 6.6 percent. Swiss Reinsurance Co., the world’s second-biggest reinsurer, said on March 21 it expects claims of about $1.2 billion and Scor SE (SCR) , the world’s sixth-largest reinsurer, estimated on March 14 its claims will be less than 185 million euros. To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Edward Evans at eevans3@bloomberg.net |
2024-03-23 | Bloomberg | Buffett Says India Insurance Ownership Limit Deters Berkshire Investment | Warren Buffett , visiting India for the first time, said the country’s 26 percent foreign ownership limit of insurance companies deters his Berkshire Hathaway Inc. (BRK/A) from making an investment in the industry. “India would be more attractive if we could buy more than 26 percent,” Buffett, Berkshire’s chairman and chief executive officer, said at a media conference in Bangalore yesterday. “That is a factor in the decision of not investing.” Buffett, 80, is seeking deals in the U.S. and abroad as earnings climb at Omaha, Nebraska-based Berkshire. He agreed this month to pay about $9 billion for engine-additive maker Lubrizol Corp. (LZ) and last year bought railroad Burlington Northern Santa Fe for $26.5 billion. Berkshire’s cash holdings rose to $38.2 billion as of Dec. 31, prompting Buffett to tell investors two months later that his “elephant gun has been reloaded.” The billionaire is seeking to expand into India to tap growth in Asia’s second-fastest growing major economy. India’s $1.3 trillion economy may expand by as much as 9.25 percent in the year starting April 1, the fastest pace since 2008, the finance ministry forecast last month. “We hope we spend some money here,” Buffett said. “I don’t consider India as an emerging market. We tend to look at larger countries like India, China, U.K., Brazil, Germany. Those all fit us.” Selling Insurance Berkshire, which started selling insurance to Indian consumers this month after forging an agreement with Bajaj Allianz General Insurance, will keep doing business in India in that form for the foreseeable future because of the foreign ownership cap, he said. India aims to raise the limit in the insurance industry to attract companies in the $41 billion market, Montek Singh Ahluwalia , deputy chairman of the nation’s Planning Commission, said in December. He didn’t give a timeframe. Allianz SE, Aviva Plc and ING Groep NV are among global insurers that will be able to invest in their Indian ventures if the limit is raised in an industry that the Life Insurance Council forecasts is expanding 34 percent annually. Nippon Life Insurance Co., Japan ’s biggest life insurer, on March 14 agreed to buy a 26 percent stake in India’s Reliance Life Insurance Co. to boost business overseas. Buffett, whose largest non-U.S. acquisition was the 2006 purchase of Israel’s Iscar Metalworking Cos., is traveling in South Korea and India to visit Berkshire’s operations and look for opportunities. Iscar, purchased for $4 billion, makes cutting tools. A stop in Japan was canceled after the March 11 earthquake and tsunami. He visited China in September. Buffett will meet customers of berkshireinsurance.com , its venture with Bajaj Allianz, on March 25. To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net ; Jay Shankar in Bangalore at jshankar1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-03-06 | Bloomberg | HSBC Hires Vineet Vohra to Head Asia-Pacific Wealth Management | HSBC Holdings Plc (HSBA) hired Vineet Vohra as head of its Asia-Pacific wealth management practice. Vohra joins HSBC after working for Australia & New Zealand Banking Group Ltd. (ANZ) , where he was also the Asia-Pacific head of wealth management. He left the Melbourne-based bank in January. In his new role, Vohra is the Hong Kong-based regional head of wealth development, HSBC said in an e-mailed statement yesterday. To contact the reporter on this story: Benjamin Garvey in Hong Kong at bgarvey8@bloomberg.net. To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net . |
2024-10-16 | Bloomberg | Manhattan District Attorney Names New Investigation Head | David Szuchman was named head of the investigation division of the Manhattan District Attorney’s office to succeed Adam Kaufmann, who is leaving for a job in the private sector. Szuchman, 40, will become chief of the unit on Nov. 15 to replace Kaufmann, 47, who is leaving the office at the end of the year, Manhattan District Attorney Cyrus R. Vance Jr. said today in a statement. Szuchman currently serves as chief of the cybercrime and identity theft bureau , and deputy chief of the investigation unit, Vance’s office said. A graduate of the University of Vermont and Hofstra Law School, Szuchman started his career as an assistant district attorney in Manhattan in 1997. He also worked for the state Attorney General’s Office, investigating and prosecuting complex fraud and antitrust cases, and as a federal prosecutor at the U.S. Justice Department’s Child Exploitation and Obscenity Section , according to Vance’s office. He was nominated by former New Jersey Governor Jon Corzine to become that state’s consumer affairs director, a post he held until he returned to the Manhattan District Attorney’s office in 2010 as chief of an expanded cybercrime and identity theft bureau, Vance’s office said. Under Szuchman’s leadership, the bureau “investigated and prosecuted major cyber fraud rings, theft of intellectual property, computer intrusions and malware attacks, and organized money laundering operations,” Vance said. Bank Probes Kaufmann, who has been with the district attorney’s office for 18 years, has headed the investigation division for three years and has supervised probes of sanctions violations by international banks that have led to $1.8 billion in fines and forfeitures. Vance’s office didn’t disclose where Kaufmann is going. The investigation division is a “recognized leader” in white-collar and organized crime prosecutions and also probes and prosecutes “more localized and traditional cases involving fraud and corruption,” such as embezzlement, insurance fraud and credit-card and check fraud, according to Vance’s website. “One of our core philosophies is that the Manhattan District Attorney’s Office has an obligation to police the financial markets to root out fraud,” according to a statement on Vance’s website. To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-11-02 | Bloomberg | Hartford Offers Buyouts to Annuity Clients to Trim Risk | Hartford Financial Services Group Inc. (HIG) is offering to pay some clients to give up retirement products as Chief Executive Officer Liam McGee works to reduce risks tied to stock market declines and free up capital. Holders of some variable annuities, which guarantee payouts, would be offered cash to give up the contracts, McGee said yesterday in an interview. The offer will be made to holders representing 45 percent of the Hartford, Connecticut- based company’s net amount at risk on the contracts, he said. Hartford is “examining every single possibility we can reasonably consider to accelerate the runoff of the book,” McGee, 58, said on a conference call with analysts today. “There’s no stone that’s being left unturned.” Insurers are scaling back from variable annuities as low interest rates and stock market declines weigh on their profits. MetLife Inc. (MET) , the largest seller of the contracts last year, said Oct. 31 that sales fell by 46 percent in the third quarter as it cut benefits. Axa SA (CS) ’s Axa Equitable and Aegon NV’s Transamerica said this year they are offering to pay clients to reduce risks tied to variable-annuity guarantees. “We are making this offer because high market volatility, declines in the equity markets and the low interest-rate environment make continuing to provide the Lifetime Income Builder II rider costly to us,” Hartford said in a filing yesterday with the U.S. Securities and Exchange Commission. “We would gain a financial benefit because we would no longer incur the cost of maintaining expensive reserves for the guarantees.” MetLife, Paulson McGee is divesting life-insurance operations to focus Hartford on property-casualty coverage, after pressure from billionaire investor John Paulson to simplify the company and boost the share price. The stock has rallied 31 percent this year after dropping 39 percent in 2011. In August, Christopher Giovanni, an analyst at Goldman Sachs Group Inc., asked whether McGee had considered paying customers to give up annuity guarantees. McGee responded that Hartford was exploring the possibility, and added that “there is no evidence yet that actually consumers will make that trade.” Today, Giovanni returned to the subject, asking whether customers will give up their contracts. “When we look at the offer that we’re making, we do think this will be attractive,” Beth Bombara, who leads Hartford’s life runoff operations, including the annuity business, said on the call. “So we do expect to see some take rate as it relates to this program once it’s launched.” Hartford dropped 66 cents, or 3 percent, to $21.26 at 4:02 p.m. in New York. To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomberg.net ; Noah Buhayar in New York at nbuhayar@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-04-24 | Bloomberg | Linea Directa Seeks Growth, Isn’t For Sale, Merino Tells Pais | Linea Directa, the insurance arm of Bankinter SA (BKT) , will seek to boost revenue by almost half to 1 billion euros ($1.46 billion) within four years, Miguel Angel Merino, the head of the company, told El Pais in an interview. Bankinter has no plans to sell Linea Directa, Merino told El Pais. Click here for web link To contact the editor responsible for this story: Charles Penty at cpenty@bloomberg.net |
2024-11-20 | Bloomberg | Russia Pulls Biggest Bank License of Year Over Dubious Transfers | Russia ’s central bank revoked the license of OAO Master-Bank, a retail lender where President Vladimir Putin ’s cousin serves on the board, after accusing it of repeatedly breaching money laundering laws. The Moscow-based lender, the biggest to lose its license this year, failed to comply with legislation, falsified accounting and was “involved in major suspicious transactions,” according to a central bank statement today. Bank Rossii is striving to clear the market of banks involved in dubious activities, seeking to curtail net capital outflow, which is forecast at $55 billion this year. The regulator is probing “many” banks and won’t ignore violations, Chairman Elvira Nabiullina said in October. “The process of cleaning up the banking system has intensified under Nabiullina,” Natalia Berezina, a banking analyst at UralSib Financial Corp. in Moscow, said by phone. The chairman started her term in June. Master-Bank had negative capital of at least 2 billion rubles ($61 million), Nabiullina told lawmakers today in the State Duma, the lower house of parliament. The payout on insured deposits will be less than 46 billion rubles, with distributions no later than Dec. 4, she said. The preliminary estimate is 30 billion rubles, the Prime news service reported, citing the Deposit Insurance Agency. Dubious Transactions Master-Bank is the 17th bank to lose its license since Nabiullina took the helm at the regulator, raising the total number of revocations to 23 this year, according to central bank data. During 2012, 23 licenses were pulled. Dubious transactions involving tax avoidance, theft of budget funds, bribes and kickbacks, money laundering , terrorism financing and drug-related operations, accounted for $38 billion of Russia’s $54 billion in net private capital outflow in 2012, former central bank Chairman Sergey Ignatiev said in June. The lender is the biggest in Russia to have its license revoked since Moscow-based International Industrial Bank in October 2010, three months after the lender controlled by lawmaker Sergei Pugachyov defaulted on foreign currency bonds, according to UralSib’s Berezina. It was the 72nd largest Russian bank by assets at the end of the third quarter, according to data compiled by Interfax. Master-Bank’s press service wasn’t available when Bloomberg called the number on its website. The lender has more than 1,100 automated teller machines and 3.4 billion rubles in capital, according to its website. The lender hired Igor Putin, a cousin of the president, as it sought to expand. To contact the reporters on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net ; Jason Corcoran in Moscow at jcorcoran13@bloomberg.net To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net |
2024-01-22 | Bloomberg | New York Regulator Drafting Rules for Bond Insurers | New York's insurance department is drafting stronger regulations to stabilize the market for bond insurers. Insurance Superintendent Eric Dinallo said in a statement today his office is drafting new regulations that would ``redefine'' the future activities of bond insurers. He said in an interview last week he is examining whether to limit the types of debt that can be guaranteed by bond insurers. Bond insurers including the two largest, MBIA Inc. (MBI) and Ambac Financial Group Inc. (ABKFQ) are struggling to find fresh capital and retain the AAA credit ratings that give them the financial credibility to guarantee bonds issued by state and local governments. Fitch Ratings last week cut Ambac's grade because of plummeting values of credit-default swap contracts it sold that guaranteed securities linked to subprime-mortgage bonds. ``It is clearly time to develop new rules for the road,'' Dinallo said an e-mailed statement today. ``The Department is engaged with insurers, banks, financial advisers, credit-rating agencies, other regulators and government officials, and other stakeholders in examining and developing measures to help stabilize the market.'' Credit-default swaps are unregulated, privately negotiated contracts traded between banks, securities firms, insurers, hedge funds and other institutional investors to speculate on a company's ability to repay debt. The market has grown to cover $45.5 trillion in bonds and loans. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to honor debt agreements. To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net. To contact the editor responsible for this story: Rick Green in New York at rgreen18@bloomberg.net . |
2024-08-01 | Bloomberg | Generali Second-Quarter Net Climbs 74% on Non-Life Business | Assicurazioni Generali SpA (UCG) , Italy’s biggest insurer, said second-quarter profit rose 74 percent as higher non-life earnings outweighed a drop at its life business. Net income climbed to 478 million euros ($634 million) from 274 million euros a year earlier, Trieste, Italy-based Generali said today. That matched the average estimate of six analysts surveyed by Bloomberg. Chief Executive Officer Mario Greco is selling non-strategic assets and refocusing on Generali’s core business to strengthen finances and boost profitability. The insurer is more than half way to its goal of raising 4 billion euros from asset sales by 2015, after selling its U.S. reinsurance unit and Mexican businesses. “Generali published mixed results,” Raphael Caruso, an analyst at Raymond James Euro Equities, wrote in an e-mailed report to clients. “Earnings were supported by the strong performance of the non-life insurance segment. Nonetheless, the life insurance segment’s earnings were significantly hampered by low investment results.” Generali shares declined 0.9 percent to 14.68 euros as of 11:49 a.m., giving the company a market value of 22.9 billion euros. The stock has advanced 6.8 percent this year compared with the 16 percent gain in the 30-company Bloomberg Europe 500 Insurance Index. Italian Operations “We have taken significant strides in strengthening our capital position and improving our operational and financial performance,” Greco, who took over as CEO last year, said in a statement. “Generali is more focused and profitable than it was a year ago and we are well on track to achieve the targets we have set ourselves,” he said, reiterating that Generali expects to report higher operating results this year. Generali yesterday replaced Raffaele Agrusti with Philippe Donnet as CEO of its Italian operations, which are being restructured. “The Italian unit restructuring starts now a new step to develop business, which will require several years,” Greco said on a conference call. “It was the right move to have a manager with long-term prospective.” Greco said Generali’s 6.8 percent stake in Telecom Italia SpA, Italy ’s biggest phone company, is among the assets that will be sold “ under right conditions.” Generali, which is the second-biggest shareholder of Telecom Italia, may consider exiting Telco SpA, the group controlling the phone company in September, even if “no decision has been taken yet,” Greco said. BSI Sale The Italian insurer is also selling its Swiss asset-management unit BSI Group as part of a plan approved in January. “BSI is a good asset and we want to sell non-core assets at the right price,” Greco said. “There is a complicated market at the moment, so a sale at a fair value takes time, requires negotiating, and this is what we are continuing to do.” Bankinter SA of Spain may buy BSI, CEO Maria Dolores Dancausa said in April. The firm offered 1.5 billion euros in partnership with U.S.-based Apollo Global Management, Swiss newspaper L’Agefi reported in March. Generali has said the unit has a book value of 2.3 billion euros. “The company is on track to achieve attractive earnings growth and returns, driven by the ongoing restructuring,” Michael van Wegen, an analyst at Bank of America Merrill Lynch, wrote in a note to clients. “Although the Italian macro remains challenging, in our view Generali still is an attractive investment case for investors comfortable with exposure to Italy.” Mixed Results Non-life operating profit increased 23 percent to 389 million euros as the insurer reduced costs. Claims and costs as a proportion of premiums, known as the combined ratio, improved to 94.7 percent in the first half from 97.1 percent a year earlier. Total operating earnings rose 1.7 percent to 1.05 billion euros in the second quarter from a year earlier as profit at the life business fell almost 13 percent to 683 million euros. Generali’s solvency ratio, a measure of its capacity to absorb losses, rose to 139 percent by June 30 from 130 percent a year earlier, the insurer said. As of mid-July, the ratio was 142 percent, excluding a contribution from the sale of Mexican minorities and U.S. assets, the company said. Generali was one of nine insurers designated systemically important by global financial rule makers last month, which may mean it will face tougher capital standards and tighter regulation. Greco said today the implications of being a systemically important insurer aren’t clear and that the company may not be included on the list in the future. Generali was put on the list because of its non-insurance activities, said Greco, adding that “the position in that list might change over time as they are focusing on core insurance activities, and disposing of non-core assets.” To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net ; Francesca Cinelli in Milan at fcinelli@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-03-08 | Bloomberg | Banks Shouldn’t Be Both Judge and Jury on Credit Defaults: View | Imagine you bought a house and, to insure it, you had to purchase coverage from the homebuilder. Then imagine a fire nearly destroyed the house, but your ability to collect the insurance depended on a committee of anonymous homebuilders meeting in secret to vote on whether to write you a check. If denied, the panel wouldn’t have to provide an explanation, you wouldn’t be allowed to review the minutes of closed-door discussions and you’d have no right to appeal. Not a great system. But not dissimilar to the one that governs the world of credit-default swaps, the contracts that insure sovereign- and corporate-debt investors against default. Panels made up of representatives from large banks, hedge funds , investment firms and other interested parties, formed by the International Swaps and Derivatives Association , decide whether payouts will be made to investors. With the Greek crisis, the group has been busy. It already ruled March 1 that Greece’s debt restructuring so far wasn’t a “credit event,” meaning it didn’t trigger payments on credit- default swaps. It may have been the correct decision. But no outsiders participated in that meeting. No transcript was made public. And when the determinations committee, as it’s called, issued a decision, a terse 300-word explanation was provided. As for CDS buyers, there was no opportunity for an appeal. Names Unknown Although the names of the firms on this committee are known, including JPMorgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley and Pacific Investment Management Co., the individual decision makers are not. What’s more, the financial stake that the firms have in Greek debt is not disclosed, although that information is sometimes available in regulatory filings. True, only a relatively small amount of money -- about $3.2 billion after netting all parties’ exposures -- is in play. But there’s a larger issue here: the integrity of the ISDA process, of which Greece offers the first of several potential tests. If Ireland, Italy, Portugal , Spain or any other troubled European Union country sought to restructure its debts like Greece, the heretofore obscure ISDA could become a household name. The next test could come as early as Thursday evening, when private bondholders must decide whether they are willing to swap existing Greek debt for new bonds, in the process accepting losses on more than half the face value of their current bonds. If the Greek government doesn’t get 75 percent acceptance, it will invoke a legal clause to force all private creditors to accept the exchange. If that happens, then ISDA may have no choice but to declare the restructuring coercive, not voluntary, and trigger the CDS payouts. Binding Contracts ISDA defends its procedures, arguing that its panelists must have market expertise. Five of the 15 members on the Greek CDS committee are from the buy side, meaning they represent investors such as mutual funds. A supermajority, 12 of the 15, is required for a credit event decision, meaning that the 10 sell-side panelists -- representing mostly major banks -- can’t ram through a decision that benefits only them. Furthermore, ISDA says, a CDS is a binding, legal contract to which all market participants have agreed. Little is left to the imagination: Definitions of credit events and other legal terms are 100 pages long. The CDS market, thanks to ISDA and pressure from the New York Fed, already operates far more smoothly than it did just a few years ago. Until 2009, the question of whether a credit event had occurred was duked out between each CDS buyer and seller. A major default could have brought financial disaster. Still, the CDS market would benefit further if ISDA deliberations were made public -- minutes could even be released a week or two after the fact, the way the Federal Reserve publishes its monetary policy deliberations. More to the point, monumental decisions involving billions of dollars ideally should be made by an outside, independent group. ISDA already has such groups in the wings, but it uses them only in case a determinations committee can’t get agreement from a supermajority and needs to hand off the matter to a neutral panel. In any market, secrecy begets fear. The credit markets must be supremely confident that judgments about credit events are made in good faith. And investors must believe they are being dealt with fairly. If they think default insurance no longer protects them, they might simply avoid owning the bonds of Ireland, Italy , Portugal and Spain, undermining the CDS market and endangering those countries’ ability to survive the debt crisis. Read more opinion online from Bloomberg View. To contact the Bloomberg View editorial board: view@bloomberg.net . |
2024-06-27 | Bloomberg | OppenheimerFunds Sues Doux, Questions JBS Leasing Deal | OppenheimerFunds Inc., the U.S. investment fund that manages about $208 billion, sued Doux SA in New York , claiming it’s owed almost $74 million by the French poultry producer placed under administration. OppenheimerFunds, in a case against Doux in State Supreme Court in Manhattan , seeks $62.5 million in principal owed under a $100 million loan agreement in 2008, along with more than $11 million in interest. OppenheimerFunds also started proceedings to gain ownership of a poultry plant in Brazil that serves as collateral for loans, said Fernando Ferreira, an attorney at Sao Paulo-based law firm Santos Neto Advogados, which represents the unit of Massachusetts Mutual Life Insurance Co. “The Passo Fundo poultry plant in Brazil is a collateral for loans and Doux could never have leased the plant without our consent,” Ferreira said yesterday in a phone interview from Sao Paulo. “It’s a clear violation of our rights over the plant.” In May 2012, Chateaulin, France-based Doux leased all of its Brazil plants, including the Passo Fundo unit, to JBS SA (JBSS3) , the world’s largest poultry producer, for 10 years. OppenheimerFunds, based in New York, has never received any proceeds from the lease agreement, Ferreira said. “The fact that JBS is partially owned indirectly by the Brazilian government further exacerbates OppenheimerFunds’ concern and frustration, as it is unclear to us whether the government has notice of and supports such questionable legal practices,” OppenheimerFunds said in an e-mailed statement in response to questions. Creditors Protection Doux was placed under court administration on June 1 after failing to pay debt estimated to be at least $550 million, Ferreira said. Doux’s chief executive officer in Brazil, Aristides Vogt, and its legal counsel, Matheus Brenner, didn’t immediately respond to e-mails seeking comment on the lawsuit filed June 6. JBS agreed to lease the plants and isn’t taking on debt incurred by Doux, according to an official, who can’t be named because of company’s policy. The case is Oppenheimer International Bond Fund (OIBAX) v. Doux Frangosul SA Agro Avicola Industrial, 652015/2013, New York State Supreme Court, New York County (Manhattan). To contact the reporters on this story: Lucia Kassai in Sao Paulo at lkassai@bloomberg.net ; Chris Dolmetsch in New York State Supreme Court in Manhattan at cdolmetsch@bloomberg.net To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net ; Michael Hytha at mhytha@bloomberg.net |
2024-05-14 | Bloomberg | Iran Ship Insurer Says Asian Operators Asking to Cover Tankers | An Iranian organization that insures ships against risks such as spills and collisions has been approached by Asian tanker operators about covering their vessels, the group’s managing director said. Chinese and Taiwanese companies that manage tankers have inquired about obtaining insurance for tankers hauling crude oil, refined fuels or chemicals from the Kish Protection & Indemnity Club , Mohammad Reza Mohammadi Banayi, managing director, said today. The club, which covers 43 Iranian ships, isn’t authorized to insure foreign vessels, he said. “We are in a position to step in but we are not authorized to do so,” Banayi said by phone from Tehran. “We have been contacted by lots of people in different parts of the world.” Asian shippers are seeking new sources of insurance for Iranian cargoes because the European Union’s embargo extends to 95 percent of the world’s tankers that are covered by the 13 members of the London-based International Group of P&I Clubs. Ship owners in Japan and India have asked for sovereign guarantees. The government in China , Iran’s largest customer, has underwritten some Iranian shipments, the International Energy Agency said in March. Sanctions by Western nations against Iran over its nuclear program have cut the Persian Gulf country’s shipments to 1.8 million barrels a day in April, according to the IEA. That compares with an average of 2.2 million in 2010, according to the U.S. Department of Energy. Crude oil traded in London rose as much as 19 percent this year to $128.40 a barrel and was at $110.36 a barrel by 11:32 a.m. The Kish P&I Club covers tankers as well as ships carrying dry-bulk commodities, according to its website. It can cover liabilities for as much as $500,000 and reinsure losses for as much as $1 billion within the Iranian insurance market headed by the Central Insurance of Iran , it said. To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net |
2024-04-22 | Bloomberg | U.S. Stocks Dominate Global Equities the Most Since 2004 | The combination of this month’s retreat in global equities and gains by U.S. consumer stocks has made American companies the five biggest in the world for the first time in eight years. Exxon Mobil Corp. (XOM) , Apple Inc. (AAPL) , Google Inc., Berkshire Hathaway (BRK/A) Inc. and Wal-Mart Stores Inc. (WMT) are now the largest by market value, according to data compiled by Bloomberg. PetroChina Co., one of three Chinese stocks in the top five last year, slipped to No. 6. Two companies that relied on banking profits, Citigroup Inc. and General Electric Co., fell out since American firms last held the leading spots at the end of 2004. The shift in the rankings, a barometer of investor expectations for profits and economic growth, shows increasing confidence in Federal Reserve Chairman Ben S. Bernanke ’s $2.3 trillion of stimulus spending. Gains in retailers, computer- device makers and media companies have preceded increases in gross domestic product in the past as markets anticipated improving consumer demand. “U.S. authorities have done an incredible job of maintaining the recovery and encouraging the consumer,” said Henk Potts , who helps oversee $282 billion as an equity strategist at Barclays Wealth in London. His team ranks U.S. shares as their top asset for 2013. “An aggressive policy is working. The U.S. consumer is in great shape. That trend continues to be very supportive of economic growth.” Weekly Loss The Standard & Poor’s 500 Index fell 2.1 percent to 1,555.25 last week, its biggest loss in five months, as concern the Fed will end its stimulus through bond buying sent copper into a bear market and oil down 3.6 percent. Of 103 companies in the S&P 500 that posted earnings this month, 51 percent trailed analyst sales forecasts, the most since 2009. Since 2010, the stock market’s biggest retreats have started this time of year. The S&P 500 fell 9.9 percent between April 2 and June 1 in 2012, and 19 percent from April through October 2011. The benchmark gauge climbed 0.5 percent to 1,562.50 at 4 p.m. New York time today. Stocks with profits tied to American consumers have led a 130 percent advance in the S&P 500 since March 2009 after trailing the index in the last bull market. Wal-Mart, the world’s biggest retailer, jumped 15 percent this year. Berkshire Hathaway, the largest investor in Coca-Cola Co., is up 17 percent. Largest Stocks The rise of U.S. companies in world rankings comes as the largest stocks in the world shrink. The average market value of the 10 biggest was $273 billion this week, a 9.2 percent decline from the end of the third quarter, even as the S&P 500 rose 5.8 percent in the period and the MSCI All-Country World Index of developed and emerging economies advanced 6.2 percent. No company in the world is worth more than $400 billion for the first time since 2011. The balancing shows the breadth of the global rally. Unlike in the 1990s, when gains were concentrated in the largest companies, the advance since 2009 has been spread evenly among the S&P 500’s constituents. A gauge that strips out market bias in calculating the S&P 500’s return is up 190 percent since March 2009, or 1.5 times as much as the market-weighted gauge. Economic reports this month slowed the rally. The S&P 500 fell 0.4 percent on April 5 after the Labor Department said employers added the fewest workers in nine months. It fell 0.3 percent a week later, when March retail sales unexpectedly fell, according to the Commerce Department. In the days between the reports, shares gained 2.6 percent. Chinese Companies U.S. companies got bigger as Chinese stocks shrunk. Losses averaged 9 percent this year in three equities that occupied the top five as recently as September: Beijing-based PetroChina (857) , Industrial & Commercial Bank of China Ltd. the world’s most profitable lender, and China Mobile Ltd. (941) , the largest phone company by users, data compiled by Bloomberg show. Economic expansion growth in China unexpectedly lost momentum last quarter as gains in factory output and consumption weakened, government figures April 15 showed. GDP rose 7.7 percent, less than the 8 percent median of economists’ forecasts. Hong Kong’s Hang Seng Index (HSI) lost 7.6 percent since Jan. 30, while the Shanghai Stock Exchange Composite Index fell to an almost four-year low in December. “ China’s economy has failed to live up to the expectations priced into its stock market,” said Howard Ward, chief investment officer at Rye, New York-based Gamco Investors Inc., which oversees $36.7 billion. “Our economy has generally exceeded very low expectations.” The U.S. is “the better risk/reward option,” he said. Fed Debate Concern the slowdown will hurt global growth just as the Fed debates ending the bond-buying program known as quantitative easing has sent the S&P 500 down 2.4 percent since reaching a record on April 11. U.S. profit growth slowed last year to a quarterly average of 4.7 percent, less than one-fifth the rate during 2010 and 2011, data compiled by Bloomberg show. “We need global GDP growth, we can’t do it in the U.S. alone,” Barry Bannister, equity strategist at Stifel Nicolaus & Co. in Baltimore, said in an April 17 phone interview. “We are not going to hit new highs without global GDP.” The International Monetary Fund cut its 2013 world growth projection the last four quarters to 3.3 percent. That compares with 4.8 percent for 2012 and 5.7 percent in 2011, IMF data compiled by Bloomberg show. PetroChina Passed The U.S. took over the biggest-companies ranking this month when Wal-Mart’s 4.6 percent gain sent its market value to $258 billion, passing PetroChina. Shares of the store chain have risen 6 percentage points more than the S&P 500 in 2013, reaching a record high last week. The retailer may say in May that first-quarter earnings rose 5 percent, according to analyst estimates. Berkshire Hathaway, the Omaha, Nebraska-based holding company run by billionaire Warren Buffett , climbed 17 percent this year to become the world’s fourth-largest at $259 billion. Buffett said March 1 that Berkshire’s five most profitable non- insurance units , which include toolmaker Iscar and chemical company Lubrizol, will boost earnings in 2013. Apple became the world’s most valuable company in January 2012, a spot it held for 12 months as consumer demand for its iPhones and iPods helped more than double profits on record revenue. At its largest in September 2012, the Cupertino, California-based company was worth $658 billion, exceeding its closest peer, Exxon, by about $240 billion. The 44 percent drop since then left it at $374 billion, No. 2 on the list. Google Rally Google (GOOG) increased 13 percent since the end of 2012 and its market capitalization reached a record $278 billion in March. The Mountain View , California-based company, a member of the S&P 500 technology group , is up 4.4 percent since it reported profits last week that topped analyst projections as advertisers boosted spending on mobile and video promotions. Gains in consumer stocks have preceded above-average economic growth in past bull markets. Following quarters in which they rallied the most or second-most in the S&P 500, GDP expanded 3.1 percent, compared with the historic average of 2.9 percent, according to data since 1990 compiled by Bloomberg. Consumer companies are beating analyst earnings estimates by 4.3 percent so far this season, about 0.5 percentage point more than the rate for the S&P 500. Of the 15 companies that have reported, 11 have exceed analyst estimates. Lennar, Mattel Lennar Corp. (LEN) , the third-largest U.S. homebuilder, hit an almost six-year high in March after posting better-than- estimated profit and a 34 percent jump in orders. Mattel Inc. (MAT) last week climbed the most in three months after the world’s largest toymaker said profit and revenue beat estimates. Out of the world’s top 50 companies by market value, 26 are now American. That’s on track for the highest annual total since 2005. The number fell to 21 at the end of 2007, from as high as 35 in 2001, as losses in so-called subprime debt roiled financial firms and pushed the U.S. into a recession. “The U.S. looks like a bright spot within the developed world,” said Tristan Hanson, who helps oversee about $1.5 billion as head of asset allocation at Ashburton Ltd. in London. “The housing market is recovering, credit is recovering, the labor market is recovering. You may be a bit frustrated with the pace, but there is recovery there.” To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net ; Whitney Kisling in New York at wkisling@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-09-06 | Bloomberg | Chrysler Names Two Directors, Elects Sergio Marchionne Board Chairman | Chrysler Group LLC, the U.S. automaker majority-owned by Fiat SpA (F) , named two new directors and elected Sergio Marchionne , chief executive officer of both automakers, as Chrysler’s chairman. Chrysler said it named Leo Houle and John Lanaway as independent directors, effective immediately. The directors appointed yesterday replace Robert Kidder, George Gosbee and Scott Stuart, who have decided to resign. Marchionne is “just consolidating his position,” Gerald Meyers, a business professor at the University of Michigan , said in a telephone interview yesterday. “They will resoundingly underscore what Marchionne wants to do.” Marchionne had said he expected to make changes to Chrysler’s board by the end of August. Fiat took a 53.5 percent stake on a fully diluted basis in July when it purchased the remaining U.S. Treasury and Canadian governments’ stakes in the Auburn Hills, Michigan-based company. Houle retired in July 2008 from BCE Inc. (BCE) and Bell Canada as chief talent officer. Lanaway was executive vice president and chief financial officer of North America for McCann Erickson until June. Houle and Lanaway were both elected to the board of CNH Global NV in 2006. The agricultural and construction equipment business is majority owned by Fiat Industrial SpA, which was spun off from Fiat last year. Merger Plans Marchionne, 59, aims to merge Fiat and Chrysler to reduce costs and generate more than 100 billion euros ($140 billion) in revenue by 2014. He said in May that timing hasn’t been decided, adding that it’s not likely this year. In July, he created a 22- person group executive council, including himself, to run both automakers. Chrysler emerged from bankruptcy in June 2009 and had nine board members. Three were appointed by Fiat, then holding a 20 percent stake, four by the U.S. government, one by the Canadian government and one by the United Auto Workers retiree health- care trust. The Turin, Italy-based automaker plans to own 58.5 percent by year’s end. The UAW’s trust holds the remainder. The U.S. originally picked 3Stone Advisors LLC Chief Executive Officer Kidder; Stuart, founding partner of Sageview Capital LLC and former partner at Kohlberg Kravis Roberts & Co.; former Northwest Airlines Corp. Chief Executive Officer Douglas Steenland; and Ronald Thompson, chairman of the board of trustees for Teachers Insurance and Annuity Association. Steenland and Thompson remain on the board; Thompson was elected lead director, Chrysler said yesterday. Gosbee, chairman and CEO of investment bank Tristone Capital Inc., was appointed by Canada. Former Michigan Governor James Blanchard, a Democrat, was selected by the UAW trust. Marchionne, Alfredo Altavilla and Stephen Wolf, chairman of R.R. Donnelley & Sons Co. and former chairman and CEO of UAL Corp. and US Airways Group Inc., represent Fiat. To contact the reporter on this story: Tim Higgins in Southfield, Michigan at thiggins21@bloomberg.net To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net |
2024-06-30 | Bloomberg | China's Stocks Decline to 14-Month Low on Concern About Economic Slowdown | China’s stocks fell, sending the benchmark index to the lowest in more than 14 months, on concern economists may reduce their growth forecasts for the nation because of policy tightening measures and the Europe debt crisis. Jiangxi Copper Co. and Zhuzhou Smelter Group Co. led declines among raw-material producers after metal prices retreated. Poly Real Estate Group Co. , the second-largest developer by market value, dropped 3.8 percent. China Cosco Holdings Co. , the world’s biggest operator of dry-bulk ships, slid 1 percent on concern shrinking global trade will reduce demand for marine transport. “The market’s expectations for economic and earnings growth are growing more pessimistic and these worries will probably become true in the next few months with data coming out,” said Wu Kan , a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “The Shanghai index will fall below 2,300 in this round of corrections.” The Shanghai Composite Index , which tracks the bigger of China’s stock exchanges, slid 28.68, or 1.2 percent, to close at 2,398.37, the lowest since April 9, 2009. The CSI 300 Index fell 1.1 percent to 2,563.07. The Shanghai Composite has tumbled 23 percent this quarter, capping the biggest loss since the three months to March 2008, as policy makers tightened rules for the property market and concern grew that Europe’s austerity measures will hurt demand in China’s largest export destination. The equity index is the world’s third-worst performer this year, down 27 percent. Conference Board China’s stocks tumbled the most in six weeks yesterday after the Conference Board yesterday revised down its April leading economic index due to a “calculation error.” Global equities slumped after China’s rout and a gauge of U.S. consumer confidence dropped more than estimates. President Barack Obama said the U.S. economy is strengthening even as it faces “headwinds” from the European debt crisis. A third of China economists may reduce their “overly bullish” growth forecasts for 2010 and 2011 in coming weeks because of property tightening measures, Ting Lu , a Hong Kong- based economist at Bank of America-Merrill Lynch, wrote in a note to clients. Growth will slow to 9.6 percent in the third quarter and 9 percent in the following three months, from 10.5 percent in the second quarter, according to 21 economists surveyed by Bloomberg. The economy expanded 11.9 percent in the first quarter, the fastest pace in almost three years. “We’re beginning to see recession signals in China,” Jim Walker , managing director at Asianomics Ltd., said on Bloomberg Television from Singapore. Manufacturing Outlook The Federation of Logistics and Purchasing tomorrow may say China’s manufacturing expanded at a slower pace in June. The Purchasing Managers’ Index probably fell to 53.2 from 53.8 in May, according to a survey by Bloomberg News. The figure is due 9 a.m. tomorrow. Jiangxi Copper, China’s biggest producer of the metal, fell 5.7 percent to 24.06 yuan. Zhuzhou Smelter, China’s biggest producer of refined zinc, lost 2.7 percent to 9.38 yuan. Aluminum Corp. of China Ltd. , the nation’s biggest maker of the lightweight metal and also called Chalco, slid 3 percent to 9.17 yuan. The Reuters/Jefferies CRB Index of 19 raw materials tumbled 2.8 percent, the most since Aug. 14. China Cosco dropped 1 percent to 8.73 yuan. China Shipping Development Co., a unit of China’s second-biggest sea-cargo group, lost 1.1 percent to 8.20 yuan. The Baltic Dry Index , a measure of commodity-shipping costs, 1.4 percent to 2,447 points yesterday, according to the Baltic Exchange in London, for a 23rd consecutive decline. Further Declines “Stocks will decline further,” said Li Jun , a strategist at Central China Securities Holdings Co. in Shanghai. “We’ll soon see slowing economic data in July and there’s no sign of a reversal in the tightening policies.” Poly Real Estate, the second-largest developer by market value, fell 3.8 percent to 10.23 yuan. Shenzhen Overseas Chinese Town Holdings Co. , a manager of theme parks in China, tumbled 9.8 percent to 11 yuan after the company said an accident at a unit’s amusement ride killed six people. Chinese stocks are still the most “overvalued” in Asia excluding Japan, even after a drop in the market’s premium to the region, according to Credit Suisse Group AG. The Shanghai Composite’s premium to the rest of Asia has slipped to 34 percent from 84 percent on Dec. 31, based on a model comparing price to book value against return on equity, Credit Suisse analysts Sakthi Siva and Kin Nang Chik wrote. Buy Signals China looks like a buy by almost any measure, according to top-ranked analysts of the Asian nation’s shares. Morgan Stanley, BNP Paribas SA and Nomura Holdings Inc. say stocks will rally as China’s June 19 decision to end the yuan’s two-year peg to the dollar helps curb inflation and asset bubbles. The Shanghai index rose 62 percent in 12 months after China last allowed a more flexible exchange rate in July 2005. The Shanghai Composite’s plunge this year sent its price- earnings ratio to 18, the lowest level versus the MSCI Emerging Markets Index in a decade. The largest owners of yuan- denominated stocks have turned net buyers for the first time since equities bottomed in 2008, while international investors are paying the biggest premium in 21 months to bet on a rally in funds that hold China’s yuan-denominated or A shares, data compiled by Macquarie Group Ltd. and Bloomberg show. The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names. Founder Technology Group Corp. (600601 CH), a manufacturer of computer products, gained 3.3 percent to 4.77 yuan. Existing shareholders who hold the company’s stock until July 1 will be able to buy three shares for every 10 held at 2.20 yuan each in a rights offer, the company said. Sany Heavy Industry Co. (600031 CH), China’s biggest maker of machinery for handling concrete, added 2 percent to 18.27 yuan, the most in a week. The company said its parent will increase its holdings in the listed unit in the next six months if prices don’t exceed 20 yuan apiece. Yunnan Baiyao Group Co. (000538 CH), a manufacturer of traditional Chinese medicines, jumped 5.4 percent to 64.50 yuan, the biggest gain since April 23, after saying first-half profit may rise as much as 70 percent from a year earlier. -- Zhang Shidong. Editors: Allen Wan , Richard Frost To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net |
2024-07-07 | Bloomberg | Trade Secret, Medical Staffing, Eco2, St. Vincent, Rangers: Bankruptcy | Trade Secret Inc. , a 612-store beauty-supply retailer based in Markham, Canada, filed a Chapter 11 petition yesterday in Delaware along with a term sheet to sell the business to former owner Regis Corp. and an entity controlled by the family that bought the company from Regis in January 2009. The $45 million price is to be paid by a credit against the $32 million in secured debt owing to Edina, Minnesota-based Regis and the assumption of $13 million in debt. The term sheet is to be converted into a formal purchase agreement. Trade Secret, along with its affiliates, is asking the bankruptcy court to set up sale procedures calling for other offers by Aug. 20 and an auction on Aug. 25, followed the next day by a hearing to approve the sale. Brian Luborsky , the chief executive officer of the family- owned unit, said in court papers that the bankruptcy was caused in part by the recession and the decline in discretionary spending. Some stores were losing money before the acquisition, and some leases are above market, he said. Trade Secret also operates under the names Beauty Express, BeautyFirst and Pure Beauty. The stores, mostly in shopping malls, generate 87 percent of revenue through product sales. The remainder is from salon services. Revenue for the fiscal year ended in January was $220 million. Luborsky said in a court filing that the bankruptcy court will be used to terminate 80 leases. Rent must be reduced on other stores for them to be viable, he said. The Luborsky family also owns Premier Salons Inc. Neither Premier nor any of its 340 stores are in bankruptcy. The case is In re Trade Secret Inc., 10-12153, U.S. Bankruptcy Court, District of Delaware (Wilmington). Watch List Skilled Healthcare Hit with $671 Million Jury Award Skilled Healthcare Group Inc. , an operator of 78 nursing homes and 22 assisted living communities, was hit for $613 million in statutory damages by a California jury yesterday for not maintaining minimum nursing staff at 22 facilities. The jury also assessed $58 million in damages for restitution. The jury is yet to consider whether to impose punitive damages. The Foothill Ranch, California-based company said in a statement that was “deeply disappointed” by the verdict and believes its facilities were “appropriately staffed.” The company vowed to “vigorously pursue” motions in the trial court to reverse the verdict and to appeal if necessary. Skilled Nursing, which has operations in seven states, said taking an appeal would require posting a bond for 150 percent of the verdict. There is currently $94 million available on the revolving credit, although availability may be limited by covenants in the loan, the company said. Revenue of $759.8 million in 2009 resulted in a net loss of $133.2 million. For the first quarter of 2010, net income was $8.9 million on revenue of $189.3 million. The balance sheet at March 31 showed current assets of $131.4 million among total assets of $859 million. Current liabilities were $91.7 million. Total liabilities were $574.7 million. The stock closed yesterday at $6.22 on the New York Stock Exchange, down 31 cents a share. Molecular Insight, Cancer-Drug Developer, May Reorganize Molecular Insight Pharmaceuticals Inc. , a developer of therapeutic and imaging radiopharmaceuticals for cancer treatment, for a fourth time has a forbearance agreement with bondholders. The new expiration date is July 16. The Cambridge, Massachusetts-based company says it’s talking with bondholders about a debt-for-equity exchange. MIP’s only income is less than $1 million from development grants. Operating expenses in the first quarter were $10.4 million. The balance sheet at the end of the first quarter had assets on the books for $74.6 million and current liabilities of $184.6 million. New Filing Medical Staffing Files for Sale to First-Lien Lenders Medical Staffing Network Holdings Inc. , a Boca Raton, Florida-based provider of temporary nursing services, filed a Chapter 11 petition July 2 in West Palm Beach, Florida, to sell the business in exchange for $84.1 million in debt to first-lien lenders owed $98.2 million. The agreement for sale to the senior lenders has consent from holders of 90 percent of the $26.8 million in second-lien debt. The buyers are to assume the $15 million loan to be made by existing lenders to sustain the Chapter 11 case. General Electric Capital Corp. is the agent for the senior lenders. NexBank SSB is agent for the junior secured lenders. To determine if there is a better offer, Medical Staffing is asking the bankruptcy judge to set up an auction on Aug. 19, with a hearing the following day for approval of the sale. Warburg Pincus Private Equity VIII LP owns 45 percent of the equity of Medical Staffing. The company was created through 30 acquisitions since founding in 2008. The petition listed assets of $87.8 million against debt totaling $140.9 million. Revenue of $341 million in 2009 resulted in an operating loss of $34.3 million. Revenue of $72 million in the first quarter of 2010 threw off a $1.3 million operating loss. Projected revenue for 2010 is $302 million. To read about the sale and projected bankruptcy when it was originally announced, click here for the June 16 Bloomberg bankruptcy report. The case is In re Medical Staffing Network Holdings Inc., 10-29101, U.S. Bankruptcy Court, Southern District of Florida (West Palm Beach). Molecular Insight, Cancer-Drug Developer, May Reorganize Molecular Insight Pharmaceuticals Inc. , a developer of therapeutic and imaging radiopharmaceuticals for cancer treatment, for a fourth time has a forbearance agreement with bondholders. The new expiration date is July 16. The Cambridge, Massachusetts-based company says it’s talking with bondholders about a debt-for-equity exchange. MIP’s only income is less than $1 million from development grants. Operating expenses in the first quarter were $10.4 million. The balance sheet at the end of the first quarter had assets on the books for $74.6 million and current liabilities of $184.6 million. Updates Visteon Suppliers Claim Right to Block Plan Approval Auto-parts maker Visteon Corp. may be unable to confirm the reorganization plan if a group of creditors are correct and can deliver “no” votes by holders of 60 percent of $167 million in debt owing to trade suppliers. A negative vote by trade suppliers may squelch Visteon’s effort to give some of the new stock to existing shareholders, or could block the plan entirely for some subsidiaries. To read Bloomberg coverage, click here. Visteon has a 10-day confirmation hearing scheduled to begin Sept. 28. Shareholders and some creditors are opposing the plan. For details on Visteon’s plan, click here for the June 15 Bloomberg bankruptcy report. For a summary of the positions by various parties before the judge approved the disclosure statement, click here for the May 25 Bloomberg bankruptcy report. Visteon filed for reorganization in May 2009, listing assets of $4.6 billion against debt totaling $5.3 billion. Sales in 2008 were $9.5 billion, including $3.1 billion to Ford Motor Co. Visteon was spun off from Ford in 2000. Van Buren Township, Michigan-based Visteon at the outset owed $2.7 billion for borrowed money, including $1.5 billion on a secured term loan, $862 million on unsecured bonds, and $214 million on other debt obligations. The case is In re Visteon Corp., 09-11786, U.S. Bankruptcy Court, District of Delaware (Wilmington). Funds Claim WaMu Fraud on Trust Preferred Securities A group of funds that purchased $1 billion of trust preferred securities issued by bank holding company Washington Mutual Inc. asked the bankruptcy court to declare that they continue holding the collateralized securities. The funds want the bankruptcy judge to rule that the trust preferred securities were never properly converted into equity immediately before WaMu’s bank was taken over and sold. Plaintiffs in the lawsuit begun yesterday in U.S. Bankruptcy Court in Delaware include funds affiliated with Black Horse Capital Advisors LP, Greywolf Capital Partners, Lonestar Partners LP, Riva Ridge Capital Management LP and Whitebox Advisors LLC. The plaintiffs contend that there was collusion between WaMu and the Office of Thrift Supervision that voids the conversion of the trust preferred securities into equity. They also argue that offering materials accompanying the securities failed to disclose the unsound manner in which WaMu’s bank was being run. They say there was an improperly undisclosed agreement to downstream the trust preferred securities to the failing bank rather than retain them at the holding company level. The funds contend that upholding their theory, coupled with success by the WaMu holding company in other lawsuits, would result in full payment to WaMu’s creditors. WaMu has a hearing scheduled tomorrow for approval of the disclosure statement explaining the Chapter 11 plan that incorporates a controversial settlement with the Federal Deposit Insurance Corp. and JPMorgan Chase & Co. The settlement and plan confirmation would enable WaMu to distribute more than $7 billion to creditors. To read about the settlement, click here for the May 24 Bloomberg bankruptcy report. Click here to read the May 18 Bloomberg bankruptcy report for a summary of WaMu’s plan. Shareholders and bank bondholders say WaMu and the Federal Deposit Insurance Corp. are giving up too cheaply and should continue lawsuits with JPMorgan. The WaMu holding company filed under Chapter 11 in September 2008, one day after the bank subsidiary was taken over. The bank was the sixth-largest depository and credit-card issuer in the U.S. and the biggest bank failure in the country’s history. The holding company filed formal lists of assets and debt showing property with a total value of $4.49 billion against liabilities of $7.83 billion. The holding company Chapter 11 case is Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington). Fairfield Residential Confirms Reorganization Plan Fairfield Residential LLC, a developer of multifamily housing, persuaded the bankruptcy judge at a hearing yesterday to approve the reorganization plan. For Bloomberg coverage of the hearing, click here. Brookfield Asset Management Inc. is providing $180 million in new-money financing for the plan, which includes a $19.5 million distribution for Fairfield’s unsecured creditors. Brookfield’s investment includes working capital, a follow-on investment, a revolving credit and $100 million as a limited partner co-investor. Fairfield’s Chapter 11 petition in December listed assets of $958 million and debt totaling $835 million as of Sept. 30. The San Diego-based company and its non-bankrupt affiliates have 200 projects in 40 markets, ranging from raw land to completed developments. When the Chapter 11 case began, debt at the parent level included $33.7 million on a revolving credit and a matured $45.8 million term loan owing to a group with Capmark Finance Inc. as agent. At the parent level, there was another $18.2 million owing on a revolving credit with Wachovia Bank NA. The case is In re Fairfield Residential LLC, 09-14378, U.S. Bankruptcy Court, District of Delaware (Wilmington). Uno Chicago Grill Reorganization Plan Confirmed in Delaware Uno Restaurant Holdings Corp. , which once operated 99 Uno Chicago Grill casual-dining restaurants, secured the signature of the bankruptcy judge yesterday on a confirmation order approving the Chapter 11 plan. Largely negotiated before the Chapter 11 filing in January, the plan gives noteholders all the new stock plus $1.75 million cash. Noteholders were owed $82.1 million. Unsecured creditors originally were to receive nothing. Thanks to a settlement, they share $1.75 million provided by the noteholders. The plan is intended to reduce debt to $41 million from $176.3 million. Before and during the Chapter 11 case, 24 locations were closed. Some noteholders are providing a backstop for a $27 million rights offering for new second-lien debt. Uno, based in West Roxbury, Massachusetts, listed assets of $145 million against debt totaling $172 million. Along with the second-lien notes, Uno at the outset owed $44 million on the first-lien revolving credit and term loan, including letters of credit. Revenue for a year was $287 million. In addition to the company-owned locations, franchisees operate 76 Grill locations. There are also 215 kiosks operated by franchisees under the name Uno Express. The owned stores are in 28 states, mostly in the eastern U.S. The case is In re Uno Restaurant Holdings Corp., 10-10209, U.S. Bankruptcy Court, Southern District of New York (Manhattan). Eco2, Recycling Tech Developer, Implements Reorganization Plan Eco2 Plastics Inc. , the owner of patented technology for cleaning and shredding plastics for recycling, implemented a reorganization plan last week that the bankruptcy judge in San Francisco approved in a May 8 confirmation order. Secured lenders owed more than $11 million will take the new stock. Unsecured creditors with $2.7 million in claims received 5 percent in cash. The Menlo Park, California-based company patented the process in 2007. A demonstration plant was closed although there were plans to build another. The petition listed assets of $1.7 million and debt of $6.4 million. The case is In re ECO2 Plastics Inc., 09-33702, U.S. Bankruptcy Court, Northern District of California (San Francisco). Briefly Noted Detroit’s Greektown Casino Consummates Chapter 11 Plan Greektown Holdings LLC , the owner of one of three casinos in Detroit, implemented the reorganization yesterday that the bankruptcy judge approved by confirming a Chapter 11 plan in January. The plan reduced debt by about $500 million. Sponsored by noteholders, the plan resulted from a settlement allowing unsecured creditors to receive $10 million. Secured lenders are to be paid in full under the plan. Existing noteholders took 6 percent of the new stock. The plan was financed with a $200 million fully-committed equity offering and $385 million from the sale of new secured notes. The casino filed under Chapter 11 in May 2008 owing $314.5 million on a defaulted term loan and revolving credit. The case is In re Greektown Holdings LLC, 08-53104, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit). St. Vincent Formally Authorized to Sell Staff House St. Vincent Catholic Medical Centers, a shuttered 727-bed acute-care hospital in Manhattan’s Greenwich Village, was given formal authority on July 2 to sell a residential building at 555 Avenue of the Americas (6th Avenue) and 15th Street in Manhattan for $67.3 million. The price rose 40 percent at auction for the property that was known as Staff House. St. Vincent filed under Chapter 11 for a second time in April, listing assets of $348 million against debt totaling $1.09 billion. The hospital ended the prior reorganization in July 2007 with a Chapter 11 plan claiming to have a “a realistic chance” of paying all creditors in full. The prior reorganization left the medical center with more than $1 billion in debt. The hospital’s primary assets are 10 buildings with 941,000 square feet. The nonprofit hospital is sponsored by the Catholic Diocese of Brooklyn and the Sisters of Charity. It was founded in the mid-19th century. When the prior bankruptcy began in July 2005, St. Vincent had seven operating hospitals. Five were sold. The new case is In re Saint Vincent Catholic Medical Centers of New York, 10-11963, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The prior case was In re Saint Vincent Catholic Medical Centers of New York, 05-14945, in the same court. Daily Podcast Texas Rangers Baseball and Old General Motors: Audio The auction for the Texas Rangers baseball club and a $3 billion transaction on the eve of the old General Motors Corp. bankruptcy are discussed in the latest bankruptcy podcast on the Bloomberg terminal and Bloomberglaw.com. To listen, click here. Advance Sheets Recording Officer’s Slow Work Voids Auto Lien A secured lender is at the mercy of government recording officers, as Branch Banking & Trust Co. was made painfully aware in a July 2 opinion from the U.S. Court of Appeals in Cincinnati. Because the recording officer was slow in noting a lien on the title to an auto, the security interest in the vehicle was set aside as a preference. The ruling makes it clear that lenders shouldn’t wait to send in lien documents, in case state employees don’t perform their jobs punctually. An individual purchased an auto on Feb. 8. The lender mailed the necessary papers to the recording officer on Feb. 17 to perfect a lien on the vehicle. The papers were received on Feb. 22, all within the 20-day period required by bankruptcy law. The recording officer didn’t record the lien until March 7, outside the 20-day period. Given an ambiguity in Kentucky law, the 6th U.S. Circuit Court of Appeals certified a question to the Kentucky Supreme Court. The highest court in Kentucky answered by saying that the lien on the auto wasn’t perfected until title was issued, even though the papers arrived on time. The arrival of the papers only pertains to priority among secured lenders, not to perfection. Because the security interest wasn’t perfected within the 20-day window, the appeals court ruled that late perfection was a preference that the bankruptcy court should void because the owner filed for bankruptcy within 90 days of perfection. The case is Brock v. Branch Banking & Trust Co. (In re Johnson), 08-5088, 6th U.S. Circuit Court of Appeals (Cincinnati). To contact the reporter on this story: Bill Rochelle in New York at wrochelle@bloomberg.net . |
2024-04-24 | Bloomberg | Lawmakers Suspended From Indian Parliament Over State Demand | Eight lawmakers in India were suspended from parliament after they disrupted proceedings to push their demand for a new state, a call that has sparked violence in the province of Andhra Pradesh. The lower house took the action against the legislators, all from the ruling Congress party, following a motion moved by Parliamentary Affairs Minister Pawan Kumar Bansal as the assembly resumed after a 24-day break. The members representing constituencies in the Telangana region of Andhra Pradesh have been advocating the division of the southern province, with agitations frequently disrupting proceedings in parliament. A 50-year-old campaign for statehood for Telangana was reinvigorated in December 2009 when Prime Minister Manmohan Singh ’s government backed the idea as a local leader’s hunger strike triggered protests that closed roads and offices. Andhra Pradesh sends 42 lawmakers to the 545-member lower house of parliament and played a crucial role in back-to-back Congress election victories in 2004 and 2009. The status of its capital Hyderabad, home to offices of Google Inc. (GOOG) and Microsoft Corp. (MSFT) , is at the heart of the dispute over Telangana, whose name is inspired by the Telugu language spoken in the region. India’s sixth-largest city, a center for information-technology and pharmaceuticals companies, lies within the proposed boundaries of the new state. Repeated disruptions in at least the last five sessions over various issues have caused a yearlong policy paralysis and hampered the government’s efforts to push through bills. Singh’s administration plans to advance some key pieces of legislation, including banking reforms, further opening up of the insurance sector to foreign investment, and passage of the budget. Today’s suspension precedes elections for a parliamentary seat and 18 assembly constituencies in Andhra Pradesh due June 12. To contact the reporter on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net |
2024-02-03 | Bloomberg | No Financial Armageddon Ahead, Options Traders Say | Options to protect U.S. banks and brokers are the cheapest since the crisis began in 2007, indicating that investors are betting financial companies will continue leading the stock-market recovery. Implied volatility, the key gauge of option prices, for at- the-money options expiring in three months on the Financial Select Sector SPDR Fund has tumbled to 19.96 this week. That’s the lowest since July 2007 relative to equivalent options on the SPDR S&P 500 ETF Trust, which tracks the Standard & Poor’s 500 Index, showing that investors are less uncertain about financial companies relative to other stocks than at any time since the worst economic downturn since the Great Depression. “It has to do with people’s growing confidence that financial Armageddon is off the table,” said Barry Bausano, the New York-based head of Global Markets Equities Americas at Deutsche Bank AG in New York. “The market is reflecting expectations that there will be a narrower and more stable range of outcomes for U.S. financial institutions.” Financial companies have rebounded 167 percent and posted the best performance among 10 industry groups since the S&P 500 fell to a 12-year low in March 2009. The S&P advanced 93 percent in the same time period, and had its biggest rally in 65 years from March 2009 to December 2010. Banks have led gains as the Federal Reserve injected more than $2 trillion into the economy to boost growth and markets continue to recover from the 2008 credit crisis. Volatility The 21-day historic volatility on the fund, which tracks 81 U.S. lenders and brokers such as JPMorgan Chase & Co. and Bank of America Corp ., was 17.65, down from its one-year high of 45.31 in June. Its shares gained less than 0.1 percent to $16.62 today, while the S&P fund rose 0.2 percent to $130.78. “The sector does not at this time appear likely to be a source of big surprises in one direction or the other,” said Brian Barish, who oversees $6 billion as president of Cambiar Investors LLC in Denver. “The returns profile of many financials will increasingly be of a somewhat regulated and boring nature, which I suppose would be consistent with much lower volatility.” The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index, fell 3.5 percent to 16.69 today, and it dropped to 15.37 in intraday trading on Jan. 14. The VIX hasn’t closed below that level since July 2007. Earnings Thirty-five of the 55 financial companies in the S&P 500 that have reported earnings since Jan. 10 have posted results beating estimates, Bloomberg data show. Bank of America and JPMorgan, the two largest U.S. banks by assets, both reported earnings last month that beat analyst estimates. Goldman Sachs Group Inc. reported its third straight quarterly earnings decline on Jan. 19. The New York-based company’s profit was $3.79 a share excluding some items and missed estimates. “We’re on a slow path to recovery,” said Jesse Lubarsky, a New York-based trader at Raymond James & Associates. “Banks need to rally for the market to go a lot higher.” To contact the reporter on this story: Cecile Vannucci in New York at cvannucci1@bloomberg.net. To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net . |
2024-07-26 | Bloomberg | Bank of America Names Shalett CIO of Merrill Lynch Wealth-Management Unit | Bank of America Corp. named Lisa Shalett chief investment officer of the bank’s Merrill Lynch Global Wealth Management unit. |
2024-08-08 | Bloomberg | Pistons’ Ben Gordon Won’t Play for Britain National Team Over Insurance | Detroit Pistons guard Ben Gordon won’t play for Britain in this year’s EuroBasket finals in preparation for the London 2012 Olympics because he couldn’t reach an agreement on insurance with the national team. Their failure to achieve a deal followed complications linked to the current National Basketball Association lockout, British Basketball said in an e-mailed statement. An insurance arrangement between the NBA and the International Basketball Federation, the sport’s world governing body known as FIBA, doesn’t cover lockout periods, said Chris Spice, performance director for British Basketball. Under that agreement, the national team had to pay 40 percent of insurance fees for NBA players, he said. “We have done our best to provide a cover that is close to what we would have had in a normal season, but in the end things didn’t work out from a financial or scope-of-cover perspective,” Spice said today in the statement. The team is still hoping to make an arrangement with Gordon in time for next year’s Olympics, according to the statement. Britain got insurance last week for the EuroBasket games with 26-year-old Chicago Bulls forward Luol Deng. “You don’t get much change from 100,000 pounds ($164,000),” Spice said yesterday of Deng’s arrangement, following a warm-up game in Cobham, outside London, where Britain beat the Netherlands 96-70. British Basketball didn’t have an estimate of what it would cost to insure Gordon. EuroBasket finals start Aug. 31 in Lithuania , and include 24 teams. The event is held every two years, and this month’s is the 37th held by FIBA Europe. The top two nations are guaranteed Olympic spots. Britain qualified for the Olympics as host through a March FIBA vote. Gordon, a 28-year-old London native, was named the NBA’s Sixth Man of the Year, denoting the best substitute player, as a rookie with the Bulls. He hasn’t played internationally for Britain. NBA owners locked out players on July 1 after their labor contract expired, in a dispute over how to split money from a league that generated about $4.3 billion revenue last season. To contact the reporter on this story: David Altaner in London at daltaner@bloomberg.net To contact the editor responsible for this story: Colin Keatinge in London at Ckeatinge@bloomberg.net |
2024-07-02 | Bloomberg | Iran-Oil Sanctions Risk Biggest OPEC Export Loss Since Libya | European Union sanctions on Iran entered into full force yesterday after exemptions on some contracts and insurance ended, adding pressure on crude prices to rise and on the Persian Gulf nation to halt its nuclear- enrichment program. The reduction in Iranian exports may become the biggest supply disruption from a member of the Organization of Petroleum Exporting Countries since an armed rebellion all but halted pumping in Libya last year, according to the International Energy Agency. It also comes as a strike by Norwegian workers is curbing flows from North Sea fields. “We expect Brent oil prices to be supported by Iranian oil sanctions and potential loss of supplies from the North Sea,” Gordon Kwan , the head of regional energy research at Mirae Asset Securities based in Hong Kong , said in a June 28 report. “The imminent EU insurance ban on tankers carrying Iranian crude could drive up demand for Brent and Dubai crude.” Brent futures fell below $90 a barrel on June 21 for the first time in 18 months on concern that Europe’s debt crisis may spread and sap fuel use. Now, the Iran embargo and Norwegian strike are stoking speculation about a rebound in prices, according to analysts such as Kwan and Ole Hansen at Saxo Bank A/S. Brent for August settlement surged 7 percent on June 29 to close at $97.80 a barrel on the ICE Futures Europe exchange, the biggest one-day increase since April 2, 2009, when prices jumped 9 percent. Brent slid to $95.77 today. Unsold Barrels Iran, the second-biggest producer in OPEC after Saudi Arabia , was producing about 3.3 million barrels a day in May. Full implementation of sanctions will remove about 1 million barrels a day during the second half of the year as buyers disappear and Iranian storage tanks become full, the Paris-based IEA forecast in a June 13 report. Mohammad Ali Khatibi, Iran’s governor to OPEC, warned yesterday that the EU would bear “the consequences of politicizing the market,” without specifying what he meant, the state-run Iranian Students News Agency reported. Mahmoud Bahmani, Iran’s central bank governor, said his nation “isn’t sitting by idly” and has a “very suitable” $150 billion in foreign currency reserves to help weather the latest trade and financial curbs. “We have programs to fight the sanctions, and we will confront hostile policies,” Bahmani said yesterday, according to the state-run Mehr news agency. Intensified Pressure Secretary of State Hillary Clinton said Iran will face increasing pressure from sanctions aimed at its nuclear program. Complementing the European restrictions is a U.S. law enacted Dec. 31 that cuts off international banks from the U.S. financial system if they settle oil trades with Iran. The U.S. rule gave importing nations, including China, India and Japan , until June 28 to demonstrate they had “significantly reduced” their purchases of Iranian oil in order to qualify for exemptions. “The pressure track is our primary focus now, and we believe that the economic sanctions are bringing Iran to the table,” Clinton said in an interview with Bloomberg Radio in Geneva on June 30. “They are going to continue to increase and cause economic difficulties” for the country, she said. Iran’s economy has deteriorated amid the punitive measures, which have weakened the national currency and pushed up costs that were already surging after the government started removing energy and food subsidies a year and a half ago. Inflation accelerated to 22.2 percent in the 12 months ended May 20, the Central Bank said. Shrinking Economy The World Bank forecast in a June 12 report that Iran’s $480 billion economy will shrink by 1 percent this year and 0.7 percent in 2013. The EU agreed in January to ban oil imports from Iran, offering a five-month phase-in period for existing contracts to let member states such as Greece find alternative supplies. An exemption on tanker insurance restrictions for the worldwide shipping industry also ran out yesterday. Foreign ministers from the 27-nation bloc decided on June 25 the exemptions shouldn’t be extended after talks between Iran and the world’s powers about the nuclear program failed to reach a breakthrough since they started in April. Iran denies that it is developing nuclear weapons. ‘Toughest Measures’ “These are the toughest measures the EU has adopted against Iran to date,” U.K. Foreign Secretary William Hague said yesterday in a statement. “It is in the power of the Iranian leadership to end Iran’s current isolation, but unless they change course, the pressure will only increase.” The EU ban on insurance for ships carrying Iranian oil affects 95 percent of the world’s tankers because they’re covered by the 13 members of the London-based International Group of P&I Clubs, which is adhering to the EU rule. In an effort to retain an important Asian customer, Iran offered to supply oil to South Korea using its own tankers, a government official in Seoul said June 29, asking not to be identified because the matter is confidential. Oil and its derivatives account for nearly 80 percent of Iran’s exports and about half of government revenue, according to the U.S. Energy Information Administration, which estimates the country’s 2010 net oil export revenues at $73 billion. Iran’s oil exports may “gradually” decline by 20 percent to 30 percent after sanctions start and amid field maintenance work, Deputy Oil Minister Ahmad Qalebani said on June 26. Hormuz Missiles Such acknowledgment hasn’t erased tensions over the sanctions. Iran warned it can strike any target in the Strait of Hormuz and the Gulf and will soon equip ships with missiles capable of firing more than 300 kilometers (186 miles), Mehr reported June 29, citing a commander of the Islamic Revolutionary Guards Corps. Tankers carrying about a fifth of globally traded oil exit the Gulf though the Hormuz chokepoint. “The Strait of Hormuz and the Persian Gulf is Iran’s playground and no one else’s,” Mehr cited Admiral Ali Fadavi as saying. “Any issues related to the Strait of Hormuz will be a very big story that will have consequences on the price of oil.” A survey of 42 analysts on June 28 showed that 16, or 38 percent of them, predicted crude futures will increase in the week starting today, citing the new sanctions. Among the remainder, 12 forecast little change in prices and 14 expected a decline. “That is the wildcard, the Iranian situation,” Torbjoern Kjus, an oil analyst at Oslo-based bank DnB ASA (DNB) , said by phone on June 29. ‘Huge’ Inventories “Nobody can be totally certain how it’s really going to affect the market,” he said. “There’s probably been huge inventory builds in Iran, and this could pose a bearish effect for next year or the second half of this year if there is a resolution.” Iran urged OPEC to call an emergency meeting to address the group’s production in excess of its targeted 30 million barrels a day, Mehr reported June 30, citing Oil Minister Rostam Qasemi. Disregard of the limit by some OPEC members “will negatively impact oil prices in the international market,” Qasemi said. The 12-member organization, which decided on June 14 to retain its daily ceiling of 30 million barrels, pumped about 1.6 million barrels more than that in May, according to data compiled by Bloomberg. To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net |
2024-11-11 | Bloomberg | Obama Stocks Among Best After Re-Election as Rally Tested | Even with the flawed roll out of health-care reform and uproar over spying, Barack Obama is enjoying one of the best stock markets for a re-elected president. Signs are building that it might not last. This year’s 24 percent jump in the Standard & Poor’s 500 Index is the third-biggest annual rally after a president was returned to office since the 1930s, trailing Bill Clinton and Ronald Reagan , according to data compiled by Bloomberg. The index has climbed 108 percent since Obama became president, adding more than $10 trillion in equity market value. Record Federal Reserve stimulus, interest rates around zero percent and a doubling of corporate profits since they fell to a five-year low in 2008 helped sustain stock increases under Obama. The rally that began just after he took office now exceeds the average length of bull markets by almost a year and valuations are up 18 percent in 2013. Add to that prospects for the Fed to curtail stimulus, threatening higher borrowing costs, and the outlook for further gains under Obama is grimmer. “The president came in at a highly unusual time with markets in complete disarray,” Chad Morganlander, a Florham Park , New Jersey-based portfolio manager at Stifel Nicolaus & Co., which oversees about $130 billion, said by phone Nov. 6. “After the rally this year, we’re fairly valued at best. The next stage of this will have to be an improving economic outlook and earnings outlook well above where we stand.” Republican Returns While history shows re-elected Republicans have had better stock-market performance, with an average 5 percent gain in the first year of their second terms compared with a 1.2 percent loss for Democrats, 2013 is on track for the best return in a decade. This year’s rally in the S&P 500 is the broadest ever, with shares of Assurant Inc., Delta Air Lines Inc. (DAL) and 442 more companies rising, data since 1990 compiled by Bloomberg show. The Obama administration is fighting a global backlash over revelations that the National Security Agency spied on foreign leaders, hacked into fiber-optic cables to get data from Google Inc. and Yahoo! Inc. and intercepted communications of Americans without warrants. The president also has been defending his Affordable Care Act this month after website glitches delayed thousands of people from signing up for the health-insurance exchanges. The S&P 500 rose 0.5 percent to 1,770.61 last week after gross domestic product and jobs reports beat projections and Twitter Inc. (TWTR) almost doubled in its trading debut. The index climbed 0.1 percent to 1,772.28 at 10:13 a.m. New York time. ‘Muted’ Returns The benchmark U.S. equity gauge capped its fifth straight weekly advance and hasn’t fallen more than 10 percent since October 2011, the longest stretch without such a drop since 2007, according to S&P. “It’s unusual that we’ve gone so long without at least a correction,” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, said from Philadelphia in a Nov. 6 phone interview. His firm oversees $58 billion. “If you just look at this from a valuation perspective, the market is rich. That doesn’t mean we have to crash, but it does suggest that going forward, your return assumptions for U.S. equities should be much more muted than they have been.” Nine of the last 12 bull markets have ended in five years or less, data compiled by Bloomberg and Birinyi Associates Inc. show. The last cycle lasted exactly five years, with stocks climbing 102 percent from October 2002 through October 2007. The rally following World War II started in May 1947 and ended about a year later in June 1948. Surprise Rise At the start of 2013, Wall Street strategists forecast the S&P 500 would rally 7.6 percent to 1,534 by year’s end. The index surpassed that level on March 5, then climbed another 15 percent. Stock gains have come as the Fed held its benchmark lending rate near zero percent since December 2008. The central bank also purchased more than $2.3 trillion of bonds in a quantitative easing program meant to stimulate the economy. “What you often find in the first year after elections is not very good because you get into periods where the policies are tightening back up,” James Paulsen , the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees about $340 billion, said in a Nov. 5 phone interview. “But this period has been so mightily different because the Fed is doing a totally unconventional thing here.” The biggest equity-market advance to follow a president’s re-election was in 1997 when Clinton started his second term. The S&P 500 gained 31 percent that year, extending a rally that began in 1990. That bull market lasted through 1998, with the S&P 500 up 302 percent, according to data compiled by Bloomberg and Birinyi. Advance Prospects More gains are possible in this bull market with interest rates likely to remain low for the next year and profits forecast to keep climbing, according to Lawrence Creatura , a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $367 billion. “This can continue for a long time,” Creatura said in a Nov. 6 phone interview. “This isn’t physics, there’s no Newton’s Laws that state how long a bull market has to last,” he said. “If you’re going to forecast a market retracement you’ll have to come up with a reason why earnings will falter.” S&P 500 profits beat analyst estimates by 4.1 percent last quarter and have avoided a contraction every quarter since 2009, data compiled by Bloomberg show. Analysts project they’ll climb 10 percent in 2014 and 2015. Corporate earnings reached a record $2.1 trillion for the quarter ending June 30, more than twice the $1 trillion at the end of 2008, according to data since 1947 from the U.S. Bureau of Economic Analysis. Lowered Expectations Analysts forecast more earnings growth next year even as economists predict the Fed will begin tapering its stimulus. The central bank will curb the monthly purchases to $70 billion from $85 billion in March, according to the median of 32 estimates compiled by Bloomberg. Projections for fourth-quarter expansion in gross domestic product fell to about 2 percent compared with an earlier prediction for 2.5 percent, data compiled by Bloomberg show. Wall Street strategists say the S&P 500 will fall in the next two months, slipping 2.4 percent to 1,728 this year, according to the average of 19 estimates compiled by Bloomberg. This year’s rally has made stocks more expensive , with the index trading at 16.8 times reported earnings, compared with about 14.2 in January. Growth Slows Assurant (AIZ) , the insurer of foreclosed homes, has climbed 72 percent in 2013, extending the rally since the bull market started to 245 percent. Per-share profit the last two quarters exceeded analyst projections. Earnings growth at the New York-based company will slow to 1 percent next year and 5 percent in 2015, when sales contract, according to estimates compiled by Bloomberg. Delta Air Lines Inc. has surged 127 percent in 2013 as the carrier probably boosted profit 70 percent, analyst estimates show. The Atlanta-based company’s growth rate will slow to 1 percent next year, according to projections. The stock’s 2013 gain is the fourth-best of S&P 500 companies. Hess Corp. (HES) ’s 52 percent rally left the shares trading at almost 27 times reported earnings, compared to 9.9 in January. Earnings for the New York-based company are forecast to contract 29 percent in the first three months of 2014 after a 17 percent expansion this quarter, according to analyst estimates compiled by Bloomberg. “Clearly earnings growth has been slowing,” Walter Todd , chief investment officer at Greenwood Capital Associates LLC in Greenwood, South Carolina , said in a Nov. 7 phone interview. He helps manage $950 million. “We’re going to have to navigate that slowdown in earnings and monetary policy things like tapering. By definition it’s going to be harder to keep going higher like this.” To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-04-24 | Bloomberg | Philadelphia Record Seen as Deal Talk Bars Public: Muni Credit | Philadelphia, which has the lowest credit grade among the five most-populous U.S. cities, is planning its largest general-obligation issue on record after holding an unprecedented closed-door conference to draw buyers. Municipal officials last week convened their first gathering with investors, letter-of-credit providers and Wall Street analysts, Treasurer Nancy Winkler said at a briefing. The goal of the two-day event, which was off-limits to the public and press, was to showcase Philadelphia’s strengths even as it grapples with the highest debt burden of the nation’s five biggest cities and a jobless rate exceeding the U.S. average. While Philadelphia debt is keeping pace with the biggest rally since November in the $3.7 trillion municipal market, the economic strains are still curbing the appetite of investors such as John Flahive at BNY Mellon Wealth Management in Boston. “When you add up all these things, it’s still challenging and we will continue to be cautious,” said Flahive, who helps manage $22 billion in munis. “It’s not going to make us run out and load the boat.” $400 Million Philadelphia plans to sell $400 million of general- obligation securities in June, of which $218 million would fund capital projects, with the remainder going to retire higher-cost debt, said Winkler, 55. She was appointed in 2011 by Mayor Michael Nutter, a 55-year-old Democrat. It would be the largest fixed-rate, long-term issue for the city since at least 1990, when Bloomberg data begin. The city, where about 26 percent of the population of 1.5 million lives in poverty, is rated BBB+ by Standard & Poor’s, three levels above speculative grade. S&P raised the credit one step a year ago, citing a budget surplus and elimination of a 2011 deficit. In comparison, New York, the nation’s biggest metropolis, is graded AA by S&P, five levels higher. Los Angeles, Chicago and Houston are all ranked at least three steps above Philadelphia. Still, Philadelphia debt has benefited from investors seeking higher-yielding assets as interest rates on city and state obligations remain below their 50-year average, said John Donaldson, who helps manage $750 million in munis at Radnor, Pennsylvania-based Haverford Trust Co. Matching Rally Philadelphia has matched top-rated munis in gains this month. Buyers require about 2.4 percentage points of extra yield for city bonds callable in August 2016, little changed since local debt began rallying in mid-March, Bloomberg Valuation data show. The June deal will benefit from “positive momentum” from the administration achieving surpluses, said Todd Sisson, who attended the conference and is a senior analyst at Wells Capital Management in Charlotte , North Carolina. The company oversees $34 billion in munis, including Philadelphia debt. City officials told investors they expect to end 2013 with a $128.1 million surplus, after a $137.2 million deficit in 2009, according to a presentation from the conference. “They’ve done a good job righting their ship,” Sisson said. “I walked away with a more favorable opinion of the city.” Winkler said officials compiled a list of debt holders and prospective investors, with input from underwriters who paid for the conference. She declined to name the companies of the 147 attendees because she didn’t receive their permission to publicize the information, she said. She didn’t identify the companies that covered the $8,500 cost of the event because the city hasn’t received all the contributions, she said. Press Protest Bloomberg News wrote Nutter April 4 objecting to the press’s exclusion from the conference. The Associated Press, the Philadelphia Inquirer, and the Arlington, Virginia-based nonprofit Reporters Committee for Freedom of the Press supported the protest. Conference participants asked about negotiations with labor unions, Winkler said. The city hasn’t reached new agreements with three of its four unions, and is appealing an arbitration award to its firefighters that would have imposed more than $200 million in new costs over five years, according to a presentation from the conference. The metropolitan area’s 8.7 percent February jobless rate was a percentage point above the national figure. Philadelphia is also shouldering a debt burden of 11.6 percent of property values, the highest of the five largest cities, according to Moody’s Investors Service. Pension Effort Philadelphia said in its slideshow to investors that efforts to bolster its pension system are part of its negotiations with city workers. The plan is 47.6 percent funded this year, bond documents say. That’s below the 80 percent threshold recommended, according to the Center for Retirement Research at Boston College. Officials also fielded questions about the school system, Winkler said. Donaldson, who was invited but didn’t attend, called the school district Philadelphia’s “number one financial headwind.” Facing a $304 million deficit for 2014, school officials have asked the city for $60 million and the state for $120 million. In March, they voted to shut 9 percent of public schools. Debt Rally In the municipal market this week, issuers led Wisconsin are offering almost $8 billion of bonds as yields on benchmark 10-year munis are the lowest since January. The 1.74 percent interest rate on AAA munis due in 2023 compares with 1.71 percent on similar-maturity Treasuries, data compiled by Bloomberg show. The ratio of the two yields, a gauge of relative value, has been above 100 percent on all but one day since March 12, showing that local debt has cheapened relative to Treasuries. The figure was as low as 86 percent in January. To contact the reporter on this story: Romy Varghese in Philadelphia at rvarghese8@bloomberg.net To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-03-31 | Bloomberg | Zurich Financial Says Large Claims ‘Above Average’ This Year | Zurich Financial Services AG (ZURN) , Switzerland’s biggest insurer, said there have been an above- average number of large claims this year. “In 2010, there was an above-average number of large claims, and this year would appear to be developing along the same lines,” Chief Executive Officer Martin Senn said today at the company’s annual general shareholders’ meeting in Zurich. Zurich Financial estimates total claims of about $500 million from the five natural disasters that hit the Asia- Pacific region this year. That preliminary assessment, net of reinsurance and before tax, is for the Brisbane floods, the Victoria storms and cyclone Yasi in Australia, the Christchurch earthquake in New Zealand and the earthquake and tsunami in Japan , the Zurich-based insurer said earlier today. To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-04-17 | Bloomberg | U.S. Federal Reserve Beige Book: Dallas District (Text) | The following is the text of the Federal Reserve Board’s eleventh District-- Dallas. The Eleventh District economy expanded at a slightly faster pace over the past six weeks than during the previous reporting period, when growth was moderate. Many manufacturing firms noted that activity increased since the last report. In the nonfinancial services sector, legal and accounting demand increased, although staffing firms reported sluggish demand. Retail sales and auto sales were up. Robust housing demand led to price gains, and commercial real estate activity remained strong. Lenders noted moderate growth in loan demand, and activity in the energy sector remained at high levels. Drought conditions remained prevalent in the agricultural sector. Reporting firms said prices remained stable overall, and there were limited reports of wage pressure. Employment levels were steady to up. Prices Most responding firms said prices were stable, although housing contacts said home prices increased at a fast pace, and cotton prices increased according to agriculture contacts. Staffing firms noted no change in rates, and accounting firms said rates were flat to slightly up. Food producers said selling prices were up since January but do not expect more increases going forward. One airline said ticket prices were up slightly. Retail prices and auto prices were steady. Financial services contacts said loan pricing was flat to down. Oil prices fell slightly, as the price of WTI averaged under $94 per barrel over the past six weeks. A late winter reduced natural gas inventories and pushed prices above $3.65. Gasoline and diesel prices increased since the last report. Labor Market Employment held steady or increased at most responding firms. Food manufacturers and airlines said employment had increased, and reports of scattered hiring came from some accounting and finance firms, retailers, auto dealers and transportation manufacturers. Several contacts noted difficulty finding qualified people to fill open positions, particularly in banking, auto sales and manufacturing. Staffing firms said the supply of labor was tight in the Houston energy sector. Wage pressures remained largely subdued, although wage increases for experienced or topperforming workers were reported in accounting, legal and financial services. Increased labor costs were also noted in energy services. Manufacturing Construction-related manufacturers said demand was flat to up slightly. A lumber contact noted a seasonal increase in demand for the first time in several years. A cement producer said demand remained strong, particularly for residential construction projects. Expectations among construction-related producers are for increases in demand, and contacts believe 2013 will be stronger than 2012. Fabricated metals producers reported a broad-based increase in demand over the reporting period. Demand reports from primary metals manufacturers were mixed and below year-ago levels. Reports on high tech orders were mixed across customer groups. Semiconductor producers reported stronger demand from industrial users, such as automotive, but continued weak demand from communication device and personal computer manufacturers. Most contacts expect moderate improvement over the next three to six months. Demand for paper products fell over the reporting period; contacts remained cautious in their outlooks but expect to see an increase in May or June. Food contacts noted demand was much better than anticipated and was up from the last report and from a year ago. Respondents were making significant capital expenditures in anticipation of further increases in activity. Transportation manufacturers noted a pickup in demand. Sales of recreational vehicles increased after experiencing a seasonal slump during the last reporting period. Demand for aviation equipment continued to rise due to a recent large project. Transportation manufacturing contacts expect 2013 to be about the same or better than 2012. Petrochemicals producers said Gulf Coast chemical production was stronger than a year ago. Contacts noted refinery operating rates and margins were up over the reporting period, partly due to normal seasonal trends. Retail Sales Retail sales were up since the previous report and from a year ago, according to contacts. Texas continued to perform well, and according to one national retailer the rate of sales growth in Texas outperformed the nation during the reporting period. Prices remained stable since the last report. Some contacts added employees in line with expanding operations. Outlooks for the quarter ranged from cautiously positive to good, and contacts expect steady growth for the remainder of the year. Automobile sales were strong and picked up since the last report, partly due to seasonality. Inventories varied by manufacturer, but all contacts noted inventories were slightly lower than desired. Selling prices held steady, as the market remained very competitive. Head count was up slightly from a year ago, and hours worked were flat over the reporting period. Outlooks for the second quarter and the rest of the year were good. Uncertainty and increasing expenses are challenges that dealerships continue to face. Nonfinancial Services Staffing firms said demand was flat or down since the last report. Responding placement firms noted activity in most sectors was sluggish, with the exception of energy related activity in Houston and overall demand for residential construction workers. Outlooks were mixed, but better than earlier in the year. Accounting firms noted continued strong demand for their services. Demand for energy, audit, insurance, consulting work and transactions was robust, while demand for tax services remained flat. Outlooks were optimistic. Legal firms said growth in demand for their services was weaker than expected, with the exception of strong real-estate related activity. Outlooks were optimistic, with contacts expecting a pickup in activity over the next three months. Reports from transportation service firms were positive. Railroad contacts said volumes picked up since the last report. Petroleum shipments continued to be strong, and contacts noted healthy volumes of some construction-related products, including lumber and wood and crushed stone. Intermodal cargo volumes increased slightly, and shipping companies said small parcel shipments grew strongly, propelled by retail trade. Air cargo volumes were flat during the reporting period as increases in domestic shipments were offset by declines in international shipments. Airline contacts said passenger demand increased slightly since the last report, in part due to spring-break related travel. Contacts expect demand to strengthen in the summer months and the outlook is for slight improvement in 2013 over 2012. Construction and Real Estate Texas home prices rose rapidly due to strong demand and very low inventories. Some builders were still finding financing difficult. Outlooks for the single-family housing sector were positive, but price gains are expected to slow later in the year as building activity picks up. Contacts said apartment demand remains strong, in part, thanks to strong job growth and migration. Commercial real estate contacts reported that gains in occupancy and rents may be slowing property sales as owning has become more profitable. Most contacts noted banks were more aggressive with lending, and Texas office and warehouse markets were improving. Financial Services Financial institutions reported broad-based growth in loan demand. Consumer lending improved, with solid growth in mortgage and automobile lending activity. Commercial lending grew at a moderate pace, and energy-related activity remained strong in Houston, Austin, San Antonio and the Eagle Ford area. Commercial real estate and home equity lending activity has started to bounce back from low levels, noted contacts. Non-performing loans continued to decline. Loan pricing remained very competitive. Deposits and deposit rates remained mostly unchanged. Outlooks were optimistic, and contacts expect growth in loan demand and deposits to continue in the near term. Energy Energy activity was slightly improved, and respondents at energy-related service firms seemed more confident that the number of active drilling rigs may have bottomed out. Margins for services, particularly pressure pumping, remained tight, and contacts reported little change in pricing pressures otherwise. Contacts said drilling activity was flat over the reporting period and continue to expect improvement in the second half of the year, particularly in the Gulf of Mexico. Agriculture Drought conditions worsened slightly across the District over the reporting period. Nearly half of the Texas wheat crop was in poor or very poor condition, and spring crops were largely being planted into very dry soil. Texas feedlots continued to run negative margins, due in part to feed costs remaining elevated. Cotton was a bright spot, with continued strong demand and rising prices. SOURCE: Federal Reserve Board |
2024-02-13 | Bloomberg | JAPAN DAYBOOK: Gross Domestic Product, Otsuka Earnings | A gross domestic product report today may show the economy contracted in the last quarter of the year, falling behind China ’s in size. WHAT TO WATCH *Gross domestic product for Oct.-Dec. quarter 8:50 a.m. *Bank of Japan begins two-day policy meeting. *Beer shipments for January 10 a.m. *Electric power output for January 11 a.m. Liberal Democratic Party of Japan President Sadakazu Tanigaki speaks to the media in Tokyo 2 p.m. *Osaka Securities Exchange ends lunch break for Nikkei futures and options. EARNIGNS (Times may change) *Tokyo Tatemono (8804 JT) 3 p.m. *TonenGeneral (5012 JT) 3 p.m. *MS&AD Insurance (8725 JT) 3:30 p.m. *Sumitomo Rubber (5110 JT) 3:30 p.m. *Tokio Marine Holdings (8766 JT) 3:30 p.m. *GS Yuasa (6674 JT) 4 p.m. *Otsuka Holdings (4578 JT) 4 p.m. *NKSJ Holdings (8630 JT) NA. EQUITY PREVIEW *Dai-Ichi Seiko (6640 JQ) plans to raise 6.17 billion yen in a public share sale. *Dentsu (4324 JT) cut its full-year net income forecast 8.7 percent to 19 billion yen, and raised its operating-profit outlook 8.8 percent to 51.7 billion yen. *Fuji Fire (8763 JT): American International Group Inc. plans to buy Fuji Fire through its Chartis unit for 146 yen a share. *Isetan Mitsukoshi (3099 JT) raised its full-year net income forecast 25 percent to 15 billion yen. *Kirin Holdings (2503 JT) forecast net income will rise to 58 billion yen this year from 11.4 billion in 2010. *Meiji Holdings (2269 JT) plans to buy back up to 3.37 percent of its outstanding shares from its own units for as much as 15 billion yen. *Olympus (7733 JT) cut its full-year net income forecast 6.7 percent to 14 billion yen. *Sapporo Holdings (2501 JT) will spend 21.3 billion yen to increase its stake in Pokka Corp., making it a subsidiary to boost its sales of non-alcoholic drinks. It forecast net income will fall 44 percent to 6 billion yen this year, and operating profit will gain 17 percent to 18 billion yen. *Tokai Carbon (5301 JT) forecast operating profit will fall 5.4 percent to 10 billion yen this year, while it expects net income to rise 1.2 percent to 5.7 billion yen. ANALYST RATINGS FOR NIKKEI 225 COMPANIES *T&D Holdings (8795 JT) cut to neutral at Nomura. *Mitsubishi Electric (6503 JT) cut to hold at Deutsche. |
2024-12-14 | Bloomberg | Obama's Health-Care Law Ruled Unconstitutional Over Insurance Requirement | The Obama administration’s health- care overhaul unconstitutionally requires Americans to maintain a minimum level of health insurance, a federal judge ruled, striking down the linchpin of the plan. U.S. District Judge Henry Hudson in Richmond, Virginia, said yesterday that the mandate on individuals in President Barack Obama ’s health-care legislation goes beyond Congress’s powers to regulate interstate commerce. Hudson severed the issue of the mandate, which is set to become effective in 2014, and didn’t address other provisions such as expanding Medicaid. “At its core, this dispute is not simply about regulating the business of insurance -- or crafting a scheme of universal health insurance coverage -- it’s about an individual’s right to choose to participate,” wrote Hudson, who was appointed by President George W. Bush in 2002. The ruling is the government’s first loss in a series of challenges to the law mounted in federal courts in Virginia, Michigan and Florida, where 20 states have joined an effort to have the statute thrown out. Constitutional scholars said unless Congress changes the law, its fate on appeal will probably be determined by the U.S. Supreme Court. Virginia Attorney General Ken Cuccinelli , who brought the suit, said his office has spoken with lawyers from the Justice Department about asking the U.S. Supreme Court to take the case without a review by the federal appeals court in Richmond. Tracy Schmaler , a Justice Department spokeswoman, said she had no comment on Cuccinelli’s statement. Appeal Likely A senior Obama administration official said that an appeal of Hudson’s ruling was likely and also expressed confidence that the legislation would be upheld. “This is only round one,” Cuccinelli said, during a news conference at his office in Richmond. “This lawsuit is not about health-care, it’s about liberty.” In his 42-page opinion, Hudson said the “unchecked expansion” of congressional power represented by the insurance requirement “would invite unbridled exercise of federal police powers.” No Supreme Court decision has authorized Congress to “compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market,” he wrote. To overcome that conclusion, the Obama administration ultimately may have to persuade at least one of the five Republican-appointed justices on a Supreme Court that in recent years has limited Congress’s power to regulate interstate commerce. Commerce Clause Cases The court hasn’t directly considered a challenge to Congress’ power under the Constitution’s commerce clause since John Roberts became chief justice in 2005. “There’s a lot of activity focused now on alternatives to the mandate,” said Dan Mendelson , chief executive officer of Avalere Health, a Washington-based consulting firm. Hudson, who didn’t order the government to stop work on implementing the law during an appeal, limited his ruling to the mandatory insurance provision. Peter Urbanowicz , a managing director at Alvarez & Marsal Healthcare Industry Group in Washington, said he read the decision to leave in place all of the law’s obligations on insurers for expanded coverage. If Hudson’s decision is upheld, insurance companies would be required to provide new benefits without expanding the pool of insureds, he said in an e-mail. That would cause “skyrocketing costs” for insurers, said Robert Zirkelbach , a spokesman for the Washington lobby group, America’s Health Insurance Plans. Health-Insurance Stocks Health plans rose as much as 2.7 percent after the ruling was announced, and then fell back. The Standard & Poor’s Managed Health Index of six insurers climbed 0.3 percent in New York trading, led by a 1 percent increase for Aetna Inc. of Hartford, Connecticut. UnitedHealth Group Inc. of Minnetonka, Minnesota, the largest medical plan by sales, rose 0.6 percent. White House spokesman Robert Gibbs said at a press briefing yesterday said that the administration still believes the legislation is constitutional. “One hundred and fifteen miles away, a different judge in a different district rendered a different decision,” Gibbs said, referring to a Nov. 30 ruling by U.S. District Judge Norman Moon , in Lynchburg, Virginia, named by President Bill Clinton. That decision upheld the act in a lawsuit brought by the evangelical Liberty University and five individuals. U.S. District Judge George Caram Steeh in Michigan, another Clinton appointee, also sided with the government. ‘Will Be Upheld’ “Our belief is that when all the legal wrangling is done, this is something that will be upheld,” Gibbs said. Justice Department lawyers in court papers called the mandatory insurance measure the cornerstone of the overhaul as it pushes younger and healthier people into the insurance pool. Through the individual mandate and expansions of Medicaid and employer-based coverage, the law is estimated to provide 32 million more people with coverage by 2019, according to the Congressional Budget Office. The law bars insurers from denying coverage to people who are sick or imposing lifetime limits on costs. Without payments generated from the required policies, the health-insurance market would face extinction, the government argued. The mandate falls under Congress’s power to regulate interstate commerce as $43 billion in unpaid medical bills are absorbed by the market each year, U.S. lawyers said. ‘Simply Wait’ “If people aren’t compelled to buy insurance and the insurance carriers are compelled to offer it, then many will simply wait until they are sick,” said John Sullivan , an analyst at Leerink Swann & Co. in Boston. “You can’t just pull this part out of it.” Virginia’s suit claimed Congress has only the power to tax, not to force participation in a market. Its case defended the Virginia Health Care Freedom Act, a state law barring compulsory purchase of health insurance by its citizens. Florida, joined by 19 other states, filed a separate lawsuit challenging the law’s constitutionality and arguing it puts too big a burden on its budget by expanding state-run Medicaid programs. U.S. District Judge Roger Vinson in Pensacola, Florida, is slated to hear arguments Dec. 16 on motions by each side to decide the case in their favor. In the Florida case, the states are backed by 63 members of the U.S. House of Representatives, mostly Republicans, in a court brief. Incoming House of Representatives Speaker John Boehner , an Ohio Republican, and 32 Republican U.S. senators separately submitted papers arguing the legislation represents an unconstitutional expansion of congressional legislative powers. Expansion of Medicaid Florida’s Attorney General Bill McCollum said he is hopeful Vinson will strike down the individual mandate and halt the expansion of Medicaid. “The implementation of this law could add more than 1.9 million Floridians to the Medicaid program, a tremendous financial burden on our state at a time when our budget has no room for extra expenses,” he said in a statement. A group of about 40 economics scholars, including Nobel laureates Eric Maskin , George Akerlof and Kenneth Arrow , filed their own brief, arguing in favor of the legislative package. The Virginia and Florida cases are the most likely to reach the Supreme Court, according to health-care and constitutional lawyers. Both have been “well briefed and well drafted,” Urbanowicz said. The case is Commonwealth of Virginia v. Sebelius, 10-cv-00188, U.S. District Court, Eastern District of Virginia (Richmond). To contact the reporters on this story: Tom Schoenberg in Richmond, Virginia, at tschoenberg@bloomberg.net ; Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net. To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net . |
2024-02-11 | Bloomberg | U.K. Will Use Inheritance Tax to Fund More Elderly Care | Prime Minister David Cameron’s government will fund planned improvements to financial support for the elderly in England by raising more money through inheritance tax, Health Secretary Jeremy Hunt said. The amount any individual pays for care in old age will be capped at 75,000 pounds ($118,000) before the government steps in when the measures come into force in 2017, Hunt told lawmakers in the House of Commons in London today. People with assets of less than 123,000 pounds will receive help sooner. The government’s aim is to encourage wealthier people to take out insurance or use pension products to cover the 75,000-pound cap. The extra cost will be partly funded by extending a freeze for three years until 2019 on the level at which people start paying inheritance tax on estates at 325,000 pounds, Hunt said. “For too long, the issue of social care has been ducked by successive governments, leading to an unfair system that has seen people selling their homes and losing nearly everything they’ve worked for to pay for their care,” Hunt said. “These historic reforms will give everyone the protection they want in their old age and save the family home.” The policy is based on a 2011 report by Andrew Dilnot , a former director of the Institute for Fiscal Studies. He recommended a cap of 35,000 pounds on what people paid and said his plan would prevent people spending more than a third of their wealth on care costs instead of as much as 90 percent under the existing system. To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net |
2024-02-16 | Bloomberg | European Stocks Are Little Changed as U.S. Data Outweigh Greece | European (SXXP) stocks were little changed, paring earlier losses, as better-than-estimated U.S. economic data outweighed a delay in the bailout of Greece. Banco Santander SA led Spanish lenders lower after the nation’s regulator removed a ban on short sales of financial shares. ABB Ltd. (ABBN) tumbled 3.6 percent after earnings missed estimates. Renault SA rose 4.5 percent after posting 2011 free cash flow that exceeded the company’s target. The Euro Stoxx 50 Index dropped 0.2 percent to 2,489.35 at the close of trading. Stocks pared earlier losses of as much as 1.6 percent after U.S. housing, manufacturing and jobless claims data beat estimates. The gauge has still rallied 7.5 percent this year amid optimism that the euro area will contain its debt crisis and as the U.S. economy continued its recovery. “Greek concerns appear to be weighing down on markets,” said Peter Dixon , global equities economist at Commerzbank AG. “It’s beginning to look as though the end game may be a lot more messy than anticipated. A Greek exit is certainly no longer off the table,” he said, referring to the possibility of the nation leaving the currency union. Europe’s creditor countries struggled to reach an agreement over a rescue of Greece , seeking more control over how future aid is spent as the country faces the threat of default over a bond payment due on March 20. Policy makers will discuss a second bailout on Feb. 20. U.S. Economy Claims for jobless benefits in the U.S. fell unexpectedly last week to the lowest level in four years, Labor Department figures showed today. First-time applications decreased in the week ended Feb. 11 to 348,000, less than the median estimate of 365,000 in a Bloomberg News survey. Housing starts rose 1.5 percent to a 699,000 annual rate, another report showed. That beat the median estimate in a Bloomberg News survey of 675,000. A third report showed that manufacturing in the Philadelphia region expanded in February at the fastest pace in four months as new orders and sales picked up. Moody’s said it is reviewing the credit ratings of 17 banks and securities firms with capital-markets operations, which may result in downgrades. The announcement comes days after the company cut the ratings of six European (SXXP) nations including Spain and lowered its outlook on France. National benchmark indexes declined in 9 of the 18 western European markets today. France’s CAC 40 gained 0.1 percent, while Germany ’s DAX lost 0.1 percent each. The U.K.’s FTSE 100 slipped 0.1 percent. Spain’s IBEX 35 Index fell 2.1 percent. Debt Auctions Spain and France today sold 14.2 billion euros ($18.5 billion) in their first auctions since the euro-area downgrades by Moody’s, getting more demand than the amount they offered. The yield on France’s benchmark two-year notes fell, while Spanish borrowing costs rose. Spain’s stock-market regulator lifted a six-month ban on short-selling of financial stocks. France and Belgium also eased restrictions this week. Banco Santander SA lost 2.6 percent to 6.29 euros, while Banco Bilbao Vizcaya Argentaria SA slid 4.1 percent to 6.80 euros. Bankia SA tumbled 7.3 percent to 3.09 euros. ABB fell 3.6 percent to 19.20 Swiss francs. The world’s largest maker of power-distribution equipment reported less- than-expected profit in the fourth quarter and said price pressure may weigh in on profitability in the first quarter. Rio Tinto, Axa Rio Tinto Group slid 1.3 percent to 3,633.5 pence as copper fell a fifth straight session, heading for its longest slump since November. Axa, Europe ’s second-largest insurer, declined 1.3 percent to 12.06 euros. The company posted an 82 percent drop in second- half profit, after it didn’t repeat a gain from an asset disposal in the first half and witnessed lower sales of life- insurance products. BAE Systems Plc dropped 2.3 percent to 325.2 pence after forecasting that sales growth will stagnate this year. Europe’s largest defense company said the U.K. market will fail to grow in 2012 and that U.S. defense budget cuts will create “uncertainty” in coming years. Nestle, the world’s biggest food company, climbed 2.1 percent to 55.60 francs after posting 2011 sales growth that beat analyst estimates and forecast higher 2012 earnings as it introduces new products. Cap Gemini SA, France’s biggest computer-services company, rose 7.9 percent to 31.66 euros after it forecast higher operating profit margin this year. Renault, France’s second-largest carmaker, advanced 4.5 percent to 37.83 euros as it reported 2011 free cash flow of 1.08 billion euros, exceeding its previously set target. Natixis SA said Renault’s cash flow is a “very good surprise” and there is a “night-and-day” difference between the performances of Renault and PSA Peugeot Citroen. Renault’s earnings and cash flow outperformed those of Peugeot. Peugeot declined 1.7 percent to 13.82 euros. To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-05-28 | Bloomberg | Fidelity National to Buy LPS in $2.9 Billion Deal | Fidelity National Financial Inc. (FNF) , the largest U.S. title insurer, agreed to acquire its former unit, Lender Processing Services Inc. (LPS) , to expand in the business of providing and analyzing mortgage data. The cash-and-stock deal values LPS at $33.25 per common share, or about $2.9 billion, Jacksonville, Florida-based Fidelity National said today in a statement. LPS, also based in Jacksonville, closed at $29.11 on May 22, before it was first reported that Fidelity National was in talks to acquire the firm. Fidelity National is expanding in housing-linked businesses amid a recovery in the U.S. real estate market. LPS has technology that’s used by lenders throughout the mortgage process, from origination to foreclosure. “This combination will create a larger, broader, more diversified and recurring revenue base for FNF and makes us the nation’s leading title insurance, mortgage technology and mortgage services provider,” Fidelity National Chairman William Foley said in the statement. LPS says its technology is used by lenders to handle about 50 percent of all U.S. mortgages by dollar value. The firm’s biggest customers are Wells Fargo & Co. and JPMorgan Chase & Co. (JPM) , according to a regulatory filing. “The old way in which banks addressed their mortgage businesses, which was heavy on paper and people, is being replaced with technology,” Mark Palmer , an analyst at BTIG LLC, said by phone. “Those functions are being outsourced and that’s where LPS comes in.” Stock Issuance Fidelity National plans to pay for LPS half in cash and half by issuing about 57.4 million shares of stock to LPS shareholders. The terms could change based on FNF’s stock price, and the deal will probably be completed in the fourth quarter, according to the statement. In a 2006 reorganization, Fidelity National split off a business called Fidelity National Information Services Inc. That entity gave investors half a share of LPS common stock for each Fidelity National Information share they owned in 2008. LPS shares closed at $33 on July 2, 2008, the day of the spinoff. “We have significant experience and familiarity with LPS from our previous ownership of these businesses,” Foley said. The transaction is expected to boost Fidelity National’s earnings by 11 percent compared with 2012, Foley said. After the deal is completed, Fidelity National will combine its ServiceLink unit with LPS in a new holding company and sell a 19 percent stake in that business to Thomas H. Lee Partners for $381 million, according to the statement. Termination Fee Under the terms of the deal, LPS is permitted to solicit other buyers through July 7. If LPS receives a better offer and terminates the deal during that period, there is a 1.25 percent breakup fee, according to the statement. LPS gained 1.8 percent to $33.49 at 4:15 p.m. in New York. Fidelity National slipped 0.6 percent to $26.03, trimming its gain this year to 11 percent. Bank of America Corp. (BAC) and JPMorgan were financial advisers on the deal and provided committed financing to Fidelity National. LPS’s bankers were Credit Suisse Group AG (CSGN) and Goldman Sachs Group Inc. Title insurers like Fidelity National and First American Financial Corp. (FAF) use their records and public documents to verify a seller is a property’s true owner and that it is free from liens. The companies collect a premium at the closing of the purchase and pay costs that may arise if someone disputes the new owner’s right to the property. Dining, Cars Fidelity National has invested in businesses ranging from restaurants to auto parts. It announced an agreement in 2012 to buy J. Alexander’s Corp. and take its dining unit public in a deal valued at $72 million. It also agreed to buy restaurant chain O’Charley’s Inc., valuing the target company at more than $200 million. Thomas H. Lee has been involved with the companies before. In 2005, an investment group led by Thomas H. Lee and Texas Pacific Group purchased a 25 percent stake in Fidelity National Information, according to a statement on Thomas H. Lee’s website. To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomberg.net ; Noah Buhayar in New York at nbuhayar@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-03-22 | Bloomberg | S&P 500 Could Drop 9.9% Before Resuming Rise: Technical Analysis | The Standard & Poor’s 500 Index may decline as much as 9.9 percent from its current level before resuming its two-year-old advance, according to Bank of America Corp. The S&P 500 ’s fall below support at 1,270 last week broke the “uptrend” that has been in place since the middle of last year, Mary Ann Bartels, Bank of America’s New York-based head of technical market analysis, said in a note yesterday. The gauge closed at 1,256.88 on March 16 and rose three straight days since then, gaining 1.5 percent to 1,298.38 yesterday. “The cyclical bull market since the March 2009 low is intact,” Bartels said, “but a test of the recent low of 1,249 and possibly 1,220 to 1,170 cannot be ruled out.” She said her estimate for the S&P 500 remains 1,400. The S&P 500 has risen as much as 99 percent from its March 9, 2009, low as corporate earnings beat expectations, the Federal Reserve bought Treasuries to stimulate growth and economic data improved. The benchmark index for U.S. stocks declined 6.4 percent from Feb. 18 through March 16 as violence in the Middle East and northern Africa threatened to drive up energy prices and an earthquake and tsunami in Japan caused chaos in the world’s third-largest economy. Technical analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. To contact the reporter on this story: Joanna Ossinger in New York at jossinger@bloomberg.net. To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net . |
2024-04-27 | Bloomberg | U.S. Stocks Gain for Week on Earnings, Stimulus Optimism | U.S. stocks rose for the week, with the Standard & Poor’s 500 Index rebounding from the biggest drop since November, as companies beat earnings estimates amid speculation central bank stimulus will continue. The S&P 500 (SPX) fell on the final day as data showed the U.S. economy grew less than forecast in the first quarter. United Parcel Service Inc. and Boeing (BA) Co. climbed more than 3.2 percent for the week after posting results. Apple Inc. rose 6.8 percent after boosting its dividend and share-buyback plan. DuPont Co. and Halliburton Co. jumped at least 7.5 percent, driving commodity shares to the biggest gain among 10 S&P 500 groups. The S&P 500 rose 1.7 percent to 1,582.24 over the five days, after tumbling 2.1 percent in the previous week. The Dow Jones Industrial Average increased 165.04 points, or 1.1 percent, to 14,712.55. The S&P 500 is up 0.8 percent in April, poised for a sixth straight monthly gain, the longest stretch since September 2009. “We see a big pivot in markets to go from safe to cyclical,” John Augustine, who helps manage $27 billion as chief market strategist at Cincinnati-based Fifth Third Bancorp, said by phone. “Earnings were OK. Now market attention is focusing on stimulus, which they believe is coming in Europe .” Global stocks rallied during the week as speculation mounted that the European Central Bank will cut rates when it meets on May 2. U.S. gross domestic product rose at a 2.5 percent rate in the first quarter, below economists’ estimates for a 3 percent gain. The economy’s inability to sustain faster growth means Federal Reserve policy makers will probably affirm a pledge to keep buying bonds after their May 1 meeting. Economic Reports Other economic reports in the week showed demand for durable goods slumped by the most in seven months while applications for unemployment benefits fell to a six-week low. The bull market in U.S. equities has entered its fifth year as the S&P 500 surged 134 percent from a 12-year low in 2009, driven by better-than-estimated corporate earnings and three rounds of monetary stimulus from the Fed. Analysts are turning more bullish on corporate earnings. Profit at S&P 500 companies gained 1.1 percent in the first three months of the year, according to analysts’ projections compiled by Bloomberg. That compares with a week earlier projection for a decline of 1.1 percent. Of the 270 companies in the benchmark index that have reported so far in this earnings season, 74 percent have exceeded analysts’ predictions on profits while 54 percent trailed on sales, data compiled by Bloomberg show. Top Line “It’s the trend we’ve seen for a while, which is, companies seem to beat on earnings, but struggle on the top line,” Rob Edel, chief investment officer with Nicola Wealth Management, in a phone interview from Vancouver. His firm manages about C$2 billion ($1.97 billion). “It’s a question of how much it is cost-saving driven versus real growth.” The markets experienced two disruptions in separate incidents during the week. The S&P 500 erased almost all of a 1 percent rally on April 23 following a post on an Associated Press Twitter account that said there were explosions at the White House. Stocks recovered as the AP said it had been hacked and there were no explosions. A software malfunction shut the Chicago Board Options Exchange for three-and-a-half hours on April 25, preventing traders from trading on options based on the S&P 500 and the so- called VIX gauge of equity volatility. The Chicago Board Options Exchange Volatility Index dropped 9.1 percent to 13.61 for the week. The gauge has lost 24 percent for the year. Commodities Rally Companies whose earnings are most tied to economic swings led gains for the week. Commodity, technology and financial companies rose the most among 10 S&P 500 groups, rallying at least 2.6 percent. The S&P GSCI gauge of 24 commodities jumped 2.4 percent as gold rallied the most in 15 months and crude capped its biggest increase since June. The Dow Jones Transportation Average (TRAN) climbed 1.4 percent. UPS advanced 3.3 percent to $85.71. First-quarter earnings beat estimates as the world’s largest package-delivery company carried more purchases to online shoppers. Boeing jumped 5.6 percent to $92.85, the highest level in more than five years. The company increased deliveries for 777- and 737-model jets, making up for the halt in buyers picking up Dreamliners while that plane was grounded and helping quarterly profit exceed forecasts. Apple Profit Apple rallied 6.8 percent, the most since November, to $417.21. The company, which this year ceded the title of the world’s largest company by market value to Exxon Mobil Corp., said it will return an additional $55 billion in cash to shareholders to compensate for a stock that’s been hammered by signs of slowing growth. The iPhone maker reported its first profit drop in a decade and forecast sales this quarter that may miss analysts’ projections. DuPont (DD) advanced 7.5 percent to $52.90. The largest U.S. chemical company by market value posted first-quarter earnings that exceeded analysts’ estimates as profit from crop seeds and pesticides hit a record and pigment demand began to recover. Cost reductions helped quarterly results at Halliburton and Cliffs Natural Resources Inc. Halliburton, the world’s largest provider of hydraulic-fracturing services, rose 9 percent to $40.57. Cliffs Natural, the largest U.S. iron-ore producer, gained 14 percent to $20.17. Homebuilders Rally An index of homebuilders jumped 14 percent. The Commerce Department reported April 23 that sales of new U.S. homes advanced in March as near record-low mortgage rates helped the industry complete the strongest quarter since 2008. Profits at D.R. Horton Inc. and PulteGroup Inc. surged amid the accelerating housing recovery. D.R. Horton, the largest U.S. homebuilder by volume, rallied 21 percent to $26.66. PulteGroup, the biggest by revenue, climbed 19 percent to $21.35. Netflix (NFLX) Inc. soared 32 percent, the most in the S&P 500, to $215.55. The online video service signed up more than 2 million new U.S. customers and 1 million internationally in the first quarter, defying skepticism about its growth prospects. Microsoft (MSFT) Corp., the world’s largest software maker, jumped 6.8 percent to $31.79 after activist investor ValueAct Holdings LP amassed about a $1.9 billion stake. Procter & Gamble Co. declined 5.3 percent to $77.10 for the biggest retreat since 2009. The maker of Gillette razors and Tide detergent projected fiscal fourth-quarter earnings that trailed analysts’ estimates because of currency fluctuations and marketing costs. AT&T Inc. slipped 3.2 percent to $37.04. The largest U.S. phone company reported lower first-quarter revenue than analysts forecast, dragged down by sluggish landline sales and competition with Verizon Wireless. Edwards Lifesciences (EW) Corp. fell the most in the S&P 500, plunging 23 percent to $64.17. The biggest maker of aortic heart valves implanted with a catheter cut its 2013 forecast on slower-than-anticipated sales. To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-02-25 | Bloomberg | Santorum Joins Romney in Final Michigan Push | Mitt Romney and Rick Santorum campaigned across Michigan (BEESMI) yesterday in a final push ahead of the state’s primary election next week, a contest that could reshape the Republican presidential race. During a campaign stop last night in Kalamazoo, Romney was forced to defend his credentials on abortion after a woman in the audience said he’d been inconsistent. In Lincoln Park, Santorum described his priorities, including eliminating regulations and simplifying corporate tax codes to a flat rate of 17.5 percent. Polls show a close race in Michigan (BEESMI) between the two, while Romney leads in Arizona (BEESAZ) , which will also hold a Feb. 28 primary. A Romney loss in Michigan, where he spent his boyhood and where his father, George Romney , served as governor and an automobile company chief executive, would be a blow to his candidacy. The two contests will help determine who has the momentum heading into so-called Super Tuesday on March 6, when 11 states will hold contests where more than 400 of the 1,144 delegates needed to win the nomination are at stake. During the Kalamazoo event, Romney responded to the abortion question by invoking former Republican President Ronald Reagan. “Ronald Reagan was pro-choice before he became pro-life,” he said. “I’m a pro-life person. I’ll be a pro-life president.” Abortion Rights Romney had said he would protect abortion rights when running for the U.S. Senate in Massachusetts in 1994. He used the question as an opportunity to criticize Santorum for votes he cast as a U.S. senator from Pennsylvania that sent federal funding to Planned Parenthood and funded a family planning program for low-income women. “I will not fund Planned Parenthood or Title X, and Senator Santorum voted for Planned Parenthood and Title X,” Romney said. Romney shared fond memories of his father, including his legendary frugality as he explained why he was buried on the opposite side of the Detroit metropolitan area from where they lived. “He checked all over for where the best deal was for a grave site,” Romney said. In Lincoln Park, Santorum said Romney hasn’t been consistent on opposing federal bailouts. “You may not like my positions on bailouts, but I’ve been consistent and principled unlike other people,” he said. Housing Prices Santorum, noting that his own home is worth less than what he paid, also talked about a need to help housing prices and suggested a tax deduction for homes sold at a loss. At an earlier stop, Santorum, 53, visited a Catholic church in Walled Lake, where more than 500 people ate fried-fish dinners served by children in the gymnasium. Santorum is Catholic and is trying to boost turnout among Michigan ’s large Catholic population. Earlier yesterday, Romney, 64, told Michigan business leaders at the Detroit Economic Club that he would revive the state’s economy and the nation’s as a whole by lowering taxes and lessening the role of the federal government. Speaking to an audience of about 1,000 people on the field of a stadium that seats about 65,000 and where the Detroit Lions football team plays, Romney criticized unions and management for the decline of the U.S. automotive industry, as well as federal fuel economy standards that he said hurt domestic car companies while providing benefits to some overseas competitors. Wife’s Cadillacs In remarks at the stadium, Romney highlighted his love of American-made cars by saying he owns a Ford Mustang and a Chevrolet pickup, while his wife, Ann, drives “a couple of Cadillacs.” Cadillacs retail for $36,000 to $74,000, according to Edmunds.com., an online auto market. The comments about his family’s cars reignited media coverage that Romney is a rich man out of touch with most Americans. The Romneys own homes in Massachusetts , California and New Hampshire. Romney was forced to defend a Feb. 1 comment on CNN that, as he offers proposals to help the middle class, he isn’t “very concerned about the very poor” because they have a “safety net” of government programs to aid them. In January, Romney told voters that he likes “being able to fire people who provide services to me.” The comments sparked criticism, though he was referring to health-insurance providers, not employees. Bet With Perry And he also faced questions after saying he would make a $10,000 bet with then-presidential rival Rick Perry , the governor of Texas , to settle an issue dispute during a Dec. 10 nationally televised debate. Romney later said in a Fox News interview that he had offered “an outrageous number to answer an outrageous charge.” Romney, the former governor of Massachusetts and a co- founder of Boston-based private-equity firm Bain Capital LLC, estimated his wealth to be as much as $250 million on financial disclosure statements. He earned $21.6 million in 2010, mostly from investments, according to tax returns he released in late January. Romney’s focus on improving the economy and his criticism of the Obama administration as a “failed presidency” came as unemployment in Michigan has declined from a peak of 14.1 percent in August 2009 to 9.3 percent last December, the latest available. The national unemployment rate in January was 8.3 percent. Obama Campaign Response President Barack Obama ’s campaign said Romney would have let the auto industry go bankrupt, referring to his opposition to the federal bailout of General Motors Co. (GM) and Chrysler Group LLC. Obama’s campaign also said Romney is paying “lip service” to the middle class. “Mitt Romney has proposed a fiscally irresponsible plan that would increase the deficit by $5 trillion over the next decade” and “provide millionaires with tax breaks 800 percent larger than those for the middle class,” Obama campaign spokesman Ben LaBolt said in an e-mail after Romney spoke. While the audience inside the stadium was supportive of Romney, the atmosphere outside was hostile. The United Auto Workers union had called on its members to stage a protest, drawing attention to Romney’s continued criticism of the $82 billion federal automotive bailout. Several Democratic UAW members gathered in freezing rain and snow outside Ford Field said they’re planning to vote in the Republican primary to oppose Romney. ‘It’s Our Jobs’ “It’s personal to us,” said Gail Lavigne, 43, a member of UAW Local 600 and employee of Ford Motor Co. “He didn’t want to try to help the auto companies, so it’s very personal -- it’s our jobs.” While Lavigne said she voted for Obama in 2008 and will do so again in November, she’s planning to cast a ballot in the Michigan primary for either Santorum or Representative Ron Paul of Texas “to show Mitt that just because he’s from Michigan that we’re not going to support him.” UAW member Jeff Hodges, 45, another Obama supporter, said he also plans to vote against Romney in the primary. It sends “a strong message if he loses his own state,” he said. “If you’re no good in your own state, how can you be good anywhere else?” UAW member Rachael Siemen, 41, said she plans to vote for Santorum. ‘Clown Show’ “If we drag this clown show out as long as we can, it’s just going to help us in the long run,” she said. Democrats will account for about 10 percent of voters in the Republican primary, according to a recent poll by Lansing- based EPIC-MRA. Those Democrats are evenly divided between Santorum, Romney and Paul, said Bernie Porn, EPIC-MRA president. The poll of 400 likely primary voters, conducted Feb. 18-21, showed Santorum leading Romney, 37 percent to 34 percent. Almost half the respondents -- 45 percent -- said they would consider changing their minds before the primary. Other recent polls have shown Romney slightly ahead. In Michigan’s 2000 Republican presidential primary, Democrats and independents were credited with helping Senator John McCain of Arizona defeat then-Texas Governor George W. Bush. Exit polls showed about 18 percent of those who voted in that primary were Democrats and they chose McCain over Bush by a 4-to-1 ratio. Michigan Spending “If only Republicans had voted, Bush would have won,” Porn said. Spending in Michigan on commercials by Romney’s team and a political action committee backing him has outpaced comparable expenditures on behalf of Santorum by a ratio of about 3-to-2, according to data from New York-based Kantar Media’s CMAG. The Romney campaign and the super-PAC Restore Our Future, which independently promotes his candidacy, spent $2.29 million to air ads 4,341 times on Michigan broadcast television stations through Feb. 23, CMAG reported. Santorum and the Red White and Blue Fund spent $1.49 million to air ads 3,721 times. The two super-PACs paid for 4,678 of the 8,062 ads, or 58 percent. Super-PACs can raise and spend unlimited amounts of money on campaign activity, as long as they don’t coordinate with candidates. To contact the reporters on this story: John McCormick in Kalamazoo, Michigan at jmccormick16@bloomberg.net ; Tim Higgins in Lincoln Park, Michigan at thiggins21@bloomberg.net To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net |
2024-11-19 | Bloomberg | Pimco Said to Seek at Least $1 Billion for Fund to Buy Troubled Bank Loans | Pacific Investment Management Co., manager of the world’s largest mutual fund, is raising at least $1 billion for a private fund to buy troubled loans from banks divesting assets to meet new rules, said two people briefed on the plans. The Pimco Bravo fund, short for Bank Recapitalization and Value Opportunities, will acquire commercial and residential mortgage loans and other debt, according to a prospective investor who asked not to be named because the capital raising is private. Pimco plans to work with a loan servicer to renegotiate the terms of the acquired debt directly with creditors, the client said. Financial institutions are selling assets after the 27- nation Basel Committee on Banking Supervision adopted standards in September that will more the double the ratio of capital banks must hold in relation to the amount of risk on their balance sheets. Pimco, the Newport Beach, California, firm best known for its fixed-income mutual funds such as those run by Bill Gross , has raised at least $5 billion from institutional clients to buy distressed mortgages and bonds backed by real estate loans since the global credit crisis began in late 2007. “Valuation is in Pimco’s wheelhouse, and valuation is really the main challenge to this type of investing,” Geoff Bobroff , an independent fund consultant in East Greenwich, Rhode Island, said in a telephone interview. The Pimco Distressed Mortgage Fund LP, opened before the peak of the crisis in October 2007, returned 54 percent in the year ended Sept. 30 after losing almost a third of its value in 2008, the investor said. The Pimco Distressed Senior Credit Opportunities Fund climbed 28 percent in the year through September, according to the investor. ‘Problem’ Banks The number of banks considered “problem” lenders by the Federal Deposit Insurance Corp. rose even with the economic recovery, as bad loans remained on balance sheets. The FDIC’s list increased 7 percent in the second quarter to 829 banks. Pimco’s institutional fund will target smaller lenders and community banks, and won’t buy consumer debt such as credit-card and auto loans, the investor said. Mark Porterfield , a Pimco spokesman, declined to comment. “Pimco is using a very wise combination of strategies to take advantage of dislocations in the banking system,” Eric Petroff , director of research at consulting firm Wurts Associates in Seattle, said in a phone interview. Dozens of money managers have opened funds to invest in mortgage-related credit to take advantage of cheap prices since that market started unraveling three years ago. Most, like Pimco Bravo, are targeted to institutional investors such as pension funds and endowments. Cargill, DoubleLine An investment unit of Cargill Inc., the Minneapolis-based food producer, said last month it raised $373 million to buy debt assets from banks. DoubleLine Capital LP in Los Angeles, started by former TCW Group Inc. investment chief Jeffrey Gundlach , gathered $79 million for a fund to invest in mortgage- related assets, according to Nov. 2 filing with the U.S. Securities and Exchange Commission. Ken Griffin ’s Chicago-based Citadel LLC collected $225 million for a residential-mortgage opportunities fund, according to an August regulatory filing. Distressed securities are mostly loans and low-rated, high- yield bonds whose issuers are having trouble meeting interest and principal payments. They typically sell below face value, and investors can profit if prices rebound or the securities are swapped for equity in a restructuring. The instruments plunged in value two years ago, when investors shunned all but the safest government-backed debt after the failures of Bear Stearns Cos. and Lehman Brothers Holdings Inc. Bank of America Merrill Lynch’s U.S. High-Yield Distressed Index fell 45 percent in 2008, followed by a record gain of 117 percent in 2009 as the markets rebounded. In the 12 months ended Sept. 30, the index gained 29 percent. Pimco’s Expansion Pimco, started in 1971 mainly as a U.S-oriented traditional bond shop, has expanded into emerging markets and hedge fund- style strategies. Under Mohamed El-Erian , who was named chief executive officer in late 2007, the firm has opened long-term funds that try to minimize risks from systemic shocks and opportunistic funds that aim to take advantage of temporary market disruptions, such as the distressed-debt vehicles. Last year, the firm made a push into actively managed equities and exchange-traded funds. The firm’s Pimco EqS Pathfinder fund, which invests in undervalued global stocks, will also devote a portion of assets to distressed debt. Pimco added an advisory arm in 2009 to help clients value mortgage-related investments and other bonds. The division, Pimco Advisory, has won assignments from the National Association of Insurance Commissioners to help assess home-loan investments held by insurers and the Federal Reserve, for which it runs the Commercial Paper Funding Facility program. PPIP Departure Pimco, with about $1.2 trillion in assets, was a leading contender to manage the U.S. Treasury’s Public-Private Investment Plan before it dropped out last year, citing “uncertainties” about the program’s design. PPIP, overseen by eight managers including New York-based BlackRock Inc., is intended to purchase devalued real estate assets to speed the recovery of financial markets. A unit of Munich-based insurer Allianz SE , Pimco runs the $255.9 billion Pimco Total Return Fund , managed by Gross. The fund had 39 percent of assets in mortgage-related debt as of Oct. 31, according to the fund company’s website. To contact the reporter on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net. To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net . |
2024-07-12 | Bloomberg | KfW IPEX-Bank, LBBW Loan $164.5 Million for Turkish Wind Farm | KfW IPEX Bank GmbH, the export finance unit of Germany ’s state-owned development lender KfW Group, and Landesbank Baden-Wuerttemberg will loan $164.5 million to a Turkish wind farm. The 14-year loan will finance construction of the 120- megawatt project near Izmir, according to a statement today from KfW-IPEX, based in Frankfurt am Main. Alto Holding AS is developing the $227 million Karaburun project, which will generate enough power for 100,000 homes starting in 2013. Turkey aims to get 30 percent of its power from renewables by 2023 as it seeks to meet an electricity demand that’s increasing at about 6 percent annually, Economy Minister Zafer Caglayan said in June. KfW IPEX and Stuttgart-based LBBW contributed “in equal shares” to the syndicated financing. Most of the loan is guaranteed by German export credit insurance company Euler Hermes Deutschland AG, according to the statement. The project will use turbines made by Enercon GmbH, the Aurich, Germany-based manufacturer. Electricity generated by renewable sources in Turkey is promoted by an off-take price guaranteed for 10 years, according to the statement. To contact the reporter on this story: Sally Bakewell in London at sbakewell1@bloomberg.net To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net |
2024-03-29 | Bloomberg | Health-Care Case Injects High Court Into Election Debate | The U.S. Supreme Court’s pending ruling on the health-care law will put a rare judicial stamp of repudiation or endorsement on an incumbent president’s most prominent achievement just as he faces re-election. “There’s been no measure this central to an administration knocked down by a court just a few years after it passed,” including when parts of President Franklin D. Roosevelt ’s New Deal were ruled unconstitutional in the 1930s, said Julian Zelizer , a presidential historian at Princeton University. On the other hand, if the court should uphold the law, “it’s significant affirmation,” he said. Striking down the health-care overhaul that President Barack Obama pushed through Congress would be a blow to the legacy of a president who used to teach constitutional law and who pursued the health legislation at a heavy political cost -- the Democrats lost control of the House in the next election. It also may bring into sharp relief the nation’s partisan divide. The law passed Congress on a party line vote, and the court may also divide between its Republican and Democratic appointees when it rules. Still, in a testament to the depth of voter concern about the economy, academic experts and political strategists say they expect the decision to generate mostly short-term turmoil rather than a sea-change in the presidential race. “Right now, the economy is pushing every other issue out of the center of the campaign,” said Bill Carrick , a Democratic political consultant. Republican Candidates Republicans seeking their party’s nomination to challenge Obama in November have all vowed to dismantle the law. The leading contender for the nomination, Mitt Romney , won passage when he was governor of Massachusetts of a health-care law that Obama’s aides have said was the model for their plan. Former Pennsylvania Senator Rick Santorum , his chief rival, said Romney is “the worst person” to debate Obama on the law. A decision against the federal health care law would produce “a little turbulence for Obama,” Carrick said. “Over the long course of the campaign, I don’t think it will be a plus or minus for either one of them.” The Republican National Committee released a video yesterday attacking the performance of Solicitor General Donald Verrilli Jr. in defending the health care plan before the Supreme Court. Titled “ObamaCare: It’s a Tough Sell,” it features Verrilli coughing and mumbling “excuse me” as he began his statement to the court. White House Cautions Obama advisers at the White House and on his campaign staff declined yesterday to discuss the political ramifications of potential rulings. Deputy White House Press Secretary Josh Earnest cautioned reporters against making predictions of the court’s decision “based solely on the tenor of the questions” from the justices. He cited lower court cases in which “conservative judges, despite their tough questions, ended up ruling” in favor of the health care law. The political split in the country that surfaced in the health care debate shows signs of spilling over into public confidence in the neutrality of the nation’s highest court. In a Bloomberg National Poll conducted March 8-11, 75 percent of respondents said they expect politics will influence the court’s ruling while only 17 percent said they believe the case will be decided solely on its legal merits. Eight percent said they weren’t sure. Court Legitimacy While that may feed a negative view of the Supreme Court from supporters of the law if it’s overruled, the court’s institutional legitimacy probably is not threatened, said Michael Klarman, a Harvard Law School professor who specializes in constitutional law. The health care law does not command majority support from the public and feeling among its backers is not as intense as was public sentiment surrounding the 2000 presidential election, Klarman said. The Supreme Court intervened in 2000 to stop a vote recount in Florida , effectively delivering the election to Republican George W. Bush over Democrat Al Gore , who won the national popular vote by more than 500,000 ballots. “It didn’t have any ramifications for the court,” Klarman said. “If Bush versus Gore didn’t do it, this won’t do it.” Public Skeptical of Law Seventy-two percent of Americans said the health care law’s individual mandate to buy insurance is unconstitutional in a USA Today /Gallup Poll conducted February 20-21 that found the country evenly split on the merits of the law. Even among those who thought the law was a “good thing,” 54 percent said they thought the requirement to buy insurance is unconstitutional. Among Democratic activists, rumblings of a political attack on the court surfaced hours after four of the Republican appointees hinted in questions during oral arguments that they might strike down the law. James Carville , a veteran Democratic strategist and adviser to former President Bill Clinton , said on CNN March 27 that a Supreme Court ruling against the law would be perceived as political and provide Democrats a boost. “Just as a professional Democrat, there’s nothing better to me than overturning this thing 5-4 and then the Republican Party will own the health care system for the foreseeable future,” Carville said. “I really believe that. That is not spin.” Previous Rulings Tad Devine, a Democratic strategist who advised the party’s 2004 presidential nominee, Senator John Kerry of Massachusetts , said a charge of partisanship might gain traction because of two prior rulings that divided the court along ideological lines: the Florida recount case and the 2010 Citizens United decision that opened the way for the use of corporate funds to influence elections. “A lot depends on the nature of the decision, how it comes down and how it reflects the polarization of politics that people resent so much today,” Devine said. Still, George Terwilliger III, a deputy attorney general under Republican President George H.W. Bush , said a Supreme Court ruling overturning the health law would validate Republican criticism that the Obama administration has overreached its authority. “If it says to independents in the middle this is a president who is willing to overreach on a lot things, unbridled in the second term that may scare them,” Terwilliger said. Conversely, a ruling that upholds the health care law would provide affirmation to Obama, even if the decision doesn’t persuade the most ardent opponents. “If the law is upheld,” Terwilliger said, “particularly if Romney is the nominee, I think the issue will fade.” To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net To contact the editor responsible for this story: Steve Komarow at skomarow1@bloomberg.net |
2024-05-17 | Bloomberg | Swiss Stocks Are Little Changed Before U.S. Reports | Swiss stocks were little changed as a Federal Reserve policy maker said the central bank may cut its monthly bond purchases as early as this summer, and investors awaited U.S. data on leading indicators and consumer sentiment. SGS SA, the world’s biggest product inspector, led losses on the Swiss Market Index, slipping 2.2 percent, after industry peer Intertek Group said profit at its mineral business will continue to fall. Sonova Holding AG gained after Deutsche Bank AG upgraded its recommendation on the shares. The SMI fell 0.1 percent to 8,250.52 at 3:27 p.m. in Zurich, paring its weekly advance to 0.9 percent. The equity benchmark lost 0.7 percent yesterday as Zurich Insurance Group AG reported earnings that missed analysts’ estimates and U.S. jobless claims rose more than forecast. The gauge has still risen 21 percent so far this year as central banks around the world maintained monetary stimulus. The Swiss Performance Index also slipped 0.1 percent today. In the U.S., Fed Bank of San Francisco President John Williams said quickening economic growth and an improving job market may prompt the Fed to begin to reduce its $85 billion of monthly bond purchases in the next few months. Williams was one of the first Fed officials to advocate that the Fed buy bonds without setting a time limit or total for such purchases. He doesn’t vote on policy this year. The Conference Board’s index of U.S. leading indicators probably rose 0.2 percent last month, according to the median estimate of economists surveyed by Bloomberg News. Economists in a separate Bloomberg poll forecast that the Thomson Reuters/University of Michigan index of consumer sentiment today will rise to 77.9 this month from 76.4 in April. To contact the editor responsible for this story: Tom Stoukas at astoukas@bloomberg.net |
2024-11-04 | Bloomberg | Initial Jobless Claims in the U.S. Climb More Than Forecast | More Americans than forecast filed applications for unemployment benefits last week, showing the labor market will take time to improve. Jobless claims rose by 20,000 to 457,000 in the week ended Oct. 30 from a revised 437,000 the prior week, Labor Department figures showed today in Washington. The total number of people receiving unemployment insurance fell, while those on extended payments increased. The pace of firings has held within a narrow range in 2010, showing employers continue to focus on cutting costs more than a year into the economic recovery. Calling progress toward lower joblessness and faster growth “disappointingly slow,” Federal Reserve policy makers yesterday announced plans to bolster the recovery through another round of large-scale asset purchases. Claims have “been relatively steady, consistent with lackluster to moderate labor market conditions,” said Scott Brown , chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. Another Labor Department report showed worker productivity rose more than forecast in the third quarter as companies redoubled efforts to rein in costs amid signs the recovery was cooling. A measure of employee output per hour increased at a 1.9 percent annual rate after falling 1.8 percent in the previous three months. Labor costs adjusted for efficiency gains unexpectedly dropped at a 0.1 percent pace. Stock-index futures and Treasuries held earlier gains after the reports. The December contract on the Standard & Poor’s 500 Index rose 0.9 percent to 1,208.3 at 8:57 a.m. in New York. The yield on the 10-year Treasury note, which moves inversely to price, fell to 2.50 percent from 2.57 percent late yesterday. Exceeds Median Forecast Economists forecast claims would rise to 442,000 from a previously estimated 434,000 the prior week, according to the median of 50 projections in a Bloomberg News survey. Estimates ranged from 430,000 to 455,000. The figures precede tomorrow’s Labor Department report on October employment. Economists surveyed by Bloomberg project companies added 80,000 positions. The unemployment rate was probably 9.6 percent for a third month, according to the survey. The four-week moving average for claims, a less volatile measure, rose to 456,000 last week from 454,000. The number of people continuing to receive jobless benefits dropped by 42,000 in the week ended Oct. 23 to 4.34 million. Extended Benefits The continuing claims figure does not include the number of Americans receiving extended and emergency benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by about 357,700 to 5.01 million in the week ended Oct. 16. The unemployment rate among people eligible for benefits fell to 3.4 percent in the week ended Oct. 23 from 3.5 percent. The labor market and the economy were top concerns for voters heading into the Nov. 2 congressional elections in which Republicans gained control of the U.S. House and narrowed the Democratic majority in the Senate. To spur the economy and encourage job creation, the Fed yesterday said it will purchase an additional $600 billion in Treasury securities by the end of June. The Fed will buy about $75 billion a month and “will adjust the program as needed to best foster maximum employment and price stability,” the Fed’s Open Market Committee said in a statement in Washington. Fed on Jobs “Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low,” the FOMC said. Progress in reaching its dual mandate of stable prices and low unemployment “has been disappointingly slow,” it said. Smurfit-Stone Container Corp. is cutting more than 450 jobs in its selling, general and administrative areas this year and expects to make more reductions over the next two years, Chief Operating Officer Steven Klinger said on a conference call Nov. 1. The second-largest U.S. maker of corrugated packaging emerged from bankruptcy protection in June. Some companies plan to expand. Cedar Rapids, Iowa-based Rockwell Collins Inc., a maker of cockpit instruments and radios, last week said it’ll add 800 people, boosting staff by 4 percent during the next 12 months. Ford Motor Co., the second- largest U.S. automaker, said it will spend $850 million and add 1,200 jobs in Michigan by 2013 as sales rebound. To contact the reporters on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net ; Bob Willis in Washington at Bobwillis@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net |
2024-09-23 | Bloomberg | Dickson Says Catastrophe Bonds Can Help Insurers | Julie Dickson, Canada ’s top financial industry regulator, said insurance-linked securities such as catastrophe bonds can be helpful in managing risks of major losses. Dickson, who heads the Ottawa-based Office of the Superintendent of Financial Institutions, said in a speech today there has been an increase in the “frequency and severity” of such losses. “Catastrophe bonds can be used to help companies to reduce exposure to certain risks, including earthquakes,” Dickson said in the text of the speech she’s giving to a conference of insurers near Ottawa. Such bonds “can be a good addition to an insurer’s risk management program.” To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net To contact the editor responsible for this story: Paul Badertscher at pbadertscher@bloomberg.net |
2024-10-16 | Bloomberg | Allianz Says Capital Rules Fuel Artificial Risk Pricing | Michael Diekmann, chief executive officer of Allianz SE (ALV) , Europe ’s biggest insurer, said capital rules that encourage financial companies to invest in sovereign bonds are thwarting a solution to the continent’s debt burden. Investments in infrastructure can revive productivity and boost growth in nations struggling to meet obligations to creditors, Diekmann said. Regulations instead promote bets on government debt that are distorting markets and contributing to a cycle of borrowing, he said. “We’re getting to a sort of artificial pricing of risk,” in bond markets, Diekmann, 58, said in an interview yesterday at Bloomberg headquarters in New York. Insurers are working to maintain returns on bond holdings as stimulus efforts depress yields and regulations limit investing options after the financial crisis. Allianz had 456 billion euros ($617 billion) of fixed-income investments tied to insurance units as of June 30. That’s 90 percent of a portfolio that also includes equities and real estate. Of the insurer’s 170 billion euros in government and government-related debt securities, France represented 20 percent, Italy 17 percent and Germany 16 percent, according to a presentation on the Munich-based company’s website. “The facts are more pessimistic for Europe, because there’s not much done about state debt,” said Diekmann, who was named CEO in 2003. “At some point in time, people will have to give a clear answer. So far the answer is we’re going to grow out of the problem.” ‘Highly Unlikely’ That would mean a country like Germany would need 3 percent to 4 percent growth with inflation increasing at the same rate, he said. Spain or Italy would need growth of at least 5 percent and “that’s all highly unlikely,” he said. Economic growth is projected to be 1.8 percent next year in Germany, 0.6 percent in Spain and 0.5 percent in Italy, according to economic estimates compiled by Bloomberg. Diekmann said so-called bail-in laws, which could enforce creditor losses in bank failures , are discouraging his company from investing in lenders as well. “Bond prices are not reflecting the risks,” he said. “Everything that can get bailed in, we have to pull out, be it nations or even the whole banking systems,” Diekmann said. Allianz has instead turned to corporate debt issued by industrial companies that will benefit in growing markets, he said. The insurer has also made investments ranging from wind parks in northern France to parking meters in Chicago. Axa, Generali France’s Axa SA (CS) , Europe’s second-biggest insurer, has been increasing bets on corporate bonds and infrastructure debt, helping hold the company’s portfolio yield steady, CEO Henri de Castries said in an interview in September. Infrastructure can include bridges, toll roads and airports. Italy’s Assicurazioni Generali SpA (G) , Europe’s third-biggest insurer, plans to boost its investments in infrastructure debt and real estate as it cuts liquidity to raise profitability, Chief Investment Officer Nikhil Srinivasan said in an interview this month. Diekmann, who was in the U.S. to meet with investors, said he will discuss with shareholders how requirements tied to some of the company’s favored investments, such as real estate and infrastructure financing, can make it harder to lift dividends. The insurer kept the payout for 2012 stable at 4.50 euros a share, representing 40 percent of profits. The insurer’s next dividend is expected to be 5.20 euros per share, according to Bloomberg projections. Regulators also need to be persuaded about the benefits of infrastructure financing, according to Diekmann. He suggested that banks could be counted on for short-term lending while insurers and pension funds could provide funds for longer durations. “There’s a void now for these long investments, and that’s a huge opportunity to get the interest of life insurers and the taxpayers in sync,” Diekmann said. “Unfortunately we’re not there yet.” To contact the reporters on this story: Oliver Suess in Munich at osuess@bloomberg.net ; Noah Buhayar in New York at nbuhayar@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net ; Dan Kraut at dkraut2@bloomberg.net |
2024-08-06 | Bloomberg | States' Attorneys General Challenging Health-Care Law Oppose Dismissal Bid | Attorneys general for 20 states challenging the health-care law signed by President Barack Obama filed court papers opposing a bid by the U.S. for dismissal of the lawsuit. “The Patient Protection and Affordable Care Act represents an unprecedented intrusion on the sovereignty of the states and the freedom of their citizens,” according to the states’ brief filed today with U.S. District Judge Roger Vinson in Pensacola, Florida. The health-care overhaul, signed into law by Obama on March 23, is intended extend the federal Medicaid program to cover 16 million more Americans, according to an estimate from the nonpartisan Congressional Budget Office. The legislation, which takes effect in 2014, will cost the states billions of dollars to administer. Thirteen of the 20 attorneys general sued to invalidate the legislation the same day it was signed, arguing that the measure placed an unfair burden on state budgets. The other states joined later. A separate complaint was filed by Virginia at the federal courthouse in Richmond, asserting that an included mandate directing individuals to obtain coverage was unconstitutional. Lawyers for the U.S. on June 16 asked Vinson to throw out the Pensacola case, saying it was prematurely filed and fails to identify any injury suffered by the states. Imminent Harm The minimum-coverage provision of the law is within the rights of Congress, the U.S. wrote in the filing. Any injuries to state budgets fall short of the imminent harm required to bring a claim, the government said. “The provision will not take effect until 2014, and it is entirely speculative whether the individual plaintiffs will be injured,” the U.S. said. The effective date “is fixed in the law and is certain to occur,” the states said in their opposition to the dismissal request. Vinson has scheduled a non-jury trial in the case before him for Sept. 14. U.S. District Judge Henry Hudson in Richmond on Aug. 2 denied a federal government motion to dismiss that state’s case, ruling that the issue of whether the U.S. has the authority to compel an individual to purchase health insurance is a novel issue upon which neither the U.S. Supreme Court nor any federal courts of appeal have ruled. The 20-state case is State of Florida v. U.S. Department of Health and Human Services, 10-cv-00091, U.S. District Court, Northern District of Florida (Pensacola). The smaller case is Commonwealth of Virginia v. Sebelius, 10-cv-00188, U.S. District Court, Eastern District of Virginia (Richmond). To contact the reporter on this story: Andrew M. Harris in Chicago at aharris16@bloomberg.net . |
2024-10-25 | Bloomberg | Bank of America Sued by U.S. Over Mortgage Loan Sales | Bank of America Corp. , the second- biggest U.S. lender by assets, was accused by the federal government in a $1 billion fraud lawsuit of selling defective residential mortgage loans to Fannie Mae and Freddie Mac (FMCC) that later defaulted. The U.S. Justice Department filed the complaint yesterday in Manhattan federal court, claiming the bank and its Countrywide Financial unit generated thousands of defective loans and sold them to the two home-mortgage finance companies now under government control. “The fraudulent conduct alleged in yesterday’s complaint was spectacularly brazen,” U.S. Attorney Preet Bharara in Manhattan said in a statement announcing the suit. “Through a program aptly named ‘the Hustle,’ Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill.” The lawsuit, which covers conduct from 2007 to 2009, is the first by the Justice Department to allege fraud over mortgage loans sold to the two entities, Bharara said. Bank of America, which acquired Countrywide in 2008, was among 17 financial institutions sued in September 2011 by Fannie Mae and Freddie Mac’s regulator, the Federal Housing Finance Agency , over losses on mortgage securities sold to the companies. The Bank of America lawsuit is the sixth brought against a major U.S. bank by the Justice Department in less than 18 months over what Bharara called “reckless mortgage practices in the lead-up to the financial crisis.” Current Employees U.S. District Judge Jed Rakoff, who is overseeing the case, today set a schedule that could result in a trial as early as August 2013. In a pretrial conference in Manhattan, Assistant U.S. Attorney Pierre Armand told Rakoff the government may amend its complaint to add current and former Bank of America employees to the case. Rakoff set Dec. 31 as the deadline for doing so. This month, the government sued Wells Fargo & Co. (WFC) , the biggest mortgage lender and servicer, over claims the San Francisco-based bank made reckless loans that caused losses for a federal insurance program when they defaulted. The complaint alleges misconduct over more than a decade related to the bank’s participation in a Federal Housing Administration program and follows similar cases against other lenders including Citigroup Inc. (C) and Deutsche Bank AG. (DB) First Action A state and federal task force is investigating misconduct in the bundling of mortgage loans into securities before the housing bust. The group’s first legal action was this month, when New York Attorney General Eric Schneiderman sued JPMorgan Chase & Co. (JPM) , the biggest U.S. lender, over defective mortgage loans underlying securities, a suit he said would act as a template for other such cases. The bank has denied wrongdoing. “Bank of America has stepped up and acted responsibly to resolve legacy mortgage matters,” Larry DiRita, a spokesman for the Charlotte , North Carolina-based company, said in an e-mailed statement. “The claim that we have failed to repurchase loans from Fannie Mae (FNMA) is simply false. At some point, Bank of America can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.” Fannie Mae and Freddie Mac losses totaled more than $1 billion, Bharara said. The Justice Department’s complaint was brought under the federal False Claims Act, which allows for triple damages. ‘The Hustle’ Fannie Mae and Freddie Mac have operated under U.S. conservatorship since 2008, when they were seized amid subprime mortgage losses that pushed them toward insolvency. The government said in the complaint that Bank of America “systematically removed every check” in the issuance of mortgages and then sold the “flawed” mortgages to Fannie Mae and Freddie Mac. Both relied on Bank of America’s assurances that the mortgages they purchased complied with their standards, the U.S. said. According to the complaint, Countrywide initiated “the Hustle” in 2007 just as mortgage loan defaults were increasing nationally and Fannie Mae and Freddie Mac were tightening their loan purchasing standards to reduce risk. The Countrywide program did just the opposite, the U.S. said. “The goals of the Hustle were high speed and high volume, where loans ‘move forward, never backward’ in the origination process,” Bharara said in his statement. “To accomplish these goals, the Hustle removed necessary quality control ‘toll gates’ that could slow down the origination process.” Whistle-Blower Lawsuit Also yesterday, a federal judge in Manhattan unsealed a so- called whistle-blower lawsuit filed on Feb. 24 against Bank of America over the same program. Edward O’Donnell, who worked at Countrywide as an executive vice president, said in his complaint that he “personally objected to the ‘Hustle’ on numerous occasions” because it was leading to an increasing number of early mortgage defaults. O’Donnell’s concerns “were dismissed and his role continued to be marginalized,” he said in his complaint. David Wasinger, a lawyer for O’Donnell, didn’t respond to phone and e-mail messages yesterday seeking comment on the complaint. O’Donnell lives in Texas and worked at Countrywide from 2003 to 2009, according to his complaint. The statute allows citizens to file complaints on behalf of the government and share in the recovery. Housing Bubble The U.S. lawsuit increases the potential losses Bank of America faces from its acquisition of Countrywide, whose lax lending standards helped fuel the housing bubble. The bank has booked more than $40 billion in costs tied to the takeover. Bank of America Chief Executive Officer Brian T. Moynihan , 53, is already engaged in disputes with Fannie Mae over who must pay for billions of dollars in failed loans made before and during the financial crisis. The bank had $12.3 billion in unresolved demands for loan refunds from the so-called government-sponsored enterprises as of Sept. 30, a 12 percent increase from the previous quarter. Fannie Mae, based in Washington , and McLean, Virginia-based Freddie Mac are both under pressure to minimize the scale of their U.S. taxpayer bailouts. The firms, which buy mortgages from lenders and package them into securities for sale to investors, have collectively drawn more than $180 billion in taxpayer funds. Steven Linick, the inspector general of the Federal Housing Finance Agency, said in the statement announcing the suit that Bank of America’s conduct was “reprehensible.” The case is U.S. v. Bank of America Corp. (BAC) , U.S. District Court, Southern District of New York (Manhattan). O’Donnell’s suit is U.S. ex rel. Edward O’Donnell v. Bank of America, 12- cv-1433, U.S. District Court, Southern District of New York (Manhattan). To contact the reporters on this story: David Glovin in New York at dglovin@bloomberg.net ; Hugh Son in New York at hson1@bloomberg.net To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net ; David Scheer at dscheer@bloomberg.net |
2024-11-11 | Bloomberg | Jackson Lewis Has White-Collar Practice: Business of Law | Workplace law firm Jackson Lewis LLP is forming a white-collar and government enforcement practice group and is hiring a former assistant U.S. attorney in Denver to bolster the practice. James M. Lord joined the firm’s Denver office as a partner. He will help start the new practice, which will be led by Jackson Lewis partner and former Assistant U.S. Attorney Paul Kelly in the Boston office. The white-collar and government enforcement practice will assist clients in strengthening compliance programs, responding to government inquiries and investigations and defending subsequent legal actions where necessary, the firm said. The attorneys in the practice, which draws on former federal and state prosecutors and enforcement lawyers, also includes Kevin Lashus in Austin, John Commisso and Sarah Walsh, in Boston, Larry Shulman in Detroit and Stacey Bastone in Long Island. “In today’s highly regulated environment, employers are facing increased scrutiny resulting in government investigations, enforcement actions and criminal proceedings,” Jackson Lewis Chairman Vincent A. Cino said in a statement. “We have an outstanding group of litigators across the country with prosecutorial experience and are extremely pleased that Jim Lord, a successful federal prosecutor, will be joining this team and helping launch our white-collar and government enforcement practice group.” Cino said in an interview that the firm has been working on forming the group for the last year, but that Lord’s hire prompted it to formalize the practice. “I think within a few years there will be 25 attorneys handling this work,” he said. Kelly, hired last May, was formerly executive director of the National Hockey League Players’ Association. In addition to his white-collar leadership, he is also co-chairman of the firm’s collegiate and professional sports industry practice group. He said he began handling white-collar work on day two of his hire. “The landscape out there for employers is getting more difficult to navigate given the volume of federal and state regulations and the increasing number of enforcement actions,” he said in an interview. The attorneys in the new practice have experience in criminal and enforcement matters related to workplace law, like corporate compliance and governance, immigration and worksite enforcement actions, health care fraud investigations, and tax matters. They also advise clients on antitrust matters, fraud charges, professional license and disciplinary proceedings, securities violations, money laundering and environmental enforcement. Lord was an assistant U.S. attorney in Seattle for more than 20 years. During his tenure as a federal prosecutor, he was chief of the Organized Crime Strike Force, coordinator of the Corporate Fraud Task Force, a member of the Financial Investigations Review Team, an asset forfeiture and money laundering attorney and a computer-hacking and intellectual-property attorney for the Western District of Washington. After leaving the Justice Department in 2011, Lord was a senior director at the consulting firm Alvarez & Marsal. There his practice focused on conducting risk assessments and compliance reviews, internal investigations, regulatory training for multinational companies and foreign sovereigns, and managing international due-diligence investigations. Lord’s practice at Jackson Lewis will concentrate on white-collar criminal defense, False Claims Act defense, Foreign Corrupt Practices Act matters, internal investigations, corporate governance and compliance issues, among other matters. Jackson Lewis has 765 attorneys in 54 locations in the U.S. and Puerto Rico. News Secrets Said to Stall Swaps Probe as EU Readies Libor Fines The European Union’s antitrust probe into credit derivatives trading by 13 of the world’s biggest banks stalled after the lenders’ lawyers won the right to see confidential information compiled by investigators. The banks asked to see business secrets about their rivals in EU files to help them fight a formal antitrust complaint sent in July , according to five people familiar with the probe who asked not to be identified because the process isn’t public. Meeting the requests may add about four months to the investigation, after the EU extended its deadline for responses to the statement of objections, two people said. “A decision before the end of Competition Commissioner Joaquin Almunia’s term would be possible, but in reality pretty difficult,” said Jacquelyn MacLennan, a lawyer at White & Case LLP in Brussels who’s not involved in the case. “This is not a settlement case but a full procedure,” so wrapping it up before Oct. 31 next year “is a challenge.” The credit-default swaps probe, which includes HSBC Holdings Plc, JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc., is one of two priority EU investigations into financial institutions. Almunia is poised to fine many of the same banks for rigging benchmarks including the London interbank offered rate in a scandal that’s tarnished the reputation of lenders seeking to recover from the biggest financial crisis since the Great Depression. Antoine Colombani, Almunia’s spokesman at the European Commission in Brussels, declined to comment. The commission was required to grant access to potentially confidential data after lawyers in the CDS probe argued the information was vital given the complexity of the case, the people said. Such data would be evidence in the commission’s file, such as e-mails and other messages for which business secrecy was claimed, one person said. After lengthy discussions, the EU agreed to distribute DVDs to lawyers with the sensitive data in exchange for pledges to protect the information. This process, known as a virtual data-room, is used only in exceptional circumstances, according to EU guidelines. Once lawyers have finished reviewing the information they would go back to the commission and seek further permission for parts of it to be shared with their clients, said the person. It’s then up to the commission to allow this or not. In the underlying probe, the EU accused the 13 banks as well as Markit and ISDA of working together to prevent Deutsche Boerse AG (DB1) and the Chicago Mercantile Exchange from entering the credit-derivatives business from 2006 to 2009. For more, click here. London’s Second Female Lord Mayor Says Banks Must Regain Trust Fiona Woolf, the second woman to head the City of London in 800 years, said bankers in her district must keep working to regain the public’s trust and backed the Bank of England ’s latest move to support lenders. “If you are in a role that is promoting London and the whole of the U.K. services sector, it makes it much more difficult to promote it when there are these reputational issues hanging over us,” Woolf said in an interview at London’s Guildhall. “I’m hoping to be able to say that we are well regulated. You can only earn trust. You can’t buy it.” Woolf, 65, who started as the 686th lord mayor Nov. 8, was law firm CMS Cameron McKenna’s first female partner in 1981. She has advised more than 28 governments and the World Bank on privatization and energy reforms. She will oversee about 3,500 staff that manage the British capital’s historic core and promote the financial-services companies based in the Square Mile. The City is also home to the Bank of England, whose governor, Mark Carney, last month unveiled an overhaul giving banks cheaper liquidity insurance and letting them use a broader range of collateral to access money. “It’s a very open and pragmatic way for the BOE to provide finance,” Woolf said. “It sounds like a nicely balanced approach. The banks have to be able to do business, and liquidity in the market is important.” Woolf, who qualified as a solicitor in 1973, follows in the footsteps of Mary Donaldson, who became the first female lord mayor in 1983. As lord mayor, Woolf assumes a yearlong ambassadorial role representing financial and business-services firms after serving as an alderman and City sheriff. She replaced Roger Gifford, a former chairman of the Association of Foreign Banks in London. The post is separate from that of London Mayor Boris Johnson, who represents 8 million people and is directly elected by voters in all of the city’s boroughs. London is home to about 251 foreign banks and sees about $1.9 trillion in foreign exchange turnover each day, or more than a third of global market share, according to the City of London’s website. The U.K. is also the second largest fund-management center, providing employment to about 60,000 people. Woolf said one of her priorities is to encourage firms in the City to hire more women and people from minority backgrounds. The U.K. Office for National Statistics published figures last week showing that for every 158 males entering the City for work daily, only 100 females do the same. For more, click here. Moves Former Bingham Life Sciences Co-Chairman Joins Brown Rudnick Brown Rudnick LLP announced that Robert C. Funsten has joined the firm’s Orange County, California , office as a partner and co-chairman of the global life sciences group. Funsten was previously a partner and co-chairman of Bingham McCutchen LLP’s life sciences practice. Funsten has experience in licensing and development deals, strategic alliances and collaborations, mergers and acquisitions, private and public securities and debt offerings, and other business transactions. He also counsels companies on intellectual-property and litigation strategies, the firm said. He previously worked as the senior vice president, general counsel and secretary of Watson Pharmaceuticals, now Actavis Group. “While our Orange County office, formally Rus, Miliband & Smith, has long been recognized for its excellence in complex commercial litigation, our strategic plan for that office includes developing a strong corporate and life sciences presence as well,” Joseph F. Ryan, chairman and chief executive officer of Brown Rudnick, said in a statement. “An experienced industry adviser with sophisticated expertise, Rob will enhance greatly our life-sciences practice in Orange County and firmwide.” Funsten is the second recent lateral addition to the Orange County office. Numan J. Siddiqi joined the firm as a partner in the global Corporate Practice. Brown Rudnick has 200 lawyers in the U.S. and Europe. Former U.S. Attorney Paul Charlton Joins Steptoe & Johnson Steptoe & Johnson LLP announced that Paul Charlton, the former U.S. attorney for the District of Arizona , has joined the firm as a partner from Gallagher & Kennedy. He will be based in the Phoenix office and will practice in Steptoe’s commercial litigation and white-collar criminal defense groups. Charlton concentrates his practice on complex litigation, internal investigations and white-collar criminal defense. He has also represented American Indian governments and tribal leaders. A former federal prosecutor, Charlton was nominated by President Bush as U.S. attorney for Arizona in 2001 after serving as an assistant U.S. attorney for 10 years. During his six years as the U.S. attorney, Charlton established the Anti-Terrorism Advisory Council, the firm said. He also established a national security division within the U.S. Attorney’s Office to work with law enforcement agencies on terrorism related criminal cases. “Paul’s arrival represents an important addition to our Phoenix office, by continuing the growth of practices in Phoenix that have local, national and global reach,” Bruce Converse, managing partner of Steptoe’s Phoenix office, said in a statement. “Paul joins two recent exciting additions to our office, former Congressman John Shadegg and former FERC Commissioner Marc Spitzer.” Steptoe & Johnson has more than 500 lawyers and other professionals in Beijing, Brussels, Century City, Chicago , London, Los Angeles, New York, Phoenix and Washington. Venture Capital Attorney Mirkin Joins Rimon in Palm Beach Office Rimon PC added early-stage venture capital partner Mark H. Mirkin as a partner in its new Palm Beach County, Florida , office. Mirkin joins Rimon from the firm of Hicks, Motto & Ehrlich, where he also worked as a partner. The Palm Beach County location is Rimon’s 13th office and the first opened in the Southeast. Mirkin focuses his practice on early-stage financing transactions, representing entrepreneurs and emerging growth companies in private placements and public offerings of equity, debt and convertible securities, venture-capital financings, mergers, acquisitions and divestitures. In addition to his financing work, Mirkin handles work in the startup world, advising companies on how to structure and organize and helping them in forward-thinking business planning, the firm said. “Mark is a great choice to head our expansion into the Southeast.” Michael Moradzadeh, CEO of Rimon, said in a statement. “He has assisted countless early stage companies to get the financing they need to move up to the next level. He will fit right into our team of attorneys who know how to help entrepreneurs take flight.” Rimon has offices in the U.S. and Israel. Nelson Mullins Hires Health-Care Partner Ruggio in Washington Mike Ruggio joined Nelson Mullins Riley & Scarborough LLP as a partner in its Washington office. He joins from LeClairRyan along with another attorney. Ruggio has represented clients in health-care antitrust matters, anti-kickback, Stark and HIPAA matters. He has been involved in pharmaceutical, e-health technology and bio-health cases concerning average wholesale pricing issues, reimbursement fraud, medical necessity, and other related matters, the firm said. Nelson Mullins has more than 500 attorneys and other professionals at offices in Washington, Florida, Georgia , Massachusetts , North Carolina, South Carolina, Tennessee and West Virginia. Video Why Milbank Sends 4th-Years to Harvard David Wolfson, partner at Milbank, Tweed, Hadley & McCloy and chairman of the firm’s professional development committee, talks with Bloomberg Law’s Lee Pacchia about the Milbank@Harvard program. The weeklong course at Harvard Law School and Harvard Business School takes midlevel Milbank associates through a wide range of professional development courses. This is a Bloomberg podcast. To download, watch or listen to this report now, click here. To contact the reporter on this story: Elizabeth Amon in New York at eamon2@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-03-18 | Bloomberg | Corporate Cash Piles Grow to Record $1.45 Trillion, Moody’s Says | U.S. non-financial companies held a record $1.45 trillion in cash at the end of 2012, up 10 percent from the previous year, according to Moody’s Investors Service. Apple Inc., Microsoft Corp., Google Inc. (GOOG) , Pfizer Inc. and Cisco Systems Inc. (CSCO) maintain the five biggest cash balances, comprising $347 billion, or 24 percent of the total held by companies graded by Moody’s, analysts led by Richard Lane wrote in a report today. The richest industries are technology, healthcare and pharmaceutical, energy and consumer products, according to Moody’s. Modest economic growth and tight cost controls enabled companies to record a 2 percent increase in revenue and unchanged cash flow from operations in the year ended September 2012, according to the report. High cash balances are positive credit factors and ensure companies can retire near-term maturing debt if the capital markets are disrupted and withstand deterioration in business conditions. “There are a few key drivers to the record cash levels including good financial performance, steady growth for the aggregate of non-financial companies, a modest increase in revenues and supplementing funding needs through raising debt in a market last year that was very receptive to debt issuance,” Lane, senior vice president at Moody’s said in a telephone interview. Economic Growth The U.S. economy grew at a modest to moderate pace across most of the country, the Federal Reserve said in its Beige Book business survey. Expansion will accelerate every quarter to 2.8 percent at the beginning of next year, economists surveyed by Bloomberg predict. Cash balances of non-financial companies have increased 77 percent from the $820 million in 2006, according to Moody’s. Investment-grade companies hold $1 trillion, or 81 percent of total cash, compared with $948 billion in 2011 and $624 billion in 2006. The four areas in which companies spend cash are acquisitions, dividends, share repurchases and capital expenditures. “Some companies can have a sense that growing cash is ‘burning a hole in their pocket’ and cause them to do things that are probably not in the best interest of creating shareholder value, such as making expensive acquisitions and aggressive share repurchase activity,” Lane said. Companies need to be able to manage cash so they are prepared to handle unforeseen macroeconomic or financial challenges, and “maintain the ability to invest in product development, research and development and capital expenditures , which are the foundation for companies to stay competitive over the long-term,” he said. Overseas Cash Overseas cash totals about $840 billion, or 58 percent of the cash balances, according to Moody’s. “A significant portion of the cash is maintained overseas,” Lane said. “Absent any tax reform or a tax holiday, we believe overseas cash will continue to build and domestic cash will probably be stable over the next year. It’s quite possible cash balances will increase and set another record next year.” The study included 1,141 companies for 2012. Banks, insurance companies, mutual funds and other financial entities are not included. To contact the reporter on this story: Krista Giovacco in New York at kgiovacco1@bloomberg.net To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net |
2024-11-15 | Bloomberg | National Bank of Greece Said to Agree on Real Estate Unit Sale | National Bank of Greece SA , the country’s largest lender, reached an agreement to sell most of its real estate unit in a transaction that values the company at more than 1 billion euros ($1.3 billion), two people with knowledge of the matter said. The sale of a majority stake in Pangaea REIC to Invel Real Estate Partners , a London-based real estate investment firm led by Christophoros Papachristophorou , was approved by the Hellenic Financial Stability Fund, according to the people, who asked not to be identified because the information isn’t public. The HFSF is a fund set up under the euro area and International Monetary Fund to recapitalize Greek banks. The deal will close by the end of the year, the people said. NBG, based in Athens, said last month it was in talks with Invel about a deal, though a valuation wasn’t disclosed. Greece is striving to attract foreign investment as the economy faces its sixth straight year of contraction. In June, Fairfax Financial Holdings Ltd. agreed to invest 164 million euros in Eurobank Properties Real Estate Investment Co. as part of a share-capital increase by Eurobank. “If this deal materializes it will be an important confidence building development,” said Nicholas Spiro , managing director of Spiro Sovereign Strategy in London. “It will be perceived as a very welcome, albeit belated, step towards restructuring and the privatization of Greek assets.” Dimitris Spyropoulos, head of the bank’s press office, said he couldn’t comment on any pending transaction as the deal would need final regulatory approval. Ellie Sweeney, an external spokeswoman for Invel’s Papachristophorou, a former managing director at Deutsche Bank and global head of RREEF Opportunistic Investments, declined to comment. Office Complex About two thirds of Pangaea’s assets are offices rented by NBG, while the rest are leased to other organizations for 10 years or more. The company owns an office complex rented by Hellenic Telecommunications SA, as well as 14 buildings that the bank bought from the state privatization fund for 115.5 million euros last month. Invel will contribute properties it owns in Italy to diversify the portfolio of assets and NBG will retain management of the unit, the people said. An initial public offering of Pangaea could be carried out within two years, they said. To contact the reporters on this story: Sharon Smyth in Madrid at +34-91-700-9601 or ssmyth2@bloomberg.net ; To contact the editors responsible for this story: Andrew Blackman in Berlin at +49-30-70010-6223 or ablackman@bloomberg.net To contact the reporters on this story: Sharon Smyth in Madrid at ssmyth2@bloomberg.net ; Maria Petrakis in Athens at mpetrakis@bloomberg.net To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net |
2024-04-25 | Bloomberg | Twitter Said to Bolster Security After AP Account Hacked | Twitter Inc. (TWTR) plans to bolster security on its site after the account of the Associated Press news service was hacked and an erroneous post triggered a stock-market decline, according to a person familiar with the matter. Two-step authentication will be introduced to make it harder for outsiders to gain access to an account, said the person, who declined to be identified because the information isn’t public. In addition to a password, the security measure usually requires a code sent as a text message to a user’s mobile phone, or generated on a device or software. Twitter’s defense against hacks involving the theft of passwords came under scrutiny this week after a hacker sent a false post about explosions at the White House, triggering a drop in the Standard & Poor’s 500 Index that wiped out $136 billion in market value. The attack came the same month the U.S. Securities and Exchange Commission said companies can use social-media sites to share market-sensitive news. It also threatened to complicate efforts by Chief Executive Officer Dick Costolo to establish the service as a viable business ahead of a possible initial public offering. “The account that got compromised is the big difference here, as opposed to the traditional impersonating-a-celebrity to say something shocking,” said Wade Williamson , a senior security analyst at Palo Alto Networks Inc. (PANW) , a provider of network-protection tools. The attack doesn’t appear to be particularly technically sophisticated and is probably an example of an account hijacking involving the theft of the AP account user’s password, Williamson said. Password Theft As people put more private information online, Apple Inc. (AAPL) , Google Inc. (GOOG) , Facebook Inc. (FB) and EBay Inc. (EBAY) ’s PayPal have introduced similar security tools. Wired reporter Mat Honan, who had some online accounts hacked last year, reported earlier this week on Twitter’s plans to introduce two-step authentication. The AP restored the Twitter account yesterday morning after it was suspended pending a security review. The Federal Bureau of Investigation “is investigating the matter with the AP and Twitter,” Jenny Shearer, an spokeswoman for the FBI, said without elaborating. The incident follows a week when social media played a prominent role after the Boston Marathon bombing, as Twitter postings and other updates contributed to the rapid spread of information. While some fanned rumors via Twitter, other posts were viewed as more reliable than traditional media. Investors should take steps to verify information even when it comes from seemingly trusted sources, according to Susan Etlinger, an industry analyst at San Mateo , California-based Altimeter Group. False Information “This is absolutely a danger of social media,” Etlinger said in an interview. “It doesn’t mean we need to throw out social media entirely; it just means we need much better methods for fact-checking and authentication.” The false information from the AP account, which also said President Barack Obama had been injured, came after repeated attempts by hackers to gain access to AP reporters’ passwords, the news agency said. The news agency is the latest victim in a series of hacking cases against news outlets, including the Twitter accounts of CBS News’ “60 Minutes.” The television news program said earlier this week that its Twitter account was “compromised,” according to a posting on parent CBS Corp. (CBS) ’s account on April 20. Some of National Public Radio’s Twitter accounts were hacked as well, the company said last week. The “60 Minutes” account has been suspended pending an investigation, according to Sonia McNair , a spokeswoman for CBS. Corporate Information Common tactics that hackers use to gain access to company accounts or user passwords include spear phishing attacks, in which someone is duped into installing malicious code onto their computer or mobile device, and malware hidden on websites, according to Eric Fiterman, a former FBI agent who recently founded the Washington-based cybersecurity company Spotkick. Bogus Twitter feeds can damage the reputation of a business and possibly expose a company to lawsuits, said Nick Economidis, an underwriter with Beazley Plc (BEZ) , a financial-services company in London that sells data-breach insurance. “A media publisher conceivably could be sued for negligence if things are published under their name that is not true and if they didn’t take reasonable steps to prevent the erroneous publication of information,” Economidis said in a phone interview. Fred Wolens, a spokesman for Menlo Park, California-based Facebook , declined to comment. SEC Guidance Corporations have been hacked as well. In February, the Twitter account for Jeep was taken over. About that same time, the account for Burger King also was compromised. The SEC changed its guidance for companies distributing information April 3, allowing them to use social-media sites such as Twitter and Facebook to distribute company announcements that can move markets. That followed an investigation into Netflix Inc. (NFLX) Chief Executive Officer Reed Hastings. He had posted monthly viewership results on his Facebook page, rather than in an SEC filing or news release. Tesla Motors Inc. (TSLA) Chief Executive Officer Elon Musk also fueled the debate in March, when he sent Twitter postings that moved the electric-car company’s shares. Shanna Hendriks, a spokeswoman for Tesla, declined to comment. Jonathan Friedland, a spokesman for Netflix, didn’t respond to a request for comment. The SEC’s decision came amid the expanding reach of social media. Facebook has grown to more than 1 billion monthly users, while Twitter has more than 200 million. Social-Media Platform Business Wire, the unit of Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) that distributes press releases, said the SEC’s decision earlier this month is hurting investors. The new policy raises “privacy concerns as users are required to register to gain access to material news, security risks that may adversely affect market stability,” Business Wire said in a statement April 4. Twitter CEO Costolo said last month that “user growth drives everything” at the social-media company. Twitter has been expanding outside the U.S. and offering advertising tools to attract marketers as it prepares to become a public offering, possibly in 2014. “Twitter is one of the most important social media platforms and a crucial part of a company’s business and communications,” Fiterman said. “Criminals, hackers and other types of threat actors will follow what gives them the greatest reach and most successful outcome.” To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net ; Chris Strohm in Washington at cstrohm1@bloomberg.net To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net |
2024-03-07 | Bloomberg | Cash Incentives Help People Lose Weight, Researchers Find | Financial incentives for losing weight help people shed more pounds than programs that don’t affect dieters’ wallets, a study found. Participants who received money monthly for losing weight or paid into a pool when they didn’t meet goals, dropped 9.1 pounds on average, compared with 2.3 pounds for those without cash incentives, according to research released today in advance of the American College of Cardiology meeting in San Francisco. “Just wanting to lose weight isn’t enough,” said Donald Hensrud, chairman of preventive medicine at the Mayo Clinic in Rochester, Minnesota , who helped write the study. “People need creative strategies. Financial incentives can be powerful.” More than two-thirds of companies are experimenting with programs that encourage healthier behavior in workers, such as higher insurance premiums for smokers or reduced rates for fitness clubs. One common tactic is to withhold incentives or raise fees for obese workers, penalties that can be lifted if they lower their body mass index, according to Michael Wood, a senior benefits consultant in Seattle at Towers Watson & Co. (TW) “The jury is still out as to whether financial incentives will improve the rate of success of people losing weight on a long-term basis,” Wood said in a telephone interview. $168 Billion More than two-thirds of U.S. adults are overweight or obese, according to the Centers for Disease Control and Prevention. Obesity-related health costs are more than $168 billion annually, according to a Feb. 20 study in JAMA-Surgery. Today’s study followed 100 adults ages 18 to 63 years who were obese based on their body mass index. They were weighed monthly for a year. The study was one of the longest looking at workplace financial incentives for weight loss. Fifteen people received the maximum $360 over the year by attending every monthly weigh-in and reaching and maintaining their weight loss goal, Hensrud said. The study participants paid $2,200 into the pool in penalties, which was then divided among the eight people who reached the overall weight-loss goal of 10 percent and two other people in a general lottery. The researchers spent $12,000 for the monthly incentives. Future studies should look at what financial incentives work best and how long the programs need to be in place to help people maintain their weight loss, Hensrud said. Rising Tide More than two-thirds of companies offer financial incentives to encourage participation in wellness activities, an increase from about half in 2010, according to the 18th annual Towers Watson survey on employer health care released today. While incentive programs can cost companies about $100 to $1,200 year for each person and any spouse, healthier employees lower health insurance costs, Wood said. Companies also can build program costs into their health insurance bill, he said. Thirty-six percent of companies reward employees for participating in a smoking-cessation program and 42 percent charge tobacco users about $50 a month, according to the survey. About 16 percent of companies reward or penalize employees based on outcomes other than tobacco use, including weight control or cholesterol levels, an increase from 10 percent in 2012. That number is expected to jump to 47 percent in 2014 as more companies say they will enact these programs, according to the Towers Watson survey taken from November 2012 to January 2013 of 583 employers with a total of 11.3 million workers. Fear Factor In the Mayo Clinic study, each person was assigned to one of four groups. One group was provided weight-loss education, another received education and financial incentives, a third was provided education plus behavior modification and the last had financial incentives with education and behavior modification. Those in the financial incentive groups who met their weight-loss goals received $20 a month, while those who didn’t had to pay $20 into a bonus pool. Half of the bonus pool went to people who met their study goals and the other half was put into a lottery for everyone who completed the yearlong study no matter their results, Hensrud said. “Fear of losing money tends to motivate people about two and a half times more than the prospect of gaining the same amount of money, so we intentionally designed the incentives so that participants would have some of their own skin in the game,” said Steven Driver, a lead study author and a resident physician in internal medicine at the Mayo Clinic. Sixty-two percent of the people with financial incentives completed the study compared with 26 percent in the non- incentive groups. The researchers estimated that 6.5 pounds of the 9.1 pounds average weight loss was attributable to the incentives. Hensrud said financial incentives don’t work alone and may need to be combined with other methods to help people lose weight. Also, the incentive program didn’t pay for itself so more work may be needed to find programs that don’t add to company costs, he said. To contact the reporter on this story: Nicole Ostrow in New York at nostrow1@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-04-04 | Bloomberg | UnitedHealth, Humana to See 0.4% Medicare Rate Rise in 2012 | Medicare payments to U.S. health insurers led by UnitedHealth Group Inc. (UNH) and Humana Inc. (HUM) will increase 0.4 percent in 2012, less than projected because of lower-than-expected spending on doctor visits, regulators said. The Baltimore-based Centers for Medicare and Medicaid Services announced in February the private health plans may expect an average 1.6 percent gain in payments. Medicare spent less than administrators expected on physician visits in 2010, Jonathan Blum, a deputy director of the agency, said during a conference call after the close of U.S. markets. Payments to Medicare Advantage plans are tied to overall program spending. A payment boost under Medicare Advantage, through which private insurers offer health benefits to those eligible for Medicare, is “incredibly important” to plans like Humana, based in Louisville, Kentucky. The plans face $136 billion in cuts under the health overhaul through 2019, said Robert Laszewski, the president of Health Policy Strategy and Associates , an Alexandria, Virginia-based company that consults with health insurers. “The chickens come home to roost” beginning in 2014, Laszewski said in an interview, referring to the point when top provisions in the health-care overhaul take effect. Medicare is the U.S. government health-care program for the elderly and disabled. Program administrators must phase in rate reductions over three to six years until they are closer to the cost of enrolling a person in the standard, government-run Medicare program, according to the nonprofit Kaiser Family Foundation in Menlo Park , California. Covering an individual through Medicare Advantage costs the U.S. an average of 10 percent more than providing benefits under traditional Medicare, the U.S. Medicare Payment Advisory Board reported last month. The lower-than-expected spending on physician services by Medicare is a reflection of the fact that Americans are using less health care, said Dan Mendelson, chief executive officer of the Washington-based consulting firm Avalere Health LLC. “That is a trend you see throughout the industry,” Mendelson said in an interview. “That will require some adjustment on the part of the plans.” Twenty-four percent of the 47 million people enrolled in Medicare last year were covered by private insurance companies, including Minnetonka, Minnesota-based UnitedHealth and Humana, according to the Kaiser Family Foundation. Enrollment is expected to increase 6 percent this year compared from 2010, Donald Berwick , the administrator of the Centers for Medicare and Medicaid Services, said in February. Regulators didn’t increase Medicare Advantage payment rates for this year so health insurance companies are being paid the same as in 2010. To contact the reporter on this story: Jeffrey Young in Washington at jyoung89@bloomberg.net. To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net . |
2024-10-03 | Bloomberg | Morgan Stanley Swaps Risk May Be Misread, Wells Fargo Says | Morgan Stanley (MS) ’s derivatives holdings may have been misread by markets and investors, prompting the bank to plunge more than 10 percent on Sept. 30, a Wells Fargo & Co. (WFC) analyst wrote in a report. Concern about Morgan Stanley “appears to be driven” by confusion over a U.S. government report that said the company had $1.78 trillion of outstanding notional value of derivatives in the second quarter, Wells Fargo’s Matthew Burnell wrote Sept. 30. In reality, so-called netting agreements outlined in the Office of the Comptroller of the Currency report mean Morgan Stanley’s derivatives positions totaled $457 million, according to Burnell. “Net credit exposure is well below its peer group,” Burnell, who has a “market perform” rating on Morgan Stanley shares, told clients. Morgan Stanley fell 1 cent, or 0.1 percent, to $13.50 at 11 a.m. in New York Stock Exchange Composite trading, after climbing as much as 4 percent earlier today. The stock has dropped 50 percent this year before today. The cost of buying credit-default swaps on Morgan Stanley, which offer investors protection against a default by the New York-based bank, rose to a mid-price of 515 basis points as of 10:28 a.m., according to broker Phoenix Partners Group. The price of insurance on Morgan Stanley is higher than Italian banks Intesa Sanpaolo SpA (ISP) and UniCredit SpA (UCG) and means investors have to pay $515,000 a year for every $10 million of debt they are protecting, according to data compiled by Bloomberg. U.S. Aid The firm, which owns the world’s biggest retail brokerage, was the largest recipient of emergency loans from the Federal Reserve during the financial crisis and also benefited from capital provided by Tokyo-based Mitsubishi UFJ Financial Group Inc., now the biggest shareholder, and the U.S. Treasury , which it repaid with interest less than a year later. The largest Wall Street firms will start reporting third- quarter results this month showing how they performed in a market grappling with fallout from Standard & Poor’s downgrade of the U.S. credit rating and concern Greece would default. JPMorgan Chase & Co. and Morgan Stanley warned investors in September trading revenue may suffer. To contact the reporters on this story: Jesse Westbrook in 東京 at jwestbrook1@bloomberg.net ; Ambereen Choudhury in London at achoudhury@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-10-27 | Bloomberg | UBS Said to Plan 10,000 Job Cuts, Investment Bank Shrinks | UBS AG (UBSN) , Switzerland ’s largest bank, will cut as many as 10,000 jobs companywide as the trading business shrinks, a person with knowledge of the plan said. Many of the reductions will come in the trading businesses overseen by investment-bank co-head Carsten Kengeter and probably will occur over several quarters, said the person, who requested anonymity because the plans haven’t been made public. An announcement may come when UBS reports third-quarter earnings on Oct. 30, the person said. Chief Executive Officer Sergio Ermotti , 52, is overhauling the bank as Swiss regulators pressure UBS and Credit Suisse Group AG to boost capital and scale back trading and investment- banking operations. Like rival securities firms, UBS has been struggling to boost profitability as client activity and trading remain sluggish. “It was a loser’s game for them,” said Terry Connelly , former dean of the Ageno School of Business at Golden Gate University in San Francisco and an ex-managing director at Salomon Brothers Inc. “It wasn’t their fault, they simply tried climbing the wrong mountain.” High fixed costs and weak demand have made it harder to be profitable, and the industry will have to shrink more, he said. ‘Paradigm Shift’ Ermotti told his staff in a memo this month he’ll do whatever it takes “to tackle the current challenging market environment and paradigm shift” in banking and will continue “remodeling” UBS. He said in July that the market environment has completely changed since the firm announced reorganization plans for the securities unit in November. “UBS is a microcosm for the industry,” Mark Williams , a lecturer at Boston University’s School of Management, said in an interview. “The banking business model is changing and we’ve got to look at cost structure, we’ve got to look at compensation, and we’ve got to readjust.” The bank had about 63,250 employees as of June 30, according to its most recent financial report , which means the staff cut could equal 16 percent. UBS already announced it is reducing risk-weighted assets at the investment bank by more than half from September 2011 levels, mostly in fixed income. The plan will lead to a further reduction of as much as 100 billion Swiss francs ($107 billion) of risk-weighted assets, the person said. Much of the fixed-income operations will be put in a new unit that will hold non-core assets, and Kengeter will probably give up his current role to head the new unit, the person said. Equity House The remaining businesses at the investment bank will include a slimmed-down advisory unit, equities trading and research, foreign exchange, government debt trading and limited credit and corporate bond trading, according to the person familiar with the bank’s plans. Capital demands by Swiss regulators, among the strictest in the world, are making it hard for UBS to compete in capital-intensive businesses such as fixed-income trading. “UBS is going back to its roots, becoming an equity house with a strong equity capital markets franchise,” said Kian Abouhossein , a London-based analyst at JPMorgan Chase & Co. “It will take time to unwind.” The staff cuts were reported earlier by the Financial Times. The eliminations will lead to changes in senior management and reduce costs in the bank’s support functions including information technology , the FT said. Serge Steiner , a spokesman for the bank, declined to comment. Since taking office last year, Ermotti has been working to cut production costs across all of the bank’s businesses. Orcel’s Role The changes at the investment bank may mean a bigger role for 49-year-old Andrea Orcel , who co-heads the unit with Kengeter, 45, three people with knowledge of the matter said. Kengeter has run the investment bank since April 2009, first as co-head with Alexander Wilmot-Sitwell, then alone, and since July with Orcel, a former top dealmaker at Bank of America Corp. The firm’s boards met in New York this week to consider the reorganization of the unit that include cuts centered on the fixed-income for which Kengeter has been responsible since 2008, the people said. Reveal Value The investment bank has suffered lapses that shook Zurich- based UBS, the world’s second-largest wealth manager. Losses during the subprime crisis forced UBS to seek a bailout from the Swiss government in 2008 to help it spin off toxic assets. Last year a $2.3 billion loss from unauthorized trading led to the departure of CEO Oswald Gruebel. “Investors want UBS to reveal the value of the asset and wealth management businesses, which will make 26 percent returns on our 2013 estimates, and downsize materially the investment bank, which struggles to make single-digit returns,” said Huw van Steenis, a London-based analyst at Morgan Stanley. Lack of demand in the banking industry means another round of dismissals is likely on Wall Street , permanently damaging careers of some investment bankers, Connelly said. “People will have a while on the beach,” he said. “Their business has been commoditized to the point where their brains don’t count as much. A lot of investment bankers will have to find another way to make money.” To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net ; Elena Logutenkova in Zurich at elogutenkova@bloomberg.net To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net ; Frank Connelly at fconnelly@bloomberg.net |
2024-05-03 | Bloomberg | Sensex is World’s Worst Perfomer as Interest Rate Increase Tops Forecasts | Indian stocks dropped the most among major indexes in the world after rate increases by the nation’s central bank exceeded economists’ estimates. The nation’s stocks listed in the U.S. also declined more than its BRIC peers. Reserve Bank of India today raised rates by 0.5 percentage point, more than analysts’ forecast, and predicted inflation to remain at about 9 percent until September because of higher oil costs. An index tracking American depositary receipts of Indian companies by Bank of New York Mellon fell 2.8 percent to a six- week low as of 4 p.m. close in New York, exceeding losses of 2.1 percent for China ’s ADRs, 1.3 percent for Russia and 2.1 percent for Brazil. Mahindra & Mahindra Ltd. (MM) , the largest maker of tractors, fell the most in three months. Jaiprakash Associates Ltd. (JPA) , a builder of dams, roads and bridges, sank 8.2 percent. The ADRs of ICICI Bank Ltd. (IBN) , India’s second-biggest lender, fell 4.4 percent, the biggest in four months, trailed by a 3.7 percent decline in U.S.-listed shares of HDFC Bank Ltd. (HDFCB) , the country’s third-largest. “The central bank is reacting to the alarming situation of inflation,” said Manish Sonthalia , who manages $300 million in stocks for wealthy individuals at Motilal Oswal Securities Ltd. in Mumbai. “I was expecting a 75 basis point increase by the end of the year, but there’s been front-loading of rate tightening.” Sonthalia is avoiding companies that require large amounts of capital as borrowing costs are set to rise. Sensex The Bombay Stock Exchange Sensitive Index, or Sensex, lost 463.33, or 2.4 percent, to 18,534.69 at the close in Mumbai. The gauge fell for the seventh day, its longest run of losses since November 2008, to close at the lowest level since March 24. The S&P CNX Nifty Index on the National Stock Exchange slid 2.4 percent to 5,565.25. Its May futures settled at 5,562.25. The BSE 200 Index lost 2.3 percent to 2,292.08. The Reserve Bank increased the repurchase rate to 7.25 percent from 6.75 percent. Only seven of 25 economists in a Bloomberg survey had predicted the move, while the remaining expected a quarter-point gain. The central bank boosted the reverse repurchase rate to 6.25 percent from 5.75 percent. State Bank of India (SBIN) , the nation’s biggest, plunged 4.1 percent to 2,583.7 rupees. The Bombay Stock Exchange’s Bankex Index of 14 lenders fell for a seventh day, losing 3.1 percent, the longest run of losses since November 2008. Higher Reserves The central bank asked lenders to set aside more funds to cover bad loans and double provisions for restructured debt as it sought to curtail risks tied to defaults by borrowers. The monetary authority capped investments by banks into so-called liquid plans by mutual funds that invest in debt instruments to reduce the risk of sudden large outflows during an economic slowdown. Mirae Asset Global Investments (India) Pvt., which managed 3.8 billion rupees ($86 million) in assets as of March, has cut holdings in state-run banks, said Gopal Agrawal, the company’s chief investment officer in Mumbai. The rate increase “really shows the RBI’s concern on inflation and they’ve taken a bold step,” he said. “The mood of the market will be decided more by the corporate earnings and the global outlook.” Inflation in India is the highest after Russia among the so-called BRICs economies and if left unchecked could rekindle public protests and undermine Prime Minister Manmohan Singh ’s government. Rising borrowing costs will slow economic growth this year and help ease inflation to 6 percent “with an upward bias” by March 31, 2012, Governor Duvvuri Subbarao said today. The Bank of New York Mellon BRIC Select ADR Index fell 2.1 percent today, after gaining 2 percent this year through yesterday. The measure tracks all the ADRs from Brazil, Russia, India and China. No Baby-Step Approach “The Reserve Bank has tried to move ahead of inflation; the baby-step approach has been sacrificed in light of rising inflationary expectations,” said Aneesh Srivastava, who oversees about $355 million as chief investment officer at IDBI Federal Life Insurance Co. Srivastava, based in Mumbai, said he would avoid developers and use the drop to buy consumer shares. Mahindra & Mahindra plunged 4.5 percent to 708.1 rupees. Tata Motors Ltd. (TTMT) , the biggest truckmaker and owner of Jaguar Land Rover, sank 5.1 percent to 1,163.1 rupees and its May futures traded at 1,163.20 rupees. Its ADRs slid 3.9 percent in New York to $26.20 each, the lowest in more than a month. Automakers, Developers Bajaj Auto Ltd. (BJAUT) , the second-largest motorcycle maker, slid 5.1 percent to 1,367.15 rupees. Larsen & Toubro Ltd. (LT) , the largest engineering company, declined 4.2 percent to 1,537.4 rupees, its steepest drop since Feb. 24. DLF Ltd. (DLFU) , the biggest developer, slid 2.5 percent to 220.75 rupees. Jaiprakash Associates sank 8.2 percent to 84.9 rupees. The company was cut to “neutral” from “buy” at Goldman Sachs Group Inc., which cited the “limited areas of potential positive surprise” given the concerns over the company’s debt levels. The Bombay Stock Exchange Realty Index fell 2.9 percent to 2,140.90, its lowest level since March 23. Rising interest costs and inflation are prompting Indian billionaire Uday Kotak’s money management unit to trim holdings in the nation’s consumer-goods stocks and add shares of lenders and pharmaceutical companies. “We are getting a sense that consumer discretionary spending may see some kind of a slowdown in the next six to eight months,” Pankaj Tibrewal, a fund manager at Kotak Mahindra Asset Management Co., which has 322 billion rupees ($7.3 billion) in assets, said in an interview yesterday. Price-Earnings Ratios The Sensex has declined 9.6 percent this year on concern faster inflation will cause borrowing costs to rise, crimping growth in corporate earnings. Sensex stocks trade at an average 14.7 times estimated profit, down from 21.5 times in March 2010. The MSCI Emerging Markets Index is valued at 11.5 times. “A rising interest rate scenario is not conducive for stock investors in near term,” IDBI Federal’s Srivastava said. “Growth and company earnings will be impacted.” Overseas investors sold a net 1.95 billion rupees ($43.9 million) of Indian stocks on April 29, paring their investments in equities this year to 45.2 billion rupees, according to data on the website of the Securities and Exchange Board of India. To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net Belinda Cao in New York at Lcao4@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-04-27 | Bloomberg | German Pension Insurance Premiums May Fall, Handelsblatt Says | Contributions to Germany ’s mandatory pension insurance may decline next year as the economy’s expansion boosting its reserves, Handelsblatt reported, citing the insurance’s chief Alexander Gunkel. Based on economic growth forecasts by Germany’s leading economic institutes, reserves will exceed 1.5 monthly payouts by the end of the year, a threshold that requires a reduction in contributions, Gunkel told the newspaper. The contribution rate of 19.9 percent of gross pay may be cut by a “small” amount next year and another 0.5 percentage points in 2013, he said. To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net |
2024-02-23 | Bloomberg | Mets Owners Seek to End $386 Million Bernie Madoff Lawsuit Without Trial | The owners of the New York Mets are set to ask a judge today to end a $386 million lawsuit by the Bernard Madoff brokerage trustee without a trial, saying he hasn’t proved they ignored the fraud because it benefited their business. U.S. District Judge Jed Rakoff threw out most of Madoff trustee Irving Picard ’s $1 billion lawsuit against the baseball team’s owners last year, saying he could pursue only $386 million at a trial set to start March 19 in Manhattan federal court. To get most of the money, Rakoff said Picard must prove the defendants, including Fred Wilpon and Saul Katz, were willfully blind to Madoff’s crimes, which Picard has said cost investors about $20 billion in principal. Wilpon and Katz contend they should be allowed to keep the $386 million. Picard isn’t entitled to a trial because he hasn’t proved what Rakoff said he was supposed to, the Mets owners said in a court filing this month. “A willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts,” they said, citing appeals court judges. “Instead, the trustee argues that defendants must be found willfully blind because they should have suspected Madoff and should have done regular” due diligence on him, according to the filing. Today, Picard will ask Rakoff to let him claim $83 million before the trial, leaving a jury to decide the rest of the suit. To get that amount, which the Mets owners received from Madoff’s Ponzi scheme in the two years before his 2008 arrest, Rakoff said Picard need only prove that Wilpon and Katz took the money without giving equal value in return. Fictitious Profits Madoff, 73, pleaded guilty in 2009 to orchestrating what prosecutors called the biggest Ponzi scheme in history. He is serving a 150-year sentence in a federal prison in North Carolina. Picard and his law firm , Baker & Hostetler LLP (1155L) , have charged about $273 million in fees for liquidating the Madoff firm since it collapsed in December 2008. Picard can’t take back the $83 million in fictitious profits because the money was owed by a registered brokerage to its clients, the Mets owners said in a court filing. The Mets owners, after losing money in the Ponzi scheme and an income stream from Madoff, have said they are trying to sell stakes in the Major League Baseball team. They have cut the team’s payroll and hired a restructuring firm to advise on their finances, which remain under threat from Picard’s claims. ‘Hooked’ on Madoff Picard contends the Mets owners had a financial motive to ignore Madoff’s fraud. Wilpon and Katz were so “hooked” on money from Madoff that they used it in place of disability insurance for the baseball team and to fund players’ deferred- compensation plans, the trustee told Rakoff in a court filing. The Mets’ Madoff accounts also funded working capital, as well as insurance and compensation, he said. “When faced with cash crunches from week to week, the Mets routinely and confidently relied on future Madoff returns to bridge the gap,” with any excess cash going back into Madoff’s firm, Picard said in the Feb. 9 filing. “The Mets relied on Madoff’s returns as a predictable source of income for a business -- professional baseball -- with an otherwise unpredictable revenue stream.” Profits from real estate and other businesses went into Madoff accounts, which provided “guaranteed returns” that were used to pay quarterly taxes, living expenses and loan interest, Picard said. The assets of the team owners’ company, Sterling Equities Inc., including their stake in television network SportsNet New York , “are by their very nature illiquid, meaning they could not and cannot provide cash on demand when needed by the many Sterling businesses,” he said. Picard Demand Picard originally demanded $300 million in profit and $700 million in principal from Wilpon, Katz and a group of family members and related entities. Rakoff last month refused to allow Picard to appeal the judge’s September decision dismissing all or part of nine of 11 claims against the Mets owners. The Sterling partners built a successful business before investing in Madoff, they said in a Jan. 26 filing. They have said they were drawn to Madoff because of his prominence in the investment community, and entrusted hundreds of millions of dollars to him before losing $500 million in the fraud. The case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York ( Manhattan ). To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net |
2024-10-31 | Bloomberg | Russia Increases Syria Arms While Joining Push for Talks | Russia has increased its weapons shipments to the Syrian government in the past year, complicating efforts to start peace talks, the U.S. ambassador to Syria said today. Ambassador Robert Ford today called the Russian military aid “substantial” and in some cases “militarily extremely significant.” A second U.S. official, Assistant Secretary of State Thomas Countryman, said the Russian aid is now more important than the weapons provided to President Bashar al-Assad’s forces by Iran. While he didn’t provide details, Ford made clear that Russia’s action are a cause for tension between U.S. Secretary of State John Kerry and his Russian counterpart, Sergei Lavrov. The diplomats speak several times a week in efforts to prepare for peace talks in Geneva as soon as next month, Ford told the Senate Foreign Relations Committee. “We have had, including at the level of the secretary, a lot of discussion with the Russians” about the arms shipments, Ford said. “The Russians would help everyone get to the negotiating table faster if they would stop these deliveries.” Republican Senator John McCain of Arizona said the U.S. is in an “Orwellian situation” in which Russia cooperates on eliminating Syria’s chemical weapons while increasing the quantity and quality of the conventional weapons in the hands of Assad’s forces. ‘Feckless’ Response Senator Bob Corker of Tennessee , the committee’s senior Republican, said the U.S. appears “feckless” with its slow and limited military supplies to the Syrian rebels. He said the U.S. has covertly trained about 1,000 Syrian rebels, and is continuing at a rate of 50 to 100 a month. Ford said a diplomatic solution is essential because neither side in the conflict “can throw a knockout punch in the foreseeable future.” The rebels are weakened by infighting between moderate and radical Islamist factions, he said. Countryman, assistant secretary for international security and nonproliferation, told the committee that Russia’s “unswerving support” for the Syrian government “costs the Russians in credibility with the rest of the Arab world and with the entire region.” Ford confirmed an incident last summer in which a cargo ship carrying Russian arms was turned back after the U.S. and allies “convinced an insurance company to withdraw its insurance coverage for the ship delivering it.” “But that is a rare success, frankly,” Ford said. Facilities Destroyed The Organization for the Prohibition of Chemical Weapons said today that Syria has met a deadline for the destruction of chemical weapons production facilities, the biggest step so far in the United Nations-authorized program to surrender its weapons of mass destruction. The Russian-brokered deal, which averted U.S. military strikes, disappointed Syrian rebels who have sought support from military intervention, Ford said. Syrian opposition leaders have said they worry that the accord will be seen as strengthening Assad’s claim to continuing in power. “While al-Assad may see himself as indispensable to the elimination of chemical weapons, that is not our view,” Countryman said. “The Syrian Arab Republic has accepted an obligation that is binding upon this government and binding upon the next government, which we hope to see soon.” To contact the reporter on this story: Terry Atlas in Washington at tatlas@bloomberg.net To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net |
2024-03-06 | Bloomberg | U.S. Federal Reserve Beige Book: Boston District (Text) | The following is the text of the Federal Reserve Board’s First District-- Boston. Economic activity continues to expand in the First District, albeit slowly, according to business contacts. Most contacted retailers but only one-half of responding manufacturers report higher sales in the latest period than a year earlier; nonetheless, most manufacturers are upbeat about 2013. Contacted staffing services firms cite a pick-up in business, while several software and IT services firms say their results are below expectations although they maintain a positive outlook. Commercial real estate fundamentals are largely unchanged, with office leasing activity mixed. Most residential real estate markets across the region continue to show robust sales growth and modest price increases. Across sectors, vendor prices and selling prices are reported to be generally stable and headcount changes fairly modest, either up or down. Retail and Tourism Retailers contacted in this round report overall fiscal year 2012 sales increases mostly ranging from 1 percent to 3 percent from 2011, with one source reporting a 7 percent year-over-year rise; these firms completed their 2012 fiscal years either at the end of December or in February. For January 2013, comparable-store sales ranged from a 1 percent decrease to a 6 percent increase from January 2012. Demand continues to be strong for clothing, home furnishings, and furniture, although a few contacts cite some softening in February which they attribute to consumer uncertainty regarding job creation , budget deficits, and the possible sequestration, as well as weather- related issues that depressed store traffic in certain areas. One contact notes that their customers often use tax refunds to finance durable good purchases, and the American Taxpayer Relief Act of 2012 enacted on January 2, 2013 has caused some people to delay filing their returns. Respondents suggest it will be easier to discern underlying sales trends in another month or two. However, they continue to predict a low-growth economy and a somewhat wary consumer in 2013. Wholesale prices are reportedly holding steady. As noted in the previous report, the tourism industry posted record highs in 2012 for hotel occupancy rates and revenues. Expectations for 2013 are that hotel occupancy will be flat or down about 1 percent compared to 2012, but that room revenues will be up about 6 percent. International travel is expected to increase by about 9 percent over 2012, fueled by continuing strong traffic from Europe and increased travel from Australia and South America , particularly from Argentina and Brazil. Increases in gas prices do not yet seem to be affecting regional travelers. Restaurants continue to have less robust results than hotels, with the average table check down compared to levels in 2009 to 2011. Manufacturing and Related Services Manufacturing firms in the First District continue to paint a picture of a slow recovery. Of the 12 firms responding this round, six report higher sales in the fourth quarter versus the same period a year earlier, two report flat sales and four report lower sales. In contrast to the mixed sales picture, 10 of the 12 firms say that their outlook for 2013 is positive. Part of the disconnect reflects the highly cyclical semiconductor industry, which accounts for two of the firms reporting both negative growth in the fourth quarter and positive expected growth in 2013. One firm in particular reports that sales were down by more than one-third in the fourth quarter but that orders are up almost 20 percent. Even some of our own contacts appear to be puzzled at the combination of poor sales results and optimism about growth for 2013; for example, one says his firm--at which January sales were down 6 percent year-on-year--wrote in planned sales growth of 4 percent to 8 percent in the second half “without any specific reason” except that “everyone expects sales to strengthen.” A contact in the home improvement goods industry notes that sales were strong in the fourth quarter but cautions that tool sales lag increases in housing starts by 6 to 9 months so it is too soon to tell if the increase is seasonal or cyclical. A contact that supplies material for filtration says the global picture is difficult to pin down because Chinese New Year and the seasonal Christmas shutdowns in Europe made year-on-year comparison particularly difficult in recent months. Finally, several respondents expressed uncertainty regarding China , with one saying that some of his Chinese customers reported dramatic reductions in sales, inconsistent with government statistics. Employment growth seems to be following sales and not the outlook. Only four of our contacts report increased hiring in the fourth quarter or planned increases in hiring in 2013 and four report the opposite. A contact in the industrial distribution business says that sales growth was negative for much of the second half of last year but they held off staff reductions until now. Three contacts cite difficulty finding the right workers in everything from welding to life sciences. Investment appeared similar to employment, with four firms reporting higher investment or higher planned investment. A manufacturer of fitness equipment says they are curtailing their investment plans because of slower expected growth in sales. Software and Information Technology Services New England software and information technology services contacts generally report lackluster activity through February. Several contacts cite weaker-than-expected demand and delays in executing large license agreements, driven in part by economic uncertainty, particularly in Europe and Japan. By contrast, two contacts--whose firms have experienced robust growth since 2010- -expanded accounts with a number of global insurance companies, bringing revenues in the fourth quarter to record highs. Many contacts continue to slow the pace at which they are hiring. Indeed, one contact shed approximately 150 jobs in the fourth quarter and has since instituted a “soft hiring freeze”; two other contacts now plan to maintain their current headcount through the end of 2013, following increases of over 5 percent in 2012. Selling prices and capital and technology spending have gone largely unchanged. The outlook among New England software and IT contacts is generally consistent with that of three months ago, with most expecting more robust growth in the second half of 2013. Staffing Services First District staffing contacts report that business continues to strengthen. Labor market activity since January is characterized as “improved” or “encouraging”, with all but one contact registering a year-over-year increase in billable hours. The continued growth reportedly reflects increases in labor demand in the IT, industrial, and business services sectors partially offset by a softening of demand for office and clerical assistants and manufacturing personnel. The number of permanent and temporary-to-permanent placements continues to grow, with one contact reporting that permanent placements in their professional business, which includes IT and engineering, are up nearly 30 percent relative to a year ago. Labor supply has gone largely unchanged since May 2012. Contacts continue to have difficulty finding candidates with high-end skill sets such as mechanical and electrical engineers, software developers, and IT personnel; one respondent says this shortage of qualified labor is putting upward pressure on pay rates. Looking forward, staffing contacts are generally more upbeat than they were three months ago, with most expecting steady or accelerated growth in the second quarter. Commercial Real Estate Contacts across the First District offer somewhat mixed reports concerning recent activity and the outlook, but note that fundamentals are largely unchanged since the last report. Leasing interest picked up slightly in Hartford in recent weeks but has not resulted in an increase in completed lease deals nor in significant absorption. In Boston, leasing inquiries remain steady. One Boston contact notes that tenants express little urgency to sign deals while another says that absorption increased slightly in recent weeks. In Providence, leasing activity picked up from last time and Class A downtown office vacancies fell to just under 9 percent from roughly 15 percent a year earlier. A Portland contact reports that leasing activity is stable and office rents unchanged since the last report, notwithstanding some newly announced plant closings in the region that will result in layoffs. Investment sales reportedly picked up in both Hartford and Providence as some investors were priced out of primary markets such as Boston. Across the region, multifamily structures remain the favored investment class, but high quality office and industrial structures are also seeing healthy demand. More properties are coming up for sale in response to rising prices. Some contacts are concerned that the high sales prices for premier properties in Boston are increasingly out of line with fundamentals. A regional lender notes a significant decline in loan demand for commercial properties since December and cites as possible reasons a temporary decline in the bank’s marketing efforts together with a general climate of economic uncertainty. Respondents raise concerns about overbuilding in Boston’s apartment market and possibly also in its office sector. While current office construction in Boston is pre-leased rather than speculative, one contact notes that the intended tenants will nonetheless generate significant vacancies at their current locations in other parts of the city. The outlook is largely unchanged in Portland and Boston, calling for a continuation of slow growth. Upside risks to absorption are cited for both Hartford and Providence, while contacts in both Boston and Hartford note downside macroeconomic risks as a threat to commercial real estate markets. Residential Real Estate Across New England, strong year-over-year sales growth continued in December in both single-family home and condominium markets. Initial sales figures for January suggest similarly robust year- over-year growth. According to contacts, low interest rates , affordable prices and improving economic conditions are all helping to spur buyer activity. Some contacts note, however, that a small increase in interest rates might actually spur potential homebuyers to purchase more quickly. Overall, realtors say they are confident in the strength of buyer demand, but worry that declining inventory could damp sales growth. In Greater Boston, realtors report that multiple bids on properties have become increasingly common as inventory falls. Declining inventory levels are putting upward pressure on prices in much of the region although the median sale price in New Hampshire slipped notwithstanding fewer listings. In the next several months, contacts anticipate continued year- over-year growth in sales and most express confidence that home values will continue to appreciate. Some contacts, however, say the strength of the improvements could be easily undermined if the economic recovery slows. Inventory levels are expected to rise in a few months with the onset of warmer weather, although several contacts worry about whether the supply will adequately sustain buyer interest. SOURCE: Federal Reserve Board |
2024-01-05 | Bloomberg | Reinsurance Pricing Subdued Even After 2011’s Disaster Record | Reinsurance brokers say the most expensive year for natural disasters didn’t drive coverage prices higher across the industry when policies were renewed on Jan. 1. Reinsurers’ strong capital base meant only insurance policies covering nations the most affected by catastrophes, such as Japan , Thailand and New Zealand , faced significant increases, James Vickers of Willis Group Holdings Plc said. Rates in many other lines of business “have hardly moved at all,” even as reinsurance companies lost money on their underwriting, Vickers, chairman of Willis Re’s international and specialty reinsurance unit, said by phone. “There is not a blanket increase. On accounts where clients had losses, prices have gone up considerably more than 10 percent.” Last year was the priciest 12 months of natural disasters on record for reinsurers and the primary insurers whose risks they help bear, Munich Re, the world’s biggest reinsurer, said on Jan. 4. Earthquakes in Japan and New Zealand and Australian and Thai floods helped cost the industry about $105 billion, surpassing the previous catastrophe record of $101 billion in 2005, when reinsurers were forced to raise capital in the wake of Hurricane Katrina. Reinsurers covered about half of those insured losses, according to Willis (WSH) , the world’s third-biggest reinsurance broker. Vickers estimated that the industry’s capital at the end of the third quarter was at the same level as the start of 2011, meaning more reinsurers were healthy enough to compete for business on price. ‘Disappointing Season’ “It was a disappointing renewal season” for reinsurers hoping to charge more, David Watson, head of XL Group Plc’s European division, said on a Jan. 3 conference call hosted by Keefe Bruyette & Woods Ltd. “There was really no significant upward movement in trading conditions.” About two-thirds of property-and-casualty reinsurance contracts of companies such as Munich Re, Swiss Re and Hannover Re (HNR1) are typically up for renewal in January. The remainder is renewed in April and July, with a focus on the Asia-Pacific region and the U.S. Rates for casualty policies, which pay out if individuals and companies are liable to pay compensation, were generally the same as a year ago, while the price of airline insurance dropped about 7 percent, Watson said. Premiums for international catastrophe policies increased about 2.7 percent in Europe ’s main insurance markets of Germany , France , Belgium , the Netherlands, Luxembourg and Scandinavia , Watson said. That’s less than the 3 percent inflation rate in the euro region. Peak Catastrophe Areas JPMorgan Chase & Co. analysts including Matthew Heimermann also estimate that casualty prices were little changed from a year earlier, according to a Jan. 2 note to investors. Property insurance increases were closer to 10 percent, they said. Only catastrophe-exposed contracts and contracts affected by losses saw “significant improvements to rates,” Brian Boornazian, head of reinsurance at Bermuda-based Aspen Insurance Holding Ltd. (AHL) , said during a Jan. 3 conference call hosted by Evercore Partners Inc. “More change is needed to reach rate levels that are adequate for exposures, and other external facts that affect our industry’s profitability.” The so-called peak areas for catastrophe insurers are U.S. earthquake and hurricane coverage and European windstorms. While such events didn’t much hurt reinsurers in 2011, the industry was surprised by the magnitude of losses elsewhere, such as the Thai floods, according to Dominic Christian, co-chief executive officer of Aon Benfield Group Ltd., the world’s biggest reinsurance broker. ‘Unbelievable’ Thai Losses “If there are losses in non-peak zones, it makes you wonder if you are applying the right diversification features,” Christian said in a phone interview from London. Munich Re estimates losses from the Thai floods, which inundated factories and disrupted Japanese companies’ local supply chains, cost $10 billion. While prices in affected areas of Asia such as Thailand have increased at least 50 percent, they haven’t risen in other countries, according to XL’s Watson. “In Thailand, the losses are just unbelievable,” he said. “What surprises me is that although reinsurers have addressed exposure in Thailand, they still provide uncapped pro-rata treaties providing net cat coverage elsewhere in the world,” Watson said, referring to policies that provide unlimited coverage against natural catastrophes. Globally, policies covering disasters in multiple regions rose a minimum of about 2 percent, Nick Frankland, CEO of the European operations of the reinsurance brokerage of Marsh & McLennan Cos. (MMC) , said during the KBW conference call. Capital Concern Willis Re says catastrophe reinsurance prices are jumping from 80 percent to 150 percent in New Zealand, where the Feb. 22 earthquake is estimated to have cost $13 billion, according to Munich Re. In Australia , catastrophe premiums have risen 40 percent to 75 percent, Willis says. The earthquake in Japan on March 11 and the ensuing tsunami caused insured losses of as much as $40 billion, according to Munich Re. Severe storms in the U.S. in April cost about $7.3 billion, while Hurricane Irene is estimated to cost $7 billion. Willis’s Vickers said broad-based price increases are only likely if the sovereign-debt crisis worsens and erodes capital. In 2008, writedowns on equity investments and other losses related to the financial crisis prompted reinsurers to increase prices in the January 2009 renewal season. Rates declined again in the following two years, mostly because of an absence of major natural catastrophes. “Capital ultimately is what drives pricing,” Vickers said. To contact the reporters on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net ; Kevin Crowley in London at kcrowley1@bloomberg.net. To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net . |
2024-10-18 | Bloomberg | Baucus Confident Obamacare Bugs Fixed Soon (Transcript) | Senate Finance Chairman Max Baucus, a Democrat who was the lead author of the 2010 U.S. health-care law, said on Bloomberg Television’s “Political Capital with Al Hunt ,” airing this weekend, that he expects the “bugs” that have plagued the rollout of the health-insurance exchanges will be fixed by Dec. 15, the deadline for Americans to sign up for coverage that starts Jan. 1. (This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.) AL HUNT: We begin the program with Senate Finance Committee Chairman Senator Max Baucus of Montana. Senator, thank you for being with us today. MAX BAUCUS: You bet, Al. Good seeing you. HUNT: Let’s look ahead after this trauma we’ve been through the last couple of weeks. You have worked assiduously on tax reform, corporate and individual, for much of the last year. What are the prospects that you and Dave Camp, your House counterpart, can turn out a piece of legislation in the next couple months? BAUCUS: I think quite good. We’ve spent years working on legislation. He and I, frankly, meet weekly talking about reform. I and my staff - especially my staff - have spent a good bit of time with the Treasury staff working out details and different ways of configuring provisions. So there’s been a lot of work on reform. And, second, I think that when the budget conference that’s just been named begins to do its work, it’s going to be - and there’s going to be more likelihood that we’ll find some agreement there. And, third, because I think there’s a great willingness today to work together better than has been the case in the past. HUNT: Do you see business and individual tax reform coming up by December? BAUCUS: I do. I do. HUNT: Or you would not separate it out and just do business? BAUCUS: No, I think it should be comprehensive, first, business is clearly important, because we’re - we have to be more competitive. Frankly, the failure to do reform is hurting the economy. There’s no question of that. But I think individuals - well, partly because some businesses are not C corporations - have to deal with the so-called - HUNT: And when will you - BAUCUS: - and add to that, there’s a lot of interest - a lot of ways - we have to simplify the code. It’s just way, way too complex. HUNT: And what’s your goal as when you start to mark up a bill and when you report out a bill in the Senate? BAUCUS: Well, I’d like to see us come up with discussion, quick drafts, the beginning of this year. I don’t know exactly when. I can’t give a date on markup, but we have to move quickly, because time is soon not becoming our friend. HUNT: Well, then, tell me, how does it fit into the budget pact - or deal which has to be done by Dec. 13? BAUCUS: Right. HUNT: Can what you’re going to do play into that? Or does it have to be done later and separately? BAUCUS: I think it’s a parallel track. I think Patty Murray and Paul Ryan are terrific. They both know budget process very well. They both know what the components are. And I wish them very well. They’re both very good people. I’m working with them. I’m working with Senator Murray, and I’ll be working with all members of that committee to help with the tax components and also the entitlement components - HUNT: So what you may do is they may have numbers, they may use numbers that you have and then you fill in the details and the specifics later? BAUCUS: Right. Yeah, the thought is, they’ll do top-line numbers, then we do the details. HUNT: Will your tax reform be a net revenue gainer or will it be a - will it be neutral? BAUCUS: Well, that’s a question that’s going to have to be resolved in the budget. HUNT: What does the chairman think right now? BAUCUS: I think that that’s one of the pieces that is part of the solution, that’s part of the puzzle. And it’s revenue, sequestration, it’s entitlements, and there - to be honest, they all have to be on the table - BAUCUS: I’m saying, everything’s on the table. We got to work together here. HUNT: Do you think you’ve got revenue out of it? BAUCUS: I think that we’re going to - I’m moving as fast - as thoroughly as I can to solve this. And I think it’s important for us to listen to each other, to build bridges and try to avoid some of these buzzwords that have been going around Washington which tend to get blamed. HUNT: Let me try one more crack at that. Would business tax reform be revenue-neutral and the question then be whether individual tax reform is revenue-neutral? BAUCUS: Well, the president’s corporate framework is revenue-neutral. HUNT: Right. Would you - BAUCUS: Well, anything’s possible. It’s early. We’ll -let’s see where we go. HUNT: Are you going to, in the business tax reform, would you imagine putting a charge, 5 percent or more, on the earnings held offshore by multinationals as of right now? Is that a likelihood? BAUCUS: I think we need - this country needs business reform that addresses overseas so-called trapped cash in a way that allows companies to bring that cash home, but in a way that also is durable, that’s not just a one-off, but is a permanent solution to income earned overseas that unfortunately some companies don’t pay taxes on because their operations are in tax havens or low tax jurisdictions. And that’s going to help create jobs in the United States. HUNT: They want the lower rates, but they don’t want the broader base. BAUCUS: Well, I - you know, that’s not - no, no, no. HUNT: Really? BAUCUS: No, no, no. Companies over and over come to us and say - HUNT: What do you think you can take the rate to? BAUCUS: I’d like to get the rate down to 30, high 20s. HUNT: High 20s or 30s? BAUCUS: High 20s, into there. Companies tell us they want to - they’re willing to give up the major deductions they get to get lower rates, because they feel they’re more competitive with lower rates. Let me - one small example here. A major California company just merged with a major Japanese company, computer manufacturing equipment, and where do you think they incorporated? Overseas, in the Netherlands. Why? Because the Netherlands rate is so much lower than it is in the United States. HUNT: What could you get the individual rate down to in an ideal world? BAUCUS: I don’t know. I don’t know. It’s - that’s - HUNT: Do you think you can get it below 30? BAUCUS: Look, it’s hard, because there are a lot of provisions that people like a lot, whether it’s charitable deduction or mortgage or state and local, whatnot. But, still, I do believe that we can dramatically simplify the code. It’ll send a very powerful message to the country. Hey, Washington’s got its act together, and it’ll unleash a lot of pent-up energy that’s not yet been realized to help create jobs. HUNT: Let me see if I’ve summarized this correctly. You think there are numbers that can be provided to the budget conferees before December 13th, and the actual legislation probably would go to the floor early next year? BAUCUS: Well, I’m hopeful. I’m not going to say that’s what’s going to happen. HUNT: But it will go to the floor next year? BAUCUS: No, I’m making a different point. I’m saying, I’m working to - with the Budget Committee to get the most definitive framework the country could get. Failing that, I’m still proceeding independently on reform. HUNT: Mr. Chairman, another matter. With prescience, you warned that the Affordable Care Act was a train wreck or potential track wreck. Republicans cite that often. The early rollout seemed to be at least that, if not more. I want to ask you this: Do you think this is intractable, that this is going to get worse? Or do you think it can be rectified in the next couple of months? BAUCUS: Well, first, I said, if they don’t get their act together, it’s going to be a train wreck. HUNT: They haven’t, have they? BAUCUS: There have been problems. But anything this massive - this is huge - is going to have bugs. And we’re seeing bugs. Look at the private sector. You’ve got - you know, you’ve got - a technology company and a software company, Windows, for example, 2.0, 2.1, all that, there’s -there are a lot of patches that fix the bugs. And that’s what’s happening. I have the utmost confidence that every amount of energy is being devoted to solving - getting these patches out to fix the bugs. And we’re an entrepreneurial - we’re a creative company. We’ll find a way. HUNT: Do you have confidence that those glitches will be largely rectified by December 15th? BAUCUS: I do. I do. I do. HUNT: OK. BAUCUS: I’m talking - I spent a lot of time talking to the administration on this. I met with Denis McDonough twice a month. We go over - this is what we go over, frankly, unless it’s some tax reform issues and other -- and they bring members of Congress to him so that they - he hears and they hear what needs to be done here. HUNT: Final question. The IRS commissioner, the appointment has been pending for two-and-a-half months. When are you going to hold hearings? And when will John Koskinen be confirmed, if he will? BAUCUS: Well, so far, I think he’s a good man, and I’m going to do my very best to get the hearing up right away. And my job is not let others link his - hearing for him - HUNT: Do you think he’ll be confirmed this year? BAUCUS: I do. And I’m going to do all I can to make that happen. He’s a good - the IRS needs a very good man. It looks like at this point, any other developments, that he’s a good man and should have that job. HUNT: Chairman Baucus, thank you so much for being with us. BAUCUS: You bet. ***END OF TRANSCRIPT*** THIS TRANSCRIPT MAY NOT BE 100% ACCURATE AND MAY CONTAIN MISSPELLINGS AND OTHER INACCURACIES. THIS TRANSCRIPT IS PROVIDED “AS IS,” WITHOUT EXPRESS OR IMPLIED WARRANTIES OF ANY KIND. BLOOMBERG RETAINS ALL RIGHTS TO THIS TRANSCRIPT AND PROVIDES IT SOLELY FOR YOUR PERSONAL, NON-COMMERCIAL USE. BLOOMBERG, ITS SUPPLIERS AND THIRD-PARTY AGENTS SHALL HAVE NO LIABILITY FOR ERRORS IN THIS TRANSCRIPT OR FOR LOST PROFITS, LOSSES OR DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THE FURNISHING, PERFORMANCE, OR USE OF SUCH TRANSCRIPT. NEITHER THE INFORMATION NOR ANY OPINION EXPRESSED IN THIS TRANSCRIPT CONSTITUTES A SOLICITATION OF THE PURCHASE OR SALE OF SECURITIES OR COMMODITIES. ANY OPINION EXPRESSED IN THE TRANSCRIPT DOES NOT NECESSARILY REFLECT THE VIEWS OF BLOOMBERG LP. #<479665.1204164.3.9.1.0.25># |
2024-01-16 | Bloomberg | U.S. Federal Reserve Beige Book: Chicago District (Text) | The following is the text of the Federal Reserve Board’s Seventh District-- Chicago. SEVENTH DISTRICT--CHICAGO Summary. Economic activity in the Seventh District continued to expand at a slow pace in late November and December. Many contacts expected that growth in 2013 would match or outperform 2012, but some remained more cautious than others, citing the impact of continued uncertainty over federal fiscal policy on the near-term economic outlook. Consumer spending increased somewhat, while growth in business spending remained tepid. Growth in manufacturing production was again moderate. Residential construction continued to increase at a slow but steady pace, but nonresidential construction remained weak. Credit conditions continued to improve gradually. Cost pressures eased some, and wage pressures remained moderate. Cattle and hog prices moved higher; while corn, soybean, and milk prices moved lower. Consumer spending. Consumer spending increased somewhat from the previous reporting period. Retailers noted that holiday sales were slightly below expectations. Multiple retailers reported that store traffic volumes fluctuated more throughout the holiday season than in recent years. Apparel and jewelry sales were strong, while sales of toys and electronics were more in line with expectations, and general merchandise sales were weaker. Auto sales in the District lagged the national pace, with several dealers indicating that lower consumer confidence hurt year-end sales. Some auto dealers also noted that inventory levels were slightly high. However, dealers expected new car sales to be stronger in 2013 due to pent-up consumer demand, easing credit conditions, and rising used vehicle prices. Business spending. Growth in business spending remained tepid in late November and December. Inventory investment was little changed while spending on equipment and structures continued to slowly increase. Some contacts again noted a reluctance to spend given heightened uncertainty related to federal fiscal policy. Labor market conditions were unchanged. Hiring plans for the coming year were limited. Retail employment increased with some seasonal hiring, but few significant full-time post-holiday additions were expected. A recruiting firm noted that customers that are heavily dependent upon government spending were very cautious about increasing headcount amidst the fiscal cliff negotiations. Companies with exposures to Europe were likewise being more conservative in their hiring plans. However, contacts indicated that there is still strong demand for talent in technology, engineering, accounting and finance, energy, and skilled manufacturing jobs. Manufacturers indicated a reluctance to reduce headcount despite the recent slowdown in activity, choosing to cut overtime hours instead in expectation of a rebound in production in the first quarter. In addition, some contacts are also beginning to limit hours for part-time workers to less than 30 hours in order to avoid the 30-hour (full-time employee status) rule related to the Affordable Care Act. Construction/real estate. Construction and real estate activity was mixed in late November and December. Residential construction continued to rise. However, homebuilders noted that new construction would stay moderate in many regional markets as long as existing home prices remained well below new home prices. Existing home prices did edge up in some areas of the District, and rental rates continued to rise. In addition, contacts reported that in many cases credit for homebuyers remained tight, slowing the pace of home sales. Demand for nonresidential construction remained weak, but some improvement was noted in the light industrial and office markets. Several commercial real estate contacts observed that uncertainty surrounding federal fiscal policy continues to weigh on structures spending in a number of market segments. However, commercial real estate conditions improved slightly. Vacancy rates continued to decrease; and while the pace of leasing and acquisition deals remained slow, it picked up slightly as financing became easier to obtain. Manufacturing. Growth in manufacturing production continued to be moderate over the reporting period. Capacity utilization in the steel industry increased slightly and service center inventories were noted to be at desirable levels. Specialty metal manufacturers reported a decline in quoting and new orders as customers continued to delay purchases until the last minute. In contrast, a contact in the defense industry noted a substantial rebound in orders due to the two-month delay in sequestration. Contacts noted a slight pick-up in demand for construction equipment due to improvement in the housing market, although demand from the public sector remained weak. The auto industry remained a source of strength for manufacturing. Auto suppliers reported strong orders through the end of the year, and many expected vehicle production to expand in 2013. Activity in the energy industry appeared to slow. The lower price of natural gas, in part due to abundant supply, has negatively affected coal mining. In addition, one contact noted the lower prices had also led to a pause in shale gas production. However, contacts expected activity in the energy industry to rebound in early 2013. Banking/finance. Credit conditions continued to gradually ease over the reporting period. Credit spreads and financial market volatility remained low, and asset quality continued to improve. Credit line utilization rose substantially, with contacts citing end-of-year factors such as tax planning and special dividends as reasons for the increase. Banking contacts also reported moderate growth in demand for small business loans, particularly from manufacturing industries such as machining and packaging. Pricing for business loans changed little, while contacts cited some loosening of loan standards. Consumer loan demand, particularly for mortgage and auto loans, continued to increase. Contacts indicated, however, that less home refinancing activity was being processed than in the previous reporting period. Prices/costs. Cost pressures eased in late November and December. Most raw material prices moved lower, although there was some pressure on lumber and drywall prices and concerns remained around potential food and energy price increases. In contrast, manufacturers supplying the defense industry said their customers were attempting to negotiate large price decreases; these contacts thought they could instead secure multi-year price agreements in exchange for more moderate price reductions. A contact in the grocery industry indicated that they have been unable to fully pass on recent meat and milk cost increases. More generally, retailers reported that discounting and promotions increased over the holiday shopping season. Wage pressures remained moderate, but nonwage costs increased. Contacts again cited higher healthcare costs; however, a few noted that increases this year were less pronounced than a year ago. Several contacts also reported increasing 401(k) payouts and year-end bonuses. Agriculture. Although drought conditions eased, depleted soil moisture remained a concern in much of the District. The low levels of the Mississippi River hampered barge traffic moving both crops to market and inputs to farms. Crop operations tended to come out ahead for the year if they had adequate insurance coverage, and most crop farmers saw their net worth grow. Uncertainty regarding the tax treatment of capital expenditures led farmers to move up purchases of equipment and other capital improvements into 2012. Corn and soybean prices slid during the reporting period. Milk prices decreased, while cattle and hog prices increased. Of these agricultural products, only hog prices were below the levels of a year ago. Farmland values trended higher, with an extra spurt of farm sales at the end of 2012 in anticipation of tax code changes. Cash rents for cropland increased as well for the upcoming season. SOURCE: Federal Reserve Board |
2024-01-20 | Bloomberg | Dexia Will Need to Tap EU75 Billion of Guarantees, Mariani Says | Dexia SA (DEXB) , the French-Belgian lender being broken up after losing access to short-term funding, will need to tap 75 billion euros ($97 billion) to 80 billion euros of promised government guarantees to replace maturing debt. The Oct. 9 agreement between Belgium, France and Luxembourg to provide as much as 90 billion euros of state guarantees includes a safety margin of 10 billion euros to 15 billion euros, Dexia Chief Executive Officer Pierre Mariani told lawmakers in the Belgian parliament in Brussels today. That margin will stay intact if market conditions don’t deteriorate, he said. The bank currently has 45 billion euros of temporary government backstops available until May 31, pending the submission of final guarantees for approval by the European Union antitrust authority, and has been using those to repay 14 billion euros of unsecured loans granted by its former Belgian banking unit. Belgium bought the local bank and its insurance company for 4 billion euros on Oct. 20. Dexia needs to pledge assets to the states in return for the temporary guarantees. “The temporary guarantees don’t do anything to improve our liquidity,” Mariani told the lawmakers. “We’re replacing secured funding by collateralized guaranteed funding here.” Both Standard & Poor’s and Moody’s Investors Service have said the Dexia guarantees were one of the main reasons to lower Belgium’s credit rating in recent months. Belgium agreed to provide more than 60 percent of the government backstops and this contingent liability may ultimately inflate the country’s debt load, Moody’s said on Dec. 15. Coming Weeks Mariani said he expects to reach agreements in coming weeks to sell Dexia’s Turkish banking unit and a 50 percent stake in a joint venture with Royal Bank of Canada. Keeping employees and persuading the European Commission, the EU’s antitrust authority, not to treat Dexia as a commercial bank when it seeks compensations to offset the state aid, are two key challenges during the breakup, Mariani said. “We won’t have any commercial operations left after the breakup, so the European Commission shouldn’t apply the same measures to us as it does to other banks,” Mariani said. “The fate of 90 billion euros lies in the hands of about 300 people.” Mariani said Dexia lost about 6 percent of its workforce in the past three months. To contact the reporter on this story: John Martens in Brussels at jmartens1@bloomberg.net To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net |
2024-12-13 | Bloomberg | Vodacom Tanzania Says Fee Currency Switch Will Ensure Investment | Telecommunications companies in Tanzania are in talks with the government to pay fees in shillings, a move Vodacom Group Ltd. (VOD) ’s local unit said will counter currency volatility and ensure investment. “We currently pay license fees in dollars and operate in shillings,” Rene Meza, the managing director of Vodacom Tanzania, the East African country’s biggest mobile-phone company by customers, said in an interview yesterday in Dar es Salaam, the commercial capital. “The shilling has been very volatile against the dollar and this could mean we have to cut back on investment to pay regulatory fees.” The currency of East Africa ’s second-biggest economy after Kenya weakened to 1,815 per dollar on Oct. 27, the lowest level since the government liberalized the foreign-exchange market in 1994, according to data compiled by Bloomberg. The shilling was 0.1 percent stronger at 1,612 per dollar by 12:03 p.m. in Dar es Salaam. Telecommunications companies pay annual fees for earth satellite stations, switching centers and networks at a rate of 0.8 percent of turnover in dollars, according to information on the website of the Tanzania Communications Regulatory Authority. Vodacom Tanzania is set to invest 100 billion Tanzanian shillings ($62 million) over the next 12 to 18 months to expand and improve its network coverage. “We are finalizing our budget,” Meza said. The company is also developing software that will enable cross-border money transfers, including loans and health insurance, with Safaricom Ltd. (SAFCOM) of Kenya. Safaricom is 40 percent owned by Vodafone Group Plc (VOD) , which owns 65 percent of Vodacom. Active accounts “We will leverage on the numbers of our sister-company in Kenya to grow our M-Pesa money-transfer service,” Meza said. Vodacom Tanzania, which expects to have 11 million subscribers this month, said 3 million of its customers now have active money-transfer accounts. As of June Vodacom Tanzania had 9.2 million subscribers, followed by Bharti Airtel Ltd. (BHARTI) ’s local unit with 6.4 million and Millicom International Cellular SA ’s unit, known as Tigo Tanzania, with 5 million, according to data on the regulator’s website. Zantel, the Tanzanian unit of Emirates Telecommunications Corp., had 1.3 million subscribers, and Tanzania Telecommunications Ltd. had 226,153. Vodacom Tanzania is considering outsourcing its tower infrastructure, as it did with its network management , to Nokia Siemens. “We are discussing internally whether to outsource our towers segment, because it is not our core business,” Meza said. “Telecoms companies are essentially marketing and sales units now.” In Talks The companies are also in talks with the Tanzanian government about introducing number portability. Meza said the service was a failure in neighboring Kenya, where he was managing director of Airtel Networks Kenya Ltd., a unit of Bharti Airtel. “It is not about moving a number to another operator, but what value that will add,” he said. “We are in high-level talks with government and are waiting for guidelines on issues like who will meet the investment cost.” To contact the reporter on this story: David Malingha Doya in Dar es Salaam via Nairobi at pmrichardson@bloomberg.net To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net |
2024-03-08 | Bloomberg | U.S. Treasury Agrees to Sell AIG Shares at $29 Each to Reduce Stake | American International Group Inc. (AIG) ’s shares priced at $29 in a U.S. Treasury Department offering that will reduce the government’s stake in the bailed-out insurer to about 70 percent. The price is 1.5 percent less than yesterday’s close of $29.45 in New York, and the stock fell 3.1 percent to $28.53 at 10:21 a.m. AIG purchased $3 billion of the $6 billion shares offered. Treasury said today in a statement that it agreed to sell 206.9 million shares. The Treasury is winding down bailouts from 2008 and 2009 that were intended to prevent a collapse of the banking system and protect jobs. The sale of AIG stock is the second for the department since it converted a preferred stake into 92 percent of the New York-based company’s common shares in January 2011. The government cut that holding to 77 percent in a May offering. “This is likely a projection of the path forward,” Josh Stirling, an analyst at Sanford C. Bernstein & Co., said before the price was announced. “As opposed to selling major chunks, $10 billion or $20 billion at a time, they’re going to sell much more manageable amounts.” He rates AIG “market perform.” The government needs to average at least $28.72 on its share sales to recoup taxpayer funds. AIG closed above that level on Feb. 28 in New York for the first time since July, after reporting fourth-quarter profit of $19.8 billion tied to a tax benefit. The insurer raised about $6 billion from the sale of a stake in Hong Kong-based AIA Group Ltd. earlier this week. Selling Assets AIG, once the world’s largest insurer, has sold non-U.S. providers of life coverage, a consumer lender and other businesses to help repay the taxpayer bailout that swelled to $182.3 billion. Chief Executive Officer Robert Benmosche , 67, has sought to convince investors of the potential of remaining units, including global property-casualty and domestic life insurance operations. AIG trades at about half its book value, a measure of assets minus liabilities. That’s lower than the valuation of insurance rivals including Ace Ltd., which trades at about book, and Travelers Cos., which is valued at about 0.9 times book. The AIG offering at $29 a share is a reflection of the company’s capacity for profits, said Meyer Shields, an analyst with Stifel Nicolaus & Co. “It kind of seems appropriate, given the fact that their earnings outlook is weak,” said Shields, who has a “hold” rating on AIG shares. “Over the next three or four years, assuming the execution of fundamentals goes well, you’ll probably see the stock goosed up.” Moving Forward AIG was first rescued in September 2008 by the Fed after trading partners demanded payments on derivatives contracts. After three revisions, the firm’s lifeline included a $60 billion Fed credit facility, a Treasury investment of as much as $69.8 billion and up to $52.5 billion to buy mortgage-linked assets owned or backed by AIG. The insurer was deemed by the Treasury a “systemically significant failing institution” and was the only company to receive bailouts through a facility created for such firms. AIG reported the biggest quarterly loss in U.S. corporate history in 2008 and posted almost $100 billion in net losses that year, fueled by bets on subprime-mortgage securities. “We’re continuing to move forward,” Tim Massad, Treasury’s assistant secretary for financial stability, said in the statement. Treasury will “exit our stakes in private companies as soon as practicable,” he said. The government’s cost basis for its common shares was $47.5 billion, excluding unpaid dividends and fees of $1.6 billion. To contact the reporters on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net ; Andrew Frye in New York at afrye@bloomberg.net. To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-10-23 | Bloomberg | ICICI Securities Forms Advisory Partnership With GCA Savvian | ICICI Securities Ltd., the investment-banking arm of India’s biggest private lender, formed a partnership with Japan ’s GCA Savvian Group Corp. to advise on cross-border mergers between the two countries. ICICI Securities’ capital markets business will also help Tokyo-based GCA Savvian’s clients with rights issues, open offers and delistings in India, the two companies said in a press release. GCA Savvian earlier had a partnership with Mumbai-based Kotak Mahindra Bank Ltd. (KMB) that ended last year. The alliance comes after the volume of mergers and acquisitions involving Indian companies slid to $25.5 billion this year, the lowest since 2009, according to data compiled by Bloomberg. The value of Indian acquisitions by Japanese companies has fallen to $359 million so far in 2013, down from a record $7.52 billion for all of 2008. Deal activity has decreased since Daiichi Sankyo Co.’s 2008 acquisition of Ranbaxy Laboratories Ltd. for $4.6 billion. The Indian drugmaker agreed in May to pay $500 million to resolve fraud allegations, and Daiichi said it will pursue “legal remedies” against Ranbaxy’s former owners for allegedly hiding details of U.S. investigations into the company. The former owners have denied the allegations. Japanese companies in industries from cars to electronics have been expanding in India , as demand at home slows because of an aging population. Toshiba Corp. agreed in September to buy Vijai Electricals Ltd.’s transmission and distribution business for $200 million. Last year, Sony Corp. spent $271 million to increase its stake in Indian television network operator Multi Screen Media Pvt. Financial firms from Japan have also been active. Kotak Mahindra Capital Co. formed a strategic alliance in December 2012 with Sumitomo Mitsui Banking Corp. and SMBC Nikko Securities Inc. Nippon Life Insurance Co., Japan’s biggest life insurer, spent $288 million last year for a minority stake in Reliance Capital Ltd.’s asset-management unit. To contact the reporters on this story: George Smith Alexander in Mumbai at galexander11@bloomberg.net ; Shigeru Sato in Tokyo at ssato10@bloomberg.net To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net |
2024-06-13 | Bloomberg | Iran Oil Storage at Sea Seen by IEA Rising to 42 Million Barrels | Iranian oil stored on tankers at sea rose to as much as 42 million barrels, the International Energy Agency said. The Persian Gulf country added about 10 million barrels of floating storage by the end of last month, the Paris-based adviser to industrialized countries said in a report today, citing unnamed shipping analysts. About 17 supertankers and seven Suezmaxes are holding crude, with another estimated 25 million barrels being kept in onshore tanks, the report showed. U.S. and European Union sanctions will cut Iranian crude exports by 1 million barrels a day this year to about 1.5 million barrels a day, the IEA said. Measuring the oil flow has been hampered as Iranian vessels routinely disabled their tracking devices, according to the report. The EU embargo that takes full effect July 1 is already curbing shipments beyond the continent because insurers won’t cover ships hauling the crude. “In months ahead, Iran may need to shut in production volumes if export markets remain similarly constrained and storage fills up,” the agency said. “The full implementation of the most severe sanctions to date on Iran’s oil and banking sectors is just weeks away.” Iran is under pressure to stop its nuclear program that the U.S. and Europe suspect involves weapons development. The Tehran government, facing four sets of United Nations sanctions, says it is enriching uranium for civilian and medical purposes. Discounted Sales The Organization of Petroleum Exporting Countries’ second- largest producer may be offering long-term credit, effectively selling oil at a discount, the IEA said. Payments are being stymied by sanctions that block banks settling trades with the country from accessing the U.S. financial system. The U.S. exempted banks in 17 countries that demonstrated reduced imports, including Japan and India , the second- and third-largest buyers of Iranian supplies. Exports to China , the biggest customer, and India rose by 70,000 barrels a day to 730,000 barrels a day in May, according to the IEA. Japan advanced a bill to compensate buyers of Iranian crude who lose insurance, the IEA said. The cabinet approved the measure Monday and will submit the legislation to the Diet, or national parliament, for approval. The number of Iranian oil tankers that sent no location signals for at least a month more than tripled in the last few weeks, according to the most recent data from the ships captured by IHS Inc. Twelve supertankers and seven smaller Suezmaxes haven’t signaled for at least a month, data show. To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net |
2024-06-30 | Bloomberg | U.S. Stocks Rally on Optimism Greece Will Avoid Debt Default | U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest four-day gain since September, amid increased optimism Greece will avoid default and after American business activity improved. Industrial, energy and technology companies led gains in the S&P 500, rising at least 1.4 percent, as investors bought stocks tied to economic growth. Caterpillar Inc. (CAT) , United Technologies Corp. (UTX) and 3M Co. (MMM) climbed at least 1.8 percent to help the Dow Jones Industrial Average erase its quarterly loss. Hewlett-Packard Co. (HPQ) added 2.4 percent after a report that private-equity firms want the computer maker to split up. The S&P 500 advanced 1 percent to 1,320.64 at 4 p.m. in New York, rising 4.1 percent in four days. The Dow average gained 152.92 points, or 1.3 percent, to 12,414.34 today. “It’s not surprising that the market is rebounding,” said Mike Ryan , the New York-based chief investment strategist at UBS Wealth Management Americas, which oversees $761 billion. “The Greece situation will work out, concerns about a soft patch were overdone and earnings will continue to be strong. The market will do better in the second half.” The Dow fell 1.2 percent in June amid concern about Europe ’s debt crisis and weaker-than-expected economic data. Over the last century, the 30-stock gauge had an average gain of 1.4 percent in July, according to data compiled by Bespoke Investment Group. The index was up 7.2 percent in 2011 amid better-than-estimated earnings and government stimulus measures. Greece ’s Bailout Global stocks rose today on expectations that Greece will avoid defaulting on its debt. Greek Prime Minister George Papandreou’s drive to stave off the euro area’s first sovereign default stayed on track after lawmakers backed a bill to authorize an austerity plan required to keep rescue aid flowing. Germany ’s biggest banks agreed on a proposal to “roll over” Greek debt holdings, Finance Minister Wolfgang Schaeuble said. That means reinvesting money from maturing bonds into new Greek bonds. German banks have agreed to roll over at least the Greek bonds they’re holding that mature through 2014, which amount to about 2 billion euros ($2.9 billion), Schaeuble said. “The big driver behind the rally has been Greece,” said Peter Jankovskis , who helps manage about $2.7 billion at Oakbrook Investments in Lisle, Illinois. “The implementation of an austerity plan is certainly an important step. That should be less of an overhang for the market in July.” Business Barometer Stocks extended gains after the Institute for Supply Management-Chicago Inc. said its business barometer climbed to 61.1 this month from 56.6 in May. Economists called for the index to drop to 54, according to the median forecast in a Bloomberg News survey. Figures greater than 50 signal expansion. Consumer confidence rose to the highest level in 10 weeks, the Bloomberg Consumer Comfort Index showed. The Morgan Stanley Cyclical Index gained 1.5 percent as 29 of its 30 stocks rallied. The Dow Jones Transportation Average of 20 stocks, which is considered a proxy for economic growth, advanced 1.3 percent. Caterpillar, the world’s largest maker of construction equipment, added 3 percent to $106.46. United Technologies rose 2.4 percent to $88.51. 3M increased 1.9 percent to $94.85. Hewlett-Packard climbed 2.4 percent to $36.40. The world’s largest maker of personal computers is being urged by private equity firms including Blackstone Group to break up and sell some units to them, Reuters reported, citing people familiar with the matter. EBay Rallies EBay Inc. (EBAY) climbed 4.6 percent to $32.27. The world’s largest online marketplace was raised to “buy” from “neutral” by Bank of America Corp, which cited the Federal Reserve Board’s vote yesterday to approve a less severe cap on debit-card transaction fees than previously proposed. First Solar Inc. (FSLR) jumped 2.2 percent to $132.27. The world’s largest maker of thin-film solar modules won $4.5 billion in conditional loan guarantees from the U.S. Energy Department for three projects it’s developing in California. The S&P 500 today surpassed its average price of the last 50 days of about 1,317, which shows potential for further gains, according to analysts who study charts to make forecasts. “It just confirms the strength of the rally that we’ve seen here,” said Richard Ross , global technical strategist at Auerbach Grayson & Co. in New York. “If it doesn’t provide any resistance at all and the market continues to power through that level, that would be a bullish signal for the market.” Key for Rally The benchmark gauge has made a high on the last day of a week only once since peaking in April, and tomorrow may determine whether the market can build on its current rally, Strategas Research Partners said. The S&P 500 had its weekly intraday high on a Friday only once over the past eight weeks, as the gauge sank 7 percent, according to data from Strategas and Bloomberg. That marked a shift in trend from the first four months of the year, when the S&P 500 rallied 8.4 percent and Fridays accounted for 10 of the 17 weekly highs. “We need to see this trend re-emerge,” Christopher Verrone , head of technical analysis at the New York-based firm, wrote in a note yesterday. “The bulls have had trouble sustaining strength late in the week.” The Institute for Supply Management is scheduled to release tomorrow the factory index, which may show a decrease to 51.8 this month from 53.5 in May, according to the median forecast from economists surveyed by Bloomberg. Worse-than-expected economic reports and concern about the debt crisis in Europe spurred losses for the S&P in six consecutive weeks from April 29 to June 10, the longest streak since July 2008. The index has since climbed 2.9 percent through yesterday. “If this is going to be more than an ‘oversold bounce,’ it will be important for this trend to improve over coming weeks,” Verrone said. To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; Cecile Vannucci in New York at cvannucci1@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net |
2024-08-07 | Bloomberg | Stocks Fall With Oil on Fed Concern as Yen, Pound Advance | Stocks (SPX) declined amid corporate earnings that disappointed investors and growing concern the Federal Reserve may reduce its bond purchases, while oil capped the biggest four-day slide in nine months. The pound gained after the Bank of England raised its growth forecast. The MSCI All-Country Index lost 0.6 percent to 374.59 and the Standard & Poor’s 500 Index slipped 0.4 percent at 4 p.m. in New York , extending its three-day drop to 1.1 percent. Japan ’s currency gained 1.3 percent to 96.44 per dollar and the pound climbed to a six-week high versus the dollar. The yield on 10-year Treasury notes decreased 4.5 basis points to 2.60 percent. Oil extended its four-day retreat to 3.3 percent, while gold rebounded following its longest slump in 11 weeks. Fed Bank of Cleveland President Sandra Pianalto said a tapering of the central bank’s stimulus may be warranted if the labor market continues to strengthen. The Bank of England raised its outlook for the economy this year and next and said price stability remained a primary objective as it linked interest rates to the jobless rate for the first time. The Bank of Japan probably won’t expand stimulus at its two-day meeting that ends tomorrow, according to all 25 economists surveyed by Bloomberg. “We’re just going through a period of consolidation,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis, said by phone. His firm manages $112 billion. “We still like the outlook for the broad equity market, but near term we’re probably in a trading-range pattern until we get greater clarity as to what happens with quantitative easing.” Earnings Miss Financial shares lost 0.8 percent to help lead declines in eight of the 10 main industry groups in the S&P 500. Bank of America Corp. declined 0.8 percent after the Department of Justice yesterday accused the company in a lawsuit of misleading investors. Walt Disney Co. dropped 1.7 percent after quarterly profit stalled on lower earnings from films and weaker revenue at the ABC network. First Solar Inc. tumbled 13 percent after the largest U.S. solar-panel manufacturer’s profit fell amid a 46 percent drop in sales. Zillow Inc. plunged 7.7 percent after the owner of the largest real-estate information web site reported a second-quarter loss on higher costs related to advertising and acquisitions. Earnings have beaten analyst estimates at about 72 percent of the 434 companies in the S&P 500 that posted results so far in the reporting season, according to data compiled by Bloomberg. Profits increased 4.1 percent for the group on 1.7 percent growth in sales. European Markets Two shares fell for each that gained in the Stoxx Europe 600 Index, which slipped 0.2 percent. Andritz AG, the world’s second-biggest maker of hydro-power turbines, slid 7.9 percent in Vienna after profit missed estimates. Rexel SA dropped 4.2 percent as Ray Investment SARL, the company’s largest investor, sold a 526 million-euro ($698 million) stake in the electrical-equipment distributor. The MSCI World AC Index has lost 1 percent in the past three days as investors gauge the prospects for continued central-bank stimulus. Dallas Fed President Richard Fisher said on Aug. 5 the central bank is closer to slowing bond buying and warned investors not to rely on stimulus. Dennis Lockhart , president of the Atlanta Fed, told Market News International that should economic growth and job creation pick up as expected, policy makers should proceed with the “removal” of asset purchases. ‘Good Improvement’ Fed Bank of Chicago President Charles Evans said yesterday he “would clearly not” rule out a decision to begin curbing bond purchases in September. “We’ve seen good improvement in the labor market, there’s no question in my mind about that,” Evans, among the strongest proponents of the unprecedented efforts to revive the U.S. economy , told reporters yesterday in Chicago. “I’m still wanting to see greater evidence that it’s a sustainable improvement.” Treasuries remained higher after the U.S. sale of $24 billion in 10-year notes produced a lower-than-forecast yield. The benchmark securities drew a yield of 2.620 percent, compared with a forecast of 2.635 percent in a Bloomberg News survey of eight of the Fed’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.45, compared with an average of 2.81 for the past 10 sales. Emerging Markets The MSCI Emerging Markets Index fell 0.9 percent to a four-week low today after results from companies including Tata Motors Ltd. and AngloGold Ashanti Ltd. missed analysts’ estimates. India’s rupee led declines in currencies. South Korea’s Kospi index dropped 1.5 percent, led by Hyundai Motor Co. and Kia Motors Corp. (000270) after their labor unions walked out of wage talks. TPK Holding, a supplier of touch screens to Apple Inc., slumped 6.9 percent in Taipei after the company said it expects third-quarter revenue to drop by at least 15 percent. The Nikkei 225 Stock Average sank 4 percent in Tokyo, the most in almost two months, as exporters slipped amid a stronger yen and earnings disappointed investors. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost 2.1 percent, the most in five weeks. The Shanghai Composite Index slid 0.7 percent. The Bloomberg Dollar Index , a gauge of the currency against 10 major peers, slipped 0.3 percent. The yen rose against all 16 major counterparts, advancing 1.1 percent versus the euro. The Bank of Japan will expand its record easing by June next year as inflation remains distant from its 2 percent target, according to a survey of economists by Bloomberg News. BOJ Bets Twenty of 26 analysts expect more stimulus in the next 10 months, while all said the BOJ would keep policy on hold at a two-day meeting starting today. Consumer prices excluding fresh food, the BOJ’s preferred measure of inflation, rose 0.4 percent in June. Koichi Hamada, a retired Yale University professor who advises Prime Minister Shinzo Abe on monetary policy, said today that Governor Haruhiko Kuroda should be prepared to add easing if the economy falters after a planned sales-tax increase in April. The pound advanced 0.9 percent to $1.5493. The BOE said it sees the economy growing 0.5 percent this quarter after expanding 0.6 percent in the previous three months. It raised its 2013 and 2014 gross domestic product growth projections to 1.5 percent and 2.7 percent from 1.2 percent and 1.9 percent in May. German Production The euro was up 0.3 percent at $1.3338, after falling as much as 0.3 percent. German industrial production increased 2.4 percent from May, the Economy Ministry in Berlin said today. Economists forecast a gain of 0.3 percent, according to the median of 41 estimates in a Bloomberg News survey. The S&P GSCI (SPGSCI) gauge declined 0.8 percent as natural gas tumbled 2.1 percent to lead losses in 15 of 24 commodities. Gold futures settled up 0.2 percent at $1,285.30 an ounce after sliding for six straight sessions. West Texas Intermediate oil fell 0.9 percent to $104.37 a barrel. A government report showed inventories of gasoline and distillate fuels unexpectedly increased. The Energy Information Administration said gasoline inventories rose 135,000 barrels to 223.6 million last week. Stockpiles were forecast to decrease 500,000 barrels, according to the median of 11 analyst estimates in a Bloomberg survey. To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net ; Michael P. Regan in New York at mregan12@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-04-25 | Bloomberg | Aflac Jumps as Profit Doubles, Japan Sales Increase | Aflac Inc. (AFL) , the world’s biggest seller of supplemental health insurance, gained the most in six months after first-quarter profit doubled as Japan sales increased. Aflac rose 7.8 percent to close at $45.26 in New York, the most since Oct. 27. The Columbus, Georgia-based insurer, which has gained 4.6 percent this year, forecast a 10 percent sales gain in Japan in 2012 after previously saying the figure may drop. Net income jumped to $785 million from $389 million a year earlier as investment losses narrowed, Aflac said in a statement yesterday after the close of regular trading. New annualized premium sales in Japan, where the company gets about three- quarters of its revenue, climbed 54 percent, led by deals through banks. Aflac also introduced an upgraded medical policy that’s seen “positive” response among Japanese consumers. “Sales in Japan were phenomenally strong,” analysts including Edward Shields at Sandler O’Neill & Partners LP wrote in an April 24 research note. “Sales trends will continue to be strong.” Realized investment losses were $29 million, compared with $376 million a year earlier, as Aflac reduced risk tied to European financial companies. Book value, a measure of assets minus liabilities, rose to $29.19 a share as of March 31 from $27.76 on Dec. 31. To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-10-29 | Bloomberg | Canada's Economy Grew 0.3% in August to Rebound from July's Contraction | Canada’s gross domestic product grew as expected in August after shrinking the month before, led by wholesaling and manufacturing. Output rose 0.3 percent to a seasonally adjusted annual rate of C$1.24 trillion ($1.21 trillion) in August following a 0.1 percent contraction in July, Statistics Canada said today in Ottawa. The result matched the median forecast of 24 economists surveyed by Bloomberg News. The Bank of Canada kept its key interest rate at 1 percent on Oct. 19 after three increases, and said further moves would be “carefully considered,” while Finance Minister Jim Flaherty delayed payroll tax increases to aid growth and said it will take five years to end a record budget deficit. “I don’t believe this is a turning point for the economy,” said Doug Porter , deputy chief economist with BMO Capital Markets in Toronto. “The recovery can keep grinding forward but it’s going to be tough to grow much faster than what we’ve been seeing in recent months” an annualized pace of about 2 percent, he said. The economic growth rate slowed to 1.6 percent on an annualized basis in the July-September period, the central bank said Oct. 20 , when it cut its forecast for five quarters due to weak household spending and U.S. demand. Canada emerged from a recession last year and won’t return to full output until the end of 2012, the bank said. Dollar Rises Canada’s dollar appreciated against its U.S. counterpart after the report and another showing the American economy grew at a 2 percent annual rate in the third quarter. The Canadian dollar rose 0.4 percent to C$1.0172 per U.S. dollar at 10:15 a.m. in Toronto, from C$1.0211 yesterday. One Canadian dollar buys 98.31 U.S. cents. “We are never an island,” Doug MacDonald , president of Aviva Investors Canada Inc., which oversees about C$6 billion in fixed-income assets, said before the report. “The bank has gotten more cautious and has put their hiking program on hold,” probably for three quarters, he said. The International Monetary Fund said yesterday that it was appropriate for the Bank of Canada to stop raising interest rates and policy makers should be prepared to offer new stimulus if the recovery falters. “We are in a time of more moderate growth,” Flaherty told reporters today in Whitby, Ontario. “The U.S. housing sector remains a major concern and that is a reality Canadians are fortunate not to share.” Soft Recovery “We are still concerned that it may be a soft recovery,” Walter Pizzolitto, marketing manager at customs broker Russell A. Farrow Ltd. in Windsor, Ontario, said Sept. 30. “We are so tied into the U.S., my concern is that if Canada were to pull the stimulus now we would really suffer.” Wholesaling increased 1.1 percent in August, the first increase in four months, led by machinery and equipment and petroleum. Manufacturing rose 0.5 percent, as did the mining and oil and gas industries. Finance and insurance output grew 0.6 percent in August, on increased lending and stock trading, Statistics Canada said. Construction gained 0.4 percent. Gross domestic product was 4.1 percent higher in August than the same month a year earlier. A separate Statistics Canada report showed that factory prices rose slower than economists predicted last month while their raw materials costs unexpectedly declined. The industrial product price index rose 0.2 percent in September from August. The median estimate in a Bloomberg survey of 15 economists was for a 0.3 percent increase. The raw-materials price index fell 0.4 percent, Statistics Canada said, versus economist predictions for 1 percent increase according to the median estimate in a Bloomberg survey with 11 responses. Industrial prices rose 1.4 percent over the 12 months ending in September. The raw materials index rose 5.8 percent on the year, the report said. To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net. To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net ; Christopher Wellisz at cwellisz@bloomberg.net |
2024-07-13 | Bloomberg | Aetna Urges Moms to Avoid Cesareans Births to Reduce Risk | As research shows the risks of delivering babies before they’re ready, insurers from Aetna Inc. (AET) to Cigna Corp. (CI) are nudging hospitals and doctors to scale back induced births and cesarean surgeries. A decades-long move toward scheduled births has helped make the C-section the most common surgery in the U.S., accounting for a third of all deliveries, according to federal statistics. More troubling, the procedures are coming earlier in pregnancy, raising costs as well as the risk of complications. Insurers are starting to push back. “We’ve known the risks of these procedures for a long time, yet the rates continue to rise,” said Maureen Corry, executive director at Childbirth Connection, a New York-based advocacy group focused on maternity care. “The payors are finally saying, ‘Enough is enough. This is crazy.’” As costs climb, insurers are shedding a reluctance to intervene in an area as sensitive as childbirth, Corry said. Aetna, the third-biggest U.S. health plan , is seeking to adjust prices for cesareans, which now earn hospitals as much as twice the rate of traditional deliveries. Cigna is considering a similar move, along with bonuses for hospitals that reduce early C-sections and inductions. Carriers led by UnitedHealth Group Inc. (UNH) , the biggest U.S. insurer, gave $60,000 in 2009 for a symposium on maternity care run by Childbirth Connection, a 94-year-old nonprofit mostly funded by foundation grants. States are taking action as well: Texas lawmakers voted last year to limit payments for the procedures from Medicaid, the health program for the poor. Expensive Births The average cesarean birth cost $24,300 in the U.S. last year, compared with $15,200 for a vaginal birth, according to the London-based International Federation of Health Plans. The industry efforts, joined by public-health groups and charities like the March of Dimes Foundation, come as early births not only proliferate but move further from the 39 weeks considered optimal for single-baby pregnancies. “It’s been a slippery slope where we’ve said ‘Let’s induce at 39 and a half weeks. OK, that worked well, let’s try 38; let’s try 37,’” said Elliott Main , chairman of obstetrics and gynecology at California Pacific Medical Center in San Francisco. “Year after year, it’s gotten pushed back.” C-sections and inductions have risen for a variety of reasons. Women are giving birth later in life, patients and doctors are seeking more convenience and payment systems often favor intervention. There’s also been a growing sense -- false, based on recent research -- that cesareans offer a risk-free alternative to natural birth, said Patricia Stephenson, a senior medical director at Bloomfield, Connecticut-based Cigna. ‘Convenience-Oriented’ “Society is becoming increasingly convenience-oriented,” said Stephenson, a former obstetrician. “If there’s any concern about the pregnancy, if the mom is uncomfortable, it’s been, ‘Sure, why not? Just suggest an early delivery.’” The procedures, of course, make sense when the health of the mother or baby is at risk. C-sections, for example, may be necessary for breech babies improperly positioned in the birth canal or when women suffer from severe high-blood pressure, according to the American College of Obstetrics and Gynecology. Still, such cases can not explain the rise to a record 33 percent of U.S. babies delivered by cesarean in 2009, the latest figures available from the U.S. Centers for Disease Control and Prevention. Induction rates rose to 23 percent that year, doubling over two decades, the Atlanta-based CDC said. ’Epidemic Proportions’ The U.S. isn’t alone in bending Mother Nature to modern medicine. Cesarean levels have reached “epidemic proportions” in many countries, the World Health Organization said in a report two years ago. The U.S. rate is on par with some Latin American nations and Australia but well ahead of the U.K., France and Norway , all with cesarean rates at 22 percent or less, the WHO said. The backlash against the procedures has spawned its own website, The Unnecesarean , where San Diego mom Jill Arnold shares tales of women who felt pushed into C-sections. Arnold, 38, was persuaded by doctors to schedule a cesarean in 2005 after being told her baby might be too large, she said. She went into labor before the operation and delivered her daughter, Maggie, normally and without incident. Two years later, she gave birth to a second girl, Molly, at an independent birth-center where she felt “more in control.” She started the website after hearing from other mothers who felt pressured while finding more research that questioned the approach. Patients ‘Railroaded’ “They feel either lied to or deceived or that they were pushed really heavily in one direction and later found out the medical indication wasn’t there,” Arnold said. “They feel they were railroaded.” It’s only recently that research has shown the tradeoffs of cutting pregnancy short by a few days, Stephenson said. A 2009 study in the New England Journal of Medicine found rates of medical problems doubled for children born at 38 weeks compared with those delivered at 39 weeks. At 37 weeks, the risk of complications, including breathing problems and infection, rose by as much as four times. The study was sponsored by the National Institutes of Health. Inductions can lead to longer, more painful deliveries that studies show are twice as likely as spontaneous labor to end in a C-section, said Main, the San Francisco doctor. Hospital Survey While there is no nationwide count of the practice, a survey of hospitals last year by the nonprofit Leapfrog Group found 14 percent of C-sections and inductions were performed for nonmedical reasons before 39 weeks. That may underestimate the phenomenon, since hospitals that track early procedures are also likely to be the ones concerned about limiting them, said Erica Newman, a program director at the Washington-based group. Among obstetricians, “people are worried” about the early births, said Joshua Copel, a Yale University professor and former president of the U.S. Society for Maternal-Fetal Medicine. “For anything elective, most of us believe that 39 weeks and zero days is the absolute earliest any delivery should occur.” Insurers are trying to shift what Main calls the “perverse incentives” that push doctors to speed up deliveries. C- sections not only pay more; along with inductions they also allow doctors to cluster births and schedule other visits around them, he said. And they assure a physician will be on hand for a delivery -- and get the insurance payment -- when a baby arrives. Wary of litigation, many hospitals also refuse to do vaginal births if a mom has had a prior C-section, even when natural delivery is a viable option, Main said. Aetna Payments Aetna has renegotiated maternity payments with 10 hospitals around the country so far, bringing rates for cesareans and vaginal births closer together, said Tammy Arnold, a spokeswoman for the Hartford, Connecticut-based carrier. The company is also highlighting hospitals that adopt guidelines designed to avoid elective births before 39 weeks, Arnold said in a telephone interview. So far, about 300 hospitals have won the designation. Cigna is pursuing similar changes. While it expects some resistance from hospitals, research on the benefits of full-term births is winning over physicians, Stephenson said. The insurer has seen a decline in early elective procedures in the last few years, she said. UnitedHealth has taken “more of a carrot approach,” said Tina Groat, the company’s national medical director for women’s health. While the Minnetonka, Minnesota-based insurer is considering bonuses for providers who reduce elective births, it has so far focused on educational campaigns, including videos and websites geared toward pregnant women. Hospitals are acting as well, said Joanne Rogovoy, a state program director for the March of Dimes, the White Plains , New York-based charity seeking to reduce premature births. Since August, the group’s Oregon chapter has persuaded 34 hospitals in the state to bar elective C-sections before 39 weeks. “We schedule everything,” said Rogovoy, who’s based in Portland. “We’ve just become complacent. And it’s only recently that it’s become clear how much of a difference a few weeks can make.” To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-10-14 | Bloomberg | U.S. Won’t Start Long-Term Care Insurance | A long-term disability care program shepherded into the U.S. health overhaul by Senator Edward Kennedy before his death was canceled as financially unsustainable by health secretary Kathleen Sebelius. Republicans opposed the so-called Class Act that created the program. It will be indefinitely suspended, Sebelius said today in a statement, because the program isn’t likely to generate enough revenue to pay for its benefits. Democrats led by Kennedy created the plan to help people disabled by illness or accident. By paying premiums while employed, beneficiaries would be eligible after five years for at least $50 a day toward health and support services provided at home. The program was billed as paying for itself. “I do not see a viable path forward for Class implementation at this time,” Sebelius said in a letter to congressional leaders. Republicans celebrated the program’s demise, calling it misguided policy used as a financial gimmick to reduce cost estimates of the health law. At the time, the Congressional Budget Office subtracted $70 billion from the cost of the law thanks to Class -- which stands for Community Living Assistance Services and Supports -- contributing to $143 billion in total savings, because the program’s premiums would exceed benefits over its first decade. The program “was destined to fail in the real world,” said Senator Mitch McConnell of Kentucky , the senior Republican in the chamber, in a statement. Saving the Program Advocates for the program said it can be salvaged. “Where our position has been and continues to be is that they have the authority to move forward and twist this Rubik’s Cube until a solution pops up,” Connie Garner, executive director of AdvanceClass, said in a telephone interview before Sebelius’ announcement. Her group represents nursing homes, disability organizations and seniors’ lobby AARP in pushing for the program’s implementation. Representative Frank Pallone of New Jersey , a Democrat who was one of the program’s leading proponents in the House, said the Obama administration was “wrong to abandon” it. “Giving up on it is simply not an option,” he said in a statement. “If the program needs improving, then let’s find the way to do it.” Needed Changes The government could make 95 percent of the necessary changes to help fix the program without congressional action, Garner said. Senator Kent Conrad , a North Dakota Democrat, described an early version of the program as a “ Ponzi scheme .” He later supported the law that created it. Republicans, seizing on that statement, have derided Class as an unaffordable entitlement that would cost more than it took in from premiums. The program’s demise was “sad but not surprising,” said Paul Van de Water, a Medicare and budget specialist at the Center on Budget and Policy Priorities , a nonprofit research group whose studies often support Democratic policies. “The aim here was a good one,” he said in an interview. “But the program as written in law was over-constrained.” The health law required Class to sustain itself on beneficiary premiums without taxpayer subsidies, Van de Water said, and Sebelius wasn’t allowed to begin it unless actuarial analysis showed it would be financially stable for 75 years. The program didn’t meet that bar, said Kathy Greenlee, assistant secretary for aging in the Department of Health and Human Services, in a memo to the secretary. Actuary’s Estimate The chief actuary for the U.S. Centers for Medicare and Medicaid Services, Richard Foster , predicted in an April 2010 report that the program would cost the federal government more than it took in starting in 2025. Because it is voluntary, Class faced a “problem of adverse selection,” in which only people who need the insurance, or think they will, would sign up, he said. Sebelius telegraphed the program’s demise in February when she told a Senate Finance Committee hearing that Class “will not start unless we can be certain it will be solvent and self- sustaining into the future.” A spokesman for her department, Richard Sorian, confirming last month that Class was on the ropes, said that “it is an open question whether the program will be implemented.” Republican Reaction Republicans in Congress plan to keep investigating the program that Democrats used to “inflate alleged savings and mask the true costs” of the health law, said Debbee Keller, a spokeswoman for the chairman of the House Energy and Commerce Committee, Republican Fred Upton of Michigan , whose panel has jurisdiction. “Everyone saw the writing on the wall that this program was not sustainable, yet the administration continued to stand behind the program right up until this announcement.” Ending the program may add to the deficit. The Congressional Budget Office estimated in February that total savings from the health law will be $210 billion across 10 years, of which Class accounts for $86 billion. The Senate Appropriations Committee passed a fiscal 2012 spending bill for the health department on Sept. 21 that eliminated funding to enact Class, saying it wasn’t clear whether it would proceed. Obama had asked for $120 million for the program. Kennedy died in August 2009 before the health-care law was signed by Obama in March 2010. To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net |
2024-07-09 | Bloomberg | James's Exit Is `Cowardly Betrayal,' Cavs Owner Says | LeBron James’s decision to spurn his hometown Cleveland Cavaliers for the Miami Heat was a “cowardly betrayal,” team owner Dan Gilbert said in an open letter to fans. The two-time National Basketball Association’s Most Valuable Player spurned the Cavaliers, where he spent seven years, along with the New York Knicks, New Jersey Nets, Chicago Bulls and Los Angeles Clippers to play for the Heat next season. Gilbert also said in an interview with the Associated Press that James quit on the Cavaliers during their playoff series loss last season to Boston, which won the final three games after trailing 2-1. James made the announcement last night in an hour-long ESPN special. He made his decision after meeting with all six teams over the past week. Following is the letter from Gilbert to Cleveland fans as well as statements from the Cavaliers, Knicks, Nets, Bulls, Clippers and Heat after James’s decision: Cavaliers Owner Dan Gilbert: “As you now know, our former hero, who grew up in the very region that he deserted this evening, is no longer a Cleveland Cavalier. “This was announced with a several day, narcissistic, self-promotional build-up culminating with a national TV special of his decision unlike anything ever witnessed in the history of sports and probably the history of entertainment. “Clearly, this is bitterly disappointing to all of us. “The good news is that the ownership team and the rest of the hard-working, loyal, and driven staff over here at your hometown Cavaliers have not betrayed you nor never will betray you. “There is so much more to tell you about the events of the recent past and our more than exciting future. Over the next several days and weeks, we will be communicating much of that to you. “You simply don’t deserve this kind of cowardly betrayal. You have given so much and deserve so much more. “In the meantime, I want to make one statement to you tonight: “I personally guarantee that the Cleveland Cavaliers will win an NBA championship before the self-titled former ‘king’ wins one.” “You can take it to the bank. “If you thought we were motivated before tonight to bring the hardware to Cleveland, I can tell you that this shameful display of selfishness and betrayal by one of our very own has shifted our motivation to previously unknown and previously never-experienced levels. “Some people think they should go to heaven but not have to die to get there. Sorry, but that’s simply not how it works. “This shocking act of disloyalty from our home-grown chosen one sends the exact opposite lesson of what we would want our children to learn. And who we would want them to grow-up to become. But the good news is that this heartless and callous action can only serve as the antidote to the so-called curse on Cleveland, Ohio. “The self-declared former King will be taking the curse with him down south. And until he does right by Cleveland and Ohio, James (and the town where he plays) will unfortunately own this dreaded spell and bad karma. Just watch. “Sleep well, Cleveland. Tomorrow is a new and much brighter day. “I promise you that our energy, focus, capital, knowledge and experience will be directed at one thing and one thing only: delivering you the championship you have long deserved and is long overdue.” Cavaliers General Manager Chris Grant: “We believe in this team, this organization, this community, and what we will do to compete at the highest level. “ We believe in the new coach and leader we have in Byron Scott and the world class basketball organization and positive and strong culture we’ve established. “Dan Gilbert and our ownership group are firmly committed to reaching our goals and succeeding on the court and in the community, at the highest level. “Our fans stepped up and showed their support, to a degree unlike anywhere else. We are fortunate to have the support of the best fans in the NBA. That passion and dedication will be rewarded. “We will work relentlessly to continue to build a team that will contend, a team that will win championships. We are all competitors and our one goal is to win, that and Dan Gilbert and our ownership team’s commitment and investment in this organization and community are constants that will not change.” Knicks President of Basketball Operations Donnie Walsh : “We are disappointed that LeBron James did not sign with the New York Knicks, but we respect his decision. “Today, we signed five-time NBA All-Star Amar’e Stoudemire and we will continue to move forward, getting back on track to develop into a championship contending team.” Nets Owner Mikhail Prokhorov : “We have a vision of a championship team and need to invest wisely and for the long term. “Fortunately, we have more than one plan to reach success, and, as I have found in all areas of my business, that is key to achieving it. “To Nets fans past, present and future, the goal of making the playoffs this season remains intact and we reiterate our commitment to winning a championship within five years.” Bulls General Manager Gar Forman: “I remain convinced that this organization made the strongest of bids to acquire LeBron James during this free agency period. “While we’re disappointed he chose to go to another franchise, our strategy for the future competitiveness of this organization did not begin or end with James, and we feel today’s addition of two-time All-Star Carlos Boozer significantly strengthens our team’s already talented roster. “It is our goal to keep exploring every avenue that it may take, whether through trades or free agency, to continue to build this team to compete at a championship level.” Clippers General Manager Neil Olshey : “Our goal remains unchanged. We will continue to be exhaustive and use every available resource to assemble an exciting and successful team. “We have a dynamic new head coach who will lead the very talented roster we already have in place. We will use the free agent market to enhance that roster. We expect to compete at a very high level.” Heat President Pat Riley : “We are thrilled that LeBron James and Chris Bosh have decided to come to Miami to join forces with our truly great player, Dwyane Wade. “We are looking forward to the opportunity of building something that our fans in Miami will be proud of for a long, long time. The journey is just beginning.” To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net Dan Gilbert of the Cleveland Cavaliers talks to the fans during a timeout in the game against the Seattle SuperSonics in Cleveland, Ohio. Photographer: David Liam Kyle/NBAE via Getty Images July 9 (Bloomberg) -- Reporter Jim Gray discusses two-time National Basketball Association Most Valuable Player LeBron James's decision to leave the Cleveland Cavaliers for the Miami Heat. Gray, who hosted the ESPN special where James announced his decision, spoke with Deirdre Bolton and Michele Steele on Bloomberg Television's "InsideTrack." (Source: Bloomberg) //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-10-02 | Bloomberg | Overwhelming Demand for Obamacare Shows Potential Success | Obamacare ’s opening day drew millions of consumers to the law’s core insurance exchanges, offering supporters and investors hope that if the websites can stay up and running, customers will follow. In New York, officials said their exchange had 2.5 million visitors in its first half hour yesterday. California reported as many as 16,000 hits a second. And U.S. officials recorded 2.8 million visitors to the federal website, healthcare.gov, even as it fought technical problems much of the day. The difficulties with the online insurance marketplaces gave new ammunition to Republicans who say the Affordable Care Act doesn’t work. President Barack Obama countered that the volume gives “a sense of how important this is to millions of Americans,” and administration officials said marketing of the exchanges will now start to pick up steam. “Anything short of a calamity on day one is a victory,” said Dan Mendelson , chief executive officer of Washington-based consultant Avalere Health LLC. “It’s all about message and repetition, and making sure it’s accessible.” While the federal site, which serves 36 states, was inaccessible for much of yesterday, administrators “added capacity and made adjustments” to put it back into service by late afternoon, Marilyn Tavenner , administrator of the Centers for Medicare & Medicaid Services, told reporters. She declined to say how many people enrolled in plans through the site. Day Two Day two opened with some improvement. The federal exchange was open for business as were most of the state-run markets. Sites were still down or experiencing delays in New York , Nevada , Oregon and Washington State. “This’ll be a shake-out cruise, there’ll clearly be bumps,” Peter Bielenson, chief executive officer of Baltimore-based insurer Evergreen Health Co-Op, said in an interview with Bloomberg Television today. The company was “deluged with calls” on the first day. “Like every new law, every new product rollout, there are going to be some glitches in the sign-up process along the way that we will fix,” Obama said yesterday at a White House event. Opponents of the startup said the delays and frozen websites were, indeed, calamitous. And it remained unclear how much the wave of interest would translate into enrollments. While Connecticut ’s site had 28,000 web hits as of 4 p.m. yesterday, only 167 people applied for coverage, said Kathleen Tallarita, a spokeswoman with Access Health CT, the state’s exchange. Spur Backlash If the technical issues aren’t quickly fixed, they may spur a backlash, said Douglas Holtz-Eakin , a former Congressional Budget Office director who is now president of American Action Forum, an advocacy group that opposes the law. Health Exchanges: The Battle and Background “To have something that doesn’t work after two-and-a-half years is pretty underwhelming,” Holtz-Eakin said in a telephone interview. Republican lawmakers, who’ve resisted appeals to increase funding for the law, called for a one-year delay. “We should have never gotten to this point,” U.S. Senator Orrin Hatch , a Utah Republican, said in a statement. “The Obama administration should have acknowledged the ample warning signs of problems in the exchanges.” Political Battle The political battle over the law enacted in 2010 will continue as Democratic supporters and Republicans opponents put their spin on events. The dispute triggered the first U.S. government shutdown in 17 years yesterday, as Republicans demanded delays in the law as a price for approving a new budget bill. Investors seemed convinced of the law’s viability, at least for a day. Insurer and hospital shares climbed amid the signs of high interest in the exchanges. Health Net Inc. (HNT) , the Woodland Hills, California-based carrier with a heavy presence on its home-state exchange, led insurers, rising 3.6 percent to $32.84 at the close of New York trading yesterday. Indianapolis-based WellPoint Inc. (WLP) , the biggest seller of coverage to individual Americans, gained 3 percent to $86.11. The biggest U.S. hospital chain, Nashville, Tennessee-based HCA Holdings Inc. (HCA) , climbed 4.3 percent to $44.60. “People who own these stocks want reform to work,” said Sheryl Skolnick , a health-care analyst at CRT Capital Group in Stamford , Connecticut. “The fact that there’s a lot of intensity, if not outright demand, for using these exchanges and getting insurance should drive these stocks up.” 48 Million The exchanges are a centerpiece of a law designed to cover more of the 48 million uninsured Americans. The websites are supposed to help consumers access federal subsidies and choose from a menu of private insurance plans that take effect Jan. 1, when the law requires all Americans to obtain insurance. The administration is seeking to get about 7 million people to buy policies through the exchanges in the open enrollment period that runs through March. Both the uninsured and those trained to help them enroll expressed frustration over yesterday’s delays. In New York City , Madelina Aviles found herself unable to enroll in a health plan after the state’s insurance website went down. The 60-year-old Bronx woman said she’d been uninsured since shortly after losing a job in January, forcing her to put off medical treatment for a pain in her arm. Couldn’t Enroll While Aviles found an exchange plan for less than $100 a month, an “awesome” result, she wasn’t able to immediately enroll because of the website’s technical problems, she said in an interview at the Community Service Society in Manhattan, a nonprofit health organization. While the delay was a disappointment, Aviles said she would keep trying. Teajai Kimsey, 49, of Wichita, Kansas, runs the website Internet Idea Girl and is uninsured. When she logged on to healthcare.gov yesterday morning, it took her about five minutes to get into the system, she said. Then the security question didn’t work and a drop-down bar failed. “If you don’t know the web well, it will be really discouraging and leave a bad taste in your mouth,” Kimsey said in a telephone interview. “They have some first-day bumps. I’m more tolerant, I know this happens.” Maryland Navigators In Maryland , Rebecca Wener and Apoorva Srivastava had a week of training to become exchange navigators in preparation for yesterday’s start. They expected to have a busy morning signing people up for insurance at Community Clinic Inc., a Silver Spring health center that serves the uninsured. Instead, they handed out fliers and tried to set up appointments for patients to come back later and sign up online. “It’s a glitch,” said Srivastava, who expected to take patients to a computer, where they could learn what subsidies they’d be eligible for, and where they could sign up. “In training, they described the rollout as a 1972 Honda. It will get there, but it won’t have all the luxuries.” Maryland is one of 14 states, and Washington , D.C., that constructed their own health exchanges. Because of technical issues, Maryland pushed back its opening from 8 a.m. until the afternoon, joining similar actions by other states that struggled during yesterday’s debut, overwhelmed by high volumes or technical bugs. Improved Performance While problems persisted, the state sites improved their performance throughout the day. Colorado officials said at day’s end about 1,500 people had created accounts on their exchange. In Kentucky , 1,235 people completed applications for insurance. In Minnesota , 100,000 people visited the site by mid-afternoon. In California , the state with the most uninsured Americans, few problems were reported. “We are having huge volume,” said Peter Lee, the exchange’s executive director. “We are live. Our state workers are answering the phone.” Staff members from eHealth Inc. , approved by the government to sign up customers through the federal exchanges, fielded calls from Hawaii, Texas, Michigan, Illinois and New York, among other states. Many people seemed unaware that new insurance plans under the law didn’t kick in until January, said Nathan Teater, who was working the phone as a TV monitor nearby displayed a message urging workers in the call center at Gold River, California , to “Keep Calm and Enroll On.” Benefit Delay “Everyone knows today’s the day, information-wise,” Teater, a customer service representative, said in an interview. “I don’t think the Jan. 1 start date sank in.” After the initial rush, things will settle down and the law will see the kind of gradual enrollment that occurred with the rollout of the Medicare Part D prescription drug program in 2005, said Joel Ario, managing director of Manatt Health Solution, a Washington-based consulting firm that advises insurers, and a former director of the federal Office of Health Insurance Exchanges. “It’s still too early to tell how serious the glitch problem will be,” Ario said in an e-mail. “But one of beauties of online systems is the ability to continually improve them, not like printing a million inaccurate brochures that have to be tossed.” The government shutdown that began yesterday didn’t delay the exchanges because they’re funded largely through mandatory spending not affected by the budget battle. People eligible for coverage can go to healthcare.gov to find their state’s insurance exchange. Monthly prices for the lowest-tier of plans average $249 nationwide. People with incomes less than about four times the poverty level will get discounts on their premiums by way of tax credits. For a family of four, that means those with incomes of less than about $94,000 qualify for the credits. Enrollees don’t have to complete the process until Dec. 15 to guarantee coverage on Jan. 1. About two-thirds of uninsured people said they plan to buy medical coverage next year rather than pay a fine, according to a Gallup poll published Sept. 30. To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-06-03 | Bloomberg | JPMorgan So-Called Hedge Is Awkward for Fed Knowing Its Meaning | When is a hedge not a hedge? That’s the question regulators from the Federal Reserve to the Office of the Comptroller of the Currency are confronting after JPMorgan Chase & Co. (JPM) reported a $2 billion trading loss from a credit-derivatives position Chief Executive Officer Jamie Dimon called a “hedge.” Regulators are under pressure to respond to JPMorgan’s loss as they finish writing the so-called Volcker Rule , which restricts banks' proprietary trading and is the most controversial provision in the Dodd-Frank Act. They’re scrutinizing the so-called hedging exemption in the proposed regulation and probably will narrow the exceptions for trades banks say are designed to mitigate risk, according to two people familiar with the matter. JPMorgan’s loss “will reinforce the position of those who want to be tough,” Representative Barney Frank , a Massachusetts Democrat and co-author of the financial-overhaul legislation, said in a telephone interview. “I do think it will mean Volcker will not allow” such trades. The rule, named for former Fed Chairman Paul Volcker , is intended to reduce the chance that banks will put depositors’ money at risk. Dodd-Frank, signed into law in 2010, largely left regulators to define the provisions, and in October, they released a proposal for the rule, which is scheduled to take effect in July. In April, the Fed said banks would have two years to implement it, as long as they make a “good faith” effort to comply with the ban on proprietary trading. Pool of Investments Under the proposed version, bankers would be permitted to do “risk-mitigating hedging activities” for “aggregate positions.” That means using derivatives or other products to reduce the risk of an entire pool of investments, as opposed to a single transaction or position. The JPMorgan loss has ignited a debate whether aggregate or portfolio hedging is appropriate at all and how to define and spot these trades. Frank said he hopes regulators will prevent such positions, allowing banks to hedge only against specific investments to offset potential losses. “Aggregate hedging isn’t hedging, it’s a profit center,” he said. “They are talking about making money out of it,” when “hedges break even.” Skeptical Look In the wake of JPMorgan’s loss, regulators “clearly” are looking “more skeptically at the claim about portfolio hedging and what does the word ‘aggregate’ in the law mean you have to do,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington research firm. Wall Street has aggressively lobbied against the Volcker Rule. The five regulators implementing the provision received over 17,000 comment letters -- the most for any part of the law. Bankers devoted the majority of their efforts to aspects other than hedging, such as allowances for trading by so-called market-makers who buy and sell securities to establish prices and whether banks can take positions in sovereign debt. JPMorgan employs 12 lobbyists and spent $7.6 million on these activities in 2011, according to the Center for Responsive Politics in Washington. Dimon led Wall Street bosses in a closed-door meeting with Fed Governor Daniel Tarullo on May 2 to press the central bank to ease regulations, including the Volcker Rule. Public Challenge Dimon publicly challenged Ben S. Bernanke in June 2011 on tougher oversight, asking whether the Fed chairman had “a fear like I do” that overzealous regulation “will be the reason it took so long” for banks, credit and job creation to recover from the financial crisis. Fed spokeswoman Barbara Hagenbaugh declined to comment. The KBW Bank Index of 24 financial stocks has dropped 14 percent (BKX) since July 2010, the month Dodd-Frank was passed, compared with a 16 percent gain in the Standard & Poor’s 500 Index of stocks. JPMorgan shares have underperformed both, tumbling 21 percent to $31.93 on June 1. Bank lobbyists now say they’re on hold in reaction to the attention JPMorgan has attracted. Their complaints may only strengthen the call for tougher rules, said Oliver Ireland, a partner at Morrison & Foerster LLP. “The problem with this event is it doesn’t do the industry’s credibility any good, so it’s not clear the industry pushing a lot harder now would do any good,‘‘ Ireland said. ‘‘It may create a backlash.’’ ‘Egregious Mistakes’ Dimon, who asked regulators in a February letter to loosen up their definition of portfolio hedging, said on a May 10 call with analysts that JPMorgan’s chief investment office made ‘‘egregious mistakes’’ by taking flawed positions on synthetic credit. He previously pushed the unit, which oversees about $360 billion, to seek profit by speculating on higher-yielding assets, ex-employees said in April. The positions were ‘‘done with the intention to hedge the tail risk for JPMorgan’’ and could result in an additional $1 billion loss or more as they’re wound down, Dimon said. ‘‘But I am telling you it morphed over time; and the new strategy, which was meant to reduce the hedge overall, made it more complex, more risky, and it was unbelievably ineffective.’’ JPMorgan profited in 2011 by betting that credit conditions would worsen. Then in December, the European Central Bank provided long-term loans to euro-zone banks, igniting a bond rally and leaving JPMorgan’s bearish bets vulnerable. So the chief investment office made offsetting bullish investments using credit-default-swap indexes that are thought to expire at the end of 2017, according to market participants. Bearish Trade The office put on another bearish trade to protect against short-term losses using contracts due in 2012, market participants said. Losses may have mounted when prices between the two indexes became distorted because JPMorgan was such a big seller of insurance. The trader who built the credit-derivatives positions, Bruno Iksil, was nicknamed the ‘‘London whale’’ because the investments became so large. Credit conditions subsequently deteriorated, and hedge funds increased purchases of the 2017 contracts, sending those higher than the 2012 index and boosting JPMorgan’s losses. The company’s investments can’t ‘‘be described in any way as a hedge,” Michael Platt , co-founder and CEO of BlueCrest Capital Management LLP, said in a May 21 interview with Bloomberg Television. “I think it’s a trading loss. They deliberately put the positions on. The London whale, who has subsequently been harpooned, put the positions on.” Geneva-based BlueCrest manages $32 billion and took a “small” position against JPMorgan, Platt said. Gone Too Far U.S. Commodity Futures Trading Commission Chairman Gary Gensler and U.S. Securities & Exchange Commission Chairman Mary Schapiro both acknowledged May 22 the difficulty regulators face in allowing some risk-mitigating hedging and then trying to determine when it’s gone too far. “The challenge when somebody uses a word like ‘portfolio hedging’ is that it can mutate and morph into many things beyond hedging specific positions,” Gensler said May 21, 10 days before the CFTC held a round-table discussion about narrowing exemptions in the Volcker Rule. An administration official told reporters on May 22 that regulators will use the JPMorgan loss as a real-life example to inform the final rule. Regulators feel pressure to react and will scrutinize the hedging exemption, according to another person who works for an agency involved in the writing of the law who wasn’t authorized to speak publicly and declined to be identified. Unpopular Regulations More stringent regulations are sure to be unpopular with bankers. “You wouldn’t want to make a big change based on one event,” said Tim Ryan , president and CEO of the Securities Industry and Financial Markets Association, Wall Street’s main lobbying group. “This is a complicated proposal.” Lawmakers are using JPMorgan’s loss for “political expediency,” and it’s unlikely that portfolio hedging actually will be banned, predicted Douglas Landy, a partner at Allen & Overy LLP in New York. Banks do need the ability to mitigate risks in their portfolio using derivatives, said Ernest Patrikis, a partner at White & Case LLP. “It’s insanity to think that they shouldn’t be doing it,” said Patrikis, former general counsel at the Federal Reserve Bank of New York. Regulators may consider options such as forcing financial institutions to “demonstrate more fully” their positions or restricting how they can hedge, he said. Prohibit Trades The Financial Stability Oversight Council, created by Dodd- Frank and led by Treasury Secretary Timothy F. Geithner , discussed JPMorgan’s loss and the Volcker Rule at a May 22 meeting, Treasury spokesman Anthony Coley said. It’s “premature” to conclude whether the rule “would have prohibited these trades and the hedging activity” the bank conducted, Bryan Hubbard , a spokesman for the comptroller’s office, said May 14 in an e-mailed statement. Senators Jeff Merkley , an Oregon Democrat, and Carl Levin , a Michigan Democrat, who co-wrote the Volcker provision, said JPMorgan’s trading losses underline why hedging on a portfolio basis should be barred in the final version. “Pressure from lobbyists during the rule-making process gave rise to regulatory loopholes that would allow proprietary trading to be hidden within market-making, risk-mitigating hedging and wealth management, among other areas,” the senators said in a May 17 letter to the Fed and other regulators. The Senate Banking Committee has begun hearings on JPMorgan and its implications for regulatory changes. The bank regulators and Neal Wolin, Treasury Department deputy secretary, will testify on June 6; Dimon will testify June 13. Dimon also will appear before the House Financial Services Committee on June 19. The main impact of JPMorgan’s sour trades will be to speed up work on finalizing the Volcker rule, said Brian Gardner, senior vice president in Washington at investment bank Keefe Bruyette & Woods Inc. Regulators “are under the gun to finish” in a way that is “totally unreasonable, which is to make sure there are no losses at banks,” he said. “They’ve basically been assigned mission impossible.” To contact the reporters on this story: Cheyenne Hopkins in Washington at chopkins19@bloomberg.net ; Caroline Salas Gage in New York at csalas1@bloomberg.net To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net |
2024-10-28 | Bloomberg | Americans More Financially Secure in 2010, BofA Survey Says | Americans with assets of more than $250,000 said they’re more financially secure today than a year ago, after a recovery in the stock market increased confidence that the worst effects of the recession are over, according to Bank of America Corp. The Merrill Lynch Affluent Insights Quarterly, which surveyed 1,000 people with investable assets of at least $250,000 from Sept. 13 to Oct. 7, found that 41 percent said they’re better off this year compared with the same period last year. About 39 percent of Americans said they’re risk-averse about investing, down from 50 percent in the previous survey. “The headline is people are feeling better,” Sallie Krawcheck , president of Bank of America’s Global Wealth & Investment Management unit, told Margaret Brennan on Bloomberg TV. The Standard & Poor’s 500 Index gained about 23 percent in 2009 and 6 percent this year, compared with a 38 percent drop in 2008. “There’s a very clear split in terms of how affluent Americans see their own personal financial fortunes and the larger U.S. economy,” Andy Sieg , head of retirement and philanthropic services for Bank of America, said in an interview. “They view their personal financial picture as being far rosier.” About 78 percent of those surveyed are confident their economic circumstances will improve in 2011, the study said. Economists surveyed by Bloomberg News earlier this month projected the unemployment rate will average 9.6 percent this year and 9.3 percent in 2011. Women and Retirement More women considered themselves conservative investors, with 44 percent favoring lower-risk investments, compared with 34 percent of men, the Charlotte, North Carolina-based bank said. Six percent of women said they were aggressive investors, compared with 17 percent of men. “This is something that we as an industry need to think through, particularly as investors are concerned about their ability to save enough for retirement,” said Krawcheck on a conference call discussing the results. Sixty-one percent of those surveyed expect to retire later than planned, compared with 29 percent in January. During the past year, 20 percent of respondents used savings to meet short- term expenses, according to the bank. Health Care Costs Rising health care costs remain an issue for Americans, with 60 percent citing them as a top concern, down from 62 percent in an April survey, Merrill Lynch said. An estimated 47 percent of Americans born between 1948 and 1954 may not be able to afford basic expenses and uninsured health-care costs through retirement, according to the Washington-based Employee Benefit Research Institute. Conditions have gotten better for owners of small businesses with 56 percent saying they saw improvements from the previous year. “You’ll see small business owners taking on risks as well,” Krawcheck said on BTV. Braun Research, a marketing research firm based in Princeton, New Jersey, conducted the survey on behalf of Merrill Lynch Wealth Management. To contact the reporter responsible for this story: Danielle Kucera at dkucera6@bloomberg.net To contact the editor responsible for this story: Rick Levinson at rlevinson2@bloomberg.net . |
2024-06-09 | Bloomberg | Pimco Adjusts Holdings to Show Gross’s Fund Owns U.S. Debt | Pacific Investment Management Co. , under criticism for missing this year’s rally in Treasuries, revised how it lists asset holdings to show that its flagship fund held U.S. government debt in May. The $243 billion Total Return Fund managed by Bill Gross increased its holdings of U.S. government debt to 5 percent from 4 percent in April, according to data on the Newport Beach , California-based company’s website. In the prior month’s posting, the category that was classified as government and government- related debt had shown negative holdings of 4 percent. The website showed an added category this month of swaps and liquid rates with holdings of minus 9 percent. Michael Reid, a spokesman at Pimco, declined to comment. Gross, the billionaire founder and co-chief investment officer of Pimco, has said for months that Treasuries are unattractive because yields don’t offer enough compensation for the risk of inflation and U.S. policies will hurt investors. After topping 98 percent of competitors the last five years, the fund beat just 33 percent in the past month as Treasuries gained 1.4 percent, according to data compiled by Bloomberg. “I certainly don’t have any regrets.” Gross said of his current strategy in an interview yesterday in Chicago. “We’re beating the market by 50 basis points. We’re not completely satisfied, but it’s not the negative headline that one sees.” ‘Swap, Liquid Rates’ The new government-Treasury category includes holdings of U.S. Treasury notes, bonds, futures and inflation-protected securities, according to Pimco. The swaps and liquid rates sector includes U.S. dollar-denominated interest rates swaps, swaptions, options, and other derivatives. A negative number in the swaps and liquid rates category indicates a negative duration position in U.S. interest rates achieved by swaps or other interest-rate derivatives, Pimco said in an email. Pimco also moved agency securities held by the Total Return Fund into a separate category called government-agency, which includes holdings of U.S. agencies, as well as FDIC-guaranteed, government-guaranteed corporate securities, and so-called supernationals. Pimco’s U.S. government-related debt category previously included nominal and inflation-linked Treasuries, agency debt, interest-rate derivatives, Treasury futures and options and bank debt backed by the Federal Deposit Insurance Corp., according to the firm. “He’s able to say I’m not short governments; I’m not short Treasuries, which is true, but doesn’t diminish the fact that the overall rate view is negative,” said Edward Lashinski, senior strategist in Chicago at ABN Amro Clearing LLC. Negative Position Treasuries are considered the safest and most liquid, investments in the world. The U.S. is the world’s biggest debt issuer. It has $14.2 trillion of debt outstanding, while marketable Treasuries total $9.7 trillion. Central banks and other overseas investors own $4.48 trillion, or 46 percent of marketable debt. The negative position reflected trades that would profit from a decline in Treasuries. Cash and equivalents, the largest component of the Total Return Fund, rose to 37 percent from 35 percent in April, under the revised categories. Gross has been betting against U.S. debt through short sales, in which the Total Return Fund would borrow and then sell government bonds , hoping to profit by repurchasing the securities at a lower price in the future. The fund’s annual report showed that, as of March 31, it had sold short about $2.2 billion of Treasuries that mature in about 10 years and $5.8 billion of agency debt that comes due in 2041. Rate Swaps In addition, the fund also entered into 10- and 30-year interest-rate swaps with a face value of about $15.2 billion during the fourth quarter of 2010 and first quarter of 2011, according to filings. Based on the terms disclosed in Pimco Total Return’s annual report, the 10-year and 30-year swaps held by the fund have lost about $1 billion in market value since March 31, according to Bloomberg calculations. In order to obtain the contracts, which are the equivalent of betting against Treasuries, the Total Return Fund paid upfront premiums totaling about $331 million to 12 Wall Street banks, the filing shows. While the swaps are costly for the fund, given that it must pay out more than it takes in under the contracts, Gross would reap profits from the trades should long-term rates rise, causing Treasuries to tumble. Conversely, a decline in long-term rates would punish the fund’s returns. To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-05-27 | Bloomberg | Lloyds Banking Said to Seek Buyer for German Insurance Company | Lloyds Banking Group Plc (LLOY) plans to sell its German life insurance company, Heidelberger Leben, according to a person with knowledge of the lender’s plans. Heidelberger Leben has about 1 billion euros ($1.4 billion) of assets, said the person, who declined to be identified because the sale is private. The London-based bank is examining its strategy following Antonio Horta-Osorio’s appointment as chief executive officer on March 1. Lloyds has sold assets including its Bank of Scotland Integrated Finance investment unit and cut about 27,500 jobs since its 20 billion-pound ($33 billion) taxpayer-funded rescue. The bank plans to shrink its balance sheet by 200 billion pounds by 2014. Ross Keany, a Lloyds spokesman, declined to comment. Reuters reported the news earlier today. To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-11-21 | Bloomberg | Bershidsky on Europe: ECB Regulator Named | Here's today's look at some of the top stories on markets and politics in Europe: ECB appoints Frenchwoman as chief bank supervisor Daniele Nouy, 62, an experienced French bank and insurance regulator who played a key role in the drafting of the Basel bank guidelines, has been selected by the European Central Bank to lead the unit that will take over the regulation of the euro area's 130 biggest banks next year. Nouy will be the first woman in the top ranks of ECB management, a nod to the European Parliament, which has to approve the appointment and has previously expressed concern about the ECB's all-male leadership. The Frenchwoman is reputed to be tough. In French banking circles she is feared as an extremely demanding regulator, an important quality in Nouy's new position: A year-long review of the big banks' balance sheets is already under way, and the new ECB official will have to persuade bankers and national regulators to take action once the results are in. Putin's friend Russia's best-paid manager Igor Sechin, chief executive of state-owned oil company Rosneft, is Russia's highest-paid manager, according to a list compiled by the Russian edition of Forbes magazine. The magazine estimates that Sechin, formerly a close aide and still a good friend to President Vladimir Putin, made $50 million in 2012, his first full year as a business executive. The top brass at Russia's state-owned companies are making more than their private sector counterparts, and the public sector is growing faster. The heads of government-controlled bank VTB and natural gas monopoly Gazprom are second and third on Forbes' list. After a brief spell of chaotic capitalism, Russia is quickly moving back to a state-controlled economy, except now the people who run it are paid in the same range as Fortune 500 CEOs. There is no excuse for such payouts, except maybe the fact that Oracle's Larry Ellison made twice as much as Sechin in 2012. BMW expects record sales in 2013 Ian Robertson, BMW management board member for sales and marketing, said the German luxury automaker will have a record year in 2013. Between January and October, BMW sold 1.6 million cars, 7.3 percent more than in the first 10 months of 2012. Sales are growing especially fast in Japan, South Korea and China, where BMW predicted a 10 percent increase this year but is likely to see 20 percent growth. The automaker will also set a new sales record in the U.S., though it has fallen behind rival Daimler in this market. As the Asian and North American economies return to healthier growth, it is the manufacturers of high-end products who benefit first: It takes time for prosperity to filter down to the mass market. In Europe, the economy is still too fragile even for this kind of limited pick-up: It is still budget car land. Ireland leads Europe in tech entrepreneurship The Wall Street Journal analyzed data on venture capital attracted by tech startups in Europe since 2003 and arrived at the conclusion that Ireland leads the old continent in tech entrepreneurship. It attracted four times the European average in venture capital per capita. The economic crisis had little effect on the activity: 131 of Ireland's 311 tech VC-backed deals came after 2009. Sweden, the U.K., Finland and Denmark complete the top five of the ranking. Ireland is better known as a tax haven for global tech companies, which employ thousands of people there, but the ecosystem emerging around them spawns plenty of local projects to draw investors' attention. Even so, Ireland's startups still lag behind U.S. and Israel. EADS plans thousands of job cuts in defense unit The European aerospace company EADS, recently renamed Airbus, plans to cut about 20 percent of the workforce in three business units – Cassidian, Airbus Military and Astrium – as they are merged into a new division called Airbus Defense & Space. The approximately 8,000 cuts are necessitated by more than just the overlap between the units: EADS customers have cut their defense budgets, and the company has to adjust production. Tough times have arrived for Airbus chief executive Tom Enders: He will have to negotiate the layoffs with the strong labor unions in Germany and France. The success of the EADS reorganization hinges on the results of these talks. (Leonid Bershidsky is a Bloomberg View contributor. He can be reached at bershidsky@gmail.com). |
2024-03-17 | Bloomberg | Japan Says There’s No Evidence Insurers Are Repatriating Overseas Assets | Japan ’s government said there’s no evidence that insurance companies are repatriating assets from abroad and that the yen’s climb today was driven by speculation. “The speculation was that Japanese life and casualty insurers will repatriate dollar-denominated assets to secure funds in wake of the earthquake,” Economic and Fiscal Policy Minister Kaoru Yosano told reporters in Tokyo today. “But they have ample cash, deposits and other liquid assets,” he said, adding that the Financial Services Agency and Bank of Japan have confirmed insurers aren’t selling their dollar assets. Policy makers have so far focused on offering intraday cash to banks, with the central bank limiting its additional monetary stimulus three days ago to 5 trillion yen, an amount about one- tenth the size of the U.S. Federal Reserve’s quantitative easing. Sustained yen strengthening risks eroding exporter earnings, making a case for officials to intervene, some analysts said. “With Japan facing a difficult situation, the yen’s rapid advance could damp its economy further, which is not good for the global economy,” said Masafumi Yamamoto , chief currency strategist at Barclays Bank Plc in Tokyo, saying it’s possible the Group of Seven could mount joint intervention to sell yen. Japan’s currency was at 79.26 per dollar as of 11:44 a.m. in Tokyo, down 4 percent from the high reached earlier today. It’s advanced 4.6 percent since the close on March 10, a day before the disaster struck Japan. Intervention Question Finance Minister Yoshihiko Noda declined to comment on whether the ministry would order the Bank of Japan to intervene in the foreign-exchange market, saying that markets were nervous. A government official speaking on condition of anonymity said that local institutional investors have abundant yen, and that repatriation wasn’t significant after the 1995 Kobe earthquake. Meantime, the central bank pumped 5 trillion yen ($63 billion) into money markets today. The Nikkei 225 Stock Average retreated 2.1 percent, recouping losses after dropping as much as 5 percent after trading began. The rout in the equity market has brought the index’s losses to 16 percent since the magnitude-9 earthquake and ensuing tsunami on March 11 devastated northeast Japan and crippled the cooling systems at a nuclear power plant. The government is still struggling to get the Fukushima Dai-Ichi nuclear facility under control, with helicopters dropping water on the plant in an effort to prevent a meltdown. Break-Even Point Japan’s exporters said they can remain profitable as long as the yen trades at 86.30 per dollar or weaker, compared with the previous year’s breakeven point at 92.90, the Cabinet Office said in an annual survey released on March 11. Every one yen the currency appreciates against the dollar erodes about 30 billion yen from Toyota Motor Co’s earnings, according to the company. Honda Motor Co, which produces over 70 percent of its vehicles outside Japan, loses 17 billion yen for each one yen the currency strengthens against the dollar. Because exporters’ operations are already disrupted at the moment, yen appreciation may have little immediate effect, lessening the need for policy makers to act, said Azusa Kato , an economist at BNP Paribas SA in Tokyo. “A stronger yen would actually help companies secure the goods and supplies they need, especially at the disaster regions, because it would make imports cheaper,” said Kato. “Stopping the yen’s gains isn’t the government’s top priority right now.” Last Intervention Japan’s government hasn’t ordered the BOJ to sell yen in the market since Sept. 15, which was the first time Japan intervened since 2004. That move followed a jump in the yen on speculation that Prime Minister Naoto Kan , who had won re- election as head of the ruling party, would be less likely to endorse yen sales than his top opponent. G-7 members haven’t entered the market together since September 2000, when they sought to buoy the euro as it tumbled in its second year of existence. BOJ Governor Masaaki Shirakawa said on March 13 that he was prepared to unleash “massive” liquidity to secure stability, a commitment followed up the next day with a record 15 trillion yen in one-day cash, with injections diminishing since then. The central bank in a March 14 policy meeting also decided to double its asset-purchase program to 10 trillion yen, including Japanese government bonds , exchange-traded funds and real estate investment trusts. To contact the reporters on this story: Aki Ito in Tokyo at aito16@bloomberg.net ; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net |
2024-01-30 | Bloomberg | Former UBS Trader Kweku Adoboli Pleads Not Guilty Over Unauthorized Trades | Kweku Adoboli, the former UBS AG (UBSN) trader who is accused of causing the largest loss from unauthorized trading in British history, pleaded not guilty to fraud and false accounting. Adoboli, dressed in a grey suit and blue tie, pleaded not guilty to all charges at a hearing in London today. A trial that may last as long as eight weeks was scheduled to start in early September. Adoboli, 31, has been in custody since Sept. 15 when UBS asked London police to arrest him for causing a $2.3 billion loss. The case led to the departures of Chief Executive Officer Oswald Gruebel and the co-heads of the Swiss bank’s global equities business. The trial could be “really awful” for UBS, said Steven Francis, a regulatory lawyer in London. “There’ll be an assessment of what training he was given” and of “the bank’s compliance procedures,” said Francis, a lawyer at Reynolds Porter Chamberlain, who isn’t involved in the case. UBS isn’t able to comment on the case because “English criminal law limits what we can say about this incident,” Oliver Gadney, a spokesman for the bank, said in an e-mailed statement. Adoboli, who was remanded into custody, is being held at Wandsworth prison in southwest London. One of his lawyers, Paul Garlick, told Judge Alistair McCreath he may request bail for Adoboli soon. Time Extensions Adoboli, who worked for UBS’s investment bank, had been given two time extensions to enter a plea. In December, he received an extra month after hiring new lawyers at Bark & Co. and Furnival Chambers in London. Garlick told the court Dec. 20 that Adoboli hadn’t received “satisfactory legal advice” before he was hired. The former trader was also granted legal aid, or government assistance, to pay his lawyer fees. British and Swiss finance regulators are investigating the system and control failures at UBS that allowed the unauthorized trades to go undetected. UBS has said it suspended some front office staff pending further discipline. The loss allegedly came from trading in Standard & Poor’s 500, DAX (DAX) and EuroStoxx index futures, according to the Zurich- based bank. He was charged with fraud and false accounting dating back to 2008. Adoboli worked for the investment bank’s Delta One desk, which handles trades for clients -- or risks the bank’s own money -- typically speculating on, or hedging the performance of, a basket of securities. Under CEO Sergio Ermotti , who took over from Gruebel, the bank set a target for profitability, announced its first cash dividend in five years and said it will shrink its investment bank to concentrate on wealth management. UBS fell 39 centimes, or 3 percent, to 12.48 francs in Swiss trading. To contact the reporter on this story: Lindsay Fortado in London at lfortado@bloomberg.net To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net |
2024-04-29 | Bloomberg | Concrete Engineering, Gadang, MAA, SEG: Malaysia Equity Preview | Shares of the following companies may have unusual moves in Malaysia trading. Stock symbols are in parentheses and prices are as of the previous close, unless stated otherwise. The FTSE Bursa Malaysia KLCI (FBMKLCI) Index rose 0.4 percent to 1,535.30. Concrete Engineering Products Bhd. (CEP) : The Malaysian building materials supplier said it had a loss of 5.96 million ringgit ($2 million) in the second quarter ended Feb. 28, compared with a profit of 1.96 million ringgit a year earlier, according to a company statement. The stock dropped 3.5 percent to 2.20 ringgit. Gadang Holdings Bhd. (GADG) : The property and construction group said net income in the third quarter ended Feb. 28 dropped 48 percent from a year earlier to 2.32 million ringgit. The stock added 2.2 percent to 70 sen. MAA Holdings Bhd. (MAA) : The insurer won central bank approval for an extension of time to complete its capital resolution plans including the sale of its insurance unit, according to a company statement. The company now has until July 31. MAA slipped 2.5 percent to 1.19 ringgit. Pantech Group Holdings Bhd. (PGHB) : The steel products maker for pipelines and refineries said profit in the fourth quarter ended Feb. 28 fell 49 percent from a year earlier to 5.48 million ringgit. The shares climbed 0.8 percent to 63 sen. Pensonic Holdings Bhd. (PSN) : The electronic and electrical home appliances maker said profit in the third quarter ended Feb. 28 more than doubled from a year earlier to 896,000 ringgit as sales climbed, according to a stock exchange statement. Pensonic declined 3.6 percent to 68 sen. SEG International Bhd. (SYS) : The college operator’s first-quarter net income surged 91 percent from a year earlier to 18.1 million ringgit as sales rose, according to a company statement. SEG also plans a share split by subdividing each share into two, it said in a separate statement. The stock gained 2.1 percent to 3.97 ringgit. Unimech Group Bhd. (UGB) : The engineering group proposed a final dividend of 3.6 sen a share for the year ended Dec. 31, 2010, according to a company statement. The stock was unchanged at 87 sen. To contact the reporters on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-01-25 | Bloomberg | Hartford Says Holdings Unhurt by Bond Insurer Woes | Hartford Financial Services Group Inc. (HIG) said it expects no material impact on its municipal bond holdings related to the struggles of the financial guarantors that insure the securities. Hartford has $13.5 billion in municipal bonds, about half of which are insured, said Ramani Ayer , chief executive officer of the Hartford, Connecticut-based insurer, in a conference call today. The largest U.S. insurance companies, including American International Group Inc. (AIG) , MetLife Inc. and Hartford fell in New York trading in the last two weeks on concern the value of their fixed-income portfolios may decline if bond guarantors lose their top ratings. Ambac Financial Group Inc. (ABKFQ) became the first bond insurer to lose its AAA grade after Fitch Ratings downgraded the company Jan. 18. Travelers Cos., (TRV) the second-largest U.S. commercial insurer, said Jan. 22 that any reduction in value on its $14.1 billion of insured municipal bonds would be ``immaterial'' if the coverage on the securities evaporated. Hartford declined $2.18, or 2.7 percent, to $77.71 at 10:43 a.m. in New York Stock Exchange composite trading. The company has dropped about 15 percent in the past year. To contact the reporter on this story: Josh P. Hamilton in New York at jphamilton@bloomberg.net To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net |
2024-03-29 | Bloomberg | MetLife Gets Approval to Merge Chinese JVs, Shanghai Daily Says | MetLife Inc. (MET) has gained regulatory approval to combine its two life-insurance joint ventures in China , Shanghai Daily said, citing Peter Smyth, managing director of MetLife Asia-Pacific. Shanghai Alliance Investment Ltd., the partner in United MetLife Insurance in Shanghai, has bought Capital Airports Holding Co.’s stake in Beijing-based Sino-U.S. MetLife Insurance Co., the English-language newspaper said today. To contact the editor responsible for this story: Joshua Fellman at jfellman@bloomberg.net |
2024-01-20 | Bloomberg | Treasuries in Worst Start Since ’03 on Stronger Economy | Treasuries are off to their worst start since 2003 on signs the U.S. economy is strengthening and Europe is moving closer to resolving its debt crisis. Treasury 10-year notes fell for a third day as a U.S. report showed home sales rose for a third month in December, adding to signs including falling claims for jobless benefits that the world’s largest economy is gaining momentum. Greek officials held debt-swap talks for a third day after Spain and France sold bonds at lower yields yesterday. “The lack of blowups in European sovereign debt have allowed calm to erupt, and that has weighed on Treasuries,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, which oversees $12 billion in fixed-income assets. “Home sales are improving, though from very poor levels, which underlies the improving data we’ve had of late,” The benchmark 10-year yield rose five basis points, or 0.05 percentage point, to 2.03 percent at 5:02 p.m. in New York , according to Bloomberg Bond Trader prices. The 2 percent note due in November 2021 was down 13/32, or per $4.06 per $1,000 face amount, to 99 25/32. The yield increased 16 basis points this week, the most since the five-day period ended Dec. 23. U.S. government securities lost 0.342 percent this year, the most since a 0.693 percent loss in 2003, according to Bank of America Merrill Lynch Indexes. Treasuries finished 2003 returning 2.25 percent despite the weak start and have posted annual gains every year but one since 2009, when they fell 3.7 percent in 2009. U.S. corporate bonds returned 0.5 percent this year and German bunds fell 0.1 percent, the indexes show. Widening Spread The difference between two- and 10-year yields widened four basis points to 1.78 percentage points after touching 1.79 percentage points, the most since Dec. 13. The spread was as narrow as 1.47 percentage points on Oct. 4. The Citi Macro Risk Index dropped to a five-month low of 0.601 yesterday, showing increased demand for higher-yielding assets. “Domestic data has been reasonably good and that’s been a catalyst to the selloff in Treasuries,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London. “Risk sentiment has been generally positive this week, which reduces the safe-haven bid, pushing yields higher.” Initial jobless claims plunged to 352,000 in the week ended Jan. 14, the lowest level since April 2008, the Labor Department said yesterday. A Federal Reserve report on Jan. 18 showed factory output increased. Labor ‘Traction’ “There is some significant traction in the labor market,” said Richard Gilhooly , an interest-rate strategist at Toronto- Dominion Bank’s TD Securities Inc. in New York. “There is beginning to be some consistency and some acceleration in the U.S. economic numbers. Once we get through the first quarter, you should get a big spike in Treasury yields.” Sales of previously owned U.S. homes rose to the highest level since January 2011, with purchases increasing 5 percent to a 4.61 million annual rate, the National Association of Realtors said today in Washington. The pace was less than the 4.65 million median forecast of 75 economists surveyed by Bloomberg News. Even as core consumer prices are running at almost the Fed’s ideal of about 2 percent, investors are snapping up inflation-protected debt for insurance against a risk that price levels rebound. The U.S. sold a record $15 billion in 10-year Treasury Inflation Protected Securities yesterday at a negative yield for the first time. Negative Yield The TIPS were auctioned at a so-called high yield of negative 0.046 percent, compared with a forecast of negative 0.027 percent, the average estimate in a Bloomberg News survey of eight of the Fed’s 21 primary dealers that are required to bid on U.S. debt sales. The last four sales of five-year TIPS were at negative yields. The World Bank said this week that the U.S. economy will expand 2.2 percent in 2012, while the euro area will contract 0.3 percent. The 10-year yield will advance to 2.59 percent by year-end, according to a Bloomberg survey of banks and securities companies with the most recent forecasts given the heaviest weightings. “Weak-but-positive growth should allow rates to grind higher, barring an increase in European stress,” according to the report by Royal Bank of Canada analysts including Michael Cloherty , the head of U.S. rates strategy for RBC Capital Markets LLC in New York. ‘Cover to Sell’ Greece ’s government and private creditors convened today for a third session of talks on how to reduce the nation’s debt and avert a collapse of the economy. “There’s been significant progress,” Hans Humes, president of Greylock Capital Management and a member of the creditor committee negotiating the deal with the government, said in a Bloomberg Television interview today. “The European situation may be dislocating itself some from the Treasury market,” said Paul Horrmann, a broker in New York at Tradition Asiel Securities Inc., an interdealer broker. “As the complexion gets better in Europe there is less need for the flight-to-quality to trade. If we didn’t have the European situation we would be further north of 2 percent on the 10-year note. We’ve had no new bad news, which has given investors cover to sell Treasuries.” Yields indicate investors are becoming more willing to lend. The three-month London interbank offered rate for loans in dollars was at 0.561 percent yesterday, headed for a second weekly decline. The Fed is seeking to keep longer-term borrowing costs capped by selling $400 billion of its short-term Treasuries and reinvesting the proceeds into longer-term government debt in a program traders dubbed Operation Twist. The central bank bought $2.52 billion of Treasuries due from 2036 to 2041 today as part of the program, according to the New York Fed’s website. To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net ; Liz Capo McCormick in New York at emccormick7@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-10-07 | Bloomberg | Data Crash Looming for Companies Processing for Obamacare: Taxes | The initial computer breakdown during the debut of the health-insurance exchanges that make up Obamacare shows how difficult it will be for corporate employers trying to get their own technology running in time. While companies received a one-year reprieve on reporting requirements and tax penalties for failure to offer affordable health coverage to employees, many still have a lot of work left to do to get systems in place to meet IRS rules, Bloomberg BNA reported. Those 12 months may not be enough, according to Anne Phelps, a member of EY’s Washington Council, which helps clients navigate regulations. “This is really the first time in the history of employers providing benefits that we’ve seen this kind of data collection” to be provided to both the Internal Revenue Service and to employees under the Patient Protection and Affordable Care Act of 2010, Phelps said. Beginning in January 2016, employers have to provide “an unprecedented amount of data” on health benefits, including details on who received an offer of coverage, what the coverage included and what its value was, Phelps said. They need to make sure they have systems in place before then to track the number of full-time employees, obtain the necessary data from them and communicate to employees about their health care coverage, Phelps said. The goal behind the massive collection of data is greater transparency for individuals and to enforce the individual and employer mandates under the law, she said. Federal Troubles The federal health exchange saw repeated software troubles and long waits in its first days last week, as 7 million people visited healthcare.gov to check out the insurance offerings under the Affordable Care Act, known as Obamacare. The 14 exchanges run by individual states , including Nevada and Connecticut , reported similar delays after opening Oct. 1. That may be a wake-up call for companies, especially big businesses built with acquisitions. A key question for employers to consider in setting up their systems is where to find all the data necessary to meet the measuring and reporting requirements under the law once the Jan. 1, 2015, compliance deadline kicks in, said Clayton Gammill, with EY’s Human Capital Practice department. If a company has three or four payroll systems built through acquisitions and multiple benefits providers, data isn’t in one place and they have to consolidate reporting to give to the IRS and employees, Gammill said. Data Warehousing Companies with separate human resources, payroll and benefits data systems will also face more complexity in meeting the requirements, he said. “What I think most people need to do is bring the data into some centralized place,” Gammill said. Whether this occurs through building a data warehouse or hiring a third-party service provider, “they need to make sure there’s data cleansing, there’s data consistency, so it’s not just a flat data dump,” he said. “There’s going to have to be some logic involved.” While employers received a reprieve from their reporting obligations, they will still have to engage with the exchanges since they opened to individuals on Oct. 1, Phelps said. Interactions with state and the federal exchanges will vary widely, as evidenced by the variety of requests the exchanges have already made of employers about their employees, she said. Because the law allowed states to establish their own health care exchanges, “each state has chosen a little bit of a different path,” Phelps said. State Rules More than half of the 50 states have opted for federally facilitated exchanges, with the remainder implementing their own insurance marketplaces or an alternative or hybrid model. The multitude of state responses to the law will affect how employers can appeal the determination of an employee’s eligibility for premium tax credits, which could subject an employer to a shared responsibility payment, Phelps said. State- and federally facilitated exchanges will make the initial eligibility determinations, and may choose to contact employers as part of a sample review process, she said. It will be critical to ensure employees going to the exchanges now have all the information they need, she said. “That interaction is so important to make sure that employees understand if they did have an offer of coverage, are they eligible for that credit,” Phelps said. Accurate information from the employer that is provided by workers to the exchanges is critical to ensure companies minimize their risk of being hit with undue penalties, she said. “The reason why is there’s a link back,” Phelps said. “If employees get a tax credit, that is the link where the employer may be on the hook for paying an excise tax.” To contact the editor responsible for this story: Cesca Antonelli at fantonelli@bloomberg.net |
2024-05-05 | Bloomberg | Most European Stocks Gain; Diageo, Swiss Re Rise as Results Top Estimates | Most European stocks gained as results from Diageo Plc to Swiss Reinsurance Co. topped analysts’ estimates. The Stoxx Europe 600 Index rose 0.1 percent to 278.9 at 8:03 a.m. in London as two sotcks gained for each that declined. To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-05-24 | Bloomberg | RBC Drops Most Since November After Missing Estimates | Royal Bank of Canada dropped the most in almost seven months after the nation’s largest lender posted second-quarter profit that missed analysts’ estimates. Royal Bank said net income from continuing operations, excluding a loss from its investment in RBC Dexia Investor Services, increased 4.9 percent to C$1.77 billion ($1.73 billion). Profit excluding some one-time items was $1.17 a share compared with the C$1.18 average estimate of 15 analysts surveyed by Bloomberg. Toronto-Dominion, Canada’s second-largest bank, said profit climbed 21 percent to C$1.69 billion, or C$1.78 a share, beating analysts’ estimates. Toronto-Dominion benefited from record profit at its U.S. consumer-banking unit and a rise in auto lending, credit cards and business banking, while Royal Bank posted higher earnings from Canadian consumer banking on growth in deposits, mortgages and business loans. “Royal Bank and TD lead the pack in terms of personal and commercial,” Ian Nakamoto , director of research at MacDougall, MacDougall & MacTier Inc., which manages about C$4 billion, said in an interview before results. “I’d like to see if they can maintain, if not extend, that lead.” Royal Bank fell 2.9 percent to close at C$51.38 in Toronto, its biggest one-day drop since Nov. 1, leading the Standard & Poor’s/TSX Financials Index to a 0.6 percent decline. Toronto- Dominion gained 0.3 percent to C$78.99. Acquisition Loss Royal Bank said net income, including a previously announced C$202 million acquisition loss from buying an additional 50 percent stake in RBC Dexia, declined 6.1 percent to C$1.53 billion, or 99 cents a share, from C$1.63 billion, or C$1.06 a share. Toronto-Dominion said it earned C$1.82 a share excluding items, topping the C$1.78-a-share average estimate of 15 analysts. Higher earnings from Canadian consumer banking as well as a 26 percent increase in trading revenue helped lift Royal Bank’s profit. Continuing operations exclude the Raleigh, North Carolina-based RBC Bank, which Royal Bank sold to PNC Financial Services Group Inc. Royal Bank set aside C$348 million for bad loans, 27 percent higher than a year ago. ‘Lost in the Woods’ Canadian banking profit rose 4.7 percent to C$937 million, from C$895 million a year ago. International banking, which includes RBC Dexia and Caribbean banking, had a net loss of C$196 million after the acquisition costs. Royal Bank “looks like they’re lost in the woods,” John Kinsey , who helps manage about C$1 billion at Caldwell Securities Ltd. in Toronto, said in an interview. “They sold the U.S. insurance and U.S. banking. I don’t know where they’re going.” Profit at the RBC Capital Markets investment-banking business rose 11 percent to C$449 million on higher trading and corporate and investment banking. Trading revenue across the bank climbed to C$761 million from C$602 million a year ago, led by trading of equities and interest rate and credit securities. Wealth management profit slid 6.6 percent to C$212 million, while insurance gained 23 percent to C$151 million on volume growth and lower claims costs on Canadian insurance products. ‘Market Confidence’ “Our retail bank is still performing,” Janice Fukakusa, Royal Bank’s chief financial officer, said in an interview. “Market confidence issues weigh heavily on the wealth business, but the minute we see some uptick we should see some performance.” Toronto-Dominion said its U.S.-based consumer lender reported profit of C$356 million on higher fees from loans and deposits. The lender, which has spent more than $25 billion on U.S. acquisitions since 2004, has more branches there than in Canada, and expects annual profit of $1.6 billion from U.S. operations by next year. U.S. personal and commercial banking profit was C$1.27 billion in 2011. Toronto-Dominion expects profit to be at the “lower end” of its 7 percent to 10 percent growth forecast for 2012, Chief Financial Officer Colleen Johnston said. “Some of the headwinds are going to affect us in the latter half of the year,” Johnston said today in a telephone interview. Profit has increased 10 percent in the first half of the fiscal year, Johnston said. Canada ’s second-largest bank also expects to have a lower rate of expense growth next fiscal year, Johnston said. Toronto-Dominion’s Canadian consumer banking profit rose 10 percent to C$808 million and wealth and insurance gained 16 percent to C$365 million, the bank said. Earnings at the TD Securities investment-banking unit climbed 4.8 percent to C$197 million. “We had tremendous strength in the retail earnings,” Johnston said. “This was a record retail quarter for us.” To contact the reporters on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net ; Sean B. Pasternak in Toronto at spasternak@bloomberg.net To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net ; David Scheer at dscheer@bloomberg.net |
2024-04-21 | Bloomberg | Bearish ETF Bets at 2007 High on Economy: China Overnight | Bets (FXI) on declines in the largest Chinese exchange-traded fund are surging to the highest level since 2007 on concern a slowdown in the world’s second-largest economy will stifle company earnings. Short interest on the iShares FTSE China 25 Index Fund climbed to 48.6 million shares, or 3.2 percent of the total outstanding at the end of March, the most since June 2007, data compiled by Bloomberg show. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese stocks in the U.S. slumped 1.1 percent in New York last week, led by solar manufacturers. Chinese economic growth slowed to 7.7 percent in the first three months of this year, government data released April 15 showed, missing the 8 percent median economist estimate. The Bloomberg China-US gauge fell to 11.7 times estimated earnings two days later, the cheapest level since September. Investors withdrew $256 million from the iShares ETF this month through April 18, after taking out $824 million in March, the most since January 2010, according to data compiled by Bloomberg. “I am cautious,” Elena Ogram, who holds fewer Chinese stocks than global benchmarks in her $50 million portfolio of emerging-market assets at Bank Bellevue AG, said by phone from Zurich April 18. “There’s more uncertainty and less visibility. I am not expecting spectacular earnings from Chinese companies.” Of the 55 companies on the China-US stock measure, 16 are scheduled to report quarterly earnings this week, including China Life Insurance Co., Yanzhou Coal Mining Co., Guangshen Railway Ltd. (GSH) , China Petroleum & Chemical Corp. (386) and Baidu Inc. Bona Film Group Ltd. (BONA) , a Beijing-based film company, has lost 4.7 percent since April 1 when it unexpectedly reported earnings losses for the fourth quarter. Sinopec Earnings Adjusted income for China Petroleum, Asia’s largest refiner known as Sinopec, will probably decline to 0.22 yuan (3.6 cents) per share for the first quarter, from 0.24 yuan the previous three months, according to the average of two analysts estimates compiled by Bloomberg. The company is scheduled to report results April 25. American depositary receipts of Beijing-based Sinopec tumbled 4 percent to $108.93 last week, the steepest weekly drop since February. The iShares ETF ended last week 0.1 percent higher at $36.05, after sliding to the lowest level since Sept. 28 April 17. The fund, which tracks the FTSE China 25 Index (XIN0I) of the biggest Chinese companies, has slumped 11 percent this year, led by a 25 percent decline in Hong Kong-listed shares of China Coal Energy Co. and a 24 percent slide in shoe retailer Belle International Holdings Ltd. (1880) Slowdown `Normal' The expansion of the Chinese economy accelerated for the first time in eight quarters at the end of 2012, stoking optimism that the nation would drive a global recovery. The disappointing first-quarter gross domestic product data pushed the Shanghai Composite Index (SHCOMP) to the lowest level since Dec. 24 April 15. The gauge of domestic Chinese stocks rallied 1.7 percent last week. Shares of the China ETF on loan, or short interest, doubled from 24.8 million at the end of March 2012, Bloomberg data show. The short interest increased to 3.2 percent of total outstanding shares, from 1.39 percent a year earlier. Short sales involve borrowing a security such as a stock, then selling it in anticipation of a price decline. The slower expansion in the first quarter is ``normal'' as China sacrifices economic growth to make structural reforms, People's Bank of China Governor Zhou Xiaochuan said in an interview at a meeting of the International Monetary Fund in Washington April 20. Telecom Gains China Telecom Corp., the nation’s biggest fixed-line carrier, rallied 3.6 percent April 19 to $48.33, trimming its weekly decline to 0.1 percent, after Morgan Stanley rated the company a top pick. The Beijing-based company has “strong execution, better earnings visibility and a rising dividend yield,” analysts led by Navin Killa wrote in a note April 19. China Unicom (CHU) , the country’s second-largest mobile-phone company, advanced 7.1 percent last week, the biggest five-day gain since November, to $13.68. China added 13.7 million new mobile phone subscribers in March, compared with 9.93 million in February, data from the Beijing-based Ministry of Information Industry show. Guangshen Railway Ltd., which runs the only train line linking mainland China to Hong Kong , climbed 7 percent last week, the most in more than a month to $24.77 in U.S. trading. Shenzhen-based Guangshen and Daqin Railway Co. will benefit most from the reorganization of the Chinese rail system, China Galaxy Securities said in a note April 19. Slumping Solars E-House China Holdings Ltd. (EJ) , a property agent based in Shanghai , increased 9.2 percent in the week, the most since January, to $4.64. E-House posted the biggest advance on the China-US index last week. Housing prices in Guangzhou rose 11.1 percent from a year earlier, while those in Beijing climbed 8.6 percent and Shanghai posted a 6.4 percent increase, the National Bureau of Statistics said April 18. All cities showed the biggest gains since January 2011 when the government changed its methodology for the data. LDK Solar Ltd., (LDK) once the world’s second-biggest maker of wafers used in solar panels, slipped 11 percent to $1.08 last week after it reported a seventh consecutive loss in the fourth quarter. Suntech Power Holdings Co., whose main unit was forced into bankruptcy after defaulting on a $541 million bond repayment last month, declined 13 percent to 65 cents. To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net |
2024-11-12 | Bloomberg | Gary Shilling Sees `Significant' Stock Selloff Within 12 Months | Gary Shilling , who predicted the U.S. housing collapse, says the stock market is overvalued and foresees a “significant” selloff within a year as the Federal Reserve fails to stimulate economic growth. The Standard & Poor’s 500 Index has climbed 17 percent since July 2 as investors anticipated the Fed’s plan to buy $600 billion in Treasuries to boost growth. The benchmark gauge for U.S. equity trades for 15 times profit from the past year, up from 13.7 in July, data compiled by Bloomberg show. Fed Chairman Ben Bernanke previewed his strategy of quantitative easing in an Aug. 27 speech in Jackson Hole, Wyoming. “I don’t think it’s enough to make a great deal of difference,” Shilling, 73, president of the investment research firm A. Gary Shilling & Co. in Springfield, New Jersey, said in a telephone interview. “The earlier QE1 didn’t and I don’t think this will, either. The economy is weak and it doesn’t take very much of a shock to push it into negative territory. I don’t think that’s enough to justify where stocks are now.” Shilling, who predicts real gross domestic product growth of 2 percent “and maybe less in the next couple of years,” said the government is out of options for fixing the economy. No Magic Bullet “There’s not much that can be done,” said Shilling. “There isn’t any magic bullet. There isn’t anything in my view that’s going to return us to the solid days of the 80s and 90s when consumers were spending freely. I don’t think that’s going to come back. The need to deleverage is just too great.” The S&P 500 lost 1.2 percent to 1,199.21 as of 4 p.m. amid speculation China will lift interest rates. The index has fallen 2.2 percent since Nov. 5 for its first weekly decline in more than a month, data compiled by Bloomberg show. Shilling’s past predictions had mixed results. The economist forecast the recession that began in December 2007 and warned investors a year earlier that residential real estate was in a bubble that would burst. The S&P 500 lost 57 percent between October 2007 and March 2009. With the S&P 500 at a 12-year low that month, he said that higher unemployment would curb consumer spending, leading to “weaker stocks.” An investor following his advice would have missed the start of an 80 percent rally. Deflation Board Game Shilling, a long-time market skeptic who once created a board game to show the dangers of deflation, earned a doctorate degree in economics at Stanford University, according to his website. In his book “The Age of Deleveraging,” which was published this month, he theorizes that the global economy will struggle for years. Other books include “Deflation: How to Survive and Thrive in the Coming Wave of Deflation” in 2002 and, “After the Crash: Recession or Depression: Business and Investment Strategies for a Deflationary World” in 1988, according to Amazon.com Inc.’s website. The U.S. economy, which grew at a 2 percent annual pace in the third quarter, may enter a recession in the next year or two, Shilling said. The U.S. gross domestic product will grow 2.7 percent this year and 2.4 percent in 2011 after 2009’s contraction, according to a Bloomberg survey of economists. The S&P 500 posted its biggest September-October rally since 1998 as economic data showed the threat of a recession is abating. The gauge extended the rally into November after the Labor Department reported a bigger-than-forecast decrease in jobless claims and as orders placed with factories and production rose to a five-month high. Beating Estimates Earnings have topped estimates at 76 percent of the 433 companies in the S&P 500 that have announced results since Oct. 7, according to data compiled by Bloomberg. Net income has grown 29 percent for the group as sales increased 9.2 percent. While estimates for U.S. corporate profit fell last quarter, they still indicate that S&P 500 companies will report record earnings in 2011. The equity benchmark is valued at about 12 times projected income for 2011, according to data compiled by Bloomberg. That’s the cheapest level since 1988, excluding the six months after New York-based Lehman Brothers Holdings Inc.’s filed for bankruptcy in September 2008, relative to reported profit from the past 12 months. “Stock valuations remain attractive,” said James Dunigan , chief investment officer at PNC Wealth Management in Philadelphia, which oversees $105 billion. “The earnings prospects continue to be positive. We’ll likely get back to an economy which is expanding in the early part of 2011. The story is pretty good.” Stock Returns Shilling, who predicts that stocks will return 5 percent to 6 percent annually after inflation adjustments over the next decade, says that half of that will come from dividends and not from appreciation. The S&P 500’s dividend yield, currently at 1.92 percent, may rise to at least 3 percent, Shilling said, without specifying a time frame. “You see a lot of companies being pressured to pay dividends,” he said. “Look at Microsoft. They borrowed money to pay dividends. It tells you that investors want dividends.” In September, Microsoft Corp. , the world’s largest software maker, sold $4.75 billion of bonds at the lowest coupons on record. A day earlier, the company raised its quarterly dividend by 23 percent to 16 cents and received approval from its board to sell as much as $6 billion in additional debt. Shilling reiterated his view in an Oct. 4 interview with Bloomberg Radio that looming deflation means U.S. Treasuries are still attractive. He says the yield on the U.S. 30-year bond will drop to 3 percent within the next “couple of years” from about 4.3 percent. Shilling also said he doesn’t see a collapse of the U.S. dollar because of debt problems in Europe. The euro slid to the lowest level in more than a month versus the dollar yesterday as concern that some European countries will have difficulty paying their debt and a drop in stocks curbed investors’ appetite for risk. “The dollar is probably going to strengthen,” Shilling said. “We’re going to see increasing problems in Europe, led by Ireland. As a result, we’re seeing a rally in the dollar.” To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net. To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net . |
2024-11-23 | Bloomberg | UnitedHealth Says Diabetes Will Cost $3.4 Trillion Over Decade | Diabetes or prediabetic conditions will strike half of all adult Americans by the end of the decade unless people lose weight, said UnitedHealth Group Inc. , the largest U.S. health insurer by sales. The disease will cost the nation almost $3.4 trillion in the 10 years through 2020, with more than 60 percent paid for by the U.S. government, according to a study released today by the Minnetonka, Minnesota-based insurer. The number of Americans with high blood sugar will rise 44 percent to 135 million in 2020, from 93.8 million in 2010, researchers said. Diabetes is growing as the U.S. population skews older and fatter, said Simon Stevens , executive vice president of the company’s Center for Health Reform & Modernization. About 28 million adult Americans, or 12 percent, are currently diabetic while 66 million others, or 28 percent, are prediabetic, according to the study. Prediabetics can lower the odds of getting diabetes by losing weight, he said. “There is nothing inevitable” about the rise in diabetes, Stevens said in a telephone interview. “Even quite modest changes, like losing five percent of body weight, have the potential of producing decreases. If we don’t take obesity seriously, we risk our children living shorter lives than we parents have lived.” UnitedHealth is developing programs to reduce spending for chronic diseases. Showing ability to combat costs benefits UnitedHealth by driving enrollment into its health plans, generating business for its disease management and prevention services and reinforcing its leadership on the topic, said Ana Gupte , an analyst at New York-based Sanford C. Bernstein & Co. Showing Value “This is a way of ensuring its role as a leader, not just an insurance company that sells health benefits,” Gupte said in a telephone interview. “By demonstrating tangibly that they can do something to moderate the cost trend, they show their value to Congress and the White House.” The U.S. government has issued similar predictions about the growth in the disease. The Centers for Disease Control and Prevention, based Atlanta, issued a study on Oct. 22 saying new cases will more than double by 2050, afflicting at least 1 in 5 adults. That amounts to as many as 75 million by mid- century. The CDC’s estimate of the number of adults with diabetes now is at least 32 million, according to the study. “I can’t comment on the differences in the numbers, but both show a growing problem,” said Ann Albright , director of the CDC’s Division of Diabetes Translation. “The message for everyone is that we need to take this issue seriously as a country.” Autoimmune Disease Diabetes limits people’s ability to make or use insulin, which helps convert blood sugar into energy. About 90 percent to 95 percent of the cases are Type 2, which is caused by a combination of genetic and lifestyle elements, such as being overweight, Albright said today in a telephone interview. The less-common Type 1 diabetes is an autoimmune disease, seen in children, that destroys the body’s natural insulin, she said. People with diabetes often develop other diseases such as heart attack, stroke, blindness and kidney disease, Albright said. “Diabetes is like dropping a rock in a pond and watching the ripples flow out from it,” Albright said. “It’s the No. 1 cause of blindness, the No. 1 cause of kidney disease and a huge contributor to heart attack and stroke.” People can help prevent diabetes through changes in lifestyle, such as increasing physical activity and losing weight, she said. ‘Most Pressing’ “Solving the obesity epidemic that has helped produce this increase is one of our most pressing public-health priorities,” U.S. Health and Human Services Secretary Kathleen Sebelius , said today in an e-mail. First lady Michelle Obama started a campaign aimed at reducing childhood obesity as a way to make Americans healthier. Former vice presidential candidate Sarah Palin criticized this government intervention into daily life, saying it’s up to parents to tell children what they should and should not eat, Bloomberg Businessweek reported Nov. 18. On a recent visit to a Pennsylvania school, Palin brought cookies for the children. Palin’s political action committee didn’t immediately respond today to a telephone call and e-mail seeking comment. This is an “epidemic that is larger than breast cancer and HIV together,” said Deneen Vojta, a physician and senior vice president at the UnitedHealth center. “Yet it doesn’t feel like an epidemic in this country because of the real under-awareness of the situation.” Lifestyle Changes The UnitedHealth study estimates that, in 2020, 39 million adults, or 15 percent, will suffer from diabetes, and an additional 96 million, or 37 percent, will be prediabetic. Under the health-care overhaul signed in March by President Barack Obama , the CDC was authorized to start the National Diabetes Prevention Program to help Americans deter the disease through lifestyle changes, Albright said. The agency has developed a program with UnitedHealth and the National Council of YMCAs of the USA , a nonprofit organization based in Chicago, to help overweight, prediabetic people exercise more, eat better and be more aware of body metrics related to diabetes. The program has two primary goals for participants: to increase the amount of daily exercise to 150 minutes and reduce body weight by at least five percent. The program followed a design tested by the National Institutes of Health, based in Bethesda, Maryland. Trade Group Six of the seven adults in the first graduating class managed to lose 7 pounds each, on average, and are still engaged in the program, said Tyler Mason , a UnitedHealth spokesman, in an e-mail. UnitedHealth didn’t directly take any public position for or against the U.S. health-care overhaul. America’s Health Insurance Plans, the insurance industry’s main trade organization, openly opposed sections of the legislation. UnitedHealth is a member of the Washington-based group. The law expanded access to coverage for the currently uninsured, while failing to address medical costs, Stevens said in an interview Oct. 1. That lapse offers opportunities for the company to expand into consulting, data analysis and other areas to help employers and hospitals control costs, Chief Executive Officer Stephen Hemsley told analysts during a conference call on July 20. To contact the reporter on this story: Pat Wechsler in New York at pwechsler@bloomberg.net. To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net . |
2024-10-16 | Bloomberg | Crop-Insurance Cuts Test Farm Power as Lobbies Push Back | Rural groups say they’ll fight a proposed $100 million-a-year cut in crop insurance subsidies, a measure that has won the support of both houses of Congress and could be a test of agriculture’s influence in Washington. The House of Representatives has endorsed reducing the government’s portion of farmers’ insurance-policy premiums for higher-income farmers, following a Senate measure approved in June. Critics of what’s become the largest U.S. farm-aid program say the measure doesn’t go far enough, while supporters warn of ripple effects through the rural economy. The proposed restrictions on insurance subsidies are “not a fait accompli, not by a long shot,” said David Graves, manager for the American Association of Crop Insurers, a trade group in Washington that says the insurance subsidies are a better way to aid farmers than disaster assistance relied upon in the past. “Our journey has been to establish a public-private partnership for the good of the nation.” Crop insurance, now the most expensive farm-aid program, has gained attention from budget watchdogs as its price tag has risen. President Barack Obama sought this year to cut almost $12 billion from it over 10 years. Republican House Budget Committee Chairman Paul Ryan, who sponsored last week’s House resolution, has called subsidized insurance “crony capitalism.” ‘Small Step’ Curbing the rise in premium subsidies is a small step toward correcting the “ abomination” of the farm bill, said Andrew Moylan, a senior fellow for R Street Institute , a Washington policy analysis group that supports limited government. “We are at records or near records in farm incomes while we have huge deficit and debt challenges,” he said. “We need means testing for crop insurance.” The crop insurance program, which subsidizes payouts at companies including Wells Fargo & Co. (WFC) , cost a record $14 billion last year covering crops ravaged by the worst drought in at least five decades. Taxpayers provide the majority of farmers’ premiums, cover much of an insurer’s administrative costs and guarantee that losses will be covered. The program’s structure will be determined in a multiyear agriculture law up for re-authorization. The farm measure pays for programs to encourage agricultural production as well as food stamps for the poor, benefiting processors including Archer-Daniels-Midland Co. (ADM) and grocers including SuperValu Inc. (SVU) Conference Committee The two chambers have passed different versions of the farm bill, which have to be reconciled by a joint committee. The biggest difference is funding for food stamps; the House proposes to cut $4 billion a year, 10 times the reductions called for by the Senate. The Senate’s bill also included a measure to reduce crop-insurance costs. It would trim the government’s portion of farmers’ insurance policy premiums to 47 percent from 62 percent for growers with adjusted gross incomes over $750,000 a year, affecting about 20,000 producers nationwide. The House didn’t include those cuts in its version of the bill, but did pass the non-binding resolution urging its conference committee members to adopt them. The program is popular among farm groups that see crop insurance as an efficient way to administer aid the federal government has long given farmers to mitigate weather and price risks. Even with the reduction in premium subsidies for higher-income farmers, overall federal insurance aid would increase at least $500 million a year over current levels because of other initiatives as lawmakers look at less-popular agriculture programs for savings. The crop insurance program under current rules would cost $84.1 billion over 10 years, according to the Congressional Budget Office. Big Vs. Small Big farms should not be treated differently than small ones through income tests, said Representative Michael Conaway, a Texas Republican and member of the House farm-bill conference committee, when debating the House motion last week. “To restrict crop insurance in this way is, in my view, wrongheaded,” he said. “This effort will punish success.” The cut to crop insurance underlies a larger question of whether farm-state lawmakers still have the clout to defend their interests, said Chuck Fluharty , president and chief executive officer of the Rural Policy Research Institute at the University of Missouri in Columbia. “Agriculture and rural power has weakened” as rural policy has become wrapped into bigger partisan debates, he said. “You’ve seen the autonomy of the agriculture committee completely usurped by larger conflicts.” Farm Lobby Last week’s resolution still leaves House members free to negotiate from their original position, Tamara Hinton, spokeswoman for the House Agriculture Committee’s chairman, Republican Representative Frank Lucas of Oklahoma , said in an e-mail. Senate Agriculture Committee Chairwoman Debbie Stabenow, a Michigan Democrat, did not comment on the House move. Still, conferees may simply have to accept the crop-insurance cut to preserve other programs, said Mary Kay Thatcher, a lobbyist with the American Farm Bureau Federation. “This puts them in a difficult position,” said Thatcher who said her group “strongly opposes” the restrictions. “But there has to be some reform, or the bill won’t move forward.” Larger controversies ranging from food stamps and dairy subsidies to the relationship between insurance and conservation programs may make income tests “small fry” not worth fighting over if congressional leadership wants a change in policies, said Gary Blumenthal, chief executive officer of World Perspectives Inc., an agricultural consultant in Washington. Restrictions on crop insurance aren’t assured, Moylan said, calling it “laughable” that farm-lobby power has waned. “It has never been easier in history to reform agriculture subsidies substantially, but we are not doing it,” he said. Still, Moylan said “the long-term arc” is in favor of reform. “We have never had this serious reckoning before on farm programs,” he said. “If I take my anti-pessimism pill for a moment, there are encouraging signs.” To contact the reporters on this story: Alan Bjerga in Washington at abjerga@bloomberg.net To contact the editor responsible for this story: Jon Morgan in Washington at jmorgan97@bloomberg.net |
2024-04-26 | Bloomberg | Ford Credit-Default Swaps Drop as Profit Beats Analyst Estimates | The cost to protect Ford Motor Co. (F) ’s debt declined after the second-largest U.S. automaker’s profit rose to the highest for a first quarter since 1998. Credit-default swaps on Ford declined 12.5 basis points to 270.5 basis points from 775.9 basis points in May 2010, according to data provider CMA. Contracts on its finance arm Ford Motor Credit Co. dropped 6.8 basis points to 202.7, down from as high as 582.6 basis points last May. Profit was 62 cents a share excluding some items, beating the 50-cent average of 14 analysts’ estimates compiled by Bloomberg, as the company won higher prices for fuel-efficient new models. The automaker’s a “very good success story,” according to Tom Farina, managing director at Deutsche Insurance Asset Management in New York , which oversees $200 billion. “They’re doing a good job selling product in a market where there seems to be some ability to take some product market share,” he said in a telephone interview. “People feel it will become investment-grade over the next six to 24 months.” The swaps need to fall about 40 basis points to imply that the company’s debt is investment-grade, according to David Munves, an analyst at Moody’s Corp.’s capital markets research group. The prices implied a rank of Ba2 as of April 22. Ford’s $1.25 billion of 8.125 percent notes maturing in January 2020 rose 0.5 cent to 118.5 cents on the dollar with a yield of 5.429 percent at 1:27 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s the highest price since Nov. 15, Trace data show. Confidence Grows The cost of protecting corporate bonds from default in the U.S. fell after earnings from Ford and 3M Co. bolstered confidence in company creditworthiness. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, decreased 0.9 basis point to a mid-price of 92.7 basis points as of 5:14 p.m. in New York, according to index administrator Markit Group Ltd. “Economic numbers were slightly better than people had hoped, confidence was slightly better and there’s earnings optimism,” said Michael Kraft , senior portfolio manager at Vanderbilt Avenue Asset Management LLC. “All of these contributed to market euphoria in the equity markets and credit markets.” The Standard & Poor’s 500 Index rose to the highest level since June 2008, adding 0.9 percent to 1,347.24 as 3M boosted its full-year earnings forecast after profit surpassed analysts’ estimates, fueled by demand for films used in solar panels and tablet computers, and International Business Machines Corp. (IBM) increased its quarterly dividend and set aside more money for share buybacks. Company Earnings The credit swaps index, which typically falls as investor confidence improves and rises as it deteriorates, has declined from 95.8 basis points at the end of last month after 122 of the 154 Standard & Poor’s 500 companies that reported results this quarter beat projections, according to data compiled by Bloomberg. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt. General Motors Co. is the biggest U.S. carmaker. To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net |
2024-12-30 | Bloomberg | Reinsurance Rate Increase to Focus on Loss Areas, Willis Re Says | Rate increases for reinsurance coverage in January will focus on loss-affected areas while this year’s claims burden won’t lead to a full turn of the market, according to reinsurance brokerage Willis Group Holdings Plc. (WSH) “The market is increasingly segmented with rate movements being driven by individual loss history and perceived exposure movements, and not by an overall blanket increase,” Willis Re said in a report today. “If 2012 underwriting results return to profitability, it’s unclear if we will witness a prolonged market hardening.” 2011 was the second-most-expensive year for reinsurers such as Munich Re (MUV2) and Swiss Re Ltd. (SREN) and the primary insurers whom they help shoulder risks for clients, according to Zurich-based Swiss Re. Man-made and natural catastrophes including the earthquake and tsunami in Japan, the earthquakes in New Zealand and the floods in Australia and Thailand cost the industry about $108 billion, it said on Dec. 15. That compares with $123 billion in claims from disasters including Hurricanes Katrina, Wilma and Rita in 2005. More than half of the insured losses recorded in 2011 will be paid by the reinsurance market, Willis Re said in the report, adding that “the majority of this year’s catastrophe claims arose from either unmodeled or inadequately modeled perils or territories” such as the earthquake and tsunami in Japan and the flooding in Thailand, which led to unexpectedly high claims in coverage for supply-chain disruptions. ‘Market Hardening’ “The key to a sustained market hardening is much more likely to lie in the impact of the current economic turmoil in the euro zone and elsewhere and how this works through to diminish the capital bases of reinsurers,” Willis Re said. Capital levels in the global reinsurance industry declined “only marginally” by the end of the third quarter compared with the start of the year, the broker said. In reinsurance terms, a hardening of markets or rates refers to an increase in prices for coverage among a broad number of areas of coverage. The earthquake in Japan on March 11 and the ensuing tsunami caused insured losses of $35 billion, while the Feb. 22 temblor in New Zealand cost $12 billion. The floods in Thailand are estimated to cost between $8 billion and $11 billion. Severe storms in the U.S. in April and May cost about $14 billion, while hurricane Irene is estimated to cost $4.9 billion, Swiss Re said. About two-thirds of property and casualty reinsurance contracts of companies such as Munich Re , Swiss Re and Hannover Re (HNR1) , the world’s fourth-biggest reinsurer, are typically up for renewal in January. The remainder is being renewed in April and July with a focus on the Asia-Pacific region and the U.S. Global prices for reinsurance coverage declined about 7.5 percent in the January 2011 renewals after they dropped about 6 percent a year earlier. Rates rose about 8 percent in January 2009 when reinsurers’ capital was drained by costly storms, including Hurricanes Ike and Gustav, and the financial crisis. To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net ; Edward Evans at eevans3@bloomberg.net |
2024-08-28 | Bloomberg | Credit Agricole Second-Quarter Net Drops 67% on Greece | Credit Agricole SA, France ’s third- largest bank by market value, posted a 67 percent decline in second-quarter profit on losses in Greece and a writedown of its stake in Intesa Sanpaolo SpA. (ISP) Net income fell to 111 million euros ($138.6 million) from 339 million euros a year earlier, the bank, based near Paris, said in a statement today. The company booked 370 million euros of losses in Greece, as well as a 427 million-euro charge on its holding in Milan-based Intesa. Losses were partly cushioned by a 140 million-euro gain on Credit Agricole’s own debt. Credit Agricole, led by Chief Executive Officer Jean-Paul Chifflet, is shutting its riskiest investment-banking activities and weighing offers from Greece’s three largest lenders for its Emporiki unit in the country, which is stuck in a five-year recession. The bank said it’s still studying the bids. “Greece and Italy keep poisoning their results,” said Gregory Moore, who helps manage 200 million euros at Montsegur Finance in Paris, including shares in Credit Agricole. (ACA) “It’s disappointing as we didn’t get more significant details” about the sale of Emporiki, he said. Credit Agricole fell 0.4 percent to 4.27 euros in Paris trading. The shares have fallen 34 percent over the past 12 months, trailing the 4.7 percent increase in the 38-member Bloomberg Europe Banks and Financial Services Index. Exclusive Talks Credit Agricole has taken no decision on entering into more advanced talks related to any of the offers for Emporiki, it said in the statement. Discussions are continuing with the Bank of Greece, the Hellenic Financial Stability Fund and the European Commission “on the terms and conditions to which the transaction would be subject,” the bank said. “We need to carry out our goals,” Chifflet told journalists on a call today. Credit Agricole aims to exit Emporiki and Greece, and any remaining stake in the Greek unit won’t exceed 10 percent, he said. Credit Agricole “hopes” to close the Emporiki sale by Dec. 31, the CEO said at a press conference. National Bank of Greece SA and Eurobank Ergasias SA this month submitted bids for Emporiki, joining Alpha Bank SA (ALPHA) , Greece’s No. 3 lender, in their pursuit of Credit Agricole’s unprofitable Athens-based unit. Emporiki’s loan book makes Credit Agricole the foreign bank with most to lose should Greece exit the euro. Entering exclusive negotiations “is a matter of weeks,” and sealing an agreement will also require weeks, Chief Financial Officer Bernard Delpit told reporters. Asked whether Credit Agricole may consider keeping a funding exposure to some of Emporiki’s least-performing loans, Delpit said that “if we keep assets in Greece, for sure it wouldn’t be the difficult assets.” Capital Increase Credit Agricole provided 2.3 billion euros in capital to Emporiki in July by converting a portion of its funding to the Greek unit into equity. Following the capital injection, Credit Agricole’s equity exposure to Emporiki was 2.7 billion euros and its net funding exposure fell to 2.3 billion euros. Credit Agricole increased Emporiki’s capital following a request from the Bank of Greece, Chifflet told journalists. Greece is overhauling its banks after lenders sustained losses on their holdings of government bonds in the country’s debt swap, the biggest sovereign restructuring in history. The country obtained a 130 billion-euro bailout in March from the European Union and International Monetary Fund which earmarked 50 billion euros for recapitalizing the banks. The HFSF is helping to oversee Emporiki’s sale as preparations continue to put capital into the country’s banks. Xavier Musca, former French President Nicolas Sarkozy ’s chief of staff, joined Credit Agricole last month as deputy CEO in charge of international retail-banking. Asset Reductions Credit Agricole, founded in 1894 as a French farmers’ bank, invested 2.2 billion euros in 2006 to buy a majority stake in Emporiki, the least profitable of Greece’s top banks at the time. Since then, Emporiki has been unprofitable every year except 2007, with accumulated losses for Credit Agricole of about 5.7 billion euros by the end of June. Credit Agricole is also reducing minority equity investments in European financial institutions. The French bank booked a 28 million-euro gain by selling its shares in Portugal ’s insurance firm BES Vida to Banco Espirito Santo SA. (BES) Credit Agricole reduced its “ownership interest” in Milan- based Intesa to below 2 percent and lowered its stake in Madrid- based Bankinter SA (BKT) to below 20 percent, it said today. Credit Agricole is “open” to all solutions regarding its holding in Bankinter, Chifflet said, without elaborating. Credit Agricole last year started trimming its balance sheet and the bank in December scrapped its 2014 earnings targets. Credit Agricole Group, the entity regulators and rating firms look at for compliance with international rules, expects to reach a 10 percent core capital ratio by the end of 2013 under Basel III rules, the bank confirmed today. Chifflet repeated that a capital increase “is not on the agenda.” Credit Agricole joined BNP Paribas SA (BNP) and Societe Generale SA (GLE) in cutting investment-banking jobs and assets as the crisis curbs access to funding in dollars, regulators impose stricter capital rules and French President Francois Hollande ’s government prepares legislation to isolate the banks’ riskiest businesses. Investment Bank Chifflet, 62, told investors at their May annual gathering that he favors “banning or limiting activities recognized as speculative.” While splitting retail banking and investment banking wouldn’t be a “miracle solution,” Credit Agricole “has put the foot on the brake” in equity derivatives and credit derivatives and has stopped all proprietary trading, the CEO repeated today. Credit Agricole at the end of June achieved 97 percent of its planned 35 billion-euro cut in risk-weighted assets, the bank said. Most of Credit Agricole’s asset reductions come from its corporate- and investment-banking, or CIB, unit, which is closing operations in 21 countries. The division aims for “medium-term” annual revenue of 5.4 billion euros, up from 4.73 billion euros in 2011, the bank said in April. Second-quarter profit at the CIB unit fell to 289 million euros from 331 million euros a year earlier. While Credit Agricole’s net losses from subprime-era activities it is winding down were trimmed to 7 million euros, CIB earnings benefitted from 185 million euros in gains from revaluing debt issues and loan hedges, according to the statement. Credit Agricole’s CEO also confirmed today that the bank has been cooperating with “all U.S. authorities for several years” regarding Office of Foreign Assets Control regulations. Credit Agricole continues reviewing internally “operations regarding physical persons and all the countries” that face a U.S. embargo, Chifflet said. To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net ; |
2024-06-13 | Bloomberg | Barclays Agrees to Pay U.K. Customers’ Payment Protection Insurance Claims | Barclays Plc (BARC) will reimburse the full payment-protection insurance premiums plus 8 percent interest to customers whose claims were put on hold during a court challenge. The bank will compensate customers sold payment-protection insurance without being told they could buy it from another lender, Barclays said in an e-mailed statement today. The British Bankers’ Association , an industry group, lost a court challenge in April to the Financial Services Authority’s PPI guidelines. Barclays, Lloyds Banking Group Plc (LLOY) and Royal Bank of Scotland Group Plc (RBS) were given more time to handle the customer complaints by the FSA today after the court challenge created a backlog. Barclays said in May it would set aside 1 billion pounds ($1.63 billion) to resolve the claims. “Barclays made a commitment to process all on-hold PPI complaints as soon as practicable,” the London-based bank said. “We have said before that when we get things wrong, we apologize, and work hard and work fast to put them right as quickly as possible.” The banks have as much as 16 weeks to respond to the complaints, rather than eight weeks, the Financial Services Authority said in a statement today. “Some firms are facing a huge backlog and now a surge of new complaints, which has created a bottleneck,” said Margaret Cole , the FSA’s interim director for business conduct. “It is not in the interests of consumers to receive further poor handling of their complaints as a result.” PPI Revenue PPI generates as much as 5.5 billion pounds in annual revenue for U.K. banks, with about 6.5 million policies sold in 2006, the FSA has estimated. The insurance covers payments on credit cards and mortgages in case of illness or unemployment. Customers who bought PPI rarely compared prices and terms or switched providers, and usually weren’t aware they could buy it from a firm other than their lender, the U.K.’s Competition Commission has said. The FSA introduced rules in August after it found financial firms reject more than half of PPI complaints they received, and some rejected “almost all of them.” Edinburgh-based RBS said in May it would earmark 850 million pounds to deal with the claims, after already making a previous provision of 100 million pounds. Lloyds, the biggest provider of PPI, set aside 3.2 billion pounds for the complaints. HSBC Holdings Plc said it estimated its liability at $440 million. To contact the reporters on this story: Lindsay Fortado in London at lfortado@bloomberg.net ; Howard Mustoe in London at hmustoe@bloomberg.net To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net |
2024-10-30 | Bloomberg | What Everyone Knew About Obamacare and Wouldn't Say | As I noted the other day, when Obamacare "czar” Jeffrey Zients announced that the health-insurance exchanges would be working by Nov. 30, he bought the administration some time. Unfortunately for them, most of that time has so far been spent discussing “rate shock” and policy cancellations: the folks in the individual market whose policies were canceled thanks to new regulations and will now have to replace them with something more expensive or that carries a higher deductible. We don’t actually know how bad a problem this is. Mathematically, two things must be true: There are some people in this country who are losing their current insurance and gaining better insurance at a lower cost, and there are some people in this country who are losing their current insurance and getting worse insurance at a higher cost. And there are some who are now getting insurance they couldn’t afford at all before. We don’t know how many people are in each group. Nor do we know how big a problem rate shock will be for the folks who experience it. But that doesn’t matter for the news story, which, in the absence of data, will be a war of anecdotes. Not ideal, but frankly, most of the folks now complaining about the “rate shock” anecdata were often the same folks who eagerly showcased every anecdotal story about a poor single mom who was excited to be getting insurance for the first time. So I find it hard to take their distress too seriously. The law’s supporters have made some quite reasonable points in response -- that rate shock was an unfortunate but necessary consequence of broadening coverage to people with pre-existing conditions, and it may not even affect that many people. You can’t make even the nicest of omelets without breaking eggs. And some of them did mention this at least once during the run-up to the law’s passage. They’ve also, however, made some arguments that were, at the very least, extremely ill-considered, such as saying that the insurance people had before wasn’t “real insurance” and implying that they are too stupid to know what’s good for them. As product marketers will tell you, when customers complain about a product change, here’s what not to do: Declare that your customers are idiots who don’t understand that they didn’t actually want the thing you took away from them. If you don’t believe me, just ask the folks on the New Coke team. There’s also a growing trend toward suggesting that either the people complaining about rate shock or their insurers are engaged in some sort of nefarious behavior. I’m pretty sure that David Frum and Bob Laszewski are neither lying nor too stupid to understand what is happening with their insurance policies, and David’s experience basically matches mine shopping on the Washington exchange -- not shopping for some outside policy that might be more expensive than the marvelously cheap insurance that I’ve seen people insisting must be available on the exchanges. Nor do I find it easy to believe that nonprofit insurers such as Kaiser Permanente, with a strong commitment to accessible and affordable insurance, are sending these letters to spite the government or cheat their members. If they’re sending cancellation letters, I tend to think that this is because those letters have to be sent. But the most interesting line of defense is, essentially, that “we always knew this was coming.” The Official Blog Spouse chronicled the emergence of this meme last summer, and it hasn’t changed much since. It’s interesting because it’s both completely true and completely false -- depending on who you think “we” is. It’s absolutely true that every policy wonk who was writing or speaking about the law in 2009 and 2010 understood that it would mean premiums going up for at least some people, many of whom would lose insurance that they would have preferred to keep. Who it would be depended a bit on how the law unfolded, of course, but at a minimum, young, healthy people who made more than $46,000 a year could expect to pay higher premiums for the same level of coverage. They had to; mathematically, it was not possible for coverage to expand and everyone’s premiums to go down -- not unless you spent more in premium subsidies than the government could afford. But I think it’s also clearly true that the majority of the public did not understand this. In 2008, the Barack Obama campaign told them that their premiums would go down under the new health-care law. And the law’s supporters believed it. The part about reinsurance was always nonsense; unless it’s subsidized, reinsurance doesn’t save money for the system, though it may reduce the risk that an individual company will go broke. But the rest of it all sounded entirely plausible; I heard many smart wonks make most of these arguments in 2008 and 2009. However, it’s fair to say that by the time the law passed, the debate had pretty well established that few to none of them were true. “We all knew” that preventive care doesn’t save money, electronic medical records don’t save money, reducing uncompensated care saves very little money, and “reining in the abusive practices” of insurance companies was likely to raise premiums, not lower them, because those “abuses” mostly consist of refusing to cover very sick people. But that information did not get communicated very well to the public. The administration reiterated that, in Obama’s words, “We will keep this promise to the American people. If you like your doctor, you will be able to keep your doctor. Period. If you like your health-care plan, you will be able to keep your health-care plan. Period.” They also promised that the average family would save $2,500 a year on premiums. There was no fine print about how some folks would lose their insurance, be forced into narrower doctor networks, and see premiums rise, even though they seem to have known what was going to happen. And the wonk community did not exactly hasten to disabuse them. The risks of higher premiums for some were acknowledged in an aside, but they were not headlined. Unless you were reading volumes of writing about health care very carefully indeed, it wasn’t hard to miss that little detail -- at least one former Democratic staffer whose boss voted for the law seems to have been unaware that this was a possibility until her rates increased. For that matter, I still see regular commenters on the liberal wonk blogs that I read repeating the canards about cost savings from uncompensated care, preventive medicine and so forth. I know that many of them were reading those blogs when they pointed out that these things aren’t true, but it doesn’t seem to have sunk in, perhaps because these pronouncements did not get quite as much airtime as analysis of the benefits of the law. In other words, the wonks were living in what I think of as “Expertopia.” It’s a shiny, happy place where everyone knows all the salient facts that the experts have agreed on. The problem is, everyone else was living in the real world, where what “everyone knows” is some compendium of anecdotes from friends, the political speeches they watched, and what they managed to read on the Internet or hear on the news in five-minute bursts snatched from their workaday lives. To see what I mean, consider two stories. In 2002 or thereabouts, I had some bloggers over to my house. Late at night, after more than a few drinks, we began discussing equity research reports. (Two of the bloggers were in finance, and I’d spent an unproductive summer at Merrill Lynch between my first and second years of business school.) We were discussing ... actually, I don’t remember what we were discussing, but somehow, the topic of buy ratings came up. “No one reads the buy ratings,” said Blogger No. 1. “You read equity research reports for the notes.” Blogger No. 2 agreed vigorously. “The buy and sell ratings are obviously meaningless.” And I was tempted to agree. After all, I’d taken multiple classes designed to teach me how to “back out” the most common accounting dodges from financial statements, as well as a summer trying to employ those skills in the real world. And all my professors, and everyone I dealt with, agreed on certain things. For example, ignore the buy/sell ratings, because “hold” actually meant “sell” and “sell” meant “short.” You read equity research reports for the verbal analysis, not some meaningless rating. “Everyone” also knew that you had to ignore ephemera like “big bath” accounting, in which a company facing a big negative charge loads as many negative changes onto the balance sheet as possible, so that they can later reverse some of those charges and have a happy upside surprise. But hold on a minute. Why were companies bothering to massage their earnings if “everyone knew” that you had to back out the surplus charges? And why were equity research analysts issuing hold ratings when they actually meant sell? Presumably because not everyone knew that all these things were meaningless. Some people were buying stocks based on these insider tricks. But we never talked about them. We never even thought about them. By “we,” I don’t mean people writing the reports and financial statements; I mean those of us who were busily selectively revising them to get a truer result. No one in my financial-statement analysis class ever raised a hand and asked why companies engaged in all those gymnastics; we simply took it as a given. Some of my classmates presumably went on to write financial statements and equity research reports. But even those of us who didn’t just sort of ... forgot about the folks all that “useless” writing was supposed to impress. We took it for granted that “everyone” knew which bits to pay attention to, and which bits were high-test horse pucky. That’s right: We’d moved to Expertopia. And the folks who didn’t live there were so far away that we couldn’t see or hear or even think of them. The second story comes from the George W. Bush administration. I told it in my profile of Austan Goolsbee, the former head of Obama’s Council of Economic Advisers: I could keep elaborating the examples: How come in the conservative wonk community, pretty much “everyone knows” that tax cuts don’t raise revenue ... but among the conservative rank and file, almost “everyone knows” that they do? But I’ve made my point, and you’re probably getting a little weary. Let’s move on. In Expertopia, you make unfortunate but necessary trade-offs, like making some people pay more for worse insurance in order to help others pay less for better insurance. But there’s no need to say so, loudly and often, because the trade-offs are obvious -- hardly worth mentioning, even. Maybe you make an offhand reference once or twice, just to keep your bases covered, or maybe you forget. It doesn’t matter much, one way or the other, because how on earth could you think that everyone was going to get to pay less for better insurance? I mean, we’re talking basic math here. We forget that when millions of people hear the president say that “if you like your insurance, you can keep it” and “premiums will fall by $2,500 for the average family,” they don’t listen with a wry smile. They don’t write it off as understandable hyperbole from a president who is working to pass a great law with a few flaws. They don’t think this speech means “I care about getting the best insurance for as many people as possible.” They think it means “if you like your insurance, you can keep it” and “premiums will fall by $2,500 for the average family.” If they didn’t think it meant that, they might not have supported the law. That gap matters -- not least because there’s a strong risk that when the people outside Expertopia finally figure out what everyone knew all along, they will turn on the people who allowed all that tacit knowledge to stay tacit. That’s what Democrats are now experiencing. It’s kind of surprising, in fact, that not everyone knew this was going to happen. |
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