This report is a few days old, and the shares of HIG have spiked significant since the comments of the CEO apparently have eased the concerns of somebody. Therefore, please be aware that the share price quoted in the report is nearly half what the current share price is. That being said, any paying subscribers interested in my take on this company can feel free to download the appropriate reports.

For those who are not paying subscribers, I'll include this tidbit from the professional subscription report (which goes in depth and significant detail in illustrating exactly what the issues are with HIG).

Shrinking shareholder's equity is threatening solvency; the insurer likely to seek further capital infusion

The margin between the tangible general account assets and general account liabilities of the company is rapidly contracting. With the tangible general account assets (general account assets excluding equities held for trading which pertain to Japanese variable interest annuities, goodwill, DAC and deferred taxes) at $109.7 bn and the general account liabilities (general account liabilities excluding policyholder funds and benefits payable on Japanese variable interest annuities) at $111.2 bn, the margin slipped to negative $1.5 bn as of September 2008 against the postive $2.0 bn in June 2008 and $5.7 bn in December 2007. The contraction in this margin accelerated in the first three quarters of 2008 owing to a significant erosion of the fair value of the investments.

This report is a few days old, and the shares of HIG have spiked significant since the comments of the CEO apparently have eased the concerns of somebody. Therefore, please be aware that the share price quoted in the report is nearly half what the current share price is. That being said, any paying subscribers interested in my take on this company can feel free to download the appropriate reports.

For those who are not paying subscribers, I'll include this tidbit from the professional subscription report (which goes in depth and significant detail in illustrating exactly what the issues are with HIG).

Shrinking shareholder's equity is threatening solvency; the insurer likely to seek further capital infusion

The margin between the tangible general account assets and general account liabilities of the company is rapidly contracting. With the tangible general account assets (general account assets excluding equities held for trading which pertain to Japanese variable interest annuities, goodwill, DAC and deferred taxes) at $109.7 bn and the general account liabilities (general account liabilities excluding policyholder funds and benefits payable on Japanese variable interest annuities) at $111.2 bn, the margin slipped to negative $1.5 bn as of September 2008 against the postive $2.0 bn in June 2008 and $5.7 bn in December 2007. The contraction in this margin accelerated in the first three quarters of 2008 owing to a significant erosion of the fair value of the investments.

I always stand behind my research. There are some times when I am wrong, and when so I will admit it. The regional banks on the list have some serious potential problems from a valuation perspective, and the ones that I performed a full analysis on (downloadable pdf) I feel are overvalued. That included PNC and STI. I am not (usually) swayed by day to day or even month to month movements in the market that do not follow the fundamentals of the company since there are so many other factors at stake here such as government intervention (a very heavy dose), momentum and algorithmic traders wielding a lot of capital, incessant short covering from weak handed players or funds whose hands are being forced through ill-conceived redemption clauses, etc..
I use a 6 to 12 month horizon when shorting, and in certain circumstances must extend even beyond that. Earnings season is upon us again, and we get to see who has no clothes. Don't be fooled by optimistic accounting numbers either. It is the economic numbers that feed the short thesis of the day. Remember, Freddie and Fannie had adequate accounting capital, and they just got their common and preferred shareholders wiped with the brown side of that white tissue in the bathroom.
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