Reggie Middleton's Boom Bust Blog

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.

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I've been gone a day or two. As I have hinted earlier, my full time job is father/husband/son, and my parents just had their 42nd anniversary, yesterday was Halloween, and wifey's birthday is today. I've been a bit preoccupied. Hopefully, my subscribers have been placated by the prescient performance of the timely insurance update. There is more to come.

As was indicated in the last two udpates, Hartford Insurance Group is in realized loss hell (and unrealized loss puragatory). They have more problems coming down the pike as well. I should have a full blown forensice report for professional subscribers next week some time. In the mean time I will leave you with this.

The financial services industry (at least the portion that uses its balance sheet to generate revenues) is a vey incestuous beast. If one catches VD, a half a dozen must visit the clinic - Lehman Brothers being case in point.

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This is the timely insurance sector update for paying subscribers. The subject company of this update reports in a couple of days so I decided to issue an update to inform subscribers on where I stand in regards to this company's prospects. A more formal report will be issued once I have a chance to congeal my projections and assumptions with the company's stated results. One thing is for sure, things don't look good. They may be able to push off reporting the inevitable this quarter (although I doubt it), but they will have to pay the piper eventually since they are in the eye of the perfect storm.

This update also exemplifies the extreme value to be had in the professional subscriptions. I decided to dump a portion of my model's inventory markdown and calculation engine results into the pro addendum to exemplify and illustrate how much high level thought and resources go into the analysis of these various subject companies. Keep in mind this is just the inventory calcluation, which is included because althought operations and premium cycles are weakening singificantly, this company's Achille's heel is trashy investment inventory. The retail summary is 7 pages while the pro summary is 44 pages. 

I will decide, after reviewing the reported numbers, whether I will pursue this company farther. Subscribers can access the research via the following links, Adobe v. 9+ required. Good luck!

 10/25/08 Insurance Industry Update - retail (335.44 kB 2008-10-27 02:57:00)

 10/25/08 Insurance Industry Update - Professional w/inventory addendum (7.5 MB 2008-10-27 03:00:37) 

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