Friday, 27 February 2009

Short the Makers of Slipcases, Martin Kett has found his Soapbox

I shared an office for 2 years in London with a couple of smart guys applying good technology to make the commercial insurance industry more efficient and less stone age. Martin Kett & Geoff Maskell were very supportive of me launching a blog even when I called them "muppets".

Martin has started a blog and just commented about a favorite topic of mine, Lloyd's quest to retire paper processing and to adopt technology (onwards Web Connectivity). See the post here and enjoy Martin's dry with and love for dry gin.

Thursday, 26 February 2009

Notes from the PLUS D&O Conference

Always good to see clients, friends and even some folks who admitted to being readers of this blog. We're in the process of redesigning and will be featuring blog posts from Dave Bradford and me among others and pull in from other favorite commentators.

Dave presented at PLUS about the correlation of bankruptcies and D&O loss and the audience really seemed connected to this important topic. The findings Dave presented were a small part of the research Advisen can conduct and we are looking for equity partners in the project.

This means firms with interest in getting a securities litigation risk score for all U.S. public companies based on their risk of bankruptcy should contact me. By joining others in the initial funding partners will be the only recipients of these risk scores. if interested.

VJ Dowling who I enjoyed meeting at the Allied World party (they have a company rock band which did some good covers), provided a bit of color to Dave about the performance of Odyssey Re (see earlier post about trailing twelve month market cap performance for commercial insurance companies).

Apparently Odyssey's CEO has said he'd love to claim underwriting genius but it was the brilliance of their chief investment officer who foresaw the credit crisis and bet accordingly. If you look at the chart he must have been selling what Joe Cassano at AIG was buying.

Insurance Company Stock Performance

We all know stocks are down and that the financial services sector has been hit the hardest, but I thought it interesting to note the relative performance of the commercial (re)insurance underwriters.

The chart shows that amazingly there are 2 firms in Odyssey Re and Navigators that are up in market cap in the last 12 months.

Unsurprisingly, the firms most in the news including AIG, Hartford, XL & Swiss Re are the firms losing more than 80% of market cap.

I believe the prices reflect investor's opinions of the investment performance and exposure to credit insurance more than underwriting performance, but those underwriting loss ratios will be a big driver of market cap growth as the big claims from subprime and the credit crisis make their way through the system and reserves are set.

E-mail to get charts like this and other insightful data and analytics.

Wednesday, 25 February 2009

D&O Liability: Beyond Class Action Lawsuits

Advisen has just published a 38-page report on securities litigation and new challenges to Boards of Directors and the D&O insurance market. Securities class action suits – which were a minority of securities suits filed in 2008 – no longer are a reliable barometer of public company D&O insurance trends.

Methodologies used by the D&O market to price trends in the past are no longer relevant. The Advisen report goes well beyond anything published by other researchers to break out all forms of securities litigation that might trigger Directors & Officers or Errors & Omissions coverage and details shortcomings in D&O claims management that are contributing to higher defense costs.

To help readers track potential exposure by company, Advisen’s report includes the list of companies facing lawsuits in 2008 and the list of companies facing multiple lawsuits over the past thirteen years.

The information contained in Advisen’s report is not freely available on the web or in any other source and is more complete and relevant than reports from other sources which charge far more for their reports.

Click here to purchase your copy.

Among my favorite quotes in the report from an Advisen customer is “We miss Bill Lerach”.

The Advisen report contains new research but follows a series of Advisen research papers detailing the impact of the subprime and credit crisis on the D&O market. The running tally by Advisen now shows more than 660 major lawsuits from this global economic trauma including 148 securities class actions.

Even in Jail, Weiss Has the Last Laugh

Today's Wall Street Journal opinion page has a scathing attack on the government handling of the settlement with Milberg law firm. While there was a large fine paid and Melvyn Weiss landed in jail, he orchestrated the settlement such that he could get paid from the firm's future fees even after being disbarred.

Part of the shady dealind included hiring the NY State Judge who ruled in favor of the Milberg law firm. Here's the recap from the WSj

A class-action firm's name partners are nailed in a 30-year fraud.
Class-action firm rewards lead perpetrator with share of future earnings. State
judge sanctions the earnings deal. Class-action firm hires state judge. We'll
let our readers decide what they think of this "fact pattern," as a plaintiffs
lawyer might put it.