Please note the huge fall in yield on the 10 year note to 3.10% This is very ominous in that it signfies huge financial failures out there.
Actually there were no bank failures last night even though there was a report that a few banks had non performing loans in the 25-50%
I guess that the FDIC could not close on these banks because they could not gurantee depositors yet. They have not raised sufficient moneys
from other banks. It is interesting that the FDIC are loathe to loan from treasury knowing full well that they cannot return the money.
However there was a big failure yesterday:
By Andrew Frye and Jamie McGee
Oct. 3 (Bloomberg) -- Penn Treaty Network American Insurance Co., the provider of long-term care coverage for 120,000 customers, was pushed by a Pennsylvania regulator toward liquidation in what may be the biggest forced breakup of an insurer in the U.S. in at least five years.
Penn Treaty and a unit “do not have the ability to pay future claims without significant rate increases,” Pennsylvania Insurance Commissioner Joel Ariosaid yesterday in a statement. “In the current circumstances, those rate increases simply would not be fair to policyholders.”
The insurer is among at least seven in the U.S. facing forced rehabilitation or liquidation by regulators this year as the recession cuts into capital, according to data collected by the National Organization of Life & Health Insurance Guaranty Associations. That compares with four in 2008. California’s regulator seized Golden State Mutual Life Insurance Co. on Sept. 30 after the company was unprofitable for five straight years.
A liquidation of Allentown-based Penn Treaty, with about $1 billion in assets, would be the largest in at least five years, said Sean McKenna, the association’s spokesman, in an e-mailed statement. “Very few companies of any size have been liquidated in that period,” he said. The association’s data was based on reports from A.M. Best.
Life and health insurers have reported losses and profit drops over the last year as stocks and bonds backing policies fell in value. MetLife Inc., the biggest U.S. life insurer, lost $1.9 billion in the first half, while No. 2 Prudential Financial Inc. posted a $1.1 billion deficit last year. Private investors withheld new funds from the industry late last year, pushing at least 12 insurers to seek U.S. bailouts.
Regulators often try to divest all or parts of insurers they seize to prevent liquidation. The Virginia watchdog is seeking to sell the group business of Shenandoah Life Insurance Co. to Assurant Inc., the New York-based provider of health and homeowner insurance. Shenandoah was seized after losing about $50 million on investments in mortgage-finance firms Fannie Mae and Freddie Mac.
Hartford Financial Services Group Inc., the Connecticut- based insurer, accepted $3.4 billion in government cash in June. Philadelphia-based Lincoln National Corp. took $950 million. New York-based MetLife and Prudential of Newark, New Jersey, shunned U.S. aid and raised money from investors.
Guaranty funds are used to pay claims when regulated insurers are unable to meet obligations. Penn Treaty policies will remain active for customers who continue to pay premiums and a state fund will take effect, Ario’s office said. The funds have the right to assess other insurance companies to raise cash. A state court will weigh Ario’s request to liquidate the company, his office said in the statement.
Penn Treaty American Corp., the parent company of the insurer, fell 15 cents, or 54 percent, to 13 cents in over-the- counter trading yesterday. A request for a statement from Penn Treaty was referred to Ario’s office.
Long-term care policies provide coverage to help pay for home-health aides or residence in a nursing home or assisted- living facility. Policyholders with questions may call 1-800- 362-0700 and dial extension 3270.
Last Updated: October 3, 2009 00:00 EDT
The collapse of real estate is now killing the returns on insurance companies. This will be the first of many failures as one of the pillars of the financial world collapses
ie. the insurance companies. Say tuned to these earth-shaking news stories.
Also note that insurance failures affect Main Street, like the CIT affair.
Loan Deliquencies continue on the rise with credit call defaults now hitting 5% for the first time. I reported to you on Thursday that home equity losses (second mortgages now exceed 4%/
Here is the story on the loan delinquencies:
Here are three people talking about the economy and all of them state that the economy is very weak:
Here is the report on the banks and their non perfoming loans: (Bloomberg)