Credit Insurance

CAMPBELL v. HOUSEHOLD LIFE INSURANCE COMPANY

2011-12-19T04:32:00.000-08:00

The appellant, Karen Campbell, appeals the final summary judgment rendered in favor of the appellee, Household Life Insurance Company ("HLIC"), determining that an application for credit life insurance completed by Mrs. Campbell and her now deceased husband, Danny R. Campbell, was not ambiguous and had never been accepted by HLIC. Because we agree with the trial court that the insurance documentation was not ambiguous and that no insurance contract was created prior to Mr. Campbell's death, we affirm.
The facts are not in dispute. Mr. and Mrs. Campbell refinanced the mortgage on their home through Beneficial Florida, Inc. Simultaneously, the couple applied for optional credit life insurance through HLIC as offered to them by the lender. In order to do so Mr. and Mrs. Campbell executed and submitted an application for credit life insurance and a disclosure form.

The Credit Insurance Disclosure provided to the Campbells for execution contained disclosures required by Florida law, and stated that "you understand that credit insurance coverage may be deferred if, at the time of application you are unable to perform normal activities of a person(s) of like age or sex, if the proposed credit insurance policy contains this restriction." It further provided that "[a]ny credit insurance you buy will be effective on your Loan Date shown above, unless coverage is added after the date of your Loan." The couple also executed an authorization to debit account which allowed Fort Knox National Bank to deduct premium payments directly from the Campbells' checking account. The fixed monthly insurance premium payment was not financed, but was to be included in the Campbells' monthly loan payments.
The Credit Insurance Disclosure also contained the following language on the signature page:

You acknowledge that: (1) your purchase of credit insurance is completely voluntary, (2) there will be no insurance until the insurer has approved your application (if one is required), (3) if the amount of your regular monthly loan payment changes and is less than the amount of your disability benefit, you direct the excess of the disability benefit to be paid to us to reduce your indebtedness, (4) you have reviewed and met the above eligibility requirements for the coverage(s) elected, and (5) you have read and received a copy of this Optional Credit Insurance Disclosure.
(Emphasis added).

Understanding the Credit Insurance Policy

2011-11-30T01:26:00.000-08:00

If you possess a credit card more than likely you have been asked if you would like to include credit insurance. Credit insurance is a type of insurance wherein you are the purchaser and the lender is the recipient. Any expenditure will be made straight to the lender. This type of insurance may be favorable for some but an unnecessary cost for others depending on your circumstances. Knowing what this kind of insurance is and the different categories will assist you in making a knowledgeable decision. There are four key types of credit insurance: disability, property, unemployment and life.

-Credit Life Insurance pays off the debt you owe when you are deceased. The company that the debt is owed to would be the beneficiary of the policy.

-Credit Disability Insurance pays your monthly minimum if you become medically immobilized.

-Involuntary Unemployment Credit Insurance will pay your minimum monthly payment if you are laid-off your job. The insurance doesn't cover payments if you purchase it after you are unemployed.

-Credit Property Insurance normally completely cancels debt on merchandise purchased with the credit if the items are ruined by particular events listed in the policy, a deductible would not have to be paid.

Normally when credit insurance is purchased the offer is free at first. Companies will entice you with a check that you can deposit. Accepting the check is also agreeing to register for the program. Be aware that unlike many insurance plans, you can be obligated to a credit insurance contract by a verbal yes. A signature is not always required.

If you already possess considerable life and disability insurance policies, you may already have enough coverage to cover your credit debts incase of your death or disability. These types of insurances are more flexible than credit insurance and more cost effective. Find out about insurance from Macquarie Life. Also make sure to visit OnePath Life Cover.

If you decide to agree to credit insurance, you should ask about what is "excluded" in the policy. Accepting an insurance policy that consist of all four types (disability, property, unemployment, life) may be more than you need, be sure to check that you are not over-your-head with excessive insurance.

Keep in mind that most credit insurance starts on a free trial footing. When the free trial is over you must decide if you would like to keep the policy. A big drawback is that after the free trial has finished it could be cumbersome to cancel your policy. Sometimes credit insurance seems more like a scam than something beneficial for you. Often times it can be problematic to find the correct phone number or to cancel your policy. Communication with the credit card company may not be of much help since they may be confused about which insurance company that offered you the insurance in the first place. The best piece of advice for dealing with credit card insurance is to make sure you are well informed with all the information you need if you decide to cancel. Write it down; keep it in a secure place with all of your credit card information.

Scam Alert: Do you need to buy credit insurance?

2011-09-12T01:18:00.001-07:00

In tough times we all worry about paying our bills. But should you take out insurance when you’re buying something big just in case?

The Maryland attorney general’s office wants to make sure you understand what’s happening if you do, because they’re getting complaints.

Pros and Cons
Whether you’re buying a car or home it can be nerve racking, so you might be looking for a safety net with something called credit insurance.

It’ll cover your bills if you die, get hurt or lose your job. But Assistant Attorney General Karen Straughn warns it’s notoriously overpriced and not everybody needs it.

She says some people are getting this kind of insurance and paying for it month after month without even realizing it.

It’s being thrown away by people who may have inadvertently signed on for credit insurance when they signed up for a big loan. It might be sold to you with claims it’s mandatory, but in Maryland that’s often not the case.

Instead Straughn warns this kind of insurance is often buried in the fine print of contracts, especially when you’re buying a car.

Dealerships may not explain it to you and it may add it into your finance agreement.

That’s why you’ve got to make sure you understand the terms before you sign on.

Anyone offering credit insurance should disclose it before you commit, so make sure you find out how long you’ll be paying, how much, and exactly what it covers.

Credit Insurance: Is It for You?

2011-09-12T01:07:00.000-07:00

The next time you apply for a mortgage or personal loan, you may be asked if you want to buy credit insurance, or it might already be included in your loan proposal. Credit insurance protects the loan on the chance that you can't make your payments. Credit insurance usually is optional, which means you don't have to purchase it from the lender. In fact, the Federal Trade Commission (FTC), the nation's consumer protection agency, says it's against the law for a lender to deceptively include credit insurance (or other optional products) in your loan without your knowledge or permission.

There are four main varieties of credit insurance: Credit life insurance pays off all or some of your loan if you die.Credit disability insurance, also known as accident and health insurance, makes payments on the loan if you become ill or injured and can't work. Involuntary unemployment insurance, also known as involuntary loss of income, makes your loan payments if you lose your job due to no fault of your own, such as a layoff.Credit property insurance protects personal property used to secure the loan if destroyed by events like theft, accident or natural disasters.

Shopping Tips

Before deciding to buy credit insurance from a lender, think about your needs, your options, and the rates you're going to pay. You may decide you don't need credit insurance. If you do, credit insurance can be an expensive form of insurance. For example, it may be less expensive and more practical for you to get life insurance than credit insurance. Before deciding to buy credit insurance, you should ask:

How much is the premium?

Will the premium be financed as part of the loan? If so, it will increase your loan amount and you'll pay additional interest, and more for points (if points are on your loan).

Can you pay monthly instead of financing the entire premium as part of your loan?
How much lower would your monthly loan payment be without the credit insurance?
Will the insurance cover the full length of your loan and the full loan amount?
What are the limits and exclusions on payment of benefits - that is, spell out exactly what's covered and what's not.

Is there a waiting period before the coverage becomes effective?
If you have a co-borrower, what coverage does he or she have and at what cost?
Can you cancel the insurance? If so, what kind of refund is available?

Before you sign any loan papers, ask the lender whether the loan includes any charges for voluntary credit insurance. If you don't want credit insurance, tell the lender. If the lender still pressures you to buy insurance, find another lender. And review your loan papers carefully to be sure they have been drawn up correctly.

Lenders can't deny you credit if you don't buy optional credit insurance - and if you don't buy it directly from them. If a lender tells you that you'll only get the loan if you buy the optional credit insurance, report the lender to your state attorney general, your state insurance commissioner or the FTC. Consumers should ask these same questions about other extra products offered with their loan, such as auto or shopping clubs, home or auto security plans, and debt cancellation products.

European credit insurance has to adapt to a new era

2011-03-09T03:48:00.002-08:00

Moody’s ratings for European credit insurers is a continuously challenging economic environment as well as common trends in the sector of progressive relaxing in underwriting discipline.
It said that it believes that profitability patterns may differentiate industry players in 2011. In particular, reserves development and costs management will be important drivers of future profitability.

In 2011, some credit insurers may also initiate strategic moves, as a result of the crisis, or in anticipation of Solvency II, which may have various ratings impacts.

Moody’s added that results disclosed by credit insurers in 2010 saw a recovery in loss ratios to levels reported before the credit crisis. This reflected improvements in the global economy, as well as strong measures taken by all industry players to adapt their pricing and risks selection to a challenging claims environment.

It said it expects continuity to prevail in the macroeconomic environment over the next two years, with a high level of business insolvencies and a sluggish economic growth; therefore, spikes in loss ratios are also less likely, marking the entry of the industry into a new cycle.

It said that both sluggish economic growth and the potential for increased levels of self-insurance in reaction to the tightening of underwriting implemented during the crisis will serve to constrain credit insurers’ revenue going forward.

In addition, it believes loss ratios reported in 2010 are unsustainable, as insurers have started to relax their underwriting discipline in order to stimulate demand and mitigate pressures on revenue.

The fragile and uneven economic outlook also exposes credit insurers to large claims and local crises. Finally, in the short term, low financial and reinsurance results will also constrain credit insurers’ profitability.Reserves development and costs management will also be important drivers of future profitability, and these factors may vary by players.

It added that the industry’s new cycle will also be influenced by the preparation for Solvency II. It said that although this legislation is not yet finalised, QIS 5 specifications suggest that regulatory capital requirements for credit insurers are likely to rise. This is a challenge for the industry, which itself has just recovered from the crisis, and is expected to drive an increased focus on capital management in the coming years. In particular, the industry may choose to increasingly rely on reinsurance.

Although reinsurers are currently able to offer ample capacity, from which credit insurers can benefit in the short term, it said it believes this capacity may be volatile or costly in the long term, such that too high a dependence on reinsurers would be a credit negative for the industry.

How to Get Mortgages For Bad Credit

2011-03-09T03:48:00.001-08:00

For people who want to pay off their debts and increase their credit score, they can always look for mortgages for bad credit. It is a loan which is derived from the home equity accumulated over the years in your home. This kind of loan can be quite beneficial for you since it can lower interest costs and monthly payments. It also consolidates your debts so that you can only pay once a month.

The two most accepted choices for bad credit mortgage loans are cash in mortgage finance and a home equity mortgage. These mortgages count on your equity, which will then be used to manage your debts. When you consolidate your debts, it can be arranged to combine all of your credit card payments, auto loans and other related debts into one easy monthly, lowered interest payment. In due time, you will notice that your credit score is improving.

When you apply for a bad credit mortgage loan, you need to increase your down payment as well as your cash reserves. A lower credit score means more money to pay for down payment. Credit scores below 600 require around 5% down payment. Lenders need to have confidence that you can still pay your loans even if you’re going through a financial situation.

You can always have the option to do your own research on this type of loan.

Can you reduce your credit card debts?

2011-03-09T03:46:00.000-08:00

Millions of us are now struggling to pay off our credit cards. The good news is that as the numbers rise, banks are increasingly agreeing to reduce or even remove your debts. We highlight where you can go to get help.

BANKS wrote off an enormous £1.18 billion of card debt in only three months at the end of last year.

That’s up from £740 million in the previous quarter, and up from £894 million during the same period in 2009. The latest figures from the Bank of England show how UK banks are more willing to help those struggling with huge credit card bills.

But this certainly doesn’t guarantee that your debts will be written off. Banks will look closely at whether you can’t pay rather than won’t pay. If you’re squandering your spare cash, you’ll still be expected to meet your payments. Also, having your debts written-off will still damage your credit record.

As millions of borrowers struggle to bring down their card and loan debts, debt helplines and management agencies have seen a huge rise in the number of enquiries.

Steve Rees, managing director of private debt management agency Vincent Bond & Co, comments: “These statistics echo the trends we are seeing at Vincent Bond as the banks, and the collection agencies who represent them, are becoming more prepared to accept settlement offers, with larger amounts of the debts written off.”

As with most other private debt agencies, Vincent Bond charges every customer a fee.

However, there are several charities and government bodies who provide debt advice and management services for nothing. For example, the Consumer Credit Counselling Service and National Debtline are registered charities that provides free, impartial advice to people struggling to repay debts.

Citizens Advice, which also provides free independent advice, has raised concerns with the Office of Fair Trading (OFT) about a number of bad practices used by some commercial debt management firms. These include persistent cold-calling of consumers and taking unauthorised upfront fees.

A CCCS spokesman explained that if people have the ability to repay their debts, instant write-offs are not something they would advise.

Debt advisers put those who can pay their bills onto a debt management plan. They will negotiate with your creditors to make repayments more manageable - interest and other charges are often frozen while you get on a better financial footing. Then you make one monthly payment to the organisation which distributes it among your creditors.

The important thing is that you don’t stick your head in the sand: If you’re in financial trouble, it’s crucial to get professional, impartial help as quickly as possible.

Credit Card Debt Management: How to Avoid Damaging your Credit

2011-03-09T03:45:00.000-08:00

Once you have that thin rectangular piece of plastic, you already feel that you have the license to shop till you drop. While this experience may be fun in some instances, people tend to forget that they have to pay for it. One great shopping trip can then turn into a horrible regrettable event. Not only will this lead you to a great amount of debt, it also wreaks havoc on your credit score.

If you want to maintain a good credit score, it’s advisable to avoid late payments as much as possible. If late payment is your form of habit, get ready to kiss your 3 digit credit score goodbye? How can one pay on time then? Monitor your purchases.

What’s worse than late payments? Missed payments, of course! Forgetting to pay their credit card dues will lead to late payment fees. Some companies even issue high interest rates for missed payments. And so, the solution for this problem is the same as the one listed above: monitor your purchases. Exercise self-control as well. If you need to prioritize on gas and other necessities, then don’t think about buying Chanel. Wait for the time when you’ve organized your budget and expenses. Once you have paid your debts, you can then allow yourself a much deserved treat (in moderation, of course).

Trade credit insurance for small businesses launched

2010-11-04T04:21:00.000-07:00

Towergate is offering trade credit cover aimed at small businesses and is letting them self-police customers over late payment
Cut price trade credit insurance designed specially for small businesses has been launched by a leading insurance broker.

The product costs almost half the typical annual premium and covers up to £350,000 of turnover from the risk that a customer becomes insolvent and cannot pay.

Towergate, run by entrepreneur Peter Cullum, estimates that up to one million small businesses could benefit.

The cover is underwritten by credit insurance giant Atradius and to start with will be available to all sectors apart from construction and clothing.

Gavin McClaren, Towergate's divisional director of credit, said: "At the moment a traditional credit insurance policy premium would start at £3,000 and go upwards, which for a small business is too high a cost. Normally that's allied with a high excess per claim of £500 to £1,000."

"Our product has a premium of £1,870 a year and an excess of £250. That opens a far larger part of the ledger to cover."

Towergate's policy tackles business concerns that credit insurers withdrew cover on a large customer during the recession without any notice or evidence of a change in payment behaviour with particular suppliers,

It is letting companies self-police their policies and cannot withdraw cover on a particular company without any direct evidence that there has been a change of payment behaviour affecting the policy holder directly.

Small businesses have to notify Towergate if a customer pays later than 30 days beyond agreed contract terms during the last six months or risk the cover being invalidated.

Mr McClaren said: "This is a big step for the insurance industry. They are giving up the monitoring to the policy holder. They have no control over what they are covering and what they are not."

The policy does not have any insurer approved credit limits but does come with a maximum liability of £20,000 a year and maximum individual claim of £10,000.

Mr McClaren said: "The impact of a bad debt on a small business can be massive. If you have a 10pc profit margin and sustain a £10,000 bad debt that means you would have to achieve another £100,000 of sales just to standstill."

Banks go to court to defy regulators over mis-selling of credit insurance

2010-10-10T02:14:00.002-07:00

BRITAIN'S banks have picked a new fight with financial regulators in the hope of avoiding multi-million pound compensation claims following the mis-selling of credit insurance.

The British Bankers' Association announced on Friday that it was going to court to block new rules on the way compensation must be paid due to come into force in December.

It will ask the court to judicially review guidelines laid down by the FinADVERTISEMENTancial Services Authority (FSA).

However, the FSA immediately announced it will contest the bankers' action, and advised institutions to continue handling complaints as they have been ordered. The Financial Services Ombudsman, which can adjudicate disputes unresolved by the banks, said it would continue operating as normal.

Credit insurance, to protect against sickness or unemployment, is believed to have been widely mis-sold, via hidden charges on credit cards, personal loans and other debt.

Peter Vicary-Smith, chief executive of Which?, said: "The BBA's taxpayer-backed members should take a long, hard look at themselves and ask why they continue to wage this ridiculous war on consumers."

Elsewhere, it has emerged that more than half of all current accounts no longer pay interest, according to Moneyfacts.co.uk.

Current account customers typically receive just 0.77 per cent interest compared with an average rate of 1.43 per cent five years ago. A total of 55 per cent of current accounts pay zero interest to customers who are in credit. A further 28 per cent pay 0.1 per cent or less.

Rate stays at record low
THE Bank of England held UK interest rates at the record low of 0.5 per cent for the 19th consecutive month.

The bank also voted to hold the £200 billion quantitative easing programme at its current amount. Rates have remained fixed since March 2009.

Cut in tracker rate
BARCLAYS has cut its lifetime tracker mortgages by up to 0.41 per cent to celebrate mortgage lending hitting £100 billion. The new rates start at Bank of England base rate (currently 0.5 per cent) plus 2.08 per cent, giving a pay rate of 2.58 per cent, on life time tracker mortgages with a 30 per cent deposit and a £999 fee.

HSBC cut rates on all its 80 per cent loan-to-value mortgages by 0.4 per cent. All the products, which require only a 20 per cent deposit, have booking fees at £399 or less. The bank also introduced a two-year discounted mortgage at 2.79 per cent with a £99 fee.

Lloyds TSB Scotland launched its lowest ever three-year fixed-rate mortgage at 3.99 per cent. The product is available to first-time buyers, house purchasers and remortgagers with a 30 per cent deposit. The deal charges an £895 fee.

India's Regulator Suspends Sale of Credit Insurance

2010-10-10T02:14:00.001-07:00

India's Insurance Regulatory and Development Authority has stopped the sale of credit insurance by nonlife insurers due to reports of malpractice and inadequate information for the selling of the products.

Nonlife insurers sell credit insurance to banks offering credit facilities to debtors. IRDA said "it is observed that such covers appear to be in the nature of credit default insurance," and such covers need a different regulatory treatment.

"After examining the credit default insurance contracts IRDA has come to the conclusion that the insurers are underwriting risks which do not have proper regulatory framework or sanction," said IRDA, in a statement.

The regulator has ordered all nonlife insurers to stop selling credit insurance until the authority develops detailed guidelines. IRDA said it will seek details of total credit risk exposure of companies and information provided with credit insurance policies issued by nonlife insurers to banks.

The sanction does not apply to Export Credit Guarantee Corp. of India Ltd., a government-owned company that provides export credit insurance support to Indian exporters.

Credit Life Insurance for Bad Credit Car Loans

2010-10-10T02:13:00.000-07:00

Weighing the pros and cons of credit life insurance as part of a bad credit auto loan

Now what?

Once you’ve picked out a car and received the final approval for a bad credit car loan, there are a number of decisions you may still have to make. We know, because at Auto Credit Express we’ve been working with poor credit car buyers for over two decades.

Having seen the embarrassment and frustration that many customers with bad credit often face, we even created a web site to accept applications and match these people up with local dealers that specialize in customers with credit issues.

The alternative – buying a vehicle from a tote the note, we finance anyone car dealer – can be a problem because normally these dealers don’t report your payments to the credit bureaus. But even taking out a loan through a dealer with a legitimate national bad credit lender can end up badly simply by choosing the wrong kind of vehicle. Both situations can create problems and either one might even result in repossession.

The car loans with bad credit process can also be confusing, because in addition to the loan itself, the special finance manager who helped to arrange the loan is bound to offer you a number of “back end” products that you may never have heard of, one of which is bound to be credit life insurance.

Credit life insurance explained

Credit life insurance is a form of term life insurance. Term insurance refers to an insurance policy that, unlike whole life insurance, is in force for a fixed period of time and cannot be renewed. And, also unlike a whole life policy, a term insurance policy builds no cash value.

In addition to being a form of term insurance, credit life insurance is also considered to be a “decreasing” term policy. This means that the payout on the policy is designed to match whatever the loan balance happens to be at any point throughout the loan term. As the loan is paid off, the loan balance decreases and the amount of life insurance covering the loan balance also decreases to match the amount owed on the loan contract.

Buying credit life insurance

If you decide to buy credit life insurance, you usually have to do it at the time you sign the loan contract. The monthly insurance premium is based upon the original loan balance and the cost is added to the finance contract and becomes part of your monthly car payment. This means that because it is part of the finance contract and not paid in a lump sum, you will be paying interest on the life insurance premium as well as on the vehicle loan.

Is it worth the cost?

Whether or not it’s worth the cost is a decision that you’ll have to make. Here are a few of the facts:

Advantages:

1. Peace of mind – credit life insurance will pay off your car if you should die before the loan contract is paid off.
2. A single payment – the insurance payment becomes part of your monthly car payment, so there is no separate insurance premium you’ll need to pay.
3. If the loan is covered by credit life insurance, your estate won’t be responsible for the loan balance or loan payments if you die before the car is paid off.

Disadvantages:

1. Generally speaking, credit life insurance is usually more costly than if you were to take out a separate term life insurance policy for the loan amount.
2. In addition to paying insurance premium, you are also paying the interest expense on the balance of the policy cost every month.
3. If there is no co-signer on the loan and you are single, even if the loan isn’t paid off before you die your family is not legally responsible for the loan balance.

As we see it

The decision to carry credit life insurance on your loan contract is one that you will have to make. If you have a family or a co-signer and you’re worried that they might not be able to make payments on your car if you die, you might want to first look at the costs of a term life policy before you sign on the dotted line making credit life insurance a part of your car loan.

At Auto Credit Express we have helped thousands of people with bad credit buy cars and reestablish their credit at the same time. Our nationwide network of affiliate dealers specializes in bad credit car loans. Unlike other sites, our toll free number is listed on every page in case you have any additional questions.

So why not begin the process right now by filling out our secure online bad credit car loan application to see what we can do for you.

Export credit insurer focuses on mining

2010-09-18T01:13:00.002-07:00

CAPE TOWN — The Export Credit Insurance Corporation of SA is becoming more exposed to the mining industry as South African mining companies seek out investment and trade opportunities in the rest of the world, and particularly Africa.

The agency, which falls under the Department of Trade and Industry, was established in 2001 to provide export credit insurance for export transactions and to provide political risk insurance for outward investments from SA.

In the company’s annual report tabled in Parliament yesterday, CEO Patrick Kohlo said the planned projects are concentrated in the mining sector, constituting 45,6% of those approved by the board.

Infrastructure, at 19,5%, is second to mining, with the agro- industry (9,3%), accommodation and catering (7,1%) and other sectors making up 18,5% of all projects approved. Results tabled by the agency have also confirmed the big hit that trade suffered during the global financial crisis last year.

Its chairman, Tladi Ditshego, said that corresponding with the downturn in underwriting activity brought about by the international crisis, gross premium income for this financial year dropped to R156,9m.

That compares with the R170,3m recorded in the previous financial year.

The company plans to focus its efforts on offering its products to small, medium and micro enterprises by actively promoting supplier and buyer credit products for small or medium transactions with quicker turnaround times in the approval process.

The agency has also sought to aggressively pursue opportunities that are beginning to arise as a result of Africa’s burgeoning trade with the rest of the world, in particular China.

Trade credit rates fall as capacity grows

2010-09-18T01:13:00.001-07:00

New insurance capacity, increased insurer competition and improved risk management have led to positive developments for buyers of trade credit insurance across most of Europe, according to Marsh.
The broker’s latest data for 2010 suggests trade credit insurance rates are reducing in France, Germany, Italy and the UK.

Meanwhile, rates are stable or experiencing minimal increases in Belgium, Denmark and The Netherlands; and localised increases are being recorded in Greece, Portugal and Spain. Trade credit cover is also becoming easier to procure, with insurers no longer taking industry sector-wide underwriting decisions.

Tim Smith, Leader of Marsh’s trade credit practice in Europe, the Middle East and Africa, commented: “The trade credit insurance market has been transformed in 2010 with rates falling or stabilising in most key European markets. Following the recession and the widespread cancellation of cover in certain high-risk industry sectors, insurers are now writing more business and deciding cover on a company-by-company basis.

“As insurers have developed more sophisticated risk assessment techniques, so companies are more willing to share financial information and formalise their business order policies. This both aids insurance procurement and helps companies obtain better terms.

“Demand for trade credit insurance remains strong. Entry to the market by insurers new to the sector has increased capacity and competition for business among trade credit insurers. For companies seeking trade credit insurance, the outlook for the remainder of the year and into 2011 is very encouraging, especially for organisations with strong credit management procedures. “

China Short-term Export Credit Insurance Hit $100B

2010-09-18T01:11:00.000-07:00

September 17 -- China Export and Credit Insurance Corporation’s (CECIC) short-term export credit insurance premiums leapt 107.2 percent year-on-year to $104.39 billion as of September 15, reports China Securities Journal.

CECIC provided short-term export credit insurance for $42.3 billion worth of exports from China to emerging economies in the first eight months of 2010, up 91.2 percent year-on-year.

As of September 14, CECIC generated insurance premiums of $126.93 billion, 1.1 times the insurance premiums for 2009, of which export credit insurance premiums jumped 113.6 percent year-on-year to $110.19 billion.

Shares of Ping An Insurance (Group) of China (601318, 2318.HK) dropped 0.35 percent to close at 48.76 yuan today.

How credit insurance can help your company

2010-08-14T21:24:00.001-07:00

Credit insurance covers the policyholder's interests in the event of a borrower's insolvency or dishonesty (deliberate non-payment) and the potential loss the creditor may suffer. These are universally known as payment protection insurance or credit default insurance.

After the contract stated risk occurs, the insurer shall undertake the contract of insurance premium to compensate its insured losses, according to the agreed amount of damages. The term credit is derived from the elements between the supply of goods from one company to another or the provision of a service and payment for a given period of time (usually 30-180 days).

The commercial risks primarily include the buyer's insolvency (bankruptcy). In addition, significant risk factors are changes in the foreign exchange transactions as well as others that have a negative impact on commercial relations.

The political risk factors include political unrest, massive strikes, a coup d'etat, not covered by government action to declare a ban (an embargo) or suspensions on exports, imports, and other commercial activities.

Any company that delivers a product or provide a service on account, must protect itself against the risk of unpaid claims. And these are capable of causing liquidity constraints, which depending on the level of outstanding debt can rapidly lead to financial problems of a company. The credit does not only claim compensation for a loss, but also the credit rating of declining business at home and abroad.

In credit insurance, the forms trade credit, are secured by receivables from goods and services, and capital goods credit insurance vary. Political risks can be secured through export credit guarantees.

For the broader sphere of credit insurance among consumers, differs only to banks, for example, in hedging against MRP or installment loans from individuals.

It has in times of increasing unemployment, an implication due to the corresponding increase in judicial decisions in this segment. In this extended environment, the deposit insurance settles, which is similar to a bank guarantee.

Credit insurance was launched for the purposes of issuing specialized insurance. The objective was to combine the product lines of business credit insurance, surety insurance and fidelity insurance, which were previously offered occasionally by large insurance companies, to companies to provide competent protection against liquidity shortages.

Consumer credit insurance is a means for consumers to cover the liquidation of loans, such that even if the debtor passes away, incapacitated, or loses a job, the debt can still be repaid.

Lebanon ranked third among 12 Arab countries in the value of overall export credit insurance

2010-08-14T21:21:00.000-07:00

BEIRUT: Figures issued by the Arab Investment and Export Credit Guarantee Corporation (Dhaman) indicate that Lebanon ranked third among 12 Arab countries in the value of overall export credit insurance contracts signed in 2009, as reported by Byblos Bank’s Lebanon This Week.

Dhaman provides insurance coverage to Arab and non-Arab investments in its member countries against non-commercial risks, as well as insurance against commercial and non-commercial risks for inter-Arab and worldwide export credits.

As an exporter, Lebanon signed $77 million worth of export credit insurance contracts in 2009, accounting for 13 percent of the total value of such contracts. Lebanon signed $85.9 million or 13.7 percent of the total value in 2008.

Lebanon ranked ahead of Kuwait with $50.3 million (8.5 percent), Bahrain on $27.5 million (4.7 percent), Egypt with $24.8 million (4.2 percent), Syria with $24.4 million (4.1 percent), Sudan with $10.5 million (1.8 percent), the UAE with $9.4 million (1.6 percent), Oman with $4 million (0.7 percent), Jordan with $3.1 million (0.5 percent) and Algeria with $1.8 million (0.3 percent). It came behind Saudi Arabia, which accounted for $247.2 million, 42 percent of the total and Tunisia with $109.6 million (18.6 percent). Lebanon did not sign any investment insurance contracts with Dhaman last year as an exported FDI.

In parallel, Lebanon ranked in 13th place among 17 Arab importing countries with $5 million worth of export credit insurance contracts signed in 2009, representing 0.85 percent of the total value of such contracts. Lebanon ranked in 8th place with $16.8 million worth of such contracts signed in 2008.

Know your new rights in the great credit card clampdown

2010-03-20T21:19:00.000-07:00

Thousands of people whose credit card rates are increased suddenly were promised new rights last week, though critics said it would do little to stop the practice.

The government announced plans to clamp down on the industry to make it fairer and more transparent. The proposals, announced by the Department for Business, Innovation and Skills (BIS), outlined five rights that, it claims, could save consumers £300m a year.

They include the right to pay off the most expensive debt first when there has been a balance transfer, more time to reject increased rates, and better access to information.

Sunday Times readers have complained that their credit card rates have risen recently — in some cases by as much as seven percentage points.

Egg, part of Citibank, Halifax, Capital One and Virgin Money have all increased rates for some customers this month.

James Taylor, 54, who runs an advertising agency in Reading, received a letter from Capital One saying he would have to accept a seven percentage point increase in his purchase rate to 27.9% or stop making new purchases on the card.

He said: “It’s like being in a restaurant and finding out that the meal that would have cost you £10 will now cost £20. I felt I was being held hostage.”

He has declined Capital One’s higher rate and switched to another provider.

Capital One said: “We must adjust rates to account appropriately for the increased risk of lending to consumers in an economic downturn.”

The government’s new rules will not ban the practice but will increase the amount of notice card firms must give from 30 to 60 days.

David Black of Defaqto, the data firm, said: “The new rules will offer a comfort blanket to consumers but if you have already had your rates increased, these measures will offer little protection. The best you can do is to switch to another card with a 0% introductory rate on balance transfers.”

However, Virgin Money last week cut its 0% offer from 16 months to 14 months, leaving the Barclaycard Platinum at the top of the best-buy tables with 15 months interest free.

It is hoped the new credit card rules will be in place by the end of the year. However, two providers have indicated they will not be able to introduce higher minimum repayments this year because of “technical difficulties”, BIS said.

Here we assess the new rights:

1 RIGHT TO REPAY QUICKER

One of the main benefits for consumers is the drive towards a “positive order of repayments”, where the most expensive debt is paid off first. Today, almost 80% of cards pay off the cheapest debt first, said Defaqto.

Say you transferred £2,000 to a card offering 0% on balance transfers for 12 months but charged 18.9% on purchases from day one. Say you also made £2,000 of purchases and paid back £190 a month.

With a negative order of repayments (where the cheapest debt is paid off first), you would pay a total of £410 in interest in the first year and still be left with a balance of £2,130 to repay, said Moneynet, the comparison site.

If the payments were going to the most expensive debt first, you would pay £187 in interest. The £2,000 on purchases would have been repaid, assuming you made no other purchase during the year and you would be left with the £2,000 on the balance transfer to pay off.

There are only two providers that now offer a positive order of repayments — Nationwide and Saga — the latter provides services only to the over-fifties.

Black suggests having two cards if you want to take advantage of balance transfer introductory offers and 0% on purchases. For balance transfers he suggests the Barclaycard Platinum, which offers 15 months at 0%. There is a 2.9% fee and its free purchase period lasts only three months. For purchases, you would be better off with a Tesco Clubcard, which has 12 months interest-free on purchases.

If you would rather have one card, consider the AA credit card, which offers 0% on balance transfers and purchases until November 2010.

Another measure is to force customers to pay off at least 1% of the debt on top of interest and other charges, to ensure they pay off the balance faster.

2 RIGHT TO REJECT RATE RISES

Customers will also be given 60 days’ notice that their interest rates will increase rather than the 30 days that providers offer today. However, they will still have to stop using the card if the new rate is rejected but can pay off the debt at the old rate.

Customers can also reject automatic credit limit increases and providers will be banned from increasing limits for those at risk of falling into financial trouble. And customers will be able to ask for a reduction in credit limits online rather than through customer services.

3 RIGHT TO CHECK YOUR CREDIT FILE ONLINE

Consumers will have better access to the credit files used by providers to determine how risky a customer is. You can already access your file for £2 from Call Credit, Equifax and Experian, but these are sent by post. BIS wants reports available online. Equifax already offers this service, while the other two have until June to comply.

Consumers will also be given more information about the way they use their cards. A minimum payments warning will be sent, for example, highlighting the overall cost of paying only the minimum each month. An annual credit card statement will also be issued allowing you to compare your spending and interest charges from one year to the next.

Greece Concerns Surface in Currency Markets

2010-03-20T21:17:00.000-07:00

While European stock markets are taking recent jitters about European support for Greece in stride, concerns are bubbling up in the foreign-exchange and credit markets. The euro is down 0.3% against the U.S. dollar to $1.3578, after falling about 1% yesterday from a height of $1.3740 and briefly crossing beneath the $1.35 level. The last time Europe’s common currency ended a New York trading session below $1.35 was May 2009.

Meanwhile, traders in the credit-default swaps market are again bidding up the price of government debt insurance as uncertainty mounts over the nature of any Greek financial-rescue plan. The cost of insuring against a Greek government debt default for five years is now about $322,000 a year compared with $316,000 yesterday and below $300,000 earlier this week, according to data provider CMA DataVision. (Greece insurance costs are still below the $350,000 to $425,000 range they occupied throughout February when Greece debt woes were center stage.) Credit insurance costs for Portugal and Spain are also slightly higher.

The reason for the ruckus: With German officials now seeming to change gears and be more open to involvement by the International Monetary Fund in any emergency Greece rescue plan, investors and analysts are worried about the impact on the broader euro-zone. IMF involvement could, like some European countries fear, be a major embarrassment that weakens the long-term credibility of the euro. Still, it may be premature to be too bearish: While the euro isn’t out of the woods yet, the end-game for Greece could be in the wings.

“The sudden German turn-around caught markets off guard,” analysts at Italian bank UniCredit say. They add, however, that “we think the short-term risks are limited, as financial support will most likely be pledged soon by either the (European Union) or the IMF.” Next week’s European Union summit could therefore be pivotal.

Bad credit can mean higher insurance premiums

2010-01-29T21:02:00.000-08:00

policyholders are well aware a hurricane is guaranteed to hike insurance rates, but fewer realize their credit reports also are factored into homeowner and automobile insurance premiums.

Consumers who have suffered financial setbacks because of the economy are seeing higher homeowner and auto insurance premiums, but the mistakes often found in credit reports also can lead to rate hikes.

Even Mississippi Insurance Commissioner Mike Chaney said that he recently faced a 10 percent increase in his Safeco auto insurance rate because of an error on the insurer’s part.

He said his rate was corrected when he questioned the charge, based on his credit history.

“The bottom line was, when we got down to it, they had rated me a credit risk because the agent had checked that I was eligible to pay on installment,” said Chaney, who pays his premiums in a lump sum. “My credit history is very good because I have a thin credit file, very little credit.”

Insurance companies contend consumers with bad credit tend to file more property insurance claims. Consumer advocates question the accuracy of studies that find a correlation between credit and risk. They also argue the industry should stick with more relevant risk indicators, such as claims history and the condition of property being insured.

The debate is attracting more attention as a bad economy affects consumer credit and also has consumers scrutinizing their expenses.

Chaney sides with consumer advocates who believe insurance companies use credit histories to cherry pick customers and charge higher premiums. The commissioner said credit information in some cases allows insurance companies to raise premiums without a state-approved rate increase.

“It’s a serious game for them,” Chaney said. “It’s always about money.”

Insurers defend their use of credit reports to develop insurance scores, which dates to the mid-1990s.

They cite a 2007 Federal Trade Commission study that found credit-based insurance scores do predict risk for automobile policies. Studies sponsored by insurance companies, and the state of Texas, have reached similar conclusions.

Insurance companies point out that customers with good credit are rewarded with lower premiums. They view rates partly based on credit as an equitable way to set premiums.

“If you’re conservative with your finances, you manage your finances and credit well, typically, you’re also going to be an individual who is less likely to be involved in an accident,” said Robert Hartwig, who heads the industry’s nonprofit Insurance Information Institute. “You’re going to be someone who is more likely to obey speed limits. You’re going to be someone who is less likely to drive impaired. You’re going to be less likely to be someone who fails to perform maintenance on your car.

Scale of China's export credit insurance and guarantee up over 80%

2010-01-29T21:01:00.000-08:00

China Exports & Credit Insurance Corporation (Sinosure) completed 11.66 billion U.S. dollars worth of insurance and guarantee business in 2009 amid a severe international trade situation, an increase of 85.8 percent year-on-year.

Of them, short-term export credit insurance policies amounted to 90.27 billion U.S. dollars, representing 2.2 times that in 2008, and not only meeting but exceeding the target of 84 billion U.S. dollars set in national policies ahead of schedule.

In 2009, the proportion of exports covered by export credit insurance to total exports rose significantly, with the export credit insurance coverage on the general export trade reaching 18.6 percent, 12.1 percentage points higher than that of 2008.

The support given to exports by major industries or exports to emerging markets has achieved new progress, helping enterprises export 49.15 billion U.S. dollars of goods to emerging markets such as Africa, Latin America and Central and Eastern Europe, up 114.1 percent year-on-year.

The results of the support to help enterprises seize orders and maintain market shares are emerging. Regarding the problems that "enterprises were afraid to receive orders," Sinosure issued more short-term export credit insurance policies, with the amount of 30-day or longer export credit insurance policies rising by 144.9 percent in 2009. Regarding the problems that "enterprises lack the financial capacities to receive orders," Sinosure actively issued export credit insurance policies to help enterprises secure trade financing totaling more than 160 billion yuan.

EU Approves Austrian Short-Term Export Credit Insurance Plan

2010-01-10T02:58:00.001-08:00

BRUSSELS (Dow Jones)--The European Commission Thursday cleared the Austrian government to provide export credit insurance to help countries unable to find coverage from private sources.

The government scheme, which is cleared to run until the end of 2010, is designed to help Austrian exporters cope with the fallout from the financial crisis.

The commission, the European Union's regulatory arm, has cleared similar measures for other countries in the bloc.

Call Your Lender and Strike a Deal

2010-01-10T02:55:00.000-08:00

Got credit card debt? Relief might be just one phone call away.

This money-saving strategy is pretty straightforward: Call your credit card company and sweet-talk the customer service rep into lowering your interest rate. (Don't worry, we'll tell you how to play your cards right during your call in a moment.)

What's a few squirmy minutes on the horn worth in cold, hard cash savings? Plenty: On a $6,000 balance, at a 19% APR that you want to pay off in one year, negotiating a rate reduction to 12% will save you $198 in interest. (Monkey with this debt reduction planner calculator to see what it's worth on your own balance.)

Dealing with the new lending reality
Clearly, anyone who carries a balance on their credit card should start dialing for dollars right now. However, unlike the good ol' days of credit card debt (yes, there were some good things about unabashed competition and rate wars), this strategy isn't the slam-dunk that it used to be.

A survey several years ago found that more than half of people who asked were able to lower their interest rate by more than one-third. I don't know what the success rate is today, but anecdotal evidence suggests that as lenders have tightened their standards and reduced their exposure to consumers' indebtedness, they are more willing to lose your business to a competitor than in the past.

So what's a gal with a credit card balance to do? Give it the old college try, that's what.

Will this work for you?
Talking your credit card company into lowering the interest rate on your account has more hurdles than yesterday's dialing-for-dollars exercise to get a break on your cable TV bill.

The customers most successful at getting a break generally have these things going for them:

A stellar on-time payment history. If you've been late paying your bill (or have skipped a month or so altogether) in the past six to 12 months, your bank probably won't be as amenable to negotiations.
A relatively blemish-free credit reputation. Lenders are constantly checking your credit file to see how you're handling your other debts. So if you've been a disaster customer with another card company or have outstanding collections marring your credit file, you don't have a lot going for you when you make that call.
A long-standing relationship with your lender. Being a longtime customer can work in your favor. Being a longtime customer who regularly carries a balance (thanks for the interest payments!), uses your card frequently (thanks for the transaction fees!), or takes the bait for special offers (thanks for signing up for our overpriced credit insurance!), you are considered a "good" (aka "profitable") customer and one worthy of keeping on your lender's books.
Have a handful of competitors' offers to refer to during your call. Credit card competition has ramped up in recent years, as card companies like JPMorgan Chase (NYSE: JPM) and American Express (NYSE: AXP) now must contend with retailers such as Target (NYSE: TGT) and Home Depot (NYSE: HD) offering their own branded credit cards. (We'll show you where to find competitors' rates in a second.)
So if you have a relatively blemish-free credit record, you've been a longtime customer, and you have the patience to work your way up the phone tree (or call back multiple times until you get a bank representative who will play ball), the deck is stacked in your favor.

How much of a break should you request?
If you don't already have the details of your debt, use the "Get to Know Your Debt" worksheet (.pdf file) to track how much you owe, to whom, at what interest rate, and when it will be paid off.

Next, you want to see what your bank's competitors are offering. LowCards.com, IndexCreditCards.com, and Cardhub.com are a few places to do some research, and you'll find information both on traditional bank cards like Citigroup (NYSE: C), Capital One (NYSE: COF), and Discover Financial (NYSE: DFS) as well as retailer-specific cards.

Keep in mind that low, low rates that many issuers offer typically expire after an introductory period. If you can pay off your balance during that time frame, ask your lender to institute a low rate like that for a fixed period. If it's going to take you longer to pay off your balance, shoot for a more realistic ongoing rate reduction.

Start dialing!
Now that you're armed with information about your current debt, and you know what kinds of deals are out there, psych up to make that important phone call.

Feeling tongue-tied? Use our sample debt negotiation script to guide your conversation to its fruitful end. If you need more moral support, call in the reinforcements! Tap into the collective wisdom of the longtime Fools who frequent our active Credit Cards and Consumer Debt discussion board. Check out the helpful FAQ, too.

If it doesn't work ...
Keep trying. If you don't get what you want the first time, try to get another customer service rep or supervisor on the line. Still won't budge? Mark your calendar and call back in a few months.

More ways to save ...
Here are two other money-saving strategies you can employ:

1. Move your balances to your lowest-rate card. Simply call your lender and ask how to transfer funds. And be sure to find out what fees -- if any -- you'll be charged. (If you're maxed out on those cards, then forget it.) Weigh those against any interest savings before making the move.

2. Sign up for a new card with a low balance-transfer deal. The websites mentioned above keep a list of current balance-transfer deals. One very important thing to note before opening a new card and moving what you owe onto it: The balance-transfer strategy is rife with "gotchas" that can wipe out any savings. Read -- no, memorize -- "How to Win the Balance-Transfer Game" before you do it so you can avoid the land mines.

Trade Credit Insurance and the Global Credit Crisis

2009-12-17T00:20:00.001-08:00

The severe, widespread, and persistent economic downturn has featured the retrenchment of bank credit, the “drying up” of letters of credit, and the virtual disappearance of the secondary banking market. These conditions have triggered a significant rise in payment defaults and corporate failures, which in turn have been reflected in a significant increase in claims against trade credit insurance policies.

Indeed, the three major trade credit insurers all had high loss ratios for this coverage line in 2008, and the performance has worsened during the first six months of this year. As a consequence, for the past several months, credit insurers have been reviewing their exposures and reducing them with respect to industry sectors and specific countries, as well as individual buyers. Unfortunately, for businesses seeking to purchase credit insurance, this has translated into an unprecedented reduction in available credit limits.

As the size and frequency of claims rises, both insured businesses and their insurers have become increasingly burdened with claims and collections processing. Furthermore, there is no coverage available at all for certain industry sectors and businesses seeking to insure transactions in specific countries. Businesses that have had significant claims or poor recent loss history are experiencing dramatic premium increases. And, some are finding it difficult or impossible to renew their coverage at any price. Frequently, there is no alternative market once other insurers have seen the loss ratios and/or bad debt experience.

Nonetheless, the news for businesses with potential credit exposures is not completely negative. During the first two quarters of 2009, as the overall level of exposure has increased substantially, the good news is that insurers are still providing coverage albeit at higher costs. The greatest impact has been on what the insurers consider to be high-risk buyers and trades. Meanwhile, many credit insurers continue to be willing to insure businesses that have effective credit management and sound business plans. In fact, even a business in an industry sector or trade region that has had difficulty obtaining coverage in the past may be able to obtain cover if its credit management record is exceptionally strong.

On the other hand, a company with poor credit management—even in what insurers might consider a desirable trade sector—may find it difficult to obtain credit insurance. In this environment, insurance brokers and advisors can help insurers understand an individual company’s credit exposure and make informed underwriting decisions.

Given the challenges present in the traditional insurance market for trade credit insurance, some firms have been exploring alternatives such as “top-up” cover, other insurers, accounts receivable purchase agreements, and government support.

Top-up cover is insurance that sits above whatever protection might be available under a firm’s existing trade credit insurance policy, thus raising the overall amount of protection available to the firm.

While a limited number of insurance companies are willing to provide this type of coverage, it is not available to address risks in all parts of the globe. Further, top-up cover generally has very restrictive terms. Several insurers will only provide this cover if the risk is “investment grade” or better. Most insurers willing to provide the coverage do so to address capacity shortfalls while maintaining strict underwriting standards. There are also potential issues related to the sharing of salvage. Notably, if the top-up insurer doesn’t agree with the primary underwriter’s assessment of the exposure, it will limit its level of participation in the program.

Alternative markets

Smaller credit insurers generally have not recoiled from the market, primarily because they did not cut their rates prior to the credit crisis and have remained prudent in their overall risk taking. While these insurers may be helpful in certain situations, they cannot replace the capacity offered by the major insurers. In general, they tend to be more suited to isolated individual or local exposures rather than more extensive portfolios of credit risk.

With the traditional insurance market for trade credit coverage so challenging, a growing number of business are placing credit risk in their captive insurance companies with excess-of-loss reinsurance provided by multi-line credit insurers. A captive program tends to work well when the insured business has sophisticated credit and collections procedures and is willing to retain a sufficient amount of risk in the form of an aggregate deductible.

There is also a developing market for specific approaches for one-off risks, known as structured trade credit. Although this market is currently dominated by financial institutions seeking to insure trade financings, other large corporations have been able to obtain coverage for certain risks in emerging markets. However, given a recent spike in claims, insurers have become more selective and their premium rates have increased significantly in step with bank loan margins.

Neither the top-up cover nor the structured trade credit market will provide a solution in situations where credit limits have been withdrawn because the business seeking to obtain coverage represents a poor (or declining) risk. Underwriters are being extremely cautious and will avoid any risks they deem to be potentially volatile or unprofitable.

Export Credit Agencies (ECAs)

ECAs appear more pragmatic and are less inclined to reduce their coverage limits than the private sector. By and large, many ECAs have a different mandate than their counterparts in the private sector. Specifically, they must support or help to facilitate exports and, as a result, may tend to be less concerned about an individual risk. In addition, because of government support, they often can taker a longer-term view. ECAs may be useful alternatives for businesses that are exporters and have exposures that are limited to a handful or fewer international markets.

Government support

Some national governments have been willing to provide some degree of support for companies operating in their domestic markets. However, for the most part, these credit facilities have been focused on small and mid-sized enterprises, limited in scope and capacity and expensive in some countries.

Generally, it appears unlikely that these facilities will develop quickly enough to address the challenges faced by large, global companies that have seen significant reductions in their trade credit insurance limits. Many governments appear wary of the open-ended commitment that may be required to support larger domestic insurance limits.

Finding a solution

While no readily available pool of trade credit insurance exists to underwrite marginal and problematic risks declined by the major credit insurers, businesses should try to work more closely with current insurance markets to appeal limit reductions and policy non-renewals. It is worth noting that some limit reductions arise not from specific concerns about individual buyers, but from general concerns about the trade, country, or requirements from shareholders or reinsurers to reduce the level of trade credit exposure across an insurer’s overall risk portfolio.

Insurers can be part of the solution by improving their risk assessment capabilities and providing reinsurers with adequate returns on their credit risk. This will enable them to attract sufficient risk capital in the future.

While the reinsurers’ appetite for credit risk eventually may return to historic levels, it is currently hard to predict when that might happen. In the interim, businesses with trade credit exposures need to work with their insurance brokers and risk advisors to assess all potential solutions for risk transfer and risk mitigation, including those outside of insurance.

In this environment multinational businesses can take a number of steps to assess and manage their receivable risks, including the following:

Negotiations with insurers

If trading experience is excellent, explore appealing for a reduced or withdrawn credit limit.

This appeal will have to be supported with specific information, such as up-to-date accounts.

The older the accounts, the more important other information becomes, such as management accounts.

Other “underwriting type” controls should be examined; these will include stock and sales returns, a forward order statement, regular aging returns (trading experience) to the underwriter, and retention of title, for example.

Given the downturn, the limit may no longer be required at the same level; this needs to be investigated, as some businesses treat the retention of limits almost as a non-negotiable requirement even if they are not used.

If a shorter credit period can be negotiated, a lower limit may suffice.

Claims management

Make sure claims are filed promptly and within the parameters of the policy.

Engage your claims brokers and insurers as soon as a potential loss is discovered so that proper filing procedures can be followed.

Alternative products

All available insurance markets should be fully explored.

For certain firms that qualify, the “Accounts Receivable Put Option” market may be a viable option if your company’s profit margins can support the high premium cost.

For businesses with strong credit and collections management, and the ability to retain risk, the use of captive insurance companies should be explored. It is possible to combine a third-party credit management system with an excess-of-loss captive program.

Single-risk accounts that are financially viable but too large for the current insurer might choose to explore either top-up cover (where available) or indications from the structured trade market, potentially on a syndicated basis.

In short, the takeaway for businesses with trade credit insurance is that while these challenging insurance market conditions persist for this coverage—and even beyond—they need to be working closely with their insurance brokers and advisors to forge stronger relationships with their current insurers and others providing various forms of trade credit coverage. This will help maximize coverage opportunities or options in this environment. Meanwhile, insurance companies will need to improve communication with their trading partners and consider alternative underwriting and pricing models to help reduce the likelihood of a repeat of the challenges associated with trade credit coverage that have occurred during the current global economic downturn.

Germany to subsidise firms' credit insurance -body

2009-12-17T00:16:00.000-08:00

FRANKFURT Dec 14 (Reuters) - The German government will subsidise commercial risk insurance to help companies keep the flow of industrial goods moving, the country's insurance industry body said on Monday.

The state has reached a deal with credit insurers in which Germany will make 7.5 billion euros ($11 billion) in guarantees available through the end of 2010 for additional insurance cover when credit insurers are unwilling or unable to take on the risk, GDV said.

The agreement comes months after industry groups said the insurers had left them in the lurch during the crisis by slashing the availability of cover for non-payment of goods and other commercial contracts, a charge the insurers have denied.

"We hope that the programme will prove its worth and we will help the government set it up," said Peter Ingenlath, the chairman of GDV's credit insurance committee.

Under the programme, Germany may provide additional risk cover up to a level matching that provided by a private credit insurer, though the set 2.88 percent annual premium for the additional cover is well above the cost of commercially available insurance, GDV said.

Credit insurers will handle the business and pass the cost for additional cover directly to the government, which should simplify the process for corporate customers, GDV said.

France has a similar programme, in which the state can step in to help a company if a credit insurer reduces coverage limits or declines to extend risk cover.

Bundesbank President Axel Weber last week expressed scepticism about the government covering such commercial defaults, saying it entailed considerable risk for taxpayers.

UNDERWRITING LOSS

The rise in corporate insolvencies in the wake of the financial crisis has boosted losses at credit insurer. GDV predicted that costs and damage claims would reach 114 percent of premium income this year, leading to an underwriting loss of 200 million euros in the segment in 2009.

Premiums in the segment are expected to fall 1.5 percent to 1.4 billion euros this year, GDV said.

Germany's five biggest credit insurers currently have about 39,600 domestic contracts on their books, compared with 38,800 at the end of 2007 before the economic crisis, the industry body said.

"This is clear evidence that credit insurers are standing by their clients," GDV's Ingenlath said.

Credit insurance in Germany is dominated by three players -- Allianz unit Euler Hermes, Atradius and French credit insurer Coface, part of French investment bank Natixis, which together have 90 percent of the market.

The head of Euler Hermes, the world's biggest credit insurer, has predicted that the number of global insolvencies would rise by a third this year and increase again in 2010.

Trade Credit Insurance and the Global Credit Crisis

2009-12-13T04:12:00.000-08:00

EU Approves Swedish Export-Credit Aid Scheme

2009-12-13T03:42:00.000-08:00

BRUSSELS (Dow Jones)--The European Commission Wednesday approved a Swedish plan to provide export credit insurance to companies that are unable to get cover on the private market, aimed at tackling the effects of the financial crisis on exporting firms.

"The Swedish scheme provides exporting firms with the insurance cover they need and, at the same time, contains adequate safeguards to avoid the crowding-out of private companies from the credit insurance market," competition commissioner Neelie Kroes said.

Under the plan, the Swedish state agency will provide short-term export-credit insurance coverage to companies established in Sweden. Only financially sound applications will be eligible for support under the scheme, the commission said.

The risk premiums will depend on the buyer's creditworthiness and on the level of political risk relating to the buyer's location. The maximum coverage the government agency will accept is limited at 90%, the commission added.

The insurance plan can stay in force until the end of 2010, the commission said.

UK Govt Changes Credit Insurance To Ease Access

2009-08-20T20:36:00.001-07:00

LONDON (Dow Jones)--The U.K. government Thursday bowed to pressure from business groups and said it is making further changes to its trade credit insurance scheme to reduce the cost for companies and ease access.

The government also released numbers showing that the scheme has so far been taken up by only a few dozen companies, a fresh sign that government programs to cushion the recession's impact have had mixed success.

A spokeswoman for the U.K. Department for Business, Innovation and Skills told Dow Jones Newswires that the department is halving the cost of the scheme to 1% from 2% of the cover being provided. She said the government is extending the upper limit on the topup cover to GBP2 million from GBP1 million. It is also removing a previous floor of GBP20,000 for companies seeking government cover.

The changes, later confirmed by the government in a press release, follow a concerted campaign from business groups, which said companies are continuing to suffer from disruptions to their supply lines due to the lack of credit insurance. A recent survey from the Confederation of British Industry said access to credit insurance declined "rapidly" in the three months to July.

Trade credit insurance is used to protect suppliers against the risk of non-payment by buyers of goods. The insurance, which is vital in maintaining supply lines, was thrown into the spotlight after cover was reduced on suppliers to a number of prominent companies, including the now-collapsed U.K. retailer Woolworths Group.

The topup scheme allows suppliers to buy government-backed insurance to restore cover to the original level of protection or double the amount of insurance they are able to obtain from the private sector up to a value of GBP2 million. The scheme will end at the close of 2009.

The latest move represents the second time the scheme has been modified since its launch May 1.

The government set a cap of GBP5 billion for the total insurance cover it is prepared to provide. But Thursday it said, thus far, 52 companies have had their applications to use the scheme approved, resulting in cover of GBP7.1 million.

The fact that only a slither of that coverage has been used suggests the credit insurance scheme hasn't been as effective in helping smaller companies, in particular, as the government had hoped. That is part of a broader story, during the recession, where several of the government's much-trailed programs for businesses, struggling mortgage holders and jobseekers haven't generated much demand.

But the government has always stressed the GBP5 billion coverage ceiling is a maximum, not a target. Officials have said the scheme is meant to provide targeted, temporary help for those businesses caught out by rapidly changing credit and economic conditions.

The spokeswoman said there is evidence the scheme has helped achieve that, with companies now adapting to reduced access to trade credit insurance, which during the boom years was a cheap alternative enabling firms to hold less working capital.

"The government's topup scheme is providing temporary help for businesses as they readjust to changed conditions. Our evidence indicates that the majority of businesses are now managing their credit risks actively, reducing their dependence on trade credit insurance," the spokeswoman said.

Reaction to the government's move was mixed, with the British Retail Consortium saying the scheme needs to be back-dated further.

"The government's decision to improve some elements of the trade credit insurance top-up scheme may help a few but the changes don't go far enough. To make a real difference the scheme needs to be back dated to last April - when insurers began removing cover as the recession began," BRC Business Environment Director Tom Ironside said.

However, trade credit insurance companies Atradius Credit Insurance NV and Euler Hermes SA UK (ELE.FR), welcomed the changes, saying they addressed issues the firms had raised with the government.

"We are pleased that the government have taken our feedback on board and that they remain committed to increasing the relevance of the trade credit insurance top-up scheme," an Atradius spokesman said.

A spokeswoman for the Association of British Insurers, which was involved in developing the scheme, also welcomed the changes. She said the industry currently insures some GBP300 billion of U.K. trade.

Home Retail sounds alarm on credit insurance risks

2009-08-20T20:32:00.000-07:00

Argos and Homebase parent Home Retail Group has written to its suppliers urging them not to do business with retailers that have had their credit insurance removed.

In a letter, seen by Retail Week, Home Retail Asia managing director Graham Kibby wrote: “In the event that credit insurance is refused for one of your customers we strongly recommend that
you do not do further business, as it is quite likely that you will not get paid.”

He said it is “an extremely dangerous practice” for suppliers to continue to work with any open account customers that cannot get credit insurance cover.

The move has sparked anger among rival retailers, with critics accusing Home Retail of piling more pressure onto struggling store groups already suffering from a withdrawal of credit insurance.

Many retailers have had some or all of their credit insurance scaled back since the recession hit, including DSGi and Focus. A withdrawal of credit insurance was one of the key contributors to the demise of 99-year-old chain Woolworths.

A Home Retail spokesman said that it accepted “the letter could have been worded better” but it was intended to raise suppliers’ awareness of a “serious issue”.

He said that Home Retail wanted to offer some “practical advice that would help to protect their interests” and added it is “not company policy to insist on suppliers holding credit insurance”. The letter also said Home Retail’s credit rating “remains very good”, and added “like many, we are experiencing a slowdown in current trading, but we do have cash in the bank and retain the confidence to lend within the banking sector”.

The spokesman said the letter was sent to a “small number of Argos and Homebase suppliers in Asia, alerting them to an industry issue”.

But one rival retailer feared suppliers would stop doing business with them as a result. The retailer said: “Home Retail is a big player. If you’re a supplier you might take notice.”

Retail Knowledge Bank senior partner Robert Clark said: “It’s a perfectly valid point that Home Retail doesn’t want its suppliers getting over-committed to retailers that might collapse,
but there are other ways to go about things.”

Business insurance scheme gets poor take-up

2009-08-20T20:29:00.000-07:00

A widely promoted government scheme offering up to £5bn to help protect suppliers from the collapse of their customers has so far provided only £7m of assistance to 52 companies.

Announced in the Budget, the government’s trade credit insurance top-up scheme was designed to shore up the market as nervous private sector insurers cut their exposure during the credit crisis.

On Thursday, the business department said it was widening its criteria and cutting charges to 1 per cent to enable more entrepreneurs to take up the initiative. The paucity of the take-up is an embarrassment for the government, given that it was forced to loosen the scheme once before.

“The scheme is £5bn, but we have never assumed that it would get to that level. That’s the amount in the programme should there ever be sufficient demand,” the business department said.

The scheme allows suppliers to buy six months of government-backed insurance either to restore cover to its original level or to double the amount they can obtain from the private sector. The four largest credit insurers have all signed up to the initiative: Euler Hermes, Atradius, Coface and HCC.

Overall, the private sector provides £300bn of trade credit insurance a year covering transactions by about 250,000 companies.

In June the department bowed to pressure from business to backdate eligibility to include suppliers that had had cover reduced since last October.

The British Retail Consortium, the trade body for retailers, on Thursday welcomed the government’s latest move, but said the scheme needed to be backdated until April 1, when insurers began removing cover.

CREDIT MARKETS: Healthy High-Grade, Asset-Backed Issuance

2009-08-04T21:45:00.001-07:00

NEW YORK(Dow Jones)--New note issuance reached robust levels for August in a couple of credit-market sectors Tuesday, particularly high-grade corporates and asset-backed securities.

Investment-grade issuance got a boost as earnings blackout periods expired, while asset-backed volume picked up ahead of a key deadline for government backing of new deals.

Credit markets digested some mixed June economic data on the day, as personal income saw the sharpest drop in four years during June while pending home sales climbed for a fifth straight month, offering a sign of improvement for housing and the overall economy.

"All these deals are being gobbled up," said Greg Habeeb, head of taxable fixed income at Calvert Asset Management.

General Electric Capital Corp., the finance arm of industrial conglomerate General Electric (GE), offered $2 billion in non-guaranteed 10-year notes. On July 22, GE said the Federal Deposit Insurance Corp. approved its exit from the guarantee program.

"The offering supports the funding plan we presented in our GE Capital investor meeting last week," said GE spokesman Russell Wilkerson in an email.

Bank of America, Barclays Capital, Deutsche Bank and RBS Greenwich Capital were underwriters.

GECC remains the biggest borrower under the FDIC program, having issued $50.7 billion of debt excluding commercial paper. It has sold only $6.9 billion without the backing, excluding Tuesday's issue, according to Dealogic.

Dow Chemical (DOW) offered $2.5 billion in notes maturing in 2012 and 2015. The deal includes protective provisions, including change of control compensation and coupon steps. The proceeds will go toward repaying a portion of borrowings under the term loan that financed the company's merger with Rohm & Haas. Underwriters were Barclays Capital, Citigroup, HSBC and Morgan Stanley.

FirstEnergy Corp. (FE) offered $1.5 billion in three parts, and Coca-Cola $250 million 10-year notes. The deals saw risk premiums at the lower end of guidance, a sign of strong demand.

As bond yields fall and after stock returns outperformed bonds in July, analysts from both Bank of America Merrill Lynch and JP Morgan expect investors to turn to stocks rather than debt.

"This is not a negative for credit but a logical step in the economic cycle as investors seek out higher yields," wrote JP Morgan analysts, adding that yields would likely stabilize even as stock prices rise.

Hospital aims to reduce traffic in its ER

2009-08-04T21:40:00.000-07:00

BRANDON - With $34 million in uncompensated care for uninsured patients in 2007, hospital officials here are scrambling to find innovative ways to make up at least a fraction of their losses and lessen wait times in the emergency room.

When patients with no insurance and noncritical needs come to the emergency room for treatment at Brandon Regional or at South Bay Hospital in Sun City Center, they now are given several options: Pay $150 up front to cover the bill or seek help at one of the many walk-in clinics in the area.

The alternative is to get treatment without paying, then suffer the loss of personal credit down the road.

So far, the program hasn't been very successful, said Brandon Regional marketing director Melonie Hall.

"A little bit of it is cultural. So many people still feel the ER is for anything and everything," Hall said. "We have such a huge job to educate people."

"The results have been mixed, at best," said Brandon Regional Chief Executive Officer Mike Fencel. "Obviously, our priority is to provide health care to all that come. But, paying customers end up helping to pay for uncompensated care."

Twenty-one percent of Floridians are uninsured, according to the federal Web site healthreform.gov. And employer-covered insurance decreased from 54 percent to 50 percent between 2000 and 2007. Much of the decline is among workers in small businesses, which make up 78 percent of Florida businesses, according to the site.

And the overall quality of care in Florida is rated as "weak," according to the Agency for Health Care Research and Quality. Preventive care, which keeps people healthier and out of the hospital, is lacking, according to the agency. That, too, is directly related to a lack of health insurance.

With national health care reform on the table, Fencel said he knows as a high earner he and people like him will likely pay more in insurance costs. But the hospital will receive direct benefits if more people are covered, which, in turn, will help those who do have insurance.

Hall said she is compiling a verified list of clinics in the Brandon area and may do a similar list for South Shore if the public expresses interest. She said the list should be available in the coming weeks.

If the program takes off, it should cut down on wait times for more critical patients coming to the ER and could result in a decrease in uncompensated care.

Germany agrees credit insurance role to help firms

2009-07-10T00:41:00.000-07:00

BERLIN, July 10 (Reuters) - The German government has agreed a plan to offer companies guarantees to enable them to get credit insurance, a government source told Reuters on Friday.

A government body responsible for decision-making on state aid had agreed on the plan, which could involve guarantees worth a 'high single-digit billion euro sum', the source said.

Industry groups have complained that credit insurers are cutting back the insurance cover on offer, fearing climbing losses as payment defaults rise.

Under the plan, the state will consider topping up coverage -- for a fee -- if private credit insurers cut the proportion of default risk they cover to significantly less than 50 percent.

Funding for the plan will come from a 115 billion euro government fund set up to help struggling firms.

Credit insurance in Germany is dominated by three players - Allianz's Euler Hermes, Atradius and Coface, part of French investment bank Natixis.

Together they make up around 90 percent of the market and insure 40,000 companies.

Credit insurance to help export enterprises

2009-07-01T02:09:00.000-07:00

Beijing municipal government has signed a strategic cooperative agreement with the China Export and Credit Insurance Corporation. The move will provide more credit to Chinese exporters, thus cushioning the impact of the financial crisis.

A large number of exporters in China is under rising financial pressure as a result of reduced orders and delayed payment of credit accounts. The agreement signed today will provide more export credit insurance to help reduce export risk. It generally covers commercial loses associated with international trade -- insolvency of the buyer, and bankruptcy.

Chen Zexing, Deputy Director of Beijing Commerce Commission said "Beijing's export enterprises have seen export volume declining due to the impact of the financial crisis. Exports dropped 16 percent year-on-year in the five months between January and May. Now we are making every effort to help enterprises cope with the difficulties and boost exports."

Liang Zhidong, Deputy GM of China Export & Credit Insurance Co. said "This is the fifteenth agreement signed with the Beijing municipal government since the financial crisis first hit. We aim to join hands with local governments to boost export enterprises, safeguard their interests, and strengthen their confidence."

China's export credit insurance coverage is expected to hit 10 percent this year, compared to 3 percent in general trade last year. Earlier in May, the State Council released a series of preferential policies to expand the nation's export credit insurance coverage, as well as arranging 84 billion US dollars in short-term export credit insurance.

Credit card provider suffers computer glitch

2009-06-18T00:52:00.001-07:00

Credit card provider Barclays resolved a technical fault yesterday, which had rendered many of its cash machines inaccessible.

Online banking was also hit by the technical fault, meaning that credit card customers were left unable to log in to their accounts.

It is thought that a computer failure in Barclays' Gloucester offices led to the bank's electronic network crashing in the early afternoon.

However, technical experts had the problem fixed by 16:00.

A female customer told the Daily Mail that the glitch had made it impossible for her to use her credit cards abroad.

"I'm currently abroad and can't use ... any of my cards - cash or credit - related to Barclays and when I called the bank I was told they are upgrading their system," she added.

The technical problem affected people in London, the south of England and parts of south Wales.

Barclays retains around 15 million customers in the UK.

Tips for gap year travellers

2009-06-18T00:49:00.000-07:00

of thousands of graduates and school leavers will soon be entering the job market – but with high unemployment, a gap year might be preferable until the job situation improves.

The financial responsibilities of travelling require strict budgeting if you don't want to find yourself stranded on the other side of the world requiring the help of parents.

Credit cards offer insurance on purchases, but can mean spending is difficult to control. On the other hand, prepaid cards are ideal for gap year travel as there is no credit facility, so you can spend money without the risk of debt, yet at the same time the holder has the protection and flexibility of a credit card.

Peter Harrison, from price comparison site moneysupermarket.com, said: "Prepaid cards offer the best foreign exchange rates and anyone can have one. But you need to be sure to get one with the lowest fees. Fairfax and CaxtonFX prepaid currency cards are currently the best in the market."

The Fairfax euro currency card has an application fee of £9.95 for orders less than £500 and is free for orders more than that. There is no monthly fee and an overseas ATM fee of £1.50 – less than most British debit cards.

However, if you lose your card Fairfax won't send you a replacement overseas so you might want to consider taking a spare card. The CaxtonFX euro card has no application or monthly fee, but a slightly higher ATM withdrawal fee of £2. It charges £5 to send you a replacement card.

The other advantages of prepaid cards is that should the ''gapper'' run into financial difficulties their parents can top up the card from Britain. Mr Harrison warned travellers to beware of less competitive prepaid cards on the market that often have hidden charges such as an application fee, a monthly fee and overseas usage fees.

The Tuxedo Pay Monthly card for example, has a £9.95 application fee and a £4.99 monthly fee. The onebanking Account prepaid card has an initial fee of £30 and an ongoing monthly fee of £12.95.

It is estimated that 25pc of travellers do not have adequate travel insurance even though gap travellers are more likely to try extreme activities, such as bungee jumping and skydiving. In the same way that holidaymakers pay a premium for winter sports cover, gappers can expect their insurance to cost more.

But the problem is that cash-strapped students are not seeing travel insurance as a financial priority. The Foreign and Commonwealth Office says it gets more referrals for help from gappers than any other type of traveller because of a lack of insurance. The help overseas embassies can give is limited, especially if you cannot meet any required expenses.

Concern over credit insurance scheme

2009-06-10T02:44:00.000-07:00

THE Government’s planned credit insurance scheme for small businesses will only have a limited impact, a North West-based lender claimed today.Edward Rimmer chief executive of Liverpool-based Bibby Financial Services said he was also concerned about the length of time it has taken for the details of how the scheme will operate to emerge.He said: “At face value, the scheme sounds like a great and extremely timely opportunity for the small business community.

Rapid growth forecast for online shopping

2009-06-04T22:59:00.001-07:00

Internet shopping is set to defy the economic downturn, with higher numbers of people using their credit cards to buy goods online.

A report from Verdict Research shows that total online spending is set to grow from £2.4bn this year to £30bn in 2013 - with branded items such as electronic goods helping to drive up sales.

If the forecast proves correct, it would mean that roughly £1 of every £10 spent on retail goods is transacted via the internet in four years' time.

Verdict Research also identified credit card driven online sales as a potential recession-buster for vendors.

The total retail sector is predicted to contract by 0.6% in 2009, but the online market is on course to grow by 13% over the same period.
Malcolm Pinkerton, senior retail analyst at Verdict Research, commented: "The more affluent groups, who do still have money to spend, continue to appreciate the internet for its convenience, making the channel doubly resilient to the downturn."

He added: "The key for individual retailers is to formulate two clear strategies: one for succeeding through the recession and one targeting growth beyond this, as the online channel begins to approach maturity."

Customers using credit cards, rather than debit cards, to purchase goods online enjoy greater legal protection from fraud.

Section 75 of the Consumer Credit Act allows cardholders to claim against their card issuer, as well as their supplier, if they suffer breach of contract or misrepresentation for items costing over £100.

Increase in credit card rates noted

2009-06-04T22:54:00.000-07:00

Card rates top 18%. Credit card costs continue to increase, despite an unchanging Bank of England lending rate.

The average APR offered by UK providers - including those for low rate credit cards - was found by a financial website to have risen above 18% over the past month.

This rising trend comes after the Bank of England embarked on an aggressive rate-cutting policy.

Today, the Bank confirmed that the rate would be held at its current level of 0.5% - the lowest-ever in the institution's history - for another month.

The lending rate stood at over 5% at this time last year.

In theory, reducing the Bank rate would have a knock-on effect on credit card deals.

However, Moneyfacts.co.uk, which conducted the research, suggested that other factors linked to the recession had pushed the APRs up over recent months.

Michelle Slade, analyst at the site, said: "Rising unemployment means that the risk of customers defaulting on their card repayments has increased, which is being passed on through higher rates."

She added: "Competitive credit card deals can still be found on the market, with 0% balance transfer deals available for 16 months and 0% introductory purchase deals for 12 months, but with the increased risk of default, only those with exemplary credit histories are likely to be accepted for the best deals."

Real estate investing making a comeback

2009-05-11T04:59:00.000-07:00

Lori Holland is looking up as she walks through a two-century-old house on Lime Rock Road in Smithfield.

“I’m trying to count how many ceilings have to come down,” she explains. “We’re trying to get a handle on what is it actually going to cost before we can get a tenant in.”

Holland and her husband, Stephen E. Holland, hope to buy the house, which is listed at $174,900, as an investment and rent it as two apartments. Improvements before that can happen could cost $100,000.

While the Rhode Island housing market has been on the slide for three years, the Hollands’ plans to make a real estate investment may be part of a revival, though the signs are conflicting.

House prices are at seven-year lows, with the median around $180,000.

But unemployment is high, with nearly 60,000 Rhode Islanders out of work.

Mortgage interest rates are at historic lows, below 5 percent on a 30-year fixed-rate loan.

But banks have tightened credit, requiring better credit scores and more money down.

S. Lawrence Yun, chief economist for the National Association of Realtors, said at a recent conference in Warwick that the Rhode Island housing market might see signs of renewed vigor this year, especially in the second half, but that a full-fledged recovery won’t materialize until next year.

Several local real estate professionals think those signs are already appearing.

“I’m seeing the investors taking advantage of properties that are priced well,” said Karl A. Martone, the real estate agent showing the Smithfield property and president-elect of the Rhode Island Association of Realtors.

Martone also said first-time buyers, spurred by an $8,000 federal tax credit, are starting to enter the market along with empty-nesters, who probably have high levels of equity in their houses and who may walk away with cash in their pocket after scaling down.

The Realtors association recently reported that the median price of a single-family house dropped more than 25 percent in the first three months of the year, compared with to the same period last year. For the same period, the number of sales stayed about even. And houses were taking slightly longer to sell. None of those factors exactly indicate a market about to soar.

But Martone and Stephen C. Tetzner, vice president of the Rhode Island Mortgage Bankers Association, said the first three months of the year were too soon to see the effects of low interest rates, low prices and the tax credit, which was enacted in February. Because the process of buying a house takes several months, any surge in the market wouldn’t show up until the April-May-June quarter is reported, they said.

Both said they have seen signs recently that things could be leveling off, if not improving.

Open houses have attracted more buyers, Tetzner said.

Cash crisis as insurers withdraw

2009-05-11T04:56:00.000-07:00

VULNERABLE retailers and suppliers across a raft of industries face a potential cash-flow crisis as trade insurance underwriters, most notably industry leader QBE, curtail their exposure to the sector.

The pull-back in cover has caused deep concern in Europe, where it is having a similar effect on stifling commerce as the lack of credit availability.

Locally, The Australian understands electrical goods manufacturers have been told they will not be covered in relation to goods sold to two well-known retail chains, or will be made subject to more onerous conditions such as 14-day payment terms.

Until now trade insurance, also known as receivables protection, has been a low-profile service routinely extended to suppliers. Locally, QBE has the lion's share, competing with Coface Australia, Euler-Hermes and Atradius.

But international failures such as Circuit City, once the biggest US electronics chain, Woolworths in Britain and, locally, Kleenmaid's $70 million collapse have prompted insurers to tighten the terms of cover.

"If a credit insurer is not prepared to provide credit insurance for a particular retailer, that has to throw up massive warning signs for the supplier," said one local retailer. "It's kind of the opposite of caveat emptor: it's seller beware."

National Association of Retail Traders managing director Kay Spencer said "clear offshore trends", especially in Britain and Europe, implied a looming crisis. It is understood that an influential industry delegation has already approached Canberra with a proposal for a scheme to protect uninsured enterprises.

The British Government last month introduced a $10 billion trade credit insurance scheme available to 14,000 mid-sized businesses, "to mitigate against disruption to the supply chain and cash flow of 250,000 companies they do business with".

According to several insurance sources, QBE took a closer look at its so-called credit and surety business after the departure of two key executives to start a niche practice.

Among other measures, CEO Frank O'Halloran implemented risk management procedures such as weekly reporting. A rival insurer said: "Their guys are doing report after report. Frank is right on this but fortunately or unfortunately they are not pulling out of it."

QBE, the country's biggest general insurer, has exited excessively risky or unprofitable business lines in the past. Last year it stopped selling indemnity cover to stockbrokers and financial advisers after being stung by huge payouts to share traders after the collapse of Opes Prime.

Niche providers are also active in the credit insurance market. "But if one company won't cover, the others will knock you back," Mr Uechtritz said. "The global financial crisis has made people do things a little bit differently."

Attempts to contact QBE were unsuccessful, while other insurers and retailers were reluctant to comment on an issue prompting growing behind-the-scenes angst.

Making Money Work Harder

2009-04-23T02:13:00.000-07:00

AS THE recession drags on, companies both big and small are finding more creative ways to stretch every dollar and make the best use of their capital.

Han Kwee Juan, managing director and Singapore country head of Citi's global transaction services, says that the financial crisis has made companies everywhere think much harder about the way that they use the funds at their disposal.

'One of the main priorities that we've seen from companies in the current environment is to generate new sources of funds,' he says.

That ranges from simple measures such as reducing unnecessary travel or other expenses, to the setting up of highly sophisticated liquidity-management structures used by some large multinational companies to channel cash from subsidiaries worldwide into a common pool.

That companies are looking to milk the most from their available funding sources is no surprise, he adds. 'In the current economic environment, companies are faced with increased challenges in generating sources of funds.'

Tan Yew Kiat, founder and general manager of fashion retailer bYSI International, says that his company recently took out a $500,000 loan under the new government-backed loan scheme administered by Spring Singapore, aimed at helping small and medium enterprises.

'That's really helping our liquidity,' he says.

The company has also been negotiating with its suppliers for better terms, hoping to extend payment deadlines for new supplies from 30 days to as long as 45 days.

Export-oriented players worldwide have been among the hardest hit by the contraction in funding sources and the collapse in demand from major export destinations such as the US and Europe since the financial crisis began.

Last month, the World Trade Organization warned that global trade volume could contract by 9 per cent this year - the biggest such decline in total exports since World War II.

It expects exports from developed economies to fall by an average of about 10 per cent, and exports from developing countries to shrink by 2-3 per cent.

'The depleted pool of funds available for trade finance has contributed to the significant decline in trade flows, in particular, in developing countries,' WTO director-general Pascal Lamy said at the time.

It estimates that world trade volume grew just 2 per cent last year - less than half the 4.5 per cent growth it had forecast a year earlier, mainly due to 'the unexpected and very sharp drop in global production in the fourth quarter of 2008'.

Mr Han says that the traditional sources of capital-market funding such as the commercial paper and bond markets, as well as syndicated loans, 'have shrunk considerably'.

Another problem, he says, is that in the boom years when funding was both cheap and easy to obtain, many companies got used to running their businesses with high working capital needs - extending generous payment terms to customers, paying suppliers quickly, and accumulating large inventories - without incurring much penalty.

'Traditionally, large companies rarely placed a high priority on working capital as the previously abundant and relatively cheap credit meant that the cost of working capital inefficiencies was low.'

Big companies, in particular, had access to a whole range of low-cost financing options besides traditional bank loans.

They could raise the funds that they needed from capital markets by issuing bonds or equity, or hybrid instruments such as convertible bonds. At the height of their popularity in 2007, even smaller companies here were issuing convertible bonds at low interest rates to raise cheap funds.

Convertible bonds give buyers the option to exchange their bonds for shares in the issuing company. That embedded option is especially valuable when investors expect share prices to rise in future, so that companies issuing convertible bonds in a bull market could borrow at much lower interest rates than with ordinary bonds.

'But increasingly, as the cost of borrowing has risen sharply due to the credit crisis, corporates are placing a renewed focus on optimising working capital and finding alternative sources of funding to reduce their reliance on capital markets,' Mr Han says.
Key priorities

As a result, 'preserving and maximising the use of working capital has become a key priority' for most companies, he adds. Now, he sees more companies taking a good, hard look at how they pay suppliers, when they receive payments from customers, and how to make the trade terms more favourable for themselves.

In some cases, the trade terms are no longer determined entirely by the business division in charge of managing sales.

Turning working capital into a source, rather than user, of cash may seem counterintuitive, but it is possible if companies use it more efficiently, he says.

Indeed, the worldwide economic slump that followed the credit crunch has driven up the cost of all kinds of funding, not just borrowing, which makes it even more urgent that companies make the funds that they do have work as hard as possible.

Raising money from the capital markets is still possible for some, 'but it's simply more expensive', Mr Han says. 'For rights issues, for example, you're seeing bigger discounts in today's market than when you have a bull market.'

So in many cases, companies conclude that their least expensive option is to try to deploy their own internal funds as efficiently as possible. An important first step is to examine in detail the way that their cash is used across their entire financial supply chain, says Mr Han.

That includes getting up-to-date information on their cash balances and trade receivables, as well as any cash paid to suppliers and distributors. Companies also need to monitor the cost of any inventory they keep, and their existing relationships with banks and other credit providers that they can tap for funds if necessary.
For bigger players, with a large network of suppliers and distributors that form a complicated supply chain, working out which part of the chain should get priority can be a much more difficult task.

A failure of a key supplier would cause far-reaching disruption to the production pipeline of a manufacturing company, for instance.

He cites as an example a Citi customer, 'a major US apparel retailer', that was concerned that a number of its suppliers - including several based here - were having difficulties obtaining funding from their banks to buy materials and produce clothes.

The retailer approached the bank for assistance, and 'we were able to provide financing throughout its supply chain, by forging collaborative partnerships with banks in those markets, and extending risk participation through its export and agency finance connections'.

In times like these, companies should examine all possible financing options, including those that were previously ignored when bank loans were cheap and easy to get.

'Clearly, with a general reduction in availability of direct credit, companies can turn to other tools available to them. These financing techniques provide incremental credit over the direct credit facilities that they receive from their banks.'

For export-oriented players, these tools include letters of credit from banks, and credit insurance from insurance firms or export credit agencies such as Hermes, Coface or Sinosure.

Here, the Singapore government has also stepped in with new trade finance schemes to help medium-size and large exporters obtain loans and trade insurance, first announced in the Budget on Jan 22.

Since March 1, IE Singapore has offered a trade credit insurance programme, known as the Export Coverage Scheme.

Through this, the government subsidises half the insurance premiums, up to $100,000, for Singapore companies that take out policies with qualified credit insurers.

IE Singapore is also offering to underwrite additional trade credit insurance, up to $10 million, for companies that need coverage exceeding the maximum offered by the private-sector insurers participating in the scheme.

Another government initiative offers to insure up to 75 per cent of the risk on loans under the Loan Insurance Scheme that are beyond the capacity of private-sector insurers.

And despite the overall slump in Singapore's export trade, the business of extending trade finance has actually become more profitable for banks, due partly to the higher rates they can now charge.

As more companies switch from open-account trading - which became popular when the risk of trading partners defaulting was considered small - back to using traditional trade financing products such as letters of credit, some banks have even seen a surge in transactions, although overall trade activity has dropped.

Still, the main reason that more companies are returning to conventional trade financing tools is the worry that their trading partners may default - a risk that banks must also consider when extending a loan.

Three angles

'The evaluation of trade finance credit can be done through three angles,' Mr Han says.

'Clearly, the first angle of evaluation will be based on the financial strength of the company, which will be largely based on its cash flows, level of debt and the types of collateral that it can offer. This is not too dissimilar from straight lending or a regular business loan.'

'But trade finance can also be done based on the incremental collateral that can be gained from a trade flow, such as with letters of credit, where banks provide financing to the company based on the strength of the financial institutions.

'The third angle will be based on the strength of the buyers and their payment behaviour through the years. If a company has financially strong buyers or buyers who have been prompt in their payments, then banks can take comfort from these factors to provide some level of financing as these provide evidence of strong possibilities of repayment for the trade loan extended.

'We have also seen a greater number of requests from clients to obtain financing based on their trade receivables and, in some instances, based on portfolios with credit insurance.'

Overall, he says, the financial crisis has changed the behaviour of many organisations. 'The way the market has evolved has resulted in companies thinking about how to raise financing.'

And that, he believes, is here to stay, even after the economy eventually recovers and financial markets return to normal.

'What we've seen in other crises is that once companies have started to focus on their working capital, they will continue to do so. The practice of squeezing the most from their capital will still be there.'

> first published in The Business Times

Trade Credit Insurance Claims Soar

2009-04-23T02:06:00.000-07:00

Insurance claims by companies left unpaid for goods supplied to firms that went bust soared more than 50% in the final three months of 2008, figures have showed.

The Association of British Insurers (ABI) said trade credit insurance claims jumped 51% to 8,366 compared with a year earlier as the recession hit home.

The total value of claims incurred over the period was £360 million, up from £257 million in 2007, the ABI said.

The total value of turnover covered by the major UK trade insurers - such as Atradius, Coface, Euler Hermes and Zurich - reached £302.5 billion in 2008, up from £282 billion the previous year.

Nick Starling, the ABI's director of general insurance and health, said: "The latest rise in trade credit insurance claims, and the value of turnover covered, shows that insurers are playing a crucial role and continue to help their customers through the recession."

There have been concerns over trade credit insurers hiking premiums and pulling out of some high-risk markets such as retail altogether.

Reports last week suggested small and medium-sized firms could gain a boost from new Government guarantees on trade credit insurance in the Budget. According to the report, the Government will offer guarantees for medium-risk companies which have seen their cover reduced, but not withdrawn.

Many firms have been crippled by the withdrawal of trade credit insurance as the recession unfolds.

A decision by insurers to withdraw cover from suppliers to Woolworths hastened the demise of the high street icon at the end of last year as it was forced into more onerous payment terms, draining its cash.

Under a new statement of principles published with the figures, the ABI said UK credit insurers should "give as much notice as is reasonably possible" to customers when deciding to stop or substantially reduce credit insurance cover.

Darling move on trade credit wins applause

2009-04-22T03:08:00.000-07:00

Business leaders today welcomed Budget plans to protect firms against a reduction of vital trade credit insurance.

Chancellor Alistair Darling is tomorrow expected to announce a temporary scheme to provide top-up insurance cover worth up to £5 billion alongside the same figure from private insurers.

Retailers and small businesses have been hit by the reduction or total withdrawal of credit insurance ,which protects suppliers against a customer failing to pay for goods.

Many insurers have raised premiums or withdrawn from high-risk markets altogether, leaving firms facing demands for upfront payments from suppliers. Such a situation can lead to the sort of cashflow problems that helped to trigger the collapse of Woolworths and MFI.

Darling has agreed to offer guarantees to firms that have seen their cover reduced but not cancelled.

Bill Grimsey, chief executive of Focus DIY and a critic of credit insurers, said this would still leave some firms stranded. “Companies that have had their cover completely withdrawn will find themselves out in the cold still if a top-up measure is introduced,” he said.

But others welcomed the move which comes after months of negotiations between the Government and Atradius, Euler Hermes and Coface, which have 85% of the global market for credit insurance.

The temporary scheme will run from 1 May to New Year's Eve and be available to firms that have seen their cover changed since 1 April this year.

The British Retail Consortium said it was vital for the survival of many firms on the High Street and added that the Government was right not to provide cover in high-risk cases where insurance has been withdrawn.

“We didn't want the Government to take on unnecessary risks,” said spokesman Krishan Rama.

“If the private sector didn't want to provide insurance, we didn't want the Government to take on that risk. We were asking for the Government to match what the private sector was willing to provide, so this is a welcome move.

“Credit insurance is very important because it protects suppliers and if it is withdrawn then suppliers will ask for this money to be paid upfront which leaves retailers with cashflow problems and undermines their ability to trade.”

Steve Radley, chief economist at manufacturing group EEF, said: “This is a package that ticks many of the right boxes and business will broadly welcome it. It is unfortunate that it can't be done retrospectively.”

Rising cost of insurance hits firms

2009-03-30T06:54:00.000-07:00

Business suffers another blow as credit insurers make greater demands for new contracts

Small businesses are being hit by a steep rise in the cost of credit insurance taken out to cover bad debts. Many are finding they are unable to get cover at all.

Credit insurers have confirmed they are increasing premiums by up to 40% for clients who are renewing their contracts, and in some cases by much more. They are also refusing to provide cover for some operating in high-risk sectors such as retailing and construction and are turning away large numbers of new customers.

Credit insurance covers small firms for bad debts suffered if one of their business customers is unable to pay, usually because it has become insolvent. Without it, firms themselves are forced to take on the risk of customers not paying. If the amount owed is large and not paid, the business could be forced to close.

Shaun Purrington, regional director at Atradius, one of the biggest credit insurers in Britain, said: “It is fair to say that compared with six months or one year ago small businesses will find it more difficult to get credit insurance. I’m afraid that the appetite of credit insurers to write new policies has declined.

“Companies that come to us and ask for cover on firms [they wish to trade with] that are clearly in financial difficulties, or that are operating in very difficult sectors, will find it nearly impossible to get cover.”

He warned that in addition to rising premiums, typically 30% to 40% up on last year, small businesses renewing their premiums would be asked to take on a greater share of the risk.

“Historically they would have typically taken 10% of the risk whereas now it will rise to 15% or even 20% in some sectors,” he said.

Small-business organisations are outraged over the plight of small firms. Phil Orford, chief executive of the Forum of Private Business, said: “Taking premiums in the good times but pulling cover when conditions worsen is a scandalous affair.

“Credit-insurance companies should be able to manage risk over a defined period, accepting losses as well as sur-pluses. That’s how the insurance industry works across the board. Perhaps this is another financial area requiring tighter regulation in the light of such catastrophic actions.”

He added: “Many businesses of all sizes are finding it is impossible to get any cover at all. The actions of credit insurers make it increasingly difficult for our members to do business with other companies and to protect themselves against increasing instances of late and defaulted payments.”

In a recent survey of its members, the Forum of Private Business found that one in five were experiencing serious difficulties with their credit insurance.

Stephen Alambritis at the Federation of Small Businesses said: “It really is appalling that the industry is pulling back from providing reasonable insurance at reasonable rates. We are very angry at the way in which credit insurance is either nonexistent or very expensive.

“It is a sad state of affairs when an industry that was very bullish and was wanting to sell its policies left, right and centre when times were good now just doesn’t want to know.

“Without credit insurance, a lot of small businesses simply can’t trade. The fault lies with the insurance industry for pulling back so quickly. One day they were there, the next day they were gone.”

At present about one in five businesses in Britain has credit insurance, which typically costs about 0.3% of sales in terms of premiums.

Fabrice Desnos, chief executive of Euler Hermes UK, another big credit insurer, said that in the past five months his firm had seen a large increase in the number of small firms seeking to take out credit insurance for the first time .

“A lot of businesses that didn’t care about it a year ago suddenly think it is a good idea. When we receive such an increase in demand we are rightly being very selective about the types of clients that we think we can accommodate and the type of clients who will buy into our ethos of risk management as well.

“We are not there to swap debts and suddenly be there to pick them up at the worst possible economic time. Sometimes there is some demand that cannot necessarily be catered for because some of the risks are uninsurable.”

Desnos said that the rise in premiums depended on the individual client. The price is determined by their record of claims and the sector in which they are operating.

“Obviously, the construction and property sectors are very difficult, and everything that is linked to the automotive sector is difficult,” he said.

“The experience that we have in terms of claims with a particular client will have a great bearing on the repricing that we will try to enforce.” Desnos pointed out that there had been a substantial increase in the number of claims being made by small businesses, particularly in the second and last quarters of 2008.

The government last week confirmed that it was looking into the possibility of providing some kind of assistance to help more small businesses get access to credit insurance.

The Department for Business, Enterprise & Regulatory Reform said: “We understand the problem faced by companies that rely on credit insurance. It’s important that any intervention allows businesses breathing space to reach new arrangements with lenders and suppliers - while also protecting taxpayers. We are looking carefully at these issues.”

It is understood that one option would be for the government to underwrite 50% of credit-insurance risk in situations where cover would otherwise be withdrawn. An announcement is thought likely in the next couple of weeks.

Daniel Steel, managing director of Esdevium Games, a specialist games distributor based in Hampshire, said that government intervention would be welcomed by small firms such as his.

“Some form of sharing some of the risk would probably have a very beneficial effect. Credit insurance is the oil that keeps the engine running in business,” he said.

“If you don’t have credit insurance, business seizes up. If we didn’t have credit insurance it wouldn’t stop us trading but it would have a significant impact on what we could do. A little intervention could make quite a big difference to a lot of people.”

Steel said that his credit insurer was steadily reducing the limits on the amount of trade that would be covered by the insurance he had, making it difficult to do business with some long-standing customers.

“The problem is that they are having to be cautious and that affects our ability to trade with our customers,” said Steel. “So you get into a downward spiral.”

WHAT IS CREDIT INSURANCE?

FIRMS take out credit insurance to protect themselves against trade customers failing to pay bills. It is particularly important in industries such as construction and retailing, where payment may not be due for up to six months. If a customer goes bust, the credit insurer will pay out an agreed percentage of the money owing.

Before a business starts trading with another firm, the credit insurer will agree a trading limit for that specific company. The insurer may then adjust this limit to reflect changes in trading conditions.

Springtime for Banks

2009-02-21T20:59:00.000-08:00

James Kwak | Feb 21, 2009
Less than a week after pulling off the media coup of publishing his universal credit insurance proposal in both the FT and the WSJ on the same day, Ricardo Caballero has a new proposal for solving the banking crisis, this one in tomorrow’s Washington Post.He should go back to the last one.Here’s the new proposal: “The government pledges to buy up to twice the number of bank shares currently available, at twice some recent average price, in five years.” According to Caballero, this will have the following effects:

Because bank stocks immediately become more valuable, it has a wealth effect that pushes up the value of all assets.
Banks will be able to raise private capital, because they can issue additional shares equal to all of their outstanding shares, and these shares will have a price floor.
Because this will have a stimulative effect and will solve the bank capital problem, the economy and the banking sector will go back to normal, and five years from now the government won’t actually have to buy any shares, because they will be trading above the government-guaranteed price floor.
Let’s start with the most important issue: fixing the banking sector. Caballero’s credit insurance plan would solve this goal, because it involves cheap government insurance for all bank assets. This proposal, by contrast, is a private sector recapitalization plan. Essentially, each bank would be able to raise new capital (by selling shares) equal in value to twice its current market capitalization, because those shares are guaranteed. For Citigroup, that would be about $20 billion. Does anyone think that would be enough to lift the clouds hanging over Citi? JPMorgan, by contrast, could raise about $150 billion. But there’s nothing saying that they have to, and bank managers who think that twice their current share price is still undervalued will have no new incentive to raise capital.

This is especially true because of the perverse incentives this plan creates, which make it especially hard to understand. This plan creates a government guarantee on the stock price. In other words, it says, “No matter how stupid you are, what ridiculous risks you take, and how bad your bank is, we will buy your stock at an artificially inflated level.” Is this really the way to create a healthy banking system? I understand why people are afraid of government control over banks, but this seems at least as bad to me, since it creates an obvious incentive to take excessive risks. In addition, this takes away the usual incentive for raising capital: the need to maintain capital adequacy levels. Now that the government has guaranteed that shareholders will not lose their capital, no matter what, why raise more and split the upside with new investors?

What about the stimulative effect on the economy? Basically bank stocks would double in value overnight. Now, the S&P 500 Financial Sector Index is down about 80% from the summer of 2007; banking stocks are probably down a little more, say 85%, and insurance stocks down a little less. So the day after this plan is announced, your bank stocks - by now a small part of most portfolios - are down only 70% instead of 85%. While this might have some wealth effect, I think it would be relatively small; among other reasons, stock holdings and retirement accounts have a relatively small impact on consumption, compared to wages, dividend and interest income, or even home values (because they can be used for home equity lines). And I don’t see how it could turn around the economy.

Besides, if the idea is to stimulate the economy by making people feel wealthier, the simplest and fairest way to do this is through a tax cut. But the problem with tax cuts right now is that most of the tax cuts will simply be saved. This should be even more true of the Caballero plan, which just makes your banking stocks double in value. And if we are looking for creative ways to make people feel wealthier, what about a government guarantee to buy your house, in five years, for whatever you paid for it? (That was a rhetorical question.)

But, Caballero says, the great thing about his plan is that it is free. Because the plan will turn around the economy and return the banks to normal, the government will never actually have to buy the shares. This is wishful thinking in its most pure form. Yes, it is possible that if we fix the banking system, the economy will turn around, and most of these troubled assets will return to something like their current book values. But in that case, every proposal anyone has offered will turn out to be free. Caballero’s credit insurance plan will cost nothing, because the government will never have to cover any losses. Paulson’s plan to buy toxic assets will cost nothing, because those assets can then be sold for more than the government paid. The nationalize-reprivatize plan will cost nothing, again because the the government can sell the bad assets at a profit. Buiter’s and Romer’s “good bank” plan will cost nothing, because the good banks will be worth more than the capital it takes to set them up. A government recapitalization plan - say, for example, the government buys, at twice the current price, a number of shares equal to the current shares outstanding, will cost nothing, because the government’s new shares will be worth more than it paid for them. (This is similar to Caballero’s plan, except we know that the banks will actually raise capital, and the taxpayer gets the upside as well as the downside.)

But as Martin Wolf put it in a post I’ve recommended before and recommend again, “the heart of the matter . . . is whether, in the presence of such uncertainty, it can be right to base policy on hoping for the best.” That question answers itself.

Covered by a few extra dirhams

2009-02-14T01:01:00.000-08:00

By Safura Rahimi on Saturday, February 14, 2009

With the financial crisis touching an increasing number of lives in the UAE, credit cardholders have been left wondering how to tackle their bulging balances.

It seems credit shield policies – temporary protection plans available on most credit cards – promise to offer a respite. The scheme, which can be activated when applying for a credit card, claims to provide cardholders with the security of knowing they are covered against outstanding credit card balances in case of an inability to pay.

In other words, the bank or insurer will shell out the money to pay the monthly credit card installments in case you get sacked for reasons such as business closure or company layoffs, but not poor performance.

Some will even cover monthly card payments for up to 12 months, or until the customer finds a new job.

But despite the different variations of the scheme offered by UAE banks, reaping the benefits of credit shield is not always simple.

Variations Galore

Some banks don't offer credit cover for at least 30 days after the cardholder reports involuntary job loss. Others only cover outstanding payments if the customer was laid off at least three months after the credit shield activation. And you most likely won't see a dirham if you've only activated the credit shield on your card after being fired from your job.

So the message from banks is, plan ahead. "Activating credit shield post a loss of job is like buying an insurance policy today to cover for yesterday's loss, which is not allowed in any part of the world, as insurance is taken to indemnify one against an unforeseen event," says Zeeshan Saleem, Head of Credit Cards at Barclays.

Saleem says it is simple to claim insurance if you're a customer already enrolled for credit shield and have lost a job. "Insured individual needs to submit a few documents like a notice of termination from the employer, copy of passport with visa page, and copy of the labour contract from the employer to verify the period of employment contract," he says. "The claim can be made only if the credit shield insurance is active or applied for by the customer."

The turnaround time to claim the insurance is about two to three weeks depending on the type of claim. Once approved, the insurance company pays the card's outstanding balance.

The Devil in the Details

Although the programme does offer peace of mind particularly in today's uncertain job market, it's important to read the fine print of your credit shield coverage.

To make a claim, Citibank says cardholders must have been employed for 12 continuous months with the same employer during the 24-month period before the claim date.

The bank also rejects claims from job losses due to misconduct, and from cardholders over the age of 65 from date of unemployment.

"We view Credit Shield as a valuable product that can further protect customers, especially in times like these.

Our approach has been to offer the product to customers in a very transparent way and let them decide on its value to them at certain price points," says William Keliehor, Citi Credit Cards Head for Middle East, Africa and Pakistan.

The credit shield payments stop when the cardholder resumes work or when the maximum benefit payment term of three monthly installments has been reached for any one claim, or six monthly installments in total for several Involuntary Loss of Employment (ILOE) claims during the period of coverage.

While Citibank cardholders insured with credit shield would have their monthly installments covered for each month they remained unemployed, the bank said a claim is turned down if the customer is sacked within the first month after activation of the policy.

"The waiting period is calculated from the first day of ILOE commencement. No benefit is paid for the first 30 days," the bank says. That means if a customer presents a redundancy letter in February, his credit shield, if approved, will cover the monthly due amounts starting from the end of March.

At Mashreq, customers can apply for a claim against credit shield cover immediately but the bank said benefits for involuntary loss of employment are only paid if the customer was laid off at least three months after the credit shield activation.

"However, if the customer has had the policy cover for more than 90 days and has just become unemployed, he can immediately apply for a claim. Hence, it is advisable to sign up for credit shield even if one's job is secure today to cover any eventuality in the future," says Vimal Kumar, Cards Business Head at Mashreq.

Mashreq's credit shield fees are charged on the card's billing date and costs 0.65 per cent of the outstanding balance. "In the current economic environment, it is extremely prudent to cover as much of one's liability arising out of unforeseen circumstances."

The feature gives customers peace of mind to use the credit card freely, without worrying about any unforeseen events in the future, he adds.

In the case of insured cardholders who have recently been sacked from their jobs, Kumar says 10 per cent of the outstanding balance on the card is subject to a maximum coverage of Dh2,500 for Classic and Gold cards and Dh4,000 in the case of Platinum cardholders.

Customers must notify the bank in writing no later than 30 days from the unemployment date to claim the coverage, as well as complete the standard claim form and submit the required documents. Kumar said credit shield will activate within 10-30 days and the amount will be credited to the cardholder's credit card account.

No Job Loss Cover

However, not all banks that offer credit shield cover job layoffs. Emirates NBD offers an 'ultra' credit shield scheme on its credit cards but it does not protect customers against involuntary layoffs. The bank declined to respond to queries from Emirates Business.

HSBC's optional Credit Cover – charged at 0.2 per cent of the cardholder's monthly outstanding – is insurance that protects outstanding balances against death or permanent total disability. However, the bank said it does not cover loss of employment at this point in time.

Comptroller Chick Slams City’s Take-Home Car Program

2009-01-24T00:39:00.000-08:00

by Damien Newton on January 23, 2009

In a city government who's transportation thoughts are directed in writing love sonnets to the private automobile, it should come as no surprise that the city's "Take-Home Car Program" is little more than an entitlement program for our urban rulers. However, following a scathing report by Controller Laura Chick, Mayor Antonio Villaraigosa made some moderate moves to control this out-of-control city program.

Chick blasted the city for not requiring city officials with take-home cars to have the proper insurance, not having a check on officials use of credit cards to purchase gasoline, that city officials are issued cars without meeting the city's written specifications and the boom of take-home vehicles to the LAPD, which has grown by 40% in the last five years.

You may remember that last year Mayor Villaraigosa brought up the possibility of cutting the car fleet and the City Council reacted as though he were proposing to slash pensions for elected officials and foreclosing on their mortgages.

Nevertheless, perhaps Chick's report will bring about some long-term changes in a city program that does more to promote car usage among city employees than any other. The city owns 1,131 vehicles in its take-home fleet, over three quarters of which are owned by the LAPD. While Chick's reccomendations are a great starting point, don't expect her office to go much farther. Last year she defended the City Council's program of rewarding employees with take-home cars as a "perk" that staffers have grown to expect.

Nevertheless, here are Chick's proposals:

Cancel the credit cards. If employees need to buy gas in an emergency, they can submit their receipt for reimbursement.
If City employees can’t produce proof that they have the required insurance, then take the car away. If not, then re-visit the insurance requirements and liability risks to see what makes sense.
Do a cost-benefit analysis of take-home cars vs. pool-cars vs. mileage reimbursement (using existing consultant dollars in the office of the City Administrative Office).
Set clearly-defined criteria as to why a vehicle is assigned to a department and/or an individual
Mayor Villaraigosa lept to work, installing the bare minimum of safeguards on the program and ordering further studies. However, any check on an uncontrolled car program was enough for the Daily News to declare that the Mayor was "putting the brakes" on auto use.

He put a freeze on issuing take-home cars and he suspended purchases of most new city vehicles.

He also ordered officials to verify that those who drive city vehicles have the proper insurance and halted the use of city credit cards to buy fuel at noncity facilities.

While these steps are laudable, what is really needed is a complete overhaul of the city's fleet policies. One proposal, which has been mentioned previousley in Streetsblog, would be for the city to basically end it's take-home program and instead support a car-sharing program that would be available to city employees when needed and the rest of the city residents as well. Already a hit in Philadelphia, the program wouldn't just save the city millions of dollars every year and reduce car dependency of city employees; it would also bring car-sharing back to Los Angeles in a signifigant way, a state goal of Council Woman, and Comptroller candidate, Wendy Greuel.

Last year, during a similar debate on the city's vehicle fleet, Soap Box LA had an alternate proposal: the city should begin hiring local:

The City of Los Angeles could reduce congestion as well as its travel expenses simply by hiring local and encouraging city employees to walk, ride or use transit.

How is it that the Mayor’s first rep to Hollywood lived in Palmdale and commuted to Hollywood in order to represent the Mayor. Are there no people living in Hollywood qualified to work for the Mayor? (No word yet on the new rep)

Hollywood is on the Red Line. If the Mayor sends out the signal, his reps can jump on the Metro and be at City Hall faster than those traveling by single occupant vehicle. (SOV)

Take it all the way through the departments! A City Council motion to requiring the General Managers of City Departments to live in the city has been floating for years with no success. Not even GM’s are required to live in the city?

At one point, LADOT had a GM who commuted from home in San Jose to work in Los Angeles.

How great would it be if City Staff actually walked the same streets, used the same bus stops, shopped at the same stores and could actually relate to the issues of our unique communities from the inside, not just from workshops and discussions and hearings.

Whether the city decides to hire local, promote car sharing, or push some other means, if it is serious about controlling this out of control program, that it could provide alternate transportation for city officials used to this "perk." If Villaraigosa's steps yesterday are the end of the story, we can file the Chick report away as another missed opportunity for the Car Culture Capital of America to join 21st Century transportation policy.

Photo: Dugm2/Flickr

Fifteen ways to cheat the credit crunch

2009-01-19T03:34:00.000-08:00

Keep your bank balance and your mood bright this year by sticking with these recession-beating tips, writes Tina Leonard

January is always bad enough as it is, but the recession has lowered a grey pallor over everything from our moods to our bank balances. Is there anything to look forward to in 2009? Is there any way of saving money or, better still, getting things for free? Yes there is. Read these credit crunchers and make sure you're a cheerful consumer in 2009.

Turn your junk into gold

eBay reckons that the average Irish household has €4,400 worth of unwanted goods, so what are you keeping them for? The fastest growing sector on eBay is 'shopping neutral'. This means that you sell the things you don't want any more to offset on-site spending on things you do want. So do an early spring-clean and start selling. This way you can justify your purchases and stay solvent.

Sell your clothes

If you don't want to sell your clothes online, then there are the more traditional 'swap shops' such as Stockxchange in Dun Laoghaire, the Bridge Mills in Galway and the Designer Swap Market in Ennis. These stores will sell your unwanted clothes for you and then pay you, minus their commission.

Swap your clothes

If you don't like the idea of money changing hands, then clothes swapping may be for you. Shebeen Chic in Dublin's Georges Street hosts a swap every Saturday where you can exchange your clothes or other items for tokens that can then be exchanged for something that you like. Keep your eyes out on online bulletin boards or at your local shop for occasional swap events, or, better still, organise one yourself.

Get free stuff

What is better than a discount? Something for nothing of course! There are many websites where you can register to receive free samples of anything from beauty products and homewares to food, children's toys and coupons. Take a look at www.mysavings.com and http://irelandfreestuff.com

Get more free stuff

If you need a radio, a sofa or a washing machine you don't necessarily have to pay for it. There are various websites that allow people to advertise things they want to give away, and if you want it you can go and collect it. Check out www.jumbletown.ie which covers the whole country or www.gumtree.ie and www.dublinwaste.ie for Dublin only.

While you're at it, if you have something you don't want anymore, you could give it away. Remember you will save on the waste disposal charges for large items.

Be an opinionated consumer

Earning a few extra euro or free gift tokens would come in handy in 2009 so why not register on a consumer opinion website. All you have to do is register with sites such as www.irishopinions.com and https://irelandsurveypanel.com and then you can take part in text or online polls or focus groups and get paid for doing it.

Save money and the planet

In 2009 you should do your bit to save the planet as well. Ditch the expensive and chemically laden household cleaners and instead use vinegar and soda crystals.

Vinegar clears blocked drains, cleans metal and gets rid of calcium build-up in kettles. If you don't believe me look at www.vinegartips.com. Soda crystals diluted in water are good for cutting through grease and limescale, so is good for cleaning kitchens and bathrooms, including ceramic or vinyl tiles.

Use your car less

If you have a car, you know it costs a lot to run -- plus it increases your carbon footprint. If you can't walk, cycle or get public transport, then use the car less. Share journeys with friends or colleagues. You could also change your driving practice: empty your boot; use heating and air conditioning sparingly; drive at a constant speed and start and stop as little as you can manage, as this all saves on fuel consumption.

Know your rights

If you buy something and it breaks, don't just leave it at the back of the drawer, no matter how little it cost. You are entitled to a repair, replacement or refund from the seller and you shouldn't have to pay for it. This also goes for electrical and other big items that are outside their manufacturer's warranty but within two years of purchase.

Have fun for free

In 2009 why not make an effort to have free fun? Walks in the countryside are free, as are public parks, galleries and museums. Check out your local event guide for any free concerts in your area.

If you're in Dublin, why not enjoy a free night out as an audience member of a television programme. Look at www.rte.ie for details. For a quieter night in, read a book, but don't buy it; join a library and read it for free.

Save on energy costs

You really should ensure you are employing every energy saving device in the book to save on household bills.

Use the appliance calculator on www.esb.ie to estimate how much your home electrical appliances and lighting cost to run.

You can also compare the cost of, for example, washing clothes at 40 degrees rather than 60. Prepare to be shocked. Then go to the website of Sustainable Energy Ireland www.sei.ie to get useful tips on how to make both small and big changes to reduce your bill.

Get your entitlements

Millions of euro in tax relief goes unclaimed each year. Make sure you get yours. You can claim for: mortgage interest relief; rent relief; union subscriptions; waste charges; medical and dental costs; annual transport tickets; letting a room; some college courses and more. You can do it all easily online at www.revenue.ie

Switch

Make sure you are getting the best deal for your home and mobile phones and broadband services. Many people pay too much simply because the tariff they are on does not match their usage pattern.

Work out how often, to where and when you make calls and then input this data to the calculator on www.callcosts.ie, which will calculate the best deals available.

Then call your provider and see if you can change your package or switch provider for a better deal.

Switch some more

You should do research on all the policies you hold, such as home, health and motor insurance, as you could potentially save yourself hundreds of euro a year by switching. Go to www.itsyourmoney.ie for cost comparisons and also www.hia.ie for more

Haggle

Haggling was always around but is now becoming more popular. If you are buying high ticket items such as furniture, electrics or cars or if you're spending a lot in one store, ask for a discount.

Remember to ask for the manager and be polite and friendly.

Keep in mind how much you are willing to pay so that you don't end up bartering as though you're in a souk or walking away when you actually really wanted the thing. Keep your cool, and remember that a €10 discount is better than nothing.

Tina Leonard writes the Smart Consumer column in the Irish Independent every Thursday

HEALTH REFORM: Our Year In Review

2008-12-26T03:52:00.000-08:00

Health Policy -
December 24, 2008 - 10:07am

Before we give this blog (and our bloggers) a holiday break and wish our readers all the best for the New Year, we wanted to take a moment to look back at 2008 and look ahead, with some optimism, to 2009. Amid our challenges are opportunities, and amid those opportunities are the best chance in many years to fix our health care system so that it is both more equitable and more sustainable.

A year ago at this time, we weren't even sure whether health care would emerge as a leading issue in the 2008 primaries, whether it would resonate with voters. To the extent that candidates were talking about health reform, it was to a large extent a squabble among Democrats about mandates that most Americans probably didn't understand. But as the primary season wore on, we heard more and more about health care -- and, as former Arkansas Gov. Mike Huckabee reminded us, about wellness and prevention. Health care, after all, isn't just about payments and insurance and financing (and politics). It's about our health.

To their everlasting credit, candidates in both parties took our nation's health care crisis seriously and voters in both parties spoke up. Headlines may have focused on the disagreements about taxes, money and insurance markets; finding consensus on how best to expand coverage remains challenging. But what also emerged is that policymakers and politicians have an increasingly sophisticated understanding of the way our health care system has become outdated. How it focuses on acute care, when our society is facing an epidemic of chronic disease. How it rewards doctors and hospitals for providing lots of care, whether or not they are providing good care. How one in three dollars we spend on our health has little or no clinical value. An understanding of how we have to both figure out how to insure everyone and how to reinvent our health care delivery system so it makes sense, for our people's physical health and our country's fiscal health. Maybe not all politicians have said this in public yet. Maybe we are not quite at such a tipping point that reform can pass in 100 days. But it's what we here at New America's Health Policy Program have begun calling a "pre-tipping point" that will see major health reforms enacted maybe not in days or weeks, but in a reasonable, workable time frame. And that's progress.

Yes we enter 2009 with trepidation about our nation's economy, about what's ahead. But we also enter the New Year with hope. Inspired in part by the passion of Sen. Kennedy, leaders in both the House and Senate have already begun the hard work that an historic legislative initiative demands. President-elect Obama has made clear that health reform is a priority for his administration, not just a slogan for his campaign. He has shown that he understands that fixing health care is part of fixing our economy. Health care costs are part of what's wrong with Detroit and the auto industry. Part of what's hurting our ability to compete globally. Part of our housing and foreclosure crisis. Part of what's eating away at our small businesses. Part of what's hurting American families. So here's to 2009. Here's to hope.

Thank you and all the best -- Len Nichols, Joanne Kenen and the rest of the New America Health Policy Program.

Queen's bank Coutts accused of giving disastrous investment advice

2008-12-20T05:57:00.000-08:00

By Simon Duke
Last updated at 2:59 AM on 20th December 2008

The Queen's bankers have been accused of giving disastrous investment advice to their well-heeled customers.

Coutts allegedly told clients to keep their cash with the American insurer AIG even though the stricken group has had to be rescued by the U.S. government.

Angry patrons, who include the Royal Family and Premiership footballers, are threatening to sue the bank over its financial guidance.
It raises the prospect of some of Britain's richest figures suing a Government guaranteed bank, as the institution is owned by Royal Bank of Scotland.
Coutts clients must have around ?500,000 in liquid assets and the bank offers free services only to those always £10,000 in the black.
Sir Keith Mills, the tycoon behind the Nectar loyalty card, yesterday launched a campaign to shame Coutts into compensating clients who have lost out by investing in the AIG savings bonds.
Sir Keith, a key figure in London's bid for the 2012 Olympics, threatened to sue Coutts if it does not agree to make up the 'several millions of pounds' he has lost.
'Given the advice it gave clients Coutts should guarantee our losses. If it doesn't legal action would be a last resort,' he said.

The entrepreneur made around ?160million after selling the Nectar Card business last year, and is believed to have invested a significant portion of the windfall in AIG.
According to Sir Keith, Coutts recommended the AIG Life Premier Bonds as a safe, but more profitable alternative to leaving his cash in the bank.
Wealthy Britons put almost ?6billion into the fund, which had a minimum investment of ?100,000.

But after the dire financial turmoil of recent months, even the safest AIG investment bonds have plummeted in value.

AIG had to be rescued by a ?100billion U.S. government cash injection in September after running up huge losses on credit insurance business.
Investors who have pulled their money out lost 13 per cent of their investment, even though Coutts assured them the products were very low-risk.
A spokesman for Coutts said: 'At the time of sale it was made clear that the investment was low risk, not risk free, and it was explained that the value of the investment could go up as well as down.'
Coutts was set up by Scotsman John Campbell of Lundie in 1692.
It boasts an illustrious history, counting Charles Dickens, Lord Nelson, Jane Austen and generations of royals among its customers.
In recent years it has started advising sportsmen. Customers are thought to include David and Victoria Beckham.

Morgan Stanley Insured Municipal Bond Trust Adopts Investment Policy Changes

2008-12-12T21:15:00.000-08:00

Morgan Stanley Insured Municipal Bond Trust (NYSE: IMC) (the "Trust") has received shareholder approval to adopt the investment policy change, as described below. This change is designed to expand the investment universe in which the Trust can invest, thereby providing the Trust's portfolio management team with important flexibility to respond to ongoing developments in the insured municipal bond market. The Trust seeks to achieve its investment objective by providing income which is exempt from federal income tax. The Trust is not changing its investment objective.

In connection with the recent instability in the marketplace, some of the insurers of municipal obligations have experienced ratings downgrades by the ratings agencies that rate such insurers' claims paying ability. This affects many funds that invest in insured municipal obligations because many of these funds (including the Trust) currently have policies that require such funds to invest 80 percent of their net assets in municipal obligations that are insured by an insurer rated "AAA" at the time of purchase. At a meeting held on December 12, 2008, the Trust's shareholders have approved the following investment policy change:

To allow the Trust to invest, under normal market conditions, at least 80 percent of the Trust's net assets in municipal obligations which are covered by insurance guaranteeing the timely payment of principal and interest thereon and that are rated at least "A" by a nationally recognized statistical rating organization ("NRSRO") or are unrated but judged to be of similar credit quality by the Trust's Investment Adviser, or covered by insurance issued by insurers rated at least "A" by a NRSRO.
The Trust's Management believes that the changed policy allows the Trust to continue to purchase higher quality insured municipal obligations, while acknowledging the changing market and economic conditions. While the market risk and the credit risk of the Trust investing in insured municipal obligations generally should be lower than the risks of a fund investing in similar municipal obligations that are uninsured, insurance does not eliminate the market risk or credit risk of the securities in the Trust's portfolio. A downgrade of an insurer would generally subject the Trust to potential market value declines and increased credit risk on the municipal obligations insured by such insurer.

Morgan Stanley Investment Management, together with its investment advisory affiliates, has nearly 1000 investment professionals around the world and approximately $570 billion in assets under management or supervision as of August 31, 2008. By leveragingÂ its globalÂ 'community of boutiques' structure andÂ the strength of Morgan Stanley, MSIMÂ strives to provide outstanding long-term investment performance, service and a comprehensive suite of investment managementÂ solutions to a diverseÂ client base, which includes governments, institutions, corporations and individualsÂ worldwide.

Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management, wealth management and credit services. The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 600 offices in 35 countries. For further information about Morgan Stanley, please visit www.morganstanley.com.

HSBC announces £1bn fund for UK businesses

2008-12-07T03:23:00.000-08:00

HSBC has announced the establishment of a $5 billion (£3.4 billion) global fund to lend money to small and medium-sized businesses affected by the credit crunch.

The banking industry has come under fire for not passing on the full benefit of interest rate cuts to consumers, for charging higher interest rates on loans to businesses and for reducing the savings rates on instant access accounts.

But in a move aimed at stemming such criticism, a total of £1 billion has been kept to assist businesses in the UK.

A spokesperson for the banking giant, which has 9,500 offices around the world, said: "The fund has been designed to help customers with fundamentally sound businesses weather short-term shocks caused by the downturn, by supplying working capital to help businesses with their cash flow needs and support businesses that trade or aspire to trade internationally.

"The fund represents new money and will be funded from HSBC's own resources, allocated on a case-by-case basis using the bank's normal lending criteria."

The bank claims that it has lent more this year than last in spite of the higher costs of lending between banks and also states that 32,000 businesses had moved their business bank accounts to it since the beginning of the year.

Business secretary Peter Mandelson welcomed the move and urged other banks to maintain charges and rates available to small and medium enterprises.

HSBC's move follows the Royal Bank of Scotland's pledge to not begin proceedings to reclaim a person's home until at least six months after a customer falls behind on mortgage payments.

Chancellor Alistair Darling has urged banks to institute a three-month wait before beginning repossession proceedings on lenders who have failed to pay an installment on their mortgage.

Pressure has been increasing on banks to help extend finance to ailing businesses after the government's £37 billion bailout plan saw it take stakes in the Royal Bank of Scotland, HBOS and Lloyds TSB.

Other high street banks were provided with emergency funding and liquidity support as part of the other measures in the bailout.

Barroso backs euro for Britain

2008-12-01T03:10:00.000-08:00

Those who matter in Britain are considering a renewed drive to abandon the pound, European Commission president Jose Manuel Barroso has hinted.

His comments have sparked speculation that senior politicians including prime minister Gordon Brown may now be mulling the option over.

"I'm not going to break the confidentiality of certain conversations, but some British politicians have already told me: 'If we had the euro, we would have been better off'," the AFP news agency quoted Mr Barroso as saying on French radio.

"The British have an enormous quality, one of many, that is they are pragmatic," he added. "This crisis has emphasised the importance of the euro, in Britain as well."

Sterling has suffered in recent months because of the credit crunch. Many analysts believe its declining fortunes could reinvigorate the dormant argument over whether Britain should join the eurozone.

Downing Street has refused to comment on the issue. It maintains the five economic tests outlined when Mr Brown was in No 11 still stand – that a referendum will only be held when five economic tests are met.

These include the euro's impact on foreign investment, jobs and financial services, in addition to flexibility and convergence criteria.

Opinion polls have in the past suggested Britons remain opposed to abandoning sterling, as Mr Barroso freely admitted.

He added: "I don't mean this will happen tomorrow, I know that the majority are still opposed, but there is a period of consideration underway and the people who matter in Britain are currently thinking about it."

It's the restive season

2008-11-28T04:22:00.000-08:00

Massive discounts are on the cards this festive season as South African retailers across the board brace themselves for the bleakest Christmas sales season in nearly two decades, experts say.

"Retailers will have to go all out this Christmas to entice consumers. I would not rule out big discounts from durables, semi-durables and non- durables retailers," Luke Doig, senior economist at Credit Guarantee Insurance Corporation, told I-Net Bridge in a phone interview in Friday.

Black Friday

Today, known as Black Friday in the US, marks the beginning of the traditional Christmas shopping season - putting retailers "in the black" - but sales forecasts for the season are gloomy, with Doig saying his initial forecast of a two percent real decline "looks optimistic" at this stage.

Supporting this forecast is this week's survey by the Bureau for Economic Research (BER) and Ernst & Young, which showed that 13 percent of the retailers expect lower sales volumes in Q4 2008, the weakest result since the 1992 festive season.

Retail sales, as released by the Statistics SA, have dropped every month since May, highlighting the distress faced by consumers given the lagged effects of interest rates hikes between June 2006 and June 2008 and uncomfortably high debt levels.

Meanwhile, earnings reports from several listed retailers show a common theme – slowing top line growth. This raises concerns about retailers' ability to implement steep price markdowns without affecting the quality of earnings.

Better volumes

"What are they going to do? Better volumes at the expense of margin? I think there is still room to give up some margin, otherwise they'd be sitting with high stock levels in January," said Doig.

According to BER/Ernst & Young survey, while more than three-quarters of the respondents raised prices in the third quarter, this came down to 61 percent in Q4, and less than 50 percent expect to increase prices in the first quarter of 2009.

"The combination of weak sales growth and reduced ability to raise prices amid falling commodity prices and weak consumer demand have seen retailer profitability decline to levels last seen in 2001/02," said Derek Engelbrecht, retail and consumer products director at Ernst & Young.

Fuel price declining

But with fuel prices declining, with the latest cut being a substantial R1.61 per litre, both the retailer and the consumer will have a little bit of extra cash this festive season.

Doig estimates that the fuel price cut in December will add an extra R2- billion, easing production costs for retailers and adding more muscle to fight for a slice of R10.3-billion estimated to be spent this holidays.

A snap website glance-through of major retailers showed that they are on furious promotional campaigns, with retail chains from Woolworths and Edgars to Game running massive shopping competitions.

Berkshire Hathaway Q3 profit down 77pc

2008-11-10T19:35:00.000-08:00

Warren Buffett's Berkshire Hathaway has reported a third-quarter profit fall of 77 percent, the fourth straight quarterly decline, hurt by weaker results from insurance underwriting and a big loss on derivatives contracts.

Net income for the Omaha, Nebraska-based insurance and investment company fell to US$1.06 billion (NZ$1.83 billion), or US$682 for an A share, from US$4.55 billion, or US$2942 a share, a year earlier.

Operating profit fell 18 percent to US$2.07 billion, or US$1335 a share, from US$2.56 billion, or US$1655.

It fell short of analysts' average expectation of US$1429 a share. Revenue fell 7 percent to US$27.93 billion.

Buffett, an economic adviser to president-elect Barack Obama, has committed more than US$27 billion of Berkshire's money this year to make acquisitions, finance takeovers and invest in blue-chip companies such as General Electric and Goldman Sachs Group as the credit crisis drives asset values down and makes it harder to borrow.

The investments give Berkshire new ways to grow as insurance operations, which generate about half its business, come under pressure. Last month, Buffett pledged to move all his personal holdings apart from Berkshire stock, which is pledged to charity, into United States stocks from government bonds, citing long- term optimism in corporate America.

Profit from insurance underwriting fell 83 percent to US$81 million, hurt by increased price competition and about US$1.05 billion of losses tied to Hurricanes Gustav and Ike. Berkshire had boosted insurance premiums after Hurricane Katrina in 2005, but prices and profit margins have since fallen.

Insurance investment income declined 12 percent in the quarter to US$809 million, and profit from other businesses declined 8 percent to US$1.08 billion. Berkshire also had US$1.01 billion of net losses from investments and derivatives.

The company has disclosed many derivative contracts tied to the performance of the Standard & Poor's 500 and three foreign stock indexes, and to the credit quality of high-yield bonds. Accounting rules require Berkshire to regularly report unrealised gains and losses on those contracts.

Central bank gets $60 mln for technology upgrade

2008-11-01T02:38:00.000-07:00

The World Bank said Friday it is lending US$60 million for a project that will provide better training and technology to the State Bank of Vietnam, helping it modernize to international standards.

The credit would help the central bank, the Credit Information Center (CIC), and the Deposit Insurance of Vietnam (DIV) “to reform and modernize the financial sector by improving delivery of their main functions in line with international standards,” the bank said in a press release.

Much of the loan would be used to build a modern, centralized information and communications technology platform to support the State Bank of Vietnam's evolving role as a central bank.

The project would also help the Credit Information Center and the Deposit Insurance of Vietnam with funding from the International Development Association, the Washington-based World Bank's concessional arm.

“The project is aimed at contributing to the achievement of the government's strategic goal of a stable and sound financial sector in Vietnam,” said Xiaofeng Hua of the bank’s East Asia and Pacific Region.

“This effort is critical in ensuring Vietnam's sustainable economic growth and continued progress in poverty reduction, especially at a time of global financial turbulence.”

Source: Thanh Nien

Obama vs. McCain: healthcare smackdown

2008-10-13T19:03:00.000-07:00

Those who don't navigate over to our other Health pages are missing out, especially this week. Staff writer Susan Brink has put together a comprehensive roundup of differences between the healthcare plans of Sens. Barack Obama and John McCain, and, not surprisingly, a lively discussion has broken out. You can read the full thread at this link, but for those who prefer (or only have time for) an abridged debate, here are several unedited samples:

From "Joan Walthers:"

"John McCain's plan would be the best. It isn't perfect but at least the insurance would not be handled by the government. We have medicare ins. It is very difficult to get a doctor to accept our insurance even with a supplement because the government is so slow at paying bills and then will pay such a small amount. Doctors can't wait until some gov. office decides to pay the bill. And what sick person can afford to wait for some politician to decide whether the illness should be covered or not and to what extent. No Thanks. Government needs to stay out of people's business. It needs to enable people to make choices, not make them for them."

From "Laura Remson Mitchell:"

"The McCain approach would be a disaster for anybody who has--or ever gets--a major health problem. If you want health care to remain essentially a private rather than a public good, we need *more* regulation, not less. The tax credit promised by McCain would be meaningless without *significant* regulation of private insurance underwriting practices, among other things. What good is the McCain health-care credit if you can't buy the coverage you need at *any* price, much less an affordable one?"

From "Strauss:"

"Obamas Healthcare Plan? McCain's Healtcare Plan ? None of the above will win. Just another campaign promise that will never happen. It never ceases to amaze me that people continue to believe candidates who make promises to get elected and then never keep them. You have a better chance of winning the lottery than getting a national health care plan. Here's a better idea. Start exercising and loose weight and quit taking blood pressure medication. Quit eating junk food and stop tsking cholesterol pills. The US is currently 45 in the world in life expectancy."

There's plenty more of that, and you are welcome to add your comments over there (or here).

-- Martin Beck

Rescue can't be hasty, Specter says

2008-09-23T05:08:00.000-07:00

By Spencer Soper

WASHINGTON | - Congress needs to carefully review a proposed $700 billion plan presented by the Bush administration to save financial markets, U.S. Sen. Arlen Specter told a crowd of more than 200 students at DeSales University Monday.

''These legislative proposals need to percolate Â and the American people need to know what's going on,'' said Specter, R-Pa., adding that the reviews should run into October if necessary. ''If they don't like the amount of time it's taking, that's too bad.''

His statements run counter to the Bush administration's push for swift action on the plan, which would be one of the government's biggest-ever private sector bailouts. The proposal calls for the U.S. Treasury to buy bad mortgages from ailing financial institutions, which are seen as clogging credit markets and dragging down the economy.

Specter said he wants to make sure such a plan has adequate oversight. He'd also like bankruptcy judges to be empowered to rework mortgages for distressed homeowners so they don't lose their homes to foreclosure. Some of those homeowners may have been misled into complex adjustable rate mortgages with payments that climb drastically after a period of lower initial payments used to entice them, Specter said.
Students applauded when Specter said limits should be placed on the compensation of executives at the companies benefiting from government help.

''The companies that created the problem shouldn't profit from it,'' he said.

Larry Meo, a student at the Center Valley school, said Specter made a convincing argument about the need for the government to move cautiously. ''I'm just as confused as everyone else about the financial crisis,'' he said.

Specter also fielded questions from the audience about Republican vice presidential candidate Sarah Palin, special education funding, illegal immigration and health care.

He told the students he thinks the government should reassess its funding priorities, and he would like to see more government money invested in health

A Race for Cash at AIG as Ratings Are Downgraded

2008-09-16T05:49:00.000-07:00

Major credit ratings agencies downgraded the American International Group late Monday, worsening its financial health, as Federal Reserve officials and two leading investment banks were in urgent talks to put together a $75 billion line of credit to stave off a crisis at the company, The New York Times’s Mary Williams Walsh and Michael J. de la Merced reported.

The credit downgrades are likely to force the company to turn over billions of dollars in collateral to its derivatives trading partners.

Without the financing, which was being arranged by Goldman Sachs and JPMorgan Chase in talks with the Federal Reserve officials, A.I.G. might be forced to declare bankruptcy, according to The Times.

The talks, which began last week and continued through the weekend, added to the sense of agitation in the stock market on Monday, as investors grappled with the implications of the bankruptcy ofLehman Brothers, which, like A.I.G., was a large counterparty to derivatives contracts held by countless financial institutions.

Shares in A.I.G. tumbled more than 60 percent on Monday morning as concerns grew that the firm lacked capital to withstand cuts to its debt rating, which were borne out later in the day. The company’s potential write-offs are mounting and may reach $60 billion to $70 billion, according to The Times.

Most of A.I.G.’s businesses are healthy, but its troubles grew from one unit that dealt in complex debt securities and derivatives and now threatens to drain cash more quickly than the financing package can be assembled.

The day started off with news that A.I.G. had requested a $40 billion bridge loan from the Fed, a request that was rebuffed, and ended with the word that its need had soared to $75 billion. The firm suffered several credit-rating downgrades Monday evening, including cuts by Standard & Poor’s and Moody’s.

The complex discussions, continuing into the night as a deal was sought before United States markets open on Tuesday, involved New York state regulators, federal regulators, private equity firms and Wall Street banks that rely on A.I.G.’s ability to honor its derivatives contracts, as they do with Lehman Brothers.

“It’s not just the failure of one company,” Julie A. Grandstaff, vice president and managing director of StanCorp Investment Advisers, told The Times. “It’s the ripple effect of the disappearance of counterparties” that was spurring urgent efforts to bolster A.I.G.

A large counterparty to derivatives contracts has not declared bankruptcy since the market grew to such enormous size, so Lehman will be a test. Financial officials fear another failure of a big counterparty could start a chain reaction.

The need to find fresh money for A.I.G. is bringing new layers of complexity to the credit crisis. As an insurance concern, A.I.G. has wholly different regulators and capital requirements than the banks and Wall Street firms that have suffered most of the huge losses so far. One person briefed on the matter told The Times that potential lenders doubted that the facility could come together without the Fed’s backing.

A.I.G. itself has had three chief executives in the last three and a half years, and one person briefed on Monday’s discussions told The Times that its officials seemed uncertain about how to proceed. The Fed was not able to provide the $40 billion bridge loan because it oversees banks, not insurers.

The talks about backing up A.I.G. began last week, when the company approached regulators, saying it was concerned that if a deal could not be put together to save Lehman, A.I.G.’s own future would be in doubt. A.I.G., through its financial products unit in London, has exposure to the same mortgage-linked debt securities that brought about the downfall of Lehman.

The talks between A.I.G. and its regulators led to the announcement at midday by Gov. David A. Paterson of New York that the state would allow A.I.G. to borrow $20 billion from its own subsidiaries, to help bolster its capital in the face of potentially disastrous credit downgrades.

Mr. Paterson said he had authorized the state insurance superintendent, Eric R. Dinallo, to include the $20 billion asset transfer in the broader plan being worked out at the New York Fed.

Normally state insurance regulations would prevent a holding company like A.I.G. from pulling assets out of its subsidiaries, which are insurance companies that need sufficient liquid resources to pay their claims.

But Mr. Paterson said the situation was dire.

“I hope you’re aware of the risks if we don’t act,” he told journalists at a midday news conference. “It is a systemic problem.”

People briefed on the matter told The Times that if JPMorgan and Goldman Sachs were able to raise a $75 billion credit line by Tuesday, it could avert an escalating series of collateral calls. But it was unclear whether they could put together such a complicated package in time.

A.I.G. has also considered sales of virtually all of its business assets, but conducting such sales quickly would be hard.

During the weekend, A.I.G. had been negotiating for a capital infusion from three private equity firms, The Times said. But A.I.G. rejected an offer from J.C. Flowers & Company to buy $8 billion in preferred shares, because the bid included an option to buy the rest of the company at a steep discount.

Two other buyout firms, Kohlberg Kravis Roberts and the Texas Pacific Group, withdrew their offers to buy preferred shares as the Fed made clear that it would not provide any sort of backstop.

But Maurice R. Greenberg, the visionary leader who built A.I.G. but was removed during an accounting scandal in 2005, has offered to help with any restructuring. Mr. Greenberg and his lawyers asked on Saturday if he could play a role in overhauling A.I.G. The deadpan response, according to a person close to the company, was: If you are willing to make a multimillion-dollar equity investment, we are happy to talk.

Mr. Greenberg has seen the value of his holdings plummet as A.I.G. shares have sunk. He holds about 39 million A.I.G. shares directly and an additional 243 million through his private equity firm, Starr International. The shares were worth about $15.8 billion at the beginning of this year, but just $1.3 billion as of Monday.

Student finance guide: Best of the banks

2008-09-03T05:10:00.000-07:00

Choosing the right student bank account is crucial. Banks will offer all sorts of incentives, from cashback tickets to free railcards, and while these can be a great bonus, there are other important things to consider. For most penniless students, the key factor will be an interest-free overdraft facility. Those lucky enough to have savings will want better savings rates.

BEST FOR INTEREST-FREE OVERDRAFT:

Halifax Bank of Scotland

If by 'best' you mean biggest then HBOS tops the table with a whopping interest-free overdraft of up to £3,000 throughout your studies.

However, those who exceed the overdraft limit will be charged eye-watering interest of 24.2%. There is also a £28 penalty for going over the limit. Move to another bank after university, one with a graduate account that gives an interest-free overdraft for three years.

Royal Bank of Scotland isn't far behind, offering £2,750 fixed from day one. But again, this is marred by the punitive 29.84% interest above this limit.

BEST FOR FREEBIES:

NatWest

It's hard to top NatWest's free five-year 16-25 Railcard worth £125. This knocks a third off rail fares and will save students a fortune. For those who don't travel by train, Lloyds TSB offers £100 cashback for joining.

BEST ALL-ROUNDER:

HSBC

Doesn't offer the biggest overdraft at £1,000 in the first year, increasing to £2,000 in year five, but its rate of 8.3% if you exceed your overdraft limit without permission is one of the lowest. There are also no additional penalties.

The incentives are useful - two years' free worldwide travel insurance, plus overdraft limit alerts at cash machines. And it pays 6% on your first £1,000 of savings - if you have any! - in your first year.

Six Ideas for Insuring Your Deposits

2008-08-27T16:31:00.001-07:00

As consumers continue to be rattled by a seemingly bottomless pit of bad financial news, they're looking for ways to ensure their entire bank deposits are covered by the Federal Deposit Insurance Corp.

It's not difficult to exceed the $100,000 limit on individual accounts, or the $250,000 limit on certain retirement accounts. In fact, the FDIC says that less than 62 percent of the $6.88 trillion on deposit in FDIC-insured banks was covered at the end of 2007. That leaves more than $2.5 trillion unprotected in the event of bank failures.
Fortunately, there are many ways you can have excess deposits covered, and you should take the trouble to use one of these methods or, through your own research, find other ways. Uninsured depositors receive an average of 72 cents on the dollar when their bank fails. Imagine having excess money in a bank and losing more than a quarter of it. In addition, it can take years for the FDIC to settle a bank failure.

The six examples of excess deposit coverage that we'll highlight here primarily involve accounts at community or state-chartered banks. Some larger institutions carry their own excess deposit insurance, so if you prefer banking at larger institutions, ask if they have it. Companies such as BancInsure and Progressive Casualty Insurance provide excess deposit insurance to financial institutions. Excess share insurance is available to credit unions. But don't assume you're covered -- always ask.

Aggressive male ostriches not the same as locked garage

2008-08-23T03:55:00.000-07:00

If an insurance policy stipulates a vehicle must be kept in a locked garage at night, not even chaining the insured vehicle, several dogs, a locked gate and aggressive male ostriches, can substitute as suitable security measures.

Abrie Burger found that several measures he had taken to protect his off road vehicle which was parked in his yard outside at night were not good enough for his insurance company when he submitted a claim for theft of the vehicle.

The insurance company rejected the claim on the basis that the vehicle had not been parked in a locked garage at night, as was required in the policy.

Burger, a sales representative from Sasolburg, complained to the FAIS Deputy Ombud that he was not aware of the requirement to keep the vehicle in a locked garage as he did not receive the policy schedule and policy wording from his broker, Heritage Insurance Brokers (Pty) Ltd of Sandton.

He said that on the day of the theft, his and his friend’s vehicles were chained and locked together and left outside for the night because they had been washed and he had arrived home late that afternoon.

He said there were several dogs on the premises but they had been poisoned during the night of the theft and one died as a result.

Outside the fence there were five ostriches of which three were “very aggressive males”. Entry to the yard by the burglar/s was gained by breaking or cutting off the lock on the gate.

The issue for determination before Ms Noluntu Bam, the Deputy Ombud for Financial Services Providers, was whether the respondent was negligent in not making the complainant aware of the condition of insurance which was breached, thus leading to the insurer rejecting the claim for theft of the vehicle.

During investigation, it was found that the complainant had stated in his own handwriting in the proposal form dated 24th February 2005 that the vehicle would be kept in a locked garage at night.

The respondent said a letter dated 2 March, 2005 accompanied by the policy schedule and policy wording was sent to the complainant shortly after inception of the policy to the postal address furnished by him in the proposal form.

The letter stated that “unless otherwise provided for, overnight theft from the permanent place of residence is EXCLUDED unless the ATV/Off road vehicle is kept in a fully enclosed garage or carport and both any door and any gate leading to the garage or carport is kept locked at all times and there is proof of visible, violent or forcible entry/exit”.

This condition is also mentioned in the policy “confirmation of cover,” which was sent to the motor dealer, as well.

Ms Bam said when motor vehicles are financed, the credit supplier requires insurance cover to protect its interests.

The insurer on the other hand, seeks to minimise its exposure to the risk materialising. To this end, the question is asked in the proposal form “where is the vehicle kept at night? – not address”. In this case, Burger answered “locked garage”.

A further clause in the form states: “I agree that this proposal shall be the basis of the contract between the insurer and myself.”

Ms Bam said that in the circumstances, it cannot be said that the complainant was unaware of the relevant condition that was breached and which led to the rejection of the claim, even assuming the complainant did not receive the policy schedule and wording as alleged by him.

“In any event, I note that two letters were posted to the complainant regarding non-payment of premiums. He thereafter paid the premiums. The probabilities seem to favour the conclusion that he did in fact receive the letter with the policy schedule and wording as well.

“There rests a duty on a broker to draw the insured’s attention to material clauses in the insurance contract.

“However, in the matter before me the complainant himself stated the vehicle would be kept in a locked garage at night and then failed to do so when it was stolen.

“It, therefore, cannot be said that in this case the respondent was negligent in rendering the service to the complainant.”

Ms Bam said it was clear that had the complainant abided by the condition about keeping the vehicle in a locked garage at night at his premises as he had warranted in the proposal form, the theft may have been avoided.

“That he had dogs and ostriches on the premises do not detract from his warranty,” she added, in dismissing the complaint.

Morgan Stanley updates lending systems: report

2008-08-18T04:23:00.000-07:00

(Reuters) - Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) and Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) are responding to the credit crisis with a system that uses the market's view of their own creditworthiness as a basis for lending decisions, the Financial Times reported.

Wall Street's second-largest investment bank Morgan Stanley is essentially tying its promise to provide financing to hedge fund clients to the price of credit insurance on its own debt, it said.

If the cost of the protection rises to a certain level, that would trigger a reduction in Morgan Stanley's commitments to hedge funds, the quoted people familiar with the situation as saying.

The message is that "if our firm is in trouble, we would rather fund ourselves than fund you (hedge funds)," the paper quoted a brokerage executive with knowledge of the arrangements as saying.

Goldman Sachs, which has largely avoided the credit losses hobbling its rivals, is understood to have a similar arrangement that uses its bond prices as a reference point for credit commitments to hedge fund clients, the paper said.

Morgan Stanley and Goldman Sachs did not immediately return calls seeking comment.

Last week, Morgan Stanley and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) agreed to buy back billions of dollars of illiquid auction-rate securities and pay fines to settle charges that they misled investors about the debt's risk.

Morgan Stanley had agreed to buy back $4.5 billion of debt and pay a $35 million fine to settle the charges.

In June, it reported a 57 percent drop in quarterly earnings on weak trading, investment losses and a slowdown in investment banking, even after it realized $1.43 billion in one-time gains.

Govt for commissioner for finance code of practice

2008-08-12T04:48:00.000-07:00

The Government is backing a proposal for a commissioner to develop a code of conduct and set up a disciplinary body for finance advisers and institutions.

A select committee considering legislation to regulate the industry made the recommendation in an interim report.

Commerce Minister Lianne Dalziel said the approach would give strong central supervision while using the experience and knowledge of industry participants.

"It will help ensure that the Securities Commission can act as both the statutory enforcer and the professional regulator."

The committee also suggested a two-level approach to imposing obligations on financial advisers depending on the complexity of the financial product involved.

"The industry and officials have been grappling with the problem of defining who should be captured by the new rules regulating financial advisers. By focusing on the actual product rather than financial decisions or occupations we are able to provide certainty about who is covered by the bill."

Category 1 would include advice on complex securities or investment and savings planning. Anyone providing category 1 advice woul have to be individually authorised by the Securities Commission.

Category 2 would cover advice on credit, general insurance or simple securities such as bank term deposits or call accounts. Individuals would not need to be individually authorised to provide these services.

In addition, the committee is considering adopting a model whereby the Securities Commission can certify financial institutions which meet the standards under the bill.

Certified Financial Institutions would then be responsible for financial advice offered by their staff on simple products.

Irish bus pass is ‘identity card by stealth’

2008-08-10T04:36:00.000-07:00

When John Welford fumbles in his pockets for change as he boards the bus, fellow passengers often nod sympathetically at the pensioner and ask him if he has forgotten his free travel pass. Those who strike up a conversation with Welford will come away thinking that he is either paranoid or has discovered an unsettling plan by the authorities to introduce a national identity card by stealth.

Welford, an Edinburgh pensioner, is interested in the introduction of the Irish public services card, a seemingly innocuous travel pass to be distributed to the country’s 640,000 free travel recipients next year. He sees a parallel between the introduction of the card in Ireland with the rollout of the travel pass in Scotland.

Two years ago, Welford returned his bus card and asked for it to be destroyed. His fear is that the apparently benign identity card, which contains a name, photograph and unique number, is a Trojan horse, the first step by the Scottish government to usher in a national ID by the back door.

There are echoes of his suspicion in the comments of privacy campaigners last week in Ireland. They claim that although the public service card will be introduced as a free travel pass, it may gradually form the basis of a national identity card.
“In 2005, a majority of Scottish members of parliament rejected a national ID. So instead they’ve issued a unique card to the most vulnerable members of society that can be expanded into what they call an ‘entitlement card’,” Welford said. “This will eventually be used for all interaction with state agencies. Because it has been introduced incrementally, there has been little debate.”

In Ireland, the “soft” introduction of the public services card has caused barely a stir. The legislation to introduce the card in Ireland was included in the 2007 Social Welfare and Pensions Act, with scarcely a mumble in the Dail or Seanad.

But what is there to be afraid of? The Department of Social and Family Affairs (DSFA) claims that the card technology will cut bureaucracy, offer improved security and reduce the potential for welfare fraud. There are an estimated 5m identity cards in circulation in Ireland, including the garda proof-of-age card, medical card and free travel pass, so would it not be convenient to create a single, universal ID card?

Civil liberties groups disagree. Privacy International, a civil rights lobby group, claims that once a national ID card is introduced, citizens’ rights will be steadily eroded.

“In Greece and Argentina, for example, being caught cardless could land you at the local police station, where your identity will be established using other means, such as fingerprinting,” the group warns.

But what have the innocent to fear?

In AUSTRALIA a proposal for a national identity card in the 1980s to combat welfare fraud initially met with enthusiasm in polls. But when the Australia card was debated by government, it was blocked by opposition parties and the Senate and public enthusiasm cooled.

In Ireland, welfare fraud is cited as the chief reason a public services card is needed. The DSFA claims to have uncovered more than 1,000 examples of people trying to collect welfare using bogus identity papers in the past four years.

The public will most likely see the public services card for the first time next year when they are given to the 640,000 recipients of free travel. The first cards will include only a photograph and name, but they will be capable of storing far more information.

When the department tendered for a company to create the cards, it stated that they should be “designed to evolve over time” so that “eventually any service provider will be able to use it”.

It should also be suitable for storing biometric data, such as fingerprints, and should be capable of being easily turned into a chip and pin card.

Radio frequency technology will also eventually be integrated to allow the card be used in a similar fashion to Transport for London’s Oyster card. The card’s specifications were drawn up in conjunction with Consult Hyperion, an IT consultancy that has worked on the introduction of national ID cards in Malaysia and Hong Kong. The card developed in Malaysia, the MyKad, contains a thumbprint and must be carried by all citizens over 12.

The department says that it is judicious to design a card that can be adapted. But privacy campaigners suggest that now is the time to debate the card, before it becomes part of the fabric of everyday life.

“Nobody is going to raise an issue about a bus pass. And when it eventually doubles as your medical card, or as garda proof of age ID, it will seem very convenient. But the more information linked to the card, the more possibility there is for function creep — when data collected for one reason is used for another — or for information to be shared between agencies, however trustworthy they may be,” said Tanya Ward, a director of the Irish Council for Civil Liberties (ICCL).

Few will be reassured by the recent audit of the DSFA carried out by the data protection commissioner. It found serious weaknesses in the protection of the personal data of more than 300,000 people. Ward is also concerned by Ireland’s “piecemeal privacy and data protection laws”.

“We want to know what safeguards are being put in place for the operation of this new system. Who will have access and how will it be used? Can we trust the DSFA to keep our data safe?” she said.

Niall Barry, the DSFA’s project director, said the public services card would be secure because of the paucity of information contained on it. “It will contain as little information as possible. Sensitive data will be held on a secure server than can be linked to the card using an ID number or, eventually, chip and pin. The card is just a key to the information,” he said.

In a book called The Internet Galaxy, the sociologist Manuel Castells argues that it is not Big Brother, an omnipotent government, that we should be afraid of but his legion of “little sisters” — the hundreds of databases that store the details of our lives.

“There is no need to worry about a card,” Welford said. “But what is the card linked to?”

He argues that in Germany, for example, confidentiality legislation prohibits the allocation of unique ID numbers to citizens. This prevents hundreds of databases being linked together to form a rounded picture of a person’s interaction with the state. In Belgium and Austria, instead of identifying numbers, people are recognised through encrypted codes.

In Ireland, though, the roll-out of the PPS (Personal Public Service) number has already paved the way for every citizen to have a personal identification number. First introduced as the RSI (Revenue and Social Insurance) number in 1993, the PPS came into being in 1998. In the intervening decade, it has gone from being used by just two bodies — the Revenue and Department of Social Welfare — to 63, including An Post, the Garda Siochana and the Legal Aid Board.

Micheal O’Dowd, who was commissioned by the European Commission to write a paper on the public services card, said that the new card would “link a person unequivocally to their PPS number”.

“There are currently restrictions on the gardai and defence forces using the PPS number. But how long the government is able to resist the temptation to lift what restrictions remain on the use of the PPS number is anyone’s guess,” he said. “At present, we have the peculiar anomaly whereby PPS numbers of non-nationals, and ID cards also, one must assume, may be examined and used by the gardai. With increased demands from Britain for an Irish ID card that more closely resembles their own proposals, one can only conclude it is matter of time before the new public services card will be used for purposes far broader than interacting with the public service.”

Barry argues that such “usage progression” would require legislation and would almost certainly stimulate debate. He concedes, though, that there is no reason the card envisaged could not be used in the medium term as a proof-of-age ID, to cite one example. Another obvious private sector application would be to use it to buy credit for a transport company, such as the purchase of electronic tokens for the Luas.

He claims it will differ from the national identity card being introduced in Britain because it will not be mandatory. Welford disagrees. “The bus pass here in Scotland is not mandatory either but the only alternative for someone who doesn’t want to use it is to pay on the bus. As it is gradually rolled out to become a library card or medical card, it becomes, in effect, compulsory,” he said.

Welford argues that identity cards were last introduced in Scotland during the second world war when there was a serious risk of German occupation. “We’ve managed fine since then without them, as has Ireland. What has changed in recent years?”

The ICCL argues that the Irish people have never been polled about their opinion towards a national identity card. While there is presumably strong opposition to welfare fraud, would we follow the Australian example by rejecting an ID card, or follow the lead of Britain, where polls show a majority support the introduction of one next year?

The arrival of the public services card only came under scrutiny because of the data protection commissioner’s audit of the DSFA, the ICCL says.

“It has come into the public sphere almost by accident. We are not aware of any privacy impact statement to date in relation to the card and we don’t know how much it costs,” Ward said.

She claims that the appetite for introducing the card is coming from government, not the users of public services. “Where does the motivation lie?”

In Britain, ID cards have been pushed as a crucial weapon in the fight against terrorism. Their introduction could be the factor that forces the Irish government to introduce a comparable card here. In 2005, Michael McDowell, then justice minister, admitted that the government may have to introduce “some form of national ID” because of our shared border and common travel area.

McDowell said he believed that a fundamental philosophy of our common law system is that citizens should not be obliged to carry documentation. “Historically, identity cards have been used to discriminate against minorities,” he said.

Despite his philosophical opposition, he admitted that Ireland must respond to Britain’s decision.

“If it becomes mandatory in the UK, how can Irish people travel into Britain without some form of ID?”

Will that form of ID be the public services card?

Welcome to Tesco-bank: Supermarket giant to offer current accounts and mortgages

2008-07-29T04:58:00.000-07:00

Tesco is to become a stand alone bank, offering cheap home loans and current accounts alongside credit cards, insurance and savings deals.

The supermarket will go head-to-head with the traditional banks in a bid to grab a share of a £20 billion profit pool from UK customers.

It will operate out of branches within more than 200 Extra stores and also over the internet and telephone both in Britain and other countries where it has stores.
Tesco is promising simple cut-price financial products alongside the shelves of baked beans, washing powder, fruit and veg.

The retail goliath will have to launch a series of market leading 'best buy' deals on home loans, savings and current accounts if it is to grab the public's imagination.

Tesco believes it can tap into customer dissatisfaction with the existing 'big five' High Street banks - HSBC, Lloyds-TSB, RBS/NatWest, Barclays and Halifax Bank of Scotland.

The company says the public will be willing to switch to a Tesco bank because the brand is trusted.

It has set itself a target of making profits of £1 billion a year from the bank and a number of related services, including its shopping website, within five to 10 years.

Tesco has hired Benny Higgins, who ran the retail arm of the UK's biggest mortgage bank, Halifax, to head the banking operation.

Mr Higgins, who left HBoS after just one year at the bank having been head-hunted from RBS, is expected to take an aggressive approach to attracting customers.

The Tesco bank will be part of a new division at the retailer headed by Andrew Higginson, who has been promoted from the job of Finance Director.

Outlining the new bank's plans, he said: 'There is a real appetite for Tesco in this area.

'If you put together simple, easy to understand, relevant products, we feel people will buy them.

'I think the current account is one we will look at very carefully. That is often at the core of people's relationship with their financial service providers.

'There are big opportunites for savings products and mortgages is something we will look at. Mortgages may well be something we offer.'

Mr Higginson said Tesco has an advantage over existing banks which have been criticised for offering complex 'labyrinthine' deals and hidden charges on current accounts.

'We start from a position where we can be more transparent,' he said.

'A lot of it is about giving customers what they really want at a really fair price and treating them well. That is really where Tesco's reputation lies.

'We have a good reputation for simpler, straight-forward, good value products.'

He said the bigger stores will have a 'branch' within them, which will help recruit customers.

Mr Higginson said: 'We have a physical presence through our stores. People come to our stores in large numbers to do their shopping, we have a terrific brand and good knowledge of customers.

'All three of those things we can exploit when it comes to build the bank.'

The decision by Tesco amounts to a major expansion of its existing personal finance business, which has been run in partnership with the Royal Bank of Scotland for 11 years.

It is buying out RBS, which currently owns 50per cent of the finance business, at a cost of £950 million.

Tesco's profits for the last financial year hit £2.8billion. While this is gargantuan in terms of retailers, it is relatively small compared to financial services.

The store's chief executive, Sir Terry Leahy, indicated expanding into this sector could bring a powerful new profit stream.

'Services are bigger and faster-growing markets than food. As consumers look to make every pound work harder, it is a good time for Tesco to expand its presence,' he said.

'With a renewed focus on growth in the UK and internationally, we can unlock the true potential of Tesco's retailing services.'

Tesco admitted that it will take three years before it is a fully functioning bank. It will be six to 12 months before it begins to roll out a range of new products.

The store's banking operation employs around 300 people in Edinburgh, Redhill and Ireland. These workers will keep their jobs, while the company is looking to expand.

Tesco Personal Finance was founded in 1997 and now has more than five million customer accounts. It generated profit before tax of £206 million last year, with the figure expected to exceed £240 million this year.

Businesswomen urged to use loan fund

2008-07-20T06:24:00.000-07:00

The economic climate may pose challenges for new business start ups, but women entrepreneurs across the county are being urged to kick-start new ventures with support from a £120,000 loan fund.

The Women's Employment and Enterprise Training Unit (WEETU), based in the city centre, is offering fixed-rate loans to help establish new enterprises and develop existing ones.

It is hope the fund - which has already helped set up and expand 115 Norfolk women's businesses in the past 10 years with loans totalling more than £100,000 - will provide alternative sources of cash to women who have been denied bank loans.

The money is being offered through WEETU's Full Circle programme in which women entrepreneurs join “enterprise circles”, groups of four to six women who provide peer support and mutual encouragement.

About 30 enterprise circles are currently active in Norfolk.

Businesswomen must come up with a business plan for their venture, which must be backed by fellow WEETU circle members, to qualify for loans of £250 to £2,500.

Jeanette Flemons, enterprise support officer at WEETU, said: “There are many women in Norfolk who want to go into business and self-employment but find it difficult to borrow through high street lenders and other traditional routes because they have a poor credit history, for example, or they are not homeowners.

“We want more women to be aware of WEETU's Full Circle loan fund, which can prove invaluable and make all the difference when it comes to getting a business off the ground.

“We're not talking about big businesses. These are more micro-businesses - people who require funding for things like computers, stock, raw materials, transport, cooking or craft equipment, or for attending training courses. We want to hear from women with business ideas and see how we can help them move forward.”

One entrepreneur who has benefited from a WEETU loan is Kate Jackson, who set up educational business the Minimonsters Creepy Crawly Roadshow, in 2004.

Ms Jackson, who lives in Bungay, takes an assortment of insects, arachnids and reptiles around schools in the Norwich area.

Facing a big public liability insurance bill in her first year she got an £850 loan from WEETU to help her through her first year.

She said the money, which she has repaid with interest, and the support and training offered by the organisation had been a big help.

She said: “I would have struggled to get into business if it hadn't been for them.”

To contact WEETU visit www.weetu.org or call 01603 230625.

Are you a woman who has achieved major business success? Call Evening News reporter Sam Williams on 01603 772447 or e-mail sam.williams@archant.co.uk

US Birthrates Are Highest in August: Farmers

2008-07-18T16:34:00.001-07:00

LOS ANGELES--(BUSINESS WIRE)--A study by the U.S. Census Bureau (2005) shows that August is the month with the highest number of births recorded in the United States. Unfortunately, in today’s economic climate, many parents are experiencing more than labor pains, because while still in the hospital, the identities of mother and child are being stolen.

The Federal Trade Commission released its national ID theft survey, which for the first time contains statistics specific to medical identity theft. According to the FTC report (p. 21), 3 percent of all identity theft victims in 2005 were victims of medical identity theft, which means of 8.3 million ID theft victims, approximately 250,000 people were victimized by medical identity theft in that year alone.

Jeff Dailey, Farmers President of Personal Lines explains, “A baby’s name can be used to open accounts by using the information the mother gives at the hospital, including her maiden name.”

It could take years before parents realize that their child’s identity has been used fraudulently. “Bank accounts can be discovered when a child first goes for a driver’s permit; or a child can be turned down when applying for college education loans or when opening a checking account,” Dailey notes. “There are some precautionary steps that parents can take to protect their children and themselves.”

Do not leave identity papers in your clothing that you hang up in your hospital room. Make sure you empty your pockets and put any identification information in a safe place.
Leave all of your credit cards at home in a safe, or somewhere you know will be safe.
Once your child has been given a social security number, make frequent checks of your child’s and your credit reports. Your child should have a clean credit record until 18 years of age.
Keep a look out for any solicitations for credit that your child might receive in the mail, or telephone calls offering credit cards, magazines, books or other offers.
“If you follow the precautions you should not have any ID problems after your stay in the hospital,” Dailey continued. “Since Identity Theft is the fastest growing crime in the world today, Farmers insurance has developed comprehensive identity theft coverage. Farmers Identity Shield not only helps you restore your identity after an identity fraud, but also provides protection for your children by alerting you when such activity begins. Those who have experienced its devastating effects know how hard it is to fix and how much time it takes,” he added.

Dailey explained that Identity Shield includes a 24/7 advocate to guide and assist victims. An expert also is on call to answer any questions policyholders may have about children or adult identity theft. “There is much more, including assistance in replacing lost, stolen or damaged identification documents and prevention tips,” Dailey said.

For more information on identity theft and how to prevent it, contact your local Farmers agent or visit www.Farmers.com

Farmers Group, Inc. is a wholly owned subsidiary of Zurich Financial Services, an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets. Farmers® is the nation's third-largest Personal Lines Property & Casualty insurance group. Property and casualty products are underwritten and issued by the Farmers Exchanges and their subsidiaries, which Farmers Group, Inc. manages but does not own. Headquartered in Los Angeles and doing business in 41 states, the Farmers insurers provide Homeowners, Auto, Business, Life insurance and financial services to more than 10 million households. For more information about Farmers, visit our Web site at www.farmers.com

The next billion

2008-07-12T01:39:00.000-07:00

Till a few years ago, N. Padmavathy and her six friends were daily-wage workers in an export unit in Chennai, with a monthly income of not more than Rs 2,000.

At times, when she had to pay her children's school fees or take her children to the doctor, she had to borrow at hefty rates from the local money lender.

As a daily-wage worker, she could never predict her income, till she discovered the power of microcredit. A Rs 15,000 loan each, taken by Padmavathy and her six colleagues, has made entrepreneurs of these daily-wage workers.

Today, they are the proud owners of a tailoring unit, which is an exclusive franchisee of a leading exporter.

Says P.N. Vasudevan, managing director of Equitas: "The loans we provide not only help the customers improve their business activity levels but also because of lower rates and easy repayment periods, customers can come out of the debt trap laid by money lenders."

Thanks to urban micro-finance institutions (MFIs) like Equitas, Padmavathy and others of her ilk now have access to credit and a better way of life.

Seeing an aching need among this category, often referred to as the Next Billion, a new set of players are coming up in urban hubs to offer financial solutions—primarily credit and insurance—to this economically active group of consumers.

If daily wage workers in Chennai are buying out garment manufacturing units, in Mumbai puran poli makers are doubling their turnover with easy access to microcredit.

Micro-finance may have started as an idea by the not-for-profit sector to cater to those who were out of the ambit of any financial sector, it has, however, emerged as a market share opportunity that banks and non-banking financial companies are fast lapping up.

Conceptually it's an irony-because what started out as an answer to the neglect by the financial sector is fast turning out an opportunity for it-and poses a dilemma- because regulation of this sector is through social pressure only.

Azerbaijan to adopt Law on Money-Laundering Counteraction at autumn parliamentary session

2008-07-02T05:55:00.000-07:00

Baku, Fineko/abc.az. The process of adopting the law begun in 2004 on counteraction of legalization of money resources and property received by criminal way and financing of terrorism has all chances to be completed in 2008.

The National Bank of Azerbaijan General Director and Director of Workgroup for Law Elaboration Rufat Aslanli said the Bill has already been adopted in the first reading.

“We expect it to be adopted in further readings straight after resuming parliamentary activity in autumn,” R.Aslanli said.

The law which is the country’s obligation while entering into the European Council introduces system of monitoring under transactions and the operations exceeding the amount of AZN 20,000. The monitoring will cover credit institutions, insurance and reinsurance companies, professional participants of a securities market, leasing services of credit institutions, money transfers through post offices and other organizations, pawnshops, investment funds, transactions with precious metals and stones and purchase of precious products, non-governmental and religious organizations, organizers of lotteries rendering real-estate sale-purchase services (realtors) as well as lawyers, auditors, real estate deals, client assets, securities and property, client bank and depot accounts. A special state body will be established for the monitoring.

Elaboration and international expertise of the Law was completed in May 2005.

Disney Lost My Social Security Number

2008-06-30T17:31:00.000-07:00

Back in 1994, Hunter Walker bought five shares of stock in theme park giant Walt Disney Company...

I invested in the House of Mouse because they were one of the only companies I knew of as a 10-year-old. Over the years, I held on to the stock as Disney made a killing by becoming a farm system of teenie bopper talent. But I just found out that Disney lost my identity.

I got a lovely letter in the mail informing me that on February 27, 2008, a company doing archive services for Disney lost a box of "data back-up tapes" that contained my name, address, and best of all, my social security number. Fun!

Apparently the people working for Disney shareowner services at Bank of New York Mellon had someone from Archive America driving my personal info through New Jersey, and it fell off the truck or something. Schmucks. Supposedly, Disney was unable to notify me about this sooner because

It took us some time to determine whose information was contained on the tapes.

Now, they've set me up with two years of identity theft insurance and credit monitoring to make up for the mistake. There's also a useless "missing box hotline." The lost box was one of two screw-ups by Archive America and Bank of New York already this year that have resulted in the loss of the "sensitive information of more than 4.5 million people and 747 companies."

Now, I'm busy filing police and FTC reports and trying to figure out whether or not this security breach has caused me any serious problems. Either way, it's a whole lot of stress. They totally owe me sushi at Epcot and a free breakfast with Mickey next time I'm at Disney World.

hello good afternoon, I'm in internet shop with your sister maybe we will use internet around 1 hour. what do you do now?

2008-06-25T01:54:00.000-07:00

by Adam Aigner-Treworgy

Tue. Jun 24, 2008

Republican presidential candidate John McCain had some observers scratching their heads last week over his decision to head north to Ottawa to deliver remarks on the economy and U.S. trade policy. For his part, Democrat Barack Obama was quick to take up the issue, saying on Friday that it was "interesting" that McCain "chose to talk about trade in Canada instead of in Ohio or Michigan."

"You know, I think Senator McCain should have shared some of his views there to American voters," the Illinois senator said.

So why did McCain go all the way to Ottawa to give a speech on the positive effects of the North American Free Trade Agreement?

In his speech, McCain contended that he had simply gone to thank the people of Canada for their work "to advance one of the finest friendships between any two nations in the world today." Despite flying to Ottawa aboard his campaign plane, accompanied by his campaign staff and with campaign reporters in tow, the Arizona senator argued that his trip was of a purely diplomatic nature, and he refused to publicly address the election while on foreign soil.

McCain spoke to reporters after his speech but balked when a questioner mentioned his Democratic rival.

"This is not a political campaign trip," McCain said, adding that he just wanted to thank Canadians and their government for their "enormous contribution to our friendship, to our relations, to trade, to our economy and to the defense of freedom in the world."

Even when given the chance to criticize Obama for proposing to renegotiate NAFTA, McCain demurred. In an effort to explain his campaign's decision to fund a nonpolitical trip to a foreign capital, the candidate said he "didn't feel it was appropriate for the taxpayers -- while I am the nominee of my party -- to pay for a trip that would have accrued to the cost of the taxpayers."

However, less than two weeks after McCain officially secured enough delegates to claim his party's nomination, he took off on a congressional delegation to the Middle East and Europe, visiting Iraq, Jordan, France and England with two of his biggest supporters, Sens. Joe Lieberman, I/D-Conn., and Lindsay Graham, R-S.C.

At the time, the McCain campaign was hammered by Democrats for the candidate's participation in a politically beneficial trip on the taxpayers' dime. Campaign officials said they were much more careful on this trip abroad. After a visit to the Economic Club of Toronto, however, McCain held two private meetings with Canadian business leaders in which the candidate's ambassadorial tone gave way to one more familiar from the campaign trail.

First, McCain participated in what the campaign described as a private roundtable with 15 to 20 Canadian business leaders. He then addressed a meeting of the Canadian Council of Chief Executives at the exclusive Rideau Club in downtown Ottawa.

McCain was introduced to the group as the "presidential nominee for the Republican Party of the United States of America," and although he stuck mostly to pleasantries in his brief remarks, he didn't hesitate to slip back into campaign mode when it came time for questions.

When asked about his plan for the American economy, McCain ran off a litany of issues that needed to be addressed, concluding with his campaign slogan: "Restoration of trust and confidence in government is the first step, and that means reform, prosperity and peace."

McCain also outlined his campaign's health care proposal when asked about the large number of children in the U.S. who remain uninsured.

"We need to make [health care] affordable and available, and we need to do that by giving American families a $5,000 refundable tax credit so they can go anyplace in America to get the health insurance of their needs," McCain said.

And in response to a question about repairing the American economy, McCain repeated another familiar line from the trail, saying that as president he would "veto every earmark, porkbarrel bill that comes across my desk, and I'll make 'em famous."

According to Ross Laver, the chief executives council's vice president for policy and communications, his organization is "absolutely nonpartisan," but it does represent business leaders who are heavily invested in an active trading relationship between the U.S. and Canada. Events like the reception with McCain help those members "stay plugged in with what's happening in the world," Laver said, as well as giving members an opportunity to share their views about the future of North American trade.

Such an event, where a presidential candidate is able to discuss his policies with foreign business leaders using political language, could be seen by some as a campaign event, and Federal Election Commission law prohibits the involvement of foreign groups in U.S. campaigns.

Although a spokesperson for the FEC was not allowed to comment on an issue that may come before the commission, FEC rules say, "A foreign national shall not, directly or indirectly, make any expenditure, independent expenditure, or disbursement in connection with any Federal, State, or local election." That includes foreign associations or partnerships.

Democrats criticized the trip even before McCain had set foot in Canada, and the Democratic National Committe on Friday filed a Freedom of Information Act request concerning the role played by U.S. Ambassador David Wilkins in arranging the visit.

Living costs for Londoners jump

2008-06-23T05:55:00.000-07:00

London families are desperately trying to cut back their spending as the impact of rising prices really starts to bite.

The Evening Standard's credit crunch panel have all reduced or stopped so-called 'discretionary' spending on treats such as new clothes and eating out. Each panel member has agreed to have their monthly spending monitored to help track changes to the cost of living.
Their latest reports come after the official inflation measure - the consumer price index - rose to 3.3% and Bank of England Governor Mervyn King warned that it could hit 4% this year.

Our panel found that despite making savings, their outgoings continue to go up as fuel, food and utility bills soar. They have also been hit by 'hidden horrors' on top of regular purchases, such as the cost of moving house.

Two households moved this month, one moved last month and the fourth is moving in two weeks. In two cases, the families are downsizing to cut costs.

The panel members all said grocery and fuel costs had increased the most. According to our survey, the average cost of a litre of unleaded petrol rose to £1.18 this month, up from £1.12 in May and £1.09 in April. A basket of 10 everyday goods bought in London increased by 0.45% between mid-April and mid-June, while food bills across the capital have risen by 6% in the past year - almost twice the official rate of inflation.

Family with two children

Emmanuel Bourdon, 28, wife Davinia, 28, and sons Olivier, two, and Sebastien, 11 months

Occupations: Emmanuel is a wine specialist and Davinia is a full-time mother.
Home: a rented two-bedroom flat in Hampton, west London.
Outgoing costs: Rent £900; council tax £125; electricity £40; gas £40; water £35; TV licence £11; petrol £85; travel £90; road tax £17; car insurance £21; groceries £648; eating out £250; going out (including children's playgroups) £208; clothes £60; credit cards £30; phone/internet £158; unexpected expenses (BT bill to re-connect line, fee for moving out, professional cleaner for previous house) £580.

Geneva Finance refunds more than $500,000

2008-06-20T00:56:00.000-07:00

Geneva Finance has refunded customers more than $500,000 after admitting it breached the law by not providing rebates on insurance when some debtors paid loans early.

The company made an out-of-court settlement with the Commerce Commission to refund $510,966 to 3700 customers, after breaching the Credit Contracts and Consumer Finance Act.

The finance company had not provided rebates on payment protection insurance premiums for loans repaid between April 2005 and December 2007, the commission said.

Those insurance policies ensure that repayments will be made if debtors are unable to meet them for reasons including accident, sickness or redundancy.

During the period, about 24,000 loans were repaid early or terminated by Geneva Finance, of which about 3700 did not receive the correct rebate.

Geneva Finance had been cooperative and provided rebates when the issue was identified, said commission chairwoman Paula Rebstock.

"Many consumer finance companies require customers to take out payment protection insurance. The commissions from those policies represent a source of revenue to the finance companies.

"When customers wish to repay their loans early they rely on creditors to calculate the correct settlement balance, including any rebates due to them. We expect others in the industry to ensure that they are not making the same mistakes Geneva Finance made," Ms Rebstock said.

Geneva also settled out of court with the commission last October over breaches of the Fair Trading Act and refunded $589,114 to over 900 debtors who had been overcharged fees and interest.

Irish Financial Regulator Financial Capability Survey: 17% don’t have a current bank account - 44%

2008-06-16T06:44:00.000-07:00

The Irish Financial Regulator today published a preliminary report on its first major study of the financial capability of consumers in Ireland. The Financial Capability Studyis the largest-ever research project undertaken by the Financial Regulator. The aim of the study is to gain a better understanding of how people in Ireland manage their money, plan ahead and make provision for their financial futures and how people assess and make choices between financial products.

Bleak May for consumers

2008-06-09T05:05:00.000-07:00

UK consumer confidence was at an all-time low in May, with a third of respondents having serious economic concerns.

The British Retail Consortium (BRC) UK Consumer Confidence index now stands at 79 points, compared to 91 a year ago – as fears of rising inflation, a slumping economy and falling house prices combine with the credit crunch.

"The fact that the score has plummeted a further 12 points is telling of how much consumers are being stretched," said Mike Watkins, senior manager at Nielsen, which compiled the data.

"Our survey reveals that 55 per cent of people ranked inflation as their main concern during periods of economic downturn while 39 percent said high interest rates.

"Unfortunately they are being hit with both at present. This has caused significant unease among consumers."

Behind inflation and higher interest rates, unemployment and falling property prices were cited as the greatest worries if the economy slumped – by 38 per cent and 25 per cent respectively.

The poll also showed 22 per cent of people have no spare cash.

BRC director general Stephen Robertson added: "With one in five people saying they have no spare cash, the highest-ever recorded by this survey, customers are telling us they are cutting back on spending on all sorts of non-essentials.

"It's clear we are seeing the effects of customers' concerns about the future and about their own levels of debt."

When asked about major concerns, the economy was cited by 31 per cent of people, followed by debt (26 per cent), work/life balance (20 per cent) and immigration (16 per cent).

NHL Inks Sponsorship Deal With Anheuser For North America

2008-06-04T07:11:00.000-07:00

The National Hockey League has signed Anheuser-Busch's Bud Light as official beer of the NHL through the 2010-11 seasons. While the NHL has the unique position of being a pro league with both Canadian and U.S. teams, it had not offered bi-national marketing platforms. The deal with Anheuser-Busch (and Labatt, which markets and distributes Bud Light in Canada) changes all that. Bud Light has brand category exclusivity across North America for NHL media, games and special events.

Bud Light has been the Official Beer Sponsor of the NHL since 1998, and at the local level, sponsors 21 of the league's 24 U.S. teams.

Keith Wachtel, NHL's SVP/sales and marketing, says the arrangement with A-B reflects a new league strategy of offering marketers category sponsorship in both in the U.S. and Canada, via games, NHL special events, and on NHL-controlled media.

Three years ago, Labatt signed a licensing deal to distribute Bud Light in Canada, but the NHL marketing program gives Bud Light official beer status in both countries. "That's what is unique for us," he says. "Other sports properties don't have businesses north of the border. So we are uniquely positioned to provide a North American platform for our partners."

He says the NHL controls its content, whether at NHL.com (broadband or the NHL Network, broadcast partners. "If we don't have one brand aligned, we have either conflicting messages or we eliminate a key partner.

In past years, NHL's beer partner in Canada was Labatt Blue. Wachtel says the league is trying to bring partners across borders. "For example, in our old deals, we might have Home Depot in Canada, but no home-improvement partner in the U.S." He says the league is talking to Home Depot to expand their presence to the U.S. market as well.

"Because there are differences in how the U.S. and Canada consume and view hockey, in Canada we are trying to elevate the brand; in the U.S. we are trying to activate it," he says, explaining that in Canada hockey is religion, and the NHL is not the only league. "It's their heritage and pastime, and everyone activates against hockey," he says. "We want to be at the top of the pyramid. We want everything to emanate from NHL, and we want our partners to use hockey to elevate NHL as the leading hockey brand in Canada."

In the U.S., where there is a plethora of sports, he explains, it's about awareness, and activating the partner brands against the sport of hockey, "so you look at partners using NHL in creative." Player Sidney Crosby appearing in Gatorade ads, for instance--or NHL in Pepsi Amp ads.

He says that the A-B renewal will include the beer brand's first national NHL promotion. They will put full weight behind it. We don't want people to just license the rights to NHL," says Wachtel.

The unified U.S./Canada brand approach for NHL includes more cross-national grassroots efforts, such as next year's All Star game, to be held in Canada. "Bud Light will not only be able to market and promote around the game, but leverage it on media. You will see Bud Light on the ice, on backboards."

Wachtel says NHL is working on sponsors in auto, insurance, technology and a credit card company and a Canadian wireless partner, "the first time in a long time the league has entered into exclusive content and marketing rights partnership for a Canada wireless partner."

"We have always been one of the major pro sports leagues with a great demographic of consumers; but we have developed a strategy of having a lot more to offer partners," says Wachtel. Karl Greenberg can be reached at karl@mediapost.com

Card protection insurance

2008-06-01T06:27:00.000-07:00

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Card protection cover is not the most common insurance product available in the market. That’s why myfinances.co.uk has teamed up with Insurancewide to search the UK card protection market and compare card protection insurance policies to get you the best card protection cover.

Click Get A Quote below to get a card protection insurance quote and fill in a short form to find a cheap card protection plan.

Half of us risking bank fraud

2008-05-21T03:01:00.000-07:00

One in two people are failing to take the most basic precautions to protect themselves from credit card and bank account fraud, Which? Money reveals today.

Around half of the 4,119 people we surveyed admitted using the same Pin for more than one card.

A similar number said they were failing to check that a website was secure before they shopped, or used their mother’s maiden name as a password.

Password
One in seven even admitted writing down Pins and passwords.

But people do seem to be aware of some other common fraud risks.

Most of those polled said they hid their Pin from potential ‘shoulder surfers’ at cashpoints, checked their statements for rogue transactions and ripped up or shredded do***ents.

ID theft
One third of those surveyed by Which? Money said they had had money fraudulently taken from their credit card or bank account.

The vast majority got all of it back, which would seem to suggest that expensive ID theft insurance is unnecessary for most people.

Which? Money editor Martyn Hocking said: ‘There’s a lot more people can do to prevent fraud occurring.

‘Shredding do***ents and checking your bank statements are a good start, but people need to be wise to basic fraud risks such as using their mother’s maiden name as a password, or shopping on websites that aren't secure.

‘By taking a few basic precautions, people can significantly reduce the risk of fraud - without buying unnecessary insurance.’

Hillary Clinton Outlines Economic Plan for Kentucky

2008-05-19T05:28:00.000-07:00

5/17/2008 -- Today, at a rally in Frankfort, Kentucky, Hillary Clinton will outline her plan to create good jobs for Kentucky workers and cut taxes for middle class families. Hillary will also criticize Senator McCain for embracing George Bush’s economic vision.

She said: "Senator McCain has said he doesn’t understand the economy. But the economic agenda he’s laying out on the campaign trail suggests he understands exactly what he’s doing. It’s nothing but four more years of George Bush economics: Corporate special interests first, middle class families last, borrow from China and stick our children and grandchildren with the bill."
Hillary has a fundamentally different approach to the economy. Her economic plan will take back the benefits from corporate special interests and make the economy work for middle class families again. Her plan will:
Provide new tax cuts for middle class families, not tax giveaways to corporations: While Senator McCain wants to offer corporations a $100 billion tax cut, Senator Clinton’s plan will provide more than $100 billion in middle class tax cuts to help families afford healthcare, college, and saving for retirement.
End tax cuts for companies that ship jobs overseas, and investing in an aggressive plan help create good jobs in the U.S.: While Senator McCain wants to maintain tax incentives for companies that outsource, Senator Clinton’s plan will reform our tax code to reward job creation here in the U.S., and invest in helping create millions of good new jobs that can’t be outsourced.
Protecting Social Security from the McCain-Bush Privatization Plan: While John McCain has embraced President Bush’s failed Social Security Privatization scheme, Senator Clinton’s plan will protect Social Security for future generations of workers.
Restoring fiscal responsibility to Washington: While Senator McCain wants to continue President Bush’s fiscal recklessness with more than $400 billion in new unpaid for tax cuts, Senator Clinton’s plan will restore fiscal discipline and move us back toward balanced budgets.
Details of Hillary Clinton’s Economic Plan for Kentucky Families
1. Provide more than $100 billion in new tax cuts for middle class families. Hillary’s middle class tax cut plan will save families thousands of dollars who are struggling to pay for health care, college costs, or the care for an elderly parent or disabled child. It would also help families who are saving for a secure retirement. The cuts would provide middle class families with at least $100 billion in tax relief per year. A typical family making $50,000 would receive at least $4,500 in tax benefits, including matching tax cut of up to $1,000 to help save and build wealth, a $3,500 tax credit to help pay for college costs, and a generous tax cut to make health care affordable. In addition, a family caring for an elderly parent or disabled child would receive a $3,000 tax credit to help cover the costs of caregiving. Hillary would also expand the Earned Income Tax Credit (EITC) to help larger families, giving at least 3 million families with $1,000 in additional income and would triple the size of the EITC benefit for single workers, providing more than four million people a tax cut averaging $750. The impact of these tax cuts would be enormous for millions of Kentucky families. For example, 1.2 million Kentucky households will be eligible to receive with new matching tax cuts to help save for retirement and at least 67,000 Kentucky seniors, people with disabilities and their families will be eligible for a new $3000 Caregivers Tax Credit.
In contrast, Senator McCain’s economic plan will give more than $100 billion in new tax cuts to America’s largest and most profitable corporations.
Senator McCain’s plan will provide a $1.4 billion tax cut for Exxon, the most profitable company in history; a $500 million tax cut for Halliburton; and a $2 billion tax cut for America’s largest health insurance companies.
Senator McCain’s tax plan is even more skewed to the wealthy than the Bush tax cuts. Fifty-eight percent of the benefits from the McCain plan would go to the top 1% of taxpayer, compared to the 31% of the Bush tax cuts that went to the top 1% of taxpayers. [Center for American Progress, 2008].
Senator McCain’s corporate tax proposal would create massive new tax sheltering opportunities that would allow many corporations to avoid paying taxes altogether. As tax expert Reuven Avi-Yonah has explained, McCain’s proposal to allow businesses immediately expense 100% of their new investments "would open up almost unlimited opportunities for sheltering income. In fact for many corporations, the proposal would result in a negative effective tax rate on many investments-rather than paying a tax on profits the corporation would get money from the government in addition to their profits." [Center for American Progress, 2008].
2. End tax cuts for companies that ship jobs overseas, and invest in an aggressive plan help create good jobs in the U.S.: John McCain’s corporate tax plan would maintain current tax incentives that actually reward companies for outsourcing jobs. In contrast, Hillary will take away all tax breaks from companies that are sending jobs and production overseas and use those tax dollars to reward companies that invest in creating good jobs here in the U.S. Her plan to create good jobs for Kentucky families includes:
Investing in Infrastructure to help create 3 million new jobs. Hillary’s infrastructure plan would invest $10 billion in funding to help states review and repair their critical infrastructure; modernize seaports; expand funding for public transit and intercity rail; incentivize environmentally sensitive land use policies; and a reduce congestion. She is also a co-sponsor of bipartisan legislation to create a national infrastructure bank that would evaluate and finance large infrastructure projects.
Establishing a $50 billion Strategic Energy Fund to help create at least 5 million green collar jobs. In 2007, many of the largest oil companies recorded record profits. Exxon-Mobil recorded an annual profit of $40.6 billion, making it the most profitable corporation in history. Together, the five largest U.S. oil companies-Exxon-Mobil, Chevron, Conoco-Phillips, Valero and Marathon Oil-earned more than $75 billion in 2007- about $2,500 per second. Hillary’s energy plan would give large oil companies a choice: invest more in renewable energy technology or pay into a Strategic Energy Fund to jumpstart clean energy research and the development and deployment of renewable energy technologies. These investments will lay the foundation for our economy to create at least 5 million high-paying green collar jobs over the next decade.
Providing New Support to Help Small Businesses Create Good Jobs. At this time of economic uncertainty, small businesses are more important than ever. They have accounted for 80 percent of net new jobs since 1990 and employ more than half of all private sector workers. As president, Hillary will double funding for the Small Business Administration, which has been cut by 50% under the Bush Administration. Hillary will also provide new tax credits to small businesses to make it easier for them to create new jobs with health care for their workers here in the U.S.
Making Trade Work for Working Families.<>

Friday Newspaper Review - Irish Business News and International Stories

2008-05-09T04:42:00.000-07:00

The Irish Independent reports that several hundred jobs will be lost when most of the world-famous Guinness brewery at St James's Gate in Dublin is closed and sold off as part of a major revamp of the company's operations.
For the first time in more than 200 years the black stout synonymous with the capital will not be brewed beside the Liffey in the centre city.
Instead it will be produced at a site at Grange Castle, Clondalkin, in west Dublin. Diageo, which owns Guinness, will reveal later today that it has decided to consolidate its Irish brewing operations at the Clondalkin site.
But it will continue to brew the Guinness flavour essence extract at St James's Gate. The move will also involve the closure of Diageo breweries in Kilkenny, Waterford and Dundalk.
It is expected to lead to the loss of several hundred jobs at the company, which employs 2,500 in the Republic and the North.
The restructuring will allow Diageo to sell much of the 55-acre site at St James's Gate for development.
The site was valued at €3bn at the height of the property boom but it might struggle to command such a price in the current market, especially as Guinness will retain some of it.
Later today, Diageo will argue it is no longer commercially viable to brew at Dublin, Kilkenny, Waterford and Dundalk. It is understood the company is also considering making its brewing operations into a separate company which might be quoted separately on the London, and possibly Dublin, stock exchanges.

St George’s small rise, or small fall?

2008-05-07T04:40:00.000-07:00

It was a less than stellar result from the Happy Dragon, St George Bank.The country's smallest 'big' bank experienced its first fall in profit in six years on higher bad debts, funding costs and a tax charge (that's being disputed).Net after tax profit including one off items fell 10% to $514 million in the six months ended March 31, from the $572 million earned in the first half of last financial year.On a cash earnings basis though (which is preferred by the various banks), profit rose 6.2% to an all time high $603 million; but it was a record overshadowed by the detail in the profit announcement.To make sure shareholders remained happy, interim dividend was boosted 6 cents a share to 88 cents, a payout ratio of a very high 81%.And to try and encourage shareholders into taking shares instead of all cash dividends, a discount of 2.5% will be applied to shares taken in the dividend reinvestment program, another sign of a bank looking to minimise the cash outflow (As the ANZ has done with its DRP being underwritten to ensure it gets as much cash as possible).And the global credit crunch, which is not going away, and associated stockmarket turmoil, which is easing from the high levels of earlier in the year, has forced St George Bank to cut its earnings forecast for the rest of this financial year from a 10% increase to one in a range of 8%-10%, so long as there are no 'material one off' events (such as a big company collapse it may be exposed to).The bank had only reaffirmed its long standing 10% target in February, about six weeks from the end of the March half.Now it says a $20 million credit loss on a margin loan and the slowing domestic economy will see its target for earnings per share growth drop to within a range of the 8% to 10%.The bank said cash earnings of $603 million would have been higher - $626 million and up 13% - if it had not been for a $23 million post-tax reversal on its large mortgage insurance investment portfolio which took a hit because of the January slump in equity and financial markets.But it was the cost of 'significant items' (or one-offs) at $93 million - including a large tax bill following a decade long battle with the Tax Office and a $30 million charge to cover future restructuring plans - took an even greater toll of the final after-tax result. The crunch and market turmoil has also seen St George increase its provisions for possible bad debts following the highly public troubles of clients such as Centro and Allco Financial Group.It also revealed that it had made a specific pre-tax provision of $20 million to cover a margin loan secured by shares in the debt-stricken and ASX-listed property company Octaviar, previously known as MFS, but didn't make a specific provision against the struggling Centro and Allco because it said they were still performing: with the support of their banks, including St George it may be said.St George has previously disclosed that it has a fully-secured $458 million exposure to Centro and a $60 million loan out with Allco which is not secured.Brokers say the house price figures showing a 1.5% drop in Sydney house prices in the March quarter and sluggish building approvals and home sales in the state, St George's main market, mean a tougher time is head for the bank in housing and propertyThe bank's cost to income ratio eased to just over 42%, a solid effort given the turmoil.Its interest margin declined 5 points to 1.92% from 1.97%, thanks to the credit crunch and higher funding costs."The higher net funding costs of $13 million ($9 million after tax) comprise a $28 million pre tax expense due to the widening spread between official cash rates and 90 day bank bill rates and a $7 million pre tax expense due to the higher cost of wholesale debt. This has been substantially recouped with a $22 million pre tax benefit obtained from repricing housing loans over and above the cash rate," the bank said in its profit announcement.It had done this by boosting home loan rates to a high 9.47%, with around 0.35% of extra increases on top of the Reserve Bank's increases in the half.Retail and business deposits rose (as they did at other banks) as worried investors of all sizes held on to their money and companies retained cash, or sought bank loans instead of going directly to the market.St George said retail deposits were up 14% to $51 billion while home loans grew by 10% over the half year to the end of March. Business banking was up by more than 30%, better than the 22% implied in the Reserve Bank's credit aggregates, but in keeping with the move to reintermediation caused by the credit crunch shutting markets.The impact of the credit crunch was seen on St George's securitised assets: they fell by around $3 billion in the half to just over $16.5 billion, compared to the first half of the previous year. St George and other banks and non bank lenders were unable to securitise any loans in the March quarter (the last three months of the half year).St George raised its figure for impaired loans by $25 million during the first half with the charge now standing at $118 million. Total provisions stand at $550 million. But while St George's experience mirrors that of rivals Westpac and ANZ who also revealed higher amounts set aside for poor loans, the $25 million increase was small compared to hit of $980 million taken by ANZ.

Worst crisis is over for Wall Street, says Buffett

2008-05-04T02:01:00.001-07:00

Omaha/New York: Warren Buffett, chief executive officer of Berkshire Hathaway Inc, said the global credit crunch has eased for bankers and the Federal Reserve probably averted more failures by helping to rescue Bear Stearns Cos.“The worst of the crisis in Wall Street is over,” Buffett said yesterday on Bloomberg Television. “In terms of people with individual mortgages, there’s a lot of pain left to come.” Buffett, the world’s richest man according to Forbes magazine, said the Fed acted properly when it arranged a $2.4bn bailout in March of New York-based Bear Stearns by JPMorgan Chase & Co. The billionaire said he turned down the opportunity because he lacked enough capital and time to grasp the situation. More failures and wider panic may have resulted if the regulators didn’t halt the run on Bear Stearns, he said.“The worry was that there would be contagion; it was a very real worry,” Buffett said. “If Bear Stearns had gone, the next day, somebody else would have gone. It could’ve been a very, very, very chaotic situation.”Buffett, 77, said he was contacted in March before JPMorgan, the third-biggest US bank by assets, agreed to buy Bear Stearns. The person calling him, whom he wouldn’t identify, was “someone responsible” and wasn’t from the Federal Reserve or the Treasury. The call lasted about half an hour, Buffett said.“As I understand it, Bear Stearns had $65bn due on Monday and I didn’t have $65bn,” Buffett said. “I couldn’t get my mind around that situation in the required time.” New York-based JPMorgan was the right buyer for Bear Stearns, he added.Berkshire had about $35bn in cash as of March 31, according to a regulatory filing yesterday.JPMorgan agreed in mid-March to acquire Bear Stearns, once the fifth-biggest US securities firm, after customers grew concerned about the company’s health and pulled out their money, leaving Bear Stearns short on cash. JPMorgan, which got financial support from the Federal Reserve, raised the purchase price a week later to $10 a share from $2 to mollify Bear Stearns shareholders who said they weren’t getting enough.The world’s biggest banks and investment firms have recorded more than $300bn of losses and writedowns tied to mortgages, bonds and loans.Berkshire’s own investment in derivative contracts recovered between $500mn and $600mn of lost value since the end of March, Buffett said. Berkshire said on Friday the value of the investments had declined by $1.7bn in the first quarter. The entire company’s quarterly profit plunged 64% to $940mn.Buffett is scheduled to embark on a four-city European trip this month to scout potential acquisitions, including family-owned companies. He has been investing in China, Israel and the UK to spur profit growth after saying that US investments meeting his criteria have become scarce.“Over time we’d like to develop more international earnings,” Buffett said. “If it’s a $2bn deal, fine; if it’s a $20bn dollar deal, fine.”Buffett, who made his first non-US acquisition in 2006, paying $4bn for 80% of Israel-based Iscar Metalworking Co, said he can’t predict the location of the next company Berkshire will acquire.“They can come from Europe, they can come from the US, you just never know,” he said. “Somebody, someplace is going to have a situation where we fit. They’re going to call me; I want to make sure I’m on their radar screen.”Buffett is looking to acquire businesses as competition forces down insurance rates in the US Berkshire, which owns National Indemnity, General Re Corp and Geico Corp, typically gets about half its profit from insurance. – Bloomberg

Secret Service probing Select Dental

2008-05-04T01:58:00.000-07:00

The Secret Service is investigating a disgraced dentist and at least two of his business associates in connection with the abrupt closure of Select Dental in Howard Beach in November, the Daily News has learned.
The dental practice, known for its once-ubiquitous ads on cable TV, allegedly targeted clients without insurance and financed their dental work with medical credit cards.
Customers were apparently billed for exorbitant fees - as much as $25,000, all up front - for poor and incomplete dental work. Then the company skipped town.
The Secret Service, known primarily for protecting the President, is involved in the case because it also is in charge of investigating counterfeiting and financial crimes that cross state borders.
The masterminds behind the alleged scheme were Gary Anusavice - a dentist whose license was suspended in Rhode Island in 2005 - and his associates, Joseph Robbio and Mike Rinaldi.
"They wanted to get people financed and then get rid of them," Linda Donnaruma, a former clerk in the Howard Beach office, told The News. "These people had bank accounts everywhere."
Select Dental was incorporated in June 2005 in Delaware under the name NYDSS Inc., with headquarters in Rhode Island.
The company reputedly began to operate a "dental mill" - a derogatory term in the industry for practices that aggressively try to attract a high volume of clients.
Anusavice, Robbio and Rinaldi allegedly forged mounds of paperwork, sometimes in the names of two dentists who worked at the office, Donnaruma told investigators and The News.
Around the time Anusavice set up Select Dental, he was being disciplined by the Rhode Island Board of Health.
According to his summary suspension in November 2005, Anusavice was found to have engaged in "credit card fraud, a bait-and-switch scheme with regard to dental services being provided to patients, billing patients for services not rendered," plus a litany of other shady practices.
The board also deemed his practice "an immediate danger to the public health, welfare and safety" of his patients.
The dentist has a shady track record that extends back to the 1990s in Massachusetts.
Anusavice operated several offices in the Worcester area, generating hundreds of complaints, according to published reports. He also was cited for bilking insurance claims, fraud, malpractice and operating while his license was suspended.
He was sentenced to four months in prison in 1999 for filing a false income-tax return.
According to another source familiar with the federal probe, Anusavice is linked to 11 other practices in Illinois, Florida, Massachusetts and Rhode Island.
Four of those practices - operating under the name Rosewood Dental in the Chicago area - closed in October in the same fashion as Select Dental.
Magna, a dental lab on Cross Bay Blvd. that did work for Select Dental, recently secured a $43,000 judgment against it, but has been unable to collect.
"We don't know what kind of assets they have," said Magna's attorney, Jay Press. "We're unable to find any open bank accounts."
An attorney at Select Dental's law firm - Barton, Barton and Plotkin - asked a judge in December 2007 to be taken off the case because his firm could not find the client.
Multiple phone calls to reach Anusavice, Robbio and Rinaldi through a number of different offices were unsuccessful.
Meanwhile, Select Dental's victims are still suffering.
"They were supposed to fix my teeth, but I can't have hard food anymore," said Joanne McCauley, who along with her husband, Michael Alvarez, was charged $19,000 for shoddy dental work. "I'm trying to have a sense of humor about it."

Buffett and Munger reassure shareholders about succession

2008-05-04T01:39:00.000-07:00

By JOSH FUNK – 4 hours ago
OMAHA, Neb. (AP) — Warren Buffett tried to reassure his shareholders Saturday that Berkshire Hathaway will be fine once he is gone, but the 77-year-old billionaire offered few new details of the company's succession plan.
Berkshire vice chairman Charlie Munger may have done more to reassure the roughly 31,000 shareholders at the company's annual meeting.
"Well, we still have a rising young man here named Warren Buffett," Munger said, to which Buffett joked that everyone seems young to the 84-year-old Munger.
Munger continued: "I think we want to encourage this rising young man to reach his full potential."
Several shareholders still asked about the succession plan and Berkshire's future.
Part of the reason why Michel Paquet and Lorie Armstrong made their second trip to the annual meeting from Calgary, Alberta, is that they're not sure how many more meetings will feature both Buffett and Munger.
"I will expect some volatility on the transition, but I'm ready for that," said Paquet, who plans to hold his Berkshire stock for many years to come.
To replace Buffett, Berkshire plans to split his job into three parts — chief investment officer, chief executive officer and chairman.
In his letter to shareholders, Buffett said the company's board has three internal candidates for CEO and four external candidates who could take over managing the company's $75 billion stock portfolio and $35.6 billion cash.
Buffett said any one of the three CEO candidates and any one of the four CIO candidates could step in and do some things better than he does. "There will be no gap after my death in terms of having someone managing the money," he said.
Buffett has refused to publicly identify the candidates, but he has said previously that after he dies his son will take over as chairman to ensure Berkshire's culture is preserved. Howard Buffett already serves on the board.
Buffett plans to visit Europe this month as part of an effort to make sure business owners there know about Berkshire, so they think about calling the American giant when they consider selling their companies.
"We want to get on their radar screen," Buffett said.
Buffett said Berkshire would also consider buying businesses in India and China, but laws in those countries would make such a purchase difficult. Berkshire faces limits on how large a stake it can buy in Indian or Chinese companies, making such deals less attractive, Buffett said.
He told shareholders Saturday that the company's new business insuring municipal bonds generated more than $400 million in premiums during the first quarter. Berkshire Hathaway Assurance was launched to take advantage of credit problems other bond insurers have been having. Buffett said most of the bond insurance policies Berkshire has sold are on bonds that already were insured by other companies, with Berkshire charging a higher fee than the original insurer.
Berkshire's book value — assets minus liabilities — per share has grown from $19 — 43 years ago — to $78,008 under Buffett and Munger's leadership. But Buffett warned shareholders that they shouldn't expect that growth to continue at the same rate.
"Anyone who expects us to come close to what we've done in the past should sell their stock," Buffett said.
With Berkshire's current size, huge acquisitions would be needed to fuel significant growth, and it's hard to predict when those opportunities will come up.
Buffett said that until a few weeks ago he didn't know Berkshire would have an opportunity to help finance candymaker Mars Inc.'s $23 billion purchase of confectioner Wm. Wrigley Jr. Co.
"The Mars people only wanted to deal with Berkshire," he said.
Berkshire will supply $4.4 billion of subordinated debt to help fund the deal, which was announced Monday. And Buffett's company will invest $2.1 billion in a minority equity interest in the new Wrigley subsidiary once the deal closes.
In Berkshire's annual cartoon, part of a humorous movie at the start of the meeting, Buffett and Munger spoofed the presidential campaign. The cartoon depicted Munger running for president as a write-in candidate for a fictional "Financial Independence Party."
At a campaign event, the cartoon Munger delivered real change — by offering a boy two dimes for a quarter.
Munger also had an answer for all the nation's ills, all involving products made by Berkshire subsidiaries:
Global warming? Munger recommended eating a Dairy Queen Blizzard a day. Health care? Eat more See's Candy. Economic problems? Munger promised to put Buffett in charge of the Federal Reserve, the Treasury Department and the Commerce Department.
An animated Hillary Rodham Clinton laughed at the notion of Munger's candidacy, while Barack Obama lamented that he thought he was the candidate of change. The cartoon of Republican John McCain celebrated Munger's candidacy: "Excellent! A candidate older than I am."