S&P Lowers Kingsway's Ratings to 'B'; on CreditWatch/Negative

Standard & Poor's Ratings Services has lowered its long-term counterparty credit and senior unsecured debt ratings on Toronto-based specialty insurance provider Kingsway Financial Services Inc. S&P also lowered the debt ratings on Kingsway's subsidiaries to 'B' from 'BB', and has placed all of the ratings on CreditWatch with negative implications.

"The downgrade follows Kingsway's Feb. 9 announcement that it expects to report a significant fourth-quarter loss due to further underwriting losses at its lead U.S. operating company, Lincoln General Insurance Co., impairments to goodwill, a further reassessment of its tax asset, and net realized losses on its investment portfolio," explained credit analyst Foster Cheng [See also IJ web site - http://www.insurancejournal.com/news/international/2009/02/09/97735.htm]. "The CreditWatch placement reflects our uncertainty that additional losses could percolate or financial figures in the announcement could worsen," he added.

S&P pointed out that "Kingsway expects a net loss of US$324 million-US$344 million. This would bring the full-year loss to US$369.5 million-US$389.5 million, which represents about 40% of the company's shareholder's equity.

"Kingsway attributed part of this loss to continued unfavorable reserve developments at Lincoln General. For the quarter, the company expects this to be about US$70 million, bringing the full-year negative reserve development at the subsidiary to about US$149 million. Since fourth-quarter 2006, the unfavorable reserve developments at Lincoln General (not rated) have totaled about US$433 million."

S&P did recognize a "positive side," citing Kingsway's introduction of "several strategic initiatives to help derisk the company and bring it back to profitability. These include plans to divest away its common equity exposure and thus reduce balance-sheet volatility and regulatory capital requirements associated with holding equities; exit noncore or unprofitable lines of business at Lincoln General and Southern United Fire Insurance Co. (not rated); and sell off other noncore assets (including putting them into run-off) to free up more capital. Furthermore, in an attempt to rebuild profitability, the company also plans on making significant cost reductions that it hopes will significantly reduce its future cost base."

S&P said it views "all these initiatives as positive toward rebuilding the company and franchise, we believe Kingsway probably should have made them earlier and are not significant enough to bring it back to profitability in the short term."

The rating agency also indicated that it "continues to question the quality of governance and senior management oversight at Kingsway, and view the company's enterprise risk management as 'weak'.

"We expect to resolve the CreditWatch placement following our review of the company's 2008 annual report. If, at that time, there are additional material items not already mentioned in the announcement, or if the audited financial figures are materially different from the items mentioned, we could lower the ratings further."

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XL Capital Posts $1.43 Billion Q4 Loss; $2.63 Billion Full Year

Bermuda-based XL Capital posted a $1.43 billion fourth-quarter net loss Tuesday, and said it will cut its dividend and slash 10 percent of its staff.

The quarterly loss was due to soured investments, hedge fund losses, and a charge to restructure its investment portfolio to reduce risk, it said.

XL, which hopes to reduce expenses by up to $120 million a year by 2010, trimmed its quarterly dividend to 10 cents a share from 19 cents. The company had about 4,000 employees at the end of 2007.

XL hired Goldman Sachs last December to explore its possible sale.

XL's quarterly net loss was equal to $4.36 a share, and compared with a loss of $6.88 a share, or $1.22 billion, a year earlier. It had a full-year 2008 loss of $2.63 billion.

The latest results included a $400 million investment portfolio restructuring charge, a $900 million noncash charge for impaired goodwill, net realized losses of $568.9 million on investments, and another $214.2 million in losses from hedge fund investments.

"No one is happier to see 2008 behind us," said Chief Executive Michael McGavick. He added that the company had "ample capital" to keep its ratings.

Operating income, the measure most commonly used by analysts, rose to $189.5 million, or 58 cents a share, compared with $98 million, or 55 cents per share, a year ago. The latest result beat the average analyst target of 54 cents a share, according to Reuters Estimates.

Its shares, down more than 90 percent in the last 12 months, rose about 8.6 percent in late electronic trading after closing down 14.5 percent in the regular session.

XL said it was glad it severed ties with a money-losing bond insurer [SCA] it had partly owned.

"We are becoming again an XL with the simple and defining mission of being a global provider of specialty property and casualty insurance and reinsurance," McGavick said.

XL was formed in Bermuda, a large insurance and reinsurance market, in 1986 in response to a severe shortage of liability insurance in the United States.

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S&P: Fortis Insurance on Credit Watch, Negative; Holding Co./'Developing'

Standard & Poor's Ratings Services has revised its implications to negative from developing on the CreditWatch placement of its 'A' long-term counterparty credit and insurer financial strength ratings on Fortis Insurance Belgium (FIB).

"The negative implications reflect increasing uncertainties about the ultimate organization of Fortis group and its resulting creditworthiness, and our belief, as we review FIB's stand-alone credit profile, that the possibility for an upgrade is remote," explained credit analyst Lotfi Elbarhdadi.

In addition S&P has maintained its "CreditWatch with developing implications" for its 'BBB-' long-term counterparty credit ratings and 'A-3' short-term counterparty credit ratings on Fortis SA/NV and Fortis N.V., the group's two holding companies. "The developing implications for the holding companies indicate the remaining upside potential for the long-term rating, assuming they head a strongly rated insurance-led group," said S&P.

However, the rating agency also indicated that they "reflect the possibility of a substantial downgrade arising from the uncertainties around the ultimate organization, cash position, and legal risk that may emerge from the Fortis shareholder meeting on Feb. 11, depending upon the outcome of the vote. Also factored in is the potential resulting pressure on the group's financial profile, including liquidity, from other noninsurance assets and liabilities of the holding companies.

"We expect to resolve or update the CreditWatch on FIB in the coming weeks. Our decision will depend on the results of our stand-alone review of FIB and our view of the effect of the outcome of the shareholder meeting on the group's overall creditworthiness. Our decision will also depend on whether the Belgian government would provide support if the shareholders reject the proposed agreement. If we come to negative conclusions in these areas, we could downgrade FIB by one or two notches.

"Upon resolving or updating the CreditWatch on FIB, we expect to follow with an update on the holding companies. We expect the upside potential for the ratings on the holding companies to be limited to one or two notches. But we believe the downside potential to be several notches because of the above mentioned uncertainties and heightened risk from the noninsurance assets and liabilities, including in case the agreement subject to vote is rejected by the shareholders."

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Validus Re Opens Singapore Office

Bermuda-based Validus Holdings has announced the opening of an Asia-Pacific reinsurance representative office located in Singapore. The new office will represent Validus Reinsurance, the Group's Bermuda-based reinsurance operation, which focuses on short-tail classes of business, including property, marine, and other specialty.

Marc Haushofer, an experienced Asian sector specialist, has joined Validus Re as Chief Representative and head of the new Asia-Pacific representative office. He is the former CEO of Munich Re's Singapore Branch Office for South-East Asia and former Deputy Chairman of the Singapore Reinsurers' Association. He has approximately 25 years of insurance and reinsurance industry experience, with nearly half of this time dedicated to the Asian marketplace.

Haushofer indicated he is looking forward to Validus "exciting phase of its development."

Conan Ward, Chief Underwriting Officer of Validus Re, commented: "We're delighted to have someone of Marc's caliber joining Validus Re. Marc will be critical to furthering our goals throughout Asia and enhancing our relationships with our existing client base in the region. The opening of our Singapore representative office demonstrates Validus' recognition of the importance of the Asia-Pacific marketplace."

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Fitch Sets Out Ratings Evaluation Criteria Focused on Investment Crisis

Fitch Ratings announced that it is "continuing its evaluation of insurance ratings globally, focusing on the impact of declines in investment portfolio market values, and other market pressures, related to the current recessionary economic environment."

Fitch had previously moved its Rating Outlook for most insurance regions and sectors globally to 'Negative', with Outlook changes made for specific sectors or regions at various dates during the second half of 2008.

The rating agency said it "expects downward rating activity to continue throughout 2009, with a heightened level of activity over the next several months. Ultimate ratings migration will be broad-based, potentially impacting over half of Fitch's rated universe of insurance ratings, but will also likely be shallow. In the vast majority of cases, Fitch expects downgrades will be limited to one or two notches. Downgrades will impact insurer financial strength (IFS) ratings of insurance operating companies, and both long- and short-term debt and hybrids security ratings of holding companies."

Fitch also indicated that it "believes that the insurance industry thus far has fared better throughout the current financial crisis than other financial institutions, including financial guarantors, mortgage insurers, broker/dealers and commercial banks. This primarily reflects much lower liquidity exposures, lower exposures to subprime assets (including lower exposure to structured finance CDOs and credit default swaps) and generally stronger balance sheets at the onset of the crisis.

"Nonetheless, many insurers are feeling significant pressures from the financial crisis, mainly via sharp declines in the market values of their investment holdings, and via diminished financial flexibility as capital markets remain closed to a number of companies and very expensive for those with access. In addition, certain products that are exposed to the capital markets -- such as variable annuities within the U.S. life sector -- are creating the potential for material increases in reserves.

"These pressures are manifesting themselves through heightened earnings volatility, reduced investment portfolio liquidity and quality, and material declines in book capital. Fitch expects fourth quarter 2008 results to be particularly acute with respect to increases in unrealized and realized losses on insurers' fixed income and common stock portfolios, and book capital under IFRS and US-GAAP based accounting (in which investment holdings are generally marked-to-market)."

However, Fitch added that it "expects the extent of downgrades to be greater among life insurers than non-life companies. This reflects life companies' higher investment leverage, exposures to products such as variable annuities, and higher yet generally manageable liquidity exposures. The ratings impact will also likely vary by region. For example, Japanese insurers tend to have larger direct common stock investment exposures compared to companies in other parts of the world.

"Fitch is using estimated loss factors to aid in the assessment of investment valuation issues in the current environment. These estimates are being used in conjunction with various forms of pro-forma risk-based capital modeling. Fitch is also focusing its reviews on liquidity, as well as various idiosyncratic risks that may exist in ancillary businesses or linked to risk concentrations."

The role for government capital, which has so far been limited "to a select number of cases (including AEGON and ING in the Netherlands, and AIG in the U.S.)," will continue to play a role. Fitch said it "believes the potential for government provided capital is real for some other of the larger, stronger insurance companies. For example, a number of U.S. life insurers have made applications under TARP. If provided, government funded capital or other forms of financial support could potentially temper downward ratings actions.

"A final important aspect of Fitch's ongoing analyses will be potential mitigants available to management to address current challenges. These include use of hedging strategies (considering both the extent of hedge benefit versus heightened counterparty exposure and any basis risk), policyholder dividend adjustments, crediting rate adjustment through experience accounts, use of reinsurance, and unlocking hidden asset valuations. For some companies strong operating earnings and rates of internal capital formation could act as an important risk mitigant.

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Australia's Sportscover Offers Assistance to Insureds Hit by Bushfires

Sports and leisure insurer Sportscover has offered immediate assistance to client businesses that have been directly affected by the Australian bushfires. The insurer said it has "set aside initial funds for distribution to affected clients to ensure that they can start to rebuild operations as soon as possible."

Sportscover's Lloyd's syndicate is a major sports and leisure insurer in Australia. Group Chairman, Peter Nash commented: "The size of the human and economic tragedy is enormous and our hearts go out to those affected. Although as an insurer we do not appear to have suffered significant losses, we do have a number of client businesses in the areas that may have been very badly affected by the bushfires. They may need urgent assistance to start the rebuilding process and we are here to help.

"The first thoughts on everybody's mind is to make sure that people are safe," he continued. "However, for many of these communities their local footy club or recreation center is the focal point and that is where we can help to try to get things back to some kind of normality as soon as possible."

A telephone hotline 1300 134 956 is available for policyholders to notify possible claims.

Sportscover has also announced that its annual Sportscover Sponsorship Fund which is normally allocated to amateur sports clubs based upon submissions from around the country, will this year be allocated to sports clubs who have been affected by the Victorian bushfires. The Fund will be used to distribute grants of $1,000 per club to replace sports equipment that has been lost due to this disaster.

Sportscover Australia's CEO Murray Anderson explained that while "some clubs around the country may be disappointed that they will not be eligible to apply for the sponsorship grants this year, we believe that this is an appropriate way in which Sportscover can assist those clubs most affected by the Victorian bushfire tragedy".

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Philippine lawmakers put insurance agency for trust firms on hold

Philippine lawmakers are treading carefully on a proposal for the government to create an insurance agency that would protect policyholders of troubled pre-need companies, after learning that no feasibility study had been conducted on such a proposal.

The Pre-Need Insurance Corporation being deliberated is to safeguard the interests of policyholders by providing cover on pre-need contracts. Pre-need companies, first established in 1968, set up trust funds covering education, health care, pension and death memorial services.

The lawmakers began deliberations on the insurance agency during their investigations into the recent collapse of the Legacy Group of rural banks and pre-need companies. The industry was reported to have a deficit of PHP47 billion (US$996 million) at 30 June 2008, and the year-end figures are expected to have worsened. Several other pre-need companies are said to be on the verge of going under.

The Securities and Exchange Commission (SEC), which oversees the pre-need sector, and the Insurance Commission which will take over such regulatory duties from the SEC, have been asked to conduct a feasibility study to ascertain whether the Pre-need Insurance Corp would be viable.

The lawmakers want to avoid a situation in which pre-need firms could shirk their responsibilities to policyholders if a government-run insurance agency was to bail out troubled trust companies.

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Asian countries expand export credit insurance

Several countries in Asia have been busy boosting export credit insurance schemes to protect domestic exporters from buyer default risks and to help them cope with a tight credit market globally.

Last week, Singapore announced the new Export Coverage Scheme (ECS) which will start on 1 March and is expected to cover up to S$4 billion (US$2.7 billion) worth of trade involving about 1,000 Singapore-based exporters. Under the ECS, the government-run trade promotion agency, International Enterprise Singapore, will act as underwriter and by pooling insurers, increase the insurance coverage capacity for firms. There are for now four participating insurers - Atradius, Coface, Euler Hermes and QBE.

Explaining the need for the scheme, Singapore's trade minister, Lim Hng Kiang, said: "Demand for trade credit insurance is growing. Exporters are now more wary of buyers' credit risks and hence want to get coverage to protect against the risk of buyers default. But insurers have also become more selective. Furthermore the cost on insurance is rising."

Meanwhile, Thailand's Export-Import Bank plans to expand its export credit insurance scheme this year. Apichai Boontherawara, president of Exim Thailand, says that as the Finance Ministry plans to inject additional capital of 5 billion baht (US$142 million) into the bank, Exim is expected to be able to expand this business.

In Seoul, the Korea Export Insurance Corp says that it will increase export insurance by 4.5 trillion won (US$3.2 billion) to 6 trillion won this year. Qualified exporters will be able to get a 20% increase in export insurance, and the insurance ceiling will be lifted on firms whose debt ratio exceeds 650%.

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Unit-linked plans remain popular in Indonesia

Unit-linked life insurance plans are likely to remain popular in Indonesia, despite the battered domestic stock market, reports The Jakarta Globe.

"Unit-linked schemes are still attractive, even if the current global crisis has undermined the value of some of them," said Mr Tatang Widjaja, president director of Sequis Life. He estimates that only 10% of unit-linked products sold in the country had equities as underlying assets.

"Therefore, the fall in the Indonesian stock market has yet to dampen sentiment in the insurance industry as a whole," he said. "I haven't seen people rushing to insurance companies to cash in their policies."

The majority of unit-linked products, he says, involve investments in fixed-income instruments, such as government and corporate bonds. Even then, only a small portion of the funds in the unit-linked products are invested in those instruments, with the majority being set aside for insurance protection.

"Unit-linked plans have become very popular in the last four to five years, and account for the bulk of premium income for almost all insurers right now," said Mr Randy Lianggara, a member of the Indonesian Life Insurance Association and the president director PT AXA Life. Nevetheless, he adds that most investors now prefer safer fixed income, or bond and cash funds, as share prices fall as a result of the global market plunge.

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Thai health insurance sector growing robustly

Health insurance premiums are growing in Thailand, rising by 13% in 2008 and 11.5% in 2007, according to the Bangkok Post citing data from the Office of Insurance Commission. Healthcare premiums collected last year totalled 25.6 billion baht (US$728 million), compared to 22.6 billion baht in 2007 and 20 billion baht in 2006.

The newspaper quoted Patchara Taveechaiwattana, chief marketing officer at Ayudhya Allianz CP Life as having said that healthcare insurance is becoming increasingly accepted by Thais, with many parents getting health coverage for their children. The key reasons for this include greater attention to health and wellness as well as increases in hospital costs.

She said: "The parents usually prefer to buy long-term life policies for their children at a very young age, say, less than five years, and have health riders attached to them. Some are also concerned about the future education of their kids and so they opt for long-term savings policies."

In the current global economic downturn, she says that while business should expand, growth would be slower as consumers defer their decisions because they think they will be safer to have cash in their pockets right now.

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More Koreans buying auto insurance by electronic means

Electronic sales - via the Internet and phone - of motor insurance in South Korea are doing better than conventional auto insurance sales even though the global economic turmoil has resulted in a steep fall in car sales, reports the Joong Ang Daily.

The online market share grew to about 20% in January from less than 19% in the last quarter of 2008, because of bargain hunting. E-auto insurance sales amounted to 171.6 billion won (US$122 million) last month, or a fifth of all auto insurance sales for the month.

According to data provided by General Insurance Association of Korea and individual member insurers, auto insurance sales last month totaled 858.3 billion won, 9.3% lower than the 946.7 billion won sold in January 2008.

The reasons for the decline include a fall in the purchase of new cars. In January, Korean carmakers sold 73,537 new vehicles, 24% less than a year earlier. Furthermore, many people are buying used cars which attract less expensive insurance premiums.

Some car owners also cut costs by buying insurance directly from insurers. Premiums payable in e-insurance is on average 15% lower than those in conventional sales because online sales do away with consultants and a physical network. Of the 15 car insurance companies in South Korea, 11 of them sell policies online. Among the 11, four sell policies only through the Internet.

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2009 prognosis for Asia's life insurance sector is rocky

Overall growth in the life insurance market will slow dramatically in 2009 as a result of financial market turmoil and erosion of the value and image of unit-linked products, according to the international accounting firm, Ernst & Young (E&Y), in its report "2009 insurance outlook - Far East".

In the current climate, insurers need time to reposition their product portfolios and retrain distribution forces. E&Y notes that some life insurers are investing in this area and realising retention levels that western operations aspire to achieve. A few companies have shifted quickly to protection and are now outperforming the market. Some multinationals may withdraw from markets, or restrain sales, as they increase reserves and write-off deferred acquisition costs related to "in the money" guarantees.

E&Y also says that while many multinationals continue to expand in Asia, a shortage of capital could constrain their growth.

On the demand side, as consumers shift from unit-linked to more traditional products, the demand is for long-term investment offerings with guarantees. Countries such as China, where investment-linked products have yet to grow in popularity, may see less disruption.

However, the ongoing emphasis on private pensions throughout Asia, and favourable tax incentives, will help prop up the market. Life insurers with mutual fund and asset management businesses are best positioned to provide alternatives for consumer savings. The insurers most likely to come out on top are those with adequate capital, strong multinational or domestic brands, and a product portfolio able to meet the needs of a more risk-averse consumer.

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Risk management must integrate actuarial functions

A key lesson learned from the current financial crisis is that risk management must integrate risk and actuarial functions, Swiss Re Canada’s Online newsletter said.
Traditionally the focus of risk management has been on identifying and reporting risks, but the crisis shows companies need to pay more attention to managing risks in a pre-emptive way, said Raj Singh, Swiss Re’s chief risk officer.
“One clear lesson is that models are an important tool, but they have to be supplemented by judgement,” he said. “Models don’t make decisions.”
Swiss Re, Singh said, is now viewing the risks it’s taking on “in a more actuarial way.”
Actuaries reserve against future losses by gathering information from the business side, Singh said. “Being able to do this effectively can be very, very critical for creating a pre-emptive risk management process.”
An integrated risk and actuarial function is the future of the insurance industry, he continued.
“It’s not just about having a financial risk manager," he said. "It’s about having people who truly understand how the financial and actuarial risks come together.”
Moving forward, the status of the chief risk officer and risk managers will increase, and more companies will implement a holistic approach to risk management, Singh predicts.
“Independent oversight and control is very important,” he said. “Risk management must be independent from P&L [profits and losses] responsibility, and it is important that the chief risk officer has an equal seat at the executive table with his business colleagues.”

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Singapore life insurance body extends helping hand

The Life Insurance Association (LIA) of Singapore is working out several measures to help cash-strapped customers who might otherwise forfeit their insurance policies because of inability to pay their insurance premiums in the current financial crisis, according to Singapore media reports.

One relief plan is to allow holders of whole life and endowment policies pay a part of the premium just for protection so that they would continue to enjoy coverage against death, critical illnesses or permanent disability while deferring the non-protection portion of their policies. Another plan is for a premium holiday in which premium payments are suspended temporarily.

These efforts follow news of an increase in the number of policyholders giving up their policies in the fourth quarter of last year. Forfeitures increased to 2.84% from 2.73% in the third quarter. LIA figures also show that the policy surrender rate increased to 2.19% in the fourth quarter from 1.9% in the corresponding period of 2007, as more policyholders cashed in their policies.

The data reveal too that Singaporeans are deferring purchasing new life insurance policies. Annual premium sales were S$228.8 million (US$153 million), while single premium sales totalled S$811 million in the October-December quarter. The figures represented a drop of 16% and 69% respectively over the same quarter in 2007.

Sources say that new rules which took effect last April on investing money from the Central Provident Fund, a mandatory provident scheme, also contributed to the decrease. The rules reduced the sum available for private investments, including insurance.

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Korea's FSS warns of a difficult year ahead

The insurance industry is not immune from the ongoing global financial crisis. 2009 will be a difficult year ahead for many insurance companies, said Mr Kang Young Goo, Assistant Governor and Head of Insurance Service Division of Korea's Financial Supervisory Service (FSS), during the first Seoul Rendezvous held last week, organised by Asia Insurance Review.

In his keynote address to some 120 delegates, he noted that last year, the Korean Insurance Research Institute forecast that Korea's insurance industry would likely grow 5.8% in 2009. However, he understands that the forecast is already set to be revised downwards soon.

Korea's regulator has earmarked a number of bold measures to shore up confidence and ensure stability in the financial markets. For the insurance industry, he said, "we are working to keep pace with the rapidly changing financial markets both at home and abroad, and preempt risks to the insurance market."

Mr Kang concluded: "In the face of a deepening global economic crisis, we do have a unique opportunity to reassess the challenges before us and forge a new consensus on where we should be headed. The Seoul Rendezvous is to do just that by bringing together our collective wisdom and helping the insurance industry and supervisors set the right agenda for risk management strategy and supervision objectives."

In the second keynote address, Mr Ludger Arnoldussen, Member of the Board of Management at Munich Re, highlighted that "there is arguably no more pressing task for responsible insurance undertakings than to maintain full transparency and control over all the risks in their books in order to protect clients, investors and staff against unpleasant surprises."

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Burnett Holdings Joins QBE

New Orleans-headquartered insurance wholesaler Burnett Holdings Inc. (Burnett) announced it has been acquired by QBE Holdings Inc. (QBE), part of Sydney, Australia-based QBE Insurance Group. The acquisition is effective from Dec. 31, 2008.

The company will continue to operate under the name of Burnett & Company Inc. and its management team will remain unchanged. With immediate effect, Burnett will act solely on behalf of QBE Marine & Energy Syndicate 1036 at Lloyd's as a full binding coverholder for all classes of business.

Burnett, with offices in New Orleans and Houston, is headed by President John Burke. The firm specializes in underwriting marine and energy business and its product offerings range from control of well to oil and gas liabilities, and social services liabilities.

Under its new ownership, Burnett will have the ability to quote and bind 100 percent with 1036 any placement that falls into the following classes:

--Marine & Energy Commercial General Liability
--$50,000,000 Excess Liabilities (Occurrence or Claims-Made)
--$50,000,000 Energy, Exploration and Development/Control of Well
--Up to $50,000,000 any one item for Physical Damage
--$50,000,000 Loss of Income/Production/Hire and Business Interruption
--Miscellaneous Marine Liabilities
--Maritime Employers' Liability (True and Contingent exposures)

Burnett will also have the ability to offer lead or follow subscription lines with its QBE facility as well as the capability to place the remainder of the account with other markets on a facultative basis. It will continue to consider both on and off shore exposures.

Established in 1886, QBE Insurance Group is rated "A+" by Standard & Poor's. Active in both insurance and reinsurance, it operates out of 45 countries across the globe, with a presence in all key insurance markets.

QBE Marine and Energy 1036 is a leading syndicate, underwriting direct risks within the Lloyd's Insurance Market. Headed by Colin O'Farrell, managing director, the syndicate has an underwriting capacity of £215m for 2009. The syndicate underwrites a worldwide account, specializing in the areas of hull, energy, liability, specie, cargo, political risks, war and allied risks.

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The Hanover Group Sees Profits Shrink

Fourth quarter profits at The Hanover Insurance Group fell 55 percent from $75.8 million a year ago to $34.1 million. Full-year net income dropped nearly 92 percent to $20.6 million, from the $253.1 million the Worcester, Massachusetts-based insurer earned in 2007.

The company said the drop in earnings stemmed from investment losses of $97.8 million, substantially higher catastrophe losses in the company's property and casualty operations and charges related to the sale of its life insurance business.

Total property and casualty pre-tax segment income was $97.5 million in the fourth quarter of 2008, compared to $98 million in the fourth quarter of the prior year. The pre-tax net impact of catastrophes was $14.1 million in the fourth quarter of 2008, compared to $11.3 million in the fourth quarter of 2007. The fourth quarter of 2007 also included a one time benefit of $11.8 million from a litigation settlement, partially offset by a pension related expense adjustment of $7.4 million in the same period.

Excluding the pre-tax net impact of catastrophes, the litigation benefit and the pension expense, Property and Casualty pre-tax segment income would have been $111.6 million in the fourth quarter of 2008, compared to $104.9 million in the fourth quarter of 2007.

Total property and casualty pre-tax segment income was $302.2 million for the full year of 2008, compared to $382.3 million in the prior year. The pre-tax segment income in 2008 included significantly higher catastrophe losses of $169.7 million pre-tax, compared to $65.2 million pre-tax in 2007. Excluding the pre-tax net impact of catastrophes, the aforementioned litigation settlement in the fourth quarter of 2007 and a pension related expense adjustment of $6.0 million for the full year, property and casualty pre-tax segment income would have been $471.9 million in 2008, $30.2 million higher than the comparable $441.7 million in 2007.

The Hanover had net premiums written of $597.3 million in the fourth quarter, compared to $561.6 million in the prior-year quarter -- an increase of 6.4 percent.

For the year, net premiums written were $2.52 billion, compared to $2.42 billion in the prior year, an increase of 4.4 percent

"I am pleased that in a year of very significant weather, including catastrophe and non-catastrophe activity, we generated solid pre-tax segment income," said Frederick H. Eppinger, chief executive officer at The Hanover. "Excluding the impact of catastrophes, we showed meaningful growth in pre-tax segment income, which is evidence of the increasing earnings power of our business. While our 2008 premium growth of 4 percent continued to outpace the industry, we remain focused on underwriting discipline, as evidenced by improvements in our ex-catastrophe accident year loss ratios for both the quarter and the year."

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Aon Hit With Q4 Benfield Merger Costs But Broker Commissions Grow Slightly

Aon Corp., the largest global insurance brokerage by assets, reported that net income fell 95 percent in the fourth quarter as it incurred costs related to restructuring and its merger with Benfield Group.

Net income was $10 million for the fourth quarter compared with $207 million a year earlier, primarily due to an expected $116 million after-tax loss on the disposition of the remaining property/ casualty insurance businesses that are now included in discontinued operations, an increase in restructuring-related costs, and costs related to the Benfield merger.

Net income from continuing operations decreased 35 percent to $123 million compared to $188 million for the prior year quarter.

Risk and insurance brokerage revenue, which is about 80 percent of total income, was three percent lower, and consulting revenue fell by about eight percent. But brokerage fees and commissions grew by two percent.

During the year, Aon completed its merger with reinsurance intermediary Benfield Group.

"In the fourth quarter, we achieved solid results despite a soft market and very challenging economic environment," said Greg Case, president and chief executive officer.

"We begin 2009 in a position of strength, with a core product portfolio that is now aligned around risk advice and human capital solutions," he said.


FOURTH QUARTER SUMMARY
Total revenue decreased 4% to $1.9 billion due to an 8% decline from foreign currency translation, a 2% increase from acquisitions net of dispositions and organic revenue growth in commissions and fees of 2%.

Total expenses increased 1% or $16 million to $1.8 billion, including a $155 million favorable impact from foreign currency translation, partially offset by a $53 million increase in restructuring costs, $46 million of Benfield transaction costs and $42 million of other Benfield expenses.

The fourth quarter includes the operating results of Benfield since the close of the merger on November 28, and reflects $38 million of revenue and $42 million of expenses. Restructuring expense was $87 million in the fourth quarter compared to $34 million in the prior year quarter.

Subsequent to the fourth quarter, the company agreed to dispose of its property and casualty insurance operations. The after-tax loss in the quarter is primarily due to an expected $116 million loss on disposal of these operations. Discontinued operations also include the results of Automobile Insurance Specialists (AIS), and for the prior year quarter, include the results of AIS, Combined Insurance Company of America and Sterling Life Insurance.

Risk and Insurance Brokerage Services total revenue decreased 3% to $1.6 billion compared to the prior year quarter due to an 8% unfavorable impact from foreign currency translation and a 14% decline in investment income, partially offset by a 4% increase from acquisitions net of dispositions and 2% organic revenue growth in commissions and fees.

Consulting total revenue decreased 8% to $342 million compared to the prior year quarter due to a 9% unfavorable impact from foreign currency translation, a 2% decrease from acquisitions net of dispositions, partially offset by 3% organic revenue growth in commissions and fees.

2008 FULL YEAR
Total revenue for 2008 increased 4% to $7.6 billion with organic revenue growth of 2%.

Net income for 2008 increased 71% to $1.5 billion compared to $864 million for the prior year. Net income from continuing operations decreased 6% to $621 million compared to $662 million for the prior year.

Risk and Insurance Brokerage Services total revenue increased 5% to $6.2 billion with organic revenue growth in commissions and fees of 2%.

Consulting total revenue was similar to the prior year with organic revenue growth in commissions and fees of 3%.

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U.S. Lawmakers Vow More Food Safety Funds As Peanut Recalls Set Record

Lawmakers vowed this week to press for stronger food safety laws and more money for inspections as the list of recalled peanut products surpassed 1,000 in an ongoing national salmonella outbreak.

"There is an openness to putting together the strongest legislation possible,'' said Rep. Rosa DeLauro, D-Conn., who introduced a bill to reorganize federal food safety enforcement and make it more accountable.

Meanwhile, the number of recalled peanut products approached 1,100 in what independent experts said appears to be a record for foods consumed by humans.

The 2007 recall of melamine-tainted pet food eventually grew to 1,179 products but "this is human food,'' said Caroline Smith DeWaal, food safety director for the Center for Science in the Public Interest. "I'm certainly not aware of any recall where so many individual branded products had to be called back, which makes it really complicated for consumers.''


The salmonella outbreak has sickened at least 550 people, eight of whom have died. A peanut-processing plant in Blakely, Ga., that produces just 1 percent of U.S. peanut products is being blamed. Authorities say Peanut Corp. of America shipped peanut butter, paste and other products that had tested positive for salmonella. The Lynchburg, Va.-based company has denied any wrongdoing and said Wednesday that the Blakely plant received regular visits and inspections from state and federal authorities in 2008.

"Independent audit and food safety firms also conducted customary unannounced inspections of the Blakely facility in 2008. One gave the plant an overall 'superior' rating, and the other rated the plant as 'meet or exceeds audit expectations (acceptable-excellent)' ratings,'' the company said in a statement.

On Wednesday, House Education Committee Chairman George Miller, D-Calif., asked for an investigation of whether tainted peanut products were distributed through the federal school lunch program.

It remains unclear whether Congress can deliver major improvements in food safety this year, given the press of critical issues such as the shaky economy and a ballooning federal deficit. Senior Democrats are dusting off legislation that went nowhere last year and hoping for better luck under President Barack Obama, who has criticized the Food and Drug Administration's handling of the outbreak.

Two regular citizens whose lives were changed by the salmonella outbreak joined DeLauro at a press conference in the Capitol building Wednesday and described the food safety bureaucracy as slow, opaque and disjointed.

Gabrielle Meunier of South Burlington, Vt., said she spent weeks wondering how her 7-year-old son Chris came down with salmonella and wound up in the hospital, when no one else in the family got sick. Eventually she found out on the Internet that Canadian authorities had identified salmonella in crackers that her son liked, and which were still in her house. "That was one of my outrages,'' she said. "My seven-year-old could have eaten those crackers again, and he could have died.''

Jeff Almer of Savage, Minn., lost his mother Shirley Mae Almer, who was 72 and twice a cancer survivor. She died the day before she was supposed to come home for Christmas from a rehab center where she was recuperating from a urinary infection.

"I expect that food poisoning will never go away, but there's so many things that could be done better,'' said Almer. Calling the food safety system "fractious,'' he said the government needs automatic access to the internal inspection records of food producers. The FDA had to invoke bioterrorism laws to get testing records from Peanut Corp.

The Meunier and Almer families have sued Peanut Corp.

Inside Congress, at least four major bills to reform the food safety system have been, or will soon be, introduced. They have major points in common, but differ in details.

All would give the FDA authority to order recalls, which are now voluntary.

Reformers also agree that food processing plants should be required to have a safety plan and document their compliance. And there is widespread agreement that standards for imported foods must be upgraded.

There's also consensus that inspections should be carried out according to common requirements, but legislators differ on how frequently checks should be performed.

There's agreement on the need for standards for fresh produce, but there are differences over setting up a traceback system to find foods implicated in an outbreak.

DeLauro's bill calls for taking food safety away from the FDA, where it is sometimes seen as a bureaucratic stepchild, and setting up a new Food Safety Administration within the Health and Human Services Dept.

William Hubbard, a former FDA associate commissioner, said no reforms can succeed without more money. He says the FDA must double its food safety budget to about $1 billion a year.

But even with that, Hubbard warned, the agency would not be able to regularly inspect some 150,000 facilities that produce, ship and store foods. He says the answer is a food safety system in which the FDA sets rules that all players in the food industry must comply with and that states help to enforce.

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U.S. Senate Rejects Cutting Company Repatriation Tax Rate

The U.S. Senate Tuesday defeated a provision to slash the tax rate on profits that companies bring into the United States from overseas, voting not to include it in the economic stimulus package.

The measure would have temporarily cut the tax rate to 5.25 percent from 35 percent and was aimed at some $800 billion that companies hold abroad, said Sen. Barbara Boxer, a California Democrat who sponsored it.

"At a time when we want to inject dollars into this economy, those dollars are sitting offshore," she said. "We have tightened the strings on what the companies can do" with their funds.

Boxer and Sen. John Ensign, a Nevada Republican, tried to attach the measure to the approximately $900 billion stimulus package but other senators said it violated budgeting rules.

The measure, which needed 60 votes, fell 18 votes short as a handful of Republicans joined Democrats in defeating it.


A similar measure sponsored by the two senators was approved in 2004 and some $362 billion was repatriated, of which $312 billion qualified for the deduction.

The measure they offered this year would have had additional conditions, requiring companies to spend the money on hiring and training workers, research and development and capital improvements.

The companies would have been prohibited from using the funds for executive compensation or to replace money that designed for that purpose. They also would have been subject to audits to ensure compliance.

However several Democrats said the previous tax break did not create jobs and cited a report that the measure this year could have cost taxpayers some $29 billion.

"It did not increase domestic investment or employment," said Sen. John Kerry, a Massachusetts Democrat. "The fact is that many of the firms that benefited from this during that period of time laid off workers after they brought that money back. They passed on the benefits to their shareholders."

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Private life insurers to seek clarity on tax laws

After having received notice from the Income Tax department to reopen their past tax assessments, private life insurers are likely to approach the sectoral watchdog seeking clarity on tax laws.

The insurers, through their representative body Life Insurance Council, plan to seek the help of the Insurance Regulatory and Development Authority (IRDA) in altering the valuation balance sheet format prescribed in the Insurance Act 1938.

These players want this done to factor in the losses incurred while calculating the surplus or loss figure on which tax is paid.

According to industry sources, private insurers, who sell with and without profit policies, contend that the format was designed several years ago and needed to be changed.

However, council secretary general S.B. Mathur told IANS that nothing has been finalised. "We are having a meeting next week to decide on the future course of action."

Acknowledging the receipt of tax reassessment notice, ICICI Prudential Life's senior vice president and head of its taxation, compliance and secretarial division Deepak Kinger said: "It is an industry issue. Most issues faced by us are faced by other life insurers."

Private life insurers are agitated as the tax department wants to apply the usual corporate tax rate of 35 per cent on its investment income and the surplus generated in the health insurance business on grounds that these were non-life insurance businesses.

They also contend that the tax department is interpreting the tax provisions to their disadvantage.

"The Income Tax Act clearly mentions that life insurers are to be taxed at 12.5 per cent. There is a lack of clarity in the tax laws when it comes to life insurance business in a scenario where companies sell different kinds of products - participating, non-participating and pensions," V. Srinivasan, chief financial officer of Bharti Axa Life Insurance, told IANS.

According to Kinger, the revenue department wants to tax the money transferred from shareholder's account (profit and loss account) to policyholder's account (revenue account), which is akin to taxing capital infusions.

Life insurers resort to such transfers so that the revenue account shows surplus and bonus can be declared for policyholders.

Their demand of setting off such amounts against their investment income has not been entertained. This amount is now being sought to be taxed.

"The reassessment notices are confined to life insurers in Mumbai. It is a matter of time before IT officials in other regions follow similar interpretations to augment their collections," the chief financial officer of a private life insurer told IANS on condition of anonymity.

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Wealth is the result of Good Financial Decisions

Experts say that it is unlikely that coming generations will have pensions, social security or retirement health benefits. Alan Greenspan in a senate review on 7/20/05 said, "Retirees will need 80% of their income level to have a comfortable life and it will have to come substantially from non-social security, non-pension benefits." Now, more than ever, people must be able to create wealth, protect their families and minimize risk.

1) The good news is that the creation of wealth is the result of making dozens of good financial decisions over the course of a lifetime and the vast majority of these decisions need not involve finding next year's best performing mutual funds or picking winners in the stock market. They involve continual analyses and coordination of your clients’ incomes, expenditures, insurance, investments, the value and financing of their home(s), the proper use of credit, taking advantage of changing interest rates, minimizing taxes, etc. Only a computer system is fast enough and accurate enough to continuously monitor so many variables and simulate the impact each of them will have on your financial affairs during your working years, retirement years and the value of your estate. mcc developed this unique software because its CEO and founder, having 40 years of highly successful global financial experience, knew it was essential for the creation of wealth and that it was not available in existing financial services companies (large or small).

2) Over the long term (30 years) investing in the stock market has been a good way to beat inflation. However, investors should know that over the last dozen years, only 25% of professional money managers (working for big or small companies) have had the expertise to outperform the benchmark S&P 500 Index. And during the 2000 - 2003 bear market even these professionals typically lost between 20% - 30% of their clients' IRA/401K values.

Jack Bogle (Senior Manager, Vanguard), “Over the last 10 years only 25% of the mutual funds out performed the standard Indexes”.

Dr. J Randall Woolridge, PSU, “Over the last 10 years only 3 out of the top 10 brokerage firms beat the S&P”

3) For the part of wealth creation that depends on the performance of the equity markets, mcc recommends that you avail yourself of money mangers and investment strategies that give clients top 25% performance. mcc can do a free evaluation of CAGRs during both bull markets and bear markets. To the extent that your performances and strategies have yielded superior results you should stick with them and consider having mcc coordinate these investment portfolios with our other 9 synergistic services which maximize the creation and protection of wealth. Regardless of what expert (or team of experts) you are currently using, it is essential that investments be thoroughly diversified in terms of asset class, domestic vs. international, correlation to the S&P, portfolio managing philosophies, insurance products, tax treatment, income production & sensitivity to economic cycles. Depending on the financials, demographics and risk aversion of clients, one should consider alternative assets such as: hedge funds, funds-of-funds, absolute returns, longs/shorts, arbitrage, REITs, energy trusts, real estate, etc.

You don't have to switch brokers or agents to seek our advice or use our revolutionary software which does all of the above and much more. Contact us and we will explain how all this works...free of charge.

On Wall Street, Bulls and Bears look at the same data and some think the market is gong up and some think it is going down. If the experts are confused...you must be too. mcc will show you how to best evaluate your broker's or advisor's performance;

If a barber makes a mistake…you can call it a new hairstyle

If a tailor makes a mistake…you can call it a new fashion

If parents make a mistake…you can call it a new generation

If your financial advisor makes a mistake…IT’S YOUR MONEY...NOT HIS!

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Mortgage Market Volatility Impact Seen Light On Insurers

The volatility roiling the residential real estate market and the economy in general may impact the commercial mortgage markets, according to several industry sources.

But reverberations for insurance companies should be minor, they said.

The International Council of Shopping Centers, New York, at a Jan. 15 press conference noted there were 150,000 store closings in 2008, and that number was likely to be matched in 2009.

The first and second quarters of 2009 will track the sharp decline in fourth-quarter 2008, but 2009 will be a “transition year,” according to Michael Niemira, ICSC vice president, chief economist and director of research.

But the commercial real estate story, he explained, is largely dependent on available credit, and currently “we are upon the worst of times” with “extremely tight standards to borrow.”

With the commercial mortgage-backed securities market “drying up,” $250 billion in funding capacity was lost between 2007 and 2008, Mr. Niemira noted.

The key issue, he added, is whether lending facilities will be forthcoming in 2009.

On Jan. 14, the U.S. Census Bureau reported a 2.7 percent decline in advance estimates of U.S. retail and food services sales in December.

And research conducted by CB Richard Ellis, New York, indicated that the national office vacancy rate increased to 14.7 percent in fourth-quarter 2008 from 14.1 percent in the previous quarter and 12.8 percent in the 2007 fourth-quarter period.

Insurers have small exposure to commercial mortgage-backed securities relative to their total net admitted assets, according to 2007 financial statements.

And any negative impact on companies will very much depend on the ratings of the securities held in those CMBS portfolios, according to Doug Meyer, a managing director with Fitch Ratings, Chicago.

Defined multiclass residential mortgage-backed securities are those securities that are first liens and are rated in one of the two highest categories (i.e., “AAA” or “AA”) by a Nationally Recognized Statistical Rating Organization (NRSRO) that is recognized by the Securities Valuation Office, a New York-based securities rating arm of the NAIC.

Other multiclass residential mortgage-backed securities are those securities that are not first liens or, if secured by first liens, are rated below “AAA” or “AA.”

Total CMBS holdings for the top 25 ranged from no holdings for Riversource Life Ins. Co., Minneapolis, to a high of 11 percent of net total admitted assets held by Allstate Life Ins. Co., Northbrook, Ill.

An Allstate spokesperson referred to the company’s Securities and Exchange Commission filing indicating that in 2008, the company took action to reduce exposure to these securities.

Allstate notes in its form 10Q that it reduced its holdings in mortgage-backed securities, CMBS and other securitized obligations to $24.79 billion as of Sept. 30, 2008 from $31.54 billion as of Dec. 31, 2007.

In addition, Allstate noted that as of Sept. 30, 2008, CMBS, excluding CRE CDOs, had a par value of $5.98 billion, an amortized cost of $5.86 billion, primarily the result of write-downs, and a fair value of $5.09 billion

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Ten Tips: How to Beat the Baby Boomer Blues

A lot of the more than 76 million baby boomers headed toward retirement are losing sleep at night because in most cases, they have not taken the time to plan for what's next in their lives, according to Joan Strewler-Carter and Stephen Carter, co-founders of the Life Options Institute, an organization dedicated to helping people plan for life after age 50.

If you're one of the millions of baby boomers beginning to think about retirement, here are some tips from the Life Options Institute:

1. Start your planning engines. Avoid the sudden and often drastic changes that retirement can bring by starting to plan for it at least 5-10 years in advance. Baby Boomers need to reevaluate goals or set some new ones periodically because life constantly changes. Web sites such as www.WhatsNextInYourLife.com offer helpful planning tools and tips.

2. Review your finances. Determine your post-retirement budget. Most people underestimate how much money they will need for retirement. Consider that less than one-quarter of workers age 55 and older--just 23%--have savings and investments totaling $250,000 or more, according to a study published by the Employee Benefit Research Institute. About 60% have less than $100,000.

3. Consider working a few more years. The average retirement age in the US is 63-but most people don't recognize the benefits from working even just two or three additional years. According to T. Rowe Price, a 62-year-old with $100,000 salary and a $500,000 nest egg will see his annual retirement income rise 6% for every additional year he remains in the workforce.

4. Think about an "encore career." With the recent economic downturn, more boomers are asking if it is time to reinvent themselves by pursuing dreams and turning their passion into "encore" careers. If you are going to have to or want to continue working, then pursue something that makes you happy--such as a career you left behind many years ago when you met that fork in the road of life.

5. Review your health insurance needs. Decide whether you should purchase additional coverage such as Medicare supplemental insurance.

6. Consider long-term care insurance. Since many boomers have already seen the enormous expenses tied to maintaining long-term care for their parents, now may be a good time for them to talk to their insurance agent about a policy of their own.

7. Set rules. Known as the "sandwich generation" because many boomers are caring for aging parents as well as their "boomerang" children who graduate from college and then move right back home, it is important to set rules. Start asking your kids for rent or set a schedule of home chores.

8. Let go of your former identity. Many boomers have tied what they do for a living to their identity as a person. Introduce yourself to a boomer and chances are he or she will include a job title in the first few seconds of conversation. According to outplacement experts Right Associates, one of the biggest hurdles for boomers in transition is to let go of the identity they are clinging to based on a former role.

9. Cultivate outside hobbies and interests. Studies show that acquiring new skills later in life helps ward off depression and may reduce the likelihood of dementia. Maybe it's time to take up painting, quilting, piano lessons, or volunteer work.

10. Exercise your mind and body. The importance of exercise in preserving your physical, cognitive and emotional well-being is well known. In fact, according to Dr. Gary Small in The Longevity Bible, recent research found that regular physical activity could add two or more years to an individual's life, not to mention enhancing the very quality of your life.

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Traffic deaths down in 42 states

Traffic deaths fell sharply across the nation last year, dropping in at least 42 states and the District of Columbia as Americans battered by high gasoline prices and the sour economy cut driving by a record amount.
Twenty-five states and the District of Columbia registered double-digit percentage declines, sending death totals in some places to levels not seen in a half-century or more, according to preliminary data the states provided to USA TODAY.

The only states reporting increases were Delaware, New Hampshire, Vermont and Wyoming. Data have not been compiled yet for California, New York, Pennsylvania and Texas.

Traffic safety experts acknowledge that last year's plunge in miles driven likely played some role in the drop, but they say it's too soon to know how much of the decline was because of that or other factors.

"High gas prices in the early part of the year and the poor economy in the second half of the year clearly played a major role," says Barbara Harsha, executive director of the Governors Highway Safety Association. "However, states are reporting that other factors such as better laws, record high safety belt use and reduced speeds played a role."

Some states are still collecting information on deaths and caution that the totals could rise.

Since 1995, the annual U.S. total has ranged between 41,000 and 43,000. Transportation Secretary Mary Peters said in December that traffic deaths through the first 10 months of 2008 were down nearly 10%. The fatality rate per 100 million miles traveled also dropped during that period from 1.37 in 2007 to 1.28, she said. If the national rate stayed at that level for all of 2008, it would be the lowest since 1966, says DOT spokeswoman Karen Aldana. The rate for the full year has yet to be calculated.

In the 13 months ending Nov. 30, Americans drove an estimated 112 billion miles fewer miles than the previous similar period, a drop of about 3.4% and far outpacing the 49.9 billion-mile decline during the oil embargos of the 1970s, according to the Federal Highway Administration.

"There's growing evidence that declines in travel are leading to declines in deaths," says Anne McCartt, senior vice president for research at the Insurance Institute for Highway Safety. "Beyond that, I don't think it's possible to pinpoint all the changes we see in deaths to different factors."

McCartt and others say that gradually phasing in driving privileges for young drivers as they gain experience, road engineering improvements and safer vehicles also have helped cut the death toll.

"New cars have a record number of airbags that mitigate frontal and side impact crashes," Harsha says. "Electronic stability control has contributed to the reduction in rollover crashes."

Some state officials say the link between fewer deaths and less driving is unmistakable.

"There are fewer people on the roads," says Rachel Kaprielian, registrar of the Massachusetts Registry of Motor Vehicles. "They're going slower to save fuel. Job layoffs have people driving shorter distances on local roads."

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Institute raises roof standard

The Insurance Institute for Highway Safety said Wednesday it will require automakers to dramatically increase the strength of vehicle roofs to receive its top safety pick ratings.

The Virginia-based IIHS conducts dozens of crash tests annually and prods automakers into adding safety features to reduce car crashes injuries and deaths. Its ratings are widely used by consumers and touted by companies that win them. Automakers often make design changes to boost their ratings.

Adrian Lund, president of IIHS, said Wednesday another study it commissioned had convinced the Institute that it was time to require automakers to do more to improve roof strength. A study being released today by IIHS, which is an industry funded group, at the SAE Government/Industry meetings shows that a 1.0 increase in roof strength reduces the risk of fatalities in a single-passenger car rollover by just over 20 percent, Lund said.

In January, the National Highway Traffic Safety Administration unveiled a proposal to require a vehicle roof to withstand a force equal to 2.5 times the vehicle weight while at the same time maintaining sufficient head room for a buckled-in, average-size adult male to avoid being struck. That's up from the current standard of withstanding a force equal to 1.5 times the vehicle weight. But NHTSA hasn't finalized its regulation.

Lund said starting in the fall IIHS will require automakers to have a 4.0 rating to win a top safety pick.

"We see significant safety benefits in stronger vehicle roofs," Lund said.

"The government is moving slowly and they are going to continue to move slowly."

He said NHTSA has "clearly undercounted" the number of injuries and deaths that can be prevented by stronger roofs.

The Alliance of Automobile Manufacturers, the trade group that represents Detroit's Big Three automakers, Toyota Motor Corp., Daimler AG and six others, supports increasing the standard to 2.5 times the vehicle's weight, but says going beyond that is unwarranted.

In December, the Bush Administration abandoned efforts to comply with a congressional deadline to update the standard. It was the third delay in finalizing the standards and Transportation Secretary Mary Peters said the new rule would be in place by April 30.

Ron Medford, a senior associate NHTSA administrator, said Wednesday at the SAE meetings in Washington that the administration had "punted for the third time" and had set the new date "without consulting with us quite frankly."

Medford said it wasn't clear if they could meet the April 30 deadline.

"The important thing is to do it right," he said.

"This has been a very controversial rule. It's been hard in terms of policy decisions," Medford added. "There's just a lot of attention on this."

He said the alliance was interested in learning more about IIHS's new rating system. NHTSA's proposed update also would cover vehicles that weigh up to 10,000 pounds, versus the current 6,000-pound requirement.

The proposal is aimed at helping people survive rollover crashes, which account for more than 10,000 deaths annually. Rollovers represent 3 percent of all crashes, but account for one-third of all vehicle deaths.

General Motors Corp. and Ford Motor Co. essentially wrote the regulation that's been in effect since 1973 after their fleets failed NHTSA's first proposed roof standard in 1971.

NHTSA studied the issue for more than a decade before proposing in August 2005 to increase the strength of vehicle roofs and broaden the number of the vehicles covered.

NHTSA said then that upping the standard to 2.5 times the vehicle weight would save 13 to 44 lives and prevent up to 800 injuries annually. The agency said it would require that both sides of the vehicle roof be tested, and in January, NHTSA updated its proposal to include a double-sided test. Currently, only one side is tested.

The Auto Alliance also noted that increasing roof strength requires making roofs heavier -- reducing fuel efficiency -- and raising costs. It supports increasing the standard to 2.5 times, but with significant modifications to the proposed rules, including a phase-in schedule.

"Drivers and passengers are better served by a system of enhancements including improvements in vehicle stability, ejection mitigation, roof crush resistance as well as road improvement and behavioral strategies aimed at consumer education," alliance spokesman Wade Newton said.

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Let State Farm Agents Act As Independents, Says Fla. CFO

State Farm has rejected a pitch by Florida’s chief financial officer, Alex Sink, to let their captive agents find coverage for customers with rival carriers, since they plan on leaving the state’s property market.

Currently, 826 State Farm Florida Insurance agents function as captive or dedicated agents, who under their contract can only place insurance with State Farm or the state-run property insurer, Citizens Property Insurance Corp.

Ms. Sink, who asked that State Farm producers basically be allowed to function as independent agents, made her request in a letter dated yesterday to State Farm Florida’s president, Jim Thompson.

“Given State Farm Florida’s projected insolvency within the next two years and intended withdrawal, I find it inappropriate to limit your agents’ ability to help your customers find the best possible property insurance coverage,” Ms. Sink wrote.

However, State Farm rejected the proposal. “We appreciate CFO Sink’s concerns, but at this time we are not considering any option to allow any of our agents to become brokers,” said a company representative, Chris Neal.

On Jan. 27, two weeks after its request for an average homeowners rate increase of 47.1 percent was turned down, the insurer announced it had applied to withdraw from the state within two years and end its coverage of more then 1.2 million home and condominium policies.

State Farm, in making its announcement, said it faced deteriorating financial conditions. Ms. Sink’s letter said she understood that the company “is projecting it will become insolvent in 2011, assuming no hurricane losses occur during the next two hurricane seasons.”

“The plan also indicates that merely $175 million in hurricane losses will accelerate this insolvency to the second half of 2010,” she added. “This indicates a more severe hurricane during the 2009 hurricane season could accelerate State Farm Florida’s anticipated insolvency to an even earlier date.”

Ms. Sink--who noted that her department has been inundated with calls from worried State Farm customers--wrote that the current State Farm contract with its agents forces them to forego giving customers alternative private coverage and to put them in that actuarially unsound Citizens, meaning that most insureds are forced to find an agent with another company.

“These choices hardly seem fair to your 826 agents and 4,479 agent staff members, who rely on their customer base for their livelihood. It is also unfair to the customers who may have a decades-long relationship with their State Farm agent,” she wrote.

Ms. Sink added that she believes the company owes it “both to your agents and policyholders to withdraw from the market in the fairest manner possible. I urge you to immediately allow your agents to obtain insurance appointments from other property insurance companies.”

State Farm was turned down on its rate increase application after an administrative law judge found it had not shown evidence the rate filing was not “excessive, inadequate, or unfairly discriminatory.”

Last week, the Florida Office of Insurance Regulation--which has 90 days to review the company’s withdrawal plan and approve or deny it--hit the company with a subpoena, answerable next Monday, for computerized data with names, addresses, policy types, policy limits and premium information for each of State Farm’s Florida policyholders.

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Uncertainty of 2008 limits cat bonds

While the catastrophe bond market as a whole was able to withstand the volatility of 2008, the market experienced steep declines in terms of both dollar issuance and number of transactions, according to a Guy Carpenter & Co. L.L.C. report released Wednesday.

Cat bond issuers brought in $2.7 billion in new and renewal capacity through a total of 13 transactions, but all but two of those transactions came within the first half of 2008. Overall, this represents a 62% drop from 2007's record-setting year of nearly $7 billion in issued risk capital, the report said. In addition, the number of transactions in 2008 dropped 52% compared with the previous year.

Further, the report found that after the heart of the credit crisis occurred in mid-September, several firms that were planning cat bond issuances for the fourth quarter deferred those issuances to the first quarter of 2009. This prompted a 14.5% drop in the total amount of risk capital outstanding to $11.8 billion at year-end 2008, the report said.

Ambiguity in the reinsurance market coupled with a deteriorating financial market spawned the drop in cat bond issuance during the fourth quarter 2008, Guy Carpenter wrote in its briefing. In addition, credit concerns related to the security of counterparties curbed growth.

In the briefing, Guy Carpenter said it expects the cat bond market to bounce back in 2009 as the effects of the credit crisis and financial market constraints are likely to continue, forcing the insurance industry to look to alternative sources of capital.

The New York-based reinsurance brokerage suggests that the catastrophe bond market's resilience may play an important role as insurers manage their portfolios over the coming year.

"We expect to see more transparency and tightened collateral requirements in 2009," David Priebe, chairman of Guy Carpenter's global client development department, said in a statement. "Cat bond issuance activity will eventually rebound as conditions improve, and as an asset class, cat bonds should offer improved utility for both sponsors and investors."

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6 car insurance mistakes to avoid

If increasing numbers of drivers on the road are uninsured as the industry expects, those of us with insurance should take a good look at our coverage to be sure we're adequately protected in case of an accident.

Here are six common car insurance mistakes to avoid:

1. Driving without uninsured motorist coverage.

If you're in an accident with an uninsured driver, this insurance will pay damages for you, your car and passengers. It also pays in hit-and-run accidents if the other driver flees the scene. It will likely increase your premiums by 7 to 10 percent, but could help you avoid financial ruin if you're in a serious accident.

2. Carrying too much/too little uninsured motorist insurance.

How much should you carry? Typical coverage is $100,000 per person in an accident up to $300,000 for any one accident. "Everybody needs to evaluate their own financial situation," said William Pearse, a vice president at The Travelers Cos. Inc. "Make sure you have enough protection there so you don't have to dip into your assets."

3. Failing to consider insurance costs when car shopping.

If you are in the market for a new vehicle, consider how the design of your car, in terms of safety and reparability, and the likelihood your model will be stolen, might impact the cost of insurance. Some car equipment, such as antilock brakes, air bags or motorized seat belts can actually provide savings through equipment discounts.

4. Insuring your home and car separately.

Many leading insurance companies offer significant discounts on your home and auto insurance if you carry both with them. Allstate, for example, says car insurance premiums could be as much as 10 percent lower if you also have homeowners insurance with them.

5. Buying insurance with the lowest deductibles.

You can save money on your monthly insurance premium if you increase the deductible on your policy. It may be worth considering increasing your deductible from $500 to $1,000, for example, to save on your premium payments. You must weigh, however, whether paying $1,000 out of pocket is worth the savings on your premium payment.

Get FREE Quotes save Money NOW!! : Click Here

6. Never evaluating coverage.

You may be paying too much for the collision coverage on your car if it's an older model. If your car is 10 years old, for example, it may be worth only a few thousand dollars. But if you haven't revisited your collision coverage, you may be paying too much to insure it for more than it's worth.

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Florida Home-Grown Insurer Says It's Ready for 30,000 State Farm Policies

After State Farm announced it would be leaving behind 1.2 million property policyholders within the next two years, state officials expressed confidence that the private insurance market, including a number of relatively new Florida-only insurers, would rescue the business.

Now one domestic insurance group is trying to seize the opportunity.

John Jerger, president of American Traditions Insurance Co. and Modern USA Insurance Co., announced that his companies are prepared to take on as many as 30,000 State Farm residential policyholders.

Jerger said he thinks his companies can not only take on that many new customers but save a lot of them some money, about $1,300 a year on average for a $200,000 home.

"We have the ability to do this," he said, adding that if there were a demand for even more, his companies would act to expand to meet it. "Our companies are also committed to raising more capital to provide additional capacity if it is needed."

Jerger's companies now write about $60 million in business in the state, insuring about 60,000 policyholders, through about 1,000 independent agents and brokers.

American Traditions and Modern USA provide residential homeowners, condos and mobile home property coverages. The companies are highly automated, with online submission forms.

Jerger said his company welcomes additional agents and brokers to do business.

He urged State Farm policyholders to begin shopping right away, noting that if there happens to be a bad storm season later in the year, that could dampen insurers' willingness to take on new business later.

Jerger's family has been in the Florida insurance business since 1946, although these insurers are new. American Traditions was formed in 2005 and Modern USA in 2007. Both have been given "A Exceptional" financial stability ratings by Demotech.

Jerger said that while capital is obviously important to writing business in Florida, a good reinsurance program is equally important. He said his firm's reinsurance program combines coverage from Lloyd's with the state catastrophe fund coverage.

Jerger told Insurance Journal he thinks the State Farm exit could be "good for the state and its home-grown companies."

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Lloyd's Makes Appointments to Council and Franchise Board

Lloyd's has announced the following appointments to its Council and Franchise Board:

• Lord Levene was re-elected as Chairman of Lloyd's;
• Andreas Prindl was elected as a Deputy Chairman, and Ewen Gilmour and Graham White were re-elected as Deputy Chairmen of Lloyd's;
• Sir Robert Finch has been appointed as a nominated member of Council for a three-year term, commencing 1 January, 2009, following Bill Knight's retirement from the Council on 31 December, 2008; and
• The new members of Council are Aprilgrange Limited (represented by Martin Hudson) and Michael Deeny, who have been elected for three-year terms, commencing 1 February 2009 as a corporate 'C' external member and as an individual member respectively.

Levene commented: "I am delighted to welcome all new Council members and would like to take this opportunity to thank Bill Knight and Peter Morgan for their outstanding contributions during their nine years on Council. The new members announced today will bring important experience and a different perspective, which will be invaluable to shaping the future of Lloyd's."

Alongside the appointments to its Council, Lloyd's also announced changes to its Franchise Board. David Shipley, non-executive Chairman of Managing Agency Partners Limited, has been appointed as a market connected non-executive director of the Franchise Board for a three-year term, commencing 1 January, following his service as a member of council. He replaces Edward Creasy, who retired after six years service on 31 December, 2008. Roy Brown, an independent non-executive director, also retired after six years service on 31 December, 2008.

Levene thanked both men for "their hard work and important contribution since the Board's inception," and said he is looking "forward to working with David Shipley and all the other members of the Board."

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Best Comments on ING Canada Sale

A.M. Best Co. has commented that the financial strength rating of 'A+' (Superior) and issuer credit ratings (ICR) of "aa-" of ING Canada Group (the Group) are unchanged following the announcement by ING Canada Inc. that its major shareholder, The Netherlands ING Insurance International N.V., intends to sell all of its common share holdings in ING Canada.

Best also stated that ING Canada's ICR of "a-" and indicative ratings of "a-" on senior unsecured debt securities, "bbb+" on subordinated unsecured debt securities and "bbb" on Class A preferred shares on its CAD 1 billion (US $815 million) preliminary short form base shelf prospectus also are unchanged.

Best also noted that ING's Canada Group includes "Belair Insurance Company Inc. (Montreal, Quebec), ING Insurance Company of Canada, ING Novex Insurance Company of Canada, The Nordic Insurance Company of Canada and Trafalgar Insurance Company of Canada. All companies are domiciled in Toronto, Ontario, unless otherwise specified. The outlook for all ratings is stable."

Best pointed out that the "planned sale is expected to be completed within the next several weeks through private placement and public offering. ING Canada Inc. will not receive any proceeds from the sale of the common shares. The Group is well positioned as the market leader in the Canadian property/casualty insurance industry."

Best added that it "does not anticipate a significant change in capitalization or operating performance as a result of the sale."

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UN Secretary-General Says Domestic Politics Undermine Climate Fight

A climate deal at Copenhagen may not be possible unless politicians take tough decisions without worrying about winning elections and compulsions of their domestic politics, the U.N. Secretary-General said on Thursday.

Ban Ki-moon said the situation had been compounded by the global financial downturn that was making it more difficult for the political leadership to take unpopular decisions.

"Their first priority maybe (is) to get elected first of all, whatever maybe the case," Ban told a conference on sustainable development in New Delhi. "But they must overcome and look beyond this personal political leadership. They have to demonstrate their leadership as a global leader.

"For political leaders, there is always clearly some political risks that they want to avoid. Political psychology in the midst of global financial crisis, global downturn, (is) they are very weak to the voters."

From rich nations to developing countries many are shelving ambitions for deep cuts or caps in greenhouse gas emissions as the economic slowdown overshadows the fight against climate change.

In countries such as India, the fourth-largest polluter in the world, climate change is hardly seen as an election issue and barely features on the agenda of political parties.

Ban called on political leaders to look beyond their domestic politics for a deal in Copenhagen. "We have to look at the whole generational issues. Therefore please look beyond your own domestic concerns and look for the future," he said.

About 190 countries are trying to craft a broader climate treaty to replace the Kyoto Protocol that only binds wealthy nations to emissions targets between 2008 and 2012.

The new deal is due to be wrapped in Copenhagen by December.
Ban said Copenhagen's success depended on how the political leadership responded to three main challenges.

"First, Copenhagen must clarify commitments of developed countries to reduce their emissions, by setting ambitious mid-term targets, with credible baselines.

"We must also achieve clarity on what mitigation actions developing countries will be prepared to make."

Alongside, Copenhagen must advance on the issue of financing the mitigation and adaptation needs of developing countries, he said.

"Thirdly, governments, as well as the U.N. system must come up with credible solutions for the governance of new funds, and for their implementation response."

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Willis Survey Finds Increasing Litigation Risk for UK Financial Firms

In a recent financial lines seminar sponsored by Willis Group Holdings, nearly 90 percent of those attending indicated they believe the current economic climate has increased the risk of litigation against financial institutions.

The seminar, titled "Credit Crunch Fallout: The Effect on Insurance Risks for Financial Institutions," was a joint presentation by Willis and the law firm K&L Gates to their financial institutions' clients. The event was held at Willis London headquarters building on Lime Street. Company secretaries, finance directors, risk managers and insurance buyers from 40 financial institutions attended.

Commenting on the survey's findings, Duncan Holmes, Executive Director of FINEX and co-head of the Willis' Financial Institutions team, stated: "This survey clearly shows that senior officials of financial institutions are concerned about growing exposure to lawsuits, and the significant trend of increasing claims frequency and severity. The findings also highlight the fact that policy wordings will need to be reviewed and limits of indemnity checked for adequacy."

Of the 108 participants who took part in the survey, 87 percent said they felt more vulnerable to litigation in the current economic climate. Other findings in the survey included:

• 35 percent of participants believe that their companies have an exposure to claims and investigations in the US.
• 52 percent have accepted that Financial Lines insurance premiums will increase at their next renewal, and 13 percent said they would be very concerned about such increases.
• 64 percent had recently completed a review of their chains of communication in order to avoid delays in notifying claims.
• 68 percent of delegates claimed that a review of insurers or broker relationships in the coming year is likely to occur.

Speaking for K&L Gates were Alan Berkeley, Jane Harte-Lovelace and Sarah Turpin, who presented an overview of current claims, litigation trends and regulatory risks faced by financial institutions in North America and the UK, and gave tips for maximizing insurance cover.

Holmes shared experiences from the financial lines insurance market with lessons learnt from fourth quarter renewals, the reinsurance renewal season and insurers' financial results, and discussed the ramifications for the market in 2009.

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Allied World Q4 Net Income Down 83.9%; Full Year Drops 60.8%

Allied World Assurance Company Holdings reported net income of $19.9 million, or $0.39 per diluted share, for the fourth quarter of 2008 compared to net income of $123.0 million, or $2.01 per diluted share, for the fourth quarter of 2007, an 83.9 percent decline.

Net income for the year ended December 31, 2008 was $183.6 million, or 3.59 per diluted share, compared to net income of $469.2 million, or $7.53 per diluted share, for the year ended December 31, 2007, down 60.8 percent.

However, the Group reported record operating income of $141.1 million, or $2.80 per diluted share, for the fourth quarter of 2008 compared to operating income of $118.1 million, or $1.93 per diluted share, for the fourth quarter of 2007. Operating income for the year ended December 31, 2008 was $455.1 million, or $8.90 per diluted share, compared to operating income of $476.0 million, or $7.64 per diluted share, for the year ended December 31, 2007.

President and CEO Scott Carmilani commented, "Allied World has emerged from 2008 as an even stronger company despite it being a very difficult year for insurance companies and the financial sector as a whole. While not immune to the impact of the catastrophe losses for the year, we still managed to generate a very impressive 20.6 percent operating ROE for 2008 and ended the year with over $2.4 billion in shareholders' equity, up 8 percent from year end 2007. In the fourth quarter, we achieved record operating income driven by strong investment income, favorable reserve development and a meaningful contribution from our recently acquired Darwin business."

Carmilani added: "We accomplished these strong results in a year when we made significant investments in our operating platforms and infrastructure, particularly in the United States. These actions combined with our strong capital have helped position us right where we want to be in the market at a time when we believe there are significant opportunities."

The bulletin also noted that Allied World had completed its acquisition of Darwin Professional Underwriters, Inc. on October 20, 2008, "and Darwin's results for the period of October 20, 2008 through December 31, 2008 are included in Allied World's consolidated results."

Gross premiums written were $310.9 million in the fourth quarter of 2008, a 19.5 percent increase compared to $260.3 million in the fourth quarter of 2007. Net premiums written were $226.5 million in the fourth quarter of 2008, a 19.6 percent increase compared to $189.4 million in the fourth quarter of 2007. "These increases were primarily due to the inclusion of Darwin business and increased writings in our casualty segment by our U.S. offices," the bulletin noted.

Net premiums earned in the fourth quarter of 2008 were $303.0 million, a 5.7 percent increase compared to $286.6 million in the fourth quarter of 2007.

Gross premiums written were $1.4456 billion for the year ended December 31, 2008, a 4.0 percent decrease compared to $1.5055 billion for the year ended December 31, 2007. Net premiums written were $1.1072 billion for the year ended December 31, 2008, a 4.0 percent decrease compared to $1.1531 billion for the year ended December 31, 2007.

Allied explained that the "decreases were primarily the result of the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or policy or contract terms and conditions), increased competition and decreasing rates for renewal business in each of our operating segments."

Net premiums earned were $1.1169 billion for the year ended December 31, 2008, a 3.7 percent decrease from net premiums earned of $1.1599 billion for the year ended December 31, 2007, primarily due to lower net premiums written in 2008.

The Group's "combined ratio was 76.1 percent in the fourth quarter of 2008 compared to 81.4 percent in the fourth quarter of 2007," said the earning announcement. "The loss and loss expense ratio was 47.4 percent in the fourth quarter of 2008 compared to 58.2 percent in the fourth quarter of 2007. During the fourth quarter of 2008, the company recorded net favorable reserve development on prior loss years of $90.3 million, a benefit of 29.8 percentage points to the company's loss and loss expense ratio for the quarter. Of this net favorable development, $15.6 million, $63.8 million and $10.9 million was recognized in our property, casualty and reinsurance segments, respectively.

"The combined ratio for the year ended December 31, 2008 was 84.2 percent compared to 81.3 percent for the year ended December 31, 2007. During the year ended December 31, 2008, the company recorded net favorable reserve development on prior loss years of $280.1 million, a benefit of 25.1 percentage points to the company's loss and loss expense ratio for the year."

The full earnings report and a replay of the web cast conference, held today, can be obtained on Allied World's web site at: www.awac.com. The web cast will remain available online through Friday, February 20, 2009.

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Florida's Uninsured and Underinsured to Benefit from Statewide Grants

The Blue Foundation for a Healthy Florida, the philanthropic affiliate of Blue Cross and Blue Shield of Florida (BCBSF), has approved $761,000 in grants to be awarded this winter to 11 nonprofit Florida organizations providing health-related services to in-need Floridians.

"Around 20 percent of Florida residents are uninsured," said Susan Towler, executive director of The Blue Foundation for a Healthy Florida. "That's more than 3.8 million people who may forgo important medical care if they don't have access to free and low-cost services. The Blue Foundation for a Healthy Florida is proud to support organizations working to help Floridians who do not have access to traditional health care options."

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COBRA Coverage Obtained By Only About One Of Ten Unemployed Workers

As unemployment rates reach the highest levels in 16 years, a new analysis from The Commonwealth Fund finds that few laid-off workers - only 9 percent - took up coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) in 2006. Unemployed workers who also lose their health insurance would need substantial financial assistance, covering 75 to 85 percent of their health insurance premiums, for their premium contributions to remain at the levels they paid while they were working, according to the report, Maintaining Health Insurance During a Recession: Likely COBRA Eligibility, by Michelle M. Doty, director of survey research at The Commonwealth Fund and colleagues.

The report also finds that low-wage workers are at a particular disadvantage - with only 38 percent eligible to receive COBRA benefits - because they don't receive health insurance through their jobs, work for small firms that aren't required to offer COBRA, or are uninsured to begin with. Coverage options for low-income workers remain limited especially for childless adults because most lack a public coverage option. The authors say that policymakers should consider temporarily expanding Medicaid and SCHIP eligibility to unemployed adults with low incomes, with assistance for premium shares, to provide critical support to families.

Sixty-six percent of all current workers, if laid off, would be eligible to extend their health insurance under COBRA But for most people, COBRA payments are unaffordable, about four to six times higher than the amount of money they contributed to their health insurance when they were employed. According to the report, millions of the eligible could keep their coverage if they could get assistance with their premiums, which average $4,704 per year for an individual and $12,680 a year for a family.

"Americans are losing their jobs at an alarming pace and this report clearly shows that many people cannot afford to take on the expense of COBRA just as they lose their income," said Commonwealth Fund President Karen Davis. "The number of uninsured Americans could grow markedly during this recession unless we take action to help unemployed Americans keep their health care coverage."

The Commonwealth Fund is a private foundation supporting independent research on health policy reform and a high performance health system.

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One In Seven U.S. Residents Younger Than Age 65 Went Without Prescribed Drugs In 2007 Because Of Cost

The rising cost of prescription drugs prompted one in seven U.S. residents younger than age 65 to skip a medication in 2007, compared with one in 10 in 2003, according to a report released on Thursday by the Center for Studying Health System Change, the New York Times reports. For the report, lead author Laurie Felland, a senior health researcher at the center, and colleagues used data from the 2007 Health Tracking Household Survey, a nationally representative telephone survey of 10,400 adults younger than age 65. Participants were asked whether during the previous 12 months there was a time when "you needed prescription medicines but didn't get them because you couldn't afford it." Researchers determined that:

• 5% of children did not have prescriptions filled in 2007 because of cost, compared with 3.1% in 2003;
• 17.8% of working-age adults did not have prescriptions filled in 2007 because of cost, compared with 13.8% in 2003;
• One in 10 working-age U.S. residents with employer-sponsored coverage did not have prescriptions filled in 2007 because of cost, compared with 8.7% in 2003;
• Three in 10 low-income U.S. residents did not have prescriptions filled in 2007 because of cost;
• Nearly one in four adults who were Medicaid beneficiaries or receive coverage through state insurance programs said they had difficulty affording drugs;
• Nearly two-thirds of uninsured, working-age adults with at least one chronic condition did not have prescriptions filled in 2007 because of cost; and
• About 36.1 million U.S. residents younger than age 65 did not have prescriptions filled in 2007 because of cost.

Felland noted that the statistics might be higher now due to the current recession. She said, "Our findings are particularly troublesome given the increased reliance on prescription drugs to treat chronic conditions," adding, "People who go without their prescriptions experience worsening health and complications." According to Felland, a number of factors contributed to the trend, including rising drug prices, the tendency of physicians to prescribe drugs more frequently, expensive new specialty medications and lessening drug coverage that shifts a greater share of costs to patients. She said, "Insurance coverage offers less financial protection against out-of-pocket costs than it did in the past"

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