Carl Dincesen - Seeking Alpha 'Carl Dincesen' Tag RSS Syndication from SeekingAlpha.com SeekingAlpha.com http://seekingalpha.com/author/carl-dincesen Affordability vs. Medical Insurer Earnings http://seekingalpha.com/article/156108-affordability-vs-medical-insurer-earnings?source=feed 156108 Affordability vs. Medical Insurer Earnings - Odds Against the Public Option Plan Are Increasing
It is well accepted that health outcomes are generally no better and in some categories worse than in Western Europe. Yet the price paid in the U.S. for healthcare is at least 50% higher per person or $830 billion more. It may come as a surprise, but total U.S. medical insurance company profits amount to a small percent of the $2.5 trillion in total current healthcare spending. It is only logical to conclude we are not getting what we pay for because waste and inefficiency are rampant. Why, because there is a direct cause and effect relationship between the desire to grow profits, a relatively small number, and wasteful non-productive spending, a massively large number.
Once the facts are presented, the proof of this reality is easy to understand.
Spending and revenue are one in the same for insurers. Grow spending and you increase revenue and profit dollars. Cut spending and earning will decline. Cutting waste and inefficiency produces the same result.
The mechanics are simple: profit margins allowed by state insurance regulators are typically 5% or less. That percent times the sum of total insured spending equals the insurers’ profit dollars. To grow earnings by 10%, total insured spending, whether productive or wasteful, has to grow by the same percent. The tail is wagging a very large dog.
The insurers are not gaming the system, this is the U.S. system. It thrives because: 1) the service is essential and demand is strong and growing, and 2) nothing is in place to check spending other than America’s ability to pay.
Anyone would be hard pressed to design a worse system for delivery of quality healthcare at an affordable price. Why are programs that reduce the volume of re-admissions abandoned and few and far between? Medical records are not shared because they aren’t in electronic form. The answer; insurers do not want to reimburse and promote anything that reduces spending for reasons already cited. It does not matter that these types of initiatives improve care. In fact, non electronic medical record keeping is the primary driver of repeat testing, not fear of lawsuits, largely a resulting problem or symptom.
Other negative consequences are less obvious. The patient loads of primary care physicians are increasing. Their highest and best use, from a revenue point of view, is being the volume generators to feed the specialist community, where the money is. This also leaves them with little time to practice preventative care or to educate patients.
The basic question is: How do you get rid of excessive waste and inefficiency and make sure that the resulting savings translates into lower prices? Competition is clearly the missing ingredient. It is the natural enemy of waste and inefficiency because it forces providers of any product or service to deliver value for the money spent. It is not really surprising that insurers have been allowed to operate without competition for so long. Up to now, the only apparent alternative was nationalization, something the majority of Americans clearly do not want.
The insurers are very much in favor of requiring all uninsured citizens under the age of 65 to buy private insurance with government subsidy for those who can not afford it. In exchange they would insure people with “pre-existing medical conditions”. They do this every day in large employee sponsored group plans with no problem and very good profits. Without a public option plan, the mandate would in fact create a very large new captive group that would be privately insured at today’s bloated prices.
A hypothetical best case multi year mission for a new self-sufficient public option plan; lower the cost of insurance to a level that equals 115% to 120% of spending in Western Europe, no more or less. That amount of spending would be more than enough to cover insurer profits. Medicare and Medicaid would capture the same savings than would accrue in the in the private market due to premium rate reductions. By law, all providers must accept the plan or it will fail in its mission, however modest or bold. Without this proviso, a non-profit national insurance exchange would be nothing more than a fly in the insurers’ ointment.
The private insurers will not compete on the basis of price unless forced to. What business would voluntarily subject themselves to price competition or a greater degree competition? If you want affordability, a strong public option plan is a must. The Country simply cannot afford the scale of that much waste and inefficiency and not pay a price in terms of standard of living.
In dollars, the difference between spending 20% more for healthcare versus 50% more, as we now do, is $500 billion per year in current dollars. The trade off is simple: less prosperity for private insurers and the best compensated providers. They would get less money for incremental per patient treatments and tests. In return, providers would get reimbursed for programs that reduce wasteful spending and improve health outcomes.
Congress is already willing to give big concessions to the insurers; age based pricing and mandated coverage. Failure to deliver a public option plan that has pricing power would be the final nail in the affordable healthcare coffin. It’s appears that will be the case; Very good news indeed equity shareholders if not already fully reflected in healthcare insurer share prices.

]]> Fri, 14 Aug 2009 05:27:48 -0400 Carl Dincesen Carl Dincesen submits:
Affordability vs. Medical Insurer Earnings - Odds Against the Public Option Plan Are Increasing
It is well accepted that health outcomes are generally no better and in some categories worse than in Western Europe. Yet the price paid in the U.S. for healthcare is at least 50% higher per person or $830 billion more. It may come as a surprise, but total U.S. medical insurance company profits amount to a small percent of the $2.5 trillion in total current healthcare spending. It is only logical to conclude we are not getting what we pay for because waste and inefficiency are rampant. Why, because there is a direct cause and effect relationship between the desire to grow profits, a relatively small number, and wasteful non-productive spending, a massively large number.
Once the facts are presented, the proof of this reality is easy to understand.
Spending and revenue are one in the same for insurers. Grow spending and you increase revenue and profit dollars. Cut spending and earning will decline. Cutting waste and inefficiency produces the same result.
The mechanics are simple: profit margins allowed by state insurance regulators are typically 5% or less. That percent times the sum of total insured spending equals the insurers’ profit dollars. To grow earnings by 10%, total insured spending, whether productive or wasteful, has to grow by the same percent. The tail is wagging a very large dog.
The insurers are not gaming the system, this is the U.S. system. It thrives because: 1) the service is essential and demand is strong and growing, and 2) nothing is in place to check spending other than America’s ability to pay.
Anyone would be hard pressed to design a worse system for delivery of quality healthcare at an affordable price. Why are programs that reduce the volume of re-admissions abandoned and few and far between? Medical records are not shared because they aren’t in electronic form. The answer; insurers do not want to reimburse and promote anything that reduces spending for reasons already cited. It does not matter that these types of initiatives improve care. In fact, non electronic medical record keeping is the primary driver of repeat testing, not fear of lawsuits, largely a resulting problem or symptom.
Other negative consequences are less obvious. The patient loads of primary care physicians are increasing. Their highest and best use, from a revenue point of view, is being the volume generators to feed the specialist community, where the money is. This also leaves them with little time to practice preventative care or to educate patients.
The basic question is: How do you get rid of excessive waste and inefficiency and make sure that the resulting savings translates into lower prices? Competition is clearly the missing ingredient. It is the natural enemy of waste and inefficiency because it forces providers of any product or service to deliver value for the money spent. It is not really surprising that insurers have been allowed to operate without competition for so long. Up to now, the only apparent alternative was nationalization, something the majority of Americans clearly do not want.
The insurers are very much in favor of requiring all uninsured citizens under the age of 65 to buy private insurance with government subsidy for those who can not afford it. In exchange they would insure people with “pre-existing medical conditions”. They do this every day in large employee sponsored group plans with no problem and very good profits. Without a public option plan, the mandate would in fact create a very large new captive group that would be privately insured at today’s bloated prices.
A hypothetical best case multi year mission for a new self-sufficient public option plan; lower the cost of insurance to a level that equals 115% to 120% of spending in Western Europe, no more or less. That amount of spending would be more than enough to cover insurer profits. Medicare and Medicaid would capture the same savings than would accrue in the in the private market due to premium rate reductions. By law, all providers must accept the plan or it will fail in its mission, however modest or bold. Without this proviso, a non-profit national insurance exchange would be nothing more than a fly in the insurers’ ointment.
The private insurers will not compete on the basis of price unless forced to. What business would voluntarily subject themselves to price competition or a greater degree competition? If you want affordability, a strong public option plan is a must. The Country simply cannot afford the scale of that much waste and inefficiency and not pay a price in terms of standard of living.
In dollars, the difference between spending 20% more for healthcare versus 50% more, as we now do, is $500 billion per year in current dollars. The trade off is simple: less prosperity for private insurers and the best compensated providers. They would get less money for incremental per patient treatments and tests. In return, providers would get reimbursed for programs that reduce wasteful spending and improve health outcomes.
Congress is already willing to give big concessions to the insurers; age based pricing and mandated coverage. Failure to deliver a public option plan that has pricing power would be the final nail in the affordable healthcare coffin. It’s appears that will be the case; Very good news indeed equity shareholders if not already fully reflected in healthcare insurer share prices.


Complete Story »]]> AET AHCI CI CVH UNH WLP XLV Carl Dincesen Municipal Bonds: Time for a Closer Look http://seekingalpha.com/article/127953-municipal-bonds-time-for-a-closer-look?source=feed 127953 In the fourth quarter of 2008, the municipal bond market collapsed along with the rest of the credit markets. Lately there has been a small revival. Still, depressed bond prices and wide spread credit concerns leave open big opportunities for investors in the new issue and secondary market, if you know where to look.

Long maturity tax exempts on average now yield 130% of comparable Treasury bonds and that’s before the exemption benefit. A portion of that differential may be attributed to what many have termed artificially low Treasury rates. Not that long ago, exempt yields averaged 75% of Treasuries. At no time since the 1930’s, has a full understanding of municipal credit risk been more valuable.

]]> Thu, 26 Mar 2009 06:25:48 -0400 Carl Dincesen Carl Dincesen submits:

In the fourth quarter of 2008, the municipal bond market collapsed along with the rest of the credit markets. Lately there has been a small revival. Still, depressed bond prices and wide spread credit concerns leave open big opportunities for investors in the new issue and secondary market, if you know where to look.

Long maturity tax exempts on average now yield 130% of comparable Treasury bonds and that’s before the exemption benefit. A portion of that differential may be attributed to what many have termed artificially low Treasury rates. Not that long ago, exempt yields averaged 75% of Treasuries. At no time since the 1930’s, has a full understanding of municipal credit risk been more valuable.


Complete Story »]]> AFB AKB APX AYN BAF BBF BBK BCK BCL BFC BFK BFO BFY BFZ BHV BIE BJZ BKK BKN BLE BLH BLJ BLN BMT BNJ BNY BPK BPS BQH BRF BRM BSD BSE BTA BYM BZA BZM CCA CEV CMF CMU CXE CXH DMF DSM DTF EIA EIF EIM EIO EIP EIV EMC EMI EMJ ENX EVJ EVM EVN EVO EVP EVY FEV FMN FPT ICS IIC IIM IMS IMT IQC IQI IQM IQN IQT ITM JQM KSM LEO MAB MAF MAV MCA MEN MFL MFM MFT MHD MHE MHF MHI MHN MIW MIY MJI MLN MMU MMV MNE MNP MPA MPT MQT MQY MUA MUB MUC MUE MUH MUI MUJ MUS MVF MVT MXA MXN MYC MYD MYF MYI MYJ MYM MYN MZA MZF NAC NAD NAN NAZ NBH NBJ NBO NBW NCA NCL NCO NCP NCU NEA NFC NFL NFM NFZ NGB NGK NGO NGX NIF NII NIM NIO NKG NKL NKO NKR NKX NMA NMB NMI NMO NMP NMT NMY NMZ NNB NNC NNF NNJ NNO NNP NNY NOM NPC NPF NPG NPI NPM NPP NPT NPV NPX NPY NQC NQF NQI NQJ NQN NQP NQS NQU NRB NRK NTC NTX NUC NUF NUJ NUM NUN NUO NUV NVC NVG NVJ NVN NVX NVY NWF NWI NXC NXE NXI NXJ NXK NXM NXN NXP NXQ NXR NXZ NYF NYH NZF NZH NZR NZW NZX OIA OIB OIC PCK PCQ PGM PIA PIF PMF PMG PMH PML PMM PMN PMO PMX PNF PNI PPM PYM PYN PZA PZC RAA RFA RNJ RNY SBI SEL SMB TFI VAZ VCF VCV VFL VGM VIM VKI VKL VKQ VMM VMO VMV VOQ VPV VTF VTJ VTN XAA Carl Dincesen Housing Bubbles and Bottoms - Light at the End of the Tunnel? http://seekingalpha.com/article/117992-housing-bubbles-and-bottoms-light-at-the-end-of-the-tunnel?source=feed 117992 In relation to PC personal income the residential real estate bubble reached its peak in 2005 and, as shown on the following chart (click to enlarge), prices continue to decline after an extraordinary run-up in the Northeast and West Regions. For the rest of the Country, except Florida, current home prices appear sustainable at least by historical standards.

]]> Mon, 02 Feb 2009 12:40:17 -0500 Carl Dincesen Carl Dincesen submits:

In relation to PC personal income the residential real estate bubble reached its peak in 2005 and, as shown on the following chart (click to enlarge), prices continue to decline after an extraordinary run-up in the Northeast and West Regions. For the rest of the Country, except Florida, current home prices appear sustainable at least by historical standards.


Complete Story »]]> Carl Dincesen Why Are Foreclosure Rates Much Higher in California, Arizona, Nevada and Florida? http://seekingalpha.com/article/117064-why-are-foreclosure-rates-much-higher-in-california-arizona-nevada-and-florida?source=feed 117064 U.S. Residential Foreclosures – Massive Dichotomy, Implications

On January 15, 2009, RealtyTrac reported that the number of U.S. residential housing units in foreclosure in 2008 increased 81% from 2007 and the overall foreclosure rate was1.84%.

]]> Wed, 28 Jan 2009 12:24:36 -0500 Carl Dincesen Carl Dincesen submits:

U.S. Residential Foreclosures – Massive Dichotomy, Implications

On January 15, 2009, RealtyTrac reported that the number of U.S. residential housing units in foreclosure in 2008 increased 81% from 2007 and the overall foreclosure rate was1.84%.


Complete Story »]]> Carl Dincesen U.S. Unemployment: Is Media Hype Missing the Point? http://seekingalpha.com/article/111888-u-s-unemployment-is-media-hype-missing-the-point?source=feed 111888 Ten million unemployed, the worst in 26 years is heard over and over in the media. Well yes, the current number of unemployed people has not been this high since 1982 when it reached 10.7 million and the unemployment rate was 9.7%, the highest since 1970 as shown on the following chart:

]]> Mon, 22 Dec 2008 10:09:46 -0500 Carl Dincesen Carl Dincesen submits:

Ten million unemployed, the worst in 26 years is heard over and over in the media. Well yes, the current number of unemployed people has not been this high since 1982 when it reached 10.7 million and the unemployment rate was 9.7%, the highest since 1970 as shown on the following chart:


Complete Story »]]> SPY Carl Dincesen Is the S&P 500 at Just the Right Level? http://seekingalpha.com/article/100453-is-the-s-p-500-at-just-the-right-level?source=feed 100453 The first chart shows the S&P 500 Index Value from 1976. "Wild ride" is not an overstatement. A casual observer could take the 1984 to1995 trend pattern out to the present, as shown, and conclude that the current Index Value is about right.

(Click to enlarge)

]]> Fri, 17 Oct 2008 08:43:51 -0400 Carl Dincesen Carl Dincesen submits:

The first chart shows the S&P 500 Index Value from 1976. "Wild ride" is not an overstatement. A casual observer could take the 1984 to1995 trend pattern out to the present, as shown, and conclude that the current Index Value is about right.

(Click to enlarge)


Complete Story »]]> SPY Carl Dincesen Playing Chicken Is a Dangerous Game http://seekingalpha.com/article/97294-playing-chicken-is-a-dangerous-game?source=feed 97294 Those expressing concern about the correctness or fairness of the prices to be paid are missing the point and might as well just oppose the Treasury and Federal Reserve Proposal. The institutions who will sell are already under-capitalized at current marks. Prices have to approximate the marks to date, whether those marks are too low, about right or too high is beside the point. The mark downs have to end; isn’t that the whole point? Current capital inadequacy is bad enough but it is the fear of more write-downs that has seized the credit markets.

If it turns out the Government paid too much for the securities i.e. the current mark downs are proved with the passage of time, to be insufficient then that is the cost of the bailout. No one knows the true value of these securities which can only be determined with the passage of time.

]]> Thu, 25 Sep 2008 03:46:09 -0400 Carl Dincesen Carl Dincesen submits:

Those expressing concern about the correctness or fairness of the prices to be paid are missing the point and might as well just oppose the Treasury and Federal Reserve Proposal. The institutions who will sell are already under-capitalized at current marks. Prices have to approximate the marks to date, whether those marks are too low, about right or too high is beside the point. The mark downs have to end; isn’t that the whole point? Current capital inadequacy is bad enough but it is the fear of more write-downs that has seized the credit markets.

If it turns out the Government paid too much for the securities i.e. the current mark downs are proved with the passage of time, to be insufficient then that is the cost of the bailout. No one knows the true value of these securities which can only be determined with the passage of time.


Complete Story »]]> Carl Dincesen MBIA Reinsures $184 Billion from FGIC’s Public Finance Book http://seekingalpha.com/article/93056-mbia-reinsures-184-billion-from-fgics-public-finance-book?source=feed 93056 MBIA (MBI) announced Wednesday that it has reached an agreement with Muni Bond insurer Financial Guaranty Insurance Company [FGIC] to reinsure $184 billion principal amount of public finance bonds insured by FGIC. The agreement is subject to the approval of the NY State Insurance Department which is expected since MBIA said in its press release: “We appreciate the encouragement and support provided by the New York State Insurance Department and Superintendent Eric Dinallo in connection with this transaction.”

This is the “end of days” for FGIC’s credit default swap counterparties but good news for the holders of the bulk of FGIC insured municipal bonds. The reinsurance agreement is a “cut through” agreement meaning the insured bondholder can call on MBIA directly to make payment in the event of default on the insured bond. As a result, these bonds will be upgraded from “B-1” Moody’s and “B” S&P, FGIC’s current financial strength ratings, to A-2 Moody’s and AA S&P, MBIA’s current financial strength ratings. Bonds with a published current uninsured (on their own) rating of at least A-2 Moody’s or AA S&P will see no rating change as a result of the agreement.

]]> Thu, 28 Aug 2008 08:03:04 -0400 Carl Dincesen Carl Dincesen submits:

MBIA (MBI) announced Wednesday that it has reached an agreement with Muni Bond insurer Financial Guaranty Insurance Company [FGIC] to reinsure $184 billion principal amount of public finance bonds insured by FGIC. The agreement is subject to the approval of the NY State Insurance Department which is expected since MBIA said in its press release: “We appreciate the encouragement and support provided by the New York State Insurance Department and Superintendent Eric Dinallo in connection with this transaction.”

This is the “end of days” for FGIC’s credit default swap counterparties but good news for the holders of the bulk of FGIC insured municipal bonds. The reinsurance agreement is a “cut through” agreement meaning the insured bondholder can call on MBIA directly to make payment in the event of default on the insured bond. As a result, these bonds will be upgraded from “B-1” Moody’s and “B” S&P, FGIC’s current financial strength ratings, to A-2 Moody’s and AA S&P, MBIA’s current financial strength ratings. Bonds with a published current uninsured (on their own) rating of at least A-2 Moody’s or AA S&P will see no rating change as a result of the agreement.


Complete Story »]]> MBI Carl Dincesen Los Angeles - the Crybaby - Sues Bond Insurers http://seekingalpha.com/article/87022-los-angeles-the-crybaby-sues-bond-insurers?source=feed 87022 Let’s be clear: the City of Los Angeles, along with many other “sophisticated” municipal issuers, played a game with the yield curve, lost and is now suing bond insurers and investment bankers in two separate actions. The City claims that it was forced to buy bond insurance and as a result of bond insurer downgrades, the City had to pay millions of dollars more than “expected” in interest on its Auction Rate securities

The City chose to issue variable rate auction bonds instead of standard fixed rate bonds.

]]> Fri, 25 Jul 2008 06:21:55 -0400 Carl Dincesen Carl Dincesen submits:

Let’s be clear: the City of Los Angeles, along with many other “sophisticated” municipal issuers, played a game with the yield curve, lost and is now suing bond insurers and investment bankers in two separate actions. The City claims that it was forced to buy bond insurance and as a result of bond insurer downgrades, the City had to pay millions of dollars more than “expected” in interest on its Auction Rate securities

The City chose to issue variable rate auction bonds instead of standard fixed rate bonds.


Complete Story »]]> Carl Dincesen Ambac, MBIA: The Rating Shoes Drop http://seekingalpha.com/article/82413-ambac-mbia-the-rating-shoes-drop?source=feed 82413 Lack of confidence in the ability of bond insurers’ to maintain triple-A ratings has now given way to unwarranted concern about the solvency of these companies. The Regulators in New York for MBIA (MBI) and Wisconsin for Ambac (ABK) have repeatedly said they have no concern about the ability of Ambac and MBIA to pay current and future claims and the rating agencies agree, since their rating opinions now converge around double-A to single-A levels. 

State bond insurance regulations are formulated and enforced for the sole purpose of protecting the interest of policy holders i.e., the ability to pay claims. Rating agency rating opinion gradations at any point in time do not drive regulatory action. These parties are consonant only when both conclude the ability to pay claims is in doubt. In rating agency speak it means a non investment grade rating (double-B or lower). Regulators use one or more of several control interventions. Do you know or care about what the credit ratings are on your homeowners or auto insurance companies? 

]]> Tue, 24 Jun 2008 05:00:24 -0400 Carl Dincesen Carl Dincesen submits:

Lack of confidence in the ability of bond insurers’ to maintain triple-A ratings has now given way to unwarranted concern about the solvency of these companies. The Regulators in New York for MBIA (MBI) and Wisconsin for Ambac (ABK) have repeatedly said they have no concern about the ability of Ambac and MBIA to pay current and future claims and the rating agencies agree, since their rating opinions now converge around double-A to single-A levels. 

State bond insurance regulations are formulated and enforced for the sole purpose of protecting the interest of policy holders i.e., the ability to pay claims. Rating agency rating opinion gradations at any point in time do not drive regulatory action. These parties are consonant only when both conclude the ability to pay claims is in doubt. In rating agency speak it means a non investment grade rating (double-B or lower). Regulators use one or more of several control interventions. Do you know or care about what the credit ratings are on your homeowners or auto insurance companies? 


Complete Story »]]> ABK MBI Carl Dincesen U.S. Housing: The Big Picture by the Numbers http://seekingalpha.com/article/70241-u-s-housing-the-big-picture-by-the-numbers?source=feed 70241 There is no denying that all real estate is local and that over the long term, personal income ultimately drives the price of residential real estate. As shown on Chart 1, residential real estate price bubbles in 1989-90 and 2006 where periods when the growth of home price values in the Northeast and West have substantially exceeded the corresponding growth in personal income.

Chart 1 displays the difference between the cumulative percentage change in the median price of new single family homes sold and the change in per capita personal income since 1976 for each US Census Bureau Region. Using 1963 as the base year (not shown) the Chart shows the same obvious correlation of home values to personal income. Since both price and income are on an unadjusted, nominal basis, they are eminently comparable.

]]> Thu, 27 Mar 2008 14:58:21 -0400 Carl Dincesen Carl Dincesen submits:

There is no denying that all real estate is local and that over the long term, personal income ultimately drives the price of residential real estate. As shown on Chart 1, residential real estate price bubbles in 1989-90 and 2006 where periods when the growth of home price values in the Northeast and West have substantially exceeded the corresponding growth in personal income.

Chart 1 displays the difference between the cumulative percentage change in the median price of new single family homes sold and the change in per capita personal income since 1976 for each US Census Bureau Region. Using 1963 as the base year (not shown) the Chart shows the same obvious correlation of home values to personal income. Since both price and income are on an unadjusted, nominal basis, they are eminently comparable.


Complete Story »]]> IYR SPY XHB Carl Dincesen How Credible Are Moody's, S&P Monoline Ratings? http://seekingalpha.com/article/67830-how-credible-are-moody-s-s-p-monoline-ratings?source=feed 67830 First, it is important to note that the ratings are "claims paying" or "financial strength" ratings applicable to the bond insurance companies, not their holding companies which have always carried lower ratings.

Second, "claims paying" ratings are based on a depression scenario. Moody's (MCO) refers to this as a severe stress scenario and S&P refers to it as a simulated depression scenario. Moody's places severe stress losses for all risks insured at $13.7 billion for MBIA (MBI) and $12.1 billion for Ambac (ABK). What is not generally understood is that the rating agencies have calculated and reported stress/depression losses near double digit $ billions for several years.

]]> Mon, 10 Mar 2008 06:52:39 -0400 Carl Dincesen Carl Dincesen submits:

First, it is important to note that the ratings are "claims paying" or "financial strength" ratings applicable to the bond insurance companies, not their holding companies which have always carried lower ratings.

Second, "claims paying" ratings are based on a depression scenario. Moody's (MCO) refers to this as a severe stress scenario and S&P refers to it as a simulated depression scenario. Moody's places severe stress losses for all risks insured at $13.7 billion for MBIA (MBI) and $12.1 billion for Ambac (ABK). What is not generally understood is that the rating agencies have calculated and reported stress/depression losses near double digit $ billions for several years.


Complete Story »]]> ABK MBI MCO Carl Dincesen Credit Risk Management Failures: Is the Sky Falling? http://seekingalpha.com/article/67279-credit-risk-management-failures-is-the-sky-falling?source=feed 67279 After three modifications to their respective RMBS and CDO loss assumptions each agency has staked their positions as to worst case losses and probable losses. Moody's Investors Service (MCO), not surprisingly, assumes the highest losses in its rating methodology for bond insurers.

For MBIA (MBI), worst case loss on their entire book of risks (municipal and asset backed) is placed at $13.7 billion, probable loss at $4 billion, both in present value terms over the life of the risks (Rating Action 2/26/08). For Ambac (ABK), on the same basis, Moody's assumes $12.1 billion worst case loss and $4.1 billion probable loss (Research Announcement 2/29/08).

]]> Wed, 05 Mar 2008 09:28:02 -0500 Carl Dincesen Carl Dincesen submits:

After three modifications to their respective RMBS and CDO loss assumptions each agency has staked their positions as to worst case losses and probable losses. Moody's Investors Service (MCO), not surprisingly, assumes the highest losses in its rating methodology for bond insurers.

For MBIA (MBI), worst case loss on their entire book of risks (municipal and asset backed) is placed at $13.7 billion, probable loss at $4 billion, both in present value terms over the life of the risks (Rating Action 2/26/08). For Ambac (ABK), on the same basis, Moody's assumes $12.1 billion worst case loss and $4.1 billion probable loss (Research Announcement 2/29/08).


Complete Story »]]> ABK MBI MCO Carl Dincesen Ambac, MBIA: The Shorting Game is Over http://seekingalpha.com/article/66718-ambac-mbia-the-shorting-game-is-over?source=feed 66718 Some facts that "experts" miss and shorters should know: Ambac (ABK) and MBIA (MBI) insured bonds have never in their history traded equal to natural triple A bonds. They always traded at double A levels, in both the tax exempt and taxable markets. Ask any trader. The holding companies have never been rated triple A.

The stress case scenarios that the rating agencies use are in fact depression (1930s style) scenarios. Simple put, at any point in time, a triple A financial guaranty insurer must have minimum capital equal to 100% of depression losses at a 99.9% probability with an extra 20-30% capital cushion thrown in for good measure. No one who understands the business has ever suggested that the insurer would necessarily maintain a triple A rating during or after a depression.

]]> Sun, 02 Mar 2008 04:38:08 -0500 Carl Dincesen Carl Dincesen submits:

Some facts that "experts" miss and shorters should know: Ambac (ABK) and MBIA (MBI) insured bonds have never in their history traded equal to natural triple A bonds. They always traded at double A levels, in both the tax exempt and taxable markets. Ask any trader. The holding companies have never been rated triple A.

The stress case scenarios that the rating agencies use are in fact depression (1930s style) scenarios. Simple put, at any point in time, a triple A financial guaranty insurer must have minimum capital equal to 100% of depression losses at a 99.9% probability with an extra 20-30% capital cushion thrown in for good measure. No one who understands the business has ever suggested that the insurer would necessarily maintain a triple A rating during or after a depression.


Complete Story »]]> ABK MBI Carl Dincesen