Looks like everyone is in a tight cash position. As noted earlier in this blog, exactly 3 weeks ago Hartford got a $2.5B investment from Allianz to shore up its balance sheet.

Yesterday CNA announced a $1.25B investment from their biggest shareholder Loews, a conglomerate run by the Tisch family. They lost $331 million in Q3 due mainly to investment losses. Also noted in a CNA press release dated Oct 27, was the early succession of Tom Motamed, former COO of Chubb, as CNA’s CEO. Investment losses are materially affecting the balance sheets of many of our insurers. We will keep a close watch on further developments with other carriers. CNA has suspended its quarterly common stock dividend. The press release reads as followsSince the press release yesterday I have received an email from CNA that provides a more complete explanation than the brief press release. The letter in its entirety follows:

October 28, 2008 To CNA’s Agents & Brokers: Against a backdrop of difficult financial markets and sluggish economic conditions, I would like to take a moment to thank you for your business and to reassure you of CNA’s financial strength and staying power.  Yesterday, we announced our third quarter financial results, including a number of items I would like to bring to your attention. First, we are supplementing our capital base by $1.25 billion through the sale of preferred stock to the Loews Corporation, our majority shareholder. This action is part of a proactive effort to deal with the impact of the current financial market turmoil on our investment portfolio. It is also designed to get ahead of future uncertainty and to position CNA for market opportunities that may emerge. With an even stronger capital base, CNA is well positioned to thrive going forward.   I am pleased to report that A.M. Best has affirmed our property & casualty “A” rating with a stable rating outlook. Moody’s has also affirmed our P&C rating of “A3” with a stable rating outlook. We expect to hear from the other rating agencies in the near future.  With respect to our financial results, our focus on catastrophe exposure management and our strong balance sheet enabled us to weather a very challenging 3rd quarter. The $331 million loss was driven by investment and hurricane-related losses. Still, I remain very positive about the underlying performance of our core Property & Casualty Operations, as measured by a 91.3% combined ratio before catastrophes. The business fundamentals of CNA are very sound. We remain committed to serving your customers, and look forward to growing profitably with you. One other item of note relates to our leadership succession plan. Back in May, we announced that I would be retiring in June 2009, and would be succeeded by Tom Motamed, formerly chief operating officer at Chubb. Tom was unable to join CNA sooner due to his non-compete and non-solicitation covenants with Chubb, and I agreed to stay on even though I had intended to retire when my contract with CNA expired at the end of this year. Since then, CNA has been in touch with Tom and Chubb, and we have reached an agreement for Tom to join CNA on January 1st as chairman and chief executive officer. Tom is an extraordinary individual and very well known throughout the industry. I look forward to working with him through the transition.   Overall, in this complex, challenging time, I would like to assure you that with respect to our capital base, our ongoing business and our leadership talent, we continue to take the steps that make CNA a stable, competitive and financially strong market for your business. Again, thank you for your business. Sincerely,   Stephen W. Lilienthal

Chase Jarvis is a hero of mine from my avocation of photography. I read his blog from time to time to see what kinds of things he is working on. He is always at full tilt going a million miles an hour. Today, he turned me on to a great piece written by a Court Crandall of the Los Angeles ad agency, Ground Zero, that talks about “making it” or being successful at anything you choose to do in life. Here’s an excerpt:

…[Noah]Clark interviewed to be my assistant a couple weeks before he was scheduled to graduate from the University of Southern California. Unlike the other finalist for the job, an attractive woman the rest of the creative department was imploring me to hire, Noah was more “boy band”: spiked hair, fresh face, jeans that were more fancy than a guy needs to own. But there was something about him that reminded me of myself. And it wasn’t the hair. He was just so damn eager to be in the business. There was no pretense, no attitude or entitlement. All he wanted to do was work hard, learn and help.

So I hired him, spelling out very clearly that the chances of his growing into an art director position with us were similar to the word at the end of our agency name: “Zero.” He nodded along and said he understood. Then he set about completing every task asked of him to the highest standard possible. Between doing all the so-called “grunt” work, Noah grabbed every creative brief he found lying around the office and looked for ways to help out with layouts, taglines, new business presentations, etcetera. He never asked to be promoted. He never bitched about his day-to-day responsibilities or acted like anything was beneath him. Which is why when a junior art director position opened, I decided it was time to do what a guy named Peter Seronick did for me years before: Give him a chance. So I gave the kid who was Ground Zero the opportunity to join our creative department over all the guys and girls who simply wanted to work for Ground Zero. [Click the 'continue reading' link below...]

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In the four years that followed, Noah turned into an award-winning art director who did the kind of work students at VCU and Art Center now point to and say, “Someday.” But that wasn’t what made him special. The longer you do this job, the more you find that doing good work is the price of entry and it’s all the other stuff that separates the folks you really like from the ones you can’t live without (my emphasis, cj).

In 15 years of owning Ground Zero, there haven’t been many folks who regularly beat me to the office in the morning. Noah was one of them. It should also be noted that he was often the last to leave at night, if he left. I don’t say this to glamorize long hours or a sweatshop mentality, but to point out that he typically wasn’t burning the midnight oil or the pre-dawn oil to better his portfolio, but to make a presentation look a little better, work on the agency new business materials or polish an ad that was still a little too rough around the edges for his liking. This kind of dedication earned him the moniker “The Cleaner” from Laura Eastman, our head of account services. Like Harvey Keitel in Pulp Fiction, Noah was the guy who fixed things, no matter how screwed up they might have been when someone dumped them in his lap. When another art director left on vacation, Noah picked up the slack. When another team dropped the meat in the dirt, he picked up the pieces…

If you’ve gotten this far, then you either have character, want character, or you are one. As such, I strongly recommend you read the full piece here, and get some insight into becoming–or surrounding yourself–with “Players of Character”. I feel quite fortunate to work with several people that have such character. . .

Thanks Chase, via Adweek.

AIG head exec, Edward Liddy, has vowed to not let the crown jewel go to the auction block. Commercial Insurance is not up for sale. According to BusinessWeek:

But the $52 billion business may be losing its luster. Customers are nervous about AIG’s future, and competitors are rushing to capitalize on AIG’s battered reputation amid an $85 billion federal bailout following massive subprime losses, and an additional infusion of $38 billion from the Federal Reserve Bank of New York to cover the company’s other obligations. Industry headhunters say competitors are courting top AIG underwriters, who play a critical role in the relationship-driven industry.

The battle has already morphed into a price war. Insurance brokers whose clients’ policies came up for renewal on Oct. 1 say AIG slashed premium rates by as much as 50% on key accounts, though the company says rates have not changed materially overall. Rivals are offering discounts of up to 20% to woo people away. Within the industry, AIG’s air of desperation is palpable. “Competitors smell blood,” says Cliff Gallant, an analyst with Keefe, Bruyette & Woods (KBW), “and they are trying to steal that business as quickly as they can.” For full article click HERE

With the IPO market bleak and venture capital scarce, innovative new companies are running low on cash.

I have subscribed to BusinessWeek for a couple of decades now and I have always regarded their analysis quite highly. (I must admit that my wife is a much more avid reader of it than I – reading it cover-to-cover every week) I prefer the Wall Street Journal for daily news but read a couple of leading BW articles each week (usually at the behest of my wife). This week’s BW has a great article on Startup funding and the problems generated from the dearth of IPOs this year:

Exit Options Dry Up

It’s a high-stakes gamble that’s being played out at thousands of startups across the country. The crop of innovative companies that venture investors helped build in recent years now finds that they can’t go public or even sell out in an acquisition. In the third quarter, only one company backed by venture capitalists went public, and the value of all mergers and acquisitions fell 65%, to $4.4 billion, from the year-earlier quarter, according to Dow Jones VentureSource (NWS). As exit options dry up, the fear is that a capital crisis could undermine American innovation.

In recent weeks, a number of prominent venture firms have begun advising their portfolio companies to cut expenses and lay off staff. Sequoia Capital, the Silicon Valley firm that funded Apple (AAPL) and Google (GOOG), gave its current crop of startups a bracing presentation that included one slide with the words “Death Spiral” and a skull-and-crossbones to signal the fate that awaited companies that didn’t take quick action.

The Sequoia Capital slide deck was posted on Venture Beat and can be seen below courtesy of VB and slideshare.net :

Adam Grosser, general partner with Silicon Valley’s Foundation Capital, sent an e-mail to his companies stressing the importance of cutting back. “I think we all need to review staffing levels—and make sure that every hire is absolutely crucial, or to see if there are opportunities for reductions,” he wrote.

Some venture-backed companies are starting to close their doors. Recently the music site Social.FM and travel planner TripHub have shut their Web sites. “In the next six months you’ll see a lot of companies go down,” says Ted Wang, a lawyer at Silicon Valley’s Fenwick & West who works with emerging companies and venture firms.

Some startups are battening down the hatches. Gigya, an Internet startup based in Palo Alto, Calif., just scratched plans to open an office in Europe. It also raised $11 million in September on top of the $9.5 million it pulled in six months earlier. “We have air for three years now,” says Rooly Eliezerov, co-founder and president of Gigya. “Nobody will be looking around for another job.” . . . click here to read more