Well the Dow Jones average dropped below 8000 yesterday. That is bad news enough but insurance stocks seem to be taking a worse than average beating. Tidbits from today:

• The Hartford dropped to $6 today – they were at $12 on Monday from $97.03 in Oct  – they have a market cap at 1.8 billion now

• Travelers is down to $35 on Monday it was $41.88 and on Oct 17 they were at $51.87

• C N A is at $9.49 – Monday at $12.77 – October $40.51

• AIG is at $1.66 today was at $2.08 on Monday was at $63.27 in October – the bailout package is $150 Billion and climbing

• XL is at $4.46 today – Monday they were at $6.14 – in October they were at $77.01 per share.

• Chubb is at $44.63 today – Monday at $49.60 – October 17 at $53.49 -

I will report back next week with hopefully better news. (though I don’t expect it to be much better)

OK. I realize this headline may not be an amazing attention grabber for many of you but the information is extremely useful to all of us that have workers’ comp insurance in Utah and want to save some money. This information was gleaned from Update – a magazine for policyholders of workers compensation fund:

On all policies written or renewed after June 1, 2008, WCF (Workers Compensation Fund of Utah) will apply new guidelines established by the Utah Insurance Department for overtime payroll allocation. Under the new rule, policyholders will see a decrease in the amount of premium paid on overtime pay.

Extra pay for overtime has previously been included in premium calculation. However, on all policies written or renewed after June 1, 2008, overtime pay will be excluded from payroll calculations.

Overtime

The new overtime guidelines describe overtime as any hours worked for which there is an increase in the rate of pay. Examples of overtime pay may include:

a. For work in any day, or in any week, in excess of the number of hours normally worked
b. For hours worked in excess of eight hours in any day or 40 hours in any week.
c. For work on Saturday, Sunday or holidays
d. In the case of a guaranteed wage agreement, overtime means only those hours worked in excess of the number specified in a set agreement.

Qualification

To qualify for the exclusion of extra pay for overtime, the policyholder’s books and records must document overtime pay separated by employee and classification.

The new $150 billion bailout package – the largest government loan ever to one company – restructures the deal to provide easier terms for AIG. The new deal announced Monday was roundly praised by AIG insiders, Hank Greenberg and now CEO Ed Liddy – as reported in the WSJ:

“This is a much better arrangement for us,” said Chief Executive Edward Liddy. He said the revised deal gave AIG “more breathing room” and “more time if we need it” to pursue its previously disclosed plan to sell off major units to help repay the government.

The dismal earnings underline the fact that the new bailout plan doesn’t completely eliminate the threats AIG faces. If financial conditions were to worsen, the company could be forced to take billions more in losses and have to go back to the government for additional financing.

AIG has had no success making any of those sales. Mr. Liddy said on a conference call that the company would announce “several key dispositions” by the end of the year. Competitors meanwhile are eagerly trying to snap up AIG’s customers and employees, putting added pressure on the company to complete the sales.

AIG’s shareholders were critical of the initial government deal and have pushed for improved terms for the insurer. “It’s a better outcome, overall,” said Maurice R. “Hank” Greenberg, the former AIG chief executive who heads a firm that is AIG’s largest shareholder and also has a substantial personal stake. “It’s progress.”

The deal takes some pressure off of AIG by dropping the interest rate on a central part of the government package — a $60 billion loan — from above 10% to closer to 6%. On the other hand, AIG also will have to pay 10% interest in exchange for a $40 billion infusion of capital from the Treasury Department, creating a significant new burden on the company.

The revised deal also creates two new entities, largely funded by up to $52.5 billion in government money, which will essentially take on the risk from some of AIG’s most toxic assets, including some of the credit derivatives.[click here to read the rest of the story]

Shares of The Hartford lost more than half their value last Thursday because of continued losses and a lack of investor confidence.

They received money recently from Allianz but have not convinced investors that they can weather the current market downturn without raising additional capital at shareholders’ expense.

According to the Wall Street Journal:

Hartford posted a $2.63 billion loss for the third quarter after the market closed Wednesday, hurt by losses on investments in the beleaguered financial services sector and by its variable annuities business, where minimum returns are guaranteed even if the underlying investments fall.
[hartford share price]

The share-price slump followed a contentious conference call Wednesday evening on which Hartford executives struggled to reassure analysts that the company had sufficient capital to hang on to their credit ratings. The drop wiped away more than $3 billion in market value and will make it more difficult for Hartford to tap equity markets for more capital should it become necessary.

Insurers have to hold a certain amount of extra capital to pay potential claims and keep regulators and rating agencies happy. When those cushions are thinned by losses on investments, insurers’ credit ratings can be cut, limiting their ability to do business.

The deep declines in equity markets, combined with much wider spreads in the credit market and increased volatility, makes it “extraordinarily difficult” to estimate how much of a capital cushion Hartford will have at the end of 2008, Greg McGreevey, the insurer’s new chief investment officer, said during the conference call.[click here to read the rest of the story]