In light of the recent financial turmoil Farmers Insurance remains in a strong financial position, is profitable and is significantly outgrowing the industry. How are our competitors doing? Here are financial news clips from the October 31, 2008 issue of the New York Times:
New York Times 10-31-08:
Insurance companies were among the day’s biggest losers as shares of the Hartford Financial Group lost more than half their value, closing at $9.62, after the company posted a painful third-quarter loss. The company struggled to reassure investors, a reminder of the troubles that have led several large insurers to open talks with the Treasury Department about investments from the federal bailout package.
An executive at the Hartford said the company was open to selling a stake to the Treasury in exchange for capital. The declines in the company’s stock came just weeks after a German insurance company took a $2.5 billion stake in the Hartford.
American International Group…disclosed Thursday afternoon [10-30-08] that it was borrowing up to $20.9 billion from the Fed’s program…
In a filing with the Securities and Exchange Commission, A.I.G. said four of its affiliates had exchanged commercial paper for cash from the Federal Reserve Bank of New York. It said in the filing that it would use the proceeds to refinance its outstanding commercial paper, as well as pay down its initial credit line of $85 billion.
The Fed said A.I.G. reduced its debt under the two existing credit lines to $83.5 billion, from $90.3 billion a week ago, by using cash from the commercial paper program, Bloomberg News reports. With the latest loans of up to $20.9 billion from the Fed, the insurer’s borrowing now totals as much as $104.4 billion.
An A.I.G. spokesman, Nicholas Ashooh, told Bloomberg that the terms of the commercial paper program were better than those for the original $85 billion credit line, which has a higher interest rate.
“They’re paying off a Fed loan with another kind of government subsidy – it’s like using one credit card to pay off another credit card,” Robert Haines, an analyst at the research firm CreditSights, told Bloomberg. “If they make progress paying off debts over time, I don’t think it’ll be viewed as necessarily a bad thing…”
This enormous need for cash has raised questions about how a company claiming to be solvent in September could have developed such a big hole by October. Some analysts say that at least part of the shortfall must have been there all along, hidden by irregular accounting.