Wednesday, October 24, 2012

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Wednesday, April 11, 2012

Reuters: Money: Spring is high season for travel scams

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Spring is high season for travel scams
Apr 11th 2012, 20:28

Shadows are cast by people who walk on a terrace overlooking the Eiffel Tower in Paris April 11, 2012. REUTERS/Kevin Coombs

Shadows are cast by people who walk on a terrace overlooking the Eiffel Tower in Paris April 11, 2012.

Credit: Reuters/Kevin Coombs

By Mitch Lipka

Wed Apr 11, 2012 4:28pm EDT

(Reuters) - When it comes to large migrations of people during the U.S. spring break and summer vacations, the travel scams can come from most any angle. College students and families are targeted. So are grandparents back home.

"There's a scam for every demographic," says John Breyault, vice president of the National Consumers League.

In Florida, one of the nation's traditional spring break destinations, consumer officials are used to getting a surge in complaints. "As you can imagine, most of the scams around spring break actually start long before the customer packs for the trip," says Sterling Ivey, spokesman for the Florida Department of Agriculture and Consumer Services. Then the problems continue when they get where they're going.

"We often see complaints during this time of year related to travel companies or sellers of travel who have been promoting destinations or vacation experiences that the consumer eventually find less appealing than advertised," he says.

More than 7,000 complaints were lodged with the Better Business Bureau against travel bureaus and agencies in 2011 - making that one of the top complaint categories.

Gearing up for the typical warm-weather surge in travel and travel-related scams, several attorneys general, along with Western Union and MoneyGram - two main conduits for wiring cash - are warning consumers about scams they could face.

One scam that comes up repeatedly takes advantage of when a grandchild - typically a young adult - is away from home. An astute crook will look for tip-offs on social networks when someone who fits the profile is traveling - a reminder that revealing personal information can be used for no-good, says Kim Garner, senior vice president of global security and investigations with MoneyGram. Crooks can also easily obtain personal information from student IDs and driver's licenses left on beach blankets or bars in vacation spots.

"I don't think (consumers) realize the amount of time that bad guys can devote to this," says Garner, a former Secret Service agent. "Really, any information, especially that young adults and teenagers provide, is useful to these guys. These guys are relentless."

In the "emergency scam" or "grandparent scam," the fraudster will reach out to the grandparents of the young person who is away and either pose as the grandchild, someone close to them or someone in a position of authority asking for money to be wired to post bail or get them out of some dire situation.

Another scam that crops up more often during times when a lot of people are traveling comes in the form of an email (from an account that has been hacked) from a friend or relative who tells a woeful tale of either being mugged or otherwise losing all their money while on vacation. The punch-line, of course, is a request to wire money.

Instead of sending the money, Garner says, determine for yourself the authenticity of these communications. "Pick up the phone and call. Don't trust the email," she says. "If they don't answer, get the number of a friend who should be with them and contact them."

Tools that can be put in place to avoid problems caused by a gap in communication includng planning when to touch base as well as providing alternate contact information, including hotel phone numbers and cell numbers of companions. Also, overseas travelers can register with the State Department's Smart Traveler Enrollment Program, which can help travelers to be reached in the event of an emergency back home.

(Editing by Beth Pinsker Gladstone)

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Reuters: Money: U.S. money market assets fall for six weeks: iMoneyNet

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U.S. money market assets fall for six weeks: iMoneyNet
Apr 11th 2012, 20:25

Traders including Jeff Silver (quik) keep an eye on the market in the S&P 500 pit at the Chicago Mercantile Exchange September 19, 2008.

Credit: Reuters/John Gress

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Reuters: Money: Stern Advice: Apple is bigger than my brain

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Stern Advice: Apple is bigger than my brain
Apr 11th 2012, 19:26

A man looks at his Apple iPad in front an Apple logo outside an Apple store in downtown Shanghai March 16, 2012. REUTERS/Aly Song

A man looks at his Apple iPad in front an Apple logo outside an Apple store in downtown Shanghai March 16, 2012.

Credit: Reuters/Aly Song

By Linda Stern

WASHINGTON | Wed Apr 11, 2012 3:26pm EDT

WASHINGTON (Reuters) - By various accounts, Apple Inc. is now bigger than Spain, Portugal and Greece (combined), or the entire retail sector of the U.S. economy, or 13 Warren Buffetts. What are we to think about that?

First, a disclosure. In my two-person household are three Apple laptops, two Apple desktops, two iPhones, one iPod, two healthy iTunes accounts, a fair amount of iPad lust, and 200 shares of Apple stock, purchased by my husband roughly two decades ago, and making up a large share of his retirement account.

He would have had 400 shares, but - as he frequently reminds me - I talked him into selling 100 shares (pre-split) back when it was selling for an eye-popping $65 a share, a price I thought was frighteningly high. It is selling today for about $628 a share.

So, (1) No sane person would take buy or sell advice from me; and (2) I have a vested interest in everyone plowing more and more into this company until it's worth more than every other company put together, or I can convince my husband to sell more. However, that isn't the point of this column.

Rather, it's to offer some perspective on this gorilla of Wall Street and the people who own it. And to warn individual investors that, even if they don't live in an iCult ashram like mine, they may own Apple stock.

That's because the most commonly held mutual funds have been plowing cash into Apple, and when a company gets that big, it can dominate even a diversified mutual fund portfolio.

And so, a few points to consider.

- You may already be an Apple shareholder, according to data compiled by Lipper, a Thomson Reuters company. For example: Do you own PowerShares QQQ Trust, Series 1? That's an exchange-traded fund that is sold as an inexpensive proxy for the whole of Nasdaq. As of March 31, Apple made up 17.5 percent of that fund; so, if you had $20,000 in that ETF, you were sitting on $3,500 of Apple stock. Of course, since then, Apple has gained about 3 percent, while most other stocks have fallen.

Other popular funds that hold a lot of Apple are Fidelity Contrafund (ironic, right?), with 9.46 percent of its March 31 portfolio in Apple; Vanguard Growth Index Fund, with 6.13 percent; and Fidelity Growth Company Fund, with 7.9 percent of the portfolio. And if you own the whole market, as proxied by the Vanguard Total Stock Market Index Fund? On March 31, $26.80 of every $100 you had in the fund was in Apple.

- Institutions dominate the stock, holding 69.1 percent of all Apple shares, according to Nasdaq data as of the end of March. Big pension funds, investment companies and more are all invested in Apple. More than half of the 1,848 institutions which claim to own Apple bought even more shares in the first quarter.

Apple pessimists say the fact that everybody seems to own the stock is a good argument for selling it. Lest we forget, in 1999, Microsoft reached a $619 billion market capitalization, and it's now worth a shade less than $255 billion. The once-popular bull market Wall Street adage holds, "Trees don't grow to the sky." At its 1999 peak, Microsoft was selling at $58.38 a share; a year later, its share price was $21.69 (and today, it's at about $30.36).

- Some people still think the company is reasonably priced. At 12.5 times estimated forward earnings, Apple is roughly in line with the NASDAQ and cheaper than the Dow Jones Industrials, which sports a forward PE of roughly 14.25 now. Indeed, Apple could keep on rising. At least two analysts - Piper Jaffray's Gene Munster and Brian White of Topeka Capital Markets - are predicting a $1,000 share price for the company.

- But naysayers have a point, too. They look at the death of Steve Jobs, the problematic labor conditions in China where most Apple equipment is made, the antitrust lawsuit filed against Apple and others by the Justice Department claiming collusion on e-book prices, increased competition from other smartphones, tablets and streaming video services, and say the company's easiest earnings days are behind it.

- Don't forget the dividend. Apple recently said it would pay shareholders $2.65 a share each quarter just to hang on to its stock. That's roughly 1.6 percent a year, and almost four times the average yield on 6-month certificates of deposit now, according to Bankrate.com figures. Of course, if all of those mutual funds, ETFs, pension funds and my husband decide they've had enough of Apple, you may wish you had your cash in the bank instead.

(The Stern Advice column appears weekly, and at additional times as warranted. Read more of Linda Stern's work at blogs.reuters.com/linda-stern)

(Editing by Bernadette Baum)

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Reuters: Money: Hedge fund Viking to rely more on junior managers

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Hedge fund Viking to rely more on junior managers
Apr 11th 2012, 20:17

By Svea Herbst-Bayliss

BOSTON | Wed Apr 11, 2012 4:17pm EDT

BOSTON (Reuters) - Hedge fund superstar Andreas Halvorsen is putting more trust in his junior portfolio managers.

Halvorsen, who runs the $16.7 billion Viking Global Investors, told clients on Wednesday that he recently upped the aggregate credit lines for a quartet of fund managers by 31 percent to $7.2 billion. The move comes less than a month after James Parsons, one of Viking's most senior managers, left the firm.

"Our next four most experienced portfolio managers, Paul Enright, Ning Jin, Hani Sabbagh and Scott Zinober, are at the center of idea generation," Halvorsen wrote, adding that the with more money to spend the group will now be able to "optimally size most of these ideas themselves." They will now directly control almost 60 percent of the Viking Global Equities fund.

He also raised the credit lines for the next three portfolio managers to $1.5 billion from $1 billion, or 6 percent of the flagship fund.

Reuters obtained a copy of the letter.

The moves will free up the firm's most experienced portfolio managers and the firm's co-chief information officers, Tom Purcell and Dan Sundheim, to focus on "our very best ideas and scale them appropriately," the letter said.

As for himself, Halvorsen, a former Norwegian Navy SEAL who got his start under industry titan Julian Robertson, said he would spend more time on allocating capital. "(I) expect this to continue as we balance a limited supply of capital with the demand from a highly accomplished team."

Viking, which has one of the $2 trillion hedge fund industry's best records, with an average annual return of 18.2 percent since its 1999 launch, bested most of the industry last year and got off to a solid start this year. In 2011 the Viking Global Equity fund gained 7.6 percent, when funds on average dropped 5 percent. It rose 5.4 percent in the first three months of 2012, roughly matching the nearly 5 percent gain of rivals.

Invesco Limited, Priceline.com, LyondellBasell Industries and Apple, long-time favorites of the hedge fund community, were among the firm's best performers, Halvorsen said in the letter.

However, Halvorsen, like some other managers, said he may have been too timid during the first quarter.

Short positions, or bets against stocks, in the information technology, financial and materials sectors all hurt the portfolio as the stock market rallied amid hopes that the worst of Europe's debt crisis was over and that U.S. economic growth would rebound.

"Our short positions partially offset the profits from our longs," he wrote, adding "we are disappointed by the lack of meaningful short winners.

Halvorsen also assured investors that his managers are as committed to delivering top returns as ever even after the firm has faced a number of high-profile departures in the last years. "We are confident that those we have asked to step up will do so and that new opportunities will come to other Vikings in the future," he wrote.

Before Parsons left in 2012, David Ott, who co-founded the firm with Halvorsen, departed in 2010 and Dris Upitis, who had also been a management committee member, resigned in early 2011. Several analysts have also left in the last year.

(Editing by Steve Orlofsky)

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Reuters: Money: Getting the most from your financial-aid package

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Getting the most from your financial-aid package
Apr 11th 2012, 17:48

By Kathleen Kingsbury

BOSTON | Wed Apr 11, 2012 1:48pm EDT

BOSTON (Reuters) - In recent weeks, Eva Chung's family watched with pride as acceptance letters arrived from all seven of the colleges to which she applied.

But some of that initial euphoria has worn off as financial aid award letters followed.

"Reality set in on how much this is going to cost," said Rosemarie Chung, Eva's mother. "We did anticipate more help. And, of course, her first choice so far was the least generous."

Getting into college can be tough. Getting a good aid package can be even tougher. Most families don't pay the full sticker price, and there are strategies for getting the most generous aid package possible.

"April is the time to ask for more, and do it as soon as possible," said Barry Sysler, a Pennsylvania-based college and financial aid consultant. "You lose leverage once you've accepted enrollment on May 1."

UNDERSTAND YOUR AWARD

About 82 percent of all first-year students receive some type of financial aid, according to the latest statistics from the U.S. Department of Education. But too often, parents assume that all elements in a financial aid award letter are free money, which rarely, if ever, is the case.

It is important to distinguish between a gift â€" such as scholarships or grants â€" and "self-help" that needs to be paid back, which includes loans and work-study.

Felicia Gopaul, a certified financial planner and college consultant, tells families that after they've maximized all the grant and scholarship aid, they should use federal loans because they offer competitive, fixed interest rates. These include Stafford loans for students and Parent Loan for Undergraduate Students (PLUS) loans for parents.

Also consider whether a Stafford loan is subsidized or unsubsidized. Interest does not accrue for subsidized loans while you are in school at least half-time or during future deferment periods.

The Free Application for Federal Student Aid's (FAFSA) calculation of Expected Family Contribution is the best estimate for how much aid you can anticipate, but it is not uncommon to be awarded less.

Also, the Consumer Financial Protection Bureau offers an interactive, online tool called Financial Aid Comparison Shopper. ( here )

ROOM FOR NEGOTIATION

The good news is that financial aid packages â€" whether they include scholarships, loans or work-study â€" aren't necessarily set in stone. Especially for families with special financial hardships, colleges are willing to listen and reconsider.

Nearly all institutions allow families to "appeal" financial aid decisions, some in formal processes but more often on an ad hoc basis. But first, families need to do some homework, and review the results of their FAFSA application, said Joe Bagnoli, dean of admission and financial aid at Grinnell College in Iowa.

"Errors are made, and identifying them can change your package," he said.

Whenever possible, set up a face-to-face meeting.

"Financial aid officers want to meet with you, that's their job," said Don Betterton, who worked in the admissions and financial aid office at Princeton University for 30 years. "Going in person can add that personal touch they need to make a decision in your favor."

Be sure you're talking to the right person. Need-based appeals are generally handled by the financial aid office, Betterton said, while the head of admissions often has discretion in his budget to increase merit aid for top candidates.

If a face-to-face meeting is impossible, write a letter rather than calling. Include awards or accomplishments a student has garnered since applying.

If you're making a need-based appeal based on unforeseen circumstances such as a job loss or sudden medical expenses, provide schools with documentation, including receipts. Consumer debt is almost never considered a hardship.

Asking for a specific amount can also be more persuasive.

"Make it a reasonable offer," Betterton said. "Two thousand dollars is a reasonable amount to ask for; $20,000 isn't."

And don't be afraid to show one school more generous packages you've received from others.

"If the student's second-choice school has offered a significantly greater amount of aid, explain this in the letter to add some leveraging power," said Scott Weingold, co-founder of the Ohio-based College Planning Network. "Just be sure not to come off too aggressive - no one likes to be threatened."

PLAN FOR FOUR YEARS, NOT ONE

Often when a child is off to school for the first time, parents forget to multiply their expected costs by four.

"You want to get reassurances from colleges that you can count on the same generosity all four years of attendance," said Ron Ramsdell, founder of Minneapolis-based College Aid Consulting Services.

Aida Mirante, director of financial aid at Salve Regina University in Newport, Rhode Island, said students need to know what is required of them to keep their aid, such as maintaining a minimum grade point average or working during school or summer.

In subsequent years, families should always notify institutions if financial circumstances change, such as a second or third child heading off to college.

Under worst-case scenarios, when the money simply isn't there, parents must be prepared to guide their child toward another school.

"There are many great options out there," Sysler said. "No college is worth financial ruin."

(The author is a Reuters contributor. The opinions expressed are her own.)

(Editing by Jilian Mincer, Chelsea Emery and John Wallace)

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Reuters: Money: Fed's George-must build appropriate bank safety net

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Fed's George-must build appropriate bank safety net
Apr 11th 2012, 16:16

NEW YORK | Wed Apr 11, 2012 12:16pm EDT

NEW YORK (Reuters) - One of the first steps that must be taken to build a stronger financial system in the wake of the crisis is to correct the incentives and "improper expansion" of federal safety net protections that allowed institutions to take excessive risks, a top Federal Reserve official said on Wednesday.

"With regard to correcting the incentives in banking, the most important challenge we face is in constructing an appropriate, but carefully limited, public safety net," Kansas City Federal Reserve President Esther George said in prepared remarks.

George said in recent years, bank supervision has take a more passive role and that a return to its traditional one of "exercising sound judgment and making informed decisions" is needed.

The expansion of the safety net for institutions during the financial crisis has led to a broad and pervasive range of moral hazard issues, George said.

"This link between large institutions and special public support has left us trapped in a pattern in which public authorities believe they must expand the safety net each time a crisis is brought on by excesses in risk-taking at large financial institutions," said George.

"This broadening of the safety net facilitates the next and even more severe crisis, as new moral hazard issues are introduced and major institutions are left with greater incentives for taking on risk," George said during a conference on financial instability in New York.

George said one of the first and most important steps is to eliminate so-called "too big to fail" policies that propped up banks during the crisis.

(Reporting by Leah Schnurr; Editing by Chizu Nomiyama)

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Reuters: Money: Another grim link between death and taxes: fatal car crashes

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Another grim link between death and taxes: fatal car crashes
Apr 11th 2012, 17:51

Firefighters and police officers stand near a pick-up truck that rolled on its side after the driver lost control along Interstate-17 in Yavapai County, Arizona, March 18, 2012.

Credit: Reuters/Joshua Lott

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Reuters: Money: Secondary stock offerings rise amid slow IPO market

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Secondary stock offerings rise amid slow IPO market
Apr 11th 2012, 14:48

By Olivia Oran

Wed Apr 11, 2012 10:48am EDT

(Reuters) - Secondary stock offerings by U.S. companies grabbed most of the equity capital markets activity in the first quarter, spurred by a sluggish market for IPOs and private equity investors who want to sell down their stakes in newly public companies.

U.S. follow-on offerings raised $41.9 billion in the first quarter, or 82 percent of equity capital markets activity from 62.3 percent a year earlier, according to Thomson Reuters data.

IPOs, in contrast, fell to 11.3 percent of overall activity in the first quarter from 20.6 percent.

"There's a lot of money on the sidelines and the number of IPOs coming to market is not up to the demand side of the curve," said David Menlow, president of research firm IPOFinancial. "People want to deploy their money and want to be involved in something â€" that's what is fueling these offerings."

More follow-on offerings signal that investors are comfortable enough with stock market volatility that they're willing to place bets on equities, provided the companies have some track record in the market, bankers say.

That suggests secondary offerings may continue to outpace IPOs in the weeks ahead.

Many of the offerings come from companies with significant stakes still held by private equity firms. Some of these firms were taken private in leveraged buyouts from 2004 to 2007 and may be too large to allow private equity backers to sell significant chunks at once.

Instead, firms are choosing to sell down small portions of their investment in a portfolio company's IPO to test the waters, and then return to the public markets soon after to decrease their stakes further if the stock price remains high.

"It's often hard to do an IPO with a large component of selling shareholders because potential investors don't want to see that," said Stephen Older, a New York-based corporate attorney with McDermott Will & Emery who specializes in public offerings. "So, later on private equity backers will sell down their stakes" in secondary offerings.

Notable follow-on offerings from private equity-backed companies came from quick-service restaurant franchisor Dunkin' Brands Group Inc, TV data company Nielsen Holdings N.V. and discount retailer Dollar General Corp.

Firms where private equity investors hold a substantial stake and are expected to pursue large follow-on offerings later this year include pipeline company Kinder Morgan Inc and hospital operator HCA Holdings Inc, say bankers.

The follow-on offerings also play an important role for private equity-backed companies: allowing legacy sponsors to cash out and be replaced by new public investors.

"There's going to be a bit of a marketing effort that goes on to get more investors paying attention to the stock and broadening that investor base," said Jay Ritter, a finance professor at the University of Florida who focuses on IPO market research.

Some companies have also pursued follow-on offerings just several months after their IPOs. This move is unusual for newly public companies, which typically must adhere to a 180 day lock-up period before insiders can sell shares.

Last week, cloud computing company Guidewire Software filed for a $225 million secondary offering only two months after its IPO.

During the first quarter, luxury retailer Michael Kors Holdings Ltd launched a more than $1 billion follow-on offer three months after its successful IPO. Social gaming company Zynga Inc also held a $515.6 million secondary offering less than four months after its public market debut.

(Reporting By Olivia Oran; Editing by Alwyn Scott; Editing by Michael Perry)

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Reuters: Money: Exclusive: Hedge fund Tyrus moves to Monaco: source

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Exclusive: Hedge fund Tyrus moves to Monaco: source
Apr 11th 2012, 15:13

LONDON | Wed Apr 11, 2012 10:55am EDT

LONDON (Reuters) - Tyrus Capital, one of London's best-known M&A hedge fund firms, has moved the bulk of its operations to Monaco, one of the first managers to relocate to the principality in response to forthcoming European Union regulation and UK tax rates.

The firm, which runs approximately $2.7 billion and which was founded by Tony Chedraoui in 2009, moved most of its staff to Monaco around the start of April, a source familiar with the matter told Reuters.

"I think it's driven by the EU regulation that's just coming through, which they see an onerous and unnecessary," the source said.

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Reuters: Money: IRS tax auditing lags for ultra-wealthy: report

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IRS tax auditing lags for ultra-wealthy: report
Apr 11th 2012, 14:50

The National Debt Clock, which displays the current United States gross national debt and each American family's share, hangs on a wall next to an office for the Internal Revenue Service near Times Square in New York May 16, 2011.

Credit: Reuters/Chip East

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Reuters: Money: Insurers rethink coverage after weather disaster payouts

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Insurers rethink coverage after weather disaster payouts
Apr 11th 2012, 12:46

John Shipman tosses a boot from the remains of his mother's home during the cleanup effort in Forney, Texas, April 4, 2012. REUTERS/Tim Sharp

John Shipman tosses a boot from the remains of his mother's home during the cleanup effort in Forney, Texas, April 4, 2012.

Credit: Reuters/Tim Sharp

By Matt Stroud

PITTSBURGH | Wed Apr 11, 2012 8:46am EDT

PITTSBURGH (Reuters) - As weather disasters strike with more frequency, homeowners first get hit with the destruction or total loss of property. Many are then hit with the unexpected loss of homeowners insurance policies as insurance companies re-evaluate their financial liabilities.

After a tornado ripped through Springfield, Massachusetts, last year, R. Paula Lazzari's home was badly damaged. The retired teacher found broken windows, missing siding and a damaged roof. Her insurer offered to fund repairs for one broken window and some of the siding. It took nine months -- and mediation services from an independent adjuster and the Massachusetts Division of Insurance -- to get her bills paid, according to the parties involved.

In this era of unpredictable weather patterns, Lazzari's case is not unique. Insurance companies are raising rates, cutting coverage, balking at some payouts and generally shifting more expense and liability to homeowners, according to reports from the industry and its critics.

"Insurance companies have significantly and methodically decreased their financial responsibility for weather catastrophes like hurricanes, tornados and floods in recent years," the Consumer Federation of America said in a statement after studying industry data.

The industry concedes that it is trying to avoid getting trounced by those same punishing weather patterns.

"Last year (2011) was an extraordinary year for natural disasters," said Michael Barry of the Insurance Information Institute (III), an industry trade group. "Insurers have taken a step back to assess whether or not they can absorb severe losses."

STATES LEFT IN THE COLD

Some insurance companies have pulled out of weather-challenged states -- meaning they will not write new homeowners policies and may not renew contracts with current policyholders.

In the wake of Hurricane Irene last summer, for example, Allstate informed some 45,000 North Carolina policyholders that it would not renew contracts that were not bundled with auto insurance.

After a spate of tornadoes last April caused $11 billion of property damage in Alabama, Alfa Mutual Group announced it would not renew 73,000 Alabama property insurance policies.

"The increased frequency and severity of storms over the last decade have highlighted the need for Alfa to review its overall property portfolio," Alfa President Jerry Newby said in a statement.

Florida, where insurers have been dropping coverage since Hurricane Andrew in 1992, is a good example of where this can lead. With an annual average of $1,460 per home, homeowners' premiums there are second-highest in the country (Texas, at $1,511 is first), according to the most recent data available, a 2010 report from the Insurance Information Institute.

"Florida's off the charts when it comes to pricing," said Mike McCartin, an Ashton, Maryland, independent insurance agent.

The state has stepped in to cover some 1.5 million properties via its publicly funded Citizens Property and Insurance Corporation as insurers drop more and more homes.

"You simply have major private insurers that are unwilling to write policies in Florida," said Robin Westcott, the state's insurance consumer advocate.

"It's just a tough market to be in," said Phil Supple, a spokesman for State Farm, which was once Florida's largest property insurer. It stopped writing new homeowners' policies there in 2007.

CHERRY-PICKING OF CUSTOMERS

Even though companies are not abandoning states at will, many opt to drop coverage on individual homes or customers that may seem prone to file claims. Insurers generally work on three-year contracts with homeowners, Barry said. At the end of those contracts, insurers can decide to raise rates or not renew.

When frozen pipes caused flooding in Phil Berger's Ijamsville, Maryland, home last year, he got a $6,000 check from Allstate for the damages -- and a policy review. Berger said an Allstate contractor told him to make $100,000 in repairs to his home at his expense or he would lose his coverage. He refused, and instead found a less expensive policy with a company that required only one smaller repair before covering the home.

"You just need to be on your toes at all times," Berger said.

Allstate declined to comment on Berger's case, but sent an email response to general questions about the company's nonrenewal policies.

"Allstate responsibly manages its risk by opting to not renew policies as warranted," company representative Kevin Smith wrote. "These actions are carefully considered, and help ensure Allstate's continued ability to provide a wide variety of insurance products to consumers at a competitive rate, while remaining financially strong in every community we serve."

PAYING MORE FOR LESS

Even homeowners that renew every year may find new limits buried in their policies. The Consumer Federation report said insurance companies have "sharply hollowed out the catastrophe coverage offered to consumers" by raising deductibles, capping replacement costs, and -- significant for folks in the path of tornadoes and hurricanes -- removing coverage for wind damage if another non-covered event (usually a flood) also occurs.

Industry groups say this misstates the facts.

"The …(CFA) could not be more wrong," said Dr. Robert P. Hartwig, president of the Insurance Information Institute. "Cities such as Tuscaloosa, Birmingham and others are being rebuilt today because of private insurance companies paying losses -- not from ‘hollowed out coverage' policies." Insurers have paid "literally billions" of dollars to "hundreds of thousands of claimants" affected by natural disasters, he said.

Hartwig also defended the practice by some insurance companies of leaving certain states or regions.

"If you tell an insurance company that they can't raise rates despite nine hurricanes in two years, obviously insurers are going to have to reduce exposure," he said.

But homeowners' insurance premiums have been rising sharply. They have increased an average 6.33 percent annually between 2002 and 2009, according to the National Association of Insurance Commissioners (NAIC). This year, insurers have asked for rate increases of 18 percent or more in 11 states, according to the Consumer Federation.

Robert Hunter, the author of the consumer report, has questioned whether limit-laden policies are worth the rising costs. But mortgage lenders require homeowners insurance, and anyone who has observed a devastating house fire or storm is unlikely to be willing to go without coverage.

COMPARISON SHOPPING

So how can consumers, who have little choice but to keep their coverage, do as Berger suggests and keep on their toes?

Hunter tells homeowners to shop carefully. "Go on your state's insurance policy website and look for houses similar to yours to compare prices," he said.

The NAIC provides a map to all state insurance offices on its website, www.naic.org/state_web_map.htm), and provides information about consumer insurance complaints.

Hunter also recommends checking comparison websites such as insuranceproviders.com (www.insuranceproviders.com) or insweb.com (www.insweb.com) for companies with favorable consumer reviews for in your state.

Another step is to get a professional agent to help, said Jim Donelon, Louisiana's insurance commissioner and president-elect of the NAIC.

"I recommend you talk to as many people as you can. Get an independent agent -- someone who's not attached to a specific company -- and get in touch with captive agents but know that captive agents can only represent their company."

The agents can check to make sure no important coverage -- like wind -- has been carved out of the policy.

Compare what the agents offer with what you can find online, said Randy Moses, assistant director with the South Dakota Insurance Department.

Even after getting coverage, consumers may find they need extra help. Lazzari needed both an independent broker and a public adjuster to resolve her case. Her insurer, Norfolk Dedham Insurance, not only initially refused to pay for most of her home repairs, but also planned to drop her as a customer, she said. Francis T. Hegarty Jr., president and CEO of Norfolk & Dedham Group, confirmed her version of events, but said it was not unusual for claims such as Lazzari's to take time to resolve.

Lazzari contacted an independent broker who worked with Norfolk Dedham to successfully complete her home repairs. But the broker said switching insurers would increase her payments 185 percent. That's when Lazzari contacted the Massachusetts Division of Insurance to find a public adjuster, who eventually persuaded Norfolk Dedham to keep her on its rolls.

"We were eventually able to work things out with Ms. Lazzari," said Francis T. Hegarty Jr., president and CEO of Norfolk & Dedham Group. "In these kinds of cases with independent adjusters, the claims tend to get strung out and tend to take longer to resolve than they would otherwise. But cases like case are pretty common and, all in all, we're pleased with how things turned out with her."

(This story corrected title of Randy Moses)

(Editing by Linda Stern and Maureen Bavdek)

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Reuters: Money: Funding options wane as debt crisis intensifies

Reuters: Money
Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com
Funding options wane as debt crisis intensifies
Apr 11th 2012, 13:11

By Kirsten Donovan

LONDON | Wed Apr 11, 2012 9:11am EDT

LONDON (Reuters) - The latest escalation of the euro zone debt crisis, with Spain now taking centre stage, is closing funding markets for banks again on concerns over exposure to the large amount of sovereign debt now being hoarded by some institutions.

Spanish and Italian bond yields have risen sharply over the last week as the effects of the European Central Bank's three-year liquidity operation wear off and worries about Spain's ability to meet its budget targets and fund itself grow.

That means banks that used the ECB's cash to buy bonds issued by their own governments may be looking at losses if they need to sell that paper to repay debt.

"If you parked the ECB cash in government bonds then you're losing money if you need to sell them to repay your own bondholders," said Rabobank rate strategist Lyn Graham-Taylor.

"That has to worry banks. Effectively sovereigns and banks in Spain and Italy have become ever more closely tied together through the (ECB's three-year tenders)."

Spanish banks' holdings of government bonds rose by almost 70 billion euros from the end of November to the end of February, while Italian banks' holdings have risen almost 55 billion euros, according to ECB data.

Fears over individual bank exposure to the euro zone debt crisis was behind a shut-down in funding markets in the second half of last year, and traders said the pick-up in unsecured interbank lending that had been seen since January had partially reversed. Lenders were again becoming pickier who they give cash to, they added.

Doors to longer-term funding markets have also quietly closed again, not only to banks in Spain and Italy but also to some corporate issuers in the two countries.

"We shouldn't put the weakness at the door of illiquidity or the Easter break, but more at Spain's door," said Societe Generale credit analyst Suki Mann.

"The speed at which the market has unwound, propagated by higher peripheral bond yields, is illustrative of how important it is that we contain Spain. To this end, decisive action somewhere needs to be taken."

On Tuesday, Bank of Spain Governor Miguel Angel Fernandez Ordonez said Spanish banks, already hurting from a property crash, could need more capital if the economy continues to deteriorate and they face a new wave of loan defaults.

Reflecting those concerns, the cost of insuring against a default by Spanish bank Santander - seen as one of the country's strongest - has risen around 25 basis points in April, according to 5-year credit default swap prices from Markit. For BBVA it is around 70 basis points higher.

Another risk as sovereign bond yields rise is that margins in the repurchase (repo) market, where banks use government bonds as collateral to access cash, may rise, making it a less effective way of funding.

Clearing House LCH.Clearnet cut its margin rate on Spanish bonds just three weeks ago, citing the fall in the yields seen since the beginning of the year, but it has not adjusted Italian margins since raising them in January.

"(A margin rise) would undeniably have an impact but probably but less so than similar hikes have done in the past," said ICAP strategist Chris Clark.

"The market will be more prepared for it this time around and also there seems to be less active positioning in repo markets these days."

Also, banks holding Spanish and Italian government bonds aren't as reliant on the repo market for funding since the ECB's massive three-year liquidity injections, Clark added.

With money market curves virtually flat, banks are tending to only enter into repo trades overnight as there is no premium for lending longer-term.

For example, the overnight rate for Spanish general collateral repo was last seen at 0.33 percent, according to ICAP, with the three-month rate at 0.35 percent.

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Reuters: Money: The Cleggite solution to rising UK utility prices: Kemp

Reuters: Money
Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com
The Cleggite solution to rising UK utility prices: Kemp
Apr 11th 2012, 12:35

By John Kemp

LONDON | Wed Apr 11, 2012 8:03am EDT

LONDON (Reuters) - Deputy Prime Minister Nick Clegg promised on Wednesday energy suppliers will have to inform customers at least once a year of the cheapest power and gas tariffs available in a bid to stimulate competition and push down prices.

It is another indication of the chaotic state of Britain's energy policy. Both government and energy suppliers are desperately trying to shift blame for rising utility bills, which have added to the financial strain on millions of households, and caused the government to miss its target of eliminating fuel poverty by a wide margin.

The result is an increasingly bizarre and contradictory set of interventions which do little to alleviate fuel poverty, improve efficiency or cut carbon emissions.

The government's climate strategy depends on guaranteeing returns for the big six energy suppliers to encourage investment, so ministers cannot do anything which would jeopardize revenues, including forcing big price cuts.

NUDGES AND SWITCHING

"Seven out of ten customers are on the wrong tariff for their needs, so are paying too much.

The deputy prime minister pointed out that Britain's big six energy suppliers offer over a confusing array of more than 120 tariffs, ensuring most customers are unaware of the best rate and stick with the devil they know. Inertia meant three-quarters of customers stayed with the same tariff in 2010.

So the government has agreed with the big six that customers will be contacted once a year (twice in the case of vulnerable households receiving subsidized tariffs) to notify them of the best tariff for their needs with the same supplier.

The government and energy markets regulator, Ofgem, have already pressed for suppliers to simplify their range of tariffs to improve comparability. In future, energy bills may be bar-coded to facilitate price comparisons using a smartphone and faster, simpler switching between suppliers.

Will any of this reduce the amount spent on heating, lighting and power by the average household? Not much if at all.

In 2009, the average household in England spent 1,340 pounds on gas and electricity, according to the comprehensive annual survey published by the Department of Energy and Climate Change ("Annual Report on Fuel Poverty Statistics 2011"). Since then prices have continued to rise. Most households will save far less than 8 percent on their combined fuel bills by switching.

However, Britain's current administration is attracted by the work on behavioral economics and "nudge" theories popularized by Cass Sunstein and Richard Thaler in the United States ("Nudge: Improving Decisions about Health, Wealth and Human Happiness" 2008).

In the energy sector, the government believes that complex bills and apathy have prevented large numbers of customers from switching suppliers, causing them to be significantly overcharged. Ofgem has diagnosed lack of competition among the big six as central to the problem in Britain's energy market.

More information prominently displayed could give the right nudge to boost switching, intensify competition, and drive down gas and power bills.

Except that it probably won't work. Soaring bills have little to do with the opaque arrangements in Britain's retail power and gas market.

COMPLEXITY AND RETURNS

Complaints about confusing products, lack of switching and customer dissatisfaction in energy are precisely the same as those which regulators and consumers have expressed for years about Britain's banks and mobile phone companies. Advocates of reform have moaned for years the average Briton is far more likely to get divorced than separate from their bank.

Complex tariff structures are no accident. Banks, phone companies and power and gas suppliers provide an essentially undifferentiated product. The most profitable form of competition limits discounts and special deals to new customers, while exploiting the inertia of the mass of existing customers by continuing charge them more (or in the case of banks offer lower rates of interest).

The result is the constant introduction of new products to secure marginal customers, while terms on old products become gradually less favorable. With their 120 tariffs, electricity and gas companies have only followed a well-worn path used by banks, phone companies, insurers and pension providers.

Government and regulators have not been able to tackle the apparent market "failure" in those other industries; there is no reason to expect they will be any more successful in power and gas.

Even if the government's strategy were successful, there is no reason to expect it would cut average bills. At the moment, inertia by the great mass of customers pays for discounts available to aggressive switchers. But if everyone becomes a switcher, the cross-subsidy would disappear.

WHERE ARE EXCESS PROFITS?

Prices could improve for everyone if greater switching enforced more competition and eliminated excess profits among the big six. But the government and Ofgem have failed to point out precisely how much those excess returns are or who is earning them.

If there are concerns about the way the market is functioning, it is not simply about excess profits in the retail market.

The major concerns are (1) the opportunities for integrated suppliers with generation/production, wholesale trading and retail distribution to exploit their market power to the detriment of customers via inappropriate transfer pricing; and (2) uniform investment strategies by the big six suppliers which have minimized risks for their investors but maximized fuel price risks for customers by concentrating excessively on gas-fired generation.

Encouraging more switching by households will not solve either of these problems.

CONTRADICTORY APPROACHES

Bills have been rising sharply because of a combination of rising natural gas prices in Europe (where gas prices remain strongly linked to oil) as well as government programs to incentivize more investment in green power and the associated transmission infrastructure.

In the case of rising energy costs, officials have privately welcomed increasing prices as providing an incentive for more conservation and efficiency (for example energy efficient lighting and better insulation) even as they publicly worried about the impact on household budgets. Rising prices are essential if the country is to meet its ambitious decarburization targets.

Bills have also risen because the government wants to encourage investment in alternatives like wind, solar, tidal and eventually nuclear, while building out the necessary transmission infrastructure. The response has been a mix of feed-in-tariffs, higher grid charges, and a minimum carbon price, all of which directly raise the cost of power and gas bills.

The industry insists higher prices and guaranteed returns are necessary to make all this possible. Because the government has opted to make customers pay for improvements through bills, rather than provide subsidies from the taxpayer, they show up directly in higher household prices.

The costs may or may not be worth it. The government insists prices would otherwise rise even more because of rising global energy prices, though the shale gas revolution may challenge that assumption.

What is certain is that prices are primarily rising because of a private consensus between the big six and the government, while each side publicly blames the other to deflect public anger, but not too much.

The result is a strange sort of kabuki theatre. Ministers fulminate (quietly) against firms for overcharging, but promise only half-hearted remedies which are not expected to cut revenues or bring costs down, while the companies point to all the extra costs the government is making them shoulder and threaten to provide detailed bill breakdowns that show just how much all those extra green measures are contributing to prices.

The deputy prime minister's initiative is nice, but the average customer should not expect to see any significant bill reduction, and it will be swamped by all the other initiatives that will push bills higher in the next few years.

(John Kemp is a Reuters market analyst. The views expressed are his own)

(Editing by Keiron Henderson)

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