Friday, October 31, 2008

Caught In The Act At CNBC

Shanker recommended XL at 79.93, ACGL at 71.62, IPCR at 29.83

XL has been a catastrophic call, now trading in single digits.  But the others are even.

Posted by Reggie Abaca, at 1:41 PM

Friday, October 31, 2008

10/31/08

Shares of Hartford have plummeted 60 percent so far during the week, with much of that decline coming Thursday, the first trading day after the company posted a third-quarter loss of $2.6 billion. Hartford shares closed Thursday at $9.62.

Investors seem to be worried about the company's capital cushion amid the ongoing credit crisis. Citi analyst Joshua Shanker said in a research note that several scenarios could play out to help Hartford boost its capital adequacy, including a potential capital raise or outright sale of the firm.

Shanker said there the five scenarios that Hartford is likely facing are selling at a premium; selling at a discount; raising equity capital; a broad rally in the stock market helping push Hartford higher; and a collapse of the company leading to run-off -- a scenario where an insurer no longer books business and only generates revenue on outstanding premiums.

There is about a 50 percent chance Hartford will be sold, Shanker wrote in the note, adding it is equally as likely it would be at a premium to current book value or at a discount.

There is about a 20 percent chance of a capital raise, Shanker said, noting that raising $2 billion at about $7.50 per share would create a strong enough capital cushion to protect the insurer during the current downturn. Capital raises have been difficult for financial firms in recent months amid the ongoing credit crisis that has seen Lehman Brothers Holdings Inc. file for bankruptcy protection and insurer American International Group Inc. receive an $85 billion loan from the government to stay in business.

A run-off scenario is the least likely possibility, Shanker added.

Taking a weighted average of those scenarios, Shanker said the price target would be about $19. Based on a 12-month time horizon, Shanker set his official price target at $21, down from a previous estimate of $38.

Shanker reduced his 2008 earnings estimate to $4.10 per share from $4.20 per share and his 2009 estimate to $4.35 per share from $4.75 per share.

Analysts poled by Thomson Reuters, on average, forecast earnings of $5.17 per share for 2008 and $7.86 per share for 2009.

Posted by Reggie Abaca, at 1:28 PM