Help me to understand HIG

D

dearinfinity

Now I know all of these insurance companies are mostly smoke and mirrors right now, but so long as the illusion is willing to perpetuate itself, I am willing to make money off of it.

What I don't understand, however, is HIG's Price/Book of .28, compared with their industry's average of 1.16.

Is this a mere discrepancy that will soon be corrected by the market? I've done my research on HIG, and just based on their website (http://ir.thehartford.com/overview.cfm) it would seem that they are in relatively good shape based on the fact that they have only 5% of their equities invested in mortgage loans. Their main source of income is life insurance.

What do you guys make of this? It's hard for me to say because the short interest has also increased by 30% this month over last...so I'm skeptical. I'm long in @ 8.00, though.
 

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Quote from dearinfinity:

Now I know all of these insurance companies are mostly smoke and mirrors right now, but so long as the illusion is willing to perpetuate itself, I am willing to make money off of it.

What I don't understand, however, is HIG's Price/Book of .28, compared with their industry's average of 1.16.

Is this a mere discrepancy that will soon be corrected by the market? I've done my research on HIG, and just based on their website (http://ir.thehartford.com/overview.cfm) it would seem that they are in relatively good shape based on the fact that they have only 5% of their equities invested in mortgage loans. Their main source of income is life insurance.

What do you guys make of this? It's hard for me to say because the short interest has also increased by 30% this month over last...so I'm skeptical. I'm long in @ 8.00, though.
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They are the largest in variable annuities tied to s&p. Kinda scary, makes them a proxy on mkt.

They are still waiting to hear on TARP like other insurers.

HIG just got downgraded to just 1 level above junk status.

Good news is regulators may blow out rating agencies influence on capital req. soon(http://www.elitetrader.com/vb/showthread.php?s=&threadid=159678). That would be BIG for all insurers. And I think its likely because I can't see Geithner opening up TARP to insurers. It would cost too much and the congress probably would balk.


Insurers hold HALF OF ALL CORPORATE BONDS so they are in a tight spot with the economy in the tank. There is nfw the government can let these co's slide into junk status.

Insurers are holding the bag on bank debt. Its a nasty situation that could lead to a death spiral of the financial system
 
Ahh, I see what you're saying. So essentially the MOODYS / S&P rating have been the impetus for this price/book value disparity. I guess I'll stick long in this stock with hopes of some more deregulation; I think if the stock becomes independent of these near junk status ratings it'd probably stabilize.
 
Quote from dearinfinity:

Ahh, I see what you're saying. So essentially the MOODYS / S&P rating have been the impetus for this price/book value disparity. I guess I'll stick long in this stock with hopes of some more deregulation; I think if the stock becomes independent of these near junk status ratings it'd probably stabilize.
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Exactly. If they get downgraded below investment grade they are forced to put up alot more capital.
 
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