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October 27, 2008
Loews Insures CNA
Lisa LaMotta, Forbes
Loews stock was hit by a terrible quarter on Monday after its insurance subsidiary CNA reported a loss, sending shares of both companies down.
Loews injected capital into the insurer, apparently not content to wait and hope the federal government might include it in the ever-widening bailout of the financial industry.
Shares of Loews fell 12.4%, or $3.88, to $27.39, in afternoon trading on Monday, while CNA Financial lost a whopping 23.8%, or $4.21, to $13.45.
CNA swung to a loss of $331.0 million in the third quarter, impacting the parent company's third-quarter results. Loews, which is owned by thr Tisch family of New York, had a third-quarter loss of $137.0 million, or 31 cents a share, down 66.5% from a profit of $409.0 million, or 77 cents a share, in the year-ago period. Revenues fell 16.0% to $2.97 billion.
The dismal credit and housing market over the past year has adversely affected CNA's income by $423.0 million of investment losses, largely from holdings in mortgage giants Fannie Mae and Freddie Mac, as well as catastrophic losses due to a horrific hurricane season. About $63.0 million of the investment portfolio losses were tied to Icelandic banks. The company has posted more than $700.0 million in losses over the last two years.
As a result, Loews, which owns 90.0% of CNA, plans to inject $1.25 billion in capital into the insurance subsidiary. The capital injection will be in the form of a new series of non-voting cumulative senior preferred stock from CNA. The insurer will pay a 10.0% dividend on the preferred shares to Loews. CNA will not pay a dividend to common stock holders as long as the new preferred shares are outstanding.
Several of Loews' other subsidiaries, including oil and gas companies Diamond Offshore Drilling and Boardwalk Pipeline Partners, did well, but that only partially offset the dismal results at CNA.
August 4, 2006
Loyola University New Orleans
sues CNA over Katrina
Chicago News Net
Loyola University New Orleans has filed a proposed class-action suit against its main property insurer over what it says are more than $20 million in unpaid Hurricane Katrina losses.
Loyola, the latest of several New Orleans educational institutions to go to court over hurricane damages, filed the suit in U.S. District Court in New Orleans on Wednesday against Continental Casualty Co., a unit of Chicago-based CNA Financial Corp.
Katrina caused extensive damage to Loyola’s campus and the "vast majority" of nearby residences that provided student housing, according to the complaint....
Ernst & Young L.L.P., which Loyola hired to document its losses, put the university’s property damage at more than $6 million and its business interruption losses at more than $22.5 million, according to the lawsuit.
July 22, 2005
Court Rejects Arguments of CNA Financial Corp. and Orders that Fraud, ERISA and Breach of Contract Lawsuit go Forward
CHICAGO, PRNewswire -- In an order issued today, federal Judge Blanche M. Manning of the United States District Court for the Northern District of Illinois rejected the arguments of CNA Financial Corp. and the CNA Severance Pay Plan and ordered that a lawsuit by former employees against them go forward.
The lawsuit, filed by 90 former CNA sales representatives, alleges that CNA secretly cut them out of the CNA Severance Pay Plan and concealed this fact until four days before they were laid off. Judge Manning ruled that the employees could proceed with their claim that CNA violated ERISA, breached its contract with the sales representatives and committed fraud.
The entire opinion from Rosenberg v. CNA Financial Corp., 04-8219 (N.D. Ill. December 21, 2004), can be found at:
March 1, 2005
SEC, Spitzer Probe CNA On Non-Traditional Products
National Underwriter, Online News Service
CNA Financial disclosed yesterday that it has joined other insurers under the scrutiny of regulators investigating non-traditional finite insurance products.
The Chicago-headquartered company disclosed in its 10-K filing with the Securities and Exchange Commission that it has received subpoenas from the SEC and New York attorney general for material concerning "finite insurance products purchased and sold by the company."
The ongoing examination of finite insurance products follows previous disclosures that they have been used as a device by some companies to distort financial statements. The inquiry appears to be growing in scope. Yesterday, RenaissanceRe Holdings Ltd. in Pembroke, Bermuda, said it was subpoenaed by the SEC regarding non-traditional insurance products.
Additionally, CNA said it has been subpoenaed by the New York State attorney general concerning attorney-malpractice insurance.
The company also noted that previously it has received subpoenas or interrogatories from regulators in California, Connecticut, Delaware, Florida, Hawaii, Illinois, Minnesota, New Jersey, New York, North Carolina, Pennsylvania and West Virginia concerning industrywide investigations into practices including contingent-compensation arrangements, fictitious quotes and tying arrangements.
November 1, 2004
Spitzer's controversial insurance lawsuit
Why claims he is overreaching are wrong
By Anthony J. Sebok, Special to CNN.com
(FINDLAW) -- After taking on the mutual fund industry, New York Attorney General Eliot Spitzer is now setting his sights on the insurance industry. Two weeks ago, at a news conference, he announced he had found wide-spread wrongdoing.
Since then, the stocks of various insurance brokers and companies have dropped. The major CEO of one insurance broker has resigned. The Wall Street Journal has denounced Spitzer on its editorial pages, alleging that he's overreaching, and turning his office into a regulatory agency.
In this column, I will examine Spitzer's civil suit. I will also consider the claim that Spitzer - rather than doing his job, and enforcing the law -- is actually, in effect, trying to write new laws without consulting the legislature or the voters.
I will argue that this claim is in error: In fact, Spitzer is doing his job. Moreover, if he is overstepping the limits of his office, it is in part because the insurance commissioners of New York and other states are not doing their jobs.
Suit against broker Marsh & McLennan
Spitzer's complaint against the insurance broker Marsh & McLennan alleged statutory claims for fraud, securities fraud, and antitrust violations, and common law claims for fraud and unjust enrichment.
Companies hire insurance brokers to help them choose insurance companies and particular policies. Historically, the broker's commission would be based on a percentage of the total value of the policy. It would be paid by the chosen insurance company, but the company doubtless passed the cost on to the client company.
But March & McLennan used a different (and quite popular) commission system that is at the heart of Spitzer's complaint. I will call it "contingent commissions."...
Spitzer: Disclosure is misleading
Persuaded by the insurance industry's argument, insurance commissioners have held that contingent commissions are permissible as long as the broker discloses their existence to the client, and as long as the client has access multiple bids for similar products.
But Spitzer's suit alleges that the insurance brokers and companies have found a way to get around both these protections, thus ripping off the companies that buy insurance.
First, Spitzer alleges, disclosure is less than complete -- or is misleading. For instance, Marsh is alleged to have concealed its contingent commissions under the bland-sounding label "Market Service Agreement" ("MSA") -- when, Spitzer alleges, no separate "service" was actually at issue, and the payment was just a reward for giving a particular insurer business.
Spitzer: Collusion undermines competition
Second, Spitzer contends, the reality is that clients are not offered genuine price competition. Theoretically, this should happen. But in reality, he alleges, it does not.
In theory, an insurance-buying client is guaranteed the lowest price for insurance as long as its broker faithfully provided a complete set of competing bids. Moreover, in theory, even if the broker provided an incomplete list, the companies that were left off the list could alert the client to their lower prices....
But in reality, Spitzer says it's not so simple or efficient. Spitzer alleges that brokers like Marsh undermined fair competition among bidders by allegedly arranging for the major insurers to fake their bids.
Because of such arrangements, Spitzer contends, each time an insurance-buying client received a set of competitive bids, the insurer that Marsh wanted the client to pick always had the "lowest" bid. Thus, the company - thinking it was exercising free choice - chose the lowest bid, unaware that in effect, it wasn't the chooser; Marsh was.
The advantage of cartelization
On Spitzer's theory, why might insurers like AIG, ACE, or Zurich--huge, powerful companies--have allowed this to happen? Why wouldn't one of them blow the whistle on the fake bids, and demand to submit genuine, lower bids and win even when Marsh didn't pick them?...
The answer Spitzer can give is simple. All the big insurers had an interest in creating a system where the brokers -- and not the market -- decided which company the client would pick. That is, they preferred cartelization to competition. And the brokers were more than happy to set up a system to manage the cartel -- for a price.
The harm that was caused if Spitzer's claims prove true
Some press accounts have asked: Even if Spitzer's right, what's the harm to the insurance-buying companies? Isn't the extra money all coming from the insurers - who are the ones bribing the brokers for policy placement?
The answer is no. In the end, the cost of the "bribes" is paid by the clients -- companies like Ford. Second, and most important, the real problem with the contingent commission system is not the commissions themselves. It is the system of price-fixing that the contingent commission seems to inevitably produce. The cost of price-fixing is not really borne by the large corporate customer, but by all of society.
For example, in his complaint, Spitzer describes the case of Greenville, South Carolina. Greenville retained Marsh as a broker to purchase insurance for a school renovation project. The value of the insurance contract was approximately $3 million.
Marsh allegedly steered the contract to one insurer, Zurich, in exchange for a contingent commission. In order to persuade Greenville that Zurich had the best price, it allegedly arranged with another insurer, CNA, that CNA would produce a dummy bid which would be guaranteed to lose, but which would make the Zurich bid look good. Of course, Greenville opted for the lower, Zurich bid.
Who really was hurt by this scheme, if it occurred as alleged? The taxpayers of Greenville - who paid more than they should have to insure their school renovation...
May 11, 2004
CNA Financial faces bias lawsuit
Class action claims age discrimination, fraud
(Dow Jones/AP) — Chicago-based CNA Financial Corp. faces a federal class-action lawsuit for allegedly discriminating against older employees and defrauding more than 400 workers of their severance pay by selling off a unit they used to belonged to.
The division, RSKCo, was sold in April 2003.
In a release Tuesday, plaintiff law firm Leeds Morelli & Brown contended, "In an effort to avoid paying millions to a group of employees over the age of 40, CNA sold these older employees off like cattle and denied them their earned benefits, which could total over 100 million dollars for the class."
Charles Boesel, a spokesman for the insurance holding company CNA, said the accusations are "not only groundless," but the characterization of the case is "grossly out of context and without merit." He said the company has been divesting several units in the past year to focus on the property and casualty business.
The suit claims that in other instances, CNA allegedly downgraded older employees' evaluations in order to lay them off.
February 7, 2002
Enron losses catch up
with insurers, sting profits
By Bill Rigby
NEW YORK, Feb 7 (Reuters) - As the Enron saga unfolded in front on Congress, the trail of devastation left by the bankrupt energy trader caught up with insurers, wiping millions off quarterly profits.
American International Group Inc. (AIG) and Chubb Corp. (CB) both took a hit on Thursday, adding to the pain of a year already clouded by the destruction of the World Trade Center.
The insurers got hurt by Enron in two ways: underwriting surety bonds, which guaranteed Enron Corp.'s promises to deliver gas; and losses on investments in the Houston company.
The insurers won't be the last this season to get hit. Life insurer MetLife Inc. (MET) held $63 million in Enron investments, according to analysts, which it may have to write down when it reports earnings next week. CNA Financial (CNA), also reporting next week, has already said it faces $50 million in surety losses.
Further losses may also be lurking in the form of directors' and officers' liabilities -- designed to protect bosses from lawsuits -- but insurers may seek to cancel Enron's policies if they can show directors meant to mislead investors.
June 21, 2001
CNA ERISA Insurance
I have been disabled since 1997 following back surgery. I was covered thru work with CNA Insurance. They cut off my disability payments in March 1999 based upon a report by their hired gun (a physical therapist), even though I was certified as 100% diabled by an orthopedic surgeon and approved by Social Security Disability (which I have been told has a much higher threshold than private insurance companies).
I cannot find and attorney who will represent me. The reason? It is a very winnable case. However, I did not make enough money so that it would be profitable for an attorney to try the case. It has to be filed in federal court. Expert witnesses must be compensated.
The ERISA law is written to benefit the insurance companies and throws the consumer to the lions. Even if the consumer wins the case, the insurance company does not necessarily have to pay attorney costs. All they have to do is say they had a good-faith basis for denying the claim (i.e. a report by their hired gun).
The insurance companies have lawyers in their employ, so they do not care about going to court. They are aware that the average person does not have the resources to fight them in court. I was told by an attorney that these cases are only attractive to them if a person had a yearly salary of over $100,000.
Once again, it isn't the righteousness of your case that counts, it is the amount of money you have. Is this equal justice under the law or only equal justice for the rich?
If you have a similar problem or know someone who does, I would love to hear from you. This is a warning to everyone out there. I never thought I would be disabled, I suppose nobody does. This could happen to you or someone you love.
I am hoping I will hear from people with a similar problem in the hopes that a class-action suit can be filed against CNA in order for it to be profitable enough to an attorney to consider taking the case. I have written to my U.S. Senator.
This law must be changed in order to protect the little guy....
July 17, 1998
Metro Business; New Lease Signed By Goldman, Sachs
By NICK RAVO , New York Times
In a deal reflecting the resurgence of real estate in the Wall Street area, Goldman, Sachs & Company, the global investment bank, signed a 15-year lease yesterday to occupy more than 650,000 square feet at 180 Maiden Lane.
The deal is thought to be one of the largest leasing transactions of its type in the city this year, as well as one of the more complex.
To accommodate Goldman, Sachs, the CNA Financial Corporation, the owner of 180 Maiden Lane, will vacate the 11 floors it occupies in the 41-story building and move to about 200,000 square feet in 40 Wall Street....
Goldman, Sachs is based at 85 Broad Street and has offices at 1 New York Plaza, both in lower Manhattan.
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MORE TO COME
For now, here are some more “birds of a feather” that
you’ll also find building nests in this tree...
ACE UP THE SLEEVE
AIG: THE UN-AMERICAN INSURANCE GROUP
ALLIED WORLD ASSURANCE
AMERICAN SAVINGS BANK: BEHIND THE BLINDS
THE BANKRUPTCY BUZZARDS
THE BERMUDA FRAUDS
THE CHUBB GROUP
CITIGROUP: VAMPIRES IN THE CITY
CONFESSIONS OF A WHISTLEBLOWER
A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT
THE CROSSROADS GROUP
DIRTY GOLD IN GOLDMAN SACHS
DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE
FIRST INSURANCE COMPANY OF HAWAII
THE GREAT NEST EGG ROBBERIES
HAWAIIAN AIR LINES
LETTERS TO THE FBI
LETTER TO THE IRS
HAWAIIAN INSURANCE COMPANIES
I SING THE HAWAIIAN ELECTRIC
THE KAMEHAMEHA SCHOOLS PENSION PLAN
KEMPER INSURANCE COMPANIES
MARSH & McLENNAN: THE MARSH BIRDS
MARSH & McLENNAN’S GUY CARPENTER
MARSH & McLENNAN’S PUTNAM
THE PRUDENTIAL: A NEST ON SHAKY GROUND
RICO IN PARADISE
THE SILENCE OF THE WHISTLEBLOWERS
THE TORCH OF ERIC SHINE
THE POOP ON AON
THE ROYAL & SUNAMERICA
TRANSYLVANIA TRAVELERS IN ST. PAUL
CITIGROUP: VAMPIRES IN THE CITY
VAMPIRES IN THE VESTA INSURANCE GROUP
WHAT PRICE WATERHOUSE?
WILLIAM SIMON SAYS...
YAKUZA DOODLE DANDIES
ZEPHYR INSURANCE COMPANY
ZEROING IN ON ZURICH FINANCIAL SERVICES
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August 26, 2006: Originally posted on www.the-catbird-seat.net
March 13, 2007: The U.S. Dept of Justice gets Order to shut down website
November 11, 2008: Latest update on www.kycbs.net
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