Investment-blog.net: Stocks, Emerging markets, Bonds, Currencies and Commodities

Fotheringham estimates shares of Security Capital would be worth between $1 and $13, depending on the type of bailout executed.

Feb 8, 2008 Market Outlook

Security Capital Shares Fall As Goldman Says Stock May Be Worthless After Second Rating Cut

NEW YORK (AP) — Shares of Security Capital Assurance Ltd. fell in Friday trading after Goldman Sachs said its stock may be worthless because its “AAA” rating was cut by Moody’s Investors Service.Moody’s cut Security Capital’s rating to “A3″ from “AAA” on Thursday. Fitch Ratings had already cut the insurer’s financial strength rating as well. Bond insurers essentially need a “AAA” rating to book new business.

Ratings agencies have been downgrading bond insurers in recent months, saying the insurers do not have enough spare cash to handle a potential spike in claims. Claims are likely to rise because rising defaults among mortgages has increased the potential for bonds backed by the troubled loans to default as well.

Goldman Sachs analyst James Fotheringham said with two ratings agencies downgrading Security Capital, the insurer must be viewed as approaching a run-off scenario. Based on a run-off scenario, Fotheringham estimates Security Capital is worthless.

Run-off is when an insurer no longer books new business and only generates revenue through outstanding insurance premiums. The company then often closes when outstanding insurance premiums are paid off.

Security Capital shares fell 60 cents, or 23.1 percent, to $2. Shares have traded between $1.50 and $34.58 during the past year.

Existing shareholders must hope the company is acquired or a bailout effort is implemented to save the company, Fotheringham wrote in a research note. If a bailout effort — being spearheaded by the New York State Insurance Department — is completed, Fotheringham estimates shares of Security Capital would be worth between $1 and $13, depending on the type of bailout executed.

http://biz.yahoo.com/ap/080208/security_capital_mover.html?.v=2

Did you like this? If so, please bookmark it, about it, and subscribe to the blog RSS feed.

Possibly Related Posts:

• Depression? Oversold? Just the beginning? Close to the end? You will find zero guidance from quality analysts.
• A List of ETFs You Should Know In Stock Market
• Florida pension fund loses a quarter its value
• Good bye to U.S dollar. Say hello to Gold and Amero
• S&P 500 losses nearly $1 trillion more than 2000-02

Did you like this? If so, please bookmark it, about it, and subscribe to the blog RSS feed.