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Thursday, October 09, 2008


here come the insurers

this fucking thing will not end.

Insurers' shares sank on Thursday as concern mounted about further capital needs in the middle of the worst credit crisis since the Great Depression.

Shares of Prudential Financial Inc (NYSE:PRU - News), the second-largest U.S. life insurer, lost one-fourth of their value, while XL Capital Inc (NYSE:XL - News), a large Bermuda-based insurer, fell 58 percent to $3.63. Prudential shares were down 13 percent at $37.62.

Among other big losers were Principal Financial Group Inc (NYSE:PFG - News), whose shares fell 11.4 percent to $19.26, and Lincoln National Corp (NYSE:LNC - News) and Protective Life Corp (NYSE:PL - News), whose shares fell 25 percent to $20.96 and 18.5 percent to $14.99, respectively.

"There's going to have to be some additional capital raises," said Michael Nix, portfolio manager of Greenwood Capital Associates.

Nix said it would become increasingly difficult to raise capital in the current credit environment, which has led a number of banks in the United States and abroad to seek bankruptcy protection or to put themselves up for sale at fire sale prices, and forced government bailouts worth close to $1 trillion.

"It's easy to say we're going to raise capital or we want to raise capital, but at the end of the day, who is going to provide you that capital?," Nix said. "You can get capital, but it's going to cost you. There is going to be a haircut" in the price.

UPDATE: more from yves smith.

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hi gm -

just checking in, pal.

all of this krap is almost too dizzying and overwhelming to keep up with. i don't even know where to begin commenting on anything.

suffice it to say: thanks for some great posts, as always.

and i fear we have a horribly long way to go.

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thanks dc --

i'll do my personal best to put a floor under the market here by saying:

if this slide does not reverse up by day's end, we will witness a full-on capitulative meltdown either today, friday or monday -- like a couple hundred further points on the s&p.

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The insurers could be in big trouble from their variable and equity-indexed annuity products. Given the way the equity-indexed annuities "rachet", if there isn't a big S&P 500 rally, the insurers which sell these products, like Allianz, could suffer tens of billions in losses.

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scary, ia -- the system is so unbelievably complex that the safest assumption seems to be that the unanticipated consequences will be the largest ones.

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