no i am not....which is not to say it is not totally confusing.
ORINSCO reinsured its liabilities with RCIC (under RFIG) up to 155% cum-loss. But this does not include the policies they have rescinded from BOA, Countrywide, and FDIC (AmTrust) and the legal risk (200-300mn?). But then RCIC got a stop-loss from ORIGENCO to cover above the 85% cum-loss. This was part of the spin-off registration document. I am not sure how they transferred the risk-in-force without regulatory approval but maybe they managed it. It is unclear how much capital ORINSCO and ORIGENCO have and how much is at risk but you have to assume that the remaining risk-in-force is statutorily solvent (so 50+mn)
As for the fact that ORINSCO only accounts for .8% of ORI premiums -> that does not tell us how much capital is at risk from previous business. The BOA lawsuit clearly indicates they did a lot of business during the boom times
They have legal risk with FDIC too and it is unclear how much of past divvys paid up would be subject to clawback as there is not 1-yr limit in these instances and there is always piercing the corporate veil. The fact that CCI risk-in-force has come down so much is more a reflection of the policies rescinded, that are subject to lawsuits, so i would be leery of using that as an argument - they may feel that there is no merit but who knows....clearly the increase in legal reserves in CCI tells you something
the bottom line is this is a mess and without clear-cut answers to the risks involved it is hard to estimate div-coverage beyond the near-term and growth prospects. I am sure that ORI's game plan is to stretch these liabilities/risks out and grow their other lines to the point where it all gets blurred out - in fact, blurring things out seems to be their specialty
I'm a little confused by the 85% of reinsurance comment on call. that said, am reasonably sure, just like MI, CCI is its own corporate entity, in run-off, with contained losses - the key principal being one insurance entity cannot finance another, reguardless of which operating segment it is included under -
At some pt. you have to take their word for this. What did Aldo say in 2008 that would make you not trust him? They certainly messed up the MI business, but so did every other mortgage insurer.
There were more details on the CCI structure in the RFIG prospectus, but I guess they withdrew this from SEC site - unless I'm missing it...
Somewhere around page 10 is the info on the new relationship but basically anything above 85% cumulative loss ratio goes back to ORI in one form or another. The recent release indicates that $48.7 in CCI op loss (out of the 49.8) goes back to ORI gen ins subs. Why then do they not just hack that out and include it in the General Insurance segment, as opposed to reporting it as CCI, I do not know. Probably to throw people off the scent and I am not convinced that its legit reporting (not that its audited). Basically, they said that it is higher lawyer costs and salvage recovery lowered. Indicates on going legal risk and poor quality of the $1.2 bn or so of risk-in-force still on the books (hooks). I don't think the CCI story is over. Aldo is not upfront - not saying he's dishonest - but he's not forthcoming for sure....his professorial demeanor wears thin. I think not coming clean over the whole spin-off and, now, CCI, and their attempt to conceal, means credibility is shot (with me for sure)....one thing I've learned is if you think they are trying to hide something, run.....good luck longs
Agree - I have been pretty positive they could continue the dividend, with the main risk being the MI division. But this was on the assumption that CCI couldnt be too much of a drag...since it isnt walled off. However, with numbers like this it really could put pressure on the holding company.
i blew out of a position i took late friday in the selling spree....this report and the whole merger thing does not smell good....soon enough, they won't report CCI out separate and we'll have no idea on book value (GAAP or non-GAAP)....i remember listening to Aldo back in '07/'08...i do not trust the old bugger