First off, there is something to be said for being long or short. As Bernard Baruch said, the stock price will fluctuate, so one might invest at $5 and hold out until $10. The $11-$12 range may prove to be a new resistance level, if you believe in that kind of thing. I agree that a short at $7 indicates a certain lack of market savvy; the easy money has been made.
* * * Mum, your headlines are premature; Harold is not in the slammer. The newspaper article contains a few likely errors. I find it amusing that the paper says "dozens" of lawsuits have been filed. Since 1999, there is an apparent progression from less than 1 filing to the current average of 4 minimum per business day. The company doesn't release litigation figures, but my guess is there are at least 3000 pending. Maybe there are 4000, perhaps 5000. The company is probably not telling the truth on it's denial statistics; only a few insiders see the true figures. One might try to find a disability attorney somewhere in the U.S. that neither represents UNUMProvident or is suing UNUMProvident. That probably is causing quite a drain on company resources. Litigation costs are hidden in company financials, so don't go looking for items like legal fees, punitive damages, and such. Look for growth in expense and liability items instead.
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The ENRON fiasco first hit in the fourth qaarter of 2001. Then one should add in WCOM, GX, the airlines and the rest. The company expressed the intention in 2000 of putting 10% into high yields. I looked like a fool to some for projecting losses in the $300-$500 million range. We eventually got to $1.2 billion in losses, but at this point, I have not added up the realized and unrealized losses. In any event that $1 billion would have come in handy in paying claims, and IMHO, the company is likely to come up short on claims reserves sometime before 2010--but that is from a non-actuary.
Actually, I have been a little surprised by how quickly one can run into a problem with capital and surplus.
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I also find the company's pronouncement that jobs are not effected to be somewhat evasive at best. A company whose stock goes from $60 to $6 has a problem with job prospects, generally speaking. While the company's ability to sell product or manage claims is unaffected thus far, the executive team's fumbling oF a billion in junk bonds, a billion in litigation...well, these things do add up to lost jobs at some point...If this company implodes, there will be major pain, since the company has major offices in locales that couldn't absorb even half these people.
Thanks for the post shortie. I enjoyed this part especially: She also said the two-day drop in the stock price was an overreaction. "It was definitely overdone," she said. "The entire equity market is very skittish about anything it perceives as negative." LoL hahahahahaha!! Also:She said Moody's warning has more to do with that company's concern about the insurance industry in general, rather than worries about UnumProvident in particular.