Massive delinquencies on U.S. subprime mortgages battered
the credit quality of these products, increasing the capital
that bond insurers need to maintain their crucial “AAA”
ratings.

As bond insurers’ ratings are downgraded, so are ratings on
much of the debt they insure, forcing sales by some investors
who can only own top-rated securities. The loss of a top “AAA”
rating also undercuts the value of bond insurance, making it
difficult for the companies to win business.

Following is a chronology of recent ratings actions on bond
insurers and ratings still under review for possible
downgrades:
MBIA Inc’s (MBI.N: Quote, Profile, Research) MBIA Insurance Corp
Feb. 26 - Moody’s removes Aaa rating from review for

downgrade, assigns negative outlook.
Feb. 25 - S%26amp;P removes AAA rating from review for

downgrade, assigns negative outlook.
Feb. 5 - Fitch puts AAA rating on review for downgrade.
Jan. 31 - S%26amp;P puts AAA rating on review for downgrade.
Jan. 17 - Moody’s puts Aaa rating on review for downgrade.
Jan. 16 - Fitch affirms AAA rating with stable outlook.
Dec. 19 - S%26amp;P changes outlook on AAA rating to negative

from stable.
Dec. 14 - Moody’s affirms Aaa rating, changes outlook to

negative from stable.
Ambac Financial Group’s (ABK.N: Quote, Profile, Research) Ambac Assurance Corp
Mar. 12 - S%26amp;P removes AAA rating from review for

–

Banking and insurance group Suncorp (SUN.AX: Quote, Profile, Research) said storms in
New South Wales and Queensland last year dragged earnings down
substantially. The company yesterday reported a 27 percent drop
in half-year profits to A$383 million. Suncorp’s insurance
division, which was hit with A$280 million worth of
disaster-related claims, posted a 55 percent plunge in profit
to A$172 million. Chief executive John Mulcahy, who oversaw
Suncorp’s A$7.9 billion acquisition of former rival Promina
last year, said the past six months had been “most
challenging.’ Page 21.

–

Building products group James Hardie Industries (JHX.AX: Quote, Profile, Research)
has posted a $US17.1 million (A$18.2 million) profit for the
three months to December 31, compared with a A$US8 million loss
in the same period a year earlier. The result included a
US$32.4 million write-down from the closure of a North American
plant. “I think it’s a good result in a very difficult market,’
said chief executive Louis Gries. However, he forecast further
declines in the troubled United States housing sector and
warned this could affect full-year profits. Page 20.

–

Cinema and theme-park group Village Roadshow (VRL.AX: Quote, Profile, Research) was
confident of continuing to deliver sound investor returns after
posting a 27 percent jump in first-half profit to A$45.3
million yesterday. Chief operating officer Peter Foo said hit
films such as The Simpsons Movie and Hairspray contributed to
earnings, while the theme parks division did reasonably well
considering adverse weather conditions. He said the company
would next week detail its plans for its most recent
acquisition, Sydney Attractions Group (SAQ.AX: Quote, Profile, Research). Page 23.

—

The measure would add coverage for wind damage, which the
coalition says could prove costly for taxpayers and send the
wrong message about developing environmentally-sensitive,
catastrophe-prone areas.

Proponents of revamping the federal plan say home and
business owners need to have access to wider coverage, after
many property owners were left without adequate coverage in the
wake of 2005’s Hurricane Katrina, which caused record damage
along the Gulf Coast.

The coalition — which counts the Consumer Federation of
America, the National Wildlife Federation and the Reinsurance
Association of America among its members — laid out its stand
in a letter to influential senators this week.

“Taxpayers nationwide will be left to pay the cost of wind
damage, which would more than triple the government’s exposure
under the National Flood Insurance Program (NFIP),” the
coalition said in the letter, a copy of which was obtained by
Reuters.

The group says expansion of NFIP will result in incentives
to build in unsafe or environmentally fragile areas. It says
the forecast of tripled exposure under a federal plan that
included wind coverage was confirmed by the American Academy of
Actuaries.

Others groups in the coalition include Defenders of
Wildlife, Environmental Defense, Friends of the Earth, the
National Wildlife Federation, Republicans for Environmental
Protection, the Council for Citizens Against Government Waste,
the Competitive Enterprise Institute, Freedom Works, Taxpayers
for Common Sense and the Association of Bermuda Insurers and
Reinsurers.

“Although our groups have differing priorities, we all
agree that expanding the NFIP program to include wind damage
insurance would overwhelm the (scheme),” said the group.

Industrial and Commercial Bank of China (601398.SS: Quote, Profile, Research) (ICBC), China’s top bank by assets, received an investment proposal late last year for a possible acquisition of Dresdner’s corporate and investment banking business. However, ICBC vetoed the idea after reviewing the financial position of the German bank, one of the bankers close to ICBC said.

A CIC executive with knowledge of the fund’s overseas investment plans, said CIC, which manages $200 billion, was not in talks with Allianz or Dresdner for such a deal.

“As far as I know, CIC is not in such kind of talks with Allianz or Dresdner,” said the CIC executive.

“Also in my personal view, I don’t think it is a good time for CIC to invest in Germany,” he added, citing political problems as one of its major concerns.

German Chancellor Angela Merkel’s decision to meet the exiled Tibetan spiritual leader Dalai Lama last year led to a four-month chill in relations between Germany and China, the world’s fastest growing major economy.

German newspaper The Sueddeutsche Zeitung, citing industry sources, reported on Thursday that CIC is in “intensive talks” to buy the whole of Allianz’s Dresdner Bank and the talks between CIC and Allianz were continuing.

On Wednesday, Germany’s manager magazine had reported that a Chinese bank was interested in buying Dresdner’s corporate and investment banking activities, known as Dresdner Kleinwort.

What’s even more shocking is that star Sean (Puff Daddy/P. Diddy/Puffy) Combs manages to get through the whole production without once slipping on dark glasses or welcoming Nas to the stage. That’s not to say that the rap mogul aces the role.

Walter Lee Younger Jr., an angry young man who could go tantrum to tantrum with Stanley Kowalski, is one of theater’s juiciest roles, played by Sidney Poitier in the 1959 original stage production and then the 1961 film, both with recent Oscar nominee Ruby Dee. Danny Glover reprised the role for a 1989 TV movie.

Combs has neither the chops nor the charisma of those two actors. It’s his popularity, not his acting talent, that made the 2004 stage revival a major Broadway hit and may persuade youngsters whose idea of theater is R. Kelly’s Trapped in the Closet to at least take a peek at this project. They’ll most likely be just fine with Combs’ portrayal as a man frustrated by his less-than-glamorous life.

His son sleeps on a couch in the living room. His family has to share one bathroom with two floors of tenants. His sister constantly belittles him. Worst of all, he makes his living driving a rich white man around, a consistent reminder that he hasn’t reached greatness.

When his deceased father’s insurance check arrives to the tune of $10,000, Younger wants to turn that bonanza into his best chance at glory: opening a neighborhood liquor store. Matters do not go according to plan.

The series of events that lead to his grave disappointment, and then his ultimate salvation, offer plenty of soliloquies about manhood that should require Shakespearean training. Combs takes a much more natural approach, as if he’s afraid to let himself go and ruin his cool-cat image, and the result is that some of the scenes that might offer the biggest emotional payoff merely make you shrug.

David Oyelowo, an English actor who specializes in the Bard, is much more passionate and effective in a small, but pivotal part of a Nigerian student wooing Younger’s sister and one salivates at the thought of what he would do in the leading role.

It doesn’t help Combs that he’s working with two excellent stage performers who can speak volumes with a whisper or a gaze. Phylicia Rashad, best known for putting up with Cliff Huxtable’s antics on The Cosby Show, is the family matron struggling to push, connive, shame and bribe her son into maturity and she does it all with such quiet power that, after watching her for a while, you start to feel guilty that you didn’t make your bed this morning.

Audra McDonald, in the role of Younger’s much-put-upon wife, is equally memorable. In a recent interview in Entertainment Weekly, director Kenny Leon said the actress has eight different ways she can cry. I only counted four in this film, but they were indeed distinctive and devastating.

For the stage production, Rashad got a Tony for best actress, the first time a black woman has ever won in that category. McDonald took home the award for best featured actress, making her grand total four Tonys, an extraordinary feat for someone who’s not even 38.

The two might pick up more awards for this version, although Leon doesn’t do them many favors. This is only the second movie on the accomplished stage director’s r%26eacute;sum%26eacute;, and he makes the unusual choice of cutting away quickly from some of the most dramatic moments: Willie Lee sending a plate of eggs flying through the air, Willie Lee leaping at his sister’s date, Momma slapping her insolent daughter across the face. It’s almost as if Leon is preserving the most explosive moments for live audiences.

But there is little doubt that Andrew Cuomo’s probe has handed company executives a significant distraction and a bit of a black eye.

Although some analysts believe UnitedHealth will continue to operate with minimal bottom-line effect during Cuomo’s fledgling inquiry and expected lawsuit, the consensus is far from unanimous. The investigation involves several large insurers, but it is also UnitedHealth-specific.

This has to be taken seriously, said Sheryl Skolnick of CRT Capital Group. Ultimately, the attorney general may not be able to prove anything, but it’s another mark of less-than-perfect behavior by United.

Cuomo’s move comes at a bad time for Minnetonka-based UnitedHealth; it is facing hefty fines in California for denied and misprocessed claims, and has acknowledged strained relations with doctors and insurance brokers.

The New York investigation involves the UnitedHealth subsidiary Ingenix, which collects and analyzes claims data that then are used to negotiate rates for reimbursement of doctors, hospitals and other providers when care is given. Other insurers also use the Ingenix data base.

Cuomo asserts that Ingenix manipulates data to lower its reimbursement obligation when patients go to doctors outside of their insurance plan’s network. Providers within the network have negotiated rates; the out-of-network providers do not. Payment to out-of-network providers is based on reasonable and customary fee as determined by the insurer.

UnitedHealth claims its data are comprehensive, continually updated and rigorously developed. Cuomo claims Ingenix lowballs out-of-network doctors and causes patients to have a greater copayment.

Several analysts view Cuomo’s case as evidence that the regulatory world for managed care insurance companies is about to change.

This development is very consistent with our view that the regulatory environment is going to get tougher for managed care, said Doug Simpson of Merrill Lynch. The last seven years have been pretty quiet and we continue to expect that to change for the worse.

UnitedHealth has supporters who attribute Cuomo’s actions, in part, to the platform he has as attorney general for the state of New York and as consistent with his crusading and headline-grabbing predecessor, Gov. Eliot Spitzer.

Going after managed care is always popular, said David Heupel, portfolio manage of the Thrivent Large Cap Growth Fund in Minneapolis. This really isn’t a very egregious accusation that can be made here. The data and robustness of Ingenix [are] hard to question.

Heupel also said that if Ingenix’s methodology was adjusted to pay more to the out-of-network doctor, the result likely would be higher premiums for customers.

Dave Shove, an analyst with BMO Capital Markets, said he expects the fallout from the Cuomo inquiry to be de minimus.

UnitedHealth’s data-management methodology has been consistent for several years, and we suspect if something was flagrantly biased, previous allegations would have been more successful, Shove wrote in report to investors Wednesday.

Goldman Sachs analyst Matthew Borsch projected UnitedHealth’s exposure in the likely lawsuit filed by Cuomo to be in the neighborhood of $3 billion, based on a settlement in New Jersey involving Health Net over similar underpayment claims.

Other analysts predicted a long, drawn-out investigation that could become financially complicated if attorneys general in other states file lawsuits with similar allegations.

In the short term, Skolnick said, the allegations could hurt UnitedHealth where it least needs it — in the eyes of the insurance brokers who steer employers from one insurer to another.

Shares of MGIC Investment Corp. dropped 11 percent, after the Milwaukee-based mortgage insurance company said that it lost $1.47 billion in the fourth quarter, believed to be the largest quarterly loss by a public company in Wisconsin. MGIC, which has been battered by the collapse of the subprime mortgage market, said that $1.2 billion of the loss was a noncash reserve set up to pay expected claims in a line of business it has since abandoned. After results were announced, MGIC shares fell $1.57, to close at $12.61.

Sears to eliminate 200 HQ jobs to cut costs

Sears Holdings Corp., which began reorganizing last month in an effort to stem declining sales, will fire 200 workers at its Illinois headquarters to cut costs. The largest U.S. department-store company has posted declining sales at older stores in every quarter since Chairman Edward Lampert combined Sears Roebuck Co. and Kmart Holdings Corp. in 2005. Last month, Lampert ousted CEO Aylwin Lewis and restructured Sears. Shares gained $2.07, or 2.1 percent, to close at $101.14.

Coupons for TV converters will be in the mail

The U.S. government on Tuesday will begin mailing $40 coupons to help consumers pay for converters they’ll need to keep some older televisions working when signals switch to digital next year. Best Buy, RadioShack, Wal-Mart, Circuit City and others are ready to apply the coupons toward the $40-to-$70 cost of a converter box, a National Telecommunications and Information Administration official told U.S. House members Wednesday. Traditional analog TVs that use antennas will need converter boxes to keep working after Feb. 17, 2009.

Morgan Stanley to cut 1,000 mortgage jobs

Morgan Stanley said it that will cut 1,000 jobs, as the nation’s second-largest investment bank trims its residential mortgage operations amid the continued deterioration of the mortgage markets. The New York-based company said it will shutter its United Kingdom business that issues home loans, and will significantly scale back its mortgage business in the United States. Morgan Stanley shares edged up 52 cents, to $43.23.

Tribune to cut hundreds of newspaper jobs

Tribune Co. employees were notified that hundreds of jobs will be cut at the Los Angeles Times, the Chicago Tribune and other publications — the first cutbacks since billionaire Sam Zell took the media company private last year. In separate memos, Tribune Publisher Scott Smith said 100 jobs would be cut, and his counterpart at the Times, David Hiller, said 100 to 150 jobs would be eliminated. Meanwhile, both newspapers reported a total of 400 to 500 cuts companywide, focusing on corporate staff, the two newspapers and the company’s seven other papers, including Newsday in New York, the Orlando Sentinel, Baltimore Sun and Hartford (Conn.) Courant.

Delphi at risk of losing investment capital

A plan by auto parts supplier Delphi Corp. to exit bankruptcy by the end of next month is in jeopardy as it struggles to get $6.1 billion in loans. If the company does not secure the exit financing by the end of March, equity investors led by hedge fund Appaloosa Management could abandon a deal to invest as much as $2.55 billion. The deal is crucial to Delphi’s ability to emerge from Chapter 11 protection.

Coors-Miller joint venture HQ not decided

The headquarters of the proposed joint venture between Molson Coors and SABMiller will not likely be in Denver or Milwaukee, where the two companies have strong ties, Molson Coors Vice Chairman Pete Coors said.

A You can reduce them by registering with Direct Marketing Association to have your name removed from their mailing lists. To do that:

%26bull; Register online at www.dmachoice.org. Click on Remove My Name From Those Lists in the left-side menu. Although online registration is free, you will be asked for a credit card number to validate your identity and mailing address when registering. It’s a no-charge transaction; you may see an authorization pending for three to seven days, but no charge will be issued to your bill.

%26bull; Register by mail for a $1 fee. Write: Mail Preference Service, P.O. Box 643, Carmel, NY 10512-0643. Send your name and mailing address and asked to be removed from member lists. Include a $1 check or money order payable to Direct Marketing Association.

%26bull; You can also reduce the number of prescreened credit and insurance offers you receive. Go to www.optoutprescreen.com or call 1-888-567-8688.

%26bull; To remove your name from commercial e-mail lists, go to www.dmachoice.org/EMPS.

Apartment alarms

Q Who is responsible for smoke alarms in an apartment? How often should they be replaced?

A The property owner is responsible for placement and maintenance of smoke alarms in apartments, said Bob Dahm with the State Fire Marshal’s Office, and the industry standard is replacement every 10 years. He added that the only time the renter is responsible is if he or she damages the unit.

Send your questions to Fixit in care of the Star Tribune, 425 Portland Av. S., Minneapolis, MN 55488, or call 612-673-9033, or e-mail fixit@startribune.com. Past columns are available at www.startribune.com/fixit. Sorry, Fixit cannot supply individual replies.

%26bull; 2002 - 2003: An investigation of Wall Street investment firms resulted in a $1.4 billion settlement by 10 firms accused of conflict of interest in their stock research.

%26bull; 2003: Initiated a far-reaching investigation into fraudulent trading in the mutual fund industry that found favored customers getting trading privileges that ordinary shareholders did not. Fines and restitution payments reached hundreds of millions of dollars.

%26bull; 2004 - 2005: Alleged widespread bid-rigging and price-fixing in the insurance industry. Settlements included $850 million paid by industry giant Marsh McLennan.

%26bull; 2005 - 2006: Investigated the nation’s largest radio conglomerates in a payola scam in which recording companies were accused of buying air time for artists and songs. The probe resulted in a $30.1 million settlement with four major record labels and an additional $6.25 million with two broadcasters.

%26bull; 2007: An investigation into the student loan industry found numerous arrangements that benefited schools and lenders at the expense of students.

%26bull; 2007: Investigated lead levels in children’s jewelry. Two major retailers, Big Lots and Michael’s Stores, agreed to stop selling the jewelry. Several companies were fined.

Sources: Star Tribune archive, Associated Press

Cuomo said Wednesday that he plans to sue UnitedHealth, launch an industrywide investigation into billing procedures and seek unspecified restitution for consumers. He has sent subpoenas to 16 insurers — including the nation’s five largest insurers — that use Ingenix data to determine how rates are computed.

This is an industrywide investigation because we believe this is an industrywide scheme to deceive and defraud consumers, Cuomo said in a New York press conference. Ingenix is at the center of this.

UnitedHealth said it intends to cooperate fully in Cuomo’s inquiry, but it defended Ingenix and its ability to analyze 1.3 billion fresh records of actual doctors’ charges to determine a range of costs for medical procedures.

It gives the health care marketplace a snapshot of the average cost for a given service in a given area, said spokesman Don Nathan.

Cuomo’s announcement came as UnitedHealth Group, the nation’s largest insurer, already was off to a rocky start with regulators in 2008. A UnitedHealth subsidiary was fined $3.5 million in California last month over problems involving the handling of medical-treatment claims, with more fines possible.

Ingenix is a $1.65 billion arm of UnitedHealth that collects, sorts and analyzes a large array of data, including therapeutic outcomes and billing information.

At the heart of Cuomo’s assertion that consumers are short-shrifted by Ingenix is the common health insurance term reasonable and customary. The term is used to describe a typical cost for treatment of a condition.

In the world of health care, insurers negotiate with providers to develop a network where there is an agreed-upon cost for procedures. In a typical 80 percent/20 percent cost-sharing arrangement, everyone basically knows what everyone is paying.

But patients who go outside of the network can pay more for those services based on the insurer’s determination of reasonable and customary.

Cuomo’s investigation found that a simple doctor’s visit cost $200, but that UnitedHealth — using Ingenix data — placed the typical rate at $77. With an 80-20 copay, the insurer paid just $62 of the $200 bill instead of $160, leaving the patient with a bill of $138 instead of $40.

For too long, too many people have been hurt by this, and it has to stop, Cuomo said.

He also said it was a conflict of interest by UnitedHealth Group to use data provided by a company it owns to determine the reimbursement rates it will pay doctors and other providers for its customers.

Linda Lacewell, head of Cuomo’s health care industry task force who led the attorney general’s investigation, used the terms deception, manipulation of data and outright fraud to describe Ingenix and UnitedHealth’s use of data.

Our investigation revealed that Ingenix is nothing more than a conduit for rigged information, Lacewell said. Garbage in, garbage out.

AMA weighs in

There is a profit motive for keeping reimbursements low, said Dr. Nancy Nielson, president-elect of the American Medical Association. She also complained that there is no oversight of the data provided by Ingenix.

It’s shocking and unacceptable for an insurance company to hide behind a shroud of secrecy, Nielson said. Its another example of UnitedHealth playing by its own rules.

The AMA is involved in a lawsuit against UnitedHealth in federal court in New York over the same reimbursement issues. That suit was filed in 2000.

Cuomo said his office’s probe is an independent investigation and does not involve attorneys general in other states, at least for the time being.