Swiss Re: Subprime fiasco keeps spreading
Reinsurance giant Swiss Re this week announced a $1.1 billion loss, after paying off a client that had taken out insurance against subprime mortgage losses, said Steve Goldstein in Marketwatch.com. Swiss Re had written the policy believing it faced “a remote risk of loss.” But analysts “questioned why a company better known for determining the risks of hurricanes and floods was in the business of providing insurance against market moves.” Said Catherine Stagg-Macey, an analyst at consulting firm Celent: “The full effect of the U.S. subprime crisis is finally washing on the shores of Continental Europe.”
The loss is a major embarrassment for the Swiss company, said Parmy Olson in Forbes.com. Until recently, the firm looked “like a shining beacon of safety among a storm of multibillion-dollar write-downs at financial institutions.”
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Swiss Re said its unnamed client’s portfolio, whose total value fell $1.5 billion in October, included subprime mortgages and mortgage-backed bonds that were now all but worthless. “The big question on analysts’ and investors’ minds now is how isolated this incident is.”
China: Stock speculation spurs lending freeze
China this week ordered commercial banks to freeze lending for the rest of the year to rein in stock speculation, said James T. Areddy in The Wall Street Journal. “The lending freeze shows how the
slowing U.S. economy may be complicating Chinese policy.” China would have preferred to raise interest rates, but the fifth rate increase in a year might have slowed China’s booming export sector. But even a temporary freeze is likely to “cast a chill” on the Chinese stock market.
Pharmaceuticals: Cancer drug makers team up
New Jersey drug maker Celgene will pay $2.9 billion for rival Pharmion, said Robert Daniel in Marketwatch.com. “The deal is in line with Celgene’s strategy to build its worldwide business in hematology and oncology.” Pharmion, based in Boulder, Colo., has four drugs to treat cancer and blood diseases already on the market and several more in the pipeline. Celgene is especially interested in an experimental Pharmion drug that has been shown in studies to improve the life expectancy of leukemia patients.
Turnarounds: Xerox marks a milestone
Emerging from a long losing streak marked by accounting scandals and hefty losses, Xerox this week declared its first dividend in six years, said Keisha Lamothe in CNNmoney.com. “We’ve significantly strengthened our financial position,” said CEO Anne Mulcahy. Analysts and colleagues credit the “dynamic duo” of Mulcahy, 54, and heir apparent Ursula Burns, 49, for Xerox’s turnaround. The two “fought off furious lenders” while reshaping Xerox’s strategy and culture. “The experiences they’ve been through—they shape you,” said Xerox chief strategist Eric Armour.
Fuel standards: Court strikes down laxer rules
A federal appeals court last week struck down the Bush administration’s fuel-economy regulations governing SUVs and light trucks, said Felicity Barringer and Micheline Maynard in The New York Times. The 9th Circuit Court of Appeals in San Francisco ruled that the regulations don’t adequately recognize how much the vehicles contribute to global warming. “It was the third federal court ruling in seven months pressing regulators to take the risk of climate change into consideration.” The administration will likely appeal to the Supreme Court.
