Numbers Tell Part Of The Story
Just like a physical health checkup where numbers like ones temperature and blood pressure dont tell the whole story, neither do the FHR or CHS ratings. But they are telltale signs of inherent weakness for a company that may have been able to struggle on through a normal retail environment, but maybe not in one that is so challenging.
A company can be weak from a core health perspective , but not terribly risky from a financial health perspective perhaps because it raised a lot of money or has a lot of cash on hand. So they may not be at immediate risk of failure, but low scores means it radically needs to improve business at the fundamental level, he says.
Such is the case for these four companies with fairly strong FHR scores but weak in the fundamentals:
- Bed Bath & Beyond
- Abercrombie & Fitch
What To Expect If Your Insurance Company Fails
If an insurance company is declared insolvent, the state guaranty association and guaranty fund swing into action. The association will transfer the insurerâs policies to another insurance company or continue providing coverage itself for policyholders. So itâs important for policyholders to continue paying premiums if their insurer is taken over by the state.
Paying your premiums keeps your coverage intact. Or consider getting a policy with another insurance company, although thatâs generally easier to do with auto and homeowners insurance than life insurance.
If an insurance company doesnât have enough funds to pay policyholder claims, the guaranty association will use what assets the company has and the guaranty funds to pay claims. However, states have a cap on the amount of claims they will pay. Most states limit benefit payouts to the following amounts:
- $300,000 in life insurance death benefits
- $100,000 in cash surrender or withdrawal values for life insurance
- $250,000 in present value annuity benefits
- $500,000 in major medical or hospital benefits
- $100,000 in other health insurance benefits
- $300,000 in long-term care insurance benefits
- $300,000 in disability insurance benefits
- $300,000 for property and casualty claims
- There are no caps on workers compensation claims
Financial Health Ratings Indicate Stress For At
Sitting at the bottom of the list of retailers with the lowest FHRs currently include:
- Party City
- Old Copper Company, formerly J.C. Penney
- Rite Aid
Beginning the year, Macys, Gamestop, Shutterfly and Sears remain financially weak. However, L Brands, Wayfair, Barnes & Noble and Overstock became more liquid during the fourth quarter so their FHR score rose. While their short-term financial health has improved, they remain fundamentally weak in their Core Health Scores, so more work is needed to keep these companies going, especially if cashflow doesnt improve substantially this year.
And these retailers have experienced the sharpest drop in FHR from 2019 to 2020, suggesting they may soon fall under the FHR 40 benchmark putting them into the high risk category:
- Burlington Stores
URBN and Walgreens Boots Alliance, which both experienced major drops in their CHS scores from 2019 to 2020, -42 and -33 points respectively.
Gellert points out that these ratings dont necessarily indicate who will file for bankruptcy next, since their debt may not be due for a while. But those with a low FHR and CHS rating have the weakest balance sheets, and those which have seen their FHR and CHS ratings drop most sharply over the past year may soon get on the high risk list.
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Th Florida Property Insurance Company Has Gone Bankrupt
Tarik Minor, Anchor, I-TEAM reporter
TALLAHASSEE, Fla. Nearly 80,000 Florida homeowners will have to find new insurance, after Southern Fidelity declared bankruptcy. The Tallahassee based company is the fourth insurer to declare insolvency since February.
Southern Fidelitys bankruptcy filing is concerning because, according to insurance agents, a large portion of those dropped customers will likely have to reinsure their homes using Citizens Property Insurance — the state-owned property insurance company. Insurance agents say Citizens has ballooned as a private company, and just one hurricane could detrimentally affect homeowners across the state.
Southern Fidelitys shutdown comes less than a month after state lawmakers held a special session to stabilize whats been described as an industry in crisis. The company announced in early June, that it wont be able to purchase reinsurance in time for the 2022 Hurricane season.
According to state insurance records: Lighthouse Property Insurance Corporation, Avatar Property and Casualty Insurance and St. Johns Insurance Company shut their doors over the past four months. Local insurance owner and agent, Sean Way, tells News4JAX, finding some of these homeowners affordable new policies can be challenging.
So what happens the more policies we place with Citizens — think of it this way, its owned by the state, its owned by all of us. Way said.
Companies Facing Bankruptcy In The Coronavirus Pandemic
A growing number of companies will file for bankruptcies in 2020 as businesses remain shuttered due to the coronavirus.
Airlines, retail stores and restaurants are among some of the industries heavily impacted. Many of these depended on foot traffic from travelers and workers as well as last-minute shoppers. While some of these businesses were able to pivot to online sales and deliveries as states mandated shutdowns, others reported revenue dropped drastically as 26 million Americans filed for unemployment.
High debt levels coupled with a large decline in consumer confidence and disposable income and the continued shutdown of a broad swath of businesses will result in more bankruptcies.
Were only seeing the tip of the iceberg of bankruptcies to come, said James Gellert, CEO of RapidRatings, a New York-based software company that analyzes the risk of public and private companies. Were going to see default and bankruptcy rates climb as the combination of the COVID-19 crisis, energy crisis and historically high corporate leverage converge into unprecedented volatility and destabilization.
Some companies will not survive despite the stimulus funds and will fold before the end of 2020.
Companies are going to fail in waves, he said. The survivors will fit into two camps: those that can rebound or grow despite the crisis and those that are unable to recover and ultimately fail despite surviving the most immediate impact.
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When Is It Time To Switch Insurance Companies
If your insurance companyâs rating still is in the middle of rating agenciesâ scales, itâs not cause for too much alarm. However, if your insurerâs ratings are really low, consider switching companies, depending on the type of policy you need to replace.
Switching to another auto or homeowners insurance company can be relatively quick and easy. Continue paying your premiums until you have bought a new policy so thereâs no lapse in coverage. Once the new policy is in place, you can cancel your old policy and make sure you get a refund for coverage you already paid for but didnât use.
Switching to a new life insurance company may be more complicated. If you abandon a policy, you can expect to pay a higher premium for a new one because of your older age. Health conditions youâve developed will also push up your new cost.
If you are looking to ditch a permanent life insurance policy, you might be able to get back the cash value, minus any surrender charge.
To help weigh your options if youâre considering switching life insurance policies, talk to a financial advisor or a life insurance agent you trust. If you do decide to replace a life insurance policy, donât drop it until you have a new one in place to avoid the possibility of ending up without any coverage.
How To Avoid Insurers That Might Go Out Of Business
To avoid having to rely on a state guaranty association to protect you as a policyholder, you can check up on insurance companies before doing business with them to make sure theyâre financially sound.
Insurance companies are rated on their financial strength by independent agencies that each have their own rating scale and standards. The five rating agencies are:
- A.M. Best, which rates companies on a scale of A++ to D-
- Fitch, which rates companies on a scale of AAA to D
- Kroll Bond Rating Agency, which rates companies on a scale of AAA to D
- Moodyâs, which rates companies on a scale of Aaa to C
- Standard & Poorâs, which rates companies on a scale from AAA to D
The highest ratings are given to companies that the ratings agencies believe are in the best positions to meet their financial obligations. Low ratings are given to companies that the agencies think have a poor ability to meet financial commitments.
You should check ratings from more than one agency because the ratings can vary from agency to agency, according to the Insurance Information Institute. Youâll have to register on these agenciesâ websites to see ratings for your insurer, but many insurers publicize their ratings on their websites.
Pay particular attention to press releases about ratings downgrades, and read the agencyâs reasoning for lowering the companyâs rating.
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Bankruptcy Of Aig Case
AIG was seriously affected by the 2008 financial crisis. Under the pressure of the authorities that questioned some of the groups practices, the groups board of directors was pushed to part ways with its historic president Maurice Greenberg on duty for 35 years.
AIG was bailed out by American Federal Reserve which had to intervene on various occasions to inject the total amount of 205 billion USD. A drastic restructuring plan was then imposed on the group which was compelled to cede a large number of non-strategic assets including subsidiaries Alico in the United States and AIA in Asia.
Bankruptcy Filings Triggered By Covid
Wall Street successfully fought off the bear market spurred by the COVID-19 coronavirus outbreak. But the American economic recovery is far from complete, and the virus continues to induce bankruptcy filings across the country.
Research from investment bank Jefferies shows that large-firm bankruptcies more than tripled year-over-year between July and August 2020, and that large-firm bankruptcies had more than doubled through the end of August. By the end of 2020, corporate bankruptcies in the U.S. hit a 10-year high.
2021 hasn’t been as bad thanks to an economic recovery built on the back of stepped-up vaccinations the 183 filings through April 30 of this year were fewer than the 207 filings to this point in 2020, says S& P Global. Still, COVID-19 is clearly taking its toll.
In many cases, COVID has simply been the straw that broke the camel’s back. The retail industry in particular endured a harrowing past year-plus. Many of these chains were already overloaded with debt and had been suffering from long-term declines amid changing tastes and Americans’ swelling adoption of e-commerce, and were finally pushed over the edge.
Just remember: Bankruptcy filings aren’t always “the end.”
- Number of locations: Over 100 properties
- Filing date: June 13, 2021
However, 2020 was anything but a normal year, and its number of guests plummeted.
As it reorganizes, Washington Prime says it will be business as usual:
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Companies That Have Filed For Bankruptcy Protection
Here is a list of companies that have filed for bankruptcy protection, including ones that filed earlier in 2020 before the impact of COVID-19:
1. The Schurman Retail Group
2. Lucky’s Market
3. Earth Fare
4. Pier 1 Imports
5. Art Van Furniture
6. Modell’s Sporting Goods
7. FoodFirst Global Restaurants
8. True Religion
10. Southland Royalty Company
11. Dalf Energy
12. Sheridan Holding Company
13. Echo Energy Partners I
15. Sklar Exploration Company
Here Are All The Companies That Went Bankrupt During The Covid Pandemic
More than ten major companies have already declared bankruptcy in 2021.
2020 was the worst year for bankruptcies in a decade, when the aftermath of the financial crisis tanked Blockbuster and Hummer. As of September, upwards of 80 companies had already filed for Chapter 11 as a result of the pandemic and its impact on our erratic, cash-strapped shopping habits and the global supply chain. Sectors like retail, restaurants, entertainment, real estate gas and oil were hit harder than most. Around 35 of those were major chains with over 25 locations. Few of these companies have completely shuttered but many sold to new owners, restructured their businesses and closed hundreds or even thousands of stores.
The carnage slowed but didnt stop in the fourth quarter and the beginnings of 2021. Most of the financially rocky and hardest hit companies had already gone under. But over ten new companies have joined the bankruptcy list since Labor Day.
Here are all the companies that have gone bankrupt since the pandemic began.
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Failed Insurance Companies Typically Lose Their Accreditation
In practical terms, insurance companies often fail when they lose their accreditation. Insurance carriers are accredited by an industry watchdog group known as Demotech. Demotech issues financial stability ratings for insurers based on the companys ability to pay its claims. When an insurance company owes more than what its total assets are worth, it loses its accreditation.
When the Louisiana Insurance Commissioner determines that an insurance company has become insolvent, it has the power to file legal injunctions against the company in state court. These injunctions halt the companys ability to sell insurance in the state, and it allows the commissioner to place the company into a receivership.
If the court agrees with the request, the state is empowered to sell off the companys assets and use the funds to pay the backlog of homeowners claims.
Retailers To Watch For A Bankruptcy Filing In The First Half Of 2021
The global pandemic has upended retail across the country. In most cases landlords and tenants are working together to get through this adversity. Although vaccines are expected before the end of the year, the distribution will not likely be available to everyone until at least mid-2021. As such, the retail industry is expected to have a tough slog through at least the first part of the year.
Following is our top retailers to watch for possible Chapter 11 filing in the year ahead.
AMC When Was the last Time You Went to the Movies? According to the Variety, the theatre chain with 659 US locations is raising $47.7 million in cash. Although this should avoid a bankruptcy by the end of the year, the question is how long after the first of the year will the infusion get the chain?
LA Fitness Weathering the Storm to Reduce Footprint? The Wall Street Journal reports that the privately held club obtained a $300 million loan from the governments Main Street Lending Program to try and weather the coronavirus pandemic. Still, as states and municipalities continue to restrict activities, the gym operations are in flux. How long can the company operate without filing for bankruptcy? The company could follow in the footsteps of Golds Gym and 24 Hour Fitness, which both filed earlier this year. If there is a filing, expect it after the first of the year to try and get new members with New Years resolutions.
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Two More Property Insurance Agencies Deemed Insolvent In Recent Weeks Total Up To Seven Since 2014
The number of Florida property insurance firms in liquidation is up to seven since 2014, according to the office of state Chief Financial Officer Jimmy Patronis. St. Johns Insurance and Avatar Property and Casualty Insurance have been deemed insolvent in recent weeks, rounding out the list of agencies. Property insurance has been a pressing issue for Floridians as of late, with rising costs and high rates of dropped coverage leading to an influx of enrollees to the state-backed Citizens Insurance.
The seven agencies American Capital Assurance Corporation, Avatar Property and Casualty Insurance Company, Florida Specialty Insurance Company, Gulfstream Property and Casualty Insurance Company, Sawgrass Mutual Insurance Company, St. Johns Insurance Company, and Sunshine State Insurance Company were deemed insolvent and entered liquidation, resulting in a vacuum for Floridians as they scramble to acquire new coverage.
During the most recent Legislative Session, property insurance reform was considered to be a leading issue needing resolution by some politicians, such as Sen. Jeff Brandes.
This is an all-hands-on-deck situation. We are not far off from homeowners paying more for insurance premiums than the mortgage, said Brandes. Floridas property insurance rates are going up 30% a year, how much money does the state spend on research property insurancezero.
Recent Insurance Company Failures In Louisiana
The failure of Louisiana insurance companies in the aftermath of a major hurricane is not unprecedented. In fact, two Louisiana-based insurers became insolvent in 2021 alone. This occurred in the wake of Hurricane Ida, which caused billions of dollars in damages across the state.
According to U.S. News & World Report, two insurance companies based in Louisiana were placed into receivership in November of 2021 after they became insolvent. Both State National Fire Insurance Company and Access Home Insurance Company lost their accreditation from Demotech in October of 2021. Shortly after, the state filed a petition to place both companies into receivership.
Together, the two companies represent around 1 percent of all homeowner policies in the state of Louisiana. These cases also represent the first time in two decades that the state has sought to place an insurance company into receivership due to its insolvency. Together, the two companies brought in a combined $20.5 million in premiums annually.
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