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Strategies & Market Trends : Mr. Pink's Picks: selected event-driven value investments -- Ignore unavailable to you. Want to Upgrade?

To: Mr. Pink who wrote (7363)	3/26/1999 1:02:00 PM
From: Retired41	Read Replies (1) \| Respond to of 18998

Mr. Pink I would appreciate the favor of your opinion on FTR as a short play. A broker I haven't used in a while called yesterday and wanted me to go long. I was an insurance executive in a former lifetime and he thought I would want to pick it up at "bargain" level. Well I was familiar with it, but it seems that things have drastically changed. It appears that not only have they had serious hits through reserve adjustments, it was in their core line. Med MAL which is a notoriously long tail. (I was with a company that after 20 years of being out of med mal business they had to periodically take increases to reserves). They are now run by the 30 something son of founder who took titles of Chairman, CEO and President (dad died suddenly about a year ago after a short illness). The family only controls about 17% of stock. The COO is intimately experienced with bankruptcy and business failure. After failing at several of his own operations and at one he didn't own he was out of work. He sought a job in the insurance industry. The insurance business has only had him about 6 years. The insurance industry former employers have personally told me that they wouldn't ever hire him back and doubt his competence in anything except self promotion. They have had two and possibly three reserve increases in the last 18 months, and that was only on med mal. They are currently price leaders in several lines that have been known for high loss frequency, yet they say they are not a market for that kind of risk. They appear to be trying to grow their way out of their current problem by dropping prices and underwriting standards. In my experience this increases cash short term, but they will get pounded long term. There is every indication that they are severely under reserved on their other lines as they routinely post reserve percentages below that of the industry, and the industry now - after many years of a soft market - is probably not reserved where it should be. The company has basically been put on probation by A.M. Best in the most bizarre details I have ever seen to make them keep their A- rating. (ask me for details and I will send them to you) The CEO has promised a 15% growth to S&P to keep their debt rating. This would explain their increased price cutting even in the face of poor results and increasing case reserves. I would have shorted right away, but the price is down 70% in the last 15 months, not to mention that it's still favored with one strong buy and one accumulate rating - no sells. Is there a chance that it might run short term and maybe even maintain it for a while as they continue to hide and ignore the problems brought on by sloppy underwriting? Couldn't this take a few years? This company actually started as a retail insurance agency and still seems to function without regard for the risks they accept. Even with their continued reserve adjustments. (this is not the first time they have had this stuff happen) They have also lost the stop loss reinsurance terms that had in the past improved their ratio which would have even been worse without it. The CEO has never worked anywhere else except in the EXECUTIVE suite at FTR. So, I doubt he knows just how bad things are. He simply doesn't have the education or training or experience to run a company having problems. The COO is a joke and will only hurt them by selling more insurance below cost. And lastly they have just hired a savvy CFO from Aetna, presumably experienced enough to hide it as long as possible. IMO there is plenty of evidence and past analogous cases to think this company is headed for the toilet, but I would prefer His opinion before I make that bet.

To: Mr. Pink who wrote (7363)	3/26/1999 2:08:00 PM
From: Mr_X	Read Replies (1) \| Respond to of 18998

IPC Information, Inc. - symbol IPI - What do you know about this one, Mr. Pink. Early rumors of an internet spin-off of IX.net. Rest of business is legit, make phones for brokerage desks. Citicorp owns the bulk of the stock, some hedge fund called Chesapeake owns half the rest, so its nice and thin. Turd with wings?