Finance and Economic

Shares of large health insurers slumped on Thursday as a budget report issued on a key U.S. Senate healthcare reform bill fueled investor worries that a health overhaul would gain approval.

Nonpartisan budget analysts said late on Wednesday that a Senate Finance Committee health plan would cost $829 billion and cut the budget deficit by $81 billion over 10 years. The bill would meet President Barack Obama’s desire for a healthcare plan that does not increase the deficit, according to the Congressional Budget Office.

Shares of WellPoint Inc fell more than 7 percent, while UnitedHealth Group Inc, Aetna Inc and Humana dropped more than 4.5 percent, bucking a positive overall market.

The determination of the finance committee bill’s impact on the deficit was seen as a “big stumbling block” for drawing support for the legislation, said Avik Roy, healthcare analyst with Monness, Crespi, Hardt & Co.

With the favorable CBO analysis, Roy said, “the fear is that the bill will actually get through, and that increases the risk to the insurers.”

The Senate Finance Committee will vote on the bill next week following the CBO report.

“The successful CBO score increases the likelihood that a reform bill will pass and it also strengthens the (Senate Finance Committee) bill’s position as the bill that will drive the debate,” Wells Fargo analyst Matt Perry said in a research note.

Pressure on the stocks also may have been coming from news that U.S. Democrats were looking at a possible tax on insurers’ windfall profits as part of reform no fax pay day loans.

The share moves continued the declines since mid-September for health insurance stocks, which have proved extremely sensitive to reform developments in Washington.

“We continue to think managed care stocks will remain in flux until the ‘devils in the detail’ are resolved in final legislation,” Goldman Sachs analyst Matthew Borsch said in a research note.

As the reform legislation has evolved, analysts have raised concerns about the status of “individual mandate” that would require people to buy health insurance. Amendments added to the Senate Finance bill have lowered the financial penalties for people if they choose not to buy health insurance.

With insurers being required to enroll people with pre-existing health conditions, the fear is that healthy Americans will choose to pay any penalties instead of insurance premiums. By losing out on that revenue while paying for coverage of the sick, insurers potentially would be hurt by higher medical costs.

“From the perspective of the insurance companies, if you require that everybody has health insurance, then you are able to counteract that tendency of people to only take coverage when they’re sick,” Roy said.

In the finance committee bill, he said, “the provisions around the individual mandate have been weakened.”

(Reporting by Lewis Krauskopf, editing by Dave Zimmerman and Gunna Dickson)

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Amazon.com Inc is introducing Kindle, its wireless electronic reader, for over 100 countries, including China and most of Europe, intensifying a battle for the burgeoning digital book market.

The move, announced on Tuesday, gives the world’s largest online retailer the widest global reach among its competitors, including chief rival Sony Corp.

The Kindle will sell for $279 in other countries.

Amazon also said it would cut prices for its U.S.-only Kindle by 13 percent to $259 from $299, bringing its cost closer to its rivals. The new price is $100 lower than it was a year ago.

Amazon — which regards the Kindle as a pivotal growth driver — said over 200,000 English-language books from a host of publishers as well as more than 85 international and U.S. newspapers and magazines would be available on the international device, which begins shipping October 19.

“Our vision for Kindle is every book ever printed, in print or out of print, in every language, all available within 60 seconds,” Chief Executive Jeff Bezos told Reuters.

“That’s a multi-decade vision,” said Bezos, visiting a Kindle office in the Silicon Valley city of Cupertino.

Analysts have pondered the likelihood of Amazon developing the Kindle into a tablet-like device for tasks like emailing, texting and surfing the Web, thus competing with devices reportedly being developed by Apple Inc.

But Bezos reiterated his intention to optimize the reading experience, saying the company rejects compromise, whether it be a touchscreen that affects legibility or computer displays that eat up too much power.

At the same time, Amazon is working on making Kindle digital books available on more devices. Besides the Kindle, those books can now be accessed on the iPhone or iPod Touch.

“We want you to read your Kindle books on laptops and smartphones, anything with an installed base,” Bezos said. He said he was not “in principle” against making the works available on rival devices like Sony’s, but was focused on platforms with “large installed bases.”

NO MEAN FEAT

E-readers are expected by some to be the hottest gadget this holiday season [ID:nN01298379] and Bezos said he had “a lot of confidence” that it would be a “great holiday quarter for Kindle.”

Forrester Research estimated 3 million e-reader devices would be sold in the United States in 2009, up from an earlier estimate of 2 million. That could double in 2010, bringing cumulative sales to 10 million by end-2010.

The research group predicts that Amazon will take 60 percent market share in 2009, followed by Sony at 35 percent. 

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A retired sales manager for airplane maker Boeing Co on Monday pleaded guilty to hiding nearly $2 million in Swiss UBS AG accounts, as the United States pursues Americans illegally stashing funds abroad to avoid taxes.

Roberto Cittadini was accused of filing a false tax return omitting that he had an interest in or control over accounts at UBS, as well as failing to report income from the accounts, according to the U.S. Justice Department.

Cittadini faces up to three years in jail, a fine of up to $250,000 and a civil penalty equal to 50 percent of the highest account balance between 2001 and 2007, the department said. He will be sentenced in January.

His plea is the seventh so far involving the government’s case against UBS, stemming from a February settlement in which the giant Swiss bank paid the U.S. government $780 million.

“The IRS (Internal Revenue Service) is continuing to do what it has said it would do and it would be foolhardy for people to think that they will go undiscovered or will not be pursued for prosecution once the IRS is on to them,” said Barbara Kaplan, an attorney at Greenberg Traurig in New York who counsels such clients.

According to court documents, Cittadini in 2000 set up a Hong Kong corporation at the suggestion of a Swiss banker, Hansruedi Schumaker, a man U.S. prosecutors in August charged with helping Americans hide their assets from U.S. tax authorities.

The plea deal said Cittadini was counseled by Matthias Rickenbach, a Swiss attorney also indicted for conspiring to defraud the government in August.

It said a Swiss attorney referred to as “A.M.R.” and a UBS banker it called “P.B.” were also involved in the scheme. A Justice Department spokesman declined to discuss those two individuals.

UBS, as part of the February deal with the government, admitted it actively took part in a scheme to defraud the United States by actively helping U.S. citizens conceal their accounts.

UBS also handed over the names of about 250 accounts of American clients. About 150 of those have been farmed out to prosecutors across the country to potentially bring to trial. In a separate settlement, UBS in August agreed to turn over details of another 4,450 accounts of Americans.

“Individuals all over the country who are hiding income and assets in offshore accounts would be well-advised to promptly come in and come clean before the government learns about their accounts through other channels,” John DiCicco, the acting assistant attorney general of the Justice Department’s Tax Division, said in a statement.

A tax amnesty program offered by the U.S. Internal Revenue Service runs through October 15 for Americans to confess to secret accounts hidden overseas.

The case is United States of America v Roberto Cittadini, No. CR 09-0344.

(Additional reporting by Jeremy Pelofsky; Editing by Matthew Lewis, Gerald E. McCormick, Gary Hill)

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The federal government should not consider a new stimulus package, even with U.S. unemployment likely “to penetrate the 10 percent barrier and stay there for a while,” Former Federal Reserve Chairman Alan Greenspan said.

“The focus has got to be on trying to get the economy going, but you also have to be careful that in trying to do too much it can actually be counterproductive,” Greenspan said on ABC’s “This Week” program.

Greenspan appeared on ABC’s “This Week” two days after the Labor Department reported an unemployment rate of 9.8 percent, the highest since 1983. The report prompted President Barack Obama to say he’s working to “explore any and all additional measures” to spur growth.

Third-quarter economic growth is likely to be 3 percent and “possibly even higher,” Greenspan said today on ABC saving account payday loan. Only 40 percent of the $787 billion economic stimulus package approved in February is “in place,” he said.

“It’s far better to wait and see how this momentum that’s already begun to develop in the economy carries forward,” he said.

While last week’s unemployment report was “pretty awful no matter how you looked at it,” the economy is recovering and it would be “premature” for Obama and Congress to enact another stimulus package, Greenspan said.

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Seattle-based Nordstrom Inc. has announced plans to open its first Nordstrom Rack store in St. Louis. This will also be the first in the state.

The 34,000-square-foot store will be in the Brentwood Square shopping center — in the old Circuit City space. It is expected to open in fall 2010.

Now, don’t get confused. Nordstrom is still planning to open a regular Nordstrom store in the St. Louis Galleria mall down the street from this location in fall of 2011. There’s already a Nordstrom in West County Mall.

But Nordstrom Rack is a unit of the company’s off-price retail division that carries merchandise from Nordstrom stores and Nordstrom.com at 50 percent to 60 percent off original Nordstrom prices payday loans.

Nordstrom spokesman Colin Johnson said the company was able to take advantage of some of the effects of the economy with finding prime space for the store.

But he wouldn’t admit that an off-priced Nordstrom Rack is preceding the long-discussed and rescheduled opening of the regular Nordstrom store opening because of the economy.

Either way, we here at Style File are not complaining. Ever since Saks Off Fifth (at St. Louis Mills) left us a few years ago, our shopping life has not felt complete. (10/1)

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Northrop Grumman Corp beat rival Boeing Co to win a major $3.8 billion contract to maintain and service the U.S. Air Force’s fleet of KC-10 refueling tankers, the Pentagon said on Thursday.

Boeing holds the current contract for servicing the aircraft, which expires in January, and has provided support for the KC-10s for more than a decade.

Boeing said it was disappointed by the Pentagon’s decision.

“We presented a competitive proposal that leveraged Boeing’s tremendous experience from over 80 years of building and maintaining tankers as well as inventing boom technology,” Boeing spokesman Forrest Gossett said.

“We now need to review the Air Force’s selection decision and process before deciding on our next course of action.”

Large Pentagon contracts are often appealed to the U.S. Government Accountability Office, the audit arm of Congress.

The Air Force had planned to award the contract in June 2008, but a decision was delayed because bidders submitted insufficient cost and pricing data.

“This is a stunning upset,” said defense analyst Loren Thompson with the Virginia-based Lexington Institute. Boeing has been servicing this plane since it was first introduced, Thompson said, adding “so for Boeing to lose to Northrop is truly amazing.”

Northrop, with its European partner, Airbus-maker EADS, is also in a battle with Boeing to win a contract to supply at least 179 new tankers to the Air Force, work that could be worth up to $50 billion.

The Air Force’s oldest tankers are the KC-135s, some of which are 50 years old.

The Air Force’s refueling fleet includes nearly 60 KC-10s, which were purchased in the 1970s and are modified DC-10 aircraft made by McDonnell Douglas, which was bought by Boeing in 1997.

(Reporting by Julie Vorman and Andrea Shalal-Esa; editing by Andre Grenon and Tim Dobbyn)

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The number of home foreclosures in process and delinquent mortgages rose during the second quarter, while home retention actions also increased, U.S. bank regulators said on Wednesday.

Foreclosures jumped 16 percent to 2.9 percent of serviced mortgages, while home retention actions such as loan modifications rose 21.7 percent, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a report.

“The mortgage data reported for the second quarter of 2009 continued to reflect negative trends influenced by weakness in economic conditions, including high unemployment and declining home prices in weak housing markets,” the report said.

The report covers mortgages serviced by most of the industry’s largest mortgage servicers, whose loans make up about 64 percent of all mortgages outstanding in the United States.

The regulators said there was a lull in newly initiated foreclosures during the second quarter as mortgage servicers worked to implement the federal “Making Home Affordable” program.

The $50 billion program, launched in March, is designed to stabilize the housing market by helping up to 9 million Americans reduce their monthly mortgage payments to more affordable levels.

The OCC and OTS said the emphasis on the program contributed to a dramatic shift in the composition of home retention actions toward lowering payments. Previously, the vast majority of loan modifications either did not change or increased monthly payments.

The weak economy continued to drive up the number of delinquent mortgages. The number of mortgages delinquent 30 to 60 days jumped 10.9 percent during the second quarter to 3.2 percent of all mortgages covered by the report.

The number of mortgages that were more than 90 days delinquent increased 11.5 percent, rising to 5.3 percent of serviced mortgages.

Separately, the Mortgage Bankers Association said on Wednesday that U.S. mortgage applications fell last week despite the lowest loan rates in four months, another sign that housing will likely recover slowly from its three-year plunge.

(Reporting by Karey Wutkowski, editing by Gerald E. McCormick and John Wallace)

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