Here is a look at more of Wednesday's top business stories:
Insurance industry in period of consolidation
NEW YORK, Nov. 28 (UPI) -- PricewaterhouseCoopers said the insurance industry has entered a period of sustained consolidation, both domestically and internationally, as a result of the Sept. 11 attacks on America.
Bill Chrnelich, a Transaction Services partner at the firm, said, "The industry will emerge stronger from this stressful period, but with fewer companies. The Sept. 11 terrorist attacks are clearly accelerating the ongoing consolidation and globalization of the insurance industry.
"What happens in the M&A market over the next 12 months will determine to a large extent how well the industry is capitalized and how well it is prepared for new disasters over the next five years."
Chrnelich noted that the weak will not survive.
With industry estimates upwards of $50 billion to $70 billion in losses from attacks on the World Trade Center and the Pentagon, weaker players -- and those with a disproportionate share of the claims -- may become targets for takeovers, workouts or bankruptcies over the next six to twelve months.
Chrnelich also noted that depleted capacity will dictate developments. In the wake of Hurricane Andrew, the second most expensive catastrophic event in the insurance industry's history, and the earlier capacity crisis in liability coverage, several new companies were formed through M&A activity to take advantage of soaring premiums and demand for capacity.
These include Mid-Ocean, ACE Ltd., XL Ltd, Tempest and Partner Re.
Chrnelich said capital flowing into insurance companies since Sept. 11 has similarly spawned several new ventures including Axis Specialty, a $1 billion aviation, war and political risk insurer and reinsurer formed by Marsh & McLennan; an aviation joint venture funded by AIG, Chubb and Goldman Sachs; DaVinci Re, a property catastrophe reinsurer launched by RenaissanceRe and State Farm; the $750 million stake taken by private equity firms Warburg Pincus and Hellman & Friedman in the new, Bermuda-based reinsurance arm of Arch Capital; a $1.3 billion capital offering by ACE Ltd , a new venture sponsored by Zurich Financial and AEON with $1.2 billion of projected capital, and the expected IPO of Converium.
The difference between the aftermaths of Hurricane Andrew and Sept. 11 is that the ante has more than doubled, reaching about $1 billion, compared with $250 million to $500 million after Hurricane Andrew.
Chrnelich said insurers and reinsurers typically cite two to three major catastrophic losses in a single year as their "Armageddon" scenario.
The destruction of the WTC, part of the Pentagon and four commercial airliners comes close to that scenario -- not enough to bankrupt the major insurance and reinsurance companies, but clearly enough to catalyse the industry's ongoing consolidation and globalization.
"What happens next will depend on the terms of upcoming Jan. 1 reinsurance renewals, positions taken by the courts in settling claims from Sept. 11, and the fine print in the insurance legislation currently before Congress. A lot depends on how governments and the global economy react to the war on terrorism," he added.
Bank of Montreal buys CSFBdirect
TORONTO, Nov. 28 (UPI) -- Bank of Montreal said it has increased its client base in the United States by 50 percent with the acquisition of New Jersey-based direct investing firm CSFBdirect Inc., a subsidiary of Credit Suisse First Boston.
The deal, which is valued at $520 million and is expected to close in February 2002, is subject to regulatory approval.
Under the terms of the deal, Bank of Montreal would absorb CSFBdirect, which used to be known as DLJdirect, into its online unit, Harris InvestorLine. CSFBdirect's headquarters would stay in Jersey City, New Jersey.
CSFBdirect is the sixth acquisition by Bank of Montreal in the United States in two years. It adds nearly 500,000 active client accounts, 1 million total accounts, providing a significant national franchise to the bank's integrated U.S. wealth management business.
Bank of Montreal and its Chicago-based U.S. subsidiary Harris Bank will now have more than 7.5 million customers in the two countries.
"This acquisition is another significant step forward in our substantial and selective expansion in the United States," said Tony Comper, chairman and chief executive officer, Bank of Montreal.
"CSFBdirect is an outstanding addition to our U.S. operations, increasing our U.S. client base to a million and a half and bringing us closer to our goal of becoming a truly trans-national financial services firm with significant operations on both sides of the Canada-U.S. border."
CSFBdirect has a client base that is national and primarily located in 20 of the fastest growing urban areas across the United States. The firm has physical locations in New York City; Chicago; Atlanta; Philadelphia; San Francisco; Dallas; Salt Lake City; Boca Raton, Fla.; Charlotte, N.C.; and Jersey City, N.J. Those locations are in addition to 18 physical locations for Harris InvestorLine, the bank's U.S. direct investing firm.
SCP Pool to buy back stock
COVINGTON, La., Nov. 28 (UPI) -- SCP Pool Corp., a distributor of swimming pool supplies, said it has completed a new $110 million revolving credit line, replacing its existing senior credit line, and said it would buy back up to $30 million of its stock.
The credit line is secured by SCP's assets and domestic subsidiaries, the company said.
Bank One served as the administrative agent, leading a group of banks in securing the new credit line, which will be used to repay SCP's existing credit line, which is set to expire in December 2002, the company said.
SCP said the $30 million stock buyback will boost earnings and builds on a $20 million buyback announced in November 1999. SCP said it spent $17.5 million of the first plan in acquiring 840,750 shares.
"The new debt facility provides SCP the financial flexibility to continue growing its business, both internally and through acquisitions," SCP Pool President and Chief Executive Manuel Perez de la Mesa said.
Fairchild Semiconductor expects flat revenues
SOUTH PORTLAND, Maine, Nov. 28 (UPI) -- Fairchild Semiconductor International Inc. said it continues to expect that fourth quarter revenues will be flat to down 5 percent from the third quarter but said its quarterly results would improve sequentially and throughout 2002.
In a statement issued ahead of Fairchild Chief Financial Officer Joe Martin's scheduled appearance at the Credit Suisse First Boston technology conference in Arizona, the microchip maker said it was optimistic about 2002 orders and that October orders were strong but have fallen in November.
Martin said the ratio of orders to shipments, or book-to-bill, is slightly above 1-to-1. He said the ratio may drop in December and January due to seasonal decline, but that Fairchild's backlog is building for the first quarter.
Martin said pricing was slightly stronger in October and gross margins will improve by 200 basis points in the fourth quarter.
He cited seasonal strength in personal computers in October and early November. Demand for DVD players, MP3 players, set top boxes and digital cameras was high, the company said. MP3 is a digital audio format.
Analysts on Wall Street expect the company to post a loss of 4 cents a share in the fourth quarter, according to Thomson Financial/First Call. Analysts see revenues of $321.9 million in the fourth quarter, down from $325.4 million in the third quarter.
