Posted on 11/23/2004 8:34:15 PM PST by crushelits
The letter was entirely polite and businesslike, but something about it chilled Wilhelm Zeller, chairman of one of the world's largest insurance companies.
Moody's Investors Service wanted to inform Zeller's firm the giant German insurer Hannover Re, that it had decided to rate its financial health at no charge. But the letter went on to suggest that Moody's looked forward to the day Hannover would be willing to pay.
In the margin of the letter, Zeller scribbled an urgent note to his finance chief: "Hier besteht handlungsbedarf."
We need to act.
Hannover, which was already writing six-figure checks annually to two other rating companies, told Moody's it didn't see the value in paying for another rating.
Moody's began evaluating Hannover anyway, giving it weaker marks over successive years and publishing the results while seeking Hannover's business. Still, the insurer refused to pay. Then last year, even as other credit raters continued to give Hannover a clean bill of health, Moody's cut Hannover's debt to junk status. Shareholders worldwide, alarmed by the downgrade, dumped the insurer's stock, lowering its market value by about $175 million within hours.
(Excerpt) Read more at washingtonpost.com ...
A company declines to pay a rating agency to rate their company and the next thing you know the rating agency downgrades the company. If the company gives in and hires the rating agency the company's rating magically improves. It almost seems like a protection racket.
Camorra in Italiano.
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