Short of having a crystal ball, picking winners when stock option trading is
not as hard as many people would have you believe. In the first place, when
considering purchasing or selling stock options, you need to conduct
extensive research on the underlying stock yourself, or rely on someone else
to do it for you – someone you trust. Many factors must be considered.
Among these are:

1. The stock’s past history and movement.

2. Expected earnings reports of the stock’s parent company.

3. Volatility and volume of shares traded daily.

4. Any current news concerning the company’s growth or profitability.

5. The price of the option with respect to how you think the stock will
perform. If you do not feel the stock’s movement will handily offset the
cost of the option, plus the trading fees, then buying or selling the option
would be fruitless.

6. Supply and demand of the underlying stock. (Industry group market
action.)

Once you have decided upon which stock to pick, you next need to decide
whether you believe the stock’s price is likely to rise or fall. (With
stock options you can make money in either direction.)

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By purchasing a Call option:

1. You expect the price of the underlying stock to rise, so you can
then purchase it at the lower strike price, making a profit in the transaction.

2. You have the right to control 100 shares of stock for a fraction of
the cost of purchasing the stock outright.

3. You are managing your risk by limiting the downside to the premium
paid for the option. The major downside to buying any option is time decay.
Your option expires within a finite period of time. If the underlying stock
price behaves as expected, you will not need to be concerned about
execution.

Having shown you the benefits of buying Calls over the risks of
purchasing the stocks outright, we must emphasize the fact that buying
short-term Calls has its associated risks as well. A Call buyer, especially
a short-term Call buyer, is severely limited by the time-decay factor. The
nearer to the expiration of an option, the less the option is worth, and the
less time is remaining for the option to become profitable. Within the
leverage used by gambling casinos (the house), the concept of short-term
Call buying is completely understood, as well as exploited, as gamblers are
considered short-term Call buyers.

Example: Consider your long-term Put, or Call, as a 6 to 8 month license to operate a
casino. It allows you to capture short-term premiums; money that gamblers
continuously give to you in attempting to beat the odds by speculating they
will make profits on very risky bets. They feverishly feed the slot
machines, ante up at poker, double-down on blackjack, or spin the roulette
wheel. The odds are overwhelmingly against these short-term buyers. You, as
the casino owner, continuously capture these short-term premiums, easily
offsetting the expense of the license to operate the casino, then earning
substantial, clear profits in the following months. They know the odds are
with the casino owner, but they still take the enormous gamble on the slim
chance they will hit a jackpot. The lottery works in the same manner.

On one side of the position, the transaction is definitely gambling, while
on the other, the casino is simply engaging in business. Would you rather
bet on the remote chance of a gambler’s rare, limited success, or rake in
the steady, routine premiums captured from operating a successful business?
Yes, occasionally a gambler does beat the odds to enjoy a limited, windfall
return on his bet. For the casino owner, that is simply part of the cost of
doing business. But we all know where the true, long-term profits lie. 30%,
40%, 50% and more, are common, and in short periods of time. The odds are
with the short-term option seller, not the buyer.

When you choose a stock for short-term Call buying, you not only must
carefully consider the proper stock for the type of option you are
purchasing, you must also decide which direction the stock will move, then,
that movement must occur within a specified, very limited period of time.
Many investors have gone broke by attempting to make those same decisions.
In short, time is not on the side of the short-term option buyer. It is on
the side of the option seller.

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Summary:
1. Buying stocks is risky.

2. Buying short-term options is less risky, but still risky.

3. Selling short-term options is the least risky, especially with a hedge, or insurance.

By selling a Call option:

1. You expect the underlying stock price to fall, so the option will not be
exercised, but expire, worthless.

2. You can capture the entire premium that was paid to you, as profit. If the
underlying stock price rises, you are obligated to sell 100 shares of stock
at the lower strike price. If you do not already own those shares, you would then
have to buy them at a higher market value, then sell them at the strike price, in order
to meet your obligation. This situation is called a “Naked,” or “Uncovered” position, and
is extremely dangerous. Anytime you sell a Call option you should consider
buying the same option with a slightly lower strike price, and longer
expiration date. This will reduce your profit potential, but will also
reduce your risk considerably. (Remember the parallel twins, Risk and Reward

- If you want to reduce risk, you must also give up some degree of potential
rewards. You may wish to lower your cost basis in the stock, to the extent
of the premium received.

By purchasing a Put option:

1. You expect the price of the underlying stock to fall, allowing you
to sell stock at the higher strike price, and thereby earning a profit.

2. This option is also used in a combination strategy as a hedge
against selling Puts. We will explore that strategy later, in detail.

3. Buying Put options could also be used as a hedge, or insurance,
against the possibility of a price drop in stock you already own. Consider
the following:

You own 100 shares of ABC stock, and are concerned that the stock price
could suddenly fall. You purchase a Put option on the same stock, with a
strike price at current market value. If your stock falls in price, you
would have the right to exercise your option and sell 100 shares of ABC
stock at the higher strike price. The premium you paid for the option could
be far less than the loss you would have incurred without that insurance. In
this instance buying Puts acted as a hedge against the possibility of a
price decrease in the stocks you already own. If the price of the underlying
stock increases, your loss is limited to the premium you paid for the
option. The option acts as an insurance policy against possible loss.

Selling a Put option without an opposing hedge -”Naked”
You expect the price of the underlying stock to increase, causing the
Put option you sold to expire worthless. You can then capture the entire
premium paid to you, as profit. If the underlying stock price were to fall
below the strike price, then you would be obligated to purchase the stock at
the strike price, or pay the difference between the strike price and the
stock price, if you do not want to own the stock. Your upside is limited to
the premium received for selling the option. Your downside is potentially
unlimited to the base value of whatever you could sell the stock for on the
open market, or to the difference between the strike price and the stock
price. This is a “Naked,” or “Uncovered” position, and should never be
allowed to occur, unintentionally. Without the implementation of combination
strategies, the main objective of the Put seller is to hope the option
expires, allowing him to capture the entire option premium as profit.
Nearing expiration, if the stock price moves below the strike price,
changing the option’s value to ITM, and highly vulnerable to exercise, then
the option seller must move quickly to buy back the option, perhaps
lessening his profit potential, while also managing his risk. Even so, a
small loss would be better than having to buy 100 shares of stock at
inflated prices. Also, the loss can be immediately compensated for by
simultaneously selling another Put expiring in the following month. We use
OPM (Other People’s Money) to buffer downside risks, while buying more time
for the stock price to rise.

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Stock Option Trading, when done properly, can drastically reduce, or even
eliminate, these two stumbling blocks to stock market success. In the first
place, A trader of stock options never is not required to own the underlying
stock in which an option is based. He or she can design a trade in such a
way that downside risk is limited to the cost of the option, which in itself
is a fraction of the cost of the stock. We capitalize on traders and
speculators greed to get rich who purchase overvalued short term options bid
up to inflated levels by an excess of demand over supply, by being the house
or casino owner and capturing the inflated premium from the players or
buyers. We buy reinsurance at a low cost by purchasing a longer term ( 5 to
6 months) out of the money option to sell the stock at a fixed price no
matter how low it may drop. We buy this reinsurance ( puts ) to create a
profitable hedge and sell overvalued puts repeatedly, month by month to
bring the cost of our hedge down to zero and a credit so that we can enjoy a
free ride capturing this inflated premium income. This strategy is known as
diagonal put spreads and you do not need to pick a winner to profit.

Hong Kong is a central hub for business in Asia. It is extremely popular for a variety of reasons, including political stability, economic freedom and tax benefits. Hong Kong has one of the lowest tax rates in the world for a developed country, and has an intricate and effective tax system that allows companies to conduct business without being overpowered by their tax liabilities. Indeed, Hong Kong is rated as the worldâ??s 3rd friendliest tax system by Forbes (Tax Misery & Reform Index 2009).

Corporate Tax in Hong Kong

Given the large number of companies that operate in Hong Kong or have an offshore business in Hong Kong, an understanding of Hong Kong tax implications begins with corporate tax.

In Hong Kong, any company conducting business on or offshore can be liable to corporate tax. Profits sourced in Hong Kong are taxed at a low rate of 16.5%, and unincorporated businesses are taxed at 15%. Profits that are sourced overseas, also known as â??offshore profitsâ??, benefit from a zero tax rate, even when remitted back to Hong Kong. Profits derived from operating ships in Hong Kong are treated as â??offshore profitsâ?? and are not liable to tax, but profits derived by professional reinsurers for reinsuring offshore risks will be taxed at 8.25% -i.e. half the corporate tax rate.

To note: offshore payments for intellectual property usage are liable to tax at 4.95%, goods sold by Hong Kong consignment agents on behalf of non-residents are also liable to tax on 0.5% of gross proceeds. On the other hand, bank deposit interest, interest on Tax Reserve Certificates, interest income on long-term debt instruments, dividends and capital gains are free from tax.

With the low tax rates there are also other regulations that protect business from unjustified taxes. Hong Kong is fully committed to its double tax agreement with thirty three nations, including PRC, Thailand and Belgium, to relieve companies from having to pay two taxes on one set of profits, as a result of multinational enterprise and multiple jurisdictions. For full details on Hong Kongâ??s double tax agreements, see the website for the Inland Revenue Department of Hong Kong (IRD).

Companies that conduct business through a branch in Hong Kong or are incorporated in Hong Kong cannot offset losses against the profits of other members in a group of companies â??through consolidated accounting systems, however the Hong Kong jurisdiction allows losses to be carried forward indefinitely. Assets are depreciated at authorized prescribed rates of depreciation, for example, computer equipment can be depreciated at 100% in the first year.

The general procedure for corporate taxation after incorporation in Hong Kong is straightforward. Typically a Hong Kong incorporated company will be tracked by the Hong Kong authority and sent a tax return at year end. Even when no tax return is issued to a company, they are responsible for notifying the government of any profits liable to tax. In standard practice, estimated tax assessments will be issued provisionally during the tax year based on historic profit information. A final assessment will then be released after filing of the tax return.

It should be noted that the Hong Kong tax year begins on April 1st. Also, companies liable to tax in Hong Kong are required to fulfill accounting and auditing standards i.e. be audited by a firm of Hong Kong accountants.

Other Taxes

In Hong Kong, people also benefit from zero sales tax, zero value added tax and zero annual net worth taxes.

Healy Consultants is a leading corporate services firm that assists entrepreneurs and investors with their company incorporation requirements. The firm provides a range of services including Hong Kong Company Formation, tax planning and offshore investing. More information on company incorporation can be found by visiting http://www.healyconsultants.com

Even though there were no Florida hurricanes in 2009, there was plenty of news from Florida home insurance companies.

To begin with, nearly 50% of all active Florida home insurance companies lost money in 2008 – a year in which no major storms hit. Many companies continued to experience losses into 2009. Among the reasons for these losses include lower revenue due to inadequate Florida home insurance rates along with rising expenses.

As 2009 unfolded, two Florida home insurance companies failed and were placed in receivership by the state after their cash reserves fell below the required minimum levels.

Homeowners insurance companies failing during non-hurricane years should send fear and panic across the state. Why? Because if these companies can’t make money in non-hurricane years the odds increase dramatically that they will not be able to build up enough cash to pay your claim after a major Florida hurricane.

A closer inspection of the company that failed in the spring of 2009 reveals disturbing trends that could affect other Florida home insurance companies in the future.

For starters this company faced an onslaught of both new and reopened claims from Hurricane Wilma – a storm that struck Florida nearly four years ago in October of 2005. These claims contributed to the ultimate collapse of this company because its backup reinsurance from 2005 was exhausted, leaving this small company on the hook to pay these claims from its own surplus.

In addition, this company had a large number of policies in many of Florida’s southern, most hurricane prone counties in the state. To the company’s credit, it also showed good faith through its willingness to cover older Florida homes.

What are the lessons from the two Florida home insurance companies that failed this year?

Even if your company meets the minimum capital and reinsurance requirements in the State of Florida it can still fail for many reasons including unexpected reopened claims from prior years and inadequate risk diversification across both Florida and into other states.

Here are the things you should look for when considering a new Florida home insurance company.

The majority of the companies still writing new home insurance in Florida are based in the state. Look for companies that are diversifying their policy base across most of the 67 counties in Florida so that they have balanced their exposure in the southern coastal counties with policies written in the northern interior counties.

Look for companies that are growing their home insurance business into other states. Some Florida home insurance companies that came into existence in the mid 1990’s are beginning to do this which is an encouraging trend. Companies that distribute their risk into other parts of the country will have improved odds of surviving the next round of hurricanes.

Learn as much as you can about the company’s customer service and claims processing. If a company you are considering has outsourced this work find out what their customer service history is and how many complaints they have received relative to others in the industry.

Finally, find out how much surplus the company has available to pay claims and check on their ratings with the major financial rating services. Many Florida home insurance companies being granted premium rate increases should be able to show that they can grow their surplus over time – particularly if Florida continues to have below average hurricane activity.

You should take note of those Florida home insurance companies that were able to stay profitable in 2008 and 2009 when many other companies lost money – together with those that demonstrate the ability to use higher rates going forward to increase their surplus.

In this brave new world of newly formed start-up Florida insurance companies, doing this research will give you the best chance of being paid quickly and fairly after the next round of Florida hurricanes.

Summary

Fairfax Financial Holdings Limited (Fairfax) is a financial services holding company based in Canada. Fairfax, together with its subsidiaries is principally engaged in insurance and reinsurance business. The company was formally known as Markel Financial Holdings Limited. Fiarfax provides property, casualty, and life insurance and reinsurance, investment management and insurance claims management. Additionally, the company also offers claims adjusting, appraisal, and loss management services. The company has operations in the US, Canada, the UK, France, Mexico, Singapore, Hong Kong, Ireland, and Bermuda.

Fairfax Financial Holdings Limited – Financial Analysis Review is an in-depth business, financial analysis of Fairfax Financial Holdings Limited. The report provides a comprehensive insight into the company, including business structure and operations, executive biographies and key competitors. The hallmark of the report is the detailed financial ratios of the company

Scope

- Provides key company information for business intelligence needs
The report contains critical company information – business structure and operations, the company history, major products and services, key competitors, key employees and executive biographies, different locations and important subsidiaries.
- The report provides detailed financial ratios for the past five years as well as interim ratios for the last four quarters.
- Financial ratios include profitability, margins and returns, liquidity and leverage, financial position and efficiency ratios.

Reasons to buy

- A quick “one-stop-shop” to understand the company.
- Enhance business/sales activities by understanding customers’ businesses better.
- Get detailed information and financial analysis on companies operating in your industry.
- Identify prospective partners and suppliers – with key data on their businesses and locations.
- Compare your company’s financial trends with those of your peers / competitors.
- Scout for potential acquisition targets, with detailed insight into the companies’ financial and operational performance.

For more information, please visit :

http://www.aarkstore.com/reports/Fairfax-Financial-Holdings-Limited-Financial-Analysis-Review-27767.html

Or email us at press@aarkstore.com or call +919272852585

Summary

Helvetia Group (Helvetia) is a Swiss-based insurance group. The company focuses on the reinsurance, life and non-life business, pensions and risk management businesses. Helvetia Patria Holding AG is the holding company of Helvetia group. The company serves and is internationally active in all-lines of insurance service group. The operations of the company are conducted through its subsidiaries and branch offices located in Germany, France, Austria, Spain, Switzerland and Italy, as well as the worldwide in assumed reinsurance business.

Helvetia Group – Financial Analysis Review is an in-depth business, financial analysis of Helvetia Group. The report provides a comprehensive insight into the company, including business structure and operations, executive biographies and key competitors. The hallmark of the report is the detailed financial ratios of the company

Scope

- Provides key company information for business intelligence needs
The report contains critical company information – business structure and operations, the company history, major products and services, key competitors, key employees and executive biographies, different locations and important subsidiaries.
- The report provides detailed financial ratios for the past five years as well as interim ratios for the last four quarters.
- Financial ratios include profitability, margins and returns, liquidity and leverage, financial position and efficiency ratios.

Reasons to buy

- A quick “one-stop-shop” to understand the company.
- Enhance business/sales activities by understanding customers’ businesses better.
- Get detailed information and financial analysis on companies operating in your industry.
- Identify prospective partners and suppliers – with key data on their businesses and locations.
- Compare your company’s financial trends with those of your peers / competitors.
- Scout for potential acquisition targets, with detailed insight into the companies’ financial and operational performance.

For more information, please visit :

http://www.aarkstore.com/reports/Helvetia-Group-Financial-Analysis-Review-27904.html

Or email us at press@aarkstore.com or call +919272852585

Special offer till 31th Dec 2009

There are thousands of unsuspecting people who end up falling victim to health insurance scams each year. Unauthorized insurers are ready to sell you health insurance with a low-cost premium and most people would never think that there are fake insurance companies out there waiting to steal your money. With so many companies offering health insurance, how does one decipher which ones are scams? The current trend of scams is on the rise due to the large number of uninsured individuals compared to the rising cost of prescription drugs. Simply put, people are looking for the best deal. There are ways to keep yourself safe from these con artists and still pay a reasonable premium.

Does a health insurance company seem to be offering a policy that is too good to be true? It could be. Victims of health insurance scams are usually those who go shopping around and find a great deal (and then find that in an emergency they are without insurance). There are no clear indicators of fraud unless you know what particular red flags to listen for during their sales pitch of their particular policy.

Con-artists are professionals at what they do because it’s often how they make their entire living. They will have paperwork that looks identical to a real insurer and uphold everything that seems to be that of a genuine and legitimate agent. First, common scams include loopholes that make sure what they are selling is not actually insurance. This would mean it is a discount program of some sort. These scams may reach you by telephone, offering a discount to individuals who, for any reason, do not qualify for real insurance. Also be wary if an agent mentions their plan being “reinsured.” It is true that some legitimate insurance companies do have reinsurance to protect themselves, but it is never mentioned when trying to sell insurance to a customer.

Health insurance scams are not easily spotted-liars may be trying to take advantage of your ignorance. Therefore, it is important to know all you can about health insurance before purchasing a plan. If someone calls your home and tries to sell you a form of health care or health insurance, take what knowledge you have and ask as many questions as you can think of. Any indication that this may be a fake insurer should be taken to the state insurance regulators for investigation. You could be saving yourself and others from being a victim.

When you have to give your kitten any kind of medication through the jaws it can be a tricky procedure. When it comes to giving your kitten pills, force feeding, grooming, and so on its preeminent to try to explain to them beforehand what you are trying to execute. You ought to not hold any secrets, trepidation of the unknown is your feline’s supreme nightmare. You must let him know what you are going to do, even though he may possibly not like it or possibly will indicate an hostility or try to leave, at slightest he will not become hysterical.

If you keep your feline from leaving and control his objections as you proceed to Calmly have your way, odds are the total thing will be done very Speedily. He’ll appear to regard the Episode as one of those Strange Actions that Pet owners indulge from Every once in a while that are mildly horrible and not to be understood, but, neither tedious nor threatening. For the reason that there’s nothing a feline can do, he puts up with such actions out of the love he Has in his heart for you, the feline possessor.

Kittens do understand that humans are assorted from felines and allow diverse ways of showing comfort. Before Starting any Steps in giving your feline his medications, be definite to wash your hands. You must at slightest wash them as the kittens awareness of smell is many times Stronger than your sensation of smell. If the feline smells anything Good it will be tough for your feline to cooperate and especially if your kittens have an obnoxious smell to bear.

The next step to resolve to organize your feline to take mediation is to make him comfortable as viable. Pet your kitten and calm his nerves. You must also talk to your kitten. Believe it or not, by chatting with intentions of reinsurance essentially can be pulled out up by your kitten. He can be aware of your feelings and emotions, and it will calm the feline possessor additionally.

Prior to giving your feline any kind of oral medications you must calmly wrap him into a comfortable towel or small blanket. Wrapping the feline in a towel gives you more control. Instead of the kitten being an equal partner, it gives The pet owner the mandate that you will need.. Remember that the towel ought to not be to thick or fluffy but must be more like a bath towel where it is light and flexible. The pet owner must also stay away from your newer and expensive towels.

The pet owner must make definite to wrap the feline strongly. You are not doing your kitten or you a favor by leaving the towel loose-fitting where there is a greater prospect that he can struggle out of control. Keep in mind, your kitten may struggle, but at least you encompass the higher hand and are in control.

When you are calmly wrapping your kitten in a towel, it is a virtuous concept to give him reinsurance and praise so that he doesn’t think that tproduce is a menace to his safety. The pet owner ought to make your kitten think that it is some kind of game that he is playing. Make certain to be tolerant and don’t bare any frustration and with practice, these steps ought to go much more rapidly.

After your kitten is all wrapped up and as Relaxed as possible, the pet owner ought to now lay the kitten on a chair or couch and you ought to kneel down on the Rug with your knees Spread and your feet as one behind you. Make definite to have the oral medication, (pills) next to you and hold the feline toward you. With your left hand, palm down, calmly take the feline’s cheekbones and tip his head back. With your right hand, holding the pill flanked by the index finger and thumb, palm up, use the back of your middle finger nail to Open the lower jaw down and place in the finger nail between the kittens teeth. At that time take your index finger and calmly push the pill far back down the throat to where it is beyond the bump of your feline’s tongue.  Then, let go speedily, so he can swallow the pill with wonder.

Don’t hold the feline’s mouth closed since feline’s swallow with their teeth a little opened and his tongue should be able to move unreservedly through his front lips. With time, giving oral medication such as pills becomes much easier. It is a helpful plan to ask your Veterinarian if perhaps your feline can take his pills with food because some pills requirement be given ahead of meals. Of course, ask if it is all right to just put the pill in the feline’s food, it would be easier for  you and your feline.

Summary

Beazley Group Plc (Beazley) is the parent company of global specialist insurance business. The company principally concentrates on writing specialty risk insurance and reinsurance business operating through Lloyd’s and Beazley Insurance Company, Inc. The company manages four Lloyd’s syndicates namely Syndicates 2623 and 623 underwrite worldwide; Syndicate 3623 focuses on accident and health business; and 3622 is a dedicated life syndicate. Through its Lloyd’s syndicates, the company is licensed to trade surplus lines insurance and reinsurance in the U.S. and 70 territories globally.

Beazley Group plc – Financial Analysis Review is an in-depth business, financial analysis of Beazley Group plc. The report provides a comprehensive insight into the company, including business structure and operations, executive biographies and key competitors. The hallmark of the report is the detailed financial ratios of the company

Scope

– Provides key company information for business intelligence needs
The report contains critical company information – business structure and operations, the company history, major products and services, key competitors, key employees and executive biographies, different locations and important subsidiaries.
– The report provides detailed financial ratios for the past five years as well as interim ratios for the last four quarters.
– Financial ratios include profitability, margins and returns, liquidity and leverage, financial position and efficiency ratios.

For more information, please visit :

http://www.aarkstore.com/reports/Beazley-Group-plc-Financial-Analysis-Review-26323.html

Or email us at press@aarkstore.com or call +919272852585

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What can’t be cured must be insured. –Oliver Herford

When a vehicle strikes another vehicle, an object, or a person, the consequences can be grave. Part of the price paid for mobility is the cost of such accidents.

The human toll is often much greater than the economic one. Although one can never hope to compensate for the human costs, insurance can certainly help soften the economic blows.

In most places, laws require you to purchase insurance for operating your vehicle. That’s a prudent way to ensure that individuals and families have some buffer against the harm from vehicle accidents.

Otherwise, people would be at greater risk of suffering personal or property damage with no compensation to cushion the blow. But you may still be hit by an uninsured driver. To help alleviate that problem, many vehicle owners purchase insurance against that uninsured-driver risk.

Receive benefits from your insurance policy after you’ve had a serious collision with an uninsured driver, and your economic health has a chance to recover. The funds you receive can be a vast multiple of all the vehicle insurance payments you’ll make in a lifetime. Now, that’s a big cost saving!

What are the low-risk alternatives to purchasing insurance? Well, you can walk. You can also ride with others. In some areas buses and subways are helpful choices.

Companies often have another opportunity. They can self-insure by keeping a pot of funds available to pay for accidents. If a company is large enough, self-insurance may be a good choice.

If the company’s drivers are cautious and the vehicles well maintained, it may be that safer driving will add up to fewer accident expenses than the average experience. Employ a simple way to administer the accident payments to those who are harmed, and you’ve saved some administrative overhead that insurance companies add to their rates. If there’s a profit on such insurance, you keep that profit for the company as well.

Obviously this option has some drawbacks for those who operate small companies. One accident costing millions can wipe out the company. The small company may also find it more costly to administer its own insurance than what a well-run insurer would charge.

A small company also may not know how its driving compares to others; there simply isn’t enough information. Even the worst drivers don’t get into accidents every day. Or a good driver may suddenly take to drinking and become a hazard to everyone.

But most importantly, people in small companies are usually doing many different jobs. Burden them with one more time-consuming activity, and something important that has to be done goes undone.

This analysis of how insurance works also applies to when an organization should outsource an internal activity. It’s good to start thinking about what could go wrong.

If you haven’t done much designing of new offerings, hiring another organization to help you test out the safety of your design may eliminate many potential accidents. Isn’t that a form of insurance?

It’s also helpful to think about how large the cost of something going wrong could be. Then consider how much it would cost to outsource and how often such expensive accidents could occur.

Insurance companies also use this thought process to consider if they have too much exposure to potentially expensive risks. If insurers sell too many home owners’ policies in areas subject to hurricanes, they will resell some of that risk to another kind of insurance company called a reinsurer. Even reinsurers sometimes find that they need to buy policies from other reinsurers to keep their balance of risk at an affordable level should claims soar due to a natural catastrophe.

Notice that this is a kind of contingent thinking based on “what-if?” examinations. A normal business analysis tends to focus on what is likely to go right and then optimizes the various choices for pursuing the opportunity to create the largest result.

Many people draw these conclusions from spreadsheet analyses derived from simple financial models. In this article, I’m suggesting that the opposite kind of thinking also be pursued.

I’m recommending that you also look at what could go wrong that would take away most of the benefit from pursuing a given opportunity. Then explore ways that outsourcing could increase your chances of success and reduce the risk of large negative events.

As we approach the one-year anniversary of the capsizing of the dredge at Sierra Rutile Limited (SRL) in July 2008, resulting not only in fatalities, injuries and property damage but triggering massive lay-offs and interruption of rutile production; my research into how the company,  its insurers and reinsurers were handling this major national catastrophic loss, has also unearthed hitherto unpublicized unconscionable agreements between successive Sierra Leone governments and Titanium Resources Group (TRG).

What is TRG?

Titanium Resources Group (TRG), for readers unfamiliar with its operations, is the parent company, owner and operator of two of Sierra Leone’s major extractive mineral mining companies, namely Sierra Rutile Limited (SRL), the country’s largest private sector employer and TRG’s major source of revenues and until recently Sierra Minerals Holdings Limited, its wholly owned bauxite mining operations in Sierra Leone.  The company is 59 percent owned and controlled by a Mauritian-born mining magnate, Mr. Jean Raymond Boulle and has as its Chairman, Mr. Walter Kansteiner, the former US Assistant Secretary of State for African Affairs and a Sierra Leonean, John Bonoh Sisay who serves as the Chief Executive Officer and also a Director.

A press release issued by the company in April, 2009 that it had successfully reached a settlement agreement on its $35 million dollar loss claims with Zurich Re, one of its major reinsurers, marked a major milestone and gives confidence that the other reinsurers will soon make whole the company’s losses from the dredge loss.

The major question now is whether the country which has made repeated sacrifices through tax subsidies and concessions and even allowed TRG to use as leverage its rutile and bauxite deposits in international financial circles will recoup some of the insurance recovery towards her development.

The collapse and loss of the dredge, estimated at 35 million dollars resulted in the company embarking on a series of cost cutting measures including a 25 percent workforce reduction, suspension of exploration activities and agreement with the government on a 2 year moratorium on interest payments to the government of Sierra Leone relative to a 45 million dollar EU loan.

However, despite the loss the company posted only a 5 percent loss in rutile production ( 78,908 tons in 2008 as opposed to 82,530 tons in 2007) while it increased ilmenite production from 15,750 tons in 2007 to 17,528 tons in 2008. The company nevertheless states that it “does not have sufficient cash reserves to rehabilitate Dredge D2 and no assurance can be given that the Company will be able to secure funds to rehabilitate the dredge”.

According to the company, “the mining concession in Sierra Leone is one of the largest natural rutile deposits known in the world” which has been mined since 1967 and currently has a projected mine life of 19 years, as estimated by Mine Development Associates in 2005. The company also extracts and produces ilmenite and zircon at the rutile facilities.

During its recently concluded shareholders meeting on June 11, 2009, TRG unveiled its 2008 annual report which essentially provides among other unreported financial statements, a virtual roadmap of how mining companies in Sierra Leone have been able to deprive our nation of millions in taxes.

Through utilization of coercive measures, insistence on secrecy of mining contracts and false accounting practices for example, TRG and Mr. John Bonoh Sisay were able to secure an unconscionable deal for Sierra Rutile (SRL) by having the Tejan-Kabbah government in 2004 grant his company a 10-year exception on fuel import taxes, a re-negotiation downwards of the government’s standard 3 percent royalties of turnover to 0.5 percent, in return for an equity stake in the mines. The turn over reported by TRG for periods 2006 to 2008 totals $168.57 million dollars. Absence the agreement of 2004, the country stood to gain in taxes at 3 percent the sum of approximately 6 million dollars. However, with the 0.5 percent rate subsequently agreed TRG would only pay the sum of approximately 900,000 dollars. The substantial difference clearly benefited someone at the detriment of the country and such an unconscionable agreement not only invites review by the regulatory bodies such as the ACC but glaringly renders such an agreement voidable in law.

 Mr. Sisay who reportedly was rewarded with the Chief Executive Officer (CEO) position after this unconscionable deal was quoted as stating that “in effect the deal was renegotiated so that the government has an equity position in the company, with a 3 percent annual increase for 10 years, until it holds 30 percent”.  The government and people of Sierra Leone according to very conservative estimates are however projected to loose more than a 100 million dollars in revenues between 2004 and 2016 as a result of the tax concessions granted to TRG.

It is note worthy that following the signing of the agreement; Mr. Sisay was granted options to common shares in the company in excess of 174,000 in 2005. Further in 2008 he was again rewarded with an additional 100,000 shares payable at 47.00p and 75.50p with maturity dates in 2010 and 2013 respectively.

The 2008 Annual Report:

The report with its accompanying independent auditor’s report by BDO De Chazal Du Mee, Chartered Accountants in Mauritius; its consolidated financial statements; balance sheet and notes to the consolidated financial statements provides a rare glimpse into the operations of a company, characterized by an intricate web of self-dealing, corporate exploitation and tax dodging schemes that have raped our nation’s strategic minerals with the covert and tacit accomplice of our nation’s political leaders.

It is thus of the utmost national economic interest and importance that TRG’s operations, business activities, subsidiaries, contracts and agreements with government officials and the local communities be subjected not only to scrutiny and transparency but an urgent legal and regulatory review by the Anti Corruption Commission (ACC) and or Parliament so that Sierra Leoneans can better understand why despite 40 years of rutile mining our nation basically has nothing of significance to show. Such a probe must be focused and designed to reform the existing agreements and to mandate an annual reporting by mining companies of capital expenditures, profits, taxes and fees and company funded community programs. Such a requirement will ensure public scrutiny of contracts and agreements with the general public better able to monitor compliance and avert the signing by politicians and bureaucrats of such catastrophic agreements, as the 2004 First Amendment Agreement.

What is the First Amendment Agreement?

According to the First Amendment Agreement dated February 4, 2004 between the government of Sierra Leone (GOSL) and Sierra Rutile Limited, the government assigned to SRL “all its rights, title and interest in, to and under the future PAYE taxes due from SRL to the GOSL in an amount not exceeding 37 million US dollars. In consideration for the foregoing assignment, SRL agreed to transfer up to a 30% equity interest in Sierra Rutile Holdings Ltd to the GOSL within 60 days of the end calendar year commencing on April 1, 2005, equal in value to the PAYE amounts accrued during such calendar year”.

According to the company’s financial statements, as of December 2007 and 2008 only a total of 2,466 shares have been transferred and PAYE accrued for the year in Sierra Rutile Limited amounted to 1,840,000 USD(one million eight hundred and forty thousand dollars)  and in 2007 USD1,288,000 (one million two hundred and eighty eight).

The above assignment in lieu of PAYE taxes resulted in GOSL obtaining a 2.063% ownership interest in Sierra Rutile Holdings Limited (SRHL). SRHL is one of several subsidiaries of TRG whose main business is listed as an “intermediate holding company”. Thus, as can be noticed the country’s revenue stream from PAYE taxes payable by SRL has cleverly and or corruptly been transferred into a worthless minority share ownership in a company with essentially no independent source of revenues. As a British Virgin Islands incorporated company, SRHL has no legal requirement to prepare and file audited accounts in Sierra Leone. TRG thus has been able to reap off Sierra Leone of over 3 million dollars just in 2007 and 2008 through such an unconscionable agreement.

Despite being a minority shareholder, GOSL does not have a seat on the board of directors of TRG. Decisions thus affecting a company and country that the nation has obtained loans on its behalf, provided subsidies and deferred collection of interest payments and owes equity shares in are made without any participation by representatives of the government. I would be pleasantly surprised if our Ministers of Finance and Mines and at least the High Commissioner in London were present at the concluded June 11, 2009 TRG shareholders meeting in London. Rather Mr. Alex Kamara, a CEMMATS Group Director was appointed to the TRG board on March 10, 2008. According to TRG, CEMMATS has a “number of contracts for the supervision of the construction of the capsized dredge and a new power house at SRL”.

Moreover, compounding the loss to the nation by such an unconscionable agreement signed in 2004, the financial statements for 2008 showed a negative loss of shareholders interests. The company’s loss before interest, tax, depreciation and amortization for 2008 is reported at 22.8 million dollars. The losses attributed thus to the minority shareholder (GOSL) exceeded their equity shares and as such the company absorbed the losses. However, any future reported profit by SRHL and SRL would be allocated to the majority interest until the government’s share of losses previously absorbed by the company is recovered.

The scheme of equity ownership on the surface appears economically viable to a layman, however what it entails in actuality is increasingly the country becomes saddled with the liabilities of a company in proportion to its shares. Thus as an example, with a projected 30 percent shares in the company and losses of 22.8 million in 2008, Sierra Leone is assessed a 30 percent share of the entire losses of the company. It is interesting to note that since the signing of the agreement, TRG has not posted any profits thus robbing the country of royalty payments and saddling the nation with additional debts.

Currently aside from the salaries of its workers and the 10 percent mandatory company contribution into NASSIT, the company does not provide any retirement benefit plan for its employees. The agricultural development fund the company contributes for development of agriculture in the mining communities represents a paltry $75,000.00 per annum. This annual amount is allegedly paid into a separate fund under the management of the government. An audit of this account by the ACC on behalf of the chiefdom communities would be highly in order to ensure that the intended recipients are benefiting.

In conclusion, a cursory review of TRG’s financial statements reveals that this company Is highly leveraged with loans and guaranties from international financial institutions Sierra Leone is signatory to forming the bulk of capital for its operations. For example, the European Union provided the GOSL the sum of 25 million Euros, to be on lent to Sierra Rutile in 2006. The loan carries an interest rate of 8% per annum with the principal and interest paid to support socio-economic development projects in Sierra Leone. However, upon capsizing of the dredge, TRG in 2008 secured a moratorium on payment of the interest with GOSL, thus impeding our nation’s development.

It is envisaged that any reforms in the mining arena especially as relates to TRG’s rutile mining operations must ensure a return to the status quo ante were the company is made to pay royalties as originally agreed instead of the bogus equity shares in SRHL, divestiture of shares in the SRHL company, recession of moratorium of interest payments on the EU loan, repeal of tax subsidies and concessions and greater transparency and regulation by the Anti-Corruption Commission (ACC)  to ensure compliance with the terms of mining agreements in the country.

As previously postulated in my article “Enterprise Risk Management: a national Risk Management & Insurance Strategy for Sierra Leone” (http://www.articlesbase.com/authors/kortor-kamara/70274.htm), the country needs a national risk management and insurance office to serve as a repository of governmental contracts and agreements; provide technical risk management and insurance review of all past, present and future governmental contracts; provide insurance and loss control oversight of all governmental contracts to ensure compliance with appropriate terms and conditions. For with such an agency in existence in our country unconscionable agreements, moratoriums and the 2004 First Amendment Agreement would never have been swept over the heads of our nation.

It is now of the utmost urgency that the Minister of Mines and the entire government embark upon a new round of negotiations with TRG to ensure that the interests of the people of Sierra Leone are adequately protected and agreements as negotiated by Mr. Sisay in 2004 are rescinded immediately. It should be noted that TRG’s operations are subject to the laws and regulations of Sierra Leone and changes in legal requirements, terms and conditions of existing permits and agreements are within the legal purview of government to revisit and reform.