Tag - Financial Services

China has been good to investors. Thanks to a wave of hot Chinese companies that have become phenomenally successful in U.S. and global markets, investors have been rewarded with exceptionally high returns.

Even as the U.S. economy fights to stay out of a recession, consumer spending slows, the credit crunch worsens, bleak financial market news becomes the norm, and a wave of American businesses struggle to stay afloat, many companies tied into China's booming economy continue to prosper. 

China Direct, Inc. (AMEX:CDS), an American firm that assists Chinese companies with accessing the U.S. capital markets and owns controlling stakes in a diversified portfolio of China-based businesses, has been no exception. China Direct invests in profitable, well-managed Chinese small to medium enterprises (SMEs) that account for 75% of the growth in the Chinese economy and have difficulties obtaining capital through traditional channels. After incorporating as Evolve One, Inc. in 1999, China Direct quietly meandered along until it grabbed the Street's attention in November 2007, when it posted unexpectedly high third-quarter revenue gains, swung into the black and upped its earnings outlook for 2007 and 2008. 

China Direct's recent success can be attributed to savvy acquisitions made by its smart management team, which has significant experience in top public and private enterprises in the United States and China.

In October 2006, it snapped up a 51% interest in Shanghai Lang Chemical Co., Ltd., a company that sells and distributes industrial grade synthetic chemicals. In February 2007 it bought a 60% majority stake in Chang Magnesium Co. Ltd., operator of a magnesium refinery in Taiyuan, China, and it secured 51% ownership of CDI Wanda Alternative Energy Co., Ltd., a recycling company that converts waste rubber tires into gasoline, diesel and fuel oil. In November of 2007, it acquired CDI Jixiang Metal Industry Co., Ltd., a company with sole mining rights to a parcel of land in the zinc- and lead-rich Yongshun Kaxi Lake Mining area. In December 2007, it bought a 51% stake in Baotou Xinjin Magnesium Co. and Baotou Sanhe Magnesium Co., Ltd., two magnesium companies.

Irwin Financial Corp. (NYSE: IFC) shares are declining after the financial services company announced before Monday’s opening that it plans to suspend quarterly dividends.

"During the last two years, our dividends have exceeded our earnings," CEO Will Miller said in a statement. "Until we return to normal levels of profitability, that is neither a sustainable nor wise strategy.”

The Columbus, Ind.-based firm needs permission from its outside regulators to pay dividends, which are financed through Irwin’s subsidiary bank. Irwin Financial is doubtful its regulators would approve quarterly dividends, citing “extraordinary uncertainty in the capital markets and continued deterioration in credit quality” as reasons.

To lower risk, Irwin’s bank tightened underwriting guidelines and ceased production of some types of mortgages.

"These precautionary steps help ensure the long-term strength of our 137-year-old bank so that it remains a vital organization in the future,” Miller said in a statement. “With strong capital, good liquidity at the bank, and our moves to reduce risk in our ongoing originations, I believe we can and will manage through the increased uncertainties in the current environment and, when conditions permit, restore the dividends.”

The company noted that the dividend action has no effect on customers of the bank.

In morning trading, IFC shares are down 13.32%, or $1, at $6.51. Over the last 52 weeks, shares have ranged from $5.80 to $20.48.

Stifel Financial Corp. (NYSE: SF) shares are down after the financial services provider’s announcement that its third-quarter profit totaled $8.1 million, or $0.45 per share, below analyst expectations of $0.92 per share and from $5.4 million, or $0.39 per share, a year earlier.

The St. Louis-based company’s quarterly revenue jumped 66% to $190.8 million, missing Wall Street expectations of $198 million and from $115.2 million during the same period of 2006.

In today’s trading, SF shares were down 9.06%, or $4.83, at $48.49. Over the last 52 weeks, shares have ranged from $34.59 to $63.48.

Put financial services and insurance together in a sentence and most people think of some of the nation's largest companies in the industry: Berkshire Hathaway Inc. (NYSE: BRKA), American International Group, Inc. (NYSE: AIG), MetLife Inc. (NYSE: MET), Allstate Corp. (NYSE: ALL) and The Hartford Financial Services Group, Inc. (NYSE: HIG). But one ever-growing small-cap is poised to make a name for itself.
 
Meet American Physicians Service Group, Inc. (Nasdaq: AMPH), an Austin, Texas-based $130 million company that not only provides brokerage and asset management services to individuals and institutions, but also provides insurance services including medical malpractice insurance. The insurance services segment provides financial management service to banks and insurance companies that provide liability insurance to doctors, while its financial services segment provides brokerage, asset management and investment advisory services to individuals and institutions.
 
Though the company has been around since 1974, American Physicians Service Group is not exactly a household name. But with a strong second quarter under its belt and glowing future prospects, that is bound to change. The company owes much of its recent success to smart management. The ambitious firm is expanding from its rather modest local roots thanks largely to a savvy acquisition. In April 2007, the company completed its acquisition of American Physicians Insurance Company (API), a firm whose operations it had managed since the mid-1970s. 
 
In the quarter ended June 30, APS increased both revenue and earnings, reporting a net income of $12 million, or $2.37 a share, compared with $598,000, or $0.21 a share, in the same quarter last year. Revenues more than tripled to $29 million, compared with $8 million over the same period in 2006. In addition, the company posted a gain of $2.3 million related to the API merger. 2007 EPS projections of $3.38 are more than 300% higher than 2006 results.
 
"This is our first quarter to report combined results with API . . . and those results have exceeded our expectations. Due to continued positive claims trends, we lowered claims reserves and related reinsurance reserves by $14.1 million in aggregate this quarter. However, we remain very conservatively reserved at the upper end of the actuarial range," Chairman Ken Shifrin said in a statement. "In addition to favorable development in reserves, our policyholder count continues to increase. During the twelve months ended June 30, 2007, our total policyholder count increased by 462 to 4,802. This is largely due to our favorable 90% retention rate in 2007. Though the market continues to be characterized by rate pressure, our profit margin remains strong due to continued favorable trends in the frequency of claims.”

Shifrin also said that American Physicians financial services segment has performed very well, with revenues up 46% for the first six months of 2007, compared with the same period last year, and pretax profits up an impressive 68% in that same time frame.
 
Wall Street has taken notice.