SOURCE: Kamakura Corporation

Kamakura Corporation

October 01, 2009 10:00 ET

Kamakura Reports the Recession Is Over

Troubled Company Index Improves for Sixth Consecutive Month in September

NEW YORK, NY--(Marketwire - October 1, 2009) - Kamakura Corporation announced Thursday that the Kamakura index of troubled public companies made its sixth consecutive improvement in September, with credit conditions now substantially better than average. After reaching a peak of 24.3% in March, the Kamakura global index of troubled companies dropped an additional 1.5 percentage points to 10.9% of the public company universe in September. Kamakura defines a troubled company as a company whose short term default probability is in excess of 1%. Credit conditions are now better than credit conditions in 62.9% of the months since the index's initiation in January 1990, and 2.8 percentage points better than the index's historical average of 13.7%. In March, by contrast, credit conditions were better than only 3.6% of the monthly periods since 1990. The all-time low in the index was 5.4%, recorded in April and May 2006, while the all-time high in the index was 28.0%, recorded in September 2001. The index is based on default probabilities for 26,965 companies in 30 countries. The absolute number of companies in the "over 20%" default probability category declined by 44 firms to 204 (a decrease of over 17%). To follow the troubled company index and other risk commentary by Kamakura on a daily basis, see www.twitter.com/dvandeventer.

In September, the improvement in credit quality was especially pronounced among the riskiest credits: the percentage of the global corporate universe with default probabilities between 1% and 5% decreased by one percentage point to 7.4%. The percentage of companies with default probabilities between 5% and 10% was down 0.1 percentage points to 1.7%. The percentage of the universe with default probabilities between 10 and 20% was down 0.2 percentage points to 1.1% of the universe, while the percentage of companies with default probabilities over 20% was down by 0.2 percentage points to 0.8% of the total universe in September. In March, by contrast, 3.1% of the total universe had default probabilities over 20%.

Kamakura's President Warren A. Sherman said Thursday, "The index's continued improvement, especially among high risk credits, is excellent news. It's now increasingly obvious that the recession is over for the economy as a whole. That being said, the credit improvement in September seemed to leave a few companies behind. The rated public companies showing the largest rise in short term default risk in September were all in Japan: Japan Airlines, Pioneer Corp., Mizuho Trust & Banking, NIS Group, and Takefuji."

The Kamakura index uses the annualized one-month default probability produced by the best performing credit model of the Kamakura Risk Information Services default and correlation service. The model used is the fourth generation Jarrow-Chava reduced form default probability, a formula that bases default predictions on a sophisticated combination of financial ratios, stock price history, and macro-economic factors. The countries currently covered by the index include Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Hong Kong, India, Ireland, Israel, Italy, Japan, Luxemburg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.

Kamakura CEO Dr. Donald R. van Deventer and other members of Kamakura senior management also maintain an active blog on key risk management issues. Recent blog entries include the following stories:

--  An Appreciation: APRA's Prudential Approach to ADI Liquidity Risk
--  Modeling Correlated Default in a Reduced Form Model: A Worked Example
--  Advances in Asset and Liability Management: Modeling Insurance and
    Pension Liabilities in an Integrated Enterprise Risk Management Framework
--  Recent Advances in Asset and Liability Management: Modeling
    Operational Risk in an Enterprise Risk Management Framework
--  An Appreciation: Lawrence G. McDonald on the Fall of Lehman Brothers
--  Comparing the Credit Risk Term Structure of Corporations and
    Sovereigns
--  Yield Curve smoothing: Nelson-Siegel versus Spline Technologies, part
    5
--  The Search for Significance in Default Modeling: The Long and the
    Short of It
    

About Kamakura Corporation

Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura has been a provider of daily default probabilities and default correlations for listed companies since November 2002. Kamakura announced the KRIS Sovereign Default Probability Service on May 19, 2008. Kamakura launched its collateralized debt obligation (CDO) pricing service KRIS-CDO in April 2007. Kamakura is also the first company in the world to develop and install a fully integrated enterprise risk management system that analyzes credit risk, market risk, asset and liability management, transfer pricing, and capital allocation. The Kamakura Risk Manager system, now in version 7.0, was first offered commercially in 1993 and has been continually enhanced since then. Kamakura has served more than 200 clients ranging in size from $3 billion in assets to $1.6 trillion in assets. Kamakura's risk management products are currently used in 32 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, the Ukraine, Eastern Europe, the Middle East, Africa, Australia, Japan, China, Korea and many other countries in Asia.

Kamakura has world-wide distribution alliances with Fiserv (www.fiserv.com), Unisys (www.unisys.com), and Zylog Systems (www.zylog.co.in) making Kamakura products available in almost every major city around the globe.

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