SOURCE: Kamakura Corporation

Kamakura Corporation

February 02, 2011 10:00 ET

Kamakura Troubled Company Index Shows Sharp Decline in Credit Quality in January

Kamakura Troubled Company Index Jumps 1.49% to 5.94%

NEW YORK, NY--(Marketwire - February 2, 2011) - Kamakura Corporation reported Wednesday that the Kamakura index of troubled public companies jumped significantly in January after setting an all time low of 4.36% on December 17. The index jumped 1.49% to reach 5.94% in January after ending December at 4.45%. Of the 1.49% increase, 1.31% represents seasonal factors, because default is much more likely in the first quarter of the year than it is at other times. The Kamakura troubled company index measures the percentage of 29,400 public firms in 37 countries that have annualized 1 month default risk over one percent. Beginning with the November 2010 index value, the Kamakura troubled company index is now based on the version 5.0 default models from Kamakura Risk Information Services. Previously, the index was reported using the KRIS version 4.1 models. The version 5 models were estimated over the period from January 1990 to December 2008 and therefore capture the key events of the credit crisis in the fall of 2008.

Kamakura's index had reached a recent peak of 22.25% in January, 2009. Credit conditions at the end of January were better than credit conditions in 93.8% of the months since the index's initiation in January 1990. This result is surprising to many. What should not be a surprise is the fact that companies in the "troubled category" are almost exclusively financial institutions or housing related firms, rather than a broad cross section of the economy. The average index value since January 1990 is 12.61%.

The all-time high in the index was 27.41%, recorded on October 31, 2001. To follow the troubled company index and other risk commentary by Kamakura on a daily basis, see For a detailed comparison of Versions 5.0 and 4.1 of the index, please see this recent blog entry:

In January, the percentage of the global corporate universe with default probabilities between 1% and 5% was 4.77%, an increase of 88 basis points. The percentage of companies with default probabilities between 5% and 10% was 0.83%, an increase of 43 basis points. The percentage of the universe with default probabilities between 10% and 20% was 0.27% of the universe, up 14 basis points, while the percentage of companies with default probabilities over 20% was 0.07% of the total universe in December, an increase of 4 basis points. 

Martin Zorn, Chief Administrative Officer for Kamakura Corporation, said Wednesday, "Among the 2,099 firms in the KRIS corporate universe with legacy ratings, 9 firms showed increases in 1 month annualized default risk of more than one percent. Four of the firms were in Italy and two were Irish firms. The seasonal increase in the troubled company index was also accompanied by an index increase of 18 basis points on a seasonally adjusted basis."

Beginning in November, 2010, the Kamakura index uses the annualized one month default probability produced by the KRIS version 5.0 Jarrow-Chava reduced form default probability model, 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, China, Denmark, Finland, France, Germany, Greece, Hong Kong, India, Indonesia, Ireland, Israel, Italy, Japan, Luxemburg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Poland, Russia, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, United Kingdom, and the United States.

About Kamakura Corporation
Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura has taken Credit Technology Innovation Awards from Credit Magazine each year since 2008. In 2010, Kamakura was the only vendor to win 2 innovation awards, one each with distribution partners Fiserv and Thomson Reuters. Kamakura, along with its distributor Fiserv, was ranked number one in asset and liability management analysis and liquidity risk analysis in the RISK Technology Rankings in 2009. Kamakura Risk Manager, first sold commercially in 1993 and now in version 7.2, was also named in the top five for market risk assessment, Basel II capital calculations, and for "risk dashboard." Kamakura was also ranked in the RISK Technology Rankings 2008 as one of the world's top 3 risk information providers for its KRIS default probability service. The KRIS public firm default service was launched in 2002, and the KRIS sovereign default service, the world's first, was launched in 2008. KRIS default probabilities are displayed for 4000 corporates and sovereigns via the Reuters 3000 Xtra service and the Thomson Reuters Eikon service. 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 33 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, the Ukraine, Eastern Europe, the Middle East, Africa, South America, Australia, Japan, China, Korea and many other countries in Asia.

Kamakura has world-wide distribution alliances with Fiserv (, Sumisho Computer Systems (, Unisys (, and Zylog Systems ( making Kamakura products available in almost every major city around the globe.

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