I always get suspicious when insurance (and to a lesser degree, financial) companies raise capital through preferred share offerings unless if such offerings are associated with some form of refinancing.
An example would be the latest preferred share offering from PartnerRE (NYSE: PRE) which is a Bermuda-based reinsurance firm. They managed to get “whacked” by the Japanese earthquake and as a result, will be taking a net loss for the year.
Normally, well-capitalized insurance firms set money aside for rainy day years, such as when earthquakes, hurricanes and other sorts of disasters strike all at once. When such disasters hit all at once, they can dip into the cash buffers and pay off the claims. So why raise relatively expensive money? Is their balance sheet that leveraged that they feel uncomfortable just paying off the claims?
All insurance firms are very research-intensive. It is impossible to properly value these companies by just reading the financial summary – otherwise they all look like spectacular purchases.