September 22, 2021

High end smart phone woes/InCapS AM Best rating

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bgr-best-smartphones-2013-1000Things are about to get even uglier for the high-end smartphone market

By Tero Kuittinen From BGR

As it happens, Samsung issued a warning about its upcoming quarterly earnings literally hours before Walmart’s decision to discount the iPhone 5c to $29, apparently permanently. Oddly enough, smartphone chip titan Qualcomm’s share price has started lagging NASDAQ since early June even as overall tech investment sentiment remains giddy. Isolated events? Or omens of high-end gadget sales slowing down? Unfortunately, it’s probably the latter.

We’ve known for months that market growth for both high-end smartphones and tablets has started coming down faster in 2014 than anyone anticipated. In India, tablet revenue growth has slowed down dramatically, dropping to just 32% in the year ending March 2014. Rumblings about China’s weakening smartphone market have rolled around for months. Way back in February, Gartner noted slowing smartphone growth globally and softening trends in China in particular.

Several trends are conspiring to undermine high-end smartphone and tablet demand: The increasing popularity of 5-inch to 6-inch phablets is sucking the life out of proper tablet market, while a flood of cheap, sub-$200 smartphones is robbing demand from luxury smartphones that have displays of under 5 inches.

Vendors have been quite aware of these trends for a long time, but unwilling to fully acknowledge their potential impact in sales projections. This summer may be the turning point as orders for the pivotal back-to-school season are locked in. If retailers are not ordering the expected volumes of pricier smartphones outside of the phablet niche, we could see a fairly dismal second-quarter earnings season in July.

As phone vendors and chip companies start issuing autumn quarter outlooks in the coming weeks after the big tech stock gains of the early summer, we could be in for a bit of turbulence. NASDAQ’s surge over the past two months probably won’t hold up very well in the face of major hardware sector disappointments.

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A.M. Best affirms debt rating of InCapS Funding II, Ltd. and InCapS Funding II Corp.’s senior notes

OLDWICK, N.J.–(BUSINESS WIRE)–A.M. Best has affirmed the debt rating on multi-tranche collateralized debt obligation (CDO) co-issued by two bankruptcy remote special purpose vehicles: InCapS Funding II, Ltd. (Cayman Islands) and InCapS Funding II Corp. (Delaware) (collectively known as InCapS II and issuers). The outlook for the rating is stable. (See below for a detailed listing of the rating.)

The principal balance of the rated notes are collateralized by a pool of trust preferred securities, surplus notes and secondary market securities (collectively, the capital securities), primarily issued by small to medium-sized insurance companies. The capital securities are pledged as security to the notes. Interest paid by the issuers of the capital securities are the primary source of funds to pay operating expenses of the issuers and interest on the notes. Repayment of the notes principal is primarily funded from the redemption of the capital securities.

This rating action primarily reflect: (1) the current issuer credit ratings (ICRs) of the remaining issuers of the capital securities; (2) a stress of up to 250% on the assumed marginal default rates of insurers (derived from Best’s Idealized Default Rates of Insurers); (3) the amount of capital securities considered to be in distress; (4) recoveries of 0% after the defaults of the capital securities; and (5) qualitative factors such as the effect of interest rate spikes; subordination levels associated with each rated tranche; the adjacency of very high investment grade ratings to very low non-investment grade ratings in the transaction’s capital structure and the possibility that additional redemptions of highly rated entities will leave lower-rated companies in the collateral pool.

The rating could be upgraded or downgraded and/or the outlook revised if there are material changes in the ICRs of the remaining insurance carriers, an increase in the number of defaulted capital securities and/or additional capital security redemptions.

This is a structured finance rating.

For access to special reports, analytical methodologies and transactions relating to insurance-linked securities, please visit

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at

A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.



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