Prudential’s Subprime Exposure Warrants Watch
According to Citigroup analyst Colin Devine, among life insurance companies, Prudential Financial Inc. has the riskiest investment portfolio, including subprime exposure, and MetLife Inc. and Genworth Financial Inc. also deserve close attention. Devine defined high risk as below investment grade bonds, equities, real estate and other partnerships and joint ventures.
Says Devine, at 13.8 percent, Prudential's portfolio had the greatest exposure to high-risk assets, followed by MetLife at 13.6 percent and Genworth at 9 percent. These figures are significantly higher than those of 15 publicly traded life insurance companies, whose high-risk assets averaged 7.8 percent of total investments, he said.
Overall, Devine said, life insurers' investment portfolios "appear to be in good shape," but he said investors should keep an eye on those companies with the higher exposures — e.g., Prudential, whose risk in its closed block of policies (those policies no longer sold but are still on the books), was much higher than its regular investments.
Prudential and MetLife officials could not be reached for comment immediately. A Genworth spokesman said a comment is forthcoming.
Analysts estimate total losses on subprime mortgages currently range from $55 billion to as much as $100 billion. Analysts and investors alike are concerned as many of these mortgages are securitized and held in collateralized debt obligations (CDOs) whose terms are not clear.
Published on August 14, 2007
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