The life insurance industry has $214 billion in commercial mortgage-backed securities, according to new data from SNL Financial, which tracks the portfolios of more than 800 life insurers. More than a third of that amount, or $86 billion, is invested in bonds rated A or less. The issuers of lower-rated bonds are more likely to default, Fitch says.
Fifteen of the top 20 life insurers had more commercial mortgage-backed securities than capital and reserves. Five of those companies held more of the riskier bonds, the ones rated A or less. They were Allianz Life Insurance; Allstate Life Insurance; Manulife's John Hancock Life Insurance; Genworth Life Insurance, part of Genworth Financial(GNW Quote - Cramer on GNW - Stock Picks); and Hartford Life Insurance, a unit of Hartford Financial Services(HIG Quote - Cramer on HIG - Stock Picks).
Allianz Life Insurance, which holds three times more of the lower-rated securities than capital and reserves, might be the most vulnerable. The company had $2.1 billion of capital and reserves and $6.9 billion of the less-desirable issues at year end.
Prudential Insurance Company of America, the largest insurance unit of Prudential Financial(PRU Quote - Cramer on PRU - Stock Picks), is the largest holder of commercial mortgage-backed securities with $11.7 billion but almost all of that amount is invested in AA-rated or AAA-rated bonds.