US life insurers dragged down by soured investments

US life insurers dragged down by soured investments
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First Published: Tue, Feb 10 2009. 11 36 AM IST
Updated: Tue, Feb 10 2009. 11 36 AM IST
New York: US life insurers Principal Financial, Lincoln National and Genworth on Monday posted fourth-quarter losses, hurt by soured investments.
Insurers, already battered by the declining value of investments in the third quarter, are increasingly being hit by charges to boost reserves for variable annuity equity market guarantees, a popular retirement product.
Principal Financial swung to a quarterly loss of $7.5 million, after net realized capital losses of $188.9 million, largely from impairments on fixed maturity securities and declining equity values.
Principal’s investment losses were larger than expected, said Morningstar analyst Alan Rambaldini. “But none of the (insurers’) operating results were good,” he added.
Shares of Des Moines, Iowa-based Principal fell 24% in post-market trading.
Lincoln National also swung to a quarterly net loss, as costs for variable annuities soared, and returns from investments in hedge funds and private equity evaporated, sending its shares down about 6% post-market.
The Philadelphia-based company said it expected a life insurance subsidiary to end the year with risk-based capital, a key regulatory metric, of between 380 and 39%.
Excluding one-time charges, Genworth would have had an adjusted operating profit of 17 cents, short of the 37 cents analysts on average expected, according to Reuters Estimates.
Still, the company said it ended 2008 with about $2 billion in capital, which it added was sufficient to satisfy rating agencies and regulators, something that investors have been closely watching.
In recent months, life insurers have been cutting jobs, trying to reduce investment risk, and have unsuccessfully lobbied US insurance regulators to ease capital rules. Many, including Lincoln, Principal, and Genworth, have also applied to take part in the US Treasury’s broad $700 billion financial services bailout.
The government could approve some insurers for a capital injection as early as Tuesday, leading to a rally in the sector’s stocks on Monday. The Dow Jones US Life Insurance index rose 2.6%, led by Genworth as the biggest percentage gainer.
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First Published: Tue, Feb 10 2009. 11 36 AM IST
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