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September 14, 2005 at 08:00 PM
Top 50 insurers’ pass-through holdings grow to $76.4 billion
A blazing real estate market is being reflected both in the increase in mortgage-backed securities in the market and in a significant increase in pass-through mortgage-backed securities held by life insurers.
Freddie Mac, for instance, grew its retained portfolio of structured securities by 5.7% to just under $678 billion year-to-date through August 2005, while total securities issued increased at an annualized 6.9% rate during the same time period.
One reason for the increase, according to Michael Cosgrove, a Freddie Mac spokesman, is that the price and mix of securities was right in August. In general, there is a demand for these securities and competitive bidding for them can be keen, he adds.
Fannie Mae reports that total business volume for mortgage-backed securities increased to $57.9 billion in August 2005 from the previous month’s $52.5 billion. Additionally, the number of issues that Fannie Mae is guaranteeing is increasing, although because of a restructuring, the number of securities retained in its own portfolio is diminishing, says Janis Smith, a spokeswoman.
Insurers also are growing their pass-through MBS holdings. Mortgage-backed securities continue to be a noticeable portion of life insurers’ gross investment holdings, making up roughly 9.5% of insurers’ investments, according to data culled from the NAIC annual statement database via National Underwriter Insurance Data Services/Highline Data.
And, according to data for the top 50 life insurers ranked by these holdings, when mortgage loans and real estate are factored in with their respective 2.2% and .59% average share of all investment holdings, the average total for all variations of real estate holdings was 12.29% of all investments.
The largest growth for the top 50 came from pass-through mortgage-backed securities, which grew 50% in 2004 to $76.4 billion from $50.8 billion in 2003. Pass-throughs are investments in which all principal and interest are passed through to investors. A caveat to that 50% growth is significant increases–ranging from 105% to 2167%–posted by 12 companies.
Those totals were comprised of three categories of pass-through mortgage-backed securities: those issued or guaranteed by the government national mortgage association, better known as Ginnie Mae; those issued by the federal national mortgage association, better known as Fannie Mae, and the federal home loan mortgage corporation, known as Freddie Mac, or Veterans Affairs; and, all others.
