Some life insurers may have done worse than Wall Street expected during the fourth quarter of 2007, but they are unlikely to post big writedowns.
Securities analysts at UBS Investment Research, New York, give that assessment, in a comment on the upcoming round of life insurance company fourth-quarter earnings releases.
Weak variable investment income and weak sales of products linked to the stock market could hurt profits, but most big life companies have only small amounts of the sorts of assets that have been causing problems for the banks and securities dealers, the analysts write.
Even when insurers do hold assets such as securities backed by mortgages issued to borrowers with weak credit scores, insurers are in a better position to ride out the current financial storms because they have the flexibility to hold the securities to maturity, the analysts write.
Life insurers tend to invest heavily in highly rated corporate bonds, and “corporate default rates are still near historic lows,” the analysts write.