U.S. life insurers reported pre-tax realized statutory investments (including the decline in valuation reserve) in 2012 of $136 million on CML portfolios compared to pre-tax realized losses of $26 million (one bp of CML book value outstanding) in 2011. Cumulative CML losses totaled about 133 bps over the 2008-2012 period, which the report characterizes as “relatively modest” compared to previous commercial real estate downturns.
“Absent significant negative economic developments, overall credit losses in 2013 are expected to be at similar, historical levels in the range of 20-25 bps of fixed income assets,” the report states.
Below is a summary of Moody’s-rated U.S. life insurance industry’s average pre-tax realized bond/preferred stock credit losses for 2008 through 2012. Bond losses (net of transfers to interest maintenance reserve) are represented as a percentage of total invested assets, as well as a percentage of fixed income investments excluding CMLs.
| U.S. life Insurance Industry Pre-Tax Bond/Preferred Stock Credit Gains/(Losses) |
|
| |
2008 |
2009 |
2010 |
2011 |
2012 |
Cumulative 5-year |
| % of Avg. Invested Assets |
-1.16% |
-0.63% |
-0.32% |
-0.29% |
-0.16% |
-2.55% |
| % of Avg. FI Investments ex CML |
-1.60% |
-0.87% |
-0.42% |
-0.38% |
-0.22% |
-3.49% |
| Amount ($B) |
($30.40) |
($16.70) |
($8.50) |
($8.10) |
($4.70) |
($68.40) |
Sources: Moody’s Investors Service, SNL FINANCIAL LC.
July 08, 2013 at 10:16 AM
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