Life Insurance Companies Bottom Line Hurt By Real Estate Investments
For those selling large commercial real estate deals, times may be a bit tougher on the news coming out of Wall Street. The large insurance companies, not known for their risk taking, are looking at impairments to their portfolios of billions of dollars due to real estate losses.
What this means is that new investments from these cash rich companies will be held off for a while until the market settles. One of the biggest sources of cash for large real estate deals, the insurance companies role is even bigger in times of tight credit.
Look for fewer commercial deals to be completed as the year winds down and the insurance companies try to keep a lid on real estate losses.
The most recent such sign for the life insurance firms was a Goldman Sachs research report that came out on Monday, warning that Prudential Life Insurance Co.’s exposure to mortgage-backed securities and real estate loans could trigger anywhere from $1 billion to $4 billion in impairments – essentially making a serious dent in its excess capital. Met Life, it said, could realize between $1 billion to $6 billion in similar impairments, although these losses would be mitigated by the $2.3 billion raised in new capital.
The concern by some is that life insurance companies may dial back their appetite for real estate investment even further, especially as such weak spots in their portfolios become apparent. “At the beginning of this year a lot of insurers decided that the risks in the market meant that they would cherry pick the best deals and then withhold investment until the market improves,” via Globe Street
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