Prudential Financial Inc. has the riskiest investment portfolio, including subprime exposure, among life insurers, while MetLife Inc. and Genworth Financial Inc. should be closely monitored, Citigroup analyst Colin Devine said in a report on Monday.
Devine said Prudential's portfolio had the greatest exposure to high-risk assets at 13.8 percent, with MetLife close behind at 13.6 percent. Genworth followed with 9 percent, he said.
The average level of high-risk assets for life insurers as a percentage of total investments was 7.8 percent for 15 publicly traded life insurers, Devine said.
The Citigroup analyst defined high risk as below investment grade bonds, equities, real estate and other partnerships and joint ventures.
Prudential and MetLife officials could not be reached for comment immediately.
Our investment portfolio is largely fixed income, with only 4 percent below investment grade with very limited exposure to equities, and no exposure to exotic structured products, said Tom Topinka, a Genworth spokesman.
Shares of all three stocks closed up Monday, along with the Standard & Poor's insurance index, which ended up 0.26 percent at 371.51.
Overall, Devine said, life insurers' investment portfolios appear to be in good shape, but said investors should watch the companies with higher exposures.
He said the risk in Prudential's closed block of policies, which are no longer sold but still on the books, was much higher than its regular investments.
Estimates of total losses on subprime mortgages range from $55 billion to as much as $100 billion, according to analysts. Analysts and investors worry because many of them are securitized and held in collateralized debt obligations (CDOs) whose terms are not transparent.
(Reporting by Ed Leefeldt)