Fitch: No Big Impact From Insurers' GSE Investments

Fitch Ratings says the impact of investments in Fannie Mae and Freddie Mac by life and property/casualty insurers will have a limited impact on those companies' ratings. The rating agency estimates insurers' loss exposure to Fannie Mae and Freddie Mac preferred and common stock to be approximately $4 billion, which equates to approximately 0.5% of combined statutory capital for life and property/casualty insurers. There is a material exposure to the GSEs' debt, an estimated $350 billion, which represents 11% of total investments and 44% of statutory capital. Fitch added that it views GSE debt as having the explicit support of the federal government. Fitch has only taken one downgrade of a life insurer because of its exposure to Fannie Mae and Freddie Mac. Old Mutual PLC's life insurance business was downgraded from BBB-plus to BBB because the company will incur investment impairments of $135 million on GSE preferred securities. Old Mutual previously took a $149 million impairment because of its exposure to residential mortgage-backed securities, as well as corporate bonds and preferred stocks.