Ratings of Insurers Lowered; Real Estate Investments Blamed

For the second time in a week, Moody’s Investors Service has downgraded the ratings of several major insurers, citing concerns about their large commercial real estate investment portfolios.

The New York-based credit rating agency downgraded the debt of Aetna Life & Casualty Co. of Hartford, Conn.; Crown Life Insurance of Toronto; Home Life Insurance of New York, and Kemper Group and its affiliated life insurance companies in Illinois.

None of the rating downgrades, which affect about $1.2 billion of debt, lower the companies’ claims-paying ability below Moody’s category of “good” financial strength.

The action Thursday follows Moody’s downgrade last Friday of the claims-paying ability of six life insurers, including Travelers Insurance Co. and John Hancock Life Insurance Co. The nation’s commercial real estate market has been plagued by a huge supply of empty office towers and other developed property after the aggressive building boom in the late 1980s.

The ratings downgrades come on the heels of failures of insurance companies Executive Life Insurance Co. and First Capital Life Insurance, both of Los Angeles, and Mutual Benefit Life Insurance in New Jersey.

Aetna, one of the nation’s largest life insurers, had its claims-paying ability lowered to “excellent” from “exceptional.” Moody’s said Aetna’s earnings and ability to raise capital “will be affected adversely as a result of its real estate exposure.”

In a statement, Aetna said that despite the downgrade, “Aetna Life & Casualty Company and related companies continue to provide excellent financial security.”

Aetna, the largest stock-owned insurance company in the nation, has commercial real estate investments totaling about $22 billion of its $63-billion investment portfolio, spokesman Jonathan Powell said.

Moody’s downgraded Crown Life, one of the eight biggest life insurers in Canada, to the lower end of the “good” category from the upper range because of its large real estate holdings.

“We have done a very exhaustive review of our mortgage portfolio, and we do not see sizable losses,” said Brian Johnson, Crown’s chief financial officer.

Kemper Investors Life Insurance Co. and Federal Kemper Life Assurance Co. were lowered to the “good” category from an “excellent” rating.

“Our real estate portfolio is well diversified and is significantly better than the industry average performance,” said Janice Kalmar, spokeswoman for Kemper Corp.

Home Life Insurance was also lowered to the low range of the “good” category from the upper tier. Company officials could not be reached for comment.

Kemper Investors Life Insurance Co. and Federal Kemper’ Life Assurance Co. are the 23rd- and 24th-biggest stock-owned life insurance companies.