Moody’s Downgrades Prudential, Nation’s Top Insurer : Investment: Lower ratings nag at an industry laden with commercial real estate and junk bonds.

A leading rating agency on Friday lowered its assessment of Prudential Insurance Co. of America, the nation’s largest insurer, marking the latest in a string of downgradings in the troubled insurance industry.

Moody’s Investor Service Inc. said the revised assessment reflects concerns about Prudential’s concentration of assets “in commercial real estate and its above-average holdings” in junk bonds.

Moody’s rating of Prudential’s financial strength slipped from Aaa, or “exceptional,” to Aa1, a rating that still places Prudential at the high end of Moody’s “excellent” category.

Prudential, headquartered in Newark, N.J., had assets of $149 billion as of Sept. 30, 1991.

Rating agencies have been taking a much harsher look at insurers’ assets since last year’s failure of large insurers. They were brought down by portfolios laden with non-performing mortgages, real estate that had declined in value and losses on junk bonds.

Prudential Chairman and Chief Executive Robert C. Winters said in a statement that the new rating “underestimates the strength and safety of this company.”

He stressed that there has been “no change in Prudential’s financial position to explain the new rating,” which reflects “a tendency by the agency to be more cautious in rating financial institutions.”

Moody’s faulted Prudential’s real estate for being “heavily weighted in office properties, a particularly troubled product type.”

Winters said Prudential’s portfolio “is faring better than that of most all competitors.” Mortgage delinquencies are running below the industry average, and the company’s equity investment in real estate remains higher than its book value.

Winters noted that publicly traded junk bonds make up less than 1% of total assets, while the remaining non-investment grade holdings are private placements, “which have a much different risk profile.”