Insurers real estate lending should slow down this year.The attractive yields and spreads that brought insurers flocking back to commercial mortgages in the second half of 1993 have declined, which should put a damper damp·er n. 1. One that deadens, restrains, or depresses: Rain put a damper on our picnic plans. 2. An adjustable plate, as in the flue of a furnace or stove, for controlling the draft. on insurers' real estate lending activity this year, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a leading insurance/real estate expert. "The influx of new lenders for a limited number of borrowers has pushed yields so far down many insurers need to spend significantly more time searching niche markets A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. for solid returns," said Dennis Yeskey, head of the insurance practice for the national accounting firm of Kenneth Leventhal & Company. "There are good opportunities in multi-family properties in the Southeast and Midwest in addition to some suburban office space in healthy markets like Atlanta." Yeskey still expects an increased number of real estate transactions this year as insurers clean up their balance sheets to meet regulators' guidelines on risk-based capital. "Because of their capital positions, many leading insurers may pursue transactions to subtract real estate from the balance sheet, especially mid-sized and Canadian-based firms," Yeskey noted. "These moves include securitizing loan portfolios, forming mortgage conduits, selling properties or moving real estate to a holding company to remove it from the regulatory arena." Generalizations, however, are dangerous because some of the largest players with strong reserves are not under pressure to sell. At the same time, distressed portfolios with upside potential Upside potential The amount by which analysts or investors expect the price of a security may increase. upside potential The potential price or gain that may be expected in a security or in a security average, generally stated as the dollar could put some companies into play for a merger or acquisition, Yeskey pointed out. He also suggested potential borrowers study the new lineup of insurance lenders "that aren't household names History Formation (1998-2000) Household Names have been together since 1998, with various members rotating throughout the line-up with singer, Jason Garcia, until it was solidified in the summer of 2000 with bassist/keyboardist, Chris Peters, and drummer, C. J. in real estate, but are financially strong and intend to stay in the game for the long term." Examples he cited include Phoenix Home, Principal Mutual and Penn Mutual Penn Mutual traces its beginning to 1847 when it became the seventh mutual life insurance company chartered in the United States. At the time of its organization there was a general distrust of stockholder-owned corporations so it was established as a mutual owned by its . In addition to real estate problems, Yeskey believes that the insurance industry's slow-motion shakeout Shakeout A situation in which many investors exit their positions, often at a loss, because of uncertainty or recent bad news circulating around a particular security or industry. Notes: During the dotcom boom and bust, numerous shakeouts occurred. will continue well into 1994. "The major life companies are facing more non-traditional competition for investment capital including banks, mutual funds and smaller insurers heavily marketing annuities. To survive, many companies including Kemper and Transamerica sold off unprofitable lines of business. Others, including Travelers and Met Life, merged with healthcare entities, while some companies will de-mutualize to go public," he explained. |
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