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COMMERCIAL MORTGAGE, REAL ESTATE INVESTMENTS WILL CONTINUE TO CHALLENGE L/H INDUSTRY, A.M. BEST REPORT SAYS

 OLDWICK, N.J., April 27 /PRNewswire/ -- While some signs of stabilization are evident, commercial mortgage and real estate investments will continue to pose a formidable challenge for a number of life/health insurers, according to a new study released by the A.M. Best Company.
 The report, "1992 Life/Health Industry Mortgage Loan Summary," is based on data extracted from the 1992 annual statements and questionnaires of insurers that filed with A.M. Best. These insurers account for approximately 95 percent of all mortgages held by the life/health industry.
 Authors Larry G. Mayewski, senior vice president of Best's life/health division, and Michael L. Albanese, assistant vice president, discuss some of the problems which led to the weakened performance of the industry's real estate/mortgage holdings, including rising interest rates and the deregulation of financial institutions in the early 1980s, increased consumer demand for investment products, immense competition among insurers and the collapse of property values as a national recession moved in.
 During 1992, total problem mortgages -- defined as loans that are restructured, overdue, in the process of foreclosure, foreclosed or acquired in the satisfaction of debt -- increased 18.5 percent, rising to 2.4 percent of general account assets from 2.1 percent in 1991, mostly from significant increases in the volume of restructured and foreclosed mortgage loans. To a lesser degree, an increase in delinquent loans and loans in the process of foreclosure also contributed to the escalation.
 However, "One positive note is that the accelerated rate of mortgage delinquencies showed a general stabilization during the final two quarters of 1992," according to Mr. Mayewski. "Companies with large exposures, including Travelers Corp., Equitable Life Assurance Society of the U.S. and Mutual Life Insurance Company of New York, have become increasingly proactive in managing their portfolios to help mitigate further deterioration," he noted. In addition, insurers have exhibited an increased willingness to foreclose quickly on underperforming properties, further contributing to the slowdown in overdue loans in the latter part of the year.
 Office building, retail facility and hotel/motel loans have been the hardest hit by deteriorating real estate markets and generally weak economic conditions, while farm and residual mortgages reported much lower rates of underperformance than the commercial loan segment. The pace of mortgage-related problems decelerated for most geographic regions during 1992, except the Pacific and mid-Atlantic regions, where significant losses and weak economic conditions contributed to an increase in problem loans.
 For the most part, more than 90 percent of the industry's mortgage loans were held by 50 companies -- many of which have been active in the interest-sensitive life, annuity and pension product markets. These same life/health insurers hold 93 percent of the aggregate non-performing loans and accounted for approximately 74 percent of the industry's 1992 total assets.
 "A.M. Best does not expect soft real estate conditions to improve materially in the near term," Mr. Mayewski said. "Real economic growth will remain sluggish and the oversupply of existing structures, coupled with the relatively low levels of liquidity that currently exist for purchases, refinancing and development, will perpetrate modest downward pressures on real estate pricing over the next several years. Given these conditions, we anticipate that life/health insurers will take further write-downs and will need to establish additional reserves throughout 1993," he added.
 -0- 4/27/93
 /NOTE TO EDITORS: Copies of the report can be obtained by calling 908-439-2200, ext. 5684./
 /CONTACT: Larry G. Mayewski, 908-439-2200, ext. 5643, or Michael L. Albanese, 908-439-2200, ext. 5645, both of A.M. Best/


CO: A.M. Best Company ST: New Jersey IN: INS SU: ECO

CK -- NY062 -- 1259 04/27/93 10:48 EDT
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Date:Apr 27, 1993
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