Monday, November 24, 2008

Going Stag, The Hartford Way

Insurance companies typically do not have to mark-to-market in the same sense as, say, a bank's held-for-sale investments, but rather they reflect reasonable impairment expectations. Mark-to-market can wreck their balance sheet, but their CMBS portfolios typically are relatively unlevered long-term investments to match expected insured payouts.
Expertise in CRE is not hard to find at most Insurance companies - they account for a large chunk of the commercial mortgage lending market themselves and have seasoned real estate staffs (mostly).
Typical CMBS investment - AAA 30% subordinated CMBS. Why? Its 10-years long and bullet proof. They want something that will be there in 10 years (or longer) so they can use it to pay off insured payouts.

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