Life Insurer Sees Opportunity in the Rubble

Life insurers seemed to be one of the safe havens as the financial crisis unfolded, until it came to light earlier this month that the federal government was preparing to open its bailout coffers to the sector.

Though life insurers tend to make relatively "safe" investments, nearly all assets have lost significant value as the economy has deteriorated. As a result, the corporate bonds, mortgage-backed securities, equities and derivative products that life insurers used to offset liabilities have taken significant writedowns.

The biggest shoe to drop has been within the variable annuities business. Salespeople made sweetened offers to woo customers amid heightened competition, including promises of minimum returns, regardless of what happened to underlying assets. Now those annuities are upside down, with life insurers required to pay out far more than the products are worth. ...