NU Online News Service, May 18, 2:57 p.m. EDT
The insurance industry held more than $1.1 billion of JPMorgan stock when the bank announced a trading loss of $2 billion on May 10, but most companies should escape any long-term fallout on their portfolios, reports SNL Financial.
JPMorgan's hard hit on one of its hedges surprised shareholders, who had long viewed the company as one of the best-managed entities on Wall Street. Almost $14.4 billion was eliminated from its market value, and shares slid again on May 14.
“In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored,” said JPMorgan Chase Chairman, President and CEO Jamie Dimon during a conference call last week. “The portfolio has proven to be riskier, more volatile and less effective an economic hedge than we thought.”
Insurance companies FM Global, American Life & Accident Insurance Co. ofKentucky, and Blue Cross & Blue Shield of Florida Inc. held the most JPMorgan shares in the insurance industry, according to SNL data.
However, JPMorgan stock held within insurer portfolios is comparatively small against policyholder surplus. SNL relays that AIG, the second-greatest P&C carrier, owned $59.9 million of JPMorgan stock at the end of 2011, which represented just 0.21 percent of its total surplus.
State Farm Multi Automobile Insurance held $42.7 million in the bank's stock at the end of last year, which was compacted into a 0.07 stock-to-surplus ratio.
A spotlight is currently on American Life & Accident Insurance Co. of Kentucky, which held $36.5 million of the bank's shares, equaling 48 percent of its $76.1 million in policyholder surplus. SNL says the company may not weather the damage as easily as the rest of the insurance landscape.
SNL states that the most-exposed insurers may regain their investments if the bank's shares regain strength in the second half of the second.
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