Months ago, Citigroup (C) and Merrill Lynch (MER) kicked off what has now become a worldwide deluge of writedowns on mortgage and credit-related assets. It was believed at the time that losses would be limited to those securities tied to risky mortgage debt. This viewpoint has been proven false.
Now, as the credit crisis spills over into markets once believed to be virtually risk free, even conservative financial institutions are feeling the pinch.
The New York Times is reporting the insurance industry may be the next to see years of consolidations packed into a few short months.
Everyone knows about the troubles at American International Group (AIG), the world's largest insurer, which is now owned by Joe and Jill Six-pack (thank you, Governor Palin, for re-introducing this archetype to the lexicon). But it was believed that AIG was an isolated incident, that its unique exposure to the treacherous credit default swap market sealed its fate.
Troubling action yesterday in other larger insurers is turning that supposition on its head.
Prudential Insurance (PRU) fell more than 30% after warning profits would slump and indicating it may need to raise capital. Lincoln National (LNC) tumbled 35%, Principal Financial (PFG) lost 27% and Unum Group (UNM) dropped 30% in other southward moves within the industry. The group as a whole fell almost 17%, making it the second worst performing sector behind the automakers.
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