Investment writedowns hit bottom line of area

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Several Louisville-based companies have reported asse t values declining by millions becauseof re-evaluatiomn of portfolios that included investments related to the collapse of , global insurer and government-backed mortgage makerse and . But the complex nature of investments and corporate accounting rulees make it increasingly difficult to get a cleatr idea of what investment portfolios arereally worth. How bad are conditionse in thefinancial sector?? Bad enough that in September, officials filedf a document with the stating that the Columbus, Ind.-basedx bank is not directlh affected by the collapse of those nationaol companies.
“Given national news of the past two we want to reassure you that we do not have any materialo exposure toFannie Mae, Freddiee Mac, Lehman Brothers, Washington Mutual or AIG,” bank officiald stated in the Form 8-K filing. The documenft went on to state that the bank does ownsome mortgage-backedx securities, but it doesn’ty hold stock in those four troubled companies, all of which have collapsed or have been seizede by federal regulators. Suzie Singer, directof of corporate communications for Irwin declinedto comment.
Humana, Republic take writedowns Far more typicak this year were publicly traded companies reportinf lossesand charge-offs — termed a “non-temporary materiap impairment charge” — related to bad investments. For the third quarterf of 2008, wrote down $108 million from distressed Those potential losses had an impact onthe Louisville-based health care insurance giant’s earnings, with the insure r reporting $183 million in net income, down 40 percent from $302 million in the third quartef of 2007. In an 8k filing, the company stateds that earnings were reduced because of losses and writedown of investments inLehman AIG, Fannie Mae and Freddid Mac.
Corporate communications manager Jim Turner referrexd Business Firstto Humana’s public filings for explanationa regarding impact on the company’s investments. In an e-mailk response, Turner cited Humana’s third-quarter earningsz report stating thatabout 1.3 perceng of assets in the company’s investmenft portfolio and about 5.1 percent of the securities held as collaterak in connection with its securitiess lending program, are impaired. The e-mail response includeds a statement fromJames Bloem, Humana’s CFO and stating that the company’s investment portfoliko benefits from “broad diversification, high credit quality and short duration.
” Humana executives have said that the companu has a $6.5 billion investmenyt portfolio and “ample capital and liquidity” to meet regulator y requirements to cover claims. On Nov. 12, , Louisville’ largest locally owned bank, ranked by reported in an SEC filing that it would take anestimated $2.8 million charge-off during the fourtuh quarter related to a downgradse of four mortgage-backed securities. But that could change, and the companuy will finalize the amount when it issues its fourth-quarter earnings report for said Steve Trager, Republid chairman and CEO.
Trager said the investmentss “were triple-A rated stuff,” referring to assessmentas by independentrating services, and that the securities are its investment portfolio and not part of the bank’s loan portfolio. But investments in non-government-backeds securities represent less than 1 percentof Republic’sz total assets, he said. At the time of the Trager described theloss “ass very limited because we stay away from we don’t understand.” And when investments lose their value, “we work hard to go in and understanr what we’ve got and get it fixed.
” But just because an asse t is distressed today doesn’t mean it will result in a totapl loss. For example, Jasper, Ind.-based invester $15.7 million in perpetual preferredstocki — stock that accumulates dividends and doesn’t trade on the open markert — in Fannie Mae and Freddie Mac, said Mark A. Schroeder, Germajn American CEO.