Wuestenrot & Wuerttembergische AG, a German insurer and home lender, seeks to raise the share of mortgage loans among its investments as asset classes such as bank debt or government bonds become less attractive.
“We consider it an advantage of our business mix that we are actually able to offer insurance, mortgage loans and mortgage bonds through our subsidiaries,” W&W Chief Executive Officer Alexander Erdland said in an interview in Munich today. “We don’t have to turn to structured products.”
The company, based in Stuttgart, has almost 10 percent of its about 35 billion euros ($48 billion) in assets under management in mortgage loans and considers increasing that to as much as 15 percent, according to Erdland. W&W acquired home-loan provider Allianz Dresdner Bauspar AG from Frankfurt-based Commerzbank AG last year.
Insurers, which held about $23 trillion in assets globally at the end of 2009, according to estimates by Swiss Reinsurance Co., are facing pressure on their investment results as low interest rates hurt returns and planned new rules for the industry in Europe make equity and real-estate investments less attractive because of higher capital requirements.
Greater risk tied to bank and sovereign debt following the financial crisis also adds to insurers’ “investment dilemma,” Erdland said. “Plain capital returns for customers are going to be lower in the future. As an industry we need to better communicate to our customers that it’s our core value to provide risk protection and reliable guarantees and that life insurance is not just an investment product.”