NEW YORK (Reuters) - American International Group Inc AIG.N, the world's largest insurer, has exposure to between $550 million and $600 million in Fannie Mae and Freddie Mac preferred shares, according to a source familiar with the investment.
The figure is a fraction of AIG’s holding of debt issued by the mortgage-funding giants, according to figures disclosed by the company last month, which did not break out equity holdings.
Fannie and Freddie shares have plunged amid the U.S. housing crisis, precipitating the U.S. government’s bailout of the companies last Sunday.
Amid the federal takeover, investors have been biting their nails over companies’ holdings of U.S. agency equity, fearful that government intervention will wipe out value.
As with AIG, insurers’ total ownership of preferred stock represents a fraction of the sector’s holding of Fannie and Freddie debt. This fact could soothe insurance investors, since the agencies’ debt is seen as guaranteed from default under the federal bailout.
Insurers had poured close to $370 billion into agency-issued fixed-income securities, according to Oldwick, New Jersey-based A.M. Best’s earlier figures.
Fannie and Freddie, government-sponsored enterprises (GSE), own or guarantee almost half of all outstanding U.S. mortgages.
AIG, at the time of reporting second-quarter results in August, disclosed that a residential mortgage-backed securities portfolio held about $16.6 billion in debt issued by the GSEs.
Reporting by Lilla Zuill; Editing by Brian Moss and Gerald E. McCormick
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