Magazine article American Banker

Equitable Life Assurance to Create Subsidiary to Manage Real Estate; Move Illustrates Drive for Diversification in Insurance Industry

Magazine article American Banker

Equitable Life Assurance to Create Subsidiary to Manage Real Estate; Move Illustrates Drive for Diversification in Insurance Industry

Article excerpt

NEW YORK -- The Equitable Life Assurance Society of the United States, the nation's third largest life insurance company, soon plans to establish a company for developing, financing, and managing real estate.

The subsidiary, to be called Equitable Real Estate Investment Management Inc., will mark another move by insurance companies to diversify into broader financial services, industry sources say.

The subsidiary will seek new business as an independent profit center and will manage the $20 billion worth of real estate already under Equitable's control. That figure represents about 40% of the company's assets.

Life insurance companies traditionally are large buyers of real estate since they invest cash generated from insurance policies and from pension funds under their management.

Now several carriers are seeking to generate extra income from their investment acumen. They want, in effect, to become investment bankers and brokers for outside concerns.

Equitable, for example, last year spun off the Equitable Investment Management Corp., which handles investments in stocks and bonds. The next move is focused on real estate, an Equitable official said. He declined further comment pending an official announcement.

The Prudential Life Insurance Company of America, the nation's largest insurance carrier, also is segregating its investment departments to go after new businesses. The company recently formed Prudential Mortgage Capital Co. to expand its real estate financing.

"We are starting to look at our investment areas as creating products that can be marketed through the insurance area," said Brian Strum, vice president in real estate investment at Prudential's headquarters in newark, N.J. A 'Revolutionary' Change

That's a big change in the life insurance industry, said Robert Waldron, the New York representative of the American Council of Life Insurance, a trade group.

The investment areas have always serviced the needs stemming from products created and sold in other departments, he said. "It's revolutionary that they now are creating their own products."

Prudential officials have indicated a particular interest in returning to the home mortgage markets, which the life insurance companies largely abandoned as lenders in the 1960s. …

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