Property-casualty insurers' investment portfolios are generallyconservative, and most companies have little subprime mortgageexposure, according to a Bank of America investment analysis on theindustry.

The bank study found also that while commercial mortgage backedsecurities (CMBS) portfolios were large for some companies, theywere generally "of very high quality and focused on pre-2005vintage years."

"Overall, we believe that the investment leverage and riskyassets are minimal for most p-c companies," the analysis said. Itadded that multiline insurers tend to have a higher exposure torisky investments.

The analysis said subprime represented less than 1 percent ofshareholders equity for most p-c companies. "Of the 27 p-ccompanies we analyzed," it said, "only five had significantsubprime and Alt-A exposure."

Alt-A mortgages are considered to be riskier than prime but lessrisky than subprime mortgages.

Subprime/Alt-A exposure was concentrated among the largestinsurers with life operations such as Allstate, AIG, The Hartford,CNA Financial and XL Capital."

Those five companies, according to the analysis, represented 98percent of the total subprime/Alt-A exposure for the 27 companiesanalyzed. "On the opposite end of the spectrum, 15 p-c companieshad essentially less than 1 percent of common equity insubprime/Alt-A exposure, with six p-c companies with no exposure atall," the analysis found.

Bank of America said that, for its analysis, it decided to lookat p-c company CMBS exposure, which it said could be the "nextconcern."

"While subprime has been discussed and disclosed in more detailsby many companies, the next concern may be commercial real estate(CRE), more specifically, commercial mortgage backed securities.This is especially true given the significant decline in thetrading value of this asset class that may lead to investmentwrite-downs in the first quarter."

The analysis looked at CMBS exposure of 12 p-c companies. Itconcluded, "CMBS exposure was of high quality, with little exposureto vulnerable classes," which are defined as securities "A"-ratedor below with 2006 and 2007 vintages.

Hartford had the most exposure to CMBS, equaling 89 percent ofits common equity, the analysis said. It noted that The Hartford,Progressive and W.R. Berkley had the highest proportion of CMBSbelow investment grade.

However, for all the companies analyzed, the most vulnerableclass of CMBS--"A"-rated or below with 2006 and 2007vintages--represented an average of just 5 percent of CMBSportfolios. The 2006 and 2007 vintages alone represented an averageof 37 percent of the CMBS portfolios, "with a low of 4 percent forTravelers and a high of 82 percent for W.R. Berkley," according tothe analysis.

The bank said CMBS portfolios represented approximately 20percent of fourth-quarter 2007 common equity for the p-c companiesexamined.

On average, 90 percent of the CMBS securities were rated "A" orabove, and 71 percent were rated "triple-A." Safeco, Travelers andCNA Financial had the highest percentage of "triple-A"-rated CMBSand no below investment grade exposure, said the analysis.

In general, the analysis said the "average p-c industryinvestment portfolio consists mainly of very high quality fixedincome securities," and added that they are well diversified.

The analysis said that p-c stocks are "a relatively safe havenwithin the financial sector." It noted that while prices arefalling across p-c lines due to the soft market, "we expect ROEs toremain relatively solid and above their historical averages through2009, supported by reserve releases and share buybacks."

Higher than expected price decreases, deterioration in terms andconditions, spikes in loss cost inflation, or severe catastrophelosses could jeopardize this outlook, the analysis noted.