Wachovia's life insurance policies lead to huge loss

Fri, 09 May 2008 06:59:57 -0400

We've all been talking about writedowns for leveraged loans, subprime-related securities, and heck even plain loan losses. But life insurance policies? Huh? About $315 million of Wachovia's first-quarter loss of $708 million was due to writedowns stemming from a revaluation of the life insurance policies it takes out on its own employees. The Financial Times reports that banks take out such policies on their own employees. They pay off when employees die, even if they are no longer with the company. There are also some tax benefits. The article also notes that shareholders and regulator have criticized such policies, in part because few employees know about them. Hey, anything for revenue. You've got to wonder what other banks are thinking. Are more revaluations coming?

For more:
- here's the Financial Times article