Citi Gags on Insurance

Only one quarter ago, Citicorp swallowed hard and wrote off $171 million of loans to First Capital Holdings, the defunct California insurance company. Bank sources now say that the company is choking on at least $30 million of exposure to Mutual Benefit Life Insurance Co.

Much of the Mutual Benefit risk - which some sources say is closer to $45 million - involves swaps, in which the bank was a counterparty. Citi has had a century-long relationship with the insurer, said a source close to the insurance industry.

It's too early to think about writeoffs, a bank source said, because bankers are working furiously to unwind some of the positions.

Citicorp chairman John S. Reed is said to have met recently with Alan J. Weber, group executive for financial institutions and transaction services, to sort out the extent of Citi's vulnerability to the insurance industry.

Line bankers responsible for some of the insurance company loans are also being shifted. The relationship manager with First Capital is now in loan workouts; several executives in charge of credit oversight in the global finance sector are reportedly under pressure.

A Citicorp spokeswoman declined to comment.

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