(Adds further stock move, industry exposure)
By Patrick Fitzgibbons
NEW YORK, July 2 (Reuters) - Insurance company London Pacific Life & Annuity Co., a U.S. subsidiary of London Pacific Group Ltd Reinsurance (NYSE:LDP - News; London:LPG.L - News), said on Tuesday its exposure to WorldCom Inc. (Nasdaq:WCOM - News) will cause it to discontinue accepting new business. ADVERTISEMENT
The news sent the shares plunging $1.80, or 56.3 percent, at $1.40 in afternoon trading on the New York Stock Exchange.
"Persistent negative events in the bond and equity markets, including the recent WorldCom announcement, continue to erode significantly the capital" of the U.S. division, the company said in a press release.
A spokesman for London Pacific could not be reached for comment.
The company becomes the latest insurer with significant exposure to the collapse of WorldCom.
WorldCom, the No. 2 U.S. long-distance carrier, said last week it improperly booked almost $4 billion in expenses in what could be one of the biggest accounting scandals in U.S. history.
The insurance industry's direct exposure to WorldCom debt is estimated at about $5.4 billion, Moody's Investors Services said on Wednesday.
Included in the list of U.S. insurers with the largest holdings of WorldCom debt are American International Group Inc. (NYSE:AIG - News), with $415 million, Prudential Insurance Co. of America, with $321 million, and Aegon USA, with $317 million.
Northwestern Mutual Life Insurance Co., MetLife Inc. (NYSE:MET - News) and Teachers Insurance Annuity Association are also among the most exposed to WorldCom, Moody's said.
"To date, the group has been unsuccessful in concluding a transaction to enhance the capital of that company. As a consequence, the U.S. insurance subsidiary has discontinued the issuance of new policies pending future developments," it said. "Although the group's other insurance company, London Pacific Assurance Limited, has not been affected to the same extent it too will be closed for new business."