Insurers’ Corporate-Bond Losses May Exceed Subprime

Corporate debt defaults may cost U.S. life insurers “substantially” more than losses on securities linked to subprime, Alt-A and commercial mortgages.

Corporate defaults are poised for a “significant” increase this year as the recession deepens, Berg, based in New York, said in a research note yesterday. The American Council of Life Insurers estimated the industry,led my Metlife Inc. and Prudential Financial Inc, holds $1 trillion in corporate debt.

“None of the life insurers we studied appear to be doing a particularly good job” of picking bonds backed by companies, Berg said. “Understandably, investors are concerned.”


Life insurers have plummeted in the past year in New York trading as investment losses and guarantees on slumping retirement products sap capital. Hatford Financial Services Group Inc. leads the industry with $7.9 billion in writedowns and unrealized losses tied to the real-estate market since 2007, while New York-based MetLife has accumulated $7.2 billion, according to Bloomberg data.

Hatford and Prudential have cut jobs, asked regulators to ease reserve standards and applied for aid from the government’s $700 billion rescue program to replenish funds after reporting net losses in the third quarter. Metlife sold $2.3 billion of stock in October to bolster finances. The Standard & Poor’s Supercomposite Life & Health Insurance Index has declined about 61 percent in the last 12 months.

Source:- Bloomberg