MetLife Unrealized Losses on Corporate Debt Jump to $14 Billion

By Andrew Frye and Stephanie Luke
Bloomberg News
March 2, 2009

March 2 (Bloomberg) -- MetLife Inc., the biggest U.S. life insurer, said net unrealized losses on corporate debt holdings increased 71 percent to $14 billion in the fourth quarter as the recession hurt firms' ability to repay or refinance their bonds.

The loss, disclosed by the New York-based insurer in a regulatory filing today, compares with $8.22 billion at the end of September. Unrealized losses, which aren't subtracted from earnings, are calculated as the difference between a holding's market value and what the company says the investment is worth.

Life insurers, whose stock prices have been battered amid writedowns linked to the housing slump, are facing further losses as the downturn spreads from consumers to companies. Corporate defaults are poised for a "significant" increase this year and may end up costing life insurers more than losses on securities linked to subprime, Alt-A and commercial mortgages, according to a report by Barclays Plc last month.

"The dramatic rise in the expected level of corporate defaults reflects our opinion of the weak credit profiles of many corporations," Standard & Poor's said in a Feb. 26 report in which the rating firm downgraded MetLife and other life insurers, including Hartford Financial Services Group Inc. and Lincoln National Corp.

MetLife declined 79 cents, or 4.3 percent, to $17.67 at 12:40 p.m. in New York Stock Exchange composite trading. The insurer has dropped 69 percent in the last year, compared with the 75 percent slide in the 11-company S&P Supercomposite Life & Health Insurance Index.

MetLife's corporate bond declines contributed to the $21.3 billion in net unrealized fixed-income losses on Dec. 31, which the company disclosed last month. Those losses increased 74 percent in the last three months of 2008. Insurers don't subtract unrealized losses from earnings because they believe companies and consumers will continue to meet their payments on debt.

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