MetLife Losses on Corporate Debt Rise to $15 Billion (Update1)

By Stephanie Luke and Andrew Frye
Bloomberg News
May 7, 2009

May 7 (Bloomberg) -- MetLife Inc., the biggest U.S. life insurer, said net unrealized losses on corporate debt holdings increased 9.9 percent to $15.4 billion in the first quarter as borrowers struggled to repay loans.

The loss, disclosed by the New York-based insurer in a regulatory filing today, compares with $14 billion at the end of 2008 and $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.

MetLife is buying residential mortgage-backed securities issued by government-backed firms after last year scaling back holdings of debt issued by airlines, automobile companies and homebuilders to reduce the risk of losses. The insurer has declined 47 percent on the New York Stock Exchange in the past 12 months as the recession forced down the value of assets held to back policies.

"Loans related to more leveraged corporate credit could be an area you could see some stress over the course of the year," Chief Investment Officer Steve Kandarian said in a conference call on May 1.

MetLife's corporate bond declines contributed to the $28.8 billion in gross unrealized fixed-income losses on March 31, a cumulative tally that the company disclosed last month. MetLife today provided a breakdown by asset class, disclosing about $6.6 billion in unrealized losses on securities backed by home loans or commercial mortgages.

Impairments Cost $618 Million

Life insurers have been battered by writedowns linked to the housing slump, and face more losses as the recession spreads among companies that issued debt. Defaults on corporate bonds are poised for a "significant" increase 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 this year.

Impairments on holdings including corporate debt and hybrid securities cost MetLife $618 million in the first quarter. Insurers impair fixed-income securities when they believe the borrowers won't pay their debts in full.

Gross unrealized losses narrowed by about $2 billion in April, after the end of the first quarter, Kandarian said.

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