Life Insurer Surplus Drops $77 Billion, Erasing Gain
Jan. 8 (Bloomberg) — U.S. life insurers, led by MetLife Inc. and Prudential Financial Inc., lost $76.8 billion in surplus in 2008 on investment declines and costs guaranteeing retirement products, erasing six years of gains, Conning & Co. said.
Statutory surplus — the difference between assets and liabilities — fell 24 percent to $237.3 billion in 2008, according to a study released yesterday by the consulting firm. The industry may need to raise $50 billion in capital and undergo “significant” consolidation after the losses, Conning said.
Life insurers cut jobs, asked regulators to ease reserve standards and applied for government aid in the fourth quarter to replenish their dwindling capital cushion. Assets have slipped on declines in the value of corporate debt and mortgage investments held to back policies. Liabilities advanced after equity market drops increased the funds carriers needed to back guarantees of minimum returns made to some annuity customers.
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