“Met Life could well take some lumps in the short term from the extreme volatility in markets. But its investment portfolio, valued at $329 billion, is widely viewed as conservatively positioned. It’s made up largely of plain-vanilla fixed-income instruments, with little to no exposure in riskier areas such as collateralized debt obligations. The company has previously disclosed exposure to AIG debt and Lehman Brothers debt of about $800 million, which is viewed as a very manageable level relative to the total investment portfolio

http://news.moneycentral.msn.com/ticker/article.aspx?symbol=...

Howie and anon

Similarly, AIG, MetLife and others write health, life and auto insurance policies. What happened to these policies when AIG got taken over by the government? How do renewals work? What will happen with MetLife or others?

Seems to me there may be additional unknown/unintended consequences.

It just will play out along somewhat different trajectories.

But it is very near the top of the list of key stories from last week.

The problem here is NOT so much that they INVESTED in derivatives using hyperleveraging.

It is MUCH more important that they were major MARKET MAKERS in those same derviatives.

Remember, there is no centralized clearing house for swaps, be they equity swaps, commodity swaps, currency swaps, sovereign swaps or credit default swaps. That’s what Corrigan is working on and we should have our first clearinghouse open in a few weeks.

But the problem here is that everyone has their eye on credit defaults swaps. I guess that seems understandable.

But credit default swaps are only a SMALL portion (around 33%) of the total swap market, ALL of which are coming under increasing pressure in the last six weeks.

Matt Dubuque
mdubuque@yahoo.comP

Now, other bits of damage — even investment grade corporates are under threat in a depression. VA and VL fees decline, leading to a writedown in DAC.

There should not be a solvency threat, as statutory accounting holds bonds at amortized cost unless there is a default.

I did not think it would get this bad. If the life insurers are under threat, we are in deep trouble. The only thing worse would be if P&C insurers, which run with more underwriting risk and less asset risk, were in trouble.

I have over 20 years of experience with life insurance…this is the worst I have seen it, and the life insurers came into this crisis with good balance sheets compared to 1988-2002.

The State Guaranty funds stand behind all policies in a crisis, however, remember that they do so by surcharging the healthy companies in the next year.

During the post 9/11 market slump these death benefit formulas resulted in hundreds of millions of losses. The situation is likely much worse now because of the magnitude of the slump and the larger volumne of outstanding VA contracts.

MetLife certainly has something to hide or they would not have disclosed that any sort of problem exists.