Metlife and Hartford credit default swaps (CDS) premiums rise

October 2, 2008 by · Leave a Comment
Filed under: Industry News 

No surprise, risk is now being valued on an basis that is now more realistic compared to the risk that is in the market now. This trend will continue until it stabilizes at an appropriate cost of insurance compared to the risk the counter-party is exposing themselves too.


The cost of protecting insurers’ debt with credit default swaps rose on Thursday as concerns mounted about potential investment losses.

Insurers’ credit spreads have been widening for several days on concerns about their exposure to recent corporate collapses including American International Group, Lehman Brothers and Washington Mutual, said Rob Haines, analyst at independent research service CreditSights.

“They’re just going to have horrible quarters and big write-downs, but it’s not going to cause a solvency issue; it’s going to cause an earnings issue,” Haines said.

Five-year credit default swaps on MetLife Inc rose to 11.5 percent upfront, or $1.15 million a year to protect $10 million of debt, plus $500,000 in annual premiums, according to data from Markit Intraday. The swaps had closed at 514 basis points on Wednesday.

Hartford Financial Services Group’s swaps rose to 10.5 percent upfront from 520 basis points.

MetLife issued a statement on Thursday saying it is financially sound and “fully able to meet all its obligations.” Hartford on Wednesday said in a statement its liquidity remains strong and its core operating businesses are performing well.

Source: Reuters

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