Nov. 17 (Bloomberg) -- U.S. life insurers, a group led by MetLife Inc. and Prudential Financial Inc., may lose as much as $22.6 billion on investments in commercial real estate through 2011, Fitch Ratings said.
Losses on investments in apartment buildings, offices, shopping malls and other commercial real estate will begin to increase in the next 6 months to a year as rents decline and vacancies increase, said Fitch Senior Director Andrew Davidson. Life insurer losses on commercial real estate have been “virtually nil” so far, he said.
“It will be more of a 2010 and 2011 issue,” Davidson said in an interview today. “It will put some stress on the capital positions as they realize the losses.”
‘Worst to Come’
“Losses in our commercial mortgage portfolio are going to accelerate over the next 18 months,” Bernard Winograd, executive vice president of Newark, New Jersey-based Prudential, said in an August conference call. “The fact that there have been very little in the way of delinquencies so far should not be taken as an indication that there won’t be losses.”
MetLife’s Chief Investment Officer Steve Kandarian said in June the insurer would have “some issues” related to the holdings. “The worst is to come,” he said in an interview with Bloomberg Television. “Typically there’s a lag between when the economy softens and when the defaults actually occur.”