U.S. life insurers' shares fall on investment concerns

NEW YORK (Reuters) - Shares of U.S. life insurers fell sharply on Wednesday as investors grew concerned that investment losses could erode profits and capital.

Shares of MetLife (MET.N), the largest U.S. life insurer, fell almost 15 percent to $47.79, and No. 2 Prudential Financial (PRU.N) fell more than 7 percent to $66.62.

Shares of large life and property insurer Hartford Financial Services Group Inc (HIG.N) dropped more than 12 percent to $35.83, extending an 18 percent decline a day earlier. And Genworth Financial (GNW.N) shares fell more than 17 percent to $7.13.

"We are seeing credit issues around liquidity risk management and the wholesale re-pricing of risk within the insurance market," said Standard & Poor's credit analyst Greg Gaskel in a report on the life insurance sector released late on Tuesday.

"Risk from spread programs, residential mortgage exposure, and transaction execution has also risen with the general reduction in market liquidity," Gaskel added.

The Dow Jones U.S. life insurance index .DJUSIL fell more than 7 percent on Wednesday. The index has fallen nearly 30 percent over the last year.

The cost to insure MetLife's debt with credit default swaps rose 11.5 percent to 470 basis points, or $470,000 per year for five years to insure $10 million in debt, from 422 basis points on Tuesday, according to Markit Intraday.

And the cost to insure Hartford's debt with credit default swaps rose 7 percent on Wednesday to 443 basis points, or $443,000 per year for five years to insure $10 million in debt, from 403 basis points on Tuesday, according to Markit Intraday.

(Reporting by Lilla Zuill; Additional reporting by Karen Brettell; Editing by Brian Moss)