June 15, 2011 / 6:31 PM / 8 years ago

Life insurers drop as yields fall sharply

A statue stands atop Grand Central Station in front of the MetLife building in New York, October 8, 2008. REUTERS/Lucas Jackson

NEW YORK (Reuters) - Shares of life insurance companies dropped sharply on Wednesday as benchmark Treasury yields headed for their biggest one-day drop in nearly four months, a bad sign for the sector.

Life insurers have been threatened for months by persistently low interest rates, which can depress their investment income. Given their long-duration liabilities, life insurers need solid investment returns over time in order to pay out claims as they arise.

Benchmark 10-year Treasury notes rose 1-1/32 in price to yield 2.98 percent, down from 3.10 percent Tuesday. Benchmark yields were headed for their sharpest one-day decline since February 22.

While yields are off their 2010 lows, they are still at low enough levels to be of concern to the industry.

The S&P insurance index .GSPINSC fell 2.4 percent, led by life insurers. The biggest decliners were Lincoln National (LNC.N), down 4.6 percent; MetLife (MET.N), down 4.5 percent; and Prudential Financial (PRU.N), which was 4.3 percent lower.

Reporting by Ben Berkowitz, editing by Bernard Orr

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