NU Online News Service, April 7, 2003, 5:14 p.m. EDT – Most U.S. life insurers are still “highly creditworthy,” but many are carrying substantial amounts of “unrecognized credit losses” on their balance sheets, according to a new report on life insurance company investments from Moody’s Investors Service, New York.

Low interest rates and weak stock markets are squeezing life insurers’ portfolios hard, and 2002 credit losses were even worse than 2001 credit losses, Moody’s analysts write.

Life insurers have already started to recognize big credit losses on investments in collateralized debt obligations and other structured securities, but Moody’s analysts warn that insurers may continue to report big credit losses, even after the economy recovers, because of the strategies they have been using to put off recognizing losses.

“Moody’s believes that certain insurers have attempted to obfuscate their actual credit losses by a variety of means, including focusing on operating earnings that exclude credit losses, realizing equity gains when available and, worst of all, using interest-related gains on bonds to help offset these credit losses,” Robert Riegel, a Moody’s managing director, says in a statement about the life investment report.