Shares of Lincoln National and Prudential Financial fell today during regular trading hours on the U.S. stock market, as investors are concerned the U.S. life sector will post losses in the first quarter, according to a Reuters report. Lincoln National dropped nearly 8%, while Prudential Financial was down more than 5%.

Life insurance investors, which report quarterly results in a few weeks, "should brace for another highly challenging earnings season," said Morgan Stanley analyst Nigel Dally, in a research note issued Monday titled "Earnings Outlook: More tough times."

Reuters reports the life sector already has badly disappointed investors over the past two quarters, as investment losses and rising costs for variable annuities sales have eroded capital and triggered credit rating downgrades.

The Dow Jones U.S. Life Insurance Index was down more than 3% Monday, and has fallen nearly 70% set May 2, 2008 according to Reuters data, based on Friday's close.

Dally also expects insurers to be hit again by large writedowns on investments, as well as on goodwill and deferred acquisition costs, a common industry measure.

"Given the weak earnings, escalation in unrealized losses, and book value deterioration, we would not be surprised to see another round of potential ratings cuts," said Dally.

Reuters also reports that shares of numerous other life insurers also fell on Monday, including Protective Life (4.5%), Unum Group (3.5%) and Assurant (2.9%).

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