By Alistair Barr

SAN FRANCISCO (Dow Jones) -- Life and health insurers, including MetLife Inc. and Conseco Inc., may need to raise capital because they will find it more difficult to earn their way out of trouble amid mounting credit losses and slumping equity markets, analysts at Friedman, Billings, Ramsey said Tuesday.

FBR's Randy Binner and Kevin Barker downgraded MetLife (MET) and Conseco (CNO) to market perform from outperform, saying these insurers may be particularly vulnerable to such issues.

MetLife shares jumped 15% to $14.83, buoyed by a broad surge among financial-services shares after several days of losses. Conseco slumped 23% to 29 cents.

"Recent spread-widening and economic deterioration significantly impacted our analysis, which implies that most life and health insurers are at risk of needing to raise capital as their prospects for earning their way out of the credit losses are diminishing, especially for stock-market-sensitive names," the analysts wrote in a note to investors.

A gloomy forecast of future credit losses suffered by life and health insurers, which includes losses that have yet to be realized, suggests there's a "significant" need for capital across the industry, they said.

Credit losses will reach 3.4 times the current excess capital of the sector on average -- and this includes extra capital that will be generated from any earnings this year and in 2010, the analysts explained.

For Conseco, credit losses could soar to 970% of current excess capital and future extra capital generated.

"It appears that the company will not be able to earn its way out," Binner and Barker warned. "The outlook is too uncertain for us to continue recommending the name."

For MetLife, credit losses could top 300% of current and future excess capital, FBR said.

Other companies in the sector face the same predicament, the analysts noted.

Hartford Financial Services (HIG) could suffer credit losses that climb to 616% of current and future excess capital, they estimated.

Credit losses at Principal Financial Group (PFG) may reach 432% of current and future excess capital. The figure for Prudential Financial (PRU) could be 275%, the analysts said.