* NY Attorney General Cuomo subpoenas MetLife, Prudential

* Cuomo says hundreds of millions of dollars at issue

* MetLife declines to comment, Prudential says cooperating

* Shares of MetLife, Prudential rise

(Adds statements from Cuomo and insurers, federal probe, stock
prices, background, byline)

By Jonathan Stempel

NEW YORK (Reuters) - New York's attorney general
has subpoenaed MetLife Inc and Prudential Financial Inc
as part of a probe into whether life insurers are
defrauding families of deceased military personnel by siphoning
off millions of dollars of death benefits for themselves.

Attorney General Andrew Cuomo announced the subpoenas of
the largest U.S. life insurers on Thursday, one day after the
U.S. Department of Veterans Affairs said in a published report
that it had begun its own investigation into the issue.

"It is shocking and plain wrong for these multinational
life insurance companies to pocket hundreds of millions in
profits that really belong to those who have lost family
members and have already suffered immensely," Cuomo said in a
statement.

MetLife spokesman John Calagna declined to comment, saying
the New York-based insurer has yet to see the subpoena.

Bob DeFillippo, a spokesman for Prudential, said the
Newark, New Jersey-based insurer will cooperate with Cuomo.

The Department of Veterans Affairs did not immediately
respond to requests for comment about its probe, which
Bloomberg News earlier reported.

At issue is whether the insurers, rather than pay out lump
sums to military families upon the deaths of policyholders,
instead would keep money in potentially risky accounts they
controlled, known as retained-asset accounts, while paying out
low yields to surviving families.

LOW RATES, NON-GUARANTEED ACCOUNTS

Cuomo said the insurers reportedly earned upward of 4.8
percent annually on these accounts, but paid families interest
as low as 0.5 percent, less than the rates they might find at
their local banks. The insurers' accounts, moreover, are not
guaranteed by the Federal Deposit Insurance Corp, Cuomo said.

The attorney general said the subpoenas seek data on how
and when beneficiaries learn about the terms and conditions of
retained-asset accounts, and data on the differences between
interest earned by insurers and beneficiaries.

In a statement issued Wednesday, the American Council of
Life Insurers, a trade group, said retained-asset accounts help
grieving military families.

"Not surprisingly, financial matters may not be the first
thing on their minds," it said, "and retained asset accounts
provide a secure place for life insurance policy proceeds to be
held until the money is needed."

Cuomo, a Democrat, is the front-runner to become New York's
next governor in the November election.

In afternoon trading, MetLife shares were up 83 cents, or
2.1 percent, at $40.13, and Prudential shares were up 58 cents,
or 1 percent, at $56.02. The Standard & Poor's Insurance Index
was up 0.18 percent.
(Reporting by Jonathan Stempel in New York; Additional
reporting by Dan Wilchins; Editing by Lisa Von Ahn and John
Wallace)