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6 insurers approved for TARP bailouts

- The Washington Times - Friday, May 15, 2009

LOS ANGELES | Six major insurers, including Hartford Financial, Prudential Financial and Allstate, received preliminary approval Thursday for billions of dollars in aid from a U.S. bailout fund, after a months-long quest by some in the sector for financial assistance.

The Hartford Financial Services Group Inc. was the first to disclose that it had been notified by the Treasury Department that it was eligible for $3.4 billion from the Troubled Asset Relief Program, or TARP.

Allstate Corp., Lincoln National Corp., Ameriprise Financial Inc., Principal Financial Group Inc. and Prudential Financial Inc. also are among insurers receiving preliminary investment approval, Treasury spokesman Andrew Williams confirmed. He declined to disclose the amount of investment each company will receive.

The total capital injection into the six companies will be less than $22 billion, the Wall Street Journal reported, citing a person familiar with the situation.

The $700 billion TARP bailout fund, approved by Congress last year, was originally intended to purchase toxic loans on the books of banks that were inhibiting their ability to make loans. But the fund quickly morphed into a capital backstop fund for banks that also was used by the Treasury Department to make loans to General Motors Corp., Chrysler LLC and insurance giant American International Group Inc.

Life insurers also requested government aid, worried that their balance sheets had became clogged by illiquid assets and escalating liabilities to policyholders who bought in to this decade's explosion in the variable annuities market. But a final word from the government was slow in arriving, and the stocks of most public insurance companies plunged in recent months.

Life insurers own 18 percent of all corporate bonds, so aiding them is consistent with the bailout program's goal of unclogging credit markets. Insurers also have seen their investment portfolios slammed by declines in stocks, real estate and other financial assets in the past two years.

Insurance companies won backing from the Bush administration last year to be considered for the government's TARP program because some of the companies either owned savings and loans or acquired them to be considered for the bailout program, or were already classified as bank holding companies. The Hartford and Lincoln National, two of the nation's largest life insurers, and several others applied to become thrift holding companies last fall.

Regulators approved applications earlier this year from those two firms. Hartford said in January that it expected to be eligible for between $1.1 billion and $3.4 billion in bailout money. But as the industry awaited the Treasury's move, shares in the sector were battered.

The KBW Insurance Index, which tracks 24 of the nation's largest insurers, tumbled 48 percent in the first two months of the year, dropping to its lowest point on March 6. The index has rebounded in recent weeks as reports circulated that Treasury would extend TARP assistance to some life insurers.

Treasury Secretary Timothy F. Geithner told a congressional oversight panel recently that the TARP fund that Congress approved in October now has $110 billion that has not been committed. But several banks, including Goldman Sachs, are pressing to repay TARP funds, boosting the pot for additional Treasury financial assistance.

Shares of the Hartford rose $2.19, or 17.4 percent, to close Thursday at $14.75 as word of the government assistance leaked. The stock rose another $1.45, or 9.8 percent, to $16.20 in aftermarket electronic trading after the company confirmed the details.

Shares of Philadelphia-based Lincoln National rose 5.2 percent to $17.09 after hours following a 13 percent jump in the regular session. Newark, N.J.-based Prudential Financial tacked on a 3.3 percent gain after rising 6.4 percent in exchange trading to $39.37.

Not all insurers sought U.S. aid, however. MetLife Inc. said last month that it would not participate in the Treasury Department's capital purchase program. The New York-based insurer issued the statement in response to widespread speculation that life insurers would seek a federal bailout.

MetLife, which launched its federally chartered bank holding company, MetLife Bank NA, in 2001, said then that it had about $5 billion in excess capital and a strong balance sheet. The company also noted that it had already taken actions to reinforce its financial position, including a $2.3 billion stock offering in October and the sale of more than $1 billion in debt earlier this year.