Treasury Will Expand TARP To Bail Out Insurers (HIG, LNC, PRU)

Discussion in 'Wall St. News' started by Cdntrader, Apr 7, 2009.

  1. Treasury Will Expand TARP To Bail Out Insurers (HIG, LNC, PRU)
    Joe Weisenthal|Apr. 7, 2009, 9:41 PM|
    Tags: Wall Street, Treasury, Bailout, TARP, Financial Services, Insurance, Financial Crisis, Tim Geithner

    HIG Apr 7 2009, 07:38 PM EDT 8.45 Change % Change
    -0.96 -10.20%

    LNC Apr 7 2009, 07:41 PM EDT 6.89 Change % Change
    +0.51 +7.99%

    PRU Apr 7 2009, 06:41 PM EDT 22.10 Change % Change
    -0.71 -3.11%

    Life insurance companies are facing many of the same solvency challenges as banks, and have been trying desperately to get under the TARP. Some, like Hartford Insurance (HIG), have announced acquisitions of thrifts banks in hopes of garnering eligibility.

    In fact, Hartford has been nursing its potential acquisition to the tune of $20 million in loans while it finds out whether the move will make it eligible.

    Well it looks like they're in luck.

    WSJ says the move to allow insurer participation will be announced in the next few days:

    How much money would be available to the insurers remains unclear. The Treasury says it has about $130 billion remaining in TARP funds. Life insurers that are bank holding companies have been eligible for TARP for some time, but the Treasury had not yet given the green-light to approve their applications.

    Several have applied, including Prudential Financial Inc. (PRU), Hartford Financial Services Group Inc. (HIG) and Lincoln National (LNC) Corp. No decisions have been made yet about which applications will be approved, these people said.

    Bear in mind that protecting insurers -- who are among the big holders of bank debt -- is one of the reasons that we've protected bank bondholders so far. Obviously, that alone isn't enough.

    Just $130 billion left though. Might take some creativity to stretch it out, since the prospects of getting more from Congress are daunting.
  2. TARP for life insurers - report
    The Treasury Department may allow life insurers that are bank holding companies or thrifts to apply for TARP funds.

    April 7, 2009: 9:47 PM ET

    NEW YORK ( -- The Treasury Department could allow certain life insurers apply for funds from its Troubled Asset Relief Program, according to people familiar with the matter, The Wall Street Journal reported in its online edition late Tuesday.
    0:00 /3:46Demanding TARP accountability

    Investors have been increasingly worried about the health of life insurers, which have been hit hard by worries about capital requirements and growing losses.

    According to the Journal, Treasury could announce within the next few days that life insurance firms that are bank holding companies or thrifts will be eligible for TARP. While life insurers that are bank holding companies have already been eligible for TARP funds, Treasury has yet to give applications the go-ahead.

    Prudential Financial Inc. (PRU, Fortune 500), Hartford Financial Services Group Inc. (HIG, Fortune 500) and Lincoln National Corp. (LNC, Fortune 500) are said to have applied but the Journal's sources said Treasury has not yet decided which applications will be approved.

    Of the original $700 billion allocated for the financial-sector bailout, roughly $135 billion remains. However, that doesn't mean all of those funds would be made available for eligible insurers
  3. NEW YORK, Aug 2 (Reuters) - Officials of Prudential Securities Inc (PRU.N), the second largest U.S. life insurer, said on Thursday they will continue to purchase subprime loans in the higher and safer end of the market.

    "We are still buying subprime paper," said Prudential Chief Financial Officer Richard Carbone at the company's earnings call.

    Investors and analysts have been concerned because of a plunge in the subprime lending market, the most risky sector of real estate. Insurers often have large portfolios of real estate loans, generally bundled as collateralized debt obligations.

    Prudential has about $8.5 billion collateralized by subprime loans, the company has said, with 90 percent having the highest credit ratings of AAA or AA.

    Carbone said that, in the "worst case analysis," Prudential could lose $150 million over the next five years from its subprime exposure, but only if there were a 40 percent decline in housing prices.

    But he also said that half of the $8.5 billion would be off the insurer's books within the next 12 months.

    Prudential Vice Chairman John Strangfeld said problems in the subprime market had also created opportunities.

    "There are significant losses in the BBB category (lower end of the market), but in securities rated AA and above, there is a lack of liquidity for reasons like forced sales," said Strangfeld. "And that can create buying opportunities."

    Chief Executive Arthur Ryan did not expect much of a net increase in subprime.

    "But we will be opportunistic," he added.