TBO.com - TBO is Tampa Bay Online

Insurers OK'd To Buy Lenders In Bid To Gain Bailout Money

ADVERTISEMENT

Bloomberg News

The Tampa Tribune

Published: January 10, 2009

Hartford Financial Services Group Inc. and Lincoln National Corp. won approval to buy lenders, a step by the insurers toward getting investments from the U.S. government, the Office of Thrift Supervision said Friday.

Life insurers including Prudential Financial Inc., Hartford and Genworth Financial Inc. are seeking federal help from the $700 billion Troubled Asset Relief Program after declines in the value of fixed-income holdings depleted capital.

The federal bailout, originally designed to buy soured loans and securities from banks, has since become a tool for the Treasury to bolster firms from credit-card companies to carmakers. Hartford, Genworth and Lincoln announced plans in November to buy small lenders to help qualify under the program. Genworth's application is still pending, said William Ruberry, a spokesman for the OTS.

Carriers need capital flexibility to operate in a highly volatile economic climate, the American Council of Life Insurers told regulators this week. Life insurers are pushing state watchdogs to ease capital requirements after losing $77 billion in surplus last year on investment declines and guarantees on slumping retirement products, according to consulting firm Conning & Co.

Insurers including Prudential and MetLife Inc. are already regulated by the OTS or the Federal Reserve.

American International Group Inc. got a $40 billion injection as regulators saved the insurer in a move to limit losses at banks that did business with the firm. Analysts including Robert Haines of CreditSights Inc. have questioned the need to prop up life insurers, saying their failure wouldn't impact the economy as much as a collapse at AIG, which sold protection on bonds to investment banks.

North American insurers have posted more than $120 billion in writedowns and unrealized losses tied to the collapse of the subprime mortgage market since early 2007.

Lincoln has said it may win access to $3 billion by taking over Newton County Loan & Savings, the Goodland, Indiana-based lender with about $7 million of assets. Philadelphia-based Lincoln halved its dividend in October.

Hartford has said acquiring Sanford-based Federal Trust Corp. may entitle it to $3.4 billion in U.S. capital. The Hartford, Conn.-based company agreed in October to sell $2.5 billion in stock and bonds to Allianz SE, Europe's largest insurer.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT