U.S. Report on Insurers Rise Gov't May Extend BACHE

 

Thursday, Apr 09,2009, 11:38:18 AM   Click:

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CHARLOTTE, North of the United States Carolina_Shares life insurance companies rose broadly on Wednesday after a report that the U.S. Treasury Department plans to extend the Troubled Asset Relief Program, some life insurers.

The announcement is expected in the coming days, according to the Wall Street Journal, citing people it did not say the name, but they know the question.

The news sent from Lincoln National Corp. for more than 34 percent in early morning trading. Hartford Financial Services Group Inc. rose more than 25 per cent, while Prudential Financial Inc. rose more than 8 percent.

This would stabilize the insurance industry-life, which has suffered massive losses during the past year. The KBW Insurance index, which tracks 24 of the largest insurers, rose 4.7 percent to $ 65.31. The index is down more than 20 percent this year.

Insurers were also under pressure to maintain a strong capital position to avoid damaging the lower the rating agencies. Keeping high ratings is key for insurers because lower ratings can mean higher costs and, in some cases, loss of activity.

To improve their capital position, earlier this year, the bank has approved applications for regulation of certain insurers to the savings and loan holding companies, which is necessary to receive federal funds.

This group includes Prudential, Hartford Financial, Genworth Financial Inc., Lincoln National Corp. and Aegon NV, a Dutch company which owns U.S. insurer Transamerica.

By acquiring savings and loan, an insurance company savings become a holding company. Thrift holding companies, which are federally regulated, have been deemed eligible for a piece of $ 250 billion, the government is spending to buy shares in banks and other financial companies.


But in January, the government said that insurers who have federally chartered banks will be eligible for the program. Treasury said last year that life insurers could be eligible for funds if they TARP bank holding companies, but has not officially decided to donate funds to these companies because it focused much of its energies on the banks and carmakers.

Several life insurers have asked the TARP funds, including Prudential Financial, Hartford Financial and Lincoln National, the Journal reported.

If all insurers holding a federally chartered bank that received the aid, the approach goes far to address the growing uncertainty in the industry of life insurance, said Robert Litan, an economist and Senior Fellow at the Brookings Institution.

"I think this should remove a substantial amount of uncertainty, in theory, all this," said Litan.

He stressed that the insurance industry problems are easier to treat than those of the banking system, because there are fewer major players holding assets much less of a problem.

Litan, but said that the main objective to pass the Treasury's "confidence in the pension participants that they will continue to do their audits."

In doing so, he said, the program is likely to resolve concerns related to the industry "bank run" scenario in which insurers are not lending money to pay for policies for people who have lost confidence in the system.

Prudential and Lincoln National representatives declined to comment on the report, and a spokesman for the Treasury.

A representative from Hartford Financial was not immediately available for comment.

Lincoln National shares jumped $ 2.38, or 34.5 percent, to $ 9.27 in morning trading. Hartford Financial gained $ 2.14, or 25.3 percent, to $ 10.59, Prudential fell $ 1.91, or 8.6 percent, to $ 24.01.

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AP Business Writer Daniel Wagner in Washington, DC, bureau contributed to this report.