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Friday, May 15, 2009


insurers gain access to TARP

following through on earlier rumors -- via bloomberg.

Prudential Financial Inc. and Hartford Financial Services Group Inc. are among six insurers granted access to U.S. aid as the government moves to shore up an industry battered by investment losses.

Hartford won preliminary approval for $3.4 billion in capital from the Treasury’s Troubled Asset Relief Program, the Connecticut-based insurer said yesterday in a statement. Prudential, Allstate Corp., Principal Financial Group Inc. and Ameriprise Financial Inc. also are eligible for funds, said Andrew Williams, a spokesman for the Treasury. Lincoln National Corp. said it may receive $2.5 billion.

Life insurers have clamored for six months to get into a program that the nation’s biggest banks are trying to flee to avoid government restrictions. Insurers need the money to quell doubts about whether they can pay claims and retirement stipends after falling stock and bond markets depleted capital.

If you had some of these companies, the bigger ones like Hartford, go into a spiral, that would just cause another round of panic,” said Robert Haines, a New York-based analyst at CreditSights Inc. “I don’t like the idea of the government getting involved with these companies. You’re making to an extent a deal with the devil, but your options are really limited at this point.”

Credit-rating downgrades and stock drops across the industry eroded client confidence and made it harder to raise money from private investors. The dwindling funds available to the industry also contributed to the credit market freeze as life insurers, which hold about $1 trillion in corporate debt, had to scale back on purchases of new bonds.

this merely reinforces the impossibility of forcing large writedowns onto bank creditors, of whom insurers are some of the largest. either bail out the banks -- or bail out what's left of the banks, the insurers, the pensions and whatever might be left of the american economy in the post-apocalyptic aftermath.

UPDATE: more from david goldman.

There is a lot less reason to hold the financials now than before Chrysler. I advocated taking profits when BAC traded above $14 and Citigroup traded above $4. The distressed investing (”Zombie”) scenario I projected to keep them profitable is much less certain given the administration’s penchant for breaking glass in the credit markets.

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I just wanted to say that you have been on fire the last few days. Thanks for all of the good insight!!

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thanks, bwdik!

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