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Life Insurers Line Up for Federal Aid Under Treasury Program

The applications are in, but it will be awhile before its known which life insurance firms have applied for federal assistance under the U.S. Treasury...
November 25, 2008

The applications are in, but it will be awhile before its known which life insurance firms have applied for federal assistance under the U.S. Treasury Department's $250 billion Capital Purchase Program. The deadline for applications was November 14 at 5:00 p.m.

Some of the companies that applied for funds are remaining silent; others had to reveal that fact because they applied to change their corporate structures in order to qualify for the assistance. The program is open only to federally regulated, U.S.-controlled banks, savings associations, and certain bank and savings and loan holding companies.

Analysts say that several major life insurance companies that have taken the unusual step of purchasing savings and loan institutions in order to qualify for the government's $700 billion rescue fund are relatively strong financially but see the government's program as good opportunity or are concerned about continuing problems in the economy. Treasury Secretary Henry Paulson said that he was not certain that the strategy would be successful since the department will only consider applications that are sensible. Neel Kashkari, who is overseeing the rescue fund, recently characterized the federal effort to rescue troubled banks as turning into a free-for-all. 

Among the life insurers applying:

  • Hartford Financial (NYSE: HIG) announced a $10 million deal to purchase Sanford, Fla.-based Federal Trust Bank, and has said it will commit roughly $100 million to recapitalize the lender. The multiline insurer estimates it could be eligible for between $1.1 billion and $3.4 billion under the guidelines Treasury has set out for the CPP.
  • Genworth Financial (NYSE: GNW), which could be eligible for $1 billion in Treasury funds, has recently announced plans to purchase Maple Grove, Minn.-based InterBank fsb.
  • Principal Financial (NYSE: PFG), which has a federal savings bank subsidiary, also said it applied to participate for up to $2 billion in the CPP as a savings and loan holding company.

Several life companies confirmed they are not participating in the Treasury program. Mutual of Omaha, which has a significant banking presence, joined fellow mutual life insurers New York Life Insurance Co. and Massachusetts Mutual Life Insurance Co. in declaring definitively that it would not look to participate. Axa Financial has not applied to TARP and has no plans to apply. State Farm, which owns a bank and has life insurance operations, will not participate, said Jeff McCollum, a spokesman. A spokesman for Nationwide Financial (NYSE: NFS) said it reviewed its options and decided not to participate.

From Wire Service Reports