The Hartford Still Waiting To Receive Federal Bailout Money
April 03, 2009
Recovery plans at The Hartford and several other insurers are in limbo as they wait for the U.S. Treasury to act on their request for federal bailout funds.
Life insurers, including The Hartford Financial Services Group Inc. and Prudential Financial Inc., have sought access to $700 billion from the federal Troubled Asset Relief Program after plunging financial markets squeezed profits and sliced the value of holdings that back insurance policies.
Some of the applications for TARP funding date from November, and while they've been pending, Prudential posted a record quarterly loss and Principal Financial Group Inc. raised doubt in a filing about meeting its obligations to clients.
Meanwhile, The Hartford has suffered multiple ratings downgrades, and Standard & Poor's has said that financial stress might have eroded the company's famous brand and competitive advantages.
The industry's odds of getting TARP funds might have dropped after the expanded $182.5 billion rescue of American International Group Inc. soured Congress on bailouts. Frank Keating, head of the Washington-based American Council of Life Insurers, said March 3 that the Treasury would probably take action on the TARP requests within weeks. But an Obama administration official said Wednesday that the department hasn't made any decisions about giving insurers TARP funds.
Life insurers were told by the Treasury last year to buy banks or savings and loan companies to become eligible for the money. That led to proposed bank takeovers by insurers, including The Hartford, Genworth Financial Inc. and Lincoln National Corp.
A federal filing disclosed Thursday that The Hartford loaned $20 million Tuesday to help prop up the ailing Federal Trust Bank in Florida, the bank that it would acquire to qualify for TARP.
The slump has dented the reputation of an industry whose sales are based on the idea that insurers will outlive their customers. AIG undermined the premise when it appealed for more bailout money in March by saying that a rumored or real failure of life or retirement companies could trigger customer withdrawals that would topple competitors and overwhelm state-run guarantee funds. State regulators have said they're confident they can still protect policyholders if an insurer fails.
The Hartford reported a $2.7 billion net loss for 2008.
Reprinted with permission of the Hartford Courant.
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