By David S. Hilzenrath and David Cho
Washington Post Staff Writers
Friday, May 15, 2009
The Treasury yesterday granted preliminary approval for some of the nation's largest insurance companies to receive capital infusions under the government's Troubled Assets Relief Program, Treasury spokesman Andrew Williams said.
Recipients are Hartford, Prudential, Allstate, Ameriprise, Lincoln National and Principal Financial Group, he said. The insurers notified yesterday are among hundreds of financial institutions in the pipeline "that are being reviewed and funded as appropriate on a rolling basis," Williams said.
The money could shore up the life insurance industry, which plays a major role in the economy and has been weakened by the financial crisis. In addition to paying death benefits, life insurers deliver retirement income in the form of annuities. They are big investors in corporate bonds and commercial real estate.
However, the erosion of their investments -- and the possibility of further declines in the value of stocks, bonds and mortgages -- raised concern in some quarters about the outlook for the industry.
"These funds would further fortify our capital resources and provide us with additional financial flexibility during one of the most volatile market climates in our nation's history," Hartford chief executive Ramani Ayer said in a statement.
Hartford said it received preliminary approval for an infusion of $3.4 billion, the full amount it estimated last year that it might obtain.
Until now, the government had used the capital purchase program to support the struggling banking industry. With the recent completion of stress tests assessing the continued needs of the banking system, the government was in a clearer position to address insurers.
Insurers applied for the federal support last year and had been in suspense for months as to whether they would get it. The Treasury had been evaluating their applications in consultation with state regulators.
Though the legislation creating TARP suggested that insurers could participate, the Treasury said that to qualify they had to be bank or thrift holding companies, which would put them under federal supervision.
The federal money has strings attached. If they take it, insurers would have to submit to restrictions on executive pay and other matters.
Spokesmen for Lincoln and Prudential declined to comment. A spokeswoman for Principal Financial, Susan Houser, said by e-mail yesterday afternoon that Principal had received no response from the Treasury to its application.