Prudential, Allstate and Hartford life insurance units all approved for TARP funds.
Friday, May 15, 2009 at 01:33PM In what was expected news, Hartford Financial announced today that they had in fact been approved by the government for up to $3.4 billion in TARP financing to shore up the capital position of their life insurance units that had been battered over the last year.
Prudential also was approved for a capital infusion as was Allstate, each to lesser amounts then Hartford.
You can read some of the details by clicking on the WSJ story here.
What does this mean to structured settlement brokers and their clients?
In the short term, not much other then some breathing room from the daily concerns of another credit rating down grade. In the long term it means that these companies are inviting the government into their business by accepting funds that will always carry some stigma and political ties that will ultimately be suffocating in running their firms.
Myself and other brokers have some real concerns about the capacity of the life insurance industry to handle the business that could be written given the credit down grades of AIG and Hartford and the capacity restrictions at Allstate and other markets in the amount of funds they will accept per life or risk. If this in any way keeps the underwriting capacity at normal limits for now, then it's a good thing. However if we keep seeing companies paring back what they will write and how much they will write this will turn out to be strictly a "stop the bleeding move".
Business is in no way, back to normal, and unless the settlement profession can start to either attract other life markets to our business or make our existing business more profitable, then we are going to keep on facing these capacity restrictions for months if not years to come.
The Settlement Channel
As was pointed out by a reader, Prudential and Allstate in fact have NOT decided if they are taking the TARP funds.
I'll continue to follow the story, but a more accurate headline would have been that Allstate, Prudential and Hartford all were APPROVED for TARP funds based on their application. I'll modify it accordingly until we know for sure which one's actually decide to accept the allocated amounts.
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Reader Comments (5)
Get your facts strait. It's people like you that mis inform the public and cause undue stress and worry where it does not need to be.
At the time I posted it the linked WSJ story and also stories in the NY Times certainly made it clear that the approval of the TARP money would then lead to the process of acceptance.
This morning we get reports that Prudential may or may not accept it, but doesn't have a position yet.
Your correct, I probably should modify the title and i'll post a follow up of the other story.
As for stress and worry I think the insurance companies can handle that on their own given their PR staffs. My stress and worry is that these companies have the capacity to continue to write all the business I send them. I've probably sent Prudential well in excess of $5 million in the last year or so and plan to send them more, so i'm definitely a believer in them regardless of whether they take the TARP funds or not.
We are in total agreement on that point. In fact I think it would be negligent of management at some life markets to not at least investigate the potential of using TARP and then deciding if they need to access them.