An insurance trade group official says the major U.S. insurers can weather the current financial turmoil, and Senate Majority Leader Harry Reid has backed off from a remark that suggested otherwise.
Senate Majority Leader Harry Reid told reporters Wednesday that a large insurer might fail if a bailout bill did not get through Congress.
“One of the individuals in the caucus today talked about a major insurance company – a major insurance company – one with a name that everyone knows, that’s on the verge of going bankrupt,” Reid said, according to ABC News, Agence France-Press and Bloomberg.
Reid’s office now has issued an official statement indicating that Reid is not “personally aware of any particular company being on the verge of bankruptcy.”
“He has no special knowledge nor has he talked to any insurance company officials,” Reid’s office says in the statement. “Rather, his comments were meant to refer to the conditions in the financial sector generally. He regrets any confusion his comments may have caused.”
MetLife Inc., New York, today put out a statement indicating that Reid’s reference did not apply to MetLife.
“MetLife is financially sound and has high ratings from all of the major insurance ratings agencies,” MetLife says. “MetLife is fully able to meet all its obligations.”
Andrew Kligerman, a securities analyst at UBS Investment Research, New York, says that the concerns about liquidity at MetLife have been overblown and notes that the company can generate up to $1 billion a week in cash if the inflows are not invested and that MetLife faces no ratings-triggered cash or collateral calls.
Hartford Financial Services Group Inc., Hartford, said Wednesday that it is disappointed with the recent performance of its stock but recognizes that it is “living through a period of unprecedented market conditions.”
“The Hartford’s core operating businesses are performing well, and our liquidity remains strong,” Hartford says. “We are confident in our financial strength and in our ability to meet our commitments to customers…. Our financial position, our long history and the strength of the operating businesses that form the foundation of our company give us confidence. For 198 years, The Hartford has successfully navigated through many different business cycles and challenging climates.”
The Dow Jones Industrial Average fell about 3% today.
Despite the new statement from Reid and reassuring statements from insurers, the prices of some insurance stocks dropped even more dramatically.
The trade group official, who says his group would not permit him to give his name, says he believes, based on calls to members and “extensive” discussions with officials at the National Association of Insurance Commissioners, Kansas City, Mo., and the Treasury Department, that most insurers are sound.
A few insurers, such as some title insurers, are “having problems,” and there are a “handful of small banks and small insurers who had significant but not overwhelming exposure to Fannie and Freddie,” the trade group official says.
H.R. 1424, the bill that incorporates the Senate version of the financial institution bailout proposal, includes a special tax break for any depository institution or bank holding company that lost money when Fannie and Freddie – the Federal National Mortgage Association, Washington, and the Federal Home Loan Mortgage Corp., Washington – were placed in conservatorship.
But, the trade group official says, the tax break does not apply to insurers, “even though they have similar restrictions on how they can invest their capital.”