Life insurers healthy enough to stand on their own may view taking Troubled Asset Relief Program money as a last resort — unless they can use the money to fund acquisitions.
Securities analysts come to that conclusion in a flurry of comments on a U.S. Treasury Department statement that the department is open to considering TARP Capital Purchase Program applications from insurers with federally regulated subsidiaries.
Andrew Kligerman, an analyst at UBS Investment Research, New York, and other UBS analysts say admitting insurers into TARP will appeal more to insurers facing tighter-than-average capital constraints.
“It likely will temporarily boost investor confidence, but TARP funds alone cannot eliminate the capital-liquidity pressures caused by weak credit, equity market, and economic conditions,” the UBS analysts write.
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But “TARP could be a relatively cheap source of capital,” the analysts write.
John Nadel and Jason Weyeneth, analysts at Sterne Agee Group Inc., New York, suggest that insurers that have had bank or thrift affiliates for many years may be in a better position to participate in TARP than insurers that have moved to acquire banks or thrifts specifically to qualify for participation in TARP.
TARP expansion could slow the insurance rating agencies’ efforts to cut ratings, and that it could help keep some insurance companies from failing outright, the Sterne Agee analysts write.