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S&P: For life insurers, TARP aid won't immediately boost ratings

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Even though the Treasury has expressed the possibility to expand federal aid to life insurers, Standard & Poor’s Rating Services says not to expect higher credit ratings any time soon as a result of the bailout, according to a Friday Dow Jones News Service report. Word from Fitch Ratings indicates the capital infusion would temper downgrades if further woes developed:

“It could take several years for some of the companies that have experienced capital erosion to restore their position to previous levels, but S&P said participating in TARP would accelerate the effort. For companies that are facing fewer liquidity issues, eligibility would create additional financial flexibility at a key time when access to capital markets is reduced.

“Meanwhile, Fitch noted that receiving TARP funds isn’t an automatic eliminator of potential downgrades. But it did say any moves would probably be limited to one or two notches. The ratings agency said a number of other factors, including franchise strength and earnings level and volatility, will be factors along with the ultimate form and terms of federal support.”


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