In the wake of the Treasury Department’s delaying for seven months a decision to provide bailout funds for eligible life insurance companies, some of those insurers who initially indicated interest in the program have changed their mind, while others are apparently still looking forward to receiving those funds.
The Treasury confirmed on April 7 that it has decided to provide aid for insurers if they met the criteria for eligibility of having a federally regulated affiliate.
“There’s no reason to disqualify them,” said a Treasury official, “because they meet the criteria.”
But, according to a Treasury spokesman on April 15, “nothing is imminent” in providing aid for any particular insurance company.
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Jason Weyeneth, CFA, an analyst in New York for Sterne Age, which is based in Birmingham, Ala., said that for the insurers that remain eligible and are pursuing the funds, “investors also are looking favorably on insurers getting aid.
“Life insurance stocks have performed better since the April 7 Treasury announcement,” he said.
The program for which they remain eligible is the Capital Purchase Program of the Troubled Asset Relief Program launched by the government last October.
But the original list of 12 applicants who applied for aid has shrunk by at least three, and several other large insurers–seeing participation as a mixed bag–are also expected to decline to participate, according to Weyeneth.
Three life insurers announced recently that they won’t be getting the aid. They are Genworth Financial, which said it has been ruled ineligible for the program because its application to purchase a federally regulated thrift was not processed by the deadline established by Treasury for eligibility; Protective Life Corp., which dropped out because its contract to buy a Florida bank holding company required it to buy the company with TARP capital before April 1; and MetLife, which announced that it is no longer considering accepting the aid.
In an announcement after the market closed on April 13, MetLife disclosed that it is one of the 19 potentially systemically-risking institutions undergoing a “stress test” of its financial viability by the Federal Reserve Board, which regulates its holding company.
But MetLife said in a statement by CEO C. Robert Henrikson that the company has decided it does not need to participate in the CPP.
Henrikson said MetLife has about $5 billion in excess capital, a strong balance sheet and leading market positions in both the group and individual insurance businesses.
He added that MetLife repositioned its investment portfolio more than a year ago in anticipation of the current recession, completing a $2.3 billion common stock offering in October 2008. The company also remarketed more than $1 billion in debt earlier this year.