One insurer announced it was rejecting funds from the government’s Troubled Asset Relief Program, while another said it would accept them.
Principal Financial Group Inc. says that it will decline the financial aid offered by the Federal government to a number of troubled corporate giants.
In turning down funds under the U.S. Dept. of the Treasury’s capital purchase program, Principal, Des Moines, Iowa, noted that the credit market has improved from last fall, when it first applied for aid.
“We have decided not to participate in the CPP due to the stabilization of the credit and financial systems in the U.S. and the further strengthening of our already solid financial and capital position,” said Larry Zimpleman, chairman, president and chief executive officer of the company.
The Principal was one of six insurers whose application for financial aid under the Treasury’s Capital Purchase Program was approved April 14. But, with the Principal’s decision, 4 of the 6 have now declared they would not to take the help because of the improvement in market conditions.
The others are Prudential Financial, Newark, N.J.; Ameriprise Financial, Minneapolis, Minn.; and Allstate Financial, Northbrook, Ill.
Hartford Financial Group, Hartford, Conn., has accepted the aid, and
In his statement, Zimpleman explained that when the Principal first applied for the aid in November 2008, the credit markets were inactive.
The CPP was intended to boost capital among healthy banks and insurance companies to encourage lending, but the economic conditions have now changed, he said.
“We’re seeing the capital markets in the U.S. returning to more normal functioning,” Zimpleman explained.
He also noted Principal has taken a number of steps to strengthen its capital base, including a recent $1.2 billion secondary equity offering and a $750 million debt offering.
At the same time, the Hartford confirmed that it would take funds under the CPP.
It also said that it has pans to offer shares of its common stock from time with a total value of up to $750 million.
“With our strategic review complete, we are continuing to take actions to build shareholder value,” said Ramani Ayer, chairman and CEO of the Hartford. “In this continued, uncertain economic environment, our decisions to participate in CPP and to access the equity market represent important steps in enhancing our financial strength and implementing our long-term capital plan.”
The Hartford intends to use proceeds of the new stock sale for general corporate purposes, including the possible repurchase of outstanding debt, he said.
One other insurer that has been offered TARP funds, Lincoln National Group, Philadelphia, has not as yet disclosed its decision on whether or not to accept them