From the WSJ:
The Treasury Department has decided to extend bailout funds to a number of struggling life-insurance companies, helping an industry that is a lynchpin of the U.S. financial system, people familiar with the matter said.
The department is expected to announce the expansion of the Troubled Asset Relief Program to aid the ailing industry within the next several days, these people said.
The news will come as a relief to a number of iconic American companies that have suffered big losses made worse by generous promises to buyers of some investment products. Shares of life insurers have fallen more than 40% this year. Their troubles led to a string of rating-agency downgrades that, in a vicious cycle, made it more difficult for some insurers to raise funds.[...]
[...] The decision by the Treasury Department adds a third industry to the banks and auto companies that have already received bailouts from the government. While American International Group Inc. is a major insurer and is the biggest recipient of government money, its problems were not caused by its life-insurance operations, but derivative bets that went bad.
Only insurers that own federally chartered banks will qualify for the program. They will have access to Treasury’s $250 billion Capital Purchase Program, which injects funds into banks. Any life insurer that gets TARP funds will have to comply with strict executive compensation rules required by Congress.
A number of life insurers, including Hartford Financial Services Group Inc., Genworth Financial Inc. and Lincoln National Corp., struck deals last fall to buy regulated savings and loans so they could call themselves banks and qualify for government funds. Hartford and Lincoln have applied for TARP funds. Genworth said it has applied with the Office of Thrift Supervision to approve its thrift purchase.[...]
[...]Insurers own 18% of all corporate bonds outstanding, according to the American Council of Life Insurers, and investors have been warily watching trading patterns in some securities for signs of a liquidation. For example, a bond issued by Jeffries & Company Inc., a securities firm, has fallen in value recently though the company is healthy. Traders have noted that the biggest holders of that bond are insurers.[...]
And the ‘bailout nation’ lives on and on and on……
