Four Major Insurers Move Toward Government Bailout

PR Log (Press Release) – Nov 14, 2008 – In a significant move, four major insurance companies are now asking the government to allow them to buy thrifts so they can qualify to receive federal capital infusions.
Hartford Financial Services Group, Genworth Financial, Lincoln National Corp., and Aegon who owns Transamerica, each asked the Office of Thrift Supervision for permission to acquire an existing thrift.
“This development should not be a significant shock to the market” said Steven Wevodau, an independent insurance industry consultant.  Wevodau added “the insurance industry has sustained a variety of economic factors that have stressed their capital base.  Matters such as catastrophic losses, elevated labor costs, depleted investment portfolios, and risky investments in derivatives have all contributed to the erosion of the industry’s equity”.
Wevodau went on to mention that “insurance is a cyclical industry and any time that you have a confluence of negative factors at one time, depletion of capital is bound to occur.    The market is beginning to signal that product rates, which have been softening for three years, are beginning to firm.  This is the natural course in the evolution of economic events in this industry”.
Insurers that own thrifts are eligible to apply for a piece of the $250 billion the government is spending to buy shares in banks and other financial companies
Steven Wevodau is an independent industry consultant to the insurance and financial services industry.