Hartford won preliminary approval for $3.4 billion in capital from the Treasury’s Troubled Asset Relief Program, the Connecticut-
Prudential, Allstate Corp., Principal Financial Group Inc. and Ameriprise Financial Inc. also are eligible for funds. Lincoln National Corp. said it may receive $2.5 billion.
Life insurers have clamored for six months to get into a program that the nation’s biggest banks are trying to flee to avoid government restrictions. Insurers need the money to quell doubts about whether they can pay claims and retirement stipends after falling stock and bond markets depleted capital.
“If you had some of these companies, the bigger ones like Hartford, go into a spiral, that would just cause another round of panic,” said Katherine Davies, President at MorganSingleton Associates in Seattle. “I don’t like the idea of the government getting involved with these companies. You’re making to an extent a deal with the devil, but your options are really limited at this point,” the Morgan Singleton Associates President said.
Credit-rating downgrades and stock drops across the industry eroded client confidence and made it harder to raise money from private investors. The dwindling funds available to the industry also contributed to the credit market freeze as life insurers, which hold about $1 trillion in corporate debt, had to scale back on purchases of new bonds.
“Treasury is taking the right step toward helping restore lending and liquidity to the marketplace,”
