But how the process unfolds is still anyone’s guess. While each of these life insurers consider their Capital Purchase Program (CPP) application — a component of the Troubled Asset Relief Program (TARP) — a prudent step toward strengthening their liquidity and capital position, it doesn’t necessarily mean they will participate.
Three leading life insurers have acknowledged they are considering TARP monies, and have identified the amount they could receive. Hartford Financial is eligible to receive $3.4 billion. Lincoln National is eligible to receive $2.5 billion. Principal Financial, is eligible to receive $2 billion. A Prudential spokesman declined to confirm an amount, saying only that the company was still weighing its options, including whether to even participate in the program.
Other leading insurers have decided not to seek TARP funds, MetLife, Allstate, and Ameriprise Financial, among them.
In other industry developments, Hartford Financial announced that its life and property/casualty insurance businesses will be retained, according to Bloomberg News. Also, Principal Financial recently sought to significantly strengthen its capital base with a roughly $1 billion secondary equity offering.
Larry Zimpleman, president and chief executive officer of Principal Financial, noted in a statement about the dispensing of TARP funds that the insurer’s “decision about whether to participate in CPP and, if so, at what level, will be based on a review following receipt of all the terms and conditions, both economic and non-economic.”
With life insurers owning 18% of corporate bonds, the government’s investment in the life insurance sector is seen as a way to help revitalize credit markets, as well as restore confidence in the eyes of policyholders — a figure estimated at 75 million. In exchange for TARP funds, life insurers must comply with a range of restrictions that include limits on executive pay.
