Insurers Back Away From TARP

By LIAM PLEVEN and DAMIAN PALETTA Thanks, but no thanks. That is the message some insurers sent Friday to the Treasury Department, after they finally got word they were approved for federal assistance under its Troubled Asset Relief Program, or TARP. Ameriprise Financial Inc., one of six life insurers preliminarily approved in the past week for billions in federal aid, said Friday that it wouldn't take the money. Prudential Financial Inc. is expected to reject it, too, according to a person familiar with the matter. Bloomberg News/Landov More U.S. Slates $22 Billion for Insurers AIG's Fed Borrowings Have Risen YRC to Apply for Bailout Funds Readers React: 'Trickle down bailouts' Two others, Allstate Corp. and Principal Financial Group Inc., responded tepidly. Each firm noted that it had recently raised $1 billion in the markets. In statements, they stopped short of saying they would participate in TARP. The remaining two firms, Hartford Financial Services Group Inc. and Lincoln National Corp., were more enthusiastic, saying they were pleased by the news. In statements, Hartford said it could tap $3.4 billion, and Lincoln, $2.5 billion. These two firms have seen their share prices fall by more than 70% since the end of 2007. The spectrum of responses shows how hard the decision of whether to take government assistance can be for firms stung by the financial crisis, and also how much circumstances have changed since these firms first sought aid in November. "You don't take TARP money unless there's some weaknesses. It's not the happiest money in the world," said Andrew Kligerman, an insurance-industry analyst at UBS. The share prices of five of the six firms closed down Friday, with Ameriprise the only exception. Its shares rose 1.4%. Shares in the life-insurance sector had risen toward the end of Thursday's session amid rumors about government aid. In the fall, many life insurers went to great lengths to qualify for the program by taking steps to become bank or thrift-holding companies. And with good reason. Amid the financial crisis, the companies' stocks got crushed, as they were hurt by pressures in their variable-annuities business -- tied to the stock market -- and investment losses. For months, insurers lobbied the government, while the companies, and their stockholders, waited for any sign that the capital might be coming. The decision to grant the money wasn't based on concern about "systemic risk," Treasury spokesman Andrew Williams said Friday. The part of the TARP program insurers qualified under, Mr. Williams said, is "about investing in healthy, viable banks that serve communities across the country. They met the criteria, and we felt it was wrong to exclude them." Life insurers are major investors in the bond market, and their health can boost investor confidence. By the time the Treasury delivered preliminary approvals, though, market conditions had changed. Lately, it has become easier for many firms seeking to boost capital to sell shares or borrow money from private investors. Both Allstate and Principal, for example, recently raised $1 billion, Principal from a common-stock offering and Allstate through a debt offering. Meanwhile, corporate executives have seen firms that do take TARP money come under government and public scrutiny. Now, efforts are under foot at several banks to repay TARP funds. Jim Cracchiolo, the chief executive of Ameriprise, an asset-management firm that also sells life insurance and annuities, said in a statement about the firm's TARP decision that it has more than $1 billion in "excess capital." A spokesman said that having more stable markets "makes the decision a little easier." It is unclear if the Treasury will urge insurers to lend part of the capital they receive within their communities. "These companies are financial companies that play an important role in our system, often as liquidity providers," Mr. Williams said. Also unclear: How much of the $22 billion left in the Capital Purchase Program of TARP under which the insurers would receive funds might be directed toward insurance companies; some of it likely will be siphoned off to community banks. As in the banking sector, the situation has the potential to divide life insurers into those seen as either strong or weak. Peter Katt, a fee-only life-insurance adviser, said existing customers of insurers who get the money may be reassured, but that taking it could cast a chill over sales to prospective clients. Allstate, which mainly insures cars and homes, but also has a life-insurance operation, didn't rule out participating, but Chief Executive Thomas Wilson said in a statement: "We remain confident in our current capital position." Principal's chief executive, Larry Zimpleman, was noncommittal. The decision about "whether to participate ... and, if so, at what level" would depend on the terms, "both economic and noneconomic," he said. Principal said it had applied for $2 billion. —Donna Kardos contributed to this article. Write to Liam Pleven at liam.pleven@wsj.com and Damian Paletta at damian.paletta@wsj.com Printed in The Wall Street Journal, page B1