Insurers’ Stocks Rise on Report They’ll Get TARP Funds

The announcement is expected within the next several days’ according to the Wall Street Journal

Shares of U.S. life insurance companies rose broadly on today, after a report that the U.S. Treasury Department
plans to extend the Troubled Asset Relief Program to some life insurers.

The announcement is expected within the next several days, according to the Wall Street Journal, citing people
it did not name but said were familiar with the matter.

The news sent shares of Lincoln National Corp. up more than 34 percent in early morning trading. Hartford
Financial Services Group Inc. rose more than 25 percent, while Prudential Financial Inc. rose more than 8
percent.

Such a move would help stabilize the life insurance industry, which has suffered massive investment losses
over the past year. The KBW Insurance index, which tracks 24 of the nation’s largest insurers, rose 4.7 percent
to $65.31. The index is down more than 20 percent this year.

Insurers have also been under pressure to maintain solid capital positions to avoid damaging downgrades by
ratings agencies. Keeping high ratings is key for insurers because lower ratings can mean higher costs, and in
some cases, even a loss of business.

To improve their capital positions, earlier this year bank regulators approved applications from some insurers
to become savings and loan holding companies, which is needed to qualify for federal funds.

That group includes Prudential, Hartford Financial, Genworth Financial Inc., Lincoln National Corp. and Aegon
NV, a Dutch company that owns U.S. insurer Transamerica.

By acquiring a savings and loan, an insurance company would become a thrift holding company. Thrift holding
companies, which are federally regulated, were thought to be eligible to apply for a piece of the $250 billion
the government is spending to buy shares in banks and other financial companies.

But in January, the government said only insurers that own federally chartered banks will qualify for the
program. Treasury had said last year that life insurers could be eligible for TARP funds if they owned bankholding
companies, but it hadn’t officially decided to give funds to these companies as it focused much of its
energies on banks and auto makers.

Several life insurers have applied for the TARP funds, including Prudential Financial, Hartford Financial and
Lincoln National, the Journal reported.

If every insurer holding a federally chartered bank does get aid, the move will go far to address the mounting
uncertainty in the life insurance industry, said Robert Litan, an economist and senior fellow at the Brookings
Institution.

“I think it should remove a substantial amount of the uncertainty, conceivably all of it”, Litan said.
He pointed out that the insurance industry"s problems are easier to address than those of the banking system
because there are fewer major players holding many fewer problem assets.

But Litan said the main purpose of Treasury"s move was to “instill confidence in annuity participants that they
will continue getting their checks.”

By doing that, he said, the program likely will resolve industry fears about “bank run” scenarios in which
insurers don’t have the ready cash to pay out policies for people who have lost confidence in the system.

Prudential and Lincoln National representatives declined to comment on the report, as did a Treasury
spokeswoman.

A representative from Hartford Financial was not immediately available for comment.

Shares of Lincoln National jumped $2.38, or 34.5 percent, to $9.27 in morning trading. Hartford Financial
gained $2.14, or 25.3 percent, to $10.59, as Prudential rose $1.91, or 8.6 percent, to $24.01.