Insurers win a round in quest for bailout aid

LOS ANGELES — Six major insurers, including The Hartford Financial, Prudential Financial and Allstate, received preliminary approval Thursday for billions of dollars in aid from a U.S. bailout fund, following a months-long quest by some in the sector for financial assistance.

The Hartford Financial Services Group Inc. was the first to disclose that it had been notified by the Treasury Department that it was eligible for $3.4 billion from the Troubled Asset Relief Program, or TARP.

Allstate Corp., Lincoln National Corp., Ameriprise Financial Inc., Principal Financial Group Inc. and Prudential Financial Inc. also are among insurers receiving preliminary investment approval, Treasury spokesman Andrew Williams confirmed. He declined to disclose the amount of investment each company will receive.

The total capital injection into the six companies will be less than $22 billion, The Wall Street Journal reported, citing a person familiar with the situation.

The $700 billion TARP bailout fund, approved by Congress last year, was originally intended to purchase toxic loans on the books of banks that were inhibiting their ability to make loans. But the fund quickly morphed into a capital backstop fund for banks that also was used by the Treasury Department to make loans to General Motors Corp., Chrysler and insurance giant American International Group Inc.

Life insurers also requested government aid, worried that their balance sheets had became clogged by illiquid assets and escalating liabilities to policy holders who bought in to this decade's explosion in the variable annuities market. But a final word from the government was slow in arriving, and the stocks of most public insurance companies plunged in recent months.

Life insurers own 18 percent of all corporate bonds, so aiding them is consistent with the bailout program's goal of unclogging credit markets. Insurers also have seen their investment portfolios slammed by declines in stocks, real estate and other financial assets in the last two years. Analysts have warned that some insurers risked falling below necessary capital levels, which is essential to avoiding costly downgrades from ratings agencies.

Insurance companies won backing from the Bush administration last year to be considered for the government's TARP program because some of the companies either owned savings and loans or acquired them to be considered for the bailout program, or were already classified as bank holding companies. The Hartford and Lincoln National, two of the nation's largest life insurers, and several others applied to become thrift holding companies last fall.