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Update: New York Life Says It Won''t Participate in Treasury Bailout
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| Copyright: | A.M. Best Company, Inc. | | Source: | BestWire Services | | Wordcount: | 635 |
New York Life Insurance Co. will not participate in the U.S. Treasury Department''s Capital Purchase Program, the company confirmed, shooting down speculation it would be among a set of insurers that could potentially receive cash infusion from the federal government.
Established last month as part of the $700 billion Troubled Asset Relief Program, the Capital Purchase Program has allocated $250 billion to taking equity stakes in U.S. controlled banks, savings associations, and certain bank and savings and loan holding companies, including $125 billion to the nine largest commercial banks.
Recent discussions have suggested insurers — particularly life and mortgage and financial guaranty insurers — could be next in line for cash injections. MetLife Inc. is organized under a bank holding company regulated by the Federal Reserve, while Prudential Financial Inc., Ameriprise Financial Inc., Nationwide Financial Services Inc. and Principal Financial Group Inc. are among the life insurers that also operate savings banks supervised by the Office of Thrift Supervision.
But New York Life, the largest mutual life insurer as ranked by 2007 admitted assets, said that "when it became clear to us that the program was entirely voluntary for insurers, New York Life was able to evaluate it solely from the point of view of its capital strength and its policyholders'' best interests."
"The company can meet all of its strategic objectives without government capital, its businesses are strong and profitable, and it is committed to remaining a mutual company operating for the sole benefit of its policyholders," the company said.
Asked whether the company would be an acquirer of other insurers'' assets, New York Life spokesman William Werfelman said "acquiring assets of other insurers is not a priority for us."
"Of course, with our strong capital position, we are able to make acquisitions. We are always open to evaluating acquisitions that may complement our business and be in the best interests of our policyholders," Werfelman said.
In an Oct. 24 letter to Assistant Treasury Secretary for Financial Stability Neel Kashkari, the Financial Services Roundtable proposed that Treasury include insurers and other non-federally regulated entities in the TARP plan. "The institutions that are excluded play a vital role in the U.S. economy by providing liquidity to the market," the Roundtable wrote.
The American Council of Life Insurers likewise has endorsed opening the CPP to life insurers, with ACLI President Frank Keating saying it was "in line with the Emergency Economic Stabilization Act, which included insurers as eligible for participation in various Treasury programs designed to increase confidence in the nation''s financial institutions."
Representatives of MetLife and Prudential, members of both ACLI and the Roundtable, had no comment on whether they would be interested in participating in the TARP program. Hartford Financial Services spokeswoman Shannon Lapierre said Hartford could have interest in the Treasury program, if the funds were made available.
A.M. Best recently revised its rating outlook for the U.S. life insurance industry to negative from stable, noting that write-downs on illiquid investments have been exacerbated by widened corporate credit spreads in addition to securities linked to subprime and Alt-A residential mortgages. The company also identified emerging investment risks in commercial mortgages, including both direct loans and securitizations; asset-backed securities such as credit card receivables and automobile loans; alternative investments such as limited partnerships and hedge funds; as well as prime residential mortgage-backed securities.
The three major trade associations representing property/casualty insurers — the American Insurance Association, Property Casualty Insurers Association of America, and the National Association of Mutual Insurance Companies — all have said property/casualty insurers do not need government assistance and would not participate in the TARP.
New York Life Insurance Co. currently has a Best''s Financial Strength Rating of A++ (Superior).
(Adds comment from Hartford in the 10th paragraph and corrects New York Life''s ranking in the fourth paragraph.)
(By R.J. Lehmann, Washington bureau manager: raymond.lehmann@ambest.com)
This is a news service of Thomson Business Intelligence Service ©2006. This content is for your personal use only, subject to Terms and Conditions. No redistribution allowed.
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