Insurance Bailout Requests Raise Concerns

Government Assistance Not Guaranteed

Whether insurance companies will succeed in their efforts to get federal TARP money remains uncertain.

In order to be eligible for the program, Hartford Financial Services Group, Lincoln Financial Group, Genworth Financial and Aegon have all announced plans to buy banks and attain approval to become savings and loan companies.

Testifying before Congress Tuesday, Treasury Secretary Henry Paulson said he wasn't sure that was "a successful strategy."

"We are going to look only at applications that we think make sense," he said. But Paulson added that a number of insurance companies are already bank holding companies.

"It may make sense to put capital into those institutions that are playing a vital role in lending and keeping our economy going," he said.

Proponents of directing TARP money to insurance companies argue that, by buying corporate debt, insurance companies have played a major role in the U.S. financial system.

Jack Dolan, of the American Council of Life Insurers, said that lately, the "irrational markets" have led insurance companies to hoard cash instead of investing it. TARP funds, he said, would help insurance companies return to the corporate debt market.

"It provides something of a safety net to allow us to continue or to get back more aggressively into our ways of providing capital and liquidity to companies and corporations," he said.

If insurance companies with newly acquired banks succeed in their TARP applications, they could see capital injections that are many times greater than the amount they originally spent on buying banks.

Hartford, which plans to spend $10 million to buy Federal Trust Corp. in Sanford, Fla., estimates that it could receive between $1.1 billion and $3.4 billion from the rescue plan.

That, said Zacks' Mishra, "is a very handsome return."