Hartford, 3 Other Insurers Seek to Buy Thrifts to Obtain Bailout Funds
Four insurance companies on Friday asked the government to allow them to buy thrifts so they can qualify to receive federal money under the financial rescue program.
Hartford Financial Services Group Inc., Genworth Financial Inc., Lincoln National Corp. and Aegon NV, a Dutch company that owns U.S. insurer Transamerica, each asked the Office of Thrift Supervision for permission to acquire an existing savings and loan.
The deadline for filing applications was Friday. The Treasury Department agency said it received submissions from those four firms to become thrift holding companies by acquiring savings and loans.
Insurers that own thrifts, which are federally regulated, are eligible to apply for a piece of the $250 billion the government is spending to buy shares in banks and other financial companies. Thrifts differ from banks in that, by law, they must have at least 65 percent of their lending in consumer loans such as mortgages.
Hartford Financial said it expects to be eligible for between $1.1 billion and $3.4 billion in government bailout money.
The Hartford, Conn.-based company said it had agreed to buy Federal Trust Bank for about $10 million and to inject an undisclosed amount of new capital into the federally chartered savings bank. Federal Trust Bank, now owned by Sanford, Fla.-based Federal Trust Corp., operates 11 branches in Florida.
Richmond, Va.-based Genworth Financial applied to acquire Inter Savings Bank, a thrift based in Minneapolis, according to the thrift agency. Philadelphia-based Lincoln National is looking to buy Newton County Loan & Savings, based in Goodland, Ind., while Transamerica is seeking to acquire Suburban Federal Savings Bank of Crofton, Md.
Insurance companies are mostly regulated at the state level, but insurers that become thrift holding companies are under federal supervision and thereby qualify for the government bailout money.
At least two dozen insurers currently own thrifts.
Many insurers have been struggling. Hartford and Lincoln were among several companies analysts identified this week as likely needing to raise capital and facing the possibility of ratings downgrades.
“It wasn’t just the banks and other institutions that were buying the subprime mortgage packages,” said Tony Plath, a finance professor at the University of North Carolina at Charlotte. “It was the insurance industry that bought a lot of that _ which is why they are now backpedaling to write all that stuff off their balance sheets.”
Plath said insurance companies are “holding their hand out to Treasury for money because they don’t have any capital left to write it off against.”
A number of property-casualty insurers have said they aren’t interested in participating in the bailout program. The industry appears to be split between life insurers, some of whom have previously expressed interest in participating in the program, and property-casualty companies.
In a letter last month to Treasury Secretary Henry Paulson, Chubb Corp., a major property-casualty insurer, said “we do not believe that allowing property and casualty insurance companies to participate in the (Treasury program) is consistent with the stated purpose” of the law creating it. That purpose is “to restore liquidity and stability” to the U.S. financial system, Chubb noted in the letter.
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AP Business Writer Ieva M. Augstums in Charlotte, N.C., contributed to this report.