Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

Geithner Says "The Returns We'll Get From Banks AND AIG Will Be More Than Enough To Cover Losses on Autos"

by John Darer CLU ChFC MSSC RSP

Yahoo Finance reports  that the price to the tax payers of the bailouts and financial rescue of 2008 and 2009 continues to fall sharply. Incredibly the final net cost of the Troubled Asserts Relief Program (TARP) is estimated to be $50 Billion, according to the report.

There has been alot of misinformation out there and to the extent it has affected structured settlement sales it needs to be corrected. If you are in the structured settlement industry , or an attorney, or a plaintiff in a personal injury case reading this a post I suggest you read this article and watch the video.

While AIG is characterized as a huge wild card , having received more than $180 billion in support from Treasury and the Federal Reserve, including $69 billion in TARP funds, the company has a plan to extricate itself from Treasury and The Federal Reserve. As published last week in the media, the plan involves converting preferred shares owned by Treasury into common stock, which would then be sold piece by piece over several years, but less than the 5 to 8 years estimated in 2009.

To underscore that Treasury is optimistic the plan will succeed, Treasury secretary Timothy Geitrner said ""The returns we'll get from our investments in banks and AIG will be more than enough to cover the money we'll lose in autos"

MetLife Praised by Barrons

Barrons is bullish on MetLife in a June 19, 2010 feature article about the insurance company stating that they " might have written the right policy to ensure future growth".

The Pluses

• The acquisition of ALICO from AIG is expected to double the percentage of operating profits the company gets from abroad and give it a foothold in Japan, China and Brazil.
• MetLife is taking share in the variable-annuity and structured-settlement markets from rivals.
• MetLife boasts $7.5 billion of capital above the total that it's required to hold.
• MetLife is benefiting from insurance consumers' flight which has been a factor in achieving double-digit premium growth.

The Question Marks

• Alico's $81 billion investment portfolio has considerable exposure to financials, lower-rated commercial mortgage-backed securities and sovereign debt, such as $1.3 billion in Greek bonds.
• MetLife has $35 billion of commercial mortgages. It could be hurt if defaults on commercial real estate rise, as many expect.

Barrons reports that company officials counter with MetLife having s a 432% risk-based capital ratio—meaning its total capital equals four times its risk-based capital, a sign of financial strength. MetLife did not participate in the Troubled Assets Relief Program (TARP) in 2008 or 2009. ( For background on TARP read MetLife CEO Says Insurer Bailouts were Bad PR Bloomberg June 10, 2010)

Ironically, the testament to insurer financial strength and declinaton of TARP (financial assistance to banks) comes just a day after USA Today carried this headline about the banking industry: "Bank failure is 83rd in '10; pace more than double last year's".

MetLife, which is 147 years old, is the largest life insurance company in the United States with over $539 billion in assets.

The Hartford Gets TARPed...To Issue New Stock

 by John Darer

Hartford Financial Services Group ("The Hartford")  has announced plans to sell up to $750 million in stock and formally announced it will participate in the Treasury Department's Troubled Asset Relief Program ("TARP").The participation is not unexpected and  various news reports characterize The Hartford as "being among the most enthusiastic after the government last month decided to allow six major insurers to tap into TARP for additional capital".

Hartford was made eligible for $3.4 billion under TARP.

Chairman and Chief Executive Ramani Ayer said the decision to participate in TARP and sell shares would boost The Hartford's financial strength and help it implement its long-term capital plan.

Among the planned changes for The Hartford is with its U.S. variable-annuity business, including raising prices and launching a new product with a lower risk profile in the third quarter. Variable annuity minimum guarantees hammered a number of life insurers when the stock market.dropped more than actuaries in pricing the feature.

 The company's market value stands at approximately $4.6 billion.

 

Canada Unveils "Canadian Life Insurers Assurance Facility"

Reuters reports that Canadian Finance Minister Jim Flaherty unveiled details of an assistance facility for the country's life insurers aimed at ensuring the firms have access to the funds they need if credit markets seize up.

The Canadian Life Insurers Assurance Facility is similar to one already available to the Canadian banks and is designed as a backstop to global credit markets, to put Canadian insurers on an equal footing with foreign competitors who are benefiting from guarantee programs provided by their governments (e.g. TARP for US insurers)

Reuters, citing the Canada budget website said that "while Canadian insurers have seen their profits suffer or vanish amid a drop in business and huge investment losses, their balance sheets are relatively solid and the credit facility may never be needed".

The life insurance sector, both in Canada and abroad, has been hurt by weaker financial markets that caused investment losses and higher costs for minimum guarantee variable annuity products that are affected when market values fall.

Under the assistance facility, companies seeking to issue insured debt will be required to enter an agreement with the Canadian government. Ottawa will then offer a guarantee of timely payment for interest and principal payments for the wholesale debt instruments that qualify, and the insurer will pay a market-based fee on the amount of insured debt issued.

A number of life insurers issue structured settlements in Canada in addition to connections to the United States structured settlement market.  Manulife, a Canadian company is the parent of US insurer John Hancock and Canada Life is a former structured settlement annuity issuer.

New York Life Chief Investment Officer Says No Need For TARP

Gary Wendlandt

, chief investment officer and vice chairman of New York Life Insurance Company, said in an interview with Dow Jones Newswire on Friday May 15, 2009 that, with more than

$12 billion

in surplus capital at the end of 2008, "we have more than enough capital to achieve our strategic objectives."

April 6, 2009 Video of New York Life CEO Ted Mathas

New York Life Insurance Company remains the only structured settlement annuity company that has the absolute top ratings from A. M Best, Moodys, Standard & Poors and Fitch  (A++, Aaa, AAA, AAA)

Would you like to see a New York Life structured settlement quote?

Simply complete and submit this secure online form, or call toll-free 888-325-8640

Hindert "Spinning TARP" | Failure to Think Things Through

by John Darer

What is former NSSTA President Patrick Hindert smoking for implying that Treasury should deny Hartford TARP funds because of a legal case that has not yet been decided,  Spencer v Hartford?

Hindert asks: "Should federal officials consider Spencer v. Hartford if and when Hartford applies for federal TARP funds?"

In November 2008 Reuters reported that Hartford agreed to buy Sanford, Florida-based Federal Trust Corp, which operates the 11-branch thrift Federal Trust Bank, for $10 million. According to the report the insurer said it plans to recapitalize Federal Trust, and has applied to the federal Office of Thrift Supervision to become a savings and loan holding company with said development hopefully allowing it to sell $1.1 billion to $3.4 billion of preferred shares to the government under the Treasury Department's $700 billion Troubled Asset Relief Program (TARP).

As the legal process takes it course one wonders why Hindert would imply that a piece of litigation should have any effect on TARP eligibilty?  Why wouldn't the Spencer litigants be interested in enhanced financial security? What about the millions of other owners or beneficiaries of Hartford insurance products?

April 9, 2009 article in Hartford Courant on Insurers and TARP