Insurers Mull S&L Status; Request Could Come Today (Update2)

By Andrew Frye
Bloomberg News
November 14, 2008

Nov. 14 (Bloomberg) -- Several U.S. insurers have asked regulators about applying for status as savings and loan institutions, a step that could give them access to Treasury funding.

"There have been some expressions of interest, no formal applications,'' Bill Ruberry, a spokesman for the Office of Thrift Supervision, said today, declining to name the companies. "It's possible that one could be finalized by the end of the day.''

The inquiries follow decisions by financial firms such as Goldman Sachs Group Inc. and Morgan Stanley to convert into banks overseen by the Federal Reserve and accept government funds. Insurers, whose operations are regulated by individual U.S. states, may be eligible for capital from Treasury if they qualify for federal oversight from the OTS.

The 24-stock KBW Insurance Index dropped by more than half this year and life insurance stocks had their worst month in at least a decade in October. North American insurers have posted more than $120 billion in writedowns and unrealized losses tied to the slumping U.S. mortgage market.

Companies that own a savings and loan and thus are already regulated by the OTS include MetLife Inc., the biggest U.S. life insurer; No. 2 Prudential Financial Inc.; Allstate Corp.; Principal Financial Group Inc. and Nationwide Corp.

`Most Attractive Path'

Those that aren't include Hartford Financial Services Group Inc., Lincoln National Corp. and Genworth Financial Inc.

"For the insurance industry specifically, the S&L path is the most attractive path,'' Genworth Chief Executive Officer Michael Fraizer told analysts in a Nov. 6 conference call. "It's one that certainly we examine.''

Lincoln CEO Dennis Glass said on Oct. 29 that the company may seek to change into a bank holding company to become eligible for government aid. Spokeswoman Laurel O'Brien, contacted yesterday, declined to comment on the OTS.

At Hartford, spokeswoman Shannon Lapierre also declined to comment on the OTS. "We would evaluate opportunities'' to access federal funds, she said.

Fitch Ratings cut its outlook on the life insurance industry to "negative'' on Sept. 29 and Standard & Poor's followed last month. Analysts including Morgan Stanley's Nigel Dally have said rating firms may require insurance companies to hold more capital, given the volatility in stock and bond markets.

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