What’ll you do when you get lonely
And nobody’s waiting by your side?
You’ve been running and hiding much too long.
You know it’s just your foolish pride.
From the Wall Street Journal (subscription required):
A dozen life insurers have pending applications for aid from the government’s $700 billion Troubled Asset Relief Program, and the industry is expecting an answer to its request for a bank-style bailout in the coming weeks. The government so far hasn’t said whether insurers will be eligible for the program.
Life insurers have taken a beating in recent weeks. The Dow Jones Wilshire U.S. Life Insurance Index has fallen 59% since the beginning of the year, leaving it down 82% since its May 2007 all-time high. The Dow Jones Industrial Average has lost 21% year to date, off 51% since its October 2007 record.
Denial is a terrible thing and it appears either the WSJ reporters were suffering the affliction or they were fed a line of BS and didn’t check it as the story continues:
Some state regulators have lately extended relief from certain capital requirements. But insurers haven’t received the kind of injections banks got in recent months. That’s partly because insurers didn’t gobble up risky assets, and also because as long-term investors, they generally don’t have to recognize on the bottom line short-term dips in values of their assets.
Of course here at slabbed we know better than to believe the BS insurers, including life insurers, didn’t buy risky assets. We’ve chronicled the investing foibles of many an insurer and their special purpose entities in the past severel months here at Slabbed. You wonder if the writersof this piece bothered to pick up a 10-K and read it before they wrote their story. The last part of the sentence I highlighted implies mark to market accounting has not been a problem for these life insurers which again is patent BS. A quick google reveals Connecticut $enator Chri$ Dodd has lead the charge for months to suspend mark to mark accounting due to it’s impacts on his big business insurance friends including life insurers like the Hartford. I reckon we’ve been dreaming all that (and all the investment write downs) as the story continues (as the authors begin to make their case why life insurers are also too big to fail):
Ratings agencies and stock investors are growing concerned about how long the industry can avoid reckoning with the distressed assets on their books. Rating agencies Moody’s Investors Service, Standard & Poor’s and A.M. Best have cut the ratings of more than a dozen insurers in recent weeks.
The ramifications of a weakened life-insurance industry for the overall economy are significant. Life insurers are among the biggest holders of the nation’s corporate debt. Together, they own about 18% of all corporate bonds outstanding, according to the American Council of Life Insurers, or ACLI, an industry trade group.
If life insurers stop buying bonds, the capital markets may not fully recover, say insurance industry representatives and analysts. Already, their buying activity has slumped. In the fourth quarter of 2008, life insurers agreed to buy $3.3 billion in stocks and bonds through private transactions, down 63% from the previous quarter, according to a survey by the ACLI. Insurers have been putting more cash into safe havens such as Treasury bonds.
This is a brazen bunch of suits as the search for their government handout (to cover their bad investing decisions) continues, especially in light of the fact the industry has successfully escaped federal regulation for the better part of 60 years. Notice the rhetorical distance the put between themselves and AIG. I don’t think this BS will fly far in Congress as the story continues:
For now, the Treasury Department hasn’t said whether life insurers will be eligible for TARP funds. Industry group ACLI expects Treasury to decide whether insurers will be eligible for federal aid some time later this month. “We don’t have a clear picture of which way that clarification would tend to go,” said ACLI representative Gary Hughes.
The Treasury Department didn’t return calls for comment made late in the day.
One stumbling block is that the industry is overseen by state regulators, not a single federal agency. That means there’s no group of federal officials responsible for it or with a deep understanding of its challenges.
The problems plaguing life insurers aren’t the same as those at insurance giant American International Group Inc., which has received a $173 billion aid package. Its losses stemmed largely from derivatives, primarily credit default swaps, tied to complex securities that turned sour in the credit crunch.
Layla, you’ve got me on my knees.
Layla, I’m begging, darling please.
Layla, darling won’t you ease my worried mind.