By Jessica Holzer
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Insurers, seeking to follow American International Group Inc. (AIG) by securing a government cash injection, are exploring the quickest way to qualify for the program: buying a thrift.
The U.S. thrift regulator has recently received "some expressions of potential interest" from insurance companies looking to purchase thrifts, Office of Thrift Supervision spokesman William Ruberry said.
The inquiries come after Treasury told insurers that only those with federally-regulated bank or thrift parents will be eligible for government cash under its Troubled Asset Relief Program.
Treasury assured the industry, however, that companies need not have acquired a bank or thrift charter before the Nov. 14 deadline to apply for a capital injection, as long as they are taking steps to do so. Even a couple acquisitions of struggling thrifts by larger, more stable insurers would be welcome news for the thrift regulator, which has been fighting for its survival after being slated for extinction by Treasury earlier this year.
"Obviously, when an institution we regulate is having some serious issues, we're certainly open to having them be acquired. But it's a case-by-case basis," Ruberry said. Insurance companies were made broadly eligible for aid under the $700 billion Troubled Asset Relief Program. Yet life insurers that represent roughly half the industry's assets are barred from the only path Treasury has so far opened to disperse the funds because they don't own a bank or thrift.
Life insurers had lobbied unsuccessfully for the Treasury to loosen its criteria so that the industry could participate broadly. Now it's unclear how many will seek cash injections.
Metlife Inc. (MET) and New York Life Insurance Company, which have a bank and thrift parents respectively, announced they won't apply for the cash. Property and casualty insurers have also said they aren't interested in the program.
Other insurers, such asHartford Financial (HIG) and Lincoln Financial Services Group (LNC), have expressed interest in acquiring a bank or thrift to participate in the program. Ruberry said the agency has not received any final applications yet.
The Treasury on Monday announced that it would inject $40 billion into AIG, which is structured as a thrift holding company. The move is part of an effort to restructure its bailout of the huge financial conglomerate.
There are plenty of troubled thrifts for insurers to chose from. At the end of the second quarter, the number of institutions on OTS' list of "problem thrifts" crept up to 17 from ten a year ago, though many suspect the estimate is low.
Becoming a thrift parent may be an easier route for insurers than acquiring a bank. The thrift regulator has less stringent capital standards for holding companies than the Federal Reserve, which oversees all bank holding companies.
Treasury spokesman Brookly McLaughlin declined to specify the steps an insurer would need to take to satisfy Treasury that it was pursuing a bank or thrift charter. She said Treasury wouldn't release TARP funds to insurers if the thrift or bank charter wasn't approved. She added a charter was also no guarantee of acceptance into the program.
The American Council of Life Insurers declined to comment about efforts by insurers to receive government cash. In a recent letter to Treasury, ACLI Vice President Carl B. Wilkerson wrote, "Life insurers should be fully included within the scope of the program on a basis equal with other financial institutions."
A spate of thrift acquisitions by insurers could kill two birds with one stone for the Office of Thrift Supervision. It could take troubled institutions off the regulator's hands while boosting the agency's clout.
The regulator lost a huge chunk of its operating budget with the collapse of large thrifts IndyMac Bancorp and Washington Mutual this year. In March, Treasury Secretary Henry Paulson recommended it be eliminated, fueling speculation about whether it would survive a regulatory overhaul next year.
This would not be the first time the OTS has bounced back from near-extinction. Back in the mid-1990s, the regulator was enduring talk by lawmakers of being eliminated.
But a move by Congress to eliminate so-called unitary thrift holding companies spurred a flurry of firms to apply for the status in order to be grandfathered in as thrifts before the change. With the swelling of its institutions' ranks, the regulator was able to reassert its relevance.
-Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com
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(END) Dow Jones Newswires
November 10, 2008 17:15 ET (22:15 GMT)

Publié le 10 novembre 2008 Copyright © 2008 Dowjones