Allstate tells Treasury ‘thanks, but no thanks’ on TARP cash
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This is the kind of ingrate a taxpayer should appreciate: Insurance giant Allstate Corp. today turned down the Treasury’s offer of TARP capital.
Just last week, after months of industry lobbying, the government approved six major life insurance companies for capital infusions under the Troubled Asset Relief Program.
But one of the six -- Ameriprise Financial Inc. -- quickly said it no longer was interested. Another, Prudential Financial Inc., sounded noncommittal in a statement Friday, saying only that it was ‘evaluating all options.’
Now, Allstate says it doesn’t want the money. ‘We applaud the administration’s decision to include insurers in the U.S. Treasury’s programs,’ said CEO Thomas J. Wilson. ‘Given Allstate’s strong capital and liquidity positions, however, we will not participate in this program.’
The crash in stock and bond markets (other than U.S. government bonds) from September to March ravaged insurers’ huge investment portfolios and raised fears about depleted capital levels.
That put them in line for TARP money because the government didn’t want to risk an insurance industry crisis on top of the banking crisis, or add another financial worry -- ‘Will my life insurance policy be wiped out?’ -- to average Americans’ already long list.
But with the dramatic improvement in financial markets over the last two months the insurers are feeling a lot better. Allstate’s stock, for example, is up 88% since March 9, to $26.50 today. Ameriprise has more than doubled in the period, to $28.94. And some of the companies have raised fresh capital in the markets; Allstate raised $1 billion via a debt offering last week.
Last but not least, of course, TARP increasingly has become a club to which you’d rather not belong, given the strings attached to the money (government meddling in your pay structure, your dividends, etc.).
When Goldman Sachs Group, JPMorgan Chase & Co. and Morgan Stanley all say they want out of TARP as soon as possible, it’s harder for any other big financial firm to persuade its investors that taking the money is a smart idea.
-- Tom Petruno