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Posts Tagged ‘Hartford Financial Services’

Where Will TARP Money Go? Let’s Start in Hartford

Posted by Larry Doyle on June 9th, 2009 3:03 PM |

Secretary Geithner and President Obama today hailed the repayment of $68 billion in TARP funds as a clear indication of the success of the overall financial recovery programs implemented by the administration. Well, as those familiar with the “shell game” know, in order to keep the game going it is critically important to display some winners on a regular basis.

How do we know the TARP funds were utilized properly and everybody won on this government investment? We don’t, despite what Barack says. Money is fungible. The system was saved, with no small thanks to the FASB’s relaxation of the mark-to-market. These TARP recipients are designated as the winners. Meanwhile, the system still has upwards of $500 billion – 1.25 trillion in embedded losses, depending on whose projection you would like to use.

In my opinion, I believe Barack and team would have preferred to keep the TARP funds within these financial institutions. That said, there are other factors at work here. What are they?

1. when the TARP legislation was passed last Fall during the Bush administration, it set specific ground rules necessary for repayment. Barack, Tim, and team would have run the risk of flouting that legislation if they did not allow some firms to repay.

2. the administration will still be able to wield significant influence over these firms via a number of other Fed backstops already in place.

3. not being widely publicized but of very real significance, the administration will need these funds in other firms. What firms? Let’s drive on over to Hartford.

As the WSJ recently revealed, Hartford Chief Expects TARP Funds Soon:

It is expected in the next few weeks to get as much as $3.4 billion in funds under the Treasury’s Capital Purchase Program.

Hartford’s stock was down today as it is being downgraded by equity analysts at Citigroup due to management issues.

Recall that Hartford was one of 6 insurance companies that received thrift status by acquiring a controlling stake in a small institution. As such, these firms became eligible for TARP funds. In my opinion, once the TARP dam is broken with one insurance company, the stigma is lessened for others to acquiesce in accepting these funds.

What might be the next stop after Hartford? Perhaps Newark (Prudential Insurance) or Philadelphia (Lincoln Financial). Sense on Cents will monitor where the TARP train moves next.

LD

Is My Insurance Insured?

Posted by Larry Doyle on March 12th, 2009 6:30 PM |

The world of insurance occupies almost every corner of our lives. Life, home, auto, disability, long term care, personal articles. Rather than addressing what is insured, an easier question may be to ask what isn’t insured.

insurance-policies1Given the intricate web of products and accompanying risks, we clearly are not currently dealing with your grandfathers’ insurance companies.

All that said, insurance is a relatively simple business. A policy is underwritten, premiums are collected and invested, and on and on we go. In fact, with major policies incorporating outsized risks, insurers can “lay off” risk with reinsurers, such as Munich Reinsurance, Swiss Reinsurance, and General Reinsurance. One would think this should be a steady and stable, if not quiet, industry. It would be such if companies did not reach for outsized returns through ever greater risks, primarily in the products in which they invested. While The Quiet Company, Northwestern Mutual invests primarily in high quality corporate bonds, entities like AIG trafficked in esoteric CDS. Hartford Financial Services played in the lower credit sectors of the commercial mortgage space, sub-prime mortgages, and junk bonds. (more…)






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