Life insurers seek aid to stabilize investments

Life insurers seek aid to stabilize investments


By Lilla Zuill - Analysis
NEW YORK (Reuters) - Life insurance companies, nervous over massive investment losses that could ultimately threaten their viability, are hoping they are next in line to get a piece of the U.S. financial bailout.
They argue federal funds could stabilize their trillions in investments and warn that any failure of a life insurer could dry up a key source of corporate financing.

But U.S. officials are not convinced.

Treasury Secretary Henry Paulson said Tuesday he had not yet decided whether other insurers would get federal funds. The only insurer to get government help so far is American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz), which was saved from bankruptcy with a rescue package that has ballooned to $152 billion.
As the biggest buyers of U.S. corporate bonds, life insurers say they grease the wheel of corporate America. Industry officials insist the failure of a large U.S. life insurer would drastically shrink bond financing, potentially creating another hurdle to the nation's economic recovery
Analysts warned that the fourth-quarter outlook for the sector is even gloomier, with growing concerns that their investments in commercial mortgages will lead to more red ink as values drop.

Hartford Financial Services Group Inc (HIG.N: Quote, Profile, Research, Stock Buzz), which sells both life and property insurance, reported a $2.6 billion quarterly loss on October 30, the 189-year-old insurer's worst-ever result, mainly from bad investments in financial companies.
Prudential Financial Inc (PRU.N: Quote, Profile, Research, Stock Buzz), the No. 2 U.S. life insurer, had a $108 million net loss, and withdrew its 2008 earnings forecast, citing market volatility. Genworth, a smaller insurer, recorded a $258 million net loss.

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