Stocks crushed, managements insisting they are well-capitalised, economy-crippling size, hands out for a bailout…it’s deja vu all over again.
WSJ: Some of the hardest-hit companies are century-old names that insure the lives of millions of Americans. Shares of Hartford Financial Services Group Inc., which already received a capital injection from German insurer Allianz, are down 93% as of Wednesday’s close from their 52-week high. MetLife Inc. and Prudential Financial Inc. are both suffering as the value of their vast investment portfolios declines.
Some life insurers are faring better than others, and some of the nation’s giants retain triple-A ratings, including Massachusetts Mutual Life Insurance Co., New York Life Insurance Co., Northwestern Mutual Life Insurance Co. and TIAA-CREF.
But as the economy buckles, analysts say many insurers face losses that can eat away at the capital cushions regulators require them to maintain.
And what are the implications, other than that you are going to have to fork over hundreds of billions of dollars to save yet another industry that should have been competent enough to avoid this mess? The credit markets will stay tight:
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.