The Treasury may inject cash/take stakes in insurance companies, according to multiple reports. This would echo the cash injections into the major banks from just over a week ago. No doubt we’ll get the same line about protection for taxpayers.
This isn’t really that weird. Banks and insurance companies aren’t very different — both take your money and then give it back to you at some point down the road, making money on it in the meantime. If you accept the logic of the bank injections, this makes just as much sense.
Check out some quotes on the insurers, including Hartford, Chubb and Metlife, all of which are trading higher (Update: A reder notes that this is more aimed at the financial insurers like MBIA and Ambac).
WSJ: Among those expected to benefit from Treasury’s program are insurance firms. Most insurance companies are financially sound but have seen their long-term investments and stock prices hurt by the recent market turmoil.
Treasury wants insurance companies to participate in its program, dubbed TARP, and is considering taking equity stakes in certain firms, according to people familiar with the matter.
For now, however, only certain insurance firms would be eligible for a capital infusion. Under the terms of Treasury’s program, insurers would have to have a financial institution holding company that was regulated at the federal level.
Reuters is saying something similar.
Meanwhile, the news hasn’t spurred any kind of late-day rally — perhaps because a bailout like this was already priced in.