Six major insurance companies have received preliminary approval to get billions of dollars in fresh capital as part of the government’s financial rescue program, a Treasury Department spokesman confirmed on Thursday.
The department said the Hartford Financial Services Group, Prudential Financial, Lincoln National, Allstate, Ameriprise and Principal Financial Group have all received approval for capital infusions, subject to terms still to be negotiated.
While the extension of additional capital to insurers had been widely expected, these are the first companies that have been identified to receive aid after the near-collapse of American International Group. According to the Treasury spokesman, Andrew Williams, these insurers qualified for capital infusions under the department’s Capital Purchase Program because each had restructured itself as a bank holding company and met the November deadline for the program.
Hundreds of other financial institutions are still in the pipeline for review and will be approved on a rolling basis, the Treasury Department said. As the financial crisis erupted last fall, A.I.G. became the first insurer to receive substantial government aid before a broad-based program to help financial firms was established. Its problems stemmed from complex derivatives that greatly increased its obligations to its trading partners.
This recent group of insurers is far less troubled than A.I.G., but they still have been hurt by the collapse in real estate prices. Amid the housing boom, many insurers invested in complex mortgage-related securities that have since turned sour, weakening their balance sheets.