Paulson Won't Rule Out TARP for Insurers

Updated from Nov. 25

Treasury Secretary Henry Paulson is not ruling out the possibility of making insurance companies eligible for TARP assistance. In a press conference Tuesday morning, Paulson said that several insurance companies already qualified for the aid as bank holding companies but the Treasury, he said, has not made a decision to include all insurance companies at this stage.

It is not clear whether Paulson is considering requiring insurance companies to become bank holding companies, or purchase an existing bank to qualify as such, before receiving aid under the Troubled Assets Relief Program. Insurers that decide to make such a move would come under a measure of federal regulatory control.

Paulson's words today must sound like music to the ears of companies such as Hartford Financial Services (HIG Quote), Lincoln National (LNC Quote), Genworth Financial (GNW Quote) and Aegon (AEG Quote) -- insurance companies that in recent days attracted a lot of attention by purchasing troubled savings and loan companies as a way to try to qualify for TARP funding.

With today's statement -- namely, that the Treasury is not ruling out insurers for TARP aid -- the chances of the insurance banks getting access to the TARP funds has risen and so should the stock of those insurance companies.

Will Paulson's words encourage other insurers to purchase troubled banks or thrifts so that they can get in line for TARP funds, or at least start negotiations on the chance that funding breaks in the insurers' favor?

MetLife (MET Quote) has been a bank holding company since well before this financial crisis began, and its president and CEO, Robert Henrikson, has been reticent on the matter, Henrikson said only, "We will explore all options. Other than that, no comment," during the company's recent third-quarter earnings conference call. Speculation is rife that MetLife is a candidate for purchasing some of AIG's assets.