Ameriprise declines federal bailout money

  • Article by: STEVE ALEXANDER , Star Tribune
  • Updated: May 15, 2009 - 9:46 PM

The Minneapolis insurer was one of six insurance companies to qualify for the rescue funding but said it doesn't need the Treasury's TARP cash after all.

Six big insurance companies qualified for $22 billion in federal rescue funding Friday, including Ameriprise Financial of Minneapolis. But Ameriprise turned down the roughly $2.5 billion cash investment, saying it doesn't need the money.

The other insurance companies offered billions of dollars under the Treasury Department's Troubled Asset Rescue Plan, or TARP, were Allstate, Hartford Financial Group, Lincoln National Corp., Principal Financial Group and Prudential Financial Inc. So far, none of the others has turned down the cash, although analysts say that could change.

There are disincentives to accepting federal rescue money, such as mandatory federal ownership of preferred shares of the recipient company, limits on executive compensation, a ban on golden parachutes and stricter rules on salary-related tax deductions.

Jim Cracchiolo, Ameriprise CEO, said the company is "confident that our current capital position and access to potential additional funding sources are more than adequate." He said the firm has "solid balance sheet fundamentals, including a high quality asset portfolio, large liquidity pool, more than $1 billion in excess capital and conservative capital ratios."

Ameriprise spokesman Benjamin Pratt said the company applied for TARP funds in November because "the Treasury Department was strongly encouraging healthy and strong companies to apply for the program." He said the company's strong capital position has not changed.

Because the insurance companies also own banks, they were entitled to receive TARP funds. Ameriprise owns a bank that serves only its financial services customers.

The amount of rescue money an insurance company could qualify for was up to 3 percent of its total assets. Ameriprise had $95 billion in assets at the end of 2008, which would seem to entitle it to $2.85 billion in TARP money. But insiders said the government also considers the risk to a firm's assets, and that the total cash available to Ameriprise would have been closer to $2.5 billion.

Some analysts say Ameriprise may not be the only insurance company to refuse the federal money.

Principal Financial Group and Prudential Financial are unlikely to take it, predicted Jeffrey Schuman of New York-based Keefe, Bruyette & Woods, writing in a Friday research note. Like Ameriprise, Principal Financial has a solid capital position, he wrote. But, he said, Prudential's case is harder to assess because it has some vulnerabilities that might make the TARP funds worth considering.

Schuman predicted that both Hartford Financial Group and Lincoln National Corp. would accept the money, although the two firms said their decision will hinge on final terms of the deal. The two firms will accept the cash, he said, "given what we believe is a need for additional capital and the cost and difficulty of potential equity raises at their modest valuations."

Allstate did not say whether it would accept the TARP funds.

Steve Alexander • 612-673-4553

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