As Life Insurers Face Losses, Next Bailout Decision Looms

Keep payouts in interest-bearing accounts and skim off profits

(NEWSER) - It turns out that insurers handling death benefits for American soldiers have got a sweet scam going that enables them to keep profiting from the money even after it is supposedly paid out to families. They tell bereaved relatives that they've opened a convenient, interest-bearing account for their money that's a nice, safe place to keep it and they give them a "checkbook." But it's not a normal checkbook, they don't open individual accounts for each soldier, and they skim off most of the interest the money is making—giving beneficiaries 1% while it's earning 4%. More»

(NEWSER) - Now that the banks' stress tests are done, it's on to the insurance industry. The Treasury Department said today it will give TARP funds to the nation's biggest life insurers, the Washington Post reports. Hartford Financial has been given preliminary approval to receive $3.4 billion, and as-yet unspecified amounts will go to Prudential, Allstate, Ameriprise, Lincoln National, and Principal Financial Group. More»

Efforts to save economy result in windfall

(NEWSER) - The Federal Reserve's efforts to keep the economy afloat last year earned it the highest profits in its 96-year history. The Fed—which funds itself and turns its earnings over to the Treasury—made a total of $45 billion last year, dwarfing the profits of many big banks. Interest on the Fed's $1.8 trillion in government bonds and mortgage-backed securities accounted for much of the earnings. More»

Treasury throwing a lifeline to a third industry

(NEWSER) - The Treasury Department has decided to give struggling life insurance companies access to federal bailout funds, insiders tell the Wall Street Journal. The industry—which had earlier seemed largely immune to the credit crisis—has been hit hard by stock market and real estate declines, leaving some firms on the hook for big payouts they may find impossible to deliver. More»

Federal aid may offer AIG a competitive advantage in ailing industry

(NEWSER) - AIG’s troubles were quickly blamed on a single, obscure wing of the company, but its problems extend to its core life-insurance division—underscoring dangerous weaknesses across the entire industry and pointing to the possibility of a second financial crisis, the Los Angeles Times reports. What's more, by offering AIG a federal lifeline, the behemoth at the eye of the storm may have an unfair competitive advantage over smaller rivals. More»