Allstate Says It Won't Use TARP Rescue Money

NU Online News Service, May 19, 12:27 p.m. EDT

WASHINGTON–Allstate Corporation said today it won't participate in the government's Troubled Asset Relief Program, saying it already has adequate capital and cash on hand.

It thus became the second insurer to reject aid. The Treasury Department said Thursday that Allstate was eligible to receive monies under the Capital Purchase Program component of TARP.

The Treasury told six insurers in all Thursday that they were approved for the program.

Ameriprise announced immediately that it wouldn't accept the funds, and Prudential has indicated they are unlikely to participate in the program. The Principal has said it has made no decision either way.

When the firms applied for the program last October and November, the credit markets were closed. Since then, the private credit markets have reopened.

Moreover, public criticism of the program and the Treasury Department is demanding strong oversight of institutions that accept aid, including limits on dividends and compensation.

Specifically, a rule proposing strict limits on pay and bonuses of executives of private firms accepting aid under the TARP program is expected to be released shortly by Treasury.

In a statement in which the company also disclosed it will pay a quarterly dividend of 20 cents a share, Allstate Chairman and President Thomas Wilson said that it appreciated the Obama administration's decision to include insurers in the TARP.

However, he added, "given Allstate's strong capital and liquidity positions, we will not participate in this program."

Mr. Wilson cited Allstate's $12.2 billion in GAAP equity and $23.1 billion in cash or highly liquid assets in its investment portfolio at the end of the first quarter of 2009.

Mr. Wilson said, "These positions reflect proactive capital management steps taken over the past year," including suspending Allstate's share repurchase program, augmenting investment risk mitigation programs and reducing operating costs.

In addition, the statement said, since the end of the quarter, the company completed a $1 billion debt offering and reported a more than $1.5 billion improvement in its securities portfolio value as of May 13.

"Maintaining our financial strength is a top priority in 2009, and we will continue to take proactive steps to manage our capital position as markets develop and the economy improves," Mr. Wilson said.