Prudential Benefits From TALF

It sounds like Prudential Financial Inc., the nation’s second-largest life insurance group, is experiencing incredible gains from purchasing credit card debt using the Treasury department’s Term-Asset Backed Securities Loan Facility, TALF for short.

Prudential executive VP in charge of US businesses, Bernard Winograd spoke about the turn of event is a recent conference organized by JPMorgan Chase & Co. He said, “Everything that we bought at this point would have very high internal rates of return.”

The TALF program, which lends taxpayer dollars to private companies, has attracted investors back into the market for securities supported by consumer loans. Ever since the program was established in March 2009, the number of request for the TALF funding has gradually increased. As a result, the demand for credit card and auto debt has been driven up and the value of Prudential’s initial TALF investment has rising to more than $800 million.

Prudential reported $1.1 billion in losses in 2008 as the recession undercut the value of corporate debt and mortgage investments in the company’s $236 billion portfolio. The insurer has issued more than $11 billion writedowns and unrealized losses. These were apparently linked back to the 2007 real estate slump, according to research compiled by Bloomberg.

Prudential has prepared for more declines by selling $2.4 billion in stock and debt in June.

The number of commercial mortgage defaults is continuing to increase even as unemployment rates grow day by day. The sentiments were voiced by Winograd, echoing similar statements made by MetLife Inc. Chief Investment Officer Steven Kandarian during a recent interview.

Met Life, the largest life insurance firm in the United States has assets in the neighborhood of $300 billion. Kandarian suggested back on June 10th that the defaults were sure to rise in the next two to three years

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