Forget TARP, TALF, TLGP, TAGP and PPIP. The federal government has a new gift for Wall Street, health reform's Early Retiree Reinsurance Program (ERRP). Consider the players receiving ERRP funds:
JP Morgan
Bank of America
Bank of New York Mellon
CitiGroup
KeyCorp
PNC Financial Services Group
JP Morgan began coverage on KeyCorp, rating it an overweight. Is that because of a multimillion dollar ERRP profit boost? Consider JP Morgan's likely ERRP boon.
Hewitt Associates estimates that the average federal reimbursement will represent between $2,000 and $3,000 per pre-65 retiree per year, or approximately 25 percent to 35 percent of total health care costs
JP Morgan's 10-K showed non-pension, post-retirement costs of $160 million last year. Netting out life insurance benefits, let's assume 75% of is medical. That equates to $120 million, of which Uncle Sam picks up $30 million to $42 million.
Wall Street must love alphabet soup. After a big bowl, they can lean back in their chairs and give a resounding ERRP.
Note: The above example is an estimate. JP Morgan is welcome to provide their projections, should these be off base.
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