Thursday, October 07, 2010

JP Morgan's ERRP

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
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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