Before the Senate passed the multi-billion dollar "bailout" bill, Democratic Senate Majority Leader Harry Reid made a comment where he said "We don't have a lot of leeway on time. One of the individuals in the caucus today talked about a major insurance company. A major insurance company -- one with a name that everyone knows that's on the verge of going bankrupt. That's what this is all about."
That sparked fear in the hearts of investors, who were already weary of potential problems and suffering losses, almost immediately stocks for several large life insurance companies started to decline.
An analyst who covers insurance companies for Raymond James & Associates, Steven Schwartz, saying that investors were already worried about "life insurers' exposure to real estate as well as "secondary exposure" via investments in troubled finance firms like Lehman Bros, Wachovia and Washington Mutual," states that "Harry Reid didn't help any."
One of those Fortune 500 companies, New York-based MetLife, saw their stock plunge by 16 percent on Thursday, following a 14 percent drop on Wednesday, forcing them to issue a statement saying "The statement yesterday by Senate Majority Leader Harry Reid does not apply to MetLife. MetLife is financially sound and has high ratings from all of the major insurance ratings agencies. MetLife is fully able to meet all its obligations."
Shares of Hartford Financial Services (HIG, Fortune 500) fell about 33%, following a 7% decline on Wednesday. The stock has lost more than half of its value this week.
As the fallout from Reid's words continued to be felt, Reid's spokesman, Jim Manley, sent an email to CNNMoney
, writing, "Senator Reid is not personally aware of any particular company being on the verge of bankruptcy. He has no special knowledge about [a bankruptcy] nor has he talked to any insurance company officials. Rather, his comments were meant to refer to the conditions in the financial sector generally. He regrets any confusion his comments may have caused."
Despite Reid's spokesman's assurances, other top life insurers' stocks continued to drop dramatically, including Paris-based AXA which plunged 12.5 percent, Canadian based Manulife Financial Corp who owns John Hancock, Prudential Financial and Principal Financial Group, fell 6 percent, 11 percent and 15.5 percent respectively.