Lincoln National Latest Insurer Seeking Treasury Funds

WASHINGTON, Nov 17, 2008 (A. M. Best via COMTEX) -- LNC | Quote | Chart | News | PowerRating -- Lincoln National Corp. is the latest life insurer to confirm it is seeking to reorganize as a savings and loan holding company to become eligible to sell preferred equity shares to the federal government.

Lincoln, the parent of Lincoln Financial Group (NYSE: LNC), joined Hartford Financial Services Group Inc. and Genworth Financial Inc. in disclosing that it has applied to the Office of Thrift Supervision to be recognized as a thrift bank holding company. Like Hartford and Genworth, Lincoln justified its application on grounds that it had recently reached an agreement to purchase a federally regulated bank, in its case the Goodland, Ind.-based Newton County Loan & Savings FSB. The deal is contingent on regulatory approval.

The three insurers completed applications to participate in the $250 billion Capital Purchase Program ahead of a 5 p.m. Nov. 14 deadline. The program, which makes use of funds allocated under the $700 billion Troubled Asset Relief Program, is open only to federally regulated, U.S.-controlled banks, savings associations, and certain bank and savings and loan holding companies.

OTS spokeswoman Janet Frank also confirmed the agency has received an application from Dutch financial services firm Aegon N.V. to purchase Crofton, Md.-based Suburban Federal Savings Bank. Aegon officials could not be immediately reached to confirm whether they, too, had applied for participation in the CPP. Although a foreign holding company, Aegon also is a parent of Cedar Rapids, Iowa-based Transamerica Life Insurance Co.

Hartford (NYSE: HIG | Quote | Chart | News | PowerRating) announced a $10 million deal to purchase Sanford, Fla.-based Federal Trust Bank, a federally chartered savings bank insured by the Federal Deposit Insurance Corp. Hartford estimated it could be eligible for between $1.1 billion and $3.4 billion under the guidelines Treasury has set out for the CPP.

Genworth (NYSE: GNW) announced an "agreement in principle" to purchase Maple Grove, Minn.-based InterBank fsb, which it said was "subject to negotiation of a definitive agreement" and as well as to regulatory approvals.

Rolled out Oct. 14, the CPP allows eligible institutions to sell preferred shares, along with warrants for common shares, to the Treasury that pay 5% annual dividends for the first five years, which then escalate to 9% dividends thereafter. Participating companies must adopt the Treasury Department's standards for executive compensation and corporate governance for as long as Treasury holds equity issued under the program.

Other major life insurers could be eligible to participate in the CPP by virtue of being organized as bank holding companies, as in the case of MetLife Inc., or due to the fact that they operate savings banks supervised by the OTS, such as those held by Prudential Financial Inc., Ameriprise Financial Inc., Nationwide Financial Services Inc., Allstate Corp., State Farm Mutual Insurance Co. and Principal Financial Group Inc.

Prudential Financial spokesman Bob DeFillippo said the company had no comment on whether it had applied for participation in the CPP. MetLife spokesman John Calagna also said the company had no comment on whether it was seeking to participate in the CPP.

New York Life Insurance Co. and Massachusetts Mutual Life Insurance Co. both have declared they would not seek participation in the CPP, citing their adequate capitalizations and commitment to a mutual structure as reasons not to participate. Northwestern Mutual Life Insurance Co. said last week it "has not determined whether or under what circumstances it would participate in any Treasury program."

A number of major property/casualty insurers also have declared that they would not seek participation in the program, including Chubb Corp., Travelers Cos. and Ace Ltd.

At midday Nov. 17, shares of Lincoln National were trading at $12.99, down 9.5% from the prior close. Shares of Genworth were trading up 13.6% to $1.67, while shares of Hartford were down 19.2% to $10.22.

(By R.J. Lehmann, Washington bureau manager: raymond.lehmann@ambest.com)

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