Reply #122: Lincoln National to Take Federal Bailout Funds (not a bank!)

[Demeter]

http://dealbook.blogs.nytimes.com/2009/06/15/lincoln-national-to-take-federal-bailout-funds/



Lincoln National, the insurance company, said it would take nearly $1 billion in federal bailout funds, issue new stock and debt, and sell its British insurance business in an effort to shore up its deteriorating capital base.

The insurer, based in Philadelphia, said in a statement Monday that it was seeking to raise about $2 billion. About $950 million of that would come from issuing preferred stock to the government through the Treasury’s Troubled Asset Relief Program, and Lincoln would become only the second insurer to take money from the TARP after Hartford Financial said last Friday that it would take $3.4 billion from the government program.

The company also said it would also sell its British insurance unit for £195 million ($319 million) in cash to Sun Life of Canada. The deal is expected to close by the third quarter of the year.

Lincoln also said it would sell $500 million in new senior debt and issue $600 million in new common stock, diluting existing shares.

“These actions supplement dividend reductions, cost cuts, and other actions previously taken to strengthen the company’s capital and liquidity, and solidify the company’s capital positions at both the subsidiary and holding company levels,” the company said in a statement.

The company said it intended to contribute approximately $1 billion of the proceeds to its principal insurance subsidiary, the Lincoln National Life Insurance Company, with the remaining $1 billion to be held at the holding company level for “general corporate purposes, including the repayment of short-term debt and investment in the company’s core businesses.”

Lincoln and other insurance companies are totaling huge losses after investments they made using their customers’ premiums during the boom times have gone sour. Many of the insurers have large exposure to commercial mortgage backed securities and commercial real estate, which are expected to take further hits in value in the coming months.

– Cyrus Sanati