Lincoln National To Tap U.S. TARP Fund For $900 Million

NU Online News Service, June 15, 2:38 p.m. EDT

WASHINGTON–Lincoln Insurance Group said today in a securities filing it will seek to raise $2.1 billion in additional capital, including $900 million through the government's Troubled Asset Relief Program and an additional $600 million in a securities offering.

At the same time, Lincoln officials announced that they have signed a definitive agreement to sell their United Kingdom operations, Lincoln National (UK) PLC to Sun Life of Canada. Lincoln National UK sells life and retirement income products in the United Kingdom.

The moves are an effort to shore up its core U.S. businesses, Lincoln officials said.

It followed the Friday decision of Hartford Insurance Group to announce a definitive decision to take government funds as well as seek $750 million in a stock offering.

And, in the prospectus for the $750 million stock sale, Hartford warned that it expects to report in its second quarter earnings statement "significant charges" resulting from other-than-temporary impairments of our securities portfolio that "are similar in magnitude to the impairments we recognized in the fourth quarter 2008 and first quarter 2009."

In the Friday filings, Hartford also said the amount Hartford will actually receive from the Treasury Department is still "subject to further discussions," and the company could receive "substantially" less than the $3.4 billion it has asked for.

Hartford also said it had amended its agreement with Allianz, through which it received funds last fall and will have the effect of reducing the amount it would have to pay to Allianz if it issues equity-related instruments worth more than 5 percent of the company's stock outstanding at the time, which the TARP deal would presumably do.

Hartford received a $2.5 billion capital investment from Allianz in last October's agreement.

The filing said that the payment to Allianz would be adjusted to $200 million, from its original agreement for an amount ranging from $50 million to $300 million.

The latest agreement also extended the payment date to Oct. 15.

Four other insurance companies have announced that because of improving market conditions, they have decided not to accept aid under the Capital Purchase Program of TARP.

The decisions of Lincoln and Hartford to accept the federal funds and also raise additional capital today prompted Standard & Poor's to raise its outlook on the two companies to stable from negative.

In its statement today, Lincoln said its capital raisings will include a public offering of $600 million, raising up to $500 million in senior debt, and $950 million in preferred stock, the vehicle through which it will receive federal aid.