A Year After Bailout, Life Insurer Lincoln National Pays Back TARP Funds

A year after receiving a bailout, life insurer Lincoln National Corp. has paid back the government by repurchasing all of the preferred shares it issued to the U.S. Treasury under the Capital Purchase Program.

The company said it used the proceeds from recent equity and debt offerings to fund the repayment.

Last month, Lincoln (NYSE: LNC) said it would issue more than $1 billion in equity and debt securities as part of its plan to buy back the $950 million of preferred shares issued under the CPP -- part of the Troubled Asset Relief Program (BestWire, June 15, 2010). The company planned to repurchase these shares with the net proceeds from a $335 million common stock offering and from a $250 million senior notes offering and cash at the holding company.

A spokeswoman for Lincoln Financial, the marketing name for the Philadelphia-based Lincoln National, declined to comment beyond the company's statement.

Life insurers gaining access to the program "was an industry effort," said Dennis R. Glass, president and chief executive officer of Lincoln, in a statement. "We always viewed CPP as a temporary cushion to be returned as soon as market conditions warranted, and we are pleased to repay the funds sooner than originally anticipated."

In July 2009, Lincoln issued the $950 million in preferred shares, which completed its plan to raise $2.1 billion (BestWire, July 13, 2009). The company was among a list of major insurers receiving preliminary approval in May of last year for the bailout funds, though other companies didn't take it.

Hartford Financial Services Group Inc. (NYSE: HIG) repaid the government in March. The life and property/casualty insurer completed its plan to buy back $3.4 billion of its preferred shares issued to the Treasury under the CPP (BestWire, March 31, 2010).

Following the repayment, Lincoln last month said the Treasury would continue to hold warrants to buy about 13 million shares of its common stock at an exercise price of $10.92 a share (BestWire, June 15, 2010).

On the afternoon of July 1, Lincoln's stock was trading at $23.67 a share, down 2.55% from the previous close.

Lincoln National Life Insurance Co. currently has a Best's Financial Strength Rating of A+ (Superior).

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])