Lincoln National to repay bailout funds

Mon Jun 14, 2010 11:13am EDT

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(Reuters) - Lincoln National Corp (LNC.N) said it will buy back close to a billion dollars worth of preferred stock issued to the U.S. Treasury, following a similar move by rival Hartford Financial Services Group (HIG.N) in March.

Shares of Lincoln rose as much as 5.4 percent to $27.79 Monday morning on the New York Stock Exchange. They have gained substantially since hitting a 52-week low of $14.34 last July.

The large U.S. life insurer will offer $335 million of common stock and up to $750 million of senior notes, it said in a statement.

The repurchase will be funded by the common stock offering, $250 million senior notes offering and cash in hand, the company said.

Proceeds of up to $500 million from the senior notes offering will be used to support universal life reserves of its insurance subsidiaries.

Many recipients of bailout funds now view participation in the Capital Purchase Program as a sign of weakness and are wary of a public backlash against perceived excessive government involvement in the sector.

The Treasury still holds warrants to buy 13 million shares of Lincoln Financial at an exercise price of $10.92 per share, but Lincoln does not intend to buy them back.

In March, rival Hartford Financial said it will offer shares and notes to repay $3.4 billion in taxpayer money it received under the bailout program, but it does not intend to repurchase the warrants.

Philadelphia-based Lincoln and Hartford were among a handful of life insurers to ask Washington for a cash injection last year after heavy investment losses and a surge in costs for stock market-linked annuities eroded capital.

Bigger rival American International Group Inc (AIG.N), which is nearly 80 percent owned by the U.S. government after a $182.3 billion rescue, is trying aggressively to sell assets to repay taxpayer money.

(Reporting by Anurag Kotoky in Bangalore; Editing by Don Sebastian)

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