S&P revises Lincoln National outlook to 'Stable' (AP)
Mon, 15 Jun 2009 17:27:14 Etc/GM
"We expect that Lincoln will contribute about $1 billion of the total proceeds to its insurance operations, which will bolster its capital position and bring our view of capital adequacy in line with what we expect for the current rating level," wrote S&P credit analyst Jeff Watson.
The Philadelphia-based insurance and financial services company said earlier it will issue $600 million in common shares, and will sell up to $500 million in senior debt.
It also intends to issue $950 million in preferred stock, as part of the Treasury department's Troubled Asset Relief Program. Lincoln National has received preliminary approval for up to $2.5 billion from the government, and said it will decide the exact amount of government funds it will pursue by the end of the month.
While raising the outlook, S&P also lowered its rating on Lincoln's preferred stock one notch, to "BBB-" from "BBB," to differentiate it from the company's junior subordinated debt. It affirmed its "AA-" counterparty credit and financial strength ratings on the insurance operations and the "A-" counterparty credit rating on the parent company.
Watson said he expect the company to use about $1 billion to support the capital position of its U.S. insurance operations, and keep the remaining $1 billion at the holding company to bolster liquidity and support future cash needs. "The cash contribution to the insurance operations brings our current view of capital adequacy in line with what we expect for the rating level," he wrote.
S&P expects weak and volatile equity and credit markets over the next 12 months, and said keeping the excess cash with the holding company is a "prudent" move, especially if the economy worsens. "We expect that the depressed equity and credit markets will continue to constrain operating performance in 2009, particularly in equity-linked lines of business, such as the variable-annuity and asset-management businesses," Watson wrote.
Another positive sign, Watson said, was Lincoln's sale of its U.K. unit to Sun Life. The company said earlier it will sell the unit to the Canadian company for $320.8 million.
Lincoln National shares fell $1.60, or 9 percent, to $16.15 in afternoon trading. The stock has changed hands between $4.76 and $59.99 in the past 52 weeks, and started the session down about 6 percent for the year.
source: http://biz.yahoo.com/ap/090615/us_lincoln_national_ratings.html?.v=1