Steve Wevodau

Lincoln, Hartford may get piece of bailout

posted by Steven Wevodau

By buying thrifts, the insurance companies will become eligible.

WASHINGTON — Federal regulators will allow two large insurance companies, including Lincoln National Corp., to buy thrifts so they can qualify to receive money from the government’s financial rescue program.

The Office of Thrift Supervision, a Treasury Department agency, said Friday that it approved applications from Hartford Financial Services Group Inc. and Lincoln National Corp. to acquire existing savings and loans and become thrift holding companies.

Insurance companies that own thrifts, which are federally regulated, are eligible to apply for a piece of the $700 billion in government bailout funds.

Hartford Financial, based in Hartford, Conn., has said it expects to be eligible for between $1.1 billion and $3.4 billion in rescue money. The company previously agreed to buy Federal Trust Bank for about $10 million and to inject an undisclosed amount of new capital into the federally chartered savings bank. Federal Trust Bank, now owned by Sanford, Fla.-based Federal Trust Corp., operates 11 branches in Florida.

Philadelphia-based Lincoln National is looking to buy Newton County Loan & Savings, based in Goodland, about 30 miles northwest of Lafayette.

Shannon Lapierre, a spokeswoman for Hartford, said the company was pleased to have received the government approval. Spokesmen for Lincoln National didn’t immediately return a telephone call seeking comment Friday evening.

Hartford and Lincoln National are among four insurance companies that applied to the thrift agency in mid-November. The other two were Genworth Financial Inc. and Aegon NV, a Dutch company that owns U.S. insurer Transamerica.

Thrifts differ from banks in that, by law, they must have at least 65 percent of their lending in consumer loans such as mortgages.

Insurance companies are mostly regulated at the state level, but insurers that become thrift holding companies are under federal supervision and thereby qualify for the government bailout money.

At least two dozen insurers currently own thrifts. Many insurers have been struggling amid the financial crisis and credit crunch. Like banks and other financial institutions, some insurance companies also bought subprime mortgage securities that turned sour.

A number of property-casualty insurers have said they aren’t interested in participating in the bailout program. The industry appears to be split between life insurers, some of whom have previously expressed interest in participating in the program, and property-casualty companies.

The biggest U.S. insurance company, American International Group Inc., skirted collapse last fall when the government stepped in with a roughly $150 billion bailout package. The New York-based company was pushed to the financial brink by the huge volume of credit default swaps, instruments traded as bets against bond defaults, that it sold and by rising levels of defaulted mortgages and other debt.

Lincoln National Corp.’s headquarters was once based in Fort Wayne. The company announced it was moving its corporate offices to Philadelphia in 1998 and relocated.

The company’s financial services group, Lincoln Financial, remains in Fort Wayne.

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