Lincoln National Corporation (LNC) has agreed to sell its asset management unit, Delaware Investments, to Macquarie Group for approximately $428 million in cash. Macquarie Group is a Sydney, Australia-based leading investment bank.
The deal is expected to close around the year-end 2009. Goldman, Sachs & Co. (GS) was the financial advisor for Lincoln. Lincoln’s decision intends to focus more on its core retirement and insurance business.
The proceeds will be used by Lincoln for general corporate purposes. The company also plans to pay back a part of the Troubled Asset Relief Program (TARP) funds it received in July.
Lincoln was one of the six big insurers who qualified for the bailout funds under the TARP in May. The other five are Hartford Financial Services Group Inc. (HIG), Prudential Financial Inc. (PRU), Allstate Corporation (ALL), Ameriprise Financial Inc. (AMP) and Principal Financial Group Inc. (PFG). However, all except Hartford and Lincoln had declined the assistance.
Lincoln completed its $2 billion capital bolstering initiatives in July. This included the issuance of preferred shares worth $950 million to the U.S. Treasury under the TARP, $600 million of common stock offering and a $500 million of senior notes in the private market.
Of the total proceeds, Lincoln contributed about $1 billion to “The Lincoln National Life Insurance Company”, its principal insurance subsidiary for strengthening its risk-based capital levels.
The capital market turmoil has significantly impacted the capital position and operating performances of the insurance industry as well as of the asset management companies. This has resulted in increased consolidation in these markets.
Though we expect the capital market turmoil to continue to restrict Lincoln ’s earnings potential in the near term, we remain encouraged by the company’s cost containment measures and capital boosting initiatives. We believe that such measures will provide Lincoln its much needed capital flexibility.
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Read the full analyst report on “ALL”
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Read the full analyst report on “PFG”
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