AIG to Be Final Insurer on U.S. Aid as Lincoln Set to Exit TARP

(Bloomberg-)

American International Group Inc., recipient of the first and the biggest of U.S. insurer bailouts, will become the last carrier with public funds now that Lincoln National Corp. plans to repay its rescue.

AIG Chief Executive Officer Robert Benmosche, who promised taxpayers full redemption and a profit, is selling units and counting on a revival at the businesses that remain. His stewardship got a vote of confidence from Federal Reserve Chairman Ben S. Bernanke on June 9, while the following day Congressional Oversight Panel Chairman Elizabeth Warren said taxpayers were still saddled with “a lot of risk.”

“They’re going to owe their ability to repay the taxpayer to capital-market conditions that are not in the hands of Robert Benmosche or Ben Bernanke,” said Bill Bergman, an analyst at Morningstar Inc. in Chicago.

Lincoln plans to sell shares and notes to fund repayment of its $950 million in aid, the Philadelphia-based insurer said today. AIG owes about $26.6 billion on a Fed credit line and $49 billion to the Treasury. Its bailout, which dates from September 2008, swelled to as much as $182.3 billion.

“AIG remains committed to repaying the taxpayer,” Mark Herr, a company spokesman, said today in an e-mailed statement. Herr cited Benmosche’s testimony on repayment before Warren’s committee last month, when the CEO said “AIG will do so with interest.”

Emergency Aid

Lincoln and Hartford Financial Services Group Inc., the Connecticut-based carrier that repaid $3.4 billion in U.S. aid in March, won relief funds in 2009 after appealing to Treasury for the same support offered to banks during the 2008 financial crisis. Emergency funds for New York-based AIG were provided a day after the Lehman Brothers Holdings Inc. bankruptcy to protect the insurer’s trading partners.

“Except for AIG, every other major institution has repaid, with interest and dividends,” Bernanke told the House Budget Committee. “And AIG, I believe, will repay.”

Lincoln Chief Executive Officer Dennis Glass is focusing on U.S. insurance operations after striking deals to sell a U.K. business and an asset manager. Last year, Lincoln reduced the workforce by 15 percent to 8,208 employees.

“We ended the year in a strong capital position, and our first-quarter results reflected the strength of our business model,” Glass said in the statement. “We appreciate the critical role the government and the American taxpayers have played in stabilizing the financial markets.”

Lincoln Gains

Lincoln advanced $1.05, or 4 percent, to $27.41 at 4:04 p.m. in New York Stock Exchange composite trading. The insurer has climbed about 54 percent in the past 12 months, compared with a gain of 15 percent by AIG.

JPMorgan Chase & Co. will lead the offerings. Credit Suisse Group AG, Morgan Stanley and Wells Fargo & Co. will help manage the equity sale, while Bank of America Corp., Deutsche Bank AG and U.S. Bancorp will assist on the debt offering.

Life insurers were cut off from traditional sources of funding after stock and bond markets fell in late 2008, and at least 12 carriers applied to Treasury for bailouts. As markets began to improve in April 2009, MetLife Inc., the biggest U.S. life insurer, announced that it wouldn’t take U.S. funds. No. 2 Prudential Financial Inc. and Principal Financial Group Inc. turned down bailouts in June of last year.

Lincoln took the bailout last year after agreeing in late 2008 to buy a Goodland, Indiana-based savings and loan with $7.3 million in assets to qualify for aid under the Troubled Asset Relief Program. The insurer reported three straight quarterly losses in the nine months ended June 30 as bond holdings slipped and the cost of guaranteeing minimum returns on retirement products called variable annuities increased.

Lincoln sold $600 million in stock to private investors a year ago for $15 each. That offering was part of an effort to raise capital that included the U.S. bailout and the sale of $500 million in debt.

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net