Lincoln Financial (LNC) Repays $500M Debt Maturity; Expects to Pay $200M in Commercial Paper Over Next Few Weeks

April 7, 2009 8:47 AM EDT

Lincoln Financial Group (NYSE: LNC) today announced that it has repaid a $500 million debt maturity and plans to repay $200 million of commercial paper as it matures over the next several weeks. The source of funds for the debt repayment includes a $400 million ordinary cash dividend from The Lincoln National Life Insurance Company and a $300 million dividend from the company's principal reinsurance subsidiary.

After these actions, short-term debt at the holding company will be reduced to approximately $450 million, a level at or below prior years. Lincoln expects to meet the holding company's ongoing cash needs with a combination of commercial paper as available and a contractual inter-company borrowing facility of up to $1 billion. The company also has access to $1 billion in bank credit lines, none of which are currently drawn. The company expects available holding company borrowing sources, combined with savings from the previously announced dividend cuts, will satisfy reduced holding company cash requirements for the foreseeable future.

Dennis R. Glass, Lincoln's President and Chief Executive Officer, said, "We continue to prudently and actively manage our liquidity and capital positions. With the repayment of this $500 million in maturing debt and planned repayment of $200 million in commercial paper, we are reducing leverage and significantly improving our financial flexibility at the holding company. The combination of strengthened holding company liquidity and well-capitalized insurance subsidiaries positions Lincoln to move forward in a difficult environment."

The company has also taken steps to protect and build capital at the insurance company subsidiaries. These actions include a recent reinsurance transaction that provided approximately $240 million of statutory capital for Lincoln's primary insurance subsidiary and an enterprise-wide restructuring program that is expected to generate $250 million in annual run-rate savings before taxes. Further actions, including reinsurance transactions, securitizations, and possible asset sales, will be focused on continuing to strengthen Lincoln's already well-capitalized insurance businesses.

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