The U.S. Office of Thrift Supervision said on Friday that it approved applications from Hartford Financial Services Group Inc and Lincoln National Corp to become bank holding companies, an important step toward these companies obtaining federal cash.
Hartford, a large life and property insurer that has been among the hardest hit by investment losses, and Lincoln, one of the United States’ largest life insurers, have applied to take part in the U.S. Treasury Department’s $250 billion capital injection program.
The program is designed for banks, but insurers with a federally regulated unit are eligible to apply.
Some life insurers, including the largest U.S. life insurer MetLife and No. 2 Prudential Financial Inc, have federally regulated units. Others, including Hartford, Lincoln and about half a dozen others, are buying small banks in order to comply with the regulation.
Hartford, which posted a record $2.6 billion loss in the third quarter on investment losses, has said it could be eligible for up to $3.4 billion if approved for the federal program.
Hartford, based in Hartford, Conn., plans to buy Federal Trust Bank in Sanford, Florida, for $10 million. The OTS said Hartford plans to inject a significant amount of capital into the bank to recapitalize it.
A Hartford spokeswoman said the company was pleased by the approval, but she declined to comment on what bearing the OTS decision might have on Hartford’s bid for federal funds.
Philadelphia-based Lincoln plans to acquire Newton County Loan & Savings FSB in Goodland, Indiana. The OTS said its approval was subject to a number of conditions, including a revised business plan for the bank.
A Lincoln spokesman could not be reached for comment.
Life insurance stocks have been battered by investors spooked by the near collapse of American International Group Inc, life insurers’ investment losses and rising costs for some retirement products.
The Dow Jones U.S. Life Insurance index, more than halved over the past year, fell nearly 3.5 percent on Friday.
Hartford’s shares closed down 32 cents at $18.16, while Lincoln’s stock closed up 2 cents at $20.10.
(Reporting by John Poirier and Karey Wutkowski in Washington, and Lilla Zuill in New York; editing by Richard Chang)
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