Hartford, Lincoln, Genworth Buy S&Ls, May Gain Treasury Funds

By Andrew Frye

Nov. 15 (Bloomberg) -- Hartford Financial Services Group Inc.,Genworth Financial Inc. and Lincoln National Corp. plan to buy lenders, a move that may entitle the insurers to billions of dollars from the Treasury's bank rescue fund.

Hartford, which posted a $2.6 billion third-quarter loss, jumped 21 percent in New York trading after agreeing to buy Sanford, Florida-based Federal Trust Corp. for $10 million. That may allow the insurer to convert to a savings-and-loan holding company and qualify for $1.1 billion to $3.4 billion from the Treasury, according to a company statement yesterday.

Genworth and Lincoln also sought recognition as S&L holding companies as they seek to buy thrift institutions in Minnesota and Indiana, Office of Thrift Supervision spokesman Bill Ruberry said. They're following American Express Co., Goldman Sachs Group Inc. and Morgan Stanley, which sought bank status to get U.S. backing and bolster themselves against the worst financial crisis since the Great Depression.

``Wave a wand and suddenly Hartford is not an insurance company but a bank -- it's voodoo,'' said Jim Glickenhaus, who helps manage $2 billion at Glickenhaus & Co. in New York. Treasury and lawmakers ``need to take a deep breath and see what they're doing.''

Aegon NV, the Dutch insurer that got a 3 billion-euro lifeline from the Netherlands last month, said it wants to buy Suburban Federal Savings Bank of Crofton, Maryland. Aegon owns U.S. insurer Transamerica.

Hartford surged $2.19 to $12.65 at 4:15 p.m. in New York Stock Exchange composite trading, after touching $9.55 earlier in the day. The stock is down 82 percent this year. Chief Executive Officer Ramani Ayer is seeking a second capital injection, five weeks after investment losses forced the company to sell $2.5 billion in stock and bonds to Allianz SE.

Declining Equities

Lincoln dropped 5.2 percent to $14.35 and Genworth, based in Richmond, Virginia, fell 3.9 percent to $1.47.

Hartford joins more than 50 regional banks that applied to tap the government aid program by yesterday's deadline. Treasury Secretary Henry Paulson's $250 billion recapitalization program injected $125 billion into nine of the largest lenders, and set aside more than $46 billion to buy preferred shares from smaller and regional banks. New York-based American International Group Inc. got $40 billion from a separate $100 billion fund in the Treasury's Troubled Asset Relief Program.

Hartford is ``looking for maximum flexibility and stability,'' Ayer said in the company's statement. Securing capital on the government's terms ``could be a prudent course in this market environment.''

Genworth, Lincoln

The insurer was rocked by the declining value of equities that back client annuities and a slump in bonds tied to ailing financial companies. Ayer announced plans this month to cut 500 jobs, or about 2 percent of staff, after the insurer had its credit grade cut by Fitch Ratings.

Genworth, whose stock is down 94 percent this year, plans to buy Inter Savings Bank of Maple Grove, Minnesota, Ruberry said. Richmond, Virginia-based Genworth was hurt by a surge in claims at its mortgage insurance division as well as investment losses. Philadelphia-based Lincoln is seeking to acquire Newton County Loan & Savings of Goodland, Indiana, he said.

``We've said previously that the TARP program is one of a series of levers we are considering,'' Genworth spokesman Al Orendorff said, reading from a prepared statement. Laurel O'Brien, a spokesman for Lincoln, didn't return an after-hours phone call seeking comment.

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