Lincoln National (LNC) Under Stress Due To Its Debt Burden

Lincoln National Corp (NYSE: LNC) is one of several life insurers struggling through the tough economic climate and is now taking steps to increase liquidity, according to the WSJ.

Today, Lincoln National will have to pay down $500 million in debt and the company has said it will pay its obligation in full with internal cash. But, LNC has to pay off another $375 million in commercial paper debt due in May. And because of several credit-rating-agency downgrades, Lincoln isn't eligible for the Treasury Department's commercial-paper funding program.

Citigroup analyst Colin Devine said in an interview with the WSJ, "We consider Lincoln's capital and liquidity position to be vulnerable and believe that the company's fate is now essentially in the hands of the direction of equity and credit markets.".

State regulators are not that concerned with Lincoln National. "We are not concerned at all about the financial stability of Lincoln National Life," said Connie Ridinger, chief financial examiner of the Indiana Department of Insurance, which oversees the company's Lincoln National Life Insurance Co. unit and whose focus is the protection of policyholders.

The cost of protection against default of Lincoln's debt, as seen in prices of credit-default swaps, has soared in the recent weeks. However, if the market stabilizes, Lincoln National's troubles and cash crunch will likely subside.

One positive development that may positively effect the stock is that the life insurance industry may become eligible to receive funds from the government's Troubled Asset Relief Program

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