Lincoln National ( LNC) operates insurance and investment management products and services in the U.S. and U.K. and has been a buy since September 2004. In April 2006, LNC completed the acquisition of Jefferson-Pilot Corporation, one of the nation's largest life insurance companies. After the acquisition, LNC ranks among the industry leaders across all its product lines and expects annualized, pretax cost saving of approximately $180 million starting from the third year of the acquisition. We are positive on the earnings growth potential of LNC due to the Jefferson-Pilot acquisition as well as the projected strong demand from the baby boomer generation for various savings and protection products. The main risk to the buy rating, however, includes any roadblocks in the integration with Jefferson-Pilot, any undue decline in equity market leading to a fall in account value, and any adverse regulatory development.
Investment firm Franklin Resources ( BEN) has had a buy rating since July 2005. The company has had a consistent track record of its funds, increasing its presence in international markets, especially in emerging markets. Franklin also is consistently showing improvement in its profitability. However, any adverse change in beneficial tax treatment from foreign earnings can hurt its results.