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In what must have appeared as insult added to injury for Lincoln National ( LNC), Standard & Poor's forecasts that the next year and a half will be the toughest for U.S. life insurers because of losses on commercial mortgage-backed securities, commercial mortgages and bonds.

Moody's mirrored this gloomy picture for Lincoln National by announcing downgrades of senior debt and the financial strength ratings of subsidiaries Lincoln National Life Insurance Co. and Lincoln Life & Annuity Co. of New York from "A1" to "A2." Fitch followed with its own rating cut Friday.

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Lincoln National spokeswoman Lauren Sammerson said the company's Troubled Asset Relief Program application is still going through the process.

According to SNL Financial, there are 18 companies that potentially qualify for TARP funding, including the mother of all bailouts, American International Group ( AIG). Six of the 18 have applied for TARP funding, including Ameriprise Financial ( AMP), Hartford Financial Services Group ( HIG) and Prudential Financial ( PRU). Most of them have suffered declines in their risk-based capital coverage, the amount of money an insurance company is required to maintain relative to its risk exposure.

Despite Lincoln National's protestations that it's not planning on receiving any TARP funding, the insurer needs the funding -- if Standard & Poor's is right about the stress to be faced by life insurers. Moody's believes there is high risk.

Lincoln National said it has repaid $500 million in debt and will repay $200 million in commercial paper from dividends paid by subsidiary insurance and reinsurance companies. All this despite $219 million in losses through 2008.

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