Lincoln National (NYSE:LNC)
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Months after turning to the U.S. Treasury for help raising capital, Lincoln National Corp.'s (LNC) chief executive said he now believes the economy is finally on the mend.

"We have not declared victory on capital markets or the economy, but I see reason for optimism," said Dennis R. Glass, president and chief executive of the Philadelphia insurer and investment manager, at a Barclays Capital investor conference that was webcast.

Investment losses and variable annuity costs both rose for the insurer over the last year as the economy weakened, pushing Lincoln National to net losses in the last three quarters and making it difficult to raise capital.

In the second quarter, Lincoln National applied to the U.S. Treasury's Troubled Asset Relief Program for a $950 million investment, and also issued $690 million of common stock and $500 million of debt, all of which gives Lincoln a "cushion" to "weather any storm" should the economy weaken again, Glass said.

While he sees many hopeful signs, he said consumers "are still reluctant to make big-ticket purchases," and that could slow the recovery. It is also having the effect of driving down the average face value of life insurance purchases and influencing more customers to buy term rather than permanent insurance, Glass said.

Glass said the company will repay the TARP funds quickly, but in the meantime he is not finding TARP's restrictions on executive compensation to be too restrictive to attract or retain key personnel.

In August, Lincoln sold its asset management business Delaware Management Holdings Inc. to Macquarie Group, an Australian investment banker, for $428 million.

Like other insurers, Glass said that the company's unrealized investment losses dropped since the end of the second quarter.

He also said that he expects the $7 billion in commercial mortgages originated by his company will perform better than the typical bank commercial mortgage portfolio because Lincoln National, and insurers in general, are more conservative in real estate lending than are banks.

"Banks take front-end risks," such as lending on buildings that are built on speculation, Glass said. "In the insurance industry and at Lincoln, we only invest in properties that are completed and properties that have achieved our leasing requirements."

He said Lincoln's average loan size in commercial real estate loans was $5.8 million, with the loan making up about 59% of the value of the transaction.

Shares of Lincoln National closed up 6% Wednesday at $27 amid a surge in insurance share prices generally.

-By Lavonne Kuykendall, Dow Jones Newswires; (312) 750 4141; lavonne.kuykendall@dowjones.com