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Posted On: Mar. 30, 1997 12:00 AM CST

INDIANAPOLIS-Lincoln National Corp. could gain as much as $2 billion from the sale of its Indianapolis-based American States Financial Corp. unit, but a change in the insurer's ownership is not expected to have a dramatic impact on its policyholders.

American States said last week it is "exploring a range of strategic options," including the potential sale of 100% of the company.

The unit, which had an initial public offering in May 1996, is now 83.3% owned by Lincoln National Corp., which says it plans to use any proceeds from a sale to focus on its core financial services businesses.

American States, which underwrites property/casualty insurance for small businesses, had 1996 net written premiums of $1.6 billion and $5.5 billion in assets. It has an A+ (superior) rating from A.M. Best Co.

Analysts estimate Lincoln National could gain $2 billion from the sale of the entire company. Names that have cropped up as potential buyers include CNA Financial Corp., Liberty Mutual Insurance Co., Travelers/Aetna Property Casualty Corp. and SAFECO Corp. Spokesmen for these insurers either could not be reached or had no comment.

"This could be a good fit for any company in the commercial lines business, or wanting to be in the smaller commercial market," said Gloria Vogel, senior vp at New York-based Advest Inc."It would give them access to a market they would probably want to be bigger in, because small companies are the fastest growing part of our economy."

Although there is some uncertainty about the adequacy of its reserves for construction defect claims, American States "has a lot of positive things going for it, including a fairly attractive business mix, a good relationship with agents, excellent loss ratio trends and fairly strong reserves on current business," said Weston Hicks, an analyst with Sanford Bernstein & Co. in New York.

A change in ownership is not expected to have a significant impact on policyholders. While there may be an effort to realize economies of scale. "competition is going to keep the price (of the insurance) where it is," said Ms. Vogel. "The question is the service level, and I would think any buyer would try to improve on that which is theirs."