Lincoln National Corp of Indiana said it will separate its life insurance and annuity businesses early next year.

The life insurance operations will be based in Hartford, Conn. - where recently acquired life units of Aetna and Cigna are headquartered - and the annuity operations will remain in Fort Wayne, the company said last week. Both previously were under Lincoln National Life Insurance Co.

The move is somewhat unusual at a time when many insurance executives are talking about breaking down product barriers.

However, Lincoln expects greater efficiency after the change, said Westley Thompson, a senior vice president, who heads Lincoln's independent life distribution channel.

"The core strategy really gets at how we need to get and drive efficient manufacturing capability," Mr. Thompson said. There are distinct differences in the development of life and annuity products, Mr. Thompson said. And thanks to a life insurance business that has grown through acquisition, he said, life sales account for 70% of Lincoln's earnings, so it made sense to separate that business from annuities.

But the restructuring is not without casualties. Gabriel L. Shaheen, who had been chief executive of Lincoln Life, resigned rather than accept a new position, a spokeswoman said. John Gotta, senior vice president and general manager of the life manufacturing operations, was named chief executive of the life unit. The annuity operations will be run by Steve Lewis, a senior vice president, while a search continues for a chief executive, the company said.

Some industry experts questioned Lincoln's strategy.

"It kind of makes the mistake that banks have made historically in organizing themselves in product silos," said Kenneth Kehrer, a Princeton, N.J.-based consultant. The handful of insurers that are structured this way have to employ an overarching distribution effort to give customers one contact point, he said.

Lincoln's customers have a single contact through Lincoln Financial Advisors, a unit that brings together all the company's products, he said. Using technology, Lincoln can show a customer how the same lineup of mutual funds will perform in a variable life product or a variable annuity, he said.

Still, proximity helps when sharing ideas for product development, said James Overholt, an insurance consultant with Milliman & Robertson Inc. of Chicago.

"When it comes to new product development and being able to link new features it is more difficult to do it across the country than across the table," Mr. Overholt said.

Michael C. Baker, who heads Amsouth Bancorp's capital management group, said he's inclined to give Lincoln the benefit of the doubt based on his past dealings with the insurer.

"My view is that if the quality of products and customer support isn't changed and the managers don't change, it would be a non-issue," Mr. Baker said.

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