American Founders Sold for $31 Million : S&L; crisis: An investors group bought the Phoenix life insurance company, which had been owned by the now-insolvent Lincoln Savings.

A life insurance company owned by Irvine-based Lincoln Savings & Loan, the insolvent thrift now operated by federal regulators, said Monday that it had been sold for $31 million to a group of investors.

American Founders Life Insurance Co. in Phoenix was acquired by a Nashville, Tenn., limited partnership called Financial Securities Fund, which bought a controlling interest, and the Riverside Group, a Jacksonville, Fla., insurance holding company.

American Founders was sold by federal regulators, who have controlled Lincoln and the insurance subsidiary since seizing the thrift in April, 1989. Despite the failure of Lincoln, the insurance company’s policies have continued in effect.

American Founders, with $2.6-billion worth of life insurance in force and assets of $286 million, is a mid-size insurance company with operations in more than three dozen states.

Lincoln had tried unsuccessfully to sell the insurance company before the thrift’s parent company, American Continental Corp., filed for bankruptcy last year and its chairman, Charles H. Keating Jr., became a symbol of S&L; industry excess.

The insurance company had lost many of its customers before the bankruptcy, though. Clients began bolting after the appearance of news reports describing the financial troubles of Lincoln and American Continental.

That was not the only reason American Founders had become less attractive to its corporate parent, however. The insurance company had loaded its portfolio--the investments made with customers’ insurance premiums--with junk bonds and real estate investments that became less attractive as the real estate market soured.

The asking price for the company slid several million dollars over the last year. The new owners, who formed a company called American Financial Acquisition Corp. to buy the insurer, said they paid $2 million less than their original offer a year earlier.

“There was something of a buyers’ market out there,” said Wayne Schreck, American Founders senior vice president for development.

Still, Schreck said, American Founders has remained profitable through all the turmoil.

Federal regulators had already started selling the insurance company’s junk bonds when they took over Lincoln last year. The new owners have installed new management and are continuing to shed bad investments, Schreck said.

The insurance company’s sales people are stressing that the company is no longer owned by American Continental or Lincoln.

Although Keating and other Lincoln officers are now under investigation by state, federal and local authorities, no current or former executives of the insurance company are, said Schreck and Chief Financial Officer Bob Stanfield, another American Founder executive.

They said the insurance company is not tainted by scandal, although American Continental did direct the company’s investments for a time. The insurance company, however, never invested in Lincoln’s real estate projects, the executives said, nor did it buy any of American Continental’s bonds, which have become worthless since the bankruptcy.

The sale comes at a time when the life insurance industry is doing relatively well. But state regulators and investors are worried about companies that have heavy investments in the troubled real estate market.

Several others had been interested in buying the company but could not close a deal, said Amir Habib, a vice president of Sutro & Co. of San Francisco, which marketed the company for federal regulators.

“Even though it has a very strong life insurance business, it was a deteriorating asset,” Habib said. “It had a bunch of junk bonds and real estate in the portfolio, and the values kept going down.”