Global multi-line reinsurer Fortitude Re has entered into an agreement with The Lincoln National Life Insurance Company, a subsidiary of Lincoln National Corporation and its affiliates, under which Lincoln will cede approximately $28 billion of in-force universal life insurance and fixed annuity business to Fortitude Re.
Specifically, the risk transfer transaction encompasses 40% of Lincoln’s universal life with secondary guarantees (ULSG) in-force, in addition to MoneyGuard® and fixed annuities.
According to Lincoln, the reinsured block is comprised of roughly $9 billion of ULSG statutory reserves, or about 40% of Lincoln’s total in-force ULSG, nearly $12 billion of MoneyGuard statutory reserves, or about 80% of Lincoln’s total in-force MoneyGuard, and almost $8 billion of fixed annuities statutory reserves, or about 40% of Lincoln’s total in-force fixed annuities.
Under the terms of the agreement, Lincoln will continue to service and administer the reinsured policies.
Alon Neches, Chief Executive Officer (CEO) of Fortitude Re commented: “With today’s announcement, Fortitude Re has again demonstrated why we are the preferred choice for insurers who seek solutions instead of transactions and who want to work with partners instead of counterparties. We are grateful for the trust that Lincoln has put in Fortitude Re and to the teams at both firms who have collaborated intensively and worked tirelessly to reach this milestone.”
Brian Schreiber, Chairman of the Fortitude Re Board of Directors, said: “This agreement is a great example of how Fortitude Re leverages its strong balance sheet, asset origination capabilities and deep insurance expertise to deliver value-enhancing solutions to our clients.”
For Lincoln, it’s expected that the transaction will reduce its exposure to life insurance in-force long-term assumption risk and lower invested asset leverage.
At the same time, the firm expects the agreement to improve its risk-based capital ratio by approximately 15 points at closing, and increase annual free cash flow by more than $100 million.
Ellen Cooper, president and CEO of Lincoln Financial Group, said: “Today’s transaction with Fortitude Re marks significant progress in our efforts to reduce our balance sheet risk, improve our capital position and increase ongoing free cash flow.
“With our leadership team in place, we are rapidly executing on actions to fortify our balance sheet, and we remain committed to further enhancing the pace of capital generation and long-term profitable growth.”
The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the second quarter of 2023.
