Global multi-line reinsurer Fortitude Re has announced the closing of its $28 billion reinsurance agreement with The Lincoln National Life Insurance Company, a subsidiary of Lincoln National Corporation.
This is consistent with the agreement announced in early May this year. It was stated that Lincoln will reinsure a significant portion of its universal life insurance and fixed annuity business to Fortitude Re.
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 to ensure a consistent experience for customers, the firm noted.
Brian Schreiber, Chairman of the Fortitude Re Board of Directors, had previously commented: “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.