Lincoln Financial, a US financial services provider specialising in life insurance, annuities and retirement products, has announced a new reinsurance agreement with Talcott Financial Group, a global life and annuity insurance and reinsurance specialist.
The agreement will transfer approximately $5.8 billion of guaranteed universal life (GUL) statutory reserves to a Talcott subsidiary, as Lincoln Financial continues its efforts to adjust its liability mix and strengthen long-term financial flexibility.
The transaction represents approximately 37% of its remaining in-force GUL portfolio and is designed to further reduce the company’s exposure to long-term mortality, policy lapse and interest rate risks linked to a legacy block of capital-intensive business.
The agreement is expected to support future free cash flow generation and enhance shareholder value, with the company forecasting an increase of approximately $30 million to $40 million in annual subsidiary remittances over the medium term.
The insurer said the deal forms part of its broader strategy to improve risk-adjusted returns on capital, reduce earnings volatility and create a more sustainable business profile.
“This transaction reinforces the progress we reported this quarter by continuing to reshape our liability mix and enhancing our free cash flow,” commented Ellen Cooper, Chairman, President and CEO of Lincoln Financial. “Further reducing our exposure to a legacy, capital-intensive block marks another deliberate step in our multi-year strategy to fortify Lincoln’s balance sheet, strengthen our financial flexibility and create long-term value for our shareholders.”
In addition to the GUL reserves transfer, Lincoln Financial said it will reinsure approximately $500 million of funding agreement business with a Talcott subsidiary. The company said the latest transaction follows a series of measures taken in recent years to strengthen its balance sheet and improve the quality and durability of its cash generation.
Lincoln Financial said that, when combined with its 2023 reinsurance agreement with Fortitude Re, the latest deal will result in approximately 60% of its total in-force GUL business being reinsured once completed.
The transaction will use a combination of coinsurance with funds withheld and modified coinsurance structures. Lincoln Financial said the arrangement includes counterparty protections such as over-collateralisation requirements and investment guidelines agreed between the parties to support alignment with its risk management approach.
Following completion, Lincoln Financial will continue to oversee policy administration, recordkeeping and claims management. The company said the agreement will not alter its obligations to policyholders or distribution partners and confirmed that it remains committed to growing its life insurance business.
Lincoln Financial said Talcott Financial Group, alongside its regulated insurance and reinsurance subsidiaries, is an established participant in the life and annuity reinsurance sector. Through its partnership with Sixth Street, a global investment firm, Talcott has completed a number of life and annuity block reinsurance transactions, including those involving secondary-guarantee universal life business.
From a capital perspective, Lincoln Financial expects the transaction to result in an estimated all-in statutory capital impact of approximately $200 million on a pro forma basis. The company said this is expected to lower its estimated risk-based capital ratio by around 10 percentage points.
Lincoln Financial added that funding for the transaction will come from a portion of proceeds from its strategic partnership with Bain Capital and that it expects to remain above its target RBC ratio buffer of 420% after completion.
The transaction is expected to improve its ongoing free cash flow position while supporting shareholder value creation. The company noted that the agreement is expected to reduce net income because of amortisation impacts, but it does not anticipate a significant effect on adjusted operating income attributable to the transaction.
The company also said that, from the fourth quarter of 2026, it intends to update its definition of adjusted operating income to exclude amortisation of deferred gains and losses associated with business blocks exited through reinsurance. Lincoln Financial said the change is intended to provide greater clarity as reinsurance activity becomes a more significant component of its operating results.
The agreement remains subject to standard closing requirements, including regulatory approval, and Lincoln Financial expects completion in the fourth quarter of 2026. The transaction will have an effective date of 1 October 2026.
Wells Fargo acted as exclusive financial adviser, while Skadden, Arps, Slate, Meagher & Flom LLP provided legal advice on the transaction.
