Lincoln National Corp. is actively negotiating with Talcott Financial Group regarding a potential reinsurance agreement that would transfer billions of dollars in life insurance reserves off the company’s balance sheet. This was reported by Bloomberg, citing informed sources.
According to sources, the deal is expected to involve approximately $5 billion in universal life insurance policies with secondary guarantees. These secondary safeguards protect life insurance policies from being voided, regardless of their cash value.
An agreement has not yet been finalized, and the parties may ultimately decide against proceeding with the transaction, the sources noted.
In a written statement to Bloomberg News, Lincoln indicated that transferring risks off its balance sheet is one of several options being considered to improve free cash flow in its life insurance business. “We routinely review options that align with our strategic objectives and will announce any transaction decisions when we are ready,” the company said.
Policies with secondary guarantees are attractive to policyholders because they cannot be canceled, yet maintaining them on the balance sheet is costly for insurers. Reinsurance agreements help insurance companies reduce these expenses and free up capital, which can then be used to underwrite new annuities and life insurance products.
Lincoln National’s shares rose 2.8% during Monday’s trading session following the emergence of this information.
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