According to reports, the development aligns with the agreement initially announced in early May of this year, wherein Lincoln expressed its intention to reinsure a substantial portion of its universal life insurance and fixed annuity business through Fortitude Re.
Regulatory approval for this significant reinsurance transaction was granted to Lincoln in early November, marking a crucial step in the process. The comprehensive risk transfer transaction encompasses 40% of Lincoln’s universal life with secondary guarantees (ULSG) in-force, along with MoneyGuard® and fixed annuities.
Breaking down the specifics, Lincoln details that the reinsured block includes approximately $9 billion of ULSG statutory reserves, representing about 40% of Lincoln’s total in-force ULSG. Additionally, it comprises nearly $12 billion of MoneyGuard statutory reserves, accounting for roughly 80% of Lincoln’s total in-force MoneyGuard, and almost $8 billion of fixed annuities statutory reserves, covering about 40% of Lincoln’s total in-force fixed annuities.
Crucially, under the terms of this agreement, Lincoln will retain responsibility for servicing and administering the reinsured policies, ensuring a seamless and consistent experience for customers. This successful closure marks a significant milestone in the collaboration between Fortitude Re and Lincoln Financial, reinforcing the stability and strategic alignment between the two entities.
Lincoln anticipates that the transaction will effectively diminish its exposure to long-term assumption risk associated with in-force life insurance and reduce the leverage of invested assets. Simultaneously, the company foresees a positive impact on its risk-based capital ratio, expecting an increase of approximately 15 points upon the agreement’s conclusion. Furthermore, the arrangement is projected to enhance annual free cash flow by over $100 million.
Speaking earlier this year on the relationship with Lincoln Financial, 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.”
