Lincoln to Reinsure $9.4B in UL and Executive Benefits Policies

What You Need to Know

Resolution Life's Security Life of Denver unit will provide the reinsurance.
Lincoln will continue to be the administrator and recordkeeper for the policies.
Lincoln says it wants to continue to grow its individual life business.

Lincoln Financial wants to shed a large amount of risk associated with old insurance policies while continuing to sell new policies.

The Radnor, Pennsylvania-based life insurer today announced that it has arranged to have Security Life of Denver — an arm of Resolution Life Group Holdings — reinsure a block of in-force universal life insurance and executive benefits insurance policies backed by $9.4 billion in reserves.

The Resolution Life organization came to life in 2003. It’s known for assuming large blocks of business from Hartford Financial Services Group and from Voya.

Resolution Life is one of many companies using cash from institutional money managers and wealthy individuals who see blocks of life and annuity business as a good investment.

Deal Numbers

The Resolution Life deal is structured as a coinsurance treaty.

The $9.4 billion reserve total includes $8.1 billion in reserves backing the corporate-owned life insurance, bank-owned life insurance and other products sold through its executive benefits program and $1.3 billion in reserves supporting universal life policies, Randal Freitag, Lincoln’s chief financial officer, said during a conference call the company held to discuss the deal with securities analysts.

About $5 billion of the reserves are general account reserves, and $4.4 billion support separate accounts, Freitag said during the call, which was streamed live on the web.

The block Resolution Life is reinsuring accounts for about one-eighth of Lincoln’s total life reserves, Freitag said.

Freitag noted that Lincoln will retain responsibility for 10% of the risk associated with the block it is ceding.

Deal Mechanics

Completion of the Resolution Life deal is not subject to any closing conditions or regulatory approvals, and the effective date will be Oct. 1, according to Resolution and Lincoln.

The Lincoln insurance subsidiary involved, The Lincoln National Life Insurance Company, will continue to handle account administration and recordkeeping for the policies reinsured, and the company wants to increase sales of individual life insurance and executive benefits products, Lincoln said.

“The transaction will have no impact on Lincoln Financial’s relationship with, or commitments to, its distribution partners and policyholders,” the company said.

Lincoln said it expects the deal to raise $1.2 billion capital.

Lincoln plans to use $900 million to buy back shares of its own stock and much of the rest to pay down debt.

The Future

Dennis Glass, Lincoln’s CEO, said during the conference call that the company will continue to evaluate opportunities to make other block sales and reinsurance deals.

The Resolution Life deal is one of several Lincoln has made, Glass noted.

“We’re open to doing more,” Glass said.