LNC Stock Pops On Report Of Lincoln National’s Potential $5B Reinsurance Deal With Talcott

• Discussions are focused on around $5 billion of universal life policies with secondary guarantees, reported Bloomberg.
• Lincoln said transferring risk is among several options it is evaluating to boost free cash flow in its life insurance business.
• The companies have not reached a final agreement, and the talks could still end without a transaction.

Shares of Lincoln National Corp. (LNC) ended Monday’s session 2.82% higher after the insurer was reported to be in advanced talks with Talcott Financial Group for a reinsurance deal that could shift billions of dollars in life insurance reserves off its balance sheet.

LNC Could Transfer $5B In Life Insurance Policies

The potential deal is expected to involve around $5 billion of universal life policies with secondary guarantees, reported Bloomberg, citing people familiar with the discussions. The sources said the talks are private and that no agreement has been reached yet, with both parties still able to walk away from the deal.

Secondary guarantees ensure that life insurance policies do not lapse, regardless of their value. While these policies provide benefits to policyholders, they can also become costly for insurers to keep on their balance sheets.

Lincoln said transferring risk off its balance sheet is among several options it is exploring to improve free cash flow in its life insurance business, according to the Bloomberg report.

Reinsurance Deals Help Insurers Free Up Capital

Reinsurance agreements allow insurers to reduce risk exposure and free up capital that can be used for new products, including annuities and life insurance policies.

Lincoln previously reinsured a $28 billion portfolio with Fortitude Re in 2023, which included similar life insurance policies, fixed annuities and products with long-term care benefits.

Other insurers have also pursued similar transactions. Massachusetts Mutual Life Insurance recently reinsured $6 billion of policies with secondary guarantees through a deal with Nationwide Mutual Insurance.

Talcott, which is owned by investment firm Sixth Street Partners, has also completed reinsurance transactions, including a $10 billion variable annuity deal with MetLife.

LNC Stock: What Stocktwits Retail Sentiment Says

On Stocktwits, retail sentiment for LNC was ‘neutral,’ while message volume was ‘high’ at the time of writing.

The LNC stock has lost nearly 11% year-to-date.

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