Lincoln National Riding on Strong Life and Annuity Business
February 27, 2019 by Zack's Equity Research
Lincoln National Corp. LNC holds a leading market position in Life and Annuity segments. The company has been able to insulate itself from involuntary risk forces such as equity market volatility and interest rate risk by de-risking its product portfolio through curtailing sales of longer-dated products.
Moreover, the company also has a strong enterprise risk management practice in place, with respect to its in-force blocks. It manages risk via strong product and investment cash flow hedging along with regular stress testing of risk-adjusted capital.
The company also uses external reinsurance for a portion of new variable annuity sales, which carry living benefit guarantees. In this vein, the company recently entered into a reinsurance transaction with a subsidiary of Athene Holding Ltd. ATH, which will reinsure approximately $7.7 billion of Lincoln National’s in-force fixed and fixed indexed annuity products. The freed up capital along with the ceding commission received from this deal will be utilized by Lincoln National for an accelerated share buyback program to the tune of $500 million. The transaction is expected to be accretive to Lincoln Financial’s earnings per share in 2019.
Lincoln National’s recent acquisition of Liberty Mutual’s group benefits business named Liberty Life Assurance Company, also solidifies the company’s hold in the Group Benefits market. The deal has enhanced the segment’s expertise in Large Case presence and Disability insurance. Going forward, the company expects this transaction to accelerate the already-strong positive momentum in the Group business.
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