$7.7B of Lincoln Financial's annuity products will be reinsured

Publish Date:

Monday, December 10, 2018 10:43 am EST

News Organization:

Philadelphia Business Journal Online

Athene Holding has agreed to reinsure $7.7 billion of Lincoln Financial Group’s in-force fixed and fixed indexed annuity products.

Radnor, Pa.-based Lincoln National (NYSE: LNC) said the capital generated from the transaction, including a ceding commission paid by West Des Moines, Iowa-based Athene (NYSE: ATH) combined with the release of capital, will predominantly be used to fund share repurchases up to $500 million. Most of the repurchases will be executed through an accelerated share repurchase program. The transaction is expected to be accretive to Lincoln’s EPS in 2019.

“As demonstrated by our record third quarter earnings, we remain focused on executing our business strategy, which includes manufacturing and distributing high-quality products,” Lincoln Financial CEO Dennis R. Glass said. “Organic growth momentum remains strong in the fourth quarter. At the same time we are committed to identifying incremental opportunities, like this transaction, to maximize the value of our attractive in-force business to reward shareholders.”

John Barnidge, an analyst with Sandler O’Neill & Partners, said Lincoln Financial was pretty direct on its third quarter 2018 earnings conference call last month with the Main Line company saying it was looking into whole block or block reinsurance transactions to free up additional capital and then use those dollars to meaningfully repurchase shares of its own stock.

“ATH being the counterparty makes sense to us given they already have a well-established reinsurance relationship with LNC,” Barnidge said. “We favorably view this transaction and anticipates investors will as well.”

After spending much of the post-recession years narrowing its focus to life insurance and retirement products, Lincoln Financial has been more active in recent years with M&A. Most recently, it closed its $3.3 billion acquisition of Liberty Life Assurance Company of Boston from Liberty Mutual Insurance Group in May.

Lincoln Financial, the marketing name for Lincoln National Corp., has about 1,200 employees in the Philadelphia region, split between its headquarters in Radnor and Center City. It also has the naming rights for the Philadelphia Eagles stadium.