Talcott completes $6.3bn Lincoln reinsurance deal on guaranteed universal life

Talcott Financial Group completed its $6.3 billion reinsurance of a run-off block of Lincoln Financial universal life policies with secondary guarantees on Oct. 1, moving the risk to a group with a substantial Bermuda platform while Lincoln continues to administer the policies and deal with customers. Lincoln expects the deal to lift medium-term annual subsidiary remittances by $30 million to $40 million.

When Lincoln announced the transaction in July, about $5.8 billion of the total related to in-force guaranteed universal life statutory reserves—37 percent of what remained in that book—and the balance, roughly $500 million, comprises funding-agreement liabilities. Neither company identified the Talcott subsidiary that assumed the liabilities, so which entity now holds the reserves remains an open question.

Guaranteed universal life is awkward capital for a life insurer because the premium is fixed while the policy can stay in force for decades, leaving the writer exposed to long-term mortality, customer lapse and interest-rate risk. That combination has led American life companies to shed legacy run-off blocks to offshore reinsurers, Bermuda most often, to recover capital flexibility. Prudential agreed in 2023 to reinsure a $12.5 billion block of guaranteed universal life statutory reserves with Bermuda-based Somerset Re, while Lincoln's own 2023 transfer sent about $28 billion of universal life, MoneyGuard and fixed-annuity statutory reserves to Bermuda-based Fortitude Re.

Because Fortitude Re came first, the percentages do not line up neatly. Talcott's $5.8 billion of reserves represented 37 percent of the guaranteed universal life book as it stood this summer; measured against the original block, Fortitude Re and Talcott together account for about 60 percent of it. The denominator shrank after Fortitude Re's transfer, so a single 37 percent figure understates how much of the original block has now moved.