Lincoln Financial Pushes Capital Levels Back Up

Lincoln Financial is recovering from a big 2022 hit to its capital.

The life and annuity issuer announced Thursday that it ended 2023 with a risk-based capital ratio, or financial soundness measure, over 400% of state insurance regulators’ “company action level,” from 377% at the end of 2022.

Lincoln increased its RBC ratio by buying reinsurance, or insurance for insurance companies, Ellen Cooper, the company’s CEO, told securities analysts during a conference call.

Lincoln announced plans in December to sell its wealth management business to Osaic for $700 million. ”When the sale of our wealth management business is finalized, we expect this will further improve our RBC ratio and provide us with additional financial flexibility,” Cooper said.

What it means: Because of Lincoln’s new focus on selling “capital-light” products, it may offer your clients more life insurance policies and annuities without extensive benefit guarantees.

The earnings: Lincoln held the analyst call to discuss earnings for the fourth quarter of 2023.

The company reported a net loss of $1.2 billion for the quarter on $700 million in revenue, compared with $812 million in net income on $3.8 billion for the fourth quarter 2022, because of items related to the Fortitude Re deal and to fluctuations in the market value of assets and benefit obligations.

After-tax adjusted operating income, which excludes those items, increased to $258 million, from $134 million.

Sales commissions spending fell 0.5%, to $651 million.