We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Lincoln National Enters Into Reinsurance Deal With Athene
Read MoreHide Full Article
In an effort to de-risk its balance sheet, Lincoln National Corp. (LNC - Free Report) has entered into an annuity reinsurance transaction with a subsidiary of Athene Holding Ltd. . Per the deal, Athene will reinsure approximately $7.7 billion of Lincoln National’s in-force fixed and fixed indexed annuity products.
Annuity reinsurance is an ultimate form of asset intensive reinsurance, which means the reinsurance of liabilities that are heavily weighted on asset/interest rate risk. The benefits of reinsuring annuities are more than one. First, reinsurance of annuities can result in powerful balance sheet benefits for the ceding insurer. Second, the risk-based capital ratio of the ceding insurer improves as these assets and liabilities come off the books. Insurers resort to such deals in order to reduce their business and balance sheet risk.
Earlier this year, another insurer Voya Financial Inc. (VOYA - Free Report) , got its $19 billion of fixed and fixed indexed annuity liabilities reinsured via Athene.
Fixed annuity products require the issuer to offer its consumers guaranteed lifetime withdrawal riders thereby giving them longevity protection by providing an income stream and the ability to participate in equity markets with downside protection for their principal. This is however, a strain on insurers as irrespective of the equity market performance (with which these products are linked) the obligation of a fixed payout needs to be maintained.
As a result of this transaction, Athene will shoulder the risk involved in the business reinsured and Lincoln National will be able to free up the capital, which it would otherwise have to keep as reserve for backing this business. Lincoln National will, however, continue to look toward the administrative services of the policies.
Lincoln National, having freed itself of this risk will be able to focus on continued growth of both its fixed and variable annuity businesses. It has plans to introduce new products and further expand distribution partners to achieve successful long-term growth.
The capital freed up along with the ceding commission received from this deal will be utilized by Lincoln National for share buyback, which the company plans to achieve via 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.
The company has a disciplined capital management strategy. This is evident from the deployment of $6.5 billion (representing 72% of operating earnings) capital through buybacks, dividends, and mergers and acquisitions since 2012.
In a year’s time, the stock has lost 27% matching the industry’s decline. But the company’s progress on fundamentals should drive its stock going forward.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Lincoln National Enters Into Reinsurance Deal With Athene
In an effort to de-risk its balance sheet, Lincoln National Corp. (LNC - Free Report) has entered into an annuity reinsurance transaction with a subsidiary of Athene Holding Ltd. . Per the deal, Athene will reinsure approximately $7.7 billion of Lincoln National’s in-force fixed and fixed indexed annuity products.
Annuity reinsurance is an ultimate form of asset intensive reinsurance, which means the reinsurance of liabilities that are heavily weighted on asset/interest rate risk. The benefits of reinsuring annuities are more than one. First, reinsurance of annuities can result in powerful balance sheet benefits for the ceding insurer. Second, the risk-based capital ratio of the ceding insurer improves as these assets and liabilities come off the books. Insurers resort to such deals in order to reduce their business and balance sheet risk.
Earlier this year, another insurer Voya Financial Inc. (VOYA - Free Report) , got its $19 billion of fixed and fixed indexed annuity liabilities reinsured via Athene.
Fixed annuity products require the issuer to offer its consumers guaranteed lifetime withdrawal riders thereby giving them longevity protection by providing an income stream and the ability to participate in equity markets with downside protection for their principal. This is however, a strain on insurers as irrespective of the equity market performance (with which these products are linked) the obligation of a fixed payout needs to be maintained.
As a result of this transaction, Athene will shoulder the risk involved in the business reinsured and Lincoln National will be able to free up the capital, which it would otherwise have to keep as reserve for backing this business. Lincoln National will, however, continue to look toward the administrative services of the policies.
Lincoln National, having freed itself of this risk will be able to focus on continued growth of both its fixed and variable annuity businesses. It has plans to introduce new products and further expand distribution partners to achieve successful long-term growth.
The capital freed up along with the ceding commission received from this deal will be utilized by Lincoln National for share buyback, which the company plans to achieve via 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.
The company has a disciplined capital management strategy. This is evident from the deployment of $6.5 billion (representing 72% of operating earnings) capital through buybacks, dividends, and mergers and acquisitions since 2012.
In a year’s time, the stock has lost 27% matching the industry’s decline. But the company’s progress on fundamentals should drive its stock going forward.
Lincoln National carries a Zacks Rank #3 (Hold). A better-ranked stock in the same space is Genworth Financial, Inc. (GNW - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>