Lincoln Financial Group announced with its third-quarter earnings that is has entered into a $4 billion reinsurance treaty covering new sales of its variable annuity guaranteed living benefit product. Under terms of the treaty, the reinsurer — Union Hamilton Reinsurance — will provide 50 percent coinsurance on up to a total of $8 billion of new living benefit guarantee sales through December 31, 2014.
Lincoln Financial will retain 100 percent of the product cash flows excluding the living benefit guarantee.
Variable annuity deposits were down 13 percent in Q3 compared with Q2. Lincoln attributed the dip in sales to pricing and wholesaler compensation changes coupled with a deliberate philosophy put in place by management to constrain the growth of sales of products that include long-term guarantees. Variable annuity products without a guaranteed living benefit rider increased 20 percent from Q2 while deposits with a living benefit rider decreased by 16 percent in the same period.
Overall, variable annuity deposits came in at $3.4 billion, up 56 percent from the prior-year quarter.
Net income for the Lincoln Financial Group for Q3 was $337 million, down $428 million from Q3 last year.
- Retirement plan services reported Q3 income from operations of $33 million, up from $29 million last year. The group benefited from robust sales in the mid-large market, a strong performance of the equity markets and effective retention efforts.
- Life insurance Q3 income from operations came in at $140 million, down from $152 million last year
- Group protection Q3 income from operations was $23 millio,n up from $16 million last year.
- Other operations reported a loss from operations of $27 million compared to a gain of $26 million last year.