Lincoln Financial (NYSE: LNC) has entered into a reinsurance agreement with Talcott Financial Group to cede approximately $5.8 billion of in-force guaranteed universal life (GUL) statutory reserves, representing about 37% of Lincoln's remaining in-force GUL block.

Under the agreement, Lincoln will also reinsure approximately $500 million of funding agreement business with a Talcott subsidiary. The transaction is structured partly as coinsurance with funds withheld and partly as modified coinsurance, with counterparty protections including over-collateralization and agreed-upon investment guidelines.

The deal carries an all-in statutory capital impact of approximately $200 million, which would reduce Lincoln's estimated risk-based capital (RBC) ratio by about 10 percentage points. Lincoln said it expects to remain above its 420% RBC ratio buffer target following closing. The transaction will be funded using a portion of proceeds from Lincoln's strategic partnership with Bain Capital.

Lincoln projects the agreement will result in approximately $30–$40 million increase in annual subsidiary remittances over the medium term. The company does not expect a material change to its adjusted operating income as a result of the transaction, though net income is expected to decline due to amortization.

Combined with Lincoln's 2023 reinsurance transaction with Fortitude Re, approximately 60% of Lincoln's total in-force GUL will be reinsured upon closing.

"This transaction reinforces the progress we reported this quarter by continuing to reshape our liability mix and enhancing our free cash flow," said Ellen Cooper, Chairman, President and CEO of Lincoln Financial.

Lincoln said it will retain account administration, recordkeeping, and claims management for the policies. The transaction is subject to regulatory approvals and is expected to close in the fourth quarter of 2026, with an effective date of October 1, 2026.

Beginning in the fourth quarter of 2026, Lincoln plans to refine its adjusted operating income definition to exclude amortization of deferred gains or losses from blocks of business exited through reinsurance. Wells Fargo acted as exclusive financial advisor to Lincoln on the transaction.