Lincoln National's universal life reserves are 'more than adequate': CEO
November 7, 2011 by Darla Mercado
Responds to fresh scrutiny on reserve calculations
By Darla Mercado
November 3, 2011
Amid state insurance regulators’ questions on whether carriers are properly
reserving against a certain type of universal life insurance, Lincoln National
Corp.’s CEO today stressed the insurer has sufficient reserves for its products.
State insurance regulators in the National Association of Insurance
Commissioners’ Life Actuarial Task Force on Tuesday said some insurers are
calculating reserves for their universal life with secondary guarantees based on
assumptions that customers are paying higher premiums into their products.
The regulators said that carriers should be basing their assumptions on
policyholders paying the lowest amount of premiums needed to keep the policy and
its secondary guarantee intact, which would require higher reserves.
That assertion ran into opposition from insurers, including Lincoln National,
who insist they have been following the law when reserving and that insurance
regulators in their respective domiciliary states can testify to that. Indeed,
the regulators’ questions seem to be more a matter of reserving methodology
rather than a question of insurers’ financial strength.
“I have full confidence that our reserves are more than adequate and that we
comply with this particular regulation,” Lincoln chief executive Dennis Glass
said on an earnings conference call today. “We have a lot of smart people in the
NAIC who are practical and who want to do the right thing; we need to work
through on this issue.”
Indiana insurance commissioner Steve Robertson today released a letter
stating that Lincoln is in “sound financial shape and at no time before or
during the deliberation of this proposed guideline did the [department’s]
financial analysis of Lincoln change.”
Referring to a Wall Street Journal article that ran Tuesday on the
regulators’ discussions, Mr. Robertson noted that the matter should not be
interpreted as a question about Lincoln’s solvency.
“The deliberations on which this article was based should in no way be
construed as a question about Lincoln’s financial health from a solvency
standpoint,” his note said. “The department’s ongoing financial examinations and
analyses, conducted both on an annual and quarterly bases, in addition to the
company’s five-year financial exam, have not noted any reserve issues.”
