Lincoln Financial to Acquire Liberty Life Assurance

Lincoln Financial Group announced that it has entered into a definitive agreement to acquire Liberty Life Assurance Company of Boston from Liberty Mutual. Upon completion of the transaction, Lincoln Financial will retain Liberty’s Group Benefits business and reinsure Liberty’s Individual Life and Annuity business to Protective Life Insurance Company. The acquisition, which is expected to create a single, powerful Group Benefits operation with industry-leading products, services, and capabilities, is expected to be completed in the second quarter of 2018, pending regulatory approvals and other customary closing conditions.

“Through this transaction, Lincoln Financial will have a significantly increased presence in the Group Benefits market by complementing our existing small to middle-market strengths with even deeper large case and disability expertise. Liberty is a respected and high-quality carrier, one with talented Group Benefits employees who will soon join our own impressive team in order to drive even greater benefit for all customers. The acquisition also aligns with our strategic priority of diversifying our sources of earnings and effectively deploying capital” – Dennis R. Glass, president and chief executive officer of Lincoln Financial Group.

With this acquisition, Lincoln Financial is poised to become a Group Benefits market leader , as the combined Fully Insured Disability sales market share would be ranked number one at 14 percent, and the combined Total Life and Fully Insured Disability sales market share rank would be number three. Lincoln Financial will expand its distribution and product reach, strengthen its capabilities, and leverage new opportunities to benefit customers and shareholders by tapping into Liberty’s competitive advantages, which include enhanced absence management, extensive claim clinical resources and broader broker and consultant relationships.

“Today’s announcement uniquely positions each company to expand on their core strengths, profitability and market presence. For Liberty, the transaction is an integral part of our overall strategy to focus on our property and casualty business. Lincoln Financial and Protective will each benefit from Liberty’s profitable book of business and its momentum in the Group, Individual Life and Annuity businesses, as well as from the addition of our many talented and committed employees” – David H. Long, Liberty Mutual chairman and chief executive officer.

The combined organization will meet the evolving needs of employers and employees by featuring Life, Disability, Dental, Vision, Critical Illness, and Accident insurance, plus a full suite of enhanced absence management services. It will also have access to 10 million insureds and enable Lincoln Financial to accelerate its employee-paid sales, which has been an increasing area of focus.


Additional Transaction Details

Under the terms of the agreement, Lincoln Financial Group will pay Liberty Mutual approximately $3.3 billion, which consists of $1.446 billion total net investment for the Group Benefits business, including a purchase price of $1.021 billion and $425 million in required capital. The remaining components of the payment to Liberty Mutual include $410 million of individual life and annuity value paid by Protective Life; $1.202 billion associated with excess capital in LLAC; and $211 million of tax items. The acquisition is expected to be accretive to Lincoln Financial’s earnings per share in 2019, excluding integration costs, and will be financed with cash and the issuance of debt. Lincoln’s shareholder buyback program will be temporarily suspended, and is expected to resume no later than the third quarter of 2018. Goldman Sachs & Co. LLC acted as financial advisor to Lincoln Financial and Wachtell, Lipton, Rosen & Katz acted as legal advisor. Barclays acted as financial advisor to Liberty Mutual, and Skadden, Arps, Slate, Meagher, & Flom LLP acted as legal advisor.