Lincoln National Corporation Restates Financial Statements Due to Accounting Treatment Misstep

Strategic Insights -

Lincoln National Corporation announced on March 27, 2023, that it will restate its previously issued financial statements due to a misstep in accounting treatment for a reinsurance transaction with Resolution Life. The transaction involved the transfer of assets to Resolution Life, resulting in a realized gain that was incorrectly accounted for as a deferred gain over the life of the reinsured policies. As a result, the Company will record a one-time gain of approximately $498 million in net income for the quarter ended December 31, 2021, rather than amortizing the gain over several years.

Key Takeaways:

  • The reinsurance transaction with Resolution Life resulted in a misstep in accounting treatment, leading to the restatement of financial statements.
  • The Company will record a one-time gain of approximately $498 million in net income for the quarter ended December 31, 2021.
  • The correction of the accounting treatment will increase stockholders' equity by approximately $467 million as of year-end December 31, 2022.
  • The leverage ratio as of year-end December 31, 2022 will improve by approximately 80 basis points as a result of the correction.
  • The restatement will impact the Company's financial statements for the years ended December 31, 2021 and 2022, as well as the quarterly periods ended March 31, June 30, and September 30, 2022.
  • The Company's previously communicated 2023 outlook is not affected by the restatement.
  • The restatement does not affect the Company's distributable earnings, free cash flow, LNL's statutory filings, or year-end risk-based capital ratio.

Statistics:

  • The one-time gain recorded in net income for the quarter ended December 31, 2021 is approximately $498 million.
  • The correction of the accounting treatment will increase stockholders' equity by approximately $467 million as of year-end December 31, 2022.
  • The leverage ratio as of year-end December 31, 2022 will improve by approximately 80 basis points.
  • The restatement will impact the financial statements for the years ended December 31, 2021 and 2022, as well as the quarterly periods ended March 31, June 30, and September 30, 2022.

Sources:

  • Lincoln National Corporation's Form 8-K filing, accessed on March 27, 2023 (EDGAR Online via COMTEX)
  • Lincoln National Corporation's Annual Report on Form 10-K for the year ended December 31, 2022
  • Lincoln National Corporation's quarterly earnings releases and investor presentations