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Lincoln National Shares Fall 30%

Lincoln National shares dropped around 30%

That happen within hours in the afternoon trading Thursday in the wake of a $2.6 billion third-quarter loss that left Wall Street analysts mincing no words.

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FactSet chart on Lincoln shares

A major feature of those earnings was an unexpectedly large, roughly $2 billion charge tied to a type of permanent life policy known as “guaranteed universal life” that it sold in large volume in past years.

The product has proved underpriced to numerous carriers and Lincoln isn’t the first to take a charge.

The guarantee is in short a promise that the insurer won’t raise premium rates. The guarantees have burned insurers in several ways, but much of the damage stems from ultralow rates lingering far longer than the insurers anticipated when they sold the policies.

As a result, they’ve earned far less than they anticipated they would by investing the annual premiums in bonds until needed to pay claims. The guarantees prevent them from raising annual insurance charges on the policyholders to make up for the shortfall.


Image: Nasdaq/Nyse