Investors Sue Lincoln Financial Over $2.2B Reserve Announcement

Two investors have launched a lawsuit against Lincoln Financial in Pennsylvania, following the company's disclosure in November 2022 that it would need to add $2.2 billion to its life insurance reserves. This prompted a significant stock price drop of 33% after announcing a $2.6 billion net loss for the third quarter. The lawsuit claims that current and former executives failed to disclose the declining performance of variable universal life policies, leading to accusations of breach of fiduciary duty and unjust enrichment.

The plaintiffs, Anthony Morgan and Harry Rosenthal, allege they have owned Lincoln Financial shares since 2020 and 2011, respectively. They are seeking damages and restitution from the defendants, including CEO Ellen Cooper. In addition to the state court suits, Lincoln Financial faces similar federal litigation and has chosen not to comment on ongoing legal matters.

The company stated that its assumptions regarding policyholder behavior had become outdated, influencing its capital reserves. While its capital remains above minimum requirements set by state regulators, Lincoln is working to bolster its capital cushion moving forward. The ongoing legal complexities may shape the company's financial future and its market response.