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Lincoln National CEO: Senate tax bill would pressure risk-based ratios downward

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Lincoln National CEO: Senate tax bill would pressure risk-based ratios downward

The Senate tax reform bill, in its current form, will drive risk-based capital ratios down for insurers if it passes as-is, Lincoln National Corp. President and CEO Dennis Glass said at an investor conference.

If the corporate tax rate goes down and an insurer realizes a loss and has a lower taxable benefit compared with the current rate, there will be an effect on companies' risk-based capital ratio, he said.

The ratio is a requirement from federal regulators that financial institutions retain enough capital to sustain operating losses during a financial crisis.

Glass said that if the tax proposal crosses the finish line, companies may have to "recalibrate" what a good ratio is and rating agencies may have to change their approach as well.

"The most important issue for the industry and Lincoln is how the rating agencies react to this change," Glass said. "I don't know the answer to that."

The bill will inevitably change after the conference committee of both chambers confer a new bill, Glass noted, adding that Lincoln's own tax cash payment would rise moderately over 10 years but that the increase would not affect the company's capital deployment plans.