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What changed in LINCOLN NATIONAL CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LINCOLN NATIONAL CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+865 added−1374 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-16)

Top changes in LINCOLN NATIONAL CORP's 2023 10-K

865 paragraphs added · 1374 removed · 606 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

131 edited+26 added−24 removed137 unchanged
Biggest changeBroker-Dealer and Securities Regulation In addition to being registered under the Securities Act of 1933, some of our separate accounts as well as mutual funds that we sponsor are registered as investment companies under the Investment Company Act of 1940, and the shares of certain of these entities are qualified for sale in some or all states and the District of Columbia.
Biggest changeRisk Factors – Operational Matters – Our information systems or the information systems of third parties on which we rely may experience interruptions, breaches in security and/or a failure of disaster recovery systems that could result in a loss or disclosure of confidential information, damage to our reputation, impairment of our ability to conduct business effectively and increased expenses.” 14 Table of Contents Securities, Broker-Dealer and Investment Adviser Regulation In addition to being registered under the Securities Act of 1933, some of our separate accounts as well as mutual funds that we sponsor are registered as investment companies under the Investment Company Act of 1940, and the shares of certain of these entities are qualified for sale in some or all states and the District of Columbia.
In general, the Life Insurance segment’s sources of revenue include premium payments, cost of insurance assessments, expense and fee charges and investment income. In turn, this segment incurs expenses, which include paying death claims, long-term care claims, and surrender benefits, crediting interest, accruing reserves for future claim payments, as well as other expenses related to the business.
In general, the Life Insurance segment’s sources of revenue include premium payments, cost of insurance assessments, expense and fee charges and investment income. In turn, this segment incurs expenses, which include paying death claims, long-term care claims, and surrender benefits, crediting interest, and accruing reserves for future claim payments, as well as other expenses related to the business.
This product is predominantly purchased on an employee-paid basis. Accident insurance provides scheduled benefits for over 30 types of benefit triggers related to accidental causes, including sports-related injuries, and is available for non-occupational accidents exclusively or on a 24-hour coverage basis. We also offer employer-sponsored group critical illness insurance to employees and their covered dependents.
Accident insurance provides scheduled benefits for over 30 types of benefit triggers related to accidental causes, including sports-related injuries, and is available for non-occupational accidents exclusively or on a 24-hour coverage basis. We also offer employer-sponsored group critical illness insurance to employees and their covered dependents. This product is predominantly purchased on an employee-paid basis.
There are five major risks involved in determining the requirements: Category Name Description Asset risk – affiliates C-0 Risk of declining value of insurance subsidiaries and risk from off-balance sheet and other miscellaneous accounts Asset risk – others C-1 Risk of assets’ default of principal and interest or fluctuation in fair value Insurance risk C-2 Risk of underestimating liabilities from business already written or inadequately pricing business to be written in the future Interest rate risk, health credit C-3 Risk of losses due to changes in interest rate levels, risk that health benefits prepaid to risk and market risk providers become the obligation of the health insurer once again and risk of loss due to changes in market levels associated with variable products with guarantees Business risk C-4 Risk of general business A company’s risk-based statutory surplus is calculated by applying factors and performing calculations relating to various asset, premium, claim, expense and reserve items.
There are five major risks involved in determining the requirements: Category Name Description Asset risk – affiliates C-0 Risk of declining value of insurance subsidiaries and risk from off-balance sheet and other miscellaneous accounts Asset risk – others C-1 Risk of assets’ default of principal and interest or fluctuation in fair value Insurance risk C-2 Risk of underestimating liabilities from business already written or inadequately pricing business to be written in the future Interest rate risk, health C-3 Risk of losses due to changes in interest rate levels, risk that health benefits prepaid to credit risk and market risk providers become the obligation of the health insurer once again and risk of loss due to changes in market levels associated with variable products with guarantees Business risk C-4 Risk of general business A company’s risk-based statutory surplus is calculated by applying factors and performing calculations relating to various asset, premium, claim, expense and reserve items.
Risk Factors – Legislative, Regulatory and Tax – Compliance with existing and emerging privacy regulations could result in increased compliance costs and/or lead to changes in business practices and policies, and any failure to protect the confidentiality of personal information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.” For information regarding cybersecurity risks, see “Item 1A.
Risk Factors – Legislative, Regulatory and Tax – Compliance with existing and emerging privacy laws and regulations could result in increased compliance costs and/or lead to changes in business practices and policies, and any failure to protect the confidentiality of personal information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.” For information regarding cybersecurity risks, see “Item 1A.
Item 1. Business OVERVIEW Lincoln National Corporation (“LNC,” which also may be referred to as “Lincoln,” “we,” “our” or “us”) is a holding company, which operates multiple insurance and retirement businesses through subsidiary companies. Through our business segments, we sell a wide range of wealth protection, accumulation, group protection and retirement income products and solutions.
Item 1. Business OVERVIEW Lincoln National Corporation (“LNC,” which also may be referred to as “Lincoln,” “we,” “our” or “us”) is a holding company that operates multiple insurance and retirement businesses through subsidiary companies. Through our business segments, we sell a wide range of wealth accumulation, wealth protection, group protection and retirement income products and solutions.
For information regarding risks related to our guaranteed benefits and hedging strategies , see “Item 1A. Risk Factors – Market Conditions – Changes in the equity markets, interest rates and/or volatility affect the profitability of our products with guaranteed benefits; therefore, such changes may have a material adverse effect on our business and profitability ,” and “ Item 1A.
For information regarding risks related to our guaranteed benefits and hedging strategies, see “Item 1A. Risk Factors – Market Conditions – Changes in the equity markets, interest rates and/or volatility affect the profitability of our products with guaranteed benefits; therefore, such changes may have a material adverse effect on our business and profitability,” and “Item 1A.
Our employees receive a personalized Your Total Rewards statement that provides a comprehensive look at their direct and indirect compensation - the total investment that we make in them. We offer paid time off and various flexible work arrangements, as part of a new hybrid work model that was informed by direct feedback from our workforce.
Our employees receive a personalized Your Total Rewards statement that provides a comprehensive look at their direct and indirect compensation – the total investment that we make in them. We offer paid time off and various flexible work arrangements, as part of a hybrid work model that was informed by direct feedback from our workforce.
Competition The retirement plan marketplace is very competitive and comprised of many providers with no one company dominating the market for all products. As stated above, we compete with numerous other financial services corporations in the small, mid and large employer markets.
Competition The retirement plan marketplace is very competitive and comprised of many providers with no one company dominating the market for all products. As stated above, we compete with numerous other financial services corporations in the small, mid and large employer-size markets.
In general, under state holding company regulations, no person may acquire, directly or indirectly, a controlling interest in our capital stock unless such person, corporation or other entity has obtained prior approval from the applicable insurance commissioner for such acquisition of control.
In general, under state holding company regulations, no person may acquire, directly or indirectly, a controlling interest in our capital stock unless such individual, corporation or other entity has obtained prior approval from the applicable insurance commissioner for such acquisition of control.
The secondary guarantee requirement is based on the payment of a required minimum premium or on the evaluation of a reference value within the policy, calculated in a manner similar to the base policy account value, but using different expense charges, cost of insurance charges and credited interest rates.
The secondary guarantee requirement is based on the payment of a required minimum premium or on the evaluation of a reference value within the policy, calculated in a manner similar to the base policy account balance, but using different expense charges, cost of insurance charges and credited interest rates.
The LINCOLN ALLIANCE program is sold primarily through consultants, registered independent advisers and both affiliated and non-affiliated financial advisers, planners and wirehouses. LINCOLN DIRECTOR group variable annuity is sold in the small marketplace by intermediaries, including financial advisers and planners.
The LINCOLN ALLIANCE program is sold primarily through consultants, registered independent advisers and both affiliated and non-affiliated financial advisers, planners and wirehouses. LINCOLN DIRECTOR group variable annuity is sold in the small plan marketplace by intermediaries, including financial advisers and planners.
We also make available, free of charge, on or through our website, www.lfg.com, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including exhibits, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We also make available, free of charge, on or through our website, www.LincolnFinancial.com, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including exhibits, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Distribution Retirement Plan Services products are primarily distributed in two ways: through our Institutional Retirement Distribution team and by LFD. Wholesalers distribute these products through advisers, consultants, banks, wirehouses and individual planners. We remain focused on wholesaler productivity, increasing relationship management expertise and growing the number of broker-dealer relationships. The Multi-Fund program is sold primarily by affiliated advisers.
Distribution Retirement Plan Services products are primarily distributed in two ways: through our Institutional Retirement Distribution team and by LFD. These teams distribute these products through advisers, consultants, banks, wirehouses and individual planners. We remain focused on wholesaler productivity, increasing relationship management expertise and growing the number of broker-dealer relationships. The Multi-Fund program is sold primarily by affiliated advisers.
Loans and withdrawals reduce the death benefit amount payable and are limited to certain contractual maximums (some of which are required under state law), and interest is charged on all loans. Our UL contracts assess surrender charges against the policies’ account values for full or partial surrenders and certain policy changes that occur during the contractual surrender charge period.
Loans and withdrawals reduce the death benefit amount payable and are limited to certain contractual maximums (some of which are required under state law), and interest is charged on all loans. Our UL contracts assess surrender charges against the policies’ account balances for full or partial surrenders and certain policy changes that occur during the contractual surrender charge period.
Claims are evaluated for eligibility and payment of benefits pursuant to the group insurance contract or self-insured plan and in compliance with federal and state regulations. Efficient and accurate disability claims management is especially important to customer service satisfaction and segment results. Results can be impacted by both the incidence and the length of approved disability claims.
Claims are evaluated for eligibility and payment of benefits pursuant to the group insurance contract or self-insured plan and in compliance with federal and state laws and regulations. Efficient and accurate disability claims management is especially important to customer service satisfaction and segment results. Financial results can be impacted by both the incidence and the length of approved disability claims.
Risk Factors – Operational Matters – We face risks of non-collectability of reinsurance and increased reinsurance rates, which could materially affect our results of operations.” RESE RVES The applicable insurance laws under which insurance companies operate require that they report, as liabilities, policy reserves to meet future obligations on their outstanding policies.
Risk Factors – Operational Matters – We face risks of non-collectability of reinsurance and increased reinsurance rates, which could materially affect our results of operations.” RESERVES The applicable insurance laws under which insurance companies operate require that they report, as liabilities, policy reserves to meet future obligations on their outstanding policies.
As of December 31, 2022, the RBC ratios of LNL, LLANY and FPP reported to their respective states of domicile and the NAIC all exceeded the “company action level.” We believe that we will be able to maintain the RBC ratios of our insurance subsidiaries in excess of “company action level” through prudent underwriting, claims handling, investing and capital management.
As of December 31, 2023, the RBC ratios of LNL, LLANY and FPP reported to their respective states of domicile and the NAIC all exceeded the “company action level.” We believe that we will be able to maintain the RBC ratios of our insurance subsidiaries in excess of “company action level” through prudent underwriting, claims handling, investing and capital management.
The Company conducts a comprehensive, company-wide engagement survey every two years, and often conducts department-specific pulse surveys in the alternate years, to inform our human resources strategy, measure progress and adjust plans, as necessary. We focus on equipping our managers to foster employee development and strengthen their 17 Table of Contents voices.
The Company conducts a comprehensive, company-wide engagement survey every two years, and often conducts department-specific pulse surveys in the alternate years, to inform our human resources strategy, measure 18 Table of Contents progress and adjust plans, as necessary. We focus on equipping our managers to foster employee development and strengthen their voices.
Contract holders under the 4LATER Select Advantage rider are subject to restrictions on the allocation of their account value within the various investment choices. We design and actively manage the features and structure of our guaranteed benefit riders to maintain a competitive suite of products consistent with profitability and risk management goals.
Contract holders under the 4LATER Select Advantage rider are subject to restrictions on the allocation of their account balance within the various investment choices. We design and actively manage the features and structure of our guaranteed benefit riders to maintain a competitive suite of products consistent with profitability and risk management goals.
We also earn investment margins on fixed annuities. Multi-Fund ® variable annuity is a defined contribution retirement plan solution with fully bundled administrative services and investment choices for small- to mid-sized healthcare, education, governmental and not-for-profit employers sponsoring 403(b), 457(b) and 401(a)/(k) plans.
We also earn investment spreads on fixed annuities. Multi-Fund® variable annuity is a defined contribution retirement plan solution with fully bundled administrative services and investment choices for small- to mid-sized healthcare, education, governmental and not-for-profit employers sponsoring 403(b), 457(b) and 401(a)/(k) plans.
The fixed annuity or funding agreement is used within small, mid-large and large employer plan sponsors or institutional investors. The contract provides a conservative investment option for those seeking stability. In some cases, we earn investment margins on assets in the fixed account, and in other product versions we earn a fee on assets in the underlying custodial account.
The fixed annuity or funding agreement is used within small, mid-large and large employer plan sponsors or institutional investors. The contract provides a conservative investment option for those seeking stability. In some cases, we earn investment spreads on assets in the fixed account, and in other product versions we earn a fee on assets in the underlying custodial account.
The difference between revenue collected and expenses incurred is the profit for the Life Insurance business. Profitability, including fluctuations from period to period, is impacted by factors such as changes in sales of products, mortality experience (the frequency and magnitude of mortality claims paid during a given period), persistency and investment income.
The difference between revenue earned and expenses incurred is the profit for the Life Insurance business. Profitability, including fluctuations from period to period, is impacted by factors such as changes in sales of products, mortality experience (the frequency and magnitude of mortality claims paid during a given period), persistency and investment income.
This rider allows annuity contract holders access and control during a portion of the income distribution phase of their contract. This added flexibility allows the contract holder to access the account value for transfers and additional withdrawals. We use derivatives to hedge the equity market risk associated with our indexed variable annuity products.
This rider allows annuity contract holders access and control during a portion of the income distribution phase of their contract. This added flexibility allows the contract holder to access the account balance for transfers and additional withdrawals. We use derivatives to hedge the equity market risk associated with our indexed variable annuity products.
The LINCOLN ALLIANCE program is a defined contribution retirement plan solution aimed at small, mid-large and large market employers, typically those that have defined contribution plans with $10 million or more in account value. The target market is primarily healthcare providers, public sector employers, corporations and educational institutions.
The LINCOLN ALLIANCE program is a defined contribution retirement plan solution aimed at small, mid-large and large market employers, typically those that have defined contribution plans with $10 million or more in account balance. The target market is primarily healthcare providers, public sector employers, corporations and educational institutions.
Our captive reinsurance and reinsurance subsidiaries are subject to periodic financial examinations by their respective domiciliary state insurance regulators. We have not received any material adverse findings resulting from state insurance department examinations of our insurance, reinsurance and captive reinsurance subsidiaries conducted during the three-year period ended December 31, 2022.
Our captive reinsurance and reinsurance subsidiaries are subject to periodic financial examinations by their respective domiciliary state insurance regulators. We have not received any material adverse findings resulting from state insurance department examinations of our insurance, reinsurance and captive reinsurance subsidiaries conducted during the three-year period ended December 31, 2023.
The annuity classification also determines the manner in which we earn investment margin profits from these products, either as investment spreads for fixed products, as asset-based fees charged to variable products, or as both for indexed variable products. Annuities have several features that are attractive to customers.
The annuity classification also determines the manner in which we earn investment margin profits from these products, either as investment spreads for fixed products, as asset-based fees charged to variable products, or as both for RILA products. Annuities have several features that are attractive to customers.
All provide contract holders with protected lifetime income that is based on a maximum rate of the income base that grows annually for a specified period of time at the greater of a specified simple rate or account value growth. The riders provide higher income if the contract holder delays withdrawals.
All provide contract holders with protected lifetime income that is based on a maximum rate of the income base that grows annually for a specified period of time at the greater of a specified simple rate or account balance growth. The riders provide higher income if the contract holder delays withdrawals.
The protected lifetime income is based on a percentage rate of income for their age at the time of purchase of the optional rider, which will grow at the greater of a specified simple rate (available each year a withdrawal is not taken for a specified period of time) or account value growth.
The protected lifetime income is based on a percentage rate of income for their age at the time of purchase of the optional rider, which will grow at the greater of a specified simple rate (available each year a withdrawal is not taken for a specified period of time) or account balance growth.
Short-term disability insurance generally provides weekly benefits for up to 26 weeks following a short waiting period, ranging from 1 to 30 days. Long-term disability insurance provides benefits following a longer waiting period, usually between 90 and 180 days, and provides benefits for a longer period, ranging from 2 years to normal (Social Security) retirement age.
Short-term disability insurance generally provides weekly benefits for up to 26 weeks following a short waiting period, ranging from 1 to 30 days. Long-term disability insurance provides benefits following a longer waiting period, usually between 90 and 180 days, and provides benefits for a longer period, up to normal (Social Security) retirement age.
Risk Factors – Legislative, Regulatory and Tax – Our businesses are heavily regulated and changes in regulation and in supervisory and enforcement policies may affect our insurance subsidiary capital requirements, reduce our profitability, limit our growth or otherwise adversely affect our business, results of operations and financial condition.” We are monitoring all potential changes and evaluating the potential impact they could have on our product offerings, financial condition and results of operations.
Risk Factors – Legislative, Regulatory and Tax – Our businesses are heavily regulated and changes in regulation and in supervisory and enforcement policies may affect our 12 Table of Contents insurance subsidiary capital requirements, reduce our profitability, limit our growth or otherwise adversely affect our business, results of operations and financial condition.” We are monitoring all potential changes and evaluating the potential impact they could have on our product offerings, financial condition and results of operations.
By offering a GWB inside a retirement plan, we provide plan sponsors a solution that gives participants the ability to participate in the market and receive guaranteed income for life while still maintaining access to their plan account value.
By offering a GWB inside a retirement plan, we provide plan sponsors a solution that gives participants the ability to participate in the market and receive guaranteed income for life while still maintaining access to their plan account balance.
In September 2022, we announced enhancements to our variable annuity hedge program that continues to focus on generating sufficient assets to fund future claims with a goal of maximizing distributable earnings and explicitly protecting capital.
In September 2022, we announced enhancements to our variable annuity hedge program that continues to focus on generating sufficient income to fund future claims with a goal of maximizing distributable earnings and explicitly protecting capital.
Contract holders under the i4LIFE Advantage Guaranteed Income Benefit (Managed Risk) rider are subject to the allocation of their account value to our Managed Risk Strategies fund options and certain fixed-income options. We also offer the 4LATER® Select Advantage rider.
Contract holders under the i4LIFE Advantage Guaranteed Income Benefit (Managed Risk) rider are subject to the allocation of their account balance to our Managed Risk Strategies fund options and certain fixed-income options. We also offer the 4LATER® Select Advantage rider.
RETI REMENT PLAN SERVICES Overview The Retirement Plan Services segment provides employers with retirement plan products and services, primarily in the defined contribution retirement plan marketplace. Defined contribution plans are a popular employee benefit offered by employers large and small across a wide spectrum of industries.
RETIREMENT PLAN SERVICES Overview The Retirement Plan Services segment provides employers with retirement plan products and services, primarily in the defined contribution retirement plan marketplace. Defined contribution plans are a popular employee benefit offered by employers large and small across a wide spectrum of industries.
For eligible employees, such programs include: a subsidized medical plan with domestic partner eligibility, plus optional dental and vision, a health savings account with a company contribution and a healthcare flexible spending account; a well-being program that provides access to personal health coaches, health screenings and flu shots, discounts and reimbursements for programs that promote health; an employee assistance program (“EAP”) that provides counseling and tools to manage well-being; paid parental leave and adoption assistance programs; fertility, pregnancy and parenting support; a dependent care flexible spending account; access to Homework Connection which, provides one-on-one, on-demand homework help to students at no cost to employees; dedicated Lincoln Financial Retirement Consultants to evaluate employee retirement readiness and help them map out ways to improve their readiness; in addition to an independent financial wellness advisor for complete financial well-being assistance; our employee 401(k) plan with a company match and other convenient features; and accident and critical illness insurance coverages, short- and long-term disability plans and company-provided life insurance.
For eligible employees, such programs include: • a subsidized medical plan with domestic partner eligibility, plus optional dental and vision, a health savings account with a company contribution and a healthcare flexible spending account; • a well-being program that provides access to personal health coaches, health screenings and flu shots, discounts and reimbursements for programs that promote health; • an employee assistance program (“EAP”) that provides counseling, work/life resources and tools to manage well-being; • paid parental leave and adoption assistance programs; • fertility, pregnancy and parenting support; • a dependent care flexible spending account; • access to Homework Connection which, provides one-on-one, on-demand homework help to students at no cost to employees; • dedicated Lincoln Financial Retirement Consultants to evaluate employee retirement readiness and help them map out ways to improve their readiness; in addition to an independent financial wellness advisor for complete financial well-being assistance; • our employee 401(k) plan with a core company contribution, company matching contribution and other convenient features; and • hospital indemnity, accident and critical illness insurance coverages, short- and long-term disability plans and company-provided life insurance.
Annuities are unique in that contract holders can select a variety of payout alternatives to provide an income flow for life. Many annuity contracts also include guarantee features (living and death benefits) that are not found in any other investment vehicle and that, we believe, make annuities attractive especially in times of economic uncertainty.
Annuities are unique in that policyholders can select a variety of payout alternatives to provide an income flow for life. Many annuity contracts also include guarantee features (living and death benefits) that are not found in any other investment vehicle and that, we believe, make annuities attractive especially in times of economic uncertainty.
We also receive fees for services that we provide to funds in the underlying separate accounts. 8 Table of Contents Additionally, we offer other products and services that complement our primary offerings: The Lincoln Next Step ® series of products is a suite of mutual fund-based IRAs available exclusively for participants in Lincoln-serviced retirement plans and their spouses.
We also receive fees for services that we provide to funds in the underlying separate accounts. Additionally, we offer other products and services that complement our primary offerings: • The Lincoln Next Step ® series of products is a suite of mutual fund-based IRAs available exclusively for participants in Lincoln-serviced retirement plans and their spouses.
We are required to comply with the amended guideline, AG49-B, for any IUL products sold on, or after, May 1, 2023, and such compliance could impact our sales of such products.
We were required to comply with the amended guideline, AG49-B, for any IUL products sold on, or after, May 1, 2023, and such compliance could impact our sales of such products.
If any revised DOL fiduciary rule or any additional new rules that are implemented are more onerous than Regulation Best Interest, or are not coordinated with Regulation Best Interest, the impact on our business could be substantial.
If the final DOL fiduciary rule or any additional new rules that are implemented are more onerous than Regulation Best Interest, or are not coordinated with Regulation Best Interest, the impact on our business could be substantial.
Insurance company regulation is discussed further in this section under “Insurance Holding Company Regulation.” 11 Table of Contents As part of their regulatory oversight process, state insurance departments conduct periodic examinations, generally once every three to five years, of the books, records, accounts and business practices of insurers domiciled in their states.
Insurance company regulation is discussed further in this section under “Insurance Holding Company Regulation.” As part of their regulatory oversight process, state insurance departments conduct periodic examinations, generally once every three to five years, of the books, records, accounts and business practices of insurers domiciled in their states.
Depending on the product selected, surrender charge periods can range from 0 to 25 years. As mentioned previously, we offer a survivorship version of our individual IUL products, Lincoln WealthPreserve® SIUL. This product insures two lives with a single policy and pays death benefits upon the second death.
Depending on the product selected, surrender charge periods can range from 0 to 25 years. We offer a survivorship version of our individual IUL products, Lincoln WealthPreserve® SIUL. This product insures two lives with a single policy and pays death benefits upon the second death.
The Secure Plus and Secure Max riders and Select Plus and Select Max riders provide contract holders with protected lifetime income up to a specified maximum rate of the income base and a lower specified maximum rate of the income base if the account value falls to zero.
The Secure Plus and Secure Max riders and Select Plus and Select Max riders provide contract holders with protected lifetime income up to a specified maximum rate of the income base and a lower specified maximum rate of the income base if the account balance falls to zero.
For more information on statutory reserving and our use of captive reinsurance structures, see “Liquidity and Capital Resources – Holding Company Sources and Uses of Liquidity and Capital –Subsidiaries’ Capital” in the MD&A.
For more information on statutory reserving and our use of captive reinsurance structures, see “ Liquidity and Capital Resources – Holding Company Sources and Uses of Liquidity and Capital – Subsidiaries’ Capital” in the MD&A.
These classifications describe whether we or the contract holders bear the primary investment risk of the assets supporting the policy. This also determines the manner in which we earn 1 Table of Contents investment margin profits from these products, either as investment spreads for fixed products or as asset-based fees charged to variable products.
These classifications describe whether we or the contract holders bear the primary investment risk of the assets supporting the policy. This also determines the manner in which we earn investment margin profits from these products, either as investment spreads for fixed products or as asset-based fees charged to variable products.
These assessments are built into accumulation unit values, which when multiplied by the number of units owned for any variable fund equals the contract holder’s account value for that variable fund.
These assessments are built into accumulation unit values, which when multiplied by the number of units owned for any variable fund equals the contract holder’s account balance for that variable fund.
Our comprehensive and compliant solutions, with ease of intake, provide coordinated and integrated management expertise to handle both leave and disability events. 6 Table of Contents Life Insurance We offer employer-sponsored group term life insurance products including basic, optional, and voluntary term life insurance to employees and their dependents.
Our comprehensive and compliant solutions, with ease of intake, provide coordinated and integrated management expertise to handle both leave and disability events. Life Insurance We offer employer-sponsored group term life insurance products including basic, optional, and voluntary term life insurance to employees and their dependents.
See “Liquidity and Capital Resources – Ratings” in the MD&A for a discussion of our credit ratings. REGU LATORY Insurance Regulation Our insurance subsidiaries, like other insurance companies, are subject to regulation and supervision by the states, territories and countries in which they are licensed to do business.
See “Liquidity and Capital Resources – Ratings” in the MD&A for a discussion of our credit ratings. REGULATORY Insurance Regulation Our insurance subsidiaries, like other insurance companies, are subject to regulation and supervision by the states, territories and countries in which they are licensed to do business.
Our key differentiator is our technology enabled, people-connected service model, which leverages digitally focused tools with personalized support and has been shown to drive positive outcomes for plan sponsors and participants. OTHER OPERATIONS Other Operations includes the financial data for operations that are not directly related to the business segments.
Our key differentiator 9 Table of Contents is our technology enabled people-connected service model, which leverages digitally focused tools with personalized support and has been shown to drive positive outcomes for plan sponsors and participants. OTHER OPERATIONS Other Operations includes the financial data for operations that are not directly related to the business segments.
In a 9 Table of Contents modified coinsurance program, we as the ceding company retain the reserves, as well as the assets backing those reserves, and the reinsurer shares proportionally in all financial terms of the reinsured policies based on their respective percentage of the risk.
In a modified coinsurance program, we as the ceding company retain the reserves, as well as the assets backing those reserves, and the reinsurer shares proportionally in all financial terms of the reinsured policies based on their respective percentage of the risk.
The information contained on our website is not included as part of, or incorporated by reference into, this report. 18 Table of Contents
The information contained on our website is not included as part of, or incorporated by reference into, this report. 19 Table of Contents
BUSI NESS SEGMENTS AND OTHER OPERATIONS LIFE INSURANCE Overview The Life Insurance segment focuses on the creation and protection of wealth for its clients by providing life insurance products, including term insurance, both single (including universal life insurance (“UL”), COLI and BOLI) and survivorship versions of indexed universal life insurance (“IUL”) and variable universal life insurance (“VUL”) products, linked-benefit products (which are UL and VUL with riders providing for long-term care costs), and critical illness and long-term care riders, which can be attached to IUL or VUL policies.
LIFE INSURANCE Overview The Life Insurance segment focuses on the creation and protection of wealth for its clients by providing life insurance products, including term insurance, both single (including universal life insurance (“UL”), COLI and BOLI) and survivorship versions of indexed universal life insurance (“IUL”) and variable universal life insurance (“VUL”) products, linked-benefit products (which are UL and VUL with riders providing for long-term care costs), and critical illness and long-term care riders, which can be attached to IUL or VUL policies.
We provide revenues, income (loss) from operations and assets attributable to each of our business segments and Other Operations in Note 21.
We provide revenues, income (loss) from operations and assets attributable to each of our business segments and Other Operations in Note 20 .
Hospital indemnity insurance provides scheduled benefits for hospital admission and daily confinement, as well as over 20 benefit triggers related to hospitalization due to an accident and/or illness. Distribution The Group Protection segment’s products are marketed primarily through a national distribution system.
Hospital indemnity insurance provides scheduled benefits for hospital admission and daily confinement, as well as over 20 benefit triggers related to hospitalization due to an accident and/or illness. 7 Table of Contents Distribution The Group Protection segment’s products are marketed primarily through a national distribution system.
From the moment our employees become part of Lincoln, they’re empowered to “Be Lincoln” by living and acting with integrity and optimism in their communities, relationships and daily interactions with colleagues and clients.
From the moment our employees become part of Lincoln, they’re empowered to “Be Lincoln” by living and acting with integrity, accountability and passion in their communities, relationships and daily interactions with colleagues and clients.
See “Item 1A. Risk Factors – Liquidity and Capital Position – A decrease in the capital and surplus of our insurance subsidiaries may result in a downgrade to our credit and insurer financial strength ratings” and “Item 1A.
See “ Item 1A. Risk Factors – Liquidity and Capital Position – A decrease in the capital and surplus of our insurance subsidiaries may result in a downgrade to our credit and insurer financial strength ratings” and “ Item 1A.
As of December 31, 2022, LFN offered LNC and non-proprietary products and advisory services through a national network of approximately 11,900 active producers who placed business with us within the last 24 months. Financial information in the tables that follow is presented in accordance with United States of America generally accepted accounting principles (“GAAP”), unless otherwise indicated.
As of December 31, 2023, LFN offered LNC and non-proprietary products and advisory services through a national network of approximately 13,000 active producers who placed business with us within the last 24 months. Financial information in the tables that follow is presented in accordance with United States of America generally accepted accounting principles (“GAAP”), unless otherwise indicated.
The monthly benefits provided are subject to reduction when Social Security benefits are also paid. We also provide insured coverage for, as well as administrative services for employer self-funded, state-specific statutory disability and paid family leave programs as legislation is passed and implemented.
The monthly benefits provided are subject to reduction when Social Security benefits are also paid. We also provide insured coverage for, as well as administrative services for employer self-funded, state-specific statutory disability and paid family leave programs.
Their collaborative efforts are backed by a variety of resources we make available and guided by our Career Framework, which provides tools and resources to help employees discover, assess, plan and invest in their careers. In 2022, we launched Get CAREER FIT, an enterprise-wide program to support all employees in creating a specific and targeted development plan.
Their collaborative efforts are backed by a variety of resources we make available, which provide tools and resources to help employees discover, assess, plan and invest in their careers. In 2022, we launched Get CAREER FIT, an enterprise-wide program to support all employees in creating a specific and targeted development plan.
We obtain reinsurance from a diverse group of reinsurers, and we monitor concentration and financial strength ratings of our principal reinsurers. Protective, Security Life of Denver Insurance Company (a subsidiary of Resolution Life that we refer to herein as “ Resolution Life”) and Athene Holding Ltd. (“Athene”) represent our largest reinsurance exposures.
We obtain reinsurance from a diverse group of reinsurers, and we monitor concentration and financial strength ratings of our principal reinsurers. Fortitude Reinsurance Company Ltd. (“Fortitude Re”), Protective Life Insurance Company, Security Life of Denver Insurance Company (a subsidiary of Resolution Life that we refer to herein as “Resolution Life”) and Athene Holding Ltd. (“Athene”) represent our largest reinsurance exposures.
Group Protection distributes its products and services primarily through employee benefit brokers, TPAs and other employee benefit firms. As of December 31, 2022, LFD had approximately 510 internal and external wholesalers (including sales and relationship managers).
Group Protection distributes its products and services primarily through employee benefit brokers, TPAs and other employee benefit firms. As of December 31, 2023, LFD had approximately 520 internal and external wholesalers (including sales and relationship managers).
The marketplace continues to evolve in the changing regulatory environment. Financial Reform Legislation Since it was enacted in 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) has imposed considerable reform in the financial services industry. The ongoing implementation continues to present challenges and uncertainties for financial market participants.
Financial Reform Legislation Since it was enacted in 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) has imposed considerable reform in the financial services industry. The ongoing implementation continues to present challenges and uncertainties for financial market participants.
The impact of each factor varies by product type. Products We offer four categories of life insurance products, consisting of: UL and IUL UL insurance products provide life insurance with account values that earn rates of return solely based on company-declared interest rates.
The impact of each factor varies by product type. 4 Table of Contents Products We offer four categories of life insurance products, consisting of: UL and IUL UL insurance products provide life insurance with account balances that earn rates of return solely based on company-declared interest rates.
For voluntary and other forms of employee paid coverages, minimum participation requirements are used to obtain a better spread of risk and minimize the risk of anti-selection. 7 Table of Contents Claims Administration Claims for the Group Protection segment are managed by in-house claim specialists.
For voluntary and other forms of employee paid coverages, minimum participation requirements are used to obtain a better spread of risk and minimize the risk of anti-selection. Claims Administration Claims for the Group Protection segment are managed by claim specialists.
The value of the variable portion of the contract holder’s account varies with the performance of the underlying variable funds chosen by the contract holder. Our variable funds include the Managed Risk Strategies fund options, a series of funds that embed volatility risk management and, with some funds, capital protection strategies inside the funds themselves.
The value of the variable portion of the policyholder’s account varies with the performance of the underlying variable funds chosen by the policyholder. Our variable funds include the Managed Risk Strategies fund options, a series of funds that embed volatility risk management and, with some funds, capital protection strategies inside the funds themselves.
Risk Factors – Operational Matters – We face risks of non-collectability of reinsurance and increased reinsurance rates, which could materially affect our results of operations.” INV ESTMENTS An important component of our financial results is the return on investments.
Risk Factors – Operational 10 Table of Contents Matters – We face risks of non-collectability of reinsurance and increased reinsurance rates, which could materially affect our results of operations.” INVESTMENTS An important component of our financial results is the return on investments.
This approach also permits us to be more effective in our asset-liability management because decisions can be made based upon both the economic and current investment income considerations affecting assets and liabilities. Investments made by our insurance subsidiaries must comply with the insurance laws and regulations of the states of domicile.
This approach also permits us to be more effective in our asset-liability management because decisions can be made based upon both the economic and current investment income considerations affecting assets and liabilities. Investments made by our insurance subsidiaries must comply with the insurance laws and regulations of the states of domicile. Derivatives are used primarily for hedging purposes.
The investment options for our annuities encompass the spectrum of asset classes with varying levels of risk and include both equity and fixed-income. LINCOLN DIRECTOR SM group variable annuity is a 401(k) defined contribution retirement plan solution available to small businesses, typically those with plans having less than $10 million in account values.
The investment options for our products encompass the spectrum of asset classes with varying levels of risk and include both equity and fixed-income. 8 Table of Contents LINCOLN DIRECTOR SM group variable annuity is primarily a 401(k) defined contribution retirement plan solution available to small businesses, typically those with plans having less than $10 million in account balances.
The insurer financial strength rating scales of AM Best, Fitch Ratings (“Fitch”), Moody’s Investors Service (“Moody’s”) and S&P Global Ratings (“S&P”) are characterized as follows: AM Best – A++ to D Fitch – AAA to C Moody’s – Aaa to C S&P – AAA to D As of February 13, 2023, the financial strength ratings of our principal insurance subsidiaries, as published by the principal rating agencies that rate us, were as follows: AM Best Fitch Moody's S&P The Lincoln National Life Insurance Company (“LNL”) A A+ A1 A+ (3 rd highest of 16) (5 th highest of 19) (5 th highest of 21) (5 th highest of 21) Lincoln Life & Annuity Company of New York (“LLANY”) A A+ A1 A+ (3 rd highest of 16) (5 th highest of 19) (5 th highest of 21) (5 th highest of 21) First Penn-Pacific Life Insurance Company (“FPP”) A A+ A1 A- (3 rd highest of 16) (5 th highest of 19) (5 th highest of 21) (7 th highest of 21) A downgrade of the financial strength rating of one of our principal insurance subsidiaries could affect our competitive position in the insurance industry and make it more difficult for us to market our products, as potential customers may select companies with higher financial strength ratings.
The insurer financial strength rating scales of AM Best, Fitch Ratings (“Fitch”), Moody’s Investors Service (“Moody’s”) and S&P Global Ratings (“S&P”) are characterized as follows: • AM Best – A++ to D • Fitch – AAA to C • Moody’s – Aaa to C • S&P – AAA to D As of February 16, 2024, the financial strength ratings of our principal insurance subsidiaries, as published by the principal rating agencies that rate us, were as follows: AM Best Fitch Moody's S&P The Lincoln National Life Insurance Company (“LNL”) A A+ A2 A+ (3rd highest of 16) (5th highest of 19) (6th highest of 21) (5th highest of 21) Lincoln Life & Annuity Company of New York (“LLANY”) A A+ A2 A+ (3rd highest of 16) (5th highest of 19) (6th highest of 21) (5th highest of 21) First Penn-Pacific Life Insurance Company (“FPP”) A A+ A2 A- (3rd highest of 16) (5th highest of 19) (6th highest of 21) (7th highest of 21) A downgrade of the financial strength rating of one of our principal insurance subsidiaries could affect our competitive position in the insurance industry and make it more difficult for us to market our products, as potential customers may select companies with higher financial strength ratings.
Some of our products include secondary guarantees, which are discussed more fully below. Generally, this segment has higher sales during the second half of the year with the fourth quarter being the strongest. Life products can be classified as “fixed” (including indexed) or “variable” contracts.
Some of our products include secondary guarantees, which are discussed more fully below. Generally, this segment has higher sales during the second half of the year with the fourth quarter being the strongest. Similar to the annuity product classifications described above, life products can be classified as “fixed” (including indexed) or “variable” contracts.
In addition, in some states and under the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), we may be liable, as an “owner” or “operator,” for costs of cleaning-up releases or threatened releases of 16 Table of Contents hazardous substances at a property mortgaged to us.
In addition, in some states and under the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), we may be liable, as an “owner” or “operator,” for costs of cleaning-up releases or threatened releases of hazardous substances at a property mortgaged to us. We also risk environmental liability when we foreclose on a property mortgaged to us.
This product is predominantly purchased on an employee-paid basis. The coverage provides for lump sum payouts upon the occurrence of one of the specified critical illness benefit triggers covered within a critical illness insurance policy. This product also includes benefits and services that assist employees and their family members in the prevention, early detection and treatment of critical illness events.
The coverage provides for lump sum payouts upon the occurrence of one of the specified critical illness benefit triggers covered within a critical illness insurance policy. This product also includes benefits and services that assist employees and their family members in the prevention, early detection and treatment of critical illness events.
The Annuities segment competes with numerous other financial services companies. The main factors upon which entities in this market compete are distribution channel access and the quality of wholesalers, investment performance, cost, breadth of product portfolio and features, speed to market, brand recognition, financial strength ratings, crediting rates and client service.
The main factors upon which entities in this market compete are distribution channel access and the quality of wholesalers, investment performance, cost, breadth of product portfolio and features, speed to market, brand recognition, financial strength ratings, crediting rates and client service.
These modifications are expected to be implemented by January 1, 2025, at the earliest. Effective December 31, 2022, the NAIC revised the C-2 mortality calculation that is expected to result in a small decrease in risk-based capital (“RBC”). For more information, see “Item 1A.
These modifications are expected to be implemented by January 1, 2025, at the earliest. Effective December 31, 2022, the NAIC revised the C-2 mortality calculation that resulted in a small decrease in RBC. For more information, see “Item 1A.
As of December 31, 2022, the policy for our reinsurance program was to retain up to $20 million on a single insured life. For more information, see Note 8. Some portions of our annuity business have been reinsured on either a coinsurance or a modified coinsurance basis with other companies to limit our exposure associated with fixed and variable annuities.
As of December 31, 2023, the policy for our reinsurance program was to retain up to $20 million on a single insured life. For more information, see Note 8 . Some portions of our annuity and life businesses have been reinsured on either a coinsurance or a modified coinsurance basis with other companies.
The extent of such regulation varies, but generally has its source in statutes that delegate regulatory, supervisory and administrative authority to supervisory agencies. In the U.S., this power is vested in state insurance departments.
The extent of such regulation varies, but generally has its source in statutes that delegate regulatory, supervisory and administrative authority to supervisory agencies. The U.S. federal government does not directly regulate the insurance industry. In the United States, this power is vested in state insurance departments.
Similar to the life insurance product classifications described above, the “fixed” and “variable” classifications describe whether we or the contract holders bear the investment risk of the assets supporting the contract. With “indexed variable” annuities, the extent to which we or the contract holders bear the investment risk of the assets is based on the investment allocations.
The “fixed” and “variable” classifications describe whether we or the policyholders bear the investment risk of the assets supporting the contract. With “indexed variable” annuities, the extent to which we or the policyholders bear the investment risk of the assets is based on the investment allocations.
We also risk environmental liability when we foreclose on a property mortgaged to us. Federal legislation provides for a safe harbor from CERCLA liability for secured lenders that foreclose and sell the mortgaged real estate, provided that certain requirements are met. However, there are circumstances in which actions taken could still expose us to CERCLA liability.
Federal legislation provides for a safe harbor from CERCLA liability for secured lenders that foreclose and sell the mortgaged real estate, provided that certain requirements are met. However, there are circumstances in which actions taken could still expose us to 17 Table of Contents CERCLA liability.
These riders allow the contract holder to accelerate death benefits on a tax-free basis in the event of a qualified condition. Term Life Insurance Term life insurance provides a fixed death benefit for a scheduled period of time. Some of our term life insurance products give the contract holder the option to reduce the death benefit at a future time.
These riders allow the contract holder to accelerate death benefits on a tax-free basis in the event of a qualified condition. Term Life Insurance Term life insurance provides a fixed death benefit for a scheduled period of time. Our term life insurance products give the contract holder the option to convert into a UL, IUL or VUL product.
We offer comprehensive employer-sponsored fully insured vision plans with a wide range of benefits for protecting employees’ and their covered dependents’ sight and vision health. All plans provide access to a national network of providers, with in and out-of-network benefits. Accident, Critical Illness and Hospital Indemnity Insurance We offer employer-sponsored group accident insurance products for employees and their covered dependents.
We also offer comprehensive employer-sponsored fully insured vision plans with a wide range of benefits for protecting employees’ and their covered dependents’ sight and vision health. All plans provide access to a national network of providers, with in and out-of-network benefits.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCertain of our regulators have proposed or adopted, or may propose or adopt, ESG rules or standards that would apply to our business. For example, in March 2022, the SEC proposed extensive rule changes that would require companies to include certain climate-related disclosures in their registration statements and periodic reports filed with the SEC.
Biggest changeFor example, in March 2022, the SEC proposed extensive rule changes that would require companies to include certain climate-related disclosures in their registration statements and periodic reports filed with the SEC, and in October 2023, the Governor of California signed two bills into law that will require significant climate-related disclosures (in some cases beyond the disclosures proposed by the SEC’s rule) by large entities doing business in that state.
Our customers and clients may engage other financial service providers, and the resulting loss of business may harm our results of operations or financial condition. Our sales representatives are not captive and may sell products of our competitors. We sell our life insurance and annuity products through independent sales representatives.
Our customers and clients may engage other financial service providers, and the resulting loss of business may harm our results of operations or financial condition. Our sales representatives are not captive and may sell products of our competitors. We sell our annuity and life insurance products through independent sales representatives.
Compliance with existing and emerging privacy regulations could result in increased compliance costs and/or lead to changes in business practices and policies, and any failure to protect the confidentiality of personal information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.
Compliance with existing and emerging privacy laws and regulations could result in increased compliance costs and/or lead to changes in business practices and policies, and any failure to protect the confidentiality of personal information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.
Defaults on our mortgage loans and write-downs of mortgage equity may adversely affect our profitability. Our mortgage loans face default risk and are principally collateralized by commercial properties. The performance of our mortgage loan investments may fluctuate in the future. In addition, some of our mortgage loan investments have balloon payment maturities.
Defaults and write-downs on our mortgage loans may adversely affect our profitability. Our mortgage loans face default risk and are principally collateralized by commercial properties. The performance of our mortgage loan investments may fluctuate in the future. In addition, some of our mortgage loan investments have balloon payment maturities.
We use a hedge to partially mitigate the risk related to equity market volatility and are evaluating other financing solutions, but there can be no guarantee that our hedge or other solutions will be fully effective to mitigate this risk.
We use a hedge to partially mitigate the risk related to equity market volatility and are evaluating other solutions, but there can be no guarantee that our hedge or other solutions will be fully effective to mitigate this risk.
To meet these requirements, we may be required to post asset adequacy reserves, which, depending on the size of the reserve, could materially affect our financial results. 19 Table of Contents Increases in interest rates may negatively affect our profitability, capital position and the value of our investment portfolio and may also result in increased contract withdrawals.
To meet these requirements, we may be required to post asset adequacy reserves, which, depending on the size of the reserve, could materially affect our financial results. 20 Table of Contents Increases in interest rates may negatively affect our profitability, capital position and the value of our investment portfolio and may also result in increased contract withdrawals.
As of December 31, 2022, no state insurance regulatory authority had imposed on us any material fines or revoked or suspended any of our licenses to conduct insurance business in any state or issued an order of supervision with respect to our insurance subsidiaries that would have a material adverse effect on our results of operations or financial condition.
As of December 31, 2023, no state insurance regulatory authority had imposed on us any material fines or revoked or suspended any of our licenses to conduct insurance business in any state or issued an order of supervision with respect to our insurance subsidiaries that would have a material adverse effect on our results of operations or financial condition.
Business – Financial Strength Ratings” for a description of our financial strength ratings. See “Reinsurance” in the MD&A for additional information on these indemnity reinsurance agreements. If the cedent recaptured the business, LNL and LLANY would be required to release reserves and transfer assets to the cedent. Such a recapture could adversely impact our future profits.
Business – Financial Strength Ratings ” for a description of our financial strength ratings. See “Reinsurance” in the MD&A for additional information on these indemnity reinsurance agreements. If the cedent recaptured the business, LNL and LLANY would be required to release reserves and transfer assets to the cedent. Such a recapture could adversely impact our future profits.
Our management of these rate increase actions and the outcomes of legal proceedings have not to date had a material effect on our results of operations or financial condition, but we can make no assurance regarding the impact of future rate increase actions or outcomes of legal proceedings. See Note 13 for a description of reinsurance-related actions.
Our management of these rate increase actions and the outcomes of legal proceedings have not to date had a material effect on our results of operations or financial condition, but we can make no assurance regarding the impact of future rate increase actions or outcomes of legal proceedings. See Note 18 for a description of reinsurance-related actions.
Such valuation allowance could have a material adverse effect on our results of operations and financial condition. For more information on our deferred income tax assets, see Note 6. The determination of the amount of allowance for credit losses and impairments taken on our investments is highly subjective and could materially impact our results of operations or financial condition.
Such valuation allowance could have a material adverse effect on our results of operations and financial condition. For more information on our deferred income tax assets, see Note 23 . The determination of the amount of allowance for credit losses and impairments taken on our investments is highly subjective and could materially impact our results of operations or financial condition.
In periods of increasing interest rates, policy loans and surrenders and withdrawals of life insurance policies and annuity contracts may increase as contract holders seek to buy products with perceived higher returns. This process may lead to a flow of cash out of our businesses.
In periods of high or increasing interest rates, policy loans and surrenders and withdrawals of life insurance policies and annuity contracts may increase as contract holders seek to buy products with perceived higher returns. This process may lead to a flow of cash out of our businesses.
One statutory provision prohibits, except under specified circumstances, LNC from engaging in any business combination with any shareholder who owns 10% or more of our common stock (which shareholder, under the statute, would be considered an “interested shareholder”) for a period of five years following the time that such shareholder became an interested shareholder, unless such business combination is approved by the Board of Directors prior to such person becoming an interested shareholder.
One statutory provision prohibits, except under 25 Table of Contents specified circumstances, LNC from engaging in any business combination with any shareholder who owns 10% or more of our common stock (which shareholder, under the statute, would be considered an “interested shareholder”) for a period of five years following the time that such shareholder became an interested shareholder, unless such business combination is approved by the Board of Directors prior to such person becoming an interested shareholder.
Because the equity markets impact the profitability and expected profitability of many of our products, changes in equity markets may significantly affect our business and profitability. The fee income that we earn on certain products, including variable annuities, is based primarily upon account values, and the fee income that we earn on VUL policies is partially based upon account values.
Because the equity markets impact the profitability and expected profitability of many of our products, changes in equity markets may significantly affect our business and profitability. The fee income that we earn on certain products, including variable annuities, is based primarily upon account balances, and the fee income that we earn on VUL policies is partially based upon account balances.
Requiring our insurance subsidiaries to hold additional reserves has the potential to constrain their ability to pay dividends to the holding company. The earnings of our insurance subsidiaries impact contract holders’ surplus. Lower earnings constrain the growth in our insurance subsidiaries’ capital, and therefore, can constrain the payment of dividends and advances or repayment of funds to us.
Requiring our insurance subsidiaries to hold additional reserves has the potential to constrain their ability to pay dividends to the holding company. The earnings of our insurance subsidiaries impact our insurance subsidiaries’ surplus. Lower earnings constrain the growth in our insurance subsidiaries’ capital, and therefore, can constrain the payment of dividends and advances or repayment of funds to us.
In addition, our failure to comply with the covenants in the credit facilities or fulfill the conditions to borrowings, or the failure of lenders to fund their lending commitments (whether due to insolvency, illiquidity or other reasons) in the amounts provided for under the terms 25 Table of Contents of the facilities, would restrict our ability to access these credit facilities when needed and, consequently, could have a material adverse effect on our financial condition and results of operations.
In addition, our failure to comply with the covenants in the credit facilities or fulfill the conditions to borrowings, or the failure of lenders to fund their lending commitments (whether due to insolvency, illiquidity or other reasons) in the amounts provided for under the terms of the facilities, would restrict our ability to access these credit facilities when needed and, consequently, could have a material adverse effect on our financial condition and results of operations.
Because strong equity markets result in higher account values, strong equity markets positively affect our net income through increased fee income. Conversely, a weakening of the equity markets results in lower fee income and may have a material adverse effect on our results of operations and capital resources.
Because strong equity markets result in higher account balances, strong equity markets positively affect our net income through increased fee income. Conversely, a weakening of the equity markets results in lower fee income and may have a material adverse effect on our results of operations and capital resources.
In recent years, there has been increased scrutiny by these bodies, which has included more extensive examinations, regular sweep inquiries and more detailed review of disclosure documents. These regulatory or governmental bodies may bring regulatory or other legal actions against us if, in their view, our practices, or those of our agents or employees, are improper.
These regulatory or governmental bodies may bring regulatory or other legal actions against us if, in their view, our practices, or those of our agents or employees, are improper. In recent years, there has been increased scrutiny by these bodies across the industry, which has included more extensive examinations, regular sweep inquiries and more detailed review of disclosure documents.
Business – Financial Strength Ratings” and “Liquidity and Capital Resources – Ratings” in the MD&A for a description of our ratings. See also “A decrease in the capital and surplus of our insurance subsidiaries may result in a downgrade to our credit and insurer financial strength ratings” above.
Business – Financial Strength Ratings” and “Liquidity and Capital Resources – Ratings” in the MD&A for a description of our ratings. See also “Liquidity and Capital Position – A decrease in the capital and surplus of our insurance subsidiaries may result in a downgrade to our credit and insurer financial strength ratings” above.
In periods of rapidly increasing interest rates, such as that we are experiencing currently, while higher interest rates will lead to higher yields on our asset portfolios, such increases in yield may be more than offset by increases in crediting rates necessary to keep our interest-sensitive products competitive and potentially higher borrowing costs, thus lowering our spreads.
In periods of increasing or high interest rates, such as that we are experiencing currently, while higher interest rates will lead to higher yields on our asset portfolios, such increases in yield may be more than offset by increases in crediting rates necessary to keep our interest-sensitive products competitive and potentially higher borrowing costs, thus lowering our spreads.
These representatives are not captive, which means they may also sell our competitors’ products. If our competitors offer products that are more attractive than ours, or pay higher commission rates to the sales representatives than we do, these representatives may concentrate their efforts in selling our competitors’ products instead of ours. Item 1B. U nresolved Staff Comments None.
These representatives are not captive, which means they may also sell our competitors’ products. If our competitors offer products that are more attractive than ours or pay higher commission rates to the sales representatives than we do, these representatives may concentrate their efforts in selling our competitors’ products instead of ours. Item 1B. Unresolved Staff Comments None.
If any revised DOL fiduciary rule or any additional new rules that are implemented are more onerous than Regulation Best Interest, or are not coordinated with Regulation Best Interest, the impact on our business could be substantial.
If the final DOL fiduciary rule or any additional new rules that are implemented are more onerous than Regulation Best Interest, or are not coordinated with Regulation Best Interest, the impact on our business could be substantial.
Alternatively, if LNL and LLANY established a security trust for the cedent, the ability to transfer assets out of the trust could be severely restricted, thus negatively impacting our liquidity. Investments We may have difficulty selling certain holdings in our investment portfolio in a timely manner and realizing full value.
Alternatively, if LNL and LLANY established a security trust for the cedent, the ability to transfer assets out of the trust could be severely restricted, thus negatively impacting our liquidity. 32 Table of Contents Investments We may have difficulty selling certain holdings in our investment portfolio in a timely manner and realizing full value.
As a result, to the extent our subsidiaries are unable or are materially restricted from being able to pay dividends to us in sufficient amounts, our ability to meet our obligations could be materially affected. A decrease in the capital and surplus of our insurance subsidiaries may result in a downgrade to our credit and insurer financial strength ratings.
As a result, to the extent our subsidiaries are unable or are materially restricted from being able to pay dividends to us in sufficient amounts, our ability to meet our obligations could be materially affected. 26 Table of Contents A decrease in the capital and surplus of our insurance subsidiaries may result in a downgrade to our credit and insurer financial strength ratings.
In addition, payments of dividends and advances or repayment of funds to us by our insurance subsidiaries are restricted by the applicable laws of their respective jurisdictions requiring that our insurance subsidiaries hold a specified amount of minimum reserves in order to meet future obligations on their 24 Table of Contents outstanding policies.
In addition, payments of dividends and advances or repayment of funds to us by our insurance subsidiaries are restricted by the applicable laws of their respective jurisdictions requiring that our insurance subsidiaries hold a specified amount of minimum reserves in order to meet future obligations on their outstanding policies.
An increase in interest rates could also result in decreased fee income associated with a decline in the value of variable annuity account values invested in fixed-income funds.
An increase in interest rates could also result in decreased fee income associated with a decline in the value of variable annuity account balances invested in fixed-income funds.
See “Item 1. Business – Financial Strength Ratings” and “Liquidity and Capital Resources – Ratings” in the MD&A for a full description of our ratings and ratings outlooks, including our S&P ratings and outlooks, certain of which were also downgraded or revised in November 2022 prior to our above-referenced announcement.
Business – Financial Strength Ratings” and “Liquidity and Capital Resources – Ratings” in the MD&A for a full description of our ratings and ratings outlooks, including our S&P ratings and outlooks, certain of which were also downgraded or revised in November 2022 prior to our above-referenced announcement.
The multi-year program will require significant investment and resource prioritization. If we do not successfully manage and execute the Spark Initiative, or if the program is inadequate or ineffective, we may not achieve all of the cost savings we expect from the initiative, or projected savings may be delayed or not sustained.
The multi-year program has and will continue to require significant investment and resource prioritization. If we do not successfully manage and execute the Spark Initiative, or if the program is inadequate or ineffective, we may not achieve all of the cost savings we expect from the initiative, or projected savings may be delayed or not sustained.
Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that is publicly available or otherwise accessible to us, which may not always be accurate, complete, up-to-date or properly evaluated.
Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that is publicly available or otherwise accessible to us, which may not always be 29 Table of Contents accurate, complete, up-to-date or properly evaluated.
If these ratings or capital ratios are not maintained, depending upon the reinsurance agreement, the cedent may recapture the business, or require us to place assets in trust or provide LOCs at least equal to the relevant statutory reserves. See “Item 1.
If these ratings or capital ratios are not maintained, depending upon the reinsurance agreement, the cedent may recapture the business, or require us to place assets in trust or provide LOCs at least equal to the relevant statutory reserves. See “ Item 1.
Tax authorities may enact changes in tax law or issue new regulations or other pronouncements that could increase our current tax burden and impose new taxes on our business. Guidance on previously enacted tax law changes could impact our interpretations of existing law and also have an impact on our business.
Tax authorities may enact changes in tax law or issue new regulations or other pronouncements that could increase 24 Table of Contents our current tax burden and impose new taxes on our business. Guidance on previously enacted tax law changes could impact our interpretations of existing law and also have an impact on our business.
Changes from period to period in the valuation of these guarantees, and in the amount of our obligations effectively hedged, will result in volatility in our results of operations and financial condition under GAAP and in the capital levels of our insurance and reinsurance subsidiaries.
Changes from period to period in the valuation of these guarantees, and in the amount of our obligations effectively hedged, will result in volatility in our results of operations and financial 21 Table of Contents condition under GAAP and in the capital levels of our insurance and reinsurance subsidiaries.
In addition, statutory capital requirements for certain fixed annuity and single premium life insurance products incorporate stochastic projections that can result in increased capital requirements, particularly as interest rates increase, which may affect our reported RBC ratio. Increases in interest rates may cause increased surrenders and withdrawals of insurance products.
In addition, statutory capital requirements for certain fixed annuity and single premium life insurance products incorporate stochastic projections that can result in increased capital requirements, particularly as interest rates increase, which may affect our reported RBC ratio. Increases in interest rates have in the past and may in the future, cause increased surrenders and withdrawals of insurance products.
We hold certain investments that may lack liquidity, such as privately placed securities, mortgage loans on real estate, policy loans, limited partnership interests and other investments. These asset classes represented 33% of the carrying value of our total investments as of December 31, 2022.
We hold certain investments that may lack liquidity, such as privately placed securities, mortgage loans on real estate, policy loans, limited partnership interests and other investments. These asset classes represented 38% of the carrying value of our total investments as of December 31, 2023.
An inability to access our credit facilities could result in a reduction in our liquidity and lead to downgrades in our credit and financial strength ratings. We rely on our credit facilities as a potential source of liquidity. We also use the credit facilities as a potential backstop to provide statutory reserve credit.
An inability to access our credit facilities could result in a reduction in our liquidity and lead to downgrades in our credit and financial strength ratings. We rely on our credit facilities as a potential source of liquidity. We also use the credit facilities as a potential backstop to provide statutory reserve credit to our insurance subsidiaries, including LNL.
In addition, we have experienced and expect to continue to experience an elevated incidence of claims, and we could experience changes in the rate of lapses or surrenders of policies or other changes in consumer behavior as a result of financial stress. Our contract holders may choose to defer paying insurance premiums or stop paying insurance premiums altogether.
In addition, we have at times experienced, and in the future could experience, an elevated incidence of claims, and we could experience changes in the rate of lapses or surrenders of policies or other changes in consumer behavior as a result of financial stress. Our contract holders may choose to defer paying insurance premiums or stop paying insurance premiums altogether.
If we or our associates fail to comply with applicable processes, policies, procedures and controls, misappropriation or intentional or unintentional inappropriate disclosure or misuse of consumer or client information, or violation of applicable state or federal laws, could occur.
If we or our associates fail to comply with applicable processes, policies, procedures and controls, misappropriation or intentional or unintentional inappropriate disclosure or misuse of individuals’ personal information, or violation of applicable state or federal laws, could occur.
Any changes in the method of calculating reserves for our life insurance and annuity products under SAP may result in increased reserve requirements. The NAIC also adopts changes to its regulations from time to time, which, depending on the scope of the change, could materially affect our financial condition and results of operations. See “Item 1.
Any changes in the method for calculating reserves for our annuity and life insurance products under SAP or applicable state insurance regulations may result in increased reserve requirements. The NAIC also adopts changes to its regulations from time to time, which, depending on the scope of the change, could materially affect our financial condition and results of operations.
The continuation of the COVID-19 pandemic, or future pandemics or other catastrophic events could cause a material adverse effect on our results of operations in any period and, depending on their severity, could also materially and adversely affect our financial condition.
Future pandemics or other catastrophic events could cause a material adverse effect on our results of operations in any period and, depending on their severity, could also materially and adversely affect our financial condition.
Business – Reinsurance” for a discussion of the indemnity reinsurance arrangements and the financial strength ratings and/or capital ratios that are required to be maintained under such arrangements. As of December 31, 2022, LNL’s and LLANY’s financial strength ratings and RBC ratios exceeded the ratings and ratios required under each agreement. See “Item 1.
Business – Reinsurance ” for a discussion of the indemnity reinsurance arrangements and the financial strength ratings and/or capital ratios that are required to be maintained under such arrangements. As of December 31, 2023, LNL’s and LLANY’s financial strength ratings and RBC ratios exceeded the ratings and ratios required under each agreement. See “ Item 1.
Changes to laws or regulations could adversely affect our distribution model and may result in additional disclosure and other requirements related to the sale and delivery of our products and services, which may adversely affect our business.
Changes to laws or regulations could adversely affect our distribution model and sales of our products and may result in additional disclosure and other requirements related to the sale and delivery of our products and services, which may adversely affect our business, results of operations or financial condition.
Decreases in the estimated fair value of our securities may harm our results of operations or financial condition. See “Critical Accounting Policies and Estimates – Investments” in the MD&A for additional information. Significant adverse mortality experience may result in the loss of, or higher prices for, reinsurance, which could adversely affect our profitability.
Decreases in the estimated fair value of our securities may harm our results of operations or financial condition. See “Summary of Critical Accounting Estimates – Investments” in the MD&A for additional information. 28 Table of Contents Significant adverse mortality experience may result in the loss of, or higher prices for, reinsurance, which could adversely affect our profitability.
We follow the insurance practice of reinsuring with other insurance and reinsurance companies a portion of the risks under the policies written by our insurance subsidiaries (known as “ceding”). As of December 31, 2022, we ceded $831.5 billion of life insurance in force to reinsurers for reinsurance protection.
We follow the insurance practice of reinsuring with other insurance and reinsurance companies a portion of the risks under the policies written by our insurance subsidiaries (known as “ceding”). As of December 31, 2023, we ceded $1.1 trillion of life insurance in force to reinsurers for reinsurance protection.
State and federal laws and regulations also require us to disclose our data collection and sharing practices to our consumers and customers and to provide certain consumers and customers with access to certain pieces of their personal information, the right to request correction of their information, the right to request deletion of their information, and the right to opt out of certain tracking, sharing and processing.
State and federal laws and regulations also require us to disclose our data collection and sharing practices to individuals who interact with us and to provide certain individuals with access to 22 Table of Contents certain pieces of their personal information, the right to request correction of their information, the right to request deletion of their information, and the right to opt out of certain tracking, sharing and processing.
For example, in the third quarter of 2022, we incurred a substantial charge related to the company’s annual review of DAC and reserve assumptions, related primarily to updated lapse assumptions related to UL products with secondary guarantees in response to emerging experience, combined with recently validated external industry perspectives.
For example, in the third quarter of 2022, we incurred a substantial charge related to the company’s annual review of reserve assumptions, related primarily to updated lapse assumptions related to UL products with secondary guarantees in response to emerging experience, combined with recently validated external industry perspectives. This charge also impacted our statutory capital in the fourth quarter of 2022.
See “Critical Accounting Policies and Estimates – Investments” in the MD&A for additional information. 26 Table of Contents Changes to our valuation of investments and our methodologies, estimations and assumptions could harm our results of operations or financial condition.
See “Summary of Critical Accounting Estimates – Investments” in the MD&A for additional information. Changes to our valuation of investments and our methodologies, estimations and assumptions could harm our results of operations or financial condition.
Competition for our employees is intense, and we may not be able to attract and retain the highly skilled people we need to support our business . Our success depends, in large part, on our ability to attract and retain qualified employees.
Competition for our employees is intense, and we may not be able to attract and retain the highly skilled people we need to support our business. Our success depends, in large part, on our ability to attract and retain qualified employees. Intense competition exists for employees with demonstrated ability, and the competition for talent has increased in recent years.
For more information, see “Legislative, Regulatory and Tax – State Regulation – Compliance with existing and emerging privacy regulations could result in increased compliance costs and/or lead to changes in business practices and policies, and any failure to protect the confidentiality of personal information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.” Although we conduct due diligence, negotiate contractual provisions and, in many cases, conduct periodic reviews of our vendors, distributors, and other third parties that provide operational or information technology services to us to confirm compliance with our information security standards, the failure of such third parties’ computer systems and/or their disaster recovery plans for any reason might cause significant interruptions in our operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to our customers.
For more information, see “Legislative, Regulatory and Tax – State Regulation – Compliance with existing and emerging privacy laws and regulations could result in increased compliance costs and/or lead to changes in business practices and policies, and any failure to protect the confidentiality of personal information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.” Although we conduct due diligence, negotiate contractual provisions and, in many cases, conduct periodic reviews of our vendors and other third party suppliers with whom we contract and who we believe may pose a cybersecurity threat to the Company, our customers or our business partners due to the type of services they provide and/or confidential information they may be handling to confirm compliance with our information security standards, the failure of such third parties’ computer systems and/or their disaster recovery plans for any reason might cause significant interruptions in our operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to our customers.
Such an event could materially damage our reputation or lead to regulatory, civil or criminal investigations and penalties, which, in turn, could have a material impact on our business, financial condition and results of operations. 21 Table of Contents In addition, we analyze customer data to better manage our business.
Such an event could materially damage our reputation or lead to regulatory, civil or criminal investigations and penalties, which, in turn, could have a material impact on our business, financial condition and results of operations.
We invest a portion of our investments in investment funds, many of which make private equity investments. The amount and timing of income from such investment funds tends to be uneven as a result of the performance of the underlying investments, including private equity investments.
The amount and timing of income from such investment funds tends to be uneven as a result of the performance of the underlying investments, including private equity investments.
Intense competition exists for employees with demonstrated ability, and the competition for talent has increased during the last two years. In addition, opportunities to work remotely have expanded the reach of recruiters and options for employees. As a result of this competition, we may be unable to hire or retain the qualified employees we need to support our business.
In addition, opportunities to work remotely have expanded the reach of recruiters and options for employees. As a result of this competition, we may be unable to hire or retain the qualified employees we need to support our business.
In addition, our investments related to the program may be greater than expected, and the work we are undertaking with respect to the initiative could result in disruption of our business or distraction of our management and employees.
In addition, our investments related to the program may be greater than expected, and the work we are undertaking with respect to the initiative could result in disruption of our business or distraction of our management and employees. If any of these risks occur, our business, financial condition and results of operations could be materially affected.
Climate change and climate change regulation may adversely affect our investment portfolio and financial condition. Climate change and climate change regulation may affect the prospects of companies and other entities whose securities we hold or our willingness to continue to hold their securities.
See Note 18 for a description of legal and regulatory proceedings and actions. Climate change and climate change regulation may adversely affect our investment portfolio and financial condition. Climate change and climate change regulation may affect the prospects of companies and other entities whose securities we hold or our willingness to continue to hold their securities.
Additionally, the impact of climate change has caused, and may continue to cause, changes in weather patterns, resulting in more severe and more frequent natural disasters such as forest fires, hurricanes, tornados, floods and storm surges.
The likelihood, timing or severity of a future pandemic or other catastrophe cannot be predicted. Additionally, the impact of climate change has caused, and may continue to cause, changes in weather patterns, resulting in more severe and more frequent natural disasters such as forest fires, hurricanes, tornados, floods and storm surges.
Business – Regulatory – Insurance Regulation.” Anti-takeover provisions could delay, deter or prevent our change in control, even if the change in control would be beneficial to LNC shareholders. We are an Indiana corporation subject to Indiana state law. Certain provisions of Indiana law could interfere with or restrict takeover bids or other change in control events affecting us.
See “ Item 1. Business – Regulatory – Insurance Regulation .” Anti-takeover provisions could delay, deter or prevent our change in control, even if the change in control would be beneficial to LNC shareholders. We are an Indiana corporation subject to Indiana state law.
Due to the COVID-19 pandemic that emerged in the first quarter of 2020, we experienced higher mortality claim payments due to an elevation in claim incidence. In addition, we experienced an increase in short-term and long-term disability claims related to the pandemic. This elevated level of claim incidence negatively impacted our earnings in each of the last three years.
Due to the COVID-19 pandemic that emerged in the first quarter of 2020, we experienced higher mortality claim payments due to an elevation in claim incidence. In addition, we experienced an increase in short-term and long-term disability claims related to the pandemic that negatively impacted our earnings. We expect COVID-19-related mortality to continue to follow U.S. death trends.
Such a failure could harm our reputation, subject us to regulatory sanctions and legal claims, lead to a loss of customers and revenues and otherwise adversely affect our business and financial results.
The occurrence of such a failure, interruption or security breach of the systems of third parties could harm our reputation, subject us to regulatory sanctions and legal claims, lead to a loss of customers, clients, agents and revenues and otherwise adversely affect our business and financial results.
Accordingly, we cannot determine with precision the ultimate amount or the timing of the payment of actual benefits and claims or whether the assets supporting the policy liabilities will grow to the level we assume prior to payment of benefits or claims.
The assumptions and estimates we use in connection with establishing and carrying our reserves are inherently uncertain. Accordingly, we cannot determine with precision the ultimate amount or the timing of the payment of actual benefits and claims or whether the assets supporting the policy liabilities will grow to the level we assume prior to payment of benefits or claims.
Publicly reported cyber-security threats and incidents have increased over recent periods, including a proliferation of ransomware attacks. Although our computer systems have in the past been, and will likely in the future be, subject to or targets of unauthorized or fraudulent access, to date, we have not had a material security breach.
Although our computer systems have in the past been, and will likely in the future be, subject to or targets of unauthorized or fraudulent access, to date, we have not had a material security breach.
Business – Regulatory – Privacy Regulations.” Many of the employees and associates who conduct our business have access to, and routinely process, personal information through a variety of media, including information technology systems.
Business – Regulatory – Privacy and Cybersecurity Regulation.” Many of the employees and associates who conduct our business have access to, and routinely process, personal information (including confidential information from consumers, clients and individuals with whom we have a business relationship) through a variety of media, including information technology systems.
For our insurance products, we calculate these reserves based on many assumptions and estimates, including, but not limited to, estimated premiums we will receive over the assumed life of the policies, the timing of the events covered by the insurance policies, the lapse rate of the policies, the amount of benefits or claims to be paid and the investment returns on the assets we purchase with the premiums we receive.
For our insurance products, we calculate these reserves based on many assumptions and estimates, including, but not limited to, estimated premiums we will receive over the assumed life of the policies, the timing of the events covered by the insurance policies, the lapse rate of the policies, the amount of benefits or claims to be paid and the investment returns on the assets we purchase with the premiums we receive. 27 Table of Contents The sensitivity of our statutory reserves and surplus established for our variable annuity base contracts and riders and VUL contracts to changes in the equity markets will vary depending on the magnitude of the decline.
We may face adverse regulatory, investor, customer, media or public scrutiny leading to business, reputational or legal challenges, which could adversely affect our reputation or otherwise adversely affect our business and results of operations, including but not limited to the ability to sell products, policyholder retention and increased cost of financing.
We may face adverse regulatory, investor, customer, media or public scrutiny leading to business, reputational or legal challenges, which could adversely affect our reputation or otherwise adversely affect our business and results of operations, including but not limited to the ability to sell products, policyholder retention and increased cost of financing. 23 Table of Contents Federal or state regulatory actions could result in substantial fines, penalties or prohibitions or restrictions on our business activities that could materially adversely affect our business, results of operations or financial condition.
The availability of these facilities could be critical to our credit and financial strength ratings and our ability to meet our obligations as they come due in a market when alternative sources of credit are tight.
If we were unable to access our facility in such circumstances, it could materially impact LNL’s capital position. The availability of these facilities could be critical to our credit and financial strength ratings and our ability to meet our obligations as they come due in a market when alternative sources of credit are tight.
For more information on goodwill, see “Critical Accounting Policies and Estimates – Goodwill and Other Intangible Assets” in the MD&A and Note 9.
For more information on goodwill, see “Summary of Critical Accounting Estimates – Goodwill and Other Intangible Assets ” in the MD&A and Note 9 .
If we were found to have infringed a third-party patent or other intellectual property rights, we could incur substantial liability, and in some circumstances could be enjoined from providing certain products or services to our customers, or alternatively could be required to enter into costly licensing arrangements with third parties, all of which could have a material adverse effect on our business, results of operations and financial condition. 28 Table of Contents Our information systems may experience interruptions, breaches in security and/or a failure of disaster recovery systems that could result in a loss or disclosure of confidential information, damage to our reputation, impairment of our ability to conduct business effectively and increased expense.
If we were found to have infringed a third-party patent or other intellectual property rights, we could incur substantial liability, and in some circumstances could be enjoined from providing certain products or services to our customers, or alternatively could be required to enter into costly licensing arrangements with third parties, all of which could have a material adverse effect on our business, results of operations and financial condition.
For example, S&P has announced that it plans to propose changes to its insurer RBC capital adequacy model, which, depending on the final changes, could increase the amount of statutory capital we are required to hold in order to maintain our current ratings.
For example, in November 2023, S&P implemented changes to its insurer RBC capital adequacy model, which could increase the amount of statutory capital we are required to hold in certain scenarios in order to maintain our current ratings.
Our information systems are critical to the operation of our business. We collect, process, maintain, retain and distribute large amounts of personal financial and health information and other confidential and sensitive data about our customers in the ordinary course of our business. Our business therefore depends on our customers’ willingness to entrust us with their personal information.
Our information systems are critical to the operation of our business. We collect, process, maintain, retain and distribute large amounts of personal financial and health information and other confidential and sensitive data about individuals with whom we interact in the 30 Table of Contents ordinary course of our business.
There has been increased scrutiny, including from U.S. state and federal regulators, regarding the use of “big data” techniques such as price optimization.
There has been increased scrutiny, including from U.S. state and federal regulators, regarding the use of artificial intelligence on large data sets for activities such as price optimization.
VM-20 and VM-21) and the required capital for these life and annuity contracts, as well as certain fixed annuity and single premium life insurance products, which could affect the level and volatility of statutory reserves and required capital for products in scope.
For example, the NAIC is considering modifications to the economic scenario generator used to calculate annuity and life reserves according to the Valuation Manual (e.g., VM-20 and VM-21) and the required capital for these annuity and life contracts, as well as certain fixed annuity and single premium life insurance products, which could affect the level and volatility of statutory reserves and required capital for products in scope.
As a result, these methods may not predict future exposures, which could be significantly greater than the historical measures indicate, such as the risk of pandemics causing a large number of deaths.
Many of our methods of managing risk and exposures are based upon our use of observed historical market behavior or statistics based on historical models. As a result, these methods may not predict future exposures, which could be significantly greater than the historical measures indicate, such as the risk of pandemics causing a large number of deaths.
For more information on these regulations, 22 Table of Contents see “Item 1. Business – Regulatory – Federal Initiatives – SEC Rules and Other Regulations relating to the Standard of Care Applicable to Investment Advisers and Broker-Dealers.” Additional disclosure and other requirements could adversely affect our business by causing us to reevaluate or change certain business practices or otherwise.
For more information on these regulations, see “Item 1. Business – Regulatory – Standard of Conduct Regulation.” Additional disclosure and other requirements related to standards of conduct could adversely affect our business by causing us to reevaluate or change certain business practices or otherwise.
Our financial results could be adversely affected by unanticipated performance issues, unforeseen liabilities, transaction-related charges, diversion of management time and resources to acquisition integration challenges or growth strategies, loss of key employees or customers, amortization of expenses related to intangibles, charges for impairment of long-term assets or goodwill and indemnifications.
Once completed, an acquired business may not perform as projected, expense and revenue synergies may not materialize as expected and costs associated with the integration may be greater than anticipated. 31 Table of Contents Our financial results could be adversely affected by unanticipated performance issues, unforeseen liabilities, transaction-related charges, diversion of management time and resources to acquisition integration challenges or growth strategies, loss of key employees or customers, amortization of expenses related to intangibles, charges for impairment of long-term assets or goodwill and indemnifications.
This charge also impacted our statutory capital in the fourth quarter of 2022. For more information on our annual assumption review, see “Critical Accounting Policies and Estimates – Annual Assumption Review” in MD&A. For information on impacts to our statutory capital, see “Liquidity and Capital Resources – Overview – Capital” in the MD&A.
For more information on our annual assumption review, including the most recent review conducted in the third quarter of 2023, see “Summary of Critical Accounting Estimates – Annual Assumption Review” in MD&A. For information on impacts to our statutory capital, see “Liquidity and Capital Resources – Overview – Capital” in the MD&A.
We rely on various internal processes and controls to protect the confidentiality of personal information that is accessible to, or in the possession of, our employees and our associates, including service providers, distribution partners, independent agents and others.
Although we rely on various internal processes and controls to protect the confidentiality of personal information that is accessible to, or in the possession of, our employees and our associates, including service providers, distribution partners, independent agents and others, a breach in the security of our information technology systems, a breach in the security of our associate’s information technology systems, or intentional or unintentional actions by an employee or associate could result in the disclosure or misappropriation of individuals’ personal information.
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and corresponding global initiatives, including the European Market Infrastructure Regulation implemented in 2012, imposed significant changes to the regulation of derivatives transactions, which we use to mitigate many types of risk in our business.
The Dodd-Frank Act, and corresponding global initiatives, including the European Market Infrastructure Regulation implemented in 2012, imposed significant changes to the regulation of derivatives transactions, which we use to mitigate many types of risk in our business. The European Market Infrastructure Regulation and matching U.K. rules impose initial margin requirements that largely correspond to the requirements of the Dodd-Frank Act.
Estimates and assumptions we make in connection with hedging activities may fail to reflect or correspond to our actual long-term exposure from our guarantees. 20 Table of Contents Legislative, Regulatory and Tax Our businesses are heavily regulated and changes in regulation and in supervisory and enforcement policies may affect our insurance subsidiary capital requirements, reduce our profitability, limit our growth or otherwise adversely affect our business, results of operations and financial condition.
Legislative, Regulatory and Tax Our businesses are heavily regulated and changes in regulation and in supervisory and enforcement policies may affect our insurance subsidiary capital requirements, reduce our profitability, limit our growth or otherwise adversely affect our business, results of operations and financial condition.
Substantial legal liability in these or future legal or regulatory actions could have a material financial effect or cause significant harm to our reputation, which in turn could materially harm our business prospects. See Note 13 for a description of legal and regulatory proceedings and actions.
In certain of these matters, the plaintiffs are seeking large and/or indeterminate amounts, including punitive or exemplary damages. Substantial legal liability in these or future legal or regulatory actions could have a material financial effect or cause significant harm to our reputation, which in turn could materially harm our business prospects.
The amount of collateral we may be required to post under these agreements may increase under certain circumstances, which could adversely affect our liquidity. In addition, under the terms of some of our transactions, we may be required to make payments to our counterparties related to any decline in the market value of the specified assets.
The amount of collateral we may be required to post under these agreements may increase under certain circumstances, which could adversely affect our liquidity.
It is possible that future accounting standards we are required to adopt could change the current accounting treatment that we apply to the consolidated financial statements and that such changes could have a material adverse effect on our financial condition and results of operations. 23 Table of Contents Specifically, in August 2018, the FASB released Accounting Standards Update 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts.
It is possible that future accounting standards we are required to adopt could change the current accounting treatment that we apply to the consolidated financial statements and that such changes could have a material adverse effect on our financial condition and results of operations. In addition, our domestic insurance subsidiaries are subject to SAP and specific state insurance regulations.
If we were forced to sell certain of our assets in the current market, there can be no assurance that we would be able to sell them for the prices at which we have recorded them, and we might be forced to sell them at significantly lower prices. 30 Table of Contents The amount and timing of income from certain investments can be uneven, and their valuations infrequent or volatile, which can impact the amount of income we record or lead to lower than expected returns, and thereby adversely impact our earnings.
If we were forced to sell certain of our assets in the current market, there can be no assurance that we would be able to sell them for the prices at which we have recorded them, and we might be forced to sell them at significantly lower prices.
We are, and in the future may be, subject to legal and regulatory actions in the ordinary course of our business. Pending legal and regulatory actions include proceedings relating to aspects of our businesses and operations that are specific to us and proceedings that are typical of the businesses in which we operate.
Pending legal and regulatory actions include proceedings relating to aspects of our businesses and operations that are specific to us and proceedings that are typical of the businesses in which we operate. Some of these legal proceedings have been brought on behalf of various alleged classes of complainants.

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Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−0 removed0 unchanged
Biggest changeWe owned or leased 0.3 million square feet of office space in Omaha, Nebraska, 0.2 million square feet of office space in Atlanta, Georgia, and 0.1 million square feet in Dover, New Hampshire, primarily for our Group Protection segment. An additional 0.3 million square feet of office space is leased in other U.S. cities for branch offices.
Biggest changeWe owned 0 .8 million square feet of office space in Greensboro, North Carolina, primarily for our Life Insurance segment. We owned or leased 0.3 million square feet of office space in Omaha, Nebraska, 0.2 million square feet of office space in Atlanta, Georgia, and 0.1 million square feet in Dover, New Hampshire, primarily for our Group Protection segment.
Item 2. Pr operties As of December 31, 2022, LNC and our subsidiaries owned or leased 2.5 million square feet of office and other space. We leased less than 0.1 million square feet of office space in Philadelphia, Pennsylvania, which includes space for LFN.
Item 2. Properties As of December 31, 2023, LNC and our subsidiaries owned or leased 2 .5 million square feet of office and other space. We leased less than 0.1 million square feet of office space in Philadelphia, Pennsylvania, which includes space for LFN.
We leased 0.2 million square feet of office space in Radnor, Pennsylvania, for our corporate center and for LFD. We leased 0.6 million square feet of office space in Fort Wayne, Indiana, primarily for our Annuities and Retirement Plan Services segments. We owned 0.8 million square feet of office space in Greensboro, North Carolina, primarily for our Life Insurance segment.
We leased 0.2 million square feet of office space in Radnor, Pennsylvania, for our corporate center and for LFD. We leased 0.6 million square feet of office space in Fort Wayne, Indiana, primarily for our Annuities and Retirement Plan Services segments.
This discussion regarding properties does not include information on field offices and investment properties.
An additional 0.3 million square feet of office space is leased in other U.S. cities for branch offices. This discussion regarding properties does not include information on field offices and investment properties.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

14 edited+6 added−2 removed3 unchanged
Biggest changeExecutive Vice President, Chief Information Officer and Head of Administrative Services (January 2016 - July 2018). Senior Vice President, Head of Technology (March 2015 - December 2015). Senior Vice President, Head of Shared Services and Technology (January 2010 - March 2015). (1) Age shown is based on the officer’s age as of February 13, 2023.
Biggest changeSenior Vice President, Head of Technology (March 2015 - December 2015). Senior Vice President, Head of Shared Services and Technology (January 2010 - March 2015). Sean N. Woodroffe 60 Executive Vice President and Chief People, Culture and Communications Officer (since May 2023). Senior Executive Vice President and Chief People Officer (March 2018 - April 2023), TIAA, a financial service provider.
For the quarter ended December 31, 2022, there were no shares purchased as part of publicly announced plans or programs. (2) On November 10, 2021, our Board of Directors authorized an increase in our securities repurchase authorization, bringing the total aggregate repurchase authorization to $1.5 billion. As of December 31, 2022, our remaining security repurchase authorization was $714 million.
For the quarter ended December 31, 2023, there were no shares purchased as part of publicly announced plans or programs. (2) On November 10, 2021, our Board of Directors authorized an increase in our securities repurchase authorization, bringing the total aggregate repurchase authorization to $1.5 billion. As of December 31, 2023, our remaining security repurchase authorization was $714 million.
Financial Statements and Supplementary Data.” For information on securities authorized for issuance under equity compensation plans, see “Part III – Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters – Securities Authorized for Issuance Under Equity Compensation Plans,” which is incorporated herein by reference.
Financial Statements and Supplementary Data .” For information on securities authorized for issuance under equity compensation plans, see “ Part III – Item 12 . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters – Securities Authorized for Issuance Under Equity Compensation Plans,” which is incorporated herein by reference.
(b) Not Applicable (c) Issuer Purchases of Equity Securities The following summarizes purchases of equity securities by the issuer during the quarter ended December 31, 2022 (dollars in millions, except per share data): (c) Total Number (d) Approximate Dollar (a) Total of Shares Value of Shares Number (b) Average Purchased as Part of that May Yet Be of Shares Price Paid Publicly Announced Purchased Under the Period Purchased (1) per Share Plans or Programs (2) Plans or Programs (2) 10/1/22 – 10/31/22 - $ - - $ 714 11/1/22 – 11/30/22 - - - 714 12/1/22 – 12/31/22 - - - 714 (1) Of the total number of shares purchased, no shares were received in connection with the exercise of stock options and related taxes.
(b) Not Applicable (c) Issuer Purchases of Equity Securities The following summarizes purchases of equity securities by the issuer during the quarter ended December 31, 2023 (dollars in millions, except per share data): (c) Total Number (d) Approximate Dollar (a) Total of Shares Value of Shares Number (b) Average Purchased as Part of that May Yet Be of Shares Price Paid Publicly Announced Purchased Under the Period Purchased (1) per Share Plans or Programs (2) Plans or Programs (2) 10/1/23 – 10/31/23 – $ – – $ 714 11/1/23 – 11/30/23 – – – 714 12/1/23 – 12/31/23 – – – 714 (1) Of the total number of shares purchased, no shares were received in connection with the exercise of stock options and related taxes.
Until May 2022, Executive Vice President (since August 2012), Head of Enterprise Risk (since 2019) and Head of Annuity Solutions Group (since March 2021). Chief Investment Officer (August 2012 - November 2021). Craig T. Beazer 55 Executive Vice President and General Counsel (since December 2020).
Until May 2022, Executive Vice President (since August 2012), Head of Enterprise Risk (since 2019) and Head of Annuity Solutions Group (since March 2021). Chief Investment Officer (August 2012 - November 2021). Craig T. Beazer 56 Executive Vice President and General Counsel (since December 2020).
For potential restrictions on our ability to pay dividends, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Restrictions on Subsidiaries’ Dividends” and Note 19 in the accompanying notes to the consolidated financial statements presented in “Item 8.
For potential restrictions on our ability to pay dividends, see “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Restrictions on Subsidiaries’ Dividends ” and Note 19 in the accompanying notes to the consolidated financial statements presented in “ Item 8.
M arket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Stock Market and Dividend Information Our common stock is traded on the New York stock exchange under the symbol LNC. As of February 13, 2023, the number of shareholders of record of our common stock was 5,424.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Stock Market and Dividend Information Our common stock is traded on the New York stock exchange under the symbol LNC. As of February 16, 2024, the number of shareholders of record of our common stock was 5,260.
Item 4. Mine Safety Disclosures Not applicable. 32 Table of Contents Information About our Exec utive Officers Our Executive Officers as of February 13, 2023, were as follows: Name Age (1) Position with LNC and Business Experience During the Past Five Years Ellen G. Cooper 58 President, Chief Executive Officer and Director (since May 2022).
Item 4. Mine Safety Disclosures Not applicable. 36 Table of Contents Information About our Executive Officers Our Executive Officers as of February 16, 2024, were as follows: Name Age (1) Position with LNC and Business Experience During the Past Five Years Ellen G. Cooper 59 President, Chief Executive Officer and Director (since May 2022).
Our stock repurchases may be effected from time to time through open market purchases or in privately negotiated transactions and may be made pursuant to an accelerated share repurchase agreement or Rule 10b5-1 plan.
Our stock repurchases may be effected from time to time through open market purchases or in privately negotiated transactions and may be made pursuant to an accelerated share repurchase agreement or Rule 10b5-1 plan. Item 6. [Reserved] 38 Table of Contents Item 7.
Bronchetti 43 Executive Vice President (since May 2022), Chief Investment Officer (since November 2021) and Head of Risk & Sustainability (since May 2022), and President, Lincoln Investment Advisors Corporation (2) (since March 2016). Head of Corporate Fixed Income (February 2020 - November 2021). Managing Director, Head of Manager Selection & Research (July 2015 - March 2016). Randal J.
Bronchetti 44 Executive Vice President (since May 2022), Chief Investment Officer (since November 2021) and Head of Hedging (since May 2023) and Sustainability (since May 2022), and President, Lincoln Investment Advisors Corporation (2) (since March 2016). Head of Risk (May 2022 - May 2023). Head of Corporate Fixed Income (February 2020 - November 2021).
President and Chief Executive Officer (April 2021 - August 2022), Versant Health, a managed vision care company. Executive Vice President and Head of Global Employee Benefits (January 2016 - March 2021), MetLife, Inc. Kenneth S. Solon 62 Executive Vice President, Chief Information Officer, Head of IT and Digital (since July 2018) and Head of Enterprise Services (since March 2021).
Executive Vice President and Head of Global Employee Benefits (January 2016 - March 2021), MetLife, Inc. Kenneth S. Solon 63 Executive Vice President, Chief Information Officer, Head of IT and Digital (since July 2018) and Head of Enterprise Services (since March 2021). Executive Vice President, Chief Information Officer and Head of Administrative Services (January 2016 - July 2018).
Kennedy 56 Executive Vice President and President, LFD (2) (since March 2021) and Head of Brand (since March 2022 ). Senior Vice President and Head of Retirement Solutions Distribution for LFD (September 2009 - March 2021). Jennifer Warne Krow 48 Executive Vice President and Chief People Officer (since June 2021).
John C. Kennedy 57 Executive Vice President (since March 2021) and Chief Distribution and Brand Officer (assuming the role of head of distribution in March 2021 and the role of head of brand in March 2022), and President, LFD (2) (since March 2021). Senior Vice President and Head of Retirement Solutions Distribution for LFD (September 2009 - March 2021).
(3) Matthew Grove 47 Executive Vice President and Head of Individual Life & Annuities and Lincoln Financial Network (since July 2022). Chief Executive Officer and President (January 2021 - July 2022), Resolution Life USA, a global life insurance company. Co-Chief Operating Officer and Executive Vice President (2017 - 2020), New York Life Insurance Company. John C.
Managing Director, Head of Manager Selection & Research (July 2015 - March 2016). Matthew Grove 48 Executive Vice President and President of Retail Solutions (since July 2022). Chief Executive Officer and President (January 2021 - July 2022), Resolution Life USA, a global life insurance company. Co-Chief Operating Officer and Executive Vice President (2017 - 2020), New York Life Insurance Company.
Senior Vice President, Chief Talent Officer and Head of HR Business Partnering (March 2011 - June 2021). Christopher Neczypor 42 Executive Vice President and Chief Strategy Officer (since November 2021). Senior Vice President and Head of Investment Risk and Strategy (April 2018 - November 2021). (3) James Reid 56 Executive Vice President and President, Workplace Solutions (since August 2022).
Christopher Neczypor 43 Executive Vice President and Chief Financial Officer (since February 2023). Until February 2023, Executive Vice President and Chief Strategy Officer (since November 2021). Senior Vice President and Head of Alternatives, Structured Credit and Investment Strategy (2020 - November 2021). Senior Vice President and Head of Investment Risk and Strategy (April 2018 - 2020). Andrew D.
Removed
Freitag 60 Executive Vice President and Chief Financial Officer (since January 2011). Head of Individual Life (June 2017 - July 2022). Senior Vice President, Chief Risk Officer (2007 - December 2010). Senior Vice President, Chief Risk Officer and Treasurer (2007 - October 2009).
Added
Rallis 61 Executive Vice President and Chief Risk Officer (since May 2023). Executive Vice President and Global Chief Actuary (July 2012 - May 2023), MetLife, Inc. James Reid 57 Executive Vice President and President, Workplace Solutions (since August 2022). President and Chief Executive Officer (April 2021 - August 2022), Versant Health, a managed vision care company.
Removed
(2) Denotes an affiliate of LNC. (3) Effective February 17, 2023, Mr. Neczypor will succeed Mr. Freitag as Chief Financial Officer and Mr. Freitag will no longer be an Executive Officer of the Company. 33 Table of Contents PART II Item 5 .
Added
Senior Vice President and Head of HR, Client Services & Technology (July 2017 - February 2018), TIAA. (1) Age shown is based on the officer’s age as of February 16, 2024. (2) Denotes an affiliate of LNC. 37 Table of Contents PART II Item 5 .
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations Page Forward-Looking Statements – Cautionary Language 40 Introduction 41 Executive Summary 41 Summary of C ritical Accounting Estimates 43 Results of Consolidated Operations 54 Results of Annuities 55 Results of Life Insurance 60 Results of Group Protection 66 Results of Retirement Plan Services 69 Results of Other Operations 73 Consolidated Investments 75 Reinsurance 87 Liquidity and Capital Resources 88 39 Table of Contents The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the financial condition as of December 31, 2023, compared with December 31, 2022, and the results of operations in 2023 compared to 2022 of Lincoln National Corporation and its consolidated subsidiaries.
Added
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “ Part II – Item 7.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K/A for the year ended December 31, 2022, as updated by our Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on May 22, 2023.
Added
Unless otherwise stated or the context otherwise requires, “LNC,” “Company,” “we,” “our” or “us” refers to Lincoln National Corporation and its consolidated subsidiaries. The MD&A is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and the accompanying notes to the consolidated financial statements (“Notes”) presented in “

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

361 edited+195 added−722 removed264 unchanged
Biggest changePhiladelphia, Pennsylvania February 16, 2023 107 Table of Contents LINCOLN NATIONAL CORPORATION C ONSOLIDATED BALANCE SHEETS (in millions, except share data) As of December 31, 2022 2021 ASSETS Investments: Fixed maturity available-for-sale securities, at fair value (amortized cost: 2022 - $ 111,707 ; 2021 - $ 105,177 ; allowance for credit losses: 2022 - $ 22 ; 2021 - $ 19 ) $ 99,736 $ 118,746 Trading securities 3,498 4,482 Equity securities 427 318 Mortgage loans on real estate, net of allowance for credit losses (portion at fair value: 2022 - $ 487 ; 2021 - $ 739 ) 18,301 17,991 Policy loans 2,359 2,364 Derivative investments 3,736 5,437 Other investments 3,739 4,292 Total investments 131,796 153,630 Cash and invested cash 3,343 2,612 Deferred acquisition costs and value of business acquired 13,588 6,081 Accrued investment income 1,253 1,189 Reinsurance recoverables, net of allowance for credit losses 19,882 20,295 Goodwill 1,144 1,778 Other assets 20,895 19,133 Separate account assets 143,536 182,583 Total assets $ 335,437 $ 387,301 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities Future contract benefits $ 42,151 $ 41,030 Other contract holder funds 120,800 111,702 Short-term debt 500 300 Long-term debt 5,955 6,325 Payables for collateral on investments 6,712 8,946 Other liabilities 11,682 16,143 Separate account liabilities 143,536 182,583 Total liabilities 331,336 367,029 Contingencies and Commitments (See Note 13) Stockholders’ Equity Preferred stock – 10,000,000 shares authorized: Series C preferred stock – 20,000 shares authorized, issued and outstanding as of December 31, 2022 493 - Series D preferred stock – 20,000 shares authorized, issued and outstanding as of December 31, 2022 493 - Common stock – 800,000,000 shares authorized; 169,220,511 and 177,193,515 shares issued and outstanding as of December 31, 2022, and December 31, 2021, respectively 4,544 4,735 Retained earnings 6,239 9,096 Accumulated other comprehensive income (loss) ( 7,668 ) 6,441 Total stockholders’ equity 4,101 20,272 Total liabilities and stockholders’ equity $ 335,437 $ 387,301 ‎ See accompanying Notes to Consolidated Financial Statements 108 Table of Contents LINCOLN NATIONAL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in millions, except per share data) For the Years Ended December 31, 2022 2021 2020 Revenues Insurance premiums $ 6,087 $ 5,617 $ 5,372 Fee income 6,054 6,887 6,371 Net investment income 5,511 6,115 5,510 Realized gain (loss) 336 ( 212 ) ( 513 ) Amortization of deferred gain on business sold through reinsurance 74 46 41 Other revenues 722 777 658 Total revenues 18,784 19,230 17,439 Expenses Interest credited 2,870 2,915 2,923 Benefits 12,546 8,529 8,677 Commissions and other expenses 5,095 5,791 5,064 Interest and debt expense 283 270 284 Spark program expense 167 87 68 Impairment of intangibles 634 - - Total expenses 21,595 17,592 17,016 Income (loss) before taxes ( 2,811 ) 1,638 423 Federal income tax expense (benefit) ( 584 ) 233 ( 76 ) Net income (loss) ( 2,227 ) 1,405 499 Other comprehensive income (loss), net of tax: Unrealized investment gains (losses) ( 14,030 ) ( 2,535 ) 3,192 Foreign currency translation adjustment ( 20 ) ( 2 ) 5 Funded status of employee benefit plans ( 59 ) 47 61 Total other comprehensive income (loss), net of tax ( 14,109 ) ( 2,490 ) 3,258 Comprehensive income (loss) $ ( 16,336 ) $ ( 1,085 ) $ 3,757 Net Income (Loss) Per Common Share Basic $ ( 13.02 ) $ 7.50 $ 2.58 Diluted $ ( 13.10 ) $ 7.43 $ 2.56 Cash Dividends Declared Per Common Share $ 1.80 $ 1.71 $ 1.62 ‎ See accompanying Notes to Consolidated Financial Statements 109 Table of Contents LINCOLN NATIONAL CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions) For the Years Ended December 31, 2022 2021 2020 Preferred Stock Balance as of beginning-of-year $ - $ - $ - Issuance of Series C preferred stock 493 - - Issuance of Series D preferred stock 493 - - Balance as of end-of-year 986 - - Common Stock Balance as of beginning-of-year 4,735 5,082 5,162 Stock compensation/issued for benefit plans 40 85 48 Retirement of common stock/cancellation of shares ( 231 ) ( 432 ) ( 128 ) Balance as of end-of-year 4,544 4,735 5,082 Retained Earnings Balance as of beginning-of-year 9,096 8,686 8,854 Cumulative effect from adoption of new accounting standards - - ( 203 ) Net income (loss) ( 2,227 ) 1,405 499 Retirement of common stock ( 319 ) ( 673 ) ( 147 ) Common stock dividends declared ( 311 ) ( 322 ) ( 317 ) Balance as of end-of-year 6,239 9,096 8,686 Accumulated Other Comprehensive Income (Loss) Balance as of beginning-of-year 6,441 8,931 5,673 Other comprehensive income (loss), net of tax ( 14,109 ) ( 2,490 ) 3,258 Balance as of end-of-year ( 7,668 ) 6,441 8,931 Total stockholders’ equity as of end-of-year $ 4,101 $ 20,272 $ 22,699 ‎ See accompanying Notes to Consolidated Financial Statements 110 Table of Contents LINCOLN NATIONAL CORPORATION CONSOLID ATED STATEMENTS OF CASH FLOWS (in millions) For the Years Ended December 31, 2022 2021 2020 Cash Flows from Operating Activities Net income (loss) $ ( 2,227 ) $ 1,405 $ 499 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Realized (gain) loss ( 336 ) 212 513 Sales and maturities (purchases) of trading securities, net 300 ( 108 ) 266 Amortization of deferred gain on business sold through reinsurance ( 74 ) ( 46 ) ( 41 ) Impairment of intangibles 634 - - Change in: Deferred acquisition costs, value of business acquired, deferred sales inducements and deferred front-end loads deferrals and interest, net of amortization 115 315 48 Premiums and fees receivable ( 54 ) ( 93 ) ( 21 ) Accrued investment income ( 67 ) 16 ( 84 ) Insurance liabilities and reinsurance-related balances 5,956 ( 1,954 ) ( 699 ) Accrued expenses ( 89 ) 389 ( 18 ) Federal income tax accruals ( 530 ) 232 ( 98 ) Other 405 ( 217 ) 169 Net cash provided by (used in) operating activities 4,033 151 534 Cash Flows from Investing Activities Purchases of available-for-sale securities and equity securities ( 14,813 ) ( 16,893 ) ( 16,761 ) Sales of available-for-sale securities and equity securities 2,297 2,268 1,426 Maturities of available-for-sale securities 5,453 9,621 5,354 Purchases of alternative investments ( 664 ) ( 757 ) ( 396 ) Sales and repayments of alternative investments 446 377 171 Issuance of mortgage loans on real estate ( 2,503 ) ( 3,084 ) ( 1,800 ) Repayment and maturities of mortgage loans on real estate 2,255 1,881 1,154 Repayment (issuance) of policy loans, net 5 62 50 Net change in collateral on investments, derivatives and related settlements ( 4,071 ) 3,261 1,474 Other ( 48 ) ( 303 ) ( 153 ) Net cash provided by (used in) investing activities ( 11,643 ) ( 3,567 ) ( 9,481 ) Cash Flows from Financing Activities Payment of long-term debt, including current maturities ( 300 ) - ( 1,096 ) Issuance of long-term debt, net of issuance costs 296 - 1,289 Payment related to modification or early extinguishment of debt - ( 8 ) ( 13 ) Payment related to sale-leaseback transactions ( 70 ) ( 59 ) ( 47 ) Proceeds from certain financing arrangements 186 159 109 Deposits of fixed account values, including the fixed portion of variable 15,229 12,639 14,034 Withdrawals of fixed account values, including the fixed portion of variable ( 6,913 ) ( 6,607 ) ( 6,113 ) Transfers from (to) separate accounts, net ( 195 ) ( 340 ) 528 Common stock issued for benefit plans ( 16 ) 20 ( 7 ) Issuance of preferred stock, net of issuance costs 986 - - Repurchase of common stock ( 550 ) ( 1,105 ) ( 275 ) Dividends paid to common stockholders ( 310 ) ( 319 ) ( 311 ) Other ( 2 ) ( 60 ) ( 6 ) Net cash provided by (used in) financing activities 8,341 4,320 8,092 Net increase (decrease) in cash, invested cash and restricted cash 731 904 ( 855 ) Cash, invested cash and restricted cash as of beginning-of-year 2,612 1,708 2,563 Cash, invested cash and restricted cash as of end-of-year $ 3,343 $ 2,612 $ 1,708 See accompanying Notes to Consolidated Financial Statements 111 Table of Contents LINCOLN NATIONAL CORPORATION NOTES TO CON SOLIDATED FINANCIAL STATEMENTS 1.
Biggest changePhiladelphia, Pennsylvania February 22, 2024 106 Table of Contents LINCOLN NATIONAL CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except share data) As of December 31, 2023 2022 ASSETS Investments: Fixed maturity available-for-sale securities, at fair value (amortized cost: 2023 - $97,433 ; 2022 - $111,707; allowance for credit losses: 2023 - $19 ; 2022 - $22) $ 88,738 $ 99,736 Trading securities 2,359 3,498 Equity securities 306 427 Mortgage loans on real estate, net of allowance for credit losses (portion at fair value: 2023 - $288; 2022 - $487) 18,963 18,301 Policy loans 2,476 2,359 Derivative investments 6,474 3,594 Other investments 5,015 3,739 Total investments 124,331 131,654 Cash and invested cash 3,365 3,343 Deferred acquisition costs, value of business acquired and deferred sales inducements 12,397 12,235 Reinsurance recoverables, net of allowance for credit losses 29,843 19,953 Deposit assets, net of allowance for credit losses 28,789 11,628 Market risk benefit assets 3,894 2,807 Accrued investment income 1,082 1,253 Goodwill 1,144 1,144 Other assets 9,311 6,778 Separate account assets 158,257 143,536 Total assets $ 372,413 $ 334,331 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities Policyholder account balances $ 120,737 $ 114,435 Future contract benefits 39,864 38,826 Funds withheld reinsurance liabilities 17,641 5,740 Market risk benefit liabilities 1,716 2,078 Deferred front-end loads 5,901 5,091 Payables for collateral on investments 8,105 6,712 Short-term debt 250 500 Long-term debt 5,699 5,955 Other liabilities 7,350 6,356 Separate account liabilities 158,257 143,536 Total liabilities 365,520 329,229 Contingencies and Commitments (See Note 18) Stockholders’ Equity Preferred stock – 10,000,000 shares authorized: Series C preferred stock – 20,000 shares authorized, issued and outstanding as of December 31, 2023 493 493 Series D preferred stock – 20,000 shares authorized, issued and outstanding as of December 31, 2023 493 493 Common stock – 800,000,000 shares authorized; 169,666,137 and 169,220,511 shares issued and outstanding as of December 31, 2023, and December 31, 2022, respectively 4,605 4,544 Retained earnings 4,778 5,924 Accumulated other comprehensive income (loss) (3,476) (6,352) Total stockholders’ equity 6,893 5,102 Total liabilities and stockholders’ equity $ 372,413 $ 334,331 See accompanying Notes to Consolidated Financial Statements 107 Table of Contents LINCOLN NATIONAL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in millions, except per share data) For the Years Ended December 31, 2023 2022 2021 Revenues Insurance premiums $ 3,672 $ 6,087 $ 5,617 Fee income 5,467 5,603 6,039 Net investment income 5,879 5,515 6,111 Realized gain (loss) (4,311) 840 (867) Amortization of deferred gain (loss) on business sold through reinsurance 38 42 38 Other revenues 900 723 777 Total revenues 11,645 18,810 17,715 Expenses Benefits 6,138 8,479 8,503 Interest credited 3,248 2,877 2,929 Market risk benefit (gain) loss (2,264) (3,246) (3,753) Policyholder liability remeasurement (gain) loss (152) 2,766 (183) Commissions and other expenses 5,339 5,125 5,219 Interest and debt expense 331 283 270 Spark program expense 153 167 87 Impairment of intangibles – 634 – Total expenses 12,793 17,085 13,072 Income (loss) before taxes (1,148) 1,725 4,643 Federal income tax expense (benefit) (396) 367 865 Net income (loss) (752) 1,358 3,778 Other comprehensive income (loss), net of tax: Unrealized investment gain (loss) 3,715 (18,059) (3,287) Market risk benefit non-performance risk gain (loss) (671) (210) (923) Policyholder liability discount rate remeasurement gain (loss) (160) 2,012 591 Foreign currency translation adjustment 8 (20) (2) Funded status of employee benefit plans (16) (59) 47 Total other comprehensive income (loss), net of tax 2,876 (16,336) (3,574) Comprehensive income (loss) $ 2,124 $ (14,978) $ 204 Net Income (Loss) Per Common Share Basic $ (4.92) $ 7.93 $ 20.17 Diluted (4.92) 7.78 19.96 Cash Dividends Declared Per Preferred Share Series C preferred stock $ 1,792.19 $ – $ – Series D preferred stock 2,306.25 – – Cash Dividends Declared Per Common Share $ 1.80 $ 1.80 $ 1.71 See accompanying Notes to Consolidated Financial Statements 108 Table of Contents LINCOLN NATIONAL CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions) For the Years Ended December 31, 2023 2022 2021 Preferred Stock Balance as of beginning-of-year $ 986 $ – $ – Issuance of Series C preferred stock – 493 – Issuance of Series D preferred stock – 493 – Balance as of end-of-year 986 986 – Common Stock Balance as of beginning-of-year 4,544 4,735 5,082 Stock compensation/issued for benefit plans 61 40 85 Retirement of common stock/cancellation of shares – (231) (432) Balance as of end-of-year 4,605 4,544 4,735 Retained Earnings Balance as of beginning-of-year 5,924 5,196 8,686 Cumulative effect from adoption of new accounting standards – – (6,273) Net income (loss) (752) 1,358 3,778 Retirement of common stock – (319) (673) Preferred stock dividends declared (82) – – Common stock dividends declared (312) (311) (322) Balance as of end-of-year 4,778 5,924 5,196 Accumulated Other Comprehensive Income (Loss) Balance as of beginning-of-year (6,352) 9,984 8,931 Cumulative effect from adoption of new accounting standards – – 4,627 Other comprehensive income (loss), net of tax 2,876 (16,336) (3,574) Balance as of end-of-year (3,476) (6,352) 9,984 Total stockholders’ equity as of end-of-year $ 6,893 $ 5,102 $ 19,915 See accompanying Notes to Consolidated Financial Statements 109 Table of Contents LINCOLN NATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) For the Years Ended December 31, 2023 2022 2021 Cash Flows from Operating Activities Net income (loss) $ (752) $ 1,358 $ 3,778 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Realized (gain) loss 4,311 (840) 867 Market risk benefit (gain) loss (2,264) (3,246) (3,753) Sales and maturities (purchases) of trading securities, net 1,301 300 (87) Amortization of deferred gain (loss) on business sold through reinsurance (38) (42) (38) Impairment of intangibles – 634 – Net operating cash payments related to closing Fortitude Re reinsurance transaction (1,438) – – Change in: Deferred acquisition costs, value of business acquired, deferred sales inducements and deferred front-end loads 637 488 475 Accrued investment income 4 (67) 16 Insurance liabilities and reinsurance-related balances (3,681) 4,419 (2,337) Accrued expenses 109 (91) 399 Federal income tax accruals (396) 421 864 Other 133 275 (401) Net cash provided by (used in) operating activities (2,074) 3,609 (217) Cash Flows from Investing Activities Purchases of available-for-sale securities and equity securities (11,131) (14,813) (16,915) Sales of available-for-sale securities and equity securities 4,013 2,297 2,268 Maturities of available-for-sale securities 5,670 5,453 9,621 Purchases of alternative investments (630) (664) (757) Sales and repayments of alternative investments 111 446 377 Issuance of mortgage loans on real estate (1,946) (2,507) (3,079) Repayment and maturities of mortgage loans on real estate 1,268 2,255 1,881 Repayment (issuance) of policy loans, net (119) 5 62 Net change in collateral on investments, certain derivatives and related settlements (260) (4,070) 3,261 Other (310) (48) (303) Net cash provided by (used in) investing activities (3,334) (11,646) (3,584) Cash Flows from Financing Activities Payment of long-term debt, including current maturities (500) (300) – Issuance of long-term debt, net of issuance costs – 296 – Payment related to modification or early extinguishment of debt – – (8) Payment related to sale-leaseback transactions (79) (70) (59) Proceeds from certain financing arrangements 86 186 159 Payment related to certain financing arrangements (49) – – Net financing cash proceeds related to closing Fortitude Re reinsurance transaction 1,246 – – Deposits of fixed account balances 16,404 16,203 13,426 Withdrawals of fixed account balances (10,660) (7,674) (7,174) Transfers from (to) separate accounts, net (624) 19 (175) Common stock issued for benefit plans (7) (16) 20 Issuance of preferred stock, net of issuance costs – 986 – Repurchase of common stock – (550) (1,105) Dividends paid to preferred stockholders (82) – – Dividends paid to common stockholders (305) (310) (319) Other – (2) (60) Net cash provided by (used in) financing activities 5,430 8,768 4,705 Net increase (decrease) in cash, invested cash and restricted cash 22 731 904 Cash, invested cash and restricted cash as of beginning-of-year 3,343 2,612 1,708 Cash, invested cash and restricted cash as of end-of-year $ 3,365 $ 3,343 $ 2,612 See accompanying Notes to Consolidated Financial Statements 110 Table of Contents LINCOLN NATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.
Management considers the following as part of the evaluation: The current economic environment and market conditions; Our business strategy and current business plans; The nature and type of security, including expected maturities and exposure to general credit, liquidity, market and interest rate risk; Our analysis of data from financial models and other internal and industry sources to evaluate the current effectiveness of our hedging and overall risk management strategies; The current and expected timing of contractual maturities of our assets and liabilities, expectations of prepayments on investments and expectations for surrenders and withdrawals of life insurance policies and annuity contracts; The capital risk limits approved by management; and Our current financial condition and liquidity demands.
Management considers the following as part of the evaluation: • The current economic environment and market conditions; • Our business strategy and current business plans; • The nature and type of security, including expected maturities and exposure to general credit, liquidity, market and interest rate risk; • Our analysis of data from financial models and other internal and industry sources to evaluate the current effectiveness of our hedging and overall risk management strategies; • The current and expected timing of contractual maturities of our assets and liabilities, expectations of prepayments on investments and expectations for surrenders and withdrawals of annuity contracts and life insurance policies; • The capital risk limits approved by management; and • Our current financial condition and liquidity demands.
Benefits also include the change in reserves for life insurance products with secondary guarantee benefits, annuity products with guaranteed death and living benefits and certain annuities with life contingencies. For traditional life, group life and disability income products, benefits are recognized when incurred in a manner consistent with the related premium recognition policies.
Benefits also include the change in reserves for annuity products with guaranteed death and living benefits, certain annuities with life contingencies and life insurance products with secondary guarantee benefits. For traditional life, group life and disability income products, benefits are recognized when incurred in a manner consistent with the related premium recognition policies.
We issued a long-term senior note to the non-affiliated VIE in exchange for a corporate bond AFS security of like principal and duration that was assigned to one of our subsidiaries.
We issued a long-term senior note to the non-affiliated VIE in exchange for a corporate bond AFS security of like principal and duration that was assigned to one of our subsidiaries.
We issued a long-term senior note to the non-affiliated VIE in exchange for a corporate bond AFS security of like principal and duration that was assigned to one of our subsidiaries.
We issued a long-term senior note to the non-affiliated VIE in exchange for a corporate bond AFS security of like principal and duration that was assigned to one of our subsidiaries.
We have concluded that we are not the primary beneficiary of the non-affiliated VIE due to our lack of power over the activities that most significantly affect its economic performance as well as the extent of our obligation to absorb its losses.
We have concluded that we are not the primary beneficiary of the non-affiliated VIE due to our lack of power over the activities that most significantly affect its economic performance as well as the extent of our obligation to absorb its losses.
In addition, the terms of the senior note provide us with a set-off right with the corporate bond AFS security we purchased from the VIE; therefore, neither appears on the Consolidated Balance Sheets.
In addition, the terms of the senior note provide us with a set-off right with the corporate bond AFS security we purchased from the VIE; therefore, neither appears on the Consolidated Balance Sheets.
We have concluded that we are not the primary beneficiary of the non-affiliated VIE due to our lack of power over the activities that most significantly affect its economic performance as well as the extent of our obligation to absorb its losses.
We have concluded that we are not the primary beneficiary of the non-affiliated VIE due to our lack of power over the activities that most significantly affect its economic performance as well as the extent of our obligation to absorb its losses.
Our reinsurance operations were acquired by Swiss Re in December 2001 through a series of indemnity reinsurance transactions. As such, Swiss Re reinsured certain liabilities and obligations under the indemnity reinsurance agreements.
Swiss Re Our reinsurance operations were acquired by Swiss Re in December 2001 through a series of indemnity reinsurance transactions. As such, Swiss Re reinsured certain liabilities and obligations under the indemnity reinsurance agreements.
Regulatory and Litigation Matters Regulatory bodies, such as state insurance departments, the SEC, Financial Industry Regulatory Authority and other regulatory bodies regularly make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, laws governing the activities of broker-dealers, registered investment advisers and unclaimed property laws.
Regulatory and Litigation Matters Regulatory bodies, such as state insurance departments, the SEC, the Financial Industry Regulatory Authority and other regulatory bodies regularly make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, laws governing the activities of broker-dealers, registered investment advisers and unclaimed property laws.
Based on the assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with United States of America generally accepted accounting principles.
Based on the assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year due to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with United States of America generally accepted accounting principles.
Equity Market Contracts We use derivative instruments as part of our equity market risk management strategy that are economic hedges and include: Call Options Based on the S&P 500 ® Index and Other Indices We use call options to hedge the liability exposure on certain options in variable annuity, indexed variable annuity, fixed indexed annuity, IUL and VUL products.
Equity Market Contracts We use derivative instruments as part of our equity market risk management strategy that are economic hedges and include: Call Options Based on the S&P 500 ® Index and Other Indices We use call options to hedge the liability exposure on certain options in variable annuity, RILA, fixed indexed annuity, IUL and VUL products.
The committees are responsible for overseeing the implementation of various hedging strategies that are developed through the analysis of financial simulation models and other internal and industry sources. The resulting hedging strategies are incorporated into our overall risk management strategies. See Note 1 for a detailed discussion of the accounting treatment for derivative instruments.
The committees are responsible for overseeing the implementation of various hedging strategies that are developed through the analysis of financial simulation models and other internal and industry sources. The resulting hedging strategies are incorporated into our overall risk management strategies. See Note 1 for a discussion of the accounting treatment for derivative instruments.
Depending on the achievement level of performance measures pre-determined by the Compensation Committee for the three-year performance period, payouts could range from 0% to 200% of the target award for performance shares granted prior to 2021, 0% to 240% of the target award for performance shares granted in 2021 and 0% to 232% of the target award for performance shares granted in 2022.
Depending on the achievement level of performance measures pre-determined by the Compensation Committee for the three-year performance period, payouts could range from 0% to 200% of the target award for performance shares granted prior to 2021, 0% to 240% of the target award for performance shares granted in 2021 and 0% to 232% of the target award for performance shares granted in 2022 and 2023.
These premiums are recognized as revenue when due. Net Investment Income We earn investment income on the underlying general account investments supporting our fixed products less related expenses. Dividends and interest income, recorded in net investment income, are recognized when earned.
These insurance premiums are recognized as revenue when due. Net Investment Income We earn investment income on the underlying general account investments supporting our fixed products less related expenses. Dividends and interest income, recorded in net investment income, are recognized when earned.
Other Operations includes investments related to the excess capital in our insurance subsidiaries; benefit plan obligations; the results of certain disability income business; our run-off institutional pension business, the majority of which was sold on a group annuity basis; debt costs; Spark program expense; and other corporate investments. 185 Table of Contents Segment operating revenues and income (loss) from operations are internal measures used by our management and Board of Directors to evaluate and assess the results of our segments.
Other Operations includes investments related to the excess capital in our insurance subsidiaries; benefit plan obligations; the results of certain disability income business; our run-off institutional pension business, the majority of which was sold on a group annuity basis; debt costs; Spark program expense; and other corporate investments. 208 Table of Contents Segment operating revenues and income (loss) from operations are internal measures used by our management and Board of Directors to evaluate and assess the results of our segments.
As discussed further below, we believe the unrealized loss position as of December 31, 2022, did not require an impairment recognized in earnings as (i) we did not intend to sell these fixed maturity AFS securities; (ii) it is not more likely than not that we will be required to sell the fixed maturity AFS securities before recovery of their amortized cost basis; and (iii) the difference in the fair value compared to the amortized cost was due to factors other than credit loss.
As discussed further below, we believe the unrealized loss position as of December 31, 2023, did not require an impairment recognized in earnings as (i) we did not intend to sell these fixed maturity AFS securities; (ii) it is not more likely than not that we will be required to sell the fixed maturity AFS securities before recovery of their amortized cost basis; and (iii) the difference in the fair value compared to the amortized cost was due to factors other than credit loss.
Such acquisition costs are capitalized in the period they are incurred and primarily include commissions, certain bonuses, portion of total compensation and benefits of certain employees involved in the acquisition process and medical and inspection fees.
Such acquisition costs are capitalized in the period they are incurred and primarily include commissions, certain bonuses, a portion of total compensation and benefits of certain employees involved in the acquisition process and medical and inspection fees.
We may, at our option, redeem the Series D Preferred Stock, (a) in whole but not in part, at any time prior to December 1, 2027, within 90 days after the occurrence of a rating agency event at a redemption price equal to 102 % of the stated amount of a share of Series D Preferred Stock (initially, $ 25,500 per share of Series D Preferred Stock, equivalent to $ 25.50 per Depositary Share), plus an amount equal to any dividends per share that have accrued but not been declared and paid for the then-current dividend period to, but excluding, such redemption date, and (b)(i) in whole but not in part, at any time prior to December 1, 2027, within 90 days after the occurrence of a regulatory capital event; or (ii) in whole or in part, at any time or from time to time on or after December 1, 2027, in each case, at a redemption price equal to the stated amount of a share of Series D Preferred Stock (initially, $ 25,000 per share of Series D Preferred Stock, equivalent to $ 25.00 per Depositary Share), plus an amount equal to any dividends per share that have accrued but not been declared and paid for the then-current dividend period to, but excluding, such redemption date.
We may, at our option, redeem the Series D Preferred Stock, (a) in whole but not in part, at any time prior to December 1, 2027, within 90 days after the occurrence of a rating agency event at a redemption price equal to 102% of the stated amount of a share of Series D Preferred Stock (initially, $25,500 per share of Series D Preferred Stock, equivalent to $25.50 per Depositary Share), plus an amount equal to any dividends per share that have accrued but not been declared and paid for the then-current dividend period to, but excluding, such 204 Table of Contents redemption date, and (b)(i) in whole but not in part, at any time prior to December 1, 2027, within 90 days after the occurrence of a regulatory capital event; or (ii) in whole or in part, at any time or from time to time on or after December 1, 2027, in each case, at a redemption price equal to the stated amount of a share of Series D Preferred Stock (initially, $25,000 per share of Series D Preferred Stock, equivalent to $25.00 per Depositary Share), plus an amount equal to any dividends per share that have accrued but not been declared and paid for the then-current dividend period to, but excluding, such redemption date.
Securities rated investment grade (those rated BBB- or higher by S&P Global Ratings (“S&P”) or Baa3 or higher by Moody’s Investors Service (“Moody’s”)) are generally considered by the rating agencies and market participants to be low credit risk. As of December 31, 2022 and 2021, 96 % of the fair value of our corporate bond portfolio was rated investment grade.
Securities rated investment grade (those rated BBB- or higher by S&P Global Ratings (“S&P”) or Baa3 or higher by Moody’s Investors Service (“Moody’s”)) are generally considered by the rating agencies and market participants to be low credit risk. As of December 31, 2023 and 2022, 96% of the fair value of our corporate bond portfolio was rated investment grade.
For each category discussed above, the unobservable inputs are not inter-related; therefore, a directional change in one input would not have affected the other inputs. As part of our ongoing valuation process, we assess the reasonableness of our valuation techniques or models and make adjustments as necessary. For more information, see Note 1. 21.
For each category discussed above, the unobservable inputs are not inter-related; therefore, a directional change in one input would not have affected the other inputs. As part of our ongoing valuation process, we assess the reasonableness of our valuation techniques or models and make adjustments as necessary. For more information, see Note 1. 16.
It is possible that some matters could require us to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of December 31, 2022. For some matters, the Company is able to estimate a reasonably possible range of loss. For such matters in which a loss is probable, an accrual has been made.
It is possible that some matters could require us to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of December 31, 2023. For some matters, the Company is able to estimate a reasonably possible range of loss. For such matters in which a loss is probable, an accrual has been made.
Our defined benefit pension plans are closed to new entrants and existing participants do not accrue any additional benefits. We comply with the minimum funding requirements in both the U.S. and the U.K. In accordance with such practice, we were not required to make contributions for the years ended December 31, 2022 and 2021.
Our defined benefit pension plans are closed to new entrants and existing participants do not accrue any additional benefits. We comply with the minimum funding requirements in both the U.S. and the U.K. In accordance with such practice, we were not required to make contributions for the years ended December 31, 2023 and 2022.
We use the equity method of accounting to recognize all of our investments in limited liability partnerships. All material inter-company accounts and transactions have been eliminated in consolidation. Our involvement with VIEs is primarily to invest in assets that allow us to gain exposure to a broadly diversified portfolio of asset classes.
We use the equity method of accounting to recognize all of our investments in limited partnerships (“LPs”). All material inter-company accounts and transactions have been eliminated in consolidation. Our involvement with VIEs is primarily to invest in assets that allow us to gain exposure to a broadly diversified portfolio of asset classes.
Based upon this evaluation as of December 31, 2022, management believes we have the ability to generate adequate amounts of cash from our normal operations (e.g., insurance premiums, fee income and investment income) to meet cash requirements with a prudent margin of safety without requiring the sale of our impaired securities.
Based upon this evaluation as of December 31, 2023, management believes we have the ability to generate adequate amounts of cash from our normal operations (e.g., insurance premiums, fee income and investment income) to meet cash requirements with a prudent margin of safety without requiring the sale of our impaired securities.
Based upon the analysis discussed above, we believe that as of December 31, 2022 and 2021, we would have recovered the amortized cost of each corporate bond. As of December 31, 2022, the unrealized losses associated with our MBS and ABS were attributable primarily to rising interest rates and widening credit spreads since purchase.
Based upon the analysis discussed above, we believe that as of December 31, 2023 and 2022, we would have recovered the amortized cost of each corporate bond. As of December 31, 2023, the unrealized losses associated with our MBS and ABS were attributable primarily to rising interest rates and widening credit spreads since purchase.
See Note 1 for a detailed discussion regarding our accounting policy relating to the allowance for credit losses on our fixed maturity AFS securities.
See Note 1 for a discussion regarding our accounting policy relating to the allowance for credit losses on our fixed maturity AFS securities.
Considerable judgment and the use of estimates are required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance.
Judgment and the use of estimates are required in determining whether a valuation allowance is necessary and, if so, the amount of such valuation allowance.
The broker-dealer services primarily relate to our retail sales network and consist of commission revenue for the sale of non-affiliated securities recorded on a trade date basis and advisory fee income. Advisory fee income is asset-based revenues recorded as earned based on a contractual percentage of customer account values.
The broker-dealer services primarily relate to our retail sales network and consist of commission revenue for the sale of non-affiliated securities recorded on a trade date basis and advisory fee income. Advisory fee income is asset-based revenues recorded as earned based on a contractual percentage of customer account balances.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
New Ac counting Standards The following table provides a description of our adoption of new Accounting Standards Updates (“ASUs”) issued by the FASB and the impact of the adoption on the consolidated financial statements. ASUs not listed below were assessed and determined to be either not applicable or insignificant in presentation or amount.
New Accounting Standards The following table provides a description of our adoption of new Accounting Standards Updates (“ASUs”) issued by the FASB and the impact of the adoption on the consolidated financial statements. ASUs not listed below were assessed and determined to be either not applicable or insignificant in presentation or amount.
For the years ended December 31, 2022, 2021 and 2020, transfers in and out of Level 3 were attributable primarily to the financial instruments’ observable market information no longer being available or becoming available. In 2022, transfers out of Level 3 included corporate bonds and ABS for which we changed valuation techniques.
For the years ended December 31, 2023, 2022 and 2021, transfers in and out of Level 3 were attributable primarily to the financial instruments’ observable market information no longer being available or becoming available. In 2022, transfers out of Level 3 included corporate bonds and ABS for which we changed valuation techniques.
The outstanding principal balance of this long-term senior note was $ 1.0 billion as of December 31, 2022, and it is variable in nature; moving concurrently with any variability in the face amount of the corporate bond AFS security up to a maximum amount of $ 1.1 billion.
The outstanding principal balance of this long-term senior note was $1.0 billion as of December 31, 2023, and it is variable in nature; moving concurrently with any variability in the face amount of the corporate bond AFS security up to a maximum amount of $1.1 billion.
One permitted practice involves accounting for the lesser of the face amount of all amounts outstanding under an LOC and the value of the Valuation of Life Insurance Policies Model Regulation (“XXX”) additional statutory reserves as an admitted asset and a form of surplus as of December 31, 2022 and 2021.
One permitted practice involves accounting for the lesser of the face amount of all amounts outstanding under an LOC and the value of the Valuation of Life Insurance Policies Model Regulation (“XXX”) additional statutory reserves as an admitted asset and a form of surplus as of December 31, 2023 and 2022.
For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of AOCI and reclassified into net income in the same period or periods during which the hedged transaction affects net income.
For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of AOCI and reclassified into net income in the same period or periods during which the hedged transaction affects net income.
The outstanding principal balance of this long-term senior note was $ 400 million as of December 31, 2022, and it is variable in nature, moving concurrently with any variability in the face amount of the corporate bond AFS security up to a maximum amount of $ 400 million.
The outstanding principal balance of this long-term senior note was $400 million as of December 31, 2023, and it is variable in nature, moving concurrently with any variability in the face amount of the corporate bond AFS security up to a maximum amount of $400 million.
Other Revenues Other revenues consist primarily of fees attributable to broker-dealer services recorded as performance obligations are met, either at the time of sale or over time based on a contractual percentage of customer account values, and proceeds from reinsurance recaptures.
Other Revenues Other revenues consist primarily of fees attributable to broker-dealer services recorded as performance obligations are met, either at the time of sale or over time based on a contractual percentage of customer account balances, and proceeds from reinsurance recaptures.
For the years ended December 31, 2022 and 2021 , there were no material reclassifications to earnings due to hedged firm commitments no longer deemed probable or due to hedged forecasted transactions that had not occurred by the end of the originally specified time period.
For the years ended December 31, 2023 and 2022, there were no material reclassifications to earnings due to hedged firm commitments no longer deemed probable or due to hedged forecasted transactions that had not occurred by the end of the originally specified time period.
Connecticut General Life Insurance Company and The Lincoln National Life Insurance Company , filed in the U.S. District Court for the District of Connecticut, No. 3:16-cv-00827, is a putative class action that was served on LNL on June 8, 2016.
Connecticut General Life Insurance Company and The Lincoln National Life Insurance Company , filed in the U.S. District Court for the District of Connecticut, No. 3:16-cv-00827, is a putative class action that was served on The Lincoln National Life Insurance Company (“LNL”) on June 8, 2016.
Management assessed our internal control over financial reporting as of December 31, 2022, the end of our fiscal year. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
Management assessed our internal control over financial reporting as of December 31, 2023, the end of our fiscal year. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
Interest Rate Futures We use interest rate futures contracts to hedge the liability exposure on certain options in variable annuity products. These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price.
These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price. Interest Rate Swap Agreements We use interest rate swap agreements to hedge the liability exposure on certain options in variable annuity products.
These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price. Put Options We use put options to hedge the liability exposure on certain options in variable annuity, indexed variable annuity and VUL products.
These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price. Put Options We use put options to hedge the liability exposure on certain options in variable annuity, RILA and VUL products.
As of December 31, 2022, the unrealized losses associated with our corporate bond, U.S. government bond, state and municipal bond and foreign government bond securities were attributable primarily to rising interest rates and widening credit spreads since purchase.
As of December 31, 2023, the unrealized losses associated with our corporate bond, U.S. government bond, state and municipal bond and foreign government bond securities were attributable primarily to rising interest rates and widening credit spreads since purchase.
District Court for the Eastern District of Pennsylvania, Case No. 2:17-cv-04150, is a consolidated litigation matter related to multiple putative class action cases that were consolidated by an order dated March 28, 2018. Plaintiffs purport to own certain universal life insurance policies originally issued by Jefferson-Pilot (now LNL).
District Court for the Eastern District of Pennsylvania, Case No. 2:17-cv-04150, is a consolidated litigation matter related to multiple putative class action cases that were consolidated by an order dated March 199 Table of Contents 28, 2018. Plaintiffs purport to own certain universal life insurance policies originally issued by Jefferson-Pilot (now LNL).
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Philadelphia, Pennsylvania February 16, 2023 ‎ 104 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Lincoln National Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Lincoln National Corporation (the Company) as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Philadelphia, Pennsylvania February 22, 2024 103 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Lincoln National Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Lincoln National Corporation (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).
The effectiveness of our internal control over financial reporting as of December 31, 2022, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included on the following page. ‎ 103 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Lincoln National Corporation Opinion on Internal Control Over Financial Reporting We have audited Lincoln National Corporation’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
The effectiveness of our internal control over financial reporting as of December 31, 2023, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included on the following page. 102 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Lincoln National Corporation Opinion on Internal Control Over Financial Reporting We have audited Lincoln National Corporation’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
At the conclusion of the index term, credited interest is reflected in the reserve as realized, based on actual index performance. The statutory accounting practices also allow accounting for certain group fixed annuity assets at general account values.
At the conclusion of the index term, credited interest is reflected in the reserve as realized, based on actual index performance. The statutory accounting practices also allow accounting for certain group fixed annuity assets at general account balances.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedules listed in the Index at Item 15(a) and our report dated February 16, 2023 expressed an unqualified opinion thereon.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedules listed in the Index at Item 15(a) and our report dated February 22, 2024 expressed an unqualified opinion thereon.
Additional information related to impaired mortgage loans on real estate (in millions) was as follows: For the Years Ended December 31, 2022 2021 2020 Average aggregate carrying value for impaired mortgage loans on real estate $ 16 $ 32 $ 21 Interest income recognized on impaired mortgage loans on real estate - - - Interest income collected on impaired mortgage loans on real estate - - - The amortized cost of mortgage loans on real estate on nonaccrual status (in millions) was as follows: As of December 31, 2022 As of December 31, 2021 Nonaccrual Nonaccrual with no with no Allowance Allowance for Credit for Credit Losses Nonaccrual Losses Nonaccrual Commercial mortgage loans on real estate $ - $ - $ - $ - Residential mortgage loans on real estate - 34 - 30 Total $ - $ 34 $ - $ 30 We use loan-to-value and debt-service coverage ratios as credit quality indicators for our commercial mortgage loans on real estate.
Additional information related to impaired mortgage loans on real estate (in millions) was as follows: For the Years Ended December 31, 2023 2022 2021 Average aggregate carrying value for impaired mortgage loans on real estate $ 30 $ 16 $ 32 Interest income recognized on impaired mortgage loans on real estate – – – Interest income collected on impaired mortgage loans on real estate – – – The amortized cost of mortgage loans on real estate on nonaccrual status (in millions) was as follows: As of December 31, 2023 As of December 31, 2022 Nonaccrual with no Allowance for Credit Losses Nonaccrual Nonaccrual with no Allowance for Credit Losses Nonaccrual Commercial mortgage loans on real estate $ – $ – $ – $ – Residential mortgage loans on real estate – 62 – 34 Total $ – $ 62 $ – $ 34 We use loan-to-value and debt-service coverage ratios as credit quality indicators for our commercial mortgage loans on real estate.
We do not expect to be required to make any contributions to these pension plans in 2023. We sponsor other postretirement benefit plans that provide health care and life insurance to certain retired employees and agents.
We do not expect to be required to make any contributions to these pension plans in 2024. We sponsor other postretirement benefit plans that provide health care and life insurance to certain retired employees and agents.
Lastly, the state of Vermont has permitted a practice to account for certain excess of loss reinsurance agreements with unaffiliated reinsurers as an asset and form of surplus as of December 31, 2022 and 2021.
Lastly, the state of Vermont has permitted a practice to account for certain excess of loss reinsurance agreements with unaffiliated reinsurers as an asset and form of surplus as of December 31, 2023 and 2022.
Another permitted practice involves the acquisition of an LLC note in exchange for a variable value surplus note that is recognized as an admitted asset and a form of surplus as of December 31, 2022 and 2021.
Another permitted practice involves the acquisition of an LLC note in exchange for a variable value surplus note that is recognized as an admitted asset and a form of surplus as of December 31, 2023 and 2022.
The cash received in our repurchase program is typically invested in fixed maturity AFS securities. As of December 31, 2022 and 2021, we were not participating in any open repurchase agreements.
The cash received in our repurchase program is typically invested in fixed maturity AFS securities. As of December 31, 2023 and 2022, we were not participating in any open repurchase agreements.
Plaintiff seeks to represent all universal life and variable universal life policyholders who owned policies containing non-guaranteed cost of insurance provisions that are similar to those of Plaintiff’s policy and seeks damages on behalf of all such policyholders. On January 158 Table of Contents 11, 2019, the court dismissed Plaintiff’s complaint in its entirety.
Plaintiff seeks to represent all universal life and variable universal life policyholders who owned policies containing non-guaranteed cost of insurance provisions that are similar to those of plaintiff’s policy and seeks damages on behalf of all such policyholders. On January 11, 2019, the court dismissed plaintiff’s complaint in its entirety.
In our opinion, Lincoln National Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
In our opinion, Lincoln National Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 16, 2023 expressed an unqualified opinion thereon.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 22, 2024 expressed an unqualified opinion thereon.
The loan’s estimated value is based on: the present value of expected future cash flows discounted at the loan’s effective interest rate; the loan’s observable market price; or the fair value of the loan’s collateral. Allowance for credit losses are maintained at a level we believe is adequate to absorb current expected lifetime credit losses.
The loan’s estimated value is based on: the present value of expected future cash flows discounted at the loan’s effective interest rate; the loan’s observable market price; or the fair value of the loan’s collateral. 116 Table of Contents Allowance for credit losses are maintained at a level we believe is adequate to absorb current expected lifetime credit losses.
As of December 31, 2022 and 2021, we did not have any exposure related to CDSs for which we are the seller. Credit Risk We are exposed to credit losses in the event of non-performance by our counterparties on various derivative contracts and reflect assumptions regarding the credit or NPR.
As of December 31, 2023 and 2022, we did not have any exposure related to CDSs for which we are the seller. Credit Risk We are exposed to credit losses in the event of non-performance by our counterparties on various derivative contracts and reflect assumptions regarding the credit or non-performance risk.
The total fair value of stock options with performance conditions that vested during the years ended December 31, 2022, 2021 and 2020, was $ 1 million, less than $ 1 million and less than $ 1 million, respectively.
The total fair value of stock options with performance conditions that vested during the years ended December 31, 2023, 2022 and 2021, was less than $1 million, $1 million and less than $1 million, respectively.
To assess the significant assumptions used by management, we compared the significant assumptions noted above to historical experience, observable market data or management’s estimates of prospective changes in these assumptions. In addition, we performed an independent recalculation of the embedded derivative for a sample of contracts which we compared to the fair value model used by management.
To assess the significant assumptions used by management, we compared the significant assumptions noted above to historical experience, observable market data or management’s estimates of prospective changes in these assumptions. In addition, we performed an independent recalculation of the MRBs for a sample of contracts which we compared to the fair value model used by management.
We use options that are highly correlated to the portfolio allocation decisions of our contract holders, such that we are economically hedged with respect to equity returns for the current reset period. Reinsurance-Related Embedded Derivatives We have certain modified coinsurance and coinsurance with funds withheld reinsurance agreements with embedded derivatives related to the withheld assets of the related funds.
We use options that are highly correlated to the portfolio allocation decisions of our policyholders, such that we are economically hedged with respect to equity returns for the current reset period. Reinsurance-Related Embedded Derivatives We have certain modified coinsurance and coinsurance with funds withheld reinsurance agreements with embedded derivatives related to the withheld assets of the related funds.
Amounts currently recoverable, such as ceded reserves, are reported in reinsurance recoverables and amounts currently payable to the reinsurers, such as premiums, are included in other liabilities on the Consolidated Balance Sheets.
Amounts currently recoverable, such as ceded reserves, other than ceded MRBs, are reported in reinsurance recoverables, and amounts currently payable to the reinsurers, such as premiums, are included in other liabilities on the Consolidated Balance Sheets.
If it is not recoverable, we record an impairment through a credit loss allowance for the security. Trading Securities Trading securities consist of fixed maturity securities in designated portfolios, some of which support modified coinsurance and coinsurance with funds withheld reinsurance agreements.
If it is not recoverable, we record an impairment through a credit loss allowance for the security. 115 Table of Contents Trading Securities Trading securities consist of fixed maturity securities in designated portfolios, some of which support modified coinsurance and coinsurance with funds withheld reinsurance agreements.
Spark Program Expense Spark program expense consists primarily of costs related to our Spark Initiative. Pension and Other Postretirement Benefit Plans Pursuant to the accounting rules for our obligations to employees and agents under our various pension and other postretirement benefit plans, we are required to make a number of assumptions to estimate related liabilities and expenses.
Spark Program Expense Spark program expense consists primarily of costs related to our Spark Initiative. 125 Table of Contents Pension and Other Postretirement Benefit Plans Pursuant to the accounting rules for our obligations to employees and agents under our various pension and other postretirement benefit plans, we are required to make a number of assumptions to estimate related liabilities and expenses.
Upon an event of default, the credit facility agreement, as currently in effect, provides that, among other things, the commitments may be terminated and the loans then outstanding may be declared due and payable. As of December 31, 2022, we were in compliance with all such covenants.
Upon an event of default, the credit agreement, as currently in effect, provides that, among other things, the commitments may be terminated and the loans then outstanding may be declared due and payable. As of December 31, 2023, we were in compliance with all such covenants.
Goodwill and S pecifically Identifiable Intangible Assets The changes in the carrying amount of goodwill (in millions) by reportable segment were as follows: For the Year Ended December 31, 2022 Gross Accumulated Net Goodwill Impairment Goodwill Net as of as of as of Goodwill Beginning- Beginning- Beginning- as of End- of-Year of-Year of-Year Impairment of-Year Life Insurance $ 2,188 $ ( 1,554 ) $ 634 $ ( 634 ) $ - Annuities 1,040 ( 600 ) 440 - 440 Group Protection 684 - 684 - 684 Retirement Plan Services 20 - 20 - 20 Total goodwill $ 3,932 $ ( 2,154 ) $ 1,778 $ ( 634 ) $ 1,144 For the Year Ended December 31, 2021 Gross Accumulated Net Goodwill Impairment Goodwill Net as of as of as of Goodwill Beginning- Beginning- Beginning- as of End- of-Year of-Year of-Year Impairment of-Year Life Insurance $ 2,188 $ ( 1,554 ) $ 634 $ - $ 634 Annuities 1,040 ( 600 ) 440 - 440 Group Protection 684 - 684 - 684 Retirement Plan Services 20 - 20 - 20 Total goodwill $ 3,932 $ ( 2,154 ) $ 1,778 $ - $ 1,778 The fair values of our reporting units (Level 3 fair value estimates) are comprised of the value of in-force (i.e., existing) business and the value of new business.
Goodwill and Specifically Identifiable Intangible Assets The changes in the carrying amount of goodwill (in millions) by reportable segment were as follows: For the Year Ended December 31, 2023 Gross Goodwill as of Beginning- of-Year Accumulated Impairment as of Beginning- of-Year Net Goodwill as of Beginning- of-Year Impairment Net Goodwill as of End- of-Year Annuities $ 1,040 $ (600) $ 440 $ – $ 440 Group Protection 684 – 684 – 684 Retirement Plan Services 20 – 20 – 20 Total goodwill $ 1,744 $ (600) $ 1,144 $ – $ 1,144 For the Year Ended December 31, 2022 Gross Goodwill as of Beginning- of-Year Accumulated Impairment as of Beginning- of-Year Net Goodwill as of Beginning- of-Year Impairment Net Goodwill as of End- of-Year Annuities $ 1,040 $ (600) $ 440 $ – $ 440 Life Insurance 2,188 (1,554) 634 (634) – Group Protection 684 – 684 – 684 Retirement Plan Services 20 – 20 – 20 Total goodwill $ 3,932 $ (2,154) $ 1,778 $ (634) $ 1,144 The fair values of our reporting units (Level 3 fair value estimates) are comprised of the value of in-force (i.e., existing) business and the value of new business.
Segm ent Information We provide products and services and report results through our Life Insurance, Annuities, Group Protection and Retirement Plan Services segments. We also have Other Operations, which includes the financial data for operations that are not directly related to the business segments.
Segment Information We provide products and services and report results through our Annuities, Life Insurance, Group Protection and Retirement Plan Services segments. We also have Other Operations, which includes the financial data for operations that are not directly related to the business segments.
Pursuant to the Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification TM (“ASC”), we categorize our financial instruments carried at fair value into a three-level fair value hierarchy, based on the priority of inputs to the respective valuation technique.
Pursuant to the Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification TM (“ASC”), we categorize our financial instruments carried at fair value into a three-level fair value hierarchy, based on the priority of inputs to the respective valuation technique.
Separate Account Assets and Liabilities Separate accounts represent segregated funds that are maintained to meet specific investment objectives of contract holders who direct the investments and bear the investment risk, except to the extent of minimum guarantees made by the Company with respect to certain accounts.
Separate Account Assets and Liabilities Separate accounts represent segregated funds that are maintained to meet specific investment objectives of policyholders who direct the investments and bear the investment risk, except to the extent of minimum guarantees made by the Company with respect to certain accounts.
Statutory Infor mation and Restrictions The Company’s domestic life insurance subsidiaries prepare financial statements in accordance with statutory accounting principles (“SAP”) prescribed or permitted by the insurance departments of their states of domicile, which may vary materially from GAAP.
Statutory Information and Restrictions The Company’s domestic life insurance subsidiaries prepare financial statements in accordance with statutory accounting principles (“SAP”) prescribed or permitted by the insurance departments of their states of domicile, which may vary materially from GAAP.
The inputs used to measure the fair value of our mortgage loans on real estate, excluding mortgage loans accounted for using the fair value option, are classified as Level 2 within the fair value hierarchy. Other Investments The carrying value of our assets classified as other investments, excluding short-term investments, approximates fair value.
The inputs used to measure the fair value of our mortgage loans on real estate, excluding mortgage loans accounted for using the fair value option, are classified as Level 2 within the fair value hierarchy. 180 Table of Contents Other Investments The carrying value of our assets classified as other investments, excluding short-term investments, approximates fair value.
The NPR is based upon assumptions for each counterparty’s credit spread over the estimated weighted average life of the counterparty exposure, less collateral held. As of December 31, 2022, the NPR adjustment was zero . The credit risk associated with such agreements is minimized by entering into agreements with financial institutions with long-standing, superior performance records.
The non-performance risk is based upon assumptions for each counterparty’s credit spread over the estimated weighted average life of the counterparty exposure, less collateral held. As of December 31, 2023, the non-performance risk adjustment was zero. The credit risk associated with such agreements is minimized by entering into agreements with financial institutions with long-standing, superior performance records.
(2) The liquidity/duration adjustment input represents an estimated market participant composite of adjustments attributable to liquidity premiums, expected durations, structures and credit quality that would be applied to the market observable information of an investment. (3) The lapse rate input represents the estimated probability of a contract surrendering during a year, and thereby forgoing any future benefits.
(2) The liquidity/duration adjustment input represents an estimated market participant composite of adjustments attributable to liquidity premiums, expected durations, structures and credit quality that would be applied to the market observable information of an investment. 192 Table of Contents (3) The lapse input represents the estimated probability of a contract surrendering during a year, and thereby forgoing any future benefits.
DAC, VOBA, DSI and DFEL Acquisition costs directly related to successful contract acquisitions or renewals of UL, VUL, traditional life insurance, group life and disability insurance, annuities and other investment contracts have been deferred (i.e., DAC) to the extent recoverable.
DAC, VOBA, DSI and DFEL Acquisition costs directly related to successful contract acquisitions or renewals of annuities, UL, VUL, traditional life insurance, group life and disability insurance and other investment contracts have been deferred (i.e., DAC).
Participants of certain plans are able to select our stock as a notional investment option; however, it is not hedged by the total return swaps and is a primary source of expense volatility related to these plans.
Participants of certain 194 Table of Contents plans are able to select our stock as a notional investment option; however, it is not hedged by the total return swaps and is a primary source of expense volatility related to these plans.
(2) Represents the difference between the target shares granted and the actual shares vested based upon the achievement level of performance measures. RSUs LNC RSUs generally cliff vest on the third anniversary of the grant date, based solely on a service condition.
(2) Represents the difference between the target shares granted and the actual shares vested based upon the achievement level of performance measures. 197 Table of Contents RSUs LNC RSUs generally cliff vest on the third anniversary of the grant date, based solely on a service condition.
Certain Financing Arrangements We periodically enter into sale-leaseback arrangements that do not meet the criteria of a sale for accounting purposes. As such, we account for these transactions as financing arrangements. As of December 31, 2022 and 2021, we had $ 558 million and $ 375 million, respectively, of financing obligations reported within other liabilities on the Consolidated Balance Sheets.
Certain Financing Arrangements We periodically enter into sale-leaseback arrangements that do not meet the criteria of a sale for accounting purposes. As such, we account for these transactions as financing arrangements. As of December 31, 2023 and 2022, we had $595 million and $558 million, respectively, of financing obligations reported within other liabilities on the Consolidated Balance Sheets.
Our model estimates the expected credit losses over the life of the reinsurance asset. Credit loss estimates are segmented based on counterparty credit risk. Our modeling process utilizes counterparty credit ratings, collateral types and amounts, and term and run-off 120 Table of Contents assumptions.
Our model estimates the expected credit losses over the life of the reinsurance asset. Credit loss estimates are segmented based on counterparty credit risk. Our modeling process utilizes counterparty credit ratings, collateral types and amounts, and term and run-off assumptions.
Investment income and net realized and unrealized gains (losses) of the separate accounts generally accrue directly to the contract holders; therefore, they are not reflected on the Consolidated Statements of Comprehensive Income (Loss), and the Consolidated Statements of Cash Flows do not reflect investment activity of the separate accounts.
Investment income and net realized and unrealized gains (losses) of the separate accounts generally accrue directly to the policyholders; therefore, they are not reflected on the Consolidated Statements of Comprehensive Income (Loss), and the Consolidated Statements of Cash Flows do not reflect investment activity of the separate accounts.
Put options are contracts that require counterparties to pay us at a specified future date the amount, if any, by which a specified equity index is less than the strike rate stated in the agreement, applied to a notional amount.
Put options are contracts that require the buyers to pay at a specified future date the amount, if any, by which a specified equity index is less than the strike rate stated in the agreement, applied to a notional amount.

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