As of or For the



Three Months Ended



March 31,

(in millions, except per share data)

2020

2019

Net Income (Loss)

$

$

Net Income (Loss) Available to Common Stockholders

Net Income (Loss) per Diluted Share Available to Common Stockholders

Revenues

Adjusted Income (Loss) from Operations

Adjusted Income (Loss) from Operations per Diluted Share Available to

Common Stockholders

Average Diluted Shares

Return on Equity (ROE), Including Accumulated Other Comprehensive

Income (AOCI) (Net Income)

Adjusted Operating ROE, Excluding AOCI (Income from Operations)

Book Value per Share, Including AOCI

$

$

Book Value per Share, Excluding AOCI

·

Adjusted income from operations of $465 million, up 5%

·

Adjusted operating revenues of $4.5 billion, up 3%

·

Total Annuity sales of $3.7 billion, up 5%, with positive net flows of $528 million in the quarter

·

Retirement Plan Services deposits of $2.8 billion, up 11%

·

Life Insurance operating revenues of $1.8 billion, up 7%

·

Group Protection insurance premiums of $1.1 billion, up 7%

·

A $349 million loss from variable annuity net derivative results.

·

A $30 million realized loss related to financial assets, which includes $16 million of credit loss expense on other financial assets.

·

A $30 million loss from indexed annuity forward-starting options.



Contacts:

Chris Giovanni

Scott Sloat



(484) 583-1793

(484) 583-1625



Investor Relations

Media Relations



[email protected]

[email protected]

·

Realized gains and losses associated with the following (“excluded realized gain (loss)”):

o

Sales or disposals and impairments of financial assets;

o

Changes in the fair value of equity securities;

o

Changes in the fair value of derivatives, embedded derivatives within certain reinsurance arrangements and trading securities (“gain (loss) on the mark-to-market on certain instruments”);

o

Changes in the fair value of the derivatives we own to hedge our guaranteed death benefit (“GDB”) riders within our variable annuities;

o

Changes in the fair value of the embedded derivatives of our guaranteed living benefit (“GLB”) riders reflected within variable annuity net derivative results accounted for at fair value;

o

Changes in the fair value of the derivatives we own to hedge our GLB riders reflected within variable annuity net derivative results; and

o

Changes in the fair value of the embedded derivative liabilities related to index options we may purchase or sell in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products accounted for at fair value (“indexed annuity forward-starting options”);

·

Changes in reserves resulting from benefit ratio unlocking on our GDB and GLB riders (“benefit ratio unlocking”);

·

Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance;

·

Gains (losses) on early extinguishment of debt;

·

Losses from the impairment of intangible assets;

·

Income (loss) from discontinued operations;

·

Acquisition and integration costs related to mergers and acquisitions; and

·

Income (loss) from the initial adoption of new accounting standards, regulations and policy changes including the net impact from the Tax Cuts and Jobs Act.

·

Excluded realized gain (loss);

·

Revenue adjustments from the initial adoption of new accounting standards;

·

Amortization of deferred front-end loads (“DFEL”) arising from changes in GDB and GLB benefit ratio unlocking; and

·

Amortization of deferred gains arising from reserve changes on business sold through reinsurance.

·

It is calculated by dividing annualized adjusted income (loss) from operations by average equity, excluding accumulated other comprehensive income (loss) ("AOCI").

·

Management evaluates return on equity by both including and excluding average goodwill within average equity.

·

We believe highlighting notable items included in adjusted income (loss) from operations enables investors to better understand the fundamental trends in its results of operations and financial condition.

·

It is calculated by dividing (a) stockholders' equity, excluding AOCI by (b) common shares outstanding.

·

We provide book value per share excluding AOCI to enable investors to analyze the amount of our net worth that is primarily attributable to our business operations.

·

Management believes book value per share, excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.

·

Book value per share is the most directly comparable GAAP measure.

·

Annuities and Retirement Plan Services – deposits from new and existing customers;

·

MoneyGuard® – 15% of total expected premium deposits;

·

Universal life (“UL”), indexed universal life (“IUL”), variable universal life (“VUL”) – first-year commissionable premiums plus 5% of excess premiums received;

·

Executive Benefits – single premium bank-owned UL and VUL, 15% of single premium deposits, and corporate-owned UL and VUL, first-year commissionable premiums plus 5% of excess premium received;

·

Term – 100% of annualized first-year premiums; and

·

Group Protection – annualized first-year premiums from new policies.





For the

(in millions, except per share data)

Three Months Ended



March 31,



2020

2019



Total Revenues

$

$

Less:

Excluded realized gain (loss)

Amortization of DFEL on benefit ratio unlocking

Total Adjusted Operating Revenues

$

$



Net Income (Loss) Available to Common

Stockholders – Diluted

$

$

Less:

Adjustment for deferred units of LNC stock in our

deferred compensation plans (1)

 -

Net Income (Loss)

Less:

Excluded realized gain (loss), after-tax

Benefit ratio unlocking, after-tax

Acquisition and integration costs related to mergers

and acquisitions, after-tax

Total adjustments

Adjusted Income (Loss) from Operations

$

$



Earnings (Loss) Per Common Share – Diluted

Net income (loss)

$

$

Adjusted income (loss) from operations



Average Stockholders' Equity

Average equity, including average AOCI

$

$

Average AOCI

Average equity, excluding AOCI

Average goodwill

Average equity, excluding AOCI and goodwill

$

$



Return on Equity, Including AOCI

Net income (loss) with average equity including goodwill



Adjusted Operating Return on Equity, Excluding AOCI

Adjusted income (loss) from operations with average equity

including goodwill

Adjusted income (loss) from operations with average equity

excluding goodwill



(1) The numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC

stock in our deferred compensation plans if the effect of equity classification would result in a more dilutive EPS.











As of March 31,



2020

2019

Book value per share, including AOCI

$

$

Per share impact of AOCI

Book value per share, excluding AOCI







For the

(in millions, except per share data)

Three Months Ended



March 31,



2020

2019



Revenues

$

$



Net Income (Loss)

$

$

Adjustment for deferred units of LNC stock in our

deferred compensation plans (1)

 -

Net Income (Loss) Available to Common

Stockholders – Diluted

$

$



Earnings (Loss) per Common Share – Basic

$

$

Earnings (Loss) per Common Share – Diluted



Average Shares – Basic

Average Shares – Diluted







(1) The numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC

stock in our deferred compensation plans if the effect of equity classification would be more dilutive to our diluted EPS.





·

The continuation of the COVID-19 pandemic, or future outbreaks of COVID-19, and uncertainty surrounding the length and severity of future impacts on the global economy and on our business, results of operations and financial condition;  

·

Continued deterioration in general economic and business conditions that may affect account values, investment results, guaranteed benefit liabilities, premium levels and claims experience;

·

Adverse global capital and credit market conditions could affect our ability to raise capital, if necessary, and may cause us to realize impairments on investments and certain intangible assets, including goodwill and the valuation allowance against deferred tax assets, which may reduce future earnings and/or affect our financial condition and ability to raise additional capital or refinance existing debt as it matures;

·

Because of our holding company structure, the inability of our subsidiaries to pay dividends to the holding company in sufficient amounts could harm the holding company’s ability to meet its obligations;

·

Legislative, regulatory or tax changes, both domestic and foreign, that affect: the cost of, or demand for, our subsidiaries' products; the required amount of reserves and/or surplus; our ability to conduct business and our captive reinsurance arrangements as well as restrictions on the payment of revenue sharing and 12b-1 distribution fees; the impact of U.S. Federal tax reform legislation on our business, earnings and capital; and the impact of any “best interest” standards of care adopted by the Securities and Exchange Commission (“SEC”) or other regulations adopted by federal or state regulators or self-regulatory organizations relating to the standard of care owed by investment advisers and/or broker dealers;

·

Actions taken by reinsurers to raise rates on in-force business;

·

Continued declines in or sustained low interest rates causing a reduction in investment income, the interest margins of our businesses, estimated gross profits and demand for our products;

·

Rapidly increasing interest rates causing contract holders to surrender life insurance and annuity policies, thereby causing realized investment losses, and reduced hedge performance related to variable annuities;

·

Uncertainty about the effect of continuing promulgation and implementation of rules and regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act on us, the economy and the financial services sector in particular;

·

The initiation of legal or regulatory proceedings against us, and the outcome of any legal or regulatory proceedings, such as: adverse actions related to present or past business practices common in businesses in which we compete; adverse decisions in significant actions including, but not limited to, actions brought by federal and state authorities and class action cases; new decisions that result in changes in law; and unexpected trial court rulings;

·

A continued decline in the equity markets causing a reduction in the sales of our subsidiaries' products; a reduction of asset-based fees that our subsidiaries charge on various investment and insurance products; an acceleration of the net amortization of deferred acquisition costs ("DAC"), value of business acquired ("VOBA"), deferred sales inducements ("DSI") and deferred front-end loads ("DFEL"); and an increase in liabilities related to guaranteed benefit features of our subsidiaries' variable annuity products;

·

Ineffectiveness of our risk management policies and procedures, including various hedging strategies used to offset the effect of changes in the value of liabilities due to changes in the level and volatility of the equity markets and interest rates;

·

A deviation in actual experience regarding future persistency, mortality, morbidity, interest rates or equity market returns from the assumptions used in pricing our subsidiaries' products, in establishing related insurance reserves and in the net amortization of DAC, VOBA, DSI and DFEL, which may reduce future earnings;

·

Changes in accounting principles that may affect our financial statements;

·

Lowering of one or more of our debt ratings issued by nationally recognized statistical rating organizations and the adverse effect such action may have on our ability to raise capital and on our liquidity and financial condition;

·

Lowering of one or more of the insurer financial strength ratings of our insurance subsidiaries and the adverse effect such action may have on the premium writings, policy retention, profitability of our insurance subsidiaries and liquidity;

·

Significant credit, accounting, fraud, corporate governance or other issues that may adversely affect the value of certain financial assets, as well as counterparties to which we are exposed to credit risk requiring that we realize losses on financial assets;

·

Inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others;

·

Interruption in telecommunication, information technology or other operational systems, or failure to safeguard the confidentiality or privacy of sensitive data on such systems from cyberattacks or other breaches of our data security systems;

·

The effect of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including the successful implementation of integration strategies or the achievement of anticipated synergies and operational efficiencies related to an acquisition; 

·

The adequacy and collectability of reinsurance that we have purchased;

·

The continuation of the COVID-19 pandemic, or future outbreaks of COVID-19 or other pandemics, acts of terrorism, war or other man-made and natural catastrophes that may adversely affect our businesses and the cost and availability of reinsurance;

·

Competitive conditions, including pricing pressures, new product offerings and the emergence of new competitors, that may affect the level of premiums and fees that our subsidiaries can charge for their products;

·

The unknown effect on our subsidiaries' businesses resulting from evolving market preferences and the changing demographics of our client base; and

·

The unanticipated loss of key management, financial planners or wholesalers.





Lincoln Financial Group



Table of Contents







Analyst Coverage and Credit Ratings



Notes



Consolidated



Consolidated Statements of Income (Loss)



Consolidated Balance Sheets



Earnings, Shares and Return on Equity



Key Stakeholder Metrics



Segment and Sources of Earnings



Select Earnings Drivers By Segment



Sales By Segment



Operating Revenues and General and Administrative Expenses By Segment



Operating Commissions and Other Expenses



Interest Rate Yields and Spreads By Segment



Select Earnings and Operational Data from Business Segments



Annuities



Retirement Plan Services



Life Insurance



Group Protection



Other Operations



DAC & Account Value Rollforwards



Consolidated DAC, VOBA, DSI and DFEL Roll Forwards



Account Value Roll Forwards:



Annuities



Retirement Plan Services



Life Insurance



Other Information



Select Investment Data



Realized Gain (Loss) and Benefit Ratio Unlocking, After-DAC



Select GAAP to Non-GAAP Reconciliations













Lincoln Financial Group



Analyst Coverage and Credit Ratings







Firm

Analyst

Phone Number



Autonomous Research U.S., L.P.

Erik Bass

646-561-6248



B. Riley FBR

Randy Binner

703-312-1890



Citi Research    

Suneet Kamath       

212-816-3457



Credit Suisse

Andrew Kligerman

212-325-5069



Dowling & Partners

Humphrey Lee

860-676-7324



Evercore

Thomas Gallagher

212-446-9439



Goldman Sachs

Alex Scott

917-343-7160



J.P. Morgan Securities

Jimmy Bhullar

212-622-6397



Keefe, Bruyette & Woods, Inc.

Ryan Krueger

860-722-5930



Morgan Stanley

Nigel Dally

212-761-4132



Piper Sandler & Co.

John Barnidge

312-281-3412



RBC Capital Markets

Mark Dwelle

804-782-4008



Wells Fargo

Elyse Greenspan

212-214-8031





This list is provided for informational purposes only.  Lincoln Financial Group does not endorse the analyses, conclusions or recommendations contained in any report issued by these



or any other analysts.





Ratings as of May 6, 2020



Standard



A.M Best

Fitch

Moody's

& Poor's



Senior Debt Ratings

a-

BBB+

Baa1

A-



Financial Strength Ratings



The Lincoln National Life Insurance Company

A+

A+

A1

AA-



First Penn-Pacific Life Insurance Company

A

A+

A1

A-



Lincoln Life & Annuity Company of New York

A+

A+

A1

AA-



Lincoln Life Assurance Company of Boston

A+

AA-





Investor Inquiries May Be Directed To:



Chris Giovanni, Senior Vice President, Corporate Treasurer



Email:  [email protected]



Phone:  484-583-1793













Page 1





Lincoln Financial Group



Notes







Computations



• The quarterly financial information for the current year may not sum to the corresponding year-to-date amount as both are rounded to millions.



• The financial ratios reported herein are calculated using whole dollars instead of dollars rounded to millions.



• If the effect of equity classification would result in a more dilutive Earnings Per Share (“EPS”), the numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market



 adjustment for deferred units of LNC stock in our deferred compensation plans.  In addition, for any period where a net loss is experienced, shares used in the diluted EPS calculation represent



 basic shares, as the use of diluted shares would result in a lower loss per share.



• Return on equity (“ROE”) measures how efficiently we generate profits from the resources provided by our net assets.  ROE is calculated by dividing annualized net income (loss) (or adjusted income (loss)



 from operations) by average equity, excluding accumulated other comprehensive income (loss) (“AOCI”).  Management evaluates consolidated ROE by both including and excluding the effect



 of average goodwill.



• Book value per share, excluding AOCI, is calculated by dividing stockholders’ equity, excluding AOCI, by common shares outstanding.  We provide book value per share, excluding AOCI, to enable



 investors to analyze the amount of our net worth that is attributable primarily to our business operations.  Management believes book value per share excluding AOCI is useful to investors because



 it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.  Book value per share is the most directly comparable GAAP measure.



• Pre-tax net margin is calculated by dividing adjusted income (loss) from operations before taxes by net revenue, which is defined as total adjusted operating revenues less interest credited.





Definitions



Holding company available liquidity consists of cash and invested cash, excluding cash held as collateral, and certain short-term investments that can be readily converted into cash, net of commercial



paper outstanding.



Sales as reported consist of the following:



• Annuities and Retirement Plan Services – deposits from new and existing customers;



•  MoneyGuard®, our linked-benefit product – 15% of total expected premium deposits;



• Universal life (“UL”), indexed universal life (“IUL”), variable universal life (“VUL”) – first-year commissionable premiums plus 5% of excess premiums received;



• Executive Benefits – single premium bank-owned UL and VUL, 15% of single premium deposits, and corporate-owned UL and VUL, first-year commissionable premiums plus 5% of excess



     premium received;



• Term – 100% of annualized first-year premiums; and



• Group Protection – annualized first-year premiums from new policies.



Throughout the document, “after-DAC” refers to the associated amortization expense of deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), deferred sales inducements (“DSI”)



and deferred front-end loads (“DFEL”) and changes in other contract holder funds.























Page 2a





Lincoln Financial Group



Notes







Sources of earnings are defined as follows:



• Investment spread earnings consist primarily of net investment income, net of interest credited earned on the underlying general account investments supporting our fixed products less related



 expenses.



• Mortality/morbidity earnings result from mortality margins, morbidity margins, and certain expense assessments and related fees that are a function of the rates priced into the product and level



 of insurance in force.



• Fees on assets under management (“AUM”) earnings results consist primarily of asset-based fees charged based on variable account values less associated benefits and related expenses.



• Variable annuity (“VA”) riders earnings consist of fees charged to the contract holder related to guaranteed benefit rider features, less the net valuation premium and associated change in



  benefit reserves and related expenses.





Non-GAAP Performance Measures



Non-GAAP measures do not replace the most directly comparable GAAP measures, and we have included detailed reconciliations herein.



Adjusted income (loss) from operations is GAAP net income excluding the after-tax effects of the following items, as applicable:



• Realized gains and losses associated with the following (“excluded realized gain (loss)”):



▪ Sales or disposals and impairments of financial assets;



▪ Changes in the fair value of equity securities;



▪ Changes in the fair value of derivatives, embedded derivatives within certain reinsurance arrangements and trading securities (“gain (loss) on the mark-to-market on certain instruments”);



▪ Changes in the fair value of the derivatives we own to hedge our guaranteed death benefit (“GDB”) riders within our variable annuities;



▪ Changes in the fair value of the embedded derivatives of our guaranteed living benefit (“GLB”) riders reflected within variable annuity net derivative results accounted for at fair value;



▪ Changes in the fair value of the derivatives we own to hedge our GLB riders reflected within variable annuity net derivative results; and



▪ Changes in the fair value of the embedded derivative liabilities related to index options we may purchase or sell in the future to hedge contract holder index allocations applicable to



future reset periods for our indexed annuity products accounted for at fair value (“indexed annuity forward-starting options”);



• Changes in reserves resulting from benefit ratio unlocking on our GDB and GLB riders (“benefit ratio unlocking”);



• Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance;



• Gains (losses) on early extinguishment of debt;



• Losses from the impairment of intangible assets;



• Income (loss) from discontinued operations;



• Acquisition and integration costs related to mergers and acquisitions; and



• Income (loss) from the initial adoption of new accounting standards, regulations and policy changes including the net impact from the Tax Cuts and Jobs Act.



Adjusted operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:



• Excluded realized gain (loss);



• Revenue adjustments from the initial adoption of new accounting standards;



• Amortization of DFEL arising from changes in GDB and GLB benefit ratio unlocking; and



• Amortization of deferred gains arising from reserve changes on business sold through reinsurance.











Page 2b





Lincoln Financial Group



Notes







Management believes that the non-GAAP performance measures previously discussed explain the results of our ongoing businesses in a manner that allows for a better understanding of the underlying



trends in our current business as the excluded items are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments, and, in many



instances, decisions regarding these items do not necessarily relate to the operations of the individual segments.  In addition, we believe that our definitions of adjusted operating revenues and adjusted



income from operations provide investors with more valuable measures of our performance as they better reveal trends in our business.





Due to reporting a net loss for the three months ended September 30, 2019, basic shares were used in the diluted earnings per share calculation for that period as the use of diluted shares would have



resulted in a lower loss per share.





Statistical Supplement is Dated



The financial data in this document is dated May 6, 2020, and has not been updated since that date.  Lincoln Financial Group does not intend to update this document.