8-K
Lincoln National Corp (LNC)
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
August 3, 2022
Date of Report (Date of earliest event reported)
Lincoln National Corporation
(Exact name of registrant as specified in its charter)
| Indiana | 1-6028 | 35-1140070 |
|---|---|---|
| (State or other jurisdiction | (Commission | (IRS Employer |
| of incorporation) | File Number) | Identification No.) |
150 N. Radnor Chester Road, Radnor, PA 19087
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (484) 583-1400
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
__________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | LNC | New York Stock Exchange |
__________________________________
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On August 3, 2022, Lincoln National Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2022, a copy of which is attached as Exhibit 99.1 and is incorporated herein by reference. The Company’s statistical supplement for the quarter ended June 30, 2022, is attached as Exhibit 99.2 and is incorporated herein by reference.
The information, including exhibits attached hereto, furnished under this Item 2.02 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as otherwise expressly stated in such filing.
Item 9.01. Financial Statements and Exhibits.
(d)Exhibits.
The following exhibits are being furnished with this Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| LINCOLN NATIONAL CORPORATION | |
|---|---|
| By | /s/ Adam Cohen |
| Name: | Adam Cohen |
| Title: | Senior Vice President and Chief |
| Accounting Officer |
Date: August 3, 2022
2Q22 - Press Release
FOR IMMEDIATE RELEASE
Lincoln Financial Group reports Second Quarter 2022 Results
_______________________________________ | v | Net income EPS of $1.34 and adjusted operating EPS of $2.23 | | --- | --- | | v | Adjusted operating EPS included $(0.42) primarily from pandemic-related claims experience | | --- | --- | and below-targeted alternative investment income | v | BVPS, including AOCI, of $53.97, down 53% primarily driven by higher interest rates | | --- | --- | | v | BVPS, excluding AOCI, of $79.49, up 5% | | --- | --- | | v | $177 million of capital returned to shareholders, including $100 million in share repurchases | | --- | --- |
Radnor, PA, August 3, 2022 – Lincoln Financial Group (NYSE: LNC) today reported net income for the second quarter of 2022 of $238 million, or $1.34 per diluted share available to common stockholders, compared to net income in the second quarter of 2021 of $642 million, or $3.34 per diluted share available to common stockholders. Second quarter adjusted income from operations was $391 million, or $2.23 per diluted share available to common stockholders, compared to adjusted income from operations of $608 million, or $3.17 per diluted share available to common stockholders, in the second quarter of 2021.
“Despite equity market headwinds, second quarter underlying earnings were solid," said Ellen Cooper, president and CEO of Lincoln Financial Group. “We are seeing positive developments including improving Group Protection results, a significant sequential decline in pandemic claims, on-track progress from our Spark expense initiative, and a meaningful rise in interest rates year to date, supporting future earnings growth and new business returns. Finally, sales remain robust with new business generating at or above targeted returns and our balance sheet, including our high-quality investment portfolio, remains resilient.”
| | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | As of or For the | | | | As of or For the | | | | | | Three Months Ended | | | | Six Months Ended | | | | | | June 30, | | | | June 30, | | | | | (in millions, except per share data) | 2022 | | 2021 | | 2022 | | 2021 | | | Net Income (Loss) | $ | 238 | $ | 642 | $ | 341 | $ | 867 | | Net Income (Loss) Available to Common Stockholders | | 231 | | 642 | | 334 | | 867 | | Net Income (Loss) per Diluted Share Available to Common Stockholders | | 1.34 | | 3.34 | | 1.91 | | 4.51 | | Revenues | | 5,104 | | 4,851 | | 9,791 | | 9,386 | | Adjusted Income (Loss) from Operations | | 391 | | 608 | | 685 | | 959 | | Adjusted Income (Loss) from Operations per Diluted Share Available to | | | | | | | | | | Common Stockholders | | 2.23 | | 3.17 | | 3.88 | | 4.98 | | Average Diluted Shares | | 172.7 | | 192.2 | | 174.6 | | 192.4 | | Return on Equity (ROE), Including Accumulated Other Comprehensive | | | | | | | | | | Income (AOCI) (Net Income) | | 8.0% | | 12.4% | | 4.6% | | 8.3% | | Adjusted Operating ROE, Excluding AOCI (Adjusted Income from Operations) | | 11.6% | | 17.3% | | 10.1% | | 13.8% | | Book Value per Share (BVPS), Including AOCI | $ | 53.97 | $ | 115.00 | $ | 53.97 | $ | 115.00 | | Book Value per Share, Excluding AOCI | | 79.49 | | 75.45 | | 79.49 | | 75.45 |
Operating Highlights – Second Quarter 2022 vs. Second Quarter 2021 | · | Annuity account values other than variable annuities with guaranteed living benefits represented 53% of total annuity account values, up five percentage points | | --- | --- | | · | Retirement Plan Services positive net flows of $913 million are up $517 million | | --- | --- | | · | Life Insurance sales of $193 million are up 53% with growth across all products | | --- | --- | | · | Group Protection insurance premiums of $1.2 billion, up 7% | | --- | --- |
There were no notable items within adjusted income from operations for the current quarter or the prior-year quarter. This quarter’s adjusted operating EPS results included an estimated unfavorable impact of $0.23 from elevated claims experience related to the pandemic, $0.11 from alternative investment income below targeted levels and $0.08 from unfavorable one-time items in our Annuities business.
Second Quarter 2022 – Segment Results
Annuities
Annuities reported income from operations of $256 million, down from $323 million in the prior-year quarter. The decrease was driven by a decline in the capital markets as well as $14 million of unfavorable one-time items.
Total annuity deposits of $2.7 billion were flat sequentially. Growth of 16% in indexed variable annuities and 40% in fixed annuities were offset by a decline in traditional variable annuities of 25%.
Compared to the prior-year quarter, total annuity deposits were down 16%. Growth of 185% in fixed annuities was more than offset by a decline of 24% in indexed variable annuities and 33% in traditional variable annuities.
Average account values for the quarter of $152 billion were down 8% from the prior-year quarter, primarily driven by a decline in the equity markets. Net outflows were $318 million in the quarter. Annuity account values other than variable annuities with guaranteed living benefits represented 53% of total annuity account values, up five percentage points over the prior-year quarter.
Retirement Plan Services
Retirement Plan Services reported income from operations of $54 million, compared to $62 million in the prior-year quarter, due to less favorable returns within the company’s alternative investment portfolio and a decline in account values driven by the equity markets partly offset by lower expenses and organic growth.
Total deposits for the quarter of $2.9 billion were up 6% from the prior-year quarter driven by a 10% increase in first-year sales and a 3% increase in recurring deposits.
Net flows totaled $913 million for the quarter. Average account values for the quarter of $91 billion were down 4% over the prior-year quarter driven by lower equity markets.
Life Insurance
Life Insurance reported income from operations of $114 million compared to $255 million in the prior-year quarter driven primarily by less favorable returns within the company’s alternative investment portfolio.
Total Life Insurance sales were $193 million, up 53% from the prior-year quarter, with growth reported across all product lines.
Average Life Insurance in-force of $1 trillion grew 10% from the prior-year quarter. Average account values for the quarter were $49 billion compared to $59 billion in the prior-year quarter, reflecting last year’s block reinsurance deal and lower equity market levels.
Group Protection
Group Protection reported income from operations of $59 million in the quarter compared to $46 million in the prior-year quarter. This change was driven by disciplined top-line growth, an improved group disability loss ratio and effective expense management, partly offset by a less favorable group life loss ratio and lower than expected returns within the company’s alternative investment portfolio.
The total loss ratio was 78.2% in the current quarter compared to 79.3% in the prior-year quarter, with the decrease driven by improved disability results.
Total Group Protection sales of $127 million were up 61% from the prior-year quarter driven by strong results across all products and size segments. Insurance premiums of $1.2 billion in the quarter were up 7% compared to the prior-year quarter.
Other Operations
Other Operations reported a loss from operations of $92 million versus a loss of $78 million in the prior-year quarter driven by increased investments in the Spark Initiative aimed at improving our efficiency and effectiveness.
Realized Gains and Losses / Impacts to Net Income
Realized gains/losses and impacts to net income (after-tax) in the quarter were driven by: | · | A $112 million loss primarily from negative hedge results driven by elevated market volatility | | --- | --- | | · | A $20 million loss related to financial assets | | --- | --- |
Unrealized Gains and Losses
The company reported a net unrealized loss of $6.3 billion, pre-tax, on its available-for-sale securities at June 30, 2022. This compares to a net unrealized gain of $15.6 billion, pre-tax, at June 30, 2021, with the year-over-year decrease primarily driven by higher interest rates.
Share Count
The quarter’s average diluted share count of 172.7 million was down 10% from the second quarter of 2021, the result of repurchasing 19.8 million shares of stock at a cost of $1.4 billion since June 30, 2021.
Book Value
As of June 30, 2022, book value per share, including AOCI, decreased 53% from the prior-year period to $53.97. Book value per share, excluding AOCI, increased 5% from the prior-year period to $79.49.
The tables attached to this release define and reconcile the non-GAAP measures adjusted income from operations, adjusted operating ROE and BVPS, excluding AOCI, to net income, ROE and BVPS, including AOCI, calculated in accordance with GAAP.
This press release contains statements that are forward-looking, and actual results may differ materially. Please see the Forward-looking Statements – Cautionary Language at the end of this release for factors that may cause actual results to differ materially from the company’s current expectations.
For other financial information, please refer to the company’s second quarter 2022 statistical supplement available on its website, http://www.lincolnfinancial.com/investor.
Conference Call Information
Lincoln Financial Group will discuss the company’s second quarter results with investors in a conference call beginning at 10:00 a.m. Eastern Time on Thursday, August 4, 2022.
The conference call will be broadcast live through the company website at www.lincolnfinancial.com/webcast. Please log on to the webcast at least 15 minutes prior to the start of the conference call to download and install any necessary streaming media software. A replay of the call will be available by 1:00 p.m. Eastern Time on August 4, 2022 at www.lincolnfinancial.com/webcast.
About Lincoln Financial Group
Lincoln Financial Group provides advice and solutions that help people take charge of their financial lives with confidence and optimism. Today, approximately 16 million customers trust our retirement, insurance and wealth protection expertise to help address their lifestyle, savings and income goals, and guard against long-term care expenses. Headquartered in Radnor, Pennsylvania, Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. The company had $279 billion in end-of-period account values as of June 30, 2022. Lincoln Financial Group is a committed corporate citizen included on major sustainability indices including the Dow Jones Sustainability Index North America and FTSE4Good and ranks among Newsweek’s Most Responsible Companies. Dedicated to diversity, equity and inclusion, we are included on transparency benchmarking tools such as the Corporate Equality Index, the Disability Equality Index and the Bloomberg Gender-Equality Index. Committed to providing our employees with flexible work arrangements, we were named to FlexJobs’ list of the Top 100 Companies to Watch for Remote Jobs in 2022. With a long and rich legacy of acting ethically, telling the truth and speaking up for what is right, Lincoln was recognized as one of Ethisphere’s 2022 World’s Most Ethical Companies®. Learn more at: www.LincolnFinancial.com. Follow us on Facebook, Twitter, LinkedIn, and Instagram. Sign up for email alerts at http://newsroom.lfg.com.
Explanatory Notes on Use of Non-GAAP Measures
Management believes that adjusted income from operations (adjusted operating income), adjusted operating return on equity, adjusted operating revenues, and adjusted operating EPS better explain the results of the company’s ongoing businesses in a manner that allows for a better understanding of the underlying trends in the company’s current business because the excluded items are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments, and, in most instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. Management also believes that using book value excluding accumulated other comprehensive income (“AOCI”) enables investors to analyze the amount of our net worth that is primarily attributable to our business operations. 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.
For the historical periods, reconciliations of non-GAAP measures used in this press release to the most directly comparable GAAP measure may be included in this Appendix to the press release and/or are included in the Statistical Reports for the corresponding periods contained in the Earnings section of the Investor Relations page on our website: www.lincolnfinancial.com/investor.
Definitions of Non-GAAP Measures Used in this Press Release
Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity (including and excluding average goodwill within average equity), excluding AOCI, using annualized adjusted income (loss) from operations are financial measures we use to evaluate and assess our results. Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity (“ROE”), as used in the press release, are non-GAAP financial measures and do not replace GAAP net income (loss), revenues and ROE, the most directly comparable GAAP measures.
Adjusted Income (Loss) from Operations
Adjusted income (loss) from operations is GAAP net income (loss) excluding the after-tax effects of the following items, as applicable:
| · | 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 and variable universal life products with secondary guarantees (“benefit ratio unlocking”); | | --- | --- | | · | Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance; | | --- | --- | | · | Gains (losses) on modification or early extinguishment of debt; | | --- | --- | | · | Losses from the impairment of intangible assets; | | --- | --- | | · | Income (loss) from discontinued operations; | | --- | --- | | · | Transaction and integration costs related to mergers and acquisitions including the acquisition or divestiture, through reinsurance or other means, of businesses or blocks of business; 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
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 deferred front-end loads (“DFEL”) arising from changes in benefit ratio unlocking; and | | --- | --- | | · | Amortization of deferred gains arising from reserve changes on business sold through reinsurance. | | --- | --- |
Adjusted Operating Return on Equity
Adjusted operating return on equity measures how efficiently we generate profits from the resources provided by our net assets. | · | 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. | | --- | --- |
Definition of Notable Items
Adjusted income (loss) from operations, excluding notable items, is a non-GAAP measure that excludes items which, in management’s view, do not reflect the company’s normal, ongoing operations. | · | 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. | | --- | --- |
Book Value Per Share, Excluding AOCI
Book value per share, excluding AOCI is calculated based upon a non-GAAP financial measure. | · | 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. | | --- | --- |
Special Note
Sales
Sales as reported consist of the following: | · | Annuities and Retirement Plan Services – deposits from new and existing customers; | | --- | --- | | · | Universal life insurance (“UL”), indexed universal life insurance (“IUL”), variable universal life insurance (“VUL”) – second-year commissionable premiums plus 5% of excess premiums received; | | --- | --- | | · | MoneyGuard® linked-benefit products – MoneyGuard® (UL), 15% of total expected premium deposits, and MoneyGuard Market AdvantageSM (VUL), 150% of commissionable premiums; | | --- | --- | | · | Executive Benefits –insurance and corporate-owned UL and VUL, second-year commissionable premiums plus 5% of excess premium received, and single premium bank-owned UL and VUL, 15% of single premium deposits; | | --- | --- | | · | Term – 100% of annualized second-year premiums; and | | --- | --- | | · | Group Protection – annualized second-year premiums from new policies. | | --- | --- |
Lincoln National Corporation
Reconciliation of Net Income to Adjusted Income from Operations
| | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | For the | | | | For the | | | | | (in millions, except per share data) | Three Months Ended | | | | Six Months Ended | | | | | | June 30, | | | | June 30, | | | | | | 2022 | | 2021 | | 2022 | | 2021 | | | | | | | | | | | | | Total Revenues | $ | 5,104 | $ | 4,851 | $ | 9,791 | $ | 9,386 | | Less: | | | | | | | | | | Excluded realized gain (loss) | | 473 | | (53) | | 447 | | (281) | | Amortization of DFEL associated with benefit ratio unlocking | | (10) | | 1 | | (15) | | 2 | | Total Adjusted Operating Revenues | $ | 4,641 | $ | 4,903 | $ | 9,359 | $ | 9,665 | | | | | | | | | | | | Net Income (Loss) Available to Common | | | | | | | | | | Stockholders – Diluted | $ | 231 | $ | 642 | $ | 334 | $ | 867 | | Less: | | | | | | | | | | Adjustment for deferred units of LNC stock in our | | | | | | | | | | deferred compensation plans (1) | | (7) | | - | | (7) | | - | | Net Income (Loss) | | 238 | | 642 | | 341 | | 867 | | Less: | | | | | | | | | | Excluded realized gain (loss), after-tax | | 374 | | (43) | | 352 | | (223) | | Benefit ratio unlocking, after-tax | | (527) | | 77 | | (696) | | 131 | | Total adjustments | | (153) | | 34 | | (344) | | (92) | | Adjusted Income (Loss) from Operations | $ | 391 | $ | 608 | $ | 685 | $ | 959 | | | | | | | | | | | | Earnings (Loss) Per Common Share – Diluted | | | | | | | | | | Net income (loss) | $ | 1.34 | $ | 3.34 | $ | 1.91 | $ | 4.51 | | Adjusted income (loss) from operations | | 2.23 | | 3.17 | | 3.88 | | 4.98 | | | | | | | | | | | | Average Stockholders' Equity | | | | | | | | | | Average equity, including average AOCI | $ | 11,950 | $ | 20,669 | $ | 14,721 | $ | 20,908 | | Average AOCI | | (1,547) | | 6,620 | | 1,149 | | 6,983 | | Average equity, excluding AOCI | | 13,497 | | 14,049 | | 13,572 | | 13,925 | | Average goodwill | | 1,778 | | 1,778 | | 1,778 | | 1,778 | | Average equity, excluding AOCI and goodwill | $ | 11,719 | $ | 12,271 | $ | 11,794 | $ | 12,147 | | | | | | | | | | | | Return on Equity, Including AOCI | | | | | | | | | | Net income (loss) with average equity including goodwill | | 8.0% | | 12.4% | | 4.6% | | 8.3% | | | | | | | | | | | | Adjusted Operating Return on Equity, Excluding AOCI | | | | | | | | | | Adjusted income (loss) from operations with average equity | | | | | | | | | | including goodwill | | 11.6% | | 17.3% | | 10.1% | | 13.8% | | Adjusted income (loss) from operations with average equity | | | | | | | | | | excluding goodwill | | 13.3% | | 19.8% | | 11.6% | | 15.8% | | | | | | | | | | | | (1) We exclude deferred units of LNC stock that are antidilutive from our diluted earnings per share calculation. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lincoln National Corporation
Reconciliation of Book Value per Share
| | | | | | | --- | --- | --- | --- | --- | | | | | | | | | As of June 30, | | | | | | 2022 | | 2021 | | | Book value per share, including AOCI | $ | 53.97 | $ | 115.00 | | Per share impact of AOCI | | (25.52) | | 39.55 | | Book value per share, excluding AOCI | | 79.49 | | 75.45 |
Lincoln National Corporation
Digest of Earnings
| | | | | | | --- | --- | --- | --- | --- | | | | | | | | | For the | | | | | (in millions, except per share data) | Three Months Ended | | | | | | June 30, | | | | | | 2022 | | 2021 | | | | | | | | | Revenues | $ | 5,104 | $ | 4,851 | | | | | | | | Net Income (Loss) | $ | 238 | $ | 642 | | Adjustment for deferred units of LNC stock in our | | | | | | deferred compensation plans (1) | | (7) | | - | | Net Income (Loss) Available to Common | | | | | | Stockholders – Diluted | $ | 231 | $ | 642 | | | | | | | | Earnings (Loss) Per Common Share – Basic | $ | 1.39 | $ | 3.38 | | Earnings (Loss) Per Common Share – Diluted | | 1.34 | | 3.34 | | | | | | | | Average Shares – Basic | 171,130,192 | | 189,987,670 | | | Average Shares – Diluted | 172,706,993 | | 192,202,398 | | | | | | | | | | For the | | | | | | Six Months Ended | | | | | | June 30, | | | | | | 2022 | | 2021 | | | | | | | | | Revenues | $ | 9,791 | $ | 9,386 | | | | | | | | Net Income (Loss) | $ | 341 | $ | 867 | | Adjustment for deferred units of LNC stock in our | | | | | | deferred compensation plans (1) | | (7) | | - | | Net Income (Loss) Available to Common | | | | | | Stockholders – Diluted | $ | 334 | $ | 867 | | | | | | | | Earnings (Loss) Per Common Share – Basic | $ | 1.98 | $ | 4.54 | | Earnings (Loss) Per Common Share – Diluted | | 1.91 | | 4.51 | | | | | | | | Average Shares – Basic | 172,633,482 | | 190,878,951 | | | Average Shares – Diluted | 174,562,419 | | 192,362,012 | | | | | | | | | | | | | | | | | | | | | (1) We exclude deferred units of LNC stock that are antidilutive from our diluted earnings per share calculation. | | | | | | | | | | | | | | | | |
Forward Looking Statements — Cautionary Language
FORWARD-LOOKING STATEMENTS – CAUTIONARY LANGUAGE
Certain statements made in this press release and in other written or oral statements made by Lincoln or on Lincoln’s behalf are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements. Forward-looking statements may contain words like: “anticipate,” “believe,” “estimate,” “expect,” “project,” “shall,” “will” and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in Lincoln’s businesses, prospective services or products, future performance or financial results and the outcome of contingencies, such as legal proceedings. Lincoln claims the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.
Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those expressed in or implied by such forward-looking statements due to a variety of factors, including: | · | 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; | | --- | --- | | · | Weak general economic and business conditions that may affect demand for our products, account values, investment results, guaranteed benefit liabilities, premium levels and claims experience; | | --- | --- | | · | Adverse global capital and credit market conditions that may 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; | | --- | --- | | · | The inability of our subsidiaries to pay dividends to the holding company in sufficient amounts, which 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; | | --- | --- | | · | The impact of Regulation Best Interest or other regulations adopted by the Securities and Exchange Commission (“SEC”), the Department of Labor or other federal or state regulators or self-regulatory organizations relating to the standard of care owed by investment advisers and/or broker-dealers that could affect our distribution model; | | --- | --- | | · | Actions taken by reinsurers to raise rates on in-force business; | | --- | --- | | · | 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; | | --- | --- | | · | The impact of the implementation of the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to the regulation of derivatives transactions; | | --- | --- | | · | 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 decline or continued volatility 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 business, results of operations and financial condition, including the adoption effective January 1, 2023, of FASB ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts; | | --- | --- | | · | 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; | | --- | --- | | · | Interruption in telecommunication, information technology or other operational systems or failure to safeguard the confidentiality or privacy of sensitive data on such systems, including from cyberattacks or other breaches of our data security systems; | | --- | --- | | · | The effect of acquisitions and divestitures, restructurings, product withdrawals and other unusual items; | | --- | --- | | · | The inability to realize or sustain the benefits we expect from, greater than expected investments in, and the potential impact of efforts related to, our strategic initiatives, including the Spark Initiative; | | --- | --- | | · | The adequacy and collectability of reinsurance that we have obtained; | | --- | --- | | · | Future 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; 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| · | 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. | | --- | --- |
The risks and uncertainties included here are not exhaustive. Our most recent Form 10-K, as well as other reports that we file with the SEC, include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.
Further, it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, Lincoln disclaims any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this press release.
The reporting of Risk Based Capital (“RBC”) measures is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising or promotional activities.
2Q22 - Stat Supp
| | | | | --- | --- | --- | | | Lincoln Financial Group | | | | Table of Contents | | | | | | | | | | | | Notes | 1 | | | Credit Ratings | 2 | | | Consolidated | | | | Consolidated Statements of Income (Loss) | 3 | | | Consolidated Balance Sheets | 4 | | | Earnings, Shares and Return on Equity | 5 | | | Key Stakeholder Metrics | 6 | | | Segment and Sources of Earnings | 7 | | | Select Earnings Drivers By Segment | 8 | | | Sales By Segment | 9 | | | Operating Revenues and General and Administrative Expenses By Segment | 10 | | | Operating Commissions and Other Expenses | 11 | | | Interest Rate Yields and Spreads By Segment | 12 | | | Select Earnings and Operational Data from Business Segments | | | | Annuities | 13 | | | Retirement Plan Services | 14 | | | Life Insurance | 15 | | | Group Protection | 16 | | | Other Operations | 17 | | | DAC & Account Value Rollforwards | | | | Consolidated DAC, VOBA, DSI and DFEL Roll Forwards | 18 | | | Account Value Roll Forwards: | | | | Annuities | 19 | | | Retirement Plan Services | 20 | | | Life Insurance | 21 | | | Other Information | | | | Fixed-Income Asset Class | 22 | | | Fixed-Income Credit Quality | 23 | | | Realized Gain (Loss), After-DAC | 24 | | | Select GAAP to Non-GAAP Reconciliations | 25 | | | | | | | | | | | | |
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| --- | --- | | | 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. | | | • We exclude deferred units of LNC stock that are antidilutive from our diluted earnings per share calculation. In addition, for any period where a net loss or adjusted loss from operations 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; | | | • Universal life insurance (“UL”), indexed universal life insurance (“IUL”), variable universal life insurance (“VUL”) – first-year commissionable premiums plus 5% of excess premiums received; | | | • MoneyGuard® linked-benefit products – MoneyGuard® (UL), 15% of total expected premium deposits, and MoneyGuard Market AdvantageSM (VUL), 150% of commissionable premiums; | | | • Executive Benefits – insurance and corporate-owned UL and VUL, first-year commissionable premiums plus 5% of excess premium received, and single premium bank-owned UL and VUL, 15% of | | | single premium deposits; | | | • 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. | | | | | | 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. | | | | | | | | | Page 1a |
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| | Notes |
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| | 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 and variable universal life insurance products with secondary guarantees (“benefit ratio unlocking”); |
| | • Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance; |
| | • Gains (losses) on modification or early extinguishment of debt; |
| | • Losses from the impairment of intangible assets; |
| | • Income (loss) from discontinued operations; |
| | • Transaction and integration costs related to mergers and acquisitions including the acquisition or divestiture, through reinsurance or other means, of business or blocks of business; 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 benefit ratio unlocking; and |
| | • Amortization of deferred gains arising from reserve changes on business sold through reinsurance. |
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| | 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. |
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| | Annuities interest rate spreads for the six months ended 2021 have been restated to conform to the current presentation. |
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| | Statistical Supplement is Dated |
| | The financial data in this document is dated August 3, 2022, and has not been updated since that date. Lincoln Financial Group does not intend to update this document. |
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| | Credit Ratings | |||||
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| | Ratings as of August 3, 2022 | |||||
| | 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- | |
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| | Investor Inquiries May Be Directed To: | |||||
| | Albert Copersino, Vice President, Investor Relations | |||||
| | Email: Albert.Copersino@lfg.com | |||||
| | Phone: 203-257-4493 | |||||
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| | Lincoln Financial Group | ||||||||||||||||
| | Consolidated Statements of Income (Loss) | ||||||||||||||||
| | Unaudited (millions of dollars, except per share data) | ||||||||||||||||
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| | For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | Revenues | ||||||||||||||||
| | Insurance premiums | $ | 1,398 | $ | 1,394 | $ | 1,420 | $ | 1,477 | $ | 1,498 | 7.2% | $ | 2,804 | $ | 2,975 | 6.1% |
| | Fee income | 1,670 | 1,996 | 1,628 | 1,568 | 1,506 | -9.8% | 3,262 | 3,075 | -5.7% | |||||||
| | Net investment income | 1,584 | 1,576 | 1,445 | 1,412 | 1,369 | -13.6% | 3,094 | 2,781 | -10.1% | |||||||
| | Realized gain (loss) | (2) | 85 | (115) | 29 | 522 | NM | (182) | 551 | NM | |||||||
| | Amortization of deferred gain on business | ||||||||||||||||
| | sold through reinsurance | 9 | 9 | 19 | 19 | 19 | 111.1% | 17 | 38 | 123.5% | |||||||
| | Other revenues | 192 | 181 | 207 | 182 | 190 | -1.0% | 391 | 371 | -5.1% | |||||||
| | Total revenues | 4,851 | 5,241 | 4,604 | 4,687 | 5,104 | 5.2% | 9,386 | 9,791 | 4.3% | |||||||
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| | Expenses | ||||||||||||||||
| | Interest credited | 737 | 750 | 692 | 697 | 706 | -4.2% | 1,474 | 1,403 | -4.8% | |||||||
| | Benefits | 1,930 | 2,122 | 2,251 | 2,565 | 2,890 | 49.7% | 4,156 | 5,456 | 31.3% | |||||||
| | Commissions and other expenses | 1,326 | 1,906 | 1,328 | 1,236 | 1,127 | -15.0% | 2,556 | 2,362 | -7.6% | |||||||
| | Interest and debt expense | 65 | 73 | 66 | 66 | 68 | 4.6% | 131 | 134 | 2.3% | |||||||
| | Spark program expense | 21 | 22 | 30 | 31 | 44 | 109.5% | 35 | 75 | 114.3% | |||||||
| | Total expenses | 4,079 | 4,873 | 4,367 | 4,595 | 4,835 | 18.5% | 8,352 | 9,430 | 12.9% | |||||||
| | Income (loss) before taxes | 772 | 368 | 237 | 92 | 269 | -65.2% | 1,034 | 361 | -65.1% | |||||||
| | Federal income tax expense (benefit) | 130 | 50 | 17 | (12) | 31 | -76.2% | 167 | 20 | -88.0% | |||||||
| | Net income (loss) | 642 | 318 | 220 | 104 | 238 | -62.9% | 867 | 341 | -60.7% | |||||||
| | Adjustment for deferred units of LNC stock | ||||||||||||||||
| | in our deferred compensation plans | - | - | - | (1) | (7) | NM | - | (7) | NM | |||||||
| | Net income (loss) available to common | ||||||||||||||||
| | stockholders – diluted | $ | 642 | $ | 318 | $ | 220 | $ | 103 | $ | 231 | -64.0% | $ | 867 | $ | 334 | -61.5% |
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| | Earnings (Loss) Per Common Share – Diluted | ||||||||||||||||
| | Net income (loss) | $ | 3.34 | $ | 1.68 | $ | 1.20 | $ | 0.58 | $ | 1.34 | -59.9% | $ | 4.51 | $ | 1.91 | -57.6% |
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| | ROE, including AOCI | ||||||||||||||||
| | Net income (loss) | 12.4% | 5.9% | 4.2% | 2.4% | 8.0% | 8.3% | 4.6% | |||||||||
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| | Lincoln Financial Group | |||||||||||
| | Consolidated Balance Sheets | |||||||||||
| | Unaudited (millions of dollars) | |||||||||||
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| | As of | |||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | ||||||
| | ASSETS | |||||||||||
| | Investments: | |||||||||||
| | Fixed maturity available-for-sale (“AFS”) securities, net of allowance for | |||||||||||
| | credit losses: | |||||||||||
| | Corporate bonds | $ | 101,003 | $ | 100,862 | $ | 98,120 | $ | 90,561 | $ | 83,158 | -17.7% |
| | U.S. government bonds | 444 | 443 | 433 | 418 | 415 | -6.5% | |||||
| | State and municipal bonds | 6,919 | 6,901 | 6,621 | 6,001 | 5,523 | -20.2% | |||||
| | Foreign government bonds | 464 | 512 | 432 | 383 | 348 | -25.0% | |||||
| | Residential mortgage-backed securities | 3,027 | 2,935 | 2,525 | 2,338 | 2,181 | -27.9% | |||||
| | Commercial mortgage-backed securities | 1,578 | 1,594 | 1,599 | 1,592 | 1,557 | -1.3% | |||||
| | Asset-backed securities | 8,177 | 8,303 | 8,512 | 8,929 | 9,711 | 18.8% | |||||
| | Hybrid and redeemable preferred securities | 603 | 535 | 504 | 473 | 472 | -21.7% | |||||
| | Total fixed maturity AFS securities, net of allowance for credit losses | 122,215 | 122,085 | 118,746 | 110,695 | 103,365 | -15.4% | |||||
| | Trading securities | 4,232 | 4,191 | 4,482 | 4,385 | 3,822 | -9.7% | |||||
| | Equity securities | 174 | 243 | 318 | 346 | 344 | 97.7% | |||||
| | Mortgage loans on real estate, net of allowance for credit losses | 17,586 | 17,730 | 17,991 | 17,892 | 17,922 | 1.9% | |||||
| | Policy loans | 2,410 | 2,379 | 2,364 | 2,339 | 2,368 | -1.7% | |||||
| | Derivative investments | 4,548 | 4,828 | 5,437 | 4,840 | 3,370 | -25.9% | |||||
| | Other investments | 3,950 | 4,069 | 4,292 | 4,127 | 4,054 | 2.6% | |||||
| | Total investments | 155,115 | 155,525 | 153,630 | 144,624 | 135,245 | -12.8% | |||||
| | Cash and invested cash | 2,389 | 2,614 | 2,612 | 1,960 | 1,567 | -34.4% | |||||
| | DAC and VOBA | 6,261 | 5,965 | 6,081 | 8,810 | 11,872 | 89.6% | |||||
| | Premiums and fees receivable | 583 | 584 | 580 | 671 | 656 | 12.5% | |||||
| | Accrued investment income | 1,254 | 1,297 | 1,189 | 1,247 | 1,226 | -2.2% | |||||
| | Reinsurance recoverables, net of allowance for credit losses | 15,981 | 15,729 | 20,295 | 20,044 | 19,909 | 24.6% | |||||
| | Funds withheld reinsurance assets | 527 | 526 | 517 | 510 | 506 | -4.0% | |||||
| | Goodwill | 1,778 | 1,778 | 1,778 | 1,778 | 1,778 | 0.0% | |||||
| | Other assets | 17,465 | 17,367 | 18,036 | 17,406 | 17,219 | -1.4% | |||||
| | Separate account assets | 178,795 | 175,667 | 182,583 | 168,879 | 145,791 | -18.5% | |||||
| | Total assets | $ | 380,148 | $ | 377,052 | $ | 387,301 | $ | 365,929 | $ | 335,769 | -11.7% |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Lincoln Financial Group | | | | | | | | | | | | | | Consolidated Balance Sheets | | | | | | | | | | | | | | Unaudited (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of | | | | | | | | | | | | | | 6/30/21 | | 9/30/21 | | 12/31/21 | | 3/31/22 | | 6/30/22 | | Change | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | Future contract benefits | $ | 40,250 | $ | 40,641 | $ | 41,030 | $ | 39,773 | $ | 39,306 | -2.3% | | | Other contract holder funds | | 108,778 | | 109,297 | | 111,702 | | 112,901 | | 115,127 | 5.8% | | | Short-term debt | | 300 | | 300 | | 300 | | - | | - | -100.0% | | | Long-term debt by rating agency leverage definitions: | | | | | | | | | | | | | | Operating (see note (2) on page 6 for details) | | 866 | | 866 | | 867 | | 867 | | 867 | 0.1% | | | Financial | | 5,468 | | 5,457 | | 5,458 | | 5,694 | | 5,631 | 3.0% | | | Reinsurance-related embedded derivatives | | 328 | | 304 | | 206 | | - | | - | -100.0% | | | Funds withheld reinsurance liabilities | | 2,027 | | 2,078 | | 2,118 | | 2,164 | | 2,229 | 10.0% | | | Payables for collateral on investments | | 8,199 | | 8,379 | | 8,946 | | 8,927 | | 7,524 | -8.2% | | | Other liabilities | | 13,392 | | 12,893 | | 13,819 | | 12,012 | | 10,106 | -24.5% | | | Separate account liabilities | | 178,795 | | 175,667 | | 182,583 | | 168,879 | | 145,791 | -18.5% | | | Total liabilities | | 358,403 | | 355,882 | | 367,029 | | 351,217 | | 326,581 | -8.9% | | | | | | | | | | | | | | | | | Stockholders’ Equity | | | | | | | | | | | | | | Common stock | | 5,021 | | 4,956 | | 4,735 | | 4,586 | | 4,546 | -9.5% | | | Retained earnings | | 9,245 | | 9,365 | | 9,096 | | 8,876 | | 8,985 | -2.8% | | | AOCI: | | | | | | | | | | | | | | Unrealized investment gains (losses) | | 7,756 | | 7,128 | | 6,674 | | 1,485 | | (4,104) | NM | | | Foreign currency translation adjustment | | (10) | | (14) | | (14) | | (19) | | (33) | NM | | | Funded status of employee benefit plans | | (267) | | (265) | | (219) | | (216) | | (206) | 22.8% | | | Total AOCI | | 7,479 | | 6,849 | | 6,441 | | 1,250 | | (4,343) | NM | | | Total stockholders’ equity | | 21,745 | | 21,170 | | 20,272 | | 14,712 | | 9,188 | -57.7% | | | Total liabilities and stockholders’ equity | $ | 380,148 | $ | 377,052 | $ | 387,301 | $ | 365,929 | $ | 335,769 | -11.7% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Page 4b | | | | | | | | | | | |
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| | Lincoln Financial Group | ||||||||||||||||
| | Earnings, Shares and Return on Equity | ||||||||||||||||
| | Unaudited (millions of dollars, except per share data) | ||||||||||||||||
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| | As of or For the Three Months Ended | As of or For the Six Months Ended | |||||||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | Income (Loss) | ||||||||||||||||
| | Net income (loss) | $ | 642 | $ | 318 | $ | 220 | $ | 104 | $ | 238 | -62.9% | $ | 867 | $ | 341 | -60.7% |
| | Pre-tax adjusted income (loss) from operations | 729 | 354 | 320 | 333 | 463 | -36.5% | 1,150 | 796 | -30.8% | |||||||
| | After-tax adjusted income (loss) from operations (1) | 608 | 307 | 286 | 294 | 391 | -35.7% | 959 | 685 | -28.6% | |||||||
| | Adjusted operating tax rate | 16.5% | 13.3% | 10.6% | 11.5% | 15.6% | 16.6% | 13.9% | |||||||||
| | |||||||||||||||||
| | Average Stockholders’ Equity | ||||||||||||||||
| | Average equity, including AOCI | $ | 20,669 | $ | 21,458 | $ | 20,721 | $ | 17,492 | $ | 11,950 | -42.2% | $ | 20,908 | $ | 14,721 | -29.6% |
| | Average AOCI | 6,620 | 7,164 | 6,645 | 3,846 | (1,547) | NM | 6,983 | 1,149 | -83.5% | |||||||
| | Average equity, excluding AOCI | $ | 14,049 | $ | 14,294 | $ | 14,076 | $ | 13,646 | $ | 13,497 | -3.9% | $ | 13,925 | $ | 13,572 | -2.5% |
| | |||||||||||||||||
| | ROE, Excluding AOCI | ||||||||||||||||
| | Net income (loss) | 18.3% | 8.9% | 6.3% | 3.0% | 7.0% | 12.5% | 5.0% | |||||||||
| | Adjusted income (loss) from operations | 17.3% | 8.6% | 8.1% | 8.6% | 11.6% | 13.8% | 10.1% | |||||||||
| | |||||||||||||||||
| | Per Share | ||||||||||||||||
| | Net income (loss) (diluted) | $ | 3.34 | $ | 1.68 | $ | 1.20 | $ | 0.58 | $ | 1.34 | -59.9% | $ | 4.51 | $ | 1.91 | -57.6% |
| | Adjusted income (loss) from operations (diluted) | 3.17 | 1.62 | 1.56 | 1.66 | 2.23 | -29.7% | 4.98 | 3.88 | -22.1% | |||||||
| | Dividends declared during the period | 0.42 | 0.42 | 0.45 | 0.45 | 0.45 | 7.1% | 0.84 | 0.90 | 7.1% | |||||||
| | |||||||||||||||||
| | Book value, including AOCI | $ | 115.00 | $ | 113.77 | $ | 114.41 | $ | 85.59 | $ | 53.97 | -53.1% | $ | 115.00 | $ | 53.97 | -53.1% |
| | Per share impact of AOCI | 39.55 | 36.81 | 36.36 | 7.27 | (25.52) | NM | 39.55 | (25.52) | NM | |||||||
| | Book value, excluding AOCI | $ | 75.45 | $ | 76.96 | $ | 78.05 | $ | 78.32 | $ | 79.49 | 5.4% | $ | 75.45 | $ | 79.49 | 5.4% |
| | |||||||||||||||||
| | Shares | ||||||||||||||||
| | Repurchased during the period | 2.2 | 3.1 | 9.1 | 5.8 | 1.8 | -18.2% | 4.1 | 7.6 | 85.4% | |||||||
| | End-of-period – basic | 189.1 | 186.1 | 177.2 | 171.9 | 170.2 | -10.0% | 189.1 | 170.2 | -10.0% | |||||||
| | End-of-period – diluted | 191.4 | 188.1 | 179.8 | 173.8 | 171.6 | -10.3% | 191.4 | 171.6 | -10.3% | |||||||
| | Average for the period – diluted | 192.2 | 189.1 | 183.2 | 176.4 | 172.7 | -10.1% | 192.4 | 174.6 | -9.3% | |||||||
| | |||||||||||||||||
| | (1) See reconciliation to net income (loss) on page 25. | ||||||||||||||||
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| | Page 5 |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Lincoln Financial Group | |||||||||||||||
| | Key Stakeholder Metrics | |||||||||||||||
| | Unaudited (millions of dollars, except per share data) | |||||||||||||||
| | ||||||||||||||||
| | For the Six Months Ended | |||||||||||||||
| | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | Cash Returned to Common Stockholders | |||||||||||||||
| | Shares repurchased | 150 | $ | 200 | $ | 650 | $ | 400 | $ | 100 | -33.3% | $ | 255 | $ | 500 | 96.1% |
| | Common dividends | 80 | 79 | 78 | 80 | 77 | -3.8% | 161 | 157 | -2.5% | ||||||
| | Total cash returned to common stockholders | 230 | $ | 279 | $ | 728 | $ | 480 | $ | 177 | -23.0% | $ | 416 | $ | 657 | 57.9% |
| | ||||||||||||||||
| | Leverage Ratio | |||||||||||||||
| | Short-term debt | 300 | $ | 300 | $ | 300 | $ | - | $ | - | -100.0% | |||||
| | Long-term debt | 6,334 | 6,323 | 6,325 | 6,561 | 6,498 | 2.6% | |||||||||
| | Total debt (1) | 6,634 | 6,623 | 6,625 | 6,561 | 6,498 | -2.1% | |||||||||
| | Less: | |||||||||||||||
| | Operating debt (2) | 866 | 866 | 867 | 867 | 867 | 0.1% | |||||||||
| | 25% of capital securities and subordinated notes | 302 | 302 | 302 | 302 | 302 | 0.0% | |||||||||
| | Carrying value of fair value hedges and other items | 345 | 333 | 335 | 273 | 209 | -39.4% | |||||||||
| | Total numerator | 5,121 | $ | 5,122 | $ | 5,121 | $ | 5,119 | $ | 5,120 | 0.0% | |||||
| | ||||||||||||||||
| | Stockholders’ equity, excluding unrealized | |||||||||||||||
| | investment gains (losses) | 13,989 | $ | 14,042 | $ | 13,598 | $ | 13,227 | $ | 13,292 | -5.0% | |||||
| | Add: 25% of capital securities and subordinated | |||||||||||||||
| | notes | 302 | 302 | 302 | 302 | 302 | 0.0% | |||||||||
| | Total numerator | 5,121 | 5,122 | 5,121 | 5,119 | 5,120 | 0.0% | |||||||||
| | Total denominator | 19,412 | $ | 19,466 | $ | 19,021 | $ | 18,648 | $ | 18,714 | -3.6% | |||||
| | ||||||||||||||||
| | Leverage ratio | 26.4% | 26.3% | 26.9% | 27.4% | 27.4% | ||||||||||
| | ||||||||||||||||
| | Holding Company Available Liquidity | 762 | $ | 754 | $ | 1,117 | $ | 755 | $ | 756 | -0.8% | |||||
| | ||||||||||||||||
| | (1) Excludes obligations under finance leases and certain financing arrangements of 557 million that are reported in other liabilities on our Consolidated Balance Sheets. | |||||||||||||||
| | (2) We have categorized as operating debt the senior notes issued in October 2007 and June 2010 because the proceeds were used as a long-term structured solution to reduce the strain | |||||||||||||||
| | on increasing statutory reserves associated with secondary guarantee UL and term policies. | |||||||||||||||
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| | Page 6 |
All values are in US Dollars.
| | | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Lincoln Financial Group | | | | | | | | | | | | | | | | | | | Segment and Sources of Earnings | | | | | | | | | | | | | | | | | | | Unaudited (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended | | | | | | | | | | | For the Six Months Ended | | | | | | | | 6/30/21 | | 9/30/21 | | 12/31/21 | | 3/31/22 | | 6/30/22 | | Change | 6/30/21 | | 6/30/22 | | Change | | | Income (Loss) from Operations, Pre-Tax | | | | | | | | | | | | | | | | | | | Annuities | $ | 380 | $ | 403 | $ | 391 | $ | 351 | $ | 295 | -22.4% | $ | 730 | $ | 646 | -11.5% | | | Retirement Plan Services | | 74 | | 72 | | 68 | | 64 | | 63 | -14.9% | | 144 | | 128 | -11.1% | | | Life Insurance | | 317 | | 113 | | 97 | | 65 | | 139 | -56.2% | | 447 | | 204 | -54.4% | | | Group Protection | | 59 | | (40) | | (146) | | (52) | | 75 | 27.1% | | 26 | | 23 | -11.5% | | | Other Operations | | (101) | | (194) | | (90) | | (95) | | (109) | -7.9% | | (197) | | (205) | -4.1% | | | Adjusted income (loss) from operations, before | | | | | | | | | | | | | | | | | | | income taxes | $ | 729 | $ | 354 | $ | 320 | $ | 333 | $ | 463 | -36.5% | $ | 1,150 | $ | 796 | -30.8% | | | | | | | | | | | | | | | | | | | | | | Income (Loss) from Operations, After-Tax | | | | | | | | | | | | | | | | | | | Annuities | $ | 323 | $ | 338 | $ | 332 | $ | 302 | $ | 256 | -20.7% | $ | 613 | $ | 558 | -9.0% | | | Retirement Plan Services | | 62 | | 60 | | 57 | | 55 | | 54 | -12.9% | | 118 | | 109 | -7.6% | | | Life Insurance | | 255 | | 93 | | 80 | | 58 | | 114 | -55.3% | | 362 | | 172 | -52.5% | | | Group Protection | | 46 | | (32) | | (115) | | (41) | | 59 | 28.3% | | 20 | | 18 | -10.0% | | | Other Operations | | (78) | | (152) | | (68) | | (80) | | (92) | -17.9% | | (154) | | (172) | -11.7% | | | Adjusted income (loss) from operations | $ | 608 | $ | 307 | $ | 286 | $ | 294 | $ | 391 | -35.7% | $ | 959 | $ | 685 | -28.6% | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended | | | | | | | | | | | For the Trailing Twelve Months | | | | | | | | 6/30/21 | | 9/30/21 | | 12/31/21 | | 3/31/22 | | 6/30/22 | | Change | 6/30/21 | | 6/30/22 | | Change | | | Sources of Earnings, Pre-Tax | | | | | | | | | | | | | | | | | | | Investment spread | $ | 228 | $ | 152 | $ | 113 | $ | 99 | $ | 128 | -43.9% | $ | 387 | $ | 492 | 27.1% | | | Mortality/morbidity | | 219 | | 21 | | (81) | | (11) | | 150 | -31.5% | | 97 | | 79 | -18.6% | | | Fees on AUM | | 363 | | 381 | | 355 | | 325 | | 305 | -16.0% | | 1,321 | | 1,366 | 3.4% | | | VA riders | | 20 | | (6) | | 23 | | 15 | | (11) | NM | | (56) | | 22 | 139.3% | | | Total sources of earnings, before income taxes | | 830 | | 548 | | 410 | | 428 | | 572 | -31.1% | | 1,749 | | 1,959 | 12.0% | | | Other Operations | | (101) | | (194) | | (90) | | (95) | | (109) | -7.9% | | (418) | | (489) | -17.0% | | | Adjusted income (loss) from operations, before | | | | | | | | | | | | | | | | | | | income taxes | $ | 729 | $ | 354 | $ | 320 | $ | 333 | $ | 463 | -36.5% | $ | 1,331 | $ | 1,470 | 10.4% | | | | | | | | | | | | | | | | | | | | | | Sources of Earnings, Pre-Tax, Percentage By Component | | | | | | | | | | | | | | | | | | | Investment spread | | 27.5% | | 27.7% | | 27.6% | | 23.2% | | 22.3% | | | 22.1% | | 25.1% | | | | Mortality/morbidity | | 26.4% | | 3.9% | | -19.7% | | -2.6% | | 26.2% | | | 5.6% | | 4.0% | | | | Fees on AUM | | 43.6% | | 69.4% | | 86.5% | | 76.0% | | 53.3% | | | 75.5% | | 69.7% | | | | VA riders | | 2.5% | | -1.0% | | 5.6% | | 3.4% | | -1.8% | | | -3.2% | | 1.2% | | | | Total | | 100.0% | | 100.0% | | 100.0% | | 100.0% | | 100.0% | | | 100.0% | | 100.0% | | | | | | | | | | | | | | | | | | | | | | | Page 7 | | | | | | | | | | | | | | | | |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Lincoln Financial Group | ||||||||||||||||
| | Select Earnings Drivers By Segment | ||||||||||||||||
| | Unaudited (millions of dollars) | ||||||||||||||||
| | |||||||||||||||||
| | For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | Annuities | ||||||||||||||||
| | Operating revenues | $ | 1,249 | $ | 1,267 | $ | 1,282 | $ | 1,232 | $ | 1,169 | -6.4% | $ | 2,453 | $ | 2,401 | -2.1% |
| | Deposits | 3,209 | 2,707 | 3,011 | 2,705 | 2,702 | -15.8% | 6,023 | 5,407 | -10.2% | |||||||
| | Net flows | (297) | (841) | (655) | (553) | (318) | -7.1% | (1,073) | (871) | 18.8% | |||||||
| | Average account values, net of reinsurance | 166,034 | 169,581 | 170,953 | 163,628 | 152,025 | -8.4% | 163,091 | 157,727 | -3.3% | |||||||
| | |||||||||||||||||
| | Retirement Plan Services | ||||||||||||||||
| | Operating revenues | $ | 333 | $ | 328 | $ | 335 | $ | 318 | $ | 315 | -5.4% | $ | 660 | $ | 633 | -4.1% |
| | Deposits | 2,789 | 2,411 | 3,000 | 3,367 | 2,943 | 5.5% | 5,429 | 6,310 | 16.2% | |||||||
| | Net flows | 517 | (21) | (380) | 946 | 913 | 76.6% | 865 | 1,859 | 114.9% | |||||||
| | Average account values | 94,096 | 96,723 | 98,008 | 95,843 | 90,628 | -3.7% | 91,902 | 93,050 | 1.2% | |||||||
| | |||||||||||||||||
| | Life Insurance | ||||||||||||||||
| | Operating revenues | $ | 2,029 | $ | 2,325 | $ | 1,844 | $ | 1,825 | $ | 1,800 | -11.3% | $ | 3,968 | $ | 3,625 | -8.6% |
| | Deposits | 1,278 | 1,324 | 1,872 | 1,334 | 1,439 | 12.6% | 2,498 | 2,775 | 11.1% | |||||||
| | Net flows | 879 | 871 | 1,438 | 883 | 1,038 | 18.1% | 1,673 | 1,921 | 14.8% | |||||||
| | Average account values, net of reinsurance | 59,056 | 59,642 | 51,067 | 51,236 | 49,380 | -16.4% | 58,532 | 59,416 | 1.5% | |||||||
| | Average in-force face amount | 916,600 | 935,096 | 959,478 | 985,286 | 1,010,659 | 10.3% | 908,786 | 997,973 | 9.8% | |||||||
| | |||||||||||||||||
| | Group Protection | ||||||||||||||||
| | Operating revenues | $ | 1,247 | $ | 1,243 | $ | 1,252 | $ | 1,303 | $ | 1,323 | 6.1% | $ | 2,500 | $ | 2,626 | 5.0% |
| | Insurance premiums | 1,107 | 1,107 | 1,117 | 1,169 | 1,187 | 7.2% | 2,226 | 2,356 | 5.8% | |||||||
| | |||||||||||||||||
| | Consolidated | ||||||||||||||||
| | Adjusted operating revenues (1) | $ | 4,903 | $ | 5,205 | $ | 4,769 | $ | 4,718 | $ | 4,641 | -5.3% | $ | 9,665 | $ | 9,359 | -3.2% |
| | Deposits | 7,276 | 6,442 | 7,883 | 7,406 | 7,084 | -2.6% | 13,950 | 14,492 | 3.9% | |||||||
| | Net flows | 1,099 | 9 | 403 | 1,276 | 1,633 | 48.6% | 1,465 | 2,909 | 98.6% | |||||||
| | Average account values, net of reinsurance | 319,186 | 325,946 | 320,028 | 310,707 | 292,033 | -8.5% | 313,525 | 310,193 | -1.1% | |||||||
| | |||||||||||||||||
| | (1) See reconciliation to total revenues on page 25. | ||||||||||||||||
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| | Page 8 |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Lincoln Financial Group | ||||||||||||||||
| | Sales By Segment | ||||||||||||||||
| | Unaudited (millions of dollars) | ||||||||||||||||
| | |||||||||||||||||
| | For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | Sales | ||||||||||||||||
| | Annuities: | ||||||||||||||||
| | Indexed variable | $ | 1,600 | $ | 853 | $ | 977 | $ | 1,048 | $ | 1,220 | -23.8% | $ | 3,080 | $ | 2,269 | |
| | Other variable without GLBs | 683 | 739 | 787 | 605 | 422 | -38.2% | 1,293 | 1,025 | ||||||||
| | Other variable with GLBs | 742 | 773 | 834 | 678 | 536 | -27.8% | 1,381 | 1,214 | -12.1% | |||||||
| | Total variable | 3,025 | 2,365 | 2,598 | 2,331 | 2,178 | -28.0% | 5,754 | 4,508 | -21.7% | |||||||
| | Fixed | 184 | 342 | 413 | 374 | 524 | 184.8% | 269 | 899 | 234.2% | |||||||
| | Total Annuities | $ | 3,209 | $ | 2,707 | $ | 3,011 | $ | 2,705 | $ | 2,702 | -15.8% | $ | 6,023 | $ | 5,407 | -10.2% |
| | Percent with GLBs | 23.1% | 28.6% | 27.7% | 25.1% | 19.8% | 22.9% | 22.5% | |||||||||
| | Percent with GLBs, including the impact of VA reinsurance | 17.2% | 20.2% | 20.8% | 17.9% | 14.0% | 19.8% | 16.0% | |||||||||
| | |||||||||||||||||
| | Retirement Plan Services: | ||||||||||||||||
| | First-year sales | $ | 1,102 | $ | 745 | $ | 1,270 | $ | 1,198 | $ | 1,210 | 9.8% | $ | 1,796 | $ | 2,409 | 34.1% |
| | Recurring deposits | 1,687 | 1,666 | 1,730 | 2,169 | 1,733 | 2.7% | 3,633 | 3,901 | 7.4% | |||||||
| | Total Retirement Plan Services | $ | 2,789 | $ | 2,411 | $ | 3,000 | $ | 3,367 | $ | 2,943 | 5.5% | $ | 5,429 | $ | 6,310 | 16.2% |
| | |||||||||||||||||
| | Life Insurance: | ||||||||||||||||
| | IUL/UL | $ | 20 | $ | 24 | $ | 42 | $ | 26 | $ | 27 | 35.0% | $ | 38 | $ | 53 | 39.5% |
| | MoneyGuard® | 23 | 26 | 36 | 22 | 24 | 4.3% | 39 | 47 | 20.5% | |||||||
| | VUL | 27 | 40 | 92 | 34 | 44 | 63.0% | 49 | 78 | 59.2% | |||||||
| | Term | 35 | 42 | 47 | 43 | 48 | 37.1% | 64 | 90 | 40.6% | |||||||
| | Executive Benefits | 21 | 34 | 37 | 30 | 50 | 138.1% | 50 | 79 | 58.0% | |||||||
| | Total Life Insurance | $ | 126 | $ | 166 | $ | 254 | $ | 155 | $ | 193 | 53.2% | $ | 240 | $ | 347 | 44.6% |
| | |||||||||||||||||
| | Group Protection: | ||||||||||||||||
| | Life | $ | 37 | $ | 22 | $ | 163 | $ | 53 | $ | 62 | 67.6% | $ | 78 | $ | 116 | 48.7% |
| | Disability | 37 | 20 | 199 | 47 | 59 | 59.5% | 65 | 105 | 61.5% | |||||||
| | Dental | 5 | 6 | 23 | 5 | 6 | 20.0% | 10 | 11 | 10.0% | |||||||
| | Total Group Protection | $ | 79 | $ | 48 | $ | 385 | $ | 105 | $ | 127 | 60.8% | $ | 153 | $ | 232 | 51.6% |
| | Percent employee-paid | 56.3% | 50.1% | 35.0% | 57.0% | 48.5% | 61.3% | 52.4% | |||||||||
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| | Page 9 |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Lincoln Financial Group | ||||||||||||||||
| | Operating Revenues and General and Administrative Expenses By Segment | ||||||||||||||||
| | Unaudited (millions of dollars) | ||||||||||||||||
| | |||||||||||||||||
| | For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | Operating Revenues | ||||||||||||||||
| | Annuities | $ | 1,249 | $ | 1,267 | $ | 1,282 | $ | 1,232 | $ | 1,169 | -6.4% | $ | 2,453 | $ | 2,401 | -2.1% |
| | Retirement Plan Services | 333 | 328 | 335 | 318 | 315 | -5.4% | 660 | 633 | -4.1% | |||||||
| | Life Insurance | 2,029 | 2,325 | 1,844 | 1,825 | 1,800 | -11.3% | 3,968 | 3,625 | -8.6% | |||||||
| | Group Protection | 1,247 | 1,243 | 1,252 | 1,303 | 1,323 | 6.1% | 2,500 | 2,626 | 5.0% | |||||||
| | Other Operations | 45 | 42 | 56 | 40 | 34 | -24.4% | 84 | 74 | -11.9% | |||||||
| | Total segment operating revenues | $ | 4,903 | $ | 5,205 | $ | 4,769 | $ | 4,718 | $ | 4,641 | -5.3% | $ | 9,665 | $ | 9,359 | -3.2% |
| | |||||||||||||||||
| | General and Administrative Expenses, | ||||||||||||||||
| | Net of Amounts Capitalized (1) | ||||||||||||||||
| | Annuities | $ | 121 | $ | 115 | $ | 125 | $ | 112 | $ | 108 | -10.7% | $ | 237 | $ | 220 | -7.2% |
| | Retirement Plan Services | 73 | 70 | 80 | 69 | 69 | -5.5% | 142 | 138 | -2.8% | |||||||
| | Life Insurance | 126 | 121 | 138 | 117 | 115 | -8.7% | 244 | 233 | -4.5% | |||||||
| | Group Protection | 161 | 163 | 177 | 165 | 166 | 3.1% | 320 | 331 | 3.4% | |||||||
| | Other Operations | 46 | 143 | 52 | 48 | 48 | 4.3% | 90 | 95 | 5.6% | |||||||
| | Total | $ | 527 | $ | 612 | $ | 572 | $ | 511 | $ | 506 | -4.0% | $ | 1,033 | $ | 1,017 | -1.5% |
| | |||||||||||||||||
| | General and Administrative Expenses, | ||||||||||||||||
| | Net of Amounts Capitalized, as a Percentage | ||||||||||||||||
| | of Operating Revenues | ||||||||||||||||
| | Annuities | 9.6% | 9.1% | 9.7% | 9.1% | 9.3% | 9.7% | 9.2% | |||||||||
| | Retirement Plan Services | 21.9% | 21.5% | 23.8% | 21.7% | 21.8% | 21.5% | 21.8% | |||||||||
| | Life Insurance | 6.2% | 5.2% | 7.5% | 6.4% | 6.4% | 6.1% | 6.4% | |||||||||
| | Group Protection | 13.0% | 13.1% | 14.1% | 12.7% | 12.5% | 12.8% | 12.6% | |||||||||
| | Other Operations | 100.8% | 345.5% | 96.8% | 116.6% | 141.5% | 107.6% | 128.0% | |||||||||
| | Total | 10.7% | 11.8% | 12.0% | 10.8% | 10.9% | 10.7% | 10.9% | |||||||||
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| | Page 10 |
| | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Lincoln Financial Group | | | | | | | | | | | | | | | | | | | Operating Commissions and Other Expenses | | | | | | | | | | | | | | | | | | | Unaudited (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended | | | | | | | | | | | For the Six Months Ended | | | | | | | | 6/30/21 | | 9/30/21 | | 12/31/21 | | 3/31/22 | | 6/30/22 | | Change | 6/30/21 | | 6/30/22 | | Change | | | Operating Commissions and | | | | | | | | | | | | | | | | | | | Other Expenses Incurred | | | | | | | | | | | | | | | | | | | General and administrative expenses | $ | 579 | $ | 662 | $ | 642 | $ | 562 | $ | 559 | -3.5% | $ | 1,135 | $ | 1,121 | -1.2% | | | Commissions | | 652 | | 656 | | 760 | | 654 | | 656 | 0.6% | | 1,268 | | 1,311 | 3.4% | | | Taxes, licenses and fees | | 86 | | 79 | | 89 | | 98 | | 83 | -3.5% | | 173 | | 181 | 4.6% | | | Interest and debt expense | | 65 | | 66 | | 66 | | 66 | | 68 | 4.6% | | 131 | | 134 | 2.3% | | | Expenses associated with reserve financing | | | | | | | | | | | | | | | | | | | and letters of credit | | 25 | | 26 | | 26 | | 26 | | 27 | 8.0% | | 50 | | 53 | 6.0% | | | Total adjusted operating commissions and other | | | | | | | | | | | | | | | | | | | expenses incurred | | 1,407 | | 1,489 | | 1,583 | | 1,406 | | 1,393 | -1.0% | | 2,757 | | 2,800 | 1.6% | | | | | | | | | | | | | | | | | | | | | | Less Amounts Capitalized | | | | | | | | | | | | | | | | | | | General and administrative expenses | | (52) | | (50) | | (70) | | (51) | | (53) | -1.9% | | (102) | | (104) | -2.0% | | | Commissions | | (261) | | (253) | | (361) | | (265) | | (281) | -7.7% | | (492) | | (546) | -11.0% | | | Taxes, licenses and fees | | (11) | | (9) | | (15) | | (11) | | (10) | 9.1% | | (20) | | (22) | -10.0% | | | Total amounts capitalized | | (324) | | (312) | | (446) | | (327) | | (344) | -6.2% | | (614) | | (672) | -9.4% | | | Total expenses incurred, net of amounts | | | | | | | | | | | | | | | | | | | capitalized, excluding amortization | | 1,083 | | 1,177 | | 1,137 | | 1,079 | | 1,049 | -3.1% | | 2,143 | | 2,128 | -0.7% | | | | | | | | | | | | | | | | | | | | | | Amortization | | | | | | | | | | | | | | | | | | | Amortization of DAC, VOBA and other intangibles | | 317 | | 821 | | 263 | | 289 | | 250 | -21.1% | | 563 | | 539 | -4.3% | | | Total operating commissions and other expenses | $ | 1,400 | $ | 1,998 | $ | 1,400 | $ | 1,368 | $ | 1,299 | -7.2% | $ | 2,706 | $ | 2,667 | -1.4% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Page 11 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Lincoln Financial Group | | | | | | | | | | | | | | | | | | | Interest Rate Yields and Spreads By Segment | | | | | | | | | | | | | | | | | | | Unaudited | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended | | | | | | | | | | | For the Six Months Ended | | | | | | | | 6/30/21 | | 9/30/21 | | 12/31/21 | | 3/31/22 | | 6/30/22 | | Change | 6/30/21 | | 6/30/22 | | Change | | | Annuities | | | | | | | | | | | | | | | | | | | Earned rate on reserves | | 3.10% | | 3.07% | | 3.06% | | 2.99% | | 3.09% | (1) | | 3.18% | | 3.04% | (14) | | | Variable investment income on reserves (1) | | 0.24% | | 0.28% | | 0.31% | | 0.23% | | 0.11% | (13) | | 0.18% | | 0.17% | (1) | | | Net investment income yield on reserves | | 3.34% | | 3.35% | | 3.37% | | 3.22% | | 3.20% | (14) | | 3.36% | | 3.21% | (15) | | | Interest rate credited to contract holders | | 1.97% | | 1.90% | | 1.82% | | 1.85% | | 1.90% | (7) | | 2.00% | | 1.88% | (12) | | | Interest rate spread | | 1.37% | | 1.45% | | 1.55% | | 1.37% | | 1.30% | (7) | | 1.36% | | 1.33% | (3) | | | Base spreads excluding variable investment income | | 1.13% | | 1.17% | | 1.24% | | 1.14% | | 1.19% | 6 | | 1.18% | | 1.16% | (2) | | | | | | | | | | | | | | | | | | | | | | Retirement Plan Services | | | | | | | | | | | | | | | | | | | Earned rate on reserves | | 3.60% | | 3.56% | | 3.51% | | 3.45% | | 3.49% | (11) | | 3.61% | | 3.48% | (13) | | | Variable investment income on reserves (1) | | 0.21% | | 0.22% | | 0.39% | | 0.19% | | 0.14% | (7) | | 0.20% | | 0.16% | (4) | | | Net investment income yield on reserves | | 3.81% | | 3.78% | | 3.90% | | 3.64% | | 3.63% | (18) | | 3.81% | | 3.64% | (17) | | | Interest rate credited to contract holders | | 2.69% | | 2.65% | | 2.63% | | 2.55% | | 2.55% | (14) | | 2.68% | | 2.56% | (12) | | | Interest rate spread | | 1.12% | | 1.13% | | 1.27% | | 1.09% | | 1.08% | (4) | | 1.13% | | 1.08% | (5) | | | Base spreads excluding variable investment income | | 0.91% | | 0.91% | | 0.88% | | 0.90% | | 0.94% | 3 | | 0.93% | | 0.92% | (1) | | | | | | | | | | | | | | | | | | | | | | Life Insurance – Interest-Sensitive | | | | | | | | | | | | | | | | | | | Earned rate on reserves | | 4.68% | | 4.64% | | 4.67% | | 4.60% | | 4.50% | (18) | | 4.70% | | 4.55% | (15) | | | Variable investment income on reserves (1) | | 1.38% | | 1.23% | | 0.85% | | 0.54% | | 0.36% | (102) | | 1.21% | | 0.45% | (76) | | | Net investment income yield on reserves | | 6.06% | | 5.87% | | 5.52% | | 5.14% | | 4.86% | (120) | | 5.91% | | 5.00% | (91) | | | Interest rate credited to contract holders | | 3.78% | | 3.76% | | 3.76% | | 3.77% | | 3.74% | (4) | | 3.77% | | 3.76% | (1) | | | Interest rate spread | | 2.28% | | 2.11% | | 1.76% | | 1.37% | | 1.12% | (116) | | 2.14% | | 1.24% | (90) | | | | | | | | | | | | | | | | | | | | | | Base spreads excluding alternative investments | | 1.06% | | 1.05% | | 1.12% | | 1.06% | | 0.99% | (7) | | 1.08% | | 1.02% | (6) | | | Base spreads assuming 10% annualized yield on alternative | | | | | | | | | | | | | | | | | | | investments | | 1.24% | | 1.24% | | 1.35% | | 1.30% | | 1.25% | 1 | | 1.26% | | 1.28% | 2 | | | | | | | | | | | | | | | | | | | | | | Total (2) | | | | | | | | | | | | | | | | | | | Earned rate (3) | | 3.94% | | 3.93% | | 3.80% | | 3.80% | | 3.77% | (17) | | 3.94% | | 3.78% | (16) | | | Variable investment income (1) (3) | | 0.78% | | 0.72% | | 0.53% | | 0.36% | | 0.22% | (56) | | 0.69% | | 0.29% | (40) | | | Net investment income yield (3) | | 4.72% | | 4.65% | | 4.33% | | 4.16% | | 3.99% | (73) | | 4.63% | | 4.07% | (56) | | | | | | | | | | | | | | | | | | | | | | (1) Variable investment income consists of commercial mortgage loan prepayment and bond make-whole premiums and investment income on alternative investments. | | | | | | | | | | | | | | | | | | | (2) Includes the results of all of our business segments and Other Operations. | | | | | | | | | | | | | | | | | | | (3) Includes investment yields on reserves and surplus. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Page 12 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Lincoln Financial Group | | | | | | | | | | | | | | | | | | | Annuities – Select Earnings and Operational Data | | | | | | | | | | | | | | | | | | | Unaudited (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of or For the Three Months Ended | | | | | | | | | | | As of or For the Six Months Ended | | | | | | | | 6/30/21 | | 9/30/21 | | 12/31/21 | | 3/31/22 | | 6/30/22 | | Change | 6/30/21 | | 6/30/22 | | Change | | | Income (Loss) from Operations | | | | | | | | | | | | | | | | | | | Operating revenues: | | | | | | | | | | | | | | | | | | | Insurance premiums | $ | 27 | $ | 30 | $ | 27 | $ | 30 | $ | 25 | -7.4% | $ | 59 | $ | 55 | -6.8% | | | Fee income | | 679 | | 690 | | 702 | | 658 | | 611 | -10.0% | | 1,332 | | 1,269 | -4.7% | | | Net investment income | | 352 | | 371 | | 349 | | 360 | | 337 | -4.3% | | 680 | | 697 | 2.5% | | | Operating realized gain (loss) | | 53 | | 49 | | 55 | | 54 | | 51 | -3.8% | | 103 | | 105 | 1.9% | | | Amortization of deferred gain | | 6 | | 7 | | 7 | | 6 | | 6 | 0.0% | | 12 | | 13 | 8.3% | | | Other revenues | | 132 | | 120 | | 142 | | 124 | | 139 | 5.3% | | 267 | | 262 | -1.9% | | | Total operating revenues | | 1,249 | | 1,267 | | 1,282 | | 1,232 | | 1,169 | -6.4% | | 2,453 | | 2,401 | -2.1% | | | Operating expenses: | | | | | | | | | | | | | | | | | | | Interest credited | | 199 | | 210 | | 203 | | 207 | | 214 | 7.5% | | 398 | | 422 | 6.0% | | | Benefits | | 135 | | 135 | | 138 | | 152 | | 180 | 33.3% | | 275 | | 332 | 20.7% | | | Commissions incurred | | 297 | | 276 | | 287 | | 268 | | 257 | -13.5% | | 573 | | 526 | -8.2% | | | Other expenses incurred | | 264 | | 258 | | 280 | | 260 | | 243 | -8.0% | | 519 | | 501 | -3.5% | | | Amounts capitalized | | (144) | | (113) | | (132) | | (118) | | (110) | 23.6% | | (271) | | (228) | 15.9% | | | Amortization | | 118 | | 98 | | 115 | | 112 | | 90 | -23.7% | | 229 | | 202 | -11.8% | | | Total operating expenses | | 869 | | 864 | | 891 | | 881 | | 874 | 0.6% | | 1,723 | | 1,755 | 1.9% | | | Income (loss) from operations before taxes | | 380 | | 403 | | 391 | | 351 | | 295 | -22.4% | | 730 | | 646 | -11.5% | | | Federal income tax expense (benefit) | | 57 | | 65 | | 59 | | 49 | | 39 | -31.6% | | 117 | | 88 | -24.8% | | | Income (loss) from operations | $ | 323 | $ | 338 | $ | 332 | $ | 302 | $ | 256 | -20.7% | $ | 613 | $ | 558 | -9.0% | | | | | | | | | | | | | | | | | | | | | | Effective Federal Income Tax Rate | | 15.0% | | 16.1% | | 15.1% | | 14.0% | | 13.1% | | | 16.0% | | 13.6% | | | | | | | | | | | | | | | | | | | | | | | Average Equity, Excluding Goodwill and AOCI | $ | 5,077 | $ | 5,282 | $ | 5,310 | $ | 5,298 | $ | 5,665 | 11.6% | $ | 5,074 | $ | 5,481 | 8.0% | | | | | | | | | | | | | | | | | | | | | | ROE, Excluding Goodwill and AOCI | | 25.5% | | 25.6% | | 25.0% | | 22.8% | | 18.1% | | | 24.2% | | 20.4% | | | | | | | | | | | | | | | | | | | | | | | Return on Average Account Values | | 78 | | 80 | | 78 | | 74 | | 67 | (11) | | 75 | | 71 | (4) | | | | | | | | | | | | | | | | | | | | | | Income (Loss) from Operations | | | | | | | | | | | | | | | | | | | Variable annuity | | 293 | | 287 | | 295 | | 269 | | 230 | -21.5% | | 553 | | 499 | -9.8% | | | Fixed annuity | | 30 | | 51 | | 37 | | 33 | | 26 | -13.3% | | 60 | | 59 | -1.7% | | | | | | | | | | | | | | | | | | | | | | Account Values, Net of Reinsurance – End of Period | | | | | | | | | | | | | | | | | | | Variable account values without GLBs | $ | 64,495 | $ | 65,223 | $ | 69,625 | $ | 66,584 | $ | 59,163 | -8.3% | $ | 64,495 | $ | 59,163 | -8.3% | | | Variable account values with GLBs | | 86,901 | | 84,320 | | 86,234 | | 78,837 | | 68,468 | -21.2% | | 86,901 | | 68,468 | -21.2% | | | Fixed account values | | 16,911 | | 16,804 | | 16,866 | | 16,723 | | 16,621 | -1.7% | | 16,911 | | 16,621 | -1.7% | | | Total account values | | 168,307 | | 166,347 | | 172,725 | | 162,144 | | 144,252 | -14.3% | | 168,307 | | 144,252 | | | | Percent variable account values with GLBs | | 51.6% | | 50.7% | | 49.9% | | 48.6% | | 47.5% | | | 51.6% | | 47.5% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Page 13 | | | | | | | | | | | | | | | | |
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| | Lincoln Financial Group | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Retirement Plan Services – Select Earnings and Operational Data | ||||||||||||||||
| | Unaudited (millions of dollars) | ||||||||||||||||
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| | As of or For the Three Months Ended | As of or For the Six Months Ended | |||||||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | Income (Loss) from Operations | ||||||||||||||||
| | Operating revenues: | ||||||||||||||||
| | Fee income | $ | 74 | $ | 75 | $ | 76 | $ | 70 | $ | 65 | -12.2% | $ | 146 | $ | 135 | -7.5% |
| | Net investment income | 250 | 245 | 250 | 238 | 241 | -3.6% | 498 | 479 | -3.8% | |||||||
| | Other revenues | 9 | 8 | 9 | 10 | 9 | 0.0% | 16 | 19 | 18.8% | |||||||
| | Total operating revenues | 333 | 328 | 335 | 318 | 315 | -5.4% | 660 | 633 | -4.1% | |||||||
| | Operating expenses: | ||||||||||||||||
| | Interest credited | 155 | 153 | 154 | 152 | 156 | 0.6% | 309 | 308 | -0.3% | |||||||
| | Benefits | 1 | 1 | 1 | 1 | 1 | 0.0% | 1 | 2 | 100.0% | |||||||
| | Commissions incurred | 20 | 21 | 21 | 20 | 18 | -10.0% | 42 | 37 | -11.9% | |||||||
| | Other expenses incurred | 79 | 78 | 89 | 79 | 76 | -3.8% | 158 | 154 | -2.5% | |||||||
| | Amounts capitalized | (4) | (5) | (7) | (5) | (5) | -25.0% | (10) | (9) | 10.0% | |||||||
| | Amortization | 8 | 8 | 9 | 7 | 6 | -25.0% | 16 | 13 | -18.8% | |||||||
| | Total operating expenses | 259 | 256 | 267 | 254 | 252 | -2.7% | 516 | 505 | -2.1% | |||||||
| | Income (loss) from operations before taxes | 74 | 72 | 68 | 64 | 63 | -14.9% | 144 | 128 | -11.1% | |||||||
| | Federal income tax expense (benefit) | 12 | 12 | 11 | 9 | 9 | -25.0% | 26 | 19 | -26.9% | |||||||
| | Income (loss) from operations | $ | 62 | $ | 60 | $ | 57 | $ | 55 | $ | 54 | -12.9% | $ | 118 | $ | 109 | -7.6% |
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| | Effective Federal Income Tax Rate | 16.7% | 16.8% | 16.3% | 13.7% | 15.5% | 17.8% | 14.6% | |||||||||
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| | Average Equity, Excluding Goodwill and AOCI | $ | 1,535 | $ | 1,492 | $ | 1,477 | $ | 1,534 | $ | 1,618 | 5.4% | $ | 1,530 | $ | 1,576 | 3.0% |
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| | ROE, Excluding Goodwill and AOCI | 16.1% | 16.1% | 15.4% | 14.4% | 13.3% | 15.5% | 13.8% | |||||||||
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| | Return on Average Account Values | 26 | 25 | 23 | 23 | 24 | (2) | 26 | 23 | (3) | |||||||
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| | Pre-tax Net Margin | 41.5% | 41.2% | 37.6% | 38.6% | 39.8% | 41.0% | 39.2% | |||||||||
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| | Net Flows by Market | ||||||||||||||||
| | Small Market | $ | 106 | $ | (43) | $ | 98 | $ | (116) | $ | 80 | -24.5% | $ | 79 | $ | (36) | NM |
| | Mid - Large Market | 755 | 423 | (58) | 1,350 | 1,074 | 42.3% | 1,435 | 2,424 | 68.9% | |||||||
| | Multi-Fund® and Other | (344) | (401) | (420) | (288) | (241) | 29.9% | (649) | (529) | 18.5% | |||||||
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| | Net Flows – Trailing Twelve Months | $ | 1,566 | $ | 1,183 | $ | 464 | $ | 1,062 | $ | 1,458 | -6.9% | $ | 1,566 | $ | 1,458 | -6.9% |
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| | Page 14 |
| | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Lincoln Financial Group | | | | | | | | | | | | | | | | | | | Life Insurance – Select Earnings and Operational Data | | | | | | | | | | | | | | | | | | | Unaudited (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of or For the Three Months Ended | | | | | | | | | | | As of or For the Six Months Ended | | | | | | | | 6/30/21 | | 9/30/21 | | 12/31/21 | | 3/31/22 | | 6/30/22 | | Change | 6/30/21 | | 6/30/22 | | Change | | | Income (Loss) from Operations | | | | | | | | | | | | | | | | | | | Operating revenues: | | | | | | | | | | | | | | | | | | | Insurance premiums | $ | 258 | $ | 256 | $ | 266 | $ | 277 | $ | 283 | 9.7% | $ | 511 | $ | 560 | 9.6% | | | Fee income | | 915 | | 1,230 | | 848 | | 846 | | 840 | -8.2% | | 1,783 | | 1,686 | -5.4% | | | Net investment income | | 852 | | 832 | | 716 | | 688 | | 665 | -21.9% | | 1,661 | | 1,353 | -18.5% | | | Operating realized gain (loss) | | (2) | | - | | (4) | | 1 | | (2) | 0.0% | | (4) | | (1) | 75.0% | | | Amortization of deferred gain on | | | | | | | | | | | | | | | | | | | business sold through reinsurance | | 3 | | 3 | | 13 | | 12 | | 12 | 300.0% | | 5 | | 25 | NM | | | Other revenues | | 3 | | 4 | | 5 | | 1 | | 2 | -33.3% | | 12 | | 2 | -83.3% | | | Total operating revenues | | 2,029 | | 2,325 | | 1,844 | | 1,825 | | 1,800 | -11.3% | | 3,968 | | 3,625 | -8.6% | | | Operating expenses: | | | | | | | | | | | | | | | | | | | Interest credited | | 372 | | 375 | | 322 | | 325 | | 329 | -11.6% | | 742 | | 653 | -12.0% | | | Benefits | | 999 | | 976 | | 1,126 | | 1,126 | | 1,041 | 4.2% | | 2,172 | | 2,167 | -0.2% | | | Commissions incurred | | 130 | | 153 | | 236 | | 156 | | 176 | 35.4% | | 250 | | 332 | 32.8% | | | Other expenses incurred | | 208 | | 201 | | 234 | | 202 | | 199 | -4.3% | | 403 | | 402 | -0.2% | | | Amounts capitalized | | (154) | | (175) | | (276) | | (182) | | (204) | -32.5% | | (293) | | (386) | -31.7% | | | Amortization | | 157 | | 682 | | 105 | | 133 | | 120 | -23.6% | | 247 | | 253 | 2.4% | | | Total operating expenses | | 1,712 | | 2,212 | | 1,747 | | 1,760 | | 1,661 | -3.0% | | 3,521 | | 3,421 | -2.8% | | | Income (loss) from operations before taxes | | 317 | | 113 | | 97 | | 65 | | 139 | -56.2% | | 447 | | 204 | -54.4% | | | Federal income tax expense (benefit) | | 62 | | 20 | | 17 | | 7 | | 25 | -59.7% | | 85 | | 32 | -62.4% | | | Income (loss) from operations | $ | 255 | $ | 93 | $ | 80 | $ | 58 | $ | 114 | -55.3% | $ | 362 | $ | 172 | -52.5% | | | | | | | | | | | | | | | | | | | | | | Effective Federal Income Tax Rate | | 19.7% | | 17.6% | | 17.1% | | 11.3% | | 17.6% | | | 19.1% | | 15.6% | | | | | | | | | | | | | | | | | | | | | | | Average Equity, Excluding Goodwill and AOCI | $ | 9,035 | $ | 9,245 | $ | 8,971 | $ | 8,831 | $ | 9,294 | 2.9% | $ | 8,972 | $ | 9,063 | 1.0% | | | | | | | | | | | | | | | | | | | | | | ROE, Excluding Goodwill and AOCI | | 11.3% | | 4.0% | | 3.6% | | 2.6% | | 4.9% | | | 8.1% | | 3.8% | | | | | | | | | | | | | | | | | | | | | | | Average Account Values, Net of Reinsurance | $ | 59,056 | $ | 59,642 | $ | 51,067 | $ | 51,236 | $ | 49,380 | -16.4% | $ | 58,532 | $ | 59,416 | 1.5% | | | | | | | | | | | | | | | | | | | | | | In-Force Face Amount | | | | | | | | | | | | | | | | | | | UL and other | $ | 357,670 | $ | 357,624 | $ | 362,106 | $ | 361,490 | $ | 361,565 | 1.1% | $ | 357,670 | $ | 361,565 | 1.1% | | | Term insurance | | 567,525 | | 587,372 | | 611,854 | | 635,123 | | 663,140 | 16.8% | | 567,525 | | 663,140 | 16.8% | | | Total in-force face amount | $ | 925,195 | $ | 944,996 | $ | 973,960 | $ | 996,613 | $ | 1,024,705 | 10.8% | $ | 925,195 | $ | 1,024,705 | 10.8% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Page 15 | | | | | | | | | | | | | | | | |
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| | Lincoln Financial Group | ||||||||||||||||
| | Group Protection – Select Earnings and Operational Data | ||||||||||||||||
| | Unaudited (millions of dollars) | ||||||||||||||||
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| | As of or For the Three Months Ended | As of or For the Six Months Ended | |||||||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | Income (Loss) from Operations | ||||||||||||||||
| | Operating revenues: | ||||||||||||||||
| | Insurance premiums | $ | 1,107 | $ | 1,107 | $ | 1,117 | $ | 1,169 | $ | 1,187 | 7.2% | $ | 2,226 | $ | 2,356 | 5.8% |
| | Net investment income | 95 | 91 | 90 | 85 | 86 | -9.5% | 185 | 171 | -7.6% | |||||||
| | Other revenues | 45 | 45 | 45 | 49 | 50 | 11.1% | 89 | 99 | 11.2% | |||||||
| | Total operating revenues | 1,247 | 1,243 | 1,252 | 1,303 | 1,323 | 6.1% | 2,500 | 2,626 | 5.0% | |||||||
| | Operating expenses: | ||||||||||||||||
| | Interest credited | 1 | 1 | 2 | 1 | 2 | 100.0% | 3 | 3 | 0.0% | |||||||
| | Benefits | 877 | 971 | 1,072 | 1,027 | 926 | 5.6% | 1,847 | 1,953 | 5.7% | |||||||
| | Commissions incurred | 87 | 88 | 95 | 94 | 96 | 10.3% | 178 | 190 | 6.7% | |||||||
| | Other expenses incurred | 210 | 209 | 225 | 217 | 214 | 1.9% | 417 | 432 | 3.6% | |||||||
| | Amounts capitalized | (21) | (19) | (30) | (21) | (24) | -14.3% | (42) | (46) | -9.5% | |||||||
| | Amortization | 34 | 33 | 34 | 37 | 34 | 0.0% | 71 | 71 | 0.0% | |||||||
| | Total operating expenses | 1,188 | 1,283 | 1,398 | 1,355 | 1,248 | 5.1% | 2,474 | 2,603 | 5.2% | |||||||
| | Income (loss) from operations before taxes | 59 | (40) | (146) | (52) | 75 | 27.1% | 26 | 23 | -11.5% | |||||||
| | Federal income tax expense (benefit) | 13 | (8) | (31) | (11) | 16 | 23.1% | 6 | 5 | -16.7% | |||||||
| | Income (loss) from operations | $ | 46 | $ | (32) | $ | (115) | $ | (41) | $ | 59 | 28.3% | $ | 20 | $ | 18 | -10.0% |
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| | Effective Federal Income Tax Rate | 21.0% | 21.0% | 21.0% | 21.0% | 21.0% | 21.0% | 21.0% | |||||||||
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| | Average Equity, Excluding Goodwill and AOCI | $ | 2,731 | $ | 2,759 | $ | 2,810 | $ | 2,899 | $ | 2,988 | 9.4% | $ | 2,725 | $ | 2,943 | 8.0% |
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| | ROE, Excluding Goodwill and AOCI | 6.8% | -4.6% | -16.4% | -5.6% | 7.9% | 1.5% | 1.2% | |||||||||
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| | Loss Ratios by Product Line | ||||||||||||||||
| | Life | 79.6% | 105.1% | 108.7% | 91.0% | 80.5% | 90.2% | 85.8% | |||||||||
| | Disability | 79.0% | 77.7% | 90.2% | 87.2% | 76.7% | 78.9% | 81.9% | |||||||||
| | Dental | 81.6% | 75.7% | 71.1% | 71.1% | 76.9% | 79.2% | 74.0% | |||||||||
| | Total | 79.3% | 87.8% | 96.1% | 88.0% | 78.2% | 83.1% | 83.0% | |||||||||
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| | Page 16 |
| | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Lincoln Financial Group | | | | | | | | | | | | | | | | | | | Other Operations – Select Earnings and Operational Data | | | | | | | | | | | | | | | | | | | Unaudited (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended | | | | | | | | | | | For the Six Months Ended | | | | | | | | 6/30/21 | | 9/30/21 | | 12/31/21 | | 3/31/22 | | 6/30/22 | | Change | 6/30/21 | | 6/30/22 | | Change | | | Other Operations | | | | | | | | | | | | | | | | | | | Operating revenues: | | | | | | | | | | | | | | | | | | | Insurance premiums | $ | 6 | $ | 1 | $ | 10 | $ | 1 | $ | 3 | -50.0% | $ | 8 | $ | 4 | -50.0% | | | Net investment income | | 35 | | 37 | | 40 | | 41 | | 40 | 14.3% | | 70 | | 81 | 15.7% | | | Other revenues | | 4 | | 4 | | 6 | | (2) | | (9) | NM | | 6 | | (11) | NM | | | Total operating revenues | | 45 | | 42 | | 56 | | 40 | | 34 | -24.4% | | 84 | | 74 | -11.9% | | | Operating expenses: | | | | | | | | | | | | | | | | | | | Interest credited | | 10 | | 10 | | 10 | | 12 | | 9 | -10.0% | | 22 | | 21 | -4.5% | | | Benefits | | 25 | | 21 | | 21 | | 14 | | 21 | -16.0% | | 40 | | 35 | -12.5% | | | Commissions and other expenses | | 25 | | 117 | | 19 | | 12 | | 1 | -96.0% | | 53 | | 14 | -73.6% | | | Interest and debt expense | | 65 | | 66 | | 66 | | 66 | | 68 | 4.6% | | 131 | | 134 | 2.3% | | | Spark program expense | | 21 | | 22 | | 30 | | 31 | | 44 | 109.5% | | 35 | | 75 | 114.3% | | | Total operating expenses | | 146 | | 236 | | 146 | | 135 | | 143 | -2.1% | | 281 | | 279 | -0.7% | | | Income (loss) from operations before taxes | | (101) | | (194) | | (90) | | (95) | | (109) | -7.9% | | (197) | | (205) | -4.1% | | | Federal income tax expense (benefit) | | (23) | | (42) | | (22) | | (15) | | (17) | 26.1% | | (43) | | (33) | 23.3% | | | Income (loss) from operations | $ | (78) | $ | (152) | $ | (68) | $ | (80) | $ | (92) | -17.9% | $ | (154) | $ | (172) | -11.7% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Page 17 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Lincoln Financial Group | | | | | | | | | | | | | | | | | | | Consolidated – DAC, VOBA, DSI and DFEL Roll Forwards | | | | | | | | | | | | | | | | | | | Unaudited (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended | | | | | | | | | | | For the Six Months Ended | | | | | | | | 6/30/21 | | 9/30/21 | | 12/31/21 | | 3/31/22 | | 6/30/22 | | Change | 6/30/21 | | 6/30/22 | | Change | | | DAC, VOBA and DSI | | | | | | | | | | | | | | | | | | | Balance as of beginning-of-period | $ | 7,884 | $ | 6,472 | $ | 6,169 | $ | 6,284 | $ | 9,020 | 14.4% | $ | 6,025 | $ | 6,284 | 4.3% | | | Business acquired (sold) through reinsurance | | - | | - | | (650) | | - | | - | NM | | - | | - | NM | | | Deferrals | | 325 | | 312 | | 446 | | 328 | | 345 | 6.2% | | 619 | | 673 | 8.7% | | | Operating amortization | | (314) | | (820) | | (259) | | (284) | | (245) | 22.0% | | (558) | | (530) | 5.0% | | | Deferrals, net of operating amortization | | 11 | | (508) | | 187 | | 44 | | 100 | NM | | 61 | | 143 | 134.4% | | | Amortization associated with benefit ratio unlocking | | (11) | | 4 | | (11) | | 36 | | 64 | NM | | (17) | | 100 | NM | | | Adjustment related to realized (gains) losses | | (10) | | 10 | | 36 | | (37) | | (131) | NM | | 41 | | (168) | NM | | | Adjustment related to unrealized (gains) losses | | (1,402) | | 191 | | 553 | | 2,693 | | 3,034 | NM | | 362 | | 5,728 | NM | | | Balance as of end-of-period | $ | 6,472 | $ | 6,169 | $ | 6,284 | $ | 9,020 | $ | 12,087 | 86.8% | $ | 6,472 | $ | 12,087 | 86.8% | | | | | | | | | | | | | | | | | | | | | | DFEL | | | | | | | | | | | | | | | | | | | Balance as of beginning-of-period | $ | 559 | $ | 433 | $ | 396 | $ | 415 | $ | 1,363 | 143.8% | $ | 401 | $ | 415 | 3.5% | | | Business acquired (sold) through reinsurance | | - | | - | | (290) | | - | | - | NM | | - | | - | NM | | | Deferrals | | 240 | | 251 | | 294 | | 256 | | 270 | 12.5% | | 471 | | 526 | 11.7% | | | Operating amortization | | (179) | | (522) | | (147) | | (151) | | (145) | 19.0% | | (310) | | (296) | 4.5% | | | Deferrals, net of operating amortization | | 61 | | (271) | | 147 | | 105 | | 125 | 104.9% | | 161 | | 230 | 42.9% | | | Amortization associated with benefit ratio unlocking | | (2) | | 1 | | (1) | | 6 | | 10 | NM | | (2) | | 15 | NM | | | Adjustment related to realized (gains) losses | | (2) | | (8) | | (1) | | (6) | | (12) | NM | | (2) | | (17) | NM | | | Adjustment related to unrealized (gains) losses | | (183) | | 241 | | 164 | | 843 | | 2,611 | NM | | (125) | | 3,454 | NM | | | Balance as of end-of-period | $ | 433 | $ | 396 | $ | 415 | $ | 1,363 | $ | 4,097 | NM | $ | 433 | $ | 4,097 | NM | | | | | | | | | | | | | | | | | | | | | | DAC, VOBA, DSI and DFEL | | | | | | | | | | | | | | | | | | | Balance as of End-of-Period, After-Tax | $ | 4,771 | $ | 4,561 | $ | 4,637 | $ | 6,049 | $ | 6,312 | 32.3% | $ | 4,771 | $ | 6,312 | 32.3% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Page 18 | | | | | | | | | | | | | | | | |
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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Lincoln Financial Group | | | | | | | | | | | | | | | | | | | Annuities – Account Value Roll Forwards | | | | | | | | | | | | | | | | | | | Unaudited (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Three Months Ended | | | | | | | | | | | For the Six Months Ended | | | | | | | | 6/30/21 | | 9/30/21 | | 12/31/21 | | 3/31/22 | | 6/30/22 | | Change | 6/30/21 | | 6/30/22 | | Change | | | Fixed Annuities | | | | | | | | | | | | | | | | | | | Balance as of beginning-of-period | $ | 25,008 | $ | 24,840 | $ | 24,642 | $ | 24,728 | $ | 24,475 | -2.1% | $ | 25,405 | $ | 24,728 | -2.7% | | | Gross deposits | | 184 | | 342 | | 413 | | 374 | | 524 | 184.8% | | 269 | | 899 | 234.2% | | | Full surrenders and deaths | | (482) | | (489) | | (415) | | (420) | | (457) | 5.2% | | (975) | | (877) | 10.1% | | | Other contract benefits | | (115) | | (163) | | (198) | | (171) | | (176) | -53.0% | | (257) | | (347) | -35.0% | | | Net flows | | (413) | | (310) | | (200) | | (217) | | (109) | 73.6% | | (963) | | (325) | 66.3% | | | Contract holder assessments | | (22) | | (20) | | (17) | | (15) | | (12) | 45.5% | | (45) | | (28) | 37.8% | | | Reinvested interest credited | | 267 | | 132 | | 303 | | (21) | | (101) | NM | | 443 | | (122) | NM | | | Balance as of end-of-period, gross | | 24,840 | | 24,642 | | 24,728 | | 24,475 | | 24,253 | -2.4% | | 24,840 | | 24,253 | -2.4% | | | Reinsurance ceded | | (7,929) | | (7,838) | | (7,862) | | (7,752) | | (7,632) | 3.7% | | (7,929) | | (7,632) | 3.7% | | | Balance as of end-of-period, net | $ | 16,911 | $ | 16,804 | $ | 16,866 | $ | 16,723 | $ | 16,621 | -1.7% | $ | 16,911 | $ | 16,621 | -1.7% | | | | | | | | | | | | | | | | | | | | | | Variable Annuities | | | | | | | | | | | | | | | | | | | Balance as of beginning-of-period | $ | 144,157 | $ | 151,396 | $ | 149,550 | $ | 155,866 | $ | 145,428 | 0.9% | $ | 140,313 | $ | 155,866 | 11.1% | | | Gross deposits | | 3,025 | | 2,365 | | 2,598 | | 2,331 | | 2,178 | -28.0% | | 5,754 | | 4,508 | -21.7% | | | Full surrenders and deaths | | (1,871) | | (1,875) | | (1,858) | | (1,567) | | (1,366) | 27.0% | | (3,772) | | (2,933) | 22.2% | | | Other contract benefits | | (1,038) | | (1,021) | | (1,195) | | (1,100) | | (1,021) | 1.6% | | (2,092) | | (2,121) | -1.4% | | | Net flows | | 116 | | (531) | | (455) | | (336) | | (209) | NM | | (110) | | (546) | NM | | | Contract holder assessments | | (705) | | (723) | | (727) | | (692) | | (655) | 7.1% | | (1,390) | | (1,347) | 3.1% | | | Change in market value and reinvestment | | 7,828 | | (592) | | 7,498 | | (9,410) | | (16,925) | NM | | 12,583 | | (26,334) | NM | | | Balance as of end-of-period, gross | | 151,396 | | 149,550 | | 155,866 | | 145,428 | | 127,639 | -15.7% | | 151,396 | | 127,639 | -15.7% | | | Reinsurance ceded | | - | | (7) | | (7) | | (7) | | (8) | NM | | - | | (8) | NM | | | Balance as of end-of-period, net | $ | 151,396 | $ | 149,543 | $ | 155,859 | $ | 145,421 | $ | 127,631 | -15.7% | $ | 151,396 | $ | 127,631 | -15.7% | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | | | | | | | | | Balance as of beginning-of-period | $ | 169,165 | $ | 176,236 | $ | 174,192 | $ | 180,594 | $ | 169,903 | 0.4% | $ | 165,718 | $ | 180,594 | 9.0% | | | Gross deposits | | 3,209 | | 2,707 | | 3,011 | | 2,705 | | 2,702 | -15.8% | | 6,023 | | 5,407 | -10.2% | | | Full surrenders and deaths | | (2,353) | | (2,364) | | (2,273) | | (1,987) | | (1,823) | 22.5% | | (4,747) | | (3,810) | 19.7% | | | Other contract benefits | | (1,153) | | (1,184) | | (1,393) | | (1,271) | | (1,197) | -3.8% | | (2,349) | | (2,468) | -5.1% | | | Net flows | | (297) | | (841) | | (655) | | (553) | | (318) | -7.1% | | (1,073) | | (871) | 18.8% | | | Contract holder assessments | | (727) | | (743) | | (744) | | (707) | | (667) | 8.3% | | (1,435) | | (1,375) | 4.2% | | | Change in market value and reinvestment | | 8,095 | | (460) | | 7,801 | | (9,431) | | (17,026) | NM | | 13,026 | | (26,456) | NM | | | Balance as of end-of-period, gross | | 176,236 | | 174,192 | | 180,594 | | 169,903 | | 151,892 | -13.8% | | 176,236 | | 151,892 | -13.8% | | | Reinsurance ceded | | (7,929) | | (7,845) | | (7,869) | | (7,759) | | (7,640) | 3.6% | | (7,929) | | (7,640) | 3.6% | | | Balance as of end-of-period, net | $ | 168,307 | $ | 166,347 | $ | 172,725 | $ | 162,144 | $ | 144,252 | -14.3% | $ | 168,307 | $ | 144,252 | -14.3% | | | | | | | | | | | | | | | | | | | | | | Page 19 | | | | | | | | | | | | | | | | |
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| | Lincoln Financial Group | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Retirement Plan Services – Account Value Roll Forwards | ||||||||||||||||
| | Unaudited (millions of dollars) | ||||||||||||||||
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| | For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | General Account | ||||||||||||||||
| | Balance as of beginning-of-period | $ | 23,008 | $ | 22,995 | $ | 23,152 | $ | 23,639 | $ | 23,958 | 4.1% | $ | 22,916 | $ | 23,639 | 3.2% |
| | Gross deposits | 424 | 504 | 908 | 572 | 1,132 | 167.0% | 913 | 1,704 | 86.6% | |||||||
| | Withdrawals | (590) | (647) | (631) | (554) | (485) | 17.8% | (1,173) | (1,039) | 11.4% | |||||||
| | Net flows | (166) | (143) | 277 | 18 | 647 | NM | (260) | 665 | NM | |||||||
| | Transfers between fixed and variable accounts | 3 | 149 | 59 | 154 | 160 | NM | 40 | 315 | NM | |||||||
| | Contract holder assessments | (3) | (3) | (4) | (3) | (3) | 0.0% | (7) | (7) | 0.0% | |||||||
| | Reinvestment interest credited | 153 | 154 | 155 | 150 | 155 | 1.3% | 306 | 305 | -0.3% | |||||||
| | Balance as of end-of-period | $ | 22,995 | $ | 23,152 | $ | 23,639 | $ | 23,958 | $ | 24,917 | 8.4% | $ | 22,995 | $ | 24,917 | 8.4% |
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| | Separate Account and Mutual Funds | ||||||||||||||||
| | Balance as of beginning-of-period | $ | 68,149 | $ | 72,913 | $ | 72,454 | $ | 75,475 | $ | 71,385 | 4.7% | $ | 65,391 | $ | 75,475 | 15.4% |
| | Gross deposits | 2,365 | 1,907 | 2,092 | 2,795 | 1,811 | -23.4% | 4,516 | 4,606 | 2.0% | |||||||
| | Withdrawals | (1,682) | (1,785) | (2,749) | (1,867) | (1,545) | 8.1% | (3,391) | (3,412) | -0.6% | |||||||
| | Net flows | 683 | 122 | (657) | 928 | 266 | -61.1% | 1,125 | 1,194 | 6.1% | |||||||
| | Transfers between fixed and variable accounts | (43) | (154) | (77) | (230) | (9) | 79.1% | (186) | (241) | -29.6% | |||||||
| | Contract holder assessments | (65) | (66) | (67) | (64) | (60) | 7.7% | (127) | (123) | 3.1% | |||||||
| | Change in market value and reinvestment | 4,189 | (361) | 3,822 | (4,724) | (9,793) | NM | 6,710 | (14,516) | NM | |||||||
| | Balance as of end-of-period | $ | 72,913 | $ | 72,454 | $ | 75,475 | $ | 71,385 | $ | 61,789 | -15.3% | $ | 72,913 | $ | 61,789 | -15.3% |
| | |||||||||||||||||
| | Total | ||||||||||||||||
| | Balance as of beginning-of-period | $ | 91,157 | $ | 95,908 | $ | 95,606 | $ | 99,114 | $ | 95,343 | 4.6% | $ | 88,307 | $ | 99,114 | 12.2% |
| | Gross deposits | 2,789 | 2,411 | 3,000 | 3,367 | 2,943 | 5.5% | 5,429 | 6,310 | 16.2% | |||||||
| | Withdrawals | (2,272) | (2,432) | (3,380) | (2,421) | (2,030) | 10.7% | (4,564) | (4,451) | 2.5% | |||||||
| | Net flows | 517 | (21) | (380) | 946 | 913 | 76.6% | 865 | 1,859 | 114.9% | |||||||
| | Transfers between fixed and variable accounts | (40) | (5) | (18) | (76) | 151 | NM | (146) | 74 | 150.7% | |||||||
| | Contract holder assessments | (68) | (69) | (71) | (67) | (63) | 7.4% | (134) | (130) | 3.0% | |||||||
| | Change in market value and reinvestment | 4,342 | (207) | 3,977 | (4,574) | (9,638) | NM | 7,016 | (14,211) | NM | |||||||
| | Balance as of end-of-period | $ | 95,908 | $ | 95,606 | $ | 99,114 | $ | 95,343 | $ | 86,706 | -9.6% | $ | 95,908 | $ | 86,706 | -9.6% |
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| | Page 20 |
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| | Lincoln Financial Group | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Life Insurance – Account Value Roll Forwards | ||||||||||||||||
| | Unaudited (millions of dollars) | ||||||||||||||||
| | |||||||||||||||||
| | For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | General Account | ||||||||||||||||
| | Balance as of beginning-of-period | $ | 38,053 | $ | 38,013 | $ | 37,969 | $ | 38,094 | $ | 37,921 | -0.3% | $ | 38,136 | $ | 38,094 | -0.1% |
| | Deposits | 895 | 894 | 1,050 | 878 | 880 | -1.7% | 1,794 | 1,759 | -2.0% | |||||||
| | Withdrawals and deaths | (243) | (237) | (213) | (315) | (226) | 7.0% | (539) | (543) | -0.7% | |||||||
| | Net flows | 652 | 657 | 837 | 563 | 654 | 0.3% | 1,255 | 1,216 | -3.1% | |||||||
| | Contract holder assessments | (1,074) | (1,086) | (1,107) | (1,131) | (1,096) | -2.0% | (2,148) | (2,227) | -3.7% | |||||||
| | Reinvested interest credited | 382 | 385 | 395 | 395 | 338 | -11.5% | 770 | 734 | -4.7% | |||||||
| | Balance as of end-of-period, gross | 38,013 | 37,969 | 38,094 | 37,921 | 37,817 | -0.5% | 38,013 | 37,817 | -0.5% | |||||||
| | Reinsurance ceded | (628) | (620) | (5,562) | (5,544) | (5,549) | NM | (628) | (5,549) | NM | |||||||
| | Balance as of end-of-period, net | $ | 37,385 | $ | 37,349 | $ | 32,532 | $ | 32,377 | $ | 32,268 | -13.7% | $ | 37,385 | $ | 32,268 | -13.7% |
| | |||||||||||||||||
| | Separate Account | ||||||||||||||||
| | Balance as of beginning-of-period | $ | 21,983 | $ | 23,361 | $ | 23,250 | $ | 24,907 | $ | 23,464 | 6.7% | $ | 21,078 | $ | 24,907 | 18.2% |
| | Deposits | 383 | 430 | 822 | 456 | 559 | 46.0% | 704 | 1,016 | 44.3% | |||||||
| | Withdrawals and deaths | (156) | (216) | (221) | (136) | (175) | -12.2% | (286) | (311) | -8.7% | |||||||
| | Net flows | 227 | 214 | 601 | 320 | 384 | 69.2% | 418 | 705 | 68.7% | |||||||
| | Contract holder assessments | (203) | (211) | (247) | (218) | (230) | -13.3% | (400) | (449) | -12.3% | |||||||
| | Change in market value and reinvestment | 1,354 | (114) | 1,303 | (1,545) | (3,255) | NM | 2,265 | (4,800) | NM | |||||||
| | Balance as of end-of-period, gross | 23,361 | 23,250 | 24,907 | 23,464 | 20,363 | -12.8% | 23,361 | 20,363 | -12.8% | |||||||
| | Reinsurance ceded | (1,044) | (1,018) | (5,593) | (5,215) | (4,498) | NM | (1,044) | (4,498) | NM | |||||||
| | Balance as of end-of-period, net | $ | 22,317 | $ | 22,232 | $ | 19,314 | $ | 18,249 | $ | 15,865 | -28.9% | $ | 22,317 | $ | 15,865 | -28.9% |
| | |||||||||||||||||
| | Total | ||||||||||||||||
| | Balance as of beginning-of-period | $ | 60,036 | $ | 61,374 | $ | 61,219 | $ | 63,001 | $ | 61,385 | 2.2% | $ | 59,214 | $ | 63,001 | 6.4% |
| | Deposits | 1,278 | 1,324 | 1,872 | 1,334 | 1,439 | 12.6% | 2,498 | 2,775 | 11.1% | |||||||
| | Withdrawals and deaths | (399) | (453) | (434) | (451) | (401) | -0.5% | (825) | (854) | -3.5% | |||||||
| | Net flows | 879 | 871 | 1,438 | 883 | 1,038 | 18.1% | 1,673 | 1,921 | 14.8% | |||||||
| | Contract holder assessments | (1,277) | (1,297) | (1,354) | (1,349) | (1,326) | -3.8% | (2,548) | (2,676) | -5.0% | |||||||
| | Change in market value and reinvestment | 1,736 | 271 | 1,698 | (1,150) | (2,917) | NM | 3,035 | (4,066) | NM | |||||||
| | Balance as of end-of-period, gross | 61,374 | 61,219 | 63,001 | 61,385 | 58,180 | -5.2% | 61,374 | 58,180 | -5.2% | |||||||
| | Reinsurance ceded | (1,672) | (1,638) | (11,155) | (10,759) | (10,047) | NM | (1,672) | (10,047) | NM | |||||||
| | Balance as of end-of-period, net | $ | 59,702 | $ | 59,581 | $ | 51,846 | $ | 50,626 | $ | 48,133 | -19.4% | $ | 59,702 | $ | 48,133 | -19.4% |
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| | Page 21 |
| | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Lincoln Financial Group | | | | | | | | | | | | | | | Fixed-Income Asset Class | | | | | | | | | | | | | | | Unaudited (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of 6/30/21 | | | | As of 12/31/21 | | | | As of 6/30/22 | | | | | | | Amount | | % | | Amount | | % | | Amount | | % | | | | Fixed Maturity AFS Securities, Net of Allowance for Credit Losses, at Amortized Cost | | | | | | | | | | | | | | | Industry corporate bonds: | | | | | | | | | | | | | | | Financial services | $ | 16,422 | | 15.4% | $ | 16,438 | | 15.6% | $ | 17,372 | | 15.8% | | | Basic industry | | 4,639 | | 4.3% | | 4,436 | | 4.2% | | 4,487 | | 4.1% | | | Capital goods | | 7,397 | | 6.9% | | 7,316 | | 7.0% | | 7,349 | | 6.7% | | | Communications | | 4,285 | | 4.0% | | 4,124 | | 3.9% | | 4,271 | | 3.9% | | | Consumer cyclical | | 5,633 | | 5.3% | | 5,811 | | 5.5% | | 6,052 | | 5.5% | | | Consumer non-cyclical | | 17,009 | | 15.9% | | 16,905 | | 16.1% | | 17,163 | | 15.7% | | | Energy | | 5,445 | | 5.1% | | 4,932 | | 4.7% | | 4,875 | | 4.4% | | | Technology | | 5,090 | | 4.8% | | 5,173 | | 4.9% | | 5,377 | | 4.9% | | | Transportation | | 3,445 | | 3.2% | | 3,414 | | 3.2% | | 3,580 | | 3.3% | | | Industrial other | | 2,110 | | 2.0% | | 2,159 | | 2.1% | | 2,294 | | 2.1% | | | Utilities | | 14,139 | | 13.3% | | 13,785 | | 13.0% | | 14,131 | | 12.9% | | | Government-related entities | | 1,951 | | 1.8% | | 1,863 | | 1.8% | | 1,833 | | 1.7% | | | Residential mortgage-backed securities ("RMBS") | | | | | | | | | | | | | | | Agency backed | | 2,363 | | 2.2% | | 1,973 | | 1.9% | | 1,878 | | 1.7% | | | Non-agency backed | | 387 | | 0.4% | | 360 | | 0.3% | | 360 | | 0.3% | | | Commercial mortgage-backed securities ("CMBS") | | 1,499 | | 1.4% | | 1,552 | | 1.5% | | 1,708 | | 1.6% | | | Asset-backed securities ("ABS") | | | | | | | | | | | | | | | Collateralized loan obligations ("CLOs") | | 6,391 | | 6.0% | | 6,356 | | 6.0% | | 7,471 | | 6.8% | | | Other ABS | | 1,648 | | 1.5% | | 2,083 | | 2.0% | | 2,802 | | 2.6% | | | Municipals | | 5,513 | | 5.2% | | 5,322 | | 5.1% | | 5,422 | | 4.9% | | | Government: | | | | | | | | | | | | | | | United States | | 383 | | 0.4% | | 375 | | 0.4% | | 415 | | 0.4% | | | Foreign | | 400 | | 0.4% | | 373 | | 0.4% | | 361 | | 0.3% | | | Hybrid & redeemable preferred securities | | 510 | | 0.5% | | 408 | | 0.4% | | 434 | | 0.4% | | | Total fixed maturity AFS securities, net of allowance for credit losses, at amortized cost | | 106,659 | | 100.0% | | 105,158 | | 100.0% | | 109,635 | | 100.0% | | | Trading Securities | | 3,851 | | | | 4,170 | | | | 4,034 | | | | | Equity Securities | | 151 | | | | 285 | | | | 319 | | | | | Total fixed maturity AFS, trading and equity securities | $ | 110,661 | | | $ | 109,613 | | | $ | 113,988 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Page 22 | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Lincoln Financial Group | | | | | | | | | | | | | | | Fixed-Income Credit Quality | | | | | | | | | | | | | | | Unaudited (millions of dollars) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of 6/30/21 | | | | As of 12/31/21 | | | | As of 6/30/22 | | | | | | | Amount | | % | | Amount | | % | | Amount | | % | | | | Fixed Maturity AFS Securities, Net of Allowance for Credit Losses, at Amortized Cost (1) | | | | | | | | | | | | | | | NAIC 1 (AAA-A) | $ | 58,609 | | 54.8% | $ | 58,542 | | 55.7% | $ | 61,623 | | 56.2% | | | NAIC 2 (BBB) | | 44,031 | | 41.3% | | 42,797 | | 40.7% | | 44,166 | | 40.3% | | | Total investment grade | | 102,640 | | 96.1% | | 101,339 | | 96.4% | | 105,789 | | 96.5% | | | | | | | | | | | | | | | | | | NAIC 3 (BB) | | 2,654 | | 2.6% | | 2,278 | | 2.1% | | 2,187 | | 2.0% | | | NAIC 4 (B) | | 1,259 | | 1.2% | | 1,424 | | 1.4% | | 1,544 | | 1.4% | | | NAIC 5 (CCC and lower) | | 53 | | 0.0% | | 51 | | 0.0% | | 113 | | 0.1% | | | NAIC 6 (in or near default) | | 53 | | 0.0% | | 66 | | 0.1% | | 2 | | 0.0% | | | Total below investment grade | | 4,019 | | 3.9% | | 3,819 | | 3.6% | | 3,846 | | 3.5% | | | Total | $ | 106,659 | | 100.0% | $ | 105,158 | | 100.0% | $ | 109,635 | | 100.0% | | | | | | | | | | | | | | | | | | Commercial Mortgage Loans, at Amortized Cost (1)(2) | | | | | | | | | | | | | | | CM1 (AAA-A) | $ | 13,808 | | 81.2% | $ | 14,028 | | 81.7% | $ | 13,623 | | 80.7% | | | CM2 (BBB) | | 2,845 | | 16.7% | | 2,878 | | 16.8% | | 3,004 | | 17.8% | | | CM3-7 (BB and lower) | | 346 | | 2.0% | | 265 | | 1.5% | | 259 | | 1.5% | | | Total | $ | 16,999 | | 100.0% | $ | 17,171 | | 100.0% | $ | 16,886 | | 100.0% | | | | | | | | | | | | | | | | | | Total Fixed Maturity AFS Securities and Commercial Mortgage Loans, at Amortized Cost (1)(2) | | | | | | | | | | | | | | | AAA-A | $ | 72,417 | | 58.6% | $ | 72,570 | | 59.3% | $ | 75,246 | | 59.5% | | | BBB | | 46,876 | | 37.9% | | 45,675 | | 37.3% | | 47,170 | | 37.3% | | | BB and lower | | 4,365 | | 3.5% | | 4,084 | | 3.4% | | 4,105 | | 3.2% | | | Total | $ | 123,658 | | 100.0% | $ | 122,329 | | 100.0% | $ | 126,521 | | 100.0% | | | | | | | | | | | | | | | | | | (1) Ratings are based upon the designations determined and provided by the National Association of Insurance Commissioners (“NAIC”) or based upon ratings from credit rating | | | | | | | | | | | | | | | agencies to derive the NAIC designation. | | | | | | | | | | | | | | | (2) CM ratings reflect the risk-based capital risk category for commercial mortgage loans. Letter ratings are assumed NAIC equivalent ratings where NAIC 1 = CM1, NAIC 2 = CM2 | | | | | | | | | | | | | | | and NAIC 3-6 = CM3-7. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Page 23 | | | | | | | | | | | | |
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| | Lincoln Financial Group | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Realized Gain (Loss), After-DAC | ||||||||||||||||
| | Unaudited (millions of dollars) | ||||||||||||||||
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| | For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | Components of Realized Gain (Loss), Pre-Tax | ||||||||||||||||
| | Total adjusted operating realized gain (loss) | $ | 51 | $ | 49 | $ | 51 | $ | 55 | $ | 49 | -3.9% | $ | 99 | $ | 104 | 5.1% |
| | Total excluded realized gain (loss) | (53) | 36 | (166) | (26) | 473 | NM | (281) | 447 | 259.1% | |||||||
| | Total realized gain (loss), pre-tax | $ | (2) | $ | 85 | $ | (115) | $ | 29 | $ | 522 | NM | $ | (182) | $ | 551 | NM |
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| | Components of Excluded Realized Gain (Loss), After-Tax | ||||||||||||||||
| | Credit loss benefit (expense) on mortgage loans on | ||||||||||||||||
| | real estate | $ | 8 | $ | 28 | $ | 26 | $ | 13 | $ | (5) | NM | $ | 26 | $ | 8 | -69.2% |
| | Credit loss benefit (expense) on other financial assets | (3) | (9) | 5 | (4) | (4) | -33.3% | (4) | (8) | -100.0% | |||||||
| | Realized gain (loss) related to certain financial assets | (5) | (4) | (6) | (7) | (5) | 0.0% | (7) | (14) | -100.0% | |||||||
| | Realized gain (loss) on equity securities | 16 | 3 | 4 | 3 | (6) | NM | 26 | (2) | NM | |||||||
| | Realized gain (loss) on the mark-to-market on certain | ||||||||||||||||
| | instruments | (2) | 8 | 34 | (9) | - | 100.0% | 18 | (9) | NM | |||||||
| | Realized gain (loss) related to financial assets, after-tax | 14 | 26 | 63 | (4) | (20) | NM | 59 | (25) | NM | |||||||
| | Variable annuity net derivative results: | ||||||||||||||||
| | Hedge program performance, including unlocking | ||||||||||||||||
| | for GLB reserves hedged and benefit ratio unlocking | 13 | (4) | (78) | (247) | (183) | NM | (29) | (430) | NM | |||||||
| | GLB non-performance risk component | (1) | (2) | (47) | 18 | 74 | NM | (145) | 92 | 163.4% | |||||||
| | Total variable annuity net derivative results | 12 | (6) | (125) | (229) | (109) | NM | (174) | (338) | -94.3% | |||||||
| | Indexed annuity forward-starting option | 8 | (3) | 7 | 43 | (3) | NM | 23 | 39 | 69.6% | |||||||
| | Excluded realized gain (loss), including | ||||||||||||||||
| | benefit ratio unlocking, after-tax | 34 | 17 | (55) | (190) | (132) | NM | (92) | (324) | NM | |||||||
| | Less: benefit ratio unlocking on GDB | ||||||||||||||||
| | and GLB riders, after-tax | 77 | (12) | 77 | (170) | (506) | NM | 131 | (676) | -30.0% | |||||||
| | Total excluded realized gain (loss), after-tax | $ | (43) | $ | 29 | $ | (132) | $ | (20) | $ | 374 | NM | $ | (223) | $ | 352 | 9.1% |
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| | Page 24 |
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| | Lincoln Financial Group | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Select GAAP to Non-GAAP Reconciliations | ||||||||||||||||
| | Unaudited (millions of dollars) | ||||||||||||||||
| | |||||||||||||||||
| | For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| | 6/30/21 | 9/30/21 | 12/31/21 | 3/31/22 | 6/30/22 | Change | 6/30/21 | 6/30/22 | Change | ||||||||
| | Revenues | ||||||||||||||||
| | Total revenues | $ | 4,851 | $ | 5,241 | $ | 4,604 | $ | 4,687 | $ | 5,104 | 5.2% | $ | 9,386 | $ | 9,791 | 4.3% |
| | Less: | ||||||||||||||||
| | Excluded realized gain (loss) | (53) | 36 | (166) | (26) | 473 | NM | (281) | 447 | 259.1% | |||||||
| | Amortization of DFEL associated with | ||||||||||||||||
| | benefit ratio unlocking | 1 | - | 1 | (5) | (10) | NM | 2 | (15) | NM | |||||||
| | Adjusted operating revenues | $ | 4,903 | $ | 5,205 | $ | 4,769 | $ | 4,718 | $ | 4,641 | -5.3% | $ | 9,665 | $ | 9,359 | -3.2% |
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| | Net Income | ||||||||||||||||
| | Net income (loss) | $ | 642 | $ | 318 | $ | 220 | $ | 104 | $ | 238 | -62.9% | $ | 867 | $ | 341 | -60.7% |
| | Less: | ||||||||||||||||
| | Excluded realized gain (loss), after-tax | (43) | 29 | (132) | (20) | 374 | NM | (223) | 352 | 257.8% | |||||||
| | Benefit ratio unlocking, after-tax | 77 | (12) | 77 | (170) | (527) | NM | 131 | (696) | NM | |||||||
| | Transaction and integration costs related to | ||||||||||||||||
| | mergers, acquisitions and divestitures, after-tax | - | - | (11) | - | - | NM | - | - | NM | |||||||
| | Gain (loss) on modification or early extinguishment | ||||||||||||||||
| | of debt, after-tax | - | (6) | - | - | - | NM | - | - | NM | |||||||
| | Total adjustments | 34 | 11 | (66) | (190) | (153) | NM | (92) | (344) | NM | |||||||
| | Adjusted income (loss) from operations | $ | 608 | $ | 307 | $ | 286 | $ | 294 | $ | 391 | -35.7% | $ | 959 | $ | 685 | -28.6% |
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| | Earnings (Loss) Per Common Share – Diluted | ||||||||||||||||
| | Net income (loss) | $ | 3.34 | $ | 1.68 | $ | 1.20 | $ | 0.58 | $ | 1.34 | -59.9% | $ | 4.51 | $ | 1.91 | -57.6% |
| | Less: | ||||||||||||||||
| | Excluded realized gain (loss), after-tax | (0.22) | 0.15 | (0.72) | (0.11) | 2.16 | NM | (1.15) | 2.02 | 275.7% | |||||||
| | Benefit ratio unlocking, after-tax | 0.39 | (0.06) | 0.42 | (0.97) | (3.05) | NM | 0.68 | (3.99) | NM | |||||||
| | Transaction and integration costs related to | ||||||||||||||||
| | mergers, acquisitions and divestitures, after-tax | - | - | (0.06) | - | - | NM | - | - | NM | |||||||
| | Gain (loss) on modification or early extinguishment | ||||||||||||||||
| | of debt, after-tax | - | (0.03) | - | - | - | NM | - | - | NM | |||||||
| | Adjusted income (loss) from operations | $ | 3.17 | $ | 1.62 | $ | 1.56 | $ | 1.66 | $ | 2.23 | -29.7% | $ | 4.98 | $ | 3.88 | -22.1% |
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