Market Overview

Lincoln Financial Group Reports Second Quarter 2018 Results

Share:

Net income EPS of $1.70, down 6% and net income ROE, including AOCI,
of 9.9%

Adjusted operating EPS of $2.02, up 9% and adjusted operating ROE,
excluding AOCI, of 13.1%

Book value per share (BVPS), including AOCI, of $69.85, down 3%;
BVPS, excluding AOCI, of $64.32, up 8%

Resumed share buybacks; $100 million of share repurchases in the
second quarter

Lincoln Financial Group (NYSE:LNC) today reported net income for the
second quarter of 2018 of $385 million, or $1.70 per diluted share
available to common stockholders, compared to net income in the second
quarter of 2017 of $411 million, or $1.81 per diluted share available to
common stockholders. Second quarter adjusted income from operations was
$454 million, or $2.02 per diluted share available to common
stockholders, compared to $419 million, or $1.85 per diluted share
available to common stockholders, in the second quarter of 2017.

"In the second quarter, adjusted operating EPS was up 9% and we achieved
a 13% ROE, as every business segment reported revenue and earnings
growth," said Dennis R. Glass, president and CEO of Lincoln Financial
Group. "We continue to see significant momentum in annuity sales and are
already benefitting from our recent Liberty acquisition. The strength of
our capital position enabled us to resume share repurchases during the
quarter, which we expect to accelerate in subsequent quarters."

               
     

As of or For the

Quarter Ended
June 30

    As of or For the

Six Months Ended
June 30

(in millions, except per share data)       2018   2017     2018   2017
Net Income (Loss) $ 385   $ 411     $ 752   $ 846
Net Income (Loss) Available to Common Stockholders 377 412 742 847
Net Income (Loss) per Diluted Share Available to Common Stockholders 1.70 1.81 3.34 3.70
Revenues 4,020 3,577 7,629 7,077
Adjusted Income (Loss) from Operations 454 419 895 860

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

2.02 1.85 3.99 3.77
Average Diluted Shares 221.6 227.3 221.9 228.7
ROE, Including AOCI (Net Income) 9.9% 10.6% 9.3% 11.2%
Adjusted Operating ROE, Excluding AOCI (Income from Operations) 13.1% 12.7% 13.0% 13.1%
Book Value per Share, Including AOCI $ 69.85 $ 71.98 $ 69.85 $ 71.98
Book Value per Share, Excluding AOCI         64.32     59.78       64.32     59.78
 

Operating Highlights – Second Quarter 2018 versus Second Quarter 2017

  • Double-digit increase in income from operations across all business
    segments
  • Adjusted operating EPS up 19% when normalizing for variable investment
    income in both periods
  • Adjusted operating revenues of $4.1 billion, up 12%
  • G&A expense ratio of 11.5%, a 30 basis point improvement
  • Annuity sales of $3.0 billion, up 50%
  • Retirement Plan Services net flows of $499 million, up 19%
  • Group Protection after-tax margin of 5.3%

There were no notable items in the current quarter or in the prior-year
quarter.

Second Quarter 2018 – Segment Results

Annuities

The Annuities segment reported income from operations of $275 million,
up 10% compared to the prior-year period driven by higher fee income
from account value growth and lower expenses.

Total annuity deposits of $3.0 billion were up 50% from the prior-year
quarter as both variable and fixed annuities benefitted from product and
distribution expansion. Variable annuity sales were up 30% versus the
prior-year quarter, and fixed annuity sales increased 136% over the same
period.

Net outflows improved to $126 million compared to outflows of $887
million in the prior-year period driven by growth in deposits. When
combined with favorable equity market performance, average account
values of $137 billion increased 5% from the prior-year quarter.

Retirement Plan Services

Retirement Plan Services reported income from operations of $43 million,
up 16% compared to the prior-year quarter. This increase is attributable
to a lower reported tax rate as a result of tax reform, higher fee
income and lower expenses.

Total deposits for the quarter of $2.2 billion were up 12% versus the
prior-year period, as a result of growth in both first-year sales and
recurring deposits.

Net flows totaled $499 million in the quarter compared to $421 million
in the prior-year quarter. When combined with favorable equity market
performance, average account values for the quarter increased 11% to $69
billion.

Life Insurance

Life Insurance reported income from operations of $150 million, up 13%
versus the prior-year quarter. This increase is attributable to a lower
reported tax rate as a result of tax reform and lower expenses,
partially offset by lower variable investment income.

Total Life Insurance sales were $162 million in the quarter driven by a
diverse product mix. The prior-year quarter totaled $197 million driven
by accelerated MoneyGuard® sales ahead of
pricing adjustments.

Total Life Insurance in-force of $730 billion grew 4% over the
prior-year quarter, and average account values of $50 billion increased
6% over the same period.

Group Protection

Group Protection income from operations was $45 million in the quarter
versus $35 million in the prior-year period. The increase in earnings
was attributable to the acquisition of the Liberty Mutual group benefits
business.

The acquisition resulted in a combined non-medical loss ratio of 73%,
which increased from the prior-year quarter, reflecting the differing
loss characteristics of the two blocks. Underlying claim results remain
favorable.

Group Protection sales were $94 million in the quarter compared to $88
million in the prior-year quarter. Employee-paid sales represented 40%
of total sales, in line with the prior-year period.

Non-medical earned premiums were $846 million, up 71% from the
prior-year quarter driven by both the acquisition and continued growth.

Other Operations

Other Operations reported a loss from operations of $59 million versus a
loss of $37 million in the prior-year quarter.

Realized Gains and Losses / Impacts to Net Income

Realized gains/losses and impacts to net income (after-tax) in the
quarter were predominantly driven by:

  • A $40 million variable annuity net derivative loss.
  • A $35 million acquisition and integration expense.
  • A $9 million gain from general account investments.

Unrealized Gains and Losses

The company reported a net unrealized gain of $3.0 billion, pre-tax, on
its available-for-sale securities at June 30, 2018. This compares to a
net unrealized gain of $6.8 billion at June 30, 2017, with the
year-over-year decline primarily driven by an increase in interest rates.

Capital

The quarter's average diluted share count of 221.6 million was down 3%
from the second quarter of 2017, the result of repurchasing 6.0 million
shares of stock at a cost of $425 million since June 30, 2017.

Book Value

As of June 20, 2018, book value per share, including accumulated other
comprehensive income ("AOCI"), of $69.85 decreased 3% from a year ago.
Book value per share, excluding AOCI, of $64.32 increased 8% from the
prior-year period.

The tables attached to this release define and reconcile the non-GAAP
measures adjusted income from operations, adjusted operating return on
equity ("ROE") and book value per share, excluding AOCI to net income,
ROE and book value per share, including AOCI calculated in accordance
with GAAP.

This press release may contain statements that are forward-looking, and
actual results may differ materially, especially given the current
economic and capital market conditions. Please see the Forward Looking
Statements – Cautionary Language that follow for additional factors that
may cause actual results to differ materially from our current
expectations.

For other financial information, please refer to the company's second
quarter 2018 statistical supplement available on its website, www.lfg.com/earnings.

Earnings 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 2, 2018. The live webcast and slide
presentation will be available on the Lincoln Financial Investor
Relations website at www.lfg.com/webcast.
Please register at least 15 minutes prior to the event to download and
install any necessary streaming media software. Interested persons may
also listen to the call by dialing the following numbers:

   
Dial: (866) 394-4575 (Domestic)
(678) 509-7536 (International)
Ask for the Lincoln National Conference Call.
 

Audio replay will begin by 1:00 p.m. Eastern Time on August 2, 2018, and
it will remain available through 1:00 p.m. Eastern Time on August 9,
2018. To access the re-broadcast:

           
(855) 859-2056 (Domestic)
(404) 537-3406 (International)
Enter conference code: 3873748
 

A replay of the call will also be available by 1:00 p.m. Eastern Time on
August 2, 2018 at www.lfg.com/webcast.

About Lincoln Financial Group

Lincoln Financial Group provides advice and solutions that help empower
people to take charge of their financial lives with confidence and
optimism. Today, more than 17 million customers trust our retirement,
insurance and wealth protection expertise to help address their
lifestyle, savings and income goals, as well as to 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 $256 billion in assets
under management as of June 30, 2018. Lincoln Financial Group is a
committed corporate citizen and was named one of the Forbes Best
Employers for 2018, is a member of the Dow Jones Sustainability Index
North America, and received a perfect score of 100 percent on the 2018
Corporate Equality Index. 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 return on equity and adjusted operating revenues 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.lfg.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 earnings 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

We exclude the after-tax effects of the following items from GAAP net
income (loss) to arrive at adjusted income (loss) from operations:

  • Realized gains and losses associated with the following ("excluded
    realized gain (loss)"):
    • Sale or disposal of securities;
    • Impairments of securities;
    • Change in the fair value of derivative investments, embedded
      derivatives within certain reinsurance arrangements and our
      trading securities;
    • Change in the fair value of the derivatives we own to hedge our
      guaranteed death benefit ("GDB") riders within our variable
      annuities, which is referred to as "GDB derivatives results";
    • Change in the fair value of the embedded derivatives of our
      guaranteed living benefit ("GLB") riders within our variable
      annuities accounted for under the Derivatives and Hedging and the
      Fair Value Measurements and Disclosures Topics of the Financial
      Accounting Standards Board ("FASB") Accounting Standards
      Codification ("ASC") ("embedded derivative reserves"), net of the
      change in the fair value of the derivatives we own to hedge the
      changes in the embedded derivative reserves, the net of which is
      referred to as "GLB net derivative results";
    • Changes in the fair value of the embedded derivative liabilities
      related to index call options we may purchase in the future to
      hedge contract holder index allocations applicable to future reset
      periods for our indexed annuity products accounted for under the
      Derivatives and Hedging and the Fair Value Measurements and
      Disclosures Topics of the FASB ASC ("indexed annuity
      forward-starting option");
    • Changes in the fair value of equities securities;
  • Change in reserves accounted for under the Financial Services -
    Insurance - Claim Costs and Liabilities for Future Policy Benefits
    Subtopic of the FASB ASC resulting from benefit ratio unlocking on our
    GDB and GLB riders ("benefit ratio unlocking");
  • Income (loss) from reserve changes (net of related amortization) on
    business sold through reinsurance;
  • Gain (loss) on early extinguishment of debt;
  • Losses from the impairment of intangible assets;
  • Income (loss) from discontinued operations;
  • Acquisition and integration costs related to mergers and acquisitions;
    and
  • Income (loss) from the initial adoption of new accounting standards,
    regulations and policy changes including the net impact from the Tax
    Cuts and Jobs Act.

Adjusted Operating Revenues

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

  • Excluded realized gain (loss);
  • Amortization of deferred front-end loads ("DFEL") arising from changes
    in GDB and GLB benefit ratio unlocking;
  • Amortization of deferred gains arising from the reserve charges on
    business sold through reinsurance;
  • Revenue adjustments from the initial adoption of new accounting
    standards.

Adjusted Operating Return on Equity

Adjusted 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:

  • MoneyGuard® – 15% of total expected premium deposits;
  • Universal life (UL), indexed universal life (IUL), variable universal
    life (VUL) – first-year commissionable premiums plus 5% of excess
    premiums received;
  • Executive Benefits – single premium bank-owned UL and VUL, 15% of
    single premium deposits, and corporate-owned UL and VUL, first-year
    commissionable premiums plus 5% of excess premium received;
  • Term – 100% of annualized first-year premiums;
  • Annuities – deposits from new and existing customers; and
  • Group Protection – annualized first-year premiums from new policies.
 

Lincoln National Corporation

Reconciliation of Net Income to Adjusted Income from Operations

 
(in millions, except per share data)       For the Quarter Ended     For the Six Months Ended
June 30, June 30,
2018     2017 2018     2017
 
Total Revenues $ 4,020 $ 3,577 $ 7,629 $ 7,077
 
Less:
Excluded realized gain (loss) (53) (52) (89) (132)
Amortization of DFEL on benefit ratio unlocking - - (1) 2

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

 

-

 

-

 

-

 

1

Total Adjusted Operating Revenues $ 4,073 $ 3,629 $ 7,719 $ 7,206
 
Net Income (Loss) Available to Common

Stockholders – Diluted

$

377

$

412

$

742

$

847

Less:

Adjustment for deferred units of LNC stock in our deferred
compensation plans (1)

 

(8)

 

1

 

(10)

 

1

Net Income (Loss) 385 411 752 846
Less (2):
Excluded realized gain (loss) (41) (34) (69) (85)
Benefit ratio unlocking 7 26 (3) 71
Net impact from the Tax Cuts and Jobs Act - - (13) -
Acquisition and integration costs related to mergers and
acquisitions, after-tax

(35)

-

(39)

-

Gain (loss) on early extinguishment of debt   -   -   (19)   -
Adjusted Income (Loss) from Operations $ 454 $ 419 $ 895 $ 860
 
Earnings (Loss) Per Common Share – Diluted
Net income (loss) $ 1.70 $ 1.81 $ 3.34 $ 3.70
Adjusted income (loss) from operations 2.02 1.85 3.99 3.77
 
Average Stockholders' Equity
Average equity, including average AOCI $ 15,581 $ 15,485 $ 16,117 $ 15,105
Average AOCI   1,717   2,279   2,384   1,993
Average equity, excluding AOCI 13,864 13,206 13,733 13,112
Average goodwill   1,559   2,273   1,463   2,273
Average equity, excluding AOCI and goodwill $ 12,305 $ 10,933 $ 12,270 $ 10,839
 
Return on Equity, Including AOCI

Net income (loss) with average equity including goodwill

 

9.9% 10.6% 9.3% 11.2%
 
Return on Equity, Excluding AOCI
Adjusted income (loss) from operations with average equity including
goodwill

13.1%

12.7%

13.0%

13.1%

Adjusted income (loss) from operations with average equity excluding
goodwill

14.8%

15.3%

14.6%

15.9%

 
(1)     The numerator used in the calculation of our diluted EPS is adjusted
to remove the mark-to-market adjustment for deferred units of LNC
stock in our deferred compensation plans if the effect of equity
classification would result in a more dilutive EPS.
 
(2) We use our prevailing federal income tax rates of 21% and 35%, where
applicable, while taking into account any permanent differences for
events recognized differently in our financial statements and
federal income tax returns when reconciling our non-GAAP measures to
the most comparable GAAP measure.
 
 

Lincoln National Corporation

Reconciliation of Notable Items

 
      For the Quarter Ended     For the Six Months Ended
June 30, June 30,
2018     2017 2018     2017
 
Adjusted Operating EPS, As Reported $ 2.02 $ 1.85 $ 3.99 $ 3.77
Notable items:
Taxes   -   -   -   0.19
Total notable items - - - 0.19
Adjusted Operating EPS, Excluding Notable Items $ 2.02 $ 1.85 $ 3.99 $ 3.58
 
 

Lincoln National Corporation

Reconciliation of Variable Investment Income Relative to
Long-Term Average

 
      For the Quarter Ended     For the Six Months Ended
June 30, June 30,
2018     2017 2018     2017
 
Adjusted Operating EPS, As Reported $ 2.02 $ 1.85 $ 3.99 $ 3.77

Variable investment income relative to long-term average

  (0.08)   0.08   (0.11)   0.10

Adjusted Operating EPS, Excluding Variable Investment Income
Relative to Long-Term Average

$ 2.10 $ 1.77 $ 4.10 $ 3.67
 
 

Lincoln National Corporation

Reconciliation of Book Value per Share

 
          As of June 30,
2018       2017
 
Book value per share, including AOCI $ 69.85 $ 71.98
Per share impact of AOCI 5.53 12.20
Book value per share, excluding AOCI 64.32 59.78
 
 

Lincoln National Corporation

Digest of Earnings

 
(in millions, except per share data)      
For the Quarter Ended
June 30,
2018     2017
 
Revenues $ 4,020 $ 3,577
 
Net Income (Loss) $ 385 $ 411

Adjustment for deferred units of LNC stock in our deferred
compensation plans (1)

 

(8)

 

1

Net Income (Loss) Available to Common Stockholders – Diluted

$

377

$

412

 
Earnings (Loss) Per Common Share – Basic $ 1.76 $ 1.84
Earnings (Loss) Per Common Share – Diluted 1.70 1.81
 
Average Shares – Basic 217,997,297 223,555,299
Average Shares – Diluted 221,604,586 227,313,882
 
 
 
  For the Six Months Ended
June 30,
2018 2017
 
Revenues $ 7,629 $ 7,077
 
Net Income (Loss) $ 752 $ 846

Adjustment for deferred units of LNC stock in our deferred
compensation plans (1):

 

(10)

 

1

Net Income (Loss) Available to Common Stockholders – Diluted

$

742

$

847

 
Earnings (Loss) Per Common Share – Basic $ 3.45 $ 3.77
Earnings (Loss) Per Common Share – Diluted 3.34 3.70
 
Average Shares – Basic 218,182,118 224,581,848
Average Shares – Diluted 221,945,054 228,702,989
 
(1)     The numerator used in the calculation of our diluted EPS is adjusted
to remove the mark-to-market adjustment for deferred units of LNC
stock in our deferred compensation plans if the effect of equity
classification would be more dilutive to our diluted EPS.
 

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, and may contain
words like: "believe," "anticipate," "expect," "estimate," "project,"
"will," "shall" 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 involve risks and uncertainties that may
cause actual results to differ materially from the results contained in
the forward-looking statements. Risks and uncertainties that may cause
actual results to vary materially, some of which are described within
the forward-looking statements, include, among others:

  • Deterioration in general economic and business conditions that may
    affect account values, investment results, guaranteed benefit
    liabilities, premium levels, claims experience and the level of
    pension benefit costs, funding and investment results;
  • Adverse global capital and credit market conditions could affect our
    ability to raise capital, if necessary, and may cause us to realize
    impairments on investments and certain intangible assets, including
    goodwill and the valuation allowance against deferred tax assets,
    which may reduce future earnings and/or affect our financial condition
    and ability to raise additional capital or refinance existing debt as
    it matures;
  • Because of our holding company structure, the inability of our
    subsidiaries to pay dividends to the holding company in sufficient
    amounts could harm the holding company's ability to meet its
    obligations;
  • Legislative, regulatory or tax changes, both domestic and foreign,
    that affect: the cost of, or demand for, our subsidiaries' products;
    the required amount of reserves and/or surplus; our ability to conduct
    business and our captive reinsurance arrangements as well as
    restrictions on the payment of revenue sharing and 12b-1 distribution
    fees; the impact of recently enacted U.S. Federal tax reform
    legislation on our business, earnings and capital; and the effect of
    the Fifth Circuit Court of Appeal's decision vacating the Department
    of Labor's ("DOL") fiduciary regulation as well as any "best interest"
    standards of care adopted by the Securities and Exchange Commission
    ("SEC") or other state regulators;
  • 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;
  • Uncertainty about the effect of continuing promulgation and
    implementation of rules and regulations under the Dodd-Frank Wall
    Street Reform and Consumer Protection Act on us, the economy and the
    financial services sector in particular;
  • The initiation of legal or regulatory proceedings against us, and the
    outcome of any legal or regulatory proceedings, such as: adverse
    actions related to present or past business practices common in
    businesses in which we compete; adverse decisions in significant
    actions including, but not limited to, actions brought by federal and
    state authorities and class action cases; new decisions that result in
    changes in law; and unexpected trial court rulings;
  • A decline in the equity markets causing a reduction in the sales of
    our subsidiaries' products; a reduction of asset-based fees that our
    subsidiaries charge on various investment and insurance products; an
    acceleration of the net amortization of deferred acquisition costs
    ("DAC"), value of business acquired ("VOBA"), deferred sales
    inducements ("DSI") and deferred front-end loads ("DFEL"); and an
    increase in liabilities related to guaranteed benefit features of our
    subsidiaries' variable annuity products;
  • Ineffectiveness of our risk management policies and procedures,
    including various hedging strategies used to offset the effect of
    changes in the value of liabilities due to changes in the level and
    volatility of the equity markets and interest rates;
  • A deviation in actual experience regarding future persistency,
    mortality, morbidity, interest rates or equity market returns from the
    assumptions used in pricing our subsidiaries' products, in
    establishing related insurance reserves and in the net amortization of
    DAC, VOBA, DSI and DFEL, which may reduce future earnings;
  • Changes in accounting principles generally accepted in the United
    States ("GAAP"), that may result in unanticipated changes to our net
    income;
  • 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 investments in
    our portfolios, as well as counterparties to which we are exposed to
    credit risk requiring that we realize losses on investments;
  • Inability to protect our intellectual property rights or claims of
    infringement of the intellectual property rights of others;
  • Interruption in telecommunication, information technology or other
    operational systems, or failure to safeguard the confidentiality or
    privacy of sensitive data on such systems from cyberattacks or other
    breaches of our data security systems;
  • The effect of acquisitions and divestitures, restructurings, product
    withdrawals and other unusual items, including the successful
    implementation of integration strategies or the achievement of
    anticipated synergies and operational efficiencies related to an
    acquisition;
  • The adequacy and collectability of reinsurance that we have purchased;
  • Acts of terrorism, a pandemic, war or other man-made and natural
    catastrophes that may adversely affect our businesses and the cost and
    availability of reinsurance;
  • Competitive conditions, including pricing pressures, new product
    offerings and the emergence of new competitors, that may affect the
    level of premiums and fees that our subsidiaries can charge for their
    products;
  • The unknown effect on our subsidiaries' businesses resulting from
    evolving market preferences and the changing demographics of our
    client base; and
  • The unanticipated loss of key management, financial planners or
    wholesalers.

The risks included here are not exhaustive. Our annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
other documents filed 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.

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