Investor presentation - lfg presentation.pdf · presentation September 9, 2020 ©2020 Lincoln...

1©2020 Lincoln National Corporation©2020 Lincoln National Corporation

This document may not be accurate after its date, and LNC does not undertake to update or keep it accurate after such date.

Chris Giovanni

SVP, Corporate [email protected]

Investor presentationNovember 17, 2020

2©2020 Lincoln National Corporation

Forward looking statements – cautionary languageCertain statements made in this presentation 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;

• Further deterioration in general economic and business conditions that may affect account values, investment results, guaranteed benefit liabilities, premium levels and claims experience;• Adverse global capital and credit market conditions could affect our ability to raise capital, if necessary, and may cause us to realize impairments on investments and certain intangible assets,

including goodwill and the valuation allowance against deferred tax assets, which may reduce future earnings and/or affect our financial condition and ability to raise additional capital or refinance existing debt as it matures;

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

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

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


Forward looking statements – cautionary language (contd.)

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

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

• Changes in accounting principles that may affect our financial statements;• Lowering of one or more of our debt ratings issued by nationally recognized statistical rating organizations and the adverse effect such action may have on our ability to raise capital and on our

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

our insurance subsidiaries and liquidity; • Significant credit, accounting, fraud, corporate governance or other issues that may adversely affect the value of certain financial assets, as well as counterparties to which we are exposed to credit

risk requiring that we realize losses on financial assets; • Inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others;• Interruption in telecommunication, information technology or other operational systems, or failure to safeguard the confidentiality or privacy of sensitive data on such systems from cyberattacks or

other breaches of our data security systems;• The effect of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including the successful implementation of integration strategies or the achievement of

anticipated synergies and operational efficiencies related to an acquisition; • The adequacy and collectability of reinsurance that we have purchased;• The continuation of the COVID-19 pandemic, or future outbreaks of COVID-19 or other pandemics, acts of terrorism, war or other man-made and natural catastrophes that may adversely affect our

businesses and the cost and availability of reinsurance; • Competitive conditions, including pricing pressures, new product offerings and the emergence of new competitors, that may affect the level of premiums and fees that our subsidiaries can charge

for their products; • The unknown effect on our subsidiaries' businesses resulting from evolving market preferences and the changing demographics of our client base; and• The unanticipated loss of key management, financial planners or wholesalers.

The risks and uncertainties included here are not exhaustive. Our most recent Form 10-K and our Form 10-Q for the quarter ended March 31, 2020, 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 presentation.

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.


Lincoln story


Lincoln strategy

Annuities Life Insurance

Group ProtectionRetirement Plan Services

Focus on the fastest growing U.S. markets

Invest in our powerful distribution network and product breadth

Maintain industry-leading risk

management

Remain focused on manufacturing retail

and worksite products

Actively direct capital to the highest

and best uses

Best for our employees Best interest of our customers

OUR FOUNDATIONAL DRIVERS

OUR PURPOSEProvide financial peace of mind to everyday consumers across the United States

ENTERPRISE STRATEGY

Utilize digital to drive a differentiated customer experience

Integrated business, financial

and talent planning

Where we play How we win Our capabilities Our tools


2008 3Q20

Holding company cash $(602)M $756M

Statutory capital $5.1B ~$9.8B

RBC ratio 393% ~445%

Below investment-grade assets2 6.1% 4.2%

Goodwill3 38% 13%

2013 2019

Greater management focus7

businesses4

businesses

% of sales with long-term guarantees 36% 18%

Mix of capital market sources of earnings4 54% spread46% fee

36% spread64% fee

% of earnings from mortality/morbidity4 24% 28%

Maintaining strong position during this crisis

Cap

ital

an

d b

alan

ce s

hee

t1St

rate

gic1

1 Time periods for comparison selected because 2008 was pre-financial crisis and 2013 shows progress on strategic initiatives over the medium term. 2 Does not include CMLs.3 Represents goodwill as a % of end-of-period equity, excluding AOCI.4 Excludes notable items, which represent pre-tax impact to business segment adjusted income from operations. See appendix for reconciliation.

Unfavorable Neutral Favorable


3Y performance (2017-2019)

Adjusted operating revenue1

9% CAGR

Adjusted operating EPS

ex. notable items1

11% CAGR

Adjusted operating ROE ex. AOCI and

notable items1

Expandedto 12.6%

$0

$30

$60

$90

2018 2019

Solid financial results in 2019 and over the longer term

$4

$6

$8

$10

2018 2019

Adjusted operating EPS1 Book value per shareex. AOCI1

Notable itemsAdjusted operating EPS

1 See Appendix for a reconciliation of non-GAAP measures to their most comparable GAAP measures and notable items.


Powerful distribution force shifting to virtual environment

Successfully adopting new technology and sales practices since COVID-19 crisis began

Leading distribution capabilities

1,300+ wholesalers and worksite

Diversified, innovative and multiple solutions across

our portfolio

✓ Annuities

✓ Life Insurance

✓ Group Protection

✓ Retirement Plan Services

Comprehensive set of retail products

Exclusively independent distribution

Broad and deep shelf spaceMultiple channels

Effectively leveraging virtual meeting

platforms

Adoption of digitaltools to enable

business continuity

Market demand forprotection and

guarantee solutions


Proven ability to change sales and earnings mix to reduce risk

Reprice products to help ensure

appropriate returns and put capital to the highest and best use

Shift to products that support our capital

management goals, with ~80% of sales without long-term guarantees1

Add new well-priced products that

achieve appropriate returns on capital

Accelerating reprice, shift & add new strategy

Track record of successfully responding to markets to protect franchise

Tilted sales towards products

without long-term guarantees

Increased percentage of earnings from mortality/ morbidity, pivoting away from products that are

more capital market sensitive

1 Data through YTD 9/30/20.


Earnings benefiting from expense management initiatives

◼ G&A as a % of adjusted operating revenue1

12.0%11.7%

10.8%

2013 2019 YTD 2020

Programs driving expense improvements2

1 Represents general and administrative expenses, net of amounts capitalized, as a percent of adjusted operating revenue. See Appendix for a reconciliation of non-GAAP measures to their most comparable GAAP measures and notable items.

2 Target achievement of savings from strategic digitization by end of 2021, Group Protection by end of 2020 and additional expense saves in 2020.

+120 bps improvement

Continued improvement in expense ratio

Strategic digitization initiative to drive

$90-150Mannual run-rate savings

Expense savings synergies of

$125Mfrom Group acquisition

Additional expense savings of

$100Mexpected to respond to economic headwinds


Industry-leading risk management programs

NAIC 1 (AAA/ AA/A)59.6% NAIC 2

(BBB)36.7%

High-quality and disciplined ALM investment strategy2

NAIC 3-6(BIG) 3.7%

Line of business

Assetduration(in years)

ALM match within target

duration range

Life Insurance 14.0 ✓

Group Protection 6.0 ✓

Retirement Plan Services 6.5 ✓

Annuities 7.0 ✓

Lincoln total4 10.5 ✓1 Represents sum of absolute value of daily hedge target change for the period.2 Data as of 3Q20, and below investment grade is abbreviated as BIG.3 As a % of rated assets including rated CML assets where CM1=NAIC 1, CM2=NAIC 2, CM3=NAIC 34 Represents total weighted average.

Minimal historic hedge breakage

96% investment grade3 Diversified across asset classes,sectors and issuers

Leveraged our multi-managermodel to proactively de-risk

Improved credit outlook

$(4)B

$0B

$4B

$8B

$12B

$16B

$20B1

Q1

5

1Q

16

1Q

17

1Q

18

1Q

19

1Q

20

Hedge target roundtrip¹ Change in hedge target Hedge program performance (net breakage)

2015 2016 2017 2018 2019 2020


Strong history of capital generation and deployment

45% of shares

or $6.4B

Shares repurchased since peak share count1

1 Based on total shares repurchased from 3Q10, which was peak share count, through 3Q20 as a percentage of 3Q10 end-of-period basic shares outstanding.

$0.00

$0.30

$0.60

$0.90

$1.20

$1.50

$1.80

2010 2021E

Consistently increased common stock dividend since the crisis

Announced 5%increase to 2021

quarterly dividend in 3Q earnings release


Protecting balance sheet in current environment Heading into 2020…

Our 3 goals in a stress scenario

…where we stand

RBC ratio of 439% Increased RBC ratio to ~445%

Cash at the holding company >$450M target Holding company cash of $756M

Buybacks targeted at historical levels Resuming buybacks in 4Q20 after 2Q/3Q pause

Analyzing additional tools for flexibility Executed $500M P-Caps2

Next debt maturity in 2021 Pre-funded debt; next maturity not until 20231

~80% non-guaranteed sales Lower sales freeing up additional capital

1 2021 debt maturity of $296M has been redeemed, and 2022 debt maturity of $300M has been prefunded.2 Established $500M contingent capital facility through P-Caps transaction in August 2020.3 Does not include CMLs.

De-risked investment portfolio Investment portfolio remains low risk; 4.2% BIG3

Maintain financialstrength ratings &business franchise

No need to raiseequity capital

Preserve shareholderdividend


YTD 2020 results


YTD19 YTD20

YTD19 YTD20

YTD19 YTD20

Solid underlying operating earnings results YTD 2020

$69.33$71.10

Category 1

Book value per share, excluding AOCI1

$1,549M

$1,454M

Category 1

G&A expenses

$254B$269B

Category 1

Average account values

1 See Appendix for a reconciliation of non-GAAP measures to their most comparable GAAP measures.

Adjusted operating EPS impacted by multiple items

Item 3Q19 3Q20 YTD19 YTD20

Adjusted operating EPS $(0.25) $(0.72) $4.30 $2.57

Notable items1 2.00 2.84 1.98 2.82

Alternative investment income 0.47 (0.29) 0.52 0.31

COVID-19 - 0.52 - 1.15-1.26


All businesses contributing solid results year-to-date

Annuities RPS Life Insurance Group Protection

VA sales withoutguaranteed living

benefits +50%

Total deposits +10% driven by growth in first-year sales and recurring deposits

G&A expenses, net of amounts capitalized

decreased 6%

Insurance premiums+5%

Average accountvalues +6%


decreased 6%

Average in-force faceamount +11%

Employee-paidsales of 56%,

+11 percentage points


decreased 5%




decreased 5%

All improvements are YTD 2020 vs. YTD 2019.


Annuities


$925M $954M

$0.0B

$0.5B

$1.0B

$1.5B

2014 2019

Annuities

High-quality in-force block

Consistent earnings growth

$686M $694M

$0

$400

$800

$1,200

YTD 2019 YTD 2020

21% ROE YTD202

76bpsROA YTD203

$(181)MImpact from annual unlocking over past

decade

1 2014 excludes $12M and 2019 excludes $(93)M of notable items. YTD 2019 excludes $(93)M from notable items and $(12)M from alternative investment portfolio underperformance. YTD 2020 excludes $(101)M from notable items and $(5)M from alternative investment portfolio underperformance.

2 Return on equity excludes goodwill, AOCI, and notable items versus 18% reported and is abbreviated as ROE.3 Return on assets excludes notable items versus 67bps reported and is abbreviated as ROA.

$1,047M$913M

Income from operations Notable items Alternative investment portfolio underperformance

$791M $800M

Income from operations, excluding notable items (all periods) and alternative investment portfolio underperformance (YTD only)1


Continuing to execute strategy to ensure strong profitability

Track record of executing on strategy

Never launched guaranteed rider without hedge program

Reinsurance for VA rider guarantees

Predictive lapse & utilization model

Tilted away from long-dated guarantees

Annuity Insights empower product actions

Flow reinsurance accelerated Fixed Annuity growth

Developed and launched Indexed VA

Infrastructure to execute agile product actions

Expansion of distribution partnerships such as Allstate & IMO

2003

Today

Transforming sales mix towards

Indexed VA enhances risk profile

53%

34% 29%

23%

31%54%

24%35%

17%

2016 2019 YTD 2020

VA w/ GLB VA w/o GLB FA


$0B $4B $8B $12B $16B $20B

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

Prior

Living benefit AV non-RMF Living benefit AV RMF Non-living benefit AV¹

High-quality variable annuity book is a strategic advantage

0.8% 1.5%

8.7%

16.2%

2019 3Q20

GLB NAR / GLB AV

0.4% 0.5%

12.3%

16.2%

2019 3Q20

GMDB NAR / GMDB AV

Lincoln Peer Average⁴

Variable annuity account value by issue year as of 9/30/2020

1 Includes the reinsured portion of living benefit account values. 2 Guaranteed Living Benefits Net Amount at Risk.3 Guaranteed Minimum Death Benefits Net Amount at Risk.4 2019 results as of 12/31/19 and 3Q20 results as of 9/30/20; peers include: AEG, AIG, AMP, BHF, EQH, Jackson, MET, MFC, Pacific Life, PRU, and VOYA.

Broaden and diversify portfolio

Shift to non-guaranteed and protecting margins

Consistent market presence added highly profitable business

Avoided living benefit arms race

GLB NAR2 GMDB NAR3

0.8% 1.9%

2.9% 0.8%

1.6% 0.4%

1.0% 0.3%

0.5% 0.2%

1.1% 0.3%

3.0% 0.3%

4.6% 0.3%

2.7% 0.5%

1.2% 0.3%

0.7% 0.3%

0.3% 0.3%

0.3% 0.3%

0.1% 0.2%

0.1% 0.2%

Total

1.5% 0.5%


Retirement Plan Services


$160M $172M

$0M

$75M

$150M

$225M

2014 2019

Retirement Plan ServicesSolid earnings results driven by expense management and strong flows

$1.5B93%

$99M6%

$(2,000)M

$(1,000)M

$0M

$1,000M

$2,000M

$3,000M

2016 2017 2018 2019 1Q20 2Q20 3Q20

Consistently positive net flows over the long term; 2Q20 impacted by two large cases

$125M $119M

$0M

$50M

$100M

$150M

YTD 2019 YTD 2020

Income from operations Notable items Alternative investment portfolio underperformance

$132M $125M

1 There were no notable items in 2014 or 2019. YTD 2019 excludes $(7)M from alternative investment portfolio underperformance. YTD 2020 excludes $(3)M from notable items and $(3)M from alternative investment portfolio underperformance.

Income from operations, excluding notable items and alternative investment portfolio underperformance (YTD only)1


Growing assets in our target markets

89%First-year sales Recurring deposits

$4.8B

$6.1B

$4.6B$4.9B

2014 2019 YTD 2019 YTD 2020

$2.7B

$3.4B

$2.2B

$2.6B

2014 2019 YTD 2019 YTD 2020


$230

$214$208

$189

2017 2018 2019 YTD 2020

+18% improvement

Expense management to help offset financial headwinds

Digital efficiencies and expense management

In-forceoptimization

• Re-engineering processes to streamline operations

• Leveraging technology to increase scalability of the business

• Driving flows to lower GMIR blocks1

• Repricing business to lower crediting rates, increase fees or reduce risk

Proven history of diligent expense management has driven down cost per participant

1 Guaranteed minimum interest rate is abbreviated at GMIR.


Life Insurance


Life Insurance

Growth in key earnings drivers

Track record of earnings growth with YTD results impacted by COVID-19 and alternative investment performance

Average account values

+4%YTD 2020 vs. YTD 2019

Total in-force face amount

+10%YTD 2020 vs. YTD 2019

$79M$(177)M

$(300)M

$0M

$300M

$600M

$900M

YTD 2019 YTD 2020

1 2014 excludes $58M and 2019 excludes $(320)M from notable items. YTD 2019 excludes $(320)M of notable items and $(75)M of alternative investment portfolio underperformance. YTD 2020 excludes $(440)M of notable items, $(50)M of alternative investment portfolio underperformance and $(181)M of COVID-19 impact.

$612M

$259M

$(250)M

$0M

$250M

$500M

$750M

2014 2019

$579M$554M

Income from operations Notable items Alternative investment portfolio underperformance COVID-19

$494M$474M

Income from operations, excluding notable items (all periods), alternative investment portfolio underperformance (YTD only) and COVID-19 (YTD only)1


Highlighting our ongoing attention to key industry trends

2011 YTD202012 2013 2014 2015 2016 2017 2018 2019

Act

ual

/an

nu

al e

xpec

tati

on

s

100%

Mortality ✓ Emerging company and industry experience reflected in our assumptions✓ YTD in line with this year’s expectations, excluding impacts from COVID-19

Morbidity ✓ MoneyGuard® reserves sufficient under stress scenarios as multi-benefit design reduces policyholder behavior risk

Reinsurance✓ Have resolved the majority of our reinsurance treaties with manageable

financial impacts

Interest rates✓ History of finding attractive opportunities such as long-duration, less-

liquid assets

Mortality within +/- 1% of expected Actual Results

Takeaways on our experience managing our in-force1

Stable long-term mortality results

1 Based on observed Lincoln and industry trends through YTD20.


Proven ability to shift sales to respond to marketplace changes

Near-term strategic focus items

Focusing on products without long-dated guarantees

Managing to a lower sales level in 2020 in response

to the economic environment

Strategic shift to focus on and expand our less

interest rate sensitive product portfolio

Accelerating digital adoption while enhancing

customer experience

YTD 2019 YTD 2020

Executive Benefits Term IUL UL VUL MoneyGuard

$635M

$515M


Group Protection


$23M

$238M

$(100)M

$0M

$100M

$200M

$300M

2014 2019

Group Protection

Well positioned to navigate through periods of volatility

Ability to reprice every one to three years

Scale anddiversification

Expenseefficiency within

our control

Trusted relationships with our brokers and customers

Targeted mix of profitable

employee-paid sales

Disability claims management expertise

$184M$85M

$(100)M

$0M

$100M

$200M

$300M

YTD 2019 YTD 2020

1 2019 excludes $10M. YTD 2019 excludes $10M from notable items and $(7)M of alternative investment portfolio underperformance. YTD 2020 excludes $(3)M of notable items, $(3)M of alternative investment portfolio underperformance and $(56)M of COVID-19 impact.

Leveraging successful acquisition with YTD impacted by claims experience, including COVID-19

$228M

Income from operations Notable items Alternative investment portfolio underperformance COVID-19

$181M $147M

Income from operations, excluding notable items (all periods), alternative investment portfolio underperformance (YTD only) and COVID-19 (YTD only)1


Sustaining strong underlying drivers

Premiums, persistency, and leave management services driving sustained growth

$3.1B

$3.2B

$2.9B

$3.0B

$3.1B

$3.2B

$3.3B

YTD 2019 YTD 2020

Premiums

84%

87%

80%

82%

84%

86%

88%

YTD 2019 YTD 2020

Persistency

2.9M

4.4M

0M

2M

4M

6M

YTD 2019 YTD 2020

Number of employees covered with our leave management services


Leadership position driven by diversification and scale

< 1K 32%

1-5K26%

5K+42%

Broad reach to all employer sizes Deep partnerships with 7K+ employee benefits brokers

Broker segment% of total

sales1 Who they are

Top 3 national partners

22%Mercer, AON, and Willis Towers Watson

serving larger employers

Top regional producers

51%350+ top producing partners,

with ~20% broker penetration2

Remaining producers

27% Remaining broker partners

2019 premiums by employer size

1 Based on 2017-2019 sales.

2 Average percentage of each broker’s total business placed with Lincoln, based on policy count.


Appendix


ReconciliationNet income to adjusted income from operations

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 rate 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.

(in millions, except per share data)

2019 2020 2019 2020 2013 2016 2018 2019

Total Revenues 4,638$ 5,361$ 12,913$ 13,303$ 11,969$ 13,330$ 16,424$ 17,258$

Less:

Excluded realized gain (loss) (61) 572 (623) (198) (273) (518) (46) (794)

Amortization of DFEL associated with benefit ratio unlocking (1) 1 3 (6) - 1 (5) 6

Amortization of deferred gains arising from reserve

changes on business sold through reinsurance - - - - 3 3 - -

Total Adjusted Operating Revenues 4,700$ 4,788$ 13,533$ 13,507$ 12,239$ 13,844$ 16,475$ 18,046$

Net Income (Loss) Available to Common

Stockholders - Diluted (164)$ 393$ 454$ 340$ 1,244$ 1,192$ 1,623$ 886$

Less:

Adjustment for deferred units of LNC stock in our

deferred compensation plans (1) (3) (5) - (16) - - (18) -

Net Income (Loss) (161) 398 454 356 1,244 1,192 1,641 886

Less (1):

Excluded realized gain (loss), after-tax (49) 452 (492) (156) (178) (337) (37) (627)

Benefit ratio unlocking, after-tax (2) 83 186 17 36 28 (136) 277

Net impact from the Tax Cuts and Jobs Act - - - - - - 19 17

Income (loss) from reserve changes (net of related

amortization) on business sold through reinsurance - - - - 2 2 - -

Acquisition and integration costs related to mergers and

acquisitions, after-tax (31) (4) (80) (12) - - (67) (103)

Gain (loss) on early extinguishment of debt, after-tax (33) - (33) (12) - (41) (18) (33)

Adjusted Income (Loss) from Operations (46)$ (133)$ 873$ 519$ 1,384$ 1,540$ 1,880$ 1,355$

Earnings (Loss) Per Common Share - Diluted

Net income (loss) (0.83)$ 2.01$ 2.24$ 1.74$ 4.52$ 5.03$ 7.40$ 4.38$

Adjusted income (loss) from operations (0.25)$ (0.72)$ 4.30$ 2.57$ 5.03$ 6.50$ 8.48$ 6.71$

December 31,

For the Year EndedFor the Nine Months Ended

September 30,

For the Quarter Ended

September 30,


ReconciliationAdjusted income (loss) from operations

(dollars in millions, except per share data)

2019 2020 2019 2020 2016 2018 2019

Adjusted operating EPS, as reported (0.25)$ (0.72)$ 4.30$ 2.57$ 6.50$ 8.48$ 6.71$

Less:

Notable items:

Tax adjustments - - - - 0.06 - -

Unlocking/reserve adjustments (2.00) (2.81) (1.98) (2.79) - (0.01) (1.99)

Other - (0.03) - (0.03) - - -

Total notable items (2.00) (2.84) (1.98) (2.82) 0.06 (0.01) (1.99)

Adjusted operating EPS, excluding notable items 1.75$ 2.12$ 6.28$ 5.39$ 6.44$ 8.49$ 8.70$

September 30,

For the Years Ended

December 31,

For the Nine Months EndedFor the Quarter Ended

September 30,


ReconciliationBook value per share

(in millions, except per share data)

2019 2020 2018 2019

Book value per share, including AOCI 100.84$ 111.51$ 69.71$ 100.11$

Per share impact of AOCI 31.51 40.41 1.98 28.84

Book value per share, excluding AOCI 69.33$ 71.10$ 67.73$ 71.27$

As of December 31,As of September 30,


ReconciliationReturn on equity (ROE)

(in mill ions, except per share data)

December 31,

2019

Average Equity

Average equity, including AOCI 17,973$

Average AOCI 4,019

Average equity, excluding AOCI 13,954$

ROE, Including AOCI

Net income (loss) 4.9%

ROE, Excluding AOCI

Adjusted income (loss) from operations 9.7%

ROE, Excluding AOCI and Notable Items

Adjusted income (loss) from operations, excluding notable items 12.6%

For the Year Ended


ReconciliationNotable items


2019 2020 2019 2020 2016 2018 2019

Adjusted income from operations (46)$ (133)$ 873$ 519$ 1,540$ 1,880$ 1,355$

Notable items:

Tax adjustments - - - - 14 - -

Reinsurance recapture - - - - - - -

Unlocking/reserve adjustments (403) (547) (403) (547) - (2) (403)

Expenses - - - - - - -

Other - (5) - (5) - - -

Total notable items (403) (552) (403) (552) 14 (2) (403)

Adjusted income from operations, excluding notable items 357$ 419$ 1,276$ 1,071$ 1,526$ 1,882$ 1,758$

September 30,

For the Years Ended

December 31,

For the Quarter Ended

September 30,

For the Nine Months Ended


ReconciliationSources of earnings excluding notable items


Sources of Earnings, Pre-Tax

Notable Items Impact to

Sources of Earnings

Sources of Earnings, Pre-Tax,

Excluding Notable Items

Investment spread $ 772 $ (21) $ 751

Mortality/morbidity $ 507 $ (36) $ 471

Fees on AUM $ 649 $ - $ 649

VA riders $ 110 $ - $ 110


Percentage by Component


Sources of Earnings,



Excluding Notable Items,


Investment spread 37.9% 0.0% 37.9%

Mortality/morbidity 24.9% -1.1% 23.8%

Fees on AUM 31.8% 1.0% 32.8%

VA riders 5.4% 0.2% 5.6%

Sources of Earnings, Pre-Tax


Sources of Earnings


Excluding Notable Items

Investment spread $ 363 $ 230 $ 593

Mortality/morbidity $ 446 $ 233 $ 679

Fees on AUM $ 1,046 $ (2) $ 1,044

VA riders $ 40 $ 50 $ 90




Sources of Earnings,



Excluding Notable Items,


Investment spread 19.2% 5.4% 24.6%

Mortality/morbidity 23.5% 4.7% 28.2%

Fees on AUM 55.2% -11.8% 43.4%

VA riders 2.1% 1.6% 3.7%

2013

2019

For the Year Ended December 31,

For the Year Ended December 31,

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