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CORRECTING and REPLACING Lincoln Financial Group Reports Fourth Quarter and Full Year 2016 Results

RADNOR, Pa.–(BUSINESS WIRE)–Summary table at start of release: Net Income (Loss) Available to Common
Stockholders, As of or For the Quarter Ended 2015, should read 283. Net
Income (Loss) per Diluted Share Available to Common Stockholders, As of
or For the Quarter Ended 2015, should read 1.14.

The corrected release reads: 

LINCOLN FINANCIAL GROUP REPORTS FOURTH QUARTER AND FULL YEAR 2016
RESULTS

Full year net income EPS of $5.03, up 12% and operating EPS of $6.50,
up 19%

Fourth quarter net income EPS of $0.82 and operating EPS of $1.77

Book value per share (BVPS), including AOCI, of $63.97, up 15%; BVPS,
excluding AOCI, of $57.05, up 9%

Total capital return to shareholders of $261 million in the fourth
quarter and $1.1 billion in 2016

Lincoln Financial Group (NYSE: LNC) today reported net income for the
fourth quarter of 2016 of $190 million, or $0.82 per diluted share
available to common stockholders, compared to net income in the fourth
quarter of 2015 of $283 million, or $1.14 per diluted share available to
common stockholders. Fourth quarter income from operations was $409
million, or $1.77 per diluted share available to common stockholders,
compared to $382 million, or $1.54 per diluted share available to common
stockholders, in the fourth quarter of 2015.

Net income for the full year of 2016 was $1.2 billion, or $5.03 per
diluted share, compared to $1.2 billion, or $4.51 per diluted share
available to common stockholders in 2015. For the full year 2016, income
from operations was $1.5 billion, or $6.50 per diluted share, compared
to $1.4 billion, or $5.46 per diluted share, available to common
stockholders, for the full year of 2015.

“Another quarter of strong earnings capped a solid year as we generated
record operating EPS, a 9% increase in book value per share, and a 12%
ROE,” said Dennis R. Glass, president and CEO of Lincoln Financial
Group. “We continue to be confident in our ability to grow EPS through
organic growth, expense management, and capital deployment while an
improved outlook for the U.S. economy provides an incremental tailwind.”

 

 

 

 

 

 

As of or For the

 

As of or For the

Quarter Ended

Year Ended

(in millions, except per share data)

 

2016

 

2015

 

2016

 

2015

Net Income (Loss)

$

190

 

$

283

$

1,192

 

$

1,154

Net Income (Loss) Available to Common Stockholders

190

283

1,192

1,150

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

0.82

1.14

5.03

4.51

Revenues

3,254

3,172

13,330

13,572

Income (Loss) from Operations

409

382

1,540

1,395

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

1.77

1.54

6.50

5.46

Average Diluted Shares

230.9

248.9

236.8

254.9

ROE, including AOCI (Net Income)

4.9%

8.1%

7.8%

7.7%

ROE, excluding AOCI (Income from Operations)

12.7%

12.0%

12.0%

11.0%

Book Value per Share, Including AOCI

$

63.97

$

55.85

$

63.97

$

55.85

Book Value per Share, Excluding AOCI

 

 

57.05

 

 

52.38

 

 

57.05

 

 

52.38

 

Operating Highlights – Full Year 2016 versus Full Year 2015

Income from operations per share, excluding notable items in both
periods, up 7%

Operating ROE, excluding AOCI, of 12%, up 100 basis points

Total individual life insurance sales of $693 million, up 7%

Group Protection sales of $470 million, up 17%

Retirement Plan Services net flows of $565 million, up 25%

Share repurchases of $879 million reduced average diluted share count
by 7%

There were no notable items in the current quarter while the full year
included approximately $0.06 of net favorable items per share related
primarily to tax adjustments and the company’s annual review of DAC and
reserve assumptions. In the prior-year quarter, there were no notable
items; however, full year 2015 included $0.58 of net unfavorable items
related primarily to the company’s annual review of DAC and reserve
assumptions.

Fourth Quarter 2016 – Segment Results

Annuities

The Annuities segment reported income from operations of $242 million in
the quarter, flat versus the prior-year quarter. The impact of modestly
higher average account balances were offset by a few small items.

Gross annuity deposits in the fourth quarter of $1.8 billion decreased
40% from the prior-year quarter largely driven by a decrease in variable
annuity sales. Variable annuity sales continue to be negatively impacted
by various market factors; however, sales of $1.4 billion in the quarter
were generally consistent with the $1.5 billion of sales in the third
quarter. The percentage of variable annuity sales from products without
living benefits increased to 34% from 28% in the prior-year quarter.
Fixed annuity sales of $411 million were largely unchanged from the
third quarter. For the full year, fixed annuity sales increased 5% while
the decline in variable annuity sales was consistent with the fourth
quarter results.

End-of-period account values of $125 billion increased 3% versus the
prior-year quarter as positive equity market performance more than
offset net outflows.

Retirement Plan Services

Retirement Plan Services reported income from operations of $34 million
compared to $33 million in the prior-year quarter. The stable earnings
compared to the prior-year quarter are primarily driven by higher
average account balances offset by the impact of low interest rates.

Total deposits for the quarter of $2.4 billion were up 15% versus the
prior year driven by strong first-year sales in both the small and
mid-large markets. Total deposits for the full year increased to a
record $7.7 billion driven by a 3% increase in recurring deposits.

Net flows totaled $386 million in the quarter compared to outflows of
$221 million in the prior-year quarter. Positive net flows in every
quarter of 2016 resulted in $565 million of annual net flows, up 25%
versus the prior year. When combined with favorable market performance,
end-of-period account values increased 8% to $58 billion.

Life Insurance

Life Insurance reported income from operations of $154 million versus
$119 million in the prior-year quarter. The current quarter included
favorable mortality results and variable investment income offset
somewhat by higher variable expenses related to strong sales growth.

Total Life Insurance sales in the quarter were $231 million, a 17%
increase from the prior-year quarter driven by double-digit growth in
most product categories. For the full year, total Life Insurance sales
increased 2% as the prior-year benefited from a large executive benefit
case. Total individual life insurance sales, which exclude executive
benefits, increased 12% versus the prior-year quarter and 7% for the
full year.

Total Life Insurance in-force of $693 billion and average account values
of $45 billion both increased 5% over the prior-year quarter.

Group Protection

Group Protection income from operations was $16 million in the quarter
compared to $13 million in the prior-year period. The increase in
earnings was driven by loss ratio improvement across all product lines,
partially offset by higher sales-driven expenses. The total non-medical
loss ratio improved to 70.9% from 75.3% in the prior-year period. For
the full year the total non-medical loss ratio, excluding the impact of
favorable reserve refinements in the third quarter, improved 460 basis
points to 70.8%.

Group Protection sales of $263 million in the fourth quarter were up 18%
from the prior-year quarter, and full-year sales of $470 million were up
17%. Employee-paid product sales as a percentage of total sales were 48%
in the quarter consistent with the prior-year quarter and the full year.

Non-medical net earned premiums were $487 million in the fourth quarter,
down 6% from the year-ago period, though they once again increased
sequentially.

Other Operations

Other Operations reported a loss from operations of $37 million versus a
loss of $26 million in the prior-year quarter. The current quarter
included a $5 million after-tax expense related to a strategic
digitization initiative.

Realized Gains and Losses / Impacts to Net Income

Realized gains/losses (after-tax) in the quarter included:

A net loss from general account investments of $10 million compared to
a $35 million net loss in the prior-year quarter.

A net loss of $178 million from variable annuity net derivative
results with more than half associated with non-performance risk. This
compares to a net loss of $56 million in the prior-year quarter.

A net loss of $41 million from an early extinguishment of debt.

Unrealized Gains and Losses

The company reported a net unrealized gain of $4.7 billion, pre-tax, on
its available-for-sale securities at December 31, 2016. This compares to
a net unrealized gain of $3.0 billion at December 31, 2015, with the
year-over-year increase driven by tighter spreads.

Capital

During the quarter, the company repurchased 3.2 million shares of stock
at a cost of $204 million. The quarter’s average diluted share count of
230.9 million was down 7% from the fourth quarter of 2015, the result of
repurchasing 19.3 million shares of stock at a cost of $879 million
since December 31, 2015.

Book Value

As of December 31, 2016, book value per share, including accumulated
other comprehensive income (“AOCI”), of $63.97 increased 15% from a year
ago. Book value per share, excluding AOCI, of $57.05 increased 9% from
the prior-year period.

The tables attached to this release define and reconcile income from
operations, return on equity (“ROE”), and book value per share excluding
AOCI, non-GAAP measures, 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 fourth
quarter 2016 statistical supplement available on its website, www.LincolnFinancial.com/earnings.

Lincoln Financial Group will discuss the company’s fourth quarter
results with investors in a conference call beginning at 10:00 a.m.
Eastern Time on Thursday, February 2, 2017. Interested persons are
invited to listen through the internet. Please go to www.LincolnFinancial.com/webcast
at least fifteen minutes prior to the event to register, 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 February 2, 2017,
and it will remain available through 1:00 p.m. Eastern Time on February
9, 2017. To access the re-broadcast:

 

 

 

 

 

(855) 859-2056 (Domestic)

(404) 537-3406 (International)

Enter conference code: 39419806

 

A replay of the call will also be available by 1:00 p.m. Eastern Time on
February 2, 2017 at www.LincolnFinancial.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 $229 billion in assets
under management as of December 31, 2016. Learn more at: www.lfg.com.
Find us on Facebook,Twitter,LinkedIn
and YouTube.
To sign up for email alerts, please visit our Newsroom at http://newsroom.lfg.com.

Explanatory Notes on Use of Non-GAAP Measures

Management believes that income from operations, return on equity and
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.LincolnFinancial.com/investor.

Definitions of Non-GAAP Measures Used in this
Press Release

Income (loss) from operations, operating revenues and return on equity
(including and excluding average goodwill within average equity),
excluding AOCI, using annualized income (loss) from operations are
financial measures we use to evaluate and assess our results. Income
(loss) from operations, operating revenues and return on equity (“ROE”),
as used in the earnings release, are non-GAAP financial measures and do
not replace GAAP revenues, net income (loss) and ROE, the most directly
comparable GAAP measures.

Income (Loss) from Operations

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

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 the initial adoption of new accounting standards;

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.

Operating Revenues

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.

Operating Return on Equity

Return on equity measures how efficiently we generate profits from the
resources provided by our net assets.

It is calculated by dividing annualized 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

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 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, including an adjustment for internal replacements
of approximately 50% of commissionable premiums;

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, including
an adjustment for internal replacements of approximately 50% of
commissionable premiums;

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 Income from Operations

 

 

 

 

 

(in millions, except per share data)

For the Quarter Ended

For the Year Ended

December 31,

December 31,

2016

2015

2016

2015

 

Total Revenues

$

3,254

$

3,172

$

13,330

$

13,572

Less:

Excluded realized gain (loss)

(265)

(183)

(518)

(329)

Amortization of DFEL on benefit ratio unlocking

(1)

1

(2)

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

 

1

 

1

 

3

 

3

Total Operating Revenues

$

3,519

$

3,354

$

13,844

$

13,900

 

Net Income (Loss) Available to Common Stockholders – Diluted

$

190

$

283

$

1,192

$

1,150

Less:

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

 

 

 

 

(4)

Net Income (Loss)

190

283

1,192

1,154

Less (2):

Excluded realized gain (loss)

(172)

(118)

(337)

(214)

Benefit ratio unlocking

(6)

19

28

(29)

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

2

2

Gain (loss) on early extinguishment of debt

 

(41)

 

 

(41)

 

Income (Loss) from Operations

$

409

$

382

$

1,540

$

1,395

 

Earnings (Loss) Per Common Share – Diluted

Net income (loss)

$

0.82

$

1.14

$

5.03

$

4.51

Income (loss) from operations

1.77

1.54

6.50

5.46

 

Average Stockholders’ Equity

Average equity, including average AOCI

$

15,400

$

14,009

$

15,237

$

15,001

Average AOCI

 

2,471

 

1,254

 

2,427

 

2,308

Average equity, excluding AOCI

12,929

12,755

12,810

12,693

Average goodwill

 

2,273

 

2,273

 

2,273

 

2,273

Average equity, excluding AOCI and goodwill

$

10,656

$

10,482

$

10,537

$

10,420

 

Return on Equity, Including AOCI

Net income (loss) with average equity including goodwill

4.9%

8.1%

7.8%

7.7%

 

Return on Equity, Excluding AOCI

Income (loss) from operations with average equity including
goodwill

12.7%

12.0%

12.0%

11.0%

Income (loss) from operations with average equity excluding
goodwill

15.4%

14.6%

14.6%

13.4%

 

 

(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 35% 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 Year Ended

December 31,

December 31,

2016

2015

2016

2015

Operating EPS, as reported

$

1.77

$

1.54

$

6.50

$

5.46

Notable items:

Unlocking/Reserve adjustments

(0.45)

Legal expenses

(0.15)

Tax adjustments

 

 

 

0.06

 

0.02

Total notable items

0.06

(0.58)

Operating EPS, excluding notable items

$

1.77

$

1.54

$

6.44

$

6.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lincoln National Corporation

Reconciliation of Book Value per Share

As of December 31,

2016

2015

Book value per share, including AOCI

$

63.97

$

55.85

Per share impact of AOCI

6.92

3.47

Book value per share, excluding AOCI

57.05

52.38

 

 

 

Lincoln National Corporation

Digest of Earnings

 

 

(in millions, except per share data)

For the Quarter Ended

December 31,

2016

2015

 

Revenues

$

3,254

$

3,172

 

Net Income (Loss)

$

190

$

283

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

 

 

Net Income (Loss) Available to Common Stockholders – Diluted

$

190

$

283

 

Earnings (Loss) per Common Share – Basic

$

0.83

$

1.15

Earnings (Loss) per Common Share – Diluted

0.82

1.14

 

Average Shares – Basic

227,652,496

246,063,417

Average Shares – Diluted

230,913,849

248,939,707

 

 

For the Year Ended

December 31,

2016

2015

 

Revenues

$

13,330

$

13,572

Net Income (Loss)

$

1,192

$

1,154

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

 

 

(4)

Net Income (Loss) Available to Common Stockholders – Diluted

$

1,192

$

1,150

 

Earnings (Loss) per Common Share – Basic

$

5.09

$

4.60

Earnings (Loss) per Common Share – Diluted

5.03

4.51

 

Average Shares – Basic

234,181,717

250,629,243

Average Shares – Diluted

236,830,287

254,938,112

 

 

(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 revenue sharing and 12b-1 payments, the potential for
U.S. Federal tax reform and the effect of the Department of Labor’s
regulation defining fiduciary;

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 and the economy, and
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, or
“DAC,” value of business acquired, or “VOBA,” deferred sales
inducements, or “DSI,” and deferred front end sales loads, or “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, or “GAAP,” including convergence with International Financial
Reporting Standards (“IFRS”), 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;

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
changes in the demographics of their client base, as aging
baby-boomers move from the asset-accumulation stage to the
asset-distribution stage of life; 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 which
could impact our business 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 impact 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 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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