485BPOS 1 a20-6281_1485bpos.htm POST-EFFECTIVE AMENDMENT FILED PURSUANT TO SECURITIES ACT RULE 485(B)
As filed with the Securities and Exchange Commission on April 9, 2020
1933 Act Registration No. 333-181796
1940 Act Registration No. 811-08557
CIK No. 0001048607
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 10
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 250
Lincoln Life Flexible Premium Variable Life Account M
(Exact Name of Registrant)
Lincoln VULone2012
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(Exact Name of Depositor)
1300 South Clinton Street
Fort Wayne, Indiana 46802
(Address of Depositor’s Principal Executive Offices)
Depositor’s Telephone Number, Including Area Code: (260) 455-2000
Leon E. Roday, Esq.
The Lincoln National Life Insurance Company
150 North Radnor Chester Road
Radnor, PA 19087
(Name and Address of Agent for Service)
Copy To:
Scott C. Durocher
The Lincoln National Life Insurance Company
350 Church Street
Hartford, CT 06103
Approximate Date of Proposed Public Offering: Continuous
Title of Securities being registered:
Indefinite Number of Units of Interest in Variable Life Insurance Contracts.
An indefinite amount of the securities being offered by the Registration Statement has been registered pursuant to
Rule 24f-2 under the Investment Company Act of 1940. The Form 24F-2 for the Registrant for the fiscal year ended
December 31, 2019 was filed March 25, 2020.
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/X/ on May 1, 2020 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on ______, 2020 pursuant to paragraph (a)(1) of Rule 485.
/ / This Post-Effective Amendment designates a new effective date for a previously filed Post-Effective Amendment. Such effective date shall be ______, 2020.
Lincoln Life Flexible Premium Variable Life Account M
The Lincoln National Life Insurance Company
Home Office Location:
1300 South Clinton Street
P.O. Box 1110
Fort Wayne, IN 46802
(800) 454-6265
Administrative Office:
Customer Service Center
100 N. Greene Street
Greensboro, NC 27401
(800) 487-1485
 
A Flexible Premium Variable Life Insurance Policy
This prospectus describes Lincoln VULONE2012, a flexible premium variable life insurance contract (the “Policy”), offered by The Lincoln National Life Insurance Company (“Lincoln Life”, the “Company”, “We”, “Us”, “Our”). The Policy provides for death benefits and policy values that may vary with the performance of the underlying investment options. Read this prospectus carefully to understand the Policy being offered. Remember, you are looking to the financial strength of the Company for fulfillment of the contractual promises and guarantees, including those related to death benefits.
The state in which your Policy is issued will govern whether or not certain features, riders, charges and fees will be allowed in your Policy. You should refer to your Policy for these state-specific features. Please check with your registered representative regarding their availability.
You, the Owner, may allocate Net Premiums to the variable Sub-Accounts of our Flexible Premium Variable Life Account M, established on December 2, 1997 (“Separate Account”), or to the Fixed Account. Each Sub-Account invests in shares of a certain fund offered by the following fund families. These funds are collectively known as the Elite Series. Comprehensive information on the funds may be found in the funds' prospectuses which is furnished with this prospectus.
• AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
• AllianceBernstein Variable Products Series Fund
• American Century Variable Portfolios, Inc.
• American Funds Insurance Series®
• BlackRock Variable Series Funds, Inc.
• Delaware VIP® Trust
• Deutsche DWS Variable Series II
• Fidelity® Variable Insurance Products
• Franklin Templeton Variable Insurance Products Trust
• JPMorgan Insurance Trust
• Legg Mason Partners Variable Equity Trust
• Lincoln Variable Insurance Products Trust
• MFS® Variable Insurance Trust
• Northern Lights Variable Trust
• PIMCO Variable Insurance Trust
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the funds’ shareholder reports from us by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on a website, and we will notify you by mail each time a report is posted and will provide you with a website link to access the report. We will also provide instructions for requesting paper copies.
If you have already elected to receive shareholder reports electronically, you will not be affected by this change and you do not need to take any action. At any time, you may elect to receive shareholder reports and other communications electronically by following the instructions we have provided.
You may elect to receive all future reports in paper free of charge by informing us that you wish to continue receiving paper copies of your shareholder reports by contacting us at the telephone number listed on the first page of this prospectus. Your election to receive reports in paper will apply to all funds available under your Policy.

 

Additional information on Lincoln Life, the Separate Account and this Policy may be found in the Statement of Additional Information (the “SAI”). See the last page of this prospectus for information on how you may obtain the SAI.
Certain terms used in this prospectus are defined within the sentences where they appear, within relevant provisions of the prospectus, including footnotes or they may be found in the prospectus Glossary, if one is provided, at the back of the prospectus.
To be valid, this prospectus must have the current funds’ prospectuses with it. Keep all prospectuses for future reference.
The Securities and Exchange Commission has not approved or disapproved these securities or determined this prospectus is accurate or complete. It is a criminal offense to state otherwise.
This Policy may not be available in all states, and this prospectus only offers the Policy for sale in jurisdictions where such offer and sale are lawful.
Prospectus Dated: May 1, 2020

 

Table of Contents
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POLICY SUMMARY
Benefits of Your Policy
Death Benefit Protection.  The Policy this prospectus describes is a variable life insurance policy which provides death benefit protection. Variable life insurance is a flexible tool for financial and investment planning for persons needing death benefit protection. It is not meant to be used for speculation, arbitrage, viatical arrangements or other collective investment schemes. The Policy may not be traded on any stock exchange and is not intended to be sold on any secondary market. You should consider other forms of investments if you do not need death benefit protection, as there are additional costs and expenses in providing the insurance. Benefits of the Policy will be impacted by a number of factors discussed in this prospectus, including adverse investment performance and the amount and timing of Premium Payments.
Tax Deferred Accumulation.  Variable life insurance has significant tax advantages under current tax law. Policy values accumulate on a tax-deferred basis. A transfer of values from one Sub-Account to another within the Policy currently generates no current taxable gain or loss. Any investment income and realized capital gains within a Sub-Account or interest from the Fixed Account are automatically reinvested without being taxed to the Owner.
Access to Your Policy Values.  Variable life insurance offers access to policy values. You may borrow against your Policy or surrender all or a portion of your Policy. Your Policy can support a variety of personal and business financial planning needs.
Flexibility.  The Policy is a flexible premium variable life insurance contract in which flexible Premium Payments are permitted. You may select death benefit options and policy riders. You may increase or decrease the amount of death benefit. You are able to select, monitor, and change investment Sub-Account choices within your Policy. With the wide variety of investment Sub-Accounts available, it is possible to fine tune an investment mix to meet changing personal objectives or investment conditions. Premium Payments and policy values you choose to allocate to Sub-Accounts are used by us to purchase shares of funds which follow investment objectives similar to the investment objectives of the corresponding Sub-Account. Those funds are referred to in this prospectus as “Underlying Funds”. You should refer to this prospectus and the prospectus for each Underlying Fund for comprehensive information on the Sub-Accounts and the Underlying Funds. You may also allocate Premiums and policy values to the Fixed Account.
No-Lapse Protection.  Your Policy will include two riders which may help you manage some of the risk of Policy Lapse.
The No-Lapse Enhancement Rider may prevent a Policy from lapsing where the Net Accumulation Value under your Policy is insufficient to cover the Monthly Deductions if the requirements of the rider, including requirements as to timing and amount of Premium Payments, are met. The duration of lapse protection provided will be determined monthly, and it will vary based on the calculations described in detail in the rider. Please note that it does not provide any additional death benefit amount or any increase in your policy value. Also, it does not provide any type of market performance guarantee. While this rider is effective, there are certain requirements and limitations that are imposed which may restrict the allocations you may wish to make.
The Premium Reserve Rider allows you to pay Premiums in addition to those you plan to pay for the base Policy and to have such amounts accumulate in the same manner as if they had been allocated to your Policy without, as detailed in the rider, being subject to all charges and expenses of your Policy. For example, this rider can be used to fund future Premium Payments if needed while retaining the flexibility to withdraw such funds from the rider without reducing the Policy’s Specified Amount (or being subject to withdrawal fees or Surrender Charges) in the event the funds are not needed due to favorable investment performance. Premiums allocated to the Premium Reserve Rider do not increase the Policy’s Accumulation Value and, therefore, will not decrease the Net Amount at Risk. Since the Net Amount at Risk will not be reduced, current Cost of Insurance Charges will not be reduced. However, the Policy’s death benefit will be increased by the Premium Reserve Rider Accumulation Value less
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Indebtedness. Refer to the section headed “Premium Reserve Rider” in the Riders section of this prospectus for more information about the benefits of this rider.
Risks of Your Policy
Fluctuating Investment Performance.  A Sub-Account is not guaranteed and will increase and decrease in value according to investment performance of the Underlying Fund. Policy values in the Sub-Accounts are not guaranteed. If you put money into the Sub-Accounts, you assume all the investment risk on that money. A comprehensive discussion of each Sub-Account’s and Underlying Fund's objective and risk is found in this prospectus and in each Underlying Fund's prospectus, respectively. You should review these prospectuses before making your investment decision. Your choice of Sub-Accounts and the performance of the Underlying Funds will impact the Policy's Accumulation Value and will impact how long the Policy remains in force, its tax status, and the amount of Premium you need to pay to keep the Policy in force.
Policy Values in the Fixed Account.  Premium Payments and policy values allocated to the Fixed Account are held in the Company's General Account. Note that there are significant limitations on your right to transfer amounts in the Fixed Account and, due to these limitations, if you want to transfer the entire balance of the Fixed Account to one or more Sub-Accounts, it may take several years to do so. Therefore, you should carefully consider whether the Fixed Account meets your investment needs. We issue other types of insurance policies and financial products as well. In addition to any amounts we are obligated to pay in excess of policy value under the Policy, we also pay our obligations under these products from our assets in the General Account. Moreover, unlike assets held in the Separate Account, the assets of the General Account are subject to the general liabilities of the Company and, therefore, to the Company’s General Account creditors. In the event of an insolvency of receivership, payments we make from our General Account to satisfy claims under the Policy would generally receive the same priority as our other Owners’ obligations.
The General Account is not segregated or insulated from the claims of the insurance company’s creditors. Investors look to the financial strength of the insurance company’s fulfillment of the contractual promises and guarantees we make to you in the Policy, including those relating to the payment of death benefits. Therefore, guarantees provided by the insurance company as to benefits promised in the prospectus are subject to the claims paying ability of the insurance company and are subject to the risk that the insurance company may not be able to cover or may default on its obligations under those guarantees.
For more information, please see “Lincoln Life, The Separate Account and The General Account” or “Transfers” sections of this prospectus.
Unsuitable for Short-Term Investment.  This Policy is intended for long-term financial and investment planning for persons needing death benefit protection, and it is unsuitable for short-term goals. Your Policy is not designed to serve as a vehicle for frequent trading.
Policy Lapse.  Sufficient Premiums must be paid to keep your Policy in force. There is a risk of lapse if Premiums are too low in relation to the insurance amount and if investment results of the Sub-Accounts you have chosen are adverse or are less favorable than anticipated. Outstanding Policy Loans and Partial Surrenders will increase the risk of lapse.
In addition to paying sufficient Premiums and being cognizant of the impact of outstanding Policy Loans and Partial Surrenders on policy values, you also have the No-Lapse Enhancement Rider and the Premium Reserve Rider, briefly noted above and discussed in more detail in the Riders section of this prospectus, to help you manage some of the risk of Policy Lapse.
Decreasing Death Benefit.  Any outstanding Policy Loans and any amount that you have surrendered will reduce your Policy’s death benefit. Depending upon your choice of Death Benefit Option, adverse performance of the Sub-Accounts you choose may also decrease your Policy's death benefit.
Consequences of Surrender.  Surrender Charges are assessed if you surrender your Policy within the first 10-15 Policy Years. Depending on the amount of Premium paid, or any Reduction in Specified Amount, there may be little
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or no Surrender Value available. Partial Surrenders may reduce the policy value and death benefit, and may increase the risk of lapse. To avoid lapse, you may be required to make additional Premium Payments. Full or Partial Surrenders may result in tax consequences.
Tax Consequences.  As noted in greater detail in the section headed “Tax Issues”, the federal income tax treatment of life insurance is complex and current tax treatment of life insurance may change. There are other federal tax consequences such as estate, gift and generation skipping transfer taxes, as well as state and local income, estate and inheritance tax consequences. You should always consult a tax advisor about the application of federal and state tax rules to your individual situation. The following discussion highlights tax risks in general, summary terms.
Tax Treatment of Life Insurance Contracts.  Your Policy is designed to enjoy the favorable tax treatment afforded life insurance, including the exclusion of death benefits from income tax, the ability to take distributions and loans over the life of your Policy, and the deferral of taxation of any increase in the value of your Policy. If the Policy does fail to qualify, you will be subject to the denial of those important benefits. In addition, if you pay more Premiums than permitted under the federal tax law your Policy may still be life insurance but will be classified as a Modified Endowment Contract (“MEC”) whereby only the tax benefits applicable to death benefits will apply and distributions will be subject to immediate taxation and to an added penalty tax.
Tax Law Compliance.   We believe that the Policy will satisfy the federal tax law definition of life insurance, and we will monitor your Policy for compliance with the tax law requirements. The discussion of the tax treatment of your Policy is based on the current Policy, as well as the current rules and regulations governing life insurance. Please note that changes made to the Policy, as well as any changes in the current tax law requirements, may affect the Policy's qualification as life insurance or may have other tax consequences.
Cyber-Security and Business Interruption Risks. We rely heavily on interconnected computer systems and digital data to conduct our variable products business.  Because our business is highly dependent upon the effective operation of our computer systems and those of our business partners, our business is vulnerable to disruptions from utility outages, and susceptible to operational and information security risks resulting from information systems failure (e.g., hardware and software malfunctions), and cyber-attacks. These risks include, among other things, the theft, misuse, corruption and destruction of data maintained online or digitally, interference with or denial of service, attacks on websites and other operational disruption and unauthorized release of confidential customer information. Such systems failures and cyber-attacks affecting us, any third-party administrator, the Underlying Funds, intermediaries and other affiliated or third-party service providers may adversely affect us and your policy value. For instance, systems failures and cyber-attacks may interfere with our processing of policy transactions, including the processing of orders from our website or with the Underlying Funds, impact our ability to calculate your policy value, cause the release and possible destruction of confidential customer or business information, impede order processing, subject us and/or our service providers and intermediaries to regulatory fines and financial losses and/or cause reputational damage. Cyber security risks may also impact the issuers of securities in which the Underlying Funds invest, which may cause the funds underlying your Policy to lose policy value. There can be no assurance that we or the Underlying Funds or our service providers will avoid losses affecting your Policy due to cyber-attacks or information security breaches in the future. In addition to cyber security risks, we are subject to business interruption risks caused by catastrophes, both natural and man-made, associated with pandemics, terrorist attacks or inclement weather events. Such events may cause systems upon which we rely to be inaccessible to our employees, customers or business partners for an extended period of time, causing a negative impact on our ability to provide services and products.
Charges and Fees
This section describes the fees and expenses that you will pay when buying, owning and surrendering your Policy. Refer to the “Policy Charges and Fees” section later in this prospectus for more information.
The fees shown in the tables below are the maximums we can charge.
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Table I describes the fees and expenses that you will pay at the time you purchase your Policy, surrender your Policy, or transfer policy values between Sub-Accounts.
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Table I: Transaction Fees
Charge When Charge
is Deducted 		Amount
Deducted
Maximum Sales Charge as a percentage of Premiums paid (Premium Load). Note: Includes 3% charge for state premium and federal tax obligations. When you pay a Premium. 7% in Policy Years 1-20; and
4% in Policy Years 21 and later.1
Surrender Charge*2    
A dollar amount per $1,000 of Specified Amount. For up to 15 years from the Policy Date and up to 15 years from the effective date of each increase in Specified Amount, a Surrender Charge will be deducted at the time you effect a Full Surrender of your Policy. For up to 10 years from the Policy Date or up to 10 years from the effective date of each increase in Specified Amount, a Surrender Charge may be deducted at the time you effect a Reduction in Specified Amount.  
Maximum Charge   $60.00 per $1,000.
Maximum Charge for a Representative Insured: male, age 45, standard non-tobacco, in year one.   $39.38 per $1,000.
Transfer Fee Applied to any transfer request in excess of 24 made during any Policy Year. $25
* These charges and costs vary based on individual characteristics. The charges and costs shown in the table may not be representative of the charges and costs that a particular Owner will pay. You may obtain more information about the particular charges that would apply to you by requesting a personalized policy illustration from your registered representative.
1 The Maximum Sales Charge Imposed on Premiums is anticipated to cover the Company's costs for sales expenses and any policy-related state and federal tax liabilities. Policy-related taxes imposed by states range from 0% to 5%. In considering policy-related state taxes component of the sales charge, the Company considers the average of the taxes imposed by the states rather than any taxes specifically imposed by the state in which the Owner resides. We use an average of 3% to account for state and federal tax obligations.
2 During the life of the Policy, you may request one or more Partial Surrenders, each of which may not exceed 90% of your Policy's Surrender Value as of the date of your request. If you wish to surrender more than 90% of your Policy's Surrender Value, you must request a Full Surrender of your Policy, which is subject to the Surrender Charge reflected in the table above. (See section headed “Partial Surrenders” for a discussion of Partial Surrenders of your Policy.)
Table II describes the fees and expenses that you will pay periodically during the time that you own your Policy, not including the fund operating expenses shown in Table III.
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Table II: Periodic Charges Other Than Fund Operating Expenses
Charge When Charge
is Deducted 		Amount
Deducted
Cost of Insurance* Monthly  
A dollar amount per $1,000 of Net Amount at Risk.    
Maximum Charge1   $83.33 per $1,000.
Minimum Charge   $0.00 per $1,000.
Maximum Charge for a Representative Insured: male, age 45, standard non-tobacco, in year one.   $0.20 per $1,000.
Mortality and Expense Risk Charge (“M&E”) At the end of each Valuation Period.  
A percentage of the value of the Separate Account, calculated daily.    
Maximum Charge   0.60%.2
Administrative Fee* Monthly  
Flat Fee; plus   $10 in all years
For the first 10 Policy Years from Policy Date or increase in Specified Amount, a monthly fee per $1,000 of Initial Specified Amount or increase in Specified Amount:    
Maximum Charge   $2.56 per $1,000.
Minimum Charge   $0.01 per $1,000.
Maximum Charge for a Representative Insured: male, age 45, standard non-tobacco.   $0.13 per $1,000.
Policy Loan Interest Annually  
A percentage of the amount held in the Loan Account.    
Maximum Charge   4%3
Interest on Accelerated Benefit Lien Annually  
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Table II: Periodic Charges Other Than Fund Operating Expenses  (continued)
Charge When Charge
is Deducted 		Amount
Deducted
A percentage of Accelerated Benefit up to Surrender Value   4%
A percentage of Accelerated Benefit Exceeding Surrender Value   Variable4
No-Lapse Enhancement Rider N/A There is no charge for this rider.5
Overloan Protection Rider One-time charge when you elect to use the benefit.  
A percentage of the then current Accumulation Value.    
Maximum Charge   5%
Optional Rider Charges   Individualized based on whether optional Rider(s) selected.
Basic Accelerated Benefits Riders6 When any benefit payment is made $250 (deducted from amount of benefit paid)
Change of Insured Rider N/A There is no charge for this rider.
Enhanced Surrender Value Rider Monthly (in Policy Years 2-5 only)  
A dollar amount per $1,000 of Initial Specified Amount.   $0.05 per $1,000.
Lincoln LifeEnhance® Accelerated Benefits Rider Monthly  
Cost of Insurance*    
A dollar amount per $1,000 of Net Amount at Risk or Rider Net Amount at Risk, whichever is applicable at the time.    
Maximum Charge7   $43.48 per $1,000.
Minimum Charge   $0.00 per $1,000.
Maximum Charge for a Representative Insured: male, age 45, standard non-tobacco, in year one.   $0.09 per $1,000.
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Table II: Periodic Charges Other Than Fund Operating Expenses  (continued)
Charge When Charge
is Deducted 		Amount
Deducted
Premium Reserve Rider When you allocate a Premium Payment to this rider 4% of each Premium Payment allocated to the rider.8
  When Rider Accumulation Value is transferred to Policy during Policy Years 1-108 3% of amount transferred
Waiver of Monthly Deduction Rider9 Monthly  
Rate factor is percent of all other covered monthly charges.    
Maximum Charge   12%
Minimum Charge   2%.
Maximum Charge for a Representative Insured: male, age 45, standard non-tobacco.   3.5%
* These charges and costs vary based on individual characteristics. The charges and costs shown in the table may not be representative of the charges and costs that a particular Owner will pay. You may obtain more information about the particular charges that would apply to you by requesting a personalized policy illustration from your registered representative.
1 Individuals with a higher mortality risk than standard issue individuals can be charged from 125% to 800% of the standard rate. However, under no circumstances would it be higher than the maximum amount shown in the table above.
2 Guaranteed at an effective annual rate of 0.60% in Policy Years 1-10 and 0.20% in Policy Years 11 and beyond.
3 Effective annual interest rate of 4% in years 1-10 and 3% in years 11 and beyond. Although deducted annually, interest accrues daily. As described in the section headed “Policy Loans”, when you request a Policy Loan, amounts equal to the amount of the loan you request are withdrawn from the Sub-Accounts and the Fixed Account in proportion to their respective values. Such amount is transferred to the Loan Account, which is part of the Company’s general account. Amounts in the Loan Account are credited interest at an effective annual rate guaranteed not to be less than 3%.
4 Under the Basic Accelerated Benefits Riders, payments of benefits are considered as liens, which as described more fully in the section headed “Policy Loans”, are charged interest as shown in the Table above. Variable interest shall be at a rate not to exceed higher of (i) published monthly average of Moody's Corporate Bond Yield Average - Monthly Average Corporates (determined 30 days in advance of beginning of Policy Year) and (ii) the rate used to compute the Accumulation Value of the Fixed Account plus 1%. Although deducted annually, interest accrues daily. As described in the section headed “Policy Loans”, when you request an Accelerated Benefit, amounts equal to the amount of the Accelerated Benefit you request are withdrawn from the Sub-Accounts and the Fixed Account in proportion to their respective values. Such amount is transferred to the Loan Account, which is part of the Company’s general account. Amounts in the Loan Account are credited interest at an effective annual rate guaranteed not to be less than 3%.
5 There is no separate charge for the No-Lapse Enhancement Rider. The Cost of Insurance Charge for the Policy has been adjusted to reflect the addition of the rider to the Policy. See No-Lapse Enhancement Rider section for further discussion.
6 There are two versions of this rider; see Riders section for detailed discussion of the terms of each rider, and note that the payment of a benefit under either version of the rider is considered a loan against the Policy.
7 Individuals with higher mortality risk than standard issue individuals can be charged from 125% to 200% of the standard rate. However, under no circumstances would it be higher than the maximum amount shown in the table above.
8 Allocations of Premium Payments to the rider are at your discretion. Allocations of Premium Payments to the rider are subject to the 4% charge shown in Table II and are not subject to the “Maximum Sales Charge Imposed on Premiums”
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  shown in Table I. This 4% charge is called the Premium Reserve Rider Premium Load. Rider Accumulation Value allocated to the Separate Account is subject to the Mortality and Expense Risk Charge (which does not exceed 0.60% for Policy Years 1-10 and 0.20% for Policy Years 11 and later).
  Transfers of Accumulation Value from the rider to the Policy are not subject to the “Maximum Sales Charge Imposed on Premiums” shown in Table I, but are subject to a charge of 3% of the Accumulation Value transferred if such transfers are made during the first 10 Policy Years. In addition, if you request a loan from the Accumulation Value of this rider, interest is charged at the same rate as for Policy Loans. See Premium Reserve Rider section for further discussion.
9 These charges and costs vary based on individual characteristics. The charges and costs shown in the tables may not be representative of the charges and costs that a particular Owner will pay. You may obtain more information about the particular charges, cost of insurance, and the cost of certain riders that would apply to you by requesting a personalized policy illustration from your registered representative.
Table III shows the annual fund fees and expenses for the year ended December 31, 2019. The fees that are deducted daily from the Underlying Funds in which your Sub-Account invests. The table shows the minimum and maximum total operating expenses charged by the Underlying Funds that you may pay during the time you own your Policy. More detail concerning each Underlying Fund’s fees and expenses is contained in the prospectus for each Underlying Fund.
These fees and expenses may change at any time.
Table III: Total Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Total Annual Operating Expense Maximum Minimum
Total management fees, distribution and/or service (12b-1) fees, and other expenses. 2.27% 1 0.23%
1 The Total Annual Operating Expenses shown in the table do not reflect waivers and reductions. Underlying Funds may offer waivers and reductions to lower their fees. Currently such waivers and reductions range from 0% to 0.30%. These waivers and reductions generally extend through April 30, 2021 but may be terminated at any time by the Underlying Fund. Refer to the Underlying Fund’s prospectus for specific information on any waivers or reductions in effect. The minimum and maximum percentages shown in the table include Fund Operating Expenses of mutual funds, if any, which may be acquired by the Underlying Funds which operate as Fund of Funds. Refer to such Underlying Fund’s prospectus for details concerning Fund Operating Expenses of mutual fund shares acquired by it, if any. In addition, certain Underlying Funds have reserved the right to impose fees when fund shares are redeemed within a specified period of time of purchase (“Redemption Fees”) not reflected in the table above. As of the date of this prospectus, none have done so. Redemption Fees are discussed in the Market Timing section of this prospectus and further information about Redemption Fees is contained in the prospectus for such Underlying Fund, copies of which accompany this prospectus or may be obtained by calling 1-800-487-1485.
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LINCOLN LIFE, THE SEPARATE ACCOUNT AND THE GENERAL ACCOUNT
The Lincoln National Life Insurance Company (Lincoln Life, the Company, we, us, our) (EIN 35-0472300), organized in 1905, is an Indiana-domiciled insurance company, engaged primarily in the direct issuance of life insurance policies and annuities. Lincoln Life is wholly owned by Lincoln National Corporation (LNC), a publicly held insurance and financial services holding company incorporated in Indiana. Lincoln Life is obligated to pay all amounts promised to owners under the policies. Death Benefit Proceeds and rider benefits to the extent those proceeds and benefits exceed the then current Accumulation Value of your Policy are backed by the claims-paying ability of Lincoln Life. Our claims paying ability is rated from time to time by various rating agencies. Information with respect to our current ratings is available at our website noted below under “How to Obtain More Information.” Those ratings do not apply to the Separate Account, but reflect the opinion of the rating agency companies as to our relative financial strength and ability to meet contractual obligations to owners of our policies. Ratings can and do change from time to time. Additional information about ratings is included in the Statement of Additional Information.
Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. Through its affiliates, Lincoln Financial Group offers annuities, life, group life and disability insurance, 401(k) and 403(b) plans, and comprehensive financial planning and advisory services.
General Account. The General Account is not segregated or insulated from the claims of the insurance company's creditors. Investors look to the financial strength of the insurance companies for these insurance guarantees. Therefore, guarantees provided by the insurance company as to benefits promised in the prospectus are subject to the claims paying ability of the insurance company and are subject to the risk that the insurance company may not be able to cover or may default on its obligations under those guarantees. The General Account represents all of the general assets of the Company. Our general assets include all assets other than those held in separate accounts which we sponsor. We will invest the assets of the General Account in accordance with applicable law. Additional information concerning laws and regulations applicable to the investment of the assets of the General Account is included in the Statement of Additional Information.
Fixed Account. The Fixed Account assets are general assets of the Company, and are held in the Company’s General Account. Amounts allocated to the Fixed Account are not subject to market fluctuation.
Separate Account. The investment performance of assets in the Separate Account is kept separate from that of the Company’s General Account. Separate Account assets attributable to the Policies are not charged with the general liabilities of the Company. Separate Account income, gains and losses are credited to or charged against the Separate Account without regard to the Company’s other income, gains or losses. The Separate Account’s values and investment performance are not guaranteed. It is registered with the Securities and Exchange Commission (the “SEC” or the “Commission”) as a unit investment trust under the Investment Company Act of 1940 (“1940 Act”) and meets the definition of “separate account.” We may change the investment policy of the Separate Account at any time. If required by the Insurance Commissioner, we will file any such change for approval with the Department of Insurance in our state of domicile, and in any other state or jurisdiction where this Policy is issued.
Our Financial Condition.  As an insurance company, we are required by state insurance regulation to hold a specified amount of reserves in order to meet all the contractual obligations of our General Account to our Owners. In order to meet our claims-paying obligations, we regularly monitor our reserves to ensure we hold sufficient amounts to cover actual or expected policy and claim payments.
State insurance regulators also require insurance companies to maintain a minimum amount of capital in excess of reserves, which acts as a cushion in the event that the insurer suffers a financial impairment, based on the inherent risks in the insurer’s operations. These risks include those associated with losses that we may incur as the result of defaults on the payment of interest or principal on assets held in our General Account, which include bonds, mortgages, general real estate investments, and stocks, as well as the loss in value of these investments resulting from a loss in their market value.
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How to Obtain More Information.   We encourage both existing and prospective Owners to read and understand our financial statements. We prepare our financial statements on both a statutory basis and according to Generally Accepted Accounting Principles (GAAP). Our audited GAAP financial statements, as well as the financial statements of the Separate Account, are located in the Statement of Additional Information. If you would like a free copy of the Statement of Additional Information please contact our Administration Office at the address or telephone number listed on the first page of this prospectus. In addition, the Statement of Additional Information is available on the SEC’s website at http://www.sec.gov. You may obtain our audited statutory financial statements, any unaudited statutory financial statements that may be available as well as ratings information by visiting our website at www.LincolnFinancial.com.
Fund Participation Agreements
In order to make the Underlying Funds available, Lincoln Life has entered into agreements with the Underlying Fund company and their advisors or distributors. In some of these agreements, we must perform certain services for the Underlying Fund advisors or distributors. Such services include, but are not limited to, recordkeeping; aggregating and processing purchase and redemption orders; providing Owners with statements showing their positions within the funds; processing dividend payments; providing sub-accounting services for shares held by Owners; and forwarding shareholder communications, such as proxies, shareholder reports, dividend and tax notices, and printing and delivering prospectuses and updates to Owners. For these administrative functions, we may be compensated at annual rates of between 0% and 0.30% based upon the assets of an Underlying Fund attributable to the Policies. Additionally, an Underlying Fund’s advisor and/or distributor (or its affiliates) may provide us with certain services that assist us in the distribution of the Policies and may pay us and/or certain affiliates amounts to participate in sales meetings. We may also receive compensation for marketing and distribution which may come from 12b-1 fees, or be paid by the advisors or distributors. The Underlying Funds offered by the following trusts or corporations make payments to Lincoln Life under their distribution plans in consideration of the administrative functions Lincoln Life performs: American Funds Insurance Series, Fidelity Variable Insurance Products, Lincoln Variable Insurance Products Trust, Northern Lights Variable Trust, and PIMCO Variable Insurance Trust.
Payments made out of the assets of an Underlying Fund will reduce the amount of assets that otherwise would be available for investment and will reduce the return on your investment. The dollar amount of future asset-based fees is not predictable because these fees are a percentage of the Underlying Fund’s average net assets, which can fluctuate over time. If, however, the value of the Underlying Fund goes up, then so would the payment to us (or our affiliates). Conversely, if the value of the Underlying Fund goes down, payments to us (or our affiliates) would decrease.
Distribution of the Policies and Compensation
The Policy is distributed by broker-dealer firms through their registered representatives who are appointed as life insurance agents for the Company, subject to the terms of selling agreements entered into by such firms, the Company and the Company’s Principal Underwriter, Lincoln Financial Distributors, Inc. (“LFD”). The Company’s affiliates, Lincoln Financial Advisors Corporation and Lincoln Financial Services Corporation (collectively, “LFN”), have such agreements in effect with LFD and the Company. In addition to compensation for distributing the Policy as described below, the Company provides financial and personnel support to LFD and LFN for operating and other expenses, including amounts used for recruitment and training of personnel, production of literature and similar services.
The maximum total compensation we pay to any broker-dealer firm in the form of commission or expense reimbursement allowance, inclusive of any bonus incentives, with respect to policy sales is 140% of the first year Premium and 5% of all other Premiums paid. The actual amount of such compensation or the timing and manner of its receipt may be affected by a number of factors including: (a) choices the Owner has made at the time of application for the Policy, including the choice of riders; (b) the volume of business produced by the firm and its representatives; or (c) the profitability of the business the firm has placed with the Company. Also, in lieu of premium-based commission, equivalent amounts may be paid over time based on Accumulation Value.
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In some situations, the broker-dealer may elect to share its commission or expense reimbursement allowance with its registered representatives. Registered representatives of broker-dealer firms may also be eligible for cash bonuses and “non-cash compensation.” “Non-cash compensation”, as defined under FINRA’s rules, includes but is not limited to, merchandise, gifts, marketing support, sponsorships, seminars, entertainment and travel expenses.
Broker-dealers or their affiliates may be paid additional amounts for: (1) “preferred product” treatment of the Policies in their marketing programs, which may include marketing services and increased access to sales representatives; (2) sales promotions relating to the Policies; (3) costs associated with sales conferences and educational seminars for their sales representatives; (4) other sales expenses incurred by them; and (5) inclusion in the financial products the broker-dealer offers. Loans may be provided to broker-dealers or their affiliates to help finance marketing and distribution of the Policies, and those loans may be forgiven if aggregate sales goals are met. In addition, staffing or other administrative support and services may be provided to broker-dealers who distribute the Policies.
These additional types of compensation are not offered to all broker-dealers. The terms of any particular agreement governing compensation may vary among broker-dealers and the amounts may be significant. The prospect of receiving, or the receipt of, additional compensation may provide broker-dealers and/or their registered representatives with an incentive to favor sales of the Policies over other variable life insurance policies (or other investments) with respect to which a broker-dealer does not receive additional compensation, or receives lower levels of additional compensation. You may ask your registered representative how he/she will personally be compensated, in whole or in part, for the sale of the Policy to you or for any alternative proposal that may have been presented to you. You may wish to take such payments into account when considering and evaluating any recommendation made to you in connection with the purchase of a Policy.
Depending on the particular selling arrangements, there may be others who are compensated for distribution activities. For example, LFD may compensate certain “wholesalers”, who control access to certain selling offices, for access to those offices or for referrals, and that compensation may be separate from the compensation paid for sales of the Policies. LFD may compensate marketing organizations, associations, brokers or consultants which provide marketing assistance and other services to broker-dealers who distribute the Policies, and which may be affiliated with those broker-dealers. Commissions and other incentives or payments described above are not charged directly to Owners or the Separate Account. The potential of receiving, or the receipt of, such marketing assistance or other services and the payment to those who control access or for referrals, may provide broker-dealers and/or their registered representatives an incentive to favor sales of the Policies over other variable life insurance policies (or other investments) with respect to which a broker-dealer does not receive similar assistance or disadvantage issuers of other variable life insurance policies (or other investments) which do not compensate for access or referrals. All compensation is paid from our resources, which include fees and charges imposed on your Policy.
We do not anticipate that the Surrender Charge, together with the portion of the Premium Load attributable to sales expense, will cover all sales and administrative expenses which we will incur in connection with your Policy. Any such shortfall would be available for recovery from the Company’s General Account, which supports insurance and annuity obligations.
Sub-Accounts and Funds
The variable investment options in the Policy are Sub-Accounts of the Separate Account (“Sub-Accounts”). Each Sub-Account invests in shares in a single Underlying Fund. All amounts allocated or transferred to a Sub-Account are used to purchase shares of the appropriate Underlying Fund. You do not invest directly in these Underlying Funds. The investment performance of each Sub-Account will reflect the investment performance of the Underlying Fund.
We create Sub-Accounts and select the Underlying Funds, the shares of which are purchased by amounts allocated or transferred to the Sub-Accounts, based on several factors, including, without limitation, asset class coverage, the strength of the manager’s reputation and tenure, brand recognition, performance, and the capability and
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qualification of each sponsoring investment firm. Another factor we consider during the initial selection process is whether the fund (or an affiliate, investment advisor or distributor of the fund) being evaluated is an affiliate of ours and whether we are compensated for provided administrative, marketing, and/or support services that would otherwise be provided by the fund, its investment advisor or its distributor. Some funds pay us significantly more than others and the amount we receive may be substantial. We often receive more revenue from an affiliated fund than one that is not affiliated with us. These factors give us an incentive to select a fund that yields more revenue, and this is often an affiliated fund.
We review each Underlying Fund periodically after it is selected. Upon review, we may either close a Sub-Account or restrict allocation of additional Premium Payments to a Sub-Account if we determine the Underlying Fund no longer meets one or more of the factors and/or if the Sub-Account has not attracted significant Owner assets. Alternatively, we may seek to substitute another fund which follows a similar investment objective as the Underlying Fund, subject to receipt of applicable regulatory approvals. Finally, when we develop a variable life insurance product in cooperation with a fund family or distributor (e.g., a “private label” product), we generally will include funds based on recommendations made by the fund family or distributor, whose selection criteria may differ from our selection criteria.
A given Underlying Fund may have an investment objective and principal investment strategy similar to those for another fund managed by the same investment advisor or subadvisor. However, because of timing of investments and other variables, there will be no correlation between the two investments. Even though the management strategy and the objectives of the funds are similar, the investment results may vary.
Certain Underlying Funds invest their assets in other funds. As a result, you will pay fees and expenses at both fund levels. This will reduce your investment return. These arrangements are referred to as “funds of funds”, which may have higher expenses than funds that invest directly in debt or equity securities. An advisor affiliated with us manages some of the available funds of funds. Our affiliates may promote the benefits of such funds to Owners and/or suggest that Owners consider whether allocating some or all of their policy value to such portfolios is consistent with their desired investment objectives. In doing so, we may be subject to conflicts of interest insofar as we may derive greater revenues from the affiliated fund of funds than certain other funds available to you under your Policy.
Certain of the Underlying Funds, including funds managed by an advisor affiliated with us, employ risk management strategies that are intended to control the Underlying Funds’ overall volatility, and for some Underlying Funds, to also reduce the downside exposure of the Underlying Funds during significant market downturns. These funds usually, but not always, have “Managed Risk” or “Managed Volatility” in the name of the fund. These risk management strategies could limit the upside participation of the Underlying Fund in rising equity markets relative to other funds. Also, several of the Underlying Funds may invest in non-investment grade, high-yield, and high-risk debt securities (commonly referred to as “junk bonds”) as detailed in the individual Underlying Fund prospectus. For more information about the Underlying Funds and the investment strategies they employ, please refer to the Underlying Funds’ current prospectuses.
Shares of the Underlying Fund are available to insurance company separate accounts which fund variable annuity contracts and variable life insurance policies, including the Policy described in this prospectus. Because shares are offered to separate accounts of both affiliated and unaffiliated insurance companies, it is conceivable that, in the future, it may not be advantageous for variable life insurance separate accounts and variable annuity separate accounts to invest in these Underlying Funds simultaneously, since the interests of such Owners or contractholders may differ. Although neither the Company nor the Underlying Funds currently foresees any such disadvantages either to variable life insurance or to variable annuity Owners, each Underlying Fund’s Board of Trustees/Directors has agreed to monitor events in order to identify any material irreconcilable conflicts which may possibly arise and to determine what action, if any, should be taken in response thereto. If such a conflict were to occur, the Separate Account might withdraw its investment in an Underlying Fund. This might force that Underlying Fund to sell the securities it holds at disadvantageous prices. Owners will not bear the attendant expense.
There is no assurance that the investment objective of any of the Underlying Funds will be met. You assume all of the investment performance risk for the Sub-Accounts you select. The amount of risk varies significantly among the
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Sub-Accounts. You should read each Underlying Fund’s prospectus carefully before making investment choices. In particular, also please note, there can be no assurance that any money market fund will be able to maintain a stable net asset value per share. During extended periods of low interest rates, and due in part to Policy fees and expenses, the yields of any Sub-Account investing in a money market fund may become extremely low and possibly negative.
Additional Sub-Accounts and Underlying Funds may be made available in our discretion. The right to select among Sub-Accounts will be limited by the terms and conditions imposed by the Company.
If an Underlying Fund imposes restrictions with respect to the acceptance of premium allocations or transfers, we reserve the right to reject an allocation or transfer request at any time that the Underlying Fund has notified us that such would not be accepted. We will notify you if your allocation or transfer request is or becomes subject to such restrictions.
The Underlying Funds and their investment advisors and objectives are listed below. Comprehensive information on each Underlying Fund, its objectives and past performance may be found in that Underlying Fund’s prospectus or summary prospectus. Prospectuses for each of the Underlying Funds listed below accompany this prospectus and are available by calling 1-800-487-1485 or by referring to the contact information provided by the Underlying Fund’s on the cover page of its summary prospectus.
AIM Variable Insurance Funds (Invesco Variable Insurance Funds), advised by Invesco Advisers, Inc.
• Invesco V.I. International Growth Fund (Series I Shares): Long-term growth of capital.
AllianceBernstein Variable Products Series Fund, advised by AllianceBernstein, L.P.
• AB VPS Global Thematic Growth Portfolio (Class A): Long-term growth of capital.
• AB VPS Small/Mid Cap Value Portfolio (Class A): Long-term growth of capital.
American Century Variable Portfolios, Inc., advised by American Century Investment Management, Inc.
• American Century VP Balanced Fund (Class I): Long-term capital growth and current income by investing approximately 60% of its assets in equity securities and the remainder in bonds and other fixed-income securities.
American Funds Insurance Series®, advised by Capital Research and Management Company.
• American Funds Global Growth Fund (Class 2): Long-term growth of capital.
• American Funds Global Small Capitalization Fund (Class 2): Long-term capital growth.
• American Funds Growth Fund (Class 2): Growth of capital.
• American Funds Growth-Income Fund (Class 2): Long-term growth of capital and income.
• American Funds International Fund (Class 2): Long-term growth of capital.
BlackRock Variable Series Funds, Inc., advised by BlackRock Advisors, LLC
• BlackRock Global Allocation V.I. Fund (Class I): High total investment return.
Delaware VIP® Trust, advised by Delaware Management Company.*
• Delaware VIP® Diversified Income Series (Standard Class): Maximum long-term total return consistent with reasonable risk.
• Delaware VIP® Emerging Markets Series (Standard Class): Long-term capital appreciation.
• Delaware VIP® Limited-Term Diversified Income Series (Standard Class): Maximum total return, consistent with reasonable risk.
• Delaware VIP® REIT Series (Standard Class): Maximum long-term total return, with capital appreciation as a secondary objective.
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• Delaware VIP® Small Cap Value Series (Standard Class): Capital appreciation.
• Delaware VIP® Smid Cap Core Series (Standard Class): Long-term capital appreciation.
• Delaware VIP® U. S. Growth Series (Standard Class): Long-term capital appreciation.
• Delaware VIP® Value Series (Standard Class): Long-term capital appreciation.
Deutsche DWS Variable Series II, advised by DWS Investment Management Americas, Inc.
• DWS Alternative Asset Allocation VIP Portfolio (Class A): Capital appreciation; a fund of funds.
Fidelity® Variable Insurance Products, advised by Fidelity Management & Research Company
• Fidelity® VIP Contrafund® Portfolio (Service Class): Long-term capital appreciation.
• Fidelity® VIP Growth Portfolio (Service Class): To achieve capital appreciation.
• Fidelity® VIP Mid Cap Portfolio (Service Class): Long-term growth of capital.
Franklin Templeton Variable Insurance Products Trust, advised by Franklin Advisers, Inc. for the Franklin Income VIP Fund and by Franklin Mutual Advisers, LLC for the Franklin Mutual Shares VIP Fund.
• Franklin Income VIP Fund (Class 1): To maximize income while maintaining prospects for capital appreciation.
• Franklin Mutual Shares VIP Fund (Class 1): Capital appreciation; income is a secondary consideration.
• Templeton Global Bond VIP Fund (Class 1): High current income consistent with preservation of capital; capital appreciation is a secondary objective.
JPMorgan Insurance Trust, advised by J.P. Morgan Investment Management Inc.
• JPMorgan Insurance Trust Global Allocation Portfolio (Class 1): Maximize long-term total return.
Legg Mason Partners Variable Equity Trust, advised by LeggMason Partners Fund Advisor, LLC.
• ClearBridge Variable Mid Cap Portfolio (Class I): Long-term growth of capital.
Lincoln Variable Insurance Products Trust, advised by Lincoln Investment Advisors Corporation.
• LVIP Baron Growth Opportunities Fund (Service Class): Capital appreciation.
• LVIP BlackRock Dividend Value Managed Volatility Fund (Standard Class): Reasonable income by investing primarily in income-producing equity securities.
• LVIP BlackRock Global Growth ETF Allocation Managed Risk Fund (Standard Class): A balance between current income and growth of capital, with a greater emphasis on growth of capital; a fund of funds.
• LVIP BlackRock Global Real Estate Fund (Standard Class): Total return through a combination of current income and long-term capital appreciation.
• LVIP BlackRock Inflation Protected Bond Fund (Standard Class): To maximize real return, consistent with preservation of real capital and prudent investment management.
• LVIP BlackRock U.S. Growth ETF Allocation Managed Risk Fund (Standard Class): A balance between current income and growth of capital, with a greater emphasis on growth of capital; a fund of funds.
• LVIP Blended Large Cap Growth Managed Volatility Fund (Standard Class): Long-term growth of capital in a manner consistent with the preservation of capital.
• LVIP Blended Mid Cap Managed Volatility Fund (Standard Class): Capital appreciation.
• LVIP ClearBridge QS Select Large Cap Managed Volatility Fund (Standard Class): Capital appreciation.
• LVIP Delaware Bond Fund (Standard Class)*: Maximum current income (yield) consistent with a prudent investment strategy.
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• LVIP Delaware Diversified Floating Rate Fund (Standard Class)*: Total return.
• LVIP Delaware Mid Cap Value Fund (Standard Class)*: To maximize long-term capital appreciation.
(formerly LVIP Delaware Special Opportunities Fund)
• LVIP Delaware Social Awareness Fund (Standard Class)*: To maximize long-term capital appreciation.
• LVIP Dimensional International Core Equity Fund (Standard Class): Long-term capital appreciation.
• LVIP Dimensional International Equity Managed Volatility Fund (Standard Class): Long-term capital appreciation; a fund of funds.
• LVIP Dimensional U.S. Core Equity 1 Fund (Standard Class): Long-term capital appreciation.
• LVIP Dimensional U.S. Core Equity 2 Fund (Standard Class): Long-term capital appreciation.
• LVIP Dimensional U.S. Equity Managed Volatility Fund (Standard Class): Long-term capital appreciation; a fund of funds.
• LVIP Dimensional/Vanguard Total Bond Fund (Standard Class): Total return consistent with the preservation of capital; a fund of funds.
• LVIP Franklin Templeton Global Equity Managed Volatility Fund (Standard Class): Long-term capital growth.
• LVIP Global Conservative Allocation Managed Risk Fund (Standard Class): A high level of current income with some consideration given to growth of capital; a fund of funds.
• LVIP Global Growth Allocation Managed Risk Fund (Standard Class): A balance between a high level of current income and growth of capital, with a greater emphasis on growth of capital; a fund of funds.
• LVIP Global Income Fund (Standard Class): Current income consistent with the preservation of capital.
• LVIP Global Moderate Allocation Managed Risk Fund (Standard Class): A balance between a high level of current income and growth of capital, with an emphasis on growth of capital; a fund of funds.
• LVIP Government Money Market Fund (Standard Class): Current income while (i)maintaining a stable value of your shares (providing stability of net asset value) and (ii) preserving the value of your initial investment (preservation of capital).
• LVIP Invesco Select Equity-Income Managed Volatility Fund (Standard Class): Capital appreciation.
• LVIP JPMorgan High Yield Fund (Standard Class): A high level of current income; capital appreciation is the secondary objective.
• LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund (Standard Class): Long-term capital appreciation.
• LVIP MFS International Growth Fund (Standard Class): Long-term capital appreciation.
• LVIP MFS Value Fund (Standard Class): Capital appreciation.
• LVIP Mondrian International Value Fund (Standard Class): Long-term capital appreciation as measured by the change in the value of fund shares over a period of three years or longer.
• LVIP Multi-Manager Global Equity Managed Volatility Fund (Standard Class): Long-term growth of capital; a fund of funds.
• LVIP SSGA Bond Index Fund (Standard Class): To match as closely as practicable, before fees and expenses, the performance of the Barclays Capital U.S. Aggregate Index.
• LVIP SSGA Conservative Index Allocation Fund (Standard Class): A high level of current income, with some consideration given to growth of capital; a fund of funds.
• LVIP SSGA Conservative Structured Allocation Fund: (Standard Class): A high level of current income, with some consideration given to growth of capital; a fund of funds.
• LVIP SSGA Developed International 150 Fund (Standard Class): To maximize long-term capital appreciation.
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• LVIP SSGA Emerging Markets 100 Fund (Standard Class): To maximize long-term capital appreciation.
• LVIP SSGA Global Tactical Allocation Managed Volatility Fund (Standard Class): Long-term growth of capital; a fund of funds.
• LVIP SSGA International Index Fund (Standard Class): To approximate as closely as practicable, before fees and expenses, the performance of a broad market index of non-U.S. foreign securities.
• LVIP SSGA International Managed Volatility Fund (Standard Class): Capital appreciation; a fund of funds.
• LVIP SSGA Large Cap 100 Fund (Standard Class): To maximize long-term capital appreciation.
• LVIP SSGA Moderate Index Allocation Fund (Standard Class): A balance between a high level of current income and growth of capital, with a greater emphasis on growth of capital; a fund of funds.
• LVIP SSGA Moderate Structured Allocation Fund (Standard Class): A balance between a high level of current income and growth of capital, with an emphasis on growth of capital; a fund of funds.
• LVIP SSGA Moderately Aggressive Index Allocation Fund (Standard Class): A balance between high level of current income and growth of capital, with a greater emphasis on growth of capital; a fund of funds.
• LVIP SSGA Moderately Aggressive Structured Allocation Fund (Standard Class): A balance between high level of current income and growth of capital, with a greater emphasis on growth of capital; a fund of funds.
• LVIP SSGA S&P 500 Index Fund (Standard Class)(1): To approximate as closely as practicable, before fees and expenses, the total rate of return of common stocks publicly traded in the United States, as represented by the S&P 500 Index.
• LVIP SSGA Small-Cap Index Fund (Standard Class): To approximate as closely as practicable, before fees and expenses, the performance of the Russell 2000® Index, which emphasizes stocks of small U.S. companies.
• LVIP SSGA Small-Mid Cap 200 Fund (Standard Class): To maximize long-term capital appreciation.
• LVIP T. Rowe Price Growth Stock Fund (Standard Class): Long-term capital growth.
• LVIP T. Rowe Price Structured Mid-Cap Growth Fund (Standard Class): To maximize capital appreciation.
• LVIP U.S. Growth Allocation Managed Risk Fund (Standard Class): High level of current income and growth of capital, with an emphasis on growth of capital; a fund of funds.
• LVIP Vanguard Domestic Equity ETF Fund (Standard Class): Long-term capital appreciation; a fund of funds.
• LVIP Vanguard International Equity ETF Fund (Standard Class): Long-term capital appreciation; a fund of funds.
• LVIP Wellington Capital Growth Fund (Standard Class): Capital growth.
• LVIP Wellington Mid-Cap Value Fund (Standard Class): Long-term capital appreciation.
MFS® Variable Insurance Trust, advised by Massachusetts Financial Services Company
• MFS® VIT Growth Series (Initial Class): Capital appreciation.
• MFS® VIT Total Return Series (Initial Class): Total return.
• MFS® VIT Utilities Series (Initial Class): Total return.
Northern Lights Variable Trust, advised by ValMark Advisers, Inc.
• TOPS® Balanced ETF Portfolio – (Class 2 Shares): Income and capital appreciation; a fund of funds.
• TOPS® Moderate Growth ETF Portfolio – (Class 2 Shares): Capital appreciation; a fund of funds.
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PIMCO Variable Insurance Trust, advised by PIMCO
• PIMCO VIT CommodityRealReturn® Strategy Portfolio (Administrative Class): Maximum real return, consistent with prudent investment management.
* Investments in Delaware VIP Series, Delaware Funds, LVIP Delaware Funds or Lincoln Life accounts managed by Macquarie Investment Management Advisers, a series of Macquarie Investments Management Business Trust, are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46008 583 542 and its holding companies, including their subsidiaries or related companies, and are subject to investment risk, including possible delays in prepayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the series or funds or accounts, the repayment of capital from the series or funds or account, or any particular rate of return.
(1) The Index to which this fund is managed is a product of S&P Dow Jones Indices LLC (“SPDJI”) and has been licensed for use by one or more of the portfolio’s service providers (licensee). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (S&P); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by the licensees. S&P®, S&P GSCI® and the Index are trademarks of S&P and have been licensed for use by SPDJI and its affiliates and sublicensed for certain purposes by the licensee. The Index is not owned, endorsed, or approved by or associated with any additional third party. The licensee’s products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, or their third party licensors, and none of these parties or their respective affiliates or third party licensors make any representation regarding the advisability of investing in such products, nor do they have any liability for any errors, omissions, or interruptions of the Index.
Sub-Account Availability and Substitution of Funds
We may add, change or eliminate any Underlying Funds that the Separate Account or the Sub-Accounts invest in, subject to state or federal laws and regulations. An Underlying Fund may also discontinue offering their shares to the Sub-Accounts.
We may choose to add or remove Sub-Accounts as investment options under the Policies. If we change any Sub-Accounts or substitute any Underlying Funds, we will make appropriate endorsements to the Policies.
Placing or transferring money into the money market Sub-Account may have impacts on other features of your Policy. Prior to moving money into the money market Sub-Account or allowing it to default into the money market Sub-Account as a result of a fund liquidation, refer to your Policy for specific impacts that may apply, if any. We will notify you of any change that is made.
If we obtain appropriate approvals from Owners and securities regulators, we may:
• Change the investment objective of the Separate Account;
• Operate the Separate Account as a management investment company, unit investment trust, or any other form permitted under applicable securities laws;
• Deregister the Separate Account; or
• Combine the Separate Account with another Separate Account.
If required by law, we will obtain any required approvals from Owners, the SEC, and state insurance regulators before substituting any Underlying Funds. Substitute Underlying Funds may have higher charges than the Underlying Funds being replaced.
We may close Sub-Accounts to Owners that purchase a new Policy after a specified date, and these Owners may not allocate Net Premium Payments or policy value to the closed Sub-Account. Owners that purchased a Policy prior to the specified date may continue to allocate Net Premium Payments and policy value to the Sub-Account.
From time to time, certain of the Underlying Funds may merge with other funds. If a merger of an Underlying Fund occurs, the policy value allocated to the existing fund will be transferred into the surviving fund. Any future Net
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Premium Payments allocated to the existing fund will automatically be allocated to the surviving fund unless otherwise instructed by you.
In addition, a Sub-Account may become unavailable due to the liquidation of its Underlying Fund portfolio. To the extent permitted by applicable law, upon notice to you and unless you otherwise instruct us, we will transfer any policy value in the liquidated Underlying Fund to the money market Sub-Account or a Sub-Account investing in another Underlying Fund designated by us. Any future Net Premium Payments allocated to the liquidated fund will automatically be allocated to the money market Sub-Account or a Sub-Account investing in another Underlying Fund designated by us unless otherwise instructed by you.
Voting Rights
The Underlying Funds do not hold regularly scheduled shareholder meetings. When an Underlying Fund holds a special meeting for the purpose of approving changes in the ownership or operation of the Underlying Fund, the Company is entitled to vote the shares held by our Sub-Account in that Underlying Fund. Under our current interpretation of applicable law, you may instruct us how to vote those shares. If the 1940 Act or any other regulation under it should be amended or if present interpretations should change, and if as a result we determine that we are permitted to vote the fund shares in our own right, we may elect to do so.
We will notify you when your instructions are needed and will provide information from the Underlying Fund about the matters requiring the special meeting. We will calculate the number of votes for which you may instruct us based on the amount you have allocated to that Sub-Account, and the value of a share of the corresponding Underlying Fund, as of a date chosen by the Underlying Fund (record date). If we receive instructions from you, we will follow those instructions in voting the shares attributable to your Policy. If we do not receive instructions from you, we will vote the shares attributable to your Policy in the same proportion as we vote other shares based on instructions received from other Owners. Since Underlying Funds may also offer their shares to entities other than the Company, those other entities also may vote shares of the Underlying Funds, and those votes may affect the outcome.
Each Underlying Fund is subject to the laws of the state in which it is organized concerning, among other things, the matters which are subject to a shareholder vote, the number of shares which must be present in person or by proxy at a meeting of shareholders (a “quorum”), and the percentage of such shareholders present in person or by proxy which must vote in favor of matters presented. Because shares of the Underlying Fund held in the Separate Account are owned by the Company, and because under the 1940 Act the Company will vote all such shares in the same proportion as the voting instructions which we receive, it is important that each Owner provide their voting instructions to the Company. For funds un-affiliated with Lincoln, even though Owners may choose not to provide voting instructions, the shares of an Underlying Fund to which such Owners would have been entitled to provide voting instructions will be voted by the Company in the same proportion as the voting instructions which we actually receive. For funds affiliated with Lincoln, shares of a fund to which such Owners would have been entitled to provide voting instructions will, once we receive a sufficient number of instructions we deem appropriate to ensure a fair representation of Owners eligible to vote, be voted on by the Company in the same proportion as the voting instructions which we actually receive. As a result, the instructions of a small number of Owners could determine the outcome of matters subject to shareholder vote. In addition, because the Company expects to vote all shares of the Underlying Fund which it owns at a meeting of the shareholders of an Underlying Fund, all shares voted by the Company will be counted when the Underlying Fund determines whether any requirement for a minimum number of shares be present at such a meeting to satisfy a quorum requirement has been met.
POLICY CHARGES AND FEES
Policy charges and fees compensate us for providing your insurance benefit, administering your Policy, assuming risks associated with your Policy, and incurring sales related expenses. We may profit from any of these charges, and we may use this profit for any purpose, including covering shortfalls from other charges.
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In addition to policy charges, the investment advisor for each of the Underlying Funds deducts a daily charge as a percent of the value in each Underlying Fund as an asset management charge. The charge reflects asset management fees of the investment advisor. Other expenses are incurred by the Underlying Funds (including 12b-1 fees for Class 2 shares and other expenses) and deducted from Underlying Fund assets as described in the fund prospectus. Values in the Sub-Accounts are reduced by these charges. Future Underlying Fund expenses may vary. Detailed information about charges and expenses incurred by an Underlying Fund is contained in each Underlying Fund’s prospectus.
The Monthly Deductions, including the Cost of Insurance Charges, will be deducted proportionately from the Net Accumulation Value of each Sub-Account and the Fixed Account subject to the charge.
The Monthly Deductions are made on the “Monthly Anniversary Day” (the Policy Date and the same day of each month thereafter). If the day that would otherwise be a Monthly Anniversary Day is non-existent for that month, or is not a Valuation Day, then the Monthly Anniversary Day is the next Valuation Day.
If the Net Accumulation Value is insufficient to cover the current Monthly Deduction, you have a 61-day Grace Period to make a payment sufficient to cover that deduction. If payment is not received before the end of the Grace Period, the Policy may lapse. (Please see the “Lapse and Reinstatement” section of this prospectus.)
Premium Load; Net Premium Payment
We make a deduction from each Premium Payment. This amount, referred to as “Premium Load,” covers certain policy-related state and federal tax liabilities. It also covers a portion of the sales expenses incurred by the Company. We deduct 7% from each Premium Payment in Policy Years 1-20 and 4% in Policy Years 21 and beyond. The Premium Payment, net of the Premium Load, is called the “Net Premium Payment.”
Surrender Charges
A Surrender Charge may apply if the Policy is totally surrendered or has a decrease in the Specified Amount of death benefit. The Surrender Charge is in part a deferred sales charge and in part a recovery of certain first year administrative costs. A schedule of Surrender Charges is included in each Policy.
The Surrender Charge varies by age of the Insured, the number of years since the date of policy issue or the date of an increase in Specified Amount, and the Specified Amount. The Surrender Charge will never exceed $60.00 per $1,000 of Specified Amount. A personalized schedule of Surrender Charges is included with each Policy. You may obtain more information about the Surrender Charges that would apply to your Policy by requesting a personalized illustration from your insurance representative.
The duration of the Surrender Charge is 15 years for Full Surrenders and 10 years for decreases in Specified Amount. A new schedule of Surrender Charges will apply with respect to any increase in Specified Amount.
Surrender Charges are assessed by withdrawing value from the Sub-Accounts and the Fixed Account proportionately. The Surrender Charge will not exceed the policy value. All Surrender Charges decline to zero within 15 years following policy issue, or within 15 years following any increase in Specified Amount.
Upon either a Full Surrender of the Policy or a decrease in Specified Amount, the charge will be subject to the following conditions:
A. For decreases in Specified Amount, excluding Full Surrender of the Policy, no Surrender Charge will be applied where the decrease:
1) occurs after the tenth Policy Anniversary following Policy issue or increase in Specified Amount; or
2) is caused by a Partial Surrender; or
3) when added to the sum of all prior decreases, does not exceed 25% of the Initial Specified Amount.
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B. For all other decreases, the charge will be calculated as 1) minus 2), then divided by 3) and then multiplied by 4), where:
1) is the amount of this decrease plus any prior decreases;
2) is the greater of an amount equal to 25% of the Initial Specified Amount or the sum of all prior decreases;
3) is the Initial Specified Amount; and
4) is the then applicable Surrender Charge from the schedule in the Policy.
We may refuse or limit requests for decreases in Specified Amount, to the extent there is insufficient value to cover the necessary Surrender Charges.
If you increase the Specified Amount, a new Surrender Charge will be applicable to each increase. This charge is in addition to any Surrender Charge on the existing Specified Amount. Upon an increase in Specified Amount, we will send you a confirmation of the increase.
Upon Full Surrender of your Policy following a decrease in Specified Amount, the Surrender Charge will be calculated as the entire amount shown in the Policy Specifications, multiplied by one minus the percentage of the Initial Specified Amount for which a Surrender Charge was previously assessed. The charge assessed upon a Full Surrender will not exceed the Policy's value.
In addition, if your Policy includes the Enhanced Surrender Value Rider, you may surrender your Policy for an enhanced Surrender Value provided under the rider, without being subject to the Policy Surrender Charges.
Any surrender may have tax implications. Consult your tax or other registered representative before initiating a surrender.
Partial Surrender Fee
No Surrender Charge or Administrative Fee is imposed on a Partial Surrender.
Transfer Fee
For each transfer request in excess of 24 made during any Policy Year, we reserve the right to charge you an Administrative Fee of $25.
In the event that we make a material change in the investment strategy of a Sub-Account, you may transfer the Accumulation Values allocated to that Sub-Account to any other Sub-Account or to the Fixed Account without being charged a fee and may do so even if you have requested 24 transfers during that Policy Year. This option to transfer from a Sub-Account must be exercised within 60 days after the effective date of such change in investment strategy of that Sub-Account. You will be provided with a supplement to your prospectus in the event that such a change is made.
Mortality and Expense Risk Charge
We assess a daily Mortality and Expense Risk Charge (“M&E”) as a percentage of the Policy’s Separate Account Value. The mortality risk assumed is that the Insured may live for a shorter period than we originally estimated. The expense risk assumed is that our expenses incurred in issuing and administering the Policies will be greater than we originally estimated. The charge is guaranteed not to exceed an effective annual rate of 0.60% in Policy Years 1-10 and 0.20% in Policy Years 11 and beyond. The current charge is at an effective annual rate of 0.60% in Policy Years 1-10, 0.20% in Policy Years 11-20, and 0% in Policy Years 21 and beyond.
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Cost of Insurance Charge
A significant cost of variable life insurance is the “Cost of Insurance Charge”. This charge is the portion of the Monthly Deduction designed to compensate the Company for the anticipated cost of paying death benefits in excess of the policy value.
The Cost of Insurance Charge for your Policy depends on the current “Net Amount at Risk”. The Net Amount at Risk is the death benefit, without regard to any benefits payable at the Insured’s death under any riders, minus the greater of zero or the Policy’s Accumulation Value. Because the Accumulation Value will vary with investment performance, Premium Payment patterns and charges, the Net Amount at Risk will vary accordingly.
The Cost of Insurance Charge is determined monthly by dividing the death benefit at the beginning of the Policy Month by 1 plus .0008295 (the monthly equivalent of an effective annual rate of 1%), subtracting the Accumulation Value at the beginning of the Policy Month, and multiplying the result (the “Net Amount at Risk”) by the applicable current cost of insurance rate as determined by the Company.
The maximum rates that we may use are found in the guaranteed maximum cost of insurance rate table in your Policy’s Specifications. The applicable cost of insurance rate used in this monthly calculation for your Policy depends upon the Policy’s duration, the age, gender (in accordance with state law) and underwriting category of the Insured. Please note that it will generally increase each Policy Year as the Insured ages. Current cost of insurance rates, in general, are determined based on our expectation of future mortality, investment earnings, persistency and expenses (including, but not limited to, taxes and reinsurance). For this reason, they may be less than the guaranteed maximum rates shown in the Policy. Accordingly, your monthly Cost of Insurance Charge may be less than the amount that would be calculated using the guaranteed maximum cost of insurance rate shown in the table in your Policy. Also, your monthly Cost of Insurance Charge will never be calculated at a rate higher than the maximum Cost of Insurance Charge shown in “Table II: Periodic Charges Other Than Fund Operating Expenses” in this prospectus.
Administrative Fee
There is a flat Monthly Deduction of $10 in all years.
For the first 10 Policy Years from Policy Date or increase in Specified Amount, there is an additional charge that varies with the Insured's age, gender, premium class, and Benefit Selection Option percentage, if any. This charge will never exceed $2.56 per $1,000 of Initial Specified Amount or increase in Specified Amount. This fee compensates the Company for administrative expenses associated with policy issue and ongoing policy maintenance including premium billing and collection, policy value calculation, confirmations, periodic reports and other similar matters.
Policy Loan Interest
If you borrow against your Policy, interest will be charged to the Loan Account Value. The annual effective interest rate is 4% in years 1-10, 3% in years 11 and beyond. The amount of your loan, plus any accrued but unpaid interest, is added to your outstanding Policy Loan balance. We will credit 3% interest on the Loan Account Value in all years.
Rider Charges
The following paragraphs describe the charges for the riders listed below. The features of the riders available with this Policy and any limitations on the selection of riders are discussed in the section headed “Riders”.
Basic Accelerated Benefits Riders.  There is a flat charge of $250 (limited in certain states), which will be deducted from any benefit when paid.
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Lincoln LifeEnhance® Accelerated Benefits Rider. If you elect this rider, there is a monthly Cost of Insurance Charge for this rider which will be part of the Monthly Deduction made under the Policy. Also, this rider’s Cost of Insurance will be part of the No-Lapse Value Monthly Deduction and Reset Account Value Monthly Deduction as described in the No-Lapse Enhancement Rider, if attached to the Policy. The amount deducted each Policy Month will be calculated as (A) multiplied by (B) where:
(A) is the applicable rate found in the “Guaranteed Cost of Insurance Rate Per $1,000 of Policy Net Amount at Risk or Rider Net Amount At Risk” table of rates shown on the Policy Specifications; and
(B) is either i. or ii. noted below:
i. For any Policy Month prior to acceleration of the death benefit, the Policy’s Net Amount at Risk divided by $1,000; or
ii. Following acceleration of the death benefit, for any Policy Month in which benefits are not payable, the Rider’s Net Amount at Risk divided by $1,000.
The Rider’s Net Amount at Risk is equal to the Remaining Benefit Amount at the beginning of the Policy Month, divided by the Net Amount at Risk Discount Factor shown on the Policy Specifications, minus the Policy’s Accumulation Value at the beginning of the Policy Month after the deduction of the per $1,000 of Specified Amount monthly administrative expense fee (the “Monthly Administrative Fee”) shown in the Policy Specifications (see Table II of this prospectus) but prior to the deduction for the monthly Cost of Insurance.
Each Policy Month you receive a Chronic Illness Monthly Benefit Amount or the Terminal Illness benefit, this rider’s Cost of Insurance will be waived.
Enhanced Surrender Value Rider.  There is a monthly charge during Policy Years 2 - 5 of $0.05 per $1,000 of Initial Specified Amount.
Overloan Protection Rider.  There is a one-time charge for this rider if you choose to elect the benefit. This charge will not exceed 5% of the then current Accumulation Value.
Premium Reserve Rider.  We deduct 4% from each Premium Payment you direct to this rider. Transfers of Premium Reserve Rider Accumulation Value from this rider to the Policy may be subject to a charge of 3% of amount transferred during Policy Years 1 – 10. Premium Reserve Rider Accumulation Value allocated to the Premium Reserve Separate Account is subject to the Mortality and Expense Risk Charge not to exceed 0.60% for Policy Years 1-10 and 0.20% for Policy Years 11 and beyond.
In addition, if you request a loan from the Premium Reserve Rider Accumulation Value, interest is charged at the same rate as for Policy Loans.
Waiver of Monthly Deduction Rider.  The monthly charge for this benefit is equal to the sum of all other covered monthly charges for the Policy and all riders, multiplied by a rate factor. The rate factor depends on the age, underwriting category and gender of the Insured. The maximum rate factor is 12%. If you have elected this rider, a table of rate factors appears on the rider pages in your Policy.
YOUR INSURANCE POLICY
Your Policy is a life insurance contract that provides for a death benefit payable on the death of the Insured. The Policy and the application constitute the entire contract between you and Lincoln Life.
The Policy includes Policy Specifications pages. These pages provide important information about your Policy such as: the identity of the Insured and Owner; Policy Date; the Initial Specified Amount; the death benefit option selected; issue age; Planned Premium Payment; Surrender Charges; expense charges and fees; and guaranteed maximum cost of insurance rates.
Note: The Policy Specifications pages (and any specifications pages relating to riders you may purchase) reference certain dates that are very important in understanding when your coverage begins and ends, when certain benefits
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become available and when certain rights or obligations arise or terminate. Generally, terms such as “Policy Date”, “Effective Date” or “Policy Effective Date” (or “Rider Date”, “Rider Effective Date”) refer to the date that coverage under the Policy (or rider) becomes effective and is the date from which Policy Years, Policy Anniversary and ages are determined. Terms such as “Issue Date” or “Policy Issue Date” (or “Rider Issue Date”) generally refer to when we print or produce the Policy (or rider), but such dates may have importance beyond that date. For example, the period of time we may have to contest a claim submitted in the first couple years of the Policy will typically start on the date the Policy is issued and not the date the Policy goes into effect. Please read your Policy carefully and make sure you understand which dates are important and why.
When your Policy is delivered to you, you should review it promptly to confirm that it reflects the information you provided in your application. If not, please notify us immediately.
The Policy is nonparticipating. This means that no dividends are payable to you. In addition, your Policy does not share in the profits or surplus earnings of the Company.
Before purchasing the Policy to replace, or to be funded with proceeds from an existing life insurance policy or annuity, make sure you understand the potential impact. The Insured will need to prove current insurability and there may be a new contestable period for the new Policy. The death benefit and policy values may be less for some period of time in the new Policy.
Once your Policy is in force, the effective date of payments and requests you send us is usually determined by the day and time we receive them.
We cannot process your requests for transactions relating to the Policy until we have received the request in “Good Order” at our Home Office. “Good Order” means the actual receipt of the requested transaction in writing (or other form subject to our consent) along with all information and supporting legal documentation necessary to effect the transaction. We may, in our sole discretion, determine whether any particular transaction request is in Good Order, and we reserve the right to change or waive any Good Order requirements at any time.
We allow telephone transactions when you complete our authorization form and return it to us. Contact our Administrative Office for information on authorization for telephone transactions.
Any telephone or other electronic transmission, whether it is yours, your service provider’s, your agent’s, or ours, can experience outages or slowdowns for a variety of reasons. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you experience problems, you should send your request in writing to our Administrative Office.
Application
If you decide to purchase a Policy, you must first complete an application. A completed application identifies the proposed Insured and provides sufficient information to permit us to begin underwriting risks in the Policy. We require a medical history and examination of the proposed Insured. Based on our review of medical information about the proposed Insured, we may decline to provide insurance, or we may place the proposed Insured in a special underwriting category. The monthly Cost of Insurance Charge deducted from the policy value after issue varies depending on the age, gender and underwriting category of the Insured.
A Policy may only be issued upon receipt of satisfactory evidence of insurability, and generally when the Insured is at least age 15 and at most age 85. Age will be determined by the nearest birthday of the Insured.
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who applies for a Policy. When you apply for a Policy, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We, or our agent, may also ask to see your driver's license, photo i.d. or other identifying documents.
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Owner
The Owner on the Date of Issue is designated in the Policy Specifications. You, as Owner, will make the following choices:
1) initial death benefit amount and death benefit option;
2) optional riders;
3) the amount and frequency of Premium Payments; and
4) the amount of Net Premium Payment to be allocated to the selected Sub-Accounts or the Fixed Account.
You are entitled to exercise rights and privileges of your Policy as long as the Insured is living. These rights generally include the power to select the Beneficiary, request Policy Loans, make Partial Surrenders, Surrender the Policy entirely,  request a Reduction in Specified Amount, name a new Owner, and assign the Policy. You must inform us of any change in writing. We will record change of Owner and Beneficiary forms to be effective as of the date of the latest signature on the written request. In addition to changes in ownership or Beneficiary designations, you should make certain that our records are up to date with respect to your address and contact information and, to the extent possible, the address and contact information of any Beneficiaries. This will ensure that there are no unnecessary delays in effecting any changes you wish to make, ownership privileges you wish to exercise or payments of proceeds to you or your Beneficiaries. Exercising a change in ownership may cause a taxable event. You should consult a tax advisor prior to exercising a change in ownership to determine the tax consequences of such exercise.
Right to Examine Period
You may return your Policy to us for cancellation within 10 days after you receive it (or a greater number of days if required by your state). This is called the “Right to Examine Period”. If the Policy is returned for cancellation within the Right to Examine Period, we will refund to you the greater of (a) all Premium Payments less any Indebtedness; or (b) the sum of (i) the Accumulation Value less any Indebtedness, on the date the returned Policy is received by us, plus (ii) any charges and fees imposed under the Policy's terms. If a Premium Payment was made by check, there may be a delay until the check clears.
If your Policy is issued in a state that requires return of Premium Payments, or you are 60 years old or over and your Policy is issued in California, any Net Premium Payments received by us within 10 days (or a greater number of days if required by your state; 30 days in California) of the date the Policy was issued will be held in the money market Sub-Account. At the end of that period, it will be allocated to the Sub-Accounts and the Fixed Account, if applicable, which you designated. If your Policy is issued in a state that provides for return of value, any Net Premium Payments received before the end of the Right to Examine Period will be allocated directly to the Sub-Accounts and the Fixed Account, if applicable, which you designated. In all cases, if the Policy is returned for cancellation within the Right to Examine Period, we will return to you the greater of (a) all Premium Payments less any Indebtedness; or (b) the sum of (i) the Accumulation Value less any Indebtedness, on the date the returned Policy is received by us, plus (ii) any charges and fees imposed under the Policy's terms. (Note: For California policies, you may direct us, in writing, to proceed to allocate your Net Premiums before the end of the 30 days.)
Initial Specified Amount
You will select the Initial Specified Amount of death benefit on the application. This may not be less than $100,000. This amount, in combination with a death benefit option, will determine the initial death benefit. The Initial Specified Amount is shown on the Policy Specifications page.
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Transfers
You may make transfers among the Sub-Accounts and the Fixed Account, subject to certain provisions. You should carefully consider current market conditions and each Underlying Fund’s objective and investment policy before allocating money to the Sub-Accounts. (Note: Prior to moving money into the money market Sub-Account or allowing it to default into the money market Sub-Account as a result of a fund liquidation, refer to your Policy for specific impacts that may apply, if any.)
During the first Policy Year, transfers from the Fixed Account to the Sub-Accounts may be made only as provided for in the Dollar Cost Averaging or Automatic Rebalancing program described below. The amount of all transfers from the Fixed Account in any other Policy Year may not exceed the greater of:
1) 25% of the Fixed Account Value as of the immediately preceding Policy Anniversary, or
2) the total dollar amount transferred from the Fixed Account in the immediately preceding Policy Year.
Due to these limitations, if you want to transfer all of your value from the Fixed Account to one or more Sub-Accounts, it may take several years to do so. We reserve the right to waive these transfer restrictions from the Fixed Account at any time. Please contact your registered representative to determine if a waiver is currently in effect.
Requests for transfers may be made in writing or by telephone, if you have previously authorized telephone transfers in writing, subject to our consent. We will use reasonable procedures, such as requiring identifying information from callers, recording telephone instructions, and providing written confirmation of transactions, in order to confirm instructions are genuine. Any instructions, which we reasonably believe to be genuine, will be your responsibility, including losses arising from any errors in the communication of instructions. As a result of this procedure, you will bear the risk of loss. If we do not use reasonable procedures, as described above, we may be liable for losses due to unauthorized instructions.
Up to 24 transfer requests (a request may involve more than a single transfer) may be made in any Policy Year without charge. Any transfer among the Sub-Accounts or to the Fixed Account will result in the crediting and cancellation of accumulation units. This will be based on the accumulation unit values determined after our Administrative Office receives a request in writing or adequately authenticated electronic transfer request. Transfer and financial requests received in Good Order before the close of regular trading on the NYSE (generally 4pm Eastern time on a business day) will normally be effective that day. There may be circumstances under which the NYSE may close before 4pm. In such circumstances transactions requested after such early closing will be processed using the accumulation unit value computed the following trading day.
Some of the Underlying Funds have reserved the right to temporarily or permanently refuse payments or transfer requests from us if, in the judgment of the Underlying Fund's investment advisor, the Underlying Fund would be unable to invest effectively in accordance with its investment objective or policies, or would otherwise potentially be adversely affected. To the extent permitted by applicable law, we reserve the right to defer or reject a transfer request at any time that we are unable to purchase or redeem shares of any of the Underlying Funds, including any refusal or restriction on purchases or redemptions of the Sub-Account units as a result of the Underlying Funds' own policies and procedures on market timing activities. We may also defer or reject an allocation or transfer request that is subject to a restriction that is imposed by the Underlying Fund at any time. If an Underlying Fund refuses to accept a transfer request we have already processed, we will reverse the transaction within 1-2 business days of the day on which we receive notice of the refusal. We will notify you in writing if we have reversed, restricted or refused any of your transfer requests.
Market Timing
Frequent, large, or short-term transfers among Sub-Accounts and the Fixed Account, such as those associated with “market timing” transactions, can affect the Underlying Funds and their investment returns. Such transfers may dilute the value of the fund shares, interfere with the efficient management of the Underlying Fund's portfolio, and increase brokerage and administrative costs of the Underlying Funds. As an effort to protect our Owners and the Underlying Funds from potentially harmful trading activity, we utilize certain market timing policies and procedures
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(the “Market Timing Procedures”). Our Market Timing Procedures are designed to detect and prevent such transfer activity among the Sub-Accounts and the Fixed Account that may affect other Owners or shareholders.
In addition, the Underlying Funds may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares. The prospectuses for the Underlying Funds describe any such policies and procedures, which may be more or less restrictive than the frequent trading policies and procedures of other funds and the Market Timing Procedures we have adopted to discourage frequent transfers among Sub-Accounts. While we reserve the right to enforce these policies and procedures, Owners and other persons with interests under the Policies should be aware that we may not have the contractual authority or the operational capacity to apply the frequent trading policies and procedures of the Underlying Funds. You should note that, these policies and procedures may result in an Underlying Fund deferring or permanently refusing to accept Premium Payments or transfers for the reasons described in “Transfers”, above. In such case, our rights and obligations will be as described in “Transfers”. Some of the Underlying Funds may also impose Redemption Fees on short-term trading (i.e., redemptions of Underlying Fund shares within a certain number of business days after purchase). We reserve the right to administer and collect any such Redemption Fees on behalf of the Underlying Funds. You should read the prospectuses of the Underlying Funds for more details on their ability to refuse or restrict purchases or redemptions of their shares.
However, under the SEC rules, we are required to: (1) enter into written agreement with each Underlying Fund or its principal underwriter that obligates us to provide to the Underlying Fund promptly upon request certain information about the trading activity of individual Owners, and (2) execute instructions from the Underlying Fund to restrict or prohibit further purchases or transfers by specific Owners who violate excessive trading policies established by the Underlying Fund.
You should be aware that the purchase and redemption orders received by Underlying Funds generally are “omnibus” orders from intermediaries such as retirement plans or Separate Accounts to which Premium Payments and policy values of variable insurance policies are allocated. The omnibus orders reflect the aggregation and netting of multiple orders from individual retirement plan participants and/or individual Owners of variable insurance policies. The omnibus nature of these orders may limit the Underlying Funds' ability to apply their respective disruptive trading policies and procedures. We cannot guarantee that the Underlying Funds (and thus our Owners) will not be harmed by transfer activity relating to the retirement plans and/or other insurance companies that may purchase the Underlying Funds. In addition, if an Underlying Fund believes that an omnibus order we submit may reflect one or more transfer requests from Owners engaged in disruptive trading activity, the Underlying Fund may reject the entire omnibus order.
Our Market Timing Procedures detect potential “market timers” by examining the number of transfers made by Owners within given periods of time. In addition, managers of the Underlying Funds might contact us if they believe or suspect that there is market timing. If requested by an Underlying Fund company, we may vary our Market Timing Procedures from Sub-Accounts to Sub-Accounts to comply with specific Underlying Fund policies and procedures.
We may increase our monitoring of Owners who we have previously identified as market timers. When applying the parameters used to detect market timers, we will consider multiple policies owned by the same Owner if that Owner has been identified as a market timer. For each Owner, we will investigate the transfer patterns that meet the parameters being used to detect potential market timers. We will also investigate any patterns of trading behavior identified by the Underlying Funds that may not have been captured by our Market Timing Procedures.
Once an Owner has been identified as a “market timer” under our Market Timing Procedures, we will notify the Owner in writing that future transfers (among the Sub-Accounts and/or the Fixed Account) will be temporarily permitted to be made only by original signature sent to us by U.S. mail, standard delivery for the remainder of the Policy Year. Overnight delivery or electronic instructions (which may include telephone, facsimile, or Internet instructions) submitted during this period will not be accepted. If overnight delivery or electronic instructions from or on behalf of an Owner who has been identified as a market timer are inadvertently accepted, we will reverse the transaction within 1 - 2 business days of our discovery of such acceptance. We will impose this “original signature”
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restriction on that Owner even if we cannot identify, in the particular circumstances, any harmful effect from that Owner's particular transfers.
Owners seeking to engage in frequent, large, or short-term transfer activity may deploy a variety of strategies to avoid detection. Our ability to detect such transfer activity may be limited by operational systems and technological limitations. The identification of Owners determined to be engaged in such transfer activity that may adversely affect other Owners or Underlying Fund shareholders involves judgments that are inherently subjective. We cannot guarantee that our Market Timing Procedures will detect every potential market timer. If we are unable to detect market timers, you may experience dilution in the value of your Underlying Fund shares and increased brokerage and administrative costs in the Underlying Funds. This may result in lower long-term returns for your investments.
Our Market Timing Procedures are applied consistently to all Owners. An exception for any Owner will be made only in the event we are required to do so by a court of law. In addition, certain Underlying Funds available as investment options in your Policy may also be available as investment options for Owners of other, older life insurance policies issued by us.
Some of these older life insurance policies do not provide a contractual basis for us to restrict or refuse transfers which are suspected to be market timing activity. In addition, because other insurance companies and/or retirement plans may invest in the Underlying Funds, we cannot guarantee that the Underlying Funds will not suffer harm from frequent, large, or short-term transfer activity among Sub-Accounts and the Fixed Accounts of variable contracts issued by other insurance companies or among investment options available to retirement plan participants.
In our sole discretion, we may revise our Market Timing Procedures at any time without prior notice as necessary to better detect and deter frequent, large, or short-term transfer activity, to comply with state or federal regulatory requirements, and/or to impose additional or alternate restrictions on market timers (such as dollar or percentage limits on transfers). If we modify our Market Timing Procedures, they will be applied uniformly to all Owners or as applicable to all Owners with policy values allocated to Sub-Accounts investing in particular Underlying Funds. We also reserve the right to implement and administer Redemption Fees imposed by one or more of the Underlying Funds in the future.
Optional Sub-Account Allocation Programs
You may elect to participate in programs for Dollar Cost Averaging or Automatic Rebalancing. There is currently no charge for these programs. You may participate in only one program at any time.
Dollar Cost Averaging systematically transfers amounts during the first Policy Year from the money market Sub-Account or the Fixed Account. Transfer allocations may be made to one or more of the Sub-Accounts (not the Fixed Account) on a monthly basis. These transfers do not count against the free transfers available. By making allocations on a regularly scheduled basis, instead of on a lump sum basis, you may reduce exposure to market volatility. Dollar Cost Averaging will not assure a profit or protect against a declining market.
If the Owner elects Dollar Cost Averaging from either the money market Sub-Account or the Fixed Account the value in that account must be at least $1,000 initially. The minimum amount that may be allocated is $50 monthly.
If Dollar Cost Averaging is desired, it must be elected at issue.
Dollar Cost Averaging terminates automatically:
1) if the value in the money market Sub-Account  or the Fixed Account is insufficient to complete the next transfer;
2) 7 calendar days after our Administrative Office receives a request for termination in writing or by telephone, with adequate authentication;
3) on the first Policy Anniversary; or
4) if your Policy is surrendered or otherwise terminates.
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From time to time, we may offer special interest rate programs for Dollar Cost Averaging. Please consult your registered representative to determine the current availability and terms of these programs. We reserve the right to modify, suspend or terminate a Dollar Cost Averaging program. Any changes will not affect Owners currently participating in the Dollar Cost Averaging program.
Automatic Rebalancing periodically restores to a pre-determined level the percentage of policy value allocated to the Fixed Account and each Sub-Account. The pre-determined level is the allocation initially selected on the application, until changed by the Owner. Your Policy will be issued with Automatic Rebalancing. When Automatic Rebalancing is in effect, all Net Premium Payments allocated to the Sub-Accounts and Fixed Account will be subject to Automatic Rebalancing. Transfers among the Sub-Accounts and the Fixed Account as a result of Automatic Rebalancing do not count against the number of free transfers available.
Automatic Rebalancing provides a method for reestablishing fixed proportions among your allocations to your Sub-Accounts and Fixed Account on a systematic basis. Automatic Rebalancing helps to maintain your allocation among market segments, although it entails reducing your policy values allocated to the better performing segments. Therefore, you should carefully consider market conditions and the investment objectives of each Sub-Account and Underlying Fund at the time you make your Premium Payment allocations which will also be used for Automatic Rebalancing.
Automatic Rebalancing is available only on a quarterly basis. Automatic Rebalancing may be terminated, or the allocation may be changed at any time, by contacting our Administrative Office. Terminating Automatic Rebalancing will terminate the No-Lapse Enhancement Rider attached to your Policy. Refer to the “Riders” section of this prospectus for more information.
Riders
We may offer you riders to your Policy from time to time. Riders may alter the benefits or charges in your Policy, rider availability and benefits may vary by state of issue, and their election may have tax consequences to you. Also, if you elect a particular rider, it may restrict or enhance the terms of your Policy, or of other riders in force. Consult your financial and tax advisors before adding riders to, or deleting them from, your Policy.
Basic Accelerated Benefits Riders.  There are two basic Accelerated Benefits Riders. The availability of the riders is based upon the Insured meeting our underwriting criteria (including the Insured's age and the state of the Insured's health at the time of your application), which will determine which, if any, form of rider will be issued to you. If the Insured meets our underwriting requirements and if you apply for the riders at the same time as you apply for your Policy, you will be issued the second version of the rider (as described below). If the Insured does not meet our underwriting requirements (or you do not apply for the riders when you apply for your Policy), you will be issued the first version of the rider that is described below. There is a charge for these riders of $250 (limited in certain states), which will be deducted from any benefit when paid. A benefit payable under either form of rider (the “Accelerated Benefits”) will be considered as a lien against your Policy for the amount of the Accelerated Benefit paid, and the lien will be considered as a Policy Loan and will be charged interest. (See section headed “Policy Loans”.) As the benefit paid is a lien, you may, if you wish, repay any part (but not less than $25) or all of the amount paid. The amount of any lien outstanding at the time of the death of the Insured will be deducted from the death benefit otherwise payable. In certain states, the availability of the riders, and the benefits available thereunder, are limited; please consult with your registered representative as to availability and benefits.
One version of this rider pays a portion of the death benefit upon occurrence of Terminal Illness (defined by the rider as when the Insured's life expectancy is reduced to less than 12 months) or Nursing Home Confinement (defined by the rider as the Insured being confined to a qualifying nursing home for the balance of life), subject to the terms of the rider. This version of the rider will pay 50% of the death benefit for Terminal Illness and 40% of the death benefit for Nursing Home Confinement, subject to an overall maximum of $250,000 on all policies in force with us, in accordance with the terms of the rider. You may apply for this rider either at the time your application for the Policy is made or at any time thereafter. Our underwriting rules in effect at the time you apply will determine whether the rider will be issued.
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The second version of this rider, which must be applied for at the time you apply for your Policy, in addition to paying the same portion of the death benefit upon the occurrence of Terminal Illness or Nursing Home Confinement (as discussed above), also may pay a portion of the death benefit upon critical illness or a condition specified in the rider. The illnesses which qualify are detailed in the rider and generally include, but are not limited to, heart attack (myocardial infarction) and life threatening cancer. In the instance of critical illness, the portion of the death benefit payable is 5% (not to exceed a total of $25,000) upon the occurrence of the first critical illness covered by the rider.
Under either version of this rider, the death benefit used to calculate the benefit under the rider will include any Premium Reserve Rider Accumulation Value less Indebtedness.
To receive a benefit, you must contact us and let us know which benefit you are requesting and the benefit amount (subject to maximum limits) you would like. We will let you know what physician’s certification or other requirements you must submit. If you request less than the maximum benefit, you may later apply for the balance of the benefit. For example, if the Insured is confined to a qualifying nursing home for the balance of life, and your only policy with us covering that Insured has a $100,000 death benefit, you could request up to 40% or $40,000, and if the Insured is later diagnosed with a medical condition resulting in a less than 12 month life expectancy, you may request an additional 10% (for a total benefit of 50%) or $10,000 (for a total benefit of $50,000). Because the benefit payable creates a lien on the Policy, the maximum amount of your benefit may also be restricted (or no benefit may be payable) if you have an outstanding Policy Loan or if the Policy has been assigned to a third party. Benefits paid under the rider may restrict your ability to request future Policy Loans.
Lincoln LifeEnhance® Accelerated Benefits Rider. The availability of this rider is based upon the Insured meeting our underwriting criteria (including the Insured’s age, gender and the state of the Insured’s health at the time of your application). You must apply for this rider at the time you apply for your Policy. Charges for this rider, if elected, are part of the Monthly Deductions.
This rider provides for the acceleration of up to 100% of the Original Benefit Amount, as determined below, upon occurrence of a Qualifying Event provided all of the terms and conditions of this rider have been met. There are two Qualifying Events: (1) the Insured is certified as Chronically Ill as defined in the rider; or (2) the Insured is certified as Terminally Ill as defined in the rider.
Depending on which Qualifying Event occurs and the benefit payment option you have chosen, the Original Benefit Amount will be determined as follows, assuming all the Conditions for Eligibility for Benefit Payments, also described below, have been satisfied:
A. For Chronic Illness where you have elected to receive benefits in a one-time lump sum and have met all Conditions for Eligibility of Benefit Payments:
• the Policy’s Death Benefit Proceeds, without reduction by an outstanding Indebtedness, (the “Gross Death Benefit Proceeds”).
• If a Premium Reserve Rider is attached to the Policy, the Policy’s Gross Death Benefit Proceeds less the Premium Reserve Rider Accumulation Value. The Premium Reserve Rider Surrender Value will be paid to you prior to the calculation of the Original Benefit Amount.
B. For Chronic Illness where you have elected to receive Monthly Benefit Amounts or where you elect to receive the Terminal Illness benefit and have met all Conditions for Eligibility for Benefit Payments:
• the Gross Death Benefit Proceeds after a (required) change to Death Benefit Option 1; or
• If a Premium Reserve Rider is attached to the Policy, you can elect to have the Premium Reserve Rider Surrender Value paid to you prior to the calculation of the Original Benefit Amount.
You are eligible to receive an Accelerated Benefit payment if the Policy and this rider are in force and the Insured is living when all of the following requirements (the “Conditions for Eligibility for Benefit Payment”) are met:
1. Our receipt and approval of the following documentation provided by you:
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a. For Chronic Illness, Written Certification or Written Re-certification that the Insured is a Chronically Ill individual; or
b. For Terminal Illness, a Terminally Ill Certification that the Insured is Terminally Ill; and
c. A written consent to make such payment from any assignee of record named under the Policy or any irrevocable Beneficiary named under the Policy; and
2. We complete, at our discretion and expense, a personal interview with, and an assessment of, the Insured, including examination or tests by a “Licensed Health Care Practitioner” of our choice; and our receipt of copies of any relevant medical records from a health care provider involved in the Insured’s care. A Licensed Health Care Practitioner is a physician, as defined in Section 1861(r)(1) of the Social Security Act, a registered professional nurse, licensed social worker, or other individual who meets such requirements as may be prescribed by the Secretary of Treasury, or qualifications to our satisfaction.
The Original Benefit Amount will be reduced by any benefit payments made. The balance remaining is the “Remaining Benefit Amount”. There is no waiting period to receive a benefit under this rider once all Conditions for Eligibility for Benefit Payments have been satisfied and benefits will be paid retroactively to the date of our receipt of all documentation provided by you that is necessary to satisfy all Conditions for Eligibility for Benefit Payments. Furthermore, we do not require proof of incurred expenses for you to receive benefits under this rider. This rider’s benefits will only be paid to the Owner of the Policy and will only be paid by check or other method made available by us. Any benefit to be paid is subject to the “Incontestability” provision of the Policy.
The benefit payment options available to you under this rider are as follows:
(1) For a Chronic Illness Qualifying Event
You may elect to receive the benefit as either (a) Monthly Benefit Amounts or (b) a one-time lump sum payment.
(a) Monthly Benefit Amounts - Provided all Conditions for Eligibility for Benefit Payments have been satisfied, you may elect to receive accelerated monthly benefit payments (the “Monthly Benefit Amount”) without losing the option of electing a one-time lump sum payment of the Remaining Benefit Amount.
For each Benefit Period, defined below, in which you qualify to receive benefits, you may elect a Monthly Benefit Amount equal to or greater than the Minimum Monthly Benefit but not exceeding the Maximum Monthly Benefit. Both of these amounts are shown on the Policy Specifications. Please note that the Monthly Benefit Amount is not cumulative. The entire Maximum Monthly Benefit may be taken, but if not, the remaining portion cannot be added to future payments. By electing an amount less than the Maximum Monthly Benefit, the amount of the Original Benefit Amount available for later benefit payments (the “Remaining Benefit Amount” as noted above) will be reduced more slowly; however, you should consider that you may or may not re-qualify for future “Written Re-certifications”. A “Written Certification” is the Written Certification that we must receive and approve prior to the start of each Benefit Period following the initial Benefit Period in order for you to be eligible for Chronic Illness Monthly Benefit Amounts, provided all other Conditions for Eligibility for Benefit Payments are met. “Written Certification” is the documentation required, in a form satisfactory to us, certifying that the Insured is Chronically Ill as defined in the rider and providing certain other information with respect to the Insured’s ongoing health service needs. A “Benefit Period” is a period of time not to exceed twelve consecutive months. Each such period begins on the Monthly Anniversary Day after we receive all documentation provided by you necessary to satisfy all Conditions for Eligibility for Benefit Payments. A new Benefit Period will begin no earlier than the end of the current Benefit Period.
The largest amount that may be elected is the Maximum Monthly Benefit. As shown on the Policy Specifications, the Maximum Monthly Benefit may not exceed the lesser of the shown percentage of the Original Benefit Amount or the monthly equivalent of the Per Diem Limit (which is set annually on January 1 by the Internal Revenue Service.) At the time of claim and for each subsequent Benefit Period, we will notify you of your Maximum Monthly Benefit.
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Sixty (60) days prior to the end of each Benefit Period, we will send you documentation for Written Re-certification. As part of this documentation, if your Maximum Monthly Benefit is based on the Per Diem Limit and the Per Diem Limit increases, we will provide you with an adjusted Maximum Monthly Benefit. If your Maximum Monthly Benefit is based on the Per Diem Limit, the Maximum Monthly Benefit in this documentation will be based on a 30 day Policy Month. If you elect the Maximum Monthly Benefit, the actual amount you receive will be adjusted based on the number of days in each Policy Month.
Chronic Illness Monthly Benefit Amounts will end when any of the following occur:
(1) the Insured fails to meet any one of the Conditions for Eligibility for Benefit Payments;
(2) you notify us to discontinue Monthly Benefit Amount payments; or
(3) this rider terminates.
In the event you request that we discontinue Monthly Benefit Amount payments and then, at a later date, you desire to begin a new Benefit Period, we will allow you to do so provided all of the Conditions for Eligibility for Benefit Payments are met.
(b) One-Time Lump Sum - If you elect a one-time lump sum payment, the Remaining Benefit Amount will be multiplied by the then applicable Chronic Illness one-time lump sum actuarial discount factor when determining the amount of the payment (as described in the discussion of actuarial discount factors below). The payment of a one-time lump sum will cause termination of both this rider and the Policy.
(2) For a Terminal Illness Qualifying Event
  The maximum Terminal Illness benefit payment will be the lesser of 1) 50% of the Remaining Benefit Amount; or 2) $250,000. Note: This benefit will only be paid once and will be paid as a lump sum, if you elect less than the maximum benefit, the remainder will not be available at a later date. The amount accelerated will be greater than the Terminal Illness benefit payment and will be determined by dividing the requested benefit payment by the applicable Terminal Illness actuarial discount factor discussed below. The amount accelerated will not be allowed to exceed the Remaining Benefit Amount.
As described above, a Chronic Illness one-time lump sum actuarial discount factor will be applied to the Chronic Illness one-time lump sum and a Terminal Illness actuarial discount factor will be applied to the Terminal Illness amount accelerated. These actuarial discount factors reflect the early payment of benefits available under the Policy. The actuarial discount factor used will be based on a mortality assumption and an interest rate which has been declared by us in effect on the date the benefit payment is determined. The maximum interest rate used shall not exceed the greater of:
a) the current yield on 90 day treasury bills available on the date the benefit payment is determined; or
b) the current Maximum Statutory Adjustable Policy Loan Interest Rate (the highest variable interest rate permitted under state law) in effect on the date the benefit payment is determined. This maximum rate will not be more than the higher of the following:
(1) The published monthly average (defined below) for the calendar month ending 2 months before the date on which the rate is determined; or
(2) The rate used to compute the Fixed Account under the Policy for that year plus 1 percent.
The published monthly average referred to above is defined as:
(a) Moody's Corporate Bond Yield Average - Monthly Average Corporates as published by Moody's Investors Service, Inc., or any successor thereto; or
(b) In the event that Moody's Corporate Bond Yield Average - Monthly Average Corporates is no longer published, a substantially similar average, established by regulation, or other method, issued by the Insurance Department of the state or other jurisdiction where the Policy is delivered.
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Please note that, subject to meeting all Conditions for Eligibility for Benefit Payments, defined below, you may elect to receive Accelerated Benefits as follows:
(a) Chronic Illness in Monthly Benefit Amounts and then at a later date elect the Chronic Illness one-time lump sum payment; or
(b) Chronic Illness Monthly Benefit Amounts and then at a later date elect to receive the Terminal Illness benefit. In the same Policy Month, you may receive both a Chronic Illness Monthly Benefit Amount and the Terminal Illness benefit; or
(c) Chronic Illness Monthly Benefit Amounts, then at a later date elect to receive the Terminal Illness benefit and finally receive the Chronic Illness one-time lump sum payment; or
(d) Terminal Illness benefit and then at a later date elect to receive a Chronic Illness benefit in either Monthly Benefit Amounts or the one-time lump sum payment, or both.
Any Chronic Illness Monthly Benefit Amount or Terminal Illness benefit paid under this rider will be first used to repay a portion of any outstanding Indebtedness under the Policy. The portion to be repaid will be determined by the product of the following:
[(A + B) / C] * D where:
A = is the balance in the Loan Account;
B = is any accrued loan interest not yet charged;
C = is the Remaining Benefit Amount immediately prior to a benefit payment; and
D = is either i. or ii. noted below, depending on the Qualifying Event:
i. the Chronic Illness Monthly Benefit Amount; or
ii. the Terminal Illness benefit payment divided by the applicable Terminal Illness actuarial discount factor.
If the Chronic Illness one-time lump sum benefit payment is elected, the benefit payment will be reduced by any outstanding Indebtedness under the Policy.
It’s important to note that if any of the following riders are attached to your Policy, this rider may have an impact on any benefits provided under such rider.
Premium Reserve Rider: For Chronic Illness Monthly Benefit Amounts and Terminal Illness benefit, you may elect to either include the Premium Reserve Rider Accumulation Value in the calculation of the Original Benefit Amount or receive a payment of the Premium Reserve Rider Surrender Value. Either action will terminate the Premium Reserve Rider. If you elect to include the Premium Reserve Rider Accumulation Value in the calculation of the Original Benefit Amount, the Premium Reserve Rider Accumulation Value will be transferred to the Policy’s corresponding Fixed Account value, Sub-Account(s) value, and/or Loan Account value and the Premium Reserve Rider's Transfer Load will be waived. If you elect the Chronic Illness one-time lump sum payment, you will receive a payment of the Premium Reserve Rider Surrender Value and the Premium Reserve Rider will terminate.
Waiver of Monthly Deduction Rider: If the Insured is on Total Disability as provided under any Waiver of Monthly Deduction Rider, we will continue to waive the Monthly Deductions falling due under the Policy once payment of an Accelerated Benefit begins under this rider.
Enhanced Surrender Value Rider: Once payment of an Accelerated Benefit under this rider begins, the Enhanced Surrender Value Rider will terminate.
Benefit payments under this rider will reduce certain policy and rider values by multiplying such values by a Reduction Ratio noted below. The values that will be reduced are as follows:
1. Specified Amount;
2. Fixed Account Value;
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3. The value of each Sub-Account;
4. Your “Cost Basis” in the Policy (the total amount of Premiums or other consideration you have paid for the Policy, less the total amount you have received that was not included in your taxable income, and less any reductions in values due to benefit payments under this rider);
5. Premiums paid to date;
6. No-Lapse Value* of any No-Lapse Enhancement Rider, if attached to the Policy;
7. Reset Account Value* of any No-Lapse Enhancement Rider, if attached to the Policy;
8. Guaranteed Minimum Death Benefit* of any No-Lapse Enhancement Rider, if attached to the Policy; and
9. Reset Death Benefit* of any No-Lapse Enhancement Rider, if attached to the Policy.
* As defined in the No-Lapse Enhancement Rider.
Any reduction will occur on the Monthly Anniversary Day prior to the Monthly Deduction. The proportion by which the above values will be reduced will be based on a Reduction Ratio, determined as follows:
A. Chronic Illness Benefit Payments:
Each Monthly Benefit Amount will reduce the above values by a Reduction Ratio of (b-a)/b where:
a = is the Monthly Benefit Amount, and
b = is the Remaining Benefit Amount immediately prior to a benefit payment.
B. Terminal Illness Benefit Payment:
The payment of a Terminal Illness benefit will reduce the above values by a Reduction Ratio of (b-a)/b where:
a = is the Terminal Illness benefit payment divided by the applicable Terminal Illness actuarial discount factor, and
b = is the Remaining Benefit Amount immediately prior to the benefit payment.
Additional terms to consider:
For each Policy Month you receive a rider benefit payment, we will send you a monthly report showing the change in current values under your Policy.
If a Death Benefit Option other than Death Benefit Option 1 (Level) is in effect, the Death Benefit Option will be changed to Death Benefit Option 1 (Level) prior to the first benefit payment.  No further Death Benefit Option changes are permitted.
The Surrender Charges as shown on the Policy Specifications will be waived.
If there is any Premium in a Premium deposit fund, this Premium will be returned to you and will be treated as a normal return of Premium and not as a benefit payment under this rider. If we return any accrued interest with the Premium amount, the interest will be reported as taxable income to you.
You may not make a change in Specified Amount, a change in the Insured’s premium class as shown on this rider’s Policy Specifications or add rider benefits or increase the amount of rider benefits.
Further, we reserve the right to transfer all value of each Sub-Account(s) to the Fixed Account.
If the death of the Insured occurs prior to the date you satisfy all Conditions for Eligibility for Benefit Payments, we will pay the Death Benefit Proceeds. If the death of the Insured occurs while benefits are being received under this rider, we will pay the Death Benefit Proceeds, which may be less than the Remaining Benefit Amount, and the Death Benefit Proceeds will be reduced by any decrease in the remaining Benefit Amount after the date of the Insured’s death.
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This rider provides for Monthly Deductions to be waived in the event you are receiving or have received Chronic Illness Monthly Benefits or a Terminal Illness Benefit. Once benefit payments begin, the Policy’s Monthly Deductions will continue until the Policy’s Net Accumulation Value, and, if attached to the Policy, the No-Lapse Enhancement Rider’s No-Lapse Value, less Indebtedness, and Reset Account Value, less Indebtedness, are reduced to an amount insufficient to pay the Monthly Deduction. After this occurs, the Policy will not lapse as long as this rider is in force. We will stop billing you and will not allow Premium Payments unless otherwise agreed to by you and us. However, we will continue to accept loan repayments.
It is important to note that this rider does not provide an Accelerated Benefit for Chronic Illness resulting from:
1. Intentionally self-inflicted injury or attempted suicide, while sane or insane;
2. Any act or incident of insurrection or war, declared or undeclared;
3. The Insured’s participation in, or attempting to participate in, a felony, riot, or insurrection; or
4. Alcoholism or drug addiction.
You may reinstate this rider as part of your Policy if the Policy is terminated and reinstated. Such reinstatement will be subject to satisfactory evidence of insurability and all other terms and conditions of the Policy to which it is attached.
This rider and all rights provided under it will terminate automatically upon whichever of the following occurs first:
1. The date you request In writing to terminate this rider;
2. The Policy’s Specified Amount exceeds the Specified Amount Limit as shown on the Policy Specifications;
3. The receipt of a Chronic Illness one-time lump sum payment which will cause the termination of both this rider and the Policy to which it is attached;
4. The Remaining Benefit Amount is reduced to zero which will cause the termination of both this rider and the Policy to which it is attached;
5. Termination of the Policy; or
6. The death of the Insured which will cause Death Benefit Proceeds to become payable under the Policy.
In addition, if you have received an Accelerated Benefit payment, this rider will terminate on the earliest of the following:
1. The date you take a Partial Surrender under the Policy; or
2. The date you take a loan under the Policy.
Change of Insured Rider.   With this rider, you may name a new Insured in place of the current Insured. Underwriting and policy value requirements must be met. The benefit expires on the anniversary nearest to the current Insured’s 65th birthday. There is no separate charge for this rider; however, policy charges applicable to the new Insured may differ from charges applicable to the current Insured. Exercising the Change of Insured Rider is a fully taxable event.
Enhanced Surrender Value Rider.  If desired, you must select this rider when you initially apply for insurance. The rider provides an enhanced Surrender Value without imposition of a Surrender Charge if you fully surrender your Policy during the first five Policy Years (the “Enhanced Surrender Value Period”). This rider does not provide for enhanced Surrender Value for Partial Surrenders, loans, or in connection with the exchange of this Policy for any other policy. This rider will terminate at the earliest of the Full Surrender of the Policy for the benefit provided by this rider; the end of the fifth Policy Year; lapse of the Policy; or exchange, replacement, or any termination of the Policy except for the benefits provided by the Change of Insured Rider. In Policy Years 2-5, there will be a monthly charge per $1,000 of Initial Specified Amount for this rider.
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If the Policy is Fully Surrendered at any time during the Enhanced Surrender Value Period, the Surrender Value payable on the date your Policy is surrendered will equal:
1) the Policy's Accumulation Value; minus
2) Indebtedness.
The following example demonstrates hypothetical Accumulation Values and Surrender Values with and without the Enhanced Surrender Value Rider during the first five Policy Years of the Policy described below:
Sample Policy
• Insured: Male Standard Non-tobacco, age 45
• Specified Amount: $1,000,000
• Benefit Selection Option: Not Elected
• Planned annual Premium Payment: $35,000
• No Indebtedness
   

End of Year 		  Accumulation
Value Without
ESV Rider 		  Surrender
Value Without
ESV Rider 		  Accumulation
Value With
ESV Rider 		  Surrender
Value With
ESV Rider
1   $31,640   $0   $31,640   $31,640
2   $65,215   $27,605   $64,593   $64,593
3   $100,863   $64,143   $99,576   $99,576
4   $138,799   $102,969   $136,801   $136,801
5   $179,219   $144,289   $176,462   $176,462
No-Lapse Enhancement Rider:   We will automatically issue this rider with your Policy and there is no charge for it. This rider provides you with a limited benefit in the event that your Policy would otherwise lapse. It does not provide any additional death benefit amount or any increase in your policy value and it does not provide any type of market performance guarantee. While this rider is effective, there are certain requirements and limitations that are imposed which may restrict the allocations you may wish to make. These are described in the “Allocation Requirements” section below.
The rider’s benefit: The rider consists of the No-Lapse Value provision (the “No-Lapse Value Provision”) and the Reset Account Value provision (the “Reset Account Value Provision”). Under this rider, if the Policy’s Net Accumulation Value is insufficient to cover the Monthly Deductions, your Policy will not lapse as long as either the No-Lapse Value or the Reset Account Value, less any Indebtedness, is greater than zero. If both the No-Lapse Value and the Reset Account Value, less any Indebtedness, are zero or less, this rider will not prevent your Policy from lapsing. The “No-Lapse Value” and “Reset Account Value” are reference values only and are determined as described below using Reference Rates and fees unique to each provision. These Reference Rates and fees are fixed at issue for the life of the Policy and are different from the rates and fees we use to calculate the Accumulation Value of the Policy.
How long the protection lasts: The duration of lapse protection provided by this rider will be determined monthly and may vary based on the amount and timing of Net Premium Payments that are paid, interest credited, the amount of any Partial Surrenders, and rates and fees for the rider. Payment of Premiums higher than the Planned Premium and interest credited on Net Premiums will increase the duration of lapse protection. Partial Surrenders and the costs of other riders which have their own charges will reduce the duration of lapse protection. Also, the duration of lapse protection provided by this rider may be reduced if:
a. Premiums or other deposits are not received on or before their due date;
b. any Indebtedness exists; or
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c. you initiate any policy change that decreases the No-Lapse Value or Reset Account Value; in addition to Partial Surrenders, these include but are not limited to changes in Specified Amount and changes in the Death Benefit Option you have selected.
You may obtain information about your Policy’s current duration of lapse protection by requesting a personalized policy illustration from your registered representative.
Impact on Death Benefit Proceeds: If this rider is actively preventing the Policy from Lapse, the death benefit payable will be determined as described below. Otherwise, the death benefit payable will be determined per the Death Benefit Proceeds provision of the Policy. (See section headed “Death Benefits” form more information.)
Each provision triggers a different death benefit, which are different from the Death Benefit Proceeds otherwise applicable under the Policy. If the requirements of only one of these provisions are met, the Death Benefit Proceeds payable will be calculated under that provision. If the requirements of both of these provisions are met, the Death Benefit Proceeds payable will be the greater of the Death Benefit Proceeds calculated under each provision.
If the Insured dies while the No-Lapse Provision is maintaining the Policy in force, the Death Benefit Proceeds will be equal to: (1) the Guaranteed Minimum Death Benefit (“GMDB”) described below less any Indebtedness and Partial Surrenders (i.e. withdrawals); plus any Death Benefit Proceeds payable under any other rider(s), if applicable. You will select a GMDB on the application for your Policy which must be between 70% and 100% of the Policy’s Initial Specified Amount. The higher the percentage you select, the higher the ongoing Premium Payments which will be required to maintain a No-Lapse Value and/or Reset Account Value greater than zero. Note: While you can’t request an increase in the GMDB, if the current Specified Amount is decreased below the Initial Specified Amount, the GMDB will automatically be decreased to an amount equal to the reduced Specified Amount.
If the Insured dies while the Reset Account Value Provision is maintaining the Policy in force, the Death Benefit Proceeds will be equal to the greater of:
a. the Reset Death Benefit described below, less any Indebtedness and Partial Surrenders (i.e. withdrawals) plus any Death Benefit Proceeds payable under any rider(s), if applicable, or
b. an amount equal to the Reset Account Value multiplied by the applicable percentage shown in the Corridor Percentages Table in the Policy Specifications, less any Indebtedness and Partial Surrenders (i.e. withdrawals) plus any Death Benefit Proceeds payable under any rider(s), if applicable.
The Reset Death Benefit on the Policy Date equals the Initial Specified Amount shown in the Policy Specifications. If the current Specified Amount is decreased below the Reset Death Benefit, the Reset Death Benefit will automatically be decreased to an amount equal to the new reduced Specified Amount.
What happens when the rider’s benefits go into effect: During any time that this rider is preventing the Policy from Lapse, the following will occur as applicable:
a. Monthly Deductions will continue to be accumulated, but will not be deducted. The Net Accumulation Value will not be less than zero. Cost of Insurance rates will not be charged on an amount greater than the death benefit at the beginning of the Policy Month. Any Death Benefit Proceeds payable will not be reduced by the accumulated unpaid Monthly Deductions.
b. Loan interest will continue to accrue and will be added to the total amount of Indebtedness.
If the rider is no longer preventing Lapse, or upon termination of the No-Lapse Enhancement Rider, whichever occurs first, any accumulated unpaid Monthly Deductions will need to be repaid in addition to the amount described in the Grace Period provision in order to keep the Policy in force.
Impact on the Policy’s Grace Period: The Grace Period provision of the Policy will begin on the Monthly Anniversary Day on which the No-Lapse Value, less Indebtedness, and the Reset Account Value, less Indebtedness, are less than or equal to zero and the Policy has met the conditions for entering the Grace Period. You will be notified of the pending Lapse as provided under that provision.
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Allocation Requirements: While this rider is effective, there are certain requirements and limitations that are imposed which may restrict the allocations you may wish to make. If you do not comply with these allocation requirements, the rider will terminate. If the rider terminates, the Policy will remain in force only if the Accumulation Value is sufficient to cover the Monthly Deductions.
Automatic Rebalancing will be in effect when the Policy is issued and you must maintain Automatic Rebalancing in order to keep this rider in effect. If you discontinue Automatic Rebalancing after the Policy is issued, this rider will terminate. (Refer to the section headed “Optional Sub-Account Allocation Programs” for more information about Automatic Rebalancing.)
We reserve the right to restrict your allocations to certain Sub-Accounts to a maximum of 40% of the Policy’s Accumulation Value in order to keep the rider in effect. While we currently do not restrict your allocation rights, if such a restriction is imposed, your Policy will include a listing of the Sub-Accounts (as of the Policy Date) to which allocations are being restricted. The decision to impose this restriction will be based on an annual review of the Separate Account investments of all Owners of this product. If we determine that the investments of all Owners are highly concentrated in certain Sub-Accounts, then the Sub-Accounts with higher concentrations than anticipated will be subject to the restriction. Any restriction will apply to all Owners of this product. If such a restriction is put in place after your Policy Date, you will be notified in writing and advised if it is necessary to reallocate the Policy’s Accumulation Value or subsequent Premium Payments among the Sub-Accounts which are not subject to the restriction. We will not reallocate the Accumulation Value to comply with any such restriction except pursuant to your instructions. You may provide instructions for reallocation in writing, or by telephone, if you have previously authorized telephone transfers in writing. If you choose not to reallocate the Accumulation Value of your Policy to comply with a Sub-Account restriction, the rider will terminate.
How we determine the No-Lapse Value: The No-Lapse Value is a reference value only (and it may become less than zero). It is not used in determining the Accumulation Value or death benefit provided by the Policy. The No-Lapse Value on the Policy Date will be the initial Premium received, plus the No-Lapse Value Premium Credit as shown in the Policy Specifications, less the No-Lapse Monthly Deduction for the first Policy Month.
On each Monthly Anniversary Day, the No-Lapse Value is calculated taking into account the following:
1. The No-Lapse Value on the preceding Monthly Anniversary Day;
2. Premiums received since the preceding Monthly Anniversary Day (either adding the No-Lapse Value Premium Credit or subtracting the No-Lapse Value Premium Load based on Policy Years as shown in the Policy Specifications);
3. Partial Surrenders (i.e. withdrawals) since the preceding Monthly Anniversary Day;
4. Accumulated No-Lapse Value Credited Interest calculated using the interest rates shown in the table of No-Lapse Value Credited Interest rates shown in the Policy Specifications;
5. The No-Lapse Monthly Deduction described below for the month following the Monthly Anniversary Day; and
6. The Surrender Charge, if any, as determined from the Table of Surrender Charges shown in the Policy Specifications for any decrease in Specified Amount on the Monthly Anniversary Day.
How we determine the No-Lapse Value Monthly Deduction and the No-Lapse Value Cost of Insurance: The No-Lapse Value Monthly Deduction for a Policy Month equals the sum of the No-Lapse Value Cost of Insurance as described below, the cost of any additional benefits provided by rider for the Policy Month and the No-Lapse Monthly Administrative Fee shown in the Policy Specifications.
The No-Lapse Value Cost of Insurance under this rider is determined on a monthly basis and takes into account:
1. The No-Lapse Death Benefit Value, described below, at the beginning of the Policy Month;
2. The Net Amount at Risk Discount Factor shown in the Policy Specifications;
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3. The No-Lapse Value at the beginning of the Policy Month after the deduction of the No-Lapse Monthly Administrative Fee but prior to the deduction for the monthly No-Lapse Cost of Insurance; and
4. The applicable No-Lapse Factor described in the Policy Specifications. The No-Lapse Factor may be modified by the Table of Funding Level Threshold Percentages and resulting reduction factor, if applicable, as described in the Policy Specifications.
The Funding Level, mentioned above, is measured by dividing the No-Lapse Value on the Monthly Anniversary Day by the current Specified Amount. The Funding Level is used in the Table of Funding Level Threshold Percentages shown in the Policy Specifications to determine if the No-Lapse Factor will be modified by a reduction factor. The No-Lapse Factor is used to calculate the No-Lapse Cost of Insurance.
How we calculate the No-Lapse Death Benefit Value: The No-Lapse Death Benefit Value is calculated in the same manner as the death benefit described in the Policy’s Death Benefit Proceeds provision and Death Benefit Options provision, using the No-Lapse Value in lieu of the Accumulation Value. While the No-Lapse Death Benefit Value is used to determine the monthly No-Lapse Value Cost of Insurance; it is not used to determine the death benefit provided by the Policy or the rider.
How we determine the Reset Account Value: The Reset Account Value is a reference value (which may become less than zero) and is not used in determining the Accumulation Value or death benefit provided by the Policy. The Reset Account Value on the Policy Date will be the initial Premium received, less the Reset Account Premium Load, as shown in the Policy Specifications, and less the Reset Account Monthly Deduction for the first Policy Month:
On each Monthly Anniversary Day, the Reset Account Value is calculating taking into account the following:
1. the Reset Account Value on the preceding Monthly Anniversary Day;
2. Premiums received since the preceding Monthly Anniversary Day, subtracting the Reset Account Value Premium Load;
3. Partial Surrenders (i.e. withdrawals) since the preceding Monthly Anniversary Day;
4. Accumulated Reset Account Value Credited Interest calculated using the Reset Account Value Credited Interest rate shown in the Policy Specifications;
5. The Reset Account Value Monthly Deduction described below for the month following the Monthly Anniversary Day; and
6. the Surrender Charge, if any, as determined from the Table of Surrender Charges shown in the Policy Specifications for any decrease in Specified Amount on the Monthly Anniversary Day.
On each Policy Anniversary, the Reset Account Value may increase to reflect positive investment performance. If the Reset Account Value on that Policy Anniversary is less than the Accumulation Value on that same Policy Anniversary, the Reset Account Value will be reset to equal the Accumulation Value.
How we determine the Reset Account Monthly Deduction and the Reset Account Cost of Insurance: The Reset Account Monthly Deduction for a Policy Month equals the sum of the Reset Account Value Cost of Insurance as described below the cost of any additional benefits provided by rider for the Policy Month and the Reset Account Monthly Administrative Fee shown in the Policy Specifications.
The Reset Account Value Cost of Insurance under this rider is determined on a monthly basis and takes into account:
1. The Reset Account Death Benefit Value at the beginning of the Policy Month;
2. The Net Amount at Risk Discount Factor shown in the Policy Specifications;
3. The Reset Account Value at the beginning of the Policy Month after the deduction of the Reset Account Monthly Administrative Fee but prior to the deduction for the monthly Reset Account Value Cost of Insurance; and
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4. The Reset Account Factor as described in the Policy Specifications.
How we calculate the Reset Account Death Benefit Value: The Reset Account Death Benefit Value is calculated in the same manner as the death benefit described in the Policy’s Death Benefit Proceeds provision and Death Benefit Options provision, using the Reset Account Value in lieu of the Accumulation Value. The Reset Account Death Benefit Value is used only to determine the monthly Reset Account Value Cost of Insurance; it is not used to determine the death benefit provided by the Policy or this rider.
When will the rider terminate: The rider and all rights provided under it will terminate automatically on the first of the following to occur:
1. the Insured reaches age 121;
2. the surrender or other termination of the Policy;
3. you request to terminate Automatic Rebalancing;
4. An allocation restriction, described in the Allocation Requirements section above is imposed and you do not take corrective action within 61 days after the date of mailing of the notice of the imposition of such restriction.
(If this rider terminates due to item (1) above, coverage will continue as described in the Continuation of Coverage section of this prospectus, and the Death Benefit Proceeds available under this rider will continue to apply.) If the Policy terminates and is reinstated, the rider will likewise be reinstated unless the rider had terminated before the Policy terminated.
Benefit Selection Option. When you apply for the Policy, you may elect the Benefit Selection Option.
With this option, you can choose to strike a balance between a potentially greater Accumulation Value and the death benefit protection provided by the No-Lapse Enhancement Rider. When considering this option, you should consider the amount of market risk which is appropriate for you and your circumstances. This option is designed to reduce the charges for the per $1,000 of Specified Amount monthly administrative expense fee (the “Monthly Administrative Expense Fee”) deducted from your Policy and thereby reduce the cost of the death benefit provided by your Policy. Therefore, if you elect to reduce the death benefits provided by this rider by electing a Benefit Selection Option percentage greater than zero, you will reduce the monthly charges deducted from your Policy’s Accumulation Value.
By reducing the monthly charges deducted from your Policy’s Accumulation Value, you have the opportunity to have a larger Accumulation Value allocated to the Fixed Account and invested in the Sub-Accounts, but will receive a reduced death benefit protection provided by the No-Lapse Enhancement Rider.
When you elect this option, you choose to reduce the benefits provided by the No-Lapse Enhancement Rider in exchange for reduced Monthly Administrative Expense Fees. The reduced Policy Monthly Administrative Expense Fee will be displayed in your Policy Specifications. However, when the Benefit Selection Option is elected, your choice of a Benefit Selection Option percentage greater than zero will increase the No-Lapse reference per $1,000 of Specified Amount Monthly Administrative Fees, and, therefore, the Premiums which you must pay in order to meet the requirements of the No-Lapse Enhancement Rider will increase. (Refer to the section headed “No-Lapse Enhancement Rider” for discussion of how rider values are calculated.) The higher the percentage you select for the Benefit Selection Option, the larger the increase in the No-Lapse reference per $1,000 of Specified Amount Monthly Administrative Fees and the higher the Premiums you must pay in order to meet the requirements of the rider.
The following example shows two Policies on the same insured. In the first example, the Benefit Selection Option was not elected; and in the second example the Benefit Selection Option was elected:
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Male, 45 Year Old, Standard Non-tobacco
Benefit Selection
Option 		Monthly Administrative
Expense Fee 		No-Lapse
Monthly Administrative
Expense
Reference Fee 		Result
Election: None $0.12583 per thousand of Specified Amount (higher) $0.33167 per thousand of Specified Amount (lower) This option offers the best No-Lapse Protection available. The price of the protection is reflected in the higher Monthly Administrative Expense Fee.
Election: 100% $0.04000 per thousand of Specified Amount (lower) $0.34917 per thousand of Specified Amount (higher) This option offers the least amount of No-Lapse Protection. The Monthly Administrative Expense Fee is reduced in exchange. Therefore, this option allows more money to be invested in the Sub-Accounts or allocated to the Fixed Account. However, the Premiums which you must pay in order to satisfy the No-Lapse requirements of the rider will increase.
You elect this option by selecting a percentage from 1 to 100%. This election must be made at policy issue and is irrevocable. The impact of selecting a Benefit Selection Option percentage greater than zero on your Policy is best shown in an illustration. Please ask your registered representative for illustrations which demonstrate the impact of electing various Benefit Selection Option percentages greater than zero.
If elected, the percentage you select under this option will be shown in your Policy Specifications. Once your Policy is issued with the Benefit Selection Option, you may not change the percentage you selected nor may you terminate your election.
Overloan Protection Rider.   If this rider is issued with your Policy, you meet the requirements as described in the rider (see below) and you choose to take advantage of the benefit it provides, your Policy will not lapse due to insufficient value. It is a limited benefit, in that it does not provide any additional death benefit or any increase in Accumulation Value. Also, it does not provide any type of market performance guarantee.
We will automatically issue this rider with your Policy. The benefit is not available to you if the Policy is a Modified Endowment Contract. While there is no charge for adding this rider to your Policy, if you choose to exercise this benefit, there is a one-time charge shown in the Policy Specifications. (See Policy Charges and Fees and Table II of this prospectus.)
In addition to the conditions mentioned above the following must be met at the time the benefit is exercised:
• Policy Indebtedness is larger than the Specified Amount;
• The Policy has been in force for a minimum number of Policy Years (“Minimum Policy Years in Force”) as shown in the Policy Specifications;
• Any Insured identified in the Policy Specifications has attained the age shown as the “Minimum Attained Age” in the Policy Specifications;
• A level Death Benefit must be in effect;
• The Policy’s Accumulation Value less Indebtedness must be enough to cover the charge as shown in the Policy Specifications;
• The sum of three Monthly Deductions and the election charge must exceed the Surrender Value.
Once you exercise the benefit, the following changes will be made to your Policy:
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1. We will no longer allow Premium Payments, Partial Surrenders, or changes to the Specified Amount;
2. All other riders will be terminated;
3. No additional Monthly Deductions will be taken;
4. No additional loans will be allowed;
5. The Separate Account Value (also referred to the “Variable Account Value” in the rider), if any, will be transferred to the Fixed Account. (This transfer will not be subject to any limitations that may otherwise be in effect and will not be assessed a charge. Also, no further transfers will be allowed, and Automatic Rebalancing will end); and
6. The Policy will become paid-up insurance (i.e. no further payments will be required) and the death benefit will be determined as provided by the Policy but will be no less than the greater of the following, less Indebtedness:
(i) Accumulation Value plus $10,000; or
(ii) An amount determined by us equal to the amount required to qualify the Policy as life insurance under the Internal Revenue Code.
You should consult with a qualified tax advisor before exercising this rider, as there may be tax consequences. Also, we will provide you with notice the first time your Policy meets all the conditions and requirements noted above. We strongly recommend that you carefully monitor the performance of your Policy by annually reviewing a projection of the Policy’s benefits and values (an “illustration”) in order to improve your opportunity of meeting the requirements and conditions of the rider.
Premium Reserve Rider:  We will automatically issue this rider with your Policy in states where it is available. The rider allows you to pay Premiums in addition to those you plan to pay for your Policy and to have such amounts accumulate in the same manner as if they had been allocated to your Policy without, as detailed in the rider, being subject to all charges and expenses of your Policy. For example, this rider can be used to fund future Premium Payments if needed while retaining the flexibility to withdraw such funds from the rider without reducing the Policy’s Specified Amount (or being subject to Surrender Charges) in the event the funds are not needed due to favorable investment performance. Premiums allocated to the Premium Reserve Rider do not increase the Policy’s Accumulation Value and, therefore, will not decrease the Net Amount at Risk. Since the Net Amount at Risk will not be reduced, current Cost of Insurance Charges will not be reduced. However, the Policy’s death benefit will be increased by the Premium Reserve Rider Accumulation Value less Indebtedness. The Premium Reserve Rider Accumulation Value is the sum of the (i) values of Sub-Accounts created for the rider which, but for having been created specifically for the rider, are in all other respects identical to the Sub-Accounts (the “Premium Reserve Rider Sub-Accounts”), and (ii) values held in the portion of the Fixed Account created specifically for the rider (the “Premium Reserve Rider Fixed Account”).
A Premium Load of 4% (known as the Premium Reserve Rider Premium Load) will be deducted from each amount allocated to this rider.
Net Premium Reserve Rider Premiums will be allocated to the Premium Reserve Rider Sub-Accounts and/or the Premium Reserve Rider Fixed Account using the same Premium allocation instruction that you have provided to us for allocating Premiums which you direct to your Policy.
Calculations of the values of the Premium Reserve Rider Sub-Accounts apply the same daily Mortality and Expense Risk Charge as would have been deducted if the Premiums had been allocated to your Policy; however, the Monthly Deductions for your Policy, which include charges for the cost of insurance and the Administrative Fee, and charges for riders to your Policy other than this rider will not be reflected.
You may request us to transfer all or part of the Premium Reserve Rider’s Accumulation Value to your Policy at any time. Transfers of the rider’s Accumulation Value to your Policy are subject to a deduction of 3% from each amount transferred (the 3% charge is called the Premium Reserve Rider transfer load) if such transfers are made (either automatically, as discussed below, or at your request) in the first ten Policy Years.
No other policy charges or fees will be deducted from the amount allocated to the Premium Reserve Rider.
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In addition, after Policy Year 10, subject to certain limitations (which relate to meeting the requirement that sufficient value remains to maintain the duration of lapse protection provided under the No-Lapse Enhancement Rider until the Insured reaches age 121 – see section headed “No-Lapse Enhancement Rider”), you may request transfers from the Policy’s Net Accumulation Value to the Premium Reserve Rider for allocation to the Premium Reserve Rider's Sub-Accounts and Fixed Account. Transfers between the Policy and the rider will not be counted against the number of free transfers permitted by the Policy.
The rider provides for the automatic transfer of the entire Accumulation Value of the rider to the Policy in the event:
1) the Net Accumulation Value under your Policy is insufficient to maintain your Policy in force and the No-Lapse Enhancement Rider described above is not at the time preventing your Policy from lapsing; and
2) you do not pay at least the amount set forth in the Lapse Notice and your payment is not received by us before the end of the Grace Period.
If the Premium Reserve Rider Accumulation Value (less the Premium Reserve Rider transfer load of 3% if the transfer is made during the first 10 Policy Years) on the day the Grace Period ends is insufficient to meet the amount then due, your Policy will lapse without value.
If this rider is in force at the time you request a loan on or Partial Surrender of your Policy, any such loan or Partial Surrender will be made first from any Premium Reserve Rider Accumulation Value and when the Premium Reserve Rider Accumulation Value is reduced to zero, then from the Accumulation Value of your Policy. Loan interest will be charged and credited to any Premium Reserve Rider loans on the same basis as the Policy. Please refer to the section headed “Policy Loans” for a more detailed discussion of Policy Loans, including interest charged on Policy Loans.
In the event of the death of the Insured while the rider is in force, any Premium Reserve Rider Accumulation Value less Indebtedness on the date of death will be added to the death benefit if Death Benefit Option 1 is in force and will be added to the Policy’s Accumulation Value less Indebtedness on the date of death if Death Benefit Option 2 is in force. If the death benefit is paid pursuant to the No-Lapse Enhancement Rider, the Premium Reserve Rider Accumulation Value less Indebtedness will be added to the death benefit payable under that rider.
The Premium Reserve Rider will terminate at the earlier of the date your Policy terminates; the date the entire Premium Reserve Rider Accumulation Value is automatically transferred to your Policy to maintain your Policy in force; or your written request to terminate the rider is received. Once terminated, the rider may not be reinstated, and no further Premium Payments may be allocated to it.
Finally, the amount of Premiums you may pay, whether you direct them to your Policy or to your Premium Reserve Rider, are subject to limits which are discussed in the Tax Issues section of the prospectus.
As with your Policy, you bear the risk that the investment results of the Sub-Accounts you have chosen are adverse or are less favorable than anticipated. Adverse investment results will impact the Accumulation Value of the rider and, therefore, the amount of rider Accumulation Value which may be available to prevent your Policy from lapsing or for providing policy benefits.
The Premium Reserve Rider, as discussed above, can help provide additional protection against lapse of your Policy. The Premium Reserve Rider Accumulation Value generated by the additional Premiums you pay to the rider may be transferred to the Policy either through (i) your voluntarily requesting us to transfer available Premium Reserve Rider Accumulation Value to the Policy in the amount needed to prevent lapse (because, for example, you do not have the funds outside of the Policy to make the Premium Payment required to keep the Policy in force), or (ii) the rider’s provision for automatically transferring all available Premium Reserve Rider Accumulation Value to the Policy should those values be needed to prevent lapse of the Policy (because, for example, the payment you do make either is less than the amount requested or is not received by the time set by the terms of the Policy). However, as noted above, if such values are transferred pursuant to the Premium Reserve Rider’s automatic transfer provision, the Premium Reserve Rider will terminate, and the Owner will permanently lose the ability to allocate any future Premium Payments to the rider.
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As a hypothetical example of how the Premium Reserve Rider might help prevent lapse of your Policy, assume that you have had your Policy for 11 years and that you have allocated additional Premiums to the rider so that your Premium Reserve Rider Accumulation Value at the end of Policy Year 11 is $25,000. Further assume that the No-Lapse Enhancement Rider is no longer preventing your Policy from lapsing, that the Premium required to maintain your Policy in force that is due at the beginning of Policy Year 12 is $15,000, and that you have decided that you wish to minimize your current cash outlays. If you do not pay the $15,000 Premium, you will receive a Lapse Notice which will tell you that you need to make a Premium Payment of $15,000 to your Policy. If you wish, you could request (before the end of the Grace Period) that we transfer $15,000 of the Premium Reserve Rider Accumulation Value to the Policy. If you do not so request, we will automatically transfer the entire Premium Reserve Rider Accumulation Value of $25,000 to the Policy (and your Premium Reserve Rider will terminate). In this example, the transfer of $15,000 from your Premium Reserve Rider Accumulation Value to your Policy will avoid lapse of the Policy.
As a further hypothetical example, again assume that you have had your Policy for 11 years but that you have allocated fewer additional Premiums to the rider so that your Premium Reserve Rider Accumulation Value is $10,000. Continuing the assumption that the No-Lapse Enhancement Rider is no longer preventing your Policy from lapsing, that the Premium required to maintain your Policy in force that is due at the beginning of Policy Year 12 is $15,000, and that you wish to minimize your current cash outlays, your Premium Reserve Rider Accumulation Value would provide (either by transfer at your specific request or through automatic transfer) $10,000 towards the Premium due. But in this example, you would have to then pay the balance of the Premium due, that is $5,000, to us from your savings or from another source outside of the Policy to avoid lapse of your Policy.
You should discuss with your registered representative the needs which purchasing the Policy will meet, including the need to provide to beneficiaries a guaranteed death benefit which does not depend upon growth of the Policy’s Accumulation Value. Policy illustrations, which the registered representative can prepare, will help determine the amount of Premiums which should be allocated to paying the costs of the Policy for the death benefit you need. Once that need for a guaranteed death benefit is met and Premium requirements determined, the Owner then could consider whether to allocate additional funds to the rider.
You should carefully weigh the balance between allocating Premiums to the Policy and Premiums to the rider. Premiums allocated to the Premium Reserve Rider may be withdrawn without reducing the Specified Amount (which might be the case if those Premiums had been allocated to the Policy). In addition, Premiums allocated to the rider initially are charged only with the 4% Premium Reserve Rider Premium Load and will only be charged the 3% Premium Reserve Rider Transfer Load if transfers are voluntarily made during the first 10 Policy Years (or are automatically transferred to help prevent Policy Lapse). And Premiums allocated to the rider become part of the Premium Reserve Rider Accumulation Value and that value (less any Indebtedness) would be paid upon the death of the Insured in addition to the death benefit paid.
However, Premiums allocated to the rider do not increase the Policy’s Accumulation Value and, therefore, would not reduce the Cost of Insurance Charges. An illustration can show the impact that paying a higher level of Premiums would have on the Policy’s cost of insurance: that is as Accumulation Values in the Policy increase (through positive investment results and/or allocating more Premiums to the Policy), the Net Amount at Risk (that is, the difference between the death benefit and the Accumulation Value) will decrease, thereby decreasing the Cost of Insurance Charges. Decreasing policy charges increases the amount of the Policy’s Accumulation value available for allocation to the Sub-Accounts, and thereby increases the amount available for investment, subject to your tolerance for risk.
Your registered representative can prepare illustrations which would reflect the potential impact that different allocations of Premium between the Policy and the Premium Reserve Rider might have, as well as illustrate the impact rates of return selected by you might have on the Policy’s benefits and the rider’s Accumulation Value.
Waiver of Monthly Deduction Rider.  If desired, you must select this rider when you initially apply for insurance. Monthly Deductions will be waived during periods of covered total disability commencing prior to the Policy Anniversary nearest the Insured’s 65th birthday. Charges for this rider, if elected, are part of the Monthly Deductions.
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Continuation of Coverage
If the Insured is still living at age 121, and the Policy is still in force and has not been surrendered, the Policy will remain in force until policy surrender or death of the Insured. There are certain changes that will take place:
1) we will no longer accept Premium Payments;
2) we will make no further deductions;
3) policy values held in the Separate Account will be transferred to the Fixed Account;
4) we will continue to credit interest to the Fixed Account; and
5) we will no longer transfer amounts to the Sub-Accounts.
However, loan interest will continue to accrue. Provisions may vary in certain states.
Termination of Coverage
All policy coverage terminates on the earliest of:
1) Full Surrender of the Policy;
2) death of the Insured; or
3) failure to pay the necessary amount of Premium to keep your Policy in force.
State Regulation
The state in which your Policy is issued will govern whether or not certain features, riders, charges and fees will be allowed in your Policy. You should refer to your Policy for these state specific features.
PREMIUMS
You may select and vary the frequency and the amount of Premium Payments and the allocation of Net Premium Payments. After the initial Premium Payment is made there is no minimum Premium required, except to keep the Policy in force. Premium Payments may be required from time to time in order to insure that the Net Accumulation Value of the Policy is sufficient to pay the Monthly Deductions. Otherwise, the Policy will lapse. (See the “Lapse and Reinstatement” section of this prospectus). Premiums may be paid any time before the Insured attains age 121, subject to our right to limit the amount or frequency of additional Premium Payments. (See the “Planned Premiums; Additional Premiums” section of this prospectus).
The initial Premium must be paid for policy coverage to be effective.
Allocation of Net Premium Payments
Your “Net Premium Payment” is the portion of a Premium Payment remaining after deduction of the Premium Load. The Net Premium Payment is available for allocation to the Sub-Accounts and the Fixed Account.
You first designate the allocation of Net Premium Payments among the Sub-Accounts and Fixed Account on a form provided by us for that purpose. Net Premium Payments will be allocated on the same basis as the initial Net Premium Payment unless we are instructed otherwise, in writing. You may change the allocation of Net Premium Payments among the Sub-Accounts and Fixed Account at any time.
The amount of Net Premium Payments allocated to the Sub-Accounts and Fixed Account must be in whole percentages and and must total 100%. We credit Net Premium Payments to your Policy as of the end of the “Valuation Period” in which it is received in Good Order at our Administrative Office. Premium Payments received from you or your broker-dealer in Good Order at our Administrative Office prior to the close of the NYSE (normally
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4:00 p.m., Eastern time on a business day), will be processed using the accumulation unit value computed on that Valuation Date. Premium Payments received in Good Order after market close will be processed using the accumulation unit value computed on the next Valuation Date. Premium Payments submitted to your registered representative will generally not be processed by us until they are received from your representative’s broker-dealer. Premium Payments placed with your broker-dealer after market close will be processed using the accumulation unit value computed on the next Valuation Date. There may be circumstances under which the NYSE may close early (prior to 4:00 p.m., Eastern time). In such instances, Premium Payments received after such early market close will be processed using the accumulation unit value computed on the next Valuation Date.
The Valuation Period is the time between “Valuation Days”. A Valuation Day is every day on which the New York Stock Exchange is open and trading is unrestricted. Your policy values are calculated on every Valuation Day.
Planned Premiums; Additional Premiums
Planned Premiums are the amount of periodic Premium (as shown in the Policy Specifications) you choose to pay the Company on a scheduled basis. This is the amount for which we send a Premium reminder notice. We reserve the right to stop sending Premium reminder notices if no Premium Payment has been made within 2 Policy Years. Premium Payments may be billed annually, semi-annually, or quarterly. You may arrange for monthly pre-authorized automatic Premium Payments at any time.
In addition to any Planned Premium, you may make additional Premium Payments. These additional payments must be sent directly to our Administrative Office, and will be credited when received by us.
Unless you specifically direct otherwise, any payment received (other than any Premium Payment necessary to prevent, or cure, Policy Lapse) will be applied as Premium and will not repay any outstanding loans. There is no Premium Load on any payment which you specifically direct as repayment of an outstanding loan.
You may increase Planned Premiums, or pay additional Premiums, subject to the certain limitations. We reserve the right to limit the amount or frequency of additional Premium Payments. You may decrease Planned Premiums. However, doing so will impact your policy values and may impact how long your Policy remains in force.
We may require evidence of insurability if any payment of additional Premium (including Planned Premium) would increase the difference between the Specified Amount and the Accumulation Value. If we are unwilling to accept the risk, your increase in Premium will be refunded without interest.
We may decline any additional Premium (including Planned Premium) or a portion of a Premium that would cause total Premium Payments to exceed the limit for life insurance under federal tax laws. Our test for whether or not your Policy exceeds the limit is referred to as the Guideline Premium Test or, if you so elected at the time you applied for the Policy, the Cash Value Accumulation Test. The excess amount of Premium will be returned to you. We may accept alternate instructions from you to prevent your Policy from becoming a MEC. Refer to the section headed “Tax Issues” for more information.
Policy Values
Policy value in your variable life insurance policy is also called the Accumulation Value.
The Accumulation Value equals the sum of the Fixed Account Value, Separate Account Value, and Loan Account Value. At any point in time, the Accumulation Value reflects:
1)  Net Premium Payments made;
2)  the amount of any Partial Surrenders;
3)  any increases or decreases as a result of market performance of the Sub-Accounts;
4)  interest credited to the Fixed Account or the Loan Account;
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5)  persistency bonuses on Net Accumulation Value in Fixed Account and the Sub-Accounts beginning in Policy Year 21; and
6)  all charges and fees deducted.
The Separate Account Value, if any, is the portion of the Accumulation Value attributable to the Separate Account. The value is equal to the sum of the current values of all the Sub-Accounts in which you have invested. The current value of each Sub-Account is determined by multiplying the number of Variable Accumulation Units credited or debited to that Sub-Account with respect to this Policy by the Variable Accumulation Unit Value of that Sub-Account for such Valuation Period.
The “Variable Accumulation Unit” is a unit of measure used in the calculation of the value of each Sub-Account. It may increase or decrease from one Valuation Period to the next. The Variable Accumulation Unit value for a Sub-Account for a Valuation Period is determined as follows:
1) the total value of Underlying Fund shares held in the Sub-Account is calculated by multiplying the number of Underlying Fund shares owned by the Sub-Account at the beginning of the Valuation Period by the net asset value per share of the Underlying Fund at the end of the Valuation Period, and adding any dividend or other distribution of the Underlying Fund made during the Valuation Period; minus
2) the liabilities of the Sub-Account at the end of the Valuation Period. Such liabilities include daily charges imposed on the Sub-Account and may include a charge or credit with respect to any taxes paid or reserved for by Lincoln Life that we determine result from the operations of the Separate Account; and
3) the result of (1) minus (2) is divided by the number of Variable Accumulation Units for that Sub-Account outstanding at the beginning of the Valuation Period.
In certain circumstances, and when permitted by law, we may use a different standard industry method for this calculation, called the Net Investment Factor method. We will achieve substantially the same result using either method.
The daily charge imposed on a Sub-Account for any Valuation Period is equal to the daily Mortality and Expense Risk Charge multiplied by the number of calendar days in the Valuation Period.
The Fixed Account Value, if any, reflects amounts allocated or transferred to the Fixed Account, plus interest credited, and less any deductions or Partial Surrenders. Fixed Account principal is not subject to market fluctuation and interest is credited daily at the greater of a rate of 0.00272616% (equivalent to a compounded annual rate of 1%) or a higher rate determined by the Company.
The Loan Account Value, if any, reflects any outstanding Policy Loans, including any interest charged on the loans. This amount is held in the Company’s General Account. We do not guarantee the Loan Account Value. Interest is credited based on the Loan Account Value at an effective annual rate of 3% in all years and is allocated to the Policy in accordance with your allocation instructions on file with us at the time the interest is credited.
The Net Accumulation Value is the Accumulation Value less the Loan Account Value. It represents the net value of your Policy and is the basis for calculating the Surrender Value.
Persistency Bonus
On each Monthly Anniversary Day beginning with the first Monthly Anniversary Day in Policy Year 21, we will credit a persistency bonus to Net Accumulation Values in each Sub-Account and the Fixed Account at an annual rate guaranteed to be not less than 0.15% of the values in each Sub-Account and the Fixed Account on the Monthly Anniversary Day. In the event that you have allocated Premiums Payments to the Premium Reserve Rider, beginning with the first Monthly Anniversary Day in Policy Year 21, a persistency bonus, calculated as described above, will be credited to the Premium Reserve Rider Net Accumulation Value. The persistency bonus is based on reduced costs in later Policy Years that we can pass on to policies that are still in force. Our payment of the persistency bonus will not increase or affect the charges and expenses of your Policy or any riders other than by
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virtue of increasing the Sub-Account values and Accumulation Value upon which certain charges and expenses of the Policy are based.
Annual Statement
We will tell you at least annually the Accumulation Value, the number of accumulation units credited to your Policy, current accumulation unit values, Sub-Account values, the Fixed Account Value and the Loan Account Value. We strongly suggest that you review your statements to determine whether additional Premium Payments may be necessary to avoid lapse of your Policy.
DEATH BENEFITS
The “Death Benefit Proceeds” is the amount payable to the Beneficiary upon the death of the Insured, based upon the death benefit option in effect. Loans, loan interest, Partial Surrenders, and overdue charges (such as Monthly Deductions), if any, are deducted from the Death Benefit Proceeds prior to payment. Riders, including the No-Lapse Enhancement Rider and the Premium Reserve Rider, may impact the amount payable as Death Benefit Proceeds in your Policy. The Guaranteed Minimum Death Benefit that you select under the provisions of the No-Lapse Enhancement Rider will only affect the Death Benefit Proceeds while the rider’s No-Lapse Provision is actively preventing the Policy from lapsing.  As discussed in more detail in the “Riders” section of this prospectus, the No-Lapse Enhancement Rider may provide a death benefit which differs from that paid under the Policy.  The Premium Reserve Rider Accumulation Value, if any, less any Indebtedness under the Premium Reserve Rider, will be added to the policy’s Death Benefit Proceeds.  If the policy’s death benefit is paid pursuant to the terms of the No-Lapse Enhancement Rider, the Premium Reserve Rider Accumulation Value, if any, less any Indebtedness under the Premium Reserve Rider, will be added to the death benefit payable under the terms of that rider. 
Death Benefit Proceeds
The Death Benefit Proceeds payable upon the death of the Insured will be the greater of:
1) the amount determined by the death benefit option in effect on the date of the death of the Insured, less any Indebtedness; or
2) an amount equal to the Accumulation Value on the date of death multiplied by the applicable percentage shown in the Corridor Percentages Table in the Policy Specifications, less any Indebtedness. (Please note that the investment performance of the Sub-Accounts you have chosen will impact the Accumulation Value and therefore may affect the amount of Death Benefit Proceeds payable.)
Death Benefit Options
Two different death benefit options are available. You may choose the death benefit option at the time you apply for your Policy. If you do not choose a death benefit option at that time, Death Benefit Option 1 will apply. You may only elect Death Benefit Option 2 at the time you apply for your Policy. (See discussion under heading “Changes to the Initial Specified Amount and Death Benefit Options” for details as to changes you are permitted to make in your choice of death benefit option after your Policy has been issued.)
The following table provides more information about the death benefit options.
Option Death Benefit Proceeds Equal to the Variability
1 Specified Amount (a minimum of $100,000) level death benefit on the date of the Insured's death, less any Partial Surrenders after the date of death. None; level death benefit.
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Option Death Benefit Proceeds Equal to the Variability
2 Sum of the Specified Amount plus the Net Accumulation Value as of the date of the Insured’s death, less any Partial Surrenders after the date of death. May increase or decrease over time, depending on the amount of Premium paid and the investment performance of the Sub-Accounts or the interest credited to the Fixed Account.
If for any reason the Owner does not elect a particular death benefit option, Option 1 will apply.
Your choice of death benefit option will impact the Cost of Insurance Charge because the Cost of Insurance Charge is based upon the “Net Amount at Risk”. The Net Amount at Risk for your Policy is the difference between the Specified Amount and the Accumulation Value of your Policy. Therefore, for example, if you choose Death Benefit Option 1, and if your Policy Accumulation Value increases (because of positive investment results), your Cost of Insurance Charge will be less than if your Policy Accumulation Value did not increase or declined. (See section headed “Cost of Insurance” for discussion of Cost of Insurance Charges.)
The death benefit payable under any of the death benefit options will also be reduced by the amount necessary to repay the Indebtedness in full and, if the Policy is within the Grace Period, any payment required to keep the Policy in force. Policy Indebtedness includes loans under the Policy and Premium Reserve Rider Indebtedness includes loans under the Premium Reserve Rider.
Partial Surrenders may also reduce the death benefit payable under any of the death benefit options (See section headed “Policy Surrenders - Partial Surrender” for details as to the impact a Partial Surrender will have on the death benefit payable under each option.)
Changes to the Initial Specified Amount and Death Benefit Options
Within certain limits, you may decrease (reduce) or, with satisfactory evidence of insurability, increase the Specified Amount. Any increase in Specified Amount may increase the Net Amount at Risk and the Cost of Insurance Charge. (See the “Cost of Insurance Charge” section of this prospectus.) The minimum Specified Amount is currently $100,000.
A Partial Surrender may reduce the Specified Amount. If the Specified Amount is reduced as a result of a Partial Surrender, the death benefit may also be reduced. (See section headed “Policy Surrenders - Partial Surrender” for details as to the impact a Partial Surrender may have on the Specified Amount.)
The death benefit option may be changed by the Owner, subject to our consent, as long as the Policy is in force.
You must submit all requests for changes among death benefit options and changes in the Specified Amount in writing to our Administrative Office. The minimum increase in Specified Amount currently permitted is $1,000. If you request a change, a supplemental application and evidence of insurability must also be submitted to us.
Option Change Impact
2 to 1 The Specified Amount will be increased by the Accumulation Value as of the effective date of change.
You may not change from Death Benefit Option 1 to Death Benefit Option 2. Death Benefit Option 2 may only be elected at the time you apply for your Policy.
If you increase the Specified amount, there will be additional Surrender Charges in the event you request a surrender of the Policy. A Surrender Charge may apply to a decrease in Specified Amount. Please refer to the Surrender Charges section of this prospectus for more information on conditions that would cause a Surrender Charge to be applied. A table of Surrender Charges is included in each Policy.
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Any Reduction in Specified Amount will be made against the Initial Specified Amount and any later increase in the Specified Amount on a last in, first out basis. Any increase in the Specified Amount will increase the amount of the Surrender Charge applicable to your Policy. Changes in Specified Amount do not affect the Premium Load as a percentage of Premium.
We may decline any request for Reduction in Specified Amount if, after the change, the Specified Amount would be less than the minimum Specified Amount. We may also decline such a request if it would reduce the Specified Amount below the level required to maintain the Policy as life insurance for purposes of federal income tax law according to the death benefit qualification test you elected at the time you applied for the Policy.
Also, because the death benefit qualification tests, as discussed below, require certain ratios between Premium and death benefit and between the Policy’s Accumulation Value and death benefit, we may increase the Policy’s death benefit above the Specified Amount in order to satisfy the test you elected. If the increase in the Policy’s death benefit causes an increase in the Net Amount at Risk, charges for the Cost of Insurance Charge will increase as well.
Any change is effective on the first Monthly Anniversary Day on, or after, the date of approval of the request by Lincoln Life, provided that any increase in cost is either included in a Premium Payment by you or the Policy’s Accumulation Value is sufficient to cover the increased Monthly Deduction. If the Monthly Deduction amount would increase as a result of the change, the changes will be effective on the first Monthly Anniversary Day on which the Accumulation Value is equal to, or greater than, the Monthly Deduction amount.
Death Benefit Qualification Test
You will have the opportunity to choose between the two death benefit qualification tests defined in Section 7702 of the Internal Revenue Code of 1986 as amended (“Code”), the “Cash Value Accumulation Test” and the “Guideline Premium Test”. If you do not choose a death benefit qualification test at that time, you will be deemed to have chosen the Guideline Premium Test. Once your Policy has been issued and is in force, the death benefit qualification test cannot be changed.
The Guideline Premium Test calculates the maximum amount of Premium that may be paid to provide the desired amount of insurance for an Insured of a particular age. Because payment of a Premium amount in excess of this amount will disqualify the Policy as life insurance, we will return to you any amount of such excess. The test also applies a prescribed percentage factor, to determine a minimum ratio of death benefit to Accumulation Value. A table of the applicable percentage factors will be included as a part of the Policy Specifications when you receive your Policy.
The Cash Value Accumulation Test requires that the death benefit be sufficient to prevent the Accumulation Value from ever exceeding the “Net Single Premium” required to fund the future benefits under the Policy. (The “Net Single Premium” is calculated in accordance with Section 7702 of the Code and is based on the Insured’s age, risk classification and gender.) At any time the Accumulation Value is greater than the Net Single Premium for the proposed death benefit, the death benefit will be automatically increased by multiplying the Accumulation Value by a percentage that is defined as $1,000 divided by the Net Single Premium. A table of the applicable percentage factors will be included as a part of the Policy Specifications when you receive your Policy.
The tests differ as follows:
(1) The Guideline Premium Test expressly limits the amount of Premium that you can pay into your Policy while the Cash Value Accumulation Test does not.
(2) The factors that determine the minimum death benefit relative to the Policy’s Accumulation Value are different and required increases in the minimum death benefit due to growth in Accumulation Value will generally be greater under the Cash Value Accumulation Test.
(3) If you wish to pay more Premium than is permitted under the Guideline Premium Test, for example to target a funding objective, you should consider the Cash Value Accumulation Test, because it generally permits the
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  payment of higher amounts of Premium. Please note that payment of higher Premiums could also cause your Policy to be deemed a MEC (see Tax Issues, sub-section Policies That Are MEC's in your prospectus).
(4) If your primary objective is to maximize the potential for growth in Accumulation Value, or to conserve Accumulation Value, generally the Guideline Premium Test will better serve this objective.
(5) While application of either test may require an increase in death benefit, any increase in the Cost of Insurance Charges that arises as a result of the increase in the Policy’s Net Amount at Risk will generally be less under the Guideline Premium Test than under the Cash Value Accumulation Test. This is because the required adjustment to the death benefit under the Guideline Premium Test is lower than that which would result under the Cash Value Accumulation Test.
You should consult with a qualified tax advisor before choosing the death benefits qualification test.
Please ask your registered representative for illustrations which demonstrate the impact of selection of each test on the particular policy, including any riders, which you are considering.
Payment of Death Benefit Proceeds
Proof of death should be furnished to us at our Administrative Office as soon as possible after the death of the Insured. This notification must include a certified copy of an official death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death, or any other proof satisfactory to us.
After receipt at our Administrative Office of proof of death of the Insured, the Death Benefit Proceeds will ordinarily be paid within seven days. The proceeds will be paid in a lump sum or in accordance with any settlement option selected by the Owner or the Beneficiary. Payment of the Death Benefit Proceeds may be delayed if your Policy is contested or if Separate Account Values cannot be determined.
Every state has unclaimed property laws which generally declare property, including monies owed (such as death benefits) to be abandoned if unclaimed or uncashed after a period of three to five years from the date the property is intended to be delivered or date the death benefit is due and payable. For example, if the payment of a death benefit has been triggered and, if after a thorough search, we are still unable to locate the Beneficiary of the death benefit, or the Beneficiary does not come forward to claim the death benefit in a timely manner, the death benefit will be paid to the abandoned property division or unclaimed property office of the state in which the Beneficiary or the Owner last resided, as shown on our books and records, or to our state of domicile. This “escheatment” is revocable, however, and the state is obligated to pay the death benefit (without interest) if your Beneficiary steps forward to claim it with the proper documentation. To prevent such escheatment, it is important that you contact us and update your Beneficiary designations, including addresses, if and as they change.
POLICY SURRENDERS
You may surrender your Policy at any time by sending us your Policy along with a written request for surrender. If you surrender your Policy, all coverage will automatically terminate and may not be reinstated. Consult your tax advisor to understand tax consequences of any surrender you are considering.
The Surrender Value of your Policy is the amount you can receive by surrendering the Policy. The Surrender Value is:
(i) the Net Accumulation Value (which is your Policy’s Accumulation Value less any Indebtedness) less any applicable Surrender Charge, less any accrued loan interest not yet charged, plus
(ii) the Net Accumulation Value, if any, of the Premium Reserve Rider (which is the Premium Reserve Rider Accumulation Value less any Indebtedness), and less any accrued loan interest not yet charged, minus
(iii) any Surrender Charge not covered by the Policy’s Accumulation Value (which is not deducted in (i) above).
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Policy Indebtedness includes loans under the Policy and Premium Reserve Rider Indebtedness includes loans under the Premium Reserve Rider.
If we receive a surrender or Partial Surrender request in Good Order at our Administrative Office before the close of the NYSE (normally 4 p.m., Eastern time on a business day), we will process the request using the accumulation unit value computed on that Valuation Date.  If we receive a surrender or Partial Surrender request in our Administrative Office after market close, we will process the request using the accumulation unit value computed on the next Valuation Date.  There may be circumstances under which the NYSE may close early (prior to 4 p.m., Eastern time). In such circumstances, surrenders or Partial Surrenders requested after such early market close will be processed using the accumulation unit value computed on the next Valuation Date.
Any surrender results in a withdrawal of values from the Sub-Accounts and Fixed Account and from the Premium Reserve Rider Sub-Accounts and Premium Reserve Rider Fixed Account that have values allocated to them. Any surrender from a Sub-Account or from a Premium Reserve Rider Sub-Account will result in the cancellation of Variable Accumulation Units. The cancellation of such units will be based on the Variable Accumulation Unit Value determined at the close of the Valuation Period during which the surrender is effective. Surrender proceeds will generally be paid within seven days of our receipt of your request.
At any time, you may transfer all of the Separate Account Value (and any Premium Reserve Rider Sub-Account and Premium Reserve Rider Fixed Account Value) to the Fixed Account. You may then surrender the Policy in exchange for a life insurance policy the values and benefits of which do not depend upon the performance of a separate account.  The new policy will not require the payment of further Premiums, and the amount of the death benefit will be equal to what can be purchased on a single Premium basis by the Surrender Value of the Policy you are surrendering. Please contact your registered representative for an illustration of the Policy which you could receive if you decide to exchange your Policy.
Partial Surrender
You may make a Partial Surrender, withdrawing a portion of your policy values. You must request a Partial Surrender in writing. The amount of any Partial Surrender may not exceed 90% of the Policy's Surrender Value as of the date of your request for a Partial Surrender. We may limit Partial Surrenders to the extent necessary to meet the federal tax law requirements. Each Partial Surrender must be at least $500. Partial Surrenders are subject to other limitations as described below. If you wish to make a surrender in excess of 90% of the Surrender Value of your Policy, you must specifically request a Full Surrender of your Policy. Charges for Full Surrenders will apply (see section headed “Surrender Charges” for a discussion of Surrender Charges). Your Policy’s Surrender Value equals the Policy’s Accumulation Value less any Indebtedness, less any applicable Surrender Charges. Policy Loans are Indebtedness under your Policy and will reduce the Surrender Value available to you.
Partial Surrenders will reduce the Accumulation Value and may reduce the Specified Amount. The amount of the Partial Surrender will be withdrawn first from the Premium Reserve Rider Sub-Accounts and Premium Reserve Rider Fixed Account in proportion to their values, and when such values are reduced to zero then from the Sub-Accounts and Fixed Account in proportion to their values. (See discussion in section headed “Riders—Premium Reserve Rider” for further details.)
The effect of Partial Surrenders on your Policy depends on the death benefit option in effect at the time of the Partial Surrender. If Death Benefit Option 1 has been elected, a Partial Surrender will reduce the Specified Amount as shown in the table below. If Death Benefit Option 2 has been elected, a Partial Surrender will reduce the Accumulation Value, but not the Specified Amount.
Partial Surrenders are deducted when the No-Lapse Value and the Reset Account Value of the No-Lapse Enhancement Rider are calculated. (See discussion in section headed “Riders – No-Lapse Enhancement Rider” for a detailed discussion of how benefits of this rider may be impacted by reductions of these values.)
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Death Benefit
Option in Effect 		Impact of Partial Surrender
1 Will reduce the Accumulation Value and the Specified Amount will be reduced by the greater of:
a. zero; or
b. an amount equal to the amount of the Partial Surrender minus the result of [(1) minus (2)] divided by (3) where:
(1) is an amount equal to the Accumulation Value on the Valuation Day immediately prior to the Partial Surrender multiplied by the applicable percentage shown in the Corridor Percentages Table in the Policy Specifications;
(2) is the Specified Amount immediately prior to the Partial Surrender; and
(3) is the applicable percentage shown in the Corridor Percentages Table in the Policy Specifications.
2 Will reduce the Accumulation Value, but not the Specified Amount.
Partial Surrender proceeds will generally be paid within 7 days of our receipt of your request.
POLICY LOANS
You may borrow against the Surrender Value of your Policy and the Premium Reserve Rider, if you have allocated Premiums to the Premium Reserve Rider. The loan may be for any amount up to 100% of the current Surrender Value. However, we reserve the right to limit the amount of your loan so that total Indebtedness under the Policy (including Premium Reserve Rider, if any, in Policy Years 1-10) will not exceed 90% of an amount equal to the Accumulation Value less Surrender Charge. A loan agreement must be executed and your Policy assigned to us free of any other assignments. Outstanding Policy Loans and accrued interest reduce the Policy’s death benefit and Accumulation Value.
The amount of your loan will be withdrawn first from Accumulation Values, if any, of the Premium Reserve Rider Sub-Accounts and Premium Reserve Rider Fixed Account and then from the Policy’s Sub-Accounts and Fixed Account in proportion to their values. The Loan Account is the account in which Indebtedness (outstanding loans and interest) accrues once it is transferred out of the Sub-Accounts and Fixed Account. Amounts transferred to the Loan Account of both the Policy and the Premium Reserve Rider do not participate in the performance of the Sub-Accounts or the Fixed Account. Loans, therefore, can affect the Policy’s death benefit and Accumulation Value whether or not they are repaid. Interest on Policy Loans (from both the Premium Reserve Rider and the Policy) accrues at an effective annual rate of 4% in years 1-10 and 3% thereafter, and is payable once a year in arrears on each Policy Anniversary, or earlier upon Full Surrender or other payment of proceeds of your Policy. Policy values in the Loan Account are part of the Company's General Account.
The amount of your loan, plus any accrued but unpaid interest, is added to your outstanding Policy Loan balance. Unless paid in advance, loan interest due will be transferred proportionately from the Sub-Accounts and Fixed Account. This amount will be treated as an additional Policy Loan, and added to the Loan Account Value.
Lincoln Life credits interest to the Loan Account Value (of both the Premium Reserve Rider and the Policy) at a rate of 3% in all years so the net cost of your Policy Loan is 1% in years 1-10 and 0% thereafter. Such interest credited is transferred to the Policy in accordance with your Net Premium Payment allocation instructions on file with us at the time the interest is credited.
Your outstanding loan balance may be repaid at any time during the lifetime of the Insured. The Loan Account will be reduced by the amount of any loan repayment. Any repayment, other than loan interest, will be allocated to the Sub-Accounts and Fixed Account in the same proportion in which Net Premium Payments are currently allocated, unless you instruct otherwise. When making a payment to us, we will apply your payment as Premiums and not loan repayments unless you specifically instruct us otherwise.
If at any time the total Indebtedness against your Policy, including interest accrued but not due, equals or exceeds the then current Accumulation Value less Surrender Charges, the Policy will terminate subject to the conditions in
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the Grace Period provision, unless the provisions of the No-Lapse Enhancement Rider are preventing policy termination. If your Policy lapses while a loan is outstanding, the borrowed amount may be taxable to you to the extent your Policy’s value exceeds your basis in the Policy.
The amount of a benefit paid under the Basic Accelerated Benefits Riders (see section headed “Riders – Basic Accelerated Benefits Riders”) is a lien against the Policy and is considered as a Policy Loan. Therefore, an amount equal to the Accelerated Benefit paid will be withdrawn first from Accumulation Values, if any, of the Premium Reserve Rider Sub-Accounts and the Premium Reserve Rider Fixed Account and then from policy Sub-Accounts and Fixed Account in proportion to their values. That amount is transferred to the Loan Account. Interest will be credited by the Company as described above. To the extent that the Accelerated Benefit paid does not exceed the Surrender Value, interest will be charged in the same manner as described above. However, to the extent that the Accelerated Benefit exceeds the Surrender Value at the time it is paid, interest charged during each Policy Year is determined annually at least 30 days in advance of the beginning of a Policy Year and will not exceed the higher of (i) the published monthly average of the Moody’s Corporate Bond Yield Average - Monthly Average Corporates (as published by Moody’s Investors Service, Inc. for the calendar month ending 2 months before the beginning of the Policy Year), and (ii) the rate used to compute the Accumulation Value of the Fixed Account plus 1%. Please ask your registered representative for additional details.
Please note that there may be adverse tax consequences in the event that your Policy lapses with an outstanding loan balance.
LAPSE AND REINSTATEMENT
If at any time:
1) the Net Accumulation Value of the Policy is insufficient to pay the Monthly Deduction, and
2) the provisions of the No-Lapse Enhancement Rider are not preventing termination of the Policy, then all coverage will terminate. This is referred to as “Policy Lapse”.
The Net Accumulation Value may be insufficient:
1) because it has been exhausted by earlier deductions;
2) as a result of poor investment performance;
3) due to Partial Surrenders;
4) due to Indebtedness for Policy Loans; or
5) because of a combination of any of these factors.
If we have not received your Premium Payment (or payment of Indebtedness on Policy Loans) necessary so that the Net Accumulation Value of your Policy is sufficient to pay the Monthly Deduction amount on a Monthly Anniversary Day, we will send a written notice to you, or any assignee of record. The notice will state the amount of the Premium Payment (or payment of Indebtedness on Policy Loans) that must be paid to avoid termination of your Policy.
If the amount stated in the notice is not paid to us within the Grace Period and any Premium Reserve Accumulation Value (less any Premium Reserve Rider transfer load) automatically transferred at the end of the Grace Period is also insufficient to keep the Policy in force, then the Policy will terminate. The Grace Period is the later of (a) 31 days after the notice was mailed, and (b) 61 days after the Monthly Anniversary Day on which the Monthly Deduction could not be paid. If the Insured dies during the Grace Period, we will deduct any charges due to us from any death benefit that may be payable under the terms of the Policy.
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No-Lapse Protection
Your Policy includes the No-Lapse Enhancement Rider. This rider provides you with additional protection to prevent a lapse in your Policy. If you meet the requirements of this rider, your Policy will not lapse, even if the Net Accumulation Value under the Policy is insufficient to cover the accumulated, if any, and current Monthly Deductions. It is a limited benefit in that it does not provide any additional death benefit amount or any increase in your policy value. Also, it does not provide any type of market performance guarantee.
Your Policy may also include the Overloan Protection Rider. If this rider is issued with your Policy, you meet the requirements as described in this rider and have elected this benefit, your Policy will not lapse solely based on Indebtedness exceeding the Accumulation Value less the Surrender Charges.
Finally, your Policy includes the Premium Reserve Rider (in states where available). To the extent you have allocated Premium Payments to this rider, any rider Accumulation Value may prevent lapse of your Policy. If your Policy’s Net Accumulation Value is insufficient to cover the Monthly Deductions, and the provisions of the No-Lapse Enhancement Rider are not preventing policy termination, we will send a written notice to you which will state the amount of the Premium Payment (or payment of Indebtedness on Policy Loans) that must be paid to avoid termination of your Policy. If the amount in the notice is not paid to us within the Grace Period, we will automatically transfer to your Policy any Premium Reserve Rider Accumulation Value (less any Premium Reserve Rider transfer load) on the day the Grace Period ends. If after such transfer, your Policy’s Net Accumulation Value is sufficient to cover the Monthly Deductions then due, your Policy will not lapse.
Reinstatement of a Lapsed Policy
If your Policy has lapsed and the Insured has not died since lapse, you may reinstate your Policy within five years of the Policy Lapse date, provided:
1) it has not been surrendered;
2) there is an application for reinstatement in writing;
3) satisfactory evidence of insurability is furnished to us and we agree to accept the risk for the Insured;
4) we receive a payment sufficient to keep your Policy in force for at least two months; and
5) any accrued loan interest is paid and any remaining Indebtedness is either paid or reinstated.
The reinstated Policy will be effective as of the Monthly Anniversary Day on or next following the date on which we approve your application for reinstatement. Surrender Charges will be based on the duration from the original Policy Date as though the Policy never lapsed. Your Accumulation Value at reinstatement will be the Net Premium Payment then made less all Monthly Deductions due. If a Policy Loan is being reinstated, the Policy's Accumulation Value at reinstatement will be the Accumulation Value on the date the Policy lapsed plus the Net Premium Payment made less all Monthly Deductions due.
TAX ISSUES
The federal income tax treatment of your Policy is complex and sometimes uncertain. The federal income tax rules may vary with your particular circumstances. This discussion does not include all the federal income tax rules that may affect you and your Policy and is not intended as tax advice. This discussion also does not address other federal tax consequences, such as estate, gift and generation-skipping transfer taxes, or any state and local income, estate and inheritance tax consequences, associated with the Policy. You should always consult a tax advisor about the application of tax rules to your individual situation.
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Taxation of Life Insurance Contracts in General
Tax Status of the Policy.  Section 7702 of the Internal Revenue Code of 1986 as amended (“Code”) establishes a statutory definition of life insurance for federal tax purposes. We believe that the Policy will meet the statutory definition of life insurance under the Guideline Premium Test, which provides for a maximum amount of Premium paid depending upon the Insured's age, gender, and risk classification in relation to the death benefit and a minimum amount of death benefit in relation to policy value. As a result, the death benefit payable will generally be excludable from the Beneficiary’s gross income, and interest and other income credited will not be taxable unless certain withdrawals are made (or are deemed to be made) from the Policy prior to the death of the Insured, as discussed below. This tax treatment will only apply, however, if (1) the investments of the Separate Account are “adequately diversified” in accordance with U.S. Treasury Department (“Treasury”) regulations, and (2) we, rather than you, are considered the Owner of the assets of the Separate Account for federal income tax purposes.
The Code also recognizes a Cash Value Accumulation Test, which does not limit Premiums paid, but requires the policy to maintain a minimum ratio between the death benefit and the Policy's Accumulation Value, depending on the Insured’s age, gender, and risk classification.  We will only apply this test to the Policy if you have advised us to do so at the time you applied for the Policy.
Investments in the Separate Account Must be Diversified.  For your Policy to be treated as a life insurance contract for federal income tax purposes, the investments of the Separate Account must be “adequately diversified.” Treasury regulations define standards for determining whether the investments of the Separate Account are adequately diversified. If the Separate Account fails to comply with these diversification standards, you could be required to pay tax currently on the excess of the policy value over the Premium Payments. Although we do not control the investments of the Sub-Accounts, we expect that the Sub-Accounts will comply with the Treasury regulations so that the Separate Account will be considered “adequately diversified.”
Restriction on Investment Options.  Federal income tax law limits your right to choose particular investments for the Policy. Because the IRS has issued little guidance specifying those limits, the limits are uncertain and your right to allocate policy values among the Sub-Accounts may exceed those limits. If so, you would be treated as the Owner of the assets of the Separate Account and thus subject to current taxation on the income and gains from those assets. We do not know what limits may be set by the IRS in any guidance that it may issue and whether any such limits will apply to existing Policies. We reserve the right to modify the Policy without your consent to try to prevent the tax law from considering you as the Owner of the assets of the Separate Account.
No Guarantees Regarding Tax Treatment.  We make no guarantee regarding the tax treatment of any life insurance policy or of any transaction involving a life insurance policy. However, the remainder of this discussion assumes that your Policy will be treated as a life insurance contract for federal income tax purposes and that the tax law will not impose tax on any increase in your policy value until there is a distribution from your Policy.
Tax Treatment of Life Insurance Death Benefit Proceeds.  In general, the amount of the death benefit payable from a life insurance policy because of the death of the Insured is excludable from gross income. Certain transfers of the Policy for valuable consideration, however, may result in a portion of the death benefit being taxable. If the death benefit is not received in a lump sum and is, instead, applied to one of the settlement options, payments generally will be prorated between amounts attributable to the death benefit, which will be excludable from the Beneficiary’s income, and amounts attributable to interest (accruing after the Insured’s death) which will be includible in the Beneficiary’s income.
Tax Deferral During Accumulation Period.  Under existing provisions of the Code, except as described below, any increase in your policy value is generally not taxable to you unless amounts are received (or are deemed to be received) from the Policy prior to the Insured’s death. If there is a total withdrawal from the Policy, the Surrender Value will be includible in your income to the extent the amount received exceeds the “investment in the contract.” (If there is any debt at the time of a total withdrawal, such debt will be treated as an amount received by the Owner.) The “investment in the contract” generally is the aggregate amount of Premium Payments and other consideration paid for the Policy, less the aggregate amount received previously to the extent such amounts received were
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excludable from gross income. Whether Partial Surrenders (or other amounts deemed to be distributed) from the Policy constitute income to you depends, in part, upon whether the Policy is considered a MEC for federal income tax purposes.
Policies That Are MECs
Characterization of a Policy as a Modified Endowment Contract (“MEC”).  A MEC is a life insurance policy that meets the requirements of Section 7702 and fails the “7-Pay Test” of 7702A of the Code. Your Policy will be classified as a MEC if Premiums are paid more rapidly than allowed by the “7-Pay Test,” a test that compares actual paid Premium in the first seven years against a pre-determined Premium amount as defined in 7702A of the Code. Your Policy may also be classified as a MEC if it is received in exchange for another policy that is a MEC. In addition, even if your Policy initially is not a MEC, it may in certain circumstances become a MEC. The circumstances under which your Policy may become a MEC include a material change to your Policy (within the meaning of tax law), a Policy Lapse and reinstatement more than 90 days following the lapse, or a withdrawal or a reduction in the death benefit during the first seven Policy Years.
Tax Treatment of Withdrawals, Loans, Assignments and Pledges under MECs.  If your Policy is a MEC, withdrawals from your Policy will be treated first as withdrawals of income and then as a recovery of Premium Payments. Thus, withdrawals will be includible in income to the extent the policy value exceeds the investment in your Policy. The Code treats any amount received as a loan under a policy, and any assignment or pledge (or agreement to assign or pledge) of any portion of your policy value, and any monthly charge for additional benefits that are not qualified additional benefits, as a withdrawal of such amount or portion. The investment in your Policy is increased by the amount includible in income with respect to such assignment, pledge, or loan.
Additional Taxes Payable on Withdrawals.  A 10% additional tax may be imposed on any withdrawal (or any deemed distribution) from your MEC which you must include in your gross income. The 10% additional tax does not apply if one of several exceptions exists. These exceptions include withdrawals or surrenders that: you receive on or after you reach age 59 1/2, you receive because you became disabled (as defined in the tax law), or you receive as a series of substantially equal periodic payments for your life (or life expectancy). None of the additional tax exceptions apply to a taxpayer who is not an individual.
Special Rules if You Own More than One MEC.  In certain circumstances, you must combine some or all of the life insurance contracts which are MECs that you own in order to determine the amount of withdrawal (including a deemed withdrawal) that you must include in income. For example, if you purchase two or more MECs from the same life insurance company (or its affiliates) during any calendar year, the Code treats all such policies as one contract. Treating two or more policies as one contract could affect the amount of a withdrawal (or a deemed withdrawal) that you must include in income and the amount that might be subject to the 10% additional tax described above.
Policies That Are Not MECs
Tax Treatment of Withdrawals.  If your Policy is not a MEC, the amount of any withdrawal from the Policy will generally be treated first as a non-taxable recovery of Premium Payments and then as income from the Policy. Thus, a withdrawal from your Policy that is not a MEC will not be includible in income except to the extent it exceeds the investment in the Policy immediately before the withdrawal.
Certain Distributions Required by the Tax Law in the First 15 Policy Years.  Section 7702 places limitations on the amount of Premium Payments that may be made and the policy values that can accumulate relative to the death benefit. Where cash distributions are required under Section 7702 in connection with a reduction in benefits during the first 15 years after the Policy is issued (or if withdrawals are made in anticipation of a reduction in benefits, within the meaning of the tax law, during this period), some or all of such amounts may be includible in income. A reduction in benefits may occur when the face amount is decreased, withdrawals are made, and in certain other instances.
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Tax Treatment of Loans.  If your Policy is not a MEC, a loan you receive under the Policy is generally treated as your Indebtedness. As a result, no part of any loan constitutes income to you so long as the Policy remains in force. Nevertheless, in those situations where the interest rate credited to the Loan Account equals the interest rate charged to you for the loan, it is possible that some or all of the loan proceeds may be includible in your income. If your Policy lapses (or if all policy value is withdrawn or exchanged to a new policy in a tax-free policy exchange) when a loan is outstanding, the amount of the loan outstanding will be treated as withdrawal proceeds for purposes of determining whether any amounts are includible in your income. Before purchasing a Policy that includes the Overloan Protection Rider, you should note that if you elect to exercise the Overloan Protection Rider at any time during your Policy's life, such exercise could be deemed to result in a taxable distribution of the outstanding loan balance. You should consult a tax advisor prior to exercising the Overloan Protection Rider to determine the tax consequences of such exercise.
Other Considerations
Insured Lives Past Age 121.  If the Insured survives beyond the end of the mortality table, which is used to measure charges for the Policy and which ends at age 121, and an option 1 death benefit is in effect, in some circumstances the policy value may equal or exceed the Specified Amount level death benefit. Thus, the policy value may equal the Death Benefit Proceeds. In such a case, we believe your Policy will continue to qualify as life insurance for federal tax purposes. However, there is some uncertainty regarding this treatment, and it is possible that you would be viewed as constructively receiving the Accumulation Value in the year the Insured attains age 121.
Compliance with the Tax Law.  We believe that the maximum amount of Premium Payments we have determined for the Policies will comply with the federal tax definition of life insurance. We will monitor the amount of Premium Payments.
If at any time you pay a Premium that would exceed the amount allowable to permit the Policy to continue to qualify as life insurance, we will either refund the excess Premium to you within 60 days of the end of the Policy Year or, if the excess Premium exceeds $250, offer you the alternative of instructing us to hold the excess Premium in a premium deposit fund and apply it to the Policy later in accordance with your instructions. We will credit interest at an annual rate that we may declare from time to time on advance premium deposit funds.
The Policy will be allowed to become a MEC under the Code only with your consent. If you pay a Premium that would cause your Policy to become a MEC and you do not consent to MEC status for your Policy, we will either refund the excess Premium to you within 60 days of the end of the Policy Year or offer you the opportunity to apply for an increase in Death Benefit. If the excess Premium exceeds $250, we will offer you the additional alternative of instructing us to hold the excess in a premium deposit fund and apply it to the Policy on the next, succeeding Policy Anniversary when the Premium no longer causes your Policy to become a MEC in accordance with your Premium allocation instructions on file at the time the Premium is applied.
Any interest and other earnings on funds in a premium deposit fund will be includible in income subject to tax as required by law.
Disallowance of Interest Deductions.  Interest on Policy Loan Indebtedness is not deductible.
If an entity (such as a corporation or a trust, not an individual) purchases a policy or is the Beneficiary of a policy issued after June 8, 1997, a portion of the interest on Indebtedness unrelated to the Policy may not be deductible by the entity. However, this rule does not apply to a policy owned by an entity engaged in a trade or business which covers the life of one individual who is either (i) a 20% Owner of the entity, or (ii) an officer, director, or employee of the trade or business, at the time first covered by the Policy. This rule also does not apply to a policy owned by an entity engaged in a trade or business which covers the joint lives of the 20% Owner of the entity and the Owner’s spouse at the time first covered by the Policy.
Employer-Owned Contracts. In the case of an “employer-owned life insurance contract” as defined in the tax law that is issued (or deemed to be issued) after August 17, 2006, the portion of the death benefit excludable from gross income generally will be limited to the premiums paid for the contract. However, this limitation on the death
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benefit exclusion will not apply if certain notice and consent requirements are satisfied and one of several exceptions is satisfied. These exceptions include circumstances in which the death benefit is payable to certain heirs of the Insured to acquire an ownership interest in a business, or where the contract covers the life of a director or an Insured who is “highly compensated” within the meaning of the tax law. These rules, including the definition of an employer-owned life insurance contract, are complex, and you should consult with your advisors for guidance as to their application.
Federal Income Tax Withholding.  We will withhold and remit to the IRS a part of the taxable portion of each distribution made under your Policy unless you notify us in writing at or before the time of the distribution that tax is not to be withheld. Regardless of whether you request that no taxes be withheld or whether the Company withholds a sufficient amount of taxes, you will be responsible for the payment of any taxes and early distribution penalties that may be due on the amounts received. You may also be required to pay penalties under the estimated tax rules, if your withholding and estimated tax payments are insufficient to satisfy your total tax liability.
Unearned Income Medicare Contribution. Congress enacted the “Unearned Income Medicare Contribution” as a part of the Health Care and Education Reconciliation Act of 2010. This new tax, which affects individuals whose modified adjusted gross income exceeds certain thresholds, is a 3.8% tax on the lesser of (i) the individual’s “unearned income,” or (ii) the dollar amount by which the individual’s modified adjusted gross income exceeds the applicable threshold. Unearned income includes the taxable portion of any annuitized distributions that you take from your Policy, but does not apply to any lump sum distribution, Full Surrender, or other non-annuitized distribution. The tax is effective for tax years beginning after December 31, 2012. Please consult your tax advisor to determine whether any distributions you take from your Policy are subject to this tax.
Changes in the Policy or Changes in the Law.  Changing the Owner, exchanging your Policy, and other changes under your Policy may have tax consequences (in addition to those discussed herein) depending on the circumstances of such change. The above discussion is based on the Code, IRS regulations, and interpretations existing on the date of this prospectus. However, Congress, the IRS, and the courts may modify these authorities, sometimes retroactively.
Reportable Policy Sales. Section 6050Y, added to the Code on December 22, 2017, imposes information reporting requirements on the acquirer and issuer in the case of the acquisition, or notice of the acquisition, of an existing life insurance contract in a reportable policy sale. In addition, there is a new reporting requirement on each person who makes a payment of reportable death benefits. A reportable policy sale means the acquisition of an interest in a life insurance contract, directly or indirectly, where the acquirer has no substantial family, business, or financial relationship with the insured apart from the acquirer’s interest in such life insurance contract. A reportable death benefit means the amount paid by reason of the death of the insured under a life insurance contract that has been transferred in a reportable policy sale.
The IRS and Treasury issued Final Regulations under section 6050Y in 2019. Under the Regulations, compliance with 6050Y is required for any reportable policy sale that occurred after December 31, 2018, and any reportable death benefits paid after December 31, 2018.
Fair Market Value of Your Policy
It is sometimes necessary for tax and other reasons to determine the “value” of your Policy. The value can be measured differently for different purposes. It is not necessarily the same as the Accumulation Value or the Net Accumulation Value. You, as the Owner, should consult with your advisors for guidance as to the appropriate methodology for determining the fair market value of your Policy.
Tax Status of Lincoln Life
Under existing federal income tax laws, the Company does not pay tax on investment income and realized capital gains of the Separate Account. However, the Company does expect, to the extent permitted under Federal tax law, to claim the benefit of the foreign tax credit as the Owner of the assets of the Separate Account. Lincoln Life does not
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expect that it will incur any federal income tax liability on the income and gains earned by the Separate Account. We, therefore, do not impose a charge for federal income taxes. If federal income tax law changes and we must pay tax on some or all of the income and gains earned by the Separate Account, we may impose a charge against the Separate Account to pay the taxes.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
In accordance with money laundering laws and federal economic sanction policy, the Company may be required in a given instance to reject a Premium Payment and/or freeze an Owner’s account. This means we could refuse to honor requests for transfers, withdrawals, surrenders, loans, assignments, Beneficiary changes or death benefit payments. Once frozen, monies would be moved from the Separate Account to a segregated interest-bearing account maintained for the Owner, and held in that account until instructions are received from the appropriate regulator. We also may be required to provide additional information about an Owner's account to government regulators.
Also, we may postpone payment whenever: (a) the New York Stock Exchange is closed, (b) trading on the New York Stock Exchange is restricted by the SEC, (c) the SEC determines if an emergency exists as a result of which disposal of securities held in the Variable Account is not reasonably practicable or is not reasonably practicable to determine the value of the Variable Account's net assets (d) if, pursuant to SEC rules, an underlying money market fund suspends payment of redemption proceeds in connection with a liquidation of the fund, we may delay payment of any transfer, Partial Surrender, Full Surrender, or death benefit from a money market Sub-Account until the fund is liquidated, or (e) during any other period when the SEC, by order, so permits for the protection of the Owner.
LEGAL PROCEEDINGS
In the ordinary course of its business and otherwise, the Company and its subsidiaries or its separate accounts and Principal Underwriter may become or are involved in various pending or threatened regulatory or legal proceedings, including purported class actions, arising from the conduct of its business. In some instances, the proceedings include claims for unspecified or substantial punitive damages and similar types of relief in addition to amounts for alleged contractual liability or requests for equitable relief.
After consultation with legal counsel and a review of available facts, it is management’s opinion that the proceedings, after consideration of any reserves and rights to indemnification, ultimately will be resolved without materially affecting the consolidated financial position of the Company and its subsidiaries, or the financial position of its separate accounts or Principal Underwriter. However, given the large and indeterminate amounts sought in certain of these proceedings and the inherent difficulty in predicting the outcome of such proceedings, it is reasonably possible that an adverse outcome in certain matters could be material to the Company's operating results for any particular reporting period. Please refer to the Statement of Additional Information for possible additional information regarding legal proceedings.
FINANCIAL STATEMENTS
The December 31, 2019 financial statements of the Separate Account and the December 31, 2019 consolidated financial statements of the Company are located in the SAI.
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CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Additional information about Lincoln Life, the Separate Account and your Policy may be found in the Statement of Additional Information (SAI).
Contents of the SAI
GENERAL INFORMATION  
Lincoln Life  
Capital Markets  
Registration Statement  
Changes of Investment Policy  
Principal Underwriter  
Disaster Plan  
Advertising & Ratings  
Unclaimed Property  
SERVICES  
Independent Registered Public Accounting Firm  
Accounting Services  
Checkbook Service for Disbursements  
   
POLICY INFORMATION  
Corporate and Group Purchasers and Case Exceptions  
Assignment  
Transfer of Ownership  
Beneficiary  
Right to Convert Contract  
Change of Plan  
Settlement Options  
Deferment of Payments  
Incontestability  
Misstatement of Age or Gender  
Suicide  
PERFORMANCE DATA  
FINANCIAL STATEMENTS  
Separate Account  
Company  
 
The SAI may be obtained, at no cost to you, by contacting our Administrative Office at the address or telephone number listed on the first page of this prospectus. Your SAI will be sent to you via first class mail within three business days of your request. You may make inquiries about your Policy to this same address and telephone number.
You may request personalized illustrations of death benefits and policy values from your registered representative without charge.
You may review or copy this prospectus, the SAI, or obtain other information about the Separate Account at the Securities and Exchange Commission’s Public Reference Room. You should contact the SEC at (202) 551-8090 to obtain information regarding days and hours the reference room is open. You may also view information at the SEC’s Internet site, http://www.sec.gov. Copies of information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section, Securities and Exchange Commission, 100 F Street, NE, Washington, D.C. 20549-0102.
This prospectus, the Underlying Funds' prospectuses, and the SAI are also available on our internet site, www.LincolnFinancial.com
Lincoln Life Flexible Premium Variable Life Account M
1933 Act Registration No. 333-181796
1940 Act Registration No. 811-08557
End of Prospectus
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GLOSSARY OF TERMS
The following terms may appear in your prospectus and are defined below:
7-Pay Test—A test that compares actual paid Premium in the first seven years against a pre-determined Premium amount as defined in 7702A of the Code.
1933 Act—The Securities Act of 1933, as amended.
1940 Act—The Investment Company Act of 1940, as amended.
Accumulation Value (Total Account Value)—An amount equal to the sum of the Fixed Account Value, the Separate Account Value, and the Loan Account Value.
Administrative Fee—The fee which compensates the Company for administrative expenses associated with policy issue and ongoing policy maintenance including Premium billing and collection, policy value calculation, confirmations, periodic reports and other similar matters.
Attained Age—An Insured’s Issue Age (shown in the Policy Specifications) plus the number of completed Policy Years.
Beneficiary—The person designated to receive the Death Benefit Proceeds.
Cash Value Accumulation Test—A provision of the Code that requires that the death benefit be sufficient to prevent the Accumulation Value from ever exceeding the net single Premium required to fund the future benefits under the Policy.
Chronically Ill—The Insured has been certified within the preceding 12 months as being unable to perform without substantial assistance at least two activities of daily living for at least 90 consecutive days (i.e. bathing, continence, dressing, eating, toileting and transferring); or requires substantial supervision from another individual, and pursuant to a Licensed Health Care Practitioner’s Plan of Care, is in need of certain services (i.e. diagnostic, preventive, therapeutic, curing, treating mitigating and rehabilitative) for the remainder of the Insured’s life.
Code—Internal Revenue Code of 1986, as amended.
Cost of Insurance Charge—This charge is the portion of the Monthly Deduction designed to compensate the Company for the anticipated cost of paying death benefits in excess of the policy value. It is determined
by multiplying the Policy's Net Amount at Risk by the Cost of Insurance Rate.
Death Benefit Proceeds—The amount payable to the Beneficiary upon the death of the Insured, based upon the death benefit option in effect. Loans, loan interest, Partial Surrenders, and overdue charges, if any, are deducted from the Death Benefit Proceeds prior to payment. Riders may impact the amount payable as Death Benefit Proceeds in your Policy.
Fixed Account—An allocation option under the Policy, which is a part of our General Account, to which we credit a guaranteed minimum interest rate.
Fixed Account Value—An amount equal to the value of amounts allocated or transferred to the Fixed Account, plus interest credited, and less any deductions or Partial Surrenders.
Full Surrender—The withdrawal of all policy values.
Good Order—The actual receipt of the requested transaction in writing (or other form subject to our consent) along with all information and supporting legal documentation necessary to effect the transaction.
Grace Period—The period during which you may make Premium Payments (or repay Indebtedness) to prevent Policy Lapse. That period is the later of (a) 31 days after the notice was mailed, and (b) 61 days after the Monthly Anniversary Day on which the Policy enters the Grace Period.
Guideline Premium Test—A provision of the Code under which the maximum amount of Premium paid in relation to the death benefit and a minimum amount of death benefit in relation to policy value is determined.
Indebtedness—The sum of all outstanding loans and accrued interest.
Insured—The person on whose life the Policy is issued.
Lapse Notice—Written notice to you (or any assignee of record) that your Policy will terminate unless we receive payment of Premiums (or payment of Indebtedness on Policy Loans). The notice will state the amount of Premium Payment (or payment of
 
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Indebtedness on Policy Loans) that must be paid to avoid termination of your Policy.
Loan Account (Loan Collateral Account)—The account in which policy Indebtedness accrues once it is transferred out of the Sub-Accounts and/or the Fixed Account. The Loan Account is part of our General Account.
Loan Account Value—An amount equal to any outstanding Policy Loans, including any interest charged on the loans. This amount is held in the Company's General Account.
Market Timing Procedures—Policies and procedures from time to time adopted by us as an effort to protect our Owners and the funds from potentially harmful trading activity.
Modified Endowment Contract (MEC)—A life insurance policy that meets the requirements of Section 7702 and fails the “7-Pay Test” of 7702A of the Code. If the policy is a MEC, withdrawals from your Policy will be treated first as withdrawals of income and then as a recovery of Premium Payments.
Monthly Anniversary Day—The Policy Date and the same day of each month thereafter. If the day that would otherwise be a Monthly Anniversary Day is non-existent for that month, or is not a Valuation Day, then the Monthly Anniversary Day is the next Valuation Day. The Monthly Deductions are made on the Monthly Anniversary Day.
Monthly Deduction—The amount of the monthly charges for the Cost of Insurance Charge, the Administrative Fee, and charges for riders to your Policy.
Net Accumulation Value—An amount equal to the Accumulation Value less the Loan Account Value. 
Net Amount at Risk—The death benefit minus the greater of zero or the Accumulation Value. The Net Amount at Risk may vary with investment performance, Premium Payment patterns, and charges.
Net Premium Payment—An amount equal to the Premium Payment, minus the Premium Load.
Owner—The person or entity designated as Owner in the Policy Specifications unless a new Owner is thereafter named, and we receive written notification of such change.
Partial Surrender—A withdrawal of a portion of your policy values.
Planned Premium—The amount of periodic Premium (as shown in the Policy Specifications) you have chosen to pay the Company on a scheduled basis. This is the amount for which we send a Premium reminder notice.
Policy Anniversary—The same date (month and day) each Policy Year equal to the Policy Date, or the next Valuation Day if the Policy Anniversary is not a Valuation Day or is nonexistent for the year.
Policy Date—The date (shown on the Policy Specification pages) on which life insurance begins if the necessary Premium has been paid.
Policy Loan—The amount you have borrowed against the Surrender Value of your Policy.
Policy Loan Interest—The charge made by the Company to cover the cost of your borrowing against your Policy.
Policy Lapse—The day on which coverage under the Policy ends as described in the Grace Period.
Policy Month— The period from one Monthly Anniversary Day up to, but not including, the next Monthly Anniversary Day.
Policy Specifications— The pages of the Policy which show your benefits, Premium, costs, and other policy information.
Policy Year—Twelve month period(s) beginning on the Policy Date and extending up to but not including the next Policy Anniversary.
Premium (Premium Payment)—The amount paid to us for a life insurance policy.
Premium Load—A deduction from each Premium Payment which covers certain policy-related state and federal tax liabilities as well as a portion of the sales expenses incurred by the Company.
Reduction in Specified Amount—A decrease in the Specified Amount of your Policy.
Right to Examine Period—The period during which the Policy may be returned to us for cancellation.
SAI—Statement of Additional Information.
SEC—The Securities and Exchange Commission.
Separate Account Value (Variable Accumulation Value)—An amount equal to the values in the Sub-Accounts.
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Specified Amount (Initial Specified Amount)—The amount chosen by you which is used to determine the amount of death benefit and the amount of rider benefits, if any. The Specified Amount chosen at the time of issue is the “Initial Specified Amount”. The Specified Amount may be increased or decreased after issue if allowed by and described in the Policy.
Sub-Account(s)—Divisions of the Separate Account created by the Company to which you may allocate your Net Premium Payments and among which you may transfer Separate Account Values.
Surrender Charge—The charge we may make if you request a Full Surrender of your Policy or request a Reduction in Specified Amount. The Surrender Charge is in part a deferred sales charge and in part a recovery of certain first year administrative costs. A schedule of Surrender Charges is included in each Policy.
Surrender Value—An amount equal to the Net Accumulation Value less any applicable Surrender Charge, less any accrued loan interest not yet charged.
Terminally Ill—An illness or physical condition which results in a life expectancy of 12 months or less.
Underlying Fund—The mutual fund the shares of which are purchased for all amounts you allocate or transfer to a Sub-Account.
Valuation Day—Each day on which the New York Stock Exchange is open and trading is unrestricted.
Valuation Period—The time between Valuation Days.
Variable Accumulation Unit—A unit of measure used in the calculation of the value of each Sub-Account.
66
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Dated May 1, 2020
Relating to Prospectus Dated May 1, 2020 for
Lincoln VULONE2012 product
Lincoln Life Flexible Premium Variable Life Account M, Registrant
The Lincoln National Life Insurance Company, Depositor
The SAI is not a prospectus. The SAI provides you with additional information about Lincoln Life, the Separate Account and your Policy. It should be read in conjunction with the product prospectus.
A copy of the product prospectus may be obtained without charge by writing to our Administrative Office:
Customer Service Center
100 N. Greene Street
Greensboro, NC 27401
or by telephoning (800) 487-1485, and requesting a copy of the Lincoln VULONE2012 product prospectus.
TABLE OF CONTENTS OF THE SAI
 
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GENERAL INFORMATION
Lincoln Life
The Lincoln National Life Insurance Company (“Lincoln Life”, the “Company”, “we”, “us”, “our”) (EIN 35-0472300), organized in 1905, is an Indiana-domiciled insurance company, engaged primarily in the direct issuance of life insurance policies and annuities. Lincoln Life is wholly owned by Lincoln National Corporation (LNC), a publicly held insurance and financial services holding company incorporated in Indiana. Lincoln Life is obligated to pay all amounts promised to Owners under the policies. Death Benefit Proceeds and rider benefits, to the extent those proceeds and benefits exceed the then current Accumulation Value of your Policy, are backed by the claims-paying ability of Lincoln Life.
Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. Through its affiliates, Lincoln Financial Group offers annuities, life, group life and disability insurance, 401(k) and 403(b) plans, and comprehensive financial planning and advisory services.
Lincoln Life is subject to the laws of Indiana governing insurance companies and to regulation by the Indiana Department of Insurance (“Insurance Department”). An annual statement in a prescribed form is filed with the Insurance Department each year covering the operation of the Company for the preceding year along with the Company’s financial condition as of the end of that year. Regulation by the Insurance Department includes periodic examination to determine our contract liabilities and reserves. Our books and accounts are subject to review by the Insurance Department at all times and a full examination of our operations is conducted periodically by the Insurance Department. Among the laws and regulations applicable to us as an insurance company are those which regulate the investments we can make with assets held in our General Account. In general, those laws and regulations determine the amount and type of investments which we can make with General Account assets. Such regulation does not, however, involve any supervision of management practices or policies, or our investment practices or policies.
On December 2, 1997, the Lincoln Life Flexible Premium Variable Life Account M (“Separate Account”) was established as an insurance company separate account under Indiana law. It is registered with the SEC as a unit investment trust under the provisions of the Investment Company Act of 1940 (1940 Act). The Separate Account is a segregated investment account, meaning that its assets may not be charged with liabilities resulting from any other business that we may conduct. Income, gains and losses, whether realized or not, from assets allocated to the Separate Account are, in accordance with the applicable variable life policies, credited to or charged against the Separate Account. They are credited or charged without regard to any other income, gains or losses of Lincoln Life. We are the issuer of the policies and the obligations set forth in the Policy, other than those of the Owner, are ours. The Separate Account satisfies the definition of a separate account under the federal securities laws. We do not guarantee the investment performance of the Separate Account. Any investment gain or loss depends on the investment performance of the funds. You assume the full investment risk for all amounts allocated to the Separate Account.
Capital Markets
In any particular year, our capital may increase or decrease depending on a variety of factors – the amount of our statutory income or losses (which is sensitive to equity market and credit market conditions), the amount of additional capital we must hold to support business growth, changes in reserving requirements, our inability to secure capital market solutions to provide reserve relief, such as issuing letters of credit to support captive reinsurance structures, changes in equity market levels, the value of certain fixed-income and equity securities in our investment portfolio and changes in interest rates.
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Registration Statement
A Registration Statement has been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, with respect to the policies offered. The Registration Statement, its amendments and exhibits, contain information beyond that found in the prospectus and the SAI. Statements contained in the prospectus and the SAI as to the content of policies and other legal instruments are summaries.
Changes of Investment Policy
We may change the investment policy of the Separate Account at any time. If required by the Insurance Commissioner, we will file any such change for approval with the Department of Insurance in our state of domicile, and in any other state or jurisdiction where this Policy is issued.
If an Owner objects, his or her Policy may be converted to a substantially comparable fixed benefit life insurance policy offered by us on the life of the Insured. The Owner has the later of 60 days (6 months in Pennsylvania) from the date of the investment policy change or 60 days (6 months in Pennsylvania) from being informed of such change to make this conversion. We will not require evidence of insurability for this conversion. The new Policy will not be affected by the investment experience of any separate account. The new Policy will be for an amount of insurance equal to or lower than the amount of the death benefit of the current Policy on the date of the conversion.
Principal Underwriter
Lincoln Financial Distributors, Inc. (“LFD”), 130 North Radnor Chester Road, Radnor, PA 19087, is the principal underwriter for the policies, which are offered continuously. LFD is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a member of the Financial Industry Regulatory Authority (“FINRA”). The principal underwriter has overall responsibility for establishing a selling plan for the policies. LFD received $201,947,231 in 2019, $212,069,092 in 2018 and $167,206,533 in 2017 for the sale of policies offered through the Separate Account. LFD retains no underwriting commissions from the sale of the policies. The maximum total compensation we pay to any broker-dealer firm in the form of commission or expense reimbursement allowance, inclusive of any bonus incentives, with respect to policy sales is 140% of the first year Premium and 5% of all other Premiums paid.
Disaster Plan
Lincoln's business continuity and disaster recovery strategy employs system and telecommunication accessibility, system back-up and recovery, and employee safety and communication. The plan includes documented and tested procedures that will assist in ensuring the availability of critical resources and in maintaining continuity of operations during an emergency situation.
Advertising & Ratings
We may include in certain advertisements, endorsements in the form of a list of organizations, individuals or other parties which recommend Lincoln Life or its policies. Furthermore, we may occasionally include in advertisements comparisons of currently taxable and tax deferred investment programs, based on selected tax brackets, or discussions of alternative investment vehicles and general economic conditions.
Our financial strength is ranked and rated by nationally recognized independent rating agencies. The ratings do not imply approval of the Policy and do not refer to the performance of the Policy, or any separate account, including the underlying investment options. Ratings are not recommendations to buy our policies. Each of the rating agencies reviews its ratings periodically. Accordingly, all ratings are subject to revision or withdrawal at any time by the rating agencies, and therefore, no assurance can be given that these ratings will be maintained. The current outlook for the insurance subsidiaries is stable for Moody’s, A.M. Best and Standard & Poor’s, and positive for Fitch. Our financial strength ratings, which are intended to measure our ability to meet Owners obligations, are an
3

 

important factor affecting public confidence in most of our policies and, as a result, our competitiveness. A downgrade of our financial strength rating could affect our competitive position in the insurance industry by making it more difficult for us to market our policies as potential customers may select companies with higher financial strength ratings and by leading to increased withdrawals by current customers seeking companies with higher financial strength ratings. For more information on ratings, including outlooks, see www.LincolnFinancial.com/investor.
About the S&P 500 Index. The S&P 500 Index (hereinafter “Index”) is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Lincoln Variable Insurance Products Trust and its affiliates (hereinafter “Licensee”).  Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”).  The fund(s) are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or any of their respective affiliates (collectively, “S&P Dow Jones Indices”).  S&P Dow Jones Indices do not make any representation or warranty, express or implied, to the owners of the funds or any member of the public regarding the advisability of investing in securities generally or in the funds particularly or the ability of the Index to track general market performance.  S&P Dow Jones Indices only relationship to Licensee with respect to the Index is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors.  The Index is determined, composed and calculated by S&P Dow Jones Indices without regard to Licensee or the funds.  S&P Dow Jones Indices have no obligation to take the needs of Licensee or the owners of the funds into consideration in determining, composing or calculating the Index.  S&P Dow Jones Indices are not responsible for and have not participated in the determination of the prices, and amount of the funds or the timing of the issuance or sale of the funds or in the determination or calculation of the equation by which the funds are to be converted into cash, surrendered or redeemed, as the case may be.  S&P Dow Jones Indices have no obligation or liability in connection with the administration, marketing or trading of the funds. There is no assurance that investment products based on the Index will accurately track index performance or provide positive investment returns.  S&P Dow Jones Indices LLC is not an investment advisor.  Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.
S&P DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO.  S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN.  S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO.  WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.  THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND LICENSEE, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
Unclaimed Property
We have entered into a Global Resolution Agreement with a third party auditor representing multiple states and jurisdictions. Under the terms of the Global Resolution Agreement, the third party auditor has compared expanded matching criteria to the Social Security Master Death File (“SSMDF”) to identify deceased Insureds and policy or contract holders where a valid claim has not been made. We have also entered into a Regulatory Settlement Agreement with multiple states and jurisdictions. The Regulatory Settlement Agreement applies prospectively and requires us to adopt and implement additional procedures comparing our records to the SSMDF to identify
4

 

unclaimed death benefits and prescribes procedures for identifying and locating Beneficiaries once deaths are identified. Other jurisdictions that are not signatories to the Regulatory Settlement Agreement are conducting examinations and audits of our compliance with unclaimed property laws. Any escheatable property identified as a result of the audits and inquiries could result in additional payments of previously unclaimed death benefits or the payment of abandoned funds to U.S. jurisdictions.
SERVICES
Independent Registered Public Accounting Firm
Ernst & Young LLP, independent registered public accounting firm, One Commerce Square, 2005 Market Street, Suite 700, Philadelphia, Pennsylvania, 19103, has audited a) the financial statements of each of the subaccounts listed in the appendix to the opinion that comprise the Lincoln Life Flexible Premium Variable Life Account M, as of December 31, 2019, the related statements of operations and the statements of changes in net assets for each of the periods indicated in the appendix to the opinion; and b) the consolidated financial statements of The Lincoln National Life Insurance Company as of December 31, 2019 and 2018 and for each of the three years in the period ended December 31, 2019 as set forth in their reports, which are included in this SAI and Registration Statement. The aforementioned financial statements are included herein in reliance on Ernst & Young LLP’s reports, given on their authority as experts in accounting and auditing.
Accounting Services
All accounts, books, records and other documents which are required to be maintained for the Separate Account are maintained by us or by third parties responsible to Lincoln Life. We have entered into an agreement with State Street Bank and Trust Company, 801 Pennsylvania Ave, Kansas City, MO 64105, to provide accounting services to the Separate Account. No separate charge against the assets of the Separate Account is made by us for this service.
Checkbook Service for Disbursements
We offer a checkbook service in which the Death Benefit Proceeds are transferred into an interest-bearing account, in the Beneficiary’s name as Owner of the account. Your Beneficiary has quick access to the proceeds and is the only one authorized to transfer proceeds from the account. This service allows the Beneficiary additional time to decide how to manage Death Benefit Proceeds with the balance earning interest from the day the account is opened.
POLICY INFORMATION
Corporate and Group Purchasers and Case Exceptions
This Policy is available for purchase by corporations and other groups or sponsoring organizations on a multiple-life case basis. We reserve the right to reduce Premium Loads or any other charges on certain cases, where it is expected that the amount or nature of such cases will result in savings of sales, underwriting, administrative or other costs. Eligibility for these reductions and the amount of reductions will be determined by a number of factors, including but not limited to, the number of lives to be insured, the total Premiums expected to be paid, total assets under management for the Owner, the nature of the relationship among the insured individuals, the purpose for which the Policies are being purchased, the expected persistency of the individual Policies and any other circumstances which we believe to be relevant to the expected reduction of its expenses. Some of these reductions may be guaranteed and others may be subject to withdrawal or modification by us on a uniform case basis. Reductions in these charges will not be unfairly discriminatory against any person, including the affected Owners invested in the Separate Account.
5

 

Assignment
While the Insured is living, you may assign your rights in the Policy, including the right to change the Beneficiary designation. The assignment must be in writing, signed by you and received at our Administrative Office. We will not be responsible for any assignment that is not received by us, nor will we be responsible for the sufficiency or validity of any assignment. Any assignment is subject to any Indebtedness owed to Lincoln Life at the time the assignment is received and any interest accrued on such Indebtedness after we have received any assignment.
Once received, the assignment remains effective until released by the assignee in writing. As long as an assignment remains effective, you will not be permitted to take any action with respect to the Policy without the consent of the assignee in writing.
Transfer of Ownership
As long as the Insured is living, you may transfer all of your rights in the Policy by submitting a Written Request to our Administrative Office. You may revoke any transfer of Ownership prior to its effective date. The transfer of Ownership, or revocation of transfer, will not take effect until recorded by us. Once we have recorded the transfer or revocation of transfer, it will take effect as of the date of the latest signature on the Written Request.
On the effective date of transfer, the transferee will become the Owner and will have all the rights of the Owner under the Policy. Unless you direct us otherwise, with the consent of any assignee recorded with us, a transfer will not affect the interest of any Beneficiary designated prior to the effective date of transfer.
Beneficiary
The Beneficiary is initially designated on a form provided by us for that purpose and is the person who will receive the Death Benefit Proceeds payable. Multiple Beneficiaries will be paid in equal shares, unless otherwise specified to the Company.
You may change the Beneficiary at any time while the Insured is living, except when we have received an assignment of your Policy or an agreement not to change the Beneficiary. Any request for a change in the Beneficiary must be in writing, signed by you, and recorded at our Administrative Office. If the Owner has specifically requested not to reserve the right to change the Beneficiary, such a request requires the consent of the Beneficiary. The change will not be effective until recorded by us. Once we have recorded the change of Beneficiary, the change will take effect as of the date of latest signature on the Written Request or, if there is no such date, the date recorded.
If any Beneficiary dies before the Insured, the Beneficiary's potential interest shall pass to any surviving Beneficiaries in the appropriate Beneficiary class, unless otherwise specified to the Company. If no named Beneficiary survives the Insured, any Death Benefit Proceeds will be paid to you, as the Owner, or to your executor, administrator or assignee.
Right to Convert Contract
You may at any time transfer 100% of the Policy's Accumulation Value to the Fixed Account and choose to have all future Premium Payments allocated to the Fixed Account. After you do this, the minimum period the Policy will be in force will be fixed and guaranteed. The minimum period will depend on the amount of Accumulation Value, the Specified Amount, the gender, Attained Age and rating class of the Insured at the time of transfer. The minimum period will decrease if you choose to surrender the Policy or make a Partial Surrender. The minimum period will increase if you choose to decrease the Specified Amount, make additional Premium Payments, or we credit a higher interest rate or charge a lower Cost of Insurance Charge than those guaranteed for the Fixed Account.
6

 

Change of Plan
Your Policy may be exchanged for another Policy issued by the Company only if the Company consents to the exchange and all requirements for the exchange, as determined by the Company, are met. Your request for exchange must be in writing.
The Company may not make an offer to you to exchange your Policy without obtaining required regulatory approvals.
Settlement Options
Proceeds will be paid in a lump sum unless you choose a settlement option we make available.
Deferment of Payments
Amounts payable as a result of Policy Loans, Surrenders or Partial Surrenders will be paid within seven calendar days of our receipt of such a request in a form acceptable to us. We may defer payment or transfer from the Fixed Account up to six months at our option. If we exercise our right to defer any payment from the Fixed Account, interest will accrue and be paid (as required by law) from the date you would otherwise have been entitled to receive the payment. We will not defer any payment used to pay Premiums on policies with us.
Incontestability
The Company will not contest your Policy or payment of the Death Benefit Proceeds based on the Initial Specified Amount, or an increase in the Specified Amount requiring evidence of insurability, after your Policy or increase has been in force for two years from Date of Issue or increase (in accordance with state law).
Misstatement of Age or Gender
If the age or gender of the Insured has been misstated, benefits will be those which would have been purchased at the correct age and gender.
Suicide
If the Insured dies by suicide, while sane or insane, within two years from the Date of Issue, the Company will pay no more than the sum of the Premiums paid, less any Indebtedness and the amount of any Partial Surrenders. If the Insured dies by suicide, while sane or insane, within two years from the date any increase in the Specified Amount, the Company will pay no more than a refund of the monthly charges for the cost of the increased amount. This time period could be less depending on the state of issue.
PERFORMANCE DATA
Performance data may appear in sales literature or reports to Owners or prospective buyers.
Past performance cannot guarantee comparable future results. Performance data reflects the time period shown on a rolling monthly basis and is based on Sub-Account level values adjusted for your Policy’s expenses.
Data reflects:
• an annual reduction for fund management fees and expenses, and
• a policy level mortality and expense charge applied on a daily equivalent basis, but
7

 

• no deductions for additional policy expenses (i.e., Premium Loads, Administrative Fees, and Cost of Insurance Charges), which, if included, would have resulted in lower performance.
These charges and deductions can have a significant effect on policy values and benefits. Ask your financial representative for a personalized illustration reflecting these costs.
Sub-Account performance figures are historical and include change in share price, reinvestment of dividends and capital gains and are net of the asset management expenses that can be levied against the Sub-Account.
The Average Annual Returns in the table below are calculated in two ways, one for Money Market Sub-Account, one for all other Sub-Accounts. Both are according to methods prescribed by the SEC.
Money Market Sub-Account:
The Average Annual Return is the income generated by an investment in the Money Market Sub-Account over a seven-day period, annualized. The process of annualizing results when the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment.
The Money Market Sub-Account’s return is determined by:
a) calculating the change in unit value for the base period (the 7-day period ended December 31, of the previous year); then
b) dividing this figure by the unit value at the beginning of the period; then
c) annualizing this result by the factor of 365/7.
Other Sub-Accounts:
The Average Annual Return for each period is determined by finding the average annual compounded rate of return over each period that would equate the initial amount invested to the ending redeemable value for that period, according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial purchase payment of $1,000
  T = average annual total return for the period in question
  n = number of years
  ERV = ending redeemable value (as of the end of the period in question) of a hypothetical $1,000 purchase payment made at the beginning of the 1-year, 3-year, 5-year, or 10-year period in question (or fractional period thereof)
The formula assumes that:
(1) all recurring fees have been charged to the Owner’s accounts; and
(2) there will be a complete redemption upon the anniversary of the 1-year, 3-year, 5-year, or 10-year period in question.
In accordance with SEC guidelines, we report Sub-Account performance back to the first date that the fund became available, which could pre-date its inclusion in this product. Where the length of the performance reporting period exceeds the period for which the fund was available, Sub-Account performance will show an “N/A”.
FINANCIAL STATEMENTS
The December 31, 2019 financial statements of the Separate Account and the December 31, 2019 consolidated financial statements of the Company follow.
8























The Lincoln National Life Insurance Company



Consolidated Financial Statements



December 31, 2019 and 2018

 

 

 

 

 









Report of Independent Registered Public Accounting Firm



To the Stockholder and the Board of Directors of The Lincoln National Life Insurance Company



Opinion on the Financial Statements



We have audited the accompanying consolidated balance sheets of The Lincoln National Life Insurance Company (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of comprehensive income (loss), stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.



Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.



We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. 



Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1966.

Philadelphia, Pennsylvania

March 13, 2020





 

 

1

 

 

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

 







 

 

 

 

 

 

 

 



 

As of December 31,

 



 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

Fixed maturity available-for-sale securities, at fair value

 

 

 

 

 

 

 

 

(amortized cost:  2019 – $93,307; 2018 – $91,219)

 

$

 103,773 

 

 

$

 92,787 

 

Trading securities

 

 

 4,602 

 

 

 

 1,869 

 

Equity securities

 

 

 103 

 

 

 

 99 

 

Mortgage loans on real estate

 

 

 16,244 

 

 

 

 13,190 

 

Policy loans

 

 

 2,460 

 

 

 

 2,491 

 

Derivative investments

 

 

 1,911 

 

 

 

 1,081 

 

Other investments

 

 

 2,565 

 

 

 

 1,962 

 

Total investments

 

 

 131,658 

 

 

 

 113,479 

 

Cash and invested cash

 

 

 1,879 

 

 

 

 1,848 

 

Deferred acquisition costs and value of business acquired

 

 

 7,745 

 

 

 

 10,308 

 

Premiums and fees receivable

 

 

 464 

 

 

 

 568 

 

Accrued investment income

 

 

 1,109 

 

 

 

 1,087 

 

Reinsurance recoverables

 

 

 19,164 

 

 

 

 19,826 

 

Reinsurance related embedded derivatives

 

 

 -

 

 

 

 188 

 

Funds withheld reinsurance assets

 

 

 542 

 

 

 

 563 

 

Goodwill

 

 

 1,778 

 

 

 

 1,782 

 

Other assets

 

 

 18,106 

 

 

 

 16,663 

 

Separate account assets

 

 

 153,571 

 

 

 

 132,833 

 

Total assets

 

$

 336,016 

 

 

$

 299,145 

 



 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDER’S EQUITY

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Future contract benefits

 

$

 35,717 

 

 

$

 33,884 

 

Other contract holder funds

 

 

 97,422 

 

 

 

 90,573 

 

Short-term debt

 

 

 609 

 

 

 

 288 

 

Long-term debt

 

 

 2,414 

 

 

 

 2,401 

 

Reinsurance related embedded derivatives

 

 

 375 

 

 

 

 -

 

Funds withheld reinsurance liabilities

 

 

 5,566 

 

 

 

 4,860 

 

Payables for collateral on investments

 

 

 5,077 

 

 

 

 4,786 

 

Other liabilities

 

 

 13,680 

 

 

 

 13,201 

 

Separate account liabilities

 

 

 153,571 

 

 

 

 132,833 

 

Total liabilities

 

 

 314,431 

 

 

 

 282,826 

 



 

 

 

 

 

 

 

 

Contingencies and Commitments (See Note 14)

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

Stockholder’s Equity

 

 

 

 

 

 

 

 

Common stock – 10,000,000 shares authorized, issued and outstanding

 

 

 11,312 

 

 

 

 11,237 

 

Retained earnings

 

 

 4,437 

 

 

 

 4,423 

 

Accumulated other comprehensive income (loss)

 

 

 5,836 

 

 

 

 659 

 

Total stockholder’s equity

 

 

 21,585 

 

 

 

 16,319 

 

Total liabilities and stockholder’s equity

 

$

 336,016 

 

 

$

 299,145 

 



See accompanying Notes to Consolidated Financial Statements

 

2

 

 

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 

 

2019

 

2018

 

2017

 

Revenues

 

 

 

 

 

 

 

 

 

Insurance premiums

$

 5,277

 

$

 4,362

 

$

 3,018

 

Fee income

 

 6,247

 

 

 5,733

 

 

 5,369

 

Net investment income

 

 4,962

 

 

 4,844

 

 

 4,760

 

Realized gain (loss):

 

 

 

 

 

 

 

 

 

Total other-than-temporary impairment losses on securities

 

 (28

)

 

 (7

)

 

 (18

)

Portion of loss recognized in other comprehensive income

 

 13

 

 

 -

 

 

 -

 

Net other-than-temporary impairment losses on securities recognized in earnings

 

 (15

)

 

 (7

)

 

 (18

)

Realized gain (loss), excluding other-than-temporary impairment losses on securities

 

 (813

)

 

 (85

)

 

 (438

)

Total realized gain (loss)

 

 (828

)

 

 (92

)

 

 (456

)

Amortization of deferred gain on business sold through reinsurance

 

 27

 

 

 4

 

 

 18

 

Other revenues

 

 507

 

 

 507

 

 

 439

 

Total revenues

 

 16,192

 

 

 15,358

 

 

 13,148

 

Expenses

 

 

 

 

 

 

 

 

 

Interest credited

 

 2,754

 

 

 2,589

 

 

 2,558

 

Benefits

 

 7,585

 

 

 6,144

 

 

 4,818

 

Commissions and other expenses

 

 5,065

 

 

 4,583

 

 

 3,967

 

Interest and debt expense

 

 145

 

 

 136

 

 

 126

 

Strategic digitization expense

 

 66

 

 

 76

 

 

 43

 

Impairment of intangibles

 

 -

 

 

 -

 

 

 905

 

Total expenses

 

 15,615

 

 

 13,528

 

 

 12,417

 

Income (loss) before taxes

 

 577

 

 

 1,830

 

 

 731

 

Federal income tax expense (benefit)

 

 (37

)

 

 257

 

 

 (1,287

)

Net income (loss)

 

 614

 

 

 1,573

 

 

 2,018

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

Unrealized investment gains (losses)

 

 5,173

 

 

 (3,314

)

 

 1,547

 

Funded status of employee benefit plans

 

 4

 

 

 2

 

 

 (2

)

Total other comprehensive income (loss), net of tax

 

 5,177

 

 

 (3,312

)

 

 1,545

 

Comprehensive income (loss)

$

 5,791

 

$

 (1,739

)

$

 3,563

 



 

 

 

 

 

 

 

 

 



See accompanying Notes to Consolidated Financial Statements

 

3

 

 

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(in millions)











 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Common Stock

 

 

 

 

 

 

 

 

 

Balance as of beginning-of-year

$

 11,237

 

$

 10,713

 

$

 10,696

 

Capital contributions from Lincoln National Corporation

 

 50

 

 

 500

 

 

 -

 

Stock compensation/issued for benefit plans

 

 25

 

 

 24

 

 

 17

 

Balance as of end-of-year

 

 11,312

 

 

 11,237

 

 

 10,713

 



 

 

 

 

 

 

 

 

 

Retained Earnings

 

 

 

 

 

 

 

 

 

Balance as of beginning-of-year

 

 4,423

 

 

 4,405

 

 

 3,342

 

Cumulative effect from adoption of new accounting standards

 

 -

 

 

 (644

)

 

 -

 

Net income (loss)

 

 614

 

 

 1,573

 

 

 2,018

 

Dividends paid to Lincoln National Corporation

 

 (600

)

 

 (911

)

 

 (955

)

Balance as of end-of-year

 

 4,437

 

 

 4,423

 

 

 4,405

 



 

 

 

 

 

 

 

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

 

 

 

 

 

 

 

Balance as of beginning-of-year

 

 659

 

 

 3,327

 

 

 1,782

 

Cumulative effect from adoption of new accounting standards

 

 -

 

 

 644

 

 

 -

 

Other comprehensive income (loss), net of tax

 

 5,177

 

 

 (3,312

)

 

 1,545

 

Balance as of end-of-year

 

 5,836

 

 

 659

 

 

 3,327

 

Total stockholder’s equity as of end-of-year

$

 21,585

 

$

 16,319

 

$

 18,445

 



See accompanying Notes to Consolidated Financial Statements

 

4

 

 

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)







 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 

Net income (loss)

$

 614

 

$

 1,573

 

$

 2,018

 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating

 

 

 

 

 

 

 

 

 

activities:

 

 

 

 

 

 

 

 

 

Trading securities purchases, sales and maturities, net

 

 (2,522

)

 

 (120

)

 

 120

 

Change in:

 

 

 

 

 

 

 

 

 

Deferred acquisition costs, value of business acquired, deferred sales inducements

 

 

 

 

 

 

 

 

 

and deferred front-end loads deferrals and interest, net of amortization

 

 (448

)

 

 (108

)

 

 (17

)

Premiums and fees receivable

 

 104

 

 

 (87

)

 

 34

 

Accrued investment income

 

 (22

)

 

 (6

)

 

 19

 

Future contract benefits and other contract holder funds

 

 (918

)

 

 1,105

 

 

 (2,062

)

Reinsurance related assets and liabilities

 

 (277

)

 

 (1,233

)

 

 1,001

 

Accrued expenses

 

 89

 

 

 (99

)

 

 86

 

Federal income tax accruals

 

 (282

)

 

 65

 

 

 (1,502

)

Cash management agreement

 

 (1,115

)

 

 329

 

 

 (277

)

Realized (gain) loss

 

 828

 

 

 92

 

 

 456

 

Amortization of deferred gain on business sold through reinsurance

 

 (27

)

 

 (4

)

 

 (18

)

Impairment of intangibles

 

 -

 

 

 -

 

 

 905

 

Other

 

 343

 

 

 88

 

 

 91

 

Net cash provided by (used in) operating activities

 

 (3,633

)

 

 1,595

 

 

 854

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

Purchases of available-for-sale securities and equity securities

 

 (14,927

)

 

 (12,406

)

 

 (9,887

)

Sales of available-for-sale securities and equity securities

 

 6,771

 

 

 3,191

 

 

 1,773

 

Maturities of available-for-sale securities

 

 6,426

 

 

 6,348

 

 

 5,790

 

Purchase of common stock in acquisition, net of cash acquired

 

 -

 

 

 (1,410

)

 

 -

 

Sale of business, net

 

 -

 

 

 (12

)

 

 -

 

Purchases of alternative investments

 

 (433

)

 

 (314

)

 

 (357

)

Sales and repayments of alternative investments

 

 131

 

 

 178

 

 

 184

 

Proceeds from affiliate transfer of alternative investments

 

 -

 

 

 -

 

 

 66

 

Issuance of mortgage loans on real estate

 

 (4,218

)

 

 (2,920

)

 

 (2,047

)

Repayment and maturities of mortgage loans on real estate

 

 1,144

 

 

 1,048

 

 

 1,145

 

Issuance and repayment of policy loans, net

 

 32

 

 

 20

 

 

 49

 

Net change in collateral on investments, derivatives and related settlements

 

 349

 

 

 654

 

 

 (374

)

Other

 

 (259

)

 

 (191

)

 

 (123

)

Net cash provided by (used in) investing activities

 

 (4,984

)

 

 (5,814

)

 

 (3,781

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

Capital contribution from Lincoln National Corporation

 

 50

 

 

 500

 

 

 -

 

Payment of long-term debt, including current maturities

 

 (28

)

 

 (13

)

 

 (290

)

Issuance of long-term debt, net of issuance costs

 

 28

 

 

 13

 

 

 75

 

Issuance (payment) of short-term debt

 

 321

 

 

 278

 

 

 (270

)

Proceeds from sale-leaseback transactions

 

 -

 

 

 88

 

 

 62

 

Payment related to sale-leaseback transactions

 

 (83

)

 

 -

 

 

 -

 

Proceeds from certain financing arrangements

 

 107

 

 

 -

 

 

 -

 

Deposits of fixed account values, including the fixed portion of variable

 

 16,049

 

 

 13,616

 

 

 10,775

 

Withdrawals of fixed account values, including the fixed portion of variable

 

 (5,800

)

 

 (5,957

)

 

 (5,764

)

Transfers to and from separate accounts, net

 

 (1,362

)

 

 (2,469

)

 

 (1,787

)

Common stock issued for benefit plans

 

 (34

)

 

 (25

)

 

 (29

)

Dividends paid to Lincoln National Corporation

 

 (600

)

 

 (911

)

 

 (955

)

Net cash provided by (used in) financing activities

 

 8,648

 

 

 5,120

 

 

 1,817

 

Net increase (decrease) in cash, invested cash and restricted cash

 

 31

 

 

 901

 

 

 (1,110

)

Cash, invested cash and restricted cash as of beginning-of-year

 

 1,848

 

 

 947

 

 

 2,057

 

Cash, invested cash and restricted cash as of end-of-year

$

 1,879

 

$

 1,848

 

$

 947

 



 

See accompanying Notes to Consolidated Financial Statements

 

5

 

 

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 







1.  Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies



Nature of Operations 



The Lincoln National Life Insurance Company (“LNL” or the “Company,” which also may be referred to as “we,” “our” or “us”), a wholly-owned subsidiary of Lincoln National Corporation (“LNC” or the “Parent Company”), is domiciled in the state of Indiana.  We own 100% of the outstanding common stock of two insurance company subsidiaries, Lincoln Life & Annuity Company of New York (“LLANY”) and Lincoln Life Assurance Company of Boston (“LLACB”).  We also own several non-insurance companies, including Lincoln Financial Distributors, our wholesale distributor, and Lincoln Financial Advisors Corporation, part of LNC’s retail distributor, Lincoln Financial Network.  LNL’s principal businesses consist of underwriting annuities, deposit-type contracts and life insurance through multiple distribution channels.  LNL is licensed and sells its products throughout the U.S. and several U.S. territories.  See Note 21 for additional information.



Basis of Presentation



The accompanying consolidated financial statements are prepared in accordance with United States of America generally accepted accounting principles (“GAAP”).  Certain GAAP policies, which significantly affect the determination of financial condition, results of operations and cash flows, are summarized below.



Summary of Significant Accounting Policies 



Principles of Consolidation



The accompanying consolidated financial statements include the accounts of LNL and all other entities in which we have a controlling financial interest and any variable interest entities (“VIEs”) in which we are the primary beneficiary.  As discussed in Note 3, on May 1, 2018, LNC and LNL completed the acquisition of Liberty Life Assurance Company of Boston (“Liberty Life”), which effective September 1, 2019, was renamed Lincoln Life Assurance Company of Boston.  We use the equity method of accounting to recognize all of our investments in limited liability partnerships.  All material inter-company accounts and transactions have been eliminated in consolidation. 



Our involvement with VIEs is primarily to invest in assets that allow us to gain exposure to a broadly diversified portfolio of asset classes.  A VIE is an entity that does not have sufficient equity to finance its own activities without additional financial support or where investors lack certain characteristics of a controlling financial interest.  We assess our contractual, ownership or other interests in a VIE to determine if our interest participates in the variability the VIE was designed to absorb and pass onto variable interest holders.  We perform an ongoing qualitative assessment of our variable interests in VIEs to determine whether we have a controlling financial interest and would therefore be considered the primary beneficiary of the VIE.  If we determine we are the primary beneficiary of a VIE, we consolidate the assets and liabilities of the VIE in our consolidated financial statements.



Accounting Estimates and Assumptions



The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses for the reporting period.  Those estimates are inherently subject to change and actual results could differ from those estimates.  Included among the material (or potentially material) reported amounts and disclosures that require extensive use of estimates are:  fair value of certain investments and derivatives, other-than-temporary impairment (“OTTI”) and asset valuation allowances, deferred acquisition costs (“DAC”),  value of business acquired (“VOBA”), deferred sales inducements (“DSI”), goodwill, future contract benefits, other contract holder funds including deferred front-end loads (“DFEL”), pension plans, stock-based incentive compensation, income taxes and the potential effects of resolving litigated matters.



Business Combinations



We use the acquisition method of accounting for all business combination transactions, and accordingly, recognize the fair values of assets acquired, liabilities assumed and any noncontrolling interests in our consolidated financial statements.  The allocation of fair values may be subject to adjustment after the initial allocation for up to a one-year period as more information becomes available relative to the fair values as of the acquisition date.  The consolidated financial statements include the results of operations of any acquired company since the acquisition date.



6

 

 

Fair Value Measurement



Our measurement of fair value is based on assumptions used by market participants in pricing the asset or liability, which may include inherent risk, restrictions on the sale or use of an asset or non-performance risk (“NPR”), which would include our own credit risk.  Our estimate of an exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability (“exit price”) in the principal market, or the most advantageous market in the absence of a principal market, for that asset or liability, as opposed to the price that would be paid to acquire the asset or receive a liability (“entry price”).  Pursuant to the Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards CodificationTM (“ASC”), we categorize our financial instruments carried at fair value into a three-level fair value hierarchy, based on the priority of inputs to the respective valuation technique.  The three-level hierarchy for fair value measurement is defined as follows:



·

Level 1 – inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date, except for large holdings subject to “blockage discounts” that are excluded;

·

Level 2 – inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value can be determined through the use of models or other valuation methodologies; and

·

Level 3 – inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability, and we make estimates and assumptions related to the pricing of the asset or liability, including assumptions regarding risk.



In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.  Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. 



When a determination is made to classify an asset or liability within Level 3 of the fair value hierarchy, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement.  Because certain securities trade in less liquid or illiquid markets with limited or no pricing information, the determination of fair value for these securities is inherently more difficult.  However, Level 3 fair value investments may include, in addition to the unobservable or Level 3 inputs, observable components, which are components that are actively quoted or can be validated to market-based sources.



Fixed Maturity Available-For-Sale Securities – Fair Valuation Methodologies and Associated Inputs



Securities classified as available-for-sale (“AFS”) consist of fixed maturity securities and are stated at fair value with unrealized gains and losses included within accumulated other comprehensive income (loss) (“AOCI”), net of associated DAC, VOBA, DSI, future contract benefits, other contract holder funds and deferred income taxes. 



We measure the fair value of our securities classified as fixed maturity AFS based on assumptions used by market participants in pricing the security.  The most appropriate valuation methodology is selected based on the specific characteristics of the fixed maturity security, and we consistently apply the valuation methodology to measure the security’s fair value.  Our fair value measurement is based on a market approach that utilizes prices and other relevant information generated by market transactions involving identical or comparable securities.  Sources of inputs to the market approach primarily include third-party pricing services, independent broker quotations or pricing matrices.  We do not adjust prices received from third parties; however, we do analyze the third-party pricing services’ valuation methodologies and related inputs and perform additional evaluation to determine the appropriate level within the fair value hierarchy.



The observable and unobservable inputs to our valuation methodologies are based on a set of standard inputs that we generally use to evaluate all of our fixed maturity AFS securities.  Observable inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data.  In addition, market indicators, industry and economic events are monitored, and further market data is acquired if certain triggers are met.  For certain security types, additional inputs may be used, or some of the inputs described above may not be applicable.  For private placement securities, we use pricing matrices that utilize observable pricing inputs of similar public securities and Treasury yields as inputs to the fair value measurement.  Depending on the type of security or the daily market activity, standard inputs may be prioritized differently or may not be available for all fixed maturity AFS securities on any given day.  For broker-quoted only securities, non-binding quotes from market makers or broker-dealers are obtained from sources recognized as market participants.  For securities trading in less liquid or illiquid markets with limited or no pricing information, we use unobservable inputs to measure fair value. 



7

 

 

The following summarizes our fair valuation methodologies and associated inputs, which are particular to the specified security type and are in addition to the defined standard inputs to our valuation methodologies for all of our fixed maturity AFS securities discussed above:



·

Corporate bonds and U.S. government bonds – We also use Trade Reporting and Compliance EngineTM reported tables for our corporate bonds and vendor trading platform data for our U.S. government bonds. 

·

Mortgage- and asset-backed securities (“ABS”) – We also utilize additional inputs, which include new issues data, monthly payment information and monthly collateral performance, including prepayments, severity, delinquencies, step-down features and over collateralization features for each of our mortgage-backed securities (“MBS”), which include collateralized mortgage obligations and mortgage pass through securities backed by residential mortgages (“RMBS”), commercial mortgage-backed securities (“CMBS”), collateralized loan obligations (“CLOs”) and collateralized debt obligations (“CDOs”).

·

State and municipal bonds – We also use additional inputs that include information from the Municipal Securities Rule Making Board, as well as material event notices, new issue data, issuer financial statements and Municipal Market Data benchmark yields for our state and municipal bonds.

·

Hybrid and redeemable preferred securities – We also utilize additional inputs of exchange prices (underlying and common stock of the same issuer) for our hybrid and redeemable preferred securities.



In order to validate the pricing information and broker-dealer quotes, we employ, where possible, procedures that include comparisons with similar observable positions, comparisons with subsequent sales and observations of general market movements for those security classes.  We have policies and procedures in place to review the process that is utilized by our third-party pricing service and the output that is provided to us by the pricing service.  On a periodic basis, we test the pricing for a sample of securities to evaluate the inputs and assumptions used by the pricing service, and we perform a comparison of the pricing service output to an alternative pricing source.  We also evaluate prices provided by our primary pricing service to ensure that they are not stale or unreasonable by reviewing the prices for unusual changes from period to period based on certain parameters or for lack of change from one period to the next. 



Fixed Maturity AFS Securities – Evaluation for Recovery of Amortized Cost



We regularly review our fixed maturity AFS securities (also referred to as “debt securities”) for declines in fair value that we determine to be other-than-temporary. 



For our debt securities, we generally consider the following to determine whether our debt securities with unrealized losses are other-than-temporarily impaired:



·

The estimated range and average period until recovery;

·

The estimated range and average holding period to maturity;

·

Remaining payment terms of the security;

·

Current delinquencies and nonperforming assets of underlying collateral;

·

Expected future default rates;

·

Collateral value by vintage, geographic region, industry concentration or property type;

·

Subordination levels or other credit enhancements as of the balance sheet date as compared to origination; and

·

Contractual and regulatory cash obligations.



For a debt security, if we intend to sell a security, or it is more likely than not we will be required to sell a debt security before recovery of its amortized cost basis and the fair value of the debt security is below amortized cost, we conclude that an OTTI has occurred and the amortized cost is written down to current fair value, with a corresponding charge to realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).  If we do not intend to sell a debt security, or it is not more likely than not we will be required to sell a debt security before recovery of its amortized cost basis but the present value of the cash flows expected to be collected is less than the amortized cost of the debt security (referred to as the credit loss), we conclude that an OTTI has occurred and the amortized cost is written down to the estimated recovery value with a corresponding charge to realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss), as this amount is deemed the credit portion of the OTTI.  The remainder of the decline to fair value is recorded in other comprehensive income (“OCI”) to unrealized OTTI on fixed maturity AFS securities on our Consolidated Statements of Stockholder’s Equity, as this amount is considered a noncredit (i.e., recoverable) impairment.



8

 

 

When assessing our intent to sell a debt security, or if it is more likely than not we will be required to sell a debt security before recovery of its cost basis, we evaluate facts and circumstances such as, but not limited to, decisions to reposition our security portfolio, sales of securities to meet cash flow needs and sales of securities to capitalize on favorable pricing.  Management considers the following as part of the evaluation:



·

The current economic environment and market conditions;

·

Our business strategy and current business plans;

·

The nature and type of security, including expected maturities and exposure to general credit, liquidity, market and interest rate risk;

·

Our analysis of data from financial models and other internal and industry sources to evaluate the current effectiveness of our hedging and overall risk management strategies;

·

The current and expected timing of contractual maturities of our assets and liabilities, expectations of prepayments on investments and expectations for surrenders and withdrawals of life insurance policies and annuity contracts;

·

The capital risk limits approved by management; and

·

Our current financial condition and liquidity demands.



In order to determine the amount of the credit loss for a debt security, we calculate the recovery value by performing a discounted cash flow analysis based on the current cash flows and future cash flows we expect to recover.  The discount rate is the effective interest rate implicit in the underlying debt security.  The effective interest rate is the original yield, or the coupon if the debt security was previously impaired.  See the discussion below for additional information on the methodology and significant inputs, by security type, that we use to determine the amount of a credit loss.



To determine the recovery period of a debt security, we consider the facts and circumstances surrounding the underlying issuer including, but not limited to, the following:



·

Historical and implied volatility of the security;

·

Length of time and extent to which the fair value has been less than amortized cost;

·

Adverse conditions specifically related to the security or to specific conditions in an industry or geographic area;

·

Failure, if any, of the issuer of the security to make scheduled payments; and

·

Recoveries or additional declines in fair value subsequent to the balance sheet date. 



In periods subsequent to the recognition of an OTTI, the fixed maturity AFS security is accounted for as if it had been purchased on the measurement date of the OTTI.  Therefore, for the fixed maturity AFS security, the original discount or reduced premium is reflected in net investment income over the contractual term of the investment in a manner that produces a constant effective yield.



To determine recovery value of a corporate bond, CLO or CDO, we perform additional analysis related to the underlying issuer including, but not limited to, the following:



·

Fundamentals of the issuer to determine what we would recover if they were to file bankruptcy versus the price at which the market is trading;

·

Fundamentals of the industry in which the issuer operates;

·

Earnings multiples for the given industry or sector of an industry that the underlying issuer operates within, divided by the outstanding debt to determine an expected recovery value of the security in the case of a liquidation;

·

Expected cash flows of the issuer (e.g., whether the issuer has cash flows in excess of what is required to fund its operations);

·

Expectations regarding defaults and recovery rates;

·

Changes to the rating of the security by a rating agency; and

·

Additional market information (e.g., if there has been a replacement of the corporate debt security).



Each quarter, we review the cash flows for the MBS to determine whether or not they are sufficient to provide for the recovery of our amortized cost.  We revise our cash flow projections only for those securities that are at most risk for impairment based on current credit enhancement and trends in the underlying collateral performance.  To determine recovery value of a MBS, we perform additional analysis related to the underlying issuer including, but not limited to, the following:



·

Discounted cash flow analysis based on the current cash flows and future cash flows we expect to recover;

·

Level of creditworthiness of the home equity loans or residential mortgages that back an RMBS or commercial mortgages that back a CMBS;

·

Susceptibility to fair value fluctuations for changes in the interest rate environment;

·

Susceptibility to reinvestment risks, in cases where market yields are lower than the securities’ book yield earned;

·

Susceptibility to reinvestment risks, in cases where market yields are higher than the book yields earned on a security;

·

Expectations of sale of such a security where market yields are higher than the book yields earned on a security; and

·

Susceptibility to variability of prepayments.



9

 

 

When evaluating MBS and mortgage-related ABS, we consider a number of pool-specific factors as well as market level factors when determining whether or not the impairment on the security is temporary or other-than-temporary.  The most important factor is the performance of the underlying collateral in the security and the trends of that performance in the prior periods.  We use this information about the collateral to forecast the timing and rate of mortgage loan defaults, including making projections for loans that are already delinquent and for those loans that are currently performing but may become delinquent in the future.  Other factors used in this analysis include the credit characteristics of borrowers, geographic distribution of underlying loans and timing of liquidations by state.  Once default rates and timing assumptions are determined, we then make assumptions regarding the severity of a default if it were to occur.  Factors that impact the severity assumption include expectations for future home price appreciation or depreciation, loan size, first lien versus second lien, existence of loan level private mortgage insurance, type of occupancy and geographic distribution of loans.  Once default and severity assumptions are determined for the security in question, cash flows for the underlying collateral are projected including expected defaults and prepayments.  These cash flows on the collateral are then translated to cash flows on our tranche based on the cash flow waterfall of the entire capital security structure.  If this analysis indicates the entire principal on a particular security will not be returned, the security is reviewed for OTTI by comparing the expected cash flows to amortized cost.  To the extent that the security has already been impaired or was purchased at a discount, such that the amortized cost of the security is less than or equal to the present value of cash flows expected to be collected, no impairment is required.  Otherwise, if the amortized cost of the security is greater than the present value of the cash flows expected to be collected, and the security was not purchased at a discount greater than the expected principal loss, then impairment is recognized.



We further monitor the cash flows of all of our fixed maturity AFS securities backed by mortgages on an ongoing basis.  We also perform detailed analysis on all of our subprime, Alt-A, non-agency residential MBS and on a significant percentage of our fixed maturity AFS securities backed by pools of commercial mortgages.  The detailed analysis includes revising projected cash flows by updating the cash flows for actual cash received and applying assumptions with respect to expected defaults, foreclosures and recoveries in the future.  These revised projected cash flows are then compared to the amount of credit enhancement (subordination) in the structure to determine whether the amortized cost of the security is recoverable.  If it is not recoverable, we record an impairment of the security. 



Trading Securities



Trading securities consist of fixed maturity securities in designated portfolios, some of which support modified coinsurance (“Modco”) and coinsurance with funds withheld (“CFW”) reinsurance agreements.  Investment results for the portfolios that support Modco and CFW reinsurance agreements, including gains and losses from sales, are passed directly to the reinsurers pursuant to contractual terms of the reinsurance agreements.  Trading securities are carried at fair value, and changes in fair value and changes in the fair value of embedded derivative liabilities associated with the underlying reinsurance agreements are recorded in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss) as they occur. 



Equity Securities



Equity securities are carried at fair value, and changes in fair value are recorded in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss) as they occur.  Equity securities consist primarily of common stock of publicly-traded companies, privately placed securities and mutual fund shares.  We measure the fair value of our equity securities based on assumptions used by market participants in pricing the security.  The most appropriate valuation methodology is selected based on the specific characteristics of the equity security.  Fair values of publicly-traded equity securities are determined using quoted prices in active markets for identical or comparable securities.  When quoted prices are not available, we use valuation methodologies most appropriate for the specific asset.  Fair values for private placement securities are determined using discounted cash flow, earnings multiple and other valuation models.  The fair values of mutual fund shares that transact regularly are based on transaction prices of identical fund shares.



Alternative Investments



Alternative investments, which consist primarily of investments in limited partnerships (“LPs”), are included in other investments on our Consolidated Balance Sheets.  We account for our investments in LPs using the equity method to determine the carrying value.  Recognition of alternative investment income is delayed due to the availability of the related financial statements, which are generally obtained from the partnerships’ general partners.  As a result, our private equity investments are generally on a three-month delay and our hedge funds are on a one-month delay.  In addition, the impact of audit adjustments related to completion of calendar-year financial statement audits of the investees are typically received during the second quarter of each calendar year.  Accordingly, our investment income from alternative investments for any calendar-year period may not include the complete impact of the change in the underlying net assets for the partnership for that calendar-year period. 



Payables for Collateral on Investments



When we enter into collateralized financing transactions on our investments, a liability is recorded equal to the cash or non-cash collateral received.  This liability is included within payables for collateral on investments on our Consolidated Balance Sheets.  Income and expenses associated with these transactions are recorded as investment income and investment expenses within net investment income on our Consolidated Statements of Comprehensive Income (Loss).  Changes in payables for collateral on investments are reflected within cash flows from investing activities on our Consolidated Statements of Cash Flows.

10

 

 

Mortgage Loans on Real Estate



Mortgage loans on real estate consist of commercial and residential mortgage loans and are carried at unpaid principal balances adjusted for amortization of premiums and accretion of discounts and are net of valuation allowances.  Interest income is accrued on the principal balance of the loan based on the loan’s contractual interest rate.  Premiums and discounts are amortized using the effective yield method over the life of the loan.  Interest income and amortization of premiums and discounts are reported in net investment income on our Consolidated Statements of Comprehensive Income (Loss) along with mortgage loan fees, which are recorded as they are incurred.



Our policy for commercial mortgage loans is to report loans that are 60 or more days past due, which equates to two or more payments missed, as delinquent.  Our policy for residential mortgage loans is to report loans that are 90 or more days past due, which equates to three or more payments missed, as delinquent.  We do not accrue interest on loans 90 days past due, and any interest received on these loans is either applied to the principal or recorded in net investment income on our Consolidated Statements of Comprehensive Income (Loss) when received, depending on the assessment of the collectability of the loan.  We resume accruing interest once a loan complies with all of its original terms or restructured terms.  Mortgage loans deemed uncollectible are charged against the valuation allowance, and subsequent recoveries, if any, are credited to the valuation allowance.  



We establish a valuation allowance to provide for the risk of credit losses inherent in our portfolio.  The valuation allowance includes specific valuation allowances for loans that are deemed to be impaired as well as general valuation allowances for pools of loans with similar risk characteristics where a property risk or market specific risk has not been identified but for which we anticipate a loss may occur. Loans are considered impaired when it is probable that, based upon current information and events, we will be unable to collect all amounts due under the contractual terms of the loan agreement.  When we determine that a loan is impaired, a specific valuation allowance is established for the excess carrying value of the loan over its estimated value.  The loan’s estimated value is based on:  the present value of expected future cash flows discounted at the loan’s effective interest rate; the loan’s observable market price; or the fair value of the loan’s collateral.  Changes in valuation allowances are reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).  General valuation allowances are primarily based on loss history adjusted for current conditions.



Valuation allowances are maintained at a level we believe is adequate to absorb estimated probable credit losses.  Our periodic evaluation of the adequacy of the valuation allowances is based on historical loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payments), the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. 



Our commercial loan portfolio is primarily comprised of long-term loans secured by existing commercial real estate.  We believe all of the commercial loans in our portfolio share three primary risks:  borrower credit worthiness; sustainability of the cash flow of the property; and market risk; therefore, our methods of monitoring and assessing credit risk are consistent for our entire portfolio.



For our commercial mortgage loan portfolio, trends in market vacancy and rental rates are incorporated into the analysis that we perform for monitored loans and may contribute to the establishment of (or an increase or decrease in) a valuation allowance.  In addition, we review each loan individually in our commercial mortgage loan portfolio on an annual basis to identify emerging risks.  We focus on properties that experienced a reduction in debt-service coverage or that have significant exposure to tenants with deteriorating credit profiles.  Where warranted, we establish or increase a valuation allowance for a specific loan based upon this analysis. 



We measure and assess the credit quality of our commercial mortgage loans by using loan-to-value and debt-service coverage ratios.  The loan-to-value ratio compares the principal amount of the loan to the fair value at origination of the underlying property collateralizing the loan and is commonly expressed as a percentage.  Loan-to-value ratios greater than 100% indicate that the principal amount is greater than the collateral value.  Therefore, all else being equal, a lower loan-to-value ratio generally indicates a higher quality loan.  The debt-service coverage ratio compares a property’s net operating income to its debt-service payments.  Debt-service coverage ratios of less than 1.0 indicate that property operations do not generate enough income to cover its current debt payments.  Therefore, all else being equal, a higher debt-service coverage ratio generally indicates a higher quality loan.



Our residential loan portfolio is primarily comprised of first lien mortgages secured by existing residential real estate.  In contrast to the commercial mortgage loan portfolio, residential mortgage loans are primarily smaller-balance homogenous loans that share similar risk characteristics.  Therefore, these pools of loans are collectively evaluated for inherent credit losses.  Such evaluations consider numerous factors, including, but not limited to borrower credit scores, collateral values, loss forecasts, geographic location, delinquency rates and economic trends.  These evaluations and assessments are revised as conditions change and new information becomes available, which can cause the valuation allowances to increase or decrease over time as such evaluations are revised.  Residential mortgage loan pools exclude loans that have been impaired as those loans are evaluated individually using the evaluation framework for specific valuation allowances described above.



For residential mortgage loans, our primary credit quality indicator is whether the loan is performing or nonperforming.  We generally define nonperforming residential mortgage loans as those that are 90 or more days past due and/or in nonaccrual status.  There is generally a higher risk of experiencing credit losses when a residential mortgage loan is nonperforming.



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Policy Loans



Policy loans represent loans we issue to contract holders that use the cash surrender value of their life insurance policy as collateral.  Policy loans are carried at unpaid principal balances. 



Real Estate



Real estate includes both real estate held for the production of income and real estate held-for-sale.  Real estate held for the production of income is carried at cost less accumulated depreciation.  Depreciation is calculated on a straight-line basis over the estimated useful life of the asset.  We periodically review properties held for the production of income for impairment.  Properties whose carrying values are greater than their projected undiscounted cash flows are written down to estimated fair value, with impairment losses reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).  The estimated fair value of real estate is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks.  Real estate classified as held-for-sale is stated at the lower of depreciated cost or fair value less expected disposition costs at the time classified as held-for-sale.  Real estate is not depreciated while it is classified as held-for-sale.  Also, valuation allowances are established, as appropriate, for real estate held-for-sale and any changes to the valuation allowances are reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).  Real estate acquired through foreclosure proceedings is recorded at fair value at the settlement date. 



Derivative Instruments



We hedge certain portions of our exposure to interest rate risk, foreign currency exchange risk, equity market risk and credit risk by entering into derivative transactions.  All of our derivative instruments are recognized as either assets or liabilities on our Consolidated Balance Sheets at estimated fair value.  We categorized derivatives into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique as discussed above in “Fair Value Measurement.”  The accounting for changes in the estimated fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship, and further, on the type of hedging relationship.  For those derivative instruments that are designated and qualify as hedging instruments, we designate the hedging instrument based upon the exposure being hedged:  as a cash flow hedge or a fair value hedge.



For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of AOCI and reclassified into net income in the same period or periods during which the hedged transaction affects net income.  The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of designated future cash flows of the hedged item (hedge ineffectiveness), if any, is recognized in net income during the period of change.  For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in net income during the period of change in estimated fair values.  For derivative instruments not designated as hedging instruments, but that are economic hedges, the gain or loss is recognized in net income.



We purchase and issue financial instruments and products that contain embedded derivative instruments.  When it is determined that the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host for measurement purposes.  The embedded derivative is carried at fair value with changes in fair value recognized in net income during the period of change. 



We employ several different methods for determining the fair value of our derivative instruments.  The fair value of our derivative contracts are measured based on current settlement values, which are based on quoted market prices, industry standard models that are commercially available and broker quotes.  These techniques project cash flows of the derivatives using current and implied future market conditions.  We calculate the present value of the cash flows to measure the current fair market value of the derivative. 



Cash and Invested Cash



Cash and invested cash is carried at cost and includes all highly liquid debt instruments purchased with an original maturity of three months or less.



DAC, VOBA, DSI and DFEL



Acquisition costs directly related to successful contract acquisitions or renewals of universal life insurance (“UL”), variable universal life insurance (“VUL”), traditional life insurance, annuities and other investment contracts have been deferred (i.e., DAC) to the extent recoverable.  VOBA is an intangible asset that reflects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the business in force at the acquisition date.  Bonus credits and excess interest for dollar cost averaging contracts are considered DSI.  Contract sales charges that are collected in the early years of an insurance contract are deferred (i.e., DFEL), and the unamortized balance is reported in other contract holder funds on our Consolidated Balance Sheets. 



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Both DAC and VOBA amortization, excluding amounts reported in realized gain (loss), is reported within commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss).  DSI amortization, excluding amounts reported in realized gain (loss), is reported in interest credited on our Consolidated Statements of Comprehensive Income (Loss).  The amortization of DFEL, excluding amounts reported in realized gain (loss), is reported within fee income on our Consolidated Statements of Comprehensive Income (Loss).  The methodology for determining the amortization of DAC, VOBA, DSI and DFEL varies by product type.  For all insurance contracts, amortization is based on assumptions consistent with those used in the development of the underlying contract adjusted for emerging experience and expected trends. 



Acquisition costs for UL and VUL insurance and investment-type products, which include fixed and variable deferred annuities, are generally amortized over the lives of the policies in relation to the incidence of estimated gross profits (“EGPs”) from surrender charges, investment, mortality net of reinsurance ceded and expense margins and actual realized gain (loss) on investments.  Contract lives for UL and VUL policies are estimated to be 40 years based on the expected lives of the contracts.  Contract lives for fixed and variable deferred annuities are generally between 15 and 30 years, while some of our fixed multi-year guarantee products have amortization periods equal to the guarantee period.  The front-end load annuity product has an assumed life of 25 years.  Longer lives are assigned to those blocks that have demonstrated lower lapse experience. 



Acquisition costs for all traditional contracts, including traditional life insurance contracts, such as individual whole life, group business and term life insurance, are amortized over the expected premium-paying period that generally results in amortization less than 30 years.  Acquisition costs are either amortized on a straight-line basis or as a level percent of premium of the related policies depending on the block of business.  There is currently no DAC, VOBA, DSI or DFEL balance or related amortization for fixed and variable payout annuities.



We account for modifications of insurance contracts that result in a substantially unchanged contract as a continuation of the replaced contract.  We account for modifications of insurance contracts that result in a substantially changed contract as an extinguishment of the replaced contract.



The carrying amounts of DAC, VOBA, DSI and DFEL are adjusted for the effects of realized and unrealized gains and losses on securities classified as fixed maturity AFS and certain derivatives and embedded derivatives.  Amortization expense of DAC, VOBA, DSI and DFEL reflects an assumption for an expected level of credit-related investment losses.  When actual credit-related investment losses are realized, we recognize a true-up to our DAC, VOBA, DSI and DFEL amortization within realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss) reflecting the incremental effect of actual versus expected credit-related investment losses.  These actual to expected amortization adjustments can create volatility from period to period in realized gain (loss). 



During the third quarter of each year, we conduct our annual comprehensive review of the assumptions and the projection models used for our estimates of future gross profits underlying the amortization of DAC, VOBA, DSI and DFEL and the calculations of the embedded derivatives and reserves for life insurance and annuity products.  These assumptions include, but are not limited to, capital markets, investment margins, mortality, retention, rider utilization and maintenance expenses (costs associated with maintaining records relating to insurance and individual and group annuity contracts, and with the processing of premium collections, deposits, withdrawals and commissions).  Based on our review, the cumulative balances of DAC, VOBA, DSI and DFEL included on our Consolidated Balance Sheets are adjusted with an offsetting benefit or charge to revenue or amortization expense to reflect such change related to our expectations of future EGPs (“unlocking”).  We may have unlocking in other quarters as we become aware of information that warrants updating assumptions outside of our annual comprehensive review.  We may also identify and implement actuarial modeling refinements that result in increases or decreases to the carrying values of DAC, VOBA, DSI, DFEL, embedded derivatives and reserves for life insurance and annuity products with living benefit and death benefit guarantees. 

 

DAC, VOBA, DSI and DFEL are reviewed to ensure that the unamortized portion does not exceed the expected recoverable amounts. 



Reinsurance



We and our insurance subsidiaries enter into reinsurance agreements in the normal course of business to limit our exposure to the risk of loss and to enhance our capital management.



In order for a reinsurance agreement to qualify for reinsurance accounting, the agreement must satisfy certain risk transfer conditions that include, among other items, a reasonable possibility of a significant loss for the assuming entity.  When we apply reinsurance accounting, premiums, benefits and DAC amortization are reported net of insurance ceded on our Consolidated Statements of Comprehensive Income (Loss).  Amounts currently recoverable, such as ceded reserves, are reported in reinsurance recoverables and amounts currently payable to the reinsurers, such as premiums, are included in other liabilities on our Consolidated Balance Sheets.  Assets and liabilities and premiums and benefits from certain reinsurance contracts that grant statutory surplus relief to our insurance companies are netted on our Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income (Loss), respectively, if there is a contractual right of offset.   



We use deposit accounting to recognize reinsurance agreements that do not transfer significant insurance risk.  This accounting treatment results in amounts paid or received by our insurance subsidiaries to be considered on deposit with the reinsurer and such amounts are reported in other assets and other liabilities, respectively, on our Consolidated Balance Sheets.  As amounts are paid or received, consistent with the underlying contracts, deposit assets or liabilities are adjusted.

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Goodwill



We recognize the excess of the purchase price, plus the fair value of any noncontrolling interest in the acquiree, over the fair value of identifiable net assets acquired as goodwill.  Goodwill is not amortized, but is reviewed for impairment annually as of October 1 and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. 



We perform a quantitative goodwill impairment test where the fair value of the reporting unit is determined and compared to the carrying value of the reporting unit.  If the carrying value of the reporting unit is greater than the reporting unit’s fair value, goodwill is impaired and written down to the reporting unit’s fair value; and a charge is reported in impairment of intangibles on our Consolidated Statements of Comprehensive Income (Loss).  The results of one goodwill impairment test on one reporting unit cannot subsidize the results of another reporting unit.



Other Assets and Other Liabilities



Other assets consist primarily of DSI, specifically identifiable intangible assets, property and equipment owned by the Company, balances associated with corporate-owned and bank-owned life insurance, certain reinsurance assets, receivables resulting from sales of securities that had not yet settled as of the balance sheet date, debt issuance costs associated with line-of-credit arrangements, operating lease right-of-use (“ROU”) assets, finance lease assets, certain financing arrangements and other prepaid expenses.  Other liabilities consist primarily of current and deferred taxes, pension and other employee benefit liabilities, derivative instrument liabilities, certain reinsurance payables, payables resulting from purchases of securities that had not yet settled as of the balance sheet date, interest on borrowed funds, long-term operating lease liabilities, finance lease liabilities, certain financing arrangements, deferred gain on business sold through reinsurance and other accrued expenses. 



Other assets and other liabilities on our Consolidated Balance Sheets include guaranteed living benefit (“GLB”) features and remaining guaranteed interest and similar contracts that are carried at fair value, which may be reported in either other assets or other liabilities.  The fair value of these items represents approximate exit price including an estimate for our NPR.  Certain of these features have elements of both insurance benefits and embedded derivatives.  Through our hybrid accounting approach, for reserve calculation purposes we assign product cash flows to the embedded derivative or insurance portion of the reserves based on the life-contingent nature of the benefits.  We classify these GLB reserves embedded derivatives in Level 3 within the hierarchy levels described above in “Fair Value Measurement.”  We report the insurance portion of the reserves in future contract benefits. 



The carrying values of specifically identifiable intangible assets are reviewed at least annually for indicators of impairment in value that are other-than-temporary, including unexpected or adverse changes in the following:  the economic or competitive environments in which the company operates; profitability analyses; cash flow analyses; and the fair value of the relevant business operation.  If there was an indication of impairment, then the discounted cash flow method would be used to measure the impairment, and the carrying value would be adjusted as necessary and reported in impairment of intangibles on our Consolidated Statements of Comprehensive Income (Loss).  Sales force intangibles are attributable to the value of the new business distribution system acquired through business combinations.  These assets are amortized on a straight-line basis over their useful life of 25 years.  Specifically identifiable intangible assets also includes the value of customer relationships acquired (“VOCRA”) and value of distribution agreements (“VODA”) that were acquired through our business combination during 2018.  The carrying values of VOCRA and VODA are amortized using a straight line basis over their weighted average life of 20 years and 13 years, respectively.  See Note 10 for more information regarding specifically identifiable intangible assets acquired.



Property and equipment owned for company use is carried at cost less allowances for depreciation.  Provisions for depreciation of investment real estate and property and equipment owned for company use are computed principally on the straight-line method over the estimated useful lives of the assets, which include buildings, computer hardware and software and other property and equipment.  Certain assets on our Consolidated Balance Sheets are related to finance leases and certain financing arrangements and are depreciated in a manner consistent with our current depreciation policy for owned assets.  We periodically review the carrying value of our long-lived assets, including property and equipment, for impairment whenever events or circumstances indicate that the carrying amount of such assets may not be fully recoverable.  For long-lived assets to be held and used, impairments are recognized when the carrying amount of a long-lived asset is not recoverable and exceeds its fair value.  The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.  An impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.



Long-lived assets to be disposed of by abandonment or in an exchange for a similar productive long-lived asset are classified as held-for-use until they are disposed.  Long-lived assets to be sold are classified as held-for-sale and are no longer depreciated.  Certain criteria have to be met in order for the long-lived asset to be classified as held-for-sale, including that a sale is probable and expected to occur within one year.  Long-lived assets classified as held-for-sale are recorded at the lower of their carrying amount or fair value less cost to sell.



Effective January 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, which resulted in a new measurement and recognition of our long-term operating leases on our Consolidated Balance Sheets.  We lease office space and certain equipment under various long-term lease agreements.  We determine if an arrangement is a lease at inception.  Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the

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commencement date.  Our leases do not provide an implicit rate; therefore, we use our incremental borrowing rate at the commencement date in determining the present value of future payments.  The ROU asset is calculated using the lease liability carrying amount, plus or minus prepaid/accrued lease payments, minus the unamortized balance of lease incentives received, plus unamortized initial direct costs.  Lease terms used to calculate our lease obligation include options when we are reasonably certain that we will exercise such options.  Our lease agreements may contain both lease and non-lease components, which are accounted for separately.  Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.  See Notes 2 and 14 for additional information.



Other assets includes deferred losses on business sold through reinsurance attributable to our 2012 and 2014 reinsurance transactions where we ceded closed blocks of UL contracts with secondary guarantees to Lincoln National Reinsurance Company (Barbados) Limited (“LNBAR”), a wholly-owned subsidiary of LNC.  We are recognizing the losses related to these transactions over a period of 30 years.



Other liabilities includes deferred gains on business sold through reinsurance.  During 2009, we completed a reinsurance transaction whereby we assumed a closed block of term contracts from First Penn-Pacific Life Insurance Company, a wholly-owned subsidiary of LNC.  We are recognizing the gain related to this transaction over a period of 15 years.  During 2012, we completed a reinsurance transaction whereby we ceded a closed block of UL contracts with secondary guarantees to LNBAR.  We are recognizing the gain related to the transaction over a period of 30 years.  During 2013, we completed a reinsurance transaction whereby we ceded a closed block of UL contracts with secondary guarantees to LNBAR.  During 2019, we amended the 2013 reinsurance transaction by recapturing the underlying base policy from LNBAR while continuing to cede the associated riders.  We are recognizing the gain related to this transaction over the expected life of the underlying business, or 20 years.  Effective October 1, 2018, we entered into an annuity reinsurance agreement with Athene Holding Ltd. (“Athene”).  We are recognizing the gain related to this transaction over the period over which the majority of account values are expected to run off, or 20 years. 



Separate Account Assets and Liabilities



We maintain separate account assets, which are reported at fair value.  The related liabilities are reported at an amount equivalent to the separate account assets.  Investment risks associated with market value changes are borne by the contract holders, except to the extent of minimum guarantees made by the Company with respect to certain accounts.



We issue variable annuity contracts through our separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder (traditional variable annuities).  We also issue variable annuity and life contracts through separate accounts that may include various types of guaranteed death benefit (“GDB”), guaranteed withdrawal benefit (“GWB”) and guaranteed income benefit (“GIB”) features.  The GDB features include those where we contractually guarantee to the contract holder either:  return of no less than total deposits made to the contract less any partial withdrawals (“return of net deposits”); total deposits made to the contract less any partial withdrawals plus a minimum return (“minimum return”); or the highest contract value on any contract anniversary date through age 80.  The highest contract value is increased by purchase payments and is decreased by withdrawals subsequent to that anniversary date in the same proportion that withdrawals reduce the contract value.



As discussed in Note 6, certain features of these guarantees are accounted for as embedded derivative reserves, whereas other guarantees are accounted for as benefit reserves.  Other guarantees contain characteristics of both and are accounted for under an approach that calculates the value of the embedded derivative reserve and the benefit reserve based on the specific characteristics of each GLB feature.  We use derivative instruments to hedge our exposure to the risks and earnings volatility that result from the embedded derivatives for living benefits in certain of our variable annuity products.  The change in fair value of these instruments tends to move in the opposite direction of the change in the value of the associated reserves.  The net impact of these changes is reported as a component of realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).



The “market consistent scenarios” used in the determination of the fair value of the GLB liability are similar to those used by an investment bank to value derivatives for which the pricing is not transparent and the aftermarket is nonexistent or illiquid.  We use risk-neutral Monte Carlo simulations in our calculation to value the entire block of guarantees, which involve 100 unique scenarios per policy or approximately 49 million scenarios.  The market consistent scenario assumptions, as of each valuation date, are those we view to be appropriate for a hypothetical market participant.  The market consistent inputs include, but are not limited to, assumptions for capital markets (e.g., implied volatilities, correlation among indices, risk-free swap curve, etc.), policyholder behavior (e.g., policy lapse, rider utilization, etc.), mortality, risk margins, maintenance expenses and a margin for profit.  We believe these assumptions are consistent with those that would be used by a market participant; however, as the related markets develop we will continue to reassess our assumptions.  It is possible that different valuation techniques and assumptions could produce a materially different estimate of fair value.



Future Contract Benefits and Other Contract Holder Funds



Future contract benefits represent liability reserves that we have established and carry based on estimates of how much we will need to pay for future benefits and claims.  Other contract holder funds represent liabilities for fixed account values, including the fixed portion of variable, dividends payable, premium deposit funds, undistributed earnings on participating business and other contract holder funds as well as the carrying value of DFEL discussed above.



The liabilities for future contract benefits and claim reserves for UL and VUL insurance policies consist of contract account balances that are equal to deposits net of withdrawals, excluding surrender charges and fees, plus interest credited, and if applicable an additional reserve for other insurance benefit guarantees.  The liabilities for future insurance contract benefits and claim reserves for traditional life

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policies are computed using assumptions for investment yields, mortality and withdrawals based principally on generally accepted actuarial methods and assumptions at the time of contract issue.  Investment yield assumptions for traditional direct individual life reserves for all contracts range from 2.25% to 7.75% depending on the time of contract issue.  The investment yield assumptions for immediate and deferred paid-up annuities range from 1.25% to 12.75%.  These investment yield assumptions are intended to represent an estimation of the interest rate experience for the period that these contract benefits are payable.

 

The liabilities for future claim reserves for variable annuity products containing GDB features are calculated by estimating the present value of total expected benefit payments over the life of the contract from inception divided by the present value of total expected assessments over the life of the contract (“benefit ratio”) multiplied by the cumulative assessments recorded from the contract inception through the balance sheet date less the cumulative GDB payments plus interest on the liability.  The change in the liability for a period is the benefit ratio multiplied by the assessments recorded for the period less GDB claims paid in the period plus interest.  As experience or assumption changes result in a change in expected benefit payments or assessments, the benefit ratio is unlocked, that is, recalculated using the updated expected benefit payments and assessments over the life of the contract since inception.  The revised benefit ratio is then applied to the liability calculation described above, with the resulting change in liability reported in benefits on our Consolidated Statements of Comprehensive Income (Loss).



The liability for future claim reserves for long-term disability contracts for incurred and reported claims are calculated based on assumptions as to interest, claim resolution rates and offsets for other insurance including social security.  Claim resolution rate assumptions and social security offsets are based on our actual experience.  The interest rate assumptions used for discounting claim reserves are based on projected portfolio yield rates, after consideration for defaults and investment expenses, for assets supporting the liabilities.  The incurred but not reported claim reserves are based on our experiences as to the reporting lags and ultimate loss experience.  Claim reserves are subject to revision as current claim experience and projections of future factors affecting claim experience change.  Claim reserves do not include a provision for adverse deviation.



With respect to our future contract benefits and other contract holder funds, we continually review overall reserve position, reserving techniques and reinsurance arrangements.  As experience develops and new information becomes known, liabilities are adjusted as deemed necessary.  The effects of changes in estimates are included in the operating results for the period in which such changes occur.



The business written or assumed by us includes participating life insurance contracts, under which the contract holder is entitled to share in the earnings of such contracts via receipt of dividends.  The dividend scale for participating policies is reviewed annually and may be adjusted to reflect recent experience and future expectations.  As of December 31, 2019 and 2018, participating policies comprised less than 1% of the face amount of business in force, and dividend expenses were $51 million, $56 million and $57 million for the years ended December 31, 2019, 2018 and 2017, respectively.



Liabilities for the secondary guarantees on UL-type products are calculated by multiplying the benefit ratio by the cumulative assessments recorded from contract inception through the balance sheet date less the cumulative secondary guarantee benefit payments plus interest.  If experience or assumption changes result in a new benefit ratio, the reserves are adjusted to reflect the changes in a manner similar to the unlocking of DAC, VOBA, DFEL and DSI.  The accounting for secondary guarantee benefits impacts, and is impacted by, EGPs used to calculate amortization of DAC, VOBA, DFEL and DSI.



Certain of our variable annuity contracts reported within future contract benefits contain GLB reserves embedded derivatives, a portion of which may be reported in either other assets or other liabilities, and include guaranteed interest and similar contracts, that are carried at fair value on our Consolidated Balance Sheets, which represents approximate exit price including an estimate for our NPR.  Certain of these features have elements of both insurance benefits and embedded derivatives.  Through our hybrid accounting approach, for reserve calculation purposes we assign product cash flows to the embedded derivative or insurance portion of the reserves based on the life-contingent nature of the benefits.  We classify these GLB reserves embedded derivatives items in Level 3 within the hierarchy levels described above in “Fair Value Measurement.”  We report the insurance portion of the reserves in future contract benefits. 



The fair value of our indexed annuity contracts is based on their approximate surrender values.



Borrowed Funds



Our short-term borrowings are defined as borrowings with contractual or expected maturities of one year or less.  Long-term borrowings have contractual or expected maturities greater than one year.



Contingencies and Commitments



Contingencies arising from environmental remediation costs, regulatory judgments, claims, assessments, guarantees, litigation, recourse reserves, fines, penalties and other sources are recorded when deemed probable and reasonably estimable.



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Fee Income



Fee income for investment and interest-sensitive life insurance contracts consists of asset-based fees, percent of premium charges, contract administration charges and surrender charges that are assessed against contract holder account balances.  Investment products consist primarily of individual and group variable and fixed deferred annuities.  Interest-sensitive life insurance products include UL insurance, VUL insurance and other interest-sensitive life insurance policies.  These products include life insurance sold to individuals, corporate-owned life insurance and bank-owned life insurance. 



In bifurcating the embedded derivative of our GLB features on our variable annuity products, we attribute to the embedded derivative the portion of total fees collected from the contract holder that relate to the GLB riders (the “attributed fees”), which are not reported within fee income on our Consolidated Statements of Comprehensive Income (Loss).  These attributed fees represent the present value of future claims expected to be paid for the GLB at the inception of the contract plus a margin that a theoretical market participant would include for risk/profit and are reported within realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).



The timing of revenue recognition as it relates to fees assessed on investment contracts is determined based on the nature of such fees.  Asset-based fees, cost of insurance and contract administration charges are assessed on a daily or monthly basis and recognized as revenue as performance obligations are met, over the period underlying customer assets are owned or advisory services are provided.  Wholesaling-related 12b-1 fees received from separate account fund sponsors as compensation for servicing the underlying mutual funds are recorded as revenues based on a contractual percentage of the market value of mutual fund assets over the period shares are owned by customers.  Net investment advisory fees related to asset management of certain separate account funds are recorded as revenues based on a contractual percentage of the customer’s managed assets over the period advisory services are provided.  Percent of premium charges are assessed at the time of premium payment and recognized as revenue when assessed and earned.  Certain amounts assessed that represent compensation for services to be provided in future periods are reported as unearned revenue and recognized in income over the periods benefited.  Surrender charges are recognized upon surrender of a contract by the contract holder in accordance with contractual terms.



For investment and interest-sensitive life insurance contracts, the amounts collected from contract holders are considered deposits and are not included in revenue.



Insurance Premiums



Our insurance premiums for traditional life insurance and group insurance products are recognized as revenue when due from the contract holder.  Our traditional life insurance products include those products with fixed and guaranteed premiums and benefits and consist primarily of whole life insurance, limited-payment life insurance, term life insurance and certain annuities with life contingencies.  Our group insurance products consist primarily of term life, disability and dental.



Net Investment Income



We earn investment income on the underlying general account investments supporting our fixed products less related expenses.  Dividends and interest income, recorded in net investment income, are recognized when earned.  Amortization of premiums and accretion of discounts on investments in debt securities are reflected in net investment income over the contractual terms of the investments in a manner that produces a constant effective yield. 



For CLOs and MBS, included in the trading and fixed maturity AFS securities portfolios, we recognize income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities.  When actual prepayments differ significantly from originally anticipated prepayments, the retrospective effective yield is recalculated to reflect actual payments to date and a catch up adjustment is recorded in the current period.  In addition, the new effective yield, which reflects anticipated future payments, is used prospectively.  Any adjustments resulting from changes in effective yield are reflected in net investment income on our Consolidated Statements of Comprehensive Income (Loss).



Realized Gain (Loss)



Realized gain (loss) includes realized gains and losses from the sale of investments, write-downs for other-than-temporary impairments of investments, changes in fair value of equity securities, certain derivative and embedded derivative gains and losses, gains and losses on the sale of subsidiaries and businesses and net gains and losses on reinsurance embedded derivatives and trading securities.  Realized gains and losses on the sale of investments are determined using the specific identification method.  Realized gain (loss) is recognized in net income, net of associated amortization of DAC, VOBA, DSI and DFEL.  Realized gain (loss) is also net of allocations of investment gains and losses to certain contract holders and certain funds withheld on reinsurance arrangements for which we have a contractual obligation.

   

Other Revenues



Other revenues consists primarily of fees attributable to broker-dealer services recorded as performance obligations are met, either at the time of sale or over time based on a contractual percentage of customer account values, changes in the market value of our seed capital investments, and proceeds from reinsurance recaptures.  The broker-dealer services primarily relate to our retail sales network and consist

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of commission revenue for the sale of non-affiliated securities recorded on a trade date basis and advisory fee income.  Advisory fee income is asset-based revenues recorded as earned based on a contractual percentage of customer account values.  Other revenues earned by our Group Protection segment consist of fees from administrative services performed, which are recognized as performance obligations are met over the terms of the underlying agreements.



Interest Credited



We credit interest to our contract holder account balances based on the contractual terms supporting our products. 



Benefits



Benefits for UL and other interest-sensitive life insurance products include benefit claims incurred during the period in excess of contract account balances.  Benefits also include the change in reserves for life insurance products with secondary guarantee benefits, annuity products with guaranteed death and living benefits and certain annuities with life contingencies.  For traditional life, group health and disability income products, benefits are recognized when incurred in a manner consistent with the related premium recognition policies. 



Strategic Digitization Expense



Strategic digitization expense consists primarily of costs related to our enterprise-wide digitization initiative.

 

Pension and Other Postretirement Benefit Plans



Pursuant to the accounting rules for our obligations to employees and agents under our various pension and other postretirement benefit plans, we are required to make a number of assumptions to estimate related liabilities and expenses.  The mortality assumption is based on actual and anticipated plan experience, determined using acceptable actuarial methods.  We use assumptions for the weighted-average discount rate and expected return on plan assets to estimate pension expense.  The discount rate assumptions are determined using an analysis of current market information and the projected benefit flows associated with these plans.  The expected long-term rate of return on plan assets is based on historical and projected future rates of return on the funds invested in the plan.  The calculation of our accumulated postretirement benefit obligation also uses an assumption of weighted-average annual rate of increase in the per capita cost of covered benefits, which reflects a health care cost trend rate. 



Stock-Based Compensation



In general, we expense the fair value of stock awards included in our incentive compensation plans.  As of the date LNC’s Board of Directors approves stock awards, the fair value of stock options is determined using a Black-Scholes options valuation methodology, and the fair value of other stock awards is based upon the market value of the stock.  The fair value of the awards is expensed over the performance or service period, which generally corresponds to the vesting period, and is recognized as an increase to common stock in stockholder’s equity.  We apply an estimated forfeiture rate to our accrual of compensation cost. We classify certain stock awards as liabilities.  For these awards, the settlement value is classified as a liability on our Consolidated Balance Sheets, and the liability is marked-to-market through net income at the end of each reporting period.  Stock-based compensation expense is reflected in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss). 



Interest and Debt Expense



Interest expense on our short-term and long-term debt is recognized as due and any associated premiums, discounts and costs are amortized (accreted) over the term of the related borrowing utilizing the effective interest method.  In addition, gains or losses related to certain derivative instruments associated with debt are recognized in interest and debt expense during the period of the change.



Income Taxes



LNC files a U.S. consolidated income tax return that includes us and LNC’s other eligible subsidiaries.  Ineligible subsidiaries file separate individual corporate tax returns.  Deferred income taxes are recognized, based on enacted rates, when assets and liabilities have different values for financial statement and tax reporting purposes.  A valuation allowance is recorded to the extent required.  Considerable judgment and the use of estimates are required in determining whether a valuation allowance is necessary and, if so, the amount of such valuation allowance.  In evaluating the need for a valuation allowance, we consider many factors, including:  the nature and character of the deferred tax assets and liabilities; taxable income in prior carryback years; future reversals of temporary differences; the length of time carryovers can be utilized; and any tax planning strategies we would employ to avoid a tax benefit from expiring unused. 

18

 

 

2.  New Accounting Standards



Adoption of New Accounting Standards



The following table provides a description of our adoption of new ASUs issued by the FASB and the impact of the adoption on our financial statements. ASUs not listed below were assessed and determined to be either not applicable or insignificant in presentation or amount. 



 

 

 

Standard

Description

Date of Adoption

Effect on Financial Statements or Other Significant Matters

ASU 2016-02, Leases and all related amendments

This standard establishes a new accounting model for leases.  Lessees will recognize most leases on the balance sheet as a ROU asset and a related lease liability.  The lease liability is measured as the present value of the lease payments over the lease term with the ROU asset measured at the lease liability amount and including adjustments for certain lease incentives and initial direct costs.  Lease expense recognition will continue to differentiate between finance leases and operating leases resulting in a similar pattern of lease expense recognition as under current GAAP.  This ASU permits a modified retrospective adoption approach that includes a number of optional practical expedients that entities may elect upon adoption.  Early adoption is permitted.

January 1, 2019

We adopted this standard and all related amendments, which resulted in the recognition of $171 million in ROU assets and $176 million in operating lease liabilities reported in other assets and other liabilities, respectively, on our Consolidated Balance Sheets as of January 1, 2019.  Comparative periods continue to be measured and presented under historical guidance, and only the period of adoption is subject to this ASU.  Also, on transition, we have elected not to reassess: 1) whether expired or existing contracts contain a lease under the new definition of a lease; 2) lease classification for expired or existing leases; and 3) whether previously capitalized initial direct costs would qualify for capitalization under this ASU.  Additionally, there is not a significant difference in our pattern of lease expense recognition under this ASU, and there is no impact on cash flows.  For more information, see Note 1.

ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities

These amendments require an entity to shorten the amortization period for certain callable debt securities held at a premium so that the premium is amortized to the earliest call date.  Early adoption is permitted, and the ASU requires adoption under a modified retrospective basis through a cumulative effect adjustment to the beginning balance of retained earnings. 

January 1, 2019

We adopted the provisions of this ASU, which did not result in a change to our existing practices; therefore, no cumulative effect adjustment was recorded.  As such, there was no impact on our consolidated financial condition and results of operations.

ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities

These amendments change both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.  These amendments retain the threshold of highly effective for hedging relationships, remove the requirement to bifurcate between the portions of the hedging relationship that are effective and ineffective, record hedge item and hedging instrument results in the same financial statement line item, require quantitative assessment initially for all hedging relationships unless the hedging relationship meets the definition of either the shortcut method or critical terms match method and allow the contractual specified index rate to be designated as the hedged risk in a cash flow hedge of interest rate risk of a variable rate financial instrument.  These amendments also eliminate the benchmark interest rate concept for variable rate instruments.  Early adoption is permitted.  

January 1, 2019

We adopted the provisions of this ASU, which did not have an impact on our consolidated financial condition and results of operations.  This ASU does result in our modification of certain hedge documentation and effectiveness methods, which we have reflected in applicable disclosures in Note 6.



19

 

 

Future Adoption of New Accounting Standards



The following table provides a description of future adoptions of new accounting standards that may have an impact on our financial statements when adopted:



 

 

 

Standard

Description

Projected Date of Adoption

Effect on Financial Statements or Other Significant Matters

ASU 2016-13, Measurement of Credit Losses on Financial Instruments and related amendments

These amendments adopt a new model in ASC Topic 326 to measure and recognize credit losses for most financial assets.  The ASU requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected over the life of the asset using an allowance for credit losses. Changes in the allowance are charged to earnings.  The measurement of expected credit losses is based on relevant information about past events, including historical experience, as well as current economic conditions and reasonable and supportable forecasts that affect the collectability of the financial asset.  The method used to measure estimated credit losses for fixed maturity AFS securities will be unchanged from current GAAP; however, the amendments require credit losses to be recognized through an allowance rather than as a reduction to the amortized cost of those securities.  The amendments will permit entities to recognize improvements in credit loss estimates on fixed maturity AFS securities by reducing the allowance account immediately through earnings.  The amendments will be adopted through a cumulative effect adjustment to the beginning balance of retained earnings as of the first reporting period in which the amendments are effective.  Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein.             

January 1, 2020

The adoption of this standard and related amendments will result in the recognition of a cumulative effect adjustment that is not expected to be material to our retained earnings, to record allowances for credit losses as of the date of adoption, primarily related to commercial and residential mortgage loans, as well as reinsurance recoverables. 

ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging and Topic 825, Financial Instruments

These amendments clarify the measurement, recognition and presentation of the allowance for credit losses on accrued interest receivable balances; the inclusion of recoveries when estimating the allowance for credit losses; the inclusion of all ASC Topic 944 – Financial Services – Insurance reinsurance recoverables within the scope of ASC 326-20; and provide additional targeted clarifications on the calculation of the allowance for credit losses.

These amendments also make targeted clarifications to ASC Topics 815 and 825.  Early adoption is permitted.

January 1, 2020

Our adoption of ASU 2016-13 and related amendments is discussed above.  The adoption of the remainder of this guidance will not have a material impact on our consolidated financial condition and results of operations.

ASU 2019-05, Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief

The amendments provide entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments – Credit Losses – Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments – Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of ASC Topic 326.

January 1, 2020

We will recognize a cumulative effect increase to retained earnings of approximately $14 million, after-tax, to elect the fair value option for certain mortgage loans in connection with our adoption of ASC Topic 326. 



 

 

 

20

 

 

Standard

Description

Projected Date of Adoption

Effect on Financial Statements or Other Significant Matters

ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts and related amendments

These amendments make changes to the accounting and reporting for long-duration contracts issued by an insurance entity that will significantly change how insurers account for long-duration contracts, including how they measure, recognize and make disclosures about insurance liabilities and DAC.  Under this ASU, insurers will be required to review cash flow assumptions at least annually and update them if necessary.  They also will have to make quarterly updates to the discount rate assumptions they use to measure the liability for future policyholder benefits.  The ASU creates a new category of market risk benefits (i.e., features that protect the contract holder from capital market risk and expose the insurer to that risk) that insurers will have to measure at fair value.  The ASU provides various transition methods by topic that entities may elect upon adoption.  The ASU is currently effective January 1, 2022, and early adoption is permitted.    

January 1, 2022

We are currently evaluating the impact of adopting this ASU on our consolidated financial condition and results of operations. 

 

3.  Acquisition



On May 1, 2018, LNC and LNL completed the acquisition from Liberty Mutual Insurance Company of 100% of the capital stock of Liberty Life, an operator of a group benefits business (the “Liberty Group Business”) and an individual life and individual and group annuity business (the “Liberty Life Business”).  The acquisition expanded the scale and capabilities of the Group Protection business while further diversifying the Company’s sources of earnings.



In connection with the acquisition and pursuant to the Master Transaction Agreement (“MTA”), dated January 18, 2018, which is attached as Exhibit 10.3 to this Form 10-K, Liberty Life sold the Liberty Life Business on May 1, 2018, by entering into reinsurance agreements and related ancillary documents (including administrative services agreements and transition services agreements) with Protective Life Insurance Company and its wholly-owned subsidiary, Protective Life and Annuity Insurance Company (together with Protective Life Insurance Company, “Protective”), providing for the reinsurance and administration of the Liberty Life Business.



We recognized $85 million of acquisition-related costs, pre-tax, for the year ended December 31, 2018.  These costs were included in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss).



21

 

 

In the year following the May 1, 2018 acquisition date, we adjusted assets acquired by $(5) million and liabilities acquired by $23 million for an increase in goodwill of $28 million.  Under the terms of the MTA, a final balance sheet will be agreed upon at a later date.  The following table presents the adjusted fair values (in millions) of the net assets acquired related to the Liberty Group Business:





 

 

 



 

 

 



Adjusted

 



Fair Value

 

Assets

 

 

 

Investments

$

 2,493 

 

Mortgage loans on real estate

 

 658 

 

Cash and invested cash

 

 107 

 

Reinsurance recoverables

 

 76 

 

Premiums and fees receivable

 

 83 

 

Accrued investment income

 

 24 

 

Other intangible assets acquired

 

 640 

 

Other assets acquired

 

 142 

 

Separate account assets

 

 99 

 

Total assets acquired

$

 4,322 

 



 

 

 

Liabilities

 

 

 

Future contract benefits

$

 2,930 

 

Other contract holder funds

 

 46 

 

Other liabilities acquired

 

 140 

 

Separate account liabilities

 

 99 

 

Total liabilities assumed

$

 3,215 

 



 

 

 

Net identifiable assets acquired

$

 1,107 

 

Goodwill

 

 410 

 

Net assets acquired

$

 1,517 

 



Financial Information



Since the acquisition date of May 1, 2018, the revenues and net income of the business acquired have been included in our Consolidated Statements of Comprehensive Income (Loss) in the Group Protection segment and were $1.5 billion and $36 million, respectively, for the period ended December 31, 2018.



The following unaudited pro forma condensed consolidated results of operations of the Company assume that the acquisition of Liberty Life was completed on January 1, 2017 (in millions):





 

 

 

 

 

 

 



 

 



 

For the Years Ended

 



 

December 31,

 



 

2018

 

2017

 

Revenue

 

$

 16,097 

 

$

 15,080 

 

Net income

 

 

 1,642 

 

 

 2,034 

 



 

 

 

 

 

 

 



Pro forma adjustments include the revenue and net income of the acquired business for each period as well as amortization of identifiable intangible assets acquired and the fair value adjustment to acquired insurance reserves and investments.  Other pro forma adjustments include the impact of reflecting acquisition and integration costs and investment expenses directly attributable to the business combination in 2017 instead of in 2018.  Pro forma adjustments do not include retrospective adjustments to defer and amortize acquisition costs as would be recorded under our accounting policy.

22

 

 

4.  Variable Interest Entities



Unconsolidated VIEs



Reinsurance Related Notes



Effective October 1, 2017, our captive reinsurance subsidiary, the Lincoln Reinsurance Company of Vermont VI, restructured the $275 million, long-term surplus note which was originally issued to a non-affiliated VIE in October 2015 in exchange for two corporate bond AFS securities of like principal and duration.  The activities of the VIE are primarily to acquire, hold and issue notes and loans and to pay and collect interest on the notes and loans.  The outstanding principal balance of the long-term surplus note is variable in nature; moving concurrently with any variability in the face amount of the corporate bond AFS securities.  We have concluded that we are not the primary beneficiary of the non-affiliated VIE because we do not have power over the activities that most significantly affect its economic performance.  As of December 31, 2019, the principal balance of the long-term surplus note was zero and we do not currently have any exposure to this VIE. 



Structured Securities



Through our investment activities, we make passive investments in structured securities issued by VIEs for which we are not the manager.  These structured securities include our RMBS, CMBS, CLOs and CDOs.  We have not provided financial or other support with respect to these VIEs other than our original investment.  We have determined that we are not the primary beneficiary of these VIEs due to the relative size of our investment in comparison to the principal amount of the structured securities issued by the VIEs and the level of credit subordination that reduces our obligation to absorb losses or right to receive benefits.  Our maximum exposure to loss on these structured securities is limited to the amortized cost for these investments.  We recognize our variable interest in these VIEs at fair value on our Consolidated Balance Sheets.  For information about these structured securities, see Note 5.



Limited Partnerships and Limited Liability Companies



We invest in certain LPs and limited liability companies (“LLCs”), including qualified affordable housing projects, that we have concluded are VIEs.  We do not hold any substantive kick-out or participation rights in the LPs and LLCs, and we do not receive any performance fees or decision maker fees from the LPs and LLCs.  Based on our analysis of the LPs and LLCs, we are not the primary beneficiary of the VIEs as we do not have the power to direct the most significant activities of the LPs and LLCs.



The carrying amounts of our investments in the LPs and LLCs are recognized in other investments on our Consolidated Balance Sheets and were $1.9 billion and $1.7 billion as of December 31, 2019 and 2018, respectively.  Included in these carrying amounts are our investments in qualified affordable housing projects, which were $13 million and $20 million as of December 31, 2019 and 2018, respectively.  We do not have any contingent commitments to provide additional capital funding to these qualified affordable housing projects.  We receive returns from these qualified affordable housing projects in the form of income tax credits and other tax benefits, which are recognized in federal income tax expense (benefit) on our Consolidated Statements of Comprehensive Income (Loss) and were $2 million and $1 million for the years ended December 31, 2019 and 2018, respectively. 



Our exposure to loss is limited to the capital we invest in the LPs and LLCs, and there have been no indicators of impairment that would require us to recognize an impairment loss related to the LPs and LLCs as of December 31, 2019.



23

 

 

5.  Investments



Fixed Maturity AFS Securities



The amortized cost, gross unrealized gains, losses and OTTI and fair value of fixed maturity AFS securities (in millions) were as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2019

 



Amortized

 

Gross Unrealized

 

 

 

 

Fair

 



Cost

 

Gains

 

Losses

 

OTTI (1)

 

Value

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 78,875

 

$

 9,071

 

$

 172

 

$

 (5

)

$

 87,779

 

U.S. government bonds

 

 355

 

 

 48

 

 

 -

 

 

 -

 

 

 403

 

State and municipal bonds

 

 4,605

 

 

 1,087

 

 

 7

 

 

 -

 

 

 5,685

 

Foreign government bonds

 

 326

 

 

 62

 

 

 -

 

 

 -

 

 

 388

 

RMBS

 

 2,820

 

 

 179

 

 

 9

 

 

 (18

)

 

 3,008

 

CMBS

 

 1,038

 

 

 45

 

 

 1

 

 

 (1

)

 

 1,083

 

ABS

 

 4,803

 

 

 62

 

 

 17

 

 

 (35

)

 

 4,883

 

Hybrid and redeemable preferred securities

 

 485

 

 

 79

 

 

 20

 

 

 -

 

 

 544

 

Total fixed maturity AFS securities

$

 93,307

 

$

 10,633

 

$

 226

 

$

 (59

)

$

 103,773

 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2018

 



Amortized

 

Gross Unrealized

 

 

 

 

Fair

 



Cost

 

Gains

 

Losses

 

OTTI (1)

 

Value

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 78,837

 

$

 2,871

 

$

 2,167

 

$

 (8

)

$

 79,549

 

U.S. government bonds

 

 361

 

 

 27

 

 

 2

 

 

 -

 

 

 386

 

State and municipal bonds

 

 4,498

 

 

 703

 

 

 17

 

 

 -

 

 

 5,184

 

Foreign government bonds

 

 402

 

 

 42

 

 

 -

 

 

 -

 

 

 444

 

RMBS

 

 3,099

 

 

 113

 

 

 61

 

 

 (13

)

 

 3,164

 

CMBS

 

 810

 

 

 6

 

 

 16

 

 

 (3

)

 

 803

 

ABS

 

 2,644

 

 

 45

 

 

 30

 

 

 (19

)

 

 2,678

 

Hybrid and redeemable preferred securities

 

 568

 

 

 44

 

 

 33

 

 

 -

 

 

 579

 

Total fixed maturity AFS securities

$

 91,219

 

$

 3,851

 

$

 2,326

 

$

 (43

)

$

 92,787

 



(1)

Includes unrealized (gains) and losses on credit-impaired securities related to changes in the fair value of such securities subsequent to the impairment measurement date.



The amortized cost and fair value of fixed maturity AFS securities by contractual maturities (in millions) as of December 31, 2019, were as follows:





 

 

 

 

 

 



 

 

 

 

 

 



Amortized

 

Fair

 



Cost

 

Value

 

Due in one year or less

$

 2,714 

 

$

 2,699 

 

Due after one year through five years

 

 15,022 

 

 

 15,578 

 

Due after five years through ten years

 

 17,440 

 

 

 18,854 

 

Due after ten years

 

 49,470 

 

 

 57,668 

 

Subtotal

 

 84,646 

 

 

 94,799 

 

Structured securities (RMBS, CMBS, ABS)

 

 8,661 

 

 

 8,974 

 

Total fixed maturity AFS securities

$

 93,307 

 

$

 103,773 

 



Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations.



24

 

 

The fair value and gross unrealized losses, including the portion of OTTI recognized in OCI, of fixed maturity AFS securities (dollars in millions), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2019

 

 

Less Than or Equal

 

Greater Than

 

 

 

 

 

 

 

 



to Twelve Months

 

Twelve Months

 

Total

 



 

 

Gross 

 

 

 

Gross 

 

 

 

 

 

Gross 

 

 

 

Unrealized

 

Unrealized

 

 

 

Unrealized



Fair

Losses and

Fair

Losses and

Fair

 

Losses and



Value

 

OTTI

 

Value

 

OTTI

 

Value

 

 

OTTI

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 2,827 

 

$

 44 

 

$

 1,381 

 

$

 131 

 

$

 4,208 

 

 

$

 175 

 

State and municipal bonds

 

 316 

 

 

 7 

 

 

 18 

 

 

 -

 

 

 334 

 

 

 

 7 

 

RMBS

 

 471 

 

 

 9 

 

 

 15 

 

 

 -

 

 

 486 

 

 

 

 9 

 

CMBS

 

 48 

 

 

 1 

 

 

 4 

 

 

 -

 

 

 52 

 

 

 

 1 

 

ABS

 

 1,791 

 

 

 8 

 

 

 300 

 

 

 9 

 

 

 2,091 

 

 

 

 17 

 

Hybrid and redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preferred securities

 

 29 

 

 

 1 

 

 

 102 

 

 

 19 

 

 

 131 

 

 

 

 20 

 

Total fixed maturity AFS securities

$

 5,482 

 

$

 70 

 

$

 1,820 

 

$

 159 

 

$

 7,302 

 

 

$

 229 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total number of fixed maturity AFS securities in an unrealized loss position

 

 

 

 882 

 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2018

 

 

Less Than or Equal

 

Greater Than

 

 

 

 

 

 

 

 



to Twelve Months

 

Twelve Months

 

Total

 



 

 

Gross 

 

 

 

Gross 

 

 

 

 

 

Gross 

 

 

 

Unrealized

 

Unrealized

 

 

 

Unrealized



Fair

Losses and

Fair

Losses and

Fair

 

Losses and



Value

 

OTTI

 

Value

 

OTTI

 

Value

 

 

OTTI

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 30,947 

 

$

 1,464 

 

$

 7,023 

 

$

 704 

 

$

 37,970 

 

 

$

 2,168 

 

U.S. government bonds

 

 70 

 

 

 1 

 

 

 23 

 

 

 1 

 

 

 93 

 

 

 

 2 

 

State and municipal bonds

 

 376 

 

 

 7 

 

 

 92 

 

 

 10 

 

 

 468 

 

 

 

 17 

 

RMBS

 

 436 

 

 

 9 

 

 

 796 

 

 

 55 

 

 

 1,232 

 

 

 

 64 

 

CMBS

 

 470 

 

 

 11 

 

 

 82 

 

 

 5 

 

 

 552 

 

 

 

 16 

 

ABS

 

 1,237 

 

 

 23 

 

 

 239 

 

 

 16 

 

 

 1,476 

 

 

 

 39 

 

Hybrid and redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preferred securities

 

 94 

 

 

 6 

 

 

 131 

 

 

 27 

 

 

 225 

 

 

 

 33 

 

Total fixed maturity AFS securities

$

 33,630 

 

$

 1,521 

 

$

 8,386 

 

$

 818 

 

$

 42,016 

 

 

$

 2,339 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total number of fixed maturity AFS securities in an unrealized loss position

 

 

 

 3,360 

 



25

 

 

The fair value, gross unrealized losses, the portion of OTTI recognized in OCI (in millions) and number of fixed maturity AFS securities where the fair value had declined and remained below amortized cost by greater than 20% were as follows:







 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2019

 



 

 

 

 

 

 

 

 

 

 

Number

 



Fair

 

Gross Unrealized

 

 

of

 



Value

 

Losses

 

OTTI

 

Securities (1)

Less than six months

$

 15 

 

$

 5 

 

$

 -

 

 

 

 7 

 

Six months or greater, but less than nine months

 

 10 

 

 

 3 

 

 

 -

 

 

 

 4 

 

Twelve months or greater

 

 130 

 

 

 74 

 

 

 -

 

 

 

 31 

 

Total

$

 155 

 

$

 82 

 

$

 -

 

 

 

 42 

 







 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2018

 



 

 

 

 

 

 

 

 

 

 

Number

 



Fair

 

Gross Unrealized

 

 

of

 



Value

 

Losses

 

OTTI

 

Securities (1)

Less than six months

$

 389 

 

$

 122 

 

$

 1 

 

 

 

 44 

 

Six months or greater, but less than nine months

 

 96 

 

 

 49 

 

 

 -

 

 

 

 11 

 

Nine months or greater, but less than twelve months

 

 11 

 

 

 8 

 

 

 -

 

 

 

 2 

 

Twelve months or greater

 

 138 

 

 

 70 

 

 

 8 

 

 

 

 32 

 

Total

$

 634 

 

$

 249 

 

$

 9 

 

 

 

 89 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



(1)

We may reflect a security in more than one aging category based on various purchase dates. 



We regularly review our investment holdings for OTTI.  Our gross unrealized losses, including the portion of OTTI recognized in OCI, on fixed maturity AFS securities decreased by $2.1 billion for the year ended December 31, 2019.  As discussed further below, we believe the unrealized loss position as of December 31, 2019, did not represent OTTI as (i) we did not intend to sell these fixed maturity AFS securities; (ii) it is not more likely than not that we will be required to sell the fixed maturity AFS securities before recovery of their amortized cost basis; and (iii) the estimated future cash flows were equal to or greater than the amortized cost basis of the debt securities.



Based upon this evaluation as of December 31, 2019, management believes we have the ability to generate adequate amounts of cash from our normal operations (e.g., insurance premiums, fee income and investment income) to meet cash requirements with a prudent margin of safety without requiring the sale of our temporarily-impaired securities. 



As of December 31, 2019, the unrealized losses associated with our corporate bond securities were attributable primarily to widening credit spreads and rising interest rates since purchase.  We performed a detailed analysis of the financial performance of the underlying issuers and determined that we expected to recover the entire amortized cost for each temporarily-impaired security. 



As of December 31, 2019, the unrealized losses associated with our MBS and ABS were attributable primarily to widening credit spreads and rising interest rates since purchase.  We assessed for credit impairment using a cash flow model that incorporates key assumptions including default rates, severities and prepayment rates.  We estimated losses for a security by forecasting the underlying loans in each transaction.  The forecasted loan performance was used to project cash flows to the various tranches in the structure, as applicable.  Our forecasted cash flows also considered, as applicable, independent industry analyst reports and forecasts and other independent market data.  Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared to our subordination or other credit enhancement, we expected to recover the entire amortized cost of each temporarily-impaired security. 



As of December 31, 2019, the unrealized losses associated with our hybrid and redeemable preferred securities were attributable primarily to wider credit spreads caused by illiquidity in the market and subordination within the capital structure, as well as credit risk of underlying issuers.  For our hybrid and redeemable preferred securities, we evaluated the financial performance of the underlying issuers based upon credit performance and investment ratings and determined that we expected to recover the entire amortized cost of each temporarily-impaired security. 



26

 

 

Changes in the amount of credit loss of OTTI recognized in net income (loss) where the portion related to other factors was recognized in OCI (in millions) on fixed maturity AFS securities were as follows





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Balance as of beginning-of-year

$

 337

 

$

 358

 

$

 411

 

Increases attributable to:

 

 

 

 

 

 

 

 

 

Credit losses on securities for which an

 

 

 

 

 

 

 

 

 

OTTI was not previously recognized

 

 13

 

 

 5

 

 

 13

 

Credit losses on securities for which an

 

 

 

 

 

 

 

 

 

OTTI was previously recognized

 

 2

 

 

 2

 

 

 7

 

Decreases attributable to:

 

 

 

 

 

 

 

 

 

Securities sold, paid down or matured

 

 (148

)

 

 (28

)

 

 (73

)

Balance as of end-of-year

$

 204

 

$

 337

 

$

 358

 



During 2019, 2018 and 2017, we recorded credit losses on securities for which an OTTI was not previously recognized as we determined the cash flows expected to be collected would not be sufficient to recover the entire amortized cost basis of the debt security.  The credit losses we recorded on securities for which an OTTI was not previously recognized were attributable primarily to one or a combination of the following reasons:



·

Failure of the issuer of the security to make scheduled payments;

·

Deterioration of creditworthiness of the issuer;

·

Deterioration of conditions specifically related to the security;

·

Deterioration of fundamentals of the industry in which the issuer operates; and

·

Deterioration of the rating of the security by a rating agency.



We recognize the OTTI attributed to the noncredit portion as a separate component in OCI referred to as unrealized OTTI on fixed maturity AFS securities. 









Determination of Credit Losses on Corporate Bonds



As of December 31, 2019 and 2018, we reviewed our corporate bond portfolio for potential shortfalls in contractual principal and interest based on numerous subjective and objective inputs.  The factors used to determine the amount of credit loss for each individual security, include, but are not limited to, near-term risk, substantial discrepancy between book and market value, sector or company-specific volatility, negative operating trends and trading levels wider than peers. 



Credit ratings express opinions about the credit quality of a security.  Securities rated investment grade, that is those rated BBB- or higher by Standard & Poor’s (“S&P”) Rating Services or Baa3 or higher by Moody’s Investors Service (“Moody’s”), are generally considered by the rating agencies and market participants to be low credit risk.  As of December 31, 2019 and 2018, 96% of the fair value of our corporate bond portfolio was rated investment grade.  As of December 31, 2019 and 2018, the portion of our corporate bond portfolio rated below investment grade had an amortized cost of $3.1 billion and a fair value of $3.1 billion and $2.9 billion, respectively.  Based upon the analysis discussed above, we believed as of December 31, 2019 and 2018, that we would recover the amortized cost of each corporate bond.



Determination of Credit Losses on MBS and ABS



As of December 31, 2019 and 2018, default rates were projected by considering underlying MBS and ABS loan performance and collateral type.  Projected default rates on existing delinquencies vary depending on loan type and severity of delinquency status.  In addition, we estimate the potential contributions of currently performing loans that may become delinquent in the future based on the change in delinquencies and loan liquidations experienced in the recent history.  Finally, we develop a default rate timing curve by aggregating the defaults for all loans in the pool (delinquent loans, foreclosure and real estate owned and new delinquencies from currently performing loans) and the associated loan-level loss severities. 



We use certain available loan characteristics such as lien status, loan sizes and occupancy to estimate the loss severity of loans.  Second lien loans are assigned 100% severity, if defaulted.  For first lien loans, we assume a minimum of 30% severity, with higher severity assumed for investor properties and further adjusted by housing price assumptions.  With the default rate timing curve and loan-level loss severity, we derive the future expected credit losses.

27

 

 

Trading Securities



Trading securities at fair value (in millions) consisted of the following:







 

 

 

 

 

 



 

 

 

 

 

 



As of December 31,

 



2019

 

2018

 

Fixed maturity securities:

 

 

 

 

 

 

Corporate bonds

$

 2,877 

 

$

 1,559 

 

U.S. government bonds

 

 45 

 

 

 43 

 

State and municipal bonds

 

 16 

 

 

 16 

 

Foreign government bonds

 

 45 

 

 

 23 

 

RMBS

 

 169 

 

 

 78 

 

CMBS

 

 163 

 

 

 7 

 

ABS

 

 1,238 

 

 

 121 

 

Hybrid and redeemable preferred securities

 

 49 

 

 

 22 

 

Total trading securities

$

 4,602 

 

$

 1,869 

 



The portion of the market adjustment for trading gains and losses recognized in realized gain (loss) that relate to trading securities still held as of December 31, 2019, 2018 and 2017, was $(225) million, $(55) million and $8 million, respectively.



Mortgage Loans on Real Estate



The following provides the current and past due composition of our mortgage loans on real estate (in millions):





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2019

 

As of December 31, 2018

 



Commercial

 

Residential

 

Total

 

Commercial

 

Residential

 

Total

 

Current

$

 15,525

 

$

 659

 

$

 16,184

 

$

 12,959

 

$

 230

 

$

 13,189

 

30 to 59 days past due

 

 3

 

 

 27

 

 

 30

 

 

 -

 

 

 9

 

 

 9

 

60 to 89 days past due

 

 -

 

 

 10

 

 

 10

 

 

 -

 

 

 1

 

 

 1

 

90 or more days past due

 

 -

 

 

 16

 

 

 16

 

 

 -

 

 

 -

 

 

 -

 

Valuation allowance

 

 -

 

 

 (2

)

 

 (2

)

 

 -

 

 

 -

 

 

 -

 

Unamortized premium (discount)

 

 (17

)

 

 23

 

 

 6

 

 

 (17

)

 

 8

 

 

 (9

)

Total carrying value

$

 15,511

 

$

 733

 

$

 16,244

 

$

 12,942

 

$

 248

 

$

 13,190

 



As of December 31, 2019, we had 38 residential mortgage loans that were either delinquent or in foreclosure.  As of December 31, 2018, we had no loans that were either delinquent or in foreclosure.



For our commercial mortgage loans, there was one specifically identified impaired loan with a carrying value of less than $1 million as of December 31, 2019. There were no specifically identified impaired commercial mortgage loans as of December 31, 2018.    



For our residential mortgage loans, there were four specifically identified impaired loans with an aggregate carrying value of $1 million as of December 31, 2019.  There were no specifically identified impaired residential mortgage loans as of December 31, 2018.  The general allowance established on residential mortgage loans was $2 million and less than $1 million as of December 31, 2019 and 2018, respectively.



We establish a valuation allowance to provide for the risk of credit losses inherent in our portfolio.  The valuation allowance includes specific valuation allowances for loans that are deemed to be impaired as well as general valuation allowances for pools of loans with similar risk characteristics where a property risk or market specific risk has not been identified but for which we anticipate a loss has occurred.



The changes in the valuation allowance associated with impaired commercial mortgage loans on real estate (in millions) were as follows:









 

 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 

 



2019

 

2018

 

2017

 

 

Valuation Allowance

 

 

 

 

 

 

 

 

 

 

Balance as of beginning-of-year

$

 -

 

$

 3

 

$

 2

 

 

Additions

 

 -

 

 

 -

 

 

 1

 

 

Charge-offs, net of recoveries

 

 -

 

 

 (3

)

 

 -

 

 

Balance as of end-of-year

$

 -

 

$

 -

 

$

 3

 

 



28

 

 

Additional information related to impaired commercial mortgage loans on real estate (in millions) was as follows:









 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Average carrying value for impaired commercial

 

 

 

 

 

 

 

 

 

mortgage loans on real estate

$

 -

 

$

 5 

 

$

 6 

 

Interest income recognized on impaired commercial

 

 

 

 

 

 

 

 

 

mortgage loans on real estate

 

 -

 

 

 1 

 

 

 -

 

Interest income collected on impaired commercial

 

 

 

 

 

 

 

 

 

mortgage loans on real estate

 

 -

 

 

 1 

 

 

 -

 



As described in Note 1, we use loan-to-value and debt-service coverage ratios as credit quality indicators for our commercial mortgage loans on real estate (dollars in millions) as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2019

 

As of December 31, 2018

 



 

 

 

 

 

Debt-

 

 

 

 

 

 

Debt-

 



 

 

 

 

 

Service

 

 

 

 

 

 

Service

 



Carrying

 

% of

 

Coverage

 

Carrying

 

% of

 

Coverage

 

Loan-to-Value Ratio

Value

 

Total

 

Ratio

 

Value

 

Total

 

Ratio

 

Less than 65%

$

 14,121 

 

 91.0% 

 

2.35

 

$

 11,656 

 

 90.1% 

 

2.30

 

65% to 74%

 

 1,389 

 

 9.0% 

 

1.88

 

 

 1,234 

 

 9.5% 

 

1.76

 

75% to 100%

 

 1 

 

 0.0% 

 

1.09

 

 

 52 

 

 0.4% 

 

1.03

 

Total

$

 15,511 

 

 100.0% 

 

 

 

$

 12,942 

 

 100.0% 

 

 

 



As described in Note 1, we use loan performance status as the primary credit quality indicator for our residential mortgage loans on real estate (dollars in millions) as follows:





 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



As of December 31, 2019

 

As of December 31, 2018

 



Carrying

 

% of

 

Carrying

 

% of

 

Performance Indicator

Value

 

Total

 

Value

 

Total

 

Performing

$

 716 

 

 97.7% 

 

$

 247 

 

 99.6% 

 

Nonperforming

 

 17 

 

 2.3% 

 

 

 1 

 

 0.4% 

 

Total

$

 733 

 

 100.0% 

 

$

 248 

 

 100.0% 

 



 

 

 

 

 

 

 

 

 

 



Our commercial mortgage loan portfolio is geographically diversified with the largest concentrations in California, which accounted for 24% and 23% of commercial mortgage loans on real estate as of December 31, 2019 and 2018, respectively, and Texas, which accounted for 11% and 12% of commercial mortgage loans on real estate as of December 31, 2019 and 2018, respectively.



Our residential mortgage loan portfolio is geographically diversified with the largest concentrations in California, which accounted for 34% of residential mortgage loans on real estate as of December 31, 2019 and 2018, and Florida, which accounted for 20% and 19% of residential mortgage loans on real estate as of December 31, 2019 and 2018, respectively.

 

Alternative Investments 



As of December 31, 2019 and 2018, alternative investments included investments in 256 and 234 different partnerships, respectively, and the portfolios represented approximately 1% of our total investments.

29

 

 

Net Investment Income



The major categories of net investment income (in millions) on our Consolidated Statements of Comprehensive Income (Loss) were as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Fixed maturity AFS securities

$

 4,214

 

$

 4,129

 

$

 4,048

 

Equity AFS securities

 

 -

 

 

 -

 

 

 12

 

Trading securities

 

 187

 

 

 79

 

 

 88

 

Equity securities

 

 4

 

 

 4

 

 

 -

 

Mortgage loans on real estate

 

 626

 

 

 492

 

 

 433

 

Real estate

 

 1

 

 

 1

 

 

 1

 

Policy loans

 

 128

 

 

 122

 

 

 134

 

Invested cash

 

 33

 

 

 23

 

 

 11

 

Commercial mortgage loan prepayment

 

 

 

 

 

 

 

 

 

and bond make-whole premiums

 

 115

 

 

 78

 

 

 138

 

Alternative investments

 

 24

 

 

 222

 

 

 165

 

Consent fees

 

 7

 

 

 4

 

 

 6

 

Other investments

 

 27

 

 

 24

 

 

 5

 

Investment income

 

 5,366

 

 

 5,178

 

 

 5,041

 

Investment expense

 

 (404

)

 

 (334

)

 

 (281

)

Net investment income

$

 4,962

 

$

 4,844

 

$

 4,760

 



30

 

 

Realized Gain (Loss)



Details underlying realized gain (loss) (in millions) reported on our Consolidated Statements of Comprehensive Income (Loss) were as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

Gross gains

$

 44

 

$

 36

 

$

 17

 

Gross losses

 

 (70

)

 

 (80

)

 

 (43

)

Gross OTTI

 

 (15

)

 

 (7

)

 

 (20

)

Equity AFS securities:

 

 

 

 

 

 

 

 

 

Gross gains

 

 -

 

 

 -

 

 

 6

 

Gain (loss) on other investments (1)

 

 (15

)

 

 (15

)

 

 (10

)

Associated amortization of DAC, VOBA, DSI and DFEL

 

 

 

 

 

 

 

 

 

and changes in other contract holder funds

 

 (13

)

 

 (22

)

 

 (21

)

Total realized gain (loss) related to certain investments

 

 (69

)

 

 (88

)

 

 (71

)

Realized gain (loss) on the mark-to-market on certain

 

 

 

 

 

 

 

 

 

instruments (2)

 

 (426

)

 

 251

 

 

 (155

)

Indexed annuity and IUL contracts net derivatives results: (3)

 

 

 

 

 

 

 

 

 

Gross gain (loss)

 

 (80

)

 

 (51

)

 

 (22

)

Associated amortization of DAC, VOBA, DSI and DFEL

 

 2

 

 

 12

 

 

 (2

)

GLB fees ceded to LNBAR and attributed fees:

 

 

 

 

 

 

 

 

 

Gross gain (loss)

 

 (223

)

 

 (184

)

 

 (174

)

Associated amortization of DAC, VOBA, DSI and DFEL

 

 (32

)

 

 (32

)

 

 (32

)

Total realized gain (loss)

$

 (828

)

$

 (92

)

$

 (456

)



(1)

Includes market adjustments on equity securities still held of $(4) million and $(17) million for the years ended December 31, 2019 and 2018, respectively.

(2)

Represents changes in the fair values of certain derivative investments (not including those associated with our variable and indexed annuity and indexed variable universal life insurance (“IUL”) contracts net derivatives results), reinsurance related embedded derivatives and trading securities.  See Notes 1 and 9 for information regarding Modco.

(3)

Represents the net difference between the change in fair value of the index options that we hold and the change in the fair value of the embedded derivative liabilities of our indexed annuity and IUL contracts along with changes in the fair value of embedded derivative liabilities related to index options we may purchase or sell in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products.



Details underlying write-downs taken as a result of OTTI that were recognized in net income (loss) and included in realized gain (loss) on fixed maturity AFS securities above and the portion of OTTI recognized in OCI (in millions) were as follows:







 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

OTTI Recognized in Net Income (Loss)

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 (13

)

$

 (5

)

$

 (13

)

State and municipal bonds

 

 -

 

 

 -

 

 

 (1

)

RMBS

 

 (1

)

 

 (1

)

 

 (2

)

CMBS

 

 -

 

 

 -

 

 

 (2

)

ABS

 

 (1

)

 

 (1

)

 

 (2

)

Gross OTTI recognized in net income (loss)

 

 (15

)

 

 (7

)

 

 (20

)

Associated amortization of DAC, VOBA, DSI and DFEL

 

 -

 

 

 -

 

 

 2

 

Net OTTI recognized in net income (loss)

$

 (15

)

$

 (7

)

$

 (18

)



 

 

 

 

 

 

 

 

 

OTTI Recognized in OCI

 

 

 

 

 

 

 

 

 

Gross OTTI recognized in OCI

$

 14

 

$

 -

 

$

 -

 

Change in DAC, VOBA, DSI and DFEL

 

 (1

)

 

 -

 

 

 -

 

Net OTTI recognized in OCI

$

 13

 

$

 -

 

$

 -

 



31

 

 

Payables for Collateral on Investments



The carrying value of the payables for collateral on investments included on our Consolidated Balance Sheets and the fair value of the related investments or collateral (in millions) consisted of the following:





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 



As of December 31, 2019

 

As of December 31, 2018

 



Carrying

 

Fair

 

Carrying

 

Fair

 



Value

 

Value

 

Value

 

Value

 

Collateral payable for derivative investments (1)

$

 1,383 

 

$

 1,383 

 

$

 616 

 

$

 616 

 

Securities pledged under securities lending agreements (2)

 

 114 

 

 

 110 

 

 

 88 

 

 

 85 

 

Securities pledged under repurchase agreements (3)

 

 -

 

 

 -

 

 

 152 

 

 

 157 

 

Investments pledged for Federal Home Loan Bank of

 

 

 

 

 

 

 

 

 

 

 

 

Indianapolis (“FHLBI”) (4)

 

 3,580 

 

 

 5,480 

 

 

 3,930 

 

 

 5,923 

 

Total payables for collateral on investments

$

 5,077 

 

$

 6,973 

 

$

 4,786 

 

$

 6,781 

 



(1)

We obtain collateral based upon contractual provisions with our counterparties.  These agreements take into consideration the counterparties’ credit rating as compared to ours, the fair value of the derivative investments and specified thresholds that if exceeded result in the receipt of cash that is typically invested in cash and invested cash.  See Note 6 for additional information. 

(2)

Our pledged securities under securities lending agreements are included in fixed maturity AFS securities on our Consolidated Balance Sheets.  We generally obtain collateral in an amount equal to 102% and 105% of the fair value of the domestic and foreign securities, respectively.  We value collateral daily and obtain additional collateral when deemed appropriate.  The cash received in our securities lending program is typically invested in cash and invested cash or fixed maturity AFS securities.

(3)

Our pledged securities under repurchase agreements are included in fixed maturity AFS securities on our Consolidated Balance Sheets.  The collateral requirements are generally 80% to 95% of the fair value of the securities, and our agreements with third parties contain contractual provisions to allow for additional collateral to be obtained when necessary.  The cash received in our repurchase program is typically invested in fixed maturity AFS securities.  As of December 31, 2019, we were not participating in any open repurchase agreements.

(4)

Our pledged investments for FHLBI are included in fixed maturity AFS securities and mortgage loans on real estate on our Consolidated Balance Sheets.  The collateral requirements are generally 105% to 115% of the fair value for fixed maturity AFS securities and 155% to 175% of the fair value for mortgage loans on real estate.  The cash received in these transactions is primarily invested in cash and invested cash or fixed maturity AFS securities.



Increase (decrease) in payables for collateral on investments (in millions) consisted of the following:





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Collateral payable for derivative investments

$

 767

 

$

 (85

)

$

 (112

)

Securities pledged under securities lending agreements

 

 26

 

 

 (134

)

 

 5

 

Securities pledged under repurchase agreements

 

 (152

)

 

 (379

)

 

 1

 

Investments pledged for FHLBI

 

 (350

)

 

 1,030

 

 

 (450

)

Total increase (decrease) in payables for collateral on investments

$

 291

 

$

 432

 

$

 (556

)



32

 

 

We have elected not to offset our securities lending and repurchase agreements transactions in our financial statements.  The remaining contractual maturities of securities lending and repurchase agreements transactions accounted for as secured borrowings (in millions) were as follows:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 



As of December 31, 2019

 



Overnight and Continuous

 

Up to 30 Days

 

30 -  90 Days

 

Greater Than 90 Days

 

Total

 

Securities Lending

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 114 

 

$

 -

 

$

 -

 

$

 -

 

$

 114 

 

Total gross secured borrowings

$

 114 

 

$

 -

 

$

 -

 

$

 -

 

$

 114 

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2018

 



Overnight and Continuous

 

Up to 30 Days

 

30 - 90 Days

 

Greater Than 90 Days

 

Total

 

Securities Lending

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 88 

 

$

 -

 

$

 -

 

$

 -

 

$

 88 

 

Repurchase Agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 -

 

 

 -

 

 

 -

 

 

 152 

 

 

 152 

 

Total gross secured borrowings

$

 88 

 

$

 -

 

$

 -

 

$

 152 

 

$

 240 

 



We accept collateral in the form of securities in connection with repurchase agreements.  In instances where we are permitted to sell or re-pledge the securities received, we report the fair value of the collateral received and a related obligation to return the collateral in the financial statements.  In addition, we receive securities in connection with securities borrowing agreements which we are permitted to sell or re-pledge.  As of December 31, 2019, the fair value of all collateral received that we are permitted to sell or re-pledge was $25 million.  As of December 31, 2019, we have re-pledged $25 million of this collateral to cover initial margin and over-the-counter collateral requirements on certain derivative investments.



Investment Commitments



As of December 31, 2019, our investment commitments were $2.0 billion, which included $1.0 billion of LPs, $544 million of mortgage loans on real estate and $407 million of private placement securities.



Concentrations of Financial Instruments



As of December 31, 2019 and 2018, our most significant investments in one issuer were our investments in securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $1.3 billion and $1.4 billion, respectively, or 1% of total investments, and our investments in securities issued by the Federal National Mortgage Association with a fair value of $1.0 billion and $1.2 billion, respectively, or 1% of total investments.  These concentrations include fixed maturity AFS, trading and equity securities.



As of December 31, 2019 and 2018, our most significant investments in one industry were our investments in securities in the financial services industry with a fair value of $18.2 billion and $16.0 billion, respectively, or 14% of total investments, and our investments in securities in the consumer non-cyclical industry with a fair value of $15.4 billion and $14.3 billion, respectively, or 12% and 13%, respectively, of total investments.  These concentrations include fixed maturity AFS, trading and equity securities.



6.  Derivative Instruments

 

We maintain an overall risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings that are caused by interest rate risk, foreign currency exchange risk, equity market risk, basis risk and credit risk.  We assess these risks by continually identifying and monitoring changes in our exposures that may adversely affect expected future cash flows and by evaluating hedging opportunities. 



Derivative activities are monitored by various management committees.  The committees are responsible for overseeing the implementation of various hedging strategies that are developed through the analysis of financial simulation models and other internal and industry sources.  The resulting hedging strategies are incorporated into our overall risk management strategies.    



See Note 1 for a detailed discussion of the accounting treatment for derivative instruments.  See Note 20 for additional disclosures related to the fair value of our derivative instruments and Note 4 for derivative instruments related to our consolidated VIEs.



We adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, in 2019.  See Note 2 for additional information.

33

 

 

Interest Rate Contracts



We use derivative instruments as part of our interest rate risk management strategy.  These instruments are economic hedges unless otherwise noted and include:



Forward-Starting Interest Rate Swaps



We use forward-starting interest rate swaps designated and qualifying as cash flow hedges to hedge our exposure to interest rate fluctuations related to the forecasted purchases of certain assets.



We also use forward-starting interest rate swaps to hedge the interest rate exposure within our life products related to the forecasted purchases of certain assets.



Interest Rate Cap Corridors



We use interest rate cap corridors to provide a level of protection from the effect of rising interest rates for certain life insurance products and annuity contracts.  Interest rate cap corridors involve purchasing an interest rate cap at a specific cap rate and selling an interest rate cap with a higher cap rate.  For each corridor, the amount of quarterly payments, if any, is determined by the rate at which the underlying index rate resets above the original capped rate.  The corridor limits the benefit the purchaser can receive as the related interest rate index rises above the higher capped rate.  There is no additional liability to us other than the purchase price associated with the interest rate cap corridor. 



Interest Rate Futures



We use interest rate futures contracts to hedge the liability exposure on certain options in variable annuity products.  These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price.



Interest Rate Swap Agreements



We use interest rate swap agreements to hedge the liability exposure on certain options in variable annuity products.

 

We also use interest rate swap agreements designated and qualifying as cash flow hedges to hedge the interest rate risk of floating-rate bond coupon payments by replicating a fixed-rate bond. 



Finally, we use interest rate swap agreements designated and qualifying as fair value hedges to hedge against changes in the fair value of certain fixed maturity securities due to interest rate risks. 



Reverse Treasury Locks



We use reverse treasury locks designated and qualifying as cash flow hedges to hedge the interest rate exposure related to the anticipated purchase of fixed-rate securities or the anticipated future cash flows of floating-rate fixed maturity securities due to changes in interest rates.  These derivatives are primarily structured to hedge interest rate risk inherent in the assumptions used to price certain liabilities.



Foreign Currency Contracts



We use derivative instruments as part of our foreign currency risk management strategy.  These instruments are economic hedges unless otherwise noted and include: 



Currency Futures



We use currency futures to hedge foreign exchange risk associated with certain options in variable annuity products.  Currency futures exchange one currency for another at a specified date in the future at a specified exchange rate. 



Foreign Currency Swaps



We use foreign currency swaps to hedge foreign exchange risk of investments in fixed maturity securities denominated in foreign currencies. A foreign currency swap is a contractual agreement to exchange one currency for another at specified dates in the future at a specified exchange rate.



We also use foreign currency swaps designated and qualifying as cash flow hedges to hedge foreign exchange risk of investments in fixed maturity securities denominated in foreign currencies.



34

 

 

Foreign Currency Forwards



We use foreign currency forwards to hedge foreign exchange risk of investments in fixed maturity securities denominated in foreign currencies. A foreign currency forward is a contractual agreement to exchange one currency for another at specified dates in the future at a specified current exchange rate.



Equity Market Contracts



We use derivative instruments as part of our equity market risk management strategy that are economic hedges and include: 



Call Options Based on the S&P 500 and Other Indices



We use call options to hedge the liability exposure on certain options in variable annuity products.



Our indexed annuity and IUL contracts permit the holder to elect an interest rate return or an equity market component, where interest credited to the contracts is linked to the performance of the Standard & Poor's 500 Index (“S&P 500”) and other indices. Contract holders may elect to rebalance index options at renewal dates. At the end of each indexed term, which can be up to 6 years, we have the opportunity to re-price the indexed component by establishing participation rates, caps, spreads and specified rates, subject to contractual guarantees. We use call options that are highly correlated to the portfolio allocation decisions of our contract holders, such that we are economically hedged with respect to equity returns for the current reset period.    



Consumer Price Index Swaps



We use consumer price index swaps to hedge the liability exposure on certain options in fixed annuity products.  Consumer price index swaps are contracts entered into at no cost and whose payoff is the difference between the consumer price index inflation rate and the fixed-rate determined as of inception.



Equity Futures



We use equity futures contracts to hedge the liability exposure on certain options in variable annuity products.  These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price.



Put Options



We use put options to hedge the liability exposure on certain options in variable annuity products.  Put options are contracts that require the seller to pay the buyer at a specified future date the amount, if any, by which a specified equity index is less than the strike rate stated in the agreement, applied to a notional amount. 



Total Return Swaps



We use total return swaps to hedge the liability exposure on certain options in variable annuity products. 



In addition, we use total return swaps to hedge a portion of the liability related to our deferred compensation plans.  We receive the total return on a portfolio of indexes and pay a floating-rate of interest. 



Credit Contracts



We use derivative instruments as part of our credit risk management strategy that are economic hedges and include: 



Credit Default Swaps – Buying Protection



We use credit default swaps to hedge the liability exposure on certain options in variable annuity products. 



We buy credit default swaps to hedge against a drop in bond prices due to credit concerns of certain bond issuers.  A credit default swap allows us to put the bond back to the counterparty at par upon a default event by the bond issuer.  A default event is defined as bankruptcy, failure to pay, obligation acceleration or restructuring. 



Credit Default Swaps – Selling Protection



We use credit default swaps to hedge the liability exposure on certain options in variable annuity products. 



We sell credit default swaps to offer credit protection to contract holders and investors.  The credit default swaps hedge the contract holders and investors against a drop in bond prices due to credit concerns of certain bond issuers.  A credit default swap allows the investor to put the bond back to us at par upon a default event by the bond issuer.  A default event is defined as bankruptcy, failure to pay, obligation acceleration or restructuring. 

35

 

 



Embedded Derivatives



We have embedded derivatives that include:



GLB Reserves Embedded Derivatives



We are exposed to risk and income statement volatility caused by changes in the equity markets, interest rates and volatility associated with GLBs offered in our variable annuity products, including products with GWB and GIB features.  These GLB features are reinsured among various reinsurance counterparties on either a Modco or coinsurance basis.  We cede a portion of the GLB features to LNBAR on a funds withheld Modco basis.  The funds withheld arrangement includes a dynamic hedging strategy designed to mitigate selected risks. Changes in the value of the hedge contracts due to changes in equity markets, interest rates and implied volatilities hedge the changes in embedded derivative GLB reserves assumed by LNBAR caused by those same factors.  The hedge positions are rebalanced based upon changes in these factors as needed.  While we actively manage the hedge positions, these hedge positions may not be totally effective in offsetting changes in the embedded derivative reserve assumed by LNBAR due to, among other things, differences in timing between when a market exposure changes and corresponding changes to the hedge positions, extreme swings in the equity markets and interest rates, market volatility, contract holder behavior, divergence between the performance of the underlying funds and the hedging indices, divergence between the actual and expected performance of the hedge instruments and our ability to purchase hedging instruments at prices consistent with the desired risk and return trade-off.  However, the hedging results do not impact LNL due to a funds withheld agreement with LNBAR, which causes the financial impact of the derivatives, as well as the cash flow activity, to be reflected on LNBAR.



Certain features of these guarantees have elements of both insurance benefits accounted for under the Financial Services – Insurance – Claim Costs and Liabilities for Future Policy Benefits Subtopic of the FASB ASC (“benefit reserves”) and embedded derivatives accounted for under the Derivatives and Hedging and the Fair Value Measurements and Disclosures Topics of the FASB ASC (“embedded derivative reserves”).  We calculate the value of the benefit reserves and the embedded derivative reserves based on the specific characteristics of each GLB feature.



Indexed Annuity and IUL Contracts Embedded Derivatives



Our indexed annuity and IUL contracts permit the holder to elect an interest rate return or an equity market component, where interest credited to the contracts is linked to the performance of the S&P 500 or other indices.  Contract holders may elect to rebalance index options at renewal dates.  At the end of each indexed term, which can be up to 6 years, we have the opportunity to re-price the indexed component by establishing participation rates, caps, spreads and specified rates, subject to contractual guarantees.  We use options that are highly correlated to the portfolio allocation decisions of our contract holders, such that we are economically hedged with respect to equity returns for the current reset period. 



Reinsurance Related Embedded Derivatives



We have certain Modco and coinsurance with funds withheld reinsurance agreements with embedded derivatives related to the withheld assets of the related funds.  These derivatives are considered total return swaps with contractual returns that are attributable to various assets and liabilities associated with these reinsurance agreements. 

36

 

 

We have derivative instruments with off-balance-sheet risks whose notional or contract amounts exceed the related credit exposure.  Outstanding derivative instruments with off-balance-sheet risks (in millions) were as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2019

 

As of December 31, 2018

 



Notional

 

Fair Value

 

Notional

 

Fair Value

 



Amounts

 

Asset

 

Liability

 

Amounts

 

Asset

 

Liability

 

Qualifying Hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts (1)

$

 1,174 

 

$

 108 

 

$

 12 

 

$

 1,528 

 

$

 33 

 

$

 9 

 

Foreign currency contracts (1)

 

 2,874 

 

 

 191 

 

 

 51 

 

 

 2,326 

 

 

 167 

 

 

 39 

 

Total cash flow hedges

 

 4,048 

 

 

 299 

 

 

 63 

 

 

 3,854 

 

 

 200 

 

 

 48 

 

Fair value hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts (1)

 

 546 

 

 

 -

 

 

 202 

 

 

 553 

 

 

 -

 

 

 137 

 

Non-Qualifying Hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts (1)

 

 112,921 

 

 

 1,082 

 

 

 219 

 

 

 100,628 

 

 

 464 

 

 

 138 

 

Foreign currency contracts (1)

 

 262 

 

 

 1 

 

 

 3 

 

 

 47 

 

 

 -

 

 

 -

 

Equity market contracts (1)

 

 43,283 

 

 

 1,442 

 

 

 664 

 

 

 30,273 

 

 

 676 

 

 

 162 

 

Credit contracts (1)

 

 55 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Embedded derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GLB direct (2)

 

 -

 

 

 450 

 

 

 -

 

 

 -

 

 

 123 

 

 

 -

 

GLB ceded (2) (3)

 

 -

 

 

 60 

 

 

 510 

 

 

 -

 

 

 72 

 

 

 196 

 

Reinsurance related (4)

 

 -

 

 

 -

 

 

 375 

 

 

 -

 

 

 188 

 

 

 -

 

Indexed annuity and IUL contracts (2) (5)

 

 -

 

 

 927 

 

 

 2,585 

 

 

 -

 

 

 902 

 

 

 1,305 

 

Total derivative instruments

$

 161,115 

 

$

 4,261 

 

$

 4,621 

 

$

 135,355 

 

$

 2,625 

 

$

 1,986 

 



(1)

Reported in derivative investments and other liabilities on our Consolidated Balance Sheets.

(2)

Reported in other assets on our Consolidated Balance Sheets.

(3)

Reported in other liabilities on our Consolidated Balance Sheets.

(4)

Reported in reinsurance related embedded derivatives on our Consolidated Balance Sheets.

(5)

Reported in future contract benefits on our Consolidated Balance Sheets.



The maturity of the notional amounts of derivative instruments (in millions) was as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Remaining Life as of December 31, 2019

 



Less Than

 

1 – 5

 

6 – 10

 

11 – 30

 

Over 30

 

 

 



1 Year

 

Years

 

Years

 

Years

 

Years

 

Total

 

Interest rate contracts (1)

$

 11,341 

 

$

 53,011 

 

$

 20,948 

 

$

 28,841 

 

$

 500 

 

$

 114,641 

 

Foreign currency contracts (2)

 

 218 

 

 

 383 

 

 

 961 

 

 

 1,473 

 

 

 101 

 

 

 3,136 

 

Equity market contracts

 

 27,594 

 

 

 7,720 

 

 

 3,762 

 

 

 13 

 

 

 4,194 

 

 

 43,283 

 

Credit contracts

 

 -

 

 

 55 

 

 

 -

 

 

 -

 

 

 -

 

 

 55 

 

Total derivative instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with notional amounts

$

 39,153 

 

$

 61,169 

 

$

 25,671 

 

$

 30,327 

 

$

 4,795 

 

$

 161,115 

 



(1)

As of December 31, 2019, the latest maturity date for which we were hedging our exposure to the variability in future cash flows for these instruments was November 24, 2021.

(2)

As of December 31, 2019, the latest maturity date for which we were hedging our exposure to the variability in future cash flows for these instruments was February 26, 2050.

37

 

 

The following amounts (in millions) were recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges:







 

 

 

 

 

 

 

 



As of December 31, 2019

 



 

 

 

 

 

 

 

 



 

 

 

 

Cumulative

 



 

 

 

 

Fair Value Hedging

 



 

 

 

 

Adjustment Included

 



Amortized Cost

 

in the Amortized

 



of the Hedged

 

Cost of the Hedged

 



Assets (Liabilities)

 

Assets (Liabilities)

 

Line Items in which the Hedged Items are Recorded

 

 

 

 

 

 

 

 

Fixed maturity AFS securities, at fair value

$

 

 776 

 

$

 

 202 

 





The change in our unrealized gain (loss) on derivative instruments within accumulated other comprehensive income (loss) (“AOCI”) (in millions) was as follows:



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Unrealized Gain (Loss) on Derivative Instruments

 

 

 

 

 

 

 

 

 

Balance as of beginning-of-year

$

 119

 

$

 27

 

$

 93

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period:

 

 

 

 

 

 

 

 

 

Cumulative effect from adoption of

 

 

 

 

 

 

 

 

 

new accounting standard

 

 -

 

 

 6

 

 

 -

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

 73

 

 

 (4

)

 

 43

 

Foreign currency contracts

 

 108

 

 

 44

 

 

 20

 

Change in foreign currency exchange rate adjustment

 

 (52

)

 

 111

 

 

 (137

)

Change in DAC, VOBA, DSI and DFEL

 

 (5

)

 

 (14

)

 

 1

 

Income tax benefit (expense)

 

 (26

)

 

 (29

)

 

 26

 

Less:

 

 

 

 

 

 

 

 

 

Reclassification adjustment for gains (losses)

 

 

 

 

 

 

 

 

 

included in net income (loss):

 

 

 

 

 

 

 

 

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

Interest rate contracts (1)

 

 3

 

 

 4

 

 

 4

 

Foreign currency contracts (1)

 

 35

 

 

 27

 

 

 18

 

Foreign currency contracts (2)

 

 9

 

 

 -

 

 

 9

 

Associated amortization of DAC, VOBA, DSI and DFEL

 

 (2

)

 

 (3

)

 

 (2

)

Income tax benefit (expense)

 

 (9

)

 

 (6

)

 

 (10

)

Balance as of end-of-year

$

 181

 

$

 119

 

$

 27

 



(1)

The OCI offset is reported within net investment income on our Consolidated Statements of Comprehensive Income (Loss).

(2)

The OCI offset is reported within realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).



38

 

 

The effects of qualifying and non-qualifying hedges (in millions) on the Consolidated Statements of Comprehensive Income (Loss) were as follows:









 

 

 

 

 

 

 

 

 



Gain (Loss)

 

 

 



Recognized in Income

 

 

 



For the Year Ended

 

 

 



December 31, 2019

 

 

 



Realized

 

Net

 

 

 



Gain

 

Investment

 

 

 



(Loss)

 

Income

 

 

 

Total Line Items in which the Effects of Fair Value

 

 

 

 

 

 

 

 

 

or Cash Flow Hedges are Recorded

 

$

 (828

)

$

 4,962

 

 

 



 

 

 

 

 

 

 

 

 

Qualifying Hedges

 

 

 

 

 

 

 

 

 

Gain or (loss) on fair value hedging relationships:

 

 

 

 

 

 

 

 

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

Hedged items

 

 

 -

 

 

 63

 

 

 

Derivatives designated as hedging instruments

 

 

 -

 

 

 (63

)

 

 

Gain or (loss) on cash flow hedging relationships:

 

 

 

 

 

 

 

 

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

Amount of gain or (loss) reclassified from AOCI into income

 

 

 -

 

 

 3

 

 

 

Foreign currency contracts:

 

 

 

 

 

 

 

 

 

Amount of gain or (loss) reclassified from AOCI into income

 

 

 9

 

 

 35

 

 

 



 

 

 

 

 

 

 

 

 

Non-Qualifying Hedges

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

 

 982

 

 

 -

 

 

 

Foreign currency contracts

 

 

 (1

)

 

 -

 

 

 

Equity market contracts

 

 

 (137

)

 

 -

 

 

 

Embedded derivatives:

 

 

 

 

 

 

 

 

 

GLB

 

 

 1

 

 

 -

 

 

 

Reinsurance related

 

 

 (626

)

 

 -

 

 

 

Indexed annuity and IUL contracts

 

 

 (742

)

 

 -

 

 

 



39

 

 

The gains (losses) on derivative instruments (in millions) recorded within income (loss) from continuing operations on our Consolidated Statements of Comprehensive Income (Loss) were as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the Years Ended

 

 

 



 

December 31,

 

 

 



 

2018

 

2017

 

 

 

Qualifying Hedges

 

 

 

 

 

 

 

 

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

Interest rate contracts (1)

 

$

 4

 

$

 4

 

 

 

Foreign currency contracts (1)

 

 

 27

 

 

 18

 

 

 

Foreign currency contracts (2)

 

 

 -

 

 

 9

 

 

 

Total cash flow hedges

 

 

 31

 

 

 31

 

 

 

Fair value hedges:

 

 

 

 

 

 

 

 

 

Interest rate contracts (1)

 

 

 (14

)

 

 (23

)

 

 

Interest rate contracts (2)

 

 

 37

 

 

 7

 

 

 

Total fair value hedges

 

 

 23

 

 

 (16

)

 

 

Non-Qualifying Hedges

 

 

 

 

 

 

 

 

 

Interest rate contracts (2)

 

 

 (149

)

 

 103

 

 

 

Foreign currency contracts (2)

 

 

 5

 

 

 -

 

 

 

Equity market contracts (2)

 

 

 445

 

 

 (1,427

)

 

 

Equity market contracts (3)

 

 

 (17

)

 

 28

 

 

 

Credit contracts (3)

 

 

 -

 

 

 1

 

 

 

Embedded derivatives:

 

 

 

 

 

 

 

 

 

GLB(2)

 

 

 (1

)

 

 -

 

 

 

Reinsurance related (2)

 

 

 292

 

 

 (141

)

 

 

Indexed annuity and IUL contracts (2)

 

 

 81

 

 

 (400

)

 

 

Total derivative instruments

 

$

 710

 

$

 (1,821

)

 

 



(1)

Reported in net investment income on our Consolidated Statements of Comprehensive Income (Loss).

(2)

Reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

(3)

Reported in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss).



Gains (losses) recognized as a component of OCI (in millions) on derivative instruments designated and qualifying as cash flow hedges were as follows:











 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

For the Years Ended

 

 

 



 

December 31,

 

 

 



 

2018

 

2017

 

 

 

Offset to net investment income

 

 

 4 

 

 

 22 

 

 

 

Offset to realized gain (loss)

 

 

 27 

 

 

 9 

 

 

 



 

 

 

 

 

 

 

 

 



As of December 31, 2019, $45 million of the deferred net gains (losses) on derivative instruments in AOCI were expected to be reclassified to earnings during the next 12 months.  This reclassification would be due primarily to interest rate variances related to our interest rate swap agreements.



For the years ended December 31, 2019 and 2018, there were no material reclassifications to earnings due to hedged firm commitments no longer deemed probable or due to hedged forecasted transactions that had not occurred by the end of the originally specified time period.



40

 

 

As of December 31, 2019, information related to our credit default swaps for which we are the seller (dollars in millions) was as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

Credit

 

 

 

 

 

 

 

 

 



 

 

 

Reason

 

Nature

 

Rating of

 

Number

 

 

 

 

Maximum

 



 

 

 

for

 

of

Underlying

of

 

Fair

 

Potential

 

Credit Contract Type

 

Maturity

 

Entering

 

Recourse

Obligation (1)

Instruments

 

Value (2)

 

Payout

 

Basket credit default swaps

 

12/20/2024

 

(3)

 

(4)

 

BBB+

 

 1 

 

$

 1 

 

$

 55 

 







(1)

Represents average credit ratings based on the midpoint of the applicable ratings among Moody’s, S&P and Fitch Ratings, as scaled to the corresponding S&P ratings.

(2)

Broker quotes are used to determine the market value of our credit default swaps.

(3)

Credit default swaps were entered into in order to hedge the liability exposure on certain variable annuity products.

(4)

Sellers do not have the right to demand indemnification or compensation from third parties in case of a loss (payment) on the contract.



As of December 31, 2018, we did not have any exposure related to credit default swaps for which we are the seller. 



Details underlying the associated collateral of our credit default swaps for which we are the seller if credit risk-related contingent features were triggered (in millions) were as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

As of

 

 

As of

 

 



December 31,

December 31,

 



 

2019

 

 

2018

 

 

Maximum potential payout

 

$

 55 

 

 

$

 -

 

 

Less:  Counterparty thresholds

 

 

 -

 

 

 

 -

 

 

Maximum collateral potentially required to post

 

$

 55 

 

 

$

 -

 

 



Certain of our credit default swap agreements contain contractual provisions that allow for the netting of collateral with our counterparties related to all of our collateralized financing transactions that we have outstanding.  If these netting agreements were not in place, we would have been required to post collateral if the market value was less than zero.



Credit Risk



We are exposed to credit losses in the event of non-performance by our counterparties on various derivative contracts and reflect assumptions regarding the credit or NPR.  The NPR is based upon assumptions for each counterparty’s credit spread over the estimated weighted average life of the counterparty exposure, less collateral held.  As of December 31, 2019, the NPR adjustment was zero.  The credit risk associated with such agreements is minimized by entering into agreements with financial institutions with long-standing, superior performance records.  Additionally, we maintain a policy of requiring derivative contracts to be governed by an International Swaps and Derivatives Association (“ISDA”) Master Agreement.  We are required to maintain minimum ratings as a matter of routine practice in negotiating ISDA agreements.  Under some ISDA agreements, we and LLANY have agreed to maintain certain financial strength or claims-paying ratings.  A downgrade below these levels could result in termination of derivative contracts, at which time any amounts payable by us would be dependent on the market value of the underlying derivative contracts.  In certain transactions, we and the counterparty have entered into a credit support annex requiring either party to post collateral when net exposures exceed pre-determined thresholds.  These thresholds vary by counterparty and credit rating.  The amount of such exposure is essentially the net replacement cost or market value less collateral held for such agreements with each counterparty if the net market value is in our favor.  We did not have any exposure as of December 31, 2019 or 2018. 



41

 

 

The amounts recognized (in millions) by S&P credit rating of counterparty, for which we had the right to reclaim cash collateral or were obligated to return cash collateral, were as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of December 31, 2019

 

As of December 31, 2018

 



 

Collateral

 

Collateral

 

Collateral

 

Collateral

 



 

Posted by

 

Posted by

 

Posted by

 

Posted by

 

S&P

 

Counter-

 

LNL

 

Counter-

 

LNL

 

Credit

 

Party

 

(Held by

 

Party

 

(Held by

 

Rating of

 

(Held by

 

Counter-

 

(Held by

 

Counter-

 

Counterparty

 

LNL)

 

Party)

 

LNL)

 

Party)

 



 

 

 

 

 

 

 

 

 

 

 

 

 

AA-

 

$

 441

 

$

 (22

)

$

 33

 

$

 (4

)

A+

 

 

 549

 

 

 (168

)

 

 296

 

 

 (26

)

A

 

 

 36

 

 

 -

 

 

 106

 

 

 (36

)

A-

 

 

 355

 

 

 -

 

 

 4

 

 

 -

 

BBB+

 

 

 -

 

 

 -

 

 

 177

 

 

 -

 



 

$

 1,381

 

$

 (190

)

$

 616

 

$

 (66

)

 

 



Balance Sheet Offsetting



Information related to the effects of offsetting on our Consolidated Balance Sheets (in millions) was as follows:









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

As of December 31, 2019

 



 

 

 

 

Embedded

 

 

 

 



Derivative

Derivative

 

 

 

 



Instruments

Instruments

 

Total

 



 

 

 

 

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

Gross amount of recognized assets

 

$

 2,619

 

 

$

 1,437

 

 

$

 4,056

 

Gross amounts offset

 

 

 (708

)

 

 

 -

 

 

 

 (708

)

Net amount of assets

 

 

 1,911

 

 

 

 1,437

 

 

 

 3,348

 

Gross amounts not offset:

 

 

 

 

 

 

 

 

 

 

 

 

Cash collateral

 

 

 (1,381

)

 

 

 -

 

 

 

 (1,381

)

Non-cash collateral

 

 

 (242

)

 

 

 -

 

 

 

 (242

)

Net amount

 

$

 288

 

 

$

 1,437

 

 

$

 1,725

 



 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Gross amount of recognized liabilities

 

$

 771

 

 

$

 3,470

 

 

$

 4,241

 

Gross amounts offset

 

 

 (15

)

 

 

 -

 

 

 

 (15

)

Net amount of liabilities

 

 

 756

 

 

 

 3,470

 

 

 

 4,226

 

Gross amounts not offset:

 

 

 

 

 

 

 

 

 

 

 

 

Cash collateral

 

 

 (190

)

 

 

 -

 

 

 

 (190

)

Non-cash collateral

 

 

 -

 

 

 

 -

 

 

 

 -

 

Net amount

 

$

 566

 

 

$

 3,470

 

 

$

 4,036

 

42

 

 





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

As of December 31, 2018

 



 

 

 

 

Embedded

 

 

 

 



Derivative

Derivative

 

 

 

 



Instruments

Instruments

 

Total

 



 

 

 

 

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

Gross amount of recognized assets

 

$

 1,282

 

 

$

 1,285

 

 

$

 2,567

 

Gross amounts offset

 

 

 (201

)

 

 

 -

 

 

 

 (201

)

Net amount of assets

 

 

 1,081

 

 

 

 1,285

 

 

 

 2,366

 

Gross amounts not offset:

 

 

 

 

 

 

 

 

 

 

 

 

Cash collateral

 

 

 (616

)

 

 

 -

 

 

 

 (616

)

Non-cash collateral

 

 

 (58

)

 

 

 -

 

 

 

 (58

)

Net amount

 

$

 407

 

 

$

 1,285

 

 

$

 1,692

 



 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Gross amount of recognized liabilities

 

$

 806

 

 

$

 1,501

 

 

$

 2,307

 

Gross amounts offset

 

 

 (59

)

 

 

 -

 

 

 

 (59

)

Net amount of liabilities

 

 

 747

 

 

 

 1,501

 

 

 

 2,248

 

Gross amounts not offset:

 

 

 

 

 

 

 

 

 

 

 

 

Cash collateral

 

 

 (66

)

 

 

 -

 

 

 

 (66

)

Non-cash collateral

 

 

 (190

)

 

 

 -

 

 

 

 (190

)

Net amount

 

$

 491

 

 

$

 1,501

 

 

$

 1,992

 





7.  Federal Income Taxes



The federal income tax expense (benefit) on continuing operations (in millions) was as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Current

$

 175

 

$

 179

 

$

 118

 

Deferred

 

 (212

)

 

 78

 

 

 (1,405

)

Federal income tax expense (benefit)

$

 (37

)

$

 257

 

$

 (1,287

)



43

 

 

A reconciliation of the effective tax rate differences (in millions) was as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Income (loss) before taxes

$

 577

 

$

 1,830

 

$

 731

 

Federal statutory rate

 

 21%

 

 

 21%

 

 

 35%

 

Federal income tax expense (benefit) at federal statutory rate

 

 121

 

 

 384

 

 

 256

 

Effect of:

 

 

 

 

 

 

 

 

 

Tax-preferred investment income (1)

 

 (99

)

 

 (87

)

 

 (280

)

Tax credits

 

 (40

)

 

 (39

)

 

 (29

)

Excess tax benefits from stock-based compensation

 

 (6

)

 

 (3

)

 

 (8

)

Goodwill impairment

 

 -

 

 

 -

 

 

 316

 

Tax impact associated with the Tax Cuts and Jobs Act (2)

 

 (16

)

 

 3

 

 

 (1,526

)

Other items

 

 3

 

 

 (1

)

 

 (16

)

Federal income tax expense (benefit)

$

 (37

)

$

 257

 

$

 (1,287

)

Effective tax rate

 

-6%

 

 

 14%

 

 

-176%

 



(1)

Relates primarily to separate account dividends eligible for the dividends-received deduction. As a result of the Tax Cuts and Jobs Act (the “Tax Act”), the recorded tax benefit for the separate account dividends-received deduction was substantially less in 2019 and 2018 as compared to 2017. 

(2)

As a result of the enactment of the Tax Act in 2017, we remeasured our existing deferred tax balances at the prevailing corporate federal income tax rate of 21% and recognized a $1.5 billion tax benefit.  In 2018, we recognized a $3 million net tax benefit from the impact of the reduced federal statutory rate under the Tax Act on our adoption of an Internal Revenue Service pronouncement related to variable annuity contracts.  In 2019, we recognized a $16 million net tax benefit from the impact of the reduced corporate tax rate under the Tax Act on our election to revalue policyholder tax reserves.



The federal income tax asset (liability) (in millions) was as follows:







 

 

 

 

 

 



As of December 31,

 



2019

 

2018

 

Current

$

 255

 

$

 205

 

Deferred

 

 (2,605

)

 

 (1,421

)

Total federal income tax asset (liability)

$

 (2,350

)

$

 (1,216

)



Significant components of our deferred tax assets and liabilities (in millions) were as follows:







 

 

 

 

 

 



 

 

 

 

 

 



As of December 31,

 



2019

 

2018

 

Deferred Tax Assets

 

 

 

 

 

 

Future contract benefits and other contract holder funds

$

 527

 

$

 549

 

Reinsurance related embedded derivative liability

 

 79

 

 

 -

 

Compensation and benefit plans

 

 135

 

 

 120

 

Intangibles

 

 26

 

 

 40

 

Net operating losses

 

 216

 

 

 264

 

Other

 

 14

 

 

 59

 

Total deferred tax assets

$

 997

 

$

 1,032

 

Deferred Tax Liabilities

 

 

 

 

 

 

DAC

$

 854

 

$

 1,380

 

VOBA

 

 191

 

 

 302

 

Net unrealized gain on fixed maturity AFS securities

 

 2,216

 

 

 333

 

Net unrealized gain on trading securities

 

 70

 

 

 25

 

Investment activity

 

 154

 

 

 334

 

Reinsurance related embedded derivative asset

 

-

 

 

 39

 

Deferred gain on business sold through reinsurance

 

 4

 

 

 34

 

Other

 

 113

 

 

 6

 

Total deferred tax liabilities

$

 3,602

 

$

 2,453

 

Net deferred tax asset (liability)

$

 (2,605

)

$

 (1,421

)



As of December 31, 2019, we have $1.0 billion of net operating losses to carry forward to future years.  The net operating losses arose in tax year 2018, and under the Tax Act changes, have an unlimited carryforward period.  As a result, management believes that it is more

44

 

 

likely than not that the deferred tax asset associated with the loss carryforwards will be realized.  Inclusive of the tax attribute for the net operating losses, although realization is not assured, management believes that it is more likely than not that we will realize the benefits of all of our deferred tax assets, and, accordingly, no valuation allowance has been recorded.



As of December 31, 2019, and 2018, $41 million and $12 million, respectively, of our unrecognized tax benefits presented below, if recognized, would have affected our federal income tax expense (benefit) and our effective tax rate.  We are not aware of any events for which it is likely that unrecognized tax benefits will significantly increase or decrease within the next year.  A reconciliation of the unrecognized tax benefits (in millions) was as follows:







 

 

 

 

 

 



 

 

 

 

 

 



For the Years Ended

 



December 31,

 



2019

 

2018

 

Balance as of beginning-of-year

$

 12 

 

$

 11 

 

Increases for prior year tax positions

 

 29 

 

 

 -

 

Increases for current year tax positions

 

-

 

 

 1 

 

Balance as of end-of-year

$

 41 

 

$

 12 

 

We recognize interest and penalties accrued, if any, related to unrecognized tax benefits as a component of tax expense.  For the years ended December 31, 2019, 2018 and 2017, we recognized no interest and penalty expense (benefit), and there was no accrued interest and penalty expense related to the unrecognized tax benefits as of December 31, 2019 and 2018. 



We are subject to examination by U.S. federal, state, local and non-U.S. income authorities.  We are currently not under examination by the Internal Revenue Service; however, tax years 2016 and forward remain open under the applicable statute of limitations.  We are currently under examination by several state and local taxing jurisdictions; however, we do not expect these examinations will materially impact us.



8.  DAC, VOBA, DSI and DFEL



Changes in DAC (in millions) were as follows:









 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Balance as of beginning-of-year

$

 9,509

 

$

 7,909

 

$

 8,269

 

Business acquired (sold) through reinsurance

 

 -

 

 

 (246

)

 

 -

 

Business recaptured through reinsurance

 

 59

 

 

 -

 

 

 -

 

Deferrals

 

 1,900

 

 

 1,596

 

 

 1,345

 

Amortization, net of interest:

 

 

 

 

 

 

 

 

 

Amortization, excluding unlocking, net of interest

 

 (922

)

 

 (913

)

 

 (922

)

Unlocking

 

 (471

)

 

 (115

)

 

 61

 

Adjustment related to realized (gains) losses

 

 (43

)

 

 (42

)

 

 (55

)

Adjustment related to unrealized (gains) losses

 

 (2,614

)

 

 1,320

 

 

 (789

)

Balance as of end-of-year

$

 7,418

 

$

 9,509

 

$

 7,909

 



45

 

 

Changes in VOBA (in millions) were as follows:









 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Balance as of beginning-of-year

$

 799

 

$

 499

 

$

 874

 

Business acquired (sold) through reinsurance

 

 -

 

 

 (11

)

 

 -

 

Business acquired

 

 -

 

 

 30

 

 

 -

 

Deferrals

 

 6

 

 

 7

 

 

 7

 

Amortization:

 

 

 

 

 

 

 

 

 

Amortization, excluding unlocking

 

 (115

)

 

 (127

)

 

 (105

)

Unlocking

 

 143

 

 

 (60

)

 

 (48

)

Accretion of interest (1)

 

 45

 

 

 48

 

 

 52

 

Adjustment related to realized (gains) losses

 

 (1

)

 

 (2

)

 

 (1

)

Adjustment related to unrealized (gains) losses

 

 (550

)

 

 415

 

 

 (280

)

Balance as of end-of-year

$

 327

 

$

 799

 

$

 499

 



(1)

The interest accrual rates utilized to calculate the accretion of interest ranged from 4.2% to 6.9%.



Estimated future amortization of VOBA, net of interest (in millions), as of December 31, 2019, was as follows:













 

 

 



 

 

 

2020

$

 72 

 

2021

 

 66 

 

2022

 

 67 

 

2023

 

 65 

 

2024

 

 61 

 



Changes in DSI (in millions) were as follows:













 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Balance as of beginning-of-year

$

 298

 

$

 287

 

$

 293

 

Business acquired (sold) through reinsurance

 

 -

 

 

 (21

)

 

 -

 

Deferrals

 

 26

 

 

 48

 

 

 29

 

Amortization, net of interest:

 

 

 

 

 

 

 

 

 

Amortization, excluding unlocking, net of interest

 

 (28

)

 

 (28

)

 

 (30

)

Unlocking

 

 (3

)

 

 -

 

 

 (4

)

Adjustment related to realized (gains) losses

 

 (2

)

 

 (1

)

 

 (2

)

Adjustment related to unrealized (gains) losses

 

 (10

)

 

 13

 

 

 1

 

Balance as of end-of-year

$

 281

 

$

 298

 

$

 287

 



Changes in DFEL (in millions) were as follows:













 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Balance as of beginning-of-year

$

 2,763

 

$

 1,429

 

$

 1,855

 

Business recaptured through reinsurance

 

 5

 

 

 -

 

 

 -

 

Deferrals

 

 1,092

 

 

 874

 

 

 753

 

Amortization, net of interest:

 

 

 

 

 

 

 

 

 

Amortization, excluding unlocking, net of interest

 

 (533

)

 

 (474

)

 

 (383

)

Unlocking

 

 (426

)

 

 (52

)

 

 (3

)

Adjustment related to realized (gains) losses

 

 (11

)

 

 (19

)

 

 (18

)

Adjustment related to unrealized (gains) losses

 

 (2,244

)

 

 1,005

 

 

 (775

)

Balance as of end-of-year

$

 646

 

$

 2,763

 

$

 1,429

 





46

 

 

9.  Reinsurance



The following summarizes reinsurance amounts (in millions) recorded on our Consolidated Statements of Comprehensive Income (Loss), excluding amounts attributable to the indemnity reinsurance agreements with Protective and Swiss Re Life & Health America, Inc. (“Swiss Re”):



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



 

For the Years Ended December 31,

 



 

2019

 

2018

 

2017

 

Direct insurance premiums and fee income

 

$

 13,347

 

$

 11,882

 

$

 10,103

 

Reinsurance assumed

 

 

 97

 

 

 96

 

 

 101

 

Reinsurance ceded

 

 

 (1,920

)

 

 (1,883

)

 

 (1,817

)

Total insurance premiums and fee income

 

$

 11,524

 

$

 10,095

 

$

 8,387

 



 

 

 

 

 

 

 

 

 

 

Direct insurance benefits

 

$

 9,482

 

$

 8,513

 

$

 6,669

 

Reinsurance recoveries netted against benefits

 

 

 (1,897

)

 

 (2,369

)

 

 (1,851

)

Total benefits

 

$

 7,585

 

$

 6,144

 

$

 4,818

 



We and our insurance subsidiaries cede insurance to other companies.  The portion of our life insurance and annuity risks exceeding our retention limit is reinsured with other insurers.  We seek reinsurance coverage to limit our exposure to mortality losses and to enhance our capital management.  Reinsurance does not discharge us from our primary obligation to contract holders for losses insured under the policies we issue.  As discussed in Note 24, a portion of this reinsurance activity is with affiliated companies.



As of December 31, 2019, the policy for our reinsurance program was to retain up to $20 million on a single insured life.  As the amount we retain varies by policy, we reinsured approximately 25% of the mortality risk on newly issued life insurance contracts in 2019. 



We focus on obtaining reinsurance from a diverse group of reinsurers, and we monitor concentration as well as financial strength ratings of our reinsurers.  Our amounts recoverable from reinsurers represent receivables from and reserves ceded to reinsurers and LNBAR.  The amounts recoverable from reinsurers were $19.2 billion and $19.8 billion as of December 31, 2019 and 2018, respectively.



Protective represents our largest reinsurance exposure following the sale of the Liberty Life Business as discussed in Note 3, which resulted in amounts recoverable from Protective of $11.8 billion and $12.1 billion as of December 31, 2019 and 2018, respectively.  Protective has funded trusts, of which the balance in the trusts changes as a result of ongoing reinsurance activity, to support the business ceded, which totaled $14.7 billion and $13.7 billion as of December 31, 2019 and 2018, respectively.



Our reinsurance operations were acquired by Swiss Re in December 2001 through a series of indemnity reinsurance transactions.  As such, Swiss Re reinsured certain liabilities and obligations under the indemnity reinsurance agreements.  As we are not relieved of our liability to the ceding companies for this business, the liabilities and obligations associated with the reinsured policies remain on our Consolidated Balance Sheets with a corresponding reinsurance receivable from Swiss Re, which totaled $1.3 billion and $1.5 billion as of December 31, 2019 and 2018, respectively.  Swiss Re has funded a trust, with a balance of $2.7 billion as of December 31, 2019, to support this business.  In addition to various remedies that we would have in the event of a default by Swiss Re, we continue to hold assets in support of certain of the transferred reserves.  These assets consist of those reported as trading securities and certain mortgage loans.  Our liabilities for funds withheld and embedded derivatives as of December 31, 2019, included $164 million and $31 million, respectively, related to the business sold to Swiss Re.  In addition, the amounts recoverable from LNBAR were $2.4 billion and $2.5 billion as of December 31, 2019 and 2018, respectively.  LNBAR has funded trusts to support the business ceded of which the balance in the trusts changes as a result of ongoing reinsurance activity and totaled $2.3 billion as of December 31, 2019. 



Some portions of our annuity business have been reinsured on a Modco basis with other companies.  In a Modco agreement, we as the ceding company retain the reserves, as well as the assets backing those reserves, and the reinsurer shares proportionally in all financial terms of the reinsured policies based on their respective percentage of the risk.  Effective October 1, 2018, we entered into one such Modco agreement with Athene to reinsure fixed and fixed indexed annuity products, which resulted in a deposit asset of $6.6 billion and $7.5 billion as of December 31, 2019 and 2018, respectively, within other assets on our Consolidated Balance Sheets.  We held investments of $6.9 billion as of December 31, 2019, in support of reserves associated with the transaction in a Modco investment portfolio.  As of December 31, 2019, the portfolio included trading securities, fixed maturity AFS securities, commercial mortgage loans, derivative investments, other investments, cash, accrued investment income and equity securities that had carrying values of $3.5 billion, $2.3 billion, $698 million, $130 million, $94 million, $62 million, $57 million and $14 million, respectively.   In addition, the portfolio was supported by $201 million of over-collateralization and a $200 million letter of credit as of December 31, 2019. As described in Note 1, we recorded a deferred gain on business sold through reinsurance related to the transaction with Athene and amortized $30 million and $8 million of the gain during 2019 and 2018, respectively.



In repositioning the Modco investment portfolio, purchases of securities classified as trading during 2019 primarily resulted in negative cash flows from operating activities that were largely offset by sales of securities classified as fixed maturity AFS within investing activities in our Consolidated Statements of Cash Flows.



See Note 6 for information on reinsurance related embedded derivatives.

47

 

 



10.  Goodwill and Specifically Identifiable Intangible Assets



The changes in the carrying amount of goodwill (in millions) by reportable segment were as follows:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Year Ended December 31, 2019

 

 



Gross

Accumulated

 

 

 

 

 

 

 

 

 

 



Goodwill

Impairment

 

 

 

 

 

 

 

 

 

Net

 

 



as of

as of

 

Acquisition

 

 

 

 

 

Goodwill

 

 



Beginning-

Beginning-

 

Accounting

 

 

 

 

 

as of End-

 

 



 

of-Year

 

 

of-Year

 

 

Adjustments

 

 

Impairment

 

 

of-Year

 

 

Annuities

 

$

 1,040

 

 

$

 (600

)

 

$

 -

 

 

$

 -

 

 

$

 440

 

 

Retirement Plan Services

 

 

 20

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 20

 

 

Life Insurance

 

 

 2,186

 

 

 

 (1,552

)

 

 

 -

 

 

 

 -

 

 

 

 634

 

 

Group Protection

 

 

 688

 

 

 

 -

 

 

 

 (4)

 

 

 

 -

 

 

 

 684

 

 

Total goodwill

 

$

 3,934

 

 

$

 (2,152

)

 

$

 (4)

 

 

$

 -

 

 

$

 1,778

 

 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Year Ended December 31, 2018

 

 



Gross

Accumulated

 

 

 

 

 

 

 

 

 

 



Goodwill

Impairment

 

 

 

 

 

 

 

 

 

Net

 

 



as of

as of

 

Acquisition

 

 

 

 

 

Goodwill

 

 



Beginning-

Beginning-

 

Accounting

 

 

 

 

 

as of End-

 

 



 

of-Year

 

 

of-Year

 

 

Adjustments

 

 

Impairment

 

 

of-Year

 

 

Annuities

 

$

 1,040

 

 

$

 (600

)

 

$

 -

 

 

$

 -

 

 

$

 440

 

 

Retirement Plan Services

 

 

 20

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 20

 

 

Life Insurance

 

 

 2,186

 

 

 

 (1,552

)

 

 

 -

 

 

 

 -

 

 

 

 634

 

 

Group Protection

 

 

 274

 

 

 

 -

 

 

 

 414

 

 

 

 -

 

 

 

 688

 

 

Total goodwill

 

$

 3,520

 

 

$

 (2,152

)

 

$

 414

 

 

$

 -

 

 

$

 1,782

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The fair values of our reporting units (Level 3 fair value estimates) are comprised of the value of in-force (i.e., existing) business and the value of new business.  Specifically, new business is representative of cash flows and profitability associated with policies or contracts we expect to issue in the future, reflecting our forecasts of future sales volume and product mix over a 10-year period.  To determine the values of in-force and new business, we use a discounted cash flows technique that applies a discount rate reflecting the market expected, weighted-average rate of return adjusted for the risk factors associated with operations to the projected future cash flows for each reporting unit.



As of October 1, 2019 and 2018, we performed our annual quantitative goodwill impairment test for our reporting units, and, as of each such date, the fair value was in excess of each reporting unit’s carrying value for Annuities, Retirement Plan Services, Life Insurance and Group Protection.



As of October 1, 2017, the date of our annual quantitative assessment of goodwill, our Annuities, Retirement Plan Services and Group Protection reporting units had fair values that exceeded the carrying value of each reporting unit. Our early adoption of ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” resulted in impairment of the Life Insurance reporting unit goodwill of $905 million during the fourth quarter of 2017 driven primarily from the impact of the December 22, 2017, enactment of the Tax Act that increased the carrying value of the Life Insurance reporting unit in excess of its fair value.



48

 

 

The gross carrying amounts and accumulated amortization (in millions) for each major specifically identifiable intangible asset class by reportable segment were as follows:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 



As of December 31, 2019

 

 

As of December 31, 2018

 

 



Gross

 

 

 

 

 

 

Gross

 

 

 

 

 



Carrying

 

Accumulated

 

Carrying

 

Accumulated

 



Amount

 

Amortization

 

Amount

 

Amortization

 

Retirement Plan Services:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual fund contract rights (1)

$

 5 

 

 

$

 -

 

 

$

 5 

 

 

$

 -

 

 

Life Insurance:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales force

 

 100 

 

 

 

 55 

 

 

 

 100 

 

 

 

 51 

 

 

Group Protection:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VOCRA

 

 576 

 

 

 

 25 

 

 

 

 576 

 

 

 

 5 

 

 

VODA

 

 31 

 

 

 

 2 

 

 

 

 31 

 

 

 

 -

 

 

Insurance licenses (1)

 

 3 

 

 

 

 -

 

 

 

 3 

 

 

 

 -

 

 

Total

$

 715 

 

 

$

 82 

 

 

$

 715 

 

 

$

 56 

 

 



(1)

No amortization recorded as the intangible asset has indefinite life. 



Future estimated amortization of specifically identifiable intangible assets (in millions) as of December 31, 2019, was as follows:







 

 

 



 

 

 

2020

$

 37 

 

2021

 

 37 

 

2022

 

 37 

 

2023

 

 37 

 

2024

 

 37 

 

Thereafter

 

 440 

 





49

 

 

11.  Guaranteed Benefit Features



Information on the GDB features outstanding (dollars in millions) was as follows:





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



As of December 31,

 

 



2019 (1)

 

 

2018 (1)

 

 

Return of Net Deposits

 

 

 

 

 

 

 

 

Total account value

$

 101,601 

 

 

$

 89,783 

 

 

Net amount at risk (2)

 

 71 

 

 

 

 1,002 

 

 

Average attained age of contract holders

 

65 years

 

 

 

65 years

 

 



 

 

 

 

 

 

 

 

Minimum Return

 

 

 

 

 

 

 

 

Total account value

$

 92 

 

 

$

 88 

 

 

Net amount at risk (2)

 

 13 

 

 

 

 18 

 

 

Average attained age of contract holders

 

77 years

 

 

 

77 years

 

 

Guaranteed minimum return

 

 5% 

 

 

 

 5% 

 

 



 

 

 

 

 

 

 

 

Anniversary Contract Value

 

 

 

 

 

 

 

 

Total account value

$

 25,763 

 

 

$

 23,365 

 

 

Net amount at risk (2)

 

 384 

 

 

 

 2,007 

 

 

Average attained age of contract holders

 

71 years

 

 

 

71 years

 

 



(1)

Our variable contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed are not mutually exclusive.

(2)

Represents the amount of death benefit in excess of the account balance that is subject to market fluctuations.



The determination of GDB liabilities is based on models that involve a range of scenarios and assumptions, including those regarding expected market rates of return and volatility, contract surrender rates and mortality experience.  The following summarizes the balances of and changes in the liabilities for GDBs (in millions), which were recorded in future contract benefits on our Consolidated Balance Sheets:





 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 

 



2019

 

2018

 

2017

 

 

Balance as of beginning-of-year

$

 161

 

$

 100

 

$

 110

 

 

Changes in reserves

 

 (24

)

 

 77

 

 

 8

 

 

Benefits paid

 

 (20

)

 

 (16

)

 

 (18

)

 

Balance as of end-of-year

$

 117

 

$

 161

 

$

 100

 

 



 

 

 

 

 

 

 

 

 

 

Variable Annuity Contracts



Account balances of variable annuity contracts, including those with guarantees, (in millions) were invested in separate account investment options as follows:





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



As of December 31,

 

 



2019

 

 

2018

 

 

Asset Type

 

 

 

 

 

 

 

 

Domestic equity

$

 64,093 

 

 

$

 54,060 

 

 

International equity

 

 19,852 

 

 

 

 18,359 

 

 

Fixed income

 

 41,405 

 

 

 

 37,942 

 

 

Total

$

 125,350 

 

 

$

 110,361 

 

 



 

 

 

 

 

 

 

 

Percent of total variable annuity separate account values

 

 98% 

 

 

 

 99% 

 

 



Secondary Guarantee Products



Future contract benefits and other contract holder funds include reserves for our secondary guarantee products sold through our Life Insurance segment.  Reserves on UL and VUL products with secondary guarantees represented 35% and 33% of total life insurance in-force reserves as of December 31, 2019 and 2018, respectively.  UL and VUL products with secondary guarantees represented 27%, 36% and 27% of total life insurance sales for the years ended December 31, 2019, 2018 and 2017, respectively.

50

 

 

12.  Liability for Unpaid Claims



The liability for unpaid claims consists primarily of long-term disability claims and is reported in future contract benefits on our Consolidated Balance Sheets.  Changes in the liability for unpaid claims (in millions) were as follows:



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Balance as of beginning-of-year

$

 5,335

 

$

 2,222

 

$

 2,242

 

Reinsurance recoverable

 

 143

 

 

 57

 

 

 69

 

Net balance as of beginning-of-year

 

 5,192

 

 

 2,165

 

 

 2,173

 

Business acquired (1)

 

 -

 

 

 2,842

 

 

 -

 

Incurred related to:

 

 

 

 

 

 

 

 

 

Current year

 

 3,193

 

 

 2,531

 

 

 1,346

 

Prior years:

 

 

 

 

 

 

 

 

 

Interest

 

 151

 

 

 120

 

 

 69

 

All other incurred (2)

 

 (308

)

 

 (208

)

 

 (76

)

Total incurred

 

 3,036

 

 

 2,443

 

 

 1,339

 

Paid related to:

 

 

 

 

 

 

 

 

 

Current year

 

 (1,518

)

 

 (1,197

)

 

 (798

)

Prior years

 

 (1,310

)

 

 (1,061

)

 

 (549

)

Total paid

 

 (2,828

)

 

 (2,258

)

 

 (1,347

)

Net balance as of end-of-year

 

 5,400

 

 

 5,192

 

 

 2,165

 

Reinsurance recoverable

 

 152

 

 

 143

 

 

 57

 

Balance as of end-of-year

$

 5,552

 

$

 5,335

 

$

 2,222

 



(1)

Represents acquired group life and disability reserves, net, as of May 1, 2018. See Note 3 for additional information.

(2)

All other incurred is primarily impacted by the level of claim resolutions in the period compared to that which is expected by the reserve assumption. A negative number implies a favorable result where claim resolutions were more favorable than assumed. Our claim resolution rate assumption used in determining reserves is our expectation of the resolution rate we will experience over the long-term life of the block of claims. It will vary from actual experience in any one period, both favorably and unfavorably.



The interest rate assumption used for discounting long-term claim reserves is an important part of the reserving process due to the long benefit period for these claims.  Interest accrued on prior years’ reserves has been calculated on the opening reserve balance less one-half of the prior years’ incurred claim payments at our average reserve discount rate.



Long-term disability benefits may extend for many years, and claim development schedules do not reflect these longer benefit periods.  As a result, we use longer term retrospective runoff studies, experience studies and prospective studies to develop our liability estimates.  Long-term disability reserves are discounted using rates ranging from 3.25% to 5%. The discount rates vary by year of claim incurral.

51

 

 

13.  Short-Term and Long-Term Debt



Details underlying short-term and long-term debt (in millions) were as follows:









 

 

 

 

 

 



 

 

 

 

 

 



As of December 31,

 



2019

 

2018

 

Short-Term Debt

 

 

 

 

 

 

Short-term debt (1)

$

 609 

 

$

 288 

 



 

 

 

 

 

 

Long-Term Debt, Excluding Current Portion

 

 

 

 

 

 

9.76% surplus note, due 2024

$

 50 

 

$

 50 

 

6.56% surplus note, due 2028

 

 500 

 

 

 500 

 

LIBOR + 111 bps surplus note, due 2028

 

 71 

 

 

 71 

 

LIBOR + 226 bps surplus note, due 2028

 

 613 

 

 

 600 

 

6.03% surplus note, due 2028

 

 750 

 

 

 750 

 

LIBOR + 200 bps surplus note, due 2035

 

 30 

 

 

 30 

 

LIBOR + 155 bps surplus note, due 2037

 

 25 

 

 

 25 

 

4.20% surplus note, due 2037

 

 50 

 

 

 50 

 

LIBOR + 100 bps surplus note, due 2037

 

 284 

 

 

 312 

 

4.225% surplus note, due 2037

 

 28 

 

 

 -

 

4.50% surplus note, due 2038

 

 13 

 

 

 13 

 

Total long-term debt

$

 2,414 

 

$

 2,401 

 



(1)

The short-term debt represents short-term notes payable to LNC.



Future principal payments due on long-term debt (in millions) as of December 31, 2019, were as follows:









 

 

 



 

 

 

2020

$

 -

 

2021

 

 -

 

2022

 

 -

 

2023

 

 -

 

2024

 

 50 

 

Thereafter

 

 2,364 

 

Total

$

 2,414 

 



We issued a surplus note of $50 million to LNC in 1994.  The note calls for us to pay the principal amount of the note on or before September 30, 2024, and interest to be paid semiannually at an annual rate of 9.76%.  Subject to approval by the Commissioner, we have the right to repay the note on any March 31 or September 30.



We issued a surplus note of $500 million to LNC in 1998.  The note calls for us to pay the principal amount of the note on or before March 31, 2028, and interest to be paid quarterly at an annual rate of 6.56%.  Subject to approval by the Commissioner, LNC has the right to redeem the note for immediate repayment in total or in part once per year on the anniversary date of the note.  Any payment of interest or repayment of principal may be paid only out of our statutory earnings, only if our statutory capital surplus exceeds our statutory capital as of the date of note issuance of $2.3 billion, and subject to approval by the Commissioner.



On October 1, 2013, we issued a surplus note of $71 million to LNC.  The note calls for us to pay the principal amount of the note on or before September 24, 2028, and interest to be paid quarterly at an annual rate of LIBOR + 111 bps.  Subject to approval by the Commissioner, we have the right to repay the note in whole or in part prior to the maturity date, if our statutory capital surplus exceeds the sum of our surplus at closing plus any accrued but unpaid interest.



On December 17, 2013, we issued a variable surplus note to a wholly-owned subsidiary of LNC with an initial outstanding principal amount of $287 million.  The outstanding principal amount as of December 31, 2019, was $613 million.  The note calls for us to pay the principal amount of the note on or before October 1, 2028, and interest to be paid quarterly at an annual rate of LIBOR + 226 bps.



We issued a surplus note of $750 million to LNC in 1998.  The note calls for us to pay the principal amount of the note on or before December 31, 2028, and interest to be paid quarterly at an annual rate of 6.03%.  Subject to approval by the Commissioner, LNC has the right to redeem the note for immediate repayment in total or in part once per year on the anniversary date of the note.  Any payment of interest or repayment of principal may be paid only out of our statutory earnings, only if our statutory capital surplus exceeds our statutory capital surplus as of the date of note issuance of $2.4 billion, and subject to approval by the Commissioner.



52

 

 

On October 1, 2015, we issued a surplus note of $30 million to LNC.  The note calls for us to pay the principal amount of the note on or before September 28, 2035, and interest to be paid quarterly at an annual rate of LIBOR + 200 bps.  Subject to approval by the Commissioner, we have the right to repay the note in whole or in part prior to the maturity date, if our statutory capital surplus exceeds the sum of our surplus at closing plus any accrued but unpaid interest. 



On July 1, 2017, we issued a surplus note of $25 million to LNC.  The note calls for us to pay the principal amount of the note on or before June 30, 2037, and interest to be paid quarterly at an annual rate of LIBOR + 155 bps.  Subject to approval by the Commissioner, we have the right to repay the note in whole or in part prior to the maturity date, if our statutory capital surplus exceeds the sum of our surplus at closing plus any accrued but unpaid interest. 



On October 1, 2017, we issued a surplus note of $50 million to LNC.  The note calls for us to pay the principal amount of the note on or before July 1, 2037, and interest to be paid quarterly at an annual rate of 4.20%.  Subject to approval by the Commissioner, we have the right to repay the note in whole or in part prior to the maturity date, if our statutory capital surplus exceeds the sum of our surplus at closing plus any accrued but unpaid interest. 



On October 9, 2007, we issued a surplus note of $375 million that LNC has held effective December 31, 2008.  The note calls for us to pay the principal amount of the note on or before October 9, 2037, and interest to be paid quarterly at an annual rate of LIBOR + 100 bps.  On June 15, 2017, the surplus note was amended to include repayment terms stating subject to approval by the Commissioner, we have the right to repay the note in whole or in part prior to the maturity date, if our statutory capital surplus exceeds the sum of our surplus at closing plus any accrued but unpaid interest.  The outstanding principal amount as of December 31, 2019, was $284 million due to executing our right to repay the surplus note in part to LNC.



On July 1, 2018, we issued a surplus note of $13 million to LNC.  The note calls for us to pay the principal amount of the note on or before June 30, 2038, and interest to be paid quarterly at an annual rate of 4.50%.  Subject to approval by the Commissioner, we have the right to repay the note in whole or in part prior to the maturity date, if our statutory capital surplus exceeds the sum of our surplus at closing plus any accrued but unpaid interest. 



On July 1, 2019, we issued a surplus note of $28 million to LNC.  The note calls for us to pay the principal amount of the note on or before October 9, 2037, and interest to be paid quarterly at an annual rate of 4.225%.  Subject to approval by the Commissioner, we have the right to repay the note in whole or in part prior to the maturity date, if our statutory capital surplus exceeds the sum of our surplus at closing plus any accrued but unpaid interest. 



Credit Facilities and Letters of Credit



Credit facilities, which allow for borrowing or issuances of letters of credit (“LOCs”), and LOCs (in millions) were as follows:









 

 

 

 

 

 

 

 





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

 

As of December 31, 2019

 



Expiration

 

Maximum

 

LOCs

 



Date

 

Available

 

Issued

 

Credit Facilities

 

 

 

 

 

 

 

 

Five-year revolving credit facility

July 31, 2024

 

$

 2,250 

 

$

 340 

 

LOC facility (1)

August 26, 2031

 

 

 990 

 

 

 965 

 

LOC facility (1)

October 1, 2031

 

 

 982 

 

 

 982 

 

Total

 

 

$

 4,222 

 

$

 2,287 

 



(1)

Our wholly-owned subsidiaries entered into irrevocable LOC facility agreements with third-party lenders supporting inter-company reinsurance agreements. 



On July 31, 2019, LNC refinanced its existing credit facility with a syndicate of banks.  This facility (the “credit facility”) allows for the issuance of LOCs and borrowing of up to $2.25 billion.  The credit facility is unsecured and has a commitment termination date of July 31, 2024.  The LOCs under the credit facility are used primarily to satisfy reserve credit requirements of (i) LNL and LNC’s other domestic insurance companies for which reserve credit is provided by our captive reinsurance subsidiaries and LNBAR and (ii) certain ceding companies of our legacy reinsurance business.



53

 

 

The credit agreement governing the credit facility contains or includes:



·

Customary terms and conditions, including covenants restricting the ability of LNC and its subsidiaries to incur liens and the ability of LNC to merge or consolidate with another entity where it is not the surviving entity and dispose of all or substantially all of its assets;

·

Financial covenants including maintenance by LNC of a minimum consolidated net worth (as defined in the credit agreement) equal to the sum of $10.6 billion plus 50% of the aggregate net proceeds of equity issuances received by LNC or any of its subsidiaries as set forth in the credit agreement; and a debt-to-capital ratio as defined in accordance with the credit facility not to exceed 0.35 to 1.00;

·

A cap on LNC’s secured non-operating indebtedness and non-operating indebtedness of LNC’s subsidiaries equal to 7.5% of total capitalization, as defined in accordance with the credit agreement; and

·

Customary events of default, subject to certain materiality thresholds and grace periods for certain of those events of default.



Upon an event of default, the credit agreement provides that, among other things, the commitments may be terminated and the loans then outstanding may be declared due and payable.  As of December 31, 2019, LNC was in compliance with all such covenants.



Our LOC facility agreements each contain customary terms and conditions, including early termination fees, covenants restricting the ability of the subsidiaries to incur liens, merge or consolidate with another entity and dispose of all or substantially all of their assets.  Upon an event of early termination, the agreements require the immediate payment of all or a portion of the present value of the future LOC fees that would have otherwise been paid.  Further, the agreements contain customary events of default, subject to certain materiality thresholds and grace periods for certain of those events of default.  The events of default include payment defaults, covenant defaults, material inaccuracies in representations and warranties, bankruptcy and liquidation proceedings and other customary defaults.  Upon an event of default, the agreements provide that, among other things, obligations to issue, amend or increase the amount of any LOC shall be terminated and any obligations shall become immediately due and payable.  As of December 31, 2019, we were in compliance with all such covenants.



14.  Contingencies and Commitments



Contingencies



Regulatory and Litigation Matters



Regulatory bodies, such as state insurance departments, the SEC, Financial Industry Regulatory Authority and other regulatory bodies regularly make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, laws governing the activities of broker-dealers, registered investment advisers and unclaimed property laws. 



LNL and its affiliates are involved in various pending or threatened legal or regulatory proceedings, including purported class actions, arising from the conduct of business both in the ordinary course and otherwise.  In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought.  Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief.  Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court.  In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding verdicts obtained in the jurisdiction for similar matters.  This variability in pleadings, together with the actual experiences of LNL in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value. 



Due to the unpredictable nature of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time is normally difficult to ascertain.  Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal.  Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.



We establish liabilities for litigation and regulatory loss contingencies when information related to the loss contingencies shows both that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.  It is possible that some matters could require us to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of December 31, 2019.  While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely to have a material adverse effect on LNL’s financial condition. 



For some matters, the Company is able to estimate a reasonably possible range of loss.  For such matters in which a loss is probable, an accrual has been made.  For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made.  Accordingly, the estimate contained in this paragraph reflects two types of matters.  For some matters included within this estimate, an accrual has been made, but there is a reasonable possibility that an exposure exists in excess of the amount accrued.  In these cases, the estimate reflects the reasonably possible range of loss in excess of the accrued amount.  For other matters included within this estimation,

54

 

 

no accrual has been made because a loss, while potentially estimable, is believed to be reasonably possible but not probable.  In these cases, the estimate reflects the reasonably possible loss or range of loss.  As of December 31, 2019, we estimate the aggregate range of reasonably possible losses, including amounts in excess of amounts accrued for these matters as of such date, to be up to approximately $90 million.  Any estimate is not an indication of expected loss, if any, or of the Company’s maximum possible loss exposure on such matters.



For other matters, we are not currently able to estimate the reasonably possible loss or range of loss.  We are often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts and the progress of settlement negotiations.  On a quarterly and annual basis, we review relevant information with respect to litigation contingencies and update our accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.



Certain reinsurers have sought rate increases on certain yearly renewable term treaties.  We are disputing the requested rate increases under these treaties.  We have initiated and will initiate arbitration proceedings, as necessary, under these treaties in order to protect our contractual rights.  Additionally, reinsurers may initiate arbitration proceedings against us.  We believe it is unlikely the outcome of these disputes will have a material adverse effect on our financial condition.  For more information about reinsurance, see Note 9.



Cost of Insurance Litigation



Glover v. Connecticut General Life Insurance Company and The Lincoln National Life Insurance Company, filed in the U.S. District Court for the District of Connecticut, No. 3:16-cv-00827, is a putative class action that was served on LNL on June 8, 2016.  Plaintiff is the owner of a universal life insurance policy who alleges that LNL charged more for non-guaranteed cost of insurance than permitted by the policy.  Plaintiff seeks to represent all universal life and variable universal life policyholders who owned policies containing non-guaranteed cost of insurance provisions that are similar to those of Plaintiff’s policy and seeks damages on behalf of all such policyholders.  On January 11, 2019, the court dismissed Plaintiff’s complaint in its entirety.  In response, Plaintiff filed a motion for leave to amend the complaint, which we have opposed.



Hanks v. The Lincoln Life and Annuity Company of New York (“LLANY”) and Voya Retirement Insurance and Annuity Company (“Voya”), filed in the U.S. District Court for the Southern District of New York, No. 1:16-cv-6399, is a putative class action that was served on LLANY on August 12, 2016.  Plaintiff owns a universal life policy originally issued by Aetna (now Voya) and alleges that (i) Voya breached the terms of the policy when it increased non-guaranteed cost of insurance rates on Plaintiff’s policy; and (ii) LLANY, as reinsurer and administrator of Plaintiff’s policy, engaged in wrongful conduct related to the cost of insurance increase and was unjustly enriched as a result.  Plaintiff seeks to represent all owners of Aetna life insurance policies that were subject to non-guaranteed cost of insurance rate increases in 2016 and seeks damages on their behalf.  On March 13, 2019, the court issued an order granting plaintiff’s motion for class certification for the breach of contract claim and denying such motion with respect to the unjust enrichment claim against LLANY, and, on September 12, 2019, the court issued an order approving the parties’ joint stipulation of dismissal with respect to the unjust enrichment claim and dismissed LLANY as a defendant in the case.  In light of LLANY’s role as reinsurer and administrator under the 1998 coinsurance agreement with Aetna (now Voya), and of the parties’ rights and obligations thereunder, LLANY continues to be actively engaged in the vigorous defense of this action.



EFG Bank AG, Cayman Branch, et al. v. The Lincoln National Life Insurance Company, pending in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:17-cv-02592, is a civil action filed on February 1, 2017.  Plaintiffs own Legend Series universal life insurance policies originally issued by Jefferson-Pilot (now LNL).  Plaintiffs allege that LNL breached the terms of policyholders’ contracts when it increased non-guaranteed cost of insurance rates beginning in 2016.  We are vigorously defending this matter.



In re: Lincoln National COI Litigation, pending in the U.S. District Court for the Eastern District of Pennsylvania, Master File No. 2:16-cv-06605-GJP, is a consolidated litigation matter related to multiple putative class action filings that were consolidated by an order dated March 20, 2017.  In addition to consolidating a number of existing matters, the order also covers any future cases filed in the same district related to the same subject matter.  Plaintiffs own universal life insurance policies originally issued by Jefferson-Pilot (now LNL).  Plaintiffs allege that LNL and LNC breached the terms of policyholders’ contracts by increasing non-guaranteed cost of insurance rates beginning in 2016.  Plaintiffs seek to represent classes of policyowners and seek damages on their behalf.  We are vigorously defending this matter.



In re: Lincoln National 2017 COI Rate Litigation, Master File No. 2:17-cv-04150 is a consolidated litigation matter related to multiple putative class action filings that were consolidated by an order of the court in March 2018.  Plaintiffs own universal life insurance policies originally issued by former Jefferson-Pilot (now LNL).  Plaintiffs allege that LNL and LNC breached the terms of policyholders’ contracts by increasing non-guaranteed cost of insurance rates beginning in 2017.  Plaintiffs seek to represent classes of policyholders and seek damages on their behalf.  We are vigorously defending this matter.



TVPX ARS INC., as Securities Intermediary for Consolidated Wealth Management, LTD. v. The Lincoln National Life Insurance Company, filed in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:18-cv-02989, is a putative class action that was filed on July 17, 2018.  Plaintiff alleges that LNL charged more for non-guaranteed cost of insurance than permitted by the policy.  Plaintiff seeks to represent all universal life and variable universal life policyholders who own policies issued by LNL or its predecessors containing non-guaranteed cost

55

 

 

of insurance provisions that are similar to those of Plaintiff’s policy and seeks damages on behalf of all such policyholders.  We are vigorously defending this matter.



LSH Co. and Wells Fargo Bank, National Association, as securities intermediary for LSH Co. v. Lincoln National Corporation and The Lincoln National Life Insurance Company, pending in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:18-cv-05529, is a civil action filed on December 21, 2018.  Plaintiffs own universal life insurance policies originally issued by Jefferson-Pilot (now LNL).  Plaintiffs allege that LNL breached the terms of policyholders’ contracts when it increased non-guaranteed cost of insurance rates in 2016 and 2017.  We are vigorously defending this matter.



Vida Longevity Fund, LP v. Lincoln Life & Annuity Company of New York, pending in the U.S. District Court for the Southern District of New York, No. 1:19-cv-06004, is a putative class action that was filed on June 27, 2019.  Plaintiff alleges that LLANY charged more for non-guaranteed cost of insurance than was permitted by the policies.  Plaintiff seeks to represent all current and former owners of universal life (including variable universal life) policies who own or owned policies issued by LLANY and its predecessors in interest that were in force at any time on or after June 27, 2013, and which contain non-guaranteed cost of insurance provisions that are similar to those of Plaintiff’s policies.  Plaintiff also seeks to represent a sub-class of such policyholders who own or owned “life insurance policies issued in the State of New York.”  Plaintiff seeks damages on behalf of the policyholder class and sub-class.  We are vigorously defending this matter.



Commitments



Leases



We recognized operating lease ROU assets of $202 million and associated lease liabilities of $208 million as of December 31, 2019.   We classified the operating lease ROU assets within other assets and the lease liabilities within other liabilities on our Consolidated Balance Sheets.  The weighted-average discount rate and remaining lease term were 3.2% and 6 years, respectively, as of December 31, 2019.  Operating lease expense for the years ended December 31, 2019, 2018 and 2017, was $46 million,  $43 million and $36 million, respectively, and reported in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss).  



As of December 31, 2019, the net book value of assets recorded as finance leases was $128 million, and the associated accumulated amortization was $345 million.  These transactions have been classified as other assets on our Consolidated Balance Sheets.  These assets will continue to be amortized on a straight-line basis over the assets’ remaining lives.  The weighted-average discount rate and remaining lease term were 2.2% and 2 years, respectively, as of December 31, 2019.



Finance lease expense (in millions) was as follows:











 

 

 

 

 



 

For the Year Ended

 

 



 

December 31,

 

 



 

2019

 

 



 

 

 

 

 

Amortization of ROU assets (1)

 

$

 67 

 

 

Interest on lease liabilities (2)

 

 

 13 

 

 

Total

 

$

 80 

 

 

 

 

 



(1)

Amortization of ROU assets is reported in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss).  

(2)

Interest on lease liabilities is reported in interest and debt expense on our Consolidated Statements of Comprehensive Income (Loss).

56

 

 



The table below presents cash flow information (in millions) related to leases: 



 

 

 

 

 



 

 



 

For the Year

Ended

 

 



 

December 31,

 

 



 

2019

 

 

Supplemental Cash Flow Information

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

Operating cash flows from operating leases

 

$

 47 

 

 

Financing cash flows from finance leases

 

 

 96 

 

 



 

 

 

 

 

Supplemental Non-cash Information

 

 

 

 

 

ROU assets obtained in exchange for new lease obligations:

 

 

 

 

 

Operating leases

 

$

 78 

 

 





Our future minimum lease payments (in millions) under non-cancellable leases as of December 31, 2019, were as follows:







 

 

 

 

 

 



Operating

 

Finance

 



Leases

 

Leases

 

2020

$

 44 

 

$

 56 

 

2021

 

 40 

 

 

 66 

 

2022

 

 35 

 

 

 66 

 

2023

 

 32 

 

 

 90 

 

2024

 

 26 

 

 

 17 

 

Thereafter

 

 65 

 

 

 12 

 

Total future minimum lease payments

 

 242 

 

 

 307 

 

Less: Amount representing interest

 

 34 

 

 

 26 

 

Present value of minimum lease payments

$

 208 

 

$

 281 

 

 

As of December 31, 2019, we had no leases that had not yet commenced.



Vulnerability from Concentrations



As of December 31, 2019, we did not have a concentration of:  business transactions with a particular customer or lender; sources of supply of labor or services used in the business; or a market or geographic area in which business is conducted that makes us vulnerable to an event that is at least reasonably possible to occur in the near term and which could cause a severe impact to our financial condition.  For information on our investment and reinsurance concentrations, see Notes 5 and 9, respectively.   



Other Contingency Matters

 

State guaranty funds assess insurance companies to cover losses to contract holders of insolvent or rehabilitated companies.  Mandatory assessments may be partially recovered through a reduction in future premium taxes in some states.  We have accrued for expected assessments and the related reductions in future state premium taxes, which net to assessments (recoveries) of $(13) million and $(18) million as of December 31, 2019 and 2018, respectively.



57

 

 

15.  Shares and Stockholder’s Equity



All authorized and issued shares of LNL are owned by LNC.



AOCI



The following summarizes the components and changes in AOCI (in millions):







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Unrealized Gain (Loss) on AFS Securities

 

 

 

 

 

 

 

 

 

Balance as of beginning-of-year

$

 536

 

$

 3,283

 

$

 1,687

 

Cumulative effect from adoption of new accounting standards

 

 -

 

 

 634

 

 

 -

 

Unrealized holding gains (losses) arising during the year

 

 8,856

 

 

 (5,995

)

 

 2,872

 

Change in foreign currency exchange rate adjustment

 

 46

 

 

 (107

)

 

 134

 

Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds

 

 (2,460

)

 

 1,748

 

 

 (703

)

Income tax benefit (expense)

 

 (1,370

)

 

 923

 

 

 (745

)

Less:

 

 

 

 

 

 

 

 

 

Reclassification adjustment for gains (losses) included in net income (loss)

 

 (26

)

 

 (44

)

 

 (40

)

Associated amortization of DAC, VOBA, DSI and DFEL

 

 (11

)

 

 (19

)

 

 (19

)

Income tax benefit (expense)

 

 8

 

 

 13

 

 

 21

 

Balance as of end-of-year

$

 5,637

 

$

 536

 

$

 3,283

 

Unrealized OTTI on AFS Securities

 

 

 

 

 

 

 

 

 

Balance as of beginning-of-year

$

 29

 

$

 39

 

$

 22

 

(Increases) attributable to:

 

 

 

 

 

 

 

 

 

Cumulative effect from adoption of new accounting standards

 

 -

 

 

 9

 

 

 -

 

Gross OTTI recognized in OCI during the year

 

 (14

)

 

 -

 

 

 -

 

Change in DAC, VOBA, DSI and DFEL

 

 1

 

 

 -

 

 

 -

 

Income tax benefit (expense)

 

 3

 

 

 -

 

 

 -

 

Decreases attributable to:

 

 

 

 

 

 

 

 

 

Changes in fair value, sales, maturities or other settlements of AFS securities

 

 30

 

 

 (18

)

 

 34

 

Change in DAC, VOBA, DSI and DFEL

 

 (2

)

 

 (5

)

 

 (7

)

Income tax benefit (expense)

 

 (7

)

 

 4

 

 

 (10

)

Balance as of end-of-year

$

 40

 

$

 29

 

$

 39

 

Unrealized Gain (Loss) on Derivative Instruments

 

 

 

 

 

 

 

 

 

Balance as of beginning-of-year

$

 119

 

$

 27

 

$

 93

 

Cumulative effect from adoption of new accounting standard

 

 -

 

 

 6

 

 

 -

 

Unrealized holding gains (losses) arising during the year

 

 181

 

 

 40

 

 

 63

 

Change in foreign currency exchange rate adjustment

 

 (52

)

 

 111

 

 

 (137

)

Change in DAC, VOBA, DSI and DFEL

 

 (5

)

 

 (14

)

 

 1

 

Income tax benefit (expense)

 

 (26

)

 

 (29

)

 

 26

 

Less:

 

 

 

 

 

 

 

 

 

Reclassification adjustment for gains (losses) included in net income (loss)

 

 47

 

 

 31

 

 

 31

 

Associated amortization of DAC, VOBA, DSI and DFEL

 

 (2

)

 

 (3

)

 

 (2

)

Income tax benefit (expense)

 

 (9

)

 

 (6

)

 

 (10

)

Balance as of end-of-year

$

 181

 

$

 119

 

$

 27

 

Funded Status of Employee Benefit Plans

 

 

 

 

 

 

 

 

 

Balance as of beginning-of-year

$

 (25

)

$

 (22

)

$

 (20

)

Cumulative effect from adoption of new accounting standard

 

 -

 

 

 (5

)

 

 -

 

Adjustment arising during the year

 

 4

 

 

 3

 

 

 (4

)

Income tax benefit (expense)

 

 (1

)

 

 (1

)

 

 2

 

Balance as of end-of-year

$

 (22

)

$

 (25

)

$

 (22

)



58

 

 

The following summarizes the reclassifications out of AOCI (in millions) and the associated line item in the Consolidated Statements of Comprehensive Income (Loss):









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 

 



2019

 

 

2018

 

 

2017

 

 

Unrealized Gain (Loss) on AFS Securities

 

 

 

 

 

 

 

 

 

 

 

 

Gross reclassification

$

 (26

)

 

$

 (44

)

 

$

 (40

)

Total realized gain (loss)

Associated amortization of DAC, 

 

 

 

 

 

 

 

 

 

 

 

 

VOBA, DSI and DFEL

 

 (11

)

 

 

 (19

)

 

 

 (19

)

Total realized gain (loss)

Reclassification before income

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing

tax benefit (expense)

 

 (37

)

 

 

 (63

)

 

 

 (59

)

operations before taxes

Income tax benefit (expense)

 

 8

 

 

 

 13

 

 

 

 21

 

Federal income tax expense (benefit)

Reclassification, net of income tax

$

 (29

)

 

$

 (50

)

 

$

 (38

)

Net income (loss)



 

 

 

 

 

 

 

 

 

 

 

 

Unrealized OTTI on AFS Securities

 

 

 

 

 

 

 

 

 

 

 

 

Gross reclassification

$

 4

 

 

$

 7

 

 

$

 5

 

Total realized gain (loss)

Change in DAC, VOBA, DSI and DFEL

 

 -

 

 

 

 -

 

 

 

 (1

)

Total realized gain (loss)

Reclassification before income

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing

tax benefit (expense)

 

 4

 

 

 

 7

 

 

 

 4

 

operations before taxes

Income tax benefit (expense)

 

 (1

)

 

 

 (1

)

 

 

 (1

)

Federal income tax expense (benefit)

Reclassification, net of income tax

$

 3

 

 

$

 6

 

 

$

 3

 

Net income (loss)



 

 

 

 

 

 

 

 

 

 

 

 

Unrealized Gain (Loss) on Derivative Instruments

 

 

 

 

 

 

 

 

 

 

Gross reclassifications:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

$

 3

 

 

$

 4

 

 

$

 4

 

Net investment income

Foreign currency contracts

 

 35

 

 

 

 27

 

 

 

 18

 

Net investment income

Foreign currency contracts

 

 9

 

 

 

 -

 

 

 

 9

 

Total realized gain (loss)

Total gross reclassifications

 

 47

 

 

 

 31

 

 

 

 31

 

 

Associated amortization of DAC,

 

 

 

 

 

 

 

 

 

 

 

 

VOBA, DSI and DFEL

 

 (2

)

 

 

 (3

)

 

 

 (2

)

Commissions and other expenses

Reclassifications before income

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing

tax benefit (expense)

 

 45

 

 

 

 28

 

 

 

 29

 

operations before taxes

Income tax benefit (expense)

 

 (9

)

 

 

 (6

)

 

 

 (10

)

Federal income tax expense (benefit)

Reclassifications, net of income tax

$

 36

 

 

$

 22

 

 

$

 19

 

Net income (loss)



 

16.  Commissions and Other Expenses



Details underlying commissions and other expenses (in millions) were as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Commissions

$

 2,566

 

$

 2,271

 

$

 1,998

 

General and administrative expenses

 

 2,152

 

 

 1,910

 

 

 1,715

 

Expenses associated with reserve financing and unrelated LOCs

 

 52

 

 

 64

 

 

 57

 

DAC and VOBA deferrals and interest, net of amortization

 

 (586

)

 

 (436

)

 

 (390

)

Broker-dealer expenses

 

 372

 

 

 358

 

 

 329

 

Specifically identifiable intangible asset amortization

 

 26

 

 

 9

 

 

 4

 

Taxes, licenses and fees

 

 353

 

 

 322

 

 

 254

 

Acquisition and integration costs related to mergers and acquisitions

 

 130

 

 

 85

 

 

 -

 

Total

$

 5,065

 

$

 4,583

 

$

 3,967

 



 

 

 

 

 

 

 

 

 



59

 

 

17.  Retirement and Deferred Compensation Plans



Defined Benefit Pension and Other Postretirement Benefit Plans



We maintain defined benefit pension plans in which certain agents are participants.  These defined benefit pension plans are closed to new entrants and existing participants do not accrue any additional benefits.  We comply with applicable minimum funding requirements. In accordance with such practice, we were not required to make contributions but elected to contribute zero and $8 million for the years ended December 31, 2019 and 2018, respectively.  We do not expect to be required to make any contributions to these pension plans in 2020.  We sponsor other postretirement benefit plans that provide health care and life insurance to certain retired agents.  Total net periodic cost (recovery) for these plans was $6  million, $6 million and $5 million during 2019, 2018 and 2017, respectively.  In 2020, we expect the plans to make benefit payments of approximately $10 million. 



Information (in millions) with respect to these plans was as follows:











 

 

 

 

 

 

 

 

 

 

 

 

 



As of or For the Years Ended December 31,

 

 



2019

 

2018

 

2019

 

2018

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Other Postretirement

 

 



Pension Plans

 

Benefit Plans

 

 

Fair value of plan assets

$

 109

 

$

 107

 

$

 9

 

$

 8

 

 

Projected benefit obligation

 

 115

 

 

 112

 

 

 10

 

 

 10

 

 

Funded status

$

 (6

)

$

 (5

)

$

 (1

)

$

 (2

)

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts Recognized on the

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

Other assets

$

 -

 

$

 -

 

$

 -

 

$

 -

 

 

Other liabilities

 

 (6

)

 

 (5

)

 

 (1

)

 

 (2

)

 

Net amount recognized

$

 (6

)

$

 (5

)

$

 (1

)

$

 (2

)

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average Assumptions

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit obligations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average discount rate

 

 3.50%

 

 

 4.50%

 

 

 3.50%

 

 

 4.50%

 

 

Net periodic benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average discount rate

 

 4.50%

 

 

 4.00%

 

 

 4.50%

 

 

 4.00%

 

 

Expected return on plan assets

 

 4.50%

 

 

 4.50%

 

 

 6.50%

 

 

 6.50%

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

The weighted average discount rate was determined based on a corporate yield curve as of December 31, 2019, and projected benefit obligation cash flows.  The expected return on plan assets was determined based on historical and expected future returns of the various asset categories, using the plans’ target plan allocation.  We reevaluate these assumptions each plan year. 



The following summarizes our fair value measurements of our benefit plans’ assets (in millions) on a recurring basis by asset category:









 

 

 

 

 

 

 



As of December 31,

 

 



2019

 

2018

 

 



 

 

 

 

 

 

 

Fixed maturity securities:

 

 

 

 

 

 

 

Corporate bonds

$

 -

 

$

 1 

 

 

U.S. government bonds

 

 83 

 

 

 87 

 

 

Cash and invested cash

 

 26 

 

 

 19 

 

 

Other investments

 

 9 

 

 

 8 

 

 

Total

$

 118 

 

$

 115 

 

 



 

 

 

 

 

 

 

See “Fair Value Measurement” in Note 1 for discussion on how we categorize our pension plans’ assets into the three-level fair value hierarchy.  See “Financial Instruments Carried at Fair Value” in Note 20 for a summary of our fair value measurement of our pension plans’ assets by the three-level fair value hierarchy. 



Participation in Defined Benefit Pension and Other Postretirement Benefit Plans



We participate in defined benefit pension plans that are sponsored by LNC for certain employees and non-employee directors.  These defined benefit pension plans are closed to new entrants, and existing participants do not accrue any additional benefits.  We also participate in other postretirement benefit plans sponsored by LNC that provide health care and life insurance to certain retired employees.  Our expense (benefit) for these plans was  $10 million, $(4) million and $7 million for the years ended December 31, 2019, 2018 and 2017, respectively.

60

 

 

Defined Contribution Plans



We sponsor tax-qualified defined contribution plans for eligible agents that are administered in accordance with the plan documents and various limitations under section 401(a) of the Internal Revenue Code of 1986.  We also participate in defined contribution plans sponsored by LNC for eligible employees.  Our expense for these plans was $101  million, $90 million and $85 million, for the years ended December 31, 2019, 2018 and 2017, respectively. 



Deferred Compensation Plans



We sponsor non-qualified, unfunded, deferred compensation plans for certain current and former agents.  Certain current employees participate in non-qualified, unfunded, deferred compensation plans sponsored by LNC.  The results of certain notional investment options within some of the plans are hedged by total return swaps.  Our expenses increase or decrease in direct proportion to the change in market value of the participants’ investment options.  Participants of certain plans are able to select LNC stock as a notional investment option; however, it is not hedged by the total return swaps and is a primary source of expense volatility related to these plans.  Our expense for these plans was $22 million, $12 million and $27 million for the years ended December 31, 2019, 2018 and 2017, respectively.  For further discussion of total return swaps related to our deferred compensation plans, see Note 6. 



Information (in millions) with respect to these plans was as follows:





 

 

 

 

 

 

 

 

 



As of December 31,

 

 

 

 



2019

 

2018

 

 

 

 

Total liabilities (1)

$

 579 

 

$

 487 

 

 

 

 

Investments dedicated to fund liabilities (2)

 

 202 

 

 

 170 

 

 

 

 



 

 

 

 

 

 

 

 

 

(1)

Reported in other liabilities on our Consolidated Balance Sheets.

(2)

Reported in other assets on our Consolidated Balance Sheets.   





18.  Stock-Based Incentive Compensation Plans



Our employees and agents are included in LNC’s various stock-based incentive compensation plans that provide for the issuance of stock options, performance shares, stock appreciation rights (“SARs”) and restricted stock units (“RSUs”).  LNC issues new shares to satisfy option exercises and vested performance shares and RSUs.



Total compensation expense (in millions) by award type for stock-based incentive compensation plans was as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Stock options

$

 8

 

$

 5

 

$

 9

 

Performance shares

 

 16

 

 

 14

 

 

 12

 

SARs

 

 -

 

 

 (1

)

 

 2

 

RSUs

 

 35

 

 

 30

 

 

 24

 

Total

$

 59

 

$

 48

 

$

 47

 



 

 

 

 

 

 

 

 

 

Recognized tax benefit

$

 12

 

$

 10

 

$

 16

 







19.  Statutory Information and Restrictions

 

We prepare financial statements in accordance with statutory accounting principles (“SAP”) prescribed or permitted by the insurance departments of our respective states of domicile, which may vary materially from GAAP.



Prescribed SAP includes the Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners (“NAIC”) as well as state laws, regulations and administrative rules.  Permitted SAP encompasses all accounting practices not so prescribed.  The principal differences between statutory financial statements and financial statements prepared in accordance with GAAP are that statutory financial statements do not reflect DAC, some bond portfolios may be carried at amortized cost, assets and liabilities are presented net of reinsurance, contract holder liabilities are generally valued using more conservative assumptions and certain assets are non-admitted.



We are subject to the applicable laws and regulations of our respective states of domicile.  Changes in these laws and regulations could change capital levels or capital requirements for the Company.



61

 

 

Statutory capital and surplus, net gain (loss) from operations, after-tax, net income (loss) and dividends to the LNC holding company amounts (in millions) below consist of all or a combination of the following entities:  LNL, LLANY, LLACB, Lincoln Reinsurance Company of South Carolina, Lincoln Reinsurance Company of Vermont I, Lincoln Reinsurance Company of Vermont III, Lincoln Reinsurance Company of Vermont IV, Lincoln Reinsurance Company of Vermont V, Lincoln Reinsurance Company of Vermont VI and Lincoln Reinsurance Company of Vermont VII.

















 

 

 

 

 

 



 

 

 

 

 

 



As of December 31,

 



2019

 

2018

 

U.S. capital and surplus

$

 8,425 

 

$

 8,330 

 









 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

U.S. net gain (loss) from operations, after-tax

$

 379 

 

$

 686 

 

$

 1,312 

 

U.S. net income (loss)

 

 359 

 

 

 1,013 

 

 

 1,452 

 

U.S. dividends to LNC holding company

 

 600 

 

 

 910 

 

 

 954 

 



Comparison of 2019 to 2018



Statutory net income (loss) decreased due primarily to lower dividends from affiliates, unfavorable reserve strain on certain products, and integration costs incurred as part of the acquisition of Liberty Life.  See Note 3 for information regarding the acquisition.



Comparison of 2018 to 2017



Statutory net income (loss) decreased due primarily to lower dividends from affiliates, acquisition and integration costs incurred as part of the acquisition of Liberty Life and unfavorable reserve strain on certain products. 



State Prescribed and Permitted Practices



The states of domicile for LNL and LLANY, Indiana and New York, respectively, have adopted certain prescribed accounting practices that differ from those found in NAIC SAP.  These prescribed practices are the use of continuous Commissioners’ Annuity Reserve Valuation Method in the calculation of reserves as prescribed by the state of New York, the calculation of reserves on universal life policies based on the Indiana universal life method as prescribed by the state of Indiana for policies issued before January 1, 2006, and the use of a more conservative valuation interest rate on certain annuities prescribed by the states of Indiana and New York.  The Vermont reinsurance subsidiaries also have certain accounting practices permitted by the state of Vermont that differ from those found in NAIC SAP.  One permitted practice involves accounting for the lesser of the face amount of all amounts outstanding under an LOC and the value of the Valuation of Life Insurance Policies Model Regulation (“XXX”) additional statutory reserves as an admitted asset and a form of surplus as of December 31, 2019 and 2018.  Another permitted practice involves the acquisition of an LLC note in exchange for a variable value surplus note that is recognized as an admitted asset and a form of surplus as of December 31, 2019.  Lastly, the state of Vermont has permitted a practice to account for certain excess of loss reinsurance treaties with unaffiliated reinsurers as an asset and form of surplus as of December 31, 2019.  These permitted practices are related to structures that continue to be allowed in accordance with the grandfathered structures under the provisions of Actuarial Guideline 48 (“AG48”) or are compliant under AG48 requirements. 



The favorable (unfavorable) effects on statutory surplus compared to NAIC statutory surplus from the use of these prescribed and permitted practices (in millions) were as follows:



 

 

 

 

 

 



 

 

 

 

 

 



As of December 31,

 



2019

 

2018

 

State Prescribed Practices

 

 

 

 

 

 

Calculation of reserves using the Indiana universal life method

$

 24

 

$

 36

 

Conservative valuation rate on certain annuities

 

 (49

)

 

 (55

)

Vermont Subsidiaries Permitted Practices (1)

 

 

 

 

 

 

Lesser of LOC and XXX additional reserve as surplus

 

 1,947

 

 

 1,959

 

LLC notes and variable value surplus notes

 

 1,648

 

 

 1,634

 

Excess of loss reinsurance treaties

 

 419

 

 

 330

 



 

 

 

 

 

 

(1)

These permitted practices are related to structures that continue to be allowed in accordance with the grandfathered structures under the provisions of AG48 or are compliant under AG48 requirements.



The NAIC has adopted RBC requirements for life insurance companies to evaluate the adequacy of statutory capital and surplus in relation to investment and insurance risks.  The requirements provide a means of measuring the minimum amount of statutory surplus appropriate for an insurance company to support its overall business operations based on its size and risk profile.  Under RBC

62

 

 

requirements, regulatory compliance is determined by the ratio of a company’s total adjusted capital, as defined by the NAIC, to its company action level of RBC (known as the “RBC ratio”), also as defined by the NAIC.  The company action level may be triggered if the RBC ratio is between 75% and 100%, which would require the insurer to submit a plan to the regulator detailing corrective action it proposes to undertake.  As of December 31, 2019, the Company’s RBC ratio was in excess of four times the aforementioned company action level.



We are subject to certain insurance department regulatory restrictions as to the transfer of funds and payment of dividends to the holding company.  Under Indiana laws and regulations, LNL may pay dividends to LNC without prior approval of the Indiana Insurance Commissioner (the “Commissioner”), only from unassigned surplus and must receive prior approval of the Commissioner to pay a dividend if such dividend, along with all other dividends paid within the preceding 12 consecutive months, would exceed the statutory limitation.  The current statutory limitation is the greater of 10% of the insurer’s contract holders’ surplus, as shown on its last annual statement on file with the Commissioner or the insurer’s statutory net gain from operations for the previous 12 months, but in no event to exceed statutory unassigned surplus.  Indiana law gives the Commissioner broad discretion to disapprove requests for dividends in excess of these limits.  LNL’s subsidiaries, LLANY, a New York-domiciled insurance company, and LLACB, a New Hampshire-domiciled company, are bound by similar restrictions, under the laws of New York and New Hampshire, respectively.  Under both New York and New Hampshire law, the applicable statutory limitation on dividends is equal to the lesser of 10% of surplus to contract holders as of the immediately preceding calendar year or net gain from operations for the immediately preceding calendar year, not including realized capital gains.  We expect that we could pay dividends to LNC of approximately $815 million in 2020 without prior approval from the Commissioner of Insurance.



All payments of principal and interest on surplus notes must be approved by the respective Commissioner of Insurance.







63

 

 

20.    Fair Value of Financial Instruments



The carrying values and estimated fair values of our financial instruments (in millions) were as follows:









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



As of December 31, 2019

 

As of December 31, 2018

 



Carrying

 

Fair

 

Carrying

 

Fair

 



Value

 

Value

 

Value

 

Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities

$

 103,773

 

$

 103,773

 

$

 92,787

 

$

 92,787

 

Trading securities

 

 4,602

 

 

 4,602

 

 

 1,869

 

 

 1,869

 

Equity securities

 

 103

 

 

 103

 

 

 99

 

 

 99

 

Mortgage loans on real estate

 

 16,244

 

 

 16,774

 

 

 13,190

 

 

 13,020

 

Derivative investments (1)

 

 1,911

 

 

 1,911

 

 

 1,081

 

 

 1,081

 

Other investments

 

 2,554

 

 

 2,554

 

 

 1,951

 

 

 1,951

 

Cash and invested cash

 

 1,879

 

 

 1,879

 

 

 1,848

 

 

 1,848

 

Reinsurance related embedded derivatives

 

 -

 

 

 -

 

 

 188

 

 

 188

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

GLB direct embedded derivatives

 

 450

 

 

 450

 

 

 123

 

 

 123

 

GLB ceded embedded derivatives

 

 60

 

 

 60

 

 

 72

 

 

 72

 

Indexed annuity ceded embedded derivatives

 

 927

 

 

 927

 

 

 902

 

 

 902

 

Separate account assets

 

 153,571

 

 

 153,571

 

 

 132,833

 

 

 132,833

 



 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Future contract benefits – indexed annuity

 

 

 

 

 

 

 

 

 

 

 

 

and IUL contracts embedded derivatives

 

 (2,585

)

 

 (2,585

)

 

 (1,305

)

 

 (1,305

)

Other contract holder funds:

 

 

 

 

 

 

 

 

 

 

 

 

Remaining guaranteed interest and similar contracts

 

 (1,900

)

 

 (1,900

)

 

 (542

)

 

 (542

)

Account values of certain investment contracts

 

 (38,606

)

 

 (46,781

)

 

 (34,500

)

 

 (36,321

)

Short-term debt

 

 (609

)

 

 (609

)

 

 (288

)

 

 (288

)

Long-term debt

 

 (2,414

)

 

 (2,714

)

 

 (2,401

)

 

 (2,519

)

Reinsurance related embedded derivatives

 

 (375

)

 

 (375

)

 

 -

 

 

 -

 

Other liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities (1)

 

 (238

)

 

 (238

)

 

 (226

)

 

 (226

)

GLB ceded embedded derivatives

 

 (510

)

 

 (510

)

 

 (196

)

 

 (196

)

Benefit Plans’ Assets (2)

 

 118

 

 

 118

 

 

 115

 

 

 115

 



(1)

We have master netting agreements with each of our derivative counterparties, which allow for the netting of our derivative asset and liability positions by counterparty.

(2)

Included in the funded statuses of the benefit plans, which is reported in other liabilities on our Consolidated Balance Sheets.  Refer to Note 17 for information regarding our benefit plans.



Valuation Methodologies and Associated Inputs for Financial Instruments Not Carried at Fair Value



The following discussion outlines the methodologies and assumptions used to determine the fair value of our financial instruments not carried at fair value on our Consolidated Balance Sheets.  Considerable judgment is required to develop these assumptions used to measure fair value.  Accordingly, the estimates shown are not necessarily indicative of the amounts that would be realized in a one-time, current market exchange of all of our financial instruments. 



Mortgage Loans on Real Estate



The fair value of mortgage loans on real estate is established using a discounted cash flow method based on credit rating, maturity and future income.  The ratings for mortgages in good standing are based on property type, location, market conditions, occupancy, debt-service coverage, loan-to-value, quality of tenancy, borrower and payment record.  The fair value for impaired mortgage loans is based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price or the fair value of the collateral if the loan is collateral dependent.  The inputs used to measure the fair value of our mortgage loans on real estate are classified as Level 2 within the fair value hierarchy. 



64

 

 

Other Investments



The carrying value of our assets classified as other investments approximates fair value.  Other investments includes primarily LPs and other privately held investments that are accounted for using the equity method of accounting and the carrying value is based on our proportional share of the net assets of the LPs.  Other investments also includes Federal Home Loan Bank (“FHLB”) stock carried at cost and periodically evaluated for impairment based on ultimate recovery of par value.  The inputs used to measure the fair value of our LPs, other privately held investments and FHLB stock are classified as Level 3 within the fair value hierarchy.  The remaining assets in other investments include cash collateral receivables and securities that are not LPs or other privately held investments.  The inputs used to measure the fair value of these assets are classified as Level 1 within the fair value hierarchy.



Separate Account Assets



Separate account assets are primarily carried at fair value.  A portion of our separate account assets includes LPs, which are accounted for using the equity method of accounting.  The carrying value is based on our proportional share of the net assets of the LPs and approximates fair value.  The inputs used to measure the fair value of the separate account asset LPs are classified as Level 3 within the fair value hierarchy.



Other Contract Holder Funds



Other contract holder funds include remaining guaranteed interest and similar contracts and account values of certain investment contracts.  The fair value for the remaining guaranteed interest and similar contracts is estimated using discounted cash flow calculations as of the balance sheet date.  These calculations are based on interest rates currently offered on similar contracts with maturities that are consistent with those remaining for the contracts being valued.  As of December 31, 2019 and 2018, the remaining guaranteed interest and similar contracts carrying value approximated fair value.  The fair value of the account values of certain investment contracts is based on their approximate surrender value as of the balance sheet date.  The inputs used to measure the fair value of our other contract holder funds are classified as Level 3 within the fair value hierarchy.



Short-Term and Long-Term Debt    



The fair value of short-term and long-term debt is based on quoted market prices.  The inputs used to measure the fair value of our short-term and long-term debt are classified as Level 2 within the fair value hierarchy.   



Financial Instruments Carried at Fair Value



We did not have any assets or liabilities measured at fair value on a nonrecurring basis as of December 31, 2019 or 2018, and we noted no changes in our valuation methodologies between these periods. 



65

 

 

The following summarizes our financial instruments carried at fair value (in millions) on a recurring basis by the fair value hierarchy levels described above:









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of December 31, 2019

 



 

Quoted

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Prices

 

 

 

 

 

 

 

 

 

 

 

 

 



 

in Active

 

 

 

 

 

 

 

 

 

 

 

 

 



Markets for

Significant

Significant

 

 

 

 



 

Identical

 

Observable

Unobservable

 

Total

 



 

Assets

 

 

Inputs

 

 

Inputs

 

 

Fair

 



 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

 -

 

 

$

 80,801

 

 

$

 6,978

 

 

$

 87,779

 

U.S. government bonds

 

 

 391

 

 

 

 7

 

 

 

 5

 

 

 

 403

 

State and municipal bonds

 

 

 -

 

 

 

 5,685

 

 

 

 -

 

 

 

 5,685

 

Foreign government bonds

 

 

 -

 

 

 

 298

 

 

 

 90

 

 

 

 388

 

RMBS

 

 

 -

 

 

 

 2,997

 

 

 

 11

 

 

 

 3,008

 

CMBS

 

 

 -

 

 

 

 1,082

 

 

 

 1

 

 

 

 1,083

 

ABS

 

 

 -

 

 

 

 4,615

 

 

 

 268

 

 

 

 4,883

 

Hybrid and redeemable preferred securities

 

 

 77

 

 

 

 389

 

 

 

 78

 

 

 

 544

 

Trading securities

 

 

 50

 

 

 

 3,886

 

 

 

 666

 

 

 

 4,602

 

Equity securities

 

 

 25

 

 

 

 48

 

 

 

 30

 

 

 

 103

 

Derivative investments (1)

 

 

 -

 

 

 

 1,089

 

 

 

 1,735

 

 

 

 2,824

 

Cash and invested cash

 

 

 -

 

 

 

 1,879

 

 

 

 -

 

 

 

 1,879

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GLB direct embedded derivatives

 

 

 -

 

 

 

 -

 

 

 

 450

 

 

 

 450

 

GLB ceded embedded derivatives

 

 

 -

 

 

 

 -

 

 

 

 60

 

 

 

 60

 

Indexed annuity ceded embedded derivatives

 

 

 -

 

 

 

 -

 

 

 

 927

 

 

 

 927

 

Separate account assets

 

 

 644

 

 

 

 152,916

 

 

 

 -

 

 

 

 153,560

 

Total assets

 

$

 1,187

 

 

$

 255,692

 

 

$

 11,299

 

 

$

 268,178

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Future contract benefits – indexed annuity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and IUL contracts embedded derivatives

 

$

 -

 

 

$

 -

 

 

$

 (2,585

)

 

$

 (2,585

)

Reinsurance related embedded derivatives

 

 

 -

 

 

 

 (375

)

 

 

 -

 

 

 

 (375

)

Other liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities (1)

 

 

 -

 

 

 

 (284

)

 

 

 (867

)

 

 

 (1,151

)

GLB ceded embedded derivatives

 

 

 -

 

 

 

 -

 

 

 

 (510

)

 

 

 (510

)

Total liabilities

 

$

 -

 

 

$

 (659

)

 

$

 (3,962

)

 

$

 (4,621

)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit Plans’ Assets

 

$

 -

 

 

$

 118

 

 

$

 -

 

 

$

 118

 







 



66

 

 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of December 31, 2018

 



 

Quoted

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Prices

 

 

 

 

 

 

 

 

 

 

 

 

 



 

in Active

 

 

 

 

 

 

 

 

 

 

 

 

 



Markets for

Significant

Significant

 

 

 

 



 

Identical

 

Observable

Unobservable

 

Total

 



 

Assets

 

 

Inputs

 

 

Inputs

 

 

Fair

 



 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

 -

 

 

$

 73,897

 

 

$

 5,652

 

 

$

 79,549

 

U.S. government bonds

 

 

 368

 

 

 

 18

 

 

 

 -

 

 

 

 386

 

State and municipal bonds

 

 

 -

 

 

 

 5,184

 

 

 

 -

 

 

 

 5,184

 

Foreign government bonds

 

 

 -

 

 

 

 335

 

 

 

 109

 

 

 

 444

 

RMBS

 

 

 -

 

 

 

 3,157

 

 

 

 7

 

 

 

 3,164

 

CMBS

 

 

 -

 

 

 

 801

 

 

 

 2

 

 

 

 803

 

ABS

 

 

 -

 

 

 

 2,544

 

 

 

 134

 

 

 

 2,678

 

Hybrid and redeemable preferred securities

 

 

 66

 

 

 

 438

 

 

 

 75

 

 

 

 579

 

Trading securities

 

 

 43

 

 

 

 1,759

 

 

 

 67

 

 

 

 1,869

 

Equity securities

 

 

 16

 

 

 

 58

 

 

 

 25

 

 

 

 99

 

Derivative investments (1)

 

 

 -

 

 

 

 636

 

 

 

 704

 

 

 

 1,340

 

Cash and invested cash

 

 

 -

 

 

 

 1,848

 

 

 

 -

 

 

 

 1,848

 

Reinsurance related embedded derivatives

 

 

 -

 

 

 

 188

 

 

 

 -

 

 

 

 188

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GLB direct embedded derivatives

 

 

 -

 

 

 

 -

 

 

 

 123

 

 

 

 123

 

GLB ceded embedded derivatives

 

 

 -

 

 

 

 -

 

 

 

 72

 

 

 

 72

 

Indexed annuity ceded embedded derivatives

 

 

 -

 

 

 

 -

 

 

 

 902

 

 

 

 902

 

Separate account assets

 

 

 665

 

 

 

 132,135

 

 

 

 -

 

 

 

 132,800

 

Total assets

 

$

 1,158

 

 

$

 222,998

 

 

$

 7,872

 

 

$

 232,028

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Future contract benefits – indexed annuity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and IUL contracts embedded derivatives

 

$

 -

 

 

$

 -

 

 

$

 (1,305

)

 

$

 (1,305

)

Other liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities (1)

 

 

 -

 

 

 

 (314

)

 

 

 (171

)

 

 

 (485

)

GLB ceded embedded derivatives

 

 

 -

 

 

 

 -

 

 

 

 (196

)

 

 

 (196

)

Total liabilities

 

$

 -

 

 

$

 (314

)

 

$

 (1,672

)

 

$

 (1,986

)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit Plans’ Assets

 

$

 -

 

 

$

 115

 

 

$

 -

 

 

$

 115

 



(1)

Derivative investment assets and liabilities are presented within the fair value hierarchy on a gross basis by derivative type and not on a master netting basis by counterparty. 

67

 

 

The following summarizes changes to our financial instruments carried at fair value (in millions) and classified within Level 3 of the fair value hierarchy.  This summary excludes any effect of amortization of DAC, VOBA, DSI and DFEL.  The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.

 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the Year Ended December 31, 2019

 



 

 

 

 

 

 

Gains

Issuances,

Transfers

 

 

 

 



 

 

 

Items

 

(Losses)

Sales,

Into or

 

 

 

 



 

 

 

Included

 

in

Maturities,

Out

 

 

 

 



Beginning

 

in

 

OCI

Settlements,

of

 

Ending

 



Fair

 

Net

 

and

 

Calls,

 

Level 3,

 

Fair

 



Value

 

Income

 

Other (1)

 

Net

 

Net (3)

 

Value

 

Investments: (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 5,652

 

$

 3

 

$

 177

 

$

 1,195

 

$

 (49

)

$

 6,978

 

U.S. government bonds

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 5

 

 

 5

 

Foreign government bonds

 

 109

 

 

 -

 

 

 6

 

 

 (25

)

 

 -

 

 

 90

 

RMBS

 

 7

 

 

 -

 

 

 -

 

 

 21

 

 

 (17

)

 

 11

 

CMBS

 

 2

 

 

 1

 

 

 -

 

 

 5

 

 

 (7

)

 

 1

 

ABS

 

 134

 

 

 -

 

 

 1

 

 

 619

 

 

 (486

)

 

 268

 

Hybrid and redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preferred securities

 

 75

 

 

 -

 

 

 3

 

 

 -

 

 

 -

 

 

 78

 

Trading securities

 

 67

 

 

 17

 

 

 -

 

 

 850

 

 

 (268

)

 

 666

 

Equity securities

 

 25

 

 

 (12

)

 

 -

 

 

 17

 

 

 -

 

 

 30

 

Derivative investments

 

 533

 

 

 9

 

 

 164

 

 

 162

 

 

 -

 

 

 868

 

Other assets: (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GLB direct embedded derivatives

 

 123

 

 

 327

 

 

 -

 

 

 -

 

 

 -

 

 

 450

 

GLB ceded embedded derivatives

 

 72

 

 

 (12

)

 

 -

 

 

 -

 

 

 -

 

 

 60

 

Indexed annuity ceded embedded derivatives

 

 902

 

 

 158

 

 

 -

 

 

 (133

)

 

 -

 

 

 927

 

Future contract benefits – indexed annuity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and IUL contracts embedded derivatives (6)

 

 (1,305

)

 

 (900

)

 

 -

 

 

 (380

)

 

 -

 

 

 (2,585

)

Other liabilities – GLB ceded embedded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

derivatives (6)

 

 (196

)

 

 (314

)

 

 -

 

 

 -

 

 

 -

 

 

 (510

)

Total, net

$

 6,200

 

$

 (723

)

$

 351

 

$

 2,331

 

$

 (822

)

$

 7,337

 



68

 

 







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the Year Ended December 31, 2018

 



 

 

 

 

 

 

Gains

Issuances,

Transfers

 

 

 

 



 

 

 

Items

 

(Losses)

Sales,

Into or

 

 

 

 



 

 

 

Included

 

in

Maturities,

Out

 

 

 

 



Beginning

 

in

 

OCI

Settlements,

of

 

Ending

 



Fair

 

Net

 

and

 

Calls,

 

Level 3,

 

Fair

 



Value

 

Income

 

Other (1)

 

Net (2)

 

Net (3)(4)

 

Value

 

Investments: (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 5,350

 

$

 10

 

$

 (198

)

$

 542

 

$

 (52

)

$

 5,652

 

U.S. government bonds

 

 5

 

 

 -

 

 

 -

 

 

 (5

)

 

 -

 

 

 -

 

Foreign government bonds

 

 110

 

 

 -

 

 

 (1

)

 

 -

 

 

 -

 

 

 109

 

RMBS

 

 12

 

 

 -

 

 

 -

 

 

 7

 

 

 (12

)

 

 7

 

CMBS

 

 6

 

 

 -

 

 

 -

 

 

 35

 

 

 (39

)

 

 2

 

ABS

 

 117

 

 

 -

 

 

 -

 

 

 223

 

 

 (206

)

 

 134

 

Hybrid and redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preferred securities

 

 76

 

 

 -

 

 

 (1

)

 

 -

 

 

 -

 

 

 75

 

Equity AFS securities

 

 161

 

 

 -

 

 

 -

 

 

 -

 

 

 (161

)

 

 -

 

Trading securities

 

 49

 

 

 (5

)

 

 -

 

 

 30

 

 

 (7

)

 

 67

 

Equity securities

 

 -

 

 

 (1

)

 

 -

 

 

 -

 

 

 26

 

 

 25

 

Derivative investments

 

 30

 

 

 168

 

 

 (74

)

 

 409

 

 

 -

 

 

 533

 

Other assets: (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GLB direct embedded derivatives

 

 903

 

 

 (780

)

 

 -

 

 

 -

 

 

 -

 

 

 123

 

GLB ceded embedded derivatives

 

 51

 

 

 21

 

 

 -

 

 

 -

 

 

 -

 

 

 72

 

Indexed annuity ceded embedded derivatives

 

 11

 

 

 (117

)

 

 -

 

 

 1,008

 

 

 -

 

 

 902

 

Future contract benefits – indexed annuity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and IUL contracts embedded derivatives (6)

 

 (1,418

)

 

 198

 

 

 -

 

 

 (85

)

 

 -

 

 

 (1,305

)

Other liabilities – GLB ceded embedded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

derivatives (6)

 

 (954

)

 

 758

 

 

 -

 

 

 -

 

 

 -

 

 

 (196

)

Total, net

$

 4,509

 

$

 252

 

$

 (274

)

$

 2,164

 

$

 (451

)

$

 6,200

 



69

 

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the Year Ended December 31, 2017

 



 

 

 

 

 

 

Gains

Issuances,

Transfers

 

 

 

 



 

 

 

Items

 

(Losses)

Sales,

Into or

 

 

 

 



 

 

 

Included

 

in

Maturities,

Out

 

 

 

 



Beginning

 

in

 

OCI

Settlements,

of

 

Ending

 



Fair

 

Net

 

and

 

Calls,

 

Level 3,

 

Fair

 



Value

 

Income

 

Other (1)

 

Net

 

Net (3)

 

Value

 

Investments: (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 4,809

 

$

 17

 

$

 199

 

$

 (45

)

$

 370

 

$

 5,350

 

U.S. government bonds

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 5

 

 

 5

 

Foreign government bonds

 

 111

 

 

 -

 

 

 (1

)

 

 -

 

 

 -

 

 

 110

 

RMBS

 

 3

 

 

 -

 

 

 -

 

 

 19

 

 

 (10

)

 

 12

 

CMBS

 

 7

 

 

 -

 

 

 1

 

 

 54

 

 

 (56

)

 

 6

 

ABS

 

 101

 

 

 -

 

 

 -

 

 

 124

 

 

 (108

)

 

 117

 

State and municipal bonds

 

 -

 

 

 (1

)

 

 -

 

 

 -

 

 

 1

 

 

 -

 

Hybrid and redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preferred securities

 

 76

 

 

 -

 

 

 14

 

 

 -

 

 

 (14

)

 

 76

 

Equity AFS securities

 

 177

 

 

 1

 

 

 (3

)

 

 (13

)

 

 (1

)

 

 161

 

Trading securities

 

 65

 

 

 3

 

 

 8

 

 

 (26

)

 

 (1

)

 

 49

 

Derivative investments

 

 (93

)

 

 (27

)

 

 127

 

 

 23

 

 

 -

 

 

 30

 

Other assets: (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GLB direct embedded derivatives

 

 -

 

 

 903

 

 

 -

 

 

 -

 

 

 -

 

 

 903

 

GLB ceded embedded derivatives

 

 371

 

 

 (320

)

 

 -

 

 

 -

 

 

 -

 

 

 51

 

Indexed annuity ceded embedded derivatives

 

 -

 

 

 -

 

 

 -

 

 

 11

 

 

 -

 

 

 11

 

Future contract benefits – indexed annuity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and IUL contracts embedded derivatives (6)

 

 (1,139

)

 

 (400

)

 

 -

 

 

 121

 

 

 -

 

 

 (1,418

)

Other liabilities: (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GLB direct embedded derivatives

 

 (371

)

 

 371

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

GLB ceded embedded derivatives

 

 -

 

 

 (954

)

 

 -

 

 

 -

 

 

 -

 

 

 (954

)

Total, net

$

 4,117

 

$

 (407

)

$

 345

 

$

 268

 

$

 186

 

$

 4,509

 



(1)

The changes in fair value of the interest rate swaps are offset by an adjustment to derivative investments (see Note 6).

(2)

Issuances, sales, maturities, settlements, calls, net, includes financial instruments acquired in the Liberty Life transaction as follows:  corporate bonds of $67 million and ABS of $17 million.

(3)

Transfers into or out of Level 3 for fixed maturity AFS and trading securities are reported at amortized cost as of the beginning-of-year.  For fixed maturity AFS and trading securities, the difference between beginning-of-year amortized cost and beginning-of-year fair value was included in OCI and earnings, respectively, in the prior years.

(4)

Transfers into or out of Level 3 for FHLB stock between equity securities and other investments are reported at cost on our Consolidated Balance Sheets.

(5)

Amortization and accretion of premiums and discounts are included in net investment income on our Consolidated Statements of Comprehensive Income (Loss).  Gains (losses) from sales, maturities, settlements and calls and OTTI are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

(6)

Gains (losses) from sales, maturities, settlements and calls are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

70

 

 

The following provides the components of the items included in issuances, sales, maturities, settlements and calls, net, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, (in millions) as reported above: 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the Year Ended December 31, 2019

 



Issuances

 

Sales

 

Maturities

Settlements

Calls

 

Total

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 1,502

 

$

 (45

)

$

 (78

)

$

 (154

)

$

 (30

)

$

 1,195

 

Foreign government bonds

 

 -

 

 

 -

 

 

 (25

)

 

 -

 

 

 -

 

 

 (25

)

RMBS

 

 21

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 21

 

CMBS

 

 7

 

 

 -

 

 

 -

 

 

 (2

)

 

 -

 

 

 5

 

ABS

 

 646

 

 

 (8

)

 

 -

 

 

 (19

)

 

 -

 

 

 619

 

Trading securities

 

 872

 

 

 -

 

 

 -

 

 

 (22

)

 

 -

 

 

 850

 

Equity securities

 

 50

 

 

 (33

)

 

 -

 

 

 -

 

 

 -

 

 

 17

 

Derivative investments

 

 555

 

 

 (61

)

 

 (332

)

 

 -

 

 

 -

 

 

 162

 

Other assets – indexed annuity ceded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

embedded derivatives

 

 56

 

 

 -

 

 

 -

 

 

 (189

)

 

 -

 

 

 (133

)

Future contract benefits – indexed annuity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and IUL contracts embedded derivatives

 

 (591

)

 

 -

 

 

 -

 

 

 211

 

 

 -

 

 

 (380

)

Total, net

$

 3,118

 

$

 (147

)

$

 (435

)

$

 (175

)

$

 (30

)

$

 2,331

 











 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the Year Ended December 31, 2018

 



Issuances

 

Sales

 

Maturities

Settlements

Calls

 

Total

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 1,068

 

$

 (171

)

$

 (3

)

$

 (275

)

$

 (77

)

$

 542

 

U.S. government bonds

 

 -

 

 

 (5

)

 

 -

 

 

 -

 

 

 -

 

 

 (5

)

RMBS

 

 7

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 7

 

CMBS

 

 39

 

 

 -

 

 

 -

 

 

 (4

)

 

 -

 

 

 35

 

ABS

 

 240

 

 

 (17

)

 

 -

 

 

 -

 

 

 -

 

 

 223

 

Trading securities

 

 54

 

 

 (24

)

 

 -

 

 

 -

 

 

 -

 

 

 30

 

Equity securities

 

 1

 

 

 (1

)

 

 -

 

 

 -

 

 

 -

 

 

 -

 

Derivative investments

 

 365

 

 

 465

 

 

 (421

)

 

 -

 

 

 -

 

 

 409

 

Other assets – indexed annuity ceded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

embedded derivatives

 

 1,030

 

 

 -

 

 

 -

 

 

 (22

)

 

 -

 

 

 1,008

 

Future contract benefits – indexed annuity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and IUL contracts embedded derivatives

 

 (284

)

 

 -

 

 

 -

 

 

 199

 

 

 -

 

 

 (85

)

Total, net

$

 2,520

 

$

 247

 

$

 (424

)

$

 (102

)

$

 (77

)

$

 2,164

 









71

 

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the Year Ended December 31, 2017

 



Issuances

 

Sales

 

Maturities

Settlements

Calls

 

Total

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 850

 

$

 (448

)

$

 (98

)

$

 (205

)

$

 (144

)

$

 (45

)

RMBS

 

 19

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 19

 

CMBS

 

 55

 

 

 -

 

 

 -

 

 

 (1

)

 

 -

 

 

 54

 

ABS

 

 124

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 124

 

Equity AFS securities

 

 18

 

 

 (31

)

 

 -

 

 

 -

 

 

 -

 

 

 (13

)

Trading securities

 

 2

 

 

 (27

)

 

 -

 

 

 (1

)

 

 -

 

 

 (26

)

Derivative investments

 

 197

 

 

 233

 

 

 (407

)

 

 -

 

 

 -

 

 

 23

 

Other assets – indexed annuity ceded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

embedded derivatives

 

 11

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 11

 

Future contract benefits – indexed annuity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and IUL contracts embedded derivatives

 

 (71

)

 

 -

 

 

 -

 

 

 192

 

 

 -

 

 

 121

 

Total, net

$

 1,205

 

$

 (273

)

$

 (505

)

$

 (15

)

$

 (144

)

$

 268

 



The following summarizes changes in unrealized gains (losses) included in net income, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, related to financial instruments carried at fair value classified within Level 3 that we still held (in millions):







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Derivative investments

$

 168

 

$

 90

 

$

 (266

)

Embedded derivatives:

 

 

 

 

 

 

 

 

 

Indexed annuity and IUL contracts

 

 (97

)

 

 (38

)

 

 (14

)

Other assets – GLB direct and ceded

 

 1,015

 

 

 (75

)

 

 1,904

 

Other liabilities – GLB direct and ceded

 

 (1,015

)

 

 75

 

 

 (1,904

)

Total, net (1)

$

 71

 

$

 52

 

$

 (280

)



(1)

Included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). 



The following provides the components of the transfers into and out of Level 3 (in millions) as reported above:





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Year Ended December 31, 2019

 



Transfers

 

Transfers

 

 

 

 



Into

 

Out of

 

 

 

 



Level 3

 

Level 3

 

Total

 

Investments:

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 173

 

$

 (222

)

$

 (49

)

U.S. government bonds

 

 5

 

 

 -

 

 

 5

 

RMBS

 

 -

 

 

 (17

)

 

 (17

)

CMBS

 

 -

 

 

 (7

)

 

 (7

)

ABS

 

 9

 

 

 (495

)

 

 (486

)

Trading securities

 

 5

 

 

 (273

)

 

 (268

)

Total, net

$

 192

 

$

 (1,014

)

$

 (822

)





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

72

 

 



For the Year Ended December 31, 2018

 



Transfers

 

Transfers

 

 

 

 



Into

 

Out of

 

 

 

 



Level 3

 

Level 3

 

Total

 

Investments:

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 78

 

$

 (130

)

$

 (52

)

RMBS

 

 -

 

 

 (12

)

 

 (12

)

CMBS

 

 1

 

 

 (40

)

 

 (39

)

ABS

 

 -

 

 

 (206

)

 

 (206

)

Equity AFS securities

 

 -

 

 

 (161

)

 

 (161

)

Trading securities

 

 -

 

 

 (7

)

 

 (7

)

Equity securities

 

 26

 

 

 -

 

 

 26

 

Total, net

$

 105

 

$

 (556

)

$

 (451

)









 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Year Ended December 31, 2017

 



Transfers

 

Transfers

 

 

 

 



Into

 

Out of

 

 

 

 



Level 3

 

Level 3

 

Total

 

Investments:

 

 

 

 

 

 

 

 

 

Fixed maturity AFS securities:

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 458

 

$

 (88

)

$

 370

 

U.S. government bonds

 

 5

 

 

 -

 

 

 5

 

RMBS

 

 -

 

 

 (10

)

 

 (10

)

CMBS

 

 3

 

 

 (59

)

 

 (56

)

ABS

 

 44

 

 

 (152

)

 

 (108

)

State and municipal bonds

 

 2

 

 

 (1

)

 

 1

 

Hybrid and redeemable preferred securities

 

 -

 

 

 (14

)

 

 (14

)

Equity AFS securities

 

 -

 

 

 (1

)

 

 (1

)

Trading securities

 

 4

 

 

 (5

)

 

 (1

)

Total, net

$

 516

 

$

 (330

)

$

 186

 



Transfers into and out of Level 3 are generally the result of observable market information on a security no longer being available or becoming available to our pricing vendors.  For the years ended December 31, 2019, 2018 and 2017, transfers in and out of Level 3 were attributable primarily to the securities’ observable market information no longer being available or becoming available.  In 2018, transfers into or out of Level 3 also included FHLB stock between equity securities and other investments at cost on our Consolidated Balance Sheets. 

73

 

 

The following summarizes the fair value (in millions), valuation techniques and significant unobservable inputs of the Level 3 fair value measurements as of December 31, 2019:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Fair

 

Valuation

 

Significant

 

Assumption or

 



Value

 

Technique

 

Unobservable Inputs

 

Input Ranges

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed maturity AFS and trading

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

$

 2,996

 

Discounted cash flow

 

Liquidity/duration adjustment (1)

 

 0.1

%

 

-

 6.4

%

 

Foreign government bonds

 

 52

 

Discounted cash flow

 

Liquidity/duration adjustment (1)

 

 2.1

%

 

-

 2.5

%

 

ABS

 

 22

 

Discounted cash flow

 

Liquidity/duration adjustment (1)

 

 3.0

%

 

-

 3.0

%

 

Hybrid and redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preferred securities

 

 4

 

Discounted cash flow

 

Liquidity/duration adjustment (1)

 

 1.4

%

 

-

 1.4

%

 

Equity securities

 

 21

 

Discounted cash flow

 

Liquidity/duration adjustment (1)

 

 4.5

%

 

-

 5.2

%

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GLB direct and ceded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

embedded derivatives

 

 510

 

Discounted cash flow

 

Long-term lapse rate (2)

 

 1

%

 

-

 30

%

 



 

 

 

 

 

 

Utilization of guaranteed withdrawals (3)

 85

%

 

-

 100

%

 



 

 

 

 

 

 

Claims utilization factor (4)

 

 60

%

 

-

 100

%

 



 

 

 

 

 

 

Premiums utilization factor (4)

 

 80

%

 

-

 115

%

 



 

 

 

 

 

 

NPR (5)

 

 0.01

%

 

-

 0.27

%

 



 

 

 

 

 

 

Mortality rate (6)

 

 

 

 

 

(8)

 

 



 

 

 

 

 

 

Volatility (7)

 

 1

%

 

-

 28

%

 

Indexed annuity ceded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

embedded derivatives

 

 927

 

Discounted cash flow

 

Lapse rate (2)

 

 1

%

 

-

 9

%

 



 

 

 

 

 

 

Mortality rate (6)

 

 

 

 

 

(8)

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Future contract benefits – indexed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

annuity and IUL contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

embedded derivatives

$

 (2,585

)

Discounted cash flow

 

Lapse rate (2)

 

 1

%

 

-

 9

%

 



 

 

 

 

 

 

Mortality rate (6)

 

 

 

 

 

(8)

 

 

Other liabilities – GLB ceded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

embedded derivatives

 

 (510

)

Discounted cash flow

 

Long-term lapse rate (2)

 

 1

%

 

-

 30

%

 



 

 

 

 

 

 

Utilization of guaranteed withdrawals (3)

 85

%

 

-

 100

%

 



 

 

 

 

 

 

Claims utilization factor (4)

 

 60

%

 

-

 100

%

 



 

 

 

 

 

 

Premiums utilization factor (4)

 

 80

%

 

-

 115

%

 



 

 

 

 

 

 

NPR (5)

 

 0.01

%

 

-

 0.27

%

 



 

 

 

 

 

 

Mortality rate (6)

 

 

 

 

 

(8)

 

 



 

 

 

 

 

 

Volatility (7)

 

 1

%

 

-

 28

%

 

(1)

The liquidity/duration adjustment input represents an estimated market participant composite of adjustments attributable to liquidity premiums, expected durations, structures and credit quality that would be applied to the market observable information of an investment.

(2)

The lapse rate input represents the estimated probability of a contract surrendering during a year, and thereby forgoing any future benefits.  The range for indexed annuity and IUL contracts represents the lapse rates during the surrender charge period.

(3)

The utilization of guaranteed withdrawals input represents the estimated percentage of contract holders that utilize the guaranteed withdrawal feature.

(4)

The utilization factors are applied to the present value of claims or premiums, as appropriate, in the GLB reserve calculation to estimate the impact of inefficient withdrawal behavior, including taking less than or more than the maximum guaranteed withdrawal.

(5)

The NPR input represents the estimated additional credit spread that market participants would apply to the market observable discount rate when pricing a contract.

(6)

The mortality rate input represents the estimated probability of when an individual belonging to a particular group, categorized according to age or some other factor such as gender, will die. 

(7)

The volatility input represents overall volatilities assumed for the underlying variable annuity funds, which include a mixture of equity and fixed-income assets.  Fair value of the variable annuity GLB embedded derivatives would increase if higher volatilities were used for valuation.

(8)

The mortality rate is based on a combination of company and industry experience, adjusted for improvement factors.

74

 

 

From the table above, we have excluded Level 3 fair value measurements obtained from independent, third-party pricing sources.  We do not develop the significant inputs used to measure the fair value of these assets and liabilities, and the information regarding the significant inputs is not readily available to us.  Independent broker-quoted fair values are non-binding quotes developed by market makers or broker-dealers obtained from third-party sources recognized as market participants.  The fair value of a broker-quoted asset or liability is based solely on the receipt of an updated quote from a single market maker or a broker-dealer recognized as a market participant as we do not adjust broker quotes when used as the fair value measurement for an asset or liability.  Significant increases or decreases in any of the quotes received from a third-party broker-dealer may result in a significantly higher or lower fair value measurement. 



Changes in any of the significant inputs presented in the table above may result in a significant change in the fair value measurement of the asset or liability as follows:



·

Investments – An increase in the liquidity/duration adjustment input would result in a decrease in the fair value measurement.

·

Indexed annuity and IUL contracts embedded derivatives – For direct embedded derivatives, an increase in the lapse rate or mortality rate inputs would result in a decrease in the fair value measurement. 

·

GLB embedded derivatives – Assuming our GLB direct embedded derivatives are in a liability position:  an increase in our lapse rate, NPR or mortality rate inputs would result in a decrease in the fair value measurement; and an increase in the utilization of guaranteed withdrawal or volatility inputs would result in an increase in the fair value measurement.



For each category discussed above, the unobservable inputs are not inter-related; therefore, a directional change in one input will not affect the other inputs. 



As part of our ongoing valuation process, we assess the reasonableness of our valuation techniques or models and make adjustments as necessary.  For more information, see “Summary of Significant Accounting Policies” above.



21.  Segment Information



We provide products and services and report results through our Annuities, Retirement Plan Services, Life Insurance and Group Protection segments.  As discussed in Note 3, we completed the acquisition of Liberty Life during the second quarter of 2018.  Related results are included within the Group Protection segment.  We also have Other Operations, which includes the financial data for operations that are not directly related to the business segments.  Our reporting segments reflect the manner by which our chief operating decision makers view and manage the business.  The following is a brief description of these segments and Other Operations.



The Annuities segment provides tax-deferred investment growth and lifetime income opportunities for its clients by offering fixed (including indexed) and variable annuities.



The Retirement Plan Services segment provides employer-sponsored defined benefit and individual retirement accounts, as well as individual and group variable annuities, group fixed annuities and mutual-fund based programs in the retirement plan marketplace. 



The Life Insurance segment focuses in the creation and protection of wealth through life insurance products, including term insurance, a linked-benefit product (which is a UL policy linked with riders that provide for long-term care costs), IUL and both single and survivorship versions of UL and VUL, including corporate-owned UL and VUL insurance and bank-owned UL and VUL insurance products.



The Group Protection segment offers group non-medical insurance products, including short and long-term disability, absence management services, term life, dental, vision and accident and critical illness benefits and services to the employer marketplace through various forms of employee-paid and employer-paid plans. 



Other Operations includes investments related to our excess capital; benefit plan net liability; the unamortized deferred gain on indemnity reinsurance related to the sale of reinsurance; the results of certain disability income business; our run-off institutional pension business, the majority of which was sold on a group annuity basis; debt costs; strategic digitization expense; and other corporate investments.



Segment operating revenues and income (loss) from operations are internal measures used by our management and Board of Directors to evaluate and assess the results of our segments.  Income (loss) from operations is GAAP net income excluding the after-tax effects of the following items, as applicable:



·

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

§

Sales or disposals and impairments of securities;

§

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

§

GLB rider fees ceded to LNBAR;

§

The net valuation premium of the GLB attributed rider fees;

75

 

 

§

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

§

Changes in the fair value of equity securities;

·

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

·

Gains (losses) on early extinguishment of debt;

·

Losses from the impairment of intangible assets;

·

Income (loss) from discontinued operations;

·

Acquisition and integration costs related to mergers and acquisitions; and

·

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



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



·

Excluded realized gain (loss);

·

Revenue adjustments from the initial adoption of new accounting standards;

·

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

·

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



We use our prevailing corporate 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 segment measures of performance to the GAAP measures presented in our consolidated results of operations.  Operating revenues and income (loss) from operations do not replace revenues and net income as the GAAP measures of our consolidated results of operations.



The tables below reconcile our segment measures of performance to the GAAP measures presented in our Consolidated Statements of Comprehensive Income (Loss) (in millions):







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Revenues

 

 

 

 

 

 

 

 

 

Operating revenues:

 

 

 

 

 

 

 

 

 

Annuities

$

 4,240

 

$

 4,025

 

$

 4,034

 

Retirement Plan Services

 

 1,186

 

 

 1,164

 

 

 1,152

 

Life Insurance

 

 6,999

 

 

 6,489

 

 

 6,128

 

Group Protection

 

 4,587

 

 

 3,756

 

 

 2,200

 

Other Operations

 

 199

 

 

 209

 

 

 263

 

Excluded realized gain (loss), pre-tax

 

 (1,019

)

 

 (285

)

 

 (630

)

Amortization of deferred gain arising from reserve changes

 

 

 

 

 

 

 

 

 

on business sold through reinsurance, pre-tax

 

 -

 

 

 -

 

 

 1

 

Total revenues

$

 16,192

 

$

 15,358

 

$

 13,148

 









 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



 

2019

 

 

2018

 

 

2017

 

Net Income (Loss)

 

 

 

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

 

 

 

 

 

 

Annuities

$

 987

 

$

 1,122

 

$

 1,072

 

Retirement Plan Services

 

 162

 

 

 160

 

 

 142

 

Life Insurance

 

 267

 

 

 530

 

 

 522

 

Group Protection

 

 237

 

 

 186

 

 

 103

 

Other Operations

 

 (148

)

 

 (130

)

 

 (30

)

Excluded realized gain (loss), after-tax

 

 (804

)

 

 (225

)

 

 (409

)

Gain (loss) on early extinguishment of debt, after-tax

 

 -

 

 

 -

 

 

 (3

)

Net impact from the Tax Cuts and Jobs Act

 

 16

 

 

 (3

)

 

 1,526

 

Impairment of intangibles, after-tax

 

 -

 

 

 -

 

 

 (905

)

Acquisition and integration costs related to mergers and acquisitions, after-tax

 

 (103

)

 

 (67

)

 

 -

 

Net income (loss)

$

 614

 

$

 1,573

 

$

 2,018

 





76

 

 

Other segment information (in millions) was as follows: 



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Net Investment Income

 

 

 

 

 

 

 

 

 

Annuities

$

 1,070 

 

$

 947 

 

$

 982 

 

Retirement Plan Services

 

 917 

 

 

 892 

 

 

 893 

 

Life Insurance

 

 2,494 

 

 

 2,546 

 

 

 2,496 

 

Group Protection

 

 306 

 

 

 259 

 

 

 167 

 

Other Operations

 

 175 

 

 

 200 

 

 

 222 

 

Total net investment income

$

 4,962 

 

$

 4,844 

 

$

 4,760 

 





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Amortization of DAC and VOBA, Net of Interest

 

 

 

 

 

 

 

 

 

Annuities

$

 427 

 

$

 347 

 

$

 402 

 

Retirement Plan Services

 

 25 

 

 

 27 

 

 

 26 

 

Life Insurance

 

 757 

 

 

 701 

 

 

 455 

 

Group Protection

 

 111 

 

 

 92 

 

 

 79 

 

Total amortization of DAC and VOBA, net of interest

$

 1,320 

 

$

 1,167 

 

$

 962 

 









 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Federal Income Tax Expense (Benefit)

 

 

 

 

 

 

 

 

 

Annuities

$

 148

 

$

 187

 

$

 198

 

Retirement Plan Services

 

 21

 

 

 28

 

 

 50

 

Life Insurance

 

 50

 

 

 116

 

 

 236

 

Group Protection

 

 63

 

 

 50

 

 

 55

 

Other Operations

 

 (61

)

 

 (48

)

 

 (78

)

Excluded realized gain (loss)

 

 (215

)

 

 (61

)

 

 (220

)

Gain (loss) on early extinguishment of debt

 

 -

 

 

 -

 

 

 (2

)

Net impact from the Tax Cuts and Jobs Act

 

 (16

)

 

 3

 

 

 (1,526

)

Acquisition and integration costs related to

 

 

 

 

 

 

 

 

 

mergers and acquisitions

 

 (27

)

 

 (18

)

 

 -

 

Total federal income tax expense (benefit)

$

 (37

)

$

 257

 

$

 (1,287

)









 

 

 

 

 

 



 

 

 

 

 

 



As of December 31,

 



2019

 

2018

 

Assets

 

 

 

 

 

 

Annuities

$

 166,639 

 

$

 145,462 

 

Retirement Plan Services

 

 40,190 

 

 

 35,742 

 

Life Insurance

 

 93,327 

 

 

 82,153 

 

Group Protection

 

 9,468 

 

 

 8,495 

 

Other Operations

 

 26,392 

 

 

 27,293 

 

Total assets

$

 336,016 

 

$

 299,145 

 



77

 

 



22.  Supplemental Disclosures of Cash Flow Data



The following summarizes our supplemental cash flow data (in millions):







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



For the Years Ended December 31,

 



2019

 

2018

 

2017

 

Interest paid

$

 152

 

$

 154

 

$

 123

 

Income taxes paid (received)

 

 245

 

 

 192

 

 

 215

 

Significant non-cash investing and financing transactions:

 

 

 

 

 

 

 

 

 

Reduction of other assets in connection with

 

 

 

 

 

 

 

 

 

the expiration of an affiliate repurchase agreement

 

 (150

)

 

 -

 

 

 -

 

Acquisition of note receivable from affiliate

 

 392

 

 

 31

 

 

 74

 

Investments received in financing transactions

 

 -

 

 

 263

 

 

 -

 

Exchange of surplus note for promissory note with affiliate:

 

 

 

 

 

 

 

 

 

Carrying value of asset

 

 40

 

 

 58

 

 

 109

 

Carrying value of liability

 

 (40

)

 

 (58

)

 

 (109

)

Net asset (liability) from exchange

$

 -

 

$

 -

 

$

 -

 







23.  Quarterly Results of Operations (Unaudited)



The unaudited quarterly results of operations (in millions) were as follows:





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



For the Three Months Ended

 

 



March 31,

 

June 30,

 

September 30,

December 31,

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

 3,764

 

$

 3,928

 

 

$

 4,227

 

 

$

 4,273

 

 

Total expenses

 

 3,646

 

 

 3,686

 

 

 

 4,526

 

 

 

 3,757

 

 

Net income (loss)

 

 133

 

 

 222

 

 

 

 (201

)

 

 

 460

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

 3,404

 

$

 3,852

 

 

$

 4,039

 

 

$

 4,063

 

 

Total expenses

 

 2,921

 

 

 3,357

 

 

 

 3,619

 

 

 

 3,631

 

 

Net income (loss)

 

 407

 

 

 420

 

 

 

 378

 

 

 

 368

 

 



78

 

 

 

24.  Transactions with Affiliates

 

The following summarizes transactions with affiliates (in millions) and the associated line item on our Consolidated Balance Sheets:







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

As of December 31,

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

Assets with affiliates:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inter-company notes

 

$

 1,557

 

 

$

 1,512

 

 

 

Fixed maturity AFS securities

Ceded reinsurance contracts

 

 

 (115

)

 

 

 (188

)

 

 

Deferred acquisition costs and value of



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

business acquired

Accrued inter-company interest receivable

 

 

 6

 

 

 

 11

 

 

 

Accrued investment income

Ceded reinsurance contracts

 

 

 2,473

 

 

 

 2,574

 

 

 

Reinsurance recoverables

Ceded reinsurance contracts

 

 

 -

 

 

 

 191

 

 

 

Reinsurance related embedded derivatives

Ceded reinsurance contracts

 

 

 228

 

 

 

 235

 

 

 

Other assets

Cash management agreement

 

 

 1,227

 

 

 

 112

 

 

 

Other assets

Service agreement receivable 

 

 

 6

 

 

 

 5

 

 

 

Other assets



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities with affiliates:

 

 

 

 

 

 

 

 

 

 

 

Assumed reinsurance contracts

 

 

 26

 

 

 

 29

 

 

 

Future contract benefits

Assumed reinsurance contracts

 

 

 390

 

 

 

 400

 

 

 

Other contract holder funds

Ceded reinsurance contracts

 

 

 (38

)

 

 

 (46

)

 

 

Other contract holder funds

Inter-company short-term debt

 

 

 609

 

 

 

 288

 

 

 

Short-term debt

Inter-company long-term debt    

 

 

 2,414

 

 

 

 2,401

 

 

 

Long-term debt

Ceded reinsurance contracts

 

 

 46

 

 

 

 -

 

 

 

Reinsurance related embedded derivatives

Ceded reinsurance contracts

 

 

 3,757

 

 

 

 3,120

 

 

 

Funds withheld reinsurance liabilities

Ceded reinsurance contracts

 

 

 497

 

 

 

 325

 

 

 

Other liabilities

Accrued inter-company interest payable

 

 

 5

 

 

 

 13

 

 

 

Other liabilities

Service agreement payable

 

 

 22

 

 

 

 56

 

 

 

Other liabilities



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following summarizes transactions with affiliates (in millions) and the associated line item on our Consolidated Statements of Comprehensive Income (Loss):









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

For the Years Ended December 31,

 

 

 



 

 

 

 

 

 

 

 

2019

 

2018

 

2017

 

 

 

Revenues with affiliates:

 

 

 

 

 

 

 

 

 

 

 

Premiums received on assumed (paid on ceded)

$

 

 

 

 

 

 

 

 

 

 

reinsurance contracts

 

 (407

)

$

 (404

)

$

 (393

)

 

Insurance premiums

Fees for management of general account

 

 (133

)

 

 (106

)

 

 (100

)

 

Net investment income

Net investment income on ceded funds withheld treaties

 

 (139

)

 

 (123

)

 

 (84

)

 

Net investment income

Net investment income on inter-company notes

 

 53

 

 

 49

 

 

 42

 

 

Net investment income

Realized gains (losses) on ceded reinsurance contracts:

 

 

 

 

 

 

 

 

 

 

 

GLB reserves embedded derivatives

 

 (305

)

 

 709

 

 

 (1,055

)

 

Realized gain (loss)

Other gains (losses)

 

 (301

)

 

 237

 

 

 (150

)

 

Realized gain (loss)

Reinsurance related settlements

 

 472

 

 

 (1,189

)

 

 951

 

 

Realized gain (loss)

Amortization of deferred gain (loss) on reinsurance

 

 

 

 

 

 

 

 

 

 

 

contracts

 

 (4

)

 

 (5

)

 

 (5

)

 

Amortization of deferred gain



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

on business sold through



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reinsurance

Benefits and expenses with affiliates:

 

 

 

 

 

 

 

 

 

 

 

Interest credited on assumed reinsurance contracts

 

 60

 

 

 57

 

 

 67

 

 

Interest credited

Reinsurance (recoveries) benefits on ceded reinsurance

 

 (254

)

 

 (610

)

 

 (299

)

 

Benefits

Ceded reinsurance contracts

 

 (19

)

 

 (8

)

 

 (12

)

 

Commissions and other



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

expenses

Service agreement payments

 

 15

 

 

 3

 

 

 3

 

 

Commissions and other



 

 

 

 

 

 

 

 

 

 

 

expenses

Interest expense on inter-company debt    

 

 130

 

 

 126

 

 

 120

 

 

Interest and debt expense

79

 

 

Inter-Company Notes



LNC issues inter-company notes to us for a predetermined face value to be repaid by LNC at a predetermined maturity with a specified interest rate.



Cash Management Agreement



In order to manage our capital more efficiently, we participate in an inter-company cash management program where LNC can lend to or borrow from us to meet short-term borrowing needs.  The cash management program is essentially a series of demand loans, which are permitted under applicable insurance laws, among LNC and its affiliates that reduces overall borrowing costs by allowing LNC and its subsidiaries to access internal resources instead of incurring third-party transaction costs.  The borrowing and lending limit is currently 3% of our admitted assets as of December 31, 2019.



Service Agreement



In accordance with service agreements with LNC and other subsidiaries of LNC for personnel and facilities usage, general management services and investment management services, we receive services from and provide services to affiliated companies and receive an allocation of corporate overhead.  Corporate overhead expenses are allocated based on specific methodologies for each function.  The majority of the expenses are allocated based on the following methodologies:  headcount, capital, investments by product, assets under management, weighted policies in force and sales.



Ceded Reinsurance Contracts



As discussed in Note 9, we cede insurance contracts to LNBAR.  We cede certain guaranteed benefit risks (including certain GDB and GWB benefits) to LNBAR.  As discussed in Note 6, we cede the GLB reserves embedded derivatives and the related hedge results to LNBAR. 



Substantially all reinsurance ceded to affiliated companies is with unauthorized companies.  To take reserve credit for such reinsurance, we hold assets from the reinsurer, including funds held under reinsurance treaties, and are the beneficiary of LOCs aggregating to $115 million and $1.2 billion as of December 31, 2019 and 2018, respectively.  The LOCs are obtained by the affiliate reinsurer and issued by banks in order for the Company to recognize the reserve credit.







80

 

Lincoln Life Flexible Premium Variable Life Account M


M-1


Lincoln Life Flexible Premium Variable Life Account M

Statements of assets and liabilities

December 31, 2019

Subaccount

  

Investments

  

Total Assets

  

Net Assets

  

AB VPS Global Thematic Growth Portfolio - Class A

  

$

11,540,813

    

$

11,540,813

    

$

11,540,813

    

AB VPS Growth and Income Portfolio - Class A

    

18,458,952

      

18,458,952

      

18,458,952

    

AB VPS International Value Portfolio - Class A

    

9,631,398

      

9,631,398

      

9,631,398

    

AB VPS Large Cap Growth Portfolio - Class A

    

4,108,839

      

4,108,839

      

4,108,839

    

AB VPS Small/Mid Cap Value Portfolio - Class A

    

52,344,724

      

52,344,724

      

52,344,724

    

American Century VP Balanced Fund - Class I

    

31,417,759

      

31,417,759

      

31,417,759

    

American Century VP Inflation Protection Fund - Class I

    

11,334,294

      

11,334,294

      

11,334,294

    

American Funds Global Growth Fund - Class 2

    

147,268,806

      

147,268,806

      

147,268,806

    

American Funds Global Small Capitalization Fund - Class 2

    

101,731,759

      

101,731,759

      

101,731,759

    

American Funds Growth Fund - Class 2

    

436,156,649

      

436,156,649

      

436,156,649

    

American Funds Growth-Income Fund - Class 2

    

415,452,519

      

415,452,519

      

415,452,519

    

American Funds International Fund - Class 2

    

215,846,233

      

215,846,233

      

215,846,233

    

BlackRock Global Allocation V.I. Fund - Class I

    

239,096,050

      

239,096,050

      

239,096,050

    

ClearBridge Variable Mid Cap Portfolio - Class I

    

25,206,852

      

25,206,852

      

25,206,852

    

Delaware VIP® Diversified Income Series - Standard Class

    

81,752,051

      

81,752,051

      

81,752,051

    

Delaware VIP® Emerging Markets Series - Standard Class

    

102,268,563

      

102,268,563

      

102,268,563

    

Delaware VIP® High Yield Series - Standard Class

    

18,303,096

      

18,303,096

      

18,303,096

    

Delaware VIP® Limited-Term Diversified Income Series - Standard Class

    

67,384,521

      

67,384,521

      

67,384,521

    

Delaware VIP® REIT Series - Standard Class

    

63,253,805

      

63,253,805

      

63,253,805

    

Delaware VIP® Small Cap Value Series - Standard Class

    

87,241,051

      

87,241,051

      

87,241,051

    

Delaware VIP® Smid Cap Core Series - Standard Class

    

74,955,085

      

74,955,085

      

74,955,085

    

Delaware VIP® U.S. Growth Series - Standard Class

    

36,429,851

      

36,429,851

      

36,429,851

    

Delaware VIP® Value Series - Standard Class

    

81,699,087

      

81,699,087

      

81,699,087

    

DWS Alternative Asset Allocation VIP Portfolio - Class A

    

16,947,674

      

16,947,674

      

16,947,674

    

DWS Equity 500 Index VIP Portfolio - Class A

    

47,978,477

      

47,978,477

      

47,978,477

    

DWS Small Cap Index VIP Portfolio - Class A

    

11,169,010

      

11,169,010

      

11,169,010

    

Fidelity® VIP Asset Manager Portfolio - Initial Class

    

532,543

      

532,543

      

532,543

    

Fidelity® VIP Contrafund® Portfolio - Service Class

    

232,657,019

      

232,657,019

      

232,657,019

    

Fidelity® VIP Equity-Income Portfolio - Initial Class

    

1,846,086

      

1,846,086

      

1,846,086

    

Fidelity® VIP Equity-Income Portfolio - Service Class

    

5,998,812

      

5,998,812

      

5,998,812

    

Fidelity® VIP Growth Opportunities Portfolio - Service Class

    

4,281,532

      

4,281,532

      

4,281,532

    

Fidelity® VIP Growth Portfolio - Service Class

    

63,523,190

      

63,523,190

      

63,523,190

    

Fidelity® VIP High Income Portfolio - Service Class

    

1,702,803

      

1,702,803

      

1,702,803

    

Fidelity® VIP Investment Grade Bond Portfolio - Initial Class

    

919,888

      

919,888

      

919,888

    

Fidelity® VIP Mid Cap Portfolio - Service Class

    

98,454,389

      

98,454,389

      

98,454,389

    

Fidelity® VIP Overseas Portfolio - Service Class

    

7,180,821

      

7,180,821

      

7,180,821

    

Franklin Income VIP Fund - Class 1

    

103,436,326

      

103,436,326

      

103,436,326

    

Franklin Mutual Shares VIP Fund - Class 1

    

61,315,212

      

61,315,212

      

61,315,212

    

Franklin Small-Mid Cap Growth VIP Fund - Class 1

    

15,176,339

      

15,176,339

      

15,176,339

    

Invesco V.I. American Franchise Fund - Series I Shares

    

12,548,809

      

12,548,809

      

12,548,809

    

Invesco V.I. Core Equity Fund - Series I Shares

    

14,164,202

      

14,164,202

      

14,164,202

    

Invesco V.I. Core Plus Bond Fund - Series I Shares

    

1,026,280

      

1,026,280

      

1,026,280

    

Invesco V.I. International Growth Fund - Series I Shares

    

29,638,957

      

29,638,957

      

29,638,957

    

Janus Henderson Balanced Portfolio - Institutional Shares

    

9,603,146

      

9,603,146

      

9,603,146

    

Janus Henderson Balanced Portfolio - Service Shares

    

9,389,026

      

9,389,026

      

9,389,026

    

Janus Henderson Enterprise Portfolio - Service Shares

    

5,843,869

      

5,843,869

      

5,843,869

    

Janus Henderson Global Research Portfolio - Institutional Shares

    

9,416,714

      

9,416,714

      

9,416,714

    

Janus Henderson Global Research Portfolio - Service Shares

    

2,208,937

      

2,208,937

      

2,208,937

    

Janus Henderson Global Technology Portfolio - Service Shares

    

3,430,810

      

3,430,810

      

3,430,810

    

JPMorgan Insurance Trust Global Allocation Portfolio - Class 1

    

26,518,841

      

26,518,841

      

26,518,841

    

LVIP Baron Growth Opportunities Fund - Service Class

    

48,201,407

      

48,201,407

      

48,201,407

    

LVIP Baron Growth Opportunities Fund - Standard Class

    

1,353,545

      

1,353,545

      

1,353,545

    

LVIP BlackRock Dividend Value Managed Volatility Fund - Standard Class

    

43,545,524

      

43,545,524

      

43,545,524

    

LVIP BlackRock Global Growth ETF Allocation Managed Risk Fund - Standard Class

    

24,668,911

      

24,668,911

      

24,668,911

    

LVIP BlackRock Global Real Estate Fund - Standard Class

    

28,607,784

      

28,607,784

      

28,607,784

    

LVIP BlackRock Inflation Protected Bond Fund - Standard Class

    

39,207,297

      

39,207,297

      

39,207,297

    

LVIP BlackRock U.S. Growth ETF Allocation Managed Risk Fund - Standard Class

    

8,835,165

      

8,835,165

      

8,835,165

    

LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class

    

9,101,308

      

9,101,308

      

9,101,308

    

LVIP Blended Mid Cap Managed Volatility Fund - Standard Class

    

9,816,296

      

9,816,296

      

9,816,296

    

LVIP ClearBridge QS Select Large Cap Managed Volatility Fund - Standard Class

    

1,285,584

      

1,285,584

      

1,285,584

    

LVIP Delaware Bond Fund - Standard Class

    

191,882,223

      

191,882,223

      

191,882,223

    

See accompanying notes.
M-2


Lincoln Life Flexible Premium Variable Life Account M

Statements of assets and liabilities (continued)

December 31, 2019

Subaccount

  

Investments

  

Total Assets

  

Net Assets

  

LVIP Delaware Diversified Floating Rate Fund - Standard Class

  

$

32,233,751

    

$

32,233,751

    

$

32,233,751

    

LVIP Delaware Social Awareness Fund - Standard Class

    

9,608,733

      

9,608,733

      

9,608,733

    

LVIP Delaware Special Opportunities Fund - Standard Class

    

18,162,876

      

18,162,876

      

18,162,876

    

LVIP Delaware Wealth Builder Fund - Standard Class

    

2,950,843

      

2,950,843

      

2,950,843

    

LVIP Dimensional International Core Equity Fund - Standard Class

    

28,788,939

      

28,788,939

      

28,788,939

    

LVIP Dimensional International Equity Managed Volatility Fund - Standard Class

    

12,512,381

      

12,512,381

      

12,512,381

    

LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class

    

33,526,594

      

33,526,594

      

33,526,594

    

LVIP Dimensional U.S. Core Equity 2 Fund - Standard Class

    

35,912,083

      

35,912,083

      

35,912,083

    

LVIP Dimensional U.S. Equity Managed Volatility Fund - Standard Class

    

14,083,868

      

14,083,868

      

14,083,868

    

LVIP Dimensional/Vanguard Total Bond Fund - Standard Class

    

92,080,106

      

92,080,106

      

92,080,106

    

LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class

    

8,829,145

      

8,829,145

      

8,829,145

    

LVIP Global Conservative Allocation Managed Risk Fund - Standard Class

    

48,320,512

      

48,320,512

      

48,320,512

    

LVIP Global Growth Allocation Managed Risk Fund - Standard Class

    

130,170,449

      

130,170,449

      

130,170,449

    

LVIP Global Income Fund - Standard Class

    

15,128,533

      

15,128,533

      

15,128,533

    

LVIP Global Moderate Allocation Managed Risk Fund - Standard Class

    

111,018,866

      

111,018,866

      

111,018,866

    

LVIP Government Money Market Fund - Standard Class

    

99,837,480

      

99,837,480

      

99,837,480

    

LVIP Invesco Select Equity Income Managed Volatility Fund - Standard Class

    

1,869,346

      

1,869,346

      

1,869,346

    

LVIP JPMorgan High Yield Fund - Standard Class

    

61,152,820

      

61,152,820

      

61,152,820

    

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class

    

16,119,022

      

16,119,022

      

16,119,022

    

LVIP MFS International Growth Fund - Standard Class

    

52,409,210

      

52,409,210

      

52,409,210

    

LVIP MFS Value Fund - Standard Class

    

134,216,004

      

134,216,004

      

134,216,004

    

LVIP Mondrian International Value Fund - Standard Class

    

41,829,478

      

41,829,478

      

41,829,478

    

LVIP Multi-Manager Global Equity Managed Volatility Fund - Standard Class

    

340,382

      

340,382

      

340,382

    

LVIP SSGA Bond Index Fund - Standard Class

    

74,814,226

      

74,814,226

      

74,814,226

    

LVIP SSGA Conservative Index Allocation Fund - Standard Class

    

25,793,589

      

25,793,589

      

25,793,589

    

LVIP SSGA Conservative Structured Allocation Fund - Standard Class

    

14,688,888

      

14,688,888

      

14,688,888

    

LVIP SSGA Developed International 150 Fund - Standard Class

    

33,526,420

      

33,526,420

      

33,526,420

    

LVIP SSGA Emerging Markets 100 Fund - Standard Class

    

47,994,806

      

47,994,806

      

47,994,806

    

LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class

    

24,787,910

      

24,787,910

      

24,787,910

    

LVIP SSGA International Index Fund - Standard Class

    

58,409,006

      

58,409,006

      

58,409,006

    

LVIP SSGA International Managed Volatility Fund - Standard Class

    

11,312,121

      

11,312,121

      

11,312,121

    

LVIP SSGA Large Cap 100 Fund - Standard Class

    

44,004,313

      

44,004,313

      

44,004,313

    

LVIP SSGA Moderate Index Allocation Fund - Standard Class

    

132,530,568

      

132,530,568

      

132,530,568

    

LVIP SSGA Moderate Structured Allocation Fund - Standard Class

    

79,458,335

      

79,458,335

      

79,458,335

    

LVIP SSGA Moderately Aggressive Index Allocation Fund - Standard Class

    

145,063,535

      

145,063,535

      

145,063,535

    

LVIP SSGA Moderately Aggressive Structured Allocation Fund - Standard Class

    

73,138,461

      

73,138,461

      

73,138,461

    

LVIP SSGA S&P 500 Index Fund - Standard Class

    

700,590,863

      

700,590,863

      

700,590,863

    

LVIP SSGA Small-Cap Index Fund - Standard Class

    

81,769,396

      

81,769,396

      

81,769,396

    

LVIP SSGA Small-Mid Cap 200 Fund - Standard Class

    

57,279,820

      

57,279,820

      

57,279,820

    

LVIP T. Rowe Price 2010 Fund - Standard Class

    

431,183

      

431,183

      

431,183

    

LVIP T. Rowe Price 2020 Fund - Standard Class

    

1,694,554

      

1,694,554

      

1,694,554

    

LVIP T. Rowe Price 2030 Fund - Standard Class

    

2,317,204

      

2,317,204

      

2,317,204

    

LVIP T. Rowe Price 2040 Fund - Standard Class

    

3,633,773

      

3,633,773

      

3,633,773

    

LVIP T. Rowe Price Growth Stock Fund - Standard Class

    

95,486,077

      

95,486,077

      

95,486,077

    

LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class

    

54,538,787

      

54,538,787

      

54,538,787

    

LVIP U.S. Growth Allocation Managed Risk Fund - Standard Class

    

12,716,621

      

12,716,621

      

12,716,621

    

LVIP Vanguard Domestic Equity ETF Fund - Standard Class

    

141,524,890

      

141,524,890

      

141,524,890

    

LVIP Vanguard International Equity ETF Fund - Standard Class

    

95,943,245

      

95,943,245

      

95,943,245

    

LVIP Wellington Capital Growth Fund - Standard Class

    

54,234,307

      

54,234,307

      

54,234,307

    

LVIP Wellington Mid-Cap Value Fund - Standard Class

    

32,713,901

      

32,713,901

      

32,713,901

    

M Capital Appreciation Fund

    

1,704,448

      

1,704,448

      

1,704,448

    

M International Equity Fund

    

1,912,402

      

1,912,402

      

1,912,402

    

M Large Cap Growth Fund

    

3,260,057

      

3,260,057

      

3,260,057

    

M Large Cap Value Fund

    

2,345,035

      

2,345,035

      

2,345,035

    

MFS® VIT Growth Series - Initial Class

    

66,911,849

      

66,911,849

      

66,911,849

    

MFS® VIT Total Return Series - Initial Class

    

63,088,060

      

63,088,060

      

63,088,060

    

MFS® VIT Utilities Series - Initial Class

    

44,941,603

      

44,941,603

      

44,941,603

    

MFS® VIT II Core Equity Portfolio - Initial Class

    

1,214,416

      

1,214,416

      

1,214,416

    

Neuberger Berman AMT Mid Cap Growth Portfolio - I Class

    

18,591,151

      

18,591,151

      

18,591,151

    

Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio - I Class

    

5,592,293

      

5,592,293

      

5,592,293

    

Neuberger Berman AMT Sustainable Equity Portfolio - I Class

    

1,469,507

      

1,469,507

      

1,469,507

    

See accompanying notes.
M-3


Lincoln Life Flexible Premium Variable Life Account M

Statements of assets and liabilities (continued)

December 31, 2019

Subaccount

  

Investments

  

Total Assets

  

Net Assets

  

PIMCO VIT CommodityRealReturn® Strategy Portfolio - Administrative Class

  

$

27,467,334

    

$

27,467,334

    

$

27,467,334

    

Putnam VT Equity Income Fund - Class IB

    

1,795,019

      

1,795,019

      

1,795,019

    

Putnam VT Global Health Care Fund - Class IB

    

1,983,152

      

1,983,152

      

1,983,152

    

Templeton Foreign VIP Fund - Class 1

    

1,101,635

      

1,101,635

      

1,101,635

    

Templeton Foreign VIP Fund - Class 2

    

2,510,605

      

2,510,605

      

2,510,605

    

Templeton Global Bond VIP Fund - Class 1

    

59,997,352

      

59,997,352

      

59,997,352

    

Templeton Growth VIP Fund - Class 1

    

7,125,421

      

7,125,421

      

7,125,421

    

Templeton Growth VIP Fund - Class 2

    

1,155,937

      

1,155,937

      

1,155,937

    

TOPS® Balanced ETF Portfolio - Class 2 Shares

    

409,829

      

409,829

      

409,829

    

TOPS® Moderate Growth ETF Portfolio - Class 2 Shares

    

494,168

      

494,168

      

494,168

    

See accompanying notes.
M-4


[THIS PAGE INTENTIONALLY LEFT BLANK]


Lincoln Life Flexible Premium Variable Life Account M

Statements of operations

Year Ended December 31, 2019

Subaccount

   Dividends
from
Investment
Income		   Mortality and
Expense
Guarantee Charges		   Net
Investment
Income (Loss)		   Net Realized
Gain (Loss)
on Investments		   Dividends
from
Net Realized
Gain on
Investments		  

AB VPS Global Thematic Growth Portfolio - Class A

  

$

43,000

    

$

(59,141

)

  

$

(16,141

)

  

$

277,697

    

$

551,888

    

AB VPS Growth and Income Portfolio - Class A

    

216,554

      

(64,814

)

    

151,740

      

248,992

      

1,839,040

    

AB VPS International Value Portfolio - Class A

    

85,357

      

(22,107

)

    

63,250

      

(88,720

)

    

—

    

AB VPS Large Cap Growth Portfolio - Class A

    

—

      

(17,094

)

    

(17,094

)

    

130,453

      

472,149

    

AB VPS Small/Mid Cap Value Portfolio - Class A

    

281,441

      

(266,713

)

    

14,728

      

(213,883

)

    

5,251,575

    

American Century VP Balanced Fund - Class I

    

385,060

      

(208,988

)

    

176,072

      

67,699

      

476,804

    

American Century VP Inflation Protection Fund - Class I

    

291,837

      

(33,453

)

    

258,384

      

(69,182

)

    

—

    

American Funds Global Growth Fund - Class 2

    

1,429,977

      

(770,581

)

    

659,396

      

1,211,812

      

6,635,616

    

American Funds Global Small Capitalization Fund - Class 2

    

146,363

      

(538,259

)

    

(391,896

)

    

618,177

      

5,690,217

    

American Funds Growth Fund - Class 2

    

2,921,840

      

(2,179,256

)

    

742,584

      

3,747,255

      

38,791,410

    

American Funds Growth-Income Fund - Class 2

    

6,370,847

      

(2,229,479

)

    

4,141,368

      

1,997,736

      

36,248,864

    

American Funds International Fund - Class 2

    

2,915,208

      

(1,130,909

)

    

1,784,299

      

450,782

      

4,912,958

    

BlackRock Global Allocation V.I. Fund - Class I

    

2,920,670

      

(1,483,466

)

    

1,437,204

      

235,256

      

7,637,347

    

ClearBridge Variable Mid Cap Portfolio - Class I

    

139,684

      

(166,112

)

    

(26,428

)

    

198,279

      

228,082

    

Delaware VIP® Diversified Income Series - Standard Class

    

2,151,890

      

(416,873

)

    

1,735,017

      

39,718

      

—

    

Delaware VIP® Emerging Markets Series - Standard Class

    

595,272

      

(517,065

)

    

78,207

      

1,069,650

      

1,843,424

    

Delaware VIP® High Yield Series - Standard Class

    

1,219,721

      

(63,647

)

    

1,156,074

      

(357,434

)

    

—

    

Delaware VIP® Limited-Term Diversified Income Series - Standard Class

    

1,708,550

      

(380,537

)

    

1,328,013

      

(12,336

)

    

—

    

Delaware VIP® REIT Series - Standard Class

    

1,261,377

      

(326,837

)

    

934,540

      

352,788

      

—

    

Delaware VIP® Small Cap Value Series - Standard Class

    

826,318

      

(449,255

)

    

377,063

      

152,061

      

6,171,495

    

Delaware VIP® Smid Cap Core Series - Standard Class

    

364,777

      

(416,471

)

    

(51,694

)

    

(1,252,958

)

    

3,561,059

    

Delaware VIP® U.S. Growth Series - Standard Class

    

—

      

(176,544

)

    

(176,544

)

    

(235,800

)

    

5,644,603

    

Delaware VIP® Value Series - Standard Class

    

1,233,567

      

(422,365

)

    

811,202

      

467,284

      

4,879,136

    

DWS Alternative Asset Allocation VIP Portfolio - Class A

    

580,921

      

(96,911

)

    

484,010

      

(32,806

)

    

—

    

DWS Equity 500 Index VIP Portfolio - Class A

    

901,997

      

(197,331

)

    

704,666

      

2,022,898

      

2,208,641

    

DWS Small Cap Index VIP Portfolio - Class A

    

111,018

      

(43,170

)

    

67,848

      

117,998

      

913,969

    

Fidelity® VIP Asset Manager Portfolio - Initial Class

    

9,097

      

(2,986

)

    

6,111

      

(5,742

)

    

24,142

    

Fidelity® VIP Contrafund® Portfolio - Service Class

    

774,553

      

(1,245,786

)

    

(471,233

)

    

2,006,605

      

22,933,956

    

Fidelity® VIP Equity-Income Portfolio - Initial Class

    

34,840

      

(9,834

)

    

25,006

      

23,026

      

113,830

    

Fidelity® VIP Equity-Income Portfolio - Service Class

    

108,094

      

(25,575

)

    

82,519

      

1,900

      

365,361

    

Fidelity® VIP Growth Opportunities Portfolio - Service Class

    

2,158

      

(16,933

)

    

(14,775

)

    

958,232

      

344,972

    

Fidelity® VIP Growth Portfolio - Service Class

    

88,843

      

(355,226

)

    

(266,383

)

    

664,985

      

3,050,845

    

Fidelity® VIP High Income Portfolio - Service Class

    

85,384

      

(8,398

)

    

76,986

      

(16,832

)

    

—

    

Fidelity® VIP Investment Grade Bond Portfolio - Initial Class

    

24,584

      

(5,058

)

    

19,526

      

1,007

      

—

    

Fidelity® VIP Mid Cap Portfolio - Service Class

    

724,434

      

(539,511

)

    

184,923

      

(306,673

)

    

8,929,604

    

Fidelity® VIP Overseas Portfolio - Service Class

    

110,177

      

(24,010

)

    

86,167

      

111,301

      

231,908

    

Franklin Income VIP Fund - Class 1

    

4,902,082

      

(603,491

)

    

4,298,591

      

30,658

      

1,410,048

    

Franklin Mutual Shares VIP Fund - Class 1

    

1,181,752

      

(284,719

)

    

897,033

      

(56,281

)

    

5,481,868

    

Franklin Small-Mid Cap Growth VIP Fund - Class 1

    

—

      

(49,871

)

    

(49,871

)

    

(89,465

)

    

1,794,804

    

Invesco V.I. American Franchise Fund - Series I Shares

    

—

      

(55,376

)

    

(55,376

)

    

1,386,588

      

1,640,023

    

Invesco V.I. Core Equity Fund - Series I Shares

    

126,624

      

(63,189

)

    

63,435

      

770,505

      

1,538,821

    

Invesco V.I. Core Plus Bond Fund - Series I Shares

    

29,315

      

(5,494

)

    

23,821

      

2,779

      

—

    

Invesco V.I. International Growth Fund - Series I Shares

    

429,915

      

(183,410

)

    

246,505

      

362,731

      

1,736,718

    

Janus Henderson Balanced Portfolio - Institutional Shares

    

173,431

      

(43,384

)

    

130,047

      

995,214

      

247,802

    

Janus Henderson Balanced Portfolio - Service Shares

    

143,860

      

(39,440

)

    

104,420

      

209,673

      

224,859

    

Janus Henderson Enterprise Portfolio - Service Shares

    

2,813

      

(24,809

)

    

(21,996

)

    

418,417

      

337,019

    

Janus Henderson Global Research Portfolio - Institutional Shares

    

88,295

      

(37,873

)

    

50,422

      

1,473,573

      

532,047

    

Janus Henderson Global Research Portfolio - Service Shares

    

17,296

      

(9,750

)

    

7,546

      

77,713

      

120,340

    

Janus Henderson Global Technology Portfolio - Service Shares

    

—

      

(15,532

)

    

(15,532

)

    

404,804

      

220,897

    

JPMorgan Insurance Trust Global Allocation Portfolio - Class 1

    

504,547

      

(182,415

)

    

322,132

      

27,696

      

—

    

LVIP Baron Growth Opportunities Fund - Service Class

    

—

      

(246,105

)

    

(246,105

)

    

1,531,546

      

1,202,129

    

LVIP Baron Growth Opportunities Fund - Standard Class

    

—

      

(5,608

)

    

(5,608

)

    

109,316

      

36,106

    

LVIP BlackRock Dividend Value Managed Volatility Fund - Standard Class

    

778,335

      

(300,788

)

    

477,547

      

502,359

      

1,838,493

    

LVIP BlackRock Global Growth ETF Allocation Managed Risk Fund - Standard Class

    

453,906

      

(184,471

)

    

269,435

      

44,226

      

71,093

    

LVIP BlackRock Global Real Estate Fund - Standard Class

    

947,748

      

(141,088

)

    

806,660

      

191,516

      

1,110,465

    

LVIP BlackRock Inflation Protected Bond Fund - Standard Class

    

870,334

      

(242,172

)

    

628,162

      

(70,945

)

    

—

    

LVIP BlackRock U.S. Growth ETF Allocation Managed Risk Fund - Standard Class

    

137,084

      

(55,018

)

    

82,066

      

21,247

      

74,308

    

See accompanying notes.
M-6


Subaccount

   Miscellanous
Gain (Loss)
on Investments		   Total
Net Realized
Gain (Loss)
on Investments		   Net Change
in Unrealized
Appreciation or
Depreciation
on Investments		   Net Increase
in Net Assets
Resulting
from Operations		  

AB VPS Global Thematic Growth Portfolio - Class A

  

$

—

    

$

829,585

    

$

1,669,205

    

$

2,482,649

    

AB VPS Growth and Income Portfolio - Class A

    

1

      

2,088,033

      

1,433,349

      

3,673,122

    

AB VPS International Value Portfolio - Class A

    

1

      

(88,719

)

    

1,442,703

      

1,417,234

    

AB VPS Large Cap Growth Portfolio - Class A

    

—

      

602,602

      

509,957

      

1,095,465

    

AB VPS Small/Mid Cap Value Portfolio - Class A

    

—

      

5,037,692

      

2,962,137

      

8,014,557

    

American Century VP Balanced Fund - Class I

    

—

      

544,503

      

3,246,857

      

3,967,432

    

American Century VP Inflation Protection Fund - Class I

    

1

      

(69,181

)

    

779,970

      

969,173

    

American Funds Global Growth Fund - Class 2

    

1

      

7,847,429

      

26,564,725

      

35,071,550

    

American Funds Global Small Capitalization Fund - Class 2

    

2

      

6,308,396

      

17,675,694

      

23,592,194

    

American Funds Growth Fund - Class 2

    

2

      

42,538,667

      

51,886,583

      

95,167,834

    

American Funds Growth-Income Fund - Class 2

    

(1

)

    

38,246,599

      

37,904,189

      

80,292,156

    

American Funds International Fund - Class 2

    

4

      

5,363,744

      

31,364,937

      

38,512,980

    

BlackRock Global Allocation V.I. Fund - Class I

    

1

      

7,872,604

      

24,424,601

      

33,734,409

    

ClearBridge Variable Mid Cap Portfolio - Class I

    

1

      

426,362

      

5,232,385

      

5,632,319

    

Delaware VIP® Diversified Income Series - Standard Class

    

2

      

39,720

      

5,155,728

      

6,930,465

    

Delaware VIP® Emerging Markets Series - Standard Class

    

(1

)

    

2,913,073

      

15,284,738

      

18,276,018

    

Delaware VIP® High Yield Series - Standard Class

    

—

      

(357,434

)

    

1,786,785

      

2,585,425

    

Delaware VIP® Limited-Term Diversified Income Series - Standard Class

    

(1

)

    

(12,337

)

    

1,466,489

      

2,782,165

    

Delaware VIP® REIT Series - Standard Class

    

2

      

352,790

      

11,950,196

      

13,237,526

    

Delaware VIP® Small Cap Value Series - Standard Class

    

3

      

6,323,559

      

12,032,487

      

18,733,109

    

Delaware VIP® Smid Cap Core Series - Standard Class

    

3

      

2,308,104

      

14,185,388

      

16,441,798

    

Delaware VIP® U.S. Growth Series - Standard Class

    

1

      

5,408,804

      

2,385,255

      

7,617,515

    

Delaware VIP® Value Series - Standard Class

    

2

      

5,346,422

      

6,297,895

      

12,455,519

    

DWS Alternative Asset Allocation VIP Portfolio - Class A

    

—

      

(32,806

)

    

1,517,720

      

1,968,924

    

DWS Equity 500 Index VIP Portfolio - Class A

    

1

      

4,231,540

      

6,911,501

      

11,847,707

    

DWS Small Cap Index VIP Portfolio - Class A

    

—

      

1,031,967

      

1,163,043

      

2,262,858

    

Fidelity® VIP Asset Manager Portfolio - Initial Class

    

—

      

18,400

      

62,698

      

87,209

    

Fidelity® VIP Contrafund® Portfolio - Service Class

    

2

      

24,940,563

      

30,190,017

      

54,659,347

    

Fidelity® VIP Equity-Income Portfolio - Initial Class

    

—

      

136,856

      

257,714

      

419,576

    

Fidelity® VIP Equity-Income Portfolio - Service Class

    

—

      

367,261

      

875,701

      

1,325,481

    

Fidelity® VIP Growth Opportunities Portfolio - Service Class

    

—

      

1,303,204

      

54,571

      

1,343,000

    

Fidelity® VIP Growth Portfolio - Service Class

    

(1

)

    

3,715,829

      

11,429,388

      

14,878,834

    

Fidelity® VIP High Income Portfolio - Service Class

    

—

      

(16,832

)

    

167,141

      

227,295

    

Fidelity® VIP Investment Grade Bond Portfolio - Initial Class

    

—

      

1,007

      

59,655

      

80,188

    

Fidelity® VIP Mid Cap Portfolio - Service Class

    

1

      

8,622,932

      

8,163,837

      

16,971,692

    

Fidelity® VIP Overseas Portfolio - Service Class

    

1

      

343,210

      

1,136,535

      

1,565,912

    

Franklin Income VIP Fund - Class 1

    

1

      

1,440,707

      

7,057,398

      

12,796,696

    

Franklin Mutual Shares VIP Fund - Class 1

    

—

      

5,425,587

      

4,644,951

      

10,967,571

    

Franklin Small-Mid Cap Growth VIP Fund - Class 1

    

—

      

1,705,339

      

2,188,985

      

3,844,453

    

Invesco V.I. American Franchise Fund - Series I Shares

    

—

      

3,026,611

      

599,820

      

3,571,055

    

Invesco V.I. Core Equity Fund - Series I Shares

    

1

      

2,309,327

      

960,954

      

3,333,716

    

Invesco V.I. Core Plus Bond Fund - Series I Shares

    

—

      

2,779

      

72,101

      

98,701

    

Invesco V.I. International Growth Fund - Series I Shares

    

1

      

2,099,450

      

3,966,384

      

6,312,339

    

Janus Henderson Balanced Portfolio - Institutional Shares

    

—

      

1,243,016

      

428,063

      

1,801,126

    

Janus Henderson Balanced Portfolio - Service Shares

    

—

      

434,532

      

1,161,679

      

1,700,631

    

Janus Henderson Enterprise Portfolio - Service Shares

    

—

      

755,436

      

837,115

      

1,570,555

    

Janus Henderson Global Research Portfolio - Institutional Shares

    

—

      

2,005,620

      

116,948

      

2,172,990

    

Janus Henderson Global Research Portfolio - Service Shares

    

—

      

198,053

      

280,702

      

486,301

    

Janus Henderson Global Technology Portfolio - Service Shares

    

—

      

625,701

      

487,742

      

1,097,911

    

JPMorgan Insurance Trust Global Allocation Portfolio - Class 1

    

—

      

27,696

      

2,939,474

      

3,289,302

    

LVIP Baron Growth Opportunities Fund - Service Class

    

—

      

2,733,675

      

9,868,094

      

12,355,664

    

LVIP Baron Growth Opportunities Fund - Standard Class

    

2

      

145,424

      

268,658

      

408,474

    

LVIP BlackRock Dividend Value Managed Volatility Fund - Standard Class

    

2

      

2,340,854

      

3,862,447

      

6,680,848

    

LVIP BlackRock Global Growth ETF Allocation Managed Risk Fund - Standard Class

    

—

      

115,319

      

2,822,541

      

3,207,295

    

LVIP BlackRock Global Real Estate Fund - Standard Class

    

2

      

1,301,983

      

3,312,292

      

5,420,935

    

LVIP BlackRock Inflation Protected Bond Fund - Standard Class

    

1

      

(70,944

)

    

1,214,578

      

1,771,796

    

LVIP BlackRock U.S. Growth ETF Allocation Managed Risk Fund - Standard Class

    

—

      

95,555

      

868,073

      

1,045,694

    


M-7


Lincoln Life Flexible Premium Variable Life Account M

Statements of operations (continued)

Year Ended December 31, 2019

Subaccount

   Dividends
from
Investment
Income		   Mortality and
Expense
Guarantee Charges		   Net
Investment
Income (Loss)		   Net Realized
Gain (Loss)
on Investments		   Dividends
from
Net Realized
Gain on
Investments		  

LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class

  

$

59,286

    

$

(41,531

)

  

$

17,755

    

$

521,310

    

$

356,452

    

LVIP Blended Mid Cap Managed Volatility Fund - Standard Class

    

—

      

(55,657

)

    

(55,657

)

    

230,779

      

774,691

    

LVIP ClearBridge Large Cap Managed Volatility Fund - Standard Class

    

1,087

      

(3,554

)

    

(2,467

)

    

14,907

      

52,241

    

LVIP ClearBridge QS Select Large Cap Managed Volatility Fund - Standard Class

    

18,242

      

(5,874

)

    

12,368

      

1,623

      

26,655

    

LVIP Delaware Bond Fund - Standard Class

    

5,727,189

      

(963,174

)

    

4,764,015

      

152,045

      

1,690,527

    

LVIP Delaware Diversified Floating Rate Fund - Standard Class

    

874,005

      

(208,433

)

    

665,572

      

7,274

      

—

    

LVIP Delaware Social Awareness Fund - Standard Class

    

184,518

      

(41,957

)

    

142,561

      

73,868

      

425,922

    

LVIP Delaware Special Opportunities Fund - Standard Class

    

201,646

      

(98,080

)

    

103,566

      

(114,139

)

    

1,863,462

    

LVIP Delaware Wealth Builder Fund - Standard Class

    

82,196

      

(9,896

)

    

72,300

      

(20,974

)

    

140,239

    

LVIP Dimensional International Core Equity Fund - Standard Class

    

620,420

      

(180,076

)

    

440,344

      

3,971

      

—

    

LVIP Dimensional International Equity Managed Volatility Fund - Standard Class

    

317,129

      

(67,825

)

    

249,304

      

(3,363

)

    

—

    

LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class

    

572,951

      

(188,202

)

    

384,749

      

156,012

      

1,374,092

    

LVIP Dimensional U.S. Core Equity 2 Fund - Standard Class

    

411,726

      

(230,322

)

    

181,404

      

293,910

      

—

    

LVIP Dimensional U.S. Equity Managed Volatility Fund - Standard Class

    

158,469

      

(72,774

)

    

85,695

      

148,487

      

—

    

LVIP Dimensional/Vanguard Total Bond Fund - Standard Class

    

2,227,944

      

(575,174

)

    

1,652,770

      

168,002

      

11,116

    

LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class

    

156,932

      

(40,296

)

    

116,636

      

26,785

      

48,717

    

LVIP Global Conservative Allocation Managed Risk Fund - Standard Class

    

1,224,725

      

(289,735

)

    

934,990

      

151,803

      

1,795,067

    

LVIP Global Growth Allocation Managed Risk Fund - Standard Class

    

2,889,880

      

(632,414

)

    

2,257,466

      

1,941,961

      

5,665,752

    

LVIP Global Income Fund - Standard Class

    

386,162

      

(79,429

)

    

306,733

      

29,691

      

—

    

LVIP Global Moderate Allocation Managed Risk Fund - Standard Class

    

2,531,198

      

(561,338

)

    

1,969,860

      

1,113,444

      

4,723,881

    

LVIP Government Money Market Fund - Standard Class

    

1,389,321

      

(448,919

)

    

940,402

      

(23

)

    

266

    

LVIP Invesco Diversified Equity-Income Managed Volatility Fund - Standard Class

    

—

      

(5,267

)

    

(5,267

)

    

4,407

      

71,514

    

LVIP Invesco Select Equity Income Managed Volatility Fund - Standard Class

    

29,073

      

(8,318

)

    

20,755

      

4,802

      

413

    

LVIP JPMorgan High Yield Fund - Standard Class

    

3,288,545

      

(349,934

)

    

2,938,611

      

(42,217

)

    

—

    

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class

    

191,146

      

(94,205

)

    

96,941

      

68,003

      

154,673

    

LVIP MFS International Growth Fund - Standard Class

    

752,428

      

(263,697

)

    

488,731

      

483,672

      

1,951,705

    

LVIP MFS Value Fund - Standard Class

    

2,102,322

      

(722,065

)

    

1,380,257

      

1,327,998

      

1,439,658

    

LVIP Mondrian International Value Fund - Standard Class

    

1,532,766

      

(222,103

)

    

1,310,663

      

(75,026

)

    

874,228

    

LVIP Multi-Manager Global Equity Managed Volatility Fund - Standard Class

    

2,362

      

(1,884

)

    

478

      

279

      

2,415

    

LVIP SSGA Bond Index Fund - Standard Class

    

1,873,357

      

(464,470

)

    

1,408,887

      

74,127

      

—

    

LVIP SSGA Conservative Index Allocation Fund - Standard Class

    

593,533

      

(179,237

)

    

414,296

      

47,930

      

189,596

    

LVIP SSGA Conservative Structured Allocation Fund - Standard Class

    

385,849

      

(89,506

)

    

296,343

      

(1,431

)

    

207,576

    

LVIP SSGA Developed International 150 Fund - Standard Class

    

1,341,824

      

(226,368

)

    

1,115,456

      

(282,503

)

    

363,289

    

LVIP SSGA Emerging Markets 100 Fund - Standard Class

    

1,748,893

      

(285,578

)

    

1,463,315

      

(296,653

)

    

—

    

LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class

    

611,036

      

(115,043

)

    

495,993

      

38,436

      

343,389

    

LVIP SSGA International Index Fund - Standard Class

    

1,419,690

      

(377,528

)

    

1,042,162

      

21,812

      

—

    

LVIP SSGA International Managed Volatility Fund - Standard Class

    

259,458

      

(70,680

)

    

188,778

      

45,914

      

26,824

    

LVIP SSGA Large Cap 100 Fund - Standard Class

    

1,091,219

      

(255,399

)

    

835,820

      

(202,092

)

    

2,755,071

    

LVIP SSGA Moderate Index Allocation Fund - Standard Class

    

2,887,124

      

(885,867

)

    

2,001,257

      

504,497

      

858,195

    

LVIP SSGA Moderate Structured Allocation Fund - Standard Class

    

2,165,744

      

(547,614

)

    

1,618,130

      

43,325

      

1,531,169

    

LVIP SSGA Moderately Aggressive Index Allocation Fund - Standard Class

    

3,145,000

      

(945,932

)

    

2,199,068

      

573,981

      

1,186,126

    

LVIP SSGA Moderately Aggressive Structured Allocation Fund - Standard Class

    

2,001,051

      

(444,222

)

    

1,556,829

      

151,654

      

1,203,918

    

LVIP SSGA S&P 500 Index Fund - Standard Class

    

10,651,236

      

(4,398,206

)

    

6,253,030

      

5,708,429

      

22,914,988

    

LVIP SSGA Small-Cap Index Fund - Standard Class

    

734,496

      

(498,612

)

    

235,884

      

270,077

      

3,513,854

    

LVIP SSGA Small-Mid Cap 200 Fund - Standard Class

    

1,103,062

      

(378,128

)

    

724,934

      

(307,855

)

    

577,410

    

LVIP T. Rowe Price 2010 Fund - Standard Class

    

12,411

      

(1,189

)

    

11,222

      

(1,327

)

    

72,024

    

LVIP T. Rowe Price 2020 Fund - Standard Class

    

45,814

      

(3,726

)

    

42,088

      

1,025

      

208,435

    

LVIP T. Rowe Price 2030 Fund - Standard Class

    

54,696

      

(5,296

)

    

49,400

      

(7,446

)

    

307,124

    

LVIP T. Rowe Price 2040 Fund - Standard Class

    

77,388

      

(10,549

)

    

66,839

      

25,225

      

488,168

    

LVIP T. Rowe Price Growth Stock Fund - Standard Class

    

65,726

      

(560,289

)

    

(494,563

)

    

1,471,342

      

4,820,077

    

LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class

    

84,076

      

(300,343

)

    

(216,267

)

    

931,451

      

3,378,466

    

LVIP U.S. Growth Allocation Managed Risk Fund - Standard Class

    

193,870

      

(81,049

)

    

112,821

      

87,162

      

436,491

    

LVIP Vanguard Domestic Equity ETF Fund - Standard Class

    

2,080,500

      

(876,186

)

    

1,204,314

      

1,556,426

      

1,349,877

    

LVIP Vanguard International Equity ETF Fund - Standard Class

    

2,692,302

      

(600,314

)

    

2,091,988

      

217,729

      

—

    

LVIP Wellington Capital Growth Fund - Standard Class

    

—

      

(259,387

)

    

(259,387

)

    

1,089,395

      

3,463,085

    

LVIP Wellington Mid-Cap Value Fund - Standard Class

    

295,877

      

(184,786

)

    

111,091

      

108,172

      

2,069,783

    

M Capital Appreciation Fund

    

5,212

      

(4,433

)

    

779

      

(18,890

)

    

131,961

    

See accompanying notes.
M-8


Subaccount

   Miscellanous
Gain (Loss)
on Investments		   Total
Net Realized
Gain (Loss)
on Investments		   Net Change
in Unrealized
Appreciation or
Depreciation
on Investments		   Net Increase
in Net Assets
Resulting
from Operations		  

LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class

  

$

1

    

$

877,763

    

$

613,719

    

$

1,509,237

    

LVIP Blended Mid Cap Managed Volatility Fund - Standard Class

    

1

      

1,005,471

      

983,468

      

1,933,282

    

LVIP ClearBridge Large Cap Managed Volatility Fund - Standard Class

    

—

      

67,148

      

(21,147

)

    

43,534

    

LVIP ClearBridge QS Select Large Cap Managed Volatility Fund - Standard Class

    

—

      

28,278

      

98,412

      

139,058

    

LVIP Delaware Bond Fund - Standard Class

    

2

      

1,842,574

      

7,156,508

      

13,763,097

    

LVIP Delaware Diversified Floating Rate Fund - Standard Class

    

1

      

7,275

      

445,857

      

1,118,704

    

LVIP Delaware Social Awareness Fund - Standard Class

    

1

      

499,791

      

1,578,574

      

2,220,926

    

LVIP Delaware Special Opportunities Fund - Standard Class

    

2

      

1,749,325

      

2,126,420

      

3,979,311

    

LVIP Delaware Wealth Builder Fund - Standard Class

    

—

      

119,265

      

205,478

      

397,043

    

LVIP Dimensional International Core Equity Fund - Standard Class

    

—

      

3,971

      

3,702,855

      

4,147,170

    

LVIP Dimensional International Equity Managed Volatility Fund - Standard Class

    

—

      

(3,363

)

    

1,531,217

      

1,777,158

    

LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class

    

—

      

1,530,104

      

4,533,389

      

6,448,242

    

LVIP Dimensional U.S. Core Equity 2 Fund - Standard Class

    

—

      

293,910

      

6,638,419

      

7,113,733

    

LVIP Dimensional U.S. Equity Managed Volatility Fund - Standard Class

    

1

      

148,488

      

2,039,158

      

2,273,341

    

LVIP Dimensional/Vanguard Total Bond Fund - Standard Class

    

2

      

179,120

      

3,361,992

      

5,193,882

    

LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class

    

1

      

75,503

      

753,854

      

945,993

    

LVIP Global Conservative Allocation Managed Risk Fund - Standard Class

    

1

      

1,946,871

      

3,124,512

      

6,006,373

    

LVIP Global Growth Allocation Managed Risk Fund - Standard Class

    

2

      

7,607,715

      

7,651,308

      

17,516,489

    

LVIP Global Income Fund - Standard Class

    

—

      

29,691

      

483,875

      

820,299

    

LVIP Global Moderate Allocation Managed Risk Fund - Standard Class

    

—

      

5,837,325

      

6,156,372

      

13,963,557

    

LVIP Government Money Market Fund - Standard Class

    

(14

)

    

229

      

—

      

940,631

    

LVIP Invesco Diversified Equity-Income Managed Volatility Fund - Standard Class

    

—

      

75,921

      

84,148

      

154,802

    

LVIP Invesco Select Equity Income Managed Volatility Fund - Standard Class

    

—

      

5,215

      

154,061

      

180,031

    

LVIP JPMorgan High Yield Fund - Standard Class

    

1

      

(42,216

)

    

3,128,181

      

6,024,576

    

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class

    

1

      

222,677

      

1,794,623

      

2,114,241

    

LVIP MFS International Growth Fund - Standard Class

    

2

      

2,435,379

      

7,256,226

      

10,180,336

    

LVIP MFS Value Fund - Standard Class

    

1

      

2,767,657

      

24,970,013

      

29,117,927

    

LVIP Mondrian International Value Fund - Standard Class

    

3

      

799,205

      

4,377,714

      

6,487,582

    

LVIP Multi-Manager Global Equity Managed Volatility Fund - Standard Class

    

—

      

2,694

      

47,961

      

51,133

    

LVIP SSGA Bond Index Fund - Standard Class

    

2

      

74,129

      

2,607,717

      

4,090,733

    

LVIP SSGA Conservative Index Allocation Fund - Standard Class

    

—

      

237,526

      

2,300,024

      

2,951,846

    

LVIP SSGA Conservative Structured Allocation Fund - Standard Class

    

—

      

206,145

      

1,068,600

      

1,571,088

    

LVIP SSGA Developed International 150 Fund - Standard Class

    

—

      

80,786

      

2,738,209

      

3,934,451

    

LVIP SSGA Emerging Markets 100 Fund - Standard Class

    

1

      

(296,652

)

    

1,935,326

      

3,101,989

    

LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class

    

1

      

381,826

      

2,393,055

      

3,270,874

    

LVIP SSGA International Index Fund - Standard Class

    

1

      

21,813

      

8,354,252

      

9,418,227

    

LVIP SSGA International Managed Volatility Fund - Standard Class

    

—

      

72,738

      

1,469,594

      

1,731,110

    

LVIP SSGA Large Cap 100 Fund - Standard Class

    

1

      

2,552,980

      

5,296,781

      

8,685,581

    

LVIP SSGA Moderate Index Allocation Fund - Standard Class

    

—

      

1,362,692

      

13,632,947

      

16,996,896

    

LVIP SSGA Moderate Structured Allocation Fund - Standard Class

    

—

      

1,574,494

      

7,116,301

      

10,308,925

    

LVIP SSGA Moderately Aggressive Index Allocation Fund - Standard Class

    

—

      

1,760,107

      

16,997,508

      

20,956,683

    

LVIP SSGA Moderately Aggressive Structured Allocation Fund - Standard Class

    

2

      

1,355,574

      

7,010,896

      

9,923,299

    

LVIP SSGA S&P 500 Index Fund - Standard Class

    

3

      

28,623,420

      

108,772,889

      

143,649,339

    

LVIP SSGA Small-Cap Index Fund - Standard Class

    

1

      

3,783,932

      

10,410,943

      

14,430,759

    

LVIP SSGA Small-Mid Cap 200 Fund - Standard Class

    

—

      

269,555

      

7,409,392

      

8,403,881

    

LVIP T. Rowe Price 2010 Fund - Standard Class

    

—

      

70,697

      

(32,657

)

    

49,262

    

LVIP T. Rowe Price 2020 Fund - Standard Class

    

—

      

209,460

      

(38,912

)

    

212,636

    

LVIP T. Rowe Price 2030 Fund - Standard Class

    

—

      

299,678

      

79,910

      

428,988

    

LVIP T. Rowe Price 2040 Fund - Standard Class

    

—

      

513,393

      

164,800

      

745,032

    

LVIP T. Rowe Price Growth Stock Fund - Standard Class

    

—

      

6,291,419

      

14,780,208

      

20,577,064

    

LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class

    

2

      

4,309,919

      

9,210,557

      

13,304,209

    

LVIP U.S. Growth Allocation Managed Risk Fund - Standard Class

    

—

      

523,653

      

1,039,562

      

1,676,036

    

LVIP Vanguard Domestic Equity ETF Fund - Standard Class

    

—

      

2,906,303

      

25,154,852

      

29,265,469

    

LVIP Vanguard International Equity ETF Fund - Standard Class

    

1

      

217,730

      

13,172,112

      

15,481,830

    

LVIP Wellington Capital Growth Fund - Standard Class

    

(1

)

    

4,552,479

      

8,847,237

      

13,140,329

    

LVIP Wellington Mid-Cap Value Fund - Standard Class

    

2

      

2,177,957

      

4,624,244

      

6,913,292

    

M Capital Appreciation Fund

    

1

      

113,072

      

282,494

      

396,345

    


M-9


Lincoln Life Flexible Premium Variable Life Account M

Statements of operations (continued)

Year Ended December 31, 2019

Subaccount

   Dividends
from
Investment
Income		   Mortality and
Expense
Guarantee Charges		   Net
Investment
Income (Loss)		   Net Realized
Gain (Loss)
on Investments		   Dividends
from
Net Realized
Gain on
Investments		  

M International Equity Fund

  

$

50,649

    

$

(3,964

)

  

$

46,685

    

$

(3,394

)

  

$

—

    

M Large Cap Growth Fund

    

—

      

(7,739

)

    

(7,739

)

    

74,973

      

189,104

    

M Large Cap Value Fund

    

39,167

      

(5,208

)

    

33,959

      

(8,110

)

    

72,922

    

MFS® VIT Growth Series - Initial Class

    

—

      

(356,070

)

    

(356,070

)

    

3,634,384

      

5,048,547

    

MFS® VIT Total Return Series - Initial Class

    

1,275,018

      

(333,426

)

    

941,592

      

493,659

      

1,451,262

    

MFS® VIT Utilities Series - Initial Class

    

1,672,894

      

(222,232

)

    

1,450,662

      

1,100,563

      

122,843

    

MFS® VIT II Core Equity Portfolio - Initial Class

    

8,309

      

(4,130

)

    

4,179

      

4,198

      

135,594

    

Neuberger Berman AMT Large Cap Value Portfolio - I Class

    

29,550

      

(2,682

)

    

26,868

      

(97,077

)

    

320,831

    

Neuberger Berman AMT Mid Cap Growth Portfolio - I Class

    

—

      

(76,063

)

    

(76,063

)

    

579,446

      

1,253,704

    

Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio - I Class

    

38,823

      

(20,350

)

    

18,473

      

59,693

      

631,487

    

Neuberger Berman AMT Sustainable Equity Portfolio - I Class

    

6,186

      

(4,755

)

    

1,431

      

(3,086

)

    

82,402

    

PIMCO VIT CommodityRealReturn® Strategy Portfolio - Administrative Class

    

1,148,489

      

(145,015

)

    

1,003,474

      

(741,743

)

    

—

    

Putnam VT Equity Income Fund - Class IB

    

32,093

      

(7,705

)

    

24,388

      

12,450

      

137,153

    

Putnam VT Global Health Care Fund - Class IB

    

—

      

(8,894

)

    

(8,894

)

    

(33,579

)

    

84,822

    

Templeton Foreign VIP Fund - Class 1

    

21,498

      

(6,026

)

    

15,472

      

(13,973

)

    

10,971

    

Templeton Foreign VIP Fund - Class 2

    

43,032

      

(12,031

)

    

31,001

      

(56,013

)

    

25,686

    

Templeton Global Bond VIP Fund - Class 1

    

3,565,278

      

(349,125

)

    

3,216,153

      

(35,268

)

    

—

    

Templeton Growth VIP Fund - Class 1

    

202,373

      

(27,266

)

    

175,107

      

(99,678

)

    

1,250,879

    

Templeton Growth VIP Fund - Class 2

    

31,089

      

(4,879

)

    

26,210

      

(41,994

)

    

213,570

    

TOPS® Balanced ETF Portfolio - Class 2 Shares

    

888

      

(410

)

    

478

      

46

      

1,143

    

TOPS® Moderate Growth ETF Portfolio - Class 2 Shares

    

772

      

(435

)

    

337

      

72

      

1,084

    

See accompanying notes.
M-10


Subaccount

   Miscellanous
Gain (Loss)
on Investments		   Total
Net Realized
Gain (Loss)
on Investments		   Net Change
in Unrealized
Appreciation or
Depreciation
on Investments		   Net Increase
in Net Assets
Resulting
from Operations		  

M International Equity Fund

  

$

1

    

$

(3,393

)

  

$

284,425

    

$

327,717

    

M Large Cap Growth Fund

    

—

      

264,077

      

678,097

      

934,435

    

M Large Cap Value Fund

    

—

      

64,812

      

322,460

      

421,231

    

MFS® VIT Growth Series - Initial Class

    

1

      

8,682,932

      

9,775,299

      

18,102,161

    

MFS® VIT Total Return Series - Initial Class

    

1

      

1,944,922

      

6,580,293

      

9,466,807

    

MFS® VIT Utilities Series - Initial Class

    

(1

)

    

1,223,405

      

6,206,523

      

8,880,590

    

MFS® VIT II Core Equity Portfolio - Initial Class

    

—

      

139,792

      

141,998

      

285,969

    

Neuberger Berman AMT Large Cap Value Portfolio - I Class

    

—

      

223,754

      

(84,918

)

    

165,704

    

Neuberger Berman AMT Mid Cap Growth Portfolio - I Class

    

—

      

1,833,150

      

3,139,639

      

4,896,726

    

Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio - I Class

    

1

      

691,181

      

89,052

      

798,706

    

Neuberger Berman AMT Sustainable Equity Portfolio - I Class

    

—

      

79,316

      

47,244

      

127,991

    

PIMCO VIT CommodityRealReturn® Strategy Portfolio - Administrative Class

    

1

      

(741,742

)

    

2,245,587

      

2,507,319

    

Putnam VT Equity Income Fund - Class IB

    

—

      

149,603

      

243,142

      

417,133

    

Putnam VT Global Health Care Fund - Class IB

    

—

      

51,243

      

431,271

      

473,620

    

Templeton Foreign VIP Fund - Class 1

    

—

      

(3,002

)

    

111,242

      

123,712

    

Templeton Foreign VIP Fund - Class 2

    

(1

)

    

(30,328

)

    

280,597

      

281,270

    

Templeton Global Bond VIP Fund - Class 1

    

2

      

(35,266

)

    

(2,437,911

)

    

742,976

    

Templeton Growth VIP Fund - Class 1

    

—

      

1,151,201

      

(365,909

)

    

960,399

    

Templeton Growth VIP Fund - Class 2

    

—

      

171,576

      

(45,863

)

    

151,923

    

TOPS® Balanced ETF Portfolio - Class 2 Shares

    

—

      

1,189

      

7,167

      

8,834

    

TOPS® Moderate Growth ETF Portfolio - Class 2 Shares

    

—

      

1,156

      

14,763

      

16,256

    


M-11


Lincoln Life Flexible Premium Variable Life Account M

Statements of changes in net assets

Years Ended December 31, 2018 and 2019




  AB VPS
Global Thematic
Growth
Portfolio -
Class A
Subaccount		   AB VPS
Growth
and Income
Portfolio -
Class A
Subaccount		   AB VPS
International
Value
Portfolio -
Class A
Subaccount		   AB VPS
Large Cap
Growth
Portfolio -
Class A
Subaccount		   AB VPS
Small/Mid
Cap Value
Portfolio -
Class A
Subaccount		   American
Century VP
Balanced
Fund -
Class I
Subaccount		   American
Century VP
Inflation
Protection
Fund -
Class I
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

8,594,636

    

$

20,780,746

    

$

10,339,799

    

$

2,905,893

    

$

44,103,285

    

$

6,458,581

    

$

12,406,425

    

Changes From Operations:

  

• Net investment income (loss)

    

(49,174

)

    

116,445

      

124,707

      

(14,842

)

    

(29,858

)

    

88,785

      

326,100

    

• Net realized gain (loss) on investments

    

539,359

      

2,862,771

      

89,870

      

489,658

      

4,133,816

      

116,808

      

(213,979

)

  

• Net change in unrealized appreciation or depreciation on investments

    

(1,404,622

)

    

(4,020,512

)

    

(2,634,348

)

    

(436,316

)

    

(11,214,063

)

    

(745,134

)

    

(466,367

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(914,437

)

    

(1,041,296

)

    

(2,419,771

)

    

38,500

      

(7,110,105

)

    

(539,541

)

    

(354,246

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

471,058

      

(2,971,065

)

    

505,786

      

366,031

      

2,603,687

      

12,544,977

      

(850,071

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

471,058

      

(2,971,065

)

    

505,786

      

366,031

      

2,603,687

      

12,544,977

      

(850,071

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(443,379

)

    

(4,012,361

)

    

(1,913,985

)

    

404,531

      

(4,506,418

)

    

12,005,436

      

(1,204,317

)

  

NET ASSETS AT DECEMBER 31, 2018

    

8,151,257

      

16,768,385

      

8,425,814

      

3,310,424

      

39,596,867

      

18,464,017

      

11,202,108

    

Changes From Operations:

  

• Net investment income (loss)

    

(16,141

)

    

151,740

      

63,250

      

(17,094

)

    

14,728

      

176,072

      

258,384

    

• Net realized gain (loss) on investments

    

829,585

      

2,088,033

      

(88,719

)

    

602,602

      

5,037,692

      

544,503

      

(69,181

)

  

• Net change in unrealized appreciation or depreciation on investments

    

1,669,205

      

1,433,349

      

1,442,703

      

509,957

      

2,962,137

      

3,246,857

      

779,970

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

2,482,649

      

3,673,122

      

1,417,234

      

1,095,465

      

8,014,557

      

3,967,432

      

969,173

    

Change From Unit Transactions:

  

• Net unit transactions

    

906,907

      

(1,982,555

)

    

(211,650

)

    

(297,050

)

    

4,733,300

      

8,986,310

      

(836,987

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

906,907

      

(1,982,555

)

    

(211,650

)

    

(297,050

)

    

4,733,300

      

8,986,310

      

(836,987

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

3,389,556

      

1,690,567

      

1,205,584

      

798,415

      

12,747,857

      

12,953,742

      

132,186

    

NET ASSETS AT DECEMBER 31, 2019

  

$

11,540,813

    

$

18,458,952

    

$

9,631,398

    

$

4,108,839

    

$

52,344,724

    

$

31,417,759

    

$

11,334,294

    

See accompanying notes.
M-12




  American
Funds
Global Growth
Fund -
Class 2
Subaccount		   American
Funds
Global Small
Capitalization
Fund -
Class 2
Subaccount		   American
Funds
Growth
Fund -
Class 2
Subaccount		   American
Funds
Growth-Income
Fund -
Class 2
Subaccount		   American
Funds
International
Fund -
Class 2
Subaccount		   BlackRock
Global
Allocation
V.I. Fund -
Class I
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

86,532,641

    

$

77,181,740

    

$

281,539,220

    

$

288,725,558

    

$

172,310,088

    

$

192,945,905

    

Changes From Operations:

  

• Net investment income (loss)

    

132,030

      

(407,162

)

    

(313,706

)

    

2,769,123

      

2,230,130

      

648,955

    

• Net realized gain (loss) on investments

    

7,843,819

      

4,550,649

      

36,267,308

      

25,510,909

      

9,919,153

      

7,959,013

    

• Net change in unrealized appreciation or depreciation on investments

    

(18,161,695

)

    

(13,403,495

)

    

(39,428,677

)

    

(36,322,051

)

    

(38,240,873

)

    

(25,137,788

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(10,185,846

)

    

(9,260,008

)

    

(3,475,075

)

    

(8,042,019

)

    

(26,091,590

)

    

(16,529,820

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

20,403,323

      

7,725,302

      

18,778,442

      

23,933,104

      

24,516,066

      

15,533,820

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

20,403,323

      

7,725,302

      

18,778,442

      

23,933,104

      

24,516,066

      

15,533,820

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

10,217,477

      

(1,534,706

)

    

15,303,367

      

15,891,085

      

(1,575,524

)

    

(996,000

)

  

NET ASSETS AT DECEMBER 31, 2018

    

96,750,118

      

75,647,034

      

296,842,587

      

304,616,643

      

170,734,564

      

191,949,905

    

Changes From Operations:

  

• Net investment income (loss)

    

659,396

      

(391,896

)

    

742,584

      

4,141,368

      

1,784,299

      

1,437,204

    

• Net realized gain (loss) on investments

    

7,847,429

      

6,308,396

      

42,538,667

      

38,246,599

      

5,363,744

      

7,872,604

    

• Net change in unrealized appreciation or depreciation on investments

    

26,564,725

      

17,675,694

      

51,886,583

      

37,904,189

      

31,364,937

      

24,424,601

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

35,071,550

      

23,592,194

      

95,167,834

      

80,292,156

      

38,512,980

      

33,734,409

    

Change From Unit Transactions:

  

• Net unit transactions

    

15,447,138

      

2,492,531

      

44,146,228

      

30,543,720

      

6,598,689

      

13,411,736

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

15,447,138

      

2,492,531

      

44,146,228

      

30,543,720

      

6,598,689

      

13,411,736

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

50,518,688

      

26,084,725

      

139,314,062

      

110,835,876

      

45,111,669

      

47,146,145

    

NET ASSETS AT DECEMBER 31, 2019

  

$

147,268,806

    

$

101,731,759

    

$

436,156,649

    

$

415,452,519

    

$

215,846,233

    

$

239,096,050

    


M-13


Lincoln Life Flexible Premium Variable Life Account M

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019



  ClearBridge
Variable
Mid Cap
Portfolio -
Class I
Subaccount		   Delaware VIP®
Diversified
Income Series -
Standard Class
Subaccount		   Delaware VIP®
Emerging
Markets Series -
Standard Class
Subaccount		   Delaware VIP®
High Yield
Series -
Standard Class
Subaccount		   Delaware VIP®
Limited-Term
Diversified
Income Series -
Standard Class
Subaccount		   Delaware VIP®
REIT Series -
Standard Class
Subaccount		   Delaware VIP®
Small Cap
Value Series -
Standard Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

12,850,270

    

$

65,217,966

    

$

74,061,466

    

$

19,777,266

    

$

48,447,654

    

$

54,493,327

    

$

73,592,347

    

Changes From Operations:

  

• Net investment income (loss)

    

(25,063

)

    

1,777,410

      

2,057,704

      

1,131,348

      

1,140,763

      

857,949

      

214,908

    

• Net realized gain (loss) on investments

    

341,057

      

(517,067

)

    

1,461,520

      

(651,912

)

    

(120,292

)

    

904,378

      

6,526,550

    

• Net change in unrealized appreciation or depreciation on investments

    

(2,716,586

)

    

(3,085,295

)

    

(17,466,627

)

    

(1,420,162

)

    

(1,148,875

)

    

(5,762,965

)

    

(20,346,793

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(2,400,592

)

    

(1,824,952

)

    

(13,947,403

)

    

(940,726

)

    

(128,404

)

    

(4,000,638

)

    

(13,605,335

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

5,532,731

      

4,610,556

      

18,175,733

      

(2,412,976

)

    

11,371,318

      

151,863

      

6,341,844

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

5,532,731

      

4,610,556

      

18,175,733

      

(2,412,976

)

    

11,371,318

      

151,863

      

6,341,844

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

3,132,139

      

2,785,604

      

4,228,330

      

(3,353,702

)

    

11,242,914

      

(3,848,775

)

    

(7,263,491

)

  

NET ASSETS AT DECEMBER 31, 2018

    

15,982,409

      

68,003,570

      

78,289,796

      

16,423,564

      

59,690,568

      

50,644,552

      

66,328,856

    

Changes From Operations:

  

• Net investment income (loss)

    

(26,428

)

    

1,735,017

      

78,207

      

1,156,074

      

1,328,013

      

934,540

      

377,063

    

• Net realized gain (loss) on investments

    

426,362

      

39,720

      

2,913,073

      

(357,434

)

    

(12,337

)

    

352,790

      

6,323,559

    

• Net change in unrealized appreciation or depreciation on investments

    

5,232,385

      

5,155,728

      

15,284,738

      

1,786,785

      

1,466,489

      

11,950,196

      

12,032,487

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

5,632,319

      

6,930,465

      

18,276,018

      

2,585,425

      

2,782,165

      

13,237,526

      

18,733,109

    

Change From Unit Transactions:

  

• Net unit transactions

    

3,592,124

      

6,818,016

      

5,702,749

      

(705,893

)

    

4,911,788

      

(628,273

)

    

2,179,086

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

3,592,124

      

6,818,016

      

5,702,749

      

(705,893

)

    

4,911,788

      

(628,273

)

    

2,179,086

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

9,224,443

      

13,748,481

      

23,978,767

      

1,879,532

      

7,693,953

      

12,609,253

      

20,912,195

    

NET ASSETS AT DECEMBER 31, 2019

  

$

25,206,852

    

$

81,752,051

    

$

102,268,563

    

$

18,303,096

    

$

67,384,521

    

$

63,253,805

    

$

87,241,051

    

See accompanying notes.
M-14



  Delaware VIP®
Smid Cap
Core Series -
Standard Class
Subaccount		   Delaware VIP®
U.S. Growth
Series -
Standard Class
Subaccount		   Delaware VIP®
Value Series -
Standard Class
Subaccount		   DWS
Alternative
Asset Allocation
VIP Portfolio -
Class A
Subaccount		   DWS
Equity 500
Index VIP
Portfolio -
Class A
Subaccount		   DWS
Small Cap
Index VIP
Portfolio -
Class A
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

56,690,538

    

$

29,003,038

    

$

61,597,728

    

$

14,472,510

    

$

46,641,587

    

$

11,673,122

    

Changes From Operations:

  

• Net investment income (loss)

    

(257,678

)

    

(149,149

)

    

679,483

      

220,828

      

562,836

      

58,692

    

• Net realized gain (loss) on investments

    

17,619,824

      

3,815,405

      

5,223,362

      

(69,953

)

    

5,434,081

      

1,027,581

    

• Net change in unrealized appreciation or depreciation on investments

    

(25,438,804

)

    

(4,566,132

)

    

(7,916,742

)

    

(1,609,652

)

    

(8,008,489

)

    

(2,354,724

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(8,076,658

)

    

(899,876

)

    

(2,013,897

)

    

(1,458,777

)

    

(2,011,572

)

    

(1,268,451

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

7,274,478

      

(808,564

)

    

1,611,836

      

814,602

      

(4,604,366

)

    

(1,111,300

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

7,274,478

      

(808,564

)

    

1,611,836

      

814,602

      

(4,604,366

)

    

(1,111,300

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(802,180

)

    

(1,708,440

)

    

(402,061

)

    

(644,175

)

    

(6,615,938

)

    

(2,379,751

)

  

NET ASSETS AT DECEMBER 31, 2018

    

55,888,358

      

27,294,598

      

61,195,667

      

13,828,335

      

40,025,649

      

9,293,371

    

Changes From Operations:

  

• Net investment income (loss)

    

(51,694

)

    

(176,544

)

    

811,202

      

484,010

      

704,666

      

67,848

    

• Net realized gain (loss) on investments

    

2,308,104

      

5,408,804

      

5,346,422

      

(32,806

)

    

4,231,540

      

1,031,967

    

• Net change in unrealized appreciation or depreciation on investments

    

14,185,388

      

2,385,255

      

6,297,895

      

1,517,720

      

6,911,501

      

1,163,043

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

16,441,798

      

7,617,515

      

12,455,519

      

1,968,924

      

11,847,707

      

2,262,858

    

Change From Unit Transactions:

  

• Net unit transactions

    

2,624,929

      

1,517,738

      

8,047,901

      

1,150,415

      

(3,894,879

)

    

(387,219

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

2,624,929

      

1,517,738

      

8,047,901

      

1,150,415

      

(3,894,879

)

    

(387,219

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

19,066,727

      

9,135,253

      

20,503,420

      

3,119,339

      

7,952,828

      

1,875,639

    

NET ASSETS AT DECEMBER 31, 2019

  

$

74,955,085

    

$

36,429,851

    

$

81,699,087

    

$

16,947,674

    

$

47,978,477

    

$

11,169,010

    


M-15


Lincoln Life Flexible Premium Variable Life Account M

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019



  Fidelity® VIP
Asset
Manager
Portfolio -
Initial Class
Subaccount		   Fidelity® VIP
Contrafund®
Portfolio -
Service Class
Subaccount		   Fidelity® VIP
Equity-Income
Portfolio -
Initial Class
Subaccount		   Fidelity® VIP
Equity-Income
Portfolio -
Service Class
Subaccount		   Fidelity® VIP
Growth
Opportunities
Portfolio -
Service Class
Subaccount		   Fidelity® VIP
Growth
Portfolio -
Service Class
Subaccount		   Fidelity® VIP
High Income
Portfolio -
Service Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

623,114

    

$

178,604,967

    

$

2,072,602

    

$

6,368,009

    

$

3,370,921

    

$

36,040,561

    

$

1,718,077

    

Changes From Operations:

  

• Net investment income (loss)

    

6,625

      

83,725

      

31,390

      

101,367

      

(12,143

)

    

(212,345

)

    

85,841

    

• Net realized gain (loss) on investments

    

17,242

      

18,195,453

      

122,405

      

297,605

      

402,292

      

6,488,366

      

(4,555

)

  

• Net change in unrealized appreciation or depreciation on investments

    

(59,604

)

    

(31,702,946

)

    

(315,574

)

    

(926,337

)

    

3,846

      

(7,195,229

)

    

(151,687

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(35,737

)

    

(13,423,768

)

    

(161,779

)

    

(527,365

)

    

393,995

      

(919,208

)

    

(70,401

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

(43,603

)

    

11,895,714

      

(261,237

)

    

(667,432

)

    

(284,703

)

    

6,661,756

      

(6,439

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(43,603

)

    

11,895,714

      

(261,237

)

    

(667,432

)

    

(284,703

)

    

6,661,756

      

(6,439

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(79,340

)

    

(1,528,054

)

    

(423,016

)

    

(1,194,797

)

    

109,292

      

5,742,548

      

(76,840

)

  

NET ASSETS AT DECEMBER 31, 2018

    

543,774

      

177,076,913

      

1,649,586

      

5,173,212

      

3,480,213

      

41,783,109

      

1,641,237

    

Changes From Operations:

  

• Net investment income (loss)

    

6,111

      

(471,233

)

    

25,006

      

82,519

      

(14,775

)

    

(266,383

)

    

76,986

    

• Net realized gain (loss) on investments

    

18,400

      

24,940,563

      

136,856

      

367,261

      

1,303,204

      

3,715,829

      

(16,832

)

  

• Net change in unrealized appreciation or depreciation on investments

    

62,698

      

30,190,017

      

257,714

      

875,701

      

54,571

      

11,429,388

      

167,141

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

87,209

      

54,659,347

      

419,576

      

1,325,481

      

1,343,000

      

14,878,834

      

227,295

    

Change From Unit Transactions:

  

• Net unit transactions

    

(98,440

)

    

920,759

      

(223,076

)

    

(499,881

)

    

(541,681

)

    

6,861,247

      

(165,729

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(98,440

)

    

920,759

      

(223,076

)

    

(499,881

)

    

(541,681

)

    

6,861,247

      

(165,729

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(11,231

)

    

55,580,106

      

196,500

      

825,600

      

801,319

      

21,740,081

      

61,566

    

NET ASSETS AT DECEMBER 31, 2019

  

$

532,543

    

$

232,657,019

    

$

1,846,086

    

$

5,998,812

    

$

4,281,532

    

$

63,523,190

    

$

1,702,803

    

See accompanying notes.
M-16



  Fidelity® VIP
Investment
Grade Bond
Portfolio -
Initial Class
Subaccount		   Fidelity® VIP
Mid Cap
Portfolio -
Service Class
Subaccount		   Fidelity® VIP
Overseas
Portfolio -
Service Class
Subaccount		   Franklin
Income
VIP Fund -
Class 1
Subaccount		   Franklin
Mutual
Shares
VIP Fund -
Class 1
Subaccount		   Franklin
Small-Mid
Cap Growth
VIP Fund -
Class 1
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

1,074,477

    

$

77,563,466

    

$

7,060,344

    

$

78,550,647

    

$

49,819,581

    

$

14,628,179

    

Changes From Operations:

  

• Net investment income (loss)

    

17,650

      

(25,173

)

    

72,966

      

3,403,715

      

1,134,509

      

(55,971

)

  

• Net realized gain (loss) on investments

    

(3,733

)

    

7,240,569

      

230,196

      

268,947

      

2,183,428

      

1,151,514

    

• Net change in unrealized appreciation or depreciation on investments

    

(27,617

)

    

(19,824,611

)

    

(1,326,231

)

    

(7,571,047

)

    

(8,158,252

)

    

(1,785,923

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(13,700

)

    

(12,609,215

)

    

(1,023,069

)

    

(3,898,385

)

    

(4,840,315

)

    

(690,380

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

(151,355

)

    

6,709,554

      

(243,410

)

    

3,952,955

      

3,079,576

      

(1,462,403

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(151,355

)

    

6,709,554

      

(243,410

)

    

3,952,955

      

3,079,576

      

(1,462,403

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(165,055

)

    

(5,899,661

)

    

(1,266,479

)

    

54,570

      

(1,760,739

)

    

(2,152,783

)

  

NET ASSETS AT DECEMBER 31, 2018

    

909,422

      

71,663,805

      

5,793,865

      

78,605,217

      

48,058,842

      

12,475,396

    

Changes From Operations:

  

• Net investment income (loss)

    

19,526

      

184,923

      

86,167

      

4,298,591

      

897,033

      

(49,871

)

  

• Net realized gain (loss) on investments

    

1,007

      

8,622,932

      

343,210

      

1,440,707

      

5,425,587

      

1,705,339

    

• Net change in unrealized appreciation or depreciation on investments

    

59,655

      

8,163,837

      

1,136,535

      

7,057,398

      

4,644,951

      

2,188,985

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

80,188

      

16,971,692

      

1,565,912

      

12,796,696

      

10,967,571

      

3,844,453

    

Change From Unit Transactions:

  

• Net unit transactions

    

(69,722

)

    

9,818,892

      

(178,956

)

    

12,034,413

      

2,288,799

      

(1,143,510

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(69,722

)

    

9,818,892

      

(178,956

)

    

12,034,413

      

2,288,799

      

(1,143,510

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

10,466

      

26,790,584

      

1,386,956

      

24,831,109

      

13,256,370

      

2,700,943

    

NET ASSETS AT DECEMBER 31, 2019

  

$

919,888

    

$

98,454,389

    

$

7,180,821

    

$

103,436,326

    

$

61,315,212

    

$

15,176,339

    


M-17


Lincoln Life Flexible Premium Variable Life Account M

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019





  Invesco V.I.
American
Franchise
Fund -
Series I
Shares
Subaccount		   Invesco V.I.
Core Equity
Fund -
Series I
Shares
Subaccount		   Invesco V.I.
Core Plus
Bond Fund -
Series I
Shares
Subaccount		   Invesco V.I.
International
Growth Fund -
Series I
Shares
Subaccount		   Janus
Henderson
Balanced
Portfolio -
Institutional
Shares
Subaccount		   Janus
Henderson
Balanced
Portfolio -
Service Shares
Subaccount		   Janus
Henderson
Enterprise
Portfolio -
Service Shares
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

11,715,569

    

$

14,837,315

    

$

628,087

    

$

23,409,844

    

$

9,258,569

    

$

8,675,892

    

$

5,276,567

    

Changes From Operations:

  

• Net investment income (loss)

    

(61,392

)

    

55,505

      

19,031

      

348,903

      

148,045

      

114,287

      

(20,582

)

  

• Net realized gain (loss) on investments

    

1,256,213

      

1,251,353

      

(760

)

    

352,696

      

496,371

      

417,033

      

509,164

    

• Net change in unrealized appreciation or depreciation on investments

    

(1,585,004

)

    

(2,660,595

)

    

(38,515

)

    

(4,686,934

)

    

(607,713

)

    

(515,925

)

    

(511,448

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(390,183

)

    

(1,353,737

)

    

(20,244

)

    

(3,985,335

)

    

36,703

      

15,395

      

(22,866

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

(904,798

)

    

(992,488

)

    

343,230

      

3,075,578

      

(809,997

)

    

(661,442

)

    

(558,494

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(904,798

)

    

(992,488

)

    

343,230

      

3,075,578

      

(809,997

)

    

(661,442

)

    

(558,494

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(1,294,981

)

    

(2,346,225

)

    

322,986

      

(909,757

)

    

(773,294

)

    

(646,047

)

    

(581,360

)

  

NET ASSETS AT DECEMBER 31, 2018

    

10,420,588

      

12,491,090

      

951,073

      

22,500,087

      

8,485,275

      

8,029,845

      

4,695,207

    

Changes From Operations:

  

• Net investment income (loss)

    

(55,376

)

    

63,435

      

23,821

      

246,505

      

130,047

      

104,420

      

(21,996

)

  

• Net realized gain (loss) on investments

    

3,026,611

      

2,309,327

      

2,779

      

2,099,450

      

1,243,016

      

434,532

      

755,436

    

• Net change in unrealized appreciation or depreciation on investments

    

599,820

      

960,954

      

72,101

      

3,966,384

      

428,063

      

1,161,679

      

837,115

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

3,571,055

      

3,333,716

      

98,701

      

6,312,339

      

1,801,126

      

1,700,631

      

1,570,555

    

Change From Unit Transactions:

  

• Net unit transactions

    

(1,442,834

)

    

(1,660,604

)

    

(23,494

)

    

826,531

      

(683,255

)

    

(341,450

)

    

(421,893

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(1,442,834

)

    

(1,660,604

)

    

(23,494

)

    

826,531

      

(683,255

)

    

(341,450

)

    

(421,893

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

2,128,221

      

1,673,112

      

75,207

      

7,138,870

      

1,117,871

      

1,359,181

      

1,148,662

    

NET ASSETS AT DECEMBER 31, 2019

  

$

12,548,809

    

$

14,164,202

    

$

1,026,280

    

$

29,638,957

    

$

9,603,146

    

$

9,389,026

    

$

5,843,869

    

See accompanying notes.
M-18





  Janus
Henderson
Global
Research
Portfolio -
Institutional
Shares
Subaccount		   Janus
Henderson
Global
Research
Portfolio -
Service Shares
Subaccount		   Janus
Henderson
Global
Technology
Portfolio -
Service Shares
Subaccount		   JPMorgan
Insurance
Trust Global
Allocation
Portfolio -
Class 1
Subaccount		   LVIP
Baron Growth
Opportunities
Fund -
Service Class
Subaccount		   LVIP
Baron Growth
Opportunities
Fund -
Standard Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

9,252,775

    

$

2,089,172

    

$

2,622,767

    

$

6,657,814

    

$

33,730,267

    

$

1,266,992

    

Changes From Operations:

  

• Net investment income (loss)

    

57,193

      

9,760

      

(15,070

)

    

(115,595

)

    

(210,859

)

    

(5,659

)

  

• Net realized gain (loss) on investments

    

477,637

      

103,171

      

251,804

      

100,712

      

2,900,980

      

108,200

    

• Net change in unrealized appreciation or depreciation on investments

    

(1,135,935

)

    

(257,889

)

    

(227,405

)

    

(1,419,626

)

    

(4,360,682

)

    

(167,187

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(601,105

)

    

(144,958

)

    

9,329

      

(1,434,509

)

    

(1,670,561

)

    

(64,646

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

(816,147

)

    

(154,777

)

    

13,547

      

13,849,991

      

2,816,278

      

(1,584

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(816,147

)

    

(154,777

)

    

13,547

      

13,849,991

      

2,816,278

      

(1,584

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(1,417,252

)

    

(299,735

)

    

22,876

      

12,415,482

      

1,145,717

      

(66,230

)

  

NET ASSETS AT DECEMBER 31, 2018

    

7,835,523

      

1,789,437

      

2,645,643

      

19,073,296

      

34,875,984

      

1,200,762

    

Changes From Operations:

  

• Net investment income (loss)

    

50,422

      

7,546

      

(15,532

)

    

322,132

      

(246,105

)

    

(5,608

)

  

• Net realized gain (loss) on investments

    

2,005,620

      

198,053

      

625,701

      

27,696

      

2,733,675

      

145,424

    

• Net change in unrealized appreciation or depreciation on investments

    

116,948

      

280,702

      

487,742

      

2,939,474

      

9,868,094

      

268,658

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

2,172,990

      

486,301

      

1,097,911

      

3,289,302

      

12,355,664

      

408,474

    

Change From Unit Transactions:

  

• Net unit transactions

    

(591,799

)

    

(66,801

)

    

(312,744

)

    

4,156,243

      

969,759

      

(255,691

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(591,799

)

    

(66,801

)

    

(312,744

)

    

4,156,243

      

969,759

      

(255,691

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

1,581,191

      

419,500

      

785,167

      

7,445,545

      

13,325,423

      

152,783

    

NET ASSETS AT DECEMBER 31, 2019

  

$

9,416,714

    

$

2,208,937

    

$

3,430,810

    

$

26,518,841

    

$

48,201,407

    

$

1,353,545

    


M-19


Lincoln Life Flexible Premium Variable Life Account M

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019





  LVIP
BlackRock
Dividend
Value
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP
BlackRock
Global Growth
ETF Allocation
Managed
Risk Fund -
Standard Class
Subaccount		   LVIP
BlackRock
Global Real
Estate Fund -
Standard Class
Subaccount		   LVIP
BlackRock
Inflation
Protected
Bond Fund -
Standard Class
Subaccount		   LVIP
BlackRock U.S.
Growth ETF
Allocation
Managed
Risk Fund -
Standard Class
Subaccount		   LVIP
Blended
Large Cap
Growth
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP
Blended
Mid Cap
Managed
Volatility Fund -
Standard Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

41,650,533

    

$

7,920,789

    

$

23,073,042

    

$

27,285,208

    

$

2,557,126

    

$

8,464,349

    

$

8,396,003

    

Changes From Operations:

  

• Net investment income (loss)

    

613,764

      

193,363

      

781,496

      

1,429,570

      

34,579

      

18,055

      

(53,330

)

  

• Net realized gain (loss) on investments

    

602,730

      

48,301

      

319,164

      

(101,042

)

    

19,226

      

1,156,729

      

329,993

    

• Net change in unrealized appreciation or depreciation on investments

    

(4,721,987

)

    

(971,519

)

    

(3,228,052

)

    

(1,436,362

)

    

(200,037

)

    

(1,557,815

)

    

(268,143

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(3,505,493

)

    

(729,855

)

    

(2,127,392

)

    

(107,834

)

    

(146,232

)

    

(383,031

)

    

8,520

    

Change From Unit Transactions:

  

• Net unit transactions

    

(764,168

)

    

9,875,864

      

1,595,408

      

4,184,913

      

1,841,484

      

(158,708

)

    

(290,252

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(764,168

)

    

9,875,864

      

1,595,408

      

4,184,913

      

1,841,484

      

(158,708

)

    

(290,252

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(4,269,661

)

    

9,146,009

      

(531,984

)

    

4,077,079

      

1,695,252

      

(541,739

)

    

(281,732

)

  

NET ASSETS AT DECEMBER 31, 2018

    

37,380,872

      

17,066,798

      

22,541,058

      

31,362,287

      

4,252,378

      

7,922,610

      

8,114,271

    

Changes From Operations:

  

• Net investment income (loss)

    

477,547

      

269,435

      

806,660

      

628,162

      

82,066

      

17,755

      

(55,657

)

  

• Net realized gain (loss) on investments

    

2,340,854

      

115,319

      

1,301,983

      

(70,944

)

    

95,555

      

877,763

      

1,005,471

    

• Net change in unrealized appreciation or depreciation on investments

    

3,862,447

      

2,822,541

      

3,312,292

      

1,214,578

      

868,073

      

613,719

      

983,468

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

6,680,848

      

3,207,295

      

5,420,935

      

1,771,796

      

1,045,694

      

1,509,237

      

1,933,282

    

Change From Unit Transactions:

  

• Net unit transactions

    

(516,196

)

    

4,394,818

      

645,791

      

6,073,214

      

3,537,093

      

(330,539

)

    

(231,257

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(516,196

)

    

4,394,818

      

645,791

      

6,073,214

      

3,537,093

      

(330,539

)

    

(231,257

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

6,164,652

      

7,602,113

      

6,066,726

      

7,845,010

      

4,582,787

      

1,178,698

      

1,702,025

    

NET ASSETS AT DECEMBER 31, 2019

  

$

43,545,524

    

$

24,668,911

    

$

28,607,784

    

$

39,207,297

    

$

8,835,165

    

$

9,101,308

    

$

9,816,296

    

See accompanying notes.
M-20





  LVIP
ClearBridge
Large Cap
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP
ClearBridge
QS Select
Large Cap
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP
Delaware
Bond Fund -
Standard Class
Subaccount		   LVIP
Delaware
Diversified
Floating
Rate Fund -
Standard Class
Subaccount		   LVIP
Delaware
Social
Awareness
Fund -
Standard Class
Subaccount		   LVIP
Delaware
Special
Opportunities
Fund -
Standard Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

1,148,336

    

$

—

    

$

143,147,977

    

$

22,295,069

    

$

6,931,545

    

$

13,197,525

    

Changes From Operations:

  

• Net investment income (loss)

    

2,674

      

—

      

4,175,691

      

802,075

      

65,560

      

119,670

    

• Net realized gain (loss) on investments

    

41,620

      

—

      

(570,683

)

    

16,063

      

750,986

      

1,364,297

    

• Net change in unrealized appreciation or depreciation on investments

    

(113,602

)

    

—

      

(5,564,447

)

    

(926,883

)

    

(1,187,312

)

    

(3,746,876

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(69,308

)

    

—

      

(1,959,439

)

    

(108,745

)

    

(370,766

)

    

(2,262,909

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

(31,288

)

    

—

      

12,098,181

      

3,152,502

      

284,939

      

1,976,039

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(31,288

)

    

—

      

12,098,181

      

3,152,502

      

284,939

      

1,976,039

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(100,596

)

    

—

      

10,138,742

      

3,043,757

      

(85,827

)

    

(286,870

)

  

NET ASSETS AT DECEMBER 31, 2018

    

1,047,740

      

—

      

153,286,719

      

25,338,826

      

6,845,718

      

12,910,655

    

Changes From Operations:

  

• Net investment income (loss)

    

(2,467

)

    

12,368

      

4,764,015

      

665,572

      

142,561

      

103,566

    

• Net realized gain (loss) on investments

    

67,148

      

28,278

      

1,842,574

      

7,275

      

499,791

      

1,749,325

    

• Net change in unrealized appreciation or depreciation on investments

    

(21,147

)

    

98,412

      

7,156,508

      

445,857

      

1,578,574

      

2,126,420

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

43,534

      

139,058

      

13,763,097

      

1,118,704

      

2,220,926

      

3,979,311

    

Change From Unit Transactions:

  

• Net unit transactions

    

(1,091,274

)

    

1,146,526

      

24,832,407

      

5,776,221

      

542,089

      

1,272,910

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(1,091,274

)

    

1,146,526

      

24,832,407

      

5,776,221

      

542,089

      

1,272,910

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(1,047,740

)

    

1,285,584

      

38,595,504

      

6,894,925

      

2,763,015

      

5,252,221

    

NET ASSETS AT DECEMBER 31, 2019

  

$

—

    

$

1,285,584

    

$

191,882,223

    

$

32,233,751

    

$

9,608,733

    

$

18,162,876

    


M-21


Lincoln Life Flexible Premium Variable Life Account M

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019





  LVIP
Delaware
Wealth
Builder
Fund -
Standard Class
Subaccount		   LVIP
Dimensional
International
Core Equity
Fund -
Standard Class
Subaccount		   LVIP
Dimensional
International
Equity
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP
Dimensional
U.S. Core
Equity 1
Fund -
Standard Class
Subaccount		   LVIP
Dimensional
U.S. Core
Equity 2
Fund -
Standard Class
Subaccount		   LVIP
Dimensional
U.S. Equity
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP
Dimensional/
Vanguard
Total Bond
Fund -
Standard Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

3,055,850

    

$

11,806,540

    

$

12,127,978

    

$

15,019,963

    

$

15,356,035

    

$

14,123,058

    

$

57,564,268

    

Changes From Operations:

  

• Net investment income (loss)

    

71,770

      

230,437

      

162,878

      

207,522

      

106,448

      

56,180

      

1,103,405

    

• Net realized gain (loss) on investments

    

504,971

      

4,729

      

62,870

      

676,059

      

201,195

      

338,331

      

(90,169

)

  

• Net change in unrealized appreciation or depreciation on investments

    

(732,452

)

    

(3,647,541

)

    

(2,324,986

)

    

(2,764,110

)

    

(2,743,223

)

    

(1,399,809

)

    

(1,362,849

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(155,711

)

    

(3,412,375

)

    

(2,099,238

)

    

(1,880,529

)

    

(2,435,580

)

    

(1,005,298

)

    

(349,613

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

(334,370

)

    

8,929,679

      

960,272

      

5,950,926

      

9,692,529

      

(1,145,520

)

    

14,254,275

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(334,370

)

    

8,929,679

      

960,272

      

5,950,926

      

9,692,529

      

(1,145,520

)

    

14,254,275

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(490,081

)

    

5,517,304

      

(1,138,966

)

    

4,070,397

      

7,256,949

      

(2,150,818

)

    

13,904,662

    

NET ASSETS AT DECEMBER 31, 2018

    

2,565,769

      

17,323,844

      

10,989,012

      

19,090,360

      

22,612,984

      

11,972,240

      

71,468,930

    

Changes From Operations:

  

• Net investment income (loss)

    

72,300

      

440,344

      

249,304

      

384,749

      

181,404

      

85,695

      

1,652,770

    

• Net realized gain (loss) on investments

    

119,265

      

3,971

      

(3,363

)

    

1,530,104

      

293,910

      

148,488

      

179,120

    

• Net change in unrealized appreciation or depreciation on investments

    

205,478

      

3,702,855

      

1,531,217

      

4,533,389

      

6,638,419

      

2,039,158

      

3,361,992

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

397,043

      

4,147,170

      

1,777,158

      

6,448,242

      

7,113,733

      

2,273,341

      

5,193,882

    

Change From Unit Transactions:

  

• Net unit transactions

    

(11,969

)

    

7,317,925

      

(253,789

)

    

7,987,992

      

6,185,366

      

(161,713

)

    

15,417,294

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(11,969

)

    

7,317,925

      

(253,789

)

    

7,987,992

      

6,185,366

      

(161,713

)

    

15,417,294

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

385,074

      

11,465,095

      

1,523,369

      

14,436,234

      

13,299,099

      

2,111,628

      

20,611,176

    

NET ASSETS AT DECEMBER 31, 2019

  

$

2,950,843

    

$

28,788,939

    

$

12,512,381

    

$

33,526,594

    

$

35,912,083

    

$

14,083,868

    

$

92,080,106

    

See accompanying notes.
M-22





  LVIP
Franklin
Templeton
Global Equity
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP
Global
Conservative
Allocation
Managed
Risk Fund -
Standard Class
Subaccount		   LVIP
Global
Growth
Allocation
Managed
Risk Fund -
Standard Class
Subaccount		   LVIP
Global
Income Fund -
Standard Class
Subaccount		   LVIP
Global
Moderate
Allocation
Managed
Risk Fund -
Standard Class
Subaccount		   LVIP
Government
Money
Market Fund -
Standard Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

8,156,943

    

$

39,998,371

    

$

121,945,158

    

$

12,622,989

    

$

106,759,661

    

$

101,859,878

    

Changes From Operations:

  

• Net investment income (loss)

    

73,994

      

889,643

      

2,391,827

      

460,351

      

1,946,663

      

671,618

    

• Net realized gain (loss) on investments

    

186,895

      

770,111

      

2,315,188

      

15,772

      

3,296,859

      

16

    

• Net change in unrealized appreciation or depreciation on investments

    

(1,046,427

)

    

(3,815,377

)

    

(13,179,042

)

    

(303,448

)

    

(11,174,877

)

    

2

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(785,538

)

    

(2,155,623

)

    

(8,472,027

)

    

172,675

      

(5,931,355

)

    

671,636

    

Change From Unit Transactions:

  

• Net unit transactions

    

77,075

      

4,276,737

      

2,267,869

      

222,996

      

(5,040,806

)

    

11,691,571

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

77,075

      

4,276,737

      

2,267,869

      

222,996

      

(5,040,806

)

    

11,691,571

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(708,463

)

    

2,121,114

      

(6,204,158

)

    

395,671

      

(10,972,161

)

    

12,363,207

    

NET ASSETS AT DECEMBER 31, 2018

    

7,448,480

      

42,119,485

      

115,741,000

      

13,018,660

      

95,787,500

      

114,223,085

    

Changes From Operations:

  

• Net investment income (loss)

    

116,636

      

934,990

      

2,257,466

      

306,733

      

1,969,860

      

940,402

    

• Net realized gain (loss) on investments

    

75,503

      

1,946,871

      

7,607,715

      

29,691

      

5,837,325

      

229

    

• Net change in unrealized appreciation or depreciation on investments

    

753,854

      

3,124,512

      

7,651,308

      

483,875

      

6,156,372

      

—

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

945,993

      

6,006,373

      

17,516,489

      

820,299

      

13,963,557

      

940,631

    

Change From Unit Transactions:

  

• Net unit transactions

    

434,672

      

194,654

      

(3,087,040

)

    

1,289,574

      

1,267,809

      

(15,326,236

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

434,672

      

194,654

      

(3,087,040

)

    

1,289,574

      

1,267,809

      

(15,326,236

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

1,380,665

      

6,201,027

      

14,429,449

      

2,109,873

      

15,231,366

      

(14,385,605

)

  

NET ASSETS AT DECEMBER 31, 2019

  

$

8,829,145

    

$

48,320,512

    

$

130,170,449

    

$

15,128,533

    

$

111,018,866

    

$

99,837,480

    


M-23


Lincoln Life Flexible Premium Variable Life Account M

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019





  LVIP
Invesco
Diversified
Equity-Income
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP
Invesco
Select
Equity Income
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP
JPMorgan
High Yield
Fund -
Standard Class
Subaccount		   LVIP
JPMorgan
Select
Mid Cap Value
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP
MFS
International
Growth Fund -
Standard Class
Subaccount		   LVIP
MFS
Value Fund -
Standard Class
Subaccount		   LVIP
Mondrian
International
Value Fund -
Standard Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

1,643,646

    

$

—

    

$

44,771,365

    

$

14,851,251

    

$

33,065,346

    

$

97,369,871

    

$

38,750,561

    

Changes From Operations:

  

• Net investment income (loss)

    

18,616

      

—

      

2,542,434

      

113,100

      

285,742

      

1,262,066

      

1,062,702

    

• Net realized gain (loss) on investments

    

61,658

      

—

      

(261,360

)

    

223,018

      

1,390,844

      

5,084,686

      

666,706

    

• Net change in unrealized appreciation or depreciation on investments

    

(242,441

)

    

—

      

(4,008,286

)

    

(2,165,049

)

    

(5,013,321

)

    

(17,464,382

)

    

(6,558,947

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(162,167

)

    

—

      

(1,727,212

)

    

(1,828,931

)

    

(3,336,735

)

    

(11,117,630

)

    

(4,829,539

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

101,616

      

—

      

4,081,304

      

158,014

      

5,953,508

      

10,772,204

      

2,224,393

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

101,616

      

—

      

4,081,304

      

158,014

      

5,953,508

      

10,772,204

      

2,224,393

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(60,551

)

    

—

      

2,354,092

      

(1,670,917

)

    

2,616,773

      

(345,426

)

    

(2,605,146

)

  

NET ASSETS AT DECEMBER 31, 2018

    

1,583,095

      

—

      

47,125,457

      

13,180,334

      

35,682,119

      

97,024,445

      

36,145,415

    

Changes From Operations:

  

• Net investment income (loss)

    

(5,267

)

    

20,755

      

2,938,611

      

96,941

      

488,731

      

1,380,257

      

1,310,663

    

• Net realized gain (loss) on investments

    

75,921

      

5,215

      

(42,216

)

    

222,677

      

2,435,379

      

2,767,657

      

799,205

    

• Net change in unrealized appreciation or depreciation on investments

    

84,148

      

154,061

      

3,128,181

      

1,794,623

      

7,256,226

      

24,970,013

      

4,377,714

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

154,802

      

180,031

      

6,024,576

      

2,114,241

      

10,180,336

      

29,117,927

      

6,487,582

    

Change From Unit Transactions:

  

• Net unit transactions

    

(1,737,897

)

    

1,689,315

      

8,002,787

      

824,447

      

6,546,755

      

8,073,632

      

(803,519

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(1,737,897

)

    

1,689,315

      

8,002,787

      

824,447

      

6,546,755

      

8,073,632

      

(803,519

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(1,583,095

)

    

1,869,346

      

14,027,363

      

2,938,688

      

16,727,091

      

37,191,559

      

5,684,063

    

NET ASSETS AT DECEMBER 31, 2019

  

$

—

    

$

1,869,346

    

$

61,152,820

    

$

16,119,022

    

$

52,409,210

    

$

134,216,004

    

$

41,829,478

    

See accompanying notes.
M-24





  LVIP
Multi-Manager
Global Equity
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP
SSGA Bond
Index Fund -
Standard Class
Subaccount		   LVIP SSGA
Conservative
Index
Allocation Fund -
Standard Class
Subaccount		   LVIP SSGA
Conservative
Structured
Allocation Fund -
Standard Class
Subaccount		   LVIP SSGA
Developed
International
150 Fund -
Standard Class
Subaccount		   LVIP SSGA
Emerging
Markets
100 Fund -
Standard Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

449,615

    

$

35,948,987

    

$

19,175,389

    

$

12,332,367

    

$

19,276,268

    

$

31,113,092

    

Changes From Operations:

  

• Net investment income (loss)

    

60

      

1,062,894

      

347,354

      

288,502

      

776,768

      

1,666,706

    

• Net realized gain (loss) on investments

    

57,278

      

(147,756

)

    

156,286

      

130,947

      

646,935

      

23,017

    

• Net change in unrealized appreciation or depreciation on investments

    

(77,225

)

    

(1,137,567

)

    

(1,566,983

)

    

(1,139,861

)

    

(5,697,506

)

    

(6,931,970

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(19,887

)

    

(222,429

)

    

(1,063,343

)

    

(720,412

)

    

(4,273,803

)

    

(5,242,247

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

(171,685

)

    

13,914,971

      

2,291,768

      

530,559

      

9,808,804

      

13,714,019

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(171,685

)

    

13,914,971

      

2,291,768

      

530,559

      

9,808,804

      

13,714,019

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(191,572

)

    

13,692,542

      

1,228,425

      

(189,853

)

    

5,535,001

      

8,471,772

    

NET ASSETS AT DECEMBER 31, 2018

    

258,043

      

49,641,529

      

20,403,814

      

12,142,514

      

24,811,269

      

39,584,864

    

Changes From Operations:

  

• Net investment income (loss)

    

478

      

1,408,887

      

414,296

      

296,343

      

1,115,456

      

1,463,315

    

• Net realized gain (loss) on investments

    

2,694

      

74,129

      

237,526

      

206,145

      

80,786

      

(296,652

)

  

• Net change in unrealized appreciation or depreciation on investments

    

47,961

      

2,607,717

      

2,300,024

      

1,068,600

      

2,738,209

      

1,935,326

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

51,133

      

4,090,733

      

2,951,846

      

1,571,088

      

3,934,451

      

3,101,989

    

Change From Unit Transactions:

  

• Net unit transactions

    

31,206

      

21,081,964

      

2,437,929

      

975,286

      

4,780,700

      

5,307,953

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

31,206

      

21,081,964

      

2,437,929

      

975,286

      

4,780,700

      

5,307,953

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

82,339

      

25,172,697

      

5,389,775

      

2,546,374

      

8,715,151

      

8,409,942

    

NET ASSETS AT DECEMBER 31, 2019

  

$

340,382

    

$

74,814,226

    

$

25,793,589

    

$

14,688,888

    

$

33,526,420

    

$

47,994,806

    


M-25


Lincoln Life Flexible Premium Variable Life Account M

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019





  LVIP SSGA
Global Tactical
Allocation
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP SSGA
International
Index Fund -
Standard Class
Subaccount		   LVIP SSGA
International
Managed
Volatility Fund -
Standard Class
Subaccount		   LVIP SSGA
Large Cap
100 Fund -
Standard Class
Subaccount		   LVIP SSGA
Moderate Index
Allocation Fund -
Standard Class
Subaccount		   LVIP SSGA
Moderate
Structured
Allocation Fund -
Standard Class
Subaccount		   LVIP SSGA
Moderately
Aggressive
Index
Allocation
Fund -
Standard Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

23,636,690

    

$

37,627,274

    

$

10,574,704

    

$

28,715,780

    

$

74,889,634

    

$

63,310,253

    

$

97,764,153

    

Changes From Operations:

  

• Net investment income (loss)

    

555,284

      

961,722

      

171,833

      

552,612

      

1,383,473

      

1,595,670

      

1,579,784

    

• Net realized gain (loss) on investments

    

210,177

      

149,894

      

56,336

      

1,841,947

      

653,897

      

1,074,136

      

1,138,781

    

• Net change in unrealized appreciation or depreciation on investments

    

(2,812,589

)

    

(8,010,764

)

    

(1,615,988

)

    

(6,463,343

)

    

(8,228,274

)

    

(7,880,325

)

    

(11,558,807

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(2,047,128

)

    

(6,899,148

)

    

(1,387,819

)

    

(4,068,784

)

    

(6,190,904

)

    

(5,210,519

)

    

(8,840,242

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

(22,440

)

    

13,383,678

      

415,191

      

6,721,583

      

16,121,776

      

4,540,832

      

14,944,923

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(22,440

)

    

13,383,678

      

415,191

      

6,721,583

      

16,121,776

      

4,540,832

      

14,944,923

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(2,069,568

)

    

6,484,530

      

(972,628

)

    

2,652,799

      

9,930,872

      

(669,687

)

    

6,104,681

    

NET ASSETS AT DECEMBER 31, 2018

    

21,567,122

      

44,111,804

      

9,602,076

      

31,368,579

      

84,820,506

      

62,640,566

      

103,868,834

    

Changes From Operations:

  

• Net investment income (loss)

    

495,993

      

1,042,162

      

188,778

      

835,820

      

2,001,257

      

1,618,130

      

2,199,068

    

• Net realized gain (loss) on investments

    

381,826

      

21,813

      

72,738

      

2,552,980

      

1,362,692

      

1,574,494

      

1,760,107

    

• Net change in unrealized appreciation or depreciation on investments

    

2,393,055

      

8,354,252

      

1,469,594

      

5,296,781

      

13,632,947

      

7,116,301

      

16,997,508

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

3,270,874

      

9,418,227

      

1,731,110

      

8,685,581

      

16,996,896

      

10,308,925

      

20,956,683

    

Change From Unit Transactions:

  

• Net unit transactions

    

(50,086

)

    

4,878,975

      

(21,065

)

    

3,950,153

      

30,713,166

      

6,508,844

      

20,238,018

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(50,086

)

    

4,878,975

      

(21,065

)

    

3,950,153

      

30,713,166

      

6,508,844

      

20,238,018

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

3,220,788

      

14,297,202

      

1,710,045

      

12,635,734

      

47,710,062

      

16,817,769

      

41,194,701

    

NET ASSETS AT DECEMBER 31, 2019

  

$

24,787,910

    

$

58,409,006

    

$

11,312,121

    

$

44,004,313

    

$

132,530,568

    

$

79,458,335

    

$

145,063,535

    

See accompanying notes.
M-26





  LVIP SSGA
Moderately
Aggressive
Structured
Allocation
Fund -
Standard Class
Subaccount		   LVIP SSGA
S&P 500 Index
Fund -
Standard Class
Subaccount		   LVIP SSGA
Small-Cap
Index Fund -
Standard Class
Subaccount		   LVIP SSGA
Small-Mid
Cap 200 Fund -
Standard Class
Subaccount		   LVIP T. Rowe
Price 2010
Fund -
Standard Class
Subaccount		   LVIP T. Rowe
Price 2020
Fund -
Standard Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

53,867,810

    

$

346,435,507

    

$

50,190,541

    

$

34,145,921

    

$

232,617

    

$

991,026

    

Changes From Operations:

  

• Net investment income (loss)

    

1,584,053

      

5,253,775

      

211,048

      

1,029,168

      

4,268

      

15,414

    

• Net realized gain (loss) on investments

    

559,340

      

13,385,211

      

3,889,167

      

1,044,368

      

15,351

      

90,271

    

• Net change in unrealized appreciation or depreciation on investments

    

(7,477,667

)

    

(44,634,350

)

    

(11,523,412

)

    

(8,029,485

)

    

(30,227

)

    

(168,721

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(5,334,274

)

    

(25,995,364

)

    

(7,423,197

)

    

(5,955,949

)

    

(10,608

)

    

(63,036

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

7,646,066

      

110,767,706

      

11,315,037

      

10,422,231

      

350

      

12,202

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

7,646,066

      

110,767,706

      

11,315,037

      

10,422,231

      

350

      

12,202

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

2,311,792

      

84,772,342

      

3,891,840

      

4,466,282

      

(10,258

)

    

(50,834

)

  

NET ASSETS AT DECEMBER 31, 2018

    

56,179,602

      

431,207,849

      

54,082,381

      

38,612,203

      

222,359

      

940,192

    

Changes From Operations:

  

• Net investment income (loss)

    

1,556,829

      

6,253,030

      

235,884

      

724,934

      

11,222

      

42,088

    

• Net realized gain (loss) on investments

    

1,355,574

      

28,623,420

      

3,783,932

      

269,555

      

70,697

      

209,460

    

• Net change in unrealized appreciation or depreciation on investments

    

7,010,896

      

108,772,889

      

10,410,943

      

7,409,392

      

(32,657

)

    

(38,912

)

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

9,923,299

      

143,649,339

      

14,430,759

      

8,403,881

      

49,262

      

212,636

    

Change From Unit Transactions:

  

• Net unit transactions

    

7,035,560

      

125,733,675

      

13,256,256

      

10,263,736

      

159,562

      

541,726

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

7,035,560

      

125,733,675

      

13,256,256

      

10,263,736

      

159,562

      

541,726

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

16,958,859

      

269,383,014

      

27,687,015

      

18,667,617

      

208,824

      

754,362

    

NET ASSETS AT DECEMBER 31, 2019

  

$

73,138,461

    

$

700,590,863

    

$

81,769,396

    

$

57,279,820

    

$

431,183

    

$

1,694,554

    


M-27


Lincoln Life Flexible Premium Variable Life Account M

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019




  LVIP T. Rowe
Price 2030
Fund -
Standard Class
Subaccount		   LVIP T. Rowe
Price 2040
Fund -
Standard Class
Subaccount		   LVIP T. Rowe
Price Growth
Stock Fund -
Standard Class
Subaccount		   LVIP T. Rowe
Price
Structured
Mid-Cap
Growth Fund -
Standard Class
Subaccount		   LVIP
U.S. Growth
Allocation
Managed Risk
Fund -
Standard Class
Subaccount		   LVIP
Vanguard
Domestic
Equity ETF
Fund -
Standard Class
Subaccount		   LVIP
Vanguard
International
Equity ETF
Fund -
Standard Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

2,233,582

    

$

3,893,372

    

$

54,950,147

    

$

30,325,424

    

$

3,971,422

    

$

79,953,483

    

$

58,596,871

    

Changes From Operations:

  

• Net investment income (loss)

    

32,558

      

45,311

      

(311,539

)

    

(84,533

)

    

115,598

      

810,393

      

1,152,936

    

• Net realized gain (loss) on investments

    

141,011

      

208,920

      

7,208,921

      

3,438,785

      

85,470

      

1,740,487

      

308,142

    

• Net change in unrealized appreciation or depreciation on investments

    

(349,724

)

    

(583,399

)

    

(8,778,898

)

    

(4,863,061

)

    

(830,801

)

    

(8,263,156

)

    

(12,778,822

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(176,155

)

    

(329,168

)

    

(1,881,516

)

    

(1,508,809

)

    

(629,733

)

    

(5,712,276

)

    

(11,317,744

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

(2,076

)

    

(311,708

)

    

11,389,201

      

5,464,698

      

6,601,059

      

20,861,507

      

20,130,052

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(2,076

)

    

(311,708

)

    

11,389,201

      

5,464,698

      

6,601,059

      

20,861,507

      

20,130,052

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

(178,231

)

    

(640,876

)

    

9,507,685

      

3,955,889

      

5,971,326

      

15,149,231

      

8,812,308

    

NET ASSETS AT DECEMBER 31, 2018

    

2,055,351

      

3,252,496

      

64,457,832

      

34,281,313

      

9,942,748

      

95,102,714

      

67,409,179

    

Changes From Operations:

  

• Net investment income (loss)

    

49,400

      

66,839

      

(494,563

)

    

(216,267

)

    

112,821

      

1,204,314

      

2,091,988

    

• Net realized gain (loss) on investments

    

299,678

      

513,393

      

6,291,419

      

4,309,919

      

523,653

      

2,906,303

      

217,730

    

• Net change in unrealized appreciation or depreciation on investments

    

79,910

      

164,800

      

14,780,208

      

9,210,557

      

1,039,562

      

25,154,852

      

13,172,112

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

428,988

      

745,032

      

20,577,064

      

13,304,209

      

1,676,036

      

29,265,469

      

15,481,830

    

Change From Unit Transactions:

  

• Net unit transactions

    

(167,135

)

    

(363,755

)

    

10,451,181

      

6,953,265

      

1,097,837

      

17,156,707

      

13,052,236

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

(167,135

)

    

(363,755

)

    

10,451,181

      

6,953,265

      

1,097,837

      

17,156,707

      

13,052,236

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

261,853

      

381,277

      

31,028,245

      

20,257,474

      

2,773,873

      

46,422,176

      

28,534,066

    

NET ASSETS AT DECEMBER 31, 2019

  

$

2,317,204

    

$

3,633,773

    

$

95,486,077

    

$

54,538,787

    

$

12,716,621

    

$

141,524,890

    

$

95,943,245

    

See accompanying notes.
M-28




  LVIP
Wellington
Capital
Growth
Fund -
Standard Class
Subaccount		   LVIP
Wellington
Mid-Cap
Value Fund -
Standard Class
Subaccount		   M Capital
Appreciation
Fund
Subaccount		   M International
Equity Fund
Subaccount		   M Large Cap
Growth Fund
Subaccount		   M Large Cap
Value Fund
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

22,336,966

    

$

20,561,424

    

$

1,517,205

    

$

1,873,762

    

$

2,927,055

    

$

2,232,755

    

Changes From Operations:

  

• Net investment income (loss)

    

(157,108

)

    

22,686

      

(75

)

    

22,867

      

(9,583

)

    

26,492

    

• Net realized gain (loss) on investments

    

2,693,152

      

1,091,065

      

323,185

      

13,380

      

538,588

      

202,509

    

• Net change in unrealized appreciation or depreciation on investments

    

(3,169,226

)

    

(4,857,353

)

    

(535,501

)

    

(456,174

)

    

(669,086

)

    

(504,589

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

(633,182

)

    

(3,743,602

)

    

(212,391

)

    

(419,927

)

    

(140,081

)

    

(275,588

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

7,433,419

      

4,956,354

      

90,436

      

189,435

      

(64,108

)

    

57,646

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

7,433,419

      

4,956,354

      

90,436

      

189,435

      

(64,108

)

    

57,646

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

6,800,237

      

1,212,752

      

(121,955

)

    

(230,492

)

    

(204,189

)

    

(217,942

)

  

NET ASSETS AT DECEMBER 31, 2018

    

29,137,203

      

21,774,176

      

1,395,250

      

1,643,270

      

2,722,866

      

2,014,813

    

Changes From Operations:

  

• Net investment income (loss)

    

(259,387

)

    

111,091

      

779

      

46,685

      

(7,739

)

    

33,959

    

• Net realized gain (loss) on investments

    

4,552,479

      

2,177,957

      

113,072

      

(3,393

)

    

264,077

      

64,812

    

• Net change in unrealized appreciation or depreciation on investments

    

8,847,237

      

4,624,244

      

282,494

      

284,425

      

678,097

      

322,460

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

13,140,329

      

6,913,292

      

396,345

      

327,717

      

934,435

      

421,231

    

Change From Unit Transactions:

  

• Net unit transactions

    

11,956,775

      

4,026,433

      

(87,147

)

    

(58,585

)

    

(397,244

)

    

(91,009

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

11,956,775

      

4,026,433

      

(87,147

)

    

(58,585

)

    

(397,244

)

    

(91,009

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

25,097,104

      

10,939,725

      

309,198

      

269,132

      

537,191

      

330,222

    

NET ASSETS AT DECEMBER 31, 2019

  

$

54,234,307

    

$

32,713,901

    

$

1,704,448

    

$

1,912,402

    

$

3,260,057

    

$

2,345,035

    


M-29


Lincoln Life Flexible Premium Variable Life Account M

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019





  MFS® VIT
Growth
Series -
Initial Class
Subaccount		   MFS® VIT
Total Return
Series -
Initial Class
Subaccount		   MFS® VIT
Utilities
Series -
Initial Class
Subaccount		   MFS® VIT II
Core Equity
Portfolio -
Initial Class
Subaccount		   Neuberger
Berman AMT
Large Cap
Value
Portfolio - I Class
Subaccount		   Neuberger
Berman AMT
Mid Cap
Growth
Portfolio - I Class
Subaccount		   Neuberger
Berman AMT
Mid Cap
Intrinsic Value
Portfolio - I Class
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

41,786,944

    

$

39,868,443

    

$

39,244,658

    

$

1,026,457

    

$

1,594,837

    

$

18,882,798

    

$

6,318,830

    

Changes From Operations:

  

• Net investment income (loss)

    

(239,899

)

    

763,756

      

227,792

      

2,655

      

9,263

      

(82,823

)

    

16,490

    

• Net realized gain (loss) on investments

    

5,076,595

      

2,394,582

      

452,843

      

119,536

      

224,451

      

1,674,833

      

417,539

    

• Net change in unrealized appreciation or depreciation on investments

    

(4,401,116

)

    

(6,049,394

)

    

(401,868

)

    

(160,932

)

    

(253,021

)

    

(2,620,821

)

    

(1,347,829

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

435,580

      

(2,891,056

)

    

278,767

      

(38,741

)

    

(19,307

)

    

(1,028,811

)

    

(913,800

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

5,962,751

      

7,403,644

      

(2,343,360

)

    

(66,607

)

    

(169,899

)

    

(2,042,726

)

    

(405,146

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

5,962,751

      

7,403,644

      

(2,343,360

)

    

(66,607

)

    

(169,899

)

    

(2,042,726

)

    

(405,146

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

6,398,331

      

4,512,588

      

(2,064,593

)

    

(105,348

)

    

(189,206

)

    

(3,071,537

)

    

(1,318,946

)

  

NET ASSETS AT DECEMBER 31, 2018

    

48,185,275

      

44,381,031

      

37,180,065

      

921,109

      

1,405,631

      

15,811,261

      

4,999,884

    

Changes From Operations:

  

• Net investment income (loss)

    

(356,070

)

    

941,592

      

1,450,662

      

4,179

      

26,868

      

(76,063

)

    

18,473

    

• Net realized gain (loss) on investments

    

8,682,932

      

1,944,922

      

1,223,405

      

139,792

      

223,754

      

1,833,150

      

691,181

    

• Net change in unrealized appreciation or depreciation on investments

    

9,775,299

      

6,580,293

      

6,206,523

      

141,998

      

(84,918

)

    

3,139,639

      

89,052

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

18,102,161

      

9,466,807

      

8,880,590

      

285,969

      

165,704

      

4,896,726

      

798,706

    

Change From Unit Transactions:

  

• Net unit transactions

    

624,413

      

9,240,222

      

(1,119,052

)

    

7,338

      

(1,571,335

)

    

(2,116,836

)

    

(206,297

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

624,413

      

9,240,222

      

(1,119,052

)

    

7,338

      

(1,571,335

)

    

(2,116,836

)

    

(206,297

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

18,726,574

      

18,707,029

      

7,761,538

      

293,307

      

(1,405,631

)

    

2,779,890

      

592,409

    

NET ASSETS AT DECEMBER 31, 2019

  

$

66,911,849

    

$

63,088,060

    

$

44,941,603

    

$

1,214,416

    

$

—

    

$

18,591,151

    

$

5,592,293

    

See accompanying notes.
M-30





  Neuberger
Berman AMT
Sustainable
Equity
Portfolio - I Class
Subaccount		   PIMCO VIT
Commodity
RealReturn®
Strategy
Portfolio -
Administrative
Class
Subaccount		   Putnam VT
Equity
Income Fund -
Class IB
Subaccount		   Putnam VT
Global Health
Care Fund -
Class IB
Subaccount		   Templeton
Foreign
VIP Fund -
Class 1
Subaccount		   Templeton
Foreign
VIP Fund -
Class 2
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

—

    

$

23,364,966

    

$

1,697,270

    

$

1,881,309

    

$

1,347,279

    

$

3,551,352

    

Changes From Operations:

  

• Net investment income (loss)

    

—

      

363,591

      

3,586

      

8,708

      

29,149

      

72,051

    

• Net realized gain (loss) on investments

    

—

      

(795,647

)

    

91,580

      

281,442

      

4,765

      

(27,343

)

  

• Net change in unrealized appreciation or depreciation on investments

    

—

      

(3,245,940

)

    

(234,926

)

    

(303,322

)

    

(237,352

)

    

(584,380

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

—

      

(3,677,996

)

    

(139,760

)

    

(13,172

)

    

(203,438

)

    

(539,672

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

—

      

2,694,098

      

(115,391

)

    

(167,147

)

    

(60,334

)

    

(587,593

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

—

      

2,694,098

      

(115,391

)

    

(167,147

)

    

(60,334

)

    

(587,593

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

—

      

(983,898

)

    

(255,151

)

    

(180,319

)

    

(263,772

)

    

(1,127,265

)

  

NET ASSETS AT DECEMBER 31, 2018

    

—

      

22,381,068

      

1,442,119

      

1,700,990

      

1,083,507

      

2,424,087

    

Changes From Operations:

  

• Net investment income (loss)

    

1,431

      

1,003,474

      

24,388

      

(8,894

)

    

15,472

      

31,001

    

• Net realized gain (loss) on investments

    

79,316

      

(741,742

)

    

149,603

      

51,243

      

(3,002

)

    

(30,328

)

  

• Net change in unrealized appreciation or depreciation on investments

    

47,244

      

2,245,587

      

243,142

      

431,271

      

111,242

      

280,597

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

127,991

      

2,507,319

      

417,133

      

473,620

      

123,712

      

281,270

    

Change From Unit Transactions:

  

• Net unit transactions

    

1,341,516

      

2,578,947

      

(64,233

)

    

(191,458

)

    

(105,584

)

    

(194,752

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

1,341,516

      

2,578,947

      

(64,233

)

    

(191,458

)

    

(105,584

)

    

(194,752

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

1,469,507

      

5,086,266

      

352,900

      

282,162

      

18,128

      

86,518

    

NET ASSETS AT DECEMBER 31, 2019

  

$

1,469,507

    

$

27,467,334

    

$

1,795,019

    

$

1,983,152

    

$

1,101,635

    

$

2,510,605

    


M-31


Lincoln Life Flexible Premium Variable Life Account M

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019



  Templeton
Global Bond
VIP Fund -
Class 1
Subaccount		   Templeton
Growth
VIP Fund -
Class 1
Subaccount		   Templeton
Growth
VIP Fund -
Class 2
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

35,923,359

    

$

8,450,952

    

$

1,257,677

    

Changes From Operations:

  

• Net investment income (loss)

    

(276,304

)

    

142,963

      

17,661

    

• Net realized gain (loss) on investments

    

(52,437

)

    

774,169

      

118,249

    

• Net change in unrealized appreciation or depreciation on investments

    

971,607

      

(2,106,628

)

    

(319,425

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

642,866

      

(1,189,496

)

    

(183,515

)

  

Change From Unit Transactions:

  

• Net unit transactions

    

8,624,824

      

(707,238

)

    

(57,660

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

8,624,824

      

(707,238

)

    

(57,660

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

9,267,690

      

(1,896,734

)

    

(241,175

)

  

NET ASSETS AT DECEMBER 31, 2018

    

45,191,049

      

6,554,218

      

1,016,502

    

Changes From Operations:

  

• Net investment income (loss)

    

3,216,153

      

175,107

      

26,210

    

• Net realized gain (loss) on investments

    

(35,266

)

    

1,151,201

      

171,576

    

• Net change in unrealized appreciation or depreciation on investments

    

(2,437,911

)

    

(365,909

)

    

(45,863

)

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

742,976

      

960,399

      

151,923

    

Change From Unit Transactions:

  

• Net unit transactions

    

14,063,327

      

(389,196

)

    

(12,488

)

  
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

14,063,327

      

(389,196

)

    

(12,488

)

  

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

14,806,303

      

571,203

      

139,435

    

NET ASSETS AT DECEMBER 31, 2019

  

$

59,997,352

    

$

7,125,421

    

$

1,155,937

    

See accompanying notes.
M-32



  TOPS®
Balanced
ETF Portfolio -
Class 2 Shares
Subaccount		   TOPS®
Moderate
Growth
ETF Portfolio -
Class 2 Shares
Subaccount		  

NET ASSETS AT JANUARY 1, 2018

  

$

—

    

$

—

    

Changes From Operations:

  

• Net investment income (loss)

    

—

      

—

    

• Net realized gain (loss) on investments

    

—

      

—

    

• Net change in unrealized appreciation or depreciation on investments

    

—

      

—

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS		    

—

      

—

    

Change From Unit Transactions:

  

• Net unit transactions

    

—

      

—

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

—

      

—

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

—

      

—

    

NET ASSETS AT DECEMBER 31, 2018

    

—

      

—

    

Changes From Operations:

  

• Net investment income (loss)

    

478

      

337

    

• Net realized gain (loss) on investments

    

1,189

      

1,156

    

• Net change in unrealized appreciation or depreciation on investments

    

7,167

      

14,763

    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    

8,834

      

16,256

    

Change From Unit Transactions:

  

• Net unit transactions

    

400,995

      

477,912

    
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
UNIT TRANSACTIONS		    

400,995

      

477,912

    

TOTAL INCREASE (DECREASE) IN NET ASSETS

    

409,829

      

494,168

    

NET ASSETS AT DECEMBER 31, 2019

  

$

409,829

    

$

494,168

    


M-33


Lincoln Life Flexible Premium Variable
Life Account M

Notes to financial statements

December 31, 2019

1. Accounting Policies and Variable Account Information

The Variable Account: Lincoln Life Flexible Premium Variable Life Account M (the Variable Account) is a segregated investment account of The Lincoln National Life Insurance Company (the Company) and is registered as a unit investment trust with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended. The operations of the Variable Account, which commenced on June 18, 1998, are part of the operations of the Company. The Variable Account consists of twenty-one products as follows:

• VUL-I
• Lincoln VULCV
• Lincoln VULCV-II
• Lincoln VULCV-III
• Lincoln VULCV-IV
• Lincoln VULDB
• Lincoln VULDB-II
• Lincoln VULDB-IV
• MoneyGuard VUL
• Lincoln VULONE
• Lincoln Momentum VULONE
• Lincoln VULONE 2005		   • Lincoln Momentum VULONE 2005
• Lincoln VULONE 2007
• Lincoln Momentum VULONE 2007
• Lincoln AssetEdge VUL
• Lincoln AssetEdge VUL 2015
• Lincoln AssetEdge VUL 2019
• Lincoln VULONE 2012
• Lincoln VULONE 2014
• Lincoln VULONE 2019		  

The assets of the Variable Account are owned by the Company. The Variable Account's assets support the variable life policies and may not be used to satisfy liabilities arising from any other business of the Company.

Basis of Presentation: The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for unit investment trusts.

Accounting Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts as of the date of the financial statements. Those estimates are inherently subject to change and actual results could differ from those estimates. Included among the material (or potentially material) reported amounts that require use of estimates is the fair value of certain assets.

Investments: The assets of the Variable Account are divided into variable subaccounts, each of which may be invested in shares of one of one hundred thirty-two mutual funds (the Funds) of twenty-one open-ended

management investment companies, each Fund with its own investment objective. The Funds are:

AIM Variable Insurance Funds (Invesco Variable Insurance Funds):

Invesco V.I. American Franchise Fund - Series I Shares

Invesco V.I. Core Equity Fund - Series I Shares

Invesco V.I. Core Plus Bond Fund - Series I Shares

Invesco V.I. International Growth Fund - Series I Shares

AllianceBernstein Variable Products Series Fund:

AB VPS Global Thematic Growth Portfolio - Class A

AB VPS Growth and Income Portfolio - Class A

AB VPS International Value Portfolio - Class A

AB VPS Large Cap Growth Portfolio - Class A

AB VPS Small/Mid Cap Value Portfolio - Class A

American Century Variable Portfolios, Inc.:

American Century VP Balanced Fund - Class I

American Century VP Inflation Protection Fund - Class I

American Funds Insurance Series®:

American Funds Global Growth Fund - Class 2

American Funds Global Small Capitalization Fund - Class 2

American Funds Growth Fund - Class 2

American Funds Growth-Income Fund - Class 2

American Funds International Fund - Class 2

BlackRock Variable Series Funds, Inc.:

BlackRock Global Allocation V.I. Fund - Class I

Delaware VIP® Trust:

Delaware VIP® Diversified Income Series - Standard Class

Delaware VIP® Emerging Markets Series - Standard Class

Delaware VIP® High Yield Series - Standard Class

Delaware VIP® Limited-Term Diversified Income Series - Standard Class

Delaware VIP® REIT Series - Standard Class

Delaware VIP® Small Cap Value Series - Standard Class

Delaware VIP® Smid Cap Core Series - Standard Class

Delaware VIP® U.S. Growth Series - Standard Class

Delaware VIP® Value Series - Standard Class

Deutsche DWS Investments VIT Funds:

DWS Equity 500 Index VIP Portfolio - Class A

DWS Small Cap Index VIP Portfolio - Class A

Deutsche DWS Variable Series II:

DWS Alternative Asset Allocation VIP Portfolio - Class A

Fidelity® Variable Insurance Products:

Fidelity® VIP Asset Manager Portfolio - Initial Class

Fidelity® VIP Contrafund® Portfolio - Service Class

Fidelity® VIP Equity-Income Portfolio - Initial Class

Fidelity® VIP Equity-Income Portfolio - Service Class

Fidelity® VIP Growth Opportunities Portfolio - Service Class

Fidelity® VIP Growth Portfolio - Service Class

Fidelity® VIP High Income Portfolio - Service Class

Fidelity® VIP Investment Grade Bond Portfolio - Initial Class

Fidelity® VIP Mid Cap Portfolio - Service Class

Fidelity® VIP Overseas Portfolio - Service Class


M-34


Lincoln Life Flexible Premium Variable
Life Account M

Notes to financial statements (continued)

1. Accounting Policies and Variable Account Information (continued)

Franklin Templeton Variable Insurance Products Trust:

Franklin Income VIP Fund - Class 1

Franklin Mutual Shares VIP Fund - Class 1

Franklin Small-Mid Cap Growth VIP Fund - Class 1

Templeton Foreign VIP Fund - Class 1

Templeton Foreign VIP Fund - Class 2

Templeton Global Bond VIP Fund - Class 1

Templeton Growth VIP Fund - Class 1

Templeton Growth VIP Fund - Class 2

Janus Aspen Series:

Janus Henderson Balanced Portfolio - Institutional Shares

Janus Henderson Balanced Portfolio - Service Shares

Janus Henderson Enterprise Portfolio - Service Shares

Janus Henderson Global Research Portfolio - Institutional Shares

Janus Henderson Global Research Portfolio - Service Shares

Janus Henderson Global Technology Portfolio - Service Shares

JPMorgan Insurance Trust:

JPMorgan Insurance Trust Global Allocation Portfolio - Class 1

Legg Mason Partners Variable Equity Trust:

ClearBridge Variable Mid Cap Portfolio - Class I

Lincoln Variable Insurance Products Trust*:

LVIP Baron Growth Opportunities Fund - Service Class

LVIP Baron Growth Opportunities Fund - Standard Class

LVIP BlackRock Dividend Value Managed Volatility Fund - Standard Class

LVIP BlackRock Global Growth ETF Allocation Managed Risk Fund - Standard Class

LVIP BlackRock Global Real Estate Fund - Standard Class

LVIP BlackRock Inflation Protected Bond Fund - Standard Class

LVIP BlackRock U.S. Growth ETF Allocation Managed Risk Fund - Standard Class

LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class

LVIP Blended Mid Cap Managed Volatility Fund - Standard Class

LVIP ClearBridge QS Select Large Cap Managed Volatility Fund - Standard Class

LVIP Delaware Bond Fund - Standard Class

LVIP Delaware Diversified Floating Rate Fund - Standard Class

LVIP Delaware Social Awareness Fund - Standard Class

LVIP Delaware Special Opportunities Fund - Standard Class

LVIP Delaware Wealth Builder Fund - Standard Class

LVIP Dimensional International Core Equity Fund - Standard Class

LVIP Dimensional International Equity Managed Volatility Fund - Standard Class

LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class

LVIP Dimensional U.S. Core Equity 2 Fund - Standard Class

LVIP Dimensional U.S. Equity Managed Volatility Fund - Standard Class

LVIP Dimensional/Vanguard Total Bond Fund - Standard Class

LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class

LVIP Global Conservative Allocation Managed Risk Fund - Standard Class

LVIP Global Growth Allocation Managed Risk Fund - Standard Class

LVIP Global Income Fund - Standard Class

LVIP Global Moderate Allocation Managed Risk Fund - Standard Class

LVIP Government Money Market Fund - Standard Class

LVIP Invesco Select Equity Income Managed Volatility Fund - Standard Class

LVIP JPMorgan High Yield Fund - Standard Class

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class

LVIP MFS International Growth Fund - Standard Class

LVIP MFS Value Fund - Standard Class

LVIP Mondrian International Value Fund - Standard Class

LVIP Multi-Manager Global Equity Managed Volatility Fund - Standard Class

LVIP SSGA Bond Index Fund - Standard Class

LVIP SSGA Conservative Index Allocation Fund - Standard Class

LVIP SSGA Conservative Structured Allocation Fund - Standard Class

LVIP SSGA Developed International 150 Fund - Standard Class

LVIP SSGA Emerging Markets 100 Fund - Standard Class

LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class

LVIP SSGA International Index Fund - Standard Class

LVIP SSGA International Managed Volatility Fund - Standard Class

LVIP SSGA Large Cap 100 Fund - Standard Class

LVIP SSGA Moderate Index Allocation Fund - Standard Class


M-35


Lincoln Life Flexible Premium Variable
Life Account M

Notes to financial statements (continued)

1. Accounting Policies and Variable Account Information (continued)

LVIP SSGA Moderate Structured Allocation Fund - Standard Class

LVIP SSGA Moderately Aggressive Index Allocation Fund - Standard Class

LVIP SSGA Moderately Aggressive Structured Allocation Fund - Standard Class

LVIP SSGA S&P 500 Index Fund - Standard Class

LVIP SSGA Small-Cap Index Fund - Standard Class

LVIP SSGA Small-Mid Cap 200 Fund - Standard Class

LVIP T. Rowe Price 2010 Fund - Standard Class

LVIP T. Rowe Price 2020 Fund - Standard Class

LVIP T. Rowe Price 2030 Fund - Standard Class

LVIP T. Rowe Price 2040 Fund - Standard Class

LVIP T. Rowe Price Growth Stock Fund - Standard Class

LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class

LVIP U.S. Growth Allocation Managed Risk Fund - Standard Class

LVIP Vanguard Domestic Equity ETF Fund - Standard Class

LVIP Vanguard International Equity ETF Fund - Standard Class

LVIP Wellington Capital Growth Fund - Standard Class

LVIP Wellington Mid-Cap Value Fund - Standard Class

M Fund, Inc.:

M Capital Appreciation Fund

M International Equity Fund

M Large Cap Growth Fund

M Large Cap Value Fund

MFS® Variable Insurance Trust:

MFS® VIT Growth Series - Initial Class

MFS® VIT Total Return Series - Initial Class

MFS® VIT Utilities Series - Initial Class

MFS® Variable Insurance Trust II:

MFS® VIT II Core Equity Portfolio - Initial Class

Neuberger Berman Advisers Management Trust:

Neuberger Berman AMT Mid Cap Growth Portfolio - I Class

Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio - I Class

Neuberger Berman AMT Sustainable Equity Portfolio - I Class

Northern Lights Variable Trust:

TOPS® Balanced ETF Portfolio - Class 2 Shares

TOPS® Moderate Growth ETF Portfolio - Class 2 Shares

PIMCO Variable Insurance Trust:

PIMCO VIT CommodityRealReturn® Strategy Portfolio - Administrative Class

Putnam Variable Trust:

Putnam VT Equity Income Fund - Class IB

Putnam VT Global Health Care Fund - Class IB

*  Denotes an affiliate of the Company

Each subaccount invests in shares of a single underlying Fund. The investment performance of each subaccount will reflect the investment performance of the underlying Fund less separate account expenses. There is no assurance that the investment objective of any underlying Fund will be met. A Fund calculates a daily net asset value per share ("NAV") which is based on the market value of its investment portfolio. The amount of risk varies significantly between subaccounts. Due to the level of risk associated with certain investment portfolios, it is at least reasonably possible that changes in the values of investment portfolios will occur in the near term and that such changes could materially affect contract holders' investments in the Funds and the amounts reported in the financial statements. The contract holder assumes all of the investment performance risk for the subaccounts selected.

Investments in the Funds are stated at fair value as determined by the closing net asset value per share on December 31, 2019. Net asset value is quoted by the Funds as derived by the fair value of the Funds' underlying investments. The difference between cost and net asset value is reflected as unrealized appreciation or depreciation of investments. There are no redemption restrictions on investments in the Funds.

Investments for which the fair value is measured at NAV using the practical expedient (investments in investees measured at NAV) are excluded from the fair value hierarchy. Accordingly, the Variable Account's investments in the Funds have not been classified in the fair value hierarchy.

Investment transactions are accounted for on a trade-date basis. The cost of investments sold is determined by the average cost method.

ASC 946-10-15, "Financial Services - Investment Companies (Topic 946) - Scope and Scope Exceptions" provides accounting guidance for assessing whether an entity is an investment company. This guidance evaluates the entity's purpose and design to determine whether the entity is an investment company. The standard also adds additional disclosure requirements regarding contractually required commitments to investees. Management has evaluated the criteria in the standard and concluded that the Variable Account qualifies as an investment company and therefore applies the accounting requirements of ASC 946.


M-36


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

1. Accounting Policies and Variable Account Information (continued)

Dividends: Dividends paid to the Variable Account are automatically reinvested in shares of the Funds on the payable date. Dividend income is recorded on the ex-dividend date.

Federal Income Taxes: Operations of the Variable Account form a part of and are taxed with operations of the Company, which is taxed as a "life insurance company" under the Internal Revenue Code. The Variable Account will not be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended. Under current federal income tax law, no federal income taxes are payable or receivable with respect to the Variable Account's net investment income and the net realized gain (loss) on investments.

Investment Fund Changes: During 2018, the following funds changed their names:

Previous Fund Name

  

New Fund Name

  

LVIP Managed Risk Profile 2010 Fund - Standard Class

  

LVIP T. Rowe Price 2010 Fund - Standard Class

  

LVIP Managed Risk Profile 2020 Fund - Standard Class

  

LVIP T. Rowe Price 2020 Fund - Standard Class

  

LVIP Managed Risk Profile 2030 Fund - Standard Class

  

LVIP T. Rowe Price 2030 Fund - Standard Class

  

LVIP Managed Risk Profile 2040 Fund - Standard Class

  

LVIP T. Rowe Price 2040 Fund - Standard Class

  

Also during 2018, the following fund families changed their names:

Previous Fund Family Name

  

New Fund Family Name

  

Deutsche Investments VIT Funds

  

Deutsche DWS Investments VIT Funds

  

Deutsche Variable Series II

  

Deutsche DWS Variable Series II

  

TOPS® Balanced ETF Portfolio - Service Class Shares

  

 

During 2019, the following funds became available as investment options for account contract owners. Accordingly, for the subaccounts that commenced operations during 2019, the 2019 statements of operations and statements of changes in net assets and total return and investment income ratios in note 3 are for the period from the commencement of operations to December 31, 2019:

Neuberger Berman AMT Sustainable Equity Portfolio - I Class

  

TOPS® Moderate Growth ETF Portfolio - Service Class Shares

  

Also during 2019, the LVIP Clarion Global Real Estate Fund - Standard Class fund changed its name to LVIP BlackRock Global Real Estate Fund - Standard Class.

Also during 2019, the following fund mergers occurred:

Fund Acquired

  

Acquiring Fund

  
LVIP ClearBridge Large Cap Managed Volatility Fund - Standard Class
  		   LVIP ClearBridge QS Select Large Cap Managed Volatility Fund -
Standard Class		  
LVIP Invesco Diversified Equity-Income Managed Volatility Fund -
Standard Class		   LVIP Invesco Select Equity Income Managed Volatility Fund -
Standard Class		  

Also during 2019, the following fund ceased to be available as an investment option to Variable Account contract owners:

Neuberger Berman AMT Large Cap Value Portfolio - I Class

  

2. Mortality and Expense Guarantees and Other Transactions with Affiliates

Amounts are paid to the Company for mortality and expense guarantees at a percentage of the current value of the Variable Account each day. The mortality and expense risk charges for each of the variable subaccounts are reported in the statements of operations. The rates are as follows for the twenty-one policy types within the Variable Account:

•  VUL-I - annual rate of .80% for policy years one through twelve and .55% thereafter.

•  Lincoln VULCV - annual rate of .75% for policy years one through ten, .35% for policy years eleven through twenty and .20% thereafter.

•  Lincoln VULCV-II - annual rate of .75% for policy years one through ten, .35% for policy years eleven through twenty and .20% thereafter.

•  Lincoln VULCV-III - annual rate of .75% for policy years one through ten, .35% for policy years eleven through twenty and .20% thereafter.

•  Lincoln VULCV-IV - annual rate of .60% for policy years one through ten and .20% thereafter.


M-37


Lincoln Life Flexible Premium Variable
Life Account M

Notes to financial statements (continued)

2. Mortality and Expense Guarantees and Other Transactions with Affiliates (continued)

•  Lincoln VULDB - annual rate of .90% for policy years one through nineteen and .20% thereafter.

•  Lincoln VULDB-II - annual rate of .90% for policy years one through nineteen and .20% thereafter.

•  Lincoln VULDB-IV - annual rate of .90% for policy years one through nineteen and .20% thereafter.

•  MoneyGuard VUL - annual rate of 1.00%.

•  Lincoln VULONE - annual rate of .50% for policy years one through ten and .20% thereafter.

•  Lincoln Momentum VULONE - annual rate of .50% for policy years one through ten and .20% thereafter.

•  Lincoln VULONE 2005 - annual rate of .50% for policy years one through ten and .20% thereafter.

•  Lincoln Momentum VULONE 2005 - annual rate of .50% for policy years one through ten and .20% thereafter.

•  Lincoln VULONE 2007 - annual rate of .60% for policy years one through ten, .20% for policy years eleven through twenty and 0.00% thereafter.

•  Lincoln Momentum VULONE 2007 - annual rate of .60% for policy years one through ten, .20% for policy years eleven through twenty and 0.00% thereafter.

•  Lincoln AssetEdge VUL - annual rate of .10% for policy years one through twenty and 0.00% thereafter for policies issued before 10/19/09. For policies issued on or after 10/19/09 an annual rate of .15% is charged for policy years one through fifteen and 0.00% thereafter.

•  Lincoln AssetEdge VUL 2015 - annual rate of .15% is charged for policy years one through fifteen and 0.00% thereafter.

•  Lincoln AssetEdge VUL 2019 - annual rate of .00% for all policy years.

•  Lincoln VULONE 2012 - annual rate of .60% for policy years one through ten, .20% for policy years eleven through twenty and 0.00% thereafter.

•  Lincoln VULONE 2014 - annual rate of .90% for policy years one through ten, .20% for policy years eleven through twenty and 0.00% thereafter.

•  Lincoln VULONE 2019 - annual rate of .90% for policy years one through ten, .20% for policy years eleven through twenty and 0.00% thereafter.

The Company deducts a premium load, based on product, to cover state taxes and federal income tax liabilities and a portion of the sales expenses incurred by the

Company. Refer to the product prospectuses for the applicable rate. The premium loads for the years ended December 31, 2019 and 2018, amounted to $91,924,410 and $96,384,189, respectively.

The Company charges a monthly administrative fee for items such as premium billings and collection, policy value calculation, confirmations and periodic reports. Refer to the product prospectus for the applicable administrative fee rates. Administrative fees for the years ended December 31, 2019 and 2018, totaled $121,764,009 and $102,483,311, respectively.

The Company assumes responsibility for providing the insurance benefit included in the policy. On a monthly basis, a cost of insurance charge is deducted proportionately from the value of each variable subaccount and/or fixed account funding option. The fixed account is part of the general account of the Company and is not included in these financial statements. The cost of insurance charge depends on the attained age, risk classification, gender classification (in accordance with state law) and the current net amount at risk. The cost of insurance charges for the years ended December 31, 2019 and 2018, amounted to $158,298,258 and $140,798,015, respectively.

Under certain circumstances, the Company reserves the right to charge a transfer fee, refer to the product prospectus for applicable rates. For the years ended December 31, 2019 and 2018, transfer charges amounted to $1,524 and $194, respectively.

The Company, upon full surrender of a policy, may charge a surrender charge. This charge is in part a deferred sales charge and in part a recovery of certain first year administrative costs. The amount of the surrender charge, if any, will depend on the amount of the death benefit, the amount of premium payments made during the first two policy years and the age of the policy. In no event will the surrender charge exceed the maximum allowed by state or federal law. No surrender charge is imposed on partial surrenders for Lincoln VULONE 2007, Lincoln Momentum VULONE 2007, Lincoln VULONE 2012, Lincoln VULONE 2014, Lincoln AssetEdge VUL, Lincoln AssetEdge VUL 2015 and Lincoln AssetEdge VUL 2019. For all other products, an administrative fee of $25 (not to exceed 2% of the amount withdrawn) is imposed, allocated pro-rata among the variable subaccounts (and, where applicable, the fixed account) from which the partial surrender proceeds are taken. Full surrender charges and partial surrender administrative charges paid to the Company attributable to the variable subaccounts for the years ended December 31, 2019 and 2018, were $7,643,425 and $6,388,046, respectively.

Premium load, cost of insurance, administrative, surrender and transfer fees are included within Contract withdrawals on the Statements of Changes in Net Assets.


M-38


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights

A summary of the fee rates, unit values, units outstanding, net assets and total return and investment income ratios for variable life contracts as of and for each year or period in the five years ended December 31, 2019, follows:

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

AB VPS Global Thematic Growth Portfolio - Class A

  
     

2019

          

0.10

%

    

0.90

%

  

$

14.59

    

$

34.95

      

635,081

    

$

11,540,813

      

28.99

%

    

30.03

%

    

0.43

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.23

      

26.94

      

547,623

      

8,151,257

      

-10.60

%

    

-9.89

%

    

0.00

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.84

      

29.97

      

496,531

      

8,594,636

      

35.44

%

    

36.53

%

    

0.48

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.41

      

22.01

      

419,905

      

5,477,044

      

-1.51

%

    

-0.72

%

    

0.00

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.70

      

22.22

      

401,151

      

5,474,239

      

1.97

%

    

2.79

%

    

0.00

%

  

AB VPS Growth and Income Portfolio - Class A

  
     

2019

          

0.10

%

    

0.90

%

    

11.55

      

43.06

      

827,209

      

18,458,952

      

22.80

%

    

23.79

%

    

1.24

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.93

      

34.87

      

912,651

      

16,768,385

      

-6.45

%

    

-5.70

%

    

0.98

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.59

      

37.07

      

1,047,809

      

20,780,746

      

17.86

%

    

18.81

%

    

1.45

%

  
     

2016

          

0.10

%

    

0.90

%

    

11.45

      

31.28

      

1,088,497

      

19,044,608

      

10.30

%

    

11.19

%

    

0.93

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.97

      

28.21

      

1,069,410

      

18,358,604

      

0.79

%

    

1.60

%

    

1.44

%

  

AB VPS International Value Portfolio - Class A

  
     

2019

          

0.10

%

    

0.90

%

    

7.41

      

13.99

      

850,606

      

9,631,398

      

16.09

%

    

17.02

%

    

0.93

%

  
     

2018

          

0.10

%

    

0.90

%

    

6.37

      

11.99

      

881,280

      

8,425,814

      

-23.48

%

    

-22.87

%

    

1.55

%

  
     

2017

          

0.10

%

    

0.90

%

    

8.29

      

15.58

      

860,133

      

10,339,799

      

24.30

%

    

25.29

%

    

2.21

%

  
     

2016

          

0.10

%

    

0.90

%

    

6.65

      

12.47

      

956,276

      

8,805,530

      

-1.39

%

    

-0.60

%

    

1.23

%

  
     

2015

          

0.10

%

    

0.90

%

    

6.73

      

12.57

      

946,832

      

8,677,035

      

1.66

%

    

2.49

%

    

2.47

%

  

AB VPS Large Cap Growth Portfolio - Class A

  
     

2019

          

0.20

%

    

0.90

%

    

23.36

      

55.97

      

133,525

      

4,108,839

      

33.49

%

    

34.43

%

    

0.00

%

  
     

2018

          

0.20

%

    

0.90

%

    

17.37

      

41.70

      

128,466

      

3,310,424

      

1.66

%

    

2.39

%

    

0.00

%

  
     

2017

          

0.20

%

    

0.90

%

    

16.97

      

40.79

      

107,378

      

2,905,893

      

30.80

%

    

31.73

%

    

0.00

%

  
     

2016

          

0.20

%

    

0.90

%

    

12.88

      

31.02

      

122,418

      

2,539,571

      

1.71

%

    

2.42

%

    

0.00

%

  
     

2015

          

0.20

%

    

0.90

%

    

12.58

      

30.33

      

146,506

      

2,988,450

      

10.12

%

    

10.89

%

    

0.00

%

  

AB VPS Small/Mid Cap Value Portfolio - Class A

  
     

2019

          

0.00

%

    

1.00

%

    

9.93

      

50.96

      

2,964,057

      

52,344,724

      

18.90

%

    

19.98

%

    

0.60

%

  
     

2018

          

0.10

%

    

1.00

%

    

9.30

      

42.86

      

2,561,697

      

39,596,867

      

-15.87

%

    

-15.11

%

    

0.48

%

  
     

2017

          

0.10

%

    

1.00

%

    

12.80

      

50.95

      

2,270,416

      

44,103,285

      

12.03

%

    

13.03

%

    

0.47

%

  
     

2016

          

0.10

%

    

1.00

%

    

11.33

      

45.48

      

1,928,473

      

35,255,726

      

23.84

%

    

24.96

%

    

0.57

%

  
     

2015

          

0.10

%

    

1.00

%

    

9.90

      

36.72

      

1,713,484

      

27,362,997

      

-6.43

%

    

-5.58

%

    

0.81

%

  

American Century VP Balanced Fund - Class I

  
     

2019

          

0.15

%

    

0.90

%

    

12.69

      

13.73

      

2,377,226

      

31,417,759

      

18.78

%

    

19.67

%

    

1.58

%

  
     

2018

          

0.15

%

    

0.90

%

    

11.25

      

11.48

      

1,639,629

      

18,464,017

      

-4.69

%

    

-3.97

%

    

1.65

%

  
     

2017

          

0.15

%

    

0.90

%

    

11.81

      

11.95

      

546,506

      

6,458,581

      

12.89

%

    

13.74

%

    

1.76

%

  
     

2016

    

6/7/16

    

0.15

%

    

0.90

%

    

10.46

      

10.51

      

151,196

      

1,582,479

      

0.29

%

    

3.84

%

    

1.04

%

  

American Century VP Inflation Protection Fund - Class I

  
     

2019

          

0.10

%

    

0.90

%

    

10.79

      

15.79

      

952,172

      

11,334,294

      

8.18

%

    

9.05

%

    

2.55

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.01

      

14.59

      

1,008,166

      

11,202,108

      

-3.44

%

    

-2.67

%

    

3.07

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.37

      

15.11

      

1,048,384

      

12,406,425

      

2.99

%

    

3.82

%

    

2.85

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.02

      

14.67

      

1,027,551

      

12,142,362

      

3.77

%

    

4.60

%

    

1.94

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.60

      

14.81

      

986,137

      

11,577,435

      

-3.16

%

    

-2.38

%

    

2.35

%

  

American Funds Global Growth Fund - Class 2

  
     

2019

          

0.00

%

    

0.90

%

    

11.69

      

42.75

      

7,841,468

      

147,268,806

      

34.06

%

    

35.14

%

    

1.18

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.27

      

31.71

      

6,501,824

      

96,750,118

      

-9.86

%

    

-9.13

%

    

0.74

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.80

      

34.99

      

4,998,285

      

86,532,641

      

30.29

%

    

31.34

%

    

0.71

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.75

      

26.78

      

4,100,726

      

58,234,955

      

-0.28

%

    

0.52

%

    

0.88

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.06

      

26.75

      

3,238,915

      

50,119,731

      

5.98

%

    

6.83

%

    

1.09

%

  

American Funds Global Small Capitalization Fund - Class 2

  
     

2019

          

0.00

%

    

0.90

%

    

11.13

      

41.67

      

5,954,355

      

101,731,759

      

30.34

%

    

31.39

%

    

0.16

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.17

      

31.97

      

5,607,302

      

75,647,034

      

-11.35

%

    

-10.64

%

    

0.08

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.39

      

36.06

      

4,868,057

      

77,181,740

      

24.77

%

    

25.77

%

    

0.43

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.07

      

28.91

      

4,358,690

      

57,801,698

      

1.18

%

    

2.00

%

    

0.24

%

  
     

2015

          

0.10

%

    

1.00

%

    

9.93

      

35.54

      

3,770,193

      

52,642,645

      

-0.74

%

    

0.17

%

    

0.00

%

  


M-39


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

American Funds Growth Fund - Class 2

  
     

2019

          

0.00

%

    

0.90

%

  

$

12.00

    

$

53.49

      

19,120,115

    

$

436,156,649

      

29.60

%

    

30.64

%

    

0.79

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.94

      

41.05

      

15,511,357

      

296,842,587

      

-1.14

%

    

-0.35

%

    

0.45

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.99

      

41.29

      

13,849,034

      

281,539,220

      

27.14

%

    

28.16

%

    

0.52

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.93

      

32.30

      

12,238,220

      

208,322,080

      

8.51

%

    

9.38

%

    

0.73

%

  
     

2015

          

0.10

%

    

1.00

%

    

11.52

      

29.60

      

10,748,835

      

183,473,700

      

5.80

%

    

6.75

%

    

0.61

%

  

American Funds Growth-Income Fund - Class 2

  
     

2019

          

0.00

%

    

1.00

%

    

11.69

      

43.36

      

20,037,478

      

415,452,519

      

24.89

%

    

26.01

%

    

1.76

%

  
     

2018

          

0.10

%

    

1.00

%

    

11.37

      

34.50

      

17,347,308

      

304,616,643

      

-2.76

%

    

-1.88

%

    

1.47

%

  
     

2017

          

0.10

%

    

1.00

%

    

13.17

      

35.25

      

15,241,486

      

288,725,558

      

21.17

%

    

22.26

%

    

1.48

%

  
     

2016

          

0.10

%

    

1.00

%

    

10.79

      

28.90

      

12,593,854

      

210,742,257

      

10.41

%

    

11.41

%

    

1.42

%

  
     

2015

          

0.10

%

    

1.00

%

    

10.87

      

26.01

      

10,692,293

      

174,387,716

      

0.45

%

    

1.35

%

    

1.36

%

  

American Funds International Fund - Class 2

  
     

2019

          

0.00

%

    

1.00

%

    

10.24

      

32.07

      

14,208,011

      

215,846,233

      

21.66

%

    

22.76

%

    

1.50

%

  
     

2018

          

0.10

%

    

1.00

%

    

10.37

      

26.36

      

13,473,368

      

170,734,564

      

-14.00

%

    

-13.22

%

    

1.82

%

  
     

2017

          

0.10

%

    

1.00

%

    

11.96

      

30.65

      

11,304,100

      

172,310,088

      

30.83

%

    

32.01

%

    

1.31

%

  
     

2016

          

0.10

%

    

1.00

%

    

9.07

      

23.43

      

10,273,705

      

123,514,398

      

2.50

%

    

3.43

%

    

1.32

%

  
     

2015

          

0.10

%

    

1.00

%

    

9.14

      

22.85

      

8,917,707

      

110,505,162

      

-5.48

%

    

-4.62

%

    

1.59

%

  

BlackRock Global Allocation V.I. Fund - Class I

  
     

2019

          

0.00

%

    

0.90

%

    

12.01

      

20.46

      

17,378,440

      

239,096,050

      

16.93

%

    

17.87

%

    

1.36

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.20

      

17.36

      

16,018,000

      

191,949,905

      

-8.17

%

    

-7.43

%

    

1.00

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.14

      

18.75

      

14,609,706

      

192,945,905

      

12.84

%

    

13.74

%

    

1.39

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.80

      

16.49

      

12,838,157

      

153,277,088

      

3.18

%

    

4.01

%

    

1.28

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.11

      

15.85

      

10,817,612

      

127,975,889

      

-1.60

%

    

-0.81

%

    

1.23

%

  

ClearBridge Variable Mid Cap Portfolio - Class I

  
     

2019

          

0.10

%

    

0.90

%

    

12.44

      

15.57

      

1,722,305

      

25,206,852

      

31.75

%

    

32.81

%

    

0.65

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.39

      

11.72

      

1,422,884

      

15,982,409

      

-13.30

%

    

-12.61

%

    

0.60

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.90

      

13.42

      

985,363

      

12,850,270

      

11.77

%

    

12.69

%

    

0.55

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.56

      

11.91

      

522,516

      

6,099,071

      

8.34

%

    

9.24

%

    

0.87

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.75

      

10.89

      

330,107

      

3,558,292

      

1.37

%

    

2.15

%

    

0.05

%

  

Delaware VIP® Diversified Income Series - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

11.21

      

20.11

      

6,637,787

      

81,752,051

      

9.44

%

    

10.32

%

    

2.85

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.17

      

18.37

      

5,948,099

      

68,003,570

      

-3.00

%

    

-2.22

%

    

3.13

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.58

      

18.94

      

5,406,839

      

65,217,966

      

4.28

%

    

5.12

%

    

2.53

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.08

      

19.10

      

4,261,885

      

52,057,689

      

2.60

%

    

3.42

%

    

2.99

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.02

      

18.55

      

3,833,088

      

47,192,164

      

-1.97

%

    

-1.18

%

    

2.98

%

  

Delaware VIP® Emerging Markets Series - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

10.43

      

60.51

      

7,215,239

      

102,268,563

      

21.53

%

    

22.51

%

    

0.67

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.40

      

49.79

      

6,546,303

      

78,289,796

      

-16.56

%

    

-15.89

%

    

3.18

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.38

      

59.67

      

4,915,691

      

74,061,466

      

39.29

%

    

40.41

%

    

0.57

%

  
     

2016

          

0.10

%

    

0.90

%

    

8.82

      

42.84

      

4,525,250

      

51,078,363

      

12.91

%

    

13.82

%

    

0.99

%

  
     

2015

          

0.10

%

    

0.90

%

    

7.76

      

37.94

      

4,002,325

      

42,423,283

      

-15.27

%

    

-14.59

%

    

0.85

%

  

Delaware VIP® High Yield Series - Standard Class

  
     

2019

          

0.10

%

    

1.00

%

    

11.22

      

33.52

      

1,219,559

      

18,303,096

      

15.27

%

    

16.31

%

    

6.81

%

  
     

2018

          

0.10

%

    

1.00

%

    

10.03

      

29.08

      

1,216,308

      

16,423,564

      

-5.42

%

    

-4.57

%

    

6.17

%

  
     

2017

          

0.10

%

    

1.00

%

    

10.82

      

30.74

      

1,311,694

      

19,777,266

      

6.42

%

    

7.38

%

    

5.76

%

  
     

2016

          

0.10

%

    

1.00

%

    

10.09

      

28.89

      

1,357,114

      

19,916,891

      

12.03

%

    

13.05

%

    

6.57

%

  
     

2015

          

0.10

%

    

1.00

%

    

8.93

      

25.79

      

1,230,142

      

17,691,901

      

-7.53

%

    

-6.69

%

    

6.90

%

  

Delaware VIP® Limited-Term Diversified Income Series - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

10.63

      

13.57

      

6,118,357

      

67,384,521

      

4.26

%

    

5.10

%

    

2.71

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.17

      

12.91

      

5,642,703

      

59,690,568

      

-0.66

%

    

0.15

%

    

2.72

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.27

      

13.47

      

4,534,141

      

48,447,654

      

1.25

%

    

2.07

%

    

2.06

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.14

      

13.43

      

3,138,535

      

33,450,746

      

1.17

%

    

1.99

%

    

1.52

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.00

      

13.22

      

2,611,448

      

27,574,993

      

-0.12

%

    

0.69

%

    

1.70

%

  

Delaware VIP® REIT Series - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

11.79

      

64.07

      

3,606,646

      

63,253,805

      

25.67

%

    

26.68

%

    

2.12

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.32

      

50.98

      

3,512,947

      

50,644,552

      

-8.05

%

    

-7.31

%

    

2.11

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.23

      

55.44

      

3,383,354

      

54,493,327

      

0.63

%

    

1.43

%

    

1.54

%

  
     

2016

          

0.10

%

    

0.90

%

    

11.08

      

55.10

      

3,037,931

      

51,206,803

      

4.92

%

    

5.76

%

    

1.14

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.60

      

52.51

      

2,557,553

      

44,256,914

      

2.82

%

    

3.64

%

    

1.23

%

  


M-40


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

Delaware VIP® Small Cap Value Series - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

  

$

10.54

    

$

64.81

      

4,638,580

    

$

87,241,051

      

26.99

%

    

28.01

%

    

1.04

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.04

      

51.04

      

4,256,007

      

66,328,856

      

-17.46

%

    

-16.80

%

    

0.84

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.44

      

61.83

      

3,588,361

      

73,592,347

      

11.05

%

    

11.94

%

    

0.83

%

  
     

2016

          

0.10

%

    

0.90

%

    

12.01

      

55.68

      

3,235,143

      

64,478,321

      

30.23

%

    

31.27

%

    

0.88

%

  
     

2015

          

0.10

%

    

1.00

%

    

9.60

      

42.76

      

3,099,508

      

50,688,724

      

-7.15

%

    

-6.31

%

    

0.71

%

  

Delaware VIP® Smid Cap Core Series - Standard Class

  
     

2019

          

0.00

%

    

1.00

%

    

10.96

      

60.46

      

3,844,589

      

74,955,085

      

28.34

%

    

29.50

%

    

0.54

%

  
     

2018

          

0.10

%

    

1.00

%

    

9.96

      

46.80

      

3,361,222

      

55,888,358

      

-12.99

%

    

-12.21

%

    

0.17

%

  
     

2017

          

0.10

%

    

1.00

%

    

12.75

      

53.44

      

2,751,030

      

56,690,538

      

17.47

%

    

18.53

%

    

0.29

%

  
     

2016

          

0.10

%

    

1.00

%

    

10.78

      

45.20

      

2,295,043

      

43,872,895

      

7.22

%

    

8.19

%

    

0.21

%

  
     

2015

          

0.10

%

    

1.00

%

    

11.60

      

41.89

      

1,950,621

      

39,170,046

      

6.47

%

    

7.43

%

    

0.37

%

  

Delaware VIP® U.S. Growth Series - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

14.90

      

50.13

      

1,594,997

      

36,429,851

      

26.11

%

    

27.12

%

    

0.00

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.74

      

39.54

      

1,435,601

      

27,294,598

      

-3.87

%

    

-3.10

%

    

0.00

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.17

      

40.90

      

1,442,528

      

29,003,038

      

27.13

%

    

28.15

%

    

0.00

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.50

      

32.00

      

1,474,284

      

23,616,731

      

-6.01

%

    

-5.26

%

    

0.60

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.82

      

33.86

      

1,253,641

      

22,166,112

      

4.44

%

    

5.28

%

    

0.54

%

  

Delaware VIP® Value Series - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

12.97

      

41.60

      

4,162,503

      

81,699,087

      

18.90

%

    

19.85

%

    

1.70

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.83

      

34.80

      

3,516,817

      

61,195,667

      

-3.60

%

    

-2.83

%

    

1.63

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.57

      

35.90

      

3,296,413

      

61,597,728

      

12.78

%

    

13.68

%

    

1.67

%

  
     

2016

          

0.10

%

    

0.90

%

    

11.07

      

31.66

      

3,077,982

      

53,318,964

      

13.62

%

    

14.53

%

    

1.72

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.88

      

27.71

      

2,635,438

      

42,976,167

      

-1.31

%

    

-0.51

%

    

1.64

%

  

DWS Alternative Asset Allocation VIP Portfolio - Class A

  
     

2019

          

0.00

%

    

0.90

%

    

10.76

      

15.90

      

1,466,036

      

16,947,674

      

13.65

%

    

14.57

%

    

3.74

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.43

      

13.88

      

1,357,501

      

13,828,335

      

-9.95

%

    

-9.23

%

    

2.15

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.40

      

15.29

      

1,276,419

      

14,472,510

      

6.44

%

    

7.30

%

    

2.35

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.70

      

14.25

      

1,261,529

      

13,672,891

      

4.34

%

    

5.19

%

    

2.04

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.47

      

13.54

      

1,114,483

      

11,658,619

      

-7.13

%

    

-6.39

%

    

3.00

%

  

DWS Equity 500 Index VIP Portfolio - Class A

  
     

2019

          

0.20

%

    

0.90

%

    

12.14

      

44.48

      

1,888,405

      

47,978,477

      

30.01

%

    

30.92

%

    

1.99

%

  
     

2018

          

0.20

%

    

0.90

%

    

12.63

      

34.02

      

1,803,008

      

40,025,649

      

-5.51

%

    

-4.84

%

    

1.68

%

  
     

2017

          

0.20

%

    

0.90

%

    

13.27

      

35.81

      

1,971,921

      

46,641,587

      

20.45

%

    

21.29

%

    

1.75

%

  
     

2016

          

0.20

%

    

0.90

%

    

10.94

      

29.57

      

2,079,174

      

41,477,903

      

10.61

%

    

11.39

%

    

1.90

%

  
     

2015

          

0.20

%

    

0.90

%

    

11.07

      

26.58

      

2,192,981

      

41,249,244

      

0.22

%

    

0.93

%

    

1.64

%

  

DWS Small Cap Index VIP Portfolio - Class A

  
     

2019

          

0.20

%

    

0.90

%

    

14.12

      

41.48

      

525,219

      

11,169,010

      

24.10

%

    

24.97

%

    

1.05

%

  
     

2018

          

0.20

%

    

0.90

%

    

11.30

      

33.43

      

497,756

      

9,293,371

      

-12.03

%

    

-11.41

%

    

0.95

%

  
     

2017

          

0.20

%

    

0.90

%

    

12.76

      

38.00

      

536,805

      

11,673,122

      

13.30

%

    

14.10

%

    

0.95

%

  
     

2016

          

0.20

%

    

0.90

%

    

11.18

      

33.53

      

549,713

      

10,955,142

      

19.94

%

    

20.79

%

    

1.01

%

  
     

2015

          

0.20

%

    

0.90

%

    

10.19

      

27.96

      

554,862

      

9,776,984

      

-5.45

%

    

-4.79

%

    

1.03

%

  

Fidelity® VIP Asset Manager Portfolio - Initial Class

  
     

2019

          

0.55

%

    

0.55

%

    

22.81

      

22.81

      

23,343

      

532,543

      

17.60

%

    

17.60

%

    

1.67

%

  
     

2018

          

0.55

%

    

0.55

%

    

19.40

      

19.40

      

28,030

      

543,774

      

-5.87

%

    

-5.87

%

    

1.63

%

  
     

2017

          

0.55

%

    

0.55

%

    

20.61

      

20.61

      

30,235

      

623,114

      

13.48

%

    

13.48

%

    

1.88

%

  
     

2016

          

0.55

%

    

0.55

%

    

18.16

      

18.16

      

31,718

      

576,034

      

2.51

%

    

2.51

%

    

1.33

%

  
     

2015

          

0.55

%

    

0.55

%

    

17.72

      

17.72

      

37,733

      

668,525

      

-0.41

%

    

-0.41

%

    

1.56

%

  

Fidelity® VIP Contrafund® Portfolio - Service Class

  
     

2019

          

0.00

%

    

0.90

%

    

11.77

      

43.69

      

11,648,903

      

232,657,019

      

30.27

%

    

31.32

%

    

0.37

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.74

      

33.36

      

10,934,915

      

177,076,913

      

-7.32

%

    

-6.58

%

    

0.62

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.64

      

35.80

      

9,885,038

      

178,604,967

      

20.67

%

    

21.64

%

    

0.93

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.40

      

29.50

      

8,137,498

      

131,831,325

      

6.95

%

    

7.80

%

    

0.71

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.97

      

27.43

      

6,987,656

      

114,483,145

      

-0.34

%

    

0.46

%

    

0.99

%

  

Fidelity® VIP Equity-Income Portfolio - Initial Class

  
     

2019

          

0.55

%

    

0.55

%

    

33.46

      

33.46

      

55,180

      

1,846,086

      

26.74

%

    

26.74

%

    

1.95

%

  
     

2018

          

0.55

%

    

0.55

%

    

26.40

      

26.40

      

62,494

      

1,649,586

      

-8.80

%

    

-8.80

%

    

2.20

%

  
     

2017

          

0.55

%

    

0.55

%

    

28.94

      

28.94

      

71,613

      

2,072,602

      

12.27

%

    

12.27

%

    

1.70

%

  
     

2016

          

0.55

%

    

0.55

%

    

25.78

      

25.78

      

79,526

      

2,049,982

      

17.37

%

    

17.37

%

    

2.11

%

  
     

2015

          

0.55

%

    

0.55

%

    

21.96

      

21.96

      

87,054

      

1,911,926

      

-4.49

%

    

-4.49

%

    

3.07

%

  


M-41


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

Fidelity® VIP Equity-Income Portfolio - Service Class

  
     

2019

          

0.20

%

    

0.90

%

  

$

15.42

    

$

28.53

      

255,428

    

$

5,998,812

      

26.18

%

    

27.07

%

    

1.91

%

  
     

2018

          

0.20

%

    

0.90

%

    

12.13

      

22.61

      

278,515

      

5,173,212

      

-9.22

%

    

-8.58

%

    

2.15

%

  
     

2017

          

0.20

%

    

0.90

%

    

13.27

      

24.91

      

314,891

      

6,368,009

      

11.79

%

    

12.58

%

    

1.58

%

  
     

2016

          

0.20

%

    

0.90

%

    

11.79

      

22.28

      

346,349

      

6,203,382

      

16.85

%

    

17.67

%

    

2.07

%

  
     

2015

          

0.20

%

    

0.90

%

    

10.02

      

19.07

      

371,143

      

5,641,373

      

-4.95

%

    

-4.28

%

    

2.98

%

  

Fidelity® VIP Growth Opportunities Portfolio - Service Class

  
     

2019

          

0.20

%

    

0.90

%

    

14.32

      

74.90

      

156,006

      

4,281,532

      

39.44

%

    

40.41

%

    

0.05

%

  
     

2018

          

0.20

%

    

0.90

%

    

24.28

      

53.42

      

81,034

      

3,480,213

      

11.34

%

    

11.95

%

    

0.11

%

  
     

2017

          

0.35

%

    

0.90

%

    

21.81

      

47.72

      

88,150

      

3,370,921

      

33.20

%

    

33.93

%

    

0.20

%

  
     

2016

          

0.35

%

    

0.90

%

    

16.37

      

35.63

      

92,573

      

2,686,871

      

-0.65

%

    

-0.10

%

    

0.21

%

  
     

2015

          

0.35

%

    

0.90

%

    

16.48

      

35.67

      

102,196

      

2,912,087

      

4.54

%

    

5.11

%

    

0.06

%

  

Fidelity® VIP Growth Portfolio - Service Class

  
     

2019

          

0.00

%

    

0.90

%

    

16.59

      

53.47

      

2,833,697

      

63,523,190

      

32.98

%

    

34.05

%

    

0.17

%

  
     

2018

          

0.10

%

    

0.90

%

    

12.39

      

39.99

      

2,337,292

      

41,783,109

      

-1.17

%

    

-0.38

%

    

0.15

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.84

      

40.24

      

1,853,706

      

36,040,561

      

33.79

%

    

34.87

%

    

0.12

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.28

      

29.91

      

1,559,524

      

23,916,861

      

-0.19

%

    

0.61

%

    

0.00

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.37

      

29.80

      

1,283,933

      

21,214,286

      

6.09

%

    

6.95

%

    

0.17

%

  

Fidelity® VIP High Income Portfolio - Service Class

  
     

2019

          

0.20

%

    

0.90

%

    

17.54

      

25.74

      

97,830

      

1,702,803

      

13.89

%

    

14.52

%

    

5.01

%

  
     

2018

          

0.35

%

    

0.90

%

    

15.32

      

22.48

      

85,546

      

1,641,237

      

-4.46

%

    

-3.94

%

    

5.55

%

  
     

2017

          

0.35

%

    

0.90

%

    

15.95

      

23.40

      

85,795

      

1,718,077

      

6.11

%

    

6.70

%

    

5.31

%

  
     

2016

          

0.35

%

    

0.90

%

    

14.95

      

21.93

      

85,940

      

1,611,420

      

13.35

%

    

13.97

%

    

4.81

%

  
     

2015

          

0.35

%

    

0.90

%

    

13.11

      

19.24

      

89,564

      

1,477,402

      

-4.62

%

    

-4.09

%

    

6.21

%

  

Fidelity® VIP Investment Grade Bond Portfolio - Initial Class

  
     

2019

          

0.55

%

    

0.55

%

    

15.61

      

15.61

      

58,942

      

919,888

      

9.06

%

    

9.06

%

    

2.67

%

  
     

2018

          

0.55

%

    

0.55

%

    

14.31

      

14.31

      

63,554

      

909,422

      

-1.08

%

    

-1.08

%

    

2.31

%

  
     

2017

          

0.55

%

    

0.55

%

    

14.47

      

14.47

      

74,280

      

1,074,477

      

3.64

%

    

3.64

%

    

2.41

%

  
     

2016

          

0.55

%

    

0.55

%

    

13.96

      

13.96

      

75,044

      

1,047,349

      

4.17

%

    

4.17

%

    

2.13

%

  
     

2015

          

0.55

%

    

0.55

%

    

13.40

      

13.40

      

80,283

      

1,075,646

      

-1.14

%

    

-1.14

%

    

2.49

%

  

Fidelity® VIP Mid Cap Portfolio - Service Class

  
     

2019

          

0.00

%

    

0.90

%

    

12.02

      

31.57

      

5,971,516

      

98,454,389

      

22.24

%

    

23.22

%

    

0.84

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.76

      

25.83

      

5,148,888

      

71,663,805

      

-15.40

%

    

-14.72

%

    

0.57

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.56

      

32.11

      

4,556,712

      

77,563,466

      

19.62

%

    

20.58

%

    

0.66

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.43

      

26.74

      

3,728,133

      

56,446,576

      

11.11

%

    

12.00

%

    

0.42

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.61

      

23.97

      

3,150,320

      

46,204,816

      

-2.38

%

    

-1.60

%

    

0.43

%

  

Fidelity® VIP Overseas Portfolio - Service Class

  
     

2019

          

0.10

%

    

0.90

%

    

12.39

      

25.02

      

464,889

      

7,180,821

      

26.53

%

    

27.55

%

    

1.68

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.72

      

19.74

      

462,338

      

5,793,865

      

-15.65

%

    

-14.97

%

    

1.49

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.44

      

23.40

      

461,523

      

7,060,344

      

28.94

%

    

29.97

%

    

1.34

%

  
     

2016

          

0.10

%

    

0.90

%

    

8.81

      

18.15

      

464,842

      

5,709,533

      

-5.97

%

    

-5.22

%

    

1.26

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.77

      

19.30

      

468,025

      

6,502,646

      

2.56

%

    

3.39

%

    

1.28

%

  

Franklin Income VIP Fund - Class 1

  
     

2019

          

0.00

%

    

0.90

%

    

11.92

      

22.34

      

7,223,355

      

103,436,326

      

15.38

%

    

16.30

%

    

5.38

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.26

      

19.22

      

6,200,452

      

78,605,217

      

-4.96

%

    

-4.19

%

    

4.86

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.38

      

20.07

      

5,759,766

      

78,550,647

      

8.96

%

    

9.83

%

    

4.16

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.36

      

18.28

      

4,693,244

      

60,965,041

      

13.31

%

    

14.22

%

    

4.64

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.60

      

16.01

      

4,050,890

      

47,720,750

      

-7.67

%

    

-6.93

%

    

4.77

%

  

Franklin Mutual Shares VIP Fund - Class 1

  
     

2019

          

0.00

%

    

0.90

%

    

11.72

      

25.17

      

3,513,378

      

61,315,212

      

21.82

%

    

22.80

%

    

2.13

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.55

      

20.51

      

3,320,248

      

48,058,842

      

-9.67

%

    

-8.95

%

    

2.70

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.47

      

22.53

      

3,038,881

      

49,819,581

      

7.66

%

    

8.53

%

    

2.52

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.58

      

20.77

      

2,599,392

      

41,017,546

      

15.31

%

    

16.24

%

    

2.12

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.36

      

17.88

      

2,311,014

      

32,607,707

      

-5.55

%

    

-4.79

%

    

3.45

%

  

Franklin Small-Mid Cap Growth VIP Fund - Class 1

  
     

2019

          

0.10

%

    

0.90

%

    

14.20

      

46.17

      

697,920

      

15,176,339

      

30.62

%

    

31.67

%

    

0.00

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.80

      

35.15

      

728,980

      

12,475,396

      

-6.00

%

    

-5.25

%

    

0.00

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.51

      

37.19

      

765,005

      

14,628,179

      

20.66

%

    

21.62

%

    

0.00

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.48

      

30.66

      

736,704

      

12,249,103

      

3.47

%

    

4.30

%

    

0.00

%

  
     

2015

          

0.10

%

    

1.00

%

    

10.52

      

29.47

      

725,305

      

12,559,923

      

-3.42

%

    

-2.54

%

    

0.00

%

  


M-42


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

Invesco V.I. American Franchise Fund - Series I Shares

  
     

2019

          

0.20

%

    

1.00

%

  

$

12.00

    

$

39.69

      

562,670

    

$

12,548,809

      

35.40

%

    

36.49

%

    

0.00

%

  
     

2018

          

0.20

%

    

1.00

%

    

11.90

      

29.12

      

481,592

      

10,420,588

      

-4.59

%

    

-3.96

%

    

0.00

%

  
     

2017

          

0.35

%

    

1.00

%

    

12.46

      

30.33

      

518,985

      

11,715,569

      

26.08

%

    

26.90

%

    

0.08

%

  
     

2016

          

0.35

%

    

1.00

%

    

9.87

      

23.90

      

596,631

      

10,444,955

      

1.25

%

    

1.91

%

    

0.00

%

  
     

2015

          

0.35

%

    

1.00

%

    

9.74

      

23.45

      

679,941

      

11,520,736

      

3.96

%

    

4.64

%

    

0.00

%

  

Invesco V.I. Core Equity Fund - Series I Shares

  
     

2019

          

0.20

%

    

0.90

%

    

11.47

      

31.10

      

759,302

      

14,164,202

      

27.81

%

    

28.71

%

    

0.94

%

  
     

2018

          

0.20

%

    

0.90

%

    

15.34

      

24.20

      

626,273

      

12,491,090

      

-10.21

%

    

-9.71

%

    

0.89

%

  
     

2017

          

0.35

%

    

0.90

%

    

16.99

      

26.81

      

664,935

      

14,837,315

      

12.16

%

    

12.78

%

    

1.03

%

  
     

2016

          

0.35

%

    

0.90

%

    

15.07

      

23.77

      

721,661

      

14,213,747

      

9.28

%

    

9.88

%

    

0.70

%

  
     

2015

          

0.35

%

    

0.90

%

    

13.71

      

21.63

      

794,112

      

14,238,813

      

-6.61

%

    

-6.10

%

    

1.12

%

  

Invesco V.I. Core Plus Bond Fund - Series I Shares

  
     

2019

          

0.55

%

    

0.55

%

    

18.34

      

18.34

      

55,947

      

1,026,280

      

10.45

%

    

10.45

%

    

2.93

%

  
     

2018

          

0.55

%

    

0.55

%

    

16.61

      

16.61

      

57,267

      

951,073

      

-2.90

%

    

-2.90

%

    

3.23

%

  
     

2017

          

0.55

%

    

0.55

%

    

17.10

      

17.10

      

36,722

      

628,087

      

5.76

%

    

5.76

%

    

3.41

%

  
     

2016

          

0.55

%

    

0.55

%

    

16.17

      

16.17

      

36,647

      

592,668

      

6.07

%

    

6.07

%

    

3.72

%

  
     

2015

          

0.55

%

    

0.55

%

    

15.25

      

15.25

      

40,163

      

612,341

      

-0.92

%

    

-0.92

%

    

4.61

%

  

Invesco V.I. International Growth Fund - Series I Shares

  
     

2019

          

0.10

%

    

0.90

%

    

11.07

      

29.83

      

2,276,436

      

29,638,957

      

27.42

%

    

28.44

%

    

1.62

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.36

      

23.41

      

2,142,830

      

22,500,087

      

-15.74

%

    

-15.06

%

    

2.15

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.02

      

27.78

      

1,851,655

      

23,409,844

      

21.90

%

    

22.88

%

    

1.51

%

  
     

2016

          

0.10

%

    

0.90

%

    

8.98

      

22.79

      

1,477,707

      

16,185,923

      

-1.34

%

    

-0.55

%

    

1.36

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.36

      

23.10

      

932,955

      

11,234,187

      

-3.22

%

    

-2.44

%

    

1.59

%

  

Janus Henderson Balanced Portfolio - Institutional Shares

  
     

2019

          

0.20

%

    

0.90

%

    

11.98

      

37.47

      

475,127

      

9,603,146

      

21.49

%

    

22.34

%

    

1.90

%

  
     

2018

          

0.20

%

    

0.90

%

    

19.74

      

30.84

      

314,783

      

8,485,275

      

-0.22

%

    

0.33

%

    

2.15

%

  
     

2017

          

0.35

%

    

0.90

%

    

19.67

      

30.91

      

339,964

      

9,258,569

      

17.37

%

    

18.02

%

    

1.58

%

  
     

2016

          

0.35

%

    

0.90

%

    

16.67

      

26.34

      

379,735

      

8,772,068

      

3.67

%

    

4.24

%

    

2.02

%

  
     

2015

          

0.35

%

    

0.90

%

    

15.99

      

25.41

      

421,246

      

9,365,077

      

-0.28

%

    

0.27

%

    

1.58

%

  

Janus Henderson Balanced Portfolio - Service Shares

  
     

2019

          

0.20

%

    

0.90

%

    

15.91

      

33.83

      

410,857

      

9,389,026

      

21.17

%

    

22.03

%

    

1.65

%

  
     

2018

          

0.20

%

    

0.90

%

    

13.04

      

27.92

      

424,213

      

8,029,845

      

-0.47

%

    

0.23

%

    

1.78

%

  
     

2017

          

0.20

%

    

0.90

%

    

13.01

      

28.05

      

454,449

      

8,675,892

      

17.08

%

    

17.90

%

    

1.40

%

  
     

2016

          

0.20

%

    

0.90

%

    

11.03

      

23.96

      

456,700

      

7,472,045

      

3.39

%

    

4.12

%

    

1.76

%

  
     

2015

          

0.20

%

    

0.90

%

    

10.60

      

23.17

      

503,303

      

7,985,501

      

-0.49

%

    

0.21

%

    

1.36

%

  

Janus Henderson Enterprise Portfolio - Service Shares

  
     

2019

          

0.20

%

    

0.90

%

    

21.76

      

65.55

      

193,162

      

5,843,869

      

33.95

%

    

34.90

%

    

0.05

%

  
     

2018

          

0.20

%

    

0.90

%

    

16.13

      

48.67

      

166,559

      

4,695,207

      

-1.56

%

    

-0.84

%

    

0.11

%

  
     

2017

          

0.20

%

    

0.90

%

    

16.27

      

49.16

      

191,701

      

5,276,567

      

25.95

%

    

26.84

%

    

0.15

%

  
     

2016

          

0.20

%

    

0.90

%

    

12.83

      

38.82

      

185,039

      

3,990,719

      

11.10

%

    

11.88

%

    

0.02

%

  
     

2015

          

0.20

%

    

0.90

%

    

11.47

      

34.75

      

184,285

      

3,595,877

      

2.84

%

    

3.56

%

    

0.53

%

  

Janus Henderson Global Research Portfolio - Institutional Shares

  
     

2019

          

0.20

%

    

0.90

%

    

11.45

      

37.43

      

476,355

      

9,416,714

      

27.89

%

    

28.79

%

    

1.00

%

  
     

2018

          

0.20

%

    

0.90

%

    

15.73

      

29.11

      

334,260

      

7,835,523

      

-7.70

%

    

-7.19

%

    

1.12

%

  
     

2017

          

0.35

%

    

0.90

%

    

17.05

      

31.36

      

361,514

      

9,252,775

      

25.89

%

    

26.58

%

    

0.82

%

  
     

2016

          

0.35

%

    

0.90

%

    

13.54

      

24.77

      

404,834

      

8,155,378

      

1.15

%

    

1.71

%

    

0.99

%

  
     

2015

          

0.35

%

    

0.90

%

    

13.39

      

24.36

      

435,385

      

8,681,008

      

-3.16

%

    

-2.63

%

    

0.64

%

  

Janus Henderson Global Research Portfolio - Service Shares

  
     

2019

          

0.35

%

    

0.90

%

    

21.84

      

24.16

      

96,871

      

2,208,937

      

27.56

%

    

28.26

%

    

0.87

%

  
     

2018

          

0.35

%

    

0.90

%

    

17.03

      

18.84

      

100,883

      

1,789,437

      

-7.91

%

    

-7.41

%

    

0.97

%

  
     

2017

          

0.35

%

    

0.90

%

    

18.39

      

20.34

      

109,072

      

2,089,172

      

25.55

%

    

26.24

%

    

0.67

%

  
     

2016

          

0.35

%

    

0.90

%

    

14.57

      

16.11

      

128,263

      

1,953,244

      

0.91

%

    

1.46

%

    

0.86

%

  
     

2015

          

0.35

%

    

0.90

%

    

14.36

      

15.88

      

153,288

      

2,309,212

      

-3.41

%

    

-2.87

%

    

0.52

%

  

Janus Henderson Global Technology Portfolio - Service Shares

  
     

2019

          

0.20

%

    

0.90

%

    

20.16

      

85.45

      

114,282

      

3,430,810

      

43.52

%

    

44.31

%

    

0.00

%

  
     

2018

          

0.35

%

    

0.90

%

    

14.05

      

59.21

      

93,148

      

2,645,643

      

0.01

%

    

0.56

%

    

0.00

%

  
     

2017

          

0.35

%

    

0.90

%

    

14.05

      

58.88

      

90,981

      

2,622,767

      

43.62

%

    

44.41

%

    

0.00

%

  
     

2016

          

0.35

%

    

0.90

%

    

9.78

      

40.78

      

76,160

      

1,537,667

      

12.83

%

    

13.45

%

    

0.08

%

  
     

2015

          

0.35

%

    

0.90

%

    

8.67

      

35.94

      

101,709

      

1,664,620

      

3.71

%

    

4.28

%

    

0.00

%

  


M-43


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

JPMorgan Insurance Trust Global Allocation Portfolio - Class 1

  
     

2019

          

0.00

%

    

0.90

%

  

$

12.50

    

$

12.96

      

2,120,874

    

$

26,518,841

      

15.83

%

    

16.70

%

    

2.25

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.79

      

11.10

      

1,762,102

      

19,073,296

      

-6.91

%

    

-6.16

%

    

0.00

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.59

      

11.82

      

571,085

      

6,657,814

      

16.06

%

    

16.94

%

    

1.79

%

  
     

2016

          

0.15

%

    

0.90

%

    

9.99

      

10.11

      

386,823

      

3,876,049

      

5.18

%

    

5.97

%

    

4.66

%

  
     

2015

    

7/7/15

    

0.15

%

    

0.90

%

    

9.49

      

9.54

      

40,309

      

382,980

      

-5.82

%

    

3.11

%

    

3.57

%

  

LVIP Baron Growth Opportunities Fund - Service Class

  
     

2019

          

0.10

%

    

0.90

%

    

12.32

      

64.76

      

2,274,875

      

48,201,407

      

35.16

%

    

36.26

%

    

0.00

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.50

      

47.91

      

2,017,346

      

34,875,984

      

-4.80

%

    

-4.03

%

    

0.00

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.35

      

50.33

      

1,766,497

      

33,730,267

      

26.10

%

    

27.11

%

    

0.00

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.72

      

39.91

      

1,552,326

      

25,522,295

      

4.62

%

    

5.46

%

    

0.49

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.28

      

38.15

      

1,396,857

      

22,940,593

      

-5.62

%

    

-4.87

%

    

0.00

%

  

LVIP Baron Growth Opportunities Fund - Standard Class

  
     

2019

          

0.20

%

    

0.90

%

    

12.37

      

40.18

      

58,473

      

1,353,545

      

35.50

%

    

36.65

%

    

0.00

%

  
     

2018

          

0.20

%

    

0.90

%

    

11.95

      

29.65

      

68,821

      

1,200,762

      

-4.57

%

    

-3.89

%

    

0.00

%

  
     

2017

          

0.20

%

    

0.90

%

    

12.44

      

31.07

      

67,774

      

1,266,992

      

26.42

%

    

27.35

%

    

0.00

%

  
     

2016

          

0.20

%

    

0.90

%

    

9.77

      

25.75

      

75,297

      

1,142,148

      

4.88

%

    

5.65

%

    

0.66

%

  
     

2015

          

0.20

%

    

0.90

%

    

10.48

      

24.45

      

90,195

      

1,385,268

      

-5.39

%

    

-4.72

%

    

0.00

%

  

LVIP BlackRock Dividend Value Managed Volatility Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

11.01

      

28.76

      

2,912,560

      

43,545,524

      

17.53

%

    

18.47

%

    

1.90

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.42

      

24.34

      

2,914,917

      

37,380,872

      

-8.74

%

    

-8.00

%

    

2.22

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.31

      

26.52

      

2,964,341

      

41,650,533

      

15.38

%

    

16.31

%

    

1.88

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.59

      

22.86

      

3,224,512

      

39,620,282

      

10.96

%

    

11.85

%

    

1.88

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.07

      

20.49

      

2,746,244

      

30,871,078

      

-5.72

%

    

-4.96

%

    

2.00

%

  

LVIP BlackRock Emerging Markets Managed Volatility Fund - Standard Class

  
     

2016

          

0.00

%

    

0.00

%

    

—

      

—

      

—

      

—

      

0.00

%

    

0.00

%

    

3.89

%

  
     

2015

          

0.10

%

    

0.90

%

    

7.43

      

8.60

      

1,013,569

      

7,857,815

      

-15.77

%

    

-15.10

%

    

1.96

%

  

LVIP BlackRock Global Growth ETF Allocation Managed Risk Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

12.67

      

13.37

      

1,901,838

      

24,668,911

      

17.00

%

    

17.88

%

    

2.14

%

  
     

2018

          

0.15

%

    

0.90

%

    

10.75

      

11.34

      

1,534,454

      

17,066,798

      

-3.88

%

    

-3.15

%

    

2.29

%

  
     

2017

          

0.15

%

    

0.90

%

    

11.56

      

11.71

      

684,857

      

7,920,789

      

13.33

%

    

14.18

%

    

3.42

%

  
     

2016

    

5/20/16

    

0.15

%

    

0.90

%

    

10.20

      

10.25

      

129,243

      

1,318,727

      

-0.21

%

    

2.65

%

    

4.02

%

  

LVIP BlackRock Global Real Estate Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

11.89

      

22.04

      

1,942,263

      

28,607,784

      

23.80

%

    

24.79

%

    

3.66

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.61

      

17.67

      

1,885,814

      

22,541,058

      

-9.16

%

    

-8.43

%

    

3.87

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.58

      

19.31

      

1,761,820

      

23,073,042

      

9.87

%

    

10.75

%

    

4.61

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.63

      

17.44

      

1,571,668

      

18,644,346

      

0.28

%

    

1.08

%

    

4.12

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.60

      

17.27

      

1,293,390

      

15,331,533

      

-2.11

%

    

-1.32

%

    

3.16

%

  

LVIP BlackRock Inflation Protected Bond Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

10.16

      

12.46

      

3,671,840

      

39,207,297

      

4.94

%

    

5.79

%

    

2.45

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.66

      

11.78

      

3,067,594

      

31,362,287

      

-0.64

%

    

0.17

%

    

5.41

%

  
     

2017

          

0.10

%

    

0.90

%

    

9.69

      

11.76

      

2,649,013

      

27,285,208

      

1.27

%

    

2.08

%

    

1.74

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.54

      

11.52

      

1,931,359

      

19,654,849

      

2.64

%

    

3.47

%

    

1.29

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.26

      

11.14

      

1,588,294

      

15,760,994

      

-3.70

%

    

-2.92

%

    

1.25

%

  

LVIP BlackRock U.S. Growth ETF Allocation Managed Risk Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

13.40

      

13.77

      

665,629

      

8,835,165

      

17.83

%

    

18.72

%

    

2.11

%

  
     

2018

          

0.15

%

    

0.90

%

    

11.37

      

11.60

      

373,349

      

4,252,378

      

-3.61

%

    

-2.88

%

    

1.89

%

  
     

2017

          

0.15

%

    

0.90

%

    

11.80

      

11.95

      

216,440

      

2,557,126

      

12.47

%

    

13.32

%

    

2.00

%

  
     

2016

    

5/20/16

    

0.15

%

    

0.90

%

    

10.49

      

10.54

      

58,410

      

612,825

      

1.69

%

    

5.51

%

    

1.64

%

  

LVIP BlackRock U.S. Opportunities Managed Volatility Fund - Standard Class

  
     

2016

          

0.00

%

    

0.00

%

    

—

      

—

      

—

      

—

      

0.00

%

    

0.00

%

    

0.72

%

  
     

2015

    

8/5/15

    

0.15

%

    

0.90

%

    

8.99

      

9.03

      

20,798

      

186,980

      

-9.54

%

    

-0.11

%

    

0.60

%

  

LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

11.26

      

33.59

      

519,209

      

9,101,308

      

18.86

%

    

19.81

%

    

0.69

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.28

      

28.11

      

468,469

      

7,922,610

      

-5.17

%

    

-4.41

%

    

0.71

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.31

      

29.48

      

464,917

      

8,464,349

      

25.00

%

    

26.01

%

    

0.64

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.78

      

23.45

      

480,678

      

7,253,704

      

-2.20

%

    

-1.41

%

    

0.44

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.52

      

23.85

      

458,834

      

7,375,932

      

0.43

%

    

1.24

%

    

0.00

%

  


M-44


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

LVIP Blended Mid Cap Managed Volatility Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

  

$

13.41

    

$

24.89

      

611,794

    

$

9,816,296

      

23.80

%

    

24.79

%

    

0.00

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.83

      

19.96

      

626,239

      

8,114,271

      

-0.56

%

    

0.26

%

    

0.00

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.89

      

19.92

      

641,649

      

8,396,003

      

24.44

%

    

25.43

%

    

0.00

%

  
     

2016

          

0.10

%

    

0.90

%

    

8.75

      

15.89

      

669,213

      

7,047,390

      

1.34

%

    

2.16

%

    

0.00

%

  
     

2015

          

0.10

%

    

0.90

%

    

8.64

      

15.56

      

579,644

      

6,192,811

      

-5.06

%

    

-4.30

%

    

0.00

%

  

LVIP ClearBridge Large Cap Managed Volatility Fund - Standard Class

  
     

2019

          

0.00

%

    

0.00

%

    

—

      

—

      

—

      

—

      

0.00

%

    

0.00

%

    

0.10

%

  
     

2018

          

0.15

%

    

0.90

%

    

10.52

      

10.81

      

99,292

      

1,047,740

      

-6.39

%

    

-5.68

%

    

1.04

%

  
     

2017

          

0.15

%

    

0.90

%

    

11.23

      

11.46

      

101,945

      

1,148,336

      

16.98

%

    

17.86

%

    

1.09

%

  
     

2016

          

0.15

%

    

0.90

%

    

9.60

      

9.72

      

85,557

      

822,256

      

2.85

%

    

3.63

%

    

1.20

%

  
     

2015

    

6/29/15

    

0.15

%

    

0.90

%

    

9.34

      

9.38

      

38,579

      

360,395

      

-7.12

%

    

0.16

%

    

1.92

%

  

LVIP ClearBridge QS Select Large Cap Managed Volatility Fund - Standard Class

  
     

2019

    

5/24/19

    

0.15

%

    

0.90

%

    

12.25

      

12.69

      

104,441

      

1,285,584

      

11.93

%

    

12.44

%

    

1.51

%

  

LVIP Delaware Bond Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

10.99

      

24.73

      

15,323,345

      

191,882,223

      

8.23

%

    

9.10

%

    

3.31

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.26

      

22.85

      

12,949,764

      

153,286,719

      

-1.72

%

    

-0.93

%

    

3.32

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.63

      

23.25

      

11,669,804

      

143,147,977

      

3.44

%

    

4.27

%

    

3.02

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.21

      

22.47

      

10,230,826

      

123,172,536

      

1.80

%

    

2.62

%

    

2.57

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.28

      

22.08

      

9,404,253

      

113,893,044

      

-0.51

%

    

0.29

%

    

2.49

%

  

LVIP Delaware Diversified Floating Rate Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

10.39

      

11.58

      

3,037,367

      

32,233,751

      

3.67

%

    

4.50

%

    

2.88

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.02

      

11.08

      

2,463,061

      

25,338,826

      

-0.65

%

    

0.17

%

    

3.95

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.09

      

11.06

      

2,151,373

      

22,295,069

      

1.62

%

    

2.44

%

    

1.16

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.93

      

10.80

      

1,568,004

      

15,973,683

      

1.33

%

    

2.15

%

    

0.00

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.80

      

10.57

      

1,342,754

      

13,509,540

      

-1.60

%

    

-0.81

%

    

1.61

%

  

LVIP Delaware Social Awareness Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

12.16

      

42.26

      

464,173

      

9,608,733

      

30.79

%

    

31.84

%

    

2.21

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.67

      

32.14

      

385,147

      

6,845,718

      

-5.43

%

    

-4.65

%

    

1.39

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.26

      

33.79

      

352,683

      

6,931,545

      

19.12

%

    

20.07

%

    

1.29

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.23

      

28.21

      

381,280

      

6,522,336

      

5.68

%

    

6.53

%

    

1.46

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.98

      

26.55

      

342,168

      

6,098,818

      

-1.55

%

    

-0.76

%

    

1.49

%

  

LVIP Delaware Special Opportunities Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

12.39

      

34.88

      

958,599

      

18,162,876

      

29.26

%

    

30.30

%

    

1.25

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.52

      

26.78

      

859,368

      

12,910,655

      

-15.52

%

    

-14.84

%

    

1.44

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.45

      

31.46

      

711,368

      

13,197,525

      

16.70

%

    

17.64

%

    

1.42

%

  
     

2016

          

0.10

%

    

0.90

%

    

11.46

      

26.76

      

599,662

      

10,086,430

      

19.33

%

    

20.29

%

    

1.74

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.96

      

22.26

      

470,557

      

6,918,385

      

-0.64

%

    

0.16

%

    

1.27

%

  

LVIP Delaware Wealth Builder Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

11.08

      

27.43

      

197,658

      

2,950,843

      

14.87

%

    

15.79

%

    

2.93

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.28

      

23.75

      

192,661

      

2,565,769

      

-6.07

%

    

-5.31

%

    

2.92

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.57

      

25.14

      

206,122

      

3,055,850

      

11.28

%

    

12.18

%

    

2.20

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.33

      

22.47

      

216,110

      

3,001,439

      

4.67

%

    

5.51

%

    

1.57

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.56

      

21.35

      

187,523

      

2,963,110

      

-2.22

%

    

-1.43

%

    

1.71

%

  

LVIP Dimensional International Core Equity Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

11.42

      

11.98

      

2,506,449

      

28,788,939

      

19.76

%

    

20.72

%

    

2.62

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.54

      

9.93

      

1,807,794

      

17,323,844

      

-18.29

%

    

-17.64

%

    

2.25

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.67

      

11.90

      

1,006,542

      

11,806,540

      

26.22

%

    

27.17

%

    

2.82

%

  
     

2016

          

0.15

%

    

0.90

%

    

9.25

      

9.36

      

466,735

      

4,320,917

      

3.57

%

    

4.35

%

    

3.62

%

  
     

2015

    

6/11/15

    

0.15

%

    

0.90

%

    

8.93

      

8.97

      

36,173

      

323,392

      

-10.07

%

    

5.99

%

    

2.12

%

  

LVIP Dimensional International Equity Managed Volatility Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

10.91

      

13.86

      

1,028,305

      

12,512,381

      

15.77

%

    

16.70

%

    

2.66

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.36

      

11.90

      

1,047,110

      

10,989,012

      

-16.84

%

    

-16.17

%

    

1.93

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.18

      

14.23

      

962,805

      

12,127,978

      

25.03

%

    

26.03

%

    

2.24

%

  
     

2016

          

0.10

%

    

0.90

%

    

8.88

      

11.32

      

1,007,564

      

10,120,850

      

1.06

%

    

1.87

%

    

2.19

%

  
     

2015

          

0.10

%

    

0.90

%

    

8.99

      

11.14

      

963,886

      

9,566,345

      

-4.83

%

    

-4.07

%

    

1.08

%

  


M-45


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

  

$

13.94

    

$

35.01

      

2,074,696

    

$

33,526,594

      

28.94

%

    

29.98

%

    

2.18

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.74

      

26.95

      

1,464,677

      

19,090,360

      

-8.14

%

    

-7.39

%

    

1.86

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.12

      

29.11

      

992,461

      

15,019,963

      

19.79

%

    

20.76

%

    

1.71

%

  
     

2016

          

0.10

%

    

0.90

%

    

11.29

      

24.12

      

661,673

      

9,076,712

      

13.38

%

    

14.29

%

    

3.43

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.55

      

21.11

      

180,829

      

3,143,938

      

-2.88

%

    

-2.10

%

    

1.49

%

  

LVIP Dimensional U.S. Core Equity 2 Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

13.20

      

15.02

      

2,467,771

      

35,912,083

      

27.67

%

    

28.69

%

    

1.36

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.34

      

11.67

      

1,984,912

      

22,612,984

      

-10.45

%

    

-9.73

%

    

1.31

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.66

      

12.91

      

1,207,325

      

15,356,035

      

17.22

%

    

18.13

%

    

1.58

%

  
     

2016

          

0.15

%

    

0.90

%

    

10.80

      

10.93

      

627,366

      

6,781,380

      

15.71

%

    

16.58

%

    

1.88

%

  
     

2015

    

5/21/15

    

0.15

%

    

0.90

%

    

9.33

      

9.38

      

57,524

      

537,556

      

-8.36

%

    

0.31

%

    

1.87

%

  

LVIP Dimensional U.S. Equity Managed Volatility Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

12.58

      

20.10

      

825,716

      

14,083,868

      

18.50

%

    

19.46

%

    

1.20

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.12

      

16.82

      

830,252

      

11,972,240

      

-8.62

%

    

-7.88

%

    

0.96

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.09

      

18.26

      

902,552

      

14,123,058

      

18.10

%

    

19.05

%

    

1.17

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.26

      

15.34

      

898,963

      

11,912,273

      

10.14

%

    

11.02

%

    

1.20

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.86

      

13.82

      

853,366

      

10,485,699

      

-8.44

%

    

-7.71

%

    

1.27

%

  

LVIP Dimensional/Vanguard Total Bond Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

10.94

      

12.39

      

8,243,625

      

92,080,106

      

6.51

%

    

7.37

%

    

2.73

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.20

      

11.54

      

6,795,506

      

71,468,930

      

-1.04

%

    

-0.25

%

    

2.34

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.45

      

11.57

      

5,411,712

      

57,564,268

      

2.00

%

    

2.84

%

    

2.17

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.18

      

11.25

      

4,161,260

      

43,397,818

      

1.19

%

    

2.01

%

    

1.95

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.14

      

11.03

      

2,816,332

      

28,994,884

      

-0.60

%

    

0.21

%

    

1.87

%

  

LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

11.04

      

18.39

      

629,810

      

8,829,145

      

11.78

%

    

12.73

%

    

1.92

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.80

      

16.33

      

596,162

      

7,448,480

      

-9.97

%

    

-9.23

%

    

1.42

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.79

      

18.00

      

585,988

      

8,156,943

      

20.32

%

    

21.28

%

    

1.38

%

  
     

2016

          

0.10

%

    

0.90

%

    

8.91

      

14.85

      

600,535

      

6,933,617

      

1.50

%

    

2.32

%

    

1.47

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.06

      

14.52

      

558,459

      

6,389,354

      

-8.85

%

    

-8.12

%

    

1.32

%

  

LVIP Global Conservative Allocation Managed Risk Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

10.96

      

23.11

      

3,495,407

      

48,320,512

      

13.98

%

    

14.90

%

    

2.68

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.31

      

20.17

      

3,437,135

      

42,119,485

      

-5.31

%

    

-4.55

%

    

2.81

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.00

      

21.18

      

3,054,150

      

39,998,371

      

9.50

%

    

10.38

%

    

2.52

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.98

      

19.23

      

2,686,367

      

32,878,208

      

4.08

%

    

4.92

%

    

2.10

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.26

      

18.38

      

2,633,648

      

31,919,169

      

-2.87

%

    

-2.09

%

    

2.18

%

  

LVIP Global Growth Allocation Managed Risk Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

12.08

      

24.59

      

9,332,192

      

130,170,449

      

14.82

%

    

15.74

%

    

2.34

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.45

      

21.30

      

9,408,947

      

115,741,000

      

-7.17

%

    

-6.42

%

    

2.48

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.21

      

22.82

      

8,991,292

      

121,945,158

      

14.60

%

    

15.52

%

    

2.42

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.72

      

19.80

      

8,409,472

      

103,606,539

      

3.81

%

    

4.64

%

    

1.84

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.73

      

18.97

      

7,873,065

      

99,090,242

      

-4.55

%

    

-3.79

%

    

2.04

%

  

LVIP Global Income Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

10.89

      

14.23

      

1,321,543

      

15,128,533

      

5.78

%

    

6.63

%

    

2.76

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.27

      

13.35

      

1,193,230

      

13,018,660

      

0.99

%

    

1.80

%

    

4.13

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.14

      

13.11

      

1,166,381

      

12,622,989

      

4.08

%

    

4.94

%

    

0.00

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.71

      

12.49

      

963,861

      

10,048,437

      

-0.39

%

    

0.41

%

    

0.00

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.72

      

12.44

      

834,838

      

8,737,823

      

-2.90

%

    

-2.12

%

    

3.06

%

  

LVIP Global Moderate Allocation Managed Risk Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

10.80

      

23.89

      

7,950,503

      

111,018,866

      

13.99

%

    

14.90

%

    

2.43

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.45

      

20.85

      

7,713,604

      

95,787,500

      

-6.28

%

    

-5.53

%

    

2.44

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.09

      

22.12

      

7,873,285

      

106,759,661

      

13.29

%

    

14.20

%

    

2.31

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.72

      

19.42

      

7,607,349

      

93,881,212

      

3.41

%

    

4.24

%

    

1.71

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.06

      

18.68

      

7,508,533

      

93,090,092

      

-4.24

%

    

-3.47

%

    

2.08

%

  

LVIP Government Money Market Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

9.79

      

11.53

      

9,926,664

      

99,837,480

      

0.88

%

    

1.69

%

    

1.78

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.67

      

11.43

      

11,561,552

      

114,223,085

      

0.49

%

    

1.29

%

    

1.40

%

  
     

2017

          

0.10

%

    

0.90

%

    

9.60

      

11.37

      

10,378,415

      

101,859,878

      

-0.49

%

    

0.31

%

    

0.41

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.62

      

11.43

      

9,452,345

      

93,224,650

      

-0.87

%

    

-0.07

%

    

0.03

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.67

      

11.53

      

7,456,983

      

74,285,516

      

-0.87

%

    

-0.08

%

    

0.02

%

  


M-46


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

LVIP Invesco Diversified Equity-Income Managed Volatility Fund - Standard Class

  
     

2018

          

0.15

%

    

0.90

%

  

$

10.53

    

$

11.06

      

147,534

    

$

1,583,095

      

-9.62

%

    

-8.94

%

    

1.91

%

  
     

2017

          

0.15

%

    

0.90

%

    

11.56

      

12.14

      

138,757

      

1,643,646

      

10.14

%

    

10.97

%

    

1.43

%

  
     

2016

          

0.15

%

    

0.90

%

    

10.42

      

10.94

      

136,979

      

1,471,551

      

10.15

%

    

10.98

%

    

1.23

%

  
     

2015

          

0.15

%

    

0.90

%

    

9.74

      

9.86

      

75,374

      

735,205

      

-5.69

%

    

-4.98

%

    

2.38

%

  

LVIP Invesco Select Equity Income Managed Volatility Fund - Standard Class

  
     

2019

    

5/24/19

    

0.15

%

    

0.90

%

    

12.85

      

13.49

      

143,784

      

1,869,346

      

3.77

%

    

11.03

%

    

1.65

%

  

LVIP JPMorgan High Yield Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

11.40

      

17.86

      

4,548,411

      

61,152,820

      

11.97

%

    

12.86

%

    

6.00

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.11

      

15.82

      

3,858,152

      

47,125,457

      

-3.74

%

    

-2.95

%

    

5.87

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.16

      

16.31

      

3,497,853

      

44,771,365

      

5.79

%

    

6.66

%

    

6.46

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.49

      

15.29

      

2,920,520

      

35,978,118

      

12.25

%

    

13.15

%

    

5.46

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.49

      

13.51

      

2,433,013

      

27,182,994

      

-4.80

%

    

-4.03

%

    

5.46

%

  

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

11.28

      

23.70

      

1,076,371

      

16,119,022

      

15.12

%

    

16.05

%

    

1.28

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.73

      

20.43

      

1,014,064

      

13,180,334

      

-12.60

%

    

-11.89

%

    

1.40

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.53

      

23.20

      

994,222

      

14,851,251

      

13.66

%

    

14.57

%

    

1.05

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.07

      

20.26

      

978,019

      

12,985,982

      

9.02

%

    

9.90

%

    

0.71

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.73

      

18.45

      

877,760

      

10,911,022

      

-8.57

%

    

-7.83

%

    

0.83

%

  

LVIP MFS International Growth Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

14.27

      

22.22

      

3,214,370

      

52,409,210

      

26.42

%

    

27.44

%

    

1.71

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.21

      

17.48

      

2,717,467

      

35,682,119

      

-9.06

%

    

-8.33

%

    

1.39

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.24

      

19.12

      

2,250,682

      

33,065,346

      

30.68

%

    

31.73

%

    

1.22

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.31

      

14.55

      

2,001,926

      

22,859,412

      

0.75

%

    

1.56

%

    

1.56

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.26

      

14.36

      

1,578,613

      

18,159,884

      

0.38

%

    

1.19

%

    

1.29

%

  

LVIP MFS Value Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

13.21

      

32.15

      

6,840,849

      

134,216,004

      

28.68

%

    

29.71

%

    

1.79

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.20

      

24.80

      

6,146,585

      

97,024,445

      

-10.80

%

    

-10.08

%

    

1.84

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.94

      

27.60

      

5,327,817

      

97,369,871

      

16.58

%

    

17.51

%

    

1.94

%

  
     

2016

          

0.10

%

    

0.90

%

    

11.02

      

23.50

      

4,183,396

      

68,828,939

      

13.04

%

    

13.95

%

    

2.01

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.20

      

20.63

      

3,265,979

      

49,920,713

      

-1.43

%

    

-0.64

%

    

2.30

%

  

LVIP Mondrian International Value Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

10.22

      

26.97

      

3,083,349

      

41,829,478

      

17.19

%

    

18.13

%

    

3.85

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.61

      

23.01

      

3,080,114

      

36,145,415

      

-12.27

%

    

-11.56

%

    

3.31

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.88

      

26.23

      

2,836,181

      

38,750,561

      

20.25

%

    

21.22

%

    

3.42

%

  
     

2016

          

0.10

%

    

0.90

%

    

8.98

      

21.81

      

2,683,568

      

31,157,739

      

3.08

%

    

3.91

%

    

2.92

%

  
     

2015

          

0.10

%

    

0.90

%

    

8.73

      

21.16

      

2,178,712

      

26,465,929

      

-4.65

%

    

-3.89

%

    

3.26

%

  

LVIP Multi-Manager Global Equity Managed Volatility Fund - Standard Class

  
     

2019

          

0.15

%

    

0.90

%

    

12.35

      

12.88

      

27,269

      

340,382

      

18.70

%

    

19.59

%

    

0.79

%

  
     

2018

          

0.15

%

    

0.90

%

    

10.40

      

10.77

      

24,651

      

258,043

      

-9.04

%

    

-8.36

%

    

0.75

%

  
     

2017

          

0.15

%

    

0.90

%

    

11.44

      

11.76

      

39,232

      

449,615

      

19.53

%

    

20.43

%

    

1.90

%

  
     

2016

          

0.15

%

    

0.90

%

    

9.54

      

9.76

      

33,977

      

325,507

      

4.95

%

    

5.74

%

    

2.02

%

  
     

2015

          

0.15

%

    

0.90

%

    

9.12

      

9.12

      

21,795

      

198,758

      

-7.61

%

    

-7.61

%

    

4.54

%

  

LVIP SSGA Bond Index Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

11.03

      

14.85

      

6,552,403

      

74,814,226

      

7.27

%

    

8.13

%

    

3.12

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.47

      

13.73

      

4,625,750

      

49,641,529

      

-1.22

%

    

-0.42

%

    

3.22

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.52

      

13.79

      

3,283,574

      

35,948,987

      

2.26

%

    

3.08

%

    

2.79

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.21

      

13.38

      

2,406,150

      

25,939,724

      

1.36

%

    

2.17

%

    

2.58

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.25

      

13.10

      

1,327,020

      

14,410,073

      

-0.65

%

    

0.15

%

    

2.80

%

  

LVIP SSGA Conservative Index Allocation Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

11.84

      

16.62

      

1,999,908

      

25,793,589

      

13.80

%

    

14.66

%

    

2.57

%

  
     

2018

          

0.15

%

    

0.90

%

    

10.33

      

14.50

      

1,784,619

      

20,403,814

      

-5.20

%

    

-4.48

%

    

2.49

%

  
     

2017

          

0.15

%

    

0.90

%

    

11.21

      

15.18

      

1,583,092

      

19,175,389

      

9.72

%

    

10.55

%

    

2.51

%

  
     

2016

          

0.15

%

    

0.90

%

    

10.14

      

13.73

      

1,162,208

      

13,074,821

      

4.06

%

    

4.86

%

    

2.27

%

  
     

2015

          

0.15

%

    

0.90

%

    

10.23

      

13.10

      

783,320

      

8,609,558

      

-1.83

%

    

-1.09

%

    

2.25

%

  


M-47


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

LVIP SSGA Conservative Structured Allocation Fund - Standard Class

  
     

2019

          

0.15

%

    

0.90

%

  

$

11.52

    

$

16.32

      

1,098,311

    

$

14,688,888

      

12.62

%

    

13.47

%

    

2.94

%

  
     

2018

          

0.15

%

    

0.90

%

    

10.58

      

14.38

      

1,010,652

      

12,142,514

      

-5.86

%

    

-5.15

%

    

3.01

%

  
     

2017

          

0.15

%

    

0.90

%

    

11.15

      

15.16

      

965,655

      

12,332,367

      

8.71

%

    

9.53

%

    

3.75

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.18

      

13.89

      

819,050

      

9,716,216

      

5.88

%

    

6.73

%

    

2.72

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.20

      

13.01

      

453,297

      

5,129,115

      

-2.74

%

    

-1.96

%

    

2.79

%

  

LVIP SSGA Developed International 150 Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

11.23

      

17.62

      

2,621,295

      

33,526,420

      

14.39

%

    

15.31

%

    

4.54

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.77

      

15.32

      

2,188,595

      

24,811,269

      

-15.99

%

    

-15.32

%

    

4.03

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.54

      

18.13

      

1,384,231

      

19,276,268

      

22.47

%

    

23.45

%

    

4.72

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.35

      

14.72

      

1,038,447

      

12,110,200

      

8.75

%

    

9.62

%

    

3.76

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.30

      

13.46

      

860,268

      

9,494,438

      

-5.16

%

    

-4.39

%

    

3.55

%

  

LVIP SSGA Emerging Markets 100 Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

9.96

      

15.03

      

4,227,433

      

47,994,806

      

6.65

%

    

7.50

%

    

4.08

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.27

      

13.98

      

3,711,501

      

39,584,864

      

-13.12

%

    

-12.40

%

    

5.17

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.60

      

15.96

      

2,503,358

      

31,113,092

      

22.72

%

    

23.71

%

    

3.00

%

  
     

2016

          

0.10

%

    

0.90

%

    

8.58

      

12.90

      

1,969,963

      

20,166,518

      

14.40

%

    

15.32

%

    

2.87

%

  
     

2015

          

0.10

%

    

0.90

%

    

7.90

      

11.19

      

1,624,339

      

14,790,712

      

-17.78

%

    

-17.12

%

    

4.78

%

  

LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

11.71

      

22.94

      

1,813,285

      

24,787,910

      

14.71

%

    

15.64

%

    

2.62

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.13

      

19.89

      

1,816,594

      

21,567,122

      

-9.00

%

    

-8.27

%

    

2.86

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.05

      

21.74

      

1,791,549

      

23,636,690

      

13.78

%

    

14.70

%

    

4.04

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.64

      

19.00

      

1,808,130

      

21,365,684

      

4.68

%

    

5.52

%

    

1.88

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.73

      

18.05

      

1,648,494

      

19,089,809

      

-7.36

%

    

-6.61

%

    

3.09

%

  

LVIP SSGA International Index Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

11.04

      

17.75

      

4,527,121

      

58,409,006

      

20.49

%

    

21.46

%

    

2.79

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.16

      

14.65

      

4,089,319

      

44,111,804

      

-14.48

%

    

-13.79

%

    

2.98

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.72

      

17.04

      

2,926,267

      

37,627,274

      

23.57

%

    

24.57

%

    

2.92

%

  
     

2016

          

0.10

%

    

0.90

%

    

8.67

      

13.71

      

2,386,974

      

25,160,758

      

0.09

%

    

0.89

%

    

3.25

%

  
     

2015

          

0.10

%

    

0.90

%

    

8.66

      

13.62

      

1,627,020

      

17,651,137

      

-2.10

%

    

-1.32

%

    

2.96

%

  

LVIP SSGA International Managed Volatility Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

9.89

      

12.37

      

1,077,649

      

11,312,121

      

17.72

%

    

18.61

%

    

2.47

%

  
     

2018

          

0.15

%

    

0.90

%

    

8.40

      

10.43

      

1,080,124

      

9,602,076

      

-13.00

%

    

-12.34

%

    

2.32

%

  
     

2017

          

0.15

%

    

0.90

%

    

9.66

      

11.18

      

1,037,831

      

10,574,704

      

23.15

%

    

24.08

%

    

2.27

%

  
     

2016

    

12/9/16

    

0.15

%

    

0.90

%

    

7.84

      

9.08

      

1,068,276

      

8,797,185

      

-0.43

%

    

-0.38

%

    

1.00

%

  

LVIP SSGA Large Cap 100 Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

12.76

      

37.06

      

2,284,473

      

44,004,313

      

26.15

%

    

27.17

%

    

2.87

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.68

      

29.16

      

1,977,389

      

31,368,579

      

-11.90

%

    

-11.20

%

    

2.42

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.16

      

32.85

      

1,511,932

      

28,715,780

      

17.69

%

    

18.64

%

    

3.20

%

  
     

2016

          

0.10

%

    

0.90

%

    

11.10

      

27.70

      

1,136,849

      

19,319,987

      

20.44

%

    

21.41

%

    

2.52

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.36

      

22.83

      

909,839

      

13,366,510

      

-5.53

%

    

-4.77

%

    

2.88

%

  

LVIP SSGA Moderate Index Allocation Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

12.26

      

18.98

      

9,719,572

      

132,530,568

      

17.18

%

    

18.12

%

    

2.59

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.85

      

16.07

      

7,119,100

      

84,820,506

      

-7.11

%

    

-6.37

%

    

2.47

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.59

      

17.16

      

5,792,800

      

74,889,634

      

13.53

%

    

14.44

%

    

2.47

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.13

      

15.00

      

4,393,504

      

50,711,847

      

5.69

%

    

6.54

%

    

2.24

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.24

      

14.08

      

3,183,111

      

35,480,330

      

-2.36

%

    

-1.57

%

    

2.40

%

  

LVIP SSGA Moderate Structured Allocation Fund - Standard Class

  
     

2019

          

0.15

%

    

0.90

%

    

12.43

      

18.45

      

5,661,913

      

79,458,335

      

15.53

%

    

16.40

%

    

3.00

%

  
     

2018

          

0.15

%

    

0.90

%

    

10.68

      

15.85

      

5,114,268

      

62,640,566

      

-7.96

%

    

-7.26

%

    

3.22

%

  
     

2017

          

0.15

%

    

0.90

%

    

11.52

      

17.09

      

4,726,704

      

63,310,253

      

12.13

%

    

12.98

%

    

4.27

%

  
     

2016

          

0.15

%

    

0.90

%

    

10.19

      

15.13

      

3,895,800

      

47,076,770

      

8.29

%

    

9.11

%

    

2.44

%

  
     

2015

          

0.15

%

    

0.90

%

    

10.22

      

13.86

      

2,978,701

      

34,030,195

      

-3.57

%

    

-2.84

%

    

3.29

%

  

LVIP SSGA Moderately Aggressive Index Allocation Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

12.45

      

19.74

      

10,187,208

      

145,063,535

      

18.65

%

    

19.55

%

    

2.50

%

  
     

2018

          

0.15

%

    

0.90

%

    

10.88

      

16.51

      

8,529,062

      

103,868,834

      

-8.25

%

    

-7.56

%

    

2.28

%

  
     

2017

          

0.15

%

    

0.90

%

    

11.77

      

17.87

      

7,319,600

      

97,764,153

      

15.92

%

    

16.80

%

    

2.40

%

  
     

2016

          

0.15

%

    

0.90

%

    

10.08

      

15.30

      

5,540,298

      

65,233,456

      

6.40

%

    

7.21

%

    

2.31

%

  
     

2015

          

0.15

%

    

0.90

%

    

10.21

      

14.27

      

3,997,802

      

45,387,396

      

-2.91

%

    

-2.18

%

    

2.39

%

  


M-48


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

LVIP SSGA Moderately Aggressive Structured Allocation Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

  

$

11.87

    

$

19.52

      

5,027,186

    

$

73,138,461

      

16.38

%

    

17.31

%

    

3.04

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.66

      

16.64

      

4,417,799

      

56,179,602

      

-9.03

%

    

-8.29

%

    

3.43

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.63

      

18.14

      

3,810,703

      

53,867,810

      

13.87

%

    

14.78

%

    

4.66

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.14

      

15.81

      

3,094,017

      

39,006,718

      

9.49

%

    

10.36

%

    

2.60

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.18

      

14.32

      

2,246,158

      

26,556,539

      

-4.35

%

    

-3.59

%

    

3.65

%

  

LVIP SSGA S&P 500 Index Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

14.51

      

37.49

      

36,650,999

      

700,590,863

      

30.02

%

    

31.07

%

    

1.89

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.08

      

28.62

      

27,668,929

      

431,207,849

      

-5.50

%

    

-4.74

%

    

2.04

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.29

      

30.06

      

20,385,057

      

346,435,507

      

20.48

%

    

21.45

%

    

2.16

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.95

      

24.76

      

14,732,615

      

217,044,152

      

10.76

%

    

11.64

%

    

2.18

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.08

      

22.19

      

9,962,537

      

140,243,346

      

0.27

%

    

1.07

%

    

2.24

%

  

LVIP SSGA Small-Cap Index Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

12.26

      

31.24

      

4,997,067

      

81,769,396

      

23.91

%

    

24.91

%

    

1.05

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.82

      

25.02

      

3,983,699

      

54,082,381

      

-12.16

%

    

-11.47

%

    

1.07

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.70

      

28.27

      

3,128,328

      

50,190,541

      

13.19

%

    

14.11

%

    

1.13

%

  
     

2016

          

0.10

%

    

0.90

%

    

11.15

      

24.79

      

2,296,033

      

34,206,627

      

19.60

%

    

20.56

%

    

1.42

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.17

      

20.57

      

1,748,509

      

22,964,838

      

-5.57

%

    

-4.81

%

    

1.10

%

  

LVIP SSGA Small-Mid Cap 200 Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

10.83

      

29.45

      

3,860,811

      

57,279,820

      

18.75

%

    

19.71

%

    

2.21

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.05

      

24.62

      

3,022,030

      

38,612,203

      

-14.23

%

    

-13.55

%

    

3.34

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.15

      

28.49

      

2,222,341

      

34,145,921

      

5.38

%

    

6.22

%

    

2.87

%

  
     

2016

          

0.10

%

    

0.90

%

    

11.46

      

26.83

      

1,627,475

      

24,540,696

      

28.92

%

    

29.96

%

    

2.63

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.09

      

20.66

      

986,778

      

12,721,287

      

-7.67

%

    

-6.93

%

    

2.82

%

  

LVIP T. Rowe Price 2010 Fund - Standard Class

  
     

2019

          

0.20

%

    

0.90

%

    

12.36

      

22.25

      

27,603

      

431,183

      

14.70

%

    

15.50

%

    

3.49

%

  
     

2018

          

0.20

%

    

0.90

%

    

10.70

      

19.29

      

17,557

      

222,359

      

-5.08

%

    

-4.41

%

    

2.17

%

  
     

2017

          

0.20

%

    

0.90

%

    

13.19

      

20.21

      

17,335

      

232,617

      

8.66

%

    

9.26

%

    

1.83

%

  
     

2016

          

0.35

%

    

0.90

%

    

12.08

      

18.50

      

22,383

      

295,330

      

3.50

%

    

4.07

%

    

1.80

%

  
     

2015

          

0.35

%

    

0.90

%

    

11.60

      

17.78

      

23,235

      

295,560

      

-2.49

%

    

-1.95

%

    

1.84

%

  

LVIP T. Rowe Price 2020 Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

12.19

      

23.43

      

122,422

      

1,694,554

      

17.86

%

    

18.80

%

    

3.59

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.71

      

19.77

      

73,223

      

940,192

      

-6.42

%

    

-5.68

%

    

1.99

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.37

      

21.01

      

69,991

      

991,026

      

11.02

%

    

11.91

%

    

2.02

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.81

      

18.82

      

73,470

      

941,136

      

3.52

%

    

4.35

%

    

1.76

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.72

      

18.08

      

79,239

      

1,009,846

      

-3.09

%

    

-2.32

%

    

1.79

%

  

LVIP T. Rowe Price 2030 Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

12.39

      

24.52

      

166,581

      

2,317,204

      

21.06

%

    

22.03

%

    

2.46

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.16

      

20.15

      

179,913

      

2,055,351

      

-8.42

%

    

-7.68

%

    

1.78

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.36

      

21.88

      

166,380

      

2,233,582

      

12.45

%

    

13.35

%

    

1.85

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.03

      

19.35

      

213,585

      

2,555,494

      

2.76

%

    

3.61

%

    

1.83

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.84

      

18.72

      

213,978

      

2,510,695

      

-3.53

%

    

-2.76

%

    

1.80

%

  

LVIP T. Rowe Price 2040 Fund - Standard Class

  
     

2019

          

0.10

%

    

0.90

%

    

12.56

      

26.01

      

236,272

      

3,633,773

      

23.33

%

    

24.32

%

    

2.23

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.11

      

20.97

      

250,772

      

3,252,496

      

-9.54

%

    

-8.81

%

    

1.55

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.42

      

23.06

      

269,091

      

3,893,372

      

13.60

%

    

14.51

%

    

2.00

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.10

      

20.19

      

269,921

      

3,529,632

      

2.88

%

    

3.71

%

    

1.75

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.30

      

19.51

      

268,057

      

3,474,566

      

-4.09

%

    

-3.32

%

    

1.69

%

  

LVIP T. Rowe Price Growth Stock Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

15.95

      

44.53

      

4,404,538

      

95,486,077

      

29.89

%

    

30.93

%

    

0.08

%

  
     

2018

          

0.10

%

    

0.90

%

    

12.20

      

34.03

      

3,668,619

      

64,457,832

      

-2.01

%

    

-1.22

%

    

0.19

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.88

      

34.47

      

2,948,541

      

54,950,147

      

32.50

%

    

33.56

%

    

0.25

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.41

      

25.82

      

2,419,308

      

35,251,022

      

0.49

%

    

1.29

%

    

0.10

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.87

      

25.50

      

1,764,974

      

27,772,426

      

9.74

%

    

10.62

%

    

0.00

%

  

LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

15.59

      

61.19

      

2,562,607

      

54,538,787

      

36.17

%

    

37.26

%

    

0.18

%

  
     

2018

          

0.10

%

    

0.90

%

    

11.37

      

44.69

      

2,074,573

      

34,281,313

      

-3.94

%

    

-3.17

%

    

0.41

%

  
     

2017

          

0.10

%

    

0.90

%

    

12.73

      

46.27

      

1,686,098

      

30,325,424

      

23.63

%

    

24.62

%

    

0.22

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.23

      

37.22

      

1,403,143

      

21,280,456

      

6.59

%

    

7.45

%

    

0.31

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.24

      

34.73

      

927,977

      

14,573,556

      

1.19

%

    

2.00

%

    

0.15

%

  


M-49


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

LVIP U.S. Growth Allocation Managed Risk Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

  

$

12.39

    

$

12.84

      

1,034,087

    

$

12,716,621

      

16.13

%

    

17.01

%

    

1.74

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.67

      

10.97

      

925,505

      

9,942,748

      

-5.47

%

    

-4.76

%

    

2.06

%

  
     

2017

          

0.15

%

    

0.90

%

    

11.29

      

11.52

      

351,360

      

3,971,422

      

14.19

%

    

15.06

%

    

2.29

%

  
     

2016

          

0.15

%

    

0.90

%

    

9.89

      

10.01

      

160,929

      

1,591,773

      

3.15

%

    

3.94

%

    

2.01

%

  
     

2015

    

7/27/15

    

0.15

%

    

0.90

%

    

9.59

      

9.63

      

9,376

      

89,887

      

-2.81

%

    

0.41

%

    

3.04

%

  

LVIP Vanguard Domestic Equity ETF Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

14.22

      

26.32

      

7,538,816

      

141,524,890

      

29.12

%

    

30.16

%

    

1.76

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.93

      

20.22

      

6,312,789

      

95,102,714

      

-5.78

%

    

-5.02

%

    

1.62

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.02

      

21.29

      

4,860,297

      

79,953,483

      

19.09

%

    

20.05

%

    

1.75

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.85

      

17.74

      

3,503,421

      

49,917,610

      

11.14

%

    

12.03

%

    

1.80

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.24

      

15.83

      

2,569,361

      

34,212,746

      

-1.22

%

    

-0.41

%

    

1.98

%

  

LVIP Vanguard International Equity ETF Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

12.16

      

15.85

      

7,242,798

      

95,943,245

      

21.10

%

    

22.08

%

    

3.30

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.97

      

13.02

      

6,098,778

      

67,409,179

      

-15.47

%

    

-14.79

%

    

2.47

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.71

      

15.31

      

4,420,556

      

58,596,871

      

27.16

%

    

28.18

%

    

2.32

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.15

      

11.98

      

3,411,709

      

36,297,522

      

2.79

%

    

3.61

%

    

2.60

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.47

      

11.59

      

2,408,567

      

25,635,793

      

-3.82

%

    

-3.04

%

    

2.73

%

  

LVIP VIP Mid Cap Managed Volatility Portfolio - Standard Class

  
     

2015

          

0.15

%

    

0.90

%

    

9.66

      

9.77

      

18,204

      

175,773

      

-5.30

%

    

-4.59

%

    

0.96

%

  

LVIP Wellington Capital Growth Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

17.99

      

45.36

      

2,176,586

      

54,234,307

      

40.11

%

    

41.24

%

    

0.00

%

  
     

2018

          

0.10

%

    

0.90

%

    

12.75

      

32.13

      

1,492,880

      

29,137,203

      

0.44

%

    

1.25

%

    

0.00

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.92

      

31.75

      

1,071,493

      

22,336,966

      

34.64

%

    

35.73

%

    

0.00

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.26

      

23.40

      

921,930

      

14,925,116

      

-0.81

%

    

0.00

%

    

0.00

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.91

      

23.41

      

666,855

      

11,947,015

      

8.44

%

    

9.31

%

    

0.00

%

  

LVIP Wellington Mid-Cap Value Fund - Standard Class

  
     

2019

          

0.00

%

    

0.90

%

    

12.07

      

31.13

      

2,008,431

      

32,713,901

      

29.42

%

    

30.46

%

    

1.08

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.26

      

23.87

      

1,704,188

      

21,774,176

      

-15.30

%

    

-14.62

%

    

0.75

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.93

      

27.98

      

1,324,350

      

20,561,424

      

12.42

%

    

13.32

%

    

0.47

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.53

      

24.70

      

911,886

      

13,570,353

      

12.05

%

    

12.95

%

    

0.50

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.69

      

21.88

      

765,738

      

10,526,110

      

-2.40

%

    

-1.61

%

    

0.72

%

  

M Capital Appreciation Fund

  
     

2019

          

0.20

%

    

0.90

%

    

12.34

      

39.76

      

104,862

      

1,704,448

      

27.70

%

    

28.59

%

    

0.32

%

  
     

2018

          

0.20

%

    

0.90

%

    

10.77

      

31.13

      

110,252

      

1,395,250

      

-14.92

%

    

-14.32

%

    

0.32

%

  
     

2017

          

0.20

%

    

0.90

%

    

12.57

      

50.97

      

91,754

      

1,517,205

      

17.95

%

    

18.78

%

    

0.00

%

  
     

2016

          

0.20

%

    

0.90

%

    

10.58

      

43.21

      

100,873

      

1,425,209

      

19.98

%

    

20.82

%

    

0.00

%

  
     

2015

          

0.20

%

    

0.90

%

    

10.15

      

36.02

      

104,383

      

1,525,765

      

-7.42

%

    

-6.77

%

    

0.00

%

  

M International Equity Fund

  
     

2019

          

0.20

%

    

0.90

%

    

10.12

      

14.82

      

184,112

      

1,912,402

      

19.25

%

    

20.09

%

    

2.84

%

  
     

2018

          

0.20

%

    

0.90

%

    

8.42

      

12.43

      

189,449

      

1,643,270

      

-21.28

%

    

-20.73

%

    

1.48

%

  
     

2017

          

0.20

%

    

0.90

%

    

9.83

      

25.18

      

172,197

      

1,873,762

      

22.93

%

    

23.80

%

    

1.69

%

  
     

2016

          

0.20

%

    

0.90

%

    

7.97

      

20.49

      

182,241

      

1,609,705

      

-0.95

%

    

-0.25

%

    

0.84

%

  
     

2015

          

0.20

%

    

0.90

%

    

8.02

      

20.68

      

208,714

      

2,122,506

      

-4.80

%

    

-4.13

%

    

1.65

%

  

M Large Cap Growth Fund

  
     

2019

          

0.20

%

    

0.90

%

    

16.59

      

41.95

      

164,147

      

3,260,057

      

34.87

%

    

35.82

%

    

0.00

%

  
     

2018

          

0.20

%

    

0.90

%

    

13.01

      

31.10

      

186,121

      

2,722,866

      

-5.80

%

    

-5.14

%

    

0.00

%

  
     

2017

          

0.20

%

    

0.90

%

    

13.72

      

41.46

      

164,647

      

2,927,055

      

37.72

%

    

38.70

%

    

0.00

%

  
     

2016

          

0.20

%

    

0.90

%

    

9.89

      

30.10

      

184,159

      

2,369,313

      

-3.20

%

    

-2.52

%

    

0.00

%

  
     

2015

          

0.20

%

    

0.90

%

    

12.08

      

31.10

      

158,788

      

2,551,482

      

6.74

%

    

7.49

%

    

0.03

%

  

M Large Cap Value Fund

  
     

2019

          

0.20

%

    

0.90

%

    

11.91

      

24.83

      

173,431

      

2,345,035

      

20.43

%

    

21.27

%

    

1.77

%

  
     

2018

          

0.20

%

    

0.90

%

    

10.48

      

20.62

      

179,719

      

2,014,813

      

-12.86

%

    

-12.24

%

    

1.44

%

  
     

2017

          

0.20

%

    

0.90

%

    

11.94

      

32.04

      

165,519

      

2,232,755

      

13.96

%

    

14.76

%

    

1.54

%

  
     

2016

          

0.20

%

    

0.90

%

    

10.40

      

28.12

      

168,942

      

2,005,540

      

8.66

%

    

9.42

%

    

1.48

%

  
     

2015

          

0.20

%

    

0.90

%

    

10.48

      

25.88

      

164,363

      

2,201,681

      

-1.55

%

    

-0.86

%

    

1.35

%

  

MFS® VIT Core Equity Series - Initial Class

  
     

2015

          

0.00

%

    

0.00

%

    

—

      

—

      

—

      

—

      

0.00

%

    

0.00

%

    

0.95

%

  


M-50


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

MFS® VIT Growth Series - Initial Class

  
     

2019

          

0.00

%

    

0.90

%

  

$

12.80

    

$

56.60

      

2,692,600

    

$

66,911,849

      

36.91

%

    

38.01

%

    

0.00

%

  
     

2018

          

0.10

%

    

0.90

%

    

12.55

      

41.11

      

2,331,007

      

48,185,275

      

1.75

%

    

2.57

%

    

0.09

%

  
     

2017

          

0.10

%

    

0.90

%

    

13.85

      

40.19

      

1,935,174

      

41,786,944

      

30.23

%

    

31.27

%

    

0.11

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.56

      

30.69

      

1,667,122

      

29,131,037

      

1.53

%

    

2.34

%

    

0.04

%

  
     

2015

          

0.10

%

    

0.90

%

    

11.62

      

30.06

      

1,320,680

      

24,733,134

      

6.60

%

    

7.45

%

    

0.16

%

  

MFS® VIT Total Return Series - Initial Class

  
     

2019

          

0.00

%

    

0.90

%

    

11.47

      

30.62

      

4,127,664

      

63,088,060

      

19.31

%

    

20.26

%

    

2.36

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.30

      

25.67

      

3,180,028

      

44,381,031

      

-6.46

%

    

-5.71

%

    

2.31

%

  
     

2017

          

0.10

%

    

0.90

%

    

11.65

      

27.44

      

2,459,176

      

39,868,443

      

11.29

%

    

12.19

%

    

2.42

%

  
     

2016

          

0.10

%

    

0.90

%

    

10.94

      

24.66

      

1,960,725

      

31,361,222

      

8.12

%

    

8.99

%

    

2.66

%

  
     

2015

          

0.10

%

    

0.90

%

    

10.44

      

22.81

      

1,716,476

      

27,419,153

      

-1.26

%

    

-0.47

%

    

2.61

%

  

MFS® VIT Utilities Series - Initial Class

  
     

2019

          

0.00

%

    

0.90

%

    

12.52

      

58.19

      

2,439,387

      

44,941,603

      

23.95

%

    

24.94

%

    

4.02

%

  
     

2018

          

0.10

%

    

0.90

%

    

10.71

      

46.95

      

2,343,690

      

37,180,065

      

0.15

%

    

0.96

%

    

1.11

%

  
     

2017

          

0.10

%

    

0.90

%

    

10.62

      

46.87

      

2,390,837

      

39,244,658

      

13.80

%

    

14.72

%

    

4.28

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.27

      

41.19

      

2,310,233

      

35,740,262

      

10.47

%

    

11.36

%

    

3.55

%

  
     

2015

          

0.10

%

    

0.90

%

    

8.72

      

37.28

      

2,036,636

      

30,854,834

      

-15.28

%

    

-14.60

%

    

4.17

%

  

MFS® VIT II Core Equity Portfolio - Initial Class

  
     

2019

          

0.20

%

    

0.90

%

    

19.17

      

48.86

      

47,569

      

1,214,416

      

32.00

%

    

32.92

%

    

0.81

%

  
     

2018

          

0.20

%

    

0.90

%

    

14.42

      

36.81

      

40,111

      

921,109

      

-4.69

%

    

-3.99

%

    

0.66

%

  
     

2017

          

0.20

%

    

0.90

%

    

15.02

      

38.41

      

42,642

      

1,026,457

      

23.71

%

    

24.58

%

    

0.91

%

  
     

2016

          

0.20

%

    

0.90

%

    

12.06

      

30.88

      

53,744

      

1,053,679

      

10.38

%

    

11.15

%

    

0.77

%

  
     

2015

    

3/27/15

    

0.20

%

    

0.90

%

    

10.85

      

27.82

      

46,067

      

798,921

      

-3.21

%

    

-2.69

%

    

0.55

%

  

Neuberger Berman AMT Large Cap Value Portfolio - I Class

  
     

2019

          

0.00

%

    

0.00

%

    

—

      

—

      

—

      

—

      

0.00

%

    

0.00

%

    

1.99

%

  
     

2018

          

0.20

%

    

0.90

%

    

20.68

      

36.55

      

47,111

      

1,405,631

      

-1.93

%

    

-1.39

%

    

1.15

%

  
     

2017

          

0.35

%

    

0.90

%

    

20.97

      

37.06

      

52,764

      

1,594,837

      

12.35

%

    

12.96

%

    

0.57

%

  
     

2016

          

0.35

%

    

0.90

%

    

18.56

      

32.81

      

60,482

      

1,647,804

      

26.23

%

    

26.92

%

    

0.73

%

  
     

2015

          

0.35

%

    

0.90

%

    

14.62

      

25.85

      

56,983

      

1,215,782

      

-12.60

%

    

-12.11

%

    

0.75

%

  

Neuberger Berman AMT Mid Cap Growth Portfolio - I Class

  
     

2019

          

0.20

%

    

0.90

%

    

11.63

      

45.51

      

776,241

      

18,591,151

      

31.56

%

    

32.48

%

    

0.00

%

  
     

2018

          

0.20

%

    

0.90

%

    

12.61

      

34.40

      

794,415

      

15,811,261

      

-7.24

%

    

-6.58

%

    

0.00

%

  
     

2017

          

0.20

%

    

0.90

%

    

13.51

      

36.88

      

867,773

      

18,882,798

      

24.17

%

    

25.04

%

    

0.00

%

  
     

2016

          

0.20

%

    

0.90

%

    

10.80

      

29.54

      

939,502

      

16,982,080

      

3.46

%

    

4.19

%

    

0.00

%

  
     

2015

          

0.20

%

    

0.90

%

    

11.08

      

28.40

      

934,244

      

17,496,330

      

0.37

%

    

1.07

%

    

0.00

%

  

Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio - I Class

  
     

2019

          

0.20

%

    

0.90

%

    

12.43

      

41.76

      

330,457

      

5,592,293

      

15.70

%

    

16.51

%

    

0.71

%

  
     

2018

          

0.20

%

    

0.90

%

    

10.67

      

35.90

      

326,774

      

4,999,884

      

-16.03

%

    

-15.44

%

    

0.66

%

  
     

2017

          

0.20

%

    

0.90

%

    

12.61

      

42.52

      

340,611

      

6,318,830

      

15.69

%

    

16.50

%

    

0.83

%

  
     

2016

          

0.20

%

    

0.90

%

    

10.83

      

36.55

      

351,672

      

5,819,933

      

15.13

%

    

15.94

%

    

0.61

%

  
     

2015

          

0.20

%

    

0.90

%

    

10.76

      

31.57

      

341,905

      

5,459,516

      

-9.16

%

    

-8.52

%

    

0.77

%

  

Neuberger Berman AMT Sustainable Equity Portfolio - I Class

  
     

2019

    

4/30/19

    

0.20

%

    

0.90

%

    

12.38

      

44.71

      

57,682

      

1,469,507

      

8.74

%

    

11.54

%

    

0.42

%

  

PIMCO VIT CommodityRealReturn® Strategy Portfolio - Administrative Class

  
     

2019

          

0.00

%

    

0.90

%

    

5.53

      

9.55

      

4,231,993

      

27,467,334

      

10.43

%

    

11.32

%

    

4.52

%

  
     

2018

          

0.10

%

    

0.90

%

    

4.99

      

8.59

      

3,820,862

      

22,381,068

      

-14.90

%

    

-14.22

%

    

2.08

%

  
     

2017

          

0.10

%

    

0.90

%

    

5.84

      

9.24

      

3,405,950

      

23,364,966

      

1.24

%

    

2.05

%

    

11.16

%

  
     

2016

          

0.10

%

    

0.90

%

    

5.76

      

9.05

      

2,757,242

      

18,599,830

      

14.12

%

    

15.04

%

    

1.04

%

  
     

2015

          

0.10

%

    

0.90

%

    

5.03

      

7.87

      

2,461,120

      

14,511,219

      

-26.37

%

    

-25.78

%

    

4.21

%

  

Putnam VT Equity Income Fund - Class IB

  
     

2019

          

0.20

%

    

0.90

%

    

24.01

      

39.10

      

71,241

      

1,795,019

      

29.24

%

    

29.95

%

    

1.99

%

  
     

2018

          

0.35

%

    

0.90

%

    

18.47

      

30.09

      

69,682

      

1,442,119

      

-9.31

%

    

-8.81

%

    

0.70

%

  
     

2017

    

5/12/17

    

0.35

%

    

0.90

%

    

20.26

      

33.00

      

74,509

      

1,697,270

      

12.56

%

    

12.95

%

    

0.00

%

  


M-51


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

Subaccount

  

Year

   Commencement
Date(1)		   Minimum
Fee
Rate(2)		   Maximum
Fee
Rate(2)		   Minimum
Unit
Value(3)		   Maximum
Unit
Value(3)		   Units
Outstanding		  

Net Assets

   Minimum
Total
Return(4)		   Maximum
Total
Return(4)		   Investment
Income
Ratio(5)		  

Putnam VT Global Health Care Fund - Class IB

  
     

2019

          

0.20

%

    

0.90

%

  

$

28.31

    

$

39.61

      

64,815

    

$

1,983,152

      

29.12

%

    

29.84

%

    

0.00

%

  
     

2018

          

0.35

%

    

0.90

%

    

21.81

      

30.51

      

67,869

      

1,700,990

      

-1.48

%

    

-0.94

%

    

0.97

%

  
     

2017

          

0.35

%

    

0.90

%

    

22.01

      

30.80

      

74,096

      

1,881,309

      

14.27

%

    

14.90

%

    

0.52

%

  
     

2016

          

0.35

%

    

0.90

%

    

19.16

      

26.81

      

89,707

      

2,014,431

      

-12.15

%

    

-11.66

%

    

0.00

%

  
     

2015

          

0.35

%

    

0.90

%

    

21.69

      

30.35

      

130,873

      

3,383,281

      

6.82

%

    

7.41

%

    

0.00

%

  

Putnam VT Growth & Income Fund - Class IB

  
     

2017

          

0.00

%

    

0.00

%

    

—

      

—

      

—

      

—

      

0.00

%

    

0.00

%

    

2.09

%

  
     

2016

          

0.35

%

    

0.90

%

    

17.08

      

27.82

      

72,298

      

1,395,426

      

13.99

%

    

14.62

%

    

1.43

%

  
     

2015

          

0.35

%

    

0.90

%

    

14.90

      

24.27

      

83,705

      

1,386,528

      

-8.36

%

    

-7.85

%

    

1.84

%

  

Templeton Foreign VIP Fund - Class 1

  
     

2019

          

0.55

%

    

0.55

%

    

17.28

      

17.28

      

63,764

      

1,101,635

      

12.22

%

    

12.22

%

    

1.96

%

  
     

2018

          

0.55

%

    

0.55

%

    

15.40

      

15.40

      

70,377

      

1,083,507

      

-15.73

%

    

-15.73

%

    

2.89

%

  
     

2017

          

0.55

%

    

0.55

%

    

18.27

      

18.27

      

73,741

      

1,347,279

      

16.38

%

    

16.38

%

    

2.76

%

  
     

2016

          

0.55

%

    

0.55

%

    

15.70

      

15.70

      

84,016

      

1,318,979

      

6.90

%

    

6.90

%

    

2.00

%

  
     

2015

          

0.55

%

    

0.55

%

    

14.69

      

14.69

      

87,339

      

1,282,639

      

-6.82

%

    

-6.82

%

    

3.32

%

  

Templeton Foreign VIP Fund - Class 2

  
     

2019

          

0.20

%

    

0.90

%

    

9.45

      

20.10

      

173,912

      

2,510,605

      

11.52

%

    

12.30

%

    

1.74

%

  
     

2018

          

0.20

%

    

0.90

%

    

13.17

      

17.92

      

144,089

      

2,424,087

      

-16.20

%

    

-15.74

%

    

2.75

%

  
     

2017

          

0.35

%

    

0.90

%

    

15.62

      

21.27

      

176,813

      

3,551,352

      

15.65

%

    

16.28

%

    

2.66

%

  
     

2016

          

0.35

%

    

0.90

%

    

13.44

      

18.29

      

185,516

      

3,196,546

      

6.22

%

    

6.80

%

    

1.77

%

  
     

2015

          

0.35

%

    

0.90

%

    

12.58

      

17.13

      

199,035

      

3,224,608

      

-7.33

%

    

-6.82

%

    

3.21

%

  

Templeton Global Bond VIP Fund - Class 1

  
     

2019

          

0.10

%

    

0.90

%

    

10.06

      

20.16

      

5,834,264

      

59,997,352

      

1.34

%

    

2.15

%

    

7.04

%

  
     

2018

          

0.10

%

    

0.90

%

    

9.93

      

19.89

      

4,419,850

      

45,191,049

      

1.29

%

    

2.11

%

    

0.00

%

  
     

2017

          

0.10

%

    

0.90

%

    

9.80

      

20.65

      

3,445,917

      

35,923,359

      

1.24

%

    

2.05

%

    

0.00

%

  
     

2016

          

0.10

%

    

0.90

%

    

9.68

      

20.32

      

2,513,859

      

27,617,345

      

2.28

%

    

3.11

%

    

0.00

%

  
     

2015

          

0.10

%

    

0.90

%

    

9.46

      

19.79

      

1,769,053

      

20,771,703

      

-4.96

%

    

-4.20

%

    

7.70

%

  

Templeton Growth VIP Fund - Class 1

  
     

2019

          

0.20

%

    

0.90

%

    

11.19

      

22.67

      

464,320

      

7,125,421

      

14.40

%

    

15.20

%

    

2.98

%

  
     

2018

          

0.20

%

    

0.90

%

    

9.71

      

19.75

      

490,276

      

6,554,218

      

-15.37

%

    

-14.78

%

    

2.21

%

  
     

2017

          

0.20

%

    

0.90

%

    

11.39

      

23.25

      

533,581

      

8,450,952

      

17.70

%

    

18.53

%

    

1.82

%

  
     

2016

          

0.20

%

    

0.90

%

    

9.61

      

19.69

      

548,239

      

7,464,657

      

8.91

%

    

9.68

%

    

2.12

%

  
     

2015

          

0.20

%

    

0.90

%

    

8.76

      

18.01

      

532,039

      

7,129,446

      

-7.08

%

    

-6.42

%

    

2.84

%

  

Templeton Growth VIP Fund - Class 2

  
     

2019

          

0.20

%

    

0.90

%

    

9.73

      

25.05

      

57,869

      

1,155,937

      

14.12

%

    

14.93

%

    

2.77

%

  
     

2018

          

0.20

%

    

0.90

%

    

16.39

      

21.94

      

46,939

      

1,016,502

      

-15.62

%

    

-15.15

%

    

1.96

%

  
     

2017

          

0.35

%

    

0.90

%

    

19.32

      

26.01

      

49,953

      

1,257,677

      

17.45

%

    

18.09

%

    

1.60

%

  
     

2016

          

0.35

%

    

0.90

%

    

16.36

      

22.14

      

49,937

      

1,083,095

      

8.64

%

    

9.24

%

    

1.91

%

  
     

2015

          

0.35

%

    

0.90

%

    

14.98

      

20.38

      

52,807

      

1,036,630

      

-7.32

%

    

-6.81

%

    

2.58

%

  

TOPS® Balanced ETF Portfolio - Class 2 Shares

  
     

2019

    

8/5/19

    

0.15

%

    

0.90

%

    

10.80

      

10.85

      

37,950

      

409,829

      

2.20

%

    

7.36

%

    

0.79

%

  

TOPS® Moderate Growth ETF Portfolio - Class 2 Shares

  
     

2019

    

6/18/19

    

0.15

%

    

0.90

%

    

10.94

      

10.99

      

45,083

      

494,168

      

3.96

%

    

9.17

%

    

0.50

%

  

(1)  Reflects less than a full year of activity. Funds were first received in this option on the commencement date noted or the option was inactive at the date funds were received thereby a succeeding commencement date is disclosed.

(2)  These amounts represent the annualized minimum and maximum contract expenses of the separate account, consisting primarily of mortality and expense charges, for only those subaccounts which contain investments as of the respective year end. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying funds have been excluded.

(3)  As the unit value is presented as a range of minimum to maximum values for only those subaccounts which existed for the entire year, some individual contract unit values may not be within the ranges presented as a result of partial year activity.


M-52


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

3. Financial Highlights (continued)

(4)  These amounts represent the total return, including changes in value of mutual funds, and reflect deductions for all items included in the fee rate. The total return does not include contract charges deducted directly from policy account values. The total return is not annualized. As the total return is presented as a range of minimum to maximum values, for only those subaccounts which existed for the entire year, some individual contract total returns may not be within the ranges presented as a result of partial year activity.

(5)  These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense guarantee charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest. Investment income ratios are not annualized.

Note: Fee rate, unit value and total return minimum and maximum are the same where there is only one active contract level charge for the subaccount.

4. Purchases and Sales of Investments

The aggregate cost of investments purchased and the aggregate proceeds from investments sold were as follows for 2019:

    Aggregate
Cost of
Purchases		   Aggregate
Proceeds
from Sales		  

AB VPS Global Thematic Growth Portfolio - Class A

  

$

2,523,467

    

$

1,078,797

    

AB VPS Growth and Income Portfolio - Class A

    

2,567,223

      

2,558,413

    

AB VPS International Value Portfolio - Class A

    

749,617

      

894,942

    

AB VPS Large Cap Growth Portfolio - Class A

    

803,135

      

645,448

    

AB VPS Small/Mid Cap Value Portfolio - Class A

    

11,584,421

      

1,543,826

    

American Century VP Balanced Fund - Class I

    

11,188,830

      

1,484,211

    

American Century VP Inflation Protection Fund - Class I

    

867,254

      

1,439,540

    

American Funds Global Growth Fund - Class 2

    

32,093,149

      

9,073,326

    

American Funds Global Small Capitalization Fund - Class 2

    

11,709,920

      

3,874,016

    

American Funds Growth Fund - Class 2

    

104,544,314

      

20,731,582

    

American Funds Growth-Income Fund - Class 2

    

82,396,986

      

11,161,564

    

American Funds International Fund - Class 2

    

21,307,055

      

7,949,210

    

BlackRock Global Allocation V.I. Fund - Class I

    

28,271,433

      

5,682,273

    

ClearBridge Variable Mid Cap Portfolio - Class I

    

5,367,646

      

1,563,607

    

Delaware VIP® Diversified Income Series - Standard Class

    

14,812,333

      

6,204,025

    

Delaware VIP® Emerging Markets Series - Standard Class

    

13,927,330

      

6,220,128

    

Delaware VIP® High Yield Series - Standard Class

    

4,766,450

      

4,316,781

    

Delaware VIP® Limited-Term Diversified Income Series - Standard Class

    

12,838,899

      

6,579,847

    

Delaware VIP® REIT Series - Standard Class

    

6,075,750

      

5,723,293

    

Delaware VIP® Small Cap Value Series - Standard Class

    

13,354,113

      

4,613,031

    

Delaware VIP® Smid Cap Core Series - Standard Class

    

11,906,182

      

5,747,149

    

Delaware VIP® U.S. Growth Series - Standard Class

    

9,146,995

      

2,127,167

    

Delaware VIP® Value Series - Standard Class

    

17,205,192

      

3,382,260

    

DWS Alternative Asset Allocation VIP Portfolio - Class A

    

2,406,811

      

770,220

    

DWS Equity 500 Index VIP Portfolio - Class A

    

3,991,365

      

4,940,514

    

DWS Small Cap Index VIP Portfolio - Class A

    

1,288,959

      

669,526

    

Fidelity® VIP Asset Manager Portfolio - Initial Class

    

54,650

      

123,926

    

Fidelity® VIP Contrafund® Portfolio - Service Class

    

35,512,863

      

11,854,115

    

Fidelity® VIP Equity-Income Portfolio - Initial Class

    

193,050

      

276,873

    

Fidelity® VIP Equity-Income Portfolio - Service Class

    

539,020

      

591,179

    

Fidelity® VIP Growth Opportunities Portfolio - Service Class

    

690,746

      

902,711

    

Fidelity® VIP Growth Portfolio - Service Class

    

13,193,564

      

3,374,694

    

Fidelity® VIP High Income Portfolio - Service Class

    

225,582

      

314,441

    

Fidelity® VIP Investment Grade Bond Portfolio - Initial Class

    

61,219

      

111,633

    

Fidelity® VIP Mid Cap Portfolio - Service Class

    

21,270,489

      

2,223,686

    

Fidelity® VIP Overseas Portfolio - Service Class

    

875,459

      

735,880

    

Franklin Income VIP Fund - Class 1

    

21,495,453

      

3,565,305

    

Franklin Mutual Shares VIP Fund - Class 1

    

11,025,755

      

2,095,549

    


M-53


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

4. Purchases and Sales of Investments (continued)

    Aggregate
Cost of
Purchases		   Aggregate
Proceeds
from Sales		  

Franklin Small-Mid Cap Growth VIP Fund - Class 1

  

$

2,781,900

    

$

2,175,904

    

Invesco V.I. American Franchise Fund - Series I Shares

    

1,817,542

      

1,673,468

    

Invesco V.I. Core Equity Fund - Series I Shares

    

2,203,226

      

2,260,894

    

Invesco V.I. Core Plus Bond Fund - Series I Shares

    

72,052

      

71,982

    

Invesco V.I. International Growth Fund - Series I Shares

    

4,755,947

      

1,944,394

    

Janus Henderson Balanced Portfolio - Institutional Shares

    

680,998

      

987,327

    

Janus Henderson Balanced Portfolio - Service Shares

    

979,369

      

990,927

    

Janus Henderson Enterprise Portfolio - Service Shares

    

885,810

      

993,006

    

Janus Henderson Global Research Portfolio - Institutional Shares

    

784,814

      

793,084

    

Janus Henderson Global Research Portfolio - Service Shares

    

287,530

      

226,463

    

Janus Henderson Global Technology Portfolio - Service Shares

    

314,604

      

422,312

    

JPMorgan Insurance Trust Global Allocation Portfolio - Class 1

    

6,262,960

      

1,781,717

    

LVIP Baron Growth Opportunities Fund - Service Class

    

5,833,562

      

3,833,372

    

LVIP Baron Growth Opportunities Fund - Standard Class

    

190,901

      

414,234

    

LVIP BlackRock Dividend Value Managed Volatility Fund - Standard Class

    

4,616,365

      

2,819,015

    

LVIP BlackRock Global Growth ETF Allocation Managed Risk Fund - Standard Class

    

5,419,858

      

678,039

    

LVIP BlackRock Global Real Estate Fund - Standard Class

    

4,555,731

      

1,982,363

    

LVIP BlackRock Inflation Protected Bond Fund - Standard Class

    

10,076,082

      

3,354,314

    

LVIP BlackRock U.S. Growth ETF Allocation Managed Risk Fund - Standard Class

    

4,024,225

      

324,276

    

LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class

    

691,075

      

648,139

    

LVIP Blended Mid Cap Managed Volatility Fund - Standard Class

    

1,224,664

      

736,988

    

LVIP ClearBridge Large Cap Managed Volatility Fund - Standard Class

    

106,049

      

1,147,618

    

LVIP ClearBridge QS Select Large Cap Managed Volatility Fund - Standard Class

    

1,220,625

      

35,076

    

LVIP Delaware Bond Fund - Standard Class

    

38,713,682

      

7,361,399

    

LVIP Delaware Diversified Floating Rate Fund - Standard Class

    

9,273,189

      

2,800,241

    

LVIP Delaware Social Awareness Fund - Standard Class

    

1,651,525

      

540,442

    

LVIP Delaware Special Opportunities Fund - Standard Class

    

4,432,049

      

1,189,672

    

LVIP Delaware Wealth Builder Fund - Standard Class

    

308,364

      

108,180

    

LVIP Dimensional International Core Equity Fund - Standard Class

    

8,945,395

      

1,032,840

    

LVIP Dimensional International Equity Managed Volatility Fund - Standard Class

    

1,061,221

      

1,040,668

    

LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class

    

11,523,480

      

1,762,821

    

LVIP Dimensional U.S. Core Equity 2 Fund - Standard Class

    

8,945,056

      

2,387,248

    

LVIP Dimensional U.S. Equity Managed Volatility Fund - Standard Class

    

954,084

      

1,001,509

    

LVIP Dimensional/Vanguard Total Bond Fund - Standard Class

    

21,469,582

      

4,206,857

    

LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class

    

819,696

      

219,832

    

LVIP Global Conservative Allocation Managed Risk Fund - Standard Class

    

5,136,027

      

2,214,354

    

LVIP Global Growth Allocation Managed Risk Fund - Standard Class

    

14,167,239

      

9,292,311

    

LVIP Global Income Fund - Standard Class

    

2,692,399

      

1,089,147

    

LVIP Global Moderate Allocation Managed Risk Fund - Standard Class

    

13,631,141

      

5,670,392

    

LVIP Government Money Market Fund - Standard Class

    

190,603,032

      

203,548,312

    

LVIP Invesco Diversified Equity-Income Managed Volatility Fund - Standard Class

    

143,797

      

1,815,547

    

LVIP Invesco Select Equity Income Managed Volatility Fund - Standard Class

    

1,901,380

      

190,897

    

LVIP JPMorgan High Yield Fund - Standard Class

    

14,731,423

      

3,739,673

    

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class

    

1,405,276

      

328,258

    

LVIP MFS International Growth Fund - Standard Class

    

10,450,717

      

1,441,824

    

LVIP MFS Value Fund - Standard Class

    

15,882,405

      

4,946,182

    

LVIP Mondrian International Value Fund - Standard Class

    

5,920,696

      

4,527,034

    

LVIP Multi-Manager Global Equity Managed Volatility Fund - Standard Class

    

57,469

      

23,384

    

LVIP SSGA Bond Index Fund - Standard Class

    

26,358,993

      

3,782,348

    

LVIP SSGA Conservative Index Allocation Fund - Standard Class

    

3,954,991

      

899,612

    

LVIP SSGA Conservative Structured Allocation Fund - Standard Class

    

2,075,901

      

588,135

    

LVIP SSGA Developed International 150 Fund - Standard Class

    

8,800,754

      

2,455,226

    

LVIP SSGA Emerging Markets 100 Fund - Standard Class

    

10,301,000

      

3,463,224

    

LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class

    

1,545,732

      

757,217

    

LVIP SSGA International Index Fund - Standard Class

    

8,269,145

      

2,275,949

    

LVIP SSGA International Managed Volatility Fund - Standard Class

    

612,343

      

418,173

    

LVIP SSGA Large Cap 100 Fund - Standard Class

    

9,582,063

      

1,984,930

    

LVIP SSGA Moderate Index Allocation Fund - Standard Class

    

38,509,822

      

4,819,358

    

LVIP SSGA Moderate Structured Allocation Fund - Standard Class

    

12,909,301

      

3,245,419

    

LVIP SSGA Moderately Aggressive Index Allocation Fund - Standard Class

    

29,846,730

      

6,113,265

    

LVIP SSGA Moderately Aggressive Structured Allocation Fund - Standard Class

    

13,949,647

      

4,052,345

    


M-54


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

4. Purchases and Sales of Investments (continued)

    Aggregate
Cost of
Purchases		   Aggregate
Proceeds
from Sales		  

LVIP SSGA S&P 500 Index Fund - Standard Class

  

$

179,900,420

    

$

27,587,291

    

LVIP SSGA Small-Cap Index Fund - Standard Class

    

19,830,610

      

2,704,486

    

LVIP SSGA Small-Mid Cap 200 Fund - Standard Class

    

14,244,061

      

2,633,291

    

LVIP T. Rowe Price 2010 Fund - Standard Class

    

311,692

      

68,890

    

LVIP T. Rowe Price 2020 Fund - Standard Class

    

952,414

      

160,191

    

LVIP T. Rowe Price 2030 Fund - Standard Class

    

575,651

      

386,420

    

LVIP T. Rowe Price 2040 Fund - Standard Class

    

653,624

      

462,454

    

LVIP T. Rowe Price Growth Stock Fund - Standard Class

    

19,684,266

      

4,819,784

    

LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class

    

13,241,352

      

3,076,969

    

LVIP U.S. Growth Allocation Managed Risk Fund - Standard Class

    

4,153,871

      

1,802,304

    

LVIP Vanguard Domestic Equity ETF Fund - Standard Class

    

26,386,444

      

6,240,497

    

LVIP Vanguard International Equity ETF Fund - Standard Class

    

18,429,567

      

3,039,991

    

LVIP Wellington Capital Growth Fund - Standard Class

    

18,808,868

      

3,633,753

    

LVIP Wellington Mid-Cap Value Fund - Standard Class

    

7,272,342

      

1,045,476

    

M Capital Appreciation Fund

    

219,716

      

174,132

    

M International Equity Fund

    

157,263

      

169,173

    

M Large Cap Growth Fund

    

276,744

      

492,657

    

M Large Cap Value Fund

    

200,429

      

184,573

    

MFS® VIT Growth Series - Initial Class

    

11,915,927

      

6,564,376

    

MFS® VIT Total Return Series - Initial Class

    

14,792,474

      

3,115,230

    

MFS® VIT Utilities Series - Initial Class

    

4,109,743

      

3,638,790

    

MFS® VIT II Core Equity Portfolio - Initial Class

    

339,441

      

192,360

    

Neuberger Berman AMT Large Cap Value Portfolio - I Class

    

373,085

      

1,596,785

    

Neuberger Berman AMT Mid Cap Growth Portfolio - I Class

    

1,389,788

      

2,328,545

    

Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio - I Class

    

1,022,335

      

577,755

    

Neuberger Berman AMT Sustainable Equity Portfolio - I Class

    

1,629,325

      

203,976

    

PIMCO VIT CommodityRealReturn® Strategy Portfolio - Administrative Class

    

5,071,267

      

1,474,752

    

Putnam VT Equity Income Fund - Class IB

    

264,255

      

167,804

    

Putnam VT Global Health Care Fund - Class IB

    

144,829

      

260,422

    

Templeton Foreign VIP Fund - Class 1

    

93,342

      

172,373

    

Templeton Foreign VIP Fund - Class 2

    

253,022

      

389,672

    

Templeton Global Bond VIP Fund - Class 1

    

22,999,409

      

5,623,503

    

Templeton Growth VIP Fund - Class 1

    

1,821,753

      

782,522

    

Templeton Growth VIP Fund - Class 2

    

408,159

      

180,908

    

TOPS® Balanced ETF Portfolio - Class 2 Shares

    

404,233

      

1,617

    

TOPS® Moderate Growth ETF Portfolio - Class 2 Shares

    

484,796

      

5,463

    

5. Investments

The following is a summary of investments owned at December 31, 2019:

    Shares
Owned		   Net
Asset
Value		   Fair Value
of Shares		  

Cost of Shares

  

AB VPS Global Thematic Growth Portfolio - Class A

    

344,296

    

$

33.52

    

$

11,540,813

    

$

9,033,630

    

AB VPS Growth and Income Portfolio - Class A

    

609,206

      

30.30

      

18,458,952

      

16,732,693

    

AB VPS International Value Portfolio - Class A

    

670,243

      

14.37

      

9,631,398

      

9,597,592

    

AB VPS Large Cap Growth Portfolio - Class A

    

67,072

      

61.26

      

4,108,839

      

3,340,544

    

AB VPS Small/Mid Cap Value Portfolio - Class A

    

2,922,653

      

17.91

      

52,344,724

      

56,286,863

    

American Century VP Balanced Fund - Class I

    

3,840,802

      

8.18

      

31,417,759

      

28,684,027

    

American Century VP Inflation Protection Fund - Class I

    

1,102,558

      

10.28

      

11,334,294

      

11,371,561

    

American Funds Global Growth Fund - Class 2

    

4,567,891

      

32.24

      

147,268,806

      

127,298,075

    

American Funds Global Small Capitalization Fund - Class 2

    

3,909,752

      

26.02

      

101,731,759

      

90,299,101

    

American Funds Growth Fund - Class 2

    

5,413,388

      

80.57

      

436,156,649

      

388,608,004

    

American Funds Growth-Income Fund - Class 2

    

8,295,777

      

50.08

      

415,452,519

      

384,373,762

    

American Funds International Fund - Class 2

    

10,387,210

      

20.78

      

215,846,233

      

200,745,512

    

BlackRock Global Allocation V.I. Fund - Class I

    

13,965,891

      

17.12

      

239,096,050

      

231,909,327

    

ClearBridge Variable Mid Cap Portfolio - Class I

    

1,115,347

      

22.60

      

25,206,852

      

22,163,626

    

Delaware VIP® Diversified Income Series - Standard Class

    

7,633,245

      

10.71

      

81,752,051

      

79,872,488

    

Delaware VIP® Emerging Markets Series - Standard Class

    

4,213,785

      

24.27

      

102,268,563

      

87,864,337

    


M-55


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

5. Investments (continued)

    Shares
Owned		   Net
Asset
Value		   Fair Value
of Shares		  

Cost of Shares

  

Delaware VIP® High Yield Series - Standard Class

    

3,602,972

    

$

5.08

    

$

18,303,096

    

$

18,668,950

    

Delaware VIP® Limited-Term Diversified Income Series - Standard Class

    

6,861,967

      

9.82

      

67,384,521

      

67,396,272

    

Delaware VIP® REIT Series - Standard Class

    

4,305,909

      

14.69

      

63,253,805

      

58,748,386

    

Delaware VIP® Small Cap Value Series - Standard Class

    

2,277,834

      

38.30

      

87,241,051

      

83,523,978

    

Delaware VIP® Smid Cap Core Series - Standard Class

    

3,246,214

      

23.09

      

74,955,085

      

79,599,249

    

Delaware VIP® U.S. Growth Series - Standard Class

    

3,589,148

      

10.15

      

36,429,851

      

37,521,523

    

Delaware VIP® Value Series - Standard Class

    

2,627,825

      

31.09

      

81,699,087

      

74,292,271

    

DWS Alternative Asset Allocation VIP Portfolio - Class A

    

1,269,489

      

13.35

      

16,947,674

      

16,779,958

    

DWS Equity 500 Index VIP Portfolio - Class A

    

2,073,400

      

23.14

      

47,978,477

      

36,900,263

    

DWS Small Cap Index VIP Portfolio - Class A

    

658,162

      

16.97

      

11,169,010

      

9,983,694

    

Fidelity® VIP Asset Manager Portfolio - Initial Class

    

34,967

      

15.23

      

532,543

      

523,419

    

Fidelity® VIP Contrafund® Portfolio - Service Class

    

6,294,833

      

36.96

      

232,657,019

      

207,454,286

    

Fidelity® VIP Equity-Income Portfolio - Initial Class

    

77,665

      

23.77

      

1,846,086

      

1,589,910

    

Fidelity® VIP Equity-Income Portfolio - Service Class

    

253,864

      

23.63

      

5,998,812

      

5,454,820

    

Fidelity® VIP Growth Opportunities Portfolio - Service Class

    

87,790

      

48.77

      

4,281,532

      

2,985,105

    

Fidelity® VIP Growth Portfolio - Service Class

    

807,156

      

78.70

      

63,523,190

      

51,839,818

    

Fidelity® VIP High Income Portfolio - Service Class

    

316,506

      

5.38

      

1,702,803

      

1,735,687

    

Fidelity® VIP Investment Grade Bond Portfolio - Initial Class

    

69,847

      

13.17

      

919,888

      

903,557

    

Fidelity® VIP Mid Cap Portfolio - Service Class

    

3,021,000

      

32.59

      

98,454,389

      

100,538,412

    

Fidelity® VIP Overseas Portfolio - Service Class

    

311,803

      

23.03

      

7,180,821

      

6,098,427

    

Franklin Income VIP Fund - Class 1

    

6,261,279

      

16.52

      

103,436,326

      

100,097,915

    

Franklin Mutual Shares VIP Fund - Class 1

    

3,195,165

      

19.19

      

61,315,212

      

63,143,122

    

Franklin Small-Mid Cap Growth VIP Fund - Class 1

    

768,811

      

19.74

      

15,176,339

      

15,461,668

    

Invesco V.I. American Franchise Fund - Series I Shares

    

186,877

      

67.15

      

12,548,809

      

9,807,476

    

Invesco V.I. Core Equity Fund - Series I Shares

    

405,270

      

34.95

      

14,164,202

      

12,885,661

    

Invesco V.I. Core Plus Bond Fund - Series I Shares

    

158,621

      

6.47

      

1,026,280

      

984,055

    

Invesco V.I. International Growth Fund - Series I Shares

    

758,806

      

39.06

      

29,638,957

      

26,656,700

    

Janus Henderson Balanced Portfolio - Institutional Shares

    

243,241

      

39.48

      

9,603,146

      

7,835,913

    

Janus Henderson Balanced Portfolio - Service Shares

    

225,157

      

41.70

      

9,389,026

      

7,165,122

    

Janus Henderson Enterprise Portfolio - Service Shares

    

73,112

      

79.93

      

5,843,869

      

4,377,641

    

Janus Henderson Global Research Portfolio - Institutional Shares

    

166,402

      

56.59

      

9,416,714

      

6,608,434

    

Janus Henderson Global Research Portfolio - Service Shares

    

39,966

      

55.27

      

2,208,937

      

1,476,029

    

Janus Henderson Global Technology Portfolio - Service Shares

    

228,264

      

15.03

      

3,430,810

      

2,227,967

    

JPMorgan Insurance Trust Global Allocation Portfolio - Class 1

    

1,502,484

      

17.65

      

26,518,841

      

24,543,667

    

LVIP Baron Growth Opportunities Fund - Service Class

    

801,487

      

60.14

      

48,201,407

      

37,819,517

    

LVIP Baron Growth Opportunities Fund - Standard Class

    

21,776

      

62.16

      

1,353,545

      

1,047,858

    

LVIP BlackRock Dividend Value Managed Volatility Fund - Standard Class

    

2,081,228

      

20.92

      

43,545,524

      

36,837,123

    

LVIP BlackRock Global Growth ETF Allocation Managed Risk Fund - Standard Class

    

1,969,417

      

12.53

      

24,668,911

      

22,528,159

    

LVIP BlackRock Global Real Estate Fund - Standard Class

    

2,928,125

      

9.77

      

28,607,784

      

27,248,664

    

LVIP BlackRock Inflation Protected Bond Fund - Standard Class

    

3,902,000

      

10.05

      

39,207,297

      

39,878,037

    

LVIP BlackRock U.S. Growth ETF Allocation Managed Risk Fund - Standard Class

    

679,210

      

13.01

      

8,835,165

      

7,998,040

    

LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class

    

243,787

      

37.33

      

9,101,308

      

7,527,830

    

LVIP Blended Mid Cap Managed Volatility Fund - Standard Class

    

572,412

      

17.15

      

9,816,296

      

7,668,928

    

LVIP ClearBridge QS Select Large Cap Managed Volatility Fund - Standard Class

    

94,265

      

13.64

      

1,285,584

      

1,187,172

    

LVIP Delaware Bond Fund - Standard Class

    

14,003,957

      

13.70

      

191,882,223

      

192,930,765

    

LVIP Delaware Diversified Floating Rate Fund - Standard Class

    

3,222,408

      

10.00

      

32,233,751

      

32,537,903

    

LVIP Delaware Social Awareness Fund - Standard Class

    

233,482

      

41.15

      

9,608,733

      

9,162,887

    

LVIP Delaware Special Opportunities Fund - Standard Class

    

498,050

      

36.47

      

18,162,876

      

19,128,935

    

LVIP Delaware Wealth Builder Fund - Standard Class

    

249,817

      

11.81

      

2,950,843

      

3,342,475

    

LVIP Dimensional International Core Equity Fund - Standard Class

    

2,623,138

      

10.98

      

28,788,939

      

27,302,467

    

LVIP Dimensional International Equity Managed Volatility Fund - Standard Class

    

1,236,401

      

10.12

      

12,512,381

      

12,010,585

    

LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class

    

966,240

      

34.70

      

33,526,594

      

30,492,429

    

LVIP Dimensional U.S. Core Equity 2 Fund - Standard Class

    

2,499,797

      

14.37

      

35,912,083

      

29,891,843

    

LVIP Dimensional U.S. Equity Managed Volatility Fund - Standard Class

    

854,344

      

16.49

      

14,083,868

      

11,580,063

    

LVIP Dimensional/Vanguard Total Bond Fund - Standard Class

    

8,552,861

      

10.77

      

92,080,106

      

90,523,901

    

LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class

    

249,094

      

35.45

      

8,829,145

      

8,000,094

    

LVIP Global Conservative Allocation Managed Risk Fund - Standard Class

    

3,423,830

      

14.11

      

48,320,512

      

47,264,823

    

LVIP Global Growth Allocation Managed Risk Fund - Standard Class

    

8,939,664

      

14.56

      

130,170,449

      

121,485,245

    

LVIP Global Income Fund - Standard Class

    

1,313,013

      

11.52

      

15,128,533

      

14,939,061

    

LVIP Global Moderate Allocation Managed Risk Fund - Standard Class

    

7,462,951

      

14.88

      

111,018,866

      

104,178,535

    

LVIP Government Money Market Fund - Standard Class

    

9,983,748

      

10.00

      

99,837,480

      

99,837,477

    


M-56


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

5. Investments (continued)

    Shares
Owned		   Net
Asset
Value		   Fair Value
of Shares		  

Cost of Shares

  

LVIP Invesco Select Equity Income Managed Volatility Fund - Standard Class

    

156,588

    

$

11.94

    

$

1,869,346

    

$

1,715,285

    

LVIP JPMorgan High Yield Fund - Standard Class

    

5,792,084

      

10.56

      

61,152,820

      

63,333,873

    

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class

    

921,508

      

17.49

      

16,119,022

      

13,815,237

    

LVIP MFS International Growth Fund - Standard Class

    

2,720,437

      

19.27

      

52,409,210

      

43,369,089

    

LVIP MFS Value Fund - Standard Class

    

2,888,726

      

46.46

      

134,216,004

      

109,967,746

    

LVIP Mondrian International Value Fund - Standard Class

    

2,466,070

      

16.96

      

41,829,478

      

41,177,750

    

LVIP Multi-Manager Global Equity Managed Volatility Fund - Standard Class

    

31,441

      

10.83

      

340,382

      

314,693

    

LVIP SSGA Bond Index Fund - Standard Class

    

6,528,292

      

11.46

      

74,814,226

      

73,961,068

    

LVIP SSGA Conservative Index Allocation Fund - Standard Class

    

1,906,118

      

13.53

      

25,793,589

      

23,989,536

    

LVIP SSGA Conservative Structured Allocation Fund - Standard Class

    

1,227,552

      

11.97

      

14,688,888

      

14,506,819

    

LVIP SSGA Developed International 150 Fund - Standard Class

    

4,111,653

      

8.15

      

33,526,420

      

35,329,509

    

LVIP SSGA Emerging Markets 100 Fund - Standard Class

    

5,593,148

      

8.58

      

47,994,806

      

50,581,533

    

LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class

    

2,020,534

      

12.27

      

24,787,910

      

23,527,973

    

LVIP SSGA International Index Fund - Standard Class

    

5,934,065

      

9.84

      

58,409,006

      

54,099,237

    

LVIP SSGA International Managed Volatility Fund - Standard Class

    

1,142,062

      

9.91

      

11,312,121

      

9,773,075

    

LVIP SSGA Large Cap 100 Fund - Standard Class

    

3,351,943

      

13.13

      

44,004,313

      

45,954,583

    

LVIP SSGA Moderate Index Allocation Fund - Standard Class

    

8,637,289

      

15.34

      

132,530,568

      

120,737,853

    

LVIP SSGA Moderate Structured Allocation Fund - Standard Class

    

6,135,779

      

12.95

      

79,458,335

      

77,271,584

    

LVIP SSGA Moderately Aggressive Index Allocation Fund - Standard Class

    

9,128,660

      

15.89

      

145,063,535

      

129,346,328

    

LVIP SSGA Moderately Aggressive Structured Allocation Fund - Standard Class

    

5,424,495

      

13.48

      

73,138,461

      

70,499,238

    

LVIP SSGA S&P 500 Index Fund - Standard Class

    

33,378,954

      

20.99

      

700,590,863

      

573,918,243

    

LVIP SSGA Small-Cap Index Fund - Standard Class

    

2,580,127

      

31.69

      

81,769,396

      

74,944,147

    

LVIP SSGA Small-Mid Cap 200 Fund - Standard Class

    

4,491,126

      

12.75

      

57,279,820

      

58,630,142

    

LVIP T. Rowe Price 2010 Fund - Standard Class

    

44,365

      

9.72

      

431,183

      

485,524

    

LVIP T. Rowe Price 2020 Fund - Standard Class

    

168,612

      

10.05

      

1,694,554

      

1,816,384

    

LVIP T. Rowe Price 2030 Fund - Standard Class

    

214,795

      

10.79

      

2,317,204

      

2,436,596

    

LVIP T. Rowe Price 2040 Fund - Standard Class

    

353,136

      

10.29

      

3,633,773

      

3,714,451

    

LVIP T. Rowe Price Growth Stock Fund - Standard Class

    

1,942,748

      

49.15

      

95,486,077

      

75,684,565

    

LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class

    

1,835,272

      

29.72

      

54,538,787

      

45,158,134

    

LVIP U.S. Growth Allocation Managed Risk Fund - Standard Class

    

1,116,178

      

11.39

      

12,716,621

      

12,220,267

    

LVIP Vanguard Domestic Equity ETF Fund - Standard Class

    

6,350,964

      

22.28

      

141,524,890

      

110,029,348

    

LVIP Vanguard International Equity ETF Fund - Standard Class

    

8,377,128

      

11.45

      

95,943,245

      

87,478,229

    

LVIP Wellington Capital Growth Fund - Standard Class

    

955,822

      

56.74

      

54,234,307

      

44,345,383

    

LVIP Wellington Mid-Cap Value Fund - Standard Class

    

1,186,361

      

27.58

      

32,713,901

      

29,676,029

    

M Capital Appreciation Fund

    

68,042

      

25.05

      

1,704,448

      

1,850,194

    

M International Equity Fund

    

153,978

      

12.42

      

1,912,402

      

1,852,095

    

M Large Cap Growth Fund

    

111,151

      

29.33

      

3,260,057

      

2,688,219

    

M Large Cap Value Fund

    

183,206

      

12.80

      

2,345,035

      

2,371,367

    

MFS® VIT Growth Series - Initial Class

    

1,126,462

      

59.40

      

66,911,849

      

51,572,949

    

MFS® VIT Total Return Series - Initial Class

    

2,533,657

      

24.90

      

63,088,060

      

58,274,382

    

MFS® VIT Utilities Series - Initial Class

    

1,277,476

      

35.18

      

44,941,603

      

38,081,047

    

MFS® VIT II Core Equity Portfolio - Initial Class

    

48,949

      

24.81

      

1,214,416

      

1,148,770

    

Neuberger Berman AMT Mid Cap Growth Portfolio - I Class

    

624,703

      

29.76

      

18,591,151

      

16,093,800

    

Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio - I Class

    

349,300

      

16.01

      

5,592,293

      

5,667,643

    

Neuberger Berman AMT Sustainable Equity Portfolio - I Class

    

54,649

      

26.89

      

1,469,507

      

1,422,263

    

PIMCO VIT CommodityRealReturn® Strategy Portfolio - Administrative Class

    

4,285,076

      

6.41

      

27,467,334

      

34,841,610

    

Putnam VT Equity Income Fund - Class IB

    

66,779

      

26.88

      

1,795,019

      

1,591,553

    

Putnam VT Global Health Care Fund - Class IB

    

118,752

      

16.70

      

1,983,152

      

1,845,082

    

Templeton Foreign VIP Fund - Class 1

    

77,416

      

14.23

      

1,101,635

      

1,113,507

    

Templeton Foreign VIP Fund - Class 2

    

180,230

      

13.93

      

2,510,605

      

2,472,312

    

Templeton Global Bond VIP Fund - Class 1

    

3,594,808

      

16.69

      

59,997,352

      

61,543,450

    

Templeton Growth VIP Fund - Class 1

    

639,051

      

11.15

      

7,125,421

      

8,118,902

    

Templeton Growth VIP Fund - Class 2

    

106,049

      

10.90

      

1,155,937

      

1,217,431

    

TOPS® Balanced ETF Portfolio - Class 2 Shares

    

32,971

      

12.43

      

409,829

      

402,662

    

TOPS® Moderate Growth ETF Portfolio - Class 2 Shares

    

40,307

      

12.26

      

494,168

      

479,405

    


M-57


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

6. Changes in Units Outstanding

The change in units outstanding for the year ended December 31, 2019, is as follows:

    Units
Issued		   Units
Redeemed		   Net Increase
(Decrease)		  

AB VPS Global Thematic Growth Portfolio - Class A

    

148,229

      

(60,771

)

    

87,458

    

AB VPS Growth and Income Portfolio - Class A

    

49,231

      

(134,673

)

    

(85,442

)

  

AB VPS International Value Portfolio - Class A

    

60,941

      

(91,615

)

    

(30,674

)

  

AB VPS Large Cap Growth Portfolio - Class A

    

24,630

      

(19,571

)

    

5,059

    

AB VPS Small/Mid Cap Value Portfolio - Class A

    

471,635

      

(69,275

)

    

402,360

    

American Century VP Balanced Fund - Class I

    

851,910

      

(114,313

)

    

737,597

    

American Century VP Inflation Protection Fund - Class I

    

60,024

      

(116,018

)

    

(55,994

)

  

American Funds Global Growth Fund - Class 2

    

1,937,350

      

(597,706

)

    

1,339,644

    

American Funds Global Small Capitalization Fund - Class 2

    

541,816

      

(194,763

)

    

347,053

    

American Funds Growth Fund - Class 2

    

4,502,380

      

(893,622

)

    

3,608,758

    

American Funds Growth-Income Fund - Class 2

    

3,192,708

      

(502,538

)

    

2,690,170

    

American Funds International Fund - Class 2

    

1,216,140

      

(481,497

)

    

734,643

    

BlackRock Global Allocation V.I. Fund - Class I

    

1,725,129

      

(364,689

)

    

1,360,440

    

ClearBridge Variable Mid Cap Portfolio - Class I

    

405,692

      

(106,271

)

    

299,421

    

Delaware VIP® Diversified Income Series - Standard Class

    

1,172,489

      

(482,801

)

    

689,688

    

Delaware VIP® Emerging Markets Series - Standard Class

    

1,073,408

      

(404,472

)

    

668,936

    

Delaware VIP® High Yield Series - Standard Class

    

305,416

      

(302,165

)

    

3,251

    

Delaware VIP® Limited-Term Diversified Income Series - Standard Class

    

1,094,075

      

(618,421

)

    

475,654

    

Delaware VIP® REIT Series - Standard Class

    

379,520

      

(285,821

)

    

93,699

    

Delaware VIP® Small Cap Value Series - Standard Class

    

592,073

      

(209,500

)

    

382,573

    

Delaware VIP® Smid Cap Core Series - Standard Class

    

728,047

      

(244,680

)

    

483,367

    

Delaware VIP® U.S. Growth Series - Standard Class

    

243,027

      

(83,631

)

    

159,396

    

Delaware VIP® Value Series - Standard Class

    

799,167

      

(153,481

)

    

645,686

    

DWS Alternative Asset Allocation VIP Portfolio - Class A

    

173,338

      

(64,803

)

    

108,535

    

DWS Equity 500 Index VIP Portfolio - Class A

    

225,215

      

(139,818

)

    

85,397

    

DWS Small Cap Index VIP Portfolio - Class A

    

48,781

      

(21,318

)

    

27,463

    

Fidelity® VIP Asset Manager Portfolio - Initial Class

    

1,036

      

(5,723

)

    

(4,687

)

  

Fidelity® VIP Contrafund® Portfolio - Service Class

    

1,165,079

      

(451,091

)

    

713,988

    

Fidelity® VIP Equity-Income Portfolio - Initial Class

    

1,539

      

(8,853

)

    

(7,314

)

  

Fidelity® VIP Equity-Income Portfolio - Service Class

    

3,116

      

(26,203

)

    

(23,087

)

  

Fidelity® VIP Growth Opportunities Portfolio - Service Class

    

88,432

      

(13,460

)

    

74,972

    

Fidelity® VIP Growth Portfolio - Service Class

    

652,180

      

(155,775

)

    

496,405

    

Fidelity® VIP High Income Portfolio - Service Class

    

25,149

      

(12,865

)

    

12,284

    

Fidelity® VIP Investment Grade Bond Portfolio - Initial Class

    

2,491

      

(7,103

)

    

(4,612

)

  

Fidelity® VIP Mid Cap Portfolio - Service Class

    

961,079

      

(138,451

)

    

822,628

    

Fidelity® VIP Overseas Portfolio - Service Class

    

53,894

      

(51,343

)

    

2,551

    

Franklin Income VIP Fund - Class 1

    

1,274,440

      

(251,537

)

    

1,022,903

    

Franklin Mutual Shares VIP Fund - Class 1

    

307,100

      

(113,970

)

    

193,130

    

Franklin Small-Mid Cap Growth VIP Fund - Class 1

    

74,698

      

(105,758

)

    

(31,060

)

  

Invesco V.I. American Franchise Fund - Series I Shares

    

128,080

      

(47,002

)

    

81,078

    

Invesco V.I. Core Equity Fund - Series I Shares

    

221,715

      

(88,686

)

    

133,029

    

Invesco V.I. Core Plus Bond Fund - Series I Shares

    

2,451

      

(3,771

)

    

(1,320

)

  

Invesco V.I. International Growth Fund - Series I Shares

    

276,686

      

(143,080

)

    

133,606

    

Janus Henderson Balanced Portfolio - Institutional Shares

    

188,532

      

(28,188

)

    

160,344

    

Janus Henderson Balanced Portfolio - Service Shares

    

32,206

      

(45,562

)

    

(13,356

)

  

Janus Henderson Enterprise Portfolio - Service Shares

    

50,886

      

(24,283

)

    

26,603

    

Janus Henderson Global Research Portfolio - Institutional Shares

    

159,263

      

(17,168

)

    

142,095

    

Janus Henderson Global Research Portfolio - Service Shares

    

6,951

      

(10,963

)

    

(4,012

)

  

Janus Henderson Global Technology Portfolio - Service Shares

    

29,929

      

(8,795

)

    

21,134

    

JPMorgan Insurance Trust Global Allocation Portfolio - Class 1

    

503,629

      

(144,857

)

    

358,772

    

LVIP Baron Growth Opportunities Fund - Service Class

    

425,647

      

(168,118

)

    

257,529

    

LVIP Baron Growth Opportunities Fund - Standard Class

    

10,505

      

(20,853

)

    

(10,348

)

  

LVIP BlackRock Dividend Value Managed Volatility Fund - Standard Class

    

178,114

      

(180,471

)

    

(2,357

)

  

LVIP BlackRock Global Growth ETF Allocation Managed Risk Fund - Standard Class

    

416,455

      

(49,071

)

    

367,384

    

LVIP BlackRock Global Real Estate Fund - Standard Class

    

196,409

      

(139,960

)

    

56,449

    

LVIP BlackRock Inflation Protected Bond Fund - Standard Class

    

899,282

      

(295,036

)

    

604,246

    

LVIP BlackRock U.S. Growth ETF Allocation Managed Risk Fund - Standard Class

    

317,184

      

(24,904

)

    

292,280

    

LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class

    

76,201

      

(25,461

)

    

50,740

    

LVIP Blended Mid Cap Managed Volatility Fund - Standard Class

    

31,130

      

(45,575

)

    

(14,445

)

  


M-58


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

6. Changes in Units Outstanding (continued)

    Units
Issued		   Units
Redeemed		   Net Increase
(Decrease)		  

LVIP ClearBridge Large Cap Managed Volatility Fund - Standard Class

    

4,979

      

(104,271

)

    

(99,292

)

  

LVIP ClearBridge QS Select Large Cap Managed Volatility Fund - Standard Class

    

107,031

      

(2,590

)

    

104,441

    

LVIP Delaware Bond Fund - Standard Class

    

2,899,040

      

(525,459

)

    

2,373,581

    

LVIP Delaware Diversified Floating Rate Fund - Standard Class

    

829,946

      

(255,640

)

    

574,306

    

LVIP Delaware Social Awareness Fund - Standard Class

    

98,918

      

(19,892

)

    

79,026

    

LVIP Delaware Special Opportunities Fund - Standard Class

    

157,893

      

(58,662

)

    

99,231

    

LVIP Delaware Wealth Builder Fund - Standard Class

    

10,627

      

(5,630

)

    

4,997

    

LVIP Dimensional International Core Equity Fund - Standard Class

    

791,754

      

(93,099

)

    

698,655

    

LVIP Dimensional International Equity Managed Volatility Fund - Standard Class

    

68,086

      

(86,891

)

    

(18,805

)

  

LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class

    

721,060

      

(111,041

)

    

610,019

    

LVIP Dimensional U.S. Core Equity 2 Fund - Standard Class

    

655,673

      

(172,814

)

    

482,859

    

LVIP Dimensional U.S. Equity Managed Volatility Fund - Standard Class

    

54,413

      

(58,949

)

    

(4,536

)

  

LVIP Dimensional/Vanguard Total Bond Fund - Standard Class

    

1,813,756

      

(365,637

)

    

1,448,119

    

LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class

    

49,966

      

(16,318

)

    

33,648

    

LVIP Global Conservative Allocation Managed Risk Fund - Standard Class

    

220,538

      

(162,266

)

    

58,272

    

LVIP Global Growth Allocation Managed Risk Fund - Standard Class

    

590,927

      

(667,682

)

    

(76,755

)

  

LVIP Global Income Fund - Standard Class

    

217,152

      

(88,839

)

    

128,313

    

LVIP Global Moderate Allocation Managed Risk Fund - Standard Class

    

619,153

      

(382,254

)

    

236,899

    

LVIP Government Money Market Fund - Standard Class

    

19,089,345

      

(20,724,233

)

    

(1,634,888

)

  

LVIP Invesco Diversified Equity-Income Managed Volatility Fund - Standard Class

    

6,438

      

(153,972

)

    

(147,534

)

  

LVIP Invesco Select Equity Income Managed Volatility Fund - Standard Class

    

158,840

      

(15,056

)

    

143,784

    

LVIP JPMorgan High Yield Fund - Standard Class

    

954,488

      

(264,229

)

    

690,259

    

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class

    

84,320

      

(22,013

)

    

62,307

    

LVIP MFS International Growth Fund - Standard Class

    

592,621

      

(95,718

)

    

496,903

    

LVIP MFS Value Fund - Standard Class

    

969,972

      

(275,708

)

    

694,264

    

LVIP Mondrian International Value Fund - Standard Class

    

318,766

      

(315,531

)

    

3,235

    

LVIP Multi-Manager Global Equity Managed Volatility Fund - Standard Class

    

4,523

      

(1,905

)

    

2,618

    

LVIP SSGA Bond Index Fund - Standard Class

    

2,250,598

      

(323,945

)

    

1,926,653

    

LVIP SSGA Conservative Index Allocation Fund - Standard Class

    

280,476

      

(65,187

)

    

215,289

    

LVIP SSGA Conservative Structured Allocation Fund - Standard Class

    

128,766

      

(41,107

)

    

87,659

    

LVIP SSGA Developed International 150 Fund - Standard Class

    

627,784

      

(195,084

)

    

432,700

    

LVIP SSGA Emerging Markets 100 Fund - Standard Class

    

824,685

      

(308,753

)

    

515,932

    

LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class

    

47,719

      

(51,028

)

    

(3,309

)

  

LVIP SSGA International Index Fund - Standard Class

    

628,645

      

(190,843

)

    

437,802

    

LVIP SSGA International Managed Volatility Fund - Standard Class

    

35,862

      

(38,337

)

    

(2,475

)

  

LVIP SSGA Large Cap 100 Fund - Standard Class

    

398,576

      

(91,492

)

    

307,084

    

LVIP SSGA Moderate Index Allocation Fund - Standard Class

    

2,943,720

      

(343,248

)

    

2,600,472

    

LVIP SSGA Moderate Structured Allocation Fund - Standard Class

    

770,103

      

(222,458

)

    

547,645

    

LVIP SSGA Moderately Aggressive Index Allocation Fund - Standard Class

    

2,104,974

      

(446,828

)

    

1,658,146

    

LVIP SSGA Moderately Aggressive Structured Allocation Fund - Standard Class

    

858,963

      

(249,576

)

    

609,387

    

LVIP SSGA S&P 500 Index Fund - Standard Class

    

10,353,283

      

(1,371,213

)

    

8,982,070

    

LVIP SSGA Small-Cap Index Fund - Standard Class

    

1,169,530

      

(156,162

)

    

1,013,368

    

LVIP SSGA Small-Mid Cap 200 Fund - Standard Class

    

1,007,337

      

(168,556

)

    

838,781

    

LVIP T. Rowe Price 2010 Fund - Standard Class

    

14,851

      

(4,805

)

    

10,046

    

LVIP T. Rowe Price 2020 Fund - Standard Class

    

60,094

      

(10,895

)

    

49,199

    

LVIP T. Rowe Price 2030 Fund - Standard Class

    

14,977

      

(28,309

)

    

(13,332

)

  

LVIP T. Rowe Price 2040 Fund - Standard Class

    

17,739

      

(32,239

)

    

(14,500

)

  

LVIP T. Rowe Price Growth Stock Fund - Standard Class

    

1,000,463

      

(264,544

)

    

735,919

    

LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class

    

628,143

      

(140,109

)

    

488,034

    

LVIP U.S. Growth Allocation Managed Risk Fund - Standard Class

    

256,870

      

(148,288

)

    

108,582

    

LVIP Vanguard Domestic Equity ETF Fund - Standard Class

    

1,563,813

      

(337,786

)

    

1,226,027

    

LVIP Vanguard International Equity ETF Fund - Standard Class

    

1,365,339

      

(221,319

)

    

1,144,020

    

LVIP Wellington Capital Growth Fund - Standard Class

    

827,465

      

(143,759

)

    

683,706

    

LVIP Wellington Mid-Cap Value Fund - Standard Class

    

375,106

      

(70,863

)

    

304,243

    

M Capital Appreciation Fund

    

6,955

      

(12,345

)

    

(5,390

)

  

M International Equity Fund

    

11,444

      

(16,781

)

    

(5,337

)

  

M Large Cap Growth Fund

    

6,217

      

(28,191

)

    

(21,974

)

  

M Large Cap Value Fund

    

7,539

      

(13,827

)

    

(6,288

)

  

MFS® VIT Growth Series - Initial Class

    

597,816

      

(236,223

)

    

361,593

    

MFS® VIT Total Return Series - Initial Class

    

1,147,420

      

(199,784

)

    

947,636

    

MFS® VIT Utilities Series - Initial Class

    

256,696

      

(160,999

)

    

95,697

    

MFS® VIT II Core Equity Portfolio - Initial Class

    

15,535

      

(8,077

)

    

7,458

    


M-59


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

6. Changes in Units Outstanding (continued)

    Units
Issued		   Units
Redeemed		   Net Increase
(Decrease)		  

Neuberger Berman AMT Large Cap Value Portfolio - I Class

    

4,464

      

(51,575

)

    

(47,111

)

  

Neuberger Berman AMT Mid Cap Growth Portfolio - I Class

    

105,713

      

(123,887

)

    

(18,174

)

  

Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio - I Class

    

31,501

      

(27,818

)

    

3,683

    

Neuberger Berman AMT Sustainable Equity Portfolio - I Class

    

68,011

      

(10,329

)

    

57,682

    

PIMCO VIT CommodityRealReturn® Strategy Portfolio - Administrative Class

    

637,232

      

(226,101

)

    

411,131

    

Putnam VT Equity Income Fund - Class IB

    

10,106

      

(8,547

)

    

1,559

    

Putnam VT Global Health Care Fund - Class IB

    

5,583

      

(8,637

)

    

(3,054

)

  

Templeton Foreign VIP Fund - Class 1

    

3,921

      

(10,534

)

    

(6,613

)

  

Templeton Foreign VIP Fund - Class 2

    

53,685

      

(23,862

)

    

29,823

    

Templeton Global Bond VIP Fund - Class 1

    

1,967,963

      

(553,549

)

    

1,414,414

    

Templeton Growth VIP Fund - Class 1

    

28,331

      

(54,287

)

    

(25,956

)

  

Templeton Growth VIP Fund - Class 2

    

19,921

      

(8,991

)

    

10,930

    

TOPS® Balanced ETF Portfolio - Class 2 Shares

    

38,077

      

(127

)

    

37,950

    

TOPS® Moderate Growth ETF Portfolio - Class 2 Shares

    

45,564

      

(481

)

    

45,083

    

The change in units outstanding for the year ended December 31, 2018, is as follows:

    Units
Issued		   Units
Redeemed		   Net Increase
(Decrease)		  

AB VPS Global Thematic Growth Portfolio - Class A

    

134,294

      

(83,202

)

    

51,092

    

AB VPS Growth and Income Portfolio - Class A

    

34,559

      

(169,717

)

    

(135,158

)

  

AB VPS International Value Portfolio - Class A

    

78,948

      

(57,801

)

    

21,147

    

AB VPS Large Cap Growth Portfolio - Class A

    

41,337

      

(20,249

)

    

21,088

    

AB VPS Small/Mid Cap Value Portfolio - Class A

    

412,473

      

(121,192

)

    

291,281

    

American Century VP Balanced Fund - Class I

    

1,201,545

      

(108,422

)

    

1,093,123

    

American Century VP Inflation Protection Fund - Class I

    

81,512

      

(121,730

)

    

(40,218

)

  

American Funds Global Growth Fund - Class 2

    

1,661,396

      

(157,857

)

    

1,503,539

    

American Funds Global Small Capitalization Fund - Class 2

    

855,785

      

(116,540

)

    

739,245

    

American Funds Growth Fund - Class 2

    

2,283,882

      

(621,559

)

    

1,662,323

    

American Funds Growth-Income Fund - Class 2

    

2,660,887

      

(555,065

)

    

2,105,822

    

American Funds International Fund - Class 2

    

2,399,444

      

(230,176

)

    

2,169,268

    

BlackRock Global Allocation V.I. Fund - Class I

    

1,941,589

      

(533,295

)

    

1,408,294

    

ClearBridge Variable Mid Cap Portfolio - Class I

    

505,331

      

(67,810

)

    

437,521

    

Delaware VIP® Diversified Income Series - Standard Class

    

978,661

      

(437,401

)

    

541,260

    

Delaware VIP® Emerging Markets Series - Standard Class

    

1,824,234

      

(193,622

)

    

1,630,612

    

Delaware VIP® High Yield Series - Standard Class

    

298,052

      

(393,438

)

    

(95,386

)

  

Delaware VIP® Limited-Term Diversified Income Series - Standard Class

    

1,393,752

      

(285,190

)

    

1,108,562

    

Delaware VIP® REIT Series - Standard Class

    

478,228

      

(348,635

)

    

129,593

    

Delaware VIP® Small Cap Value Series - Standard Class

    

888,008

      

(220,362

)

    

667,646

    

Delaware VIP® Smid Cap Core Series - Standard Class

    

773,260

      

(163,068

)

    

610,192

    

Delaware VIP® U.S. Growth Series - Standard Class

    

98,567

      

(105,494

)

    

(6,927

)

  

Delaware VIP® Value Series - Standard Class

    

413,589

      

(193,185

)

    

220,404

    

DWS Alternative Asset Allocation VIP Portfolio - Class A

    

169,545

      

(88,463

)

    

81,082

    

DWS Equity 500 Index VIP Portfolio - Class A

    

27,701

      

(196,614

)

    

(168,913

)

  

DWS Small Cap Index VIP Portfolio - Class A

    

15,946

      

(54,995

)

    

(39,049

)

  

Fidelity® VIP Asset Manager Portfolio - Initial Class

    

1,608

      

(3,813

)

    

(2,205

)

  

Fidelity® VIP Contrafund® Portfolio - Service Class

    

1,315,652

      

(265,775

)

    

1,049,877

    

Fidelity® VIP Equity-Income Portfolio - Initial Class

    

1,611

      

(10,730

)

    

(9,119

)

  

Fidelity® VIP Equity-Income Portfolio - Service Class

    

6,094

      

(42,470

)

    

(36,376

)

  

Fidelity® VIP Growth Opportunities Portfolio - Service Class

    

4,642

      

(11,758

)

    

(7,116

)

  

Fidelity® VIP Growth Portfolio - Service Class

    

678,706

      

(195,120

)

    

483,586

    

Fidelity® VIP High Income Portfolio - Service Class

    

4,577

      

(4,826

)

    

(249

)

  

Fidelity® VIP Investment Grade Bond Portfolio - Initial Class

    

6,077

      

(16,803

)

    

(10,726

)

  

Fidelity® VIP Mid Cap Portfolio - Service Class

    

756,835

      

(164,659

)

    

592,176

    

Fidelity® VIP Overseas Portfolio - Service Class

    

42,161

      

(41,346

)

    

815

    

Franklin Income VIP Fund - Class 1

    

878,772

      

(438,086

)

    

440,686

    

Franklin Mutual Shares VIP Fund - Class 1

    

368,321

      

(86,954

)

    

281,367

    

Franklin Small-Mid Cap Growth VIP Fund - Class 1

    

71,481

      

(107,506

)

    

(36,025

)

  

Invesco V.I. American Franchise Fund - Series I Shares

    

12,471

      

(49,864

)

    

(37,393

)

  

Invesco V.I. Core Equity Fund - Series I Shares

    

24,350

      

(63,012

)

    

(38,662

)

  

Invesco V.I. Core Plus Bond Fund - Series I Shares

    

23,075

      

(2,530

)

    

20,545

    

Invesco V.I. International Growth Fund - Series I Shares

    

372,515

      

(81,340

)

    

291,175

    


M-60


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

6. Changes in Units Outstanding (continued)

    Units
Issued		   Units
Redeemed		   Net Increase
(Decrease)		  

Janus Henderson Balanced Portfolio - Institutional Shares

    

11,243

      

(36,424

)

    

(25,181

)

  

Janus Henderson Balanced Portfolio - Service Shares

    

14,032

      

(44,268

)

    

(30,236

)

  

Janus Henderson Enterprise Portfolio - Service Shares

    

18,557

      

(43,699

)

    

(25,142

)

  

Janus Henderson Global Research Portfolio - Institutional Shares

    

8,871

      

(36,125

)

    

(27,254

)

  

Janus Henderson Global Research Portfolio - Service Shares

    

5,970

      

(14,159

)

    

(8,189

)

  

Janus Henderson Global Technology Portfolio - Service Shares

    

11,042

      

(8,875

)

    

2,167

    

JPMorgan Insurance Trust Global Allocation Portfolio - Class 1

    

1,253,203

      

(62,186

)

    

1,191,017

    

LVIP Baron Growth Opportunities Fund - Service Class

    

388,987

      

(138,138

)

    

250,849

    

LVIP Baron Growth Opportunities Fund - Standard Class

    

12,679

      

(11,632

)

    

1,047

    

LVIP BlackRock Dividend Value Managed Volatility Fund - Standard Class

    

136,398

      

(185,822

)

    

(49,424

)

  

LVIP BlackRock Global Growth ETF Allocation Managed Risk Fund - Standard Class

    

991,719

      

(142,122

)

    

849,597

    

LVIP BlackRock Global Real Estate Fund - Standard Class

    

236,787

      

(112,793

)

    

123,994

    

LVIP BlackRock Inflation Protected Bond Fund - Standard Class

    

657,036

      

(238,455

)

    

418,581

    

LVIP BlackRock U.S. Growth ETF Allocation Managed Risk Fund - Standard Class

    

181,501

      

(24,592

)

    

156,909

    

LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class

    

31,368

      

(27,816

)

    

3,552

    

LVIP Blended Mid Cap Managed Volatility Fund - Standard Class

    

43,971

      

(59,381

)

    

(15,410

)

  

LVIP ClearBridge Large Cap Managed Volatility Fund - Standard Class

    

9,998

      

(12,651

)

    

(2,653

)

  

LVIP Delaware Bond Fund - Standard Class

    

1,925,551

      

(645,591

)

    

1,279,960

    

LVIP Delaware Diversified Floating Rate Fund - Standard Class

    

526,929

      

(215,241

)

    

311,688

    

LVIP Delaware Social Awareness Fund - Standard Class

    

68,757

      

(36,293

)

    

32,464

    

LVIP Delaware Special Opportunities Fund - Standard Class

    

188,985

      

(40,985

)

    

148,000

    

LVIP Delaware Wealth Builder Fund - Standard Class

    

25,756

      

(39,217

)

    

(13,461

)

  

LVIP Dimensional International Core Equity Fund - Standard Class

    

882,769

      

(81,517

)

    

801,252

    

LVIP Dimensional International Equity Managed Volatility Fund - Standard Class

    

119,124

      

(34,819

)

    

84,305

    

LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class

    

584,179

      

(111,963

)

    

472,216

    

LVIP Dimensional U.S. Core Equity 2 Fund - Standard Class

    

854,084

      

(76,497

)

    

777,587

    

LVIP Dimensional U.S. Equity Managed Volatility Fund - Standard Class

    

54,929

      

(127,229

)

    

(72,300

)

  

LVIP Dimensional/Vanguard Total Bond Fund - Standard Class

    

1,863,929

      

(480,135

)

    

1,383,794

    

LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class

    

36,520

      

(26,346

)

    

10,174

    

LVIP Global Conservative Allocation Managed Risk Fund - Standard Class

    

520,467

      

(137,482

)

    

382,985

    

LVIP Global Growth Allocation Managed Risk Fund - Standard Class

    

780,213

      

(362,558

)

    

417,655

    

LVIP Global Income Fund - Standard Class

    

156,940

      

(130,091

)

    

26,849

    

LVIP Global Moderate Allocation Managed Risk Fund - Standard Class

    

602,944

      

(762,625

)

    

(159,681

)

  

LVIP Government Money Market Fund - Standard Class

    

31,671,597

      

(30,488,460

)

    

1,183,137

    

LVIP Invesco Diversified Equity-Income Managed Volatility Fund - Standard Class

    

15,895

      

(7,118

)

    

8,777

    

LVIP JPMorgan High Yield Fund - Standard Class

    

920,854

      

(560,555

)

    

360,299

    

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class

    

63,809

      

(43,967

)

    

19,842

    

LVIP MFS International Growth Fund - Standard Class

    

587,430

      

(120,645

)

    

466,785

    

LVIP MFS Value Fund - Standard Class

    

990,817

      

(172,049

)

    

818,768

    

LVIP Mondrian International Value Fund - Standard Class

    

403,155

      

(159,222

)

    

243,933

    

LVIP Multi-Manager Global Equity Managed Volatility Fund - Standard Class

    

4,968

      

(19,549

)

    

(14,581

)

  

LVIP SSGA Bond Index Fund - Standard Class

    

1,641,502

      

(299,326

)

    

1,342,176

    

LVIP SSGA Conservative Index Allocation Fund - Standard Class

    

329,918

      

(128,391

)

    

201,527

    

LVIP SSGA Conservative Structured Allocation Fund - Standard Class

    

91,473

      

(46,476

)

    

44,997

    

LVIP SSGA Developed International 150 Fund - Standard Class

    

845,347

      

(40,983

)

    

804,364

    

LVIP SSGA Emerging Markets 100 Fund - Standard Class

    

1,344,915

      

(136,772

)

    

1,208,143

    

LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class

    

117,221

      

(92,176

)

    

25,045

    

LVIP SSGA International Index Fund - Standard Class

    

1,208,548

      

(45,496

)

    

1,163,052

    

LVIP SSGA International Managed Volatility Fund - Standard Class

    

72,039

      

(29,746

)

    

42,293

    

LVIP SSGA Large Cap 100 Fund - Standard Class

    

552,386

      

(86,929

)

    

465,457

    

LVIP SSGA Moderate Index Allocation Fund - Standard Class

    

1,601,203

      

(274,903

)

    

1,326,300

    

LVIP SSGA Moderate Structured Allocation Fund - Standard Class

    

691,579

      

(304,015

)

    

387,564

    

LVIP SSGA Moderately Aggressive Index Allocation Fund - Standard Class

    

1,573,861

      

(364,399

)

    

1,209,462

    

LVIP SSGA Moderately Aggressive Structured Allocation Fund - Standard Class

    

790,996

      

(183,900

)

    

607,096

    

LVIP SSGA S&P 500 Index Fund - Standard Class

    

7,762,359

      

(478,487

)

    

7,283,872

    

LVIP SSGA Small-Cap Index Fund - Standard Class

    

1,086,906

      

(231,535

)

    

855,371

    

LVIP SSGA Small-Mid Cap 200 Fund - Standard Class

    

933,544

      

(133,855

)

    

799,689

    

LVIP T. Rowe Price 2010 Fund - Standard Class

    

1,482

      

(1,260

)

    

222

    

LVIP T. Rowe Price 2020 Fund - Standard Class

    

16,191

      

(12,959

)

    

3,232

    

LVIP T. Rowe Price 2030 Fund - Standard Class

    

18,727

      

(5,194

)

    

13,533

    

LVIP T. Rowe Price 2040 Fund - Standard Class

    

23,621

      

(41,940

)

    

(18,319

)

  

LVIP T. Rowe Price Growth Stock Fund - Standard Class

    

821,083

      

(101,005

)

    

720,078

    


M-61


Lincoln Life Flexible Premium Variable Life Account M

Notes to financial statements (continued)

6. Changes in Units Outstanding (continued)

    Units
Issued		   Units
Redeemed		   Net Increase
(Decrease)		  

LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class

    

438,624

      

(50,149

)

    

388,475

    

LVIP U.S. Growth Allocation Managed Risk Fund - Standard Class

    

665,044

      

(90,899

)

    

574,145

    

LVIP Vanguard Domestic Equity ETF Fund - Standard Class

    

1,747,229

      

(294,737

)

    

1,452,492

    

LVIP Vanguard International Equity ETF Fund - Standard Class

    

1,775,298

      

(97,076

)

    

1,678,222

    

LVIP Wellington Capital Growth Fund - Standard Class

    

490,884

      

(69,497

)

    

421,387

    

LVIP Wellington Mid-Cap Value Fund - Standard Class

    

427,653

      

(47,815

)

    

379,838

    

M Capital Appreciation Fund

    

24,261

      

(5,763

)

    

18,498

    

M International Equity Fund

    

32,804

      

(15,552

)

    

17,252

    

M Large Cap Growth Fund

    

36,082

      

(14,608

)

    

21,474

    

M Large Cap Value Fund

    

29,497

      

(15,297

)

    

14,200

    

MFS® VIT Growth Series - Initial Class

    

538,660

      

(142,827

)

    

395,833

    

MFS® VIT Total Return Series - Initial Class

    

852,405

      

(131,553

)

    

720,852

    

MFS® VIT Utilities Series - Initial Class

    

230,019

      

(277,166

)

    

(47,147

)

  

MFS® VIT II Core Equity Portfolio - Initial Class

    

2,830

      

(5,361

)

    

(2,531

)

  

Neuberger Berman AMT Large Cap Value Portfolio - I Class

    

2,212

      

(7,865

)

    

(5,653

)

  

Neuberger Berman AMT Mid Cap Growth Portfolio - I Class

    

34,598

      

(107,956

)

    

(73,358

)

  

Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio - I Class

    

18,023

      

(31,860

)

    

(13,837

)

  

PIMCO VIT CommodityRealReturn® Strategy Portfolio - Administrative Class

    

622,799

      

(207,887

)

    

414,912

    

Putnam VT Equity Income Fund - Class IB

    

3,543

      

(8,370

)

    

(4,827

)

  

Putnam VT Global Health Care Fund - Class IB

    

1,982

      

(8,209

)

    

(6,227

)

  

Templeton Foreign VIP Fund - Class 1

    

4,710

      

(8,074

)

    

(3,364

)

  

Templeton Foreign VIP Fund - Class 2

    

10,289

      

(43,013

)

    

(32,724

)

  

Templeton Global Bond VIP Fund - Class 1

    

1,256,556

      

(282,623

)

    

973,933

    

Templeton Growth VIP Fund - Class 1

    

25,393

      

(68,698

)

    

(43,305

)

  

Templeton Growth VIP Fund - Class 2

    

3,063

      

(6,077

)

    

(3,014

)

  

7. Subsequent Events

Management evaluated subsequent events through the date these financial statements were issued.

The worldwide coronavirus, or COVID-19, outbreak in the first quarter of 2020 has led to an extreme downturn and volatility of the financial markets and wide-ranging changes in consumer behavior. As the economic and regulatory environment continues to evolve, we cannot reasonably estimate the length or severity of this event or the impact to Separate Account performance and financial results. However, in general, a deterioration in general economic and business conditions can have a negative impact on individual unit values and could cause a net decrease in net assets resulting from operations of the separate account.

Management identified no other items or events required for disclosure.


M-62


Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of The Lincoln National Life Insurance Company
and

Contract Owners of Lincoln Life Flexible Premium Variable Life Account M

Opinion on the Financial Statements

We have audited the accompanying statements of assets and liabilities of each of the subaccounts listed in the Appendix that comprise Lincoln Life Flexible Premium Variable Life Account M ("Variable Account"), as of December 31, 2019, the related statements of operations and the statements of changes in net assets for each of the periods indicated in the Appendix, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of each subaccount as of December 31, 2019, the results of its operations and changes in its net assets for each of the periods indicated in the Appendix, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Variable Account's management. Our responsibility is to express an opinion on each of the subaccounts' financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Variable Account in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the fund companies or their transfer agents, as applicable. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Ernst & Young

We have served as the Variable Account's Auditor since 1998.
Philadelphia, Pennsylvania
April 9, 2020


M-63


Subaccount

   Statements of
Assets and Liabilities		  

Statements of Operations

  

Statements of Changes in Net Assets

  

AB VPS Global Thematic Growth Portfolio - Class A

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

AB VPS Growth and Income Portfolio - Class A

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

AB VPS International Value Portfolio - Class A

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

AB VPS Large Cap Growth Portfolio - Class A

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

AB VPS Small/Mid Cap Value Portfolio - Class A

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

American Century VP Balanced Fund - Class I

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

American Century VP Inflation Protection Fund - Class I

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

American Funds Global Growth Fund - Class 2

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

American Funds Global Small Capitalization Fund - Class 2

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

American Funds Growth Fund - Class 2

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

American Funds Growth-Income Fund - Class 2

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

American Funds International Fund - Class 2

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

BlackRock Global Allocation V.I. Fund - Class I

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

ClearBridge Variable Mid Cap Portfolio - Class I

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Delaware VIP® Diversified Income Series - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Delaware VIP® Emerging Markets Series - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Delaware VIP® High Yield Series - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Delaware VIP® Limited-Term Diversified Income Series - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Delaware VIP® REIT Series - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Delaware VIP® Small Cap Value Series - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Delaware VIP® Smid Cap Core Series - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Delaware VIP® U.S. Growth Series - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Delaware VIP® Value Series - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  


M-64


Subaccount

   Statements of
Assets and Liabilities		  

Statements of Operations

  

Statements of Changes in Net Assets

  

DWS Alternative Asset Allocation VIP Portfolio - Class A

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

DWS Equity 500 Index VIP Portfolio - Class A

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

DWS Small Cap Index VIP Portfolio - Class A

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Fidelity® VIP Asset Manager Portfolio - Initial Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Fidelity® VIP Contrafund® Portfolio - Service Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Fidelity® VIP Equity-Income Portfolio - Initial Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Fidelity® VIP Equity-Income Portfolio - Service Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Fidelity® VIP Growth Opportunities Portfolio - Service Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Fidelity® VIP Growth Portfolio - Service Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Fidelity® VIP High Income Portfolio - Service Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Fidelity® VIP Investment Grade Bond Portfolio - Initial Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Fidelity® VIP Mid Cap Portfolio - Service Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Fidelity® VIP Overseas Portfolio - Service Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Franklin Income VIP Fund - Class 1

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Franklin Mutual Shares VIP Fund - Class 1

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Franklin Small-Mid Cap Growth VIP Fund - Class 1

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Invesco V.I. American Franchise Fund - Series I Shares

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Invesco V.I. Core Equity Fund - Series I Shares

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Invesco V.I. Core Plus Bond Fund - Series I Shares

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Invesco V.I. International Growth Fund - Series I Shares

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Janus Henderson Balanced Portfolio - Institutional Shares

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Janus Henderson Balanced Portfolio - Service Shares

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Janus Henderson Enterprise Portfolio - Service Shares

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Janus Henderson Global Research Portfolio - Institutional Shares

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  


M-65


Subaccount

   Statements of
Assets and Liabilities		  

Statements of Operations

  

Statements of Changes in Net Assets

  

Janus Henderson Global Research Portfolio - Service Shares

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Janus Henderson Global Technology Portfolio - Service Shares

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

JPMorgan Insurance Trust Global Allocation Portfolio - Class 1

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Baron Growth Opportunities Fund - Service Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Baron Growth Opportunities Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP BlackRock Dividend Value Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP BlackRock Global Growth ETF Allocation Managed Risk Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP BlackRock Global Real Estate Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP BlackRock Inflation Protected Bond Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP BlackRock U.S. Growth ETF Allocation Managed Risk Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Blended Mid Cap Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP ClearBridge Large Cap Managed Volatility Fund - Standard Class

  

N/A - the fund merged into LVIP ClearBridge QS Select Large Cap Managed Volatility Fund - Standard Class during 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019 (the fund merged into LVIP ClearBridge QS Select Large Cap Managed Volatility Fund - Standard Class during 2019)

  

LVIP ClearBridge QS Select Large Cap Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the period from May 24, 2019 through December 31, 2019

  

For the period from May 24, 2019 through December 31, 2019

  

LVIP Delaware Bond Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Delaware Diversified Floating Rate Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Delaware Social Awareness Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Delaware Special Opportunities Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Delaware Wealth Builder Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Dimensional International Core Equity Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  


M-66


Subaccount

   Statements of
Assets and Liabilities		  

Statements of Operations

  

Statements of Changes in Net Assets

  

LVIP Dimensional International Equity Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Dimensional U.S. Core Equity 2 Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Dimensional U.S. Equity Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Dimensional/Vanguard Total Bond Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Global Conservative Allocation Managed Risk Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Global Growth Allocation Managed Risk Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Global Income Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Global Moderate Allocation Managed Risk Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Government Money Market Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Invesco Diversified Equity-Income Managed Volatility Fund - Standard Class

  

N/A - the fund merged into LVIP Invesco Select Equity Income Managed Volatility Fund - Standard Class during 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019 (the fund merged into LVIP Invesco Select Equity Income Managed Volatility Fund - Standard Class during 2019)

  

LVIP Invesco Select Equity Income Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the period from May 24, 2019 through December 31, 2019

  

For the period from May 24, 2019 through December 31, 2019

  

LVIP JPMorgan High Yield Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP MFS International Growth Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP MFS Value Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Mondrian International Value Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Multi-Manager Global Equity Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  


M-67


Subaccount

   Statements of
Assets and Liabilities		  

Statements of Operations

  

Statements of Changes in Net Assets

  

LVIP SSGA Bond Index Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Conservative Index Allocation Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Conservative Structured Allocation Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Developed International 150 Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Emerging Markets 100 Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA International Index Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA International Managed Volatility Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Large Cap 100 Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Moderate Index Allocation Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Moderate Structured Allocation Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Moderately Aggressive Index Allocation Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Moderately Aggressive Structured Allocation Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA S&P 500 Index Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Small-Cap Index Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP SSGA Small-Mid Cap 200 Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP T. Rowe Price 2010 Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP T. Rowe Price 2020 Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP T. Rowe Price 2030 Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP T. Rowe Price 2040 Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP T. Rowe Price Growth Stock Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  


M-68


Subaccount

   Statements of
Assets and Liabilities		  

Statements of Operations

  

Statements of Changes in Net Assets

  

LVIP U.S. Growth Allocation Managed Risk Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Vanguard Domestic Equity ETF Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Vanguard International Equity ETF Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Wellington Capital Growth Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

LVIP Wellington Mid-Cap Value Fund - Standard Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

M Capital Appreciation Fund

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

M International Equity Fund

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

M Large Cap Growth Fund

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

M Large Cap Value Fund

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

MFS® VIT Growth Series - Initial Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

MFS® VIT Total Return Series - Initial Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

MFS® VIT Utilities Series - Initial Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

MFS® VIT II Core Equity Portfolio - Initial Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Neuberger Berman AMT Large Cap Value Portfolio - I Class

  

N/A - the fund ceased to be available as an investment option to Variable Account contract owners during 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019 (the fund ceased to be available as an investment option to Variable Account contract owners during 2019)

  

Neuberger Berman AMT Mid Cap Growth Portfolio - I Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio - I Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Neuberger Berman AMT Sustainable Equity Portfolio - I Class

  

As of December 31, 2019

  

For the period from April 30, 2019 through December 31, 2019

  

For the period from April 30, 2019 through December 31, 2019

  

PIMCO VIT CommodityRealReturn® Strategy Portfolio - Administrative Class

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Putnam VT Equity Income Fund - Class IB

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Putnam VT Global Health Care Fund - Class IB

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Templeton Foreign VIP Fund - Class 1

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  


M-69


Subaccount

   Statements of
Assets and Liabilities		  

Statements of Operations

  

Statements of Changes in Net Assets

  

Templeton Foreign VIP Fund - Class 2

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Templeton Global Bond VIP Fund - Class 1

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Templeton Growth VIP Fund - Class 1

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

Templeton Growth VIP Fund - Class 2

  

As of December 31, 2019

  

For the year ended December 31, 2019

  

For each of the two years in the period ended December 31, 2019

  

TOPS® Balanced ETF Portfolio - Class 2 Shares

  

As of December 31, 2019

  

For the period from August 5, 2019 through December 31, 2019

  

For the period from August 5, 2019 through December 31, 2019

  

TOPS® Moderate Growth ETF Portfolio - Class 2 Shares

  

As of December 31, 2019

  

For the period from June 18, 2019 through December 31, 2019

  

For the period from June 18, 2019 through December 31, 2019

  


M-70


PART C - OTHER INFORMATION
Item 26. EXHIBITS
(a) Amendment Selling Group Agreement for Lincoln Financial Advisors incorporated herein by reference to Post-Effective Amendment No. 16 (File No. 033-25990) filed on April 22, 1999.
(b) Amendment dated November 22, 1999 to Selling Group Agreement incorporated herein by reference to Post-Effective Amendment No. 18 (File No. 033-25990) filed on April 13, 2000.
(c) Amendment dated February 14, 2000 to Selling Group Agreement incorporated herein by reference to Post-Effective Amendment No. 18 (File No. 033-25990) filed on April 13, 2000.
(d) Amended and Restated Principal Underwriting Agreement dated May 1, 2007 between The Lincoln National Life Insurance Company and Lincoln Financial Distributors, Inc. incorporated herein by reference to Post-Effective Amendment No. 24 (File No. 333-61554) filed on December 18, 2007.
(e) Form of Broker-Dealer Selling Agreement among The Lincoln National Life Insurance Company, Lincoln Life & Annuity Company of New York and Lincoln Financial Distributors, Inc. incorporated herein by reference to Registration Statement on Form N-4 (File No. 333-222786) filed on January 30, 2018.
(2) Accelerated Benefits Rider—Policy Form ABR 5645 incorporated by reference to Post-Effective Amendment No. 1 on Form N-6 (File No. 333-139960) filed on July 31, 2007.
(3) Accelerated Benefits Rider—Policy Form ABR 5650 incorporated by reference to Post-Effective Amendment No. 1 on Form N-6 (File No. 333-139960) filed on July 31, 2007.
(4) Change of Insured Rider—Policy Form LR496 incorporated by reference to Post-Effective Amendment No. 3 on Form S-6 (File No. 333-82663) filed on April 12, 2001.
(5) Enhanced Surrender Value Rider—Policy Form LR541 incorporated by reference to Post-Effective Amendment No. 1 on Form N-6 (File No. 333-139960) filed on July 31, 2007.
(6) No-Lapse Enhancement Rider—Policy Form LR629 incorporated by reference to Pre-Effective Amendment No. 1 on Form N-6 (File No. 333-181796) filed on August 14, 2012.
(7) Overloan Protection Rider—Policy Form LR540 incorporated by reference to Post-Effective Amendment No. 2 on Form N-6 (File No. 333-118478) filed on April 6, 2006.
(8) Premium Reserve Rider—Policy Form LR543 incorporated by reference to Post-Effective Amendment No. 1 on Form N-6 (File No. 333-139960) filed on July 31, 2007.
(9) Waiver of Monthly Deduction Benefit Rider—Policy Form LR436 incorporated by reference to Registrant's Registration Statement on Form S-6 (File No. 333-42479) filed on December 17, 1997.
(10) Waiver of Monthly Deduction Benefit Rider—Policy Form LR437 incorporated by reference to Registrant's Registration Statement on Form S-6 (File No. 333-42479) filed on December 17, 1997.
(11) Accelerated Benefits Rider for Chronic Illness—Policy Form LR630 incorporated by reference to Pre-Effective Amendment No. 1 on Form N-6 (File No. 333-181796) filed on August 14, 2012.

 

g) Reinsurance Contracts incorporated by reference to Post-Effective Amendment No. 1 on Form N-6 (File No. 333-139960) filed on April 1, 2008.
h) Fund Participation Agreements, and amendments thereto, between The Lincoln National Life Insurance Company and:
B-2

 

Item 27. Directors and Officers of the Depositor
Name   Positions and Offices with Depositor
Dennis R. Glass**   President, Director and Chairman
Leon E. Roday**   Executive Vice President, General Counsel and Director
Ellen G. Cooper**   Executive Vice President, Chief Investment Officer and Director
Randal Freitag**   Executive Vice President, Chief Financial Officer and Director
Wilford H. Fuller**   Executive Vice President and Director
Christopher A. Giovanni**   Senior Vice President and Treasurer
Stephen B. Harris**   Senior Vice President and Chief Ethics and Compliance Officer
Keith J. Ryan*   Vice President and Director
Joseph D. Spada***   Vice President and Chief Compliance Officer for Separate Accounts
* Principal business address is 1300 South Clinton Street, Fort Wayne, Indiana 46802-3506
** Principal business address is 150 N. Radnor Chester Road, Radnor, PA 19087
*** Principal business address is 350 Church Street, Hartford, CT 06103
Item 28. Persons Controlled by or Under Common Control with the Depositor or the Registrant
Item 29. Indemnification
(a) Brief description of indemnification provisions:
  In general, Article VII of the By-Laws of The Lincoln National Life Insurance Company (Lincoln Life) provides that Lincoln Life will indemnify certain persons against expenses, judgments and certain other specified costs incurred by any such person if he/she is made a party or is threatened to be made a party to a suit or proceeding because he/she was a director, officer, or employee of Lincoln Life, as long as he/she acted in good faith and in a manner he/she reasonably believed to be in the best interests of, or not opposed to the best interests of, Lincoln Life. Certain additional conditions apply to indemnification in criminal proceedings.
  In particular, separate conditions govern indemnification of directors, officers, and employees of Lincoln Life in connection with suits by, or in the right of, Lincoln Life.
  Please refer to Article VII of the By-Laws of Lincoln Life (Exhibit No. 6(b) hereto) for the full text of the indemnification provisions. Indemnification is permitted by, and is subject to the requirements of, Indiana law.
(b) Undertaking pursuant to Rule 484 of Regulation C under the Securities Act of 1933:
  Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 28(a) above or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any such action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
B-3

 

Item 30. Principal Underwriter
(a) Lincoln Financial Distributors, Inc. is the principal underwriter for Lincoln National Variable Annuity Fund A (Group); Lincoln National Variable Annuity Fund A (Individual); Lincoln National Variable Annuity Account C; Lincoln Life Flexible Premium Variable Life Account D; Lincoln National Flexible Premium Variable Life Account F; Lincoln National Flexible Premium Variable Life Account G; Lincoln Life Flexible Premium Variable Life Account JF-A; Lincoln Life Flexible Premium Variable Life Account JF-C; Lincoln Life Variable Annuity Account JF-I; Lincoln Life Variable Annuity Account JF-II; Lincoln Life Variable Annuity Account JL-A; Lincoln Life Flexible Premium Variable Life Account K; Lincoln National Variable Annuity Account L; Lincoln Life Variable Annuity Account N; Lincoln Life Variable Annuity Account Q; Lincoln Life Flexible Premium Variable Life Account R; Lincoln Life Flexible Premium Variable Life Account S; Lincoln Life Variable Annuity Account T; Lincoln Life Variable Annuity Account W; Lincoln Life Flexible Premium Variable Life Account Y; and Lincoln National Variable Annuity Account 53.
(b) Following are the Officers and Directors of Lincoln Financial Distributors, Inc.:
    
Name   Positions and Offices with Underwriter
Wilford H. Fuller*   President, Chief Executive Officer and Director
Claire H. Hanna*   Secretary
Andrew J. Bucklee*   Senior Vice President and Director
Christopher A. Giovanni*   Senior Vice President, Treasurer
Thomas O'Neill*   Senior Vice President and Chief Operating Officer
John C. Kennedy*   Senior Vice President and Director
Christopher P. Potochar*   Senior Vice President and Director
* Principal Business address is 150 N. Radnor Chester Road, Radnor, PA 19087
(c) N/A
Item 31. Location of Accounts and Records
All accounts, books, and other documents, except accounting records, required to be maintained by Section 31a of the 1940 Act and the Rules promulgated thereunder are maintained by The Lincoln National Life Insurance Company, 1300 S. Clinton Street, Fort Wayne, Indiana 46802 and at One Granite Place, Concord, New Hampshire 03301. The accounting records are maintained by State Street Bank and Trust Company, 801 Pennsylvania Ave, Kansas City, MO 64105.
Item 32. Management Services
Not Applicable.
Item 33. Fee Representation
Lincoln Life represents that the fees and charges deducted under the policies, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Lincoln Life.
B-4

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused these Post-Effective Amendments to the Registration Statements listed below on Form N-6/S-6 to be signed on its behalf by the undersigned duly authorized, in the City of Hartford and State of Connecticut on the 7th day of April, 2020 at 12:00 pm.

 

Lincoln Life Flexible Premium Variable Life Account M (File No. 811-08557; CIK: 0001048607)

 

333-200100 (Amendment No: 9)

333-146507 (Amendment No: 29)

333-111137 (Amendment No: 21)

333-191329 (Amendment No: 16)

333-181796 (Amendment No: 10)

333-118477 (Amendment No: 20)

333-139960 (Amendment No: 21)

333-229198 (Amendment No: 1)

333-118478 (Amendment No: 20)

333-229292 (Amendment No: 3)

 

Lincoln Life Flexible Premium Variable Life Account R (File No. 811-08579; CIK: 0001051932)

 

333-232013 (Amendment No: 1)

333-188891 (Amendment No: 9)

333-207968 (Amendment No: 6)

333-115882 (Amendment No: 21)

 

Lincoln Life Flexible Premium Variable Life Account JF-A (File No: 811-04160; CIK No. 000757552)

 

333-144272 (Amendment No: 16)

333-144274 (Amendment No: 15)

 

Lincoln Life Flexible Premium Variable Life Account G (File No. 811-05585; CIK: 0000835414)

 

033-22740 (Amendment No: 33)

 

Lincoln Life & Annuity Flexible Premium Variable Life Account M (File No: 811-08559; CIK: 0001051629)

 

333-203099 (Amendment No: 11)

 

Lincoln Life Premium Life Account M, R, S, JF-A and G

Lincoln Life & Annuity Flexible Premium Variable Life Account M

LLANY Separate Account S for Flexible Premium Variable Life Insurance

(Registrant)

 

By

/s/Joshua R. Durand

 

 

Joshua R. Durand

 

 

Vice President

 

 

The Lincoln National Life Insurance Company

 

 

 

The Lincoln National Life Insurance Company

 

(Depositor)

 

 

 

By

/s/Joshua R. Durand

 

 

Joshua R. Durand

 

 

Vice President

 

 

 

Pursuant to the requirements of the Securities Act of 1933, these Post-Effective Amendments to the Registration Statements listed above on Form N-6/S-6 have been signed below on April 7, 2020 at 12:35 pm, by the following persons, as officers and directors of the Depositor, in the capacities indicated:

 

Signature

 

Title

 

 

 

 

 

 

/s/ Dennis R. Glass *

 

President and Director

Dennis R. Glass

 

 

 

 

 

 

 

 

/s/ Ellen G. Cooper *

 

Executive Vice President, Chief Investment Officer

Ellen G. Cooper

 

 

 

 

 

 

 

 

/s/ Randal J. Freitag *

 

Executive Vice President; Chief Financial Officer and Director

Randal J. Freitag

 

 

 

 

 

 

 

 

/s/ Leon E. Roday*

 

Executive Vice President, Chief Counsel and Director

Leon E. Roday

 

 

 

 

 

 

 

 

/s/ Wilford H. Fuller*

 

Executive Vice President and Director

Wilford H. Fuller

 

 

 

 

 

 

 

 

/s/ Keith J. Ryan *

 

Vice President and Director

Keith J. Ryan

 

 

 

 

 

 

 

 

* By

/s/Scott C. Durocher

 

 

 

Scott C. Durocher

 

 

 

Attorney-in-Fact, pursuant to a Power-of-Attorney filed with this Registration Statement

 

 

 

 

POWER OF ATTORNEY

 

We, the undersigned directors and/or officers of The Lincoln National Life Insurance Company, hereby constitute and appoint Delson R. Campbell, Scott C. Durocher, Kimberly A. Genovese, Daniel P. Herr, Donald E. Keller, Michelle Grindle,  Jeffrey L. Smith, Jassmin McIver-Jones, Carolyn Augur and John D. Weber,  individually, our true and lawful attorneys-in-fact, with full power to each of them to sign for us, in our names and in the capacities indicated below, any Registration Statements and any and all amendments to Registration Statements; including exhibits, or other documents filed on Forms N-6, N-4 or S-3 or any successors or amendments to these Forms, filed with the Securities and Exchange Commission, under the Securities Act of 1933 and/or Securities Act of 1940, on behalf of the Company in its own name or in the name of one of its Separate Accounts, hereby ratifying and confirming our signatures as they may be signed by any of our attorneys-in-fact to any such amendments to said Registration Statements as follows:

 

Variable Life Insurance Separate Accounts:

 

Account

 

Product name

Lincoln Life Flexible Premium Variable Life Account D (811-04592)

 

Variable Universal Life Leadership Series

Lincoln Life Flexible Premium Variable Life Account F (811-05164)

 

American Legacy Life

American Legacy Estate Builder

Lincoln Life Flexible Premium Variable Life Account G (811-05585)

 

VUL-III

Lincoln Life Flexible Premium Variable Life Account J (811-08410)

 

American Legacy Variable Life

Lincoln Life Flexible Premium Variable Life Account K (811-08412)

 

Multi Fund Variable Life

Lincoln Life Flexible Premium Variable Life Account M (811-08557)

 

VULdb / VULdb ES

VULdb-II ES

VUL-I / VULcv

VULcv-II / VULcvII ES / VUL Flex

VULcv-III ES

MoneyGuard VUL

VULone ES / VULone 2005 ES

Momentum VULone / Momentum VULone 2005

VULcv-IV ES

VULdb-IV ES

Momentum VULone 2007

VULone 2007

AssetEdge VUL

AssetEdge VUL2015/AssetEdge Exec VUL 2015

VULone2012

VULone2014

InReach VULone2014

VULone2019

AssetEdge VUL2019/AssetEdge Exec VUL 2019

AssetEdge VUL2019-2/AssetEdge Exec VUL 2019-2

Lincoln Life Flexible Premium Variable Life Account R (811-08579)

 

SVUL / SVUL-I

SVUL-II / SVUL-II ES

SVUL-III ES

SVUL-IV ES / PreservationEdge SVUL

SVULone ES

Momentum SVULone

SVULone 2007 ES

Momentum SVULone 2007

SVULone2013

SVULone2016

SVULone2019

 

 

Lincoln Life Flexible Premium Variable Life Account S (811-09241)

 

CVUL / CVUL Series III / CVUL Series III ES

LCV4 ES

LCV5 ES / LCC VUL

Lincoln Corporate Executive VUL

Lincoln Life Flexible Premium Variable Life Account Y (811-21028)

 

American Legacy VULcv-III

American Legacy VULdb-II

American Legacy SVUL-II

American Legacy SVUL-III

American Legacy VULcv-IV

American Legacy VULdb-IV

American Legacy SVUL-IV/PreservationEdge SVUL

American Legacy AssetEdge

 

Variable Annuity Separate Accounts:

 

Account

 

Product name

Lincoln National Variable Annuity Account C (811-03214)

 

Multi-Fund

Multi-Fund Select

Multi-Fund 5 Retirement Annuity

Lincoln National Variable Annuity Account E (811-04882)

 

The American Legacy

Lincoln National Variable Annuity Account H (811-05721)

 

American Legacy II

American Legacy III

American Legacy III B Class

American Legacy III C Share

American Legacy III Plus

American Legacy III View

American Legacy Design

American Legacy Signature

American Legacy Fusion

American Legacy Series

American Legacy Advisory

American Legacy Target Date Income B Share

American Legacy Target Date Income Advisory

Shareholder’s Advantage

Shareholder’s Advantage A Class

Shareholder’s Advantage purchased on and after May 21, 2018

Lincoln National Variable Annuity Account L (811-07645)

 

Group Variable Annuity

Secured Retirement Income Version 1

Secured Retirement Income Version 2

Secured Retirement Income Version 3

Secured Retirement Income Version 4

Retirement Income Rollover Version 1

Retirement Income Rollover Version 2

Retirement Income Rollover Version 3

Retirement Income Rollover Version 4

Lincoln Life Variable Annuity Account N (811-08517)

 

ChoicePlus Assurance (A Share)

ChoicePlus Assurance (A Class)

ChoicePlus Assurance (B Share)

ChoicePlus Assurance (B Class)

ChoicePlus Assurance (C Share)

ChoicePlus Assurance (L Share)

ChoicePlus Assurance (Bonus)

Choice Plus

Choice Plus II

ChoicePlus Access

ChoicePlus II Access

ChoicePlus Bonus

ChoicePlus II Bonus

 

 

Lincoln Life Variable Annuity Account N (811-08517) Continued

 

ChoicePlus II Advance

ChoicePlus Design

ChoicePlus Signature

ChoicePlus Rollover

ChoicePlus Fusion

ChoicePlus Series

ChoicePlus Prime

ChoicePlus Advisory

ChoicePlus Select B-Share

InvestmentSolutions

InvestmentSolutions RIA

Lincoln Investor Advantage

Lincoln Invester Advantage 2018

Lincoln Investor Advantage Fee-Based

Lincoln Investor Advantage RIA

Lincoln Investor Advantage Advisory

Lincoln Investor Advantage RIA Class

Lincoln Level Advantage B Share Indexed Variable Annuity

Lincoln Level Advantage Advisory Indexed Variable Annuity

Lincoln Level Advantage B Class Indexed Variable Annuity

Lincoln Level Advantage Advisory Class Indexed Variable Annuity

Lincoln Level Advantage Fee-Based Indexed Variable Annuity

Lincoln Level Advantage Select B-Share Indexed Variable Annuity

Lincoln Level Advantage Design B-Share Indexed Variable Annuity

Lincoln Level Advantage Design Advisory Indexed Variable Annuity

Core Income

Lincoln Life Variable Annuity Account Q (811-08569)

 

Multi-Fund Group

Lincoln Life S-3 Filing (File No. 333-231487)

 

Lincoln Level Advantage B Share Indexed Variable Annuity

Lincoln Level Advantage Advisory Indexed Variable Annuity

Lincoln Level Advantage B Class Indexed Variable Annuity

Lincoln Level Advantage Advisory Class Indexed Variable Annuity

Lincoln Level Advantage Fee-Based Indexed Variable Annuity

Lincoln Level Advantage Select B Share Indexed Variable Annuity

Lincoln Level Advantage Design B-Share Indexed Variable Annuity

Lincoln Level Advantage Design Advisory Indexed Variable Annuity

 

Except as otherwise specifically provided herein, the power-of-attorney granted herein shall not in any manner revoke in whole or in part any power-of-attorney that each person whose signature appears below has previously executed.  This power-of-attorney shall not be revoked by any subsequent power-of-attorney each person whose signature appears below may execute, unless such subsequent power specifically refers to this power-of-attorney or specifically states that the instrument is intended to revoke all prior general powers-of-attorney or all prior powers-of-attorney.

 

This Power-of-Attorney may be executed in separate counterparts each of which when executed and delivered shall be an original; but all such counterparts shall together constitute one and the same instrument.  Each counterpart may consist of a number of copies, each signed by less than all, but together signed by all, of the undersigned.

 

Signature

 

Title

 

 

 

/s/Dennis R. Glass

 

President, Chairman and Director

Dennis R. Glass

 

 

 

 

 

/s/Ellen G. Cooper

 

Executive Vice President, Chief Investment Officer and Director

Ellen G. Cooper

 

 

 

 

/s/Randal J. Freitag

 

Executive Vice President; Chief Financial Officer and Director

Randal J. Freitag

 

 

 

 

 

/s/Christine A. Janofsky

 

Senior Vice President and Controller

Christine A. Janofsky

 

 

 

 

 

/s/Leon E. Roday

 

Executive Vice President, General Counsel and Director

Leon E. Roday

 

 

 

 

 

/s/Wilford H. Fuller

 

Executive Vice President and Director

Wilford H. Fuller

 

 

 

 

 

/s/Keith J. Ryan

 

Vice President and Director

Keith J. Ryan

 

 

 

We, Delson R. Campbell, Scott C. Durocher, Kimberly A. Genovese, Daniel P. Herr, Donald E. Keller,  Michelle Grindle, Jeffrey L. Smith, Jassmin McIver-Jones, Carolyn Augur and John D. Weber, have read the foregoing Power of Attorney.  We are the person(s) identified therein as agent(s) for the principal named therein.  We acknowledge our legal responsibilities.

 

/s/Delson R. Campbell

 

/s/Scott C. Durocher

Delson R. Campbell

 

Scott C. Durocher

 

 

 

/s/Kimberly A. Genovese

 

/s/Daniel P. Herr

Kimberly A. Genovese

 

Daniel P. Herr

 

 

 

/s/Donald E. Keller

 

/s/Michelle Grindle

Donald E. Keller

 

Michelle Grindle

 

 

 

/s/Jeffrey L. Smith

 

/s/John D. Weber

Jeffrey L. Smith

 

John D. Weber

 

 

 

/s/Jassmin McIver-Jones

 

/s/Caroly Augur

Jassmin McIver-Jones

 

Carolyn Augur

 

 

 

Version dated: February 2020