lnc-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2024

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _________ to _________.

Commission File Number: 1-6028

_______________________________________________________________________________________________________

LINCOLN NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

_______________________________________________________________________________________________________




Indiana						35-1140070
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

150 N. Radnor-Chester Road, Suite A305, Radnor, Pennsylvania						19087
(Address of principal executive offices)						(Zip Code)

(484) 583-1400

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

_____________________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock

LNC

New York Stock Exchange

Depositary Shares, each representing a 1/1000th interest in a share of 9.000% Non-Cumulative Preferred Stock, Series D

LNC PRD

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of April 29, 2024, there were 170,026,818 shares of the registrant’s common stock outstanding.

—————————————————————————————————————————————————————

Table of Contents

Lincoln National Corporation

Table of Contents



		Page
PART I
Item 1.	Financial Statements:
	Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023	1
	Unaudited Consolidated Statements of Comprehensive Income (Loss) for the three months
	ended March 31, 2024 and 2023	2
	Unaudited Consolidated Statements of Stockholders’ Equity for the three months
	ended March 31, 2024 and 2023	3
	Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023	4
	Notes to Unaudited Consolidated Financial Statements:
	Note 1 – Nature of Operations and Basis of Presentation	5
	Note 2 – New Accounting Standards	6
	Note 3 – Investments	7
	Note 4 – Variable Interest Entities	16
	Note 5 – Derivatives	17
	Note 6 – DAC, VOBA, DSI and DFEL	26
	Note 7 – Reinsurance	29

	Note 8 – MRBs	29
	Note 9 – Separate Accounts	31
	Note 1 0 – Policyholder Account Balances	32
	Note 1 1 – Future Contract Benefits	36
	Note 1 2 – Debt	41
	Note 1 3 – Fair Value of Financial Instruments	42
	Note 1 4 – Contingencies and Commitments	54
	Note 1 5 – Shares and Stockholders’ Equity	58
	Note 1 6 – Segment Information	61
	Note 1 7 – Realized Gain (Loss)	64
	Note 18 – Federal Income Taxes	64
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	65
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	112
Item 4.	Controls and Procedures	112

PART II
Item 1.	Legal Proceedings	112
Item1A.	Risk Factors	113
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	113
Item 5.	Other Information	113
Item 6.	Exhibits	113
	Exhibit Index for the Report on Form 10-Q	114
	Signatures	115

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

LINCOLN NATIONAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)


	As of		As of
	March 31,		December 31,
	2024		2023
	(Unaudited)
ASSETS
Investments:
Fixed maturity available-for-sale securities, at fair value

(amortized cost: 2024 - $97,546; 2023 - $97,433; allowance for credit losses: 2024 - $21; 2023 - $19)	$	87,764	$	88,738
Trading securities	2,227		2,359
Equity securities	319		306
Mortgage loans on real estate, net of allowance for credit losses
(portion at fair value: 2024 - $289; 2023 - $288)	19,266		18,963
Policy loans	2,476		2,476
Derivative investments	8,394		6,474
Other investments	5,256		5,015
Total investments	125,702		124,331
Cash and invested cash	4,122		3,365
Deferred acquisition costs, value of business acquired and deferred sales inducements	12,405		12,397
Reinsurance recoverables, net of allowance for credit losses	29,461		29,843
Deposit assets, net of allowance for credit losses	28,904		28,789
Market risk benefit assets	4,878		3,894
Accrued investment income	1,127		1,082
Goodwill	1,144		1,144
Other assets	9,413		9,311
Separate account assets	166,225		158,257
Total assets	$	383,381	$	372,413

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Policyholder account balances	$	122,300	$	120,737
Future contract benefits	38,848		39,864
Funds withheld reinsurance liabilities	17,486		17,641
Market risk benefit liabilities	1,266		1,716
Deferred front-end loads	6,099		5,901
Payables for collateral on investments	10,117		8,105
Short-term debt	503		250
Long-term debt	5,726		5,699




Other liabilities	7,265		7,350
Separate account liabilities	166,225		158,257
Total liabilities	375,835		365,520

Contingencies and Commitments (See Note 14)

Stockholders’ Equity
Preferred stock – 10,000,000 shares authorized:
Series C preferred stock – 20,000 shares authorized, issued and outstanding
as of March 31, 2024, and December 31, 2023	493		493
Series D preferred stock – 20,000 shares authorized, issued and outstanding
as of March 31, 2024, and December 31, 2023	493		493
Common stock – 800,000,000 shares authorized; 170,016,887 and 169,666,137 shares
issued and outstanding as of March 31, 2024, and December 31, 2023, respectively	4,624		4,605
Retained earnings	5,887		4,778
Accumulated other comprehensive income (loss)	(3,951)		(3,476)
Total stockholders’ equity	7,546		6,893
Total liabilities and stockholders’ equity	$	383,381	$	372,413

See accompanying Notes to Consolidated Financial Statements

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LINCOLN NATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in millions, except per share data)


	For the Three Months Ended March 31,
		2024		2023
Revenues
Insurance premiums		$	1,601	$	1,579
Fee income		1,324		1,379
Net investment income		1,346		1,466
Realized gain (loss)		(434)		(828)
Amortization of deferred gain (loss) on business sold through reinsurance		(12)		9
Other revenues		291		209
Total revenues		4,116		3,814
Expenses
Benefits		2,003		2,291
Interest credited		822		785
Market risk benefit (gain) loss		(1,907)		619
Policyholder liability remeasurement (gain) loss		(12)		(118)
Commissions and other expenses		1,601		1,324
Interest and debt expense		81		83


Total expenses		2,588		4,984
Income (loss) before taxes		1,528		(1,170)
Federal income tax expense (benefit)		306		(289)


Net income (loss)		1,222		(881)
Other comprehensive income (loss), net of tax:

Unrealized investment gain (loss)		(127)		1,774
Market risk benefit non-performance risk gain (loss)		(464)		1,025
Policyholder liability discount rate remeasurement gain (loss)		116		(202)
Foreign currency translation adjustment		(1)		3
Funded status of employee benefit plans		1		(2)
Total other comprehensive income (loss), net of tax		(475)		2,598
Comprehensive income (loss)		$	747	$	1,717

Net Income (Loss) Available to Common Stockholders
Net income (loss)		$	1,222	$	(881)
Preferred stock dividends declared		(34)		(25)
Deferred units of LNC stock in our deferred compensation plans		3		(3)
Net income (loss) available to common stockholders		$	1,191	$	(909)

Net Income (Loss) Per Common Share


Basic		$	6.98	$	(5.35)




Diluted		6.93		(5.37)

Cash Dividends Declared Per Preferred Share
Series C preferred stock		$	1,156.25	$	635.94
Series D preferred stock		562.50		618.75

Cash Dividends Declared Per Common Share		$	0.45	$	0.45

See accompanying Notes to Consolidated Financial Statements

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LINCOLN NATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in millions)


	For the Three Months Ended March 31,
		2024		2023
Preferred Stock
Balance as of beginning-of-year		$	986	$	986


Balance as of end-of-period		986		986

Common Stock
Balance as of beginning-of-year		4,605		4,544
Stock compensation/issued for benefit plans		19		16

Balance as of end-of-period		4,624		4,560

Retained Earnings
Balance as of beginning-of-year		4,778		5,924

Net income (loss)		1,222		(881)

Preferred stock dividends declared		(34)		(25)
Common stock dividends declared		(79)		(78)
Balance as of end-of-period		5,887		4,940

Accumulated Other Comprehensive Income (Loss)
Balance as of beginning-of-year		(3,476)		(6,352)

Other comprehensive income (loss), net of tax		(475)		2,598
Balance as of end-of-period		(3,951)		(3,754)
Total stockholders’ equity as of end-of-period		$	7,546	$	6,732


See accompanying Notes to Consolidated Financial Statements

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LINCOLN NATIONAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)


	For the Three Months Ended March 31,
	2024		2023
Cash Flows from Operating Activities
Net income (loss)	$	1,222	$	(881)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Realized (gain) loss	434		828
Market risk benefit (gain) loss	(1,907)		619
Sales and maturities (purchases) of trading securities, net	129		290
Amortization of deferred gain (loss) on business sold through reinsurance	12		(9)

Change in:
Deferred acquisition costs, value of business acquired, deferred sales inducements
and deferred front-end loads	190		156
Accrued investment income	(32)		4
Insurance liabilities and reinsurance-related balances	(1,047)		(1,322)
Accrued expenses	(41)		(143)
Federal income tax accruals	306		(289)
Other	(609)		(27)
Net cash provided by (used in) operating activities	(1,343)		(774)
Cash Flows from Investing Activities
Purchases of available-for-sale securities and equity securities	(2,360)		(2,999)
Sales of available-for-sale securities and equity securities	677		1,739
Maturities of available-for-sale securities	1,694		1,440
Purchases of alternative investments	(315)		(170)
Sales and repayments of alternative investments	16		22
Issuance of mortgage loans on real estate	(571)		(269)
Repayment and maturities of mortgage loans on real estate	267		183
Repayment (issuance) of policy loans, net	(1)		(27)
Net change in collateral on investments, certain derivatives and related settlements	2,232		(184)
Other	–		(60)
Net cash provided by (used in) investing activities	1,639		(325)
Cash Flows from Financing Activities
Payment of long-term debt, including current maturities	(47)		–
Issuance of long-term debt, net of issuance costs	347		–
Payment related to sale-leaseback transactions	(4)		(5)

Payment related to certain financing arrangements	(16)		(10)
Deposits of fixed account balances	3,602		4,192
Withdrawals of fixed account balances	(3,215)		(2,570)
Transfers from (to) separate accounts, net	(90)		21
Common stock issued for benefit plans	(5)		(4)


Dividends paid to preferred stockholders	(34)		(25)
Dividends paid to common stockholders	(77)		(77)

Net cash provided by (used in) financing activities	461		1,522
Net increase (decrease) in cash, invested cash and restricted cash	757		423
Cash, invested cash and restricted cash as of beginning-of-year	3,365		3,343
Cash, invested cash and restricted cash as of end-of-period	$	4,122	$	3,766


See accompanying Notes to Consolidated Financial Statements

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LINCOLN NATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Operations and Basis of Presentation

Nature of Operations

Lincoln National Corporation and its subsidiaries (“LNC” or the “Company,” which also may be referred to as “we,” “our” or “us”) operate multiple insurance businesses through four business segments: Annuities, Life Insurance, Group Protection and Retirement Plan Services. In addition, we include financial data for operations that are not directly related to our business segments in Other Operations. The collective group of businesses uses “Lincoln Financial Group” as its marketing identity. Through our business segments, we sell a wide range of wealth accumulation, wealth protection, group protection and retirement income products and solutions. These products primarily include variable annuities, fixed annuities (including indexed), registered index-linked annuities (“RILA”), universal life insurance (“UL”), variable universal life insurance (“VUL”), linked-benefit UL and VUL, indexed universal life insurance (“IUL”), term life insurance, group life, disability and dental and employer-sponsored retirement plans and services. For more information on our segments and the products and solutions we provide, see Note 16.

Basis of Presentation

The accompanying unaudited consolidated financial statements are prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10-Q, including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The information contained in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”), should be read in connection with the reading of these interim unaudited consolidated financial statements.

Certain GAAP policies, which significantly affect the determination of financial condition, results of operations and cash flows, are summarized in our 2023 Form 10-K.

In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Interim results for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024. All material inter-company accounts and transactions have been eliminated in consolidation.

Certain amounts reported in prior periods’ consolidated financial statements have been reclassified to conform to the presentation adopted in the current period.

We present disaggregated disclosures in the Notes below for long-duration insurance balances, applying the level of aggregation by reportable segment as follows:


Reportable Segment			Level of Aggregation
Annuities			Variable Annuities
			Fixed Annuities
			Payout Annuities
Life Insurance			Traditional Life
			UL and Other
Group Protection			Group Protection
Retirement Plan Services			Retirement Plan Services

The variable annuities level of aggregation includes RILA products, which are indexed variable annuities. The fixed annuities level of aggregation represents deferred fixed annuities. We have excluded amounts reported in Other Operations from our disaggregated disclosures that are attributable to the indemnity reinsurance agreements with Protective Life Insurance Company (“Protective”) and Swiss Re Life & Health America, Inc (“Swiss Re”) as these contracts are fully reinsured, run-off institutional pension business in the form of group annuity and the results of certain disability income business and are not reflected in the results of the reportable segments listed above.

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Sale of Wealth Management Business

On December 14, 2023, we announced that we had entered into a Stock Purchase Agreement with Osaic Holdings, Inc., a Delaware corporation (“Osaic”), pursuant to which Osaic agreed to acquire all of the ownership interests in the subsidiaries of the Company that comprise the Company’s wealth management business, which include Lincoln Financial Securities Corporation and Lincoln Financial Advisors Corporation. The transaction is expected to close in the first half of 2024, subject to customary closing conditions.

As of March 31, 2024, we had assets of $155 million and liabilities of $81 million classified as held-for-sale and reported within other assets and other liabilities, respectively, on our Consolidated Balance Sheets. As of December 31, 2023, we had assets of $131 million and liabilities of $60 million classified as held-for-sale and reported within other assets and other liabilities, respectively, on our Consolidated Balance Sheets. Assets considered held-for-sale do not include $71 million of cash and invested cash held by our wealth management business subsidiaries as of March 31, 2024. The assets are reported primarily within Other Operations in Note 16.

2. New Accounting Standards

Adoption of New Accounting Standards

In the current period, we did not adopt any new Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board that were material in presentation or amount.

Future Adoption of New Accounting Standards

The following table provides a description of future adoptions of new ASUs that may have an impact on our consolidated financial statements when adopted. ASUs not listed below were assessed and determined to be either not applicable or insignificant in presentation or amount.


Standard	Description	Effective Date	Effect on Financial Statements or Other Significant Matters
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures	This ASU aims to enhance reportable segment disclosure requirements. It requires that a public entity disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), disclose and describe other segment items and report additional measures of a segment’s profit or loss if used by the CODM.	January 1, 2024 (Annual Filings) and January 1, 2025 (Quarterly Filings)	We are evaluating the impact of this ASU to our consolidated financial statements.
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures	This ASU establishes new income tax disclosure requirements, along with adjusting certain existing requirements. It specifically requires expanded and disaggregated disclosures around the tax rate reconciliation.	January 1, 2025	We are evaluating the impact of this ASU to our consolidated financial statements.

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3. Investments

Fixed Maturity AFS Securities

The amortized cost, gross unrealized gains and losses, allowance for credit losses and fair value of fixed maturity available-for-sale (“AFS”) securities (in millions) were as follows:

As of March 31, 2024

Amortized Cost

Gross Unrealized

Allowance for Credit Losses

Fair Value

Gains

Losses

Fixed maturity AFS securities:

Corporate bonds

76,968

640