Lincoln National Corporation · NYSE:LNC
Lincoln National — Investor Presentation (May 2022)
32 slides from Lincoln National's investor presentation, May 18, 2022
Slide 1: Investor presentation
Investor presentation May 18, 2022 Al Copersino Head of Investor Relations 203-257-4493 Albert.Copersino@LFG.com This document may not be accurate after its date, and LNC does not undertake to update or keep it accurate after such date. ©2022 Lincoln National Corporation 1
Slide 2: Forward looking statements – cautionary language
Forward looking statements – cautionary language Certain statements made in this presentation and in other written or oral statements made by Lincoln or on Lincoln’s behalf are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). A forwar
Slide 3: Forward looking statements – cautionary language (contd.)
Forward looking statements – cautionary language (contd.) • Ineffectiveness of our risk management policies and procedures, including various hedging strategies used to offset the effect of changes in the value of liabilities due to changes in the level and volatility of the equity markets and inter
Slide 4: Lincoln story
Lincoln story ©2022 Lincoln National Corporation 4
Slide 5: The Lincoln strategy
The Lincoln strategy Our purpose—Provide financial peace of mind to everyday consumers across the United States ENTERPRISE STRATEGY Where we play How we win Our capabilities Our tools Focus on the fastest Invest in our powerful Maintain industry-leading risk Utilize digital to growing U.S. markets d
Slide 6: Protecting the balance sheet
Protecting the balance sheet Where we stand after 1Q’22 RBC ratio ~415% Cash at the holding company >$450M target Next debt maturity in 20231 Executed Life block and VA flow reinsurance deals; Life deal generated $1.2B in capital Completed $900M incremental buybacks from Life deal; Repurchased 11% o
Slide 7: Strong 2021 underlying operating earnings
Strong 2021 underlying operating earnings Average account values Strong underlying earnings Item 1Q22 $311B $308B Reported adjusted operating EPS1 $1.66 Category 1 1Q21 1Q22 Less Pandemic-related claims $(0.85) and unusual (0.96) items $(0.11)2 Book value per share, Poised to deliver at or above 8-1
Slide 8: Powerful distribution force succeeding in virtual environment
Powerful distribution force succeeding in virtual environment Comprehensive set of retail Leading distribution capabilities and worksite products 1,200+ wholesalers Diversified, innovative and and worksite employees multiple solutions across our portfolio Broad and deep shelf space Annuities Multi
Slide 9: Continuing to execute enterprise strategies
Continuing to execute enterprise strategies Reprice, shift & add new product strategy is focused on achieving appropriate returns and providing consumer value Reprice Shift Add new products to help to products that well-priced products ensure appropriate have strong consumer that increase returns de
Slide 10: Multiple programs driving expense improvements
Multiple programs driving expense improvements Run-rate savings of Preserving 2020 savings of Targeting $100M $100M $260 - 300M from strategic digitization taken to respond to in run-rate savings from initiative as of year-end 2021 environment Spark Initiative exiting 2024 ©2022 Lincoln National Cor
Slide 11: Industry-leading risk management programs
Industry-leading risk management programs Minimal historic hedge breakage Hedge target roundtrip¹ Change in hedge target Hedge program performance (net breakage) $20B $16B $12B $8B $4B $0B 1Q17 1Q18 1Q19 1Q20 1Q21 1Q22 $(4)B 2017 2018 2019 2020 2021 2022 High-quality and disciplined ALM investment s
Slide 12: Strong history of capital generation and deployment
Strong history of capital generation and deployment Consistently increased common Shares repurchased stock dividend since the crisis since peak share count1 $2.10 $1.80 $1.50 Announced 7% 53% of Annual dividend $1.20 increase to quarterly dividend for 2022 shares $0.90 in 4Q21 or $7.9B $0.60 $0.30 $
Slide 13: Annuities
Annuities ©2022 Lincoln National Corporation 13
Slide 14: Annuities
Annuities Consistent earnings growth $1,254M $400 $1,400 $302M $280M $949M $300 $900 $200 $1,283 $290M $302M $400 $935 $100 $0 $(100) 2016 2021 $(100) 1Q21 1Q22 Income from operations Notable items Alternative investment portfolio overperformance or underperformance Income from operations, excluding
Slide 15: Organic and inorganic actions driving quality book
Organic and inorganic actions driving quality book Track record of executing on strategy Adding value through reinsurance block and flow deals 2003 Emphasized product design & realistic assumptions VA flow reinsurance Never participated in the living benefits arms race • On specific living benefit r
Slide 16: High-quality book is a strategic advantage
High-quality book is a strategic advantage Account values are diverse by product and risk, with net amount at risk consistently below peer average 3/31/2022 Annuity account value by issue year VA with GLB Fixed VA without GLB¹ Indexed VA GLB NAR2 GMDB NAR3 GLB NAR / GLB AV 24.8% Prior 0.6% 1.7% 20%
Slide 17: Retirement Plan Services
Retirement Plan Services ©2022 Lincoln National Corporation 17
Slide 18: Retirement Plan Services
Retirement Plan Services Solid earnings growth $250M $215M $80M $200M $51M $55M $60M $150M $131M $235M $40M $100M $57M $55M $127M $20M $50M $0M $0M $(50)M $(20)M 2016 2021 1Q21 1Q22 Income from operations Notable items Alternative investment portfolio overperformance and underperformance Income from
Slide 19: Long-term and near-term growth in first-year sales and recurring deposits
Long-term and near-term growth in first-year sales and recurring deposits 89% First-year sales Recurring deposits $7.0B $3.8B $5.0B $2.6B $1.2B $1.9B $2.2B $0.7B 2016 2021 1Q21 1Q22 2016 2021 1Q21 1Q22 ©2021 Lincoln National Corporation 19
Slide 20: Expense management is a key driver of earnings growth
Expense management is a key driver of earnings growth Creating efficiencies while delivering a digitally-enabled customer experience Leveraging technology to increase scalability of business Re-engineering processes to streamline operations Track record of driving efficiencies in cost per part
Slide 21: Life Insurance
Life Insurance ©2022 Lincoln National Corporation 21
Slide 22: Life Insurance
Life Insurance Strong underlying earnings drivers with return to more normal 1Q seasonality in 2022 $623M $300 $900 $180M $700 $225 $515M $500 $150 $127M $535M $300 $515M $75 $100 $107M $58M -$100 $0 -$300 $(75) 2016 2021 1Q21 1Q22 Income from operations Notable items Alternative investment portfoli
Slide 23: Highlighting our ongoing attention to key industry trends
Highlighting our ongoing attention to key industry trends Stable long-term mortality results 115% 115% 113% Actual/annual expectations 106% Average A/E 100% of 100% over past 5 years1 2013 2014 2015 2016 2017 2018 2019 2020 2021 1Q22 Actual Results excluding Mortality within +/- 1% of expected Actua
Slide 24: Grow sales while shifting to lower-guarantee solutions
Grow sales while shifting to lower-guarantee solutions As expected, sales grew 36% year-over-year; advanced the shift to lower-guarantee, risk-sharing solutions Total Sales | % of sales in lower-guarantee, risk-sharing solutions Executive Benefits Term IUL/UL VUL MoneyGuard $155M | 78% $114M | 73% 1
Slide 25: Group Protection
Group Protection ©2021 Lincoln National Corporation 25
Slide 26: Group Protection
Group Protection Solid underlying earnings despite recent pandemic impacts $204M $58M $59M $250 $50 $150 $62M $25 $50 $65M $0 -$50 $(26)M $(25) $(41)M $(127)M -$150 $(50) 2016 2021 1Q21 1Q22 Income from operations Unusual & Notable items Alternative investment portfolio overperformance and underperf
Slide 27: Sustaining strong underlying drivers
Sustaining strong underlying drivers Premiums, persistency, and leave management services driving sustained growth 90% 6M 88% 4M $4.5B $4.3B 89% 86% 2M 4.0M 87% 3.6M 84% 0M 2020 2021 2020 2021 2020 2021 Premiums Persistency Number of employees covered with our leave management services ©2021 Lincoln
Slide 28: Leadership position driven by diversification and scale
Leadership position driven by diversification and scale Broad reach to Partnerships with Diversified all employer sizes 7K+ brokers product offerings Short & 58% <500 Broker segment % of total sales1 long-term 19% disability Top 3 national partners 5K+ (Mercer, Aon & 20% $4.5B 48% Willis Towers Wats
Slide 29: Appendix
Appendix ©2022 Lincoln National Corporation 29
Slide 30: Reconciliation
Reconciliation Net income to adjusted income from operations (in millions, except per share data) For the Quarter Ended March 31, 2022 Total Revenues $ 4,687 Less: Excluded realized gain (loss) (26) Amortization of DFEL associated with benefit ratio unlocking (5) Total Adjusted Operating Revenues $
Slide 31: Reconciliation
Reconciliation Book value per share (in millions, except per share data) As of March 31, 2021 2022 Book value per share, including AOCI $ 102.50 $ 85.59 Per share impact of AOCI 30.14 7.27 Book value per share, excluding AOCI $ 72.36 $ 78.32 ©2022 Lincoln National Corporation 31
Slide 32: Reconciliation
Reconciliation Sources of earnings excluding notable items and pandemic impacts (in millions, except per share data) For the Year Ended December 31, 2013 Notable Items Impact to Sources of Earnings, Pre-Tax, Sources of Earnings, Pre-Tax Sources of Earnings Excluding Notable Items Investment spread $