Lincoln National Corporation · NYSE:LNC
Lincoln National — Investor Day (November 2017)
103 slides from Lincoln National's investor day presentation, Nov 16, 2017
Slide 1: Strategic overview – 2017 Conference for Analysts, Investors and Bankers
Dennis Glass | President and Chief Executive Officer Strategic overview 2017 Conference for Analysts, Investors and Bankers Exhibit 99.1
Slide 2: Consistently differentiating ourselves in the marketplace
consistently differentiating ourselves in the marketplace Proven ability to successfully respond to industry headwinds Strong, resilient, repeatable financial results driving shareholder value Powerful retail franchise that is growing today with attractive long-term opportunities Leveraging technolo
Slide 3: Proven ability to respond to industry headwinds
Low interest rates Capital market volatility Competitive industry environment Changing regulatory landscape Repriced product portfolio to achieve 12%+ new business returns Pivoted towards products without long-term guarantees Minimized balance sheet impacts through disciplined ALM Took actions to gr
Slide 4: Superior and differentiated financial results
70bps expansion1 Operating EPS z Operating ROE excluding AOCI z 1 See Appendix for a reconciliation of non-GAAP measures to their most comparable GAAP measures. 11% EPS CAGR1 Capital returned to shareholders 75% increase Superior and differentiated financial results
Slide 5: Strong execution creating significant shareholder value
Strong execution creating significant shareholder value Outpacing peers since last Investor Day Outpacing peers since YE11 1 Source: FactSet, prices as of 11/10/17. Last Investor Day held 6/9/16. Peers: AFL, AMP, CNO, MET, PFG, PRU, TMK, UNM and VOYA. Best performing stock in both periods
Slide 6: Earnings growth to continue as all segments contribute
Targeted annual EPS growth of 8-10% 1 Capital market assumptions include: equity markets, 6-8% total return and interest rates, remain at current levels. 2 Short-term represents approximate contributions of the principal drivers of earnings growth over the next two to three years. earnings growth to
Slide 7: Powerful retail franchise targeting high-growth segments
Leading distribution capabilities 700+ wholesalers Wholesale and worksite Diversified, innovative and multiple solutions across our portfolio Annuities Life Insurance Group Protection Retirement Plan Services Comprehensive set of retail products Exclusively independent distribution Distribution stre
Slide 8: Strong sales growth with attractive new business returns
Retirement Plan Services ● Group Protection ● Life Insurance ● Annuities ● returns on new business 12%+ ˜ Above 12% ˜ Below 12% Accelerated sales growth across most businesses ■ YoY growth (YTD16-YTD17) ■ 5Y CAGR (2012-2016) Strong Sales growth with attractive new business returns
Slide 9: Digital enhances customer experience and reduces costs
2,500+ chats 75% resolved Implemented click-to-chat 95%+ of claims survey respondents would recommend Lincoln Strategic digitization initiative to drive $90-150M in annual run-rate savings Improved customer experience Easily digestible summary â Guides for agents, brokers and clients â Annual statem
Slide 10: Distribution
Distribution 2017 Conference for Analysts, Investors and Bankers Will Fuller | President, Annuity Solutions, Lincoln Financial Distributors and Lincoln Financial Network
Slide 11: Distribution franchises are a competitive advantage
Distribution OUR WHOLESALE, WORKSITE AND RETAIL DISTRIBUTION FRANCHISES ARE A COMPETITIVE ADVANTAGE Consistent market presence allows us to sell through business cycles Proven ability to be a leader in our U.S. retail products supported by our strategic partner focus Leveraging best-in-class distrib
Slide 12: Delivering expertise in growing markets
Delivering expertise in growing markets Advisors act as generalists and partner with specialists in our segments Worksite Disability Employee-paid benefits Mid-large retirement 185 Wholesalers Retail Financial planning Insurance producers 8,900 Financial advisors Wholesale Annuities Life insurance L
Slide 13: Consistent results and leadership in our target markets
Consistent results and leadership in our target markets Product Rank1 Life insurance #1 Linked benefits #1 Variable annuity #3 Healthcare retirement #3 Group disability #6 Leader in many of our target markets Broad access and reach to independent advisors Our sales are diverse2 90K active Lincoln pr
Slide 14: Our strategic partner strategy drives our success
Our strategic partner strategy drives our success Distribution is aligned to various business models to reach consumers2 LFD sales mix is diversified across multiple channels and strategic partners Focused on largest and still growing independent distribution channel1 1 Source: 2016 LIMRA Annuity Sa
Slide 15: A new focus on our strategic partners
A new focus on our strategic partners Invest in wholesaling targeting these partners Sustainable sales growth Annuities 240 wholesalers Life Insurance 115 wholesalers MoneyGuard® 115 wholesalers 20% of sales from cross-sell Broad product portfolio National wholesaler footprint Channelized model Best
Slide 16: Effective management of distribution
Effective management of distribution Managing annuity wholesalers under varying market conditions Growing MoneyGuard® wholesalers to continue market leadership Increase wholesaler franchises to drive accelerated growth in 2018 and beyond Pivoted to non-guaranteed VA Right-sized wholesalers for decli
Slide 17: Lincoln is well positioned for DOL fiduciary rule
Lincoln is well positioned for dol fiduciary RULE ~50% of distribution partners made reductions to their annuity offerings and / or carriers1 of our distribution partners continue to offer commission options 97% Our broad product portfolio is in demand Benefited from our consistent market presence E
Slide 18: Expand distribution to accelerate sales growth
Expand distribution to accelerate sales growth Grow best-in-class distribution to 600+ wholesalers Annuities 275+ wholesalers Life and MoneyGuard® 240+ wholesalers Small market retirement 90+ wholesalers Return annuity wholesalers to pre-2016 levels Focused expansion in bank and fixed indexed annuit
Slide 19: Distribution summary
Distribution Consistent market presence allows us to sell through business cycles, contributing $60B in net flows since 2008 Proven ability to be a leader across annuities, life insurance, retirement plans and group benefits accessing industry-leading distribution partners Leveraging best-in-class d
Slide 20: Group Protection
Dick Mucci | President, Group Protection Group Protection 2017 Conference for Analysts, Investors and Bankers
Slide 21: Focused on earnings growth and 5-7% margin target
FOCUSED ON EARNINGS GROWTH AND 5-7% MARGIN TARGET Earnings growth and margin expansion is supported by re-emerging premium growth while sustaining favorable loss ratios Attractive target market opportunities and superior distribution will drive top-line growth Investments in new technology and proce
Slide 22: Drivers of Group Protection earnings growth
Sensitivities 1% change in persistency rates ~$5M after-tax or ~6% 1% change in loss ratio ~$14M after-tax or ~16% Organic earnings Short term1: 7 to 12% Capital markets Short term1: 0 to (1)% 1 Short term represents approximate contributions of the principal drivers of earnings growth over the next
Slide 23: Margin expansion driven by improved loss ratio
Margin expansion driven by proven ability to improve loss ratio Loss ratio 74.5% 74.0% 78.4% 75.4% 70.8% 70.7% 66.9%1 After-tax earnings After-tax margin 1 ü Pricing actions ü Claims management 1 1 Results have been adjusted to reflect a $5M after-tax gain for a favorable disability reserve refineme
Slide 24: Premium growth re-emerging
Persistency 2012 2013 2014 2015 2016 YTD16 YTD17 Renewal 77% 80% 78% 66% 63% 64% 74% Block 83% 83% 83% 75% 75% 73% 77% Sales 2012 2013 2014 2015 2016 YTD16 YTD17 Sales $458 $541 $479 $402 $470 $208 $239 Growth 16% 18% (11)% (16)% 17% 16% 15% Premium growth moving toward 5-7% expectation Return to sa
Slide 25: Driving growth through focus on target markets
Growth drivers Competitive dental products support cross-sell packaging New, competitive voluntary products in 2018 – accident and critical illness portfolio Absence, FMLA and claim management services Projected short-term sales growth in the 4-6% range1 Expand on strength in core 100-1,000 market a
Slide 26: Large and highly regarded distribution platform
Objectives: Grow number of Tier 1 brokers 15% and increase their sales productivity 10% by 2019 Broker segment Avg. in-force premium Avg. total sales1 # of brokers Avg. sales market share1,2 Tier 1 $2.3M $615K 555 21% All active $0.3M $67K 7,152 16% Large and highly regarded distribution platform Ex
Slide 27: Investments in technology and process capabilities
Improving operational efficiencies Enhancing the customer experience Enhanced speed to market for new products and services Increased flexibility in product offerings and plan design Faster turnaround times and fewer errors Simplified employee benefit purchase processes, including enrollment Robust
Slide 28: Efficiencies and growth drive reduction in expense ratio
Growth and targeted investments driving expense savings expense ratio improvement Move from median to 1st quartile industry expense performance Premium growth Controlling fixed expenses Process and technology improvements Improvement driven by run-rate reduction ~2% ~$50M Efficiencies and Growth Dri
Slide 29: Group Protection summary
Earnings growth and margin expansion is supported by re-emerging premium growth while sustaining favorable loss ratios Attractive target market opportunities and superior distribution will drive top-line growth Investments in new technology and process capabilities will enable an enhanced customer e
Slide 30: Life Insurance
| Senior Vice President, Head of Life Solutions Randy Freitag | Executive Vice President, Chief Financial Officer and Head of Individual Life Mike Burns Life Insurance 2017 Conference for Analysts, Investors and Bankers
Slide 31: Industry-leading life insurance franchise
INDUSTRY-LEADING LIFE INSURANCE FRANCHISE Broad portfolio enables scale, diversification, and a balanced risk profile Investing in solutions in select, attractive markets will drive long-term growth and capture demographic shifts Diligent financial management Strategic overview Distribution Group Pr
Slide 32: Drivers of Life Insurance earnings growth
Sensitivities 1% change in interest rates ~$8M after-tax or ~2% 1% change in mortality A/E ~$10M after-tax or ~2% Organic earnings Short term1: 4 to 8% Capital markets Short term1: (2) to (4)% 1 Short term represents approximate contributions of the principal drivers of earnings growth over the next
Slide 33: Changing economic landscape has redefined the industry and Lincoln
What has enabled differentiation Broad product portfolio with scale $40M+ of sales in each product Large, productive wholesale force 230 wholesalers nationwide Independent distribution model 46K advisors serving a diverse set of consumers Sales $M 2006 2016 Lincoln $707 ↑ $737 John Hancock $748 ↓ $4
Slide 34: Positioned to continue outpacing industry growth
Rank for 20161 2012-2016 CAGR Market appeal and approach Permanent life2 # 3 Broad portfolio is a competitive advantage Meeting core multi-generation needs Income protection Asset accumulation Wealth preservation Linked benefits # 1 10,000 boomers turning 65 daily Double-digit industry growth Levera
Slide 35: MoneyGuard's ability to evolve with consumer needs
MoneyGuard’s unparalleled ability to evolve with growing consumer needs3 Ease of business Streamlined underwriting Digital-driven enhancements Product appeal Multiple payment options Return of premium flexibility Distribution strength 115 dedicated wholesalers Multi-channel distribution Linked benef
Slide 36: Expanding into small face policies
Expanding into small face policies while maintaining existing strength in large face market Protect market position Maintain competitive pricing Average face of Lincoln policy is 3X industry Expand customer reach and market share Positioned to take share in Millennials and Gen X Expanded product bre
Slide 37: Strong new business profitability and risk profile
1 Based on pricing of product portfolio. 2 Forward curve as of 9/30/17. De-risked product portfolio earning strong returns under multiple scenarios Since 2012: Managed exposure to long-term guarantees down to ~1/3 of portfolio Sales of less interest-rate-sensitive products now represent ~60% of port
Slide 38: Underwriting risk profile remains strong
Delivering results consistent with expectations Suicide and accidental deaths stable and lower than overall population Stable long-term mortality results Elevated seasonality in 1Q reverses during second half of year Historic results within 1% of expectations Insured experience remains strong and st
Slide 39: Leveraging growth and efficiency
1 Operating revenue excludes unlocking; 2011 revenue unlocking ($37M); 2016 revenue unlocking $56M. Actions to drive growth leading to increased operating revenue and lower expense ratio Operating revenue growth driven by Face amount 4% CAGR Account value 5% CAGR Outpacing industry sales growth +5%
Slide 40: Industry-leading life insurance franchise summary
Unmatched product diversification and scale with balanced risk profile and unique ability to grow and adapt, combined with the depth and breadth of our distribution, distinguishes Lincoln in the market place Lincoln’s industry-leading linked benefit solution, scalability of term franchise, and longs
Slide 41: Retirement Plan Services
Jamie Ohl | President, Retirement Plan Services Retirement Plan Services 2017 Conference for Analysts, Investors and Bankers
Slide 42: Consistent and focused strategy driving growth
CONSISTENT AND FOCUSED STRATEGY DRIVING GROWTH IN SALES, NET FLOWS AND EARNINGS Business model positions us to compete effectively and further accelerate growth in our target markets Strong sales, initiatives to increase recurring deposits and improving retention leading to growth in net flows and a
Slide 43: Drivers of Retirement Plan Services earnings growth
Sensitivities 1% change in equity markets ~$1M after-tax or ~1% 25bps change in interest rates ~$3M after-tax or ~2% Organic earnings Short term1: 7 to 13% Capital markets Short term1: (2) to (5)% 1 Short term represents approximate contributions of the principal drivers of earnings growth over the
Slide 44: Take market share through high-touch, high-tech model
1 Source: Cerulli Associates: The Cerulli report- U.S. Retirement Markets 2016. 2 Source: Cerulli Associates: The Cerulli report- U.S. Retirement Markets 2016; 401k plans excluding mega market (>20K participants). Market1 Asset growth 5Y CAGR Target market industry assets1 Market share 2016 7% CAGR
Slide 45: Strategy to grow top line leading to results
strategy to grow top line leading to results Double-digit growth with attractive returns Investment in an intuitive, user-friendly digital experience Leveraging innovation to drive new business Building on Lincoln’s historical strength in product development and distribution2 Targeting higher volume
Slide 46: Investments in innovation driving outcomes
Omni-channel engagement Multifaceted approach to engaging with participants based on preferences Click2Meet SM Web-based tool to increase access to on-site representatives Click-2-Contribute Online capability making it easier for participants to take action Quick enroll Streamlined two-step enrollme
Slide 47: High-touch, high-tech model drives engagement
1 Source: Sterling Resources: 2016 Profit 2000TM Benchmark Study report, Total DC Plan average termination rate 2012-2016. Termination rates continue to decline driven by investments in the model Participants have higher contribution rates when they engage with Lincoln average industry termination r
Slide 48: Strategy driving strong flows and asset growth
$1B+ net flows expected for the first time in 2017 Record account values driven by $3B of cumulative net flows combined with 8% annual market appreciation2 Success in sales, recurring deposits and retention is driving record net flows and account values 1 Trailing twelve months is abbreviated as TTM
Slide 49: Profitable actions overcoming spread compression
Bending the cost curve Investing in digital initiatives that reduce print and paper while also eliminating manual processes to lower operating costs Streamlining operational processes to ensure scalability, drive efficiencies and improve customer experience Expense management Targeting decline in co
Slide 50: Retirement Plan Services summary
Lincoln’s high-touch, high-tech model is driving growth, outpacing the industry across key target markets Double-digit annual growth in new sales and below-industry termination rates are driving asset growth and higher net flows Overcoming 10-15bps of spread compression through targeted in-force man
Slide 51: Annuities
Will Fuller | President, Annuity Solutions, Lincoln Financial Distributors and Lincoln Financial Network Annuities 2017 Conference for Analysts, Investors and Bankers
Slide 52: Business model delivers consistent results through disciplined approach
Annuities OUR BUSINESS MODEL DELIVERS CONSISTENT AND IMPRESSIVE RESULTS THROUGH A DISCIPLINED APPROACH TO THE ANNUITY BUSINESS Quality book of business resulting from our strategy of consistency and selling on our terms Industry-leading end-to-end risk management with proven results Expand our produ
Slide 53: Drivers of annuities earnings growth
Drivers of annuities earnings growth Sensitivities 1% change in equity markets ~$8M after-tax or ~1% $1B change in net flows ~$8M after-tax or ~1% Organic earnings Short term1: (1) to 5% Capital markets Short term1: 2 to 4% 1 Short term represents approximate contributions of the principal drivers o
Slide 54: Delivered impressive financial results
Net flows 3% Market growth 6% 12% CAGR Delivered impressive financial results Growing earnings with limited volatility Consistently delivering 20%+ ROE 1 Return on equity, excluding goodwill and AOCI. 2 Includes operating earnings and VA net derivative results, excluding impact of non-performance ri
Slide 55: Our high quality book is a strategic advantage
■ VA with GLB: non-RMFs1 ■ FA ■ VA with GLB: RMFs1 ■ VA without GLB2 Our high quality book is a strategic advantage GLB NAR3 DB NAR4 0.8% 1.7% 3.0% 0.8% 0.8% 0.3% 0.2% 0.1% 0.2% 0.1% 0.3% 0.1% 0.4% 0.1% 0.7% 0.1% 0.5% 0.2% 0.3% 0.1% 0.2% 0.1% 0.1% 0.0% Current variable annuity account value by issue
Slide 56: History of selling profitable living benefit business
History of selling profitable living benefit business 1 Oliver Wyman calculations, based on market‐consistent valuation of one or more guaranteed living benefits (GLB) riders sold by each company, using a consistent set of capital market and policyholder behavior assumptions at each valuation date.
Slide 57: Unlocking results and stress scenarios
1 Rate of full surrenders for VA living benefit policies from 2013-2016. 2 Average percent of VA guarantee withdrawal benefit policyholders initiating income in each year from 2013-2016. Not all policyholders utilize their guarantee withdrawal benefits. Severe stress represents net income unlocking
Slide 58: Compelling market share growth opportunity
Source: LIMRA. 2018 sales forecast as of September 2017. 2 Compound annual growth rates, 2012 to 2016. 3 Source: U.S. Census Bureau, McKinsey retirement practice. Compelling market share growth opportunity Significant long-term demand for guaranteed income Modest near-term industry growth projected1
Slide 59: Leveraging product and distribution strength to grow
1% 2016 Leveraging our product and distribution strength to grow 1 VA market share calculated with data from Morningstar. FA market share calculated with data from LIMRA. Restoring our VA market share with product actions VA 10Y market share range1 6% 12% Upper end implies $10B+ sales Growing FIA ma
Slide 60: Annuities summary
annuities Quality book of business resulting from our strategy of consistency and selling on our terms Industry-leading end-to-end risk management with proven results Expand our product portfolio and leverage our best-in-class distribution to drive sales growth Strategic overview Distribution Group
Slide 61: Investment portfolio
Ellen Cooper | Executive Vice President, Chief Investment Officer Investment portfolio 2017 Conference for Analysts, Investors and Bankers
Slide 62: Investment approach based on disciplined ALM and risk management
OUR INVESTMENT APPROACH IS BASED ON DISCIPLINED ALM AND RISK MANAGEMENT Unique multi-manager investment framework maximizes agility, enhances risk management and lowers costs Proactive investment strategies improve investment income and moderate portfolio yield decline Diligent portfolio constructio
Slide 63: Unique multi-manager investment framework
Lincoln’s unique multi-manager investment framework is a combination of internal and external responsibilities Unique multi-manager investment framework Balance maximizing NII with diligent risk guidelines ❶ Diversified investment approach across and within asset classes ❷ Managers select securities
Slide 64: Compelling benefits from multi-manager framework
1 Based on 12/31/16 statutory filings with 2017 reduction in base manager fees. 2 Source: J.P. Morgan investment expense analysis as of 12/31/16; peer group: AEG, ALL, AFL, AIG, AXA, GNW, HIG, MFC, MET, PFG, PL, PRU and VOYA. Maximizes agility and enhances risk management Captures trend of lower inv
Slide 65: Liability-driven strategy shifting new money to shorter maturities
…is shifting new money needs to shorter maturities Disciplined liability-driven investment strategy… 1 As of 9/30/17. Line of business Asset duration1 (in years) ALM match within target duration range Life Insurance 12.5 ü Group Protection 7.0 ü Retirement Plan Services 6.5 ü Annuities 5.5 ü Lincoln
Slide 66: Strong new money spread from diversified sources
1 Source: FactSet, Barclays industrial spreads weighted 50% A and 50% BBB. 2 YTD through 9/30/17. 3 Relative to Barclays Public Corporate Index for comparably rated public corporate bonds. +60bps Other strategies 40% New money yield 4.1% ALM 12% Avg. 10Y UST 2.3% Public IG corps 48% Other strategies
Slide 67: Value add from private corporate debt strategy
Private new money purchases By industry By quality Private portfolio holdings3 Book value of $14.1B (14% of invested assets) Better protections through covenant tests Low average annual losses of 10bps since 20124 2 1 Relative to Barclays Public Corporate Index for comparably rated public corporate
Slide 68: Disciplined commercial mortgage loan strategy
Portfolio yield3 Portfolio quality Note: All data as of 9/30/17 unless otherwise noted. 1 Relative to Barclays Public Corporate Index for comparably rated public corporate bonds. 2 Projected by 12/31/19. 3 Source: SNL Financial, based on 12/31/16 U.S. commercial mortgage loan statutory filings for p
Slide 69: Alternatives strategy delivering strong results
1 As of 9/30/17. 2 Peer group: AIG, HIG, MET, PRU and VOYA. Private equity portfolio by industry1 10% CAGR +170bps Hedge funds 17% Private equity 83% Growing and shifting the alternatives portfolio… …with a focus on portfolio construction and diversification… …delivers strong performance Alternative
Slide 70: Fixed income portfolio yield decline continues to moderate
Average annual decline in fixed income portfolio yield 5.2% 4.1% 4.0% 1 YTD through 9/30/17. 2 Assumes 4% annual portfolio growth, consistent with historical experience. Average book yield of runoff portfolio YTD171 6.2% Fixed income portfolio yield decline continues to moderate 2012 to 2017 -16bps
Slide 71: Well diversified and high quality portfolio
Average quality rating is A- Below investment grade assets: 4.3% of rated assets $102.2B invested assets Net unrealized gain of $7.2B on AFS assets Portfolio diversified across asset classes, sectors and issuers1 Below investment grade exposure has declined 1 As of 9/30/17; amortized cost excluding
Slide 72: Top corporate issuers below peers
Top 50 corporate issuers are below peers1 1 Source: J.P. Morgan for peer data as of 12/31/16; includes public and private corporates: AEG, AFL, AIG, ALL, ATH, AXA, GA, GNW, HIG, MET, MFC, MML, NFS, NML, NYL, PAC, PFG, PL, PRU, SF, SLF, TIAA, UNM and VOYA. 2 Source: BlackRock peer risk analysis as of
Slide 73: Lower risk assets provide investment flexibility
Risk assets / total assets1 Risk assets / capital and surplus1 6.4% 9.8% 70.5% 105.2% Other² Schedule BA assets BIG bonds 1 Source: J.P. Morgan compiled from 12/31/16 statutory statements; peers include: AMP, BHF, MET, PFG, PRU, TMK, UNM and VOYA. 2 Other includes: unaffiliated equity, real estate,
Slide 74: Investment portfolio summary
Unique multi-manager investment framework maximizes agility, enhances risk management and lowers costs Proactive investment strategies improve investment income and moderate portfolio yield decline Diligent portfolio construction and active risk management provides greater flexibility Investment Por
Slide 75: Financial overview
Randy Freitag | Executive Vice President, Chief Financial Officer and Head of Individual Life Financial overview 2017 Conference for Analysts, Investors and Bankers
Slide 76: Financial results continue to differentiate Lincoln
FINANCIAL RESULTS CONTINUE TO DIFFERENTIATE LINCOLN Strategic overview Distribution Group Protection Life Insurance Retirement Plan Services Annuities Investment portfolio Financial overview Strong, stable and sustainable financial results provide catalyst to close valuation gap Appropriately balanc
Slide 77: Track record of financial success
40 bps 5% CAGR n Operating EPS Double-digit growth in EPS z Steady revenue growth with disciplined expense management z 1 See Appendix for a reconciliation of non-GAAP measures to their most comparable GAAP measures. G&A as a percent of revenue represents general and administrative expenses, net of
Slide 78: Exceeding investment community expectations
EPS CAGR nearly 2X peers z Consensus estimates have moved higher for LNC and lower for peers z LNC delivering on expectations Reported operating earnings exceeding consensus by 5%+ on average since 20123 Beat consensus estimates for 4 of past 5 years; on track to outperform in 2017 as well Peers hav
Slide 79: Other key stakeholder metrics compare favorably to peers
ROE expansion 50bps greater than peers BVPS CAGR nearly double and less volatile than peers Double-digit growth in book value per share Book value per share (BVPS), ex. AOCI: 10% CAGR3 More consistent growth in BVPS than peers LNC’s lowest annual growth rate still exceeds peer average ROE expansion
Slide 80: Key drivers continue to support solid financial results
Targeted annual EPS growth of 8-10% 2012-2016 average2: Buybacks accelerated targeted EPS 4% 1% 4% (3)% 6% 12% Short term3: Focused on restoring net flows to targeted range 2% 2% 3% (2)% 3% 8% 1 Capital market assumptions include: equity markets, 6-8% total return and interest rates, remain at curre
Slide 81: Near-term investments leading to long-term savings
2021: $90-150M Annual run-rate savings target Near-term investments leading to long-term savings $M (pre-tax) 2017 2018 2019 2020 Gross expenses $40 $70-80 $80-90 $30-40 Savings Capture Digital Enhanced business practices 0 - - 30-40 10-15 20-25 80-90 45-50 35-40 120-130 80-85 40-45 Net savings / (e
Slide 82: Underappreciated in an undervalued industry
LNC’s multiple does not reflect strong financial results 82% | Pre- financial crisis 63% | Current 54% | Prior periods of stress Financial crisis Euro sovereign crisis Brexit Industry still trades at a discounted valuation 1 Peers: AFL, AMP, CNO, MET, PFG, PRU, TMK, UNM and VOYA. Source: FactSet. Pr
Slide 83: Above average earnings growth and buybacks
One of the only companies with above average earnings growth and buybacks 1 Peers: AFL, AMP, CNO, MET, PFG, PRU, TMK, UNM and VOYA. 2 Source: FactSet. 3 Source: SNL DataSource and company filings. Above average earnings growth and buybacks Peer average1 4% earnings CAGR vs. 3% for peers 22% reductio
Slide 84: Capital deployment driven by strong free cash flow
capital deployment driven by strong free cash flow 1 RBC is estimated for 3Q17. 2 Annualized dividend based on quarterly dividend declared in 4Q11 and 4Q16. Strong free cash flow Long-term target of 50-55% Product mix shift gradually improving FCF Maintaining balance sheet strength RBC ended 3Q17 at
Slide 85: Statutory capital position remains strong
Statutory capital position remains strong 1 Values are estimated. Improvement in cash flow coverage and leverage ratio Strong statutory capital position +$1B increase in statutory capital even with active capital management $9B of statutory capital as of 3Q17 RBC ratio has remained stable 495% as of
Slide 86: Modest impact in a much lower rate environment
1 Modest impacts could be seen if UST 10Y approached 1%. 2 Long-term earned rate assumption also reduced by 50bps in 2010. 3 Management actions taken include: repriced and pivoted product portfolio, investment opportunities to boost yield, expense savings, in-force management actions, and refinanced
Slide 87: Well positioned in low interest rate environment
1) New business returns 2) Spread compression1 3) Balance sheet Repriced and repositioned products for low interest rates Manageable EPS headwind Strength even in a much lower interest rate scenario 1 The impact of spread compression is shown as a percent of income from operations, excluding notable
Slide 88: Strong economic value of variable annuity block
Baseline Adverse LNC economic value: $9.9B LNC economic value: $4.4B Attractive annuity block under various scenarios Economic value as a % of living benefit account values1 Strong economic value of Variable Annuity Block Benefit from high quality annuity book and selling through market cycles Less
Slide 89: Financial overview summary
Strong, stable and sustainable financial results provide catalyst to close valuation gap Appropriately balancing growth and capital management Risk management programs remain competitive advantage and have distinguished us in the marketplace Strategic overview Distribution Group Protection Life Insu
Slide 90: Appendix
Appendix 2017 Conference for Analysts, Investors and Bankers
Slide 91: 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 92: Forward Looking Statements – Cautionary Language (cont.)
Forward Looking Statements – Cautionary Language (CONT.) The initiation of legal or regulatory proceedings against us, and the outcome of any legal or regulatory proceedings, such as: adverse actions related to present or past business practices common in businesses in which we compete; adverse deci
Slide 93: Forward Looking Statements – Cautionary Language (cont.)
Forward Looking Statements – Cautionary Language (CONT.) Competitive conditions, including pricing pressures, new product offerings and the emergence of new competitors, that may affect the level of premiums and fees that our subsidiaries can charge for their products; The unknown effect on our subs
Slide 94: Explanatory notes on use of non-GAAP measures
Explanatory notes on use of non-gaap measures Management believes that income from operations, operating return on equity and operating revenues better explain the results of the company’s ongoing businesses in a manner that allows for a better understanding of the underlying trends in the company’s
Slide 95: Definitions of non-GAAP measures used in this presentation
Definitions of non-gaap measures used in this presentation Income (loss) from operations, operating revenues and operating return on equity (including and excluding average goodwill within average equity), excluding AOCI, using annualized income (loss) from operations are financial measures we use t
Slide 96: Definitions of non-GAAP measures (cont.)
Definitions of non-gaap measures used in this presentation (CONT.) Definition of notable items Income (loss) from operations, excluding notable items is a non-GAAP measure that excludes items which, in management’s view, do not reflect the company’s normal, ongoing operations. We believe highlightin
Slide 97: Corporate federal tax rate and sales definitions
Corporate federal tax rate The company uses its prevailing corporate federal income tax rate of 35% while taking into account any permanent differences for events recognized differently in its financial statements and federal income tax returns when reconciling non-GAAP measures to the most comparab
Slide 98: Detailed BlackRock disclosure
Detailed BlackRock disclosure (Investment portfolio presentation) Peer risk assumptions and methodology: key limitations Holdings are as of December 31, 2016. US statutory entities only; no offshore reinsurance, no non-US entities. No derivatives exposure or risk. Terms and definitions: Value-at-ris
Slide 99: Reconciliation of net income to income from operations
Reconciliation of net income to income from operations 1 The numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC stock in our deferred compensation plans if the effect of equity classification would result in a more dilut
Slide 100: Reconciliation of book value per share
Reconciliation of book value per share
Slide 101: Reconciliation of return on average equity
Reconciliation of return on average equity
Slide 102: Reconciliation of annuities return on equity including VA hedge results
Reconciliation of annuities return on equity to annuities return on equity, including va hedge results 1 Excludes AOCI.
Slide 103: Notable items reconciliation: income from operations
Notable Items reconciliation: Income from operations