Lincoln National Corporation · NYSE:LNC
Lincoln National — Q4 2023 Earnings Presentation
23 slides from Lincoln National's earnings presentation, Feb 8, 2024
Slide 1: 4Q23 Investor Outlook
©2024 Lincoln National Corporation February 8, 2024 4Q23 Investor Outlook
Slide 2: Forward-looking statement – cautionary language
2©2024 Lincoln National Corporation Forward-looking statement – 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 Ref
Slide 3: Forward-looking statement – cautionary language (continued)
3©2024 Lincoln National Corporation • A decline or continued volatility in the equity markets causing a reduction in the sales of our subsidiaries’ products; a reduction of asset-based fees that our subsidiaries charge on various investment and insurance products; and an increase in liabilities rela
Slide 4: Our message
4©2024 Lincoln National Corporation Our message Restoring value Strengthening the balance sheet Improving free cash flow Profitably growing
Slide 5: Our foundation
5©2024 Lincoln National Corporation Our foundation At-scale Retail and Workplace Solutions businesses with leading distribution1 Building on our competitive advantages Leading distribution At-scale Workplace Solutions A market leader in Retail Solutions • $5B+ in Group premiums • $100B+ in Retiremen
Slide 6: Executing on our strategy to achieve targeted outcomes
6©2024 Lincoln National Corporation Growth and distribution enablersStrategy Our businesses Executing on our strategy to achieve targeted outcomes Annuities Group Life Retirement • Grow our addressable market by extending reach to new segments and optimizing capabilities to bolster our competitivene
Slide 7: Our opportunity
7©2024 Lincoln National Corporation • RBC ratio • Leverage ratio • Expense ratios • Investment spread • Free cash flow conversion ratio • Return on capital • Life and disability premium and margins • Annuity and retirement account values and return on assets Our opportunity Long-term value creation
Slide 8: Illustrative timeline for strategic initiatives
8©2024 Lincoln National Corporation Illustrative timeline for strategic initiatives 2023 2024 2025 Foundational capital Reinsurance (external risk transfer) M&A/divestitures Deleveraging Optimized operating model Expense efficiency/process optimization programs General account optimization Reinsuran
Slide 9: Our future
9©2024 Lincoln National Corporation Our future A balanced mix with targeted growth in businesses and products with higher risk-adjusted returns and more stable cash flows 2023 2026 Outlook Longer Term Outlook Operating Income Earnings Mix1 RBC % (Total Capital/Risk-Based Capital) ~400 – 410% 420%+ 4
Slide 10: Income growth drivers
10©2024 Lincoln National Corporation Operating Income Growth Drivers 2023 Op Income1 3-Yr Op Income CAGR Outlook 2026 FCF Conversion Outlook Expected Free Cash Flow Improvement Drivers Annuities • General account optimization • Growth from new business • Market growth $1,060M 2 – 4% 65 – 75% • Affil
Slide 11: Our commitment
11©2024 Lincoln National Corporation 118 years Providing financial protection and security to our customers and their families $295B In end-of-period account balances, net of reinsurance 17M Customers across Retail and Workplace Solutions 10K+ Lincoln employees providing advice and solutions to empo
Slide 12: Appendix
12©2024 Lincoln National Corporation Appendix
Slide 13: 2024 outlook and key seasonality considerations
13©2024 Lincoln National Corporation 2024 outlook and key seasonality considerations Business 2024 Operating Income Outlook1 Q1 Seasonality Q2 Seasonality Q3 Seasonality Q4 Seasonality Annuities $1,000 – 1,200M • One less fee day • One less fee day • One additional fee day • One additional fee day G
Slide 14: Investment portfolio
14©2024 Lincoln National Corporation Investment portfolio High quality and well-diversified portfolio1 The portfolio is well-positioned • Long-term investment strategy is tightly aligned with our liability profile and positioned for various economic cycles – 97% investment grade, the portfolio is up
Slide 15: Commercial mortgage loan portfolio
15©2024 Lincoln National Corporation Commercial mortgage loan portfolio Conservatively positioned CML portfolio1 Overall CML exposure: • Disciplined portfolio construction delivering consistent loan performance – Virtually no credit losses since 2019 or current loan modifications • Robust surveillan
Slide 16: Approximate Fortitude Re impacts at close
16©2024 Lincoln National Corporation Approximate Fortitude Re impacts at close On November 17, 2023, we closed our reinsurance transaction with Fortitude Re. • Impacts at close – Under reinsurance accounting, annuity products require the ceded premium to be reflected as contra-revenue in "Insurance
Slide 17: Impacts at close and expected impacts for Q1 2024
17©2024 Lincoln National Corporation Impacts at close and expected impacts for Q1 2024 $M (approximate) Annuities Life Other Operations 4Q23 1Q24E Change 4Q23 1Q24E Change 4Q23 1Q24E Change Fee income $– $– $– $(40) $(90) $(50) $– $– $– Net investment income (30) (60) (30) (70) (155) (85) (5) (15) (
Slide 18: Non-GAAP financial measures appendix
18©2024 Lincoln National Corporation Non-GAAP financial measures appendix
Slide 19: Non-GAAP financial measures
19©2024 Lincoln National Corporation Non-GAAP financial measures Reconciliations of the following non-GAAP financial measures to the most directly comparable GAAP financial measures or calculations of such measures, as applicable, are presented herein beginning on slide 20. Adjusted income (loss) fr
Slide 20: Leverage Ratio
20©2024 Lincoln National Corporation Leverage Ratio Unaudited (millions of dollars) As of 12/31/23 Leverage Ratio Short-term debt $ 250 Long-term debt 5,699 Total debt (1) 5,949 Preferred stock 986 Total debt and preferred stock 6,935 Less: Operating debt (2) 867 25% of capital securities and subord
Slide 21: Reconciliation of Stockholders' Equity to Adjusted Stockholders' Equity
21©2024 Lincoln National Corporation Reconciliation of Stockholders’ Equity to Adjusted Stockholders’ Equity Unaudited (millions of dollars) As of 12/31/23 Stockholders’ Equity, End-of-Period Stockholders’ equity $ 6,893 Less: Preferred stock 986 AOCI (3,476) Stockholders’ equity, excluding AOCI and
Slide 22: Reconciliation of Holding Company Net Cash Provided by Operating Activities to Free Cash Flow
22©2024 Lincoln National Corporation Free Cash Flow Conversion Ratio Including Reconciliation of Holding Company Net Cash Provided by Operating Activities to Free Cash Flow Unaudited (millions of dollars) For the Year Ended 12/31/23 Holding company net cash provided by operating activities $ 398 Les
Slide 23: Reconciliation of Net Income to Adjusted Income from Operations
23©2024 Lincoln National Corporation Reconciliation of Net Income Available to Common Stockholders’ to Adjusted Income from Operations Available to Common Stockholders’ Unaudited (millions of dollars) 12/31/2023 Net income $ (752) Add: Preferred stock dividends declared (82) Adjustment for deferred