Lincoln National Corporation · NYSE:LNC
Lincoln National — Investor Day (June 2019)
102 slides from Lincoln National's investor day presentation, Jun 12, 2019
Slide 1: 2019 Conference for Analysts, Investors and Bankers
2019 Conference for Analysts, Investors and Bankers Jun 12, 2019 ©2019 Lincoln National Corporation
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
Forward-looking statements – Cautionary language • 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 interest rates
Slide 4: Strategic overview
2019 Conference for Analysts, Investors and Bankers Strategic overview Dennis Glass President and Chief Executive Officer June 12, 2019 This document may not be accurate after its date, and LNC does not undertake to update or keep it accurate after such date. ©2019 Lincoln National Corporation
Slide 5: A decade of strong results
A decade of strong results Durable ✓ Reliable and strong financial performance Target ~8-10% Differentiated ✓ Share price consistently outperforming peers Diversified ✓ All businesses contributing to our success Dependable ✓ Achieving strategic goals through management actions 5
Slide 6: Reliable and strong financial performance
Reliable and strong financial performance Adjusted operating EPS1 Adjusted operating ROE1 excluding AOCI $12 15% $9 12% $6 9% $3 6% $0 3% 2008 2018 2008 2018 1 See Appendix for a reconciliation of non-GAAP measures to their most comparable GAAP measures. 6
Slide 7: Share price consistently outperforming peers
Share price consistently outperforming peers Strong long-term share price performance 50% 30% 300% 40% 25% 225% 30% 20% 150% 20% 15% 75% 10% 10% 0% LNC Peers¹ LNC Peers¹ LNC Peers¹ 3-year 5-year 10-year 1 Source: FactSet, price as of 06/05/19. Peer group includes: AFL, AMP, AEG, CNO, MET, MFC, PFG,
Slide 8: All businesses contributing to our success
All businesses contributing to our success Retirement Plan Life Group Annuities Services Insurance Protection High-quality Differentiated high- Product breadth Leader in in-force block touch, high-tech model and scale all markets Consistently Record deposits Expanding sales where Positioned to outpa
Slide 9: Achieving strategic goals through management actions
Achieving strategic goals through management actions Pivot sales and ✓ Leveraging distribution expansion and growing product portfolio grow in attractive ✓ 77% of sales now without long-term guarantees1 U.S. markets ✓ All four businesses growing sales1 Increase percentage ✓ Driving margin improvemen
Slide 10: Expect to achieve adjusted operating EPS growth target
Durable | Differentiated | Diversified | Dependable Expect to achieve 8-10% adjusted operating EPS growth target1 Strategic Strength management actions of franchise 1 This represents earnings growth potential from the principal drivers of growth discussed later in this presentation. 10
Slide 11: Distribution
2019 Conference for Analysts, Investors and Bankers Distribution Will Fuller Executive Vice President, President, Annuities, Lincoln Financial Distributors and Lincoln Financial Network June 12, 2019 This document may not be accurate after its date, and LNC does not undertake to update or keep it ac
Slide 12: Distribution
Distribution Lincoln’s distribution is industry leading and a major competitive advantage • Distribution is run as a business and attracts top talent with defined career paths • Our model is valued by the largest distributors, yielding broad product shelf space • Distribution effectiveness and expan
Slide 13: New business is a key driver of targeted earnings growth
New business is a key driver of targeted earnings growth Half of our earnings growth target comes from net flows and premiums How we win All other Powerful distribution network contributors 4-5% Broad product portfolio Target 8-10% Net flows / Consistent market presence premiums 4-5% Attract and ret
Slide 14: Industry-leading franchises are valued by our partners
Industry-leading franchises are valued by our partners Multiple distribution franchises that focus on the fastest growing markets Wholesale Worksite Retail Lincoln Financial Group Protection and Lincoln Financial Distributors (LFD) Retirement Plan Services Network (LFN) 620 190 8,600 Wholesalers Who
Slide 15: Distribution is run as a business and offers career paths
Distribution is run as a business and offers career paths Fully integrated distribution model driving sales and expansion Manage within Channels of the a pricing allowable Sales force future development leadership Sales Sales training analytics and development Competitive Partner relationship intell
Slide 16: Wholesale and independent distribution offer multiple ways to win
Wholesale and independent distribution offer multiple ways to win Large and productive wholesale force reaches a broad independent adviser base across multiple channels 800+ wholesalers 92K active advisers ✓ Expanded sales force by ✓ 1/3 selling multiple 14% from 2017 to 2018 product types ✓ 32% inc
Slide 17: Effective management and activation of distribution capabilities
Effective management and activation of distribution capabilities Managing annuity wholesalers under Targeted approach to expand shelf space varying market conditions and reach new advisers 3 350 288 1 2 285 May 2018: Indexed VA launch 244 236 $13B $12B $8B $9B 20K Wholesalers target industry indexed
Slide 18: Well positioned to continue strong sales momentum
Well positioned to continue strong sales momentum Double-digit sales growth across all channels Insurance Independent Wirehouse + regional Banks brokerage broker dealers broker dealers +12% +33% +13% +13% vs. 2016 vs. 2016 vs. 2016 vs. 2016 ✓ Expanded shelf ✓ Launched new ✓ Increased sales space par
Slide 19: Investing in new distribution channels to drive long-term growth
Investing in new distribution channels to drive long-term growth Expanding the reach of our distribution system to enter new and growing markets Registered investment Term insurance Direct-to-consumer wealth advisors (RIA) digital aggregators management Growing channel for annuities that Captures pr
Slide 20: Distribution
Distribution • Distribution is run as a business and attracts top talent with defined career paths • Our model is valued by the largest distributors, yielding broad product shelf space • Distribution effectiveness and expansion offers multiple ways to win and room to grow Retirement Plan Investment
Slide 21: Group Protection
2019 Conference for Analysts, Investors and Bankers Group Protection Dick Mucci Executive Vice President, President, Group Protection June 12, 2019 This document may not be accurate after its date, and LNC does not undertake to update or keep it accurate after such date. ©2019 Lincoln National Corpo
Slide 22: Group Protection
Group Protection Market-leading franchise positioned to deliver strong, profitable growth • Our Liberty acquisition is creating sustainable competitive advantages, including scale and diversification of our book of business • We are capitalizing on significant top-line opportunities: in addition to
Slide 23: Drivers of Group Protection earnings growth
Drivers of Group Protection earnings growth Long-term growth potential of 7-9%1 18-20% (14)-(12)% 1-3% 0% 0% Target 7-9% New In-force Loss ratio / expense Equity market Spread Earnings business management growth compression growth Near-term considerations: Favorable claims and expenses provide signi
Slide 24: Financial results of the acquisition integration exceeding expectations
Financial results of the acquisition integration exceeding expectations What we said1 What we delivered1 Significant re-pricing needed ✓ $1.4B of premium renewed as of year-end 2018 with 7% rate increase on old Liberty ✓ Favorable renewal persistency book of business ✓ 7% additional after-tax margin
Slide 25: Sustainable competitive advantages drive incremental growth
Sustainable competitive advantages drive incremental growth Premium growth expectations ahead of industry ~4% 5-7% Lincoln’s long-term Industry growth1 growth expectation Three key strategic objectives Fortify disability and Serve employers Pursue the leave management of all sizes employee-paid mark
Slide 26: Industry leader in disability and leave management
Industry leader in disability and leave management Differentiating Proprietary Expertise in claims management clinical model leave management Rapidly growing employee coverage1 Leverage professional medical 3.0M 1,800 claims staff expertise to evaluate claims 2.3M 2.0M 5 claims centers 1.7M 135 cons
Slide 27: Distribution expertise and partnerships drive growth across all markets
Distribution expertise and partnerships drive growth across all markets Competitive large-scale distribution Deep partnerships with 7K+ employee benefits brokers 170+ sales reps segmented by region, partner and employer size Broker segment % of total sales1 Who they are Top 3 Mercer, AON, and 140+ a
Slide 28: Current employer customers are an important source of new sales
Current employer customers are an important source of new sales 54% of our 5K+ sized 18% of our <1K sized 2% of existing customers have Accident customers have Group Life1 customers have Dental1 and/or Critical Illness1 Customers average ~2 of our products; goal is to increase to ~31 Enhanced premiu
Slide 29: Capitalize on fast-growing employee-paid market
Capitalize on fast-growing employee-paid market Employee-paid is fastest growing industry segment with major need among employees 7% 3% 1% 42% of adults have no emergency savings2 Total market Employer-paid Employee-paid 53% do not feel prepared for an unexpected healthcare cost2 Industry premium gr
Slide 30: Operating efficiencies to drive further margin expansion
Operating efficiencies to drive further margin expansion Continued expense ratio improvement1 ~2% ~2% ~$75M in Near-term goal to move run-rate from median to +~$80M in expense run-rate 1st quartile savings expense industry expense performance savings 2017 pro-forma 2 2018 actual Near-term expectatio
Slide 31: Sustaining profitable growth momentum
Sustaining profitable growth momentum Rational marketplace eases competitive pressures Consistent mid-single digit industry growth | Consolidation driving stability with fewer players Lincoln is well-positioned to navigate changes Business plan Scale and Enhanced assumes claims diversification prici
Slide 32: Group Protection
Group Protection • The Liberty acquisition is creating sustainable competitive advantages, including scale and diversification of our book of business • We are capitalizing on significant top-line opportunities: in addition to acquiring new customers, we are cross-selling to an expanded book of busi
Slide 33: Life Insurance
2019 Conference for Analysts, Investors and Bankers Life Insurance Randy Freitag Executive Vice President, Chief Financial Officer and Head of Individual Life June 12, 2019 This document may not be accurate after its date, and LNC does not undertake to update or keep it accurate after such date. ©20
Slide 34: Life Insurance
Life Insurance Industry-leading life insurance franchise with scale • Product breadth and distribution allowing us to protect and expand market reach • Disciplined financial management enabling us to overcome industry headwinds • Investing in select and attractive markets where we are underrepresent
Slide 35: Drivers of Life Insurance earnings growth
Drivers of Life Insurance earnings growth Long-term growth potential of 4-6%1 9-10% (5)-(4)% 0-2% 0% (2)-0% Target 4-6% New In-force Margin / expense Equity Spread Earnings business management market growth compression growth Near-term considerations: Spread compression and potential increase in rei
Slide 36: Unparalleled ability to grow
Unparalleled ability to grow #1 seller of life insurance among public companies1 • Supported by a powerful network of 250+ wholesalers accessing 65 thousand advisers • Backed by a broad product portfolio • Proven ability to innovate and leverage scale to protect and expand our market presence Delive
Slide 37: Highlighting our ongoing attention to key industry trends
Highlighting our ongoing attention to key industry trends Mortality consistently in line with our annual expectations Actual/expected ratio 100% 2013 2014 2015 2016 2017 2018 Actual results ▪ Within +/- 1% of expected Takeaways on our experience managing our in-force1 Mortality ✓ Emerging company an
Slide 38: Expense efficiency driving tangible results
Expense efficiency driving tangible results Expense growth Operating revenue growth 2018 5Y CAGR 2018 5Y CAGR Driving efficiency by growing expenses at a slower rate than revenues +2% +6% Reducing expense ratio1 Centralize cross-functional activities Business-wide cost controls 8.1% ✓ Valuation and
Slide 39: Delivering earnings growth and strong operating margin
Delivering earnings growth and strong operating margin Management actions have overcome headwinds resulting in an industry-leading operating margin Headwinds diminishing Operating margin after a period of industry- above peers wide pressure Pre-tax growth in operating income1 Strong operating margin
Slide 40: Positioning to deliver business growth
Positioning to deliver business growth Focus Evolving and expanding Delivering a lower cost Increasing margin from product development underwriting model enhanced data insights Increasing speed to reprice products, Expanding automated underwriting Utilizing advanced analytics to optimize reducing ti
Slide 41: Poised to deliver additional sales growth
Poised to deliver additional sales growth Protecting our leadership position1 Hybrid Variable UL Industry $400M 8% $825M 4% Size 5Y CAGR size 5Y CAGR 53% share #1 rank 33% share #1 rank Lincoln’s positioning, Leverage innovation to penetrate Grow in $465M protection market, opportunity 10K boomers r
Slide 42: Life Insurance
Life Insurance • Product breadth and distribution allowing us to protect and expand market reach • Disciplined financial management enabling us to overcome industry headwinds • Investing in select and attractive markets where we are underrepresented to drive growth Retirement Plan Investment Financi
Slide 43: Retirement Plan Services
2019 Conference for Analysts, Investors and Bankers Retirement Plan Services Jamie Ohl Executive Vice President, President, Retirement Plan Services, Head of Life and Annuity Operations June 12, 2019 This document may not be accurate after its date, and LNC does not undertake to update or keep it ac
Slide 44: Retirement Plan Services
Retirement Plan Services Our strategy is delivering success and driving profitable growth • Our high-touch, high-tech, digitally-focused model creates a competitive advantage in our target markets, and positions us to continue to outperform the industry • Capitalizing on product innovation and custo
Slide 45: Drivers of Retirement Plan Services earnings growth
Drivers of Retirement Plan Services earnings growth Long-term growth potential of 8-10%1 3-5% (2)-0% Target 8-10% 5-7% (3)-(1)% 1-3% New In-force Margin / expense Equity market Spread Earnings business improvement growth compression growth Near-term considerations: Further spread compression partial
Slide 46: Our high-touch, high-tech model is key to our success
Our high-touch, high-tech model is key to our success One-on-one support Growing assets faster More than 150 Retirement Consultants and Relationship Managers than the industry Click2Meet® 10% Web-based tool increases access to on-site representatives 8% High-touch (2012 – 2017) 5Y CAGR Omni-channel
Slide 47: Growing and retaining assets in our target markets
Growing and retaining assets in our target markets Succeeding in markets that value our model Target markets 89% ✓Healthcare ✓Corporate (small and mid/large) ✓Government All other 2014-2018 sales Successful model drives Proven ability recurring deposit growth to retain business Termination rate $5.6
Slide 48: Distribution expertise fueling sales growth across all markets
Distribution expertise fueling sales growth across all markets Expanding reach and strength of distribution Record sales driving success enabling us to win across case sizes1 across target markets1 $4.5B +45% +33% $2.3B in wholesaler in number of productivity wholesalers Balanced mix of sales by cas
Slide 49: Innovative products and services that drive outcomes
Innovative products and services that drive outcomes Majority of deposits going into target date funds $1.4T 54% 89% of industry $0.6T of proposals now include deposits go YourPath®, Lincoln’s new into target date proprietary alternative to funds annually1 2013 2017 target date funds Growth in targe
Slide 50: Expanding stable value business through investment-only sales
Expanding stable value business through investment-only sales Stable Value meets a market need for Success built on ability to leverage capital preservation Lincoln’s strengths 80% of boomers say it’s ✓ Distribution and strategic relationships important to protect ✓ Disciplined approach to pricing a
Slide 51: Growing earnings through profitable actions
Growing earnings through profitable actions Digital efficiencies and In-force expense management optimization • Re-engineering processes to streamline • Restricting inflows to high GMIR blocks operations • Repricing business to lower crediting rates, • Leveraging technology to increase scalability i
Slide 52: Management actions driving success across leading growth indicators
Management actions driving success across leading growth indicators Success in driving deposit growth and improving retention leading to record net flows 8% CAGR in deposits Strong growth in net flows $10.1B in 2018 $2.5B vs. $6.8B in 2013 $1.4B $0.7B 160bps improvement in $0.5B withdrawal rates (%
Slide 53: Retirement Plan Services
Retirement Plan Services • Our high-touch, high-tech, digitally-focused model creates a competitive advantage in our target markets, and positions us to continue to outperform the industry • Capitalizing on product innovation and customer experience capabilities to drive both top-line opportunities
Slide 54: Annuities
2019 Conference for Analysts, Investors and Bankers Annuities Will Fuller Executive Vice President, President, Annuities, Lincoln Financial Distributors and Lincoln Financial Network June 12, 2019 This document may not be accurate after its date, and LNC does not undertake to update or keep it accur
Slide 55: Annuities
Annuities Our business model delivers consistent and impressive results through a disciplined approach to the business • Expansion into new markets strengthens franchise and builds net flows • High-quality book of business forged by a strategy of growing on our terms • Industry-leading risk manageme
Slide 56: Drivers of Annuities earnings growth
Drivers of Annuities earnings growth Long-term growth potential of 6-8%1 10-12% (10)-(8)% 3-5% 0% Target 6-8% 0-2% New In-force Margin / expense Equity market Spread Earnings business improvement growth compression growth Near-term considerations: None2 Sensitivities 1% change in equity markets ~$9M
Slide 57: Our target market is poised for continued growth
Our target market is poised for continued growth We target the fastest growing age cohort with the most money to invest Currently By 2026 112M 75% of 95M $32 trillion investable assets investable assets are owned by will be held by those Americans ages 55+1 2018 2030 near or in retirement3 U.S. popu
Slide 58: Formula for operating the business successfully
Formula for operating the business successfully Broad Disciplined product product pricing portfolio Invest in powerful Prudent distribution assumption setting Consistent presence Industry-leading through cycles hedge program Management actions result in high-quality book of business 58
Slide 59: Delivering on commitment to grow
Delivering on commitment to grow 2018 strategic management actions Grow market share on our terms Became a market leader in FA 10Y market share range1 fixed indexed annuities 1% 2017 2018 5% Entered the fast-growing VA 10Y market share range1 indexed variable annuity market 6% 2017 2018 12% Expanded
Slide 60: Dependable financial results for a decade
Dependable financial results for a decade 15% CAGR in operating income $1,200M $900M $600M $300M $0M 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 22% average ROE1 32bp increase in ROA1 60% 90bps 40% 75bps 20% 60bps ~20% if including variable annuities hedge results2 0% 45bps 2009 2010 2011 2012
Slide 61: Our high-quality book is a strategic advantage
Our high-quality book is a strategic advantage Net amount at risk consistently below peer average 9% Guaranteed living benefit as a % of account value 6% 6% net amount at risk 3% 4% 2% 1% 1% 0% 0% 2014 2015 2016 2017 2018 LNC Peer average¹ History of modest and favorable annual unlocking impacts dif
Slide 62: History of diligently setting assumptions
History of diligently setting assumptions VA statutory assumption changes are not expected to materially impact results Assume more policies will stay in-force… …and everyone will use their benefit 100% 100% % of population on income2 % of population in-force1 50% 50% 0% 0% 0 55 10 10 1515 2020 0 55
Slide 63: Economic value is strong and growing
Economic value is strong and growing Successful execution results in attractive annuity block under various scenarios Economic value under baseline Continue to generate positive economic scenario has grown value under adverse scenario $12B $6B $6B $11.7B $3B $9.9B $4.4B $4.6B $0B $0B 4Q16 1Q19 4Q16
Slide 64: Consistently outperforming asset managers
Consistently outperforming asset managers Variable annuities offer a unique protection overlay making them an attractive investment Positive net flows Higher persistency Outperforming fee structure Average 2009-2018 Average 2009-2018 300bps LNC VA outflow rate LNC VA 200bps +1% 7-9% 100bps Equity mu
Slide 65: Annuities
Annuities • Expansion into new markets strengthens franchise and builds net flows • High-quality book of business forged by a strategy of growing on our terms • Industry-leading risk management program optimizes economic value Retirement Plan Investment Financial Distribution Group Protection Life I
Slide 66: Investment portfolio
2019 Conference for Analysts, Investors and Bankers Investment portfolio Ellen Cooper Executive Vice President and Chief Investment Officer June 12, 2019 This document may not be accurate after its date, and LNC does not undertake to update or keep it accurate after such date. Special note: All info
Slide 67: Investment portfolio
Investment portfolio Lincoln’s unique investment approach is structured to deliver strong results in both steady and shifting markets • Lincoln’s multi-manager framework enables expanded sourcing, enhanced risk management, and lower investment management fees • Achieving strong new money yields from
Slide 68: Lincoln's investment philosophy
Lincoln’s investment philosophy Our retail-focused business model does not depend on taking excess credit or duration risk to drive sales or earnings growth Disciplined ALM drives Diligent portfolio Active credit risk investment strategy construction management framework • Asset duration managed to
Slide 69: Lincoln's multi-manager framework
Lincoln’s multi-manager framework Lincoln External managers ✓ Investment strategy ✓ Security selection ✓ Portfolio construction ✓ Independent fiduciaries for Lincoln ✓ Risk management ✓ Multiple manager views ✓ Manager selection ✓ Broad and diversified sourcing Increased sourcing across Managing ris
Slide 70: Multiple strategies contributing to additional new money spread
Multiple strategies contributing to additional new money spread Consistently picking Diversifying the purchase Maintaining high- up additional spread mix with less liquid assets quality purchases 5% New 100% 100% Less money 8% 3% 3% BIG liquid yield 12% Structured strategies 4.1% 17% 4% 15% Privates
Slide 71: Relative value in less liquid strategies while maintaining risk discipline
Relative value in less liquid strategies while maintaining risk discipline New money investment strategy Asset class Yield pickup1 Areas of focus Defense as offense ✓ Diversified sourcing across geography and property type with Mortgage emphasis on industrial and ✓ No construction or bridge loans +3
Slide 72: Fixed income portfolio yield decline continues to moderate
Fixed income portfolio yield decline continues to moderate Average annual decline in fixed income portfolio yield 2012 to 2018 2019 to 2021 2022 to 2025 -13bps -7bps -3bps 6.0% 6.0% 5.5% 5.4% 5.0% 4.9% 4.6% 4.5% 4.2% 4.0% 4.0% 3.5% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 202
Slide 73: Diversified alternatives strategy delivering strong results
Diversified alternatives strategy delivering strong results1 Alternatives annualized return of 10% since 2013 Alternatives portfolio by strategy Private equity portfolio by industry ↑ Increased Consumer Other Staples 2% infrastructure 5% from 0% to 7%2 ↓ Reduced hedge funds Materials from 38% to 12%
Slide 74: Shifting the asset mix and maintaining high-quality
Shifting the asset mix and maintaining high-quality Strategically shifting asset mix1 Maintaining high-quality mix1 $107B invested assets A- overall average rating ↑ Increased consumer non-cyclical by 2%3 Consumer non- 4% cyclical BBB+ Financials 13% ↑ Increased 13% mortgage Mortgage loans by 5%3 Ut
Slide 75: Diligent BBB portfolio construction
Diligent BBB portfolio construction NAIC Public corporate Public corporate NAIC 22 ratings ratings by notch BBB- by outlook 100% 4% BIG 13% BBB+ 75% 43% NAIC 2 34% Public 15% BBB 80% 5% Positive / Stable 6% BBB- 1% Negative Total rated assets1 9% Private 50% Private BBB debt has 80% of the BBB- hold
Slide 76: Positioning the portfolio to prepare for the next credit cycle
Positioning the portfolio to prepare for the next credit cycle1 De-risking drove sales of ~$4B since 2015 across all ratings notches Reducing exposures that have a Proactively 18% 1NAIC 1 greater risk of deterioration in a de-risking credit cycle 48% 2NAIC 2 34% 3BIG Below investment grade exposure
Slide 77: Investment portfolio
Investment portfolio • Lincoln’s multi-manager framework enables expanded sourcing, enhanced risk management, and lower investment management fees • Achieving strong new money yields from diversified strategies that continue to moderate portfolio yield decline • Proactively de-risking now while main
Slide 78: Financial overview
2019 Conference for Analysts, Investors and Bankers Financial overview Randy Freitag Executive Vice President, Chief Financial Officer and Head of Individual Life June 12, 2019 This document may not be accurate after its date, and LNC does not undertake to update or keep it accurate after such date.
Slide 79: Financial overview
Financial overview Continued financial success by balancing growth, capital return and balance sheet strength • Durable, dependable and differentiated financial performance • Investing in the business to support growth and returning capital to shareholders • Fortified balance sheet and risk manageme
Slide 80: Durable and dependable over multiple time periods
Durable and dependable over multiple time periods Multiple contributors to strong financial performance 2018 3-year 5-year 10-year Growing the top line $16.5B 6% 6% 5% CAGR in adjusted operating revenue1 Disciplined expense management 11.6% 11.5% 12.0% 16.8% G&A expenses as a % of adjusted operating
Slide 81: Differentiated financial results
Differentiated financial results EPS growth and earnings quality consistently ahead of peers Double-digit growth Limited in adjusted operating EPS below-the-line impacts 12% 11% 100% adjusted operating income (5Y average 2014-2018) 92% Net income as % of 9% 90% 5Y EPS CAGR (2014-2018) 6% 6% 80% 73%
Slide 82: Differentiated financial results
Differentiated financial results Strong performance in key stakeholder metrics BVPS CAGR 2X peers ROE expansion 30bps greater than peers 200 Change in adjusted operating 8% CAGR ROE ex AOCI (bps) LNC¹ 150 (2013-2018) 100 4% CAGR 140bps Peers² 50 110bps 0 0% 5% 10% 15% LNC¹ Peers² Range of annual BVP
Slide 83: Remain focused on balancing growth and returning capital
Remain focused on balancing growth and returning capital Investing in growth at targeted returns and consistently returning capital to shareholders $2.5B • Capital generation continues to grow Opportunistic • Capital deployment historically balanced $160M buybacks1 $2.0B – Supporting growth in futur
Slide 84: Strong history of capital management
Strong history of capital management Shares repurchased Consistently increased common since peak share count1 stock dividend since the crisis $1.50 $1.00 42% of shares or $5.5B $0.50 $0.00 2010 2019E Recently executed two key transactions to boost shareholder value Group benefits ✓ Gained leadership
Slide 85: Demonstrated willingness to accelerate buybacks opportunistically
Demonstrated willingness to accelerate buybacks opportunistically Consistent share repurchases while remaining flexible around opportunities or changes in the environment Fixed annuity reinsurance $600M transaction $500M Life reinsurance $400M recapture Opportunistic given share price $300M Less cap
Slide 86: Much better prepared for economic headwinds
Much better prepared for economic headwinds 2008 1Q19 Comments Holding • Moved from short-term borrowing to $(602)M $481M minimum cash buffer of $450M company cash Capital • Strong free-cash-flow generation Statutory capital $5.1B ~$9.6B • Additional capital resources via credit facility RBC ratio 3
Slide 87: Strong balance sheet supports ability to withstand significant stress
Strong balance sheet supports ability to withstand significant stress Stress-testing scenarios All scenarios enable us to Maintain financial Equity markets S&P 500 down 30-40% strength ratings US10YT down to 1.0% or Not need to Interest rates up to 7.5% raise equity capital Credit 1 in 100 event Pre
Slide 88: Well positioned to deliver strong financial results
Well positioned to deliver strong financial results Changes to underlying drivers, but continue to target long-term annual adjusted operating EPS growth of 8-10%1 2-3% Target 2-3% (2)-0% 8-10% 4-5% 0-1% Net flows / Margin / expense Equity market Spread Share Targeted EPS premiums improvement growth
Slide 89: Financial overview
Financial overview • Durable, dependable and differentiated financial performance • Investing in the business to support growth and returning capital to shareholders • Fortified balance sheet and risk management framework while well positioned for strong financial results to continue Retirement Plan
Slide 90: Appendix
2019 Conference for Analysts, Investors and Bankers Appendix This document may not be accurate after its date, and LNC does not undertake to update or keep it accurate after such date. ©2019 Lincoln National Corporation
Slide 91: Investor Relations contact
Investor Relations contact Chris Giovanni: Senior Vice President, Corporate Treasurer Phone: 484.583.1793 Email: Christopher.Giovanni@LFG.com 91
Slide 92: Non-GAAP measures and definitions
Non-GAAP measures and definitions Management believes that adjusted income from operations (adjusted operating income), adjusted operating return on equity, adjusted operating revenues, and adjusted operating EPS better explain the results of the company’s ongoing businesses in a manner that allows
Slide 93: Non-GAAP measures and definitions
Non-GAAP measures and definitions Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity (including and excluding average goodwill within average equity), excluding AOCI, using annualized adjusted income (loss) from operations are financial measur
Slide 94: Non-GAAP measures and definitions
Non-GAAP measures and definitions Adjusted operating revenues Adjusted 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; • Amort
Slide 95: Non-GAAP measures and definitions
Non-GAAP measures and definitions Definition of notable items Adjusted 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 highlighting notable items inclu
Slide 96: Non-GAAP measures and definitions
Non-GAAP measures and definitions Sales Sales as reported consist of the following: • Annuities – deposits from new and existing customer • MoneyGuard® – 15% of total expected premium deposits; • Universal life (UL), indexed universal life (IUL), variable universal life (VUL) – first-year commission
Slide 97: Non-GAAP measures and definitions
Non-GAAP measures and definitions Economic value assumptions (Slide 10 of Annuities presentation) • Economic value is the present value of future cash flows. LNC values based on in-force book of business as of 3/31/19. The baseline scenario assumes 5% separate account growth, before all charges and
Slide 98: Reconciliation of net income to adjusted income from operations
Reconciliation of net income to adjusted income from operations (in millions, except per share data) For the Year Ended December 31, 2008 2013 2014 2015 2016 2017 2018 Total Revenues $ 9,251 $ 11,969 $ 13,554 $ 13,572 $ 13,330 $ 14,257 $ 16,424 Less: Excluded realized gain (loss) (551) (273) (165) (
Slide 99: Reconciliation of book value per share
Reconciliation of book value per share (in millions, except per share data) As of December 31, 2013 2014 2015 2016 2017 2018 Book value per share, including AOCI $ 51.17 $ 61.35 $ 55.85 $ 63.97 $ 79.43 $ 69.71 Per share impact of AOCI 5.94 12.06 3.47 6.92 14.81 1.98 Book value per share, excluding A
Slide 100: Reconciliation of return on average equity
Reconciliation of return on average equity (in millions, except per share data) For the Year Ended December 31, 2008 2013 2018 Average Equity Average equity, including AOCI $ 9,128 $ 13,945 $ 15,517 Average AOCI (1,122) 2,477 1,602 Average equity, excluding AOCI $ 10,250 $ 11,468 $ 13,915 ROE, Inclu
Slide 101: Reconciliation of annuities return on equity to pro-forma return on equity
Reconciliation of annuities return on equity to annuities pro-forma return on equity (dollars in millions) For the Year Ended December 31, 2009 2010 2011 2012 2013 Average equity including goodwill 1 2,719 2,711 2,954 3,493 3,451 Income from operations 324 471 573 595 750 Return on average equity -
Slide 102: Notable Items reconciliation: Adjusted income from operations and adjusted operating EPS
Notable Items reconciliation: Adjusted income from operations and adjusted operating EPS (dollars in millions, except per share data) For the Year Ended December 31, 2008 2013 2014 2015 2016 2017 2018 Adjusted operating EPS $ 2.89 $ 5.03 $ 6.03 $ 5.46 $ 6.50 $ 7.79 $ 8.48 Notable items: Tax adjustme