AM Best Affirms Credit Ratings of Lincoln National Corporation and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” (Superior) of The Lincoln National Life Insurance Company and its wholly owned subsidiary, Lincoln Life & Annuity Company of New York (Syracuse, NY). These companies are the key/life health insurance subsidiaries of Lincoln National Corporation (LNC) (headquartered in Radnor, PA) and are referred to collectively as Lincoln Financial Insurance Group (Lincoln).

Additionally, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” (Excellent) of First Penn-Pacific Life Insurance Company (FPP). Concurrently, AM Best has affirmed the Long-Term ICR of “a-” (Excellent) and Long- and Short-Term Issue Credit Ratings (Long-Term ICR; Short-Term IR) of LNC. The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Fort Wayne, IN, unless otherwise specified. (Please see below for a detailed listing of the Long-and Short-Term IRs.)

The ratings of Lincoln reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and very strong enterprise risk management. Lincoln’s risk-adjusted capital is assessed as strong, as measured by Best’s Capital Adequacy Ratio (BCAR). Although Lincoln increased its capital level in the review period, it is constrained by dividend payments to the parent company to fund shareholder dividends and share buybacks. AM Best’s view on the company’s capital is somewhat tempered due to its use of captives and external reinsurance for its XXX and AXXX reserves. Mitigating these factors are Lincoln’s diverse, high-quality general account portfolio, which is managed by internal and external portfolio managers. The portfolio grew and performed sufficiently during the year. Additionally, financial and operating leverage metrics, along with strong interest coverage, are within guidelines for the ratings. At the holding company level, LNC maintains significant balance sheet liquidity with additional financial flexibility through its access to capital markets.

Operating earnings in 2021 were favorable on a GAAP basis. Lincoln reported net income of $1.41 billion compared with approximately $500 million in 2020. Additionally, Lincoln experienced growth in all product segments with the exception of group life as the segment was impacted by unfavorable mortality related to COVID-19. Lincoln’s diverse product offering and its ability to launch consumer-centric products allows the company to maintain strong positions in its core markets.

The ratings of FPP reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and very strong enterprise risk management. The subsidiary performs as expected and is in line with the profile of a company in runoff.

The following Long-Term IRs have been assigned with a stable outlook:

Lincoln National Corporation—

-- “bbb+” (Good) on $562,034,000 million LIBOR + 236 bps subordinated notes, due 2066

-- “bbb+” (Good) on $432,743,000 million LIBOR + 204 bps subordinated notes, due 2067

The following Long-Term IRs have been affirmed with stable outlooks:

Lincoln National Corporation—

-- “a-” (Excellent) on $500 million 4.00% senior unsecured notes, due 2023

-- “a-” (Excellent) on $300 million 3.35% senior unsecured notes, due 2025

-- “a-” (Excellent) on $400 million 3.625% senior unsecured notes, due 2026

-- “a-” (Excellent) on $500 million 3.8% senior unsecured notes, due 2028

-- “a-” (Excellent) on $500 million 3.05% senior unsecured notes, due 2030

-- “a-” (Excellent) on $500 million 3.40% senior unsecured notes, due 2031

-- “a-” (Excellent) on $300 million 3.40% senior unsecured notes, due 2032

-- “a-” (Excellent) on $500 million 6.15% senior unsecured notes, due 2036 ($243 million outstanding)

-- “a-” (Excellent) on $375 million 6.30% senior unsecured notes, due 2037

-- “a-” (Excellent) on $500 million 7.00% senior unsecured notes, due 2040

-- “a-” (Excellent) on $450 million 4.35% senior unsecured notes, due 2048

-- “a-” (Excellent) on $300 million 4.375% senior unsecured notes, due 2050

-- “bbb” (Good) on $800 million LIBOR + 236 bps junior subordinated capital securities, due 2066 ($160 million outstanding)

-- “bbb” (Good) on $500 million LIBOR + 204 bps junior subordinated capital securities, due 2067 ($58 million outstanding)

The following Short-Term IR has been affirmed:

Lincoln National Corporation—

-- AMB-1 (Outstanding) on commercial paper

The following indicative Long-Term IRs on securities available under a universal shelf registration have been affirmed with stable outlooks:

Lincoln National Corporation—

-- “a-” (Excellent) on senior unsecured notes

-- “bbb+” (Good) on subordinated notes

-- “bbb” (Good) on preferred stock

-- “bbb” (Good) on junior subordinated notes

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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