Lincoln Financial Group



Table of Contents







Analyst Coverage and Credit Ratings



Notes



Consolidated



Consolidated Statements of Income (Loss)



Consolidated Balance Sheets



Earnings, Shares, and Return on Equity



Key Stakeholder Metrics



Segment and Sources of Earnings



Select Earnings Drivers By Segment



Sales By Segment



Operating Revenues and General and Administrative Expenses By Segment



Operating Commissions and Other Expenses



Interest Rate Yields and Spreads By Segment



Select Earnings and Operational Data from Business Segments



Annuities



Retirement Plan Services



Life Insurance



Group Protection



Other Operations



DAC & Account Value Rollforwards



Consolidated DAC, VOBA, DSI and DFEL Roll Forwards



Account Value Roll Forwards:



Annuities



Retirement Plan Services



Life Insurance



Other Information



Select Investment Data



Realized Gain (Loss) and Benefit Ratio Unlocking, After-DAC



Select Non-GAAP to GAAP Reconciliations













Lincoln Financial Group



Analyst Coverage







Firm

Analyst

Phone Number



Bank of America Merrill Lynch

Seth Weiss

646-855-3783



Barclays Capital

Jay Gelb

212-526-1561



Citi Research

Erik Bass

212-816-5257



Deutsche Bank

Yaron Kinar

212-250-7927



Dowling & Partners

Humphrey Lee

860-676-7324



FBR Capital Markets

Randy Binner

703-312-1890



Goldman Sachs

Michael Kovac

212-902-2303



J.P. Morgan Securities

Jimmy Bhullar

212-622-6397



Janney Montgomery Scott

Bob Glasspiegel

860-724-1203



Keefe, Bruyette and Woods

Ryan Krueger

860-722-5930



Macquarie Capital

Sean Dargan

212-231-0663



Morgan Stanley

Nigel Dally

212-761-4132



Piper Jaffray

John Nadel

212-284-6123



Raymond James and Associates

Steven Schwartz

312-612-7686



RBC Capital

Eric Berg

212-618-7593



Sandler O’Neill & Partners, L.P.

John Barnidge

312-281-3412



UBS

Suneet Kamath

212-713-1355



Wells Fargo Securities

John Hall

212-214-8032





This list is provided for informational purposes only.  Lincoln Financial Group does not endorse the analyses, conclusions or recommendations contained in any report issued by these



or any other analysts.



Ratings as of May 4, 2016



Standard



A.M Best

Fitch

Moody's

& Poor's



Senior Debt Ratings

a-

BBB+

Baa1

A-



Financial Strength Ratings



Lincoln National Life Insurance Company

A+

A+

A1

AA-



First Penn-Pacific Life Insurance Company

A

A+

A1

A-



Lincoln Life & Annuity Company of New York

A+

A+

A1

AA-





Investor Inquiries May Be Directed To:



Chris Giovanni, Senior Vice President, Investor Relations



Email:  Christopher.Giovanni@lfg.com



Phone:  484-583-1793



Page 1





Lincoln Financial Group



Notes







Computations



The quarterly financial information for the current year may not sum to the corresponding year-to-date amount as both are rounded to millions.



The financial ratios reported herein are calculated using whole dollars instead of dollars rounded to millions.



If the effect of equity classification would result in a more dilutive Earnings Per Share (“EPS”), 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.  In addition, for any period where a loss from continuing operations is experienced, shares used in the diluted  EPS



calculation represent basic shares, as using dilutive shares would be anti-dilutive to the calculation.  In these periods, we would also exclude the deferred compensation adjustment.



Return on equity (“ROE”) measures how efficiently we generate profits from the resources provided by our net assets.  ROE is calculated by dividing annualized net income (loss) (or



income (loss) from operations) by average equity, excluding accumulated other comprehensive income (loss) (“AOCI”).  Management evaluates consolidated ROE by both including



and excluding the effect of average goodwill.



Book value per share, excluding AOCI, is calculated by dividing stockholders’ equity, excluding AOCI, by common shares outstanding.  We provide book value



per share, excluding AOCI, to enable investors to analyze the amount of our net worth that is attributable primarily to our business operations.



Pre-tax net margin is calculated by dividing income (loss) from operations before taxes by net revenue, which is defined as total operating revenues less interest credited.





Definitions



Holding company available liquidity consists of cash and invested cash, excluding cash held as collateral, and certain short-term investments that can be readily converted into cash, net of



commercial paper outstanding.





Sales as reported consist of the following:



•  MoneyGuard®, our linked-benefit product – 15% of total expected premium deposits;



•  Universal life (“UL”), indexed universal life ("IUL"), variable universal life (“VUL”) – first year commissionable premiums plus 5% of excess premiums received, including an adjustment



     for internal replacements of approximately 50% of commissionable premiums;



•  Executive Benefits - single premium bank-owned UL and VUL, 15% of single premium deposits, and corporate owned UL and VUL, first year commissionable premiums plus



      5% of excess premium received, including an adjustment for internal replacements of approximately 50% of commissionable premiums;



•  Term – 100% of annualized first year premiums;



•  Annuities – deposits from new and existing customers; and



•  Group Protection – annualized first year premiums from new policies.





Throughout the document, “after-DAC” refers to the associated amortization expense of deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), deferred sales



inducements (“DSI”) and deferred front-end loads (“DFEL”) and changes in other contract holder funds.





Sources of Earnings are defined as follows:



•  Investment spread earnings consist primarily of net investment income, net of interest credited earned on the underlying general account investments supporting our fixed products



  less related expenses.



•  Mortality/morbidity earnings result from mortality margins, morbidity margins, and certain expense assessments and related fees that are a function of the rates priced into the product



  and level of insurance in force.



•  Fees on Assets Under Management (“AUM”) earnings results consist primarily of asset-based fees charged based on variable account values less associated benefits and related expenses.



•  Variable Annuity (“VA”) Riders earnings consist of fees charged to the contract holder related to guaranteed benefit rider features, less the net valuation premium and associated change in



  benefit reserves and related expenses.



Page 2a





Lincoln Financial Group



Notes







Non-GAAP Performance Measures





Non-GAAP measures do not replace the most directly comparable GAAP measures, and we have included detailed reconciliations herein.





We exclude the after-tax effects of the following items from GAAP net income (loss) to arrive at income (loss) from operations:



•  Realized gains and losses associated with the following (“excluded realized gain (loss)”):



▪  Sales or disposals and impairments of securities;



▪  Changes in the fair value of derivatives, embedded derivatives within certain reinsurance arrangements and trading securities (“gain (loss) on the mark-to-market on certain



  instruments”);



▪  Changes in the fair value of the derivatives we own to hedge our guaranteed death benefit (“GDB”) riders reflected within our variable annuities;



▪  Changes in the fair value of the embedded derivatives of our guaranteed living benefit (“GLB”) riders reflected within variable annuity net derivative results accounted for at fair value;



▪  Changes in the fair value of the derivatives we own to hedge our guaranteed living benefit ("GLB") riders reflected within variable annuity net derivative results;



▪  Changes in the fair value of the embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to



  future reset periods for our indexed annuity products accounted for at fair value (“indexed annuity forward-starting option”);



•  Changes in reserves resulting from benefit ratio unlocking on our GDB and GLB riders (“benefit ratio unlocking”);



•  Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance;



•  Gains (losses) on early extinguishment of debt;



• Losses from the impairment of intangible assets;



•  Income (loss) from discontinued operations; and



•  Income (loss) from the initial adoption of new accounting standards.





Operating revenues represent GAAP revenues excluding the pre-tax effects of the following items:



• Excluded realized gain (loss);



•  Revenue adjustments from the initial adoption of new accounting standards;



•  Amortization of DFEL arising from changes in GDB and GLB benefit ratio unlocking; and



•  Amortization of deferred gains arising from reserve changes on business sold through reinsurance.





We use our prevailing federal income tax rate of 35% while taking into account any permanent differences for events recognized differently in our financial statements and federal income tax returns



when reconciling our non-GAAP measures to the most comparable GAAP measure.





Management believes that the non-GAAP performance measures discussed above explain the results of our ongoing businesses in a manner that allows for a better understanding of the



underlying trends in our current business as the excluded items are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the



business segments, and, in many instances, decisions regarding these items do not necessarily relate to the operations of the individual segments.  In addition, we believe that our



definitions of operating revenues and income from operations provide investors with more valuable measures of our performance as they better reveal trends in our business.





Statistical Supplement is Dated



The financial data in this document is dated May 4, 2016, and has not been updated since that date.  Lincoln Financial Group does not intend to update this document.









Page 2b





Lincoln Financial Group



Consolidated Statements of Income (Loss)



Unaudited (millions of dollars, except per share data)





For the Three Months Ended



3/31/15

6/30/15

9/30/15

12/31/15

3/31/16

Change



Revenues



Insurance premiums

$

$

$

$

$



Fee income



Net investment income

-1.3%



Realized gain (loss):



Other-than-temporary impairment (“OTTI”)

NM



Realized gain (loss), excluding OTTI

NM



Total realized gain (loss)

NM



Amortization of deferred gains on business



sold through reinsurance



Other revenues

-14.1%



Total revenues

-1.8%





Expenses



Interest credited



Benefits



Commissions and other expenses

-3.7%



Interest and debt expense



Total expenses



Income (loss) from continuing operations before taxes

-35.1%



Federal income tax expense (benefit)

-56.5%



Net income (loss)

-30.7%



Adjustment for LNC stock units in our



deferred compensation plans

 -

 -

NM



Net income (loss) available to common



stockholders – diluted

$

$

$

$

$

-32.8%





Earnings (Loss) Per Common Share – Diluted



Net income (loss)

$

$

$

$

$

-28.7%











Page 3





Lincoln Financial Group



Consolidated Balance Sheets



Unaudited (millions of dollars)





As of



3/31/15

6/30/15

9/30/15

12/31/15

3/31/16

Change



ASSETS



Investments:



Available-for-sale (“AFS”) securities:



Corporate bonds

$

$

$

$

$

-0.1%



U.S. government bonds

-0.4%



Foreign government bonds

-5.2%



Mortgage-backed securities

-13.8%



Asset-backed collateralized debt obligations



State and municipal bonds



Hybrid and redeemable preferred securities

-22.4%



VIEs' fixed maturity securities



Equity securities



Total AFS securities

-0.8%



Trading securities

-10.3%



Mortgage loans on real estate



Real estate

-10.5%



Policy loans

-4.9%



Derivative investments

-0.5%



Other investments



Total investments



Cash and invested cash

-8.9%



DAC and VOBA



Premiums and fees receivable

-11.3%



Accrued investment income

-1.9%



Reinsurance recoverables



Funds withheld reinsurance assets

-2.5%



Goodwill



Other assets



Separate account assets

-3.4%



Total assets

$

$

$

$

$

-1.1%







Page 4a





Lincoln Financial Group



Consolidated Balance Sheets



Unaudited (millions of dollars)





As of



3/31/15

6/30/15

9/30/15

12/31/15

3/31/16

Change



LIABILITIES AND STOCKHOLDERS’ EQUITY



Liabilities



Future contract benefits

$

$

$

$

$



Other contract holder funds



Short-term debt

 -

 -

 -

 -

-100.0%



Long-term debt by rating agency leverage definitions:



Operating (see note (2) on page 6 for details)



Financial



Reinsurance related embedded derivatives

-32.7%



Funds withheld reinsurance liabilities

-16.7%



Deferred gain on business sold through reinsurance

-48.4%



Payables for collateral on investments

-0.6%



VIEs' liabilities

 -

-100.0%



Other liabilities 



Separate account liabilities

-3.4%



Total liabilities

-0.5%





Stockholders’ Equity



Common stock

-5.1%



Retained earnings



AOCI:



Unrealized investment gains (losses)

-43.1%



Foreign currency translation adjustment

-75.0%



Funded status of employee benefit plans

-9.2%



Total AOCI

-47.1%



Total stockholders’ equity

-9.6%



Total liabilities and stockholders’ equity

$

$

$

$

$

-1.1%