As of or For the

As of or For the



Quarter Ended

Year Ended



December 31,

December 31,

(in millions, except per share data)

2017

2016

2017

2016

Net Income (Loss)

$

$

$

$

Net Income (Loss) Available to Common Stockholders

Net Income (Loss) Per Diluted Share Available to Common Stockholders

Revenues

Income (Loss) from Operations

Income (Loss) from Operations per Diluted Share Available to Common Stockholders

Average Diluted Shares

ROE, including AOCI (Net Income)

ROE, excluding AOCI (Income from Operations)

Book Value per Share, Including AOCI

$

$

$

$

Book Value per Share, Excluding AOCI

·

Operating EPS, up 20%

·

Operating ROE, excluding AOCI, of 13.1%, up 110 basis points

·

Variable annuity sales of $6.7 billion, up 8%

·

Total Life Insurance sales of $798 million, up 8%

·

Retirement Plan Services net flows of $1.3 billion, up 137%

·

Group Protection sales of $504 million, up 7%

·

A $1.3 billion benefit from the impact on our net deferred tax liability as a result of the Tax Cuts and Jobs Act.

·

A $905 million impairment of intangibles related to the Tax Cuts and Jobs Act and early adoption of GAAP accounting changes to goodwill.

·

A $23 million net loss from general account investments compared to a $10 million net loss in the prior-year quarter.

·

A $16 million variable annuity net derivative loss in the quarter compared to a $178 million net loss in the prior-year quarter where more than half was associated with non-performance risk



Contacts:

Chris Giovanni

Scott Sloat



(484) 583-1793

(484) 583-1625



Investor Relations

Media Relations



InvestorRelations@LFG.com

Scott.sloat@LFG.com

·

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

o

Sale or disposal of securities;

o

Impairments of securities;

o

Change in the fair value of derivative investments, embedded derivatives within certain reinsurance arrangements and our trading securities;

o

Change in the fair value of the derivatives we own to hedge our guaranteed death benefit (“GDB”) riders within our variable annuities, which is referred to as “GDB derivatives results”;

o

Change in the fair value of the embedded derivatives of our guaranteed living benefit (“GLB”) riders within our variable annuities accounted for under the Derivatives and Hedging and the Fair Value Measurements and Disclosures Topics of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) (“embedded derivative reserves”), net of the change in the fair value of the derivatives we own to hedge the changes in the embedded derivative reserves, the net of which is referred to as “GLB net derivative results”;

o

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 under the Derivatives and Hedging and the Fair Value Measurements and Disclosures Topics of the FASB ASC (“indexed annuity forward-starting option”);

·

Change in reserves accounted for under the Financial Services - Insurance - Claim Costs and Liabilities for Future Policy Benefits Subtopic of the FASB ASC 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;

·

Gain (loss) on early extinguishment of debt;

·

Losses from the impairment of intangible assets;

·

Income (loss) from discontinued operations;

·

Acquisition and integration costs related to mergers and acquisitions; and

·

Income (loss) from the initial adoption of new accounting standards, regulations and policy changes including the net impact from the Tax Cuts and Jobs Act.

·

Excluded realized gain (loss);

·

Amortization of deferred front-end loads (“DFEL”) arising from changes in GDB and GLB benefit ratio unlocking;

·

Amortization of deferred gains arising from the reserve charges on business sold through reinsurance;

·

Revenue adjustments from the initial adoption of new accounting standards.

·

It is calculated by dividing annualized income (loss) from operations by average equity, excluding accumulated other comprehensive income (loss) (“AOCI”).

·

Management evaluates return on equity by both including and excluding average goodwill within average equity.

·

We believe highlighting notable items included in income (loss) from operations enables investors to better understand the fundamental trends in its results of operations and financial condition. 

·

It is calculated by dividing (a) stockholders’ equity excluding AOCI by (b) common shares outstanding.

·

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

·

Management believes book value per share excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.

·

Book value per share is the most directly comparable GAAP measure.

·

MoneyGuard® – 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;

·

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;

·

Term – 100% of annualized first-year premiums;

·

Annuities – deposits from new and existing customers; and

·

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



(in millions, except per share data)

For the

For the



Quarter Ended

Year Ended



December 31,

December 31,



2017

2016

2017

2016

Total Revenues

$

$

$

$

Less:

Excluded realized gain (loss)

Amortization of DFEL on benefit ratio unlocking

 -

Amortization of deferred gains arising from reserve

changes on business sold through reinsurance

 -

Total Operating Revenues

$

$

$

$



Net Income (Loss) Available to Common

Stockholders – Diluted

$

$

$

$

Less:

Adjustment for deferred units of LNC stock in our

deferred compensation plans (1)

 -

 -

Net Income (Loss)

Less (2):

Excluded realized gain (loss)

Benefit ratio unlocking

Net impact from the Tax Cuts and Jobs Act

 -

 -

Impairment of intangibles

 -

 -

Income (loss) from reserve changes (net of related

amortization) on business sold through reinsurance

 -

 -

 -

Gain (loss) on early extinguishment of debt

 -

Income (Loss) from Operations

$

$

$

$



Earnings (Loss) Per Common Share – Diluted

Net income (loss)

$

$

$

$

Income (loss) from operations



Average Stockholders’ Equity

Average equity, including average AOCI

$

$

$

$

Average AOCI

Average equity, excluding AOCI

Average goodwill

Average equity, excluding AOCI and goodwill

$

$

$

$



Return on Equity, Including AOCI

Net income (loss) with average equity including goodwill



Return on Equity, Excluding AOCI

Income (loss) from operations with average equity

including goodwill

Income (loss) from operations with average equity

excluding goodwill



(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 dilutive EPS.

(2) 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.









For the

For the



Quarter Ended

Year Ended



December 31,

December 31,



2017

2016

2017

2016

Operating EPS, as reported

$

$

$           7.79

$           6.50

Notable items:

Tax adjustments

 -

 -

Reinsurance recapture

 -

 -

 -

Unlocking/reserve adjustments

 -

 -

 -

Total notable items

 -

 -



Operating EPS, excluding notable items

$

$

$           7.50

$           6.44





As of December 31,



2017

2016

Book value per share, including AOCI

$

$

Per share impact of AOCI

Book value per share, excluding AOCI











(in millions, except per share data)

For the



Quarter Ended



December 31,



2017

2016



Revenues

$

$



Net Income (Loss)

$

$

Adjustment for deferred units of LNC stock in our

deferred compensation plans (1)

 -

Net Income (Loss) Available to Common

Stockholders – Diluted

$

$



Earnings (Loss) per Common Share – Basic

$

$

Earnings (Loss) per Common Share – Diluted



Average Shares – Basic

218,617,352

227,652,496

Average Shares – Diluted

221,880,072

230,913,849





For the



Year Ended



December 31,



2017

2016



Revenues

$

$



Net Income (Loss)

$

$

Adjustment for deferred units of LNC stock in our

deferred compensation plans (1)

 -

Net Income (Loss) Available to Common

Stockholders – Diluted

$

$



Earnings (Loss) per Common Share – Basic

$

$

Earnings (Loss) per Common Share – Diluted



Average Shares – Basic

222,128,687

234,181,717

Average Shares – Diluted

226,220,980

236,830,287







(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 be more dilutive to our diluted EPS.













·

Deterioration in general economic and business conditions that may affect account values, investment results, guaranteed benefit liabilities, premium levels, claims experience and the level of pension benefit costs, funding and investment results;

·

Adverse global capital and credit market conditions could affect our ability to raise capital, if necessary, and may cause us to realize impairments on investments and certain intangible assets, including goodwill and the valuation allowance against deferred tax assets, which may reduce future earnings and/or affect our financial condition and ability to raise additional capital or refinance existing debt as it matures;

·

Because of our holding company structure, the inability of our subsidiaries to pay dividends to the holding company in sufficient amounts could harm the holding company’s ability to meet its obligations;

·

Legislative, regulatory or tax changes, both domestic and foreign, that affect: the cost of, or demand for, our subsidiaries' products; the required amount of reserves and/or surplus; our ability to conduct business and our captive reinsurance arrangements, as well as restrictions on revenue sharing and 12b-1 payments; the impact of recently enacted U.S. Federal tax reform legislation on our business, earnings and capital; and the effect of the Department of Labor’s (“DOL”) regulation defining fiduciary;  

·

Actions taken by reinsurers to raise rates on in-force business;

·

Declines in or sustained low interest rates causing a reduction in investment income, the interest margins of our businesses, estimated gross profits and demand for our products;

·

Rapidly increasing interest rates causing contract holders to surrender life insurance and annuity policies, thereby causing realized investment losses, and reduced hedge performance related to variable annuities;

·

Uncertainty about the effect of continuing promulgation and implementation of rules and regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act on us, the economy and the financial services sector in particular;

·

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 decisions in significant actions including, but not limited to, actions brought by federal and state authorities and class action cases; new decisions that result in changes in law; and unexpected trial court rulings;

·

A decline 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; an acceleration of the net amortization of deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), deferred sales inducements (“DSI”) and deferred front-end loads (“DFEL”); and an increase in liabilities related to guaranteed benefit features of our subsidiaries’ variable annuity products;

·

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;

·

A deviation in actual experience regarding future persistency, mortality, morbidity, interest rates or equity market returns from the assumptions used in pricing our subsidiaries’ products, in establishing related insurance reserves and in the net amortization of DAC, VOBA, DSI and DFEL, which may reduce future earnings;

·

Changes in accounting principles generally accepted in the United States (“GAAP”), that may result in unanticipated changes to our net income;

·

Lowering of one or more of our debt ratings issued by nationally recognized statistical rating organizations and the adverse effect such action may have on our ability to raise capital and on our liquidity and financial condition;

·

Lowering of one or more of the insurer financial strength ratings of our insurance subsidiaries and the adverse effect such action may have on the premium writings, policy retention, profitability of our insurance subsidiaries and liquidity;

·

Significant credit, accounting, fraud, corporate governance or other issues that may adversely affect the value of certain investments in our portfolios, as well as counterparties to which we are exposed to credit risk requiring that we realize losses on investments;

·

Inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others;

·

Interruption in telecommunication, information technology or other operational systems, or failure to safeguard the confidentiality or privacy of sensitive data on such systems from cyberattacks or other breaches of our data security systems;

·

The effect of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including the successful implementation of integration strategies or the achievement of anticipated synergies and operational efficiencies related to an acquisition;  

·

The adequacy and collectability of reinsurance that we have purchased;

·

Acts of terrorism, a pandemic, war or other man-made and natural catastrophes that may adversely affect our businesses and the cost and availability of reinsurance;

·

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 subsidiaries’ businesses resulting from evolving market preferences and the changing demographics of our client base; and

·

The unanticipated loss of key management, financial planners or wholesalers.