AM Best has revised the outlooks of the Long-Term Issuer Credit Ratings (Long-Term ICR) to stable from negative and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) 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 and annuity insurance subsidiaries of Lincoln National Corporation (LNC) (headquartered in Radnor, PA) and are referred to collectively as Lincoln Financial Insurance Group (Lincoln). The outlook of the FSR is stable.

Concurrently, AM Best has revised the outlooks to stable from negative and affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of First Penn-Pacific Life Insurance Company (FPP), a wholly owned non-core subsidiary of LNC, which is in run-off.

In addition, AM Best has revised the outlooks to stable from negative and affirmed the Long-Term ICR of “bbb+” (Good) and the Long- and Short-Term Issue Credit Ratings (Long-Term IR; Short-Term IR) of securities issued by LNC, the ultimate holding company. 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 reflect Lincoln’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

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 appropriate ERM. The ratings of FPP also reflect implicit support from the greater organization.

Since Lincoln reported a material GAAP reserve charge of approximately $2.0 billion in third-quarter 2022, primarily due to unlocking policyholder lapse assumptions in its universal life with secondary guarantee (ULSG) insurance block of business, the group has successfully executed several strategic initiatives that have reduced product risk and have started to stabilize and rebuild risk-adjusted capitalization to historical levels. In 2023, Lincoln reinsured approximately $28 billion of in-force fixed annuity, hybrid long-term care (MoneyGuard), and ULSG reserves to Fortitude Reinsurance Company Ltd (Bermuda); and Lincoln also unlocked some capital by selling its wealth management business to Osaic. In 2024, Lincoln also began reinsuring various in-force and new policies to a new affiliate it called Lincoln Pinehurst Reinsurance Company (Bermuda) Limited, which the group is expected to continue utilizing in addition to the existing cessions to its onshore captive reinsurers and another offshore affiliate, Lincoln National Reinsurance Company (Barbados) Limited. Reinsurance with a range of generally well-rated counterparties provides capital flexibility for the group, which AM Best views favorably overall, but with some caution. Some released capital has also been used to pay down debt, which has slightly eased pressure on LNC’s financial leverage ratio, but this remains slightly elevated compared to Lincoln’s 25% target.

Lincoln has also implemented various other capital management actions that have included pausing buybacks, reducing the level of dividends upstreamed to LNC from the operating subsidiaries, managing the level and mix of sales to optimize capital and enhancing the group’s hedging program to further protect statutory capital.

Partially offsetting these positive rating factors, is Lincoln’s concentration in certain reinsurers and incremental reinsurance leverage, which somewhat diminishes its quality of capital and places pressure on the group’s overall balance sheet strength assessment. Reinsurer counterparty credit risk analysis during Lincoln’s financial planning, monitoring and stress testing processes under its ERM framework has gained even more importance, and AM Best will also monitor Lincoln’s periodic credit reviews of its reinsurers, focusing on, among other things, financial capacity, stability, trends and commitment to the reinsurance business. Statutory earnings have been volatile in the last two years partly due to the material amount of in-force liabilities and assets transferred through the aforementioned outbound coinsurance treaties, and a portion of the change in assets supporting registered index-linked annuities reserves not being included in statutory earnings. However, AM Best expects statutory earnings and capitalization to further stabilize and remain above Lincoln’s 420% risk-based capital ratio target (company action level) over the next five years for its onshore operations. The stable outlooks reflect AM Best's expectation that Lincoln maintains strong overall balance sheet strength and operating performance metrics, supported by a well-diversified mix of business.

The following Long-Term IRs have been affirmed with revised outlooks to stable from negative:

Lincoln National Corporation—
-- “bbb+” (Good) on $300 million 3.35% senior unsecured notes, due 2025
-- “bbb+” (Good) on $400 million 3.625% senior unsecured notes, due 2026
-- “bbb+” (Good) on $500 million 3.8% senior unsecured notes, due 2028
-- “bbb+” (Good) on $500 million 3.05% senior unsecured notes, due 2030
-- “bbb+” (Good) on $500 million 3.40% senior unsecured notes, due 2031
-- “bbb+” (Good) on $300 million 3.40% senior unsecured notes, due 2032
-- “bbb+” (Good) on $350 million 5.852% senior unsecured notes, due 2034
-- “bbb+” (Good) on $500 million 6.15% senior unsecured notes, due 2036
-- “bbb+” (Good) on $375 million 6.30% senior unsecured notes, due 2037
-- “bbb+” (Good) on $500 million 7.00% senior unsecured notes, due 2040
-- “bbb+” (Good) on $450 million 4.35% senior unsecured notes, due 2048
-- “bbb+” (Good) on $300 million 4.375% senior unsecured notes, due 2050
-- “bbb” (Good) on $562 million SOFR + 236 basis points (bps) subordinated notes, due 2066
-- “bbb” (Good) on $433 million SOFR + 204 bps subordinated notes, due 2067
-- “bbb-” (Good) on $800 million SOFR + 236 bps junior subordinated capital securities, due 2066 ($160`million outstanding)
-- “bbb-” (Good) on $500 million SOFR + 204 bps junior subordinated capital securities, due 2067 ($58 million outstanding)
-- “bbb-” (Good) on $500 million 9.25% non-cumulative preferred stock
-- “bbb-” (Good) on $500 million 9.00% non-cumulative preferred stock

The following Short-Term IR has been affirmed.

Lincoln National Corporation—
-- AMB-2 (Satisfactory) on commercial paper

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

Lincoln National Corporation—
-- “bbb+” (Good) on senior unsecured notes
-- “bbb” (Good) on subordinated notes
-- “bbb-” (Good) on junior subordinated notes
-- “bbb-” (Good) on preferred stock

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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