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AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "aa-" of The Lincoln National Life Insurance Company and its wholly owned subsidiaries, Lincoln Life & Annuity Company of New York (Syracuse, NY) and Lincoln Life Assurance Company of Boston (LLAC) (Dover, NH). These companies are the key life/health insurance subsidiaries of Lincoln National Corporation (LNC) (headquartered in Radnor, PA) [NYSE: LNC] and collectively referred to as Lincoln Financial Insurance Group (Lincoln).
Additionally, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of "a+" of Lincoln’s affiliate, First Penn-Pacific Life Insurance Company (FPP). Concurrently, AM Best has affirmed the Long-Term ICR of "a-" and all Long- and Short-Term Issue Credit Ratings (Long-Term IR; 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 maintains leading market positions in its core product lines, and is well-diversified by product type, source of earnings and distribution channels. While product risk has decreased moderately over time, the company remains highly sensitive to the macroeconomic environment. The company has reported favorable core trends consistently, although earnings have suffered from elevated pandemic-related claims experience and lower interest rates. The impact on earnings due to unfavorable mortality impacted the Life Insurance and Group Protection segments. Despite these headwinds, the company posted stable earnings for all segments except its group business in 2020. Earnings headwinds from elevated pandemic mortality, GAAP assumption updates and interest rates were partially offset by strong equity markets and a rebound of alternative asset income. AM Best’s view of the quality of Lincoln’s capital is somewhat low due to the utilization of captives and external reinsurance for its XXX and AXXX reserves. Recently, capital growth has been constrained by dividends to the holding company, used for shareholder dividends and share buyback programs, although the share buyback program was on hold for a good part of 2020. Financial and operating leverage metrics are within guidelines for the ratings with strong interest coverage, and LNC maintains sufficient balance sheet liquidity at the holding company level, with additional financial flexibility from a recent contingent capital facility that is undrawn.
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 due to its runoff status, and very strong ERM. The ratings also reflect the financial strength of its parent organization and its integration into Lincoln’s management and ERM functions.
The following Long-Term IRs have been affirmed with stable outlooks:
Lincoln National Corporation—
-- "a-" on $300 million 4.20% senior unsecured notes, due 2022
-- "a-" on $500 million 4.00% senior unsecured notes, due 2023
-- "a-" on $300 million 3.35% senior unsecured notes, due 2025
-- "a-" on $400 million 3.625% senior unsecured notes, due 2026
-- "a-" on $500 million 3.8% senior unsecured notes, due 2028
-- "a-" on $500 million 3.05% senior unsecured notes, due 2030
-- "a-" on $500 million 3.40% senior unsecured notes, due 2031
-- "a-" on $500 million 6.15% senior unsecured notes, due 2036 ($243 million outstanding)
-- "a-" on $375 million 6.30% senior unsecured notes, due 2037
-- "a-" on $500 million 7.00% senior unsecured notes, due 2040
-- "a-" on $450 million 4.35% senior unsecured notes, due 2048
-- "a-" on $300 million 4.375% senior unsecured notes, due 2050
-- "bbb" on $800 million 7.00% junior subordinated capital securities, due 2066 ($722 million outstanding)
-- "bbb" on $500 million 6.05% junior subordinated capital securities, due 2067 ($491 million outstanding)
The following Short-Term IR has been affirmed:
Lincoln National Corporation—
-- AMB-1 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-" on senior unsecured debt
-- "bbb+" on subordinated debt
-- "bbb" on junior subordinated debt
-- "bbb" 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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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