Lincoln National Profile
Lincoln National Corporation (LNC) operates multiple insurance and retirement businesses through subsidiary companies.
Through the company's business segments, the company sells a wide range of wealth accumulation, wealth protection, group protection and retirement income products and solutions. 'Lincoln Financial Group' is the marketing name for LNC and its subsidiary companies.
The company provides products and services and report results through four segments: Annuities, Life Insurance, Group Protection, and Retirement Plan Services.
The company also has Other Operations, which includes the financial data for operations that are not directly related to the business segments.
The results of Lincoln Financial Network ('LFN') and Lincoln Financial Distributors ('LFD'), the company's retail and wholesale distributors, respectively, are included in the segments for which they distribute products. LFD distributes the company's individual products and services, retirement plans and corporate-owned universal life insurance and variable universal life insurance ('COLI') and bank-owned universal life insurance and variable universal life insurance ('BOLI') products and services. The distribution occurs primarily through consultants, brokers, planners, agents, financial advisers, third-party administrators ('TPAs') and other intermediaries. Group Protection distributes its products and services primarily through employee benefit brokers, TPAs and other employee benefit firms. As of December 31, 2023, LFD had approximately 520 internal and external wholesalers (including sales and relationship managers). As of December 31, 2023, LFN offered LNC and non-proprietary products and advisory services through a national network of approximately 13,000 active producers who placed business with the company within the last 24 months.
Business Segments and Other Operations
Annuities segment
The Annuities segment provides tax-deferred investment growth and lifetime income opportunities for its clients by offering variable annuities, fixed (including indexed) annuities and indexed variable annuities, also referred to as registered index-linked annuities ('RILA'). The 'fixed' and 'variable' classifications describe whether the company or the policyholders bear the investment risk of the assets supporting the contract. With 'indexed variable' annuities, the extent to which the company or the policyholders bear the investment risk of the assets is based on the investment allocations. The annuity classification also determines the manner in which the company earns investment margin profits from these products, either as investment spreads for fixed products, as asset-based fees charged to variable products, or as both for RILA products.
Annuities have several features that are attractive to customers. Annuities are unique in that policyholders can select a variety of payout alternatives to provide an income flow for life. Many annuity contracts also include guarantee features (living and death benefits) that are not found in any other investment vehicle and that make annuities attractive especially in times of economic uncertainty. In addition, growth on the underlying principal in annuities is typically granted tax-deferred treatment, thereby deferring the tax consequences of the growth in value until withdrawals are made from the accumulation values, potentially at lower tax rates occurring during retirement.
Products
In general, an annuity is a contract between an insurance company and an individual in which the insurance company, after receipt of one or more premium payments, agrees to pay an amount of money either in one lump sum or on a periodic basis (i.e., annually, semi-annually, quarterly or monthly), beginning on a certain date and continuing for a period of time as specified in the contract or as requested. Periodic payments can begin within 12 months after the premium is received (referred to as an immediate annuity) or at a future date in time (referred to as a deferred annuity). This retirement vehicle helps protect an individual from outliving their money.
Variable Annuities
A variable annuity provides the contract holder the ability to direct the investment of premium deposits into one or more variable sub-accounts ('variable funds') offered through the product ('variable portion') and, for a specified period, into a fixed account (if available) with a guaranteed return ('fixed portion'). The value of the variable portion of the policyholder's account varies with the performance of the underlying variable funds chosen by the policyholder.
The company's variable funds include the Managed Risk Strategies fund options, a series of funds that embed volatility risk management and, with some funds, capital protection strategies inside the funds themselves. These funds seek to reduce equity market volatility risk for both the contract holder and the company.
The company charges mortality and expense assessments and administrative fees on variable annuity accounts to cover insurance and administrative expenses. These assessments are built into accumulation unit values, which when multiplied by the number of units owned for any variable fund equals the contract holder's account balance for that variable fund. In addition, for some contracts, the company imposes surrender charges, which are typically applicable to withdrawals during the early years of the annuity contract, with a declining level of surrender charges over time.
The company offers guaranteed benefit riders with certain of the company's variable annuity products, such as a guaranteed death benefit ('GDB'), a guaranteed withdrawal benefit ('GWB'), a guaranteed income benefit ('GIB') and a combination of such benefits.
The GDB features offered include those where the company contractually guarantees to the contract holder that upon death, depending on the particular product, the company will return no less than: the current contract value; the total deposits made to the contract, adjusted to reflect any partial withdrawals; the highest contract value on a specified anniversary date adjusted to reflect any partial withdrawals following the contract anniversary; or an earnings enhancement on gains in the contract.
The company offers the optional Lincoln ProtectedPay lifetime income suite, which provides a GWB and includes: Secure Core, Secure Plus and Secure Max, and Select Core, Select Plus and Select Max. All provide contract holders with protected lifetime income that is based on a maximum rate of the income base that grows annually for a specified period of time at the greater of a specified simple rate or account balance growth. The riders provide higher income if the contract holder delays withdrawals. The Secure Core and Select Core riders are hybrid benefit riders combining aspects of GWB and GIB that provide a specified maximum rate of income. The Secure Plus and Secure Max riders and Select Plus and Select Max riders provide contract holders with protected lifetime income up to a specified maximum rate of the income base and a lower specified maximum rate of the income base if the account balance falls to zero. Contract holders under the Secure riders are subject to the allocation of their account balance to the company's Managed Risk Strategies fund options and certain fixed-income options. Contract holders under the Select riders are subject to restrictions on the allocation of their account balance within the various investment choices.
The company also offers the American Legacy Target Date Income variable annuity with an optional Target Date Income Benefit rider, which combines target date investing with a protected lifetime income. Contract holders who elect the Target Date Income Benefit are automatically allocated to the Target Date Fund based on their year of birth. The protected lifetime income is based on a percentage rate of income for their age at the time of purchase of the optional rider, which will grow at the greater of a specified simple rate (available each year a withdrawal is not taken for a specified period of time) or account balance growth.
In addition, the company offers the i4LIFE Advantage and i4LIFE Advantage Guaranteed Income Benefit (Managed Risk) riders. These riders allow variable annuity contract holders access and control during a portion of the income distribution phase of their contract. In general, GIB is an optional feature available with the i4LIFE Advantage rider and a non-optional feature on the i4LIFE Advantage Guaranteed Income Benefit (Managed Risk) rider that guarantees regular income payments will not fall below the greater of a minimum income floor set at benefit issue and 75% of the highest income payment on a specified anniversary date (reduced for any subsequent withdrawals). Contract holders under the i4LIFE Advantage Guaranteed Income Benefit (Managed Risk) rider are subject to the allocation of their account balance to the company's Managed Risk Strategies fund options and certain fixed-income options.
The company also offers the 4LATER Select Advantage rider. This rider provides a minimum income base used to determine the GIB floor when a client begins income payments under the i4LIFE Advantage Select Guaranteed Income Benefit rider. The 4LATER Select Advantage rider provides growth during the accumulation phase through both an enhancement to the income base each year a withdrawal is not taken for a specified period of time and an annual step-up of the income base to the current contract value. Contract holders under the 4LATER Select Advantage rider are subject to restrictions on the allocation of their account balance within the various investment choices.
The company designs and actively manages the features and structure of the company's guaranteed benefit riders to maintain a competitive suite of products consistent with profitability and risk management goals. The company uses a variety of hedging strategies to mitigate the risks to the statutory capital of the company's insurance subsidiaries associated with its guaranteed benefit riders.
Fixed Annuities
A fixed annuity preserves the principal value of the contract while guaranteeing a minimum interest rate to be credited to the accumulation value. The company's fixed annuity product offerings consist of traditional fixed-rate and fixed indexed deferred annuities, as well as fixed-rate immediate and deferred income annuities with various payment options, including lifetime incomes. Fixed annuity contracts are general account obligations. The company bear the investment risk for fixed annuity contracts. To protect from premature withdrawals, the company imposes surrender charges. Surrender charges are typically applicable during the early years of the annuity contract, with a declining level of surrender charges over time. On most policies, within the surrender charge period, the company also has a market value adjustment provision that protects the company against disintermediation risk in the case of rapidly rising interest rates. The company expects to earn a spread between what the company earns on the underlying general account investments supporting the fixed annuity product line and what the company credits to its fixed annuity contract holders' accounts.
The company offers single and flexible premium fixed deferred annuities. Single premium fixed deferred annuities are contracts that allow only a single premium to be paid. Flexible premium fixed deferred annuities are contracts that allow multiple premium payments, subject to contractual limits, on either a scheduled or non-scheduled basis.
The company's fixed indexed annuities allow the contract holder to choose between a fixed interest crediting rate and an indexed interest crediting rate, which is based on the performance of the S&P 500 Index, the S&P 500 Daily Risk Control 5% Index, the S&P 500 Daily Risk Control 10% Index, the J.P. Morgan First Trust Balanced Capital Strength 6 Index, the J.P. Morgan First Trust Balanced Capital Strength 5 Index, the BlackRock Dynamic Allocation Index, or the Fidelity AIM Dividend Index. The indexed interest credit is guaranteed never to be less than zero.
The company uses derivatives to hedge the equity market risk associated with its fixed indexed annuity products.
RILA
Lincoln Level Advantage is the company's RILA product. Lincoln Level Advantage provides the contract holder the ability to direct the investment of premium deposits into one or more variable funds and/or indexed accounts offered through the product. The value of the variable sub-accounts varies with the performance of the underlying variable funds chosen by the contract holder. The index interest crediting rate for an indexed account is based, in part, on the performance of an index. The available indices are the S&P 500 Index, the Russell 2000 Index, the MSCI EAFE, the Capital Strength Net Fee Index, the First Trust American Leadership Index and the NASDAQ-100 Index.
The company charges mortality and expense assessments and administrative fees on the variable funds to cover insurance and administrative expenses. These assessments are built into accumulation unit values, which when multiplied by the number of units owned for any variable fund equals the contract holder's account balance for that variable fund. In addition, for some contracts, the company imposes surrender charges, which are typically applicable during the early years of the annuity contract, with a declining level of surrender charges over time.
The company offers a GDB rider where the company contractually guarantees to the contract holder that upon death, depending on the particular product, the company will return no less than the current contract value or the total deposits made to the contract, adjusted to reflect any partial withdrawals.
The company also offers the i4LIFE Advantage rider. This rider allows annuity contract holders access and control during a portion of the income distribution phase of their contract. This added flexibility allows the contract holder to access the account balance for transfers and additional withdrawals.
The company uses derivatives to hedge the equity market risk associated with its indexed variable annuity products.
Distribution
The Annuities segment distributes its individual fixed and variable annuity products through LFD. LFD's distribution channels give the Annuities segment access to its target markets. LFD distributes the segment's products to a large number of financial intermediaries, including LFN. The financial intermediaries include wire/regional firms, independent financial planners, financial institutions, registered investment advisers and managing general agents.
Life Insurance segment
The Life Insurance segment focuses on the creation and protection of wealth for its clients by providing life insurance products, including term insurance, both single (including universal life insurance ('UL'), COLI and BOLI) and survivorship versions of indexed universal life insurance ('IUL') and variable universal life insurance ('VUL') products, linked-benefit products (which are UL and VUL with riders providing for long-term care costs), and critical illness and long-term care riders, which can be attached to IUL or VUL policies. Some of the company's products include secondary guarantees, which are discussed more fully below. Generally, this segment has higher sales during the second half of the year with the fourth quarter being the strongest.
Similar to the annuity product classifications described above, life products can be classified as 'fixed' (including indexed) or 'variable' contracts. These classifications describe whether the company or the contract holders bear the primary investment risk of the assets supporting the policy. This also determines the manner in which the company earns investment margin profits from these products, either as investment spreads for fixed products or as asset-based fees charged to variable products.
In general, the Life Insurance segment's sources of revenue include premium payments, cost of insurance assessments, expense and fee charges and investment income. In turn, this segment incurs expenses, which include paying death claims, long-term care claims, and surrender benefits, crediting interest, and accruing reserves for future claim payments, as well as other expenses related to the business. The difference between revenue earned and expenses incurred is the profit for the Life Insurance business. Profitability, including fluctuations from period to period, is impacted by factors, such as changes in sales of products, mortality experience (the frequency and magnitude of mortality claims paid during a given period), persistency and investment income. The impact of each factor varies by product type.
Products
The company offers four categories of life insurance products, consisting of:
UL and IUL
UL insurance products provide life insurance with account balances that earn rates of return solely based on company-declared interest rates. Contract holder account balances are invested in the company's general account investment portfolio, so the company bears the risk of investment performance. The company's fixed IUL products function similarly to a traditional UL policy, with the added flexibility of allowing contract holders to have portions of their account balances earn credits based on the performance of indexes, such as the S&P 500 Index. These products include Lincoln WealthPreserve IUL and Lincoln WealthAccumulate IUL.
In a UL contract, contract holders typically have flexibility in the timing and amount of premium payments and the amount of death benefit, provided there is sufficient account balance to cover all policy charges for cost of insurance and expenses for the coming period. Under certain contract holder options and market conditions, the death benefit amount may increase or decrease. Premiums received on a UL product, net of expense loads and charges, are added to the contract holder's account balance and accrued with interest. The client has access to their account balance (or a portion thereof), less surrender charges and policy loan payoffs, through contractual liquidity features, such as loans, partial withdrawals and full surrenders. Loans and withdrawals reduce the death benefit amount payable and are limited to certain contractual maximums (some of which are required under state law), and interest is charged on all loans. The company's UL contracts assess surrender charges against the policies' account balances for full or partial surrenders and certain policy changes that occur during the contractual surrender charge period. Depending on the product selected, surrender charge periods can range from 0 to 25 years.
The company offers a survivorship version of its individual IUL products, Lincoln WealthPreserve SIUL. This product insures two lives with a single policy and pays death benefits upon the second death.
A UL policy with a lifetime secondary guarantee can stay in force, even if the base policy cash value is zero, as long as secondary guarantee requirements have been met. The secondary guarantee requirement is based on the payment of a required minimum premium or on the evaluation of a reference value within the policy, calculated in a manner similar to the base policy account balance, but using different expense charges, cost of insurance charges and credited interest rates. The parameters for the secondary guarantee requirement are listed in the contract. As long as the contract holder pays the minimum premium or funds the policy to a level that keeps this calculated reference value positive, the policy is guaranteed to stay in force. The reference value has no actual monetary value to the contract holder; it is only a calculated value used to determine whether or not the policy will lapse should the base policy cash value be less than zero. During 2022, the company discontinued new sales of UL products with secondary guarantees, but the company still has an in-force block of such products that the company continues to administer.
VUL
VUL products are UL products that provide a return on account balances linked to an underlying investment portfolio of variable funds offered through the product. The value of the variable portion of the contract holder's account is driven by the performance of the underlying variable funds chosen by the contract holder. As the return on the investment portfolio increases or decreases, that portion of the account balance of the VUL policy will increase or decrease. In addition, VUL products offer a fixed account option that is managed by the company. As with fixed UL products, contract holders have access, within contractual maximums, to account balances through loans, withdrawals and surrenders. Surrender charges are assessed during the surrender charge period, ranging from 0 to 20 years depending on the product. The company's single life VUL offerings include Lincoln AssetEdge VUL and Lincoln VULONE insurance products. The company's COLI products are also VUL-type products.
The company also offers a survivorship version of its individual VUL products, Lincoln SVULONE. This product insures two lives with a single policy and pays death benefits upon the second death.
The company offers lifetime guaranteed benefit riders with its Lincoln VULONE and Lincoln SVULONE products. The ONE rider features guarantee to the contract holder that upon death, as long as secondary guarantee requirements have been met, the death benefit will be payable even if the account balance equals zero.
The company's secondary guarantee benefits maintain the flexibility of a UL or VUL policy, which allow a contract holder to take loans or withdrawals. Although loans and withdrawals are likely to shorten the time period of the secondary guarantee, the guarantee is not automatically or completely forfeited. Additional premium may be deposited to extend the length of the guarantee. For additional information on the company's reserves on UL and VUL products with secondary guarantees, see Note 13.
Linked-Benefit Life Products and Products with Critical Illness Riders
Lincoln MoneyGuard, the company's linked-benefit life product group, combines UL or VUL with long-term care insurance through the use of a rider or riders. The policy rider allows the contract holder to accelerate death benefits on a tax-free basis in the event of a qualified long-term care need, reducing the remaining death benefit, and, once the death benefit is exhausted, offers access to an additional pool of dollars that can be used for qualified long-term care expenses. Certain policies also provide a reduced death benefit to the contract holder's beneficiary if the death benefit has been fully accelerated as long-term care benefits during the contract holder's life.
Some life products provide for critical illness or long-term care insurance by the use of riders attached to IUL or VUL policies. These riders allow the contract holder to accelerate death benefits on a tax-free basis in the event of a qualified condition.
Term Life Insurance
Term life insurance provides a fixed death benefit for a scheduled period of time. The company's term life insurance products give the contract holder the option to convert into a UL, IUL or VUL product. Scheduled policy premiums are required to be paid at least annually. These products include Lincoln TermAccel Level Term and Lincoln LifeElements Level Term.
Distribution
The Life Insurance segment's products are sold through LFD. LFD provides the Life Insurance segment with access to financial intermediaries in the following primary distribution channels: wire/regional firms; independent planner firms (including LFN); financial institutions; and managing general agents/independent marketing organizations. LFD distributes BOLI/COLI products and services to banks and mid- to large-sized corporations, primarily through intermediaries who specialize in one or both of these markets and who are serviced through a network of internal and external LFD sales professionals.
Group Protection segment
The Group Protection segment offers group non-medical insurance products and services, including short- and long-term disability, statutory disability and paid family medical leave administration and absence management services, term life, dental, vision and accident, critical illness and hospital indemnity benefits and services to the employer marketplace through various forms of employee-paid and employer-paid plans. Group Protection markets its products and services to employer groups of all sizes, from small companies with fewer than 100 employees to large employers with 10,000 or more employees.
Products
Disability Insurance and Services
The company offers insured coverage for, as well as administrative services for employer self-funded, short- and long-term employer-sponsored group and voluntary disability insurance, which protects an employee against loss of wages due to illness or injury. Short-term disability insurance generally provides weekly benefits for up to 26 weeks following a short waiting period, ranging from 1 to 30 days. Long-term disability insurance provides benefits following a longer waiting period, usually between 90 and 180 days, and provides benefits for a longer period, up to normal (Social Security) retirement age. The monthly benefits provided are subject to reduction when Social Security benefits are also paid. The company also provides insured coverage for, as well as administrative services for employer self-funded, state-specific statutory disability and paid family leave programs.
Absence Management
The company offers a robust portfolio of absence management services to help employers manage their state and federal family medical and company leave programs (paid and unpaid), as well as accommodation services that help employers identify accommodations that could be made to help claimants return to work (e.g., assistive devices, ergonomic assessments, etc.). The company's comprehensive and compliant solutions, with ease of intake, provide coordinated and integrated management expertise to handle both leave and disability events.
Life Insurance
The company offers employer-sponsored group term life insurance products including basic, optional, and voluntary term life insurance to employees and their dependents. Additional benefits may be provided in the event of a covered individual's accidental death or dismemberment.
Dental and Vision
The company offers a variety of employer-sponsored group dental insurance plans, which cover a portion of the cost of eligible dental procedures for employees and their dependents. Products offered include: indemnity coverage, which does not distinguish benefits based on a dental provider's participation in a network arrangement; Preferred Provider Organization ('PPO') products, on an insured and administrative services only basis, that do reflect the dental provider's participation in the PPO network arrangement, including an agreement with network fee schedules; a Dental Health Maintenance Organization product that limits benefit coverage to a closed panel of network providers; an in-network-only option that limits benefit coverage to providers in certain states; and self-funded options for groups with more than 200 employees.
The company also offers comprehensive employer-sponsored fully insured vision plans with a wide range of benefits for protecting employees' and their covered dependents' sight and vision health. All plans provide access to a national network of providers, with in and out-of-network benefits.
Accident, Critical Illness and Hospital Indemnity Insurance
The company offers employer-sponsored group accident insurance products for employees and their covered dependents. This product is predominantly purchased on an employee-paid basis. Accident insurance provides scheduled benefits for over 30 types of benefit triggers related to accidental causes, including sports-related injuries, and is available for non-occupational accidents exclusively or on a 24-hour coverage basis.
The company also offers employer-sponsored group critical illness insurance to employees and their covered dependents. This product is predominantly purchased on an employee-paid basis. The coverage provides for lump sum payouts upon the occurrence of one of the specified critical illness benefit triggers covered within a critical illness insurance policy. This product also includes benefits and services that assist employees and their family members in the prevention, early detection and treatment of critical illness events.
The company also offers hospital indemnity insurance as part of its suite of supplemental health solutions. Similar to the company's employer-sponsored group accident and critical illness insurance, hospital indemnity is offered to employees and their covered dependents and is predominantly purchased on an employee-paid basis. Hospital indemnity insurance provides scheduled benefits for hospital admission and daily confinement, as well as over 20 benefit triggers related to hospitalization due to an accident and/or illness.
Distribution
The Group Protection segment's products are marketed primarily through a national distribution system. The managers and marketing representatives develop business through employee benefit brokers, consultants, and other employee benefit firms that work with employers to provide access to the company's products.
Retirement Plan Services
The Retirement Plan Services segment provides employers with retirement plan products and services, primarily in the defined contribution retirement plan marketplace. Defined contribution plans are a popular employee benefit offered by employers large and small across a wide spectrum of industries. While the company's focus is employer-sponsored defined contribution plans, the company also serves the defined benefit plan and individual retirement account ('IRA') markets on a limited basis. The company provides a variety of plan investment vehicles, including individual and group variable annuities, group fixed annuities and mutual fund-based programs. The company also offers a broad array of plan services, including plan recordkeeping, compliance testing, participant education and trust and custodial services through the company's affiliated trust company, Lincoln Financial Group Trust Company.
Products and Services
The Retirement Plan Services segment brings three primary offerings to the employer-sponsored market: LINCOLN DIRECTOR group variable annuity, LINCOLN ALLIANCE program and Multi-Fund variable annuity. The LINCOLN ALLIANCE program is a mutual fund-based record-keeping platform. These offerings primarily cover the 403(b), 401(k) and 457 plan marketplaces. The 403(b) plans are available to educational institutions, not-for-profit healthcare organizations and certain other not-for-profit entities 401(k) plans are generally available to for-profit entities; and 457 plans are available to not-for-profit entities and state and local government entities. The investment options for the company's products encompass the spectrum of asset classes with varying levels of risk and include both equity and fixed-income.
LINCOLN DIRECTOR group variable annuity is primarily a 401(k) defined contribution retirement plan solution available to small businesses, typically those with plans having less than $10 million in account balances. The LINCOLN DIRECTOR product offers participants a broad array of investment options from several fund families and a fixed account. The Retirement Plan Services segment earns revenue through asset charges and/or separate account charges, which are used to pay the company's fees for recordkeeping services. The company also receives fees from the underlying mutual fund companies for the services the company provides, and the company earns investment margins on assets in the fixed account. Through the LINCOLN DIRECTOR product, as well the LINCOLN ALLIANCE product discussed below, the company also offers its proprietary YourPath portfolios, a series of target-date portfolios for employer-sponsored retirement plans. These target-date portfolios are managed along multiple risk-based paths to support a more personalized investment approach based upon financial circumstances and risk tolerance. These target-date portfolios are also available with an income solution in the form of a GWB.
The LINCOLN ALLIANCE program is a defined contribution retirement plan solution aimed at small, mid-large and large market employers, typically those that have defined contribution plans with $10 million or more in account balance. The target market is primarily healthcare providers, public sector employers, corporations and educational institutions. The program bundles the company's traditional fixed annuity products with the employer's choice of mutual funds, along with recordkeeping, plan compliance services and customized employee education services. The program allows the use of any mutual fund. The company earns fees for its recordkeeping and educational services and other services that the company provides to plan sponsors and participants. The company also earns investment spreads on fixed annuities.
Multi-Fund variable annuity is a defined contribution retirement plan solution with fully bundled administrative services and investment choices for small- to mid-sized healthcare, education, governmental and not-for-profit employers sponsoring 403(b), 457(b) and 401(a)/(k) plans. The product is available to the employer through the Multi-Fund group variable annuity contract or directly to the individual participant through the Multi-Fund Select variable annuity contract. The company earns mortality and expense charges, investment income on the fixed account and surrender charges from this product. The company also receives fees for services that the company provides to funds in the underlying separate accounts.
Additionally, the company offers other products and services that complement the company's primary offerings:
The Lincoln Next Step series of products is a suite of mutual fund-based IRAs available exclusively for participants in Lincoln-serviced retirement plans and their spouses. The products can accept rollovers and transfers from other providers as well as ongoing contributions. The Lincoln Next Step IRA product has no annual account charges and offers an array of mutual fund investment options provided by 20 fund families all offered at net asset value. The Lincoln Next Step Select IRA has an annual record keeping charge and offers an even wider array of mutual fund investment options from over 20 families, all at net asset value. The company earn 12b-1 and service fees on the mutual funds within the product.
Through a group annuity contract, the company offers a series of products intended to fulfill future needs of retirement security for the company's clients. By offering a GWB inside a retirement plan, the company provides plan sponsors a solution that gives participants the ability to participate in the market and receive guaranteed income for life while still maintaining access to their plan account balance. These products are available both to retirement plans where the company provides plan recordkeeping services and those where the company does not.
Through a group annuity contract or funding agreement, the company offers fixed return products to retirement plans and other institutional contract holders where the company does not provide plan recordkeeping services. The fixed annuity or funding agreement is used within small, mid-large and large employer plan sponsors or institutional investors. The contract provides a conservative investment option for those seeking stability. In some cases, the company earns investment spreads on assets in the fixed account, and in other product versions the company earns a fee on assets in the underlying custodial account.
Distribution
Retirement Plan Services products are primarily distributed in two ways: through the company's Institutional Retirement Distribution team and by LFD. These teams distribute these products through advisers, consultants, banks, wirehouses and individual planners. The company remains focused on wholesaler productivity, increasing relationship management expertise and growing the number of broker-dealer relationships.
The Multi-Fund program is sold primarily by affiliated advisers. The LINCOLN ALLIANCE program is sold primarily through consultants, registered independent advisers and both affiliated and non-affiliated financial advisers, planners and wirehouses. LINCOLN DIRECTOR group variable annuity is sold in the small plan marketplace by intermediaries, including financial advisers and planners.
Other Operations
Other Operations includes the financial data for operations that are not directly related to the business segments. Other Operations includes investments related to the excess capital in the company's insurance subsidiaries; corporate investments; benefit plan net liability; the results of certain disability income business; the company's run-off Institutional Pension business in the form of group annuity and insured funding-type of contracts; debt; and Spark program expenses.
Regulation
The company is subject to information security laws and regulations that impose governance and compliance obligations applicable to the company's business. For example, in 2017, the New York Department of Financial Services ('NYDFS') enacted a regulation establishing cybersecurity requirements for financial services companies (the 'NYDFS Cybersecurity Regulation').
In addition to being registered under the Securities Act of 1933, some of the company's separate accounts, as well as mutual funds that the company sponsors are registered as investment companies under the Investment Company Act of 1940, and the shares of certain of these entities are qualified for sale in some or all states and the District of Columbia. The company also has subsidiaries that are registered as broker-dealers under the Exchange Act and are subject to federal and state regulation, including, but not limited to, the Financial Industry Regulation Authority's ('FINRA') net capital rules. In addition, the company has subsidiaries that are registered investment advisers under the Investment Advisers Act of 1940.
As a result of overlapping efforts by the Department of Labor ('DOL'), the NAIC, individual states and the SEC to impose fiduciary-like requirements in connection with the sale of annuities, life insurance policies and securities, which are each discussed in more detail below, there have been a number of proposed or adopted changes to the laws and regulations that govern the conduct of the company's business and the distribution of the company's products.
The Dodd-Frank Act (Dodd-Frank Wall Street Reform and Consumer Protection Act) and corresponding global initiatives imposed significant changes to the regulation of derivatives transactions, which the company uses to mitigate many types of risk in the company's business.
Additional provisions of the Dodd-Frank Act include, among other things, the creation of a new Consumer Financial Protection Bureau to protect consumers of certain financial products; and changes to certain corporate governance rules. The Federal Insurance Office established under the Dodd-Frank Act issues annually a wide-ranging report on the state of insurance regulation in the U.S., together with a series of recommendations on ways to monitor and improve the regulatory environment. The ultimate impact of these recommendations on the company's business is undeterminable at this time.
The company continues to monitor any efforts by the government to repeal or replace provisions of the Patient Protection and Affordable Care Act and the effect those efforts may have on the company's businesses.
The company's insurance, asset management, plan administrative services and other businesses provide services to employee benefit plans subject to ERISA, including services where the company may act as an ERISA fiduciary.
Intellectual Property
The company has an extensive portfolio of trademarks and service marks that the company considers important in the marketing of its products and services, including among others, the trademarks of the Lincoln National and Lincoln Financial names, the Lincoln silhouette logo and the combination of these marks. The company owns several issued U.S. patents.
History
Lincoln National Corporation was founded in 1905. The company was incorporated under the laws of the state of Indiana in 1968.
