LINCOLN NATIONAL CORP

Executive Summary

We are a holding company that operates multiple insurance and retirement businesses through subsidiary companies. We sell a wide range of wealth accumulation, wealth protection, group protection and retirement income products and solutions through our four business segments:

•Annuities;

•Life Insurance;

•Group Protection; and

•Retirement Plan Services

We also have Other Operations, which includes the financial data for operations that are not directly related to the business segments. See “Part I – Item 1. Business” above for a discussion of our business segments and products.

In this report, in addition to providing consolidated revenues and net income (loss), we also provide segment operating revenues and income (loss) from operations because we believe they are meaningful measures of revenues and the profitability of our operating segments. Operating revenues and income (loss) from operations are the financial performance measures we use to evaluate and assess the results of our segments. Accordingly, we define and report operating revenues and income (loss) from operations by segment in Note 20. Our management believes that operating revenues and income (loss) from operations explain the results of our ongoing businesses in a manner that allows for a better understanding of the underlying trends in our current businesses. Certain items are excluded from operating revenue and income (loss) from operations because they 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 (loss) from operations will provide investors with a more valuable measure of our performance because it better reveals trends in our businesses.

We provide information about our segments’ and Other Operations’ operating revenue and expense line items, key drivers of changes and historical details underlying the line items below. For factors that could cause actual results to differ materially from those set forth, see “Part I – Item 1A. Risk Factors” and “Forward-Looking Statements – Cautionary Language” above.

Industry Trends

We continue to be influenced by a variety of trends that affect the industry.

Interest Rate Environment

Throughout 2023, the Federal Reserve continued to reiterate its commitment to implement and maintain policy as needed to achieve a return to its target level inflation over the longer run. To support this goal, the Federal Reserve increased the federal funds rate target range by 100 basis points during 2023. In January 2024, the Federal Reserve announced it would maintain the current federal funds target range of 5.25% to 5.50% for the time-being and stated that while the policy rate is likely at its peak for this tightening cycle, it does not expect it will be appropriate to reduce the federal funds target range until it has greater confidence that inflation is moving sustainably toward 2.0%. As interest rates were rising, which improves the yield on our new money and floating rate investments, we continued to be proactive in our investment strategies, product designs, crediting rate strategies, expense management actions and overall asset-liability practices to mitigate the risk of unfavorable consequences in this interest rate environment. As a result of the higher interest rate environment, sales of fixed annuities, fixed-indexed annuities and registered index-linked annuities (“RILA”) products increased across the industry. Due to inflationary concerns and the higher interest rate environment, life insurance industry sales slowed in 2023. If the higher interest rate environment persists into 2024, these industry sales trends may continue in 2024.

We have provided disclosures around risks related to changes in interest rates in “Part I – Item 1A. Risk Factors – Market Conditions – Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease, impacting our profitability, and make it more challenging to meet certain statutory requirements,” “Part I – Item 1A. Risk Factors – Market Conditions – Increases in interest rates may negatively affect our profitability, capital position and the value of our investment portfolio and may also result in increased contract withdrawals,” “Summary of Critical Accounting Estimates – Annual Assumption Review – Long-Term New Money Investment Yield Sensitivity” below and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk.”

Regulatory Environment

U.S.-domiciled insurance entities are regulated at the state level, while certain products and services are also subject to federal regulation. Regulators may refine capital requirements and introduce new reserving standards for the life insurance industry. Regulations recently adopted or currently under review can potentially affect the capital requirements and profitability of the industry and result in increased regulation and oversight for the industry. See “Part I – Item 1. Business – Regulatory” and “Part I – Item 1A. Risk Factors – Legislative, Regulatory and Tax” for a discussion of regulatory developments that may impact the Company and the associated risks.

Significant Operational Matters

Throughout 2023, we executed against our strategic priorities of strengthening our balance sheet, improving free cash flow and focusing on profitable growth. Notable actions in 2023 include the following:

•In November 2023, we closed our reinsurance agreements with Fortitude Reinsurance Company Ltd. (“Fortitude Re”), with an effective date of October 1, 2023;

•In December 2023, we announced we had entered into an agreement to sell our wealth management business operated through Lincoln Financial Network (“LFN”), which is expected to close in the first half of 2024. We anticipate that the capital benefit from this transaction will be used to improve our statutory capital position and reduce our leverage ratio; and

•We did not repurchase any shares of common stock under our buyback program during 2023.

For additional information on the Fortitude Re reinsurance agreements, see Notes 4 and 8. For additional information on the planned sale of our wealth management business, see “Results of Annuities” below and Note 1. For information on risks related to capital, see “Part I – Item 1A. Risk Factors – Liquidity and Capital Position.” For information on the risks related to acquisitions and dispositions, see “Part I – Item 1A. Risk Factors – Operational Matters – Acquisitions and dispositions of businesses may not produce anticipated benefits and could result in operating difficulties, unforeseen liabilities or asset impairments, which may adversely affect our operating results and financial condition.”

We continue to focus on the following actions in 2024:

•Growing our industry-leading wholesale distribution through Lincoln Financial Distributors, which distributes our annuities and life insurance products as well as our retirement plan products and services through financial professionals, broker-dealers and other financial services intermediaries;

•Making investments in our businesses and product enhancements to grow revenues, drive margin and reduce costs;

•Shifting our new business to a more capital-efficient mix with higher risk-adjusted returns;

•Exploring reinsurance and other strategies to maximize the value of our businesses;

•Improving the profitability of our Group Protection business through strategic pricing actions and repositioning our business through new market segment strategies as part of our longer-term margin expansion initiatives; and

•Focusing on expense discipline and managing our expenses aggressively. In February 2024, we reduced our workforce by approximately 5% to streamline our organizational structure, improve operational efficiency and reduce expenses. While we expect that this action will ultimately create expense efficiencies, we will incur workforce reduction expenses during the first half of 2024 that will be reported within Other Operations.