LINCOLN NATIONAL CORP

Previous wording

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the financial condition as of March 31, 2024, compared with December 31, 2023, and the results of operations for the three months ended March 31, 2024, compared with the corresponding period in 2023 of Lincoln National Corporation and its consolidated subsidiaries. Unless otherwise stated or the context otherwise requires, “LNC,” “Company,” “we,” “our” or “us” refers to Lincoln National Corporation and its consolidated subsidiaries.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the financial condition as of June 30, 2024, compared with December 31, 2023, and the results of operations for the three and six months ended June 30, 2024, compared with the corresponding periods in 2023 of Lincoln National Corporation and its consolidated subsidiaries. Unless otherwise stated or the context otherwise requires, “LNC,” “Company,” “we,” “our” or “us” refers to Lincoln National Corporation and its consolidated subsidiaries.

Previous wording

The MD&A is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and the accompanying notes to the consolidated financial statements (“Notes”) presented in “Part I – Item 1. Financial Statements”; our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”); and other reports filed with the Securities and Exchange Commission (“SEC”). For more detailed information on the risks and uncertainties associated with the Company’s business activities, see the risks described in “Part I – Item 1A. Risk Factors” in our 2023 Form 10-K.

Current wording

The MD&A is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and the accompanying notes to the consolidated financial statements (“Notes”) presented in “Part I – Item 1. Financial Statements”; our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”); and other reports filed with the Securities and Exchange Commission (“SEC”). For more detailed information on the risks and uncertainties associated with the Company’s business activities, see the risks described in “Part I – Item 1A. Risk Factors” in our 2023 Form 10-K and “Part II – Item 1A. Risk Factors” herein.

Previous wording

The risks and uncertainties included here are not exhaustive. Other sections of this report and other reports that we file with the SEC include additional factors that could affect our businesses and financial performance, including “Part I – Item 1A. Risk Factors” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our 2023 Form 10-K. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.

Current wording

The risks and uncertainties included here are not exhaustive. Other sections of this report and other reports that we file with the SEC include additional factors that could affect our businesses and financial performance, including “Part I – Item 1A. Risk Factors” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our 2023 Form 10-K and “Part II – Item 1A. Risk Factors” herein. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.

Previous wording

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 “Forward-Looking Statements – Cautionary Language” above and “Part I – Item 1A. Risk Factors” in our 2023 Form 10-K.

Current wording

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 “Forward-Looking Statements – Cautionary Language” above and “Part I – Item 1A. Risk Factors” in our 2023 Form 10-K and “Part II – Item 1A. Risk Factors” herein.

Previous wording

Net amount at risk (“NAR”) represents the amount of GLB or GDB in excess of a policyholder’s account balance at the balance sheet date. Underperforming markets increase our exposure to potential benefits with the GLB and GDB riders. A contract with a GDB rider is “in the money” if the policyholder’s account balance falls below the GDB. As of March 31, 2024 and 2023, 9% and 22%, respectively, of all in-force contracts with a GDB rider were “in the money.” A contract with a GLB rider is “in the money” if the policyholder’s account balance falls below the present value of GLB payments, assuming no full surrenders. As of March 31, 2024 and 2023,16% and 32%, respectively, of all in-force contracts with a GLB rider were “in the money.” However, the only way the policyholder can realize the excess of the present value of benefits over the account balance of the contract is through a series of withdrawals or income payments that do not exceed a maximum amount. If, after the series of withdrawals or income payments, the account balance is exhausted, the policyholder will continue to receive a series of annuity payments. The account balance can also fluctuate with market returns on a daily basis resulting in increases or decreases in the excess of the present value of benefits over account balance.

Current wording

Net amount at risk (“NAR”) represents the amount of GLB or GDB in excess of a policyholder’s account balance at the balance sheet date. Underperforming markets increase our exposure to potential benefits with the GLB and GDB riders. A contract with a GDB rider is “in the money” if the policyholder’s account balance falls below the GDB. As of June 30, 2024 and 2023, 8% and 21%, respectively, of all in-force contracts with a GDB rider were “in the money.” A contract with a GLB rider is “in the money” if the policyholder’s account balance falls below the present value of GLB payments, assuming no full surrenders. As of June 30, 2024 and 2023,18% and 28%, respectively, of all in-force contracts with a GLB rider were “in the money.” However, the only way the policyholder can realize the excess of the present value of benefits over the account balance of the contract is through a series of withdrawals or income payments that do not exceed a maximum amount. If, after the series of withdrawals or income payments, the account balance is exhausted, the policyholder will continue to receive a series of annuity payments. The account balance can also fluctuate with market returns on a daily basis resulting in increases or decreases in the excess of the present value of benefits over account balance.

Previous wording

Change in the fair value of MRB assets and liabilities is reported in market risk benefit gain (loss) in the Consolidated Statements of Comprehensive Income (Loss), except for the portion attributable to the change in non-performance risk, which is recognized in other comprehensive income (loss) (“OCI”). Change in the fair value of ceded MRB assets and liabilities, including the changes in our counterparties’ non-performance risks, is reported in market risk benefit gain (loss) in the Consolidated Statements of Comprehensive Income (Loss).

Current wording

Change in the fair value of MRB assets and liabilities is reported in market risk benefit gain (loss) on the Consolidated Statements of Comprehensive Income (Loss), except for the portion attributable to the change in non-performance risk, which is recognized in other comprehensive income (loss) (“OCI”). Change in the fair value of ceded MRB assets and liabilities, including the changes in our counterparties’ non-performance risks, is reported in market risk benefit gain (loss) on the Consolidated Statements of Comprehensive Income (Loss).

Previous wording

As of March 31, 2024, we had an approximate$5 billion deferred tax asset related to net unrealized losses on fixed maturity available-for-sale (“AFS”) securities. In the assessment of the future realizability of this deferred tax asset, management concluded that its tax planning strategy to hold these securities to recovery was prudent and feasible as these unrealized losses were caused by factors other than credit loss, and we have the intent and ability to hold these securities to recovery and collect all of the contractual cash flows.

Current wording

As of June 30, 2024, we had an approximate $2.2 billion deferred tax asset related to net unrealized losses on fixed maturity available-for-sale (“AFS”) securities. In the assessment of the future realizability of this deferred tax asset, management concluded that its tax planning strategy to hold these securities to recovery was prudent and feasible as these unrealized losses were caused by factors other than credit loss, and we have the intent and ability to hold these securities to recovery and collect all of the contractual cash flows.

Previous wording

For additional information on income taxes, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Introduction – Summary of Critical Accounting Estimates – Income Taxes” in our 2023 Form 10-K and Note 18 herein.

Current wording

For additional information on income taxes, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Introduction – Summary of Critical Accounting Estimates – Income Taxes” and Note 23 in our 2023 Form 10-K and Note 18 herein.

Previous wording

(1)The coinsurance with funds withheld investment portfolio includes fixed maturity securities classified as AFS with changes in fair value recorded in OCI. Since the corresponding and offsetting changes in fair value of the embedded derivative related to the coinsurance with funds withheld investment portfolio are recorded in realized gain (loss), volatility can occur within net income (loss). See Note 7 for more information.

Current wording

(2)The three and six months ended June 30, 2024, include primarily changes in the fair value of the embedded derivative related to the fourth quarter 2023 reinsurance transaction. The coinsurance with funds withheld investment portfolio includes fixed maturity securities classified as AFS with changes in fair value recorded in OCI. Since the corresponding and offsetting changes in fair value of the embedded derivative related to the coinsurance with funds withheld investment portfolio are recorded in realized gain (loss), volatility can occur within net income (loss). See Note 7 for more information.

Previous wording

•Gain in net annuity product features in 2024 compared to loss in 2023 driven by MRB-related impacts due to the effect of capital markets.

Current wording

•Gain in net annuity product features in 2024 compared to loss in 2023 driven by improvement in the fair value of GLB hedge instruments attributable to the impact of capital markets and higher gain in MRB-related impacts due to higher interest rates, partially offset by less favorable changes in equity markets.

Previous wording

The increase in net income was partially offset by a legal accrual in the first quarter of 2024 and higher compensation-related expenses and other costs pertaining to business operations.

Current wording

•Higher expenses driven by a legal accrual in the first quarter of 2024 and higher compensation-related expenses.

Previous wording

(2)Consists primarily of revenues attributable to broker-dealer services, which are subject to market volatility, and the net settlement related to certain reinsurance transactions, which has a corresponding offset in net investment income and interest credited.

Current wording

(2)Consists primarily of revenues attributable to broker-dealer services, which are subject to market volatility and have a comparable offset in commissions and other expenses; and the net settlement related to certain reinsurance transactions, which has a corresponding offset in net investment income and interest credited. On May 6, 2024, we closed the previously announced sale to Osaic. For information on the sale of our wealth management business, see Note 1.

Previous wording

•Higher federal income tax expense due to the separate account dividends-received deduction.

Current wording

•Higher federal income tax expense due to the separate account dividends-received deduction in the first quarter of 2024.

Previous wording

•Higher commissions and other expenses driven by higher costs pertaining to business operations, including a balance sheet true-up in preparation for the close of the sale of the wealth management business.

Current wording

•Higher commissions and other expenses due to higher broker-dealer expenses in the first quarter of 2024 as a result of a balance sheet true-up in preparation for the close of the sale of the wealth management business.

Previous wording

The other component of net flows relates to the retention of new business and account balances. An important measure of retention is the reduction in account balances caused by full surrenders, deaths and other contract benefits. These outflows as a percentage of average gross account balances were 11% and 9% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

The other component of net flows relates to the retention of new business and account balances. An important measure of retention is the reduction in account balances caused by full surrenders, deaths and other contract benefits. These outflows as a percentage of average gross account balances were 10% and 11% for the three and six months ended June 30, 2024, respectively, and 9% for the corresponding periods in 2023.

Previous wording

Our fixed annuities and registered index-linked annuities have discretionary fixed and indexed crediting rates that reset on an annual or periodic basis and may be subject to surrender charges. Our ability to retain these annuities will be subject to current competitive conditions at the time crediting rates for these products reset. We expect to manage the effects of spreads on near-term income from operations through portfolio management and, to a lesser extent, crediting rate actions, which assumes no significant changes in net flows or other changes that may cause interest rate spreads to differ from our expectations. For information on interest rate spreads and interest rate risk, see “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” and “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk” in our 2023 Form 10-K. For information on the interest rate environment, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Introduction – Executive Summary – Industry Trends – Interest Rate Environment ” in our 2023 Form 10-K.

Current wording

Our fixed annuities and registered index-linked annuities (“RILA”) have discretionary fixed and indexed crediting rates that reset on an annual or periodic basis and may be subject to surrender charges. Our ability to retain these annuities will be subject to current competitive conditions at the time crediting rates for these products reset. We expect to manage the effects of spreads on near-term income from operations through portfolio management and, to a lesser extent, crediting rate actions, which assumes no significant changes in net flows or other changes that may cause interest rate spreads to differ from our expectations. For information on interest rate spreads and interest rate risk, see “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” and “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk” in our 2023 Form 10-K. For information on the interest rate environment, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Introduction – Executive Summary – Industry Trends – Interest Rate Environment” in our 2023 Form 10-K.

Previous wording

(3)Includes the fixed portion of variable annuities.

Current wording

(3)Includes the fixed portion of variable annuities and RILA.

Previous wording

•Lower net investment income, net of interest credited, driven by the run-rate impact of the fourth quarter 2023 reinsurance transaction, partially offset by higher investment income on alternative investments.

Current wording

•Lower net investment income, net of interest credited, driven by the run-rate impact of the fourth quarter 2023 reinsurance transaction and lower investment income on alternative investments.

Previous wording

The increase in loss from operations was partially offset by lower benefits and policyholder liability remeasurement (gain) loss driven by the run-rate impact of the fourth quarter 2023 reinsurance transaction.

Current wording

•Lower benefits and policyholder liability remeasurement loss driven by the run-rate impact of the fourth quarter 2023 reinsurance transaction.

Previous wording

Effective October 1, 2023, we entered into reinsurance agreements with Fortitude Reinsurance Company Ltd. to reinsure liabilities under certain blocks of in-force UL with secondary guarantees (“ULSG”) and MoneyGuard®. We expect an ongoing unfavorable impact to operating results in future quarters of approximately $25 million to $30 million per quarter as a result of this reinsurance transaction. See Note 7 for more information on the transaction, which improved our capital position and is expected to be accretive to ongoing free cash flow.

Current wording

Effective October 1, 2023, we entered into reinsurance agreements with Fortitude Reinsurance Company Ltd. to reinsure liabilities under certain blocks of in-force UL with secondary guarantees (“ULSG”) and MoneyGuard®. We expect an ongoing unfavorable impact to operating results in future quarters of approximately $25 million to $30 million per quarter as a result of this reinsurance transaction. See

Previous wording

•Lower net investment income driven by lower average fixed account balances.

Current wording

•Lower net investment income, net of interest credited, driven by lower average fixed account balances.

Previous wording

New deposits are an important component of net flows and key to our efforts to grow our business. Although deposits do not significantly affect current period income from operations, they can significantly impact future income from operations. The other component of net flows relates to the retention of the business. An important measure of retention is the reduction in account balances caused by plan sponsor terminations and participant withdrawals. These outflows as a percentage of average account balances were 13% and 12% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

New deposits are an important component of net flows and key to our efforts to grow our business. Although deposits do not significantly affect current period income from operations, they can significantly impact future income from operations. The other component of net flows relates to the retention of the business. An important measure of retention is the reduction in account balances caused by plan sponsor terminations and participant withdrawals. These outflows as a percentage of average account balances were 13% for the three and six months ended June 30, 2024, and 11% and 12%, respectively, for the corresponding periods in 2023.

Previous wording

As of March 31, 2024, and December 31, 2023, 97% of the total fixed maturity AFS securities in an unrealized loss position were investment grade. Our gross unrealized losses recognized in OCI on fixed maturity AFS securities as of March 31, 2024, increased by $814 million since December 31, 2023. For the three months ended March 31, 2024, and the corresponding period in 2023, we recognized $61 million and $65 million of gross losses, respectively, on fixed maturity AFS securities, which were primarily related to portfolio rebalancing and sales driven by the regional banking crisis, respectively. For further information on our unrealized losses on fixed maturity AFS securities, see “Composition by Industry Categories of our Unrealized Losses on Fixed Maturity AFS Securities” below.

Current wording

As of June 30, 2024, and December 31, 2023, 97% of the total fixed maturity AFS securities in an unrealized loss position were investment grade. Our gross unrealized losses recognized in OCI on fixed maturity AFS securities as of June 30, 2024, increased by $1.5 billion since December 31, 2023. For the six months ended June 30, 2024, we recognized $167 million of gross losses on fixed maturity AFS securities, which were primarily related to portfolio rebalancing and sales that support our reinsurance funds withheld agreements where the investment results are passed directly to the reinsurers. For the six months ended June 30, 2023, we recognized $117 million of gross losses on fixed maturity AFS securities, which were primarily related to sales driven by the regional banking crisis. For further information on our unrealized losses on fixed maturity AFS securities, see “Composition by Industry Categories of our Unrealized Losses on Fixed Maturity AFS Securities” below.

Previous wording

We recognized $(2) million of credit loss benefit (expense) on our fixed maturity AFS securities for the three months ended March 31, 2024, and $(17) million for the corresponding period in 2023. In order to determine the amount of credit loss, we calculated the recovery value by performing a discounted cash flow analysis based on the current cash flows and future cash flows we expect to recover. To determine the recoverability, we considered the facts and circumstances surrounding the underlying issuer including, but not limited to, the following:

Current wording

We recognized $(23) million and $(25) million of credit loss benefit (expense) on our fixed maturity AFS securities for the three and six months ended June 30, 2024, respectively, and $1 million and $(16) million, respectively, for the corresponding periods in 2023. In order to determine the amount of credit loss, we calculated the recovery value by performing a discounted cash flow analysis based on the current cash flows and future cash flows we expect to recover. To determine the recoverability, we considered the facts and circumstances surrounding the underlying issuer including, but not limited to, the following:

Previous wording

For information on credit loss impairment on fixed maturity AFS securities, see Notes 1, 3 and 17 herein.

Current wording

For information on credit loss impairment on fixed maturity AFS securities, see Notes 1,3 and 17 herein and Note 1 to the Consolidated Financial Statements in our 2023 Form 10-K.

Previous wording

As reported on the Consolidated Balance Sheets, we had $134.2 billion of liabilities for future obligations under insurance policies and contracts, net of amounts recoverable from reinsurers, which exceeded investments and cash and invested cash, which totaled $129.8 billion as of March 31, 2024. If it were necessary to liquidate fixed maturity AFS securities prior to maturity or call to meet cash flow needs, we would first look to those fixed maturity AFS securities that are in an unrealized gain position, which had a fair value of $16.9 billion as of March 31, 2024, rather than selling fixed maturity AFS securities in an unrealized loss position. The amount of cash that we have on hand at any point in time takes into account our liquidity needs in the future, other sources of cash, such as the maturities of investments, interest and dividends we earn on our investments and the ongoing cash flows from new and existing business. For additional information, see “Liquidity and Capital Resources” below.

Current wording

As reported on the Consolidated Balance Sheets, we had $136.4 billion of liabilities for future obligations under insurance policies and contracts, net of amounts recoverable from reinsurers, which exceeded investments and cash and invested cash, which totaled $132.0 billion as of June 30, 2024. If it were necessary to liquidate fixed maturity AFS securities prior to maturity or call to meet cash flow needs, we would first look to those fixed maturity AFS securities that are in an unrealized gain position, which had a fair value of $16.7 billion as of June 30, 2024, rather than selling fixed maturity AFS securities in an unrealized loss position. The amount of cash that we have on hand at any point in time takes into account our liquidity needs in the future, other sources of cash, such as the maturities of investments, interest and dividends we earn on our investments and the ongoing cash flows from new and existing business. For additional information, see “Liquidity and Capital Resources” below.

Previous wording

As of March 31, 2024, and December 31, 2023, the estimated fair value for all private placement securities was $20.3 billion and $20.6 billion, respectively, representing 16% and 17% of total investments, respectively.

Current wording

As of June 30, 2024, and December 31, 2023, the estimated fair value for all private placement securities was $20.6 billion, representing 16% and 17% of total investments, respectively.

Previous wording

The market value of fixed maturity AFS and trading securities backed by subprime loans was $172 million and represented less than 1% of our total investment portfolio as of March 31, 2024. Fixed maturity AFS securities represented $165 million, or 96%, and trading securities represented $7 million, or 4%, of the subprime exposure as of March 31, 2024. The table below summarizes our investments in fixed maturity AFS securities backed by pools of residential mortgages (in millions) as of March 31, 2024:

Current wording

The market value of fixed maturity AFS and trading securities backed by subprime loans was $168 million and represented less than 1% of our total investment portfolio as of June 30, 2024. Fixed maturity AFS securities represented $161 million, or 96%, and trading securities represented $7 million, or 4%, of the subprime exposure as of June 30, 2024. The table below summarizes our investments in fixed maturity AFS securities backed by pools of residential mortgages (in millions) as of June 30, 2024:

Previous wording

(1)Includes the net amortized cost and fair value of option adjustable rate mortgages (“ARM”) within RMBS, totaling $89 million and $96 million, respectively.

Current wording

(1)Includes the net amortized cost and fair value of option adjustable rate mortgages (“ARM”) within RMBS, totaling $87 million and $94 million, respectively.

Previous wording

(2)Does not include the amortized cost of trading securities totaling $61 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $61 million in trading securities consisted of $53 million prime and $8 million subprime.

Current wording

(2)Does not include the amortized cost of trading securities totaling $55 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $55 million in trading securities consisted of $44 million prime, $3 million Alt-A and $8 million subprime.

Previous wording

(3)Does not include the fair value of trading securities totaling $50 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $50 million in trading securities consisted of $43 million prime and $7 million subprime.

Current wording

(3)Does not include the fair value of trading securities totaling $44 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $44 million in trading securities consisted of $35 million prime, $3 million Alt-A and $6 million subprime.

Previous wording

(1)Does not include the amortized cost of trading securities totaling $125 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $125 million in trading securities consisted of $85 million of multiple property CMBS and $40 million of single property CMBS.

Current wording

(1)Does not include the amortized cost of trading securities totaling $125 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $125 million in trading securities consisted of $77 million of multiple property CMBS and $48 million of single property CMBS.

Previous wording

(2)Does not include the fair value of trading securities totaling $108 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $108 million in trading securities consisted of $74 million of multiple property CMBS and $34 million of single property CMBS.

Current wording

(2)Does not include the fair value of trading securities totaling $108 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $108 million in trading securities consisted of $68 million of multiple property CMBS and $40 million of single property CMBS.

Previous wording

As of March 31, 2024, there were 3 specifically identified impaired commercial mortgage loans on real estate with an aggregate carrying value of $2 million and 101 specifically identified impaired residential mortgage loans on real estate with an aggregate carrying value of $50 million. As of December 31, 2023, there were 3 specifically identified impaired commercial mortgage loans on real estate with an aggregate carrying value of $2 million and 99 specifically identified impaired residential mortgage loans on real estate with an aggregate carrying value of $47 million.

Current wording

As of June 30, 2024, there were specifically identified impaired commercial and residential mortgage loans with an aggregate carrying value of $13 million and $49 million, respectively, or less than 1% of total mortgage loans on real estate. As of December 31, 2023, there were specifically identified impaired commercial and residential mortgage loans with an aggregate carrying value of $2 million and $47 million, respectively, or less than 1% of total mortgage loans on real estate.

Previous wording

The total outstanding principal and interest on commercial mortgage loans on real estate that were two or more payments delinquent, excluding foreclosures, as of March 31, 2024, and December 31, 2023, was $62 million and less than $1 million, respectively. The total outstanding principal and interest on residential mortgage loans on real estate that were three or more payments delinquent, excluding foreclosures, as of March 31, 2024, and December 31, 2023, was $23 million and $20 million, respectively.

Current wording

The total outstanding principal and interest on commercial mortgage loans that were two or more payments delinquent, excluding foreclosures, as of June 30, 2024, and December 31, 2023, was $34 million and less than $1 million, respectively, or less than 1% of total mortgage loans on real estate. The total outstanding principal and interest on residential mortgage loans that were three or more payments delinquent, excluding foreclosures, as of June 30, 2024, and December 31, 2023, was $17 million and $20 million, respectively, or less than 1% of total mortgage loans on real estate.

Previous wording

The composition of commercial mortgage loans (in millions) by property type, geographic region and state is shown below:

Current wording

The composition of commercial mortgage loans (in millions) by property type, geographic region and state is shown below as of June 30, 2024:

Previous wording

As of March 31, 2024, and December 31, 2023, alternative investments included investments in 358 and 352 different partnerships, respectively, and the portfolio represented approximately 3% of total investments. The partnerships do not represent off-balance sheet financing and generally involve several third-party partners. Some of our partnerships contain capital calls, which require us to contribute capital upon notification by the general partner. These capital calls are contemplated during the initial investment decision and are planned for well in advance of the call date. The capital calls are not material in size and are not material to our liquidity. Alternative investments are accounted for using the equity method of accounting and are included in other investments on the Consolidated Balance Sheets.

Current wording

As of June 30, 2024, and December 31, 2023, alternative investments included investments in 362 and 352 different partnerships, respectively, and the portfolio represented approximately 3% of total investments. The partnerships do not represent off-balance sheet financing and generally involve several third-party partners. Some of our partnerships contain capital calls, which require us to contribute capital upon notification by the general partner. These capital calls are contemplated during the initial investment decision and are planned for well in advance of the call date. The capital calls are not material in size and are not material to our liquidity. Alternative investments are accounted for using the equity method of accounting and are included in other investments on the Consolidated Balance Sheets.

Previous wording

We earn investment income on our general account assets supporting fixed annuity, term life, whole life, UL, interest-sensitive whole life and the fixed portion of retirement plan and VUL products. The profitability of our fixed annuity and life insurance products is affected by our ability to achieve target spreads, or margins, between the interest income earned on the general account assets and the interest credited to the contract holder on our average fixed account balances, including the fixed portion of variable. Net investment income and the interest rate yield table each include commercial mortgage loan prepayments and bond make-whole premiums, alternative investments and contingent interest and standby real estate equity commitments. These items can vary significantly from period to period due to a number of factors and, therefore, can provide results that are not indicative of the underlying trends.

Current wording

We earn investment income on our general account assets supporting fixed annuity, term life, whole life, UL, interest-sensitive whole life and the fixed portion of retirement plan and VUL products. The profitability of our fixed annuity and life insurance products is affected by our ability to achieve target spreads, or margins, between the interest income earned on the general account assets and the interest credited to the policyholder on our average fixed account balances, including the fixed portion of variable. Net investment income and the interest rate yield table each include commercial mortgage loan prepayments and bond make-whole premiums, alternative investments and contingent interest and standby real estate equity commitments. These items can vary significantly from period to period due to a number of factors and, therefore, can provide results that are not indicative of the underlying trends.

Previous wording

For factors that could cause actual results to differ materially from those set forth in this section and that could affect our expectations for liquidity and capital, see “Part I – Item 1A. Risk Factors” in our 2023 Form 10-K and “Forward-Looking Statements – Cautionary Language” above.

Current wording

For factors that could cause actual results to differ materially from those set forth in this section and that could affect our expectations for liquidity and capital, see “Part I – Item 1A. Risk Factors” in our 2023 Form 10-K, “Forward-Looking Statements – Cautionary Language” above and “Part II – Item 1A. Risk Factors” herein.

Previous wording

Our primary sources of liquidity and capital are insurance premiums and fees, investment income, maturities and sales of investments, issuance of debt or other types of securities and policyholder deposits. We also have access to alternative sources of liquidity as discussed below. Our primary uses are to pay policy claims and benefits, to fund commissions and other general operating expenses, to purchase investments, to fund policy surrenders and withdrawals, to pay dividends to our common and preferred stockholders, to repurchase our common stock and to repay debt. Our operating activities provided (used) cash of $(1.3) billion and $(774) million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Our primary sources of liquidity and capital are insurance premiums and fees, investment income, maturities and sales of investments, issuance of debt or other types of securities and policyholder deposits. We also have access to alternative sources of liquidity as discussed below. Our primary uses are to pay policy claims and benefits, to fund commissions and other general operating expenses, to purchase investments, to fund policy surrenders and withdrawals, to pay dividends to our common and preferred stockholders, to repurchase our common stock and to repay debt. Our operating activities provided (used) cash of $(2.2) billion and $(252) million for the six months ended June 30, 2024 and 2023, respectively.