There are no sales charges, deferred sales charges, or surrender charges associated with this contract. |
Separate Account Annual Expense (as a percentage of average daily net assets in the Subaccount): | ||
Mortality and Expense Risk and Administrative Charge | 0.45% | |
Guaranteed Withdrawal Benefit1 | ||
Guaranteed Maximum Annual Charge | 2.00% | |
Current Annual Charge | 0.90% |
(1) | As a percentage of the Income Base, as increased for subsequent Purchase Payments, Automatic Annual Step-ups and decreased upon an Excess Withdrawal. The current monthly charge is 0.075%, not to exceed the guaranteed maximum monthly percentage charge of 0.17%. This charge is deducted from the AAV on a monthly basis. |
Minimum | Maximum | ||
Total Annual Fund Operating Expenses (expenses that are deducted from fund assets, including management fees, distribution and/or service (12b-1) fees, and other expenses) | 0.69% | 0.69% | |
Management Fees (before any waivers/ reimburse- ments) | + | 12b-1 Fees (before any waivers/ reimburse- ments) | + | Other Expenses (before any waivers/ reimburse- ments) | + | Acquired Fund Fees and Expenses (“AFFE”) | = | Total Expenses (before any waivers/ reimburse- ments) | Total Contractual waivers/ reimburse- ments (if any) | Total Expenses (after Contractual waivers/ reimburse- ments) | |
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class(1) | 0.25% | 0.00% | 0.02% | 0.42% | 0.69% | 0.00% | 0.69% |
(1) | The Total Annual Fund Operating Expenses do not correlate to the ratio of expenses to the average net assets appearing in the Financial Highlights table which reflects only the operating expenses of the Fund and does not include AFFE. |
1 year | 3 years | 5 years | 10 years | |||
$315 | $963 | $1,634 | $3,423 |
1 year | 3 years | 5 years | 10 years | |||
$315 | $963 | $1,634 | $3,423 |
• | LVIP Global Moderate Allocation Managed Risk Fund (Standard Class): Balance between high current income with growth of capital. The fund employs hedging strategies designed to provide for downside protection during sharp downward movements in equity markets; A fund of funds. |
• | remove, combine, or add Subaccounts and make the new Subaccounts available to you at our discretion; |
• | transfer assets supporting the contract from one Subaccount to another or from the VAA to another separate account; |
• | combine the VAA with other separate accounts and/or create new separate accounts; |
• | deregister the VAA under the 1940 Act; and |
• | operate the VAA as a management investment company under the 1940 Act or as any other form permitted by law. |
• | processing applications for and issuing the contracts; |
• | processing purchases and redemptions of fund shares as required; |
• | maintaining records; |
• | administering Annuity Payouts; |
• | furnishing accounting and valuation services (including the calculation and monitoring of daily Subaccount values); |
• | reconciling and depositing cash receipts; |
• | providing contract confirmations; and |
• | providing toll-free and website inquiry services. |
• | a Death Benefit; |
• | a Guaranteed Withdrawal Benefit; |
• | Annuity Payout benefits; and |
• | cash surrender value benefits. |
• | the risk that Annuitants receiving Annuity Payouts live longer than we assumed when we calculated our guaranteed rates (these rates are incorporated in the contract and cannot be changed); |
• | the risk that lifetime payments to individuals from the Guaranteed Withdrawal Benefit will exceed the AAV; |
• | the risk that the Death Benefits paid will exceed the actual AAV; and |
• | the risk that our costs in providing the services will exceed our revenues from contract charges (which we cannot change). |
Mortality and expense risk and administrative charge | 0.45% |
• | the use of mass enrollment procedures; |
• | the performance of administrative or sales functions by the employer; |
• | the use by an employer of automated techniques in submitting deposits or information related to deposits on behalf of its employees; or |
• | any other circumstances which reduce distribution or administrative expenses. |
• | Guaranteed lifetime periodic withdrawals up to the Guaranteed Annual Income amount which is based upon a guaranteed Income Base; |
• | Automatic Annual Step-ups of the Income Base to the AAV if the AAV is equal to or greater than the Income Base and the maximum age(s) has not been reached; |
• | Age-based increases to the Guaranteed Annual Income amount (after reaching a higher age-band and after an Automatic Annual Step-up). |
a) | the Annuitant (single life option), or the Annuitant or spouse (joint life option) are still living and under age 86 (if both spouses are living, they both must be under age 86); and |
b) | the AAV on that Valuation Date, after the deduction of any withdrawals (including the Guaranteed Withdrawal Benefit charge), plus any Purchase Payments made on that date, is equal to or greater than the Income Base. |
AAV | Income Base | ||
Initial Rollover Money $50,000 | $50,000 | $50,000 | |
Valuation Date immediately prior to 1st Benefit Year anniversary | $54,000 | $54,000 | |
Valuation Date immediately prior to 2nd Benefit Year anniversary | $53,900 | $54,000 | |
Valuation Date immediately prior to 3rd Benefit Year anniversary | $57,000 | $57,000 | |
Valuation Date immediately prior to 4th Benefit Year anniversary | $64,000 | $64,000 |
(a) | is the portion of the Income Base calculated on the basis of Purchase Payments made during the time the specific Table is in effect and adjusted by Automatic Annual Step-Ups and Excess Withdrawals; |
(b) | is the total Income Base for all Tables; |
(c) | is the applicable percentage for the age and measuring life option for that Table. |
Total Purchase Payment during Year 1 (Table 1 in effect) | $5,000 |
Automatic Step-Up of Income Base to market value on Benefit Year anniversary | $5,900 |
Total Purchase Payments during Year 2 (Table 2 in effect) | $5,000 |
Market loss so no Automatic Step-Up on Benefit Year anniversary | $10,900 |
Age | Guaranteed Annual Income amount percentage (Single Life Option) | Guaranteed Annual Income amount percentage (Joint Life Option) | ||
At Least 55 and under 65 | 4% | 3.5% | ||
65-70 | 5% | 4.5% | ||
71+ | 6% | 5.5% |
AAV on the Guaranteed Annual Income Effective Date | $200,000 |
Income Base on the Guaranteed Annual Income Effective Date | $200,000 |
Initial Guaranteed Annual Income amount on the Guaranteed Annual Income Effective Date ($200,000 x 4%) | $ 8,000 |
AAV six months after Guaranteed Annual Income Effective Date | $210,000 |
Income Base six months after Guaranteed Annual Income Effective Date | $200,000 |
Withdrawal six months after Guaranteed Annual Income Effective Date when Annuitant is still age 58 | $ 8,000 |
AAV after withdrawal ($210,000 - $8,000) | $202,000 |
Income Base after withdrawal ($200,000 - $0) | $200,000 |
AAV on next Benefit Year anniversary | $205,000 |
Income Base on next Benefit Year anniversary | $205,000 |
Guaranteed Annual Income amount on next Benefit Year anniversary | $ 8,200 |
• | the Income Base is reduced by the same proportion that the Excess Withdrawal reduces the AAV. This means that the reduction in the Income Base could be more than the dollar amount of the withdrawal; and |
• | the Guaranteed Annual Income amount will be recalculated to equal the applicable WAGAI percentage multiplied by the new (reduced) Income Base. |
• | Lincoln's monthly or quarterly automatic withdrawal service is used to calculate and pay the RMD; |
• | The RMD calculation must be based only on the AAV in this contract; and |
• | No withdrawals other than RMDs are made within the Benefit Year (except as described in the next paragraph). |
• | the current AAV as of the Valuation Date we approve the payment of the claim; or |
• | the sum of all Purchase Payments into the AAV decreased by withdrawals. Excess Withdrawals reduce the sum of all Purchase Payments in the same proportion that Excess Withdrawals reduced the AAV. All other withdrawals reduce the sum of all Purchase Payments by the dollar amount of the withdrawal. |
• | proof, satisfactory to us, of the death; |
• | written authorization for payment; and |
• | our receipt of all required claim forms, fully completed. |
• | on the Annuity Commencement Date; or |
• | upon the death of the Annuitant prior to the Guaranteed Annual Income Effective Date or under the single life option; or |
• | upon the death of the survivor under the joint life option; or |
• | when the Income Base or AAV is reduced to zero due to an Excess Withdrawal. |
• | when the NYSE is closed (other than weekends and holidays); |
• | times when market trading is restricted or the SEC declares an emergency, and we cannot value units or the funds cannot redeem shares; or |
• | when the SEC so orders for your protection. |
• | the amount payable at the death of the payee under the unit refund life annuity; or |
• | the proceeds remaining with Lincoln Life under the payouts guaranteed for designated amount or interest income, if available. |
• | proof, satisfactory to us, of the death; |
• | written authorization for payment; and |
• | all claim forms, fully completed. |
• | Individual Retirement Accounts and Annuities (“Traditional IRAs”) |
• | Roth IRAs |
• | Traditional IRA that is part of a Simplified Employee Pension Plan (“SEP”) |
• | SIMPLE 401(k) plans (Savings Incentive Matched Plan for Employees) |
• | 401(a) / (k) plans (qualified corporate employee pension and profit-sharing plans) |
• | 403(a) plans (qualified annuity plans) |
• | 403(b) plans (public school system and tax-exempt organization annuity plans) |
• | H.R. 10 or Keogh Plans (self-employed individual plans) |
• | 457(b) plans (deferred compensation plans for state and local governments and tax-exempt organizations) |
• | An individual must own the contract (or the tax law must treat the contract as owned by an individual). |
• | The investments of the VAA must be “adequately diversified” in accordance with IRS regulations. |
• | Your right to choose particular investments for a contract must be limited. |
• | The Annuity Commencement Date must not occur near the end of the Annuitant’s life expectancy. |
• | Federal tax rules limit the amount of Purchase Payments that can be made, and the tax deduction or exclusion that may be allowed for the Purchase Payments. These limits vary depending on the type of qualified retirement plan and the plan participant’s specific circumstances (e.g., the participant’s compensation). |
• | Minimum annual distributions are required under some qualified retirement plans once you reach age 70 ½ or retire, if later as described below. |
• | Under most qualified plans, such as a traditional IRA, the owner must begin receiving payments from the contract in certain minimum amounts by a certain age, typically age 70 ½. Other qualified plans may allow the participant to take required distributions upon the later of reaching age 70 ½ or retirement. |
• | Distribution received on or after the Annuitant reaches 59½ |
• | Distribution received on or after the Annuitant’s death or because of the Annuitant’s disability (as defined in the tax law) |
• | Distribution received as a series of substantially equal periodic payments based on the Annuitant’s life (or life expectancy), or |
• | Distribution received as reimbursement for certain amounts paid for medical care. |
Item | Page |
Special Terms | B-2 |
Services | B-2 |
Principal Underwriter | B-2 |
Purchase and Pricing of Securities Being Offered | B-2 |
Determination of Accumulation Unit Value | B-2 |
Capital Markets | B-3 |
Advertising & Ratings | B-3 |
Unclaimed Property | B-3 |
Other Information | B-4 |
Financial Statements | B-4 |
Please send me a free copy of the current Statement of Additional Information for Lincoln National Variable Annuity Account L / Lincoln Retirement Income RolloverSM Version 3. |
The Lincoln National Life Insurance Company
The Lincoln National Life Insurance Company
Consolidated Financial Statements
December 31, 2015 and 2014
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholder of
The Lincoln National Life Insurance Company
We have audited the accompanying consolidated balance sheets of The Lincoln National Life Insurance Company as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income (loss), stockholder’s equity, and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Lincoln National Life Insurance Company at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
March 31, 2016
1
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
As of December 31, |
||||||||
2015 |
2014 |
|||||||
ASSETS |
||||||||
Investments: |
||||||||
Available-for-sale securities, at fair value: |
||||||||
Fixed maturity securities (amortized cost: 2015 – $81,196; 2014 – $78,039) |
$ |
84,072 |
$ |
85,421 | ||||
Variable interest entities’ fixed maturity securities (amortized cost: 2015 – $596; 2014 – $587) |
598 | 598 | ||||||
Equity securities (cost: 2015 – $226; 2014 – $216) |
237 | 231 | ||||||
Trading securities |
1,762 | 1,966 | ||||||
Mortgage loans on real estate |
8,513 | 7,387 | ||||||
Real estate |
13 | 14 | ||||||
Policy loans |
2,520 | 2,645 | ||||||
Derivative investments |
1,485 | 1,763 | ||||||
Other investments |
1,588 | 1,551 | ||||||
Total investments |
100,788 | 101,576 | ||||||
Cash and invested cash |
2,400 | 3,224 | ||||||
Deferred acquisition costs and value of business acquired |
9,493 | 8,155 | ||||||
Premiums and fees receivable |
379 | 480 | ||||||
Accrued investment income |
1,034 | 1,016 | ||||||
Reinsurance recoverables |
7,100 | 6,926 | ||||||
Reinsurance related embedded derivatives |
95 |
- |
||||||
Funds withheld reinsurance assets |
635 | 655 | ||||||
Goodwill |
2,273 | 2,273 | ||||||
Other assets |
4,872 | 3,940 | ||||||
Separate account assets |
123,619 | 125,265 | ||||||
Total assets |
$ |
252,688 |
$ |
253,510 | ||||
LIABILITIES AND STOCKHOLDER’S EQUITY |
||||||||
Liabilities |
||||||||
Future contract benefits |
$ |
19,893 |
$ |
19,225 | ||||
Other contract holder funds |
76,483 | 74,561 | ||||||
Short-term debt |
90 | 2 | ||||||
Long-term debt |
2,745 | 2,662 | ||||||
Reinsurance related embedded derivatives |
- |
109 | ||||||
Funds withheld reinsurance liabilities |
4,478 | 4,441 | ||||||
Deferred gain on business sold through reinsurance |
144 | 220 | ||||||
Payables for collateral on investments |
4,565 | 4,311 | ||||||
Variable interest entities’ liabilities |
4 | 13 | ||||||
Other liabilities |
5,781 | 5,804 | ||||||
Separate account liabilities |
123,619 | 125,265 | ||||||
Total liabilities |
237,802 | 236,613 | ||||||
Contingencies and Commitments (See Note 14) |
||||||||
Stockholder’s Equity |
||||||||
Common stock – 10,000,000 shares authorized, issued and outstanding |
10,677 | 10,652 | ||||||
Retained earnings |
3,118 | 3,066 | ||||||
Accumulated other comprehensive income (loss) |
1,091 | 3,179 | ||||||
Total stockholder’s equity |
14,886 | 16,897 | ||||||
Total liabilities and stockholder’s equity |
$ |
252,688 |
$ |
253,510 |
See accompanying Notes to Consolidated Financial Statements
2
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Revenues |
|||||||||
Insurance premiums |
$ |
2,825 |
$ |
2,371 |
$ |
2,339 | |||
Fee income |
4,960 | 4,608 | 4,008 | ||||||
Net investment income |
4,611 | 4,648 | 4,561 | ||||||
Realized gain (loss): |
|||||||||
Total other-than-temporary impairment losses on securities |
(75 |
) |
(25 |
) |
(75 |
) |
|||
Portion of loss recognized in other comprehensive income |
25 | 10 | 10 | ||||||
Net other-than-temporary impairment losses on securities recognized in earnings |
(50 |
) |
(15 |
) |
(65 |
) |
|||
Realized gain (loss), excluding other-than-temporary impairment losses on securities |
(172 |
) |
(509 |
) |
122 | ||||
Total realized gain (loss) |
(222 |
) |
(524 |
) |
57 | ||||
Amortization of deferred gain on business sold through reinsurance |
69 | 69 | 69 | ||||||
Other revenues |
440 | 867 | 426 | ||||||
Total revenues |
12,683 | 12,039 | 11,460 | ||||||
Expenses |
|||||||||
Interest credited |
2,472 | 2,492 | 2,468 | ||||||
Benefits |
4,529 | 4,354 | 3,613 | ||||||
Commissions and other expenses |
4,109 | 3,876 | 3,526 | ||||||
Interest and debt expense |
105 | 103 | 93 | ||||||
Total expenses |
11,215 | 10,825 | 9,700 | ||||||
Income (loss) before taxes |
1,468 | 1,214 | 1,760 | ||||||
Federal income tax expense (benefit) |
295 | 220 | 431 | ||||||
Net income (loss) |
1,173 | 994 | 1,329 | ||||||
Other comprehensive income (loss), net of tax: |
|||||||||
Unrealized investment gains (losses) |
(2,090 |
) |
1,752 | (2,424 |
) |
||||
Funded status of employee benefit plans |
2 | (3 |
) |
(6 |
) |
||||
Total other comprehensive income (loss), net of tax |
(2,088 |
) |
1,749 | (2,430 |
) |
||||
Comprehensive income (loss) |
$ |
(915 |
) |
$ |
2,743 |
$ |
(1,101 |
) |
|
See accompanying Notes to Consolidated Financial Statements
3
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY
(in millions)
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Common Stock |
|||||||||
Balance as of beginning-of-year |
$ |
10,652 |
$ |
10,636 |
$ |
10,620 | |||
Stock compensation/issued for benefit plans |
25 | 16 | 16 | ||||||
Balance as of end-of-year |
10,677 | 10,652 | 10,636 | ||||||
Retained Earnings |
|||||||||
Balance as of beginning-of-year |
3,066 | 2,778 | 2,089 | ||||||
Net income (loss) |
1,173 | 994 | 1,329 | ||||||
Dividends declared |
(1,121 |
) |
(706 |
) |
(640 |
) |
|||
Balance as of end-of-year |
3,118 | 3,066 | 2,778 | ||||||
Accumulated Other Comprehensive Income (Loss) |
|||||||||
Balance as of beginning-of-year |
3,179 | 1,430 | 3,860 | ||||||
Other comprehensive income (loss), net of tax |
(2,088 |
) |
1,749 | (2,430 |
) |
||||
Balance as of end-of-year |
1,091 | 3,179 | 1,430 | ||||||
Total stockholder’s equity as of end-of-year |
$ |
14,886 |
$ |
16,897 |
$ |
14,844 |
See accompanying Notes to Consolidated Financial Statements
4
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Cash Flows from Operating Activities |
|||||||||
Net income (loss) |
$ |
1,173 |
$ |
994 |
$ |
1,329 | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|||||||||
Deferred acquisition costs, value of business acquired, deferred sales inducements |
|||||||||
and deferred front-end loads deferrals and interest, net of amortization |
(176 |
) |
(535 |
) |
(539 |
) |
|||
Trading securities purchases, sales and maturities, net |
143 | 310 | 131 | ||||||
Change in premiums and fees receivable |
101 | (56 |
) |
(42 |
) |
||||
Change in accrued investment income |
(18 |
) |
(14 |
) |
(16 |
) |
|||
Change in future contract benefits and other contract holder funds |
868 | 1,407 | (232 |
) |
|||||
Change in reinsurance related assets and liabilities |
(1,060 |
) |
(960 |
) |
68 | ||||
Change in federal income tax accruals |
170 | 48 | 437 | ||||||
Realized (gain) loss |
222 | 524 | (57 |
) |
|||||
Amortization of deferred gain on business sold through reinsurance |
(69 |
) |
(69 |
) |
(69 |
) |
|||
Proceeds from reinsurance recapture |
- |
422 |
- |
||||||
Change in cash management agreement investment |
351 | 329 | (29 |
) |
|||||
Other |
45 | 249 | (85 |
) |
|||||
Net cash provided by (used in) operating activities |
1,750 | 2,649 | 896 | ||||||
Cash Flows from Investing Activities |
|||||||||
Purchases of available-for-sale securities |
(8,858 |
) |
(8,306 |
) |
(11,002 |
) |
|||
Sales of available-for-sale securities |
1,329 | 1,120 | 954 | ||||||
Maturities of available-for-sale securities |
4,265 | 4,984 | 5,952 | ||||||
Purchases of other investments |
(13,868 |
) |
(5,013 |
) |
(2,481 |
) |
|||
Sales or maturities of other investments |
13,104 | 4,411 | 2,494 | ||||||
Increase (decrease) in payables for collateral on investments |
254 | 1,446 | (1,256 |
) |
|||||
Proceeds (outflows) from business ceded, recaptured and novated |
- |
(3 |
) |
(22 |
) |
||||
Proceeds from sale of subsidiary/business |
75 |
- |
- |
||||||
Other |
(80 |
) |
(82 |
) |
(95 |
) |
|||
Net cash provided by (used in) investing activities |
(3,779 |
) |
(1,443 |
) |
(5,456 |
) |
|||
Cash Flows from Financing Activities |
|||||||||
Payment of long-term debt, including current maturities |
(4 |
) |
- |
- |
|||||
Issuance of long-term debt, net of issuance costs |
- |
- |
311 | ||||||
Issuance (decrease) in short-term debt |
88 | (49 |
) |
23 | |||||
Proceeds from sales leaseback transaction |
47 | 83 |
- |
||||||
Deposits of fixed account values, including the fixed portion of variable |
10,745 | 10,363 | 10,466 | ||||||
Withdrawals of fixed account values, including the fixed portion of variable |
(6,062 |
) |
(5,775 |
) |
(5,230 |
) |
|||
Transfers to and from separate accounts, net |
(2,474 |
) |
(2,509 |
) |
(3,001 |
) |
|||
Common stock issued for benefit plans and excess tax benefits |
(14 |
) |
(19 |
) |
(17 |
) |
|||
Dividends paid to common and preferred stockholders |
(1,121 |
) |
(706 |
) |
(640 |
) |
|||
Net cash provided by (used in) financing activities |
1,205 | 1,388 | 1,912 | ||||||
Net increase (decrease) in cash and invested cash |
(824 |
) |
2,594 | (2,648 |
) |
||||
Cash and invested cash as of beginning-of-year |
3,224 | 630 | 3,278 | ||||||
Cash and invested cash as of end-of-year |
$ |
2,400 |
$ |
3,224 |
$ |
630 |
See accompanying Notes to Consolidated Financial Statements
5
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies
Nature of Operations
The Lincoln National Life Insurance Company (“LNL” or the “Company,” which also may be referred to as “we,” “our” or “us”), a wholly-owned subsidiary of Lincoln National Corporation (“LNC” or the “Parent Company”), is domiciled in the state of Indiana. We own 100% of the outstanding common stock of one insurance company subsidiary, Lincoln Life & Annuity Company of New York (“LLANY”). We also own several non-insurance companies, including Lincoln Financial Distributors and Lincoln Financial Advisors, LNC’s wholesaling and retailing business units, respectively. LNL’s principal businesses consist of underwriting annuities, deposit-type contracts and life insurance through multiple distribution channels. LNL is licensed and sells its products throughout the U.S. and several U.S. territories. See Note 22 for additional information.
Basis of Presentation
The accompanying consolidated financial statements are prepared in accordance with United States of America generally accepted accounting principles (“GAAP”). Certain GAAP policies, which significantly affect the determination of financial condition, results of operations and cash flows, are summarized below.
Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of LNL and all other entities in which we have a controlling financial interest and any variable interest entities (“VIEs”) in which we are the primary beneficiary. Entities in which we do not have a controlling financial interest and do not exercise significant management influence over the operating and financing decisions are reported using the equity method. All material inter-company accounts and transactions have been eliminated in consolidation.
Our involvement with VIEs is primarily to invest in assets that allow us to gain exposure to a broadly diversified portfolio of asset classes. A VIE is an entity that does not have sufficient equity to finance its own activities without additional financial support or where investors lack certain characteristics of a controlling financial interest. We assess our contractual, ownership or other interests in a VIE to determine if our interest participates in the variability the VIE was designed to absorb and pass onto variable interest holders. We perform an ongoing qualitative assessment of our variable interests in VIEs to determine whether we have a controlling financial interest and would therefore be considered the primary beneficiary of the VIE. If we determine we are the primary beneficiary of a VIE, we consolidate the assets and liabilities of the VIE in our consolidated financial statements.
Accounting Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Those estimates are inherently subject to change and actual results could differ from those estimates. Included among the material (or potentially material) reported amounts and disclosures that require extensive use of estimates are: fair value of certain invested assets and derivatives, other-than-temporary impairment (“OTTI”) and asset valuation allowances, deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), deferred sales inducements (“DSI”), goodwill, future contract benefits, other contract holder funds including deferred front-end loads (“DFEL”), pension plans, stock-based incentive compensation, income taxes and the potential effects of resolving litigated matters.
Business Combinations
We use the acquisition method of accounting for all business combination transactions, and accordingly, recognize the fair values of assets acquired, liabilities assumed and any noncontrolling interests in our consolidated financial statements. The allocation of fair values may be subject to adjustment after the initial allocation for up to a one-year period as more information becomes available relative to the fair values as of the acquisition date. The consolidated financial statements include the results of operations of any acquired company since the acquisition date.
Fair Value Measurement
Our measurement of fair value is based on assumptions used by market participants in pricing the asset or liability, which may include inherent risk, restrictions on the sale or use of an asset or non-performance risk (“NPR”), which would include our own credit risk. Our estimate of an exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability (“exit price”) in the principal market, or the most advantageous market in the absence of a principal market, for that asset or liability, as
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opposed to the price that would be paid to acquire the asset or receive a liability (“entry price”). Pursuant to the Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards CodificationTM (“ASC”),
we categorize our financial instruments carried at fair value into a three-level fair value hierarchy, based on the priority of inputs to the respective valuation technique. The three-level hierarchy for fair value measurement is defined as follows:
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Level 1 – inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date, except for large holdings subject to “blockage discounts” that are excluded; |
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Level 2 – inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value can be determined through the use of models or other valuation methodologies; and |
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Level 3 – inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability, and we make estimates and assumptions related to the pricing of the asset or liability, including assumptions regarding risk. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.
When a determination is made to classify an asset or liability within Level 3 of the fair value hierarchy, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. Because certain securities trade in less liquid or illiquid markets with limited or no pricing information, the determination of fair value for these securities is inherently more difficult. However, Level 3 fair value investments may include, in addition to the unobservable or Level 3 inputs, observable components, which are components that are actively quoted or can be validated to market-based sources.
Available-For-Sale Securities – Fair Valuation Methodologies and Associated Inputs
Securities classified as available-for-sale (“AFS”) consist of fixed maturity and equity securities and are stated at fair value with unrealized gains and losses included within accumulated other comprehensive income (loss) (“AOCI”), net of associated DAC, VOBA, DSI, future contract benefits, other contract holder funds and deferred income taxes.
We measure the fair value of our securities classified as AFS based on assumptions used by market participants in pricing the security. The most appropriate valuation methodology is selected based on the specific characteristics of the fixed maturity or equity security, and we consistently apply the valuation methodology to measure the security’s fair value. Our fair value measurement is based on a market approach that utilizes prices and other relevant information generated by market transactions involving identical or comparable securities. Sources of inputs to the market approach primarily include third-party pricing services, independent broker quotations or pricing matrices. We do not adjust prices received from third parties; however, we do analyze the third-party pricing services’ valuation methodologies and related inputs and perform additional evaluation to determine the appropriate level within the fair value hierarchy.
The observable and unobservable inputs to our valuation methodologies are based on a set of standard inputs that we generally use to evaluate all of our AFS securities. Observable inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. In addition, market indicators, industry and economic events are monitored, and further market data is acquired if certain triggers are met. For certain security types, additional inputs may be used, or some of the inputs described above may not be applicable. For private placement securities, we use pricing matrices that utilize observable pricing inputs of similar public securities and Treasury yields as inputs to the fair value measurement. Depending on the type of security or the daily market activity, standard inputs may be prioritized differently or may not be available for all AFS securities on any given day. For broker-quoted only securities, non-binding quotes from market makers or broker-dealers are obtained from sources recognized as market participants. For securities trading in less liquid or illiquid markets with limited or no pricing information, we use unobservable inputs to measure fair value.
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The following summarizes our fair valuation methodologies and associated inputs, which are particular to the specified security type and are in addition to the defined standard inputs to our valuation methodologies for all of our AFS securities discussed above:
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Corporate bonds and U.S. government bonds – We also use Trade Reporting and Compliance EngineTM reported tables for our corporate bonds and vendor trading platform data for our U.S. government bonds. |
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Mortgage- and asset-backed securities (“ABS”) – We also utilize additional inputs, which include new issues data, monthly payment information and monthly collateral performance, including prepayments, severity, delinquencies, step-down features and over collateralization features for each of our mortgage-backed securities (“MBS”), which include collateralized mortgage obligations and mortgage pass through securities backed by residential mortgages (“RMBS”), commercial mortgage-backed securities (“CMBS”), collateralized loan obligations (“CLOs”) and collateralized debt obligations (“CDOs”). |
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State and municipal bonds – We also use additional inputs that include information from the Municipal Securities Rule Making Board, as well as material event notices, new issue data, issuer financial statements and Municipal Market Data benchmark yields for our state and municipal bonds. |
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Hybrid and redeemable preferred and equity securities – We also utilize additional inputs of exchange prices (underlying and common stock of the same issuer) for our hybrid and redeemable preferred and equity securities. |
In order to validate the pricing information and broker-dealer quotes, we employ, where possible, procedures that include comparisons with similar observable positions, comparisons with subsequent sales and observations of general market movements for those security classes. We have policies and procedures in place to review the process that is utilized by our third-party pricing service and the output that is provided to us by the pricing service. On a periodic basis, we test the pricing for a sample of securities to evaluate the inputs and assumptions used by the pricing service, and we perform a comparison of the pricing service output to an alternative pricing source. We also evaluate prices provided by our primary pricing service to ensure that they are not stale or unreasonable by reviewing the prices for unusual changes from period to period based on certain parameters or for lack of change from one period to the next.
AFS Securities – Evaluation for Recovery of Amortized Cost
We regularly review our AFS securities for declines in fair value that we determine to be other-than-temporary. For an equity security, if we do not have the ability and intent to hold the security for a sufficient period of time to allow for a recovery in value, we conclude that an OTTI has occurred and the amortized cost of the equity security is written down to the current fair value, with a corresponding charge to realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). When assessing our ability and intent to hold the equity security to recovery, we consider, among other things, the severity and duration of the decline in fair value of the equity security as well as the cause of the decline, a fundamental analysis of the liquidity, and business prospects and overall financial condition of the issuer.
For our fixed maturity AFS securities (also referred to as “debt securities”), we generally consider the following to determine whether our debt securities with unrealized losses are other-than-temporarily impaired:
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The estimated range and average period until recovery; |
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The estimated range and average holding period to maturity; |
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Remaining payment terms of the security; |
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Current delinquencies and nonperforming assets of underlying collateral; |
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Expected future default rates; |
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Collateral value by vintage, geographic region, industry concentration or property type; |
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Subordination levels or other credit enhancements as of the balance sheet date as compared to origination; and |
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Contractual and regulatory cash obligations. |
For a debt security, if we intend to sell a security, or it is more likely than not we will be required to sell a debt security before recovery of its amortized cost basis and the fair value of the debt security is below amortized cost, we conclude that an OTTI has occurred and the amortized cost is written down to current fair value, with a corresponding charge to realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). If we do not intend to sell a debt security, or it is not more likely than not we will be required to sell a debt security before recovery of its amortized cost basis but the present value of the cash flows expected to be collected is less than the amortized cost of the debt security (referred to as the credit loss), we conclude that an OTTI has occurred and the amortized cost is written down to the estimated recovery value with a corresponding charge to realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss), as this amount is deemed the credit portion of the OTTI. The remainder of the decline to fair value is recorded in other comprehensive income (“OCI”) to unrealized OTTI on AFS securities on our Consolidated Statements of Stockholder’s Equity, as this amount is considered a noncredit (i.e., recoverable) impairment.
When assessing our intent to sell a debt security, or if it is more likely than not we will be required to sell a debt security before recovery of its cost basis, we evaluate facts and circumstances such as, but not limited to, decisions to reposition our security portfolio, sales of
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securities to meet cash flow needs and sales of securities to capitalize on favorable pricing. Management considers the following as part of the evaluation:
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The current economic environment and market conditions; |
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Our business strategy and current business plans; |
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The nature and type of security, including expected maturities and exposure to general credit, liquidity, market and interest rate risk; |
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Our analysis of data from financial models and other internal and industry sources to evaluate the current effectiveness of our hedging and overall risk management strategies; |
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The current and expected timing of contractual maturities of our assets and liabilities, expectations of prepayments on investments and expectations for surrenders and withdrawals of life insurance policies and annuity contracts; |
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The capital risk limits approved by management; and |
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Our current financial condition and liquidity demands. |
In order to determine the amount of the credit loss for a debt security, we calculate the recovery value by performing a discounted cash flow analysis based on the current cash flows and future cash flows we expect to recover. The discount rate is the effective interest rate implicit in the underlying debt security. The effective interest rate is the original yield, or the coupon if the debt security was previously impaired. See the discussion below for additional information on the methodology and significant inputs, by security type, that we use to determine the amount of a credit loss.
To determine the recovery period of a debt security, we consider the facts and circumstances surrounding the underlying issuer including, but not limited to, the following:
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Historical and implied volatility of the security; |
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Length of time and extent to which the fair value has been less than amortized cost; |
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Adverse conditions specifically related to the security or to specific conditions in an industry or geographic area; |
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Failure, if any, of the issuer of the security to make scheduled payments; and |
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Recoveries or additional declines in fair value subsequent to the balance sheet date. |
In periods subsequent to the recognition of an OTTI, the AFS security is accounted for as if it had been purchased on the measurement date of the OTTI. Therefore, for the fixed maturity AFS security, the original discount or reduced premium is reflected in net investment income over the contractual term of the investment in a manner that produces a constant effective yield.
To determine recovery value of a corporate bond, CLO or CDO, we perform additional analysis related to the underlying issuer including, but not limited to, the following:
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Fundamentals of the issuer to determine what we would recover if they were to file bankruptcy versus the price at which the market is trading; |
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Fundamentals of the industry in which the issuer operates; |
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Earnings multiples for the given industry or sector of an industry that the underlying issuer operates within, divided by the outstanding debt to determine an expected recovery value of the security in the case of a liquidation; |
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Expected cash flows of the issuer (e.g., whether the issuer has cash flows in excess of what is required to fund its operations); |
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Expectations regarding defaults and recovery rates; |
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Changes to the rating of the security by a rating agency; and |
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Additional market information (e.g., if there has been a replacement of the corporate debt security). |
Each quarter we review the cash flows for the MBS to determine whether or not they are sufficient to provide for the recovery of our amortized cost. We revise our cash flow projections only for those securities that are at most risk for impairment based on current credit enhancement and trends in the underlying collateral performance. To determine recovery value of a MBS, we perform additional analysis related to the underlying issuer including, but not limited to, the following:
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Discounted cash flow analysis based on the current cash flows and future cash flows we expect to recover; |
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Level of creditworthiness of the home equity loans or residential mortgages that back an RMBS or commercial mortgages that back a CMBS; |
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Susceptibility to fair value fluctuations for changes in the interest rate environment; |
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Susceptibility to reinvestment risks, in cases where market yields are lower than the securities’ book yield earned; |
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Susceptibility to reinvestment risks, in cases where market yields are higher than the book yields earned on a security; |
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Expectations of sale of such a security where market yields are higher than the book yields earned on a security; and |
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Susceptibility to variability of prepayments. |
When evaluating MBS and mortgage-related ABS, we consider a number of pool-specific factors as well as market level factors when determining whether or not the impairment on the security is temporary or other-than-temporary. The most important factor is the performance of the underlying collateral in the security and the trends of that performance in the prior periods. We use this information
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about the collateral to forecast the timing and rate of mortgage loan defaults, including making projections for loans that are already delinquent and for those loans that are currently performing but may become delinquent in the future. Other factors used in this analysis include the credit characteristics of borrowers, geographic distribution of underlying loans and timing of liquidations by state. Once default rates and timing assumptions are determined, we then make assumptions regarding the severity of a default if it were to occur. Factors that impact the severity assumption include expectations for future home price appreciation or depreciation, loan size, first lien versus second lien, existence of loan level private mortgage insurance, type of occupancy and geographic distribution of loans. Once default and severity assumptions are determined for the security in question, cash flows for the underlying collateral are projected including expected defaults and prepayments. These cash flows on the collateral are then translated to cash flows on our tranche based on the cash flow waterfall of the entire capital security structure. If this analysis indicates the entire principal on a particular security will not be returned, the security is reviewed for OTTI by comparing the expected cash flows to amortized cost. To the extent that the security has already been impaired or was purchased at a discount, such that the amortized cost of the security is less than or equal to the present value of cash flows expected to be collected, no impairment is required.
Otherwise, if the amortized cost of the security is greater than the present value of the cash flows expected to be collected, and the security was not purchased at a discount greater than the expected principal loss, then impairment is recognized.
We further monitor the cash flows of all of our AFS securities backed by mortgages on an ongoing basis. We also perform detailed analysis on all of our subprime, Alt-A, non-agency residential MBS and on a significant percentage of our AFS securities backed by pools of commercial mortgages. The detailed analysis includes revising projected cash flows by updating the cash flows for actual cash received and applying assumptions with respect to expected defaults, foreclosures and recoveries in the future. These revised projected cash flows are then compared to the amount of credit enhancement (subordination) in the structure to determine whether the amortized cost of the security is recoverable. If it is not recoverable, we record an impairment of the security.
Trading Securities
Trading securities consist of fixed maturity and equity securities in designated portfolios, some of which support modified coinsurance (“Modco”) and coinsurance with funds withheld (“CFW”) reinsurance arrangements. Investment results for the portfolios that support Modco and CFW reinsurance arrangements, including gains and losses from sales, are passed directly to the reinsurers pursuant to contractual terms of the reinsurance arrangements. Trading securities are carried at fair value and changes in fair value and changes in the fair value of embedded derivative liabilities associated with the underlying reinsurance arrangements, are recorded in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss) as they occur.
Alternative Investments
Alternative investments, which consist primarily of investments in limited partnerships (“LPs”), are included in other investments on our Consolidated Balance Sheets. We account for our investments in LPs using the equity method to determine the carrying value. Recognition of alternative investment income is delayed due to the availability of the related financial statements, which are generally obtained from the partnerships’ general partners. As a result, our venture capital, real estate and oil and gas portfolios are generally on a three-month delay and our hedge funds are on a one-month delay. In addition, the impact of audit adjustments related to completion of calendar-year financial statement audits of the investees are typically received during the second quarter of each calendar year. Accordingly, our investment income from alternative investments for any calendar-year period may not include the complete impact of the change in the underlying net assets for the partnership for that calendar-year period.
Payables for Collateral on Investments
When we enter into collateralized financing transactions on our investments, a liability is recorded equal to the cash or non-cash collateral received. This liability is included within payables for collateral on investments on our Consolidated Balance Sheets. Income and expenses associated with these transactions are recorded as investment income and investment expenses within net investment income on our Consolidated Statements of Comprehensive Income (Loss). Changes in payables for collateral on investments are reflected within cash flows from investing activities on our Consolidated Statements of Cash Flows.
Mortgage Loans on Real Estate
Mortgage loans on real estate are carried at unpaid principal balances adjusted for amortization of premiums and accretion of discounts and are net of valuation allowances. Interest income is accrued on the principal balance of the loan based on the loan’s contractual interest rate. Premiums and discounts are amortized using the effective yield method over the life of the loan. Interest income and amortization of premiums and discounts are reported in net investment income on our Consolidated Statements of Comprehensive Income (Loss) along with mortgage loan fees, which are recorded as they are incurred.
Our commercial loan portfolio is comprised of long-term loans secured by existing commercial real estate. As such, it does not exhibit risk characteristics unique to mezzanine, construction, residential, agricultural, land or other types of real estate loans. We believe all of the loans in our portfolio share three primary risks: borrower creditworthiness; sustainability of the cash flow of the property; and market risk; therefore, our methods for monitoring and assessing credit risk are consistent for our entire portfolio. Loans are considered impaired when it is probable that, based upon current information and events, we will be unable to collect all amounts due under the contractual terms of the loan agreement. When we determine that a loan is impaired, a valuation allowance is established for the excess
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carrying value of the loan over its estimated value. The loan’s estimated value is based on: the present value of expected future cash flows discounted at the loan’s effective interest rate; the loan’s observable market price; or the fair value of the loan’s collateral. Valuation allowances are maintained at a level we believe is adequate to absorb estimated probable credit losses of each specific loan. Our periodic evaluation of the adequacy of the allowance for losses is based on our past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payments), the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. Trends in market vacancy and rental rates are incorporated into the analysis that we perform for monitored loans and may contribute to the establishment of (or an increase or decrease in) an allowance for credit losses. In addition, we review each loan individually in our commercial mortgage loan portfolio on an annual basis to identify emerging risks. We focus on properties that experienced a reduction in debt-service coverage or that have significant exposure to tenants with deteriorating credit profiles. Where warranted, we establish or increase loss reserves for a specific loan based upon this analysis. Our process for determining past due or delinquency status begins when a payment date is missed, at which time the borrower is contacted. After the grace period expiration that may last up to 10 days, we send a default notice. The default notice generally provides a short time period to cure the default. Our policy is to report loans that are 60 or more days past due, which equates to two or more payments missed, as delinquent. We do not accrue interest on loans 90 days past due, and any interest received on these loans is either applied to the principal or recorded in net investment income on our Consolidated Statements of Comprehensive Income (Loss) when received, depending on the assessment of the collectability of the loan. We resume accruing interest once a loan complies with all of its original terms or restructured terms. Mortgage loans deemed uncollectable are charged against the allowance for losses, and subsequent recoveries, if any, are credited to the allowance for losses. All mortgage loans that are impaired have an established allowance for credit losses. Changes in valuation allowances are reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).
We measure and assess the credit quality of our mortgage loans by using loan-to-value and debt-service coverage ratios. The loan-to-value ratio compares the principal amount of the loan to the fair value at origination of the underlying property collateralizing the loan and is commonly expressed as a percentage. Loan-to-value ratios greater than 100% indicate that the principal amount is greater than the collateral value. Therefore, all else being equal, a lower loan-to-value ratio generally indicates a higher quality loan. The debt-service coverage ratio compares a property’s net operating income to its debt-service payments. Debt-service coverage ratios of less than 1.0 indicate that property operations do not generate enough income to cover its current debt payments. Therefore, all else being equal, a higher debt-service coverage ratio generally indicates a higher quality loan.
Policy Loans
Policy loans represent loans we issue to contract holders that use the cash surrender value of their life insurance policy as collateral. Policy loans are carried at unpaid principal balances.
Real Estate
Real estate includes both real estate held for the production of income and real estate held-for-sale. Real estate held for the production of income is carried at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. We periodically review properties held for the production of income for impairment. Properties whose carrying values are greater than their projected undiscounted cash flows are written down to estimated fair value, with impairment losses reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). The estimated fair value of real estate is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks. Real estate classified as held-for-sale is stated at the lower of depreciated cost or fair value less expected disposition costs at the time classified as held-for-sale. Real estate is not depreciated while it is classified as held-for-sale. Also, valuation allowances for losses are established, as appropriate, for real estate held-for-sale and any changes to the valuation allowances are reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). Real estate acquired through foreclosure proceedings is recorded at fair value at the settlement date.
Derivative Instruments
We hedge certain portions of our exposure to interest rate risk, foreign currency exchange risk, equity market risk and credit risk by entering into derivative transactions. All of our derivative instruments are recognized as either assets or liabilities on our Consolidated Balance Sheets at estimated fair value. We categorized derivatives into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique as discussed above in “Fair Value Measurement.” The accounting for changes in the estimated fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship, and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, we designate the hedging instrument based upon the exposure being hedged: as a cash flow hedge or a fair value hedge.
For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of AOCI and reclassified into net income in the same period or periods during which the hedged transaction affects net income. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of designated future cash flows of the hedged item (hedge ineffectiveness), if any, is recognized in net income during the period of change. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in net income during the period of
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change in estimated fair values. For derivative instruments not designated as hedging instruments, but that are economic hedges, the gain or loss is recognized in net income.
We purchase and issue financial instruments and products that contain embedded derivative instruments. When it is determined that the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host for measurement purposes. The embedded derivative is carried at fair value with changes in fair value recognized in net income during the period of change.
We employ several different methods for determining the fair value of our derivative instruments. The fair value of our derivative contracts are measured based on current settlement values, which are based on quoted market prices, industry standard models that are commercially available and broker quotes. These techniques project cash flows of the derivatives using current and implied future market conditions. We calculate the present value of the cash flows to measure the current fair market value of the derivative.
Cash and Invested Cash
Cash and invested cash is carried at cost and includes all highly liquid debt instruments purchased with an original maturity of three months or less.
DAC, VOBA, DSI and DFEL
Acquisition costs directly related to successful contract acquisitions or renewals of universal life insurance (“UL”), variable universal life insurance (“VUL”), traditional life insurance, annuities and other investment contracts have been deferred (i.e., DAC) to the extent recoverable. VOBA is an intangible asset that reflects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the business in force at the acquisition date. Bonus credits and excess interest for dollar cost averaging contracts are considered DSI. Contract sales charges that are collected in the early years of an insurance contract are deferred (i.e., DFEL), and the unamortized balance is reported in other contract holder funds on our Consolidated Balance Sheets.
Both DAC and VOBA amortization, excluding amounts reported in realized gain (loss), is reported within commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss). DSI amortization, excluding amounts reported in realized gain (loss), is reported in interest credited on our Consolidated Statements of Comprehensive Income (Loss). The amortization of DFEL, excluding amounts reported in realized gain (loss), is reported within fee income on our Consolidated Statements of Comprehensive Income (Loss). The methodology for determining the amortization of DAC, VOBA, DSI and DFEL varies by product type. For all insurance contracts, amortization is based on assumptions consistent with those used in the development of the underlying contract adjusted for emerging experience and expected trends.
Acquisition costs for UL and VUL insurance and investment-type products, which include fixed and variable deferred annuities, are generally amortized over the lives of the policies in relation to the incidence of estimated gross profits (“EGPs”) from surrender charges, investment, mortality net of reinsurance ceded and expense margins and actual realized gain (loss) on investments. Contract lives for UL and VUL policies are estimated to be 30 to 40 years based on the expected lives of the contracts. Contract lives for fixed and variable deferred annuities are generally between 15 and 30 years, while some of our fixed multi-year guarantee products have amortization periods equal to the guarantee period. The front-end load annuity product has an assumed life of 25 years. Longer lives are assigned to those blocks that have demonstrated favorable lapse experience.
Acquisition costs for all traditional contracts, including traditional life insurance contracts, such as individual whole life, group business and term life insurance, are amortized over the expected premium-paying period that generally results in amortization less than 30 years. Acquisition costs are either amortized on a straight-line basis or as a level percent of premium of the related policies depending on the block of business. There is currently no DAC, VOBA, DSI or DFEL balance or related amortization for fixed and variable payout annuities.
We account for modifications of insurance contracts that result in a substantially unchanged contract as a continuation of the replaced contract. We account for modifications of insurance contracts that result in a substantially changed contract as an extinguishment of the replaced contract.
The carrying amounts of DAC, VOBA, DSI and DFEL are adjusted for the effects of realized and unrealized gains and losses on securities classified as AFS and certain derivatives and embedded derivatives. Amortization expense of DAC, VOBA, DSI and DFEL reflects an assumption for an expected level of credit-related investment losses. When actual credit-related investment losses are realized, we recognize a true-up to our DAC, VOBA, DSI and DFEL amortization within realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss) reflecting the incremental effect of actual versus expected credit-related investment losses. These actual to expected amortization adjustments can create volatility from period to period in realized gain (loss).
During the third quarter of each year, we conduct our annual comprehensive review of the assumptions and the projection models used for our estimates of future gross profits underlying the amortization of DAC, VOBA, DSI and DFEL and the calculations of the embedded derivatives and reserves for life insurance and annuity products. These assumptions include investment margins, mortality,
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retention, rider utilization and maintenance expenses (costs associated with maintaining records relating to insurance and individual and group annuity contracts, and with the processing of premium collections, deposits, withdrawals and commissions). Based on our review, the cumulative balances of DAC, VOBA, DSI and DFEL included on our Consolidated Balance Sheets are adjusted with an offsetting benefit or charge to revenue or amortization expense to reflect such change related to our expectations of future EGPs (“unlocking”). We may have unlocking in other quarters as we become aware of information that warrants updating assumptions outside of our annual comprehensive review. We may also identify and implement actuarial modeling refinements that result in increases or decreases to the carrying values of DAC, VOBA, DSI, DFEL, embedded derivatives and reserves for life insurance and annuity products with living benefit and death benefit guarantees.
DAC, VOBA, DSI and DFEL are reviewed to ensure that the unamortized portion does not exceed the expected recoverable amounts.
Reinsurance
We enter into reinsurance agreements with other companies in the normal course of business. Assets and liabilities and premiums and benefits from certain reinsurance contracts that grant statutory surplus relief provided by or to other insurance companies are netted on our Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income (Loss), respectively, because there is a right of offset. All other reinsurance agreements are reported on a gross basis on our Consolidated Balance Sheets as an asset for amounts recoverable from reinsurers or as a component of other liabilities for amounts, such as premiums, owed to the reinsurers, with the exception of Modco agreements for which the right of offset also exists. Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums, benefits and DAC are reported net of insurance ceded.
Goodwill
We recognize the excess of the purchase price, plus the fair value of any noncontrolling interest in the acquiree, over the fair value of identifiable net assets acquired as goodwill. Goodwill is not amortized, but is reviewed at least annually for indications of value impairment, with consideration given to financial performance and other relevant factors. We perform a two-step test in our evaluation of the carrying value of goodwill for each of our reporting units, if qualitative factors determine it is necessary to complete the two-step goodwill impairment test. The results of one test on one reporting unit cannot subsidize the results of another reporting unit. In Step 1 of the evaluation, the fair value of each reporting unit is determined and compared to the carrying value of the reporting unit. If the fair value is greater than the carrying value, then the carrying value of the reporting unit is deemed to be recoverable, and Step 2 is not required. If the fair value estimate is less than the carrying value, it is an indicator that impairment may exist, and Step 2 is required. In Step 2, the implied fair value of goodwill is determined for the reporting unit. The reporting unit’s fair value as determined in Step 1 is assigned to all of its net assets (recognized and unrecognized) as if the reporting unit were acquired in a business combination as of the date of the impairment test. If the implied fair value of the reporting unit’s goodwill is lower than its carrying amount, goodwill is impaired and written down to its fair value; and a charge is reported in impairment of intangibles on our Consolidated Statements of Comprehensive Income (Loss).
Other Assets and Other Liabilities
Other assets consist primarily of DSI, specifically identifiable intangible assets, property and equipment owned by the Company, balances associated with corporate-owned and bank-owned life insurance, certain reinsurance assets, receivables resulting from sales of securities that had not yet settled as of the balance sheet date, debt issue costs, assets under capital leases, guaranteed living benefit (“GLB”) reserves embedded derivatives, other prepaid expenses and deferred losses on business sold through reinsurance. Other liabilities consist primarily of current and deferred taxes, pension and other employee benefit liabilities, derivative instrument liabilities, certain reinsurance payables, payables resulting from purchases of securities that had not yet settled as of the balance sheet date, interest on borrowed funds, obligations under capital leases and other accrued expenses.
Other assets and other liabilities on our Consolidated Balance Sheets include GLB features and remaining guaranteed interest and similar contracts that are carried at fair value, which may be reported in either other assets or other liabilities. The fair value of these items represents approximate exit price including an estimate for our NPR. Certain of these features have elements of both insurance benefits and embedded derivatives. Through our hybrid accounting approach, for reserve calculation purposes we assign product cash flows to the embedded derivative or insurance portion of the reserves based on the life-contingent nature of the benefits. We classify these GLB reserves embedded derivatives in Level 3 within the hierarchy levels described above in “Fair Value Measurement.” We report the insurance portion of the reserves in future contract benefits.
The carrying values of specifically identifiable intangible assets are reviewed at least annually for indicators of impairment in value that are other-than-temporary, including unexpected or adverse changes in the following: the economic or competitive environments in which the company operates; profitability analyses; cash flow analyses; and the fair value of the relevant business operation. If there was an indication of impairment, then the discounted cash flow method would be used to measure the impairment, and the carrying value would be adjusted as necessary and reported in impairment of intangibles on our Consolidated Statements of Comprehensive Income (Loss). Sales force intangibles are attributable to the value of the new business distribution system acquired through business combinations. These assets are amortized on a straight-line basis over their useful life of 25 years.
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Property and equipment owned for company use is carried at cost less allowances for depreciation. Provisions for depreciation of investment real estate and property and equipment owned for company use are computed principally on the straight-line method over the estimated useful lives of the assets, which include buildings, computer hardware and software and other property and equipment. Certain assets on our Consolidated Balance Sheets are related to capital leases. These assets under capital leases are depreciated in a manner consistent with our current depreciation policy for owned assets. We periodically review the carrying value of our long-lived assets, including property and equipment, for impairment whenever events or circumstances indicate that the carrying amount of such assets may not be fully recoverable. For long-lived assets to be held and used, impairments are recognized when the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. An impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.
Long-lived assets to be disposed of by abandonment or in an exchange for a similar productive long-lived asset are classified as held-for-use until they are disposed. Long-lived assets to be sold are classified as held-for-sale and are no longer depreciated. Certain criteria have to be met in order for the long-lived asset to be classified as held-for-sale, including that a sale is probable and expected to occur within one year. Long-lived assets classified as held-for-sale are recorded at the lower of their carrying amount or fair value less cost to sell.
We completed reinsurance transactions in 2012 and 2014 whereby we ceded closed blocks of UL contracts with secondary guarantees to Lincoln National Reinsurance Company (Barbados) Limited (“LNBAR”), a wholly-owned subsidiary of LNC. We are recognizing the losses related to these transactions over a period of 30 years.
Separate Account Assets and Liabilities
We maintain separate account assets, which are reported at fair value. The related liabilities are reported at an amount equivalent to the separate account assets. Investment risks associated with market value changes are borne by the contract holders, except to the extent of minimum guarantees made by the Company with respect to certain accounts.
We issue variable annuity contracts through our separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder (traditional variable annuities). We also issue variable annuity and life contracts through separate accounts that include various types of guaranteed death benefit (“GDB”), guaranteed withdrawal benefit (“GWB”) and guaranteed income benefit (“GIB”) features. The GDB features include those where we contractually guarantee to the contract holder either: return of no less than total deposits made to the contract less any partial withdrawals (“return of net deposits”); total deposits made to the contract less any partial withdrawals plus a minimum return (“minimum return”); or the highest contract value on any contract anniversary date through age 80. The highest contract value is increased by purchase payments and is decreased by withdrawals subsequent to that anniversary date in the same proportion that withdrawals reduce the contract value.
As discussed in Note 7, certain features of these guarantees are accounted for as embedded derivative reserves, whereas other guarantees are accounted for as benefit reserves. Other guarantees contain characteristics of both and are accounted for under an approach that calculates the value of the embedded derivative reserve and the benefit reserve based on the specific characteristics of each GLB feature. We use derivative instruments to hedge our exposure to the risks and earnings volatility that result from the embedded derivatives for living benefits in certain of our variable annuity products. The change in fair value of these instruments tends to move in the opposite direction of the change in the value of the associated reserves. The net impact of these changes is reported as a component of realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).
The “market consistent scenarios” used in the determination of the fair value of the GLB liability are similar to those used by an investment bank to value derivatives for which the pricing is not transparent and the aftermarket is nonexistent or illiquid. We use risk-neutral Monte Carlo simulations in our calculation to value the entire block of guarantees, which involve 100 unique scenarios per policy or approximately 49 million scenarios. The market consistent scenario assumptions, as of each valuation date, are those we view to be appropriate for a hypothetical market participant. The market consistent inputs include assumptions for the capital markets (e.g., implied volatilities, correlation among indices, risk-free swap curve, etc.), policyholder behavior (e.g., policy lapse, benefit utilization, mortality, etc.), risk margins, administrative expenses and a margin for profit. We believe these assumptions are consistent with those that would be used by a market participant; however, as the related markets develop we will continue to reassess our assumptions. It is possible that different valuation techniques and assumptions could produce a materially different estimate of fair value.
Future Contract Benefits and Other Contract Holder Funds
Future contract benefits represent liability reserves that we have established and carry based on estimates of how much we will need to pay for future benefits and claims. Other contract holder funds represent liabilities for fixed account values, including the fixed portion of variable, dividends payable, premium deposit funds, undistributed earnings on participating business and other contract holder funds as well the carrying value of DFEL discussed above.
The liabilities for future contract benefits and claim reserves for UL and VUL insurance policies consist of contract account balances that accrue to the benefit of the contract holders, excluding surrender charges. The liabilities for future insurance contract benefits and claim reserves for traditional life policies are computed using assumptions for investment yields, mortality and withdrawals based principally on generally accepted actuarial methods and assumptions at the time of contract issue. Investment yield assumptions for traditional direct individual life reserves for all contracts range from 2.25% to 7.75% depending on the time of contract issue. The investment yield
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assumptions for immediate and deferred paid-up annuities range from 1.50% to 13.50%. These investment yield assumptions are intended to represent an estimation of the interest rate experience for the period that these contract benefits are payable.
The liabilities for future claim reserves for variable annuity products containing GDB features are calculated by estimating the present value of total expected benefit payments over the life of the contract from inception divided by the present value of total expected assessments over the life of the contract (“benefit ratio”) multiplied by the cumulative assessments recorded from the contract inception through the balance sheet date less the cumulative GDB payments plus interest on the liability. The change in the liability for a period is the benefit ratio multiplied by the assessments recorded for the period less GDB claims paid in the period plus interest. As experience or assumption changes result in a change in expected benefit payments or assessments, the benefit ratio is unlocked, that is, recalculated using the updated expected benefit payments and assessments over the life of the contract since inception. The revised benefit ratio is then applied to the liability calculation described above, with the resulting change in liability reported in benefits on our Consolidated Statements of Comprehensive Income (Loss).
With respect to our future contract benefits and other contract holder funds, we continually review overall reserve position, reserving techniques and reinsurance arrangements. As experience develops and new information becomes known, liabilities are adjusted as deemed necessary. The effects of changes in estimates are included in the operating results for the period in which such changes occur.
The business written or assumed by us includes participating life insurance contracts, under which the contract holder is entitled to share in the earnings of such contracts via receipt of dividends. The dividend scale for participating policies is reviewed annually and may be adjusted to reflect recent experience and future expectations. As of December 31, 2015 and 2014, participating policies comprised approximately 1% of the face amount of business in force, and dividend expenses were $67 million, $64 million and $62 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Liabilities for the secondary guarantees on UL-type products are calculated by multiplying the benefit ratio by the cumulative assessments recorded from contract inception through the balance sheet date less the cumulative secondary guarantee benefit payments plus interest. If experience or assumption changes result in a new benefit ratio, the reserves are adjusted to reflect the changes in a manner similar to the unlocking of DAC, VOBA, DFEL and DSI. The accounting for secondary guarantee benefits impacts, and is impacted by, EGPs used to calculate amortization of DAC, VOBA, DFEL and DSI.
Certain of our variable annuity contracts reported within future contract benefits contain GLB reserves embedded derivatives, a portion of which may be reported in either other assets or other liabilities, and include guaranteed interest and similar contracts, that are carried at fair value on our Consolidated Balance Sheets, which represents approximate exit price including an estimate for our NPR. Certain of these features have elements of both insurance benefits and embedded derivatives. Through our hybrid accounting approach, for reserve calculation purposes we assign product cash flows to the embedded derivative or insurance portion of the reserves based on the life-contingent nature of the benefits. We classify these GLB reserves embedded derivatives items in Level 3 within the hierarchy levels described above in “Fair Value Measurement.” We report the insurance portion of the reserves in future contract benefits.
The fair value of our indexed annuity contracts is based on their approximate surrender values.
Borrowed Funds
LNL’s short-term borrowings are defined as borrowings with contractual or expected maturities of one year or less. Long-term borrowings have contractual or expected maturities greater than one year.
Deferred Gain on Business Sold Through Reinsurance
Our reinsurance operations were acquired by Swiss Re Life & Health America, Inc. (“Swiss Re”) in December 2001 through a series of indemnity reinsurance transactions. We are recognizing the gain related to these transactions at the rate that earnings on the reinsured business are expected to emerge, over a period of 15 years from the date of sale.
We completed a reinsurance transaction in 2009 whereby we assumed a closed block of term contracts from First Penn-Pacific Life Insurance Company. We are recognizing the gain related to this transaction over a period of 15 years.
We completed reinsurance transactions in 2012 and 2013 whereby we ceded a closed block of UL contracts with secondary guarantees to LNBAR. We are recognizing the gains related to these transactions over a period of 30 years.
Contingencies and Commitments
Contingencies arising from environmental remediation costs, regulatory judgments, claims, assessments, guarantees, litigation, recourse reserves, fines, penalties and other sources are recorded when deemed probable and reasonably estimable.
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Fee Income
Fee income for investment and interest-sensitive life insurance contracts consist of asset-based fees, cost of insurance charges, percent of premium charges, contract administration charges and surrender charges that are assessed against contract holder account balances. Investment products consist primarily of individual and group variable and fixed deferred annuities. Interest-sensitive life insurance products include UL insurance, VUL insurance and other interest-sensitive life insurance policies. These products include life insurance sold to individuals, corporate-owned life insurance and bank-owned life insurance.
In bifurcating the embedded derivative of our GLB features on our variable annuity products, we attribute to the embedded derivative the portion of total fees collected from the contract holder that relate to the GLB riders (the “attributed fees”), which are not reported within fee income on our Consolidated Statements of Comprehensive Income (Loss). These attributed fees represent the present value of future claims expected to be paid for the GLB at the inception of the contract plus a margin that a theoretical market participant would include for risk/profit and are reported within realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).
The timing of revenue recognition as it relates to fees assessed on investment contracts is determined based on the nature of such fees. Asset-based fees, cost of insurance and contract administration charges are assessed on a daily or monthly basis and recognized as revenue when assessed and earned. Percent of premium charges are assessed at the time of premium payment and recognized as revenue when assessed and earned. Certain amounts assessed that represent compensation for services to be provided in future periods are reported as unearned revenue and recognized in income over the periods benefited. Surrender charges are recognized upon surrender of a contract by the contract holder in accordance with contractual terms.
For investment and interest-sensitive life insurance contracts, the amounts collected from contract holders are considered deposits and are not included in revenue.
Insurance Premiums
Our insurance premiums for traditional life insurance and group insurance products are recognized as revenue when due from the contract holder. Our traditional life insurance products include those products with fixed and guaranteed premiums and benefits and consist primarily of whole life insurance, limited-payment life insurance, term life insurance and certain annuities with life contingencies. Our group non-medical insurance products consist primarily of term life, disability and dental.
Net Investment Income
Dividends and interest income, recorded in net investment income, are recognized when earned. Amortization of premiums and accretion of discounts on investments in debt securities are reflected in net investment income over the contractual terms of the investments in a manner that produces a constant effective yield.
For CLOs and MBS, included in the trading and AFS fixed maturity securities portfolios, we recognize income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from originally anticipated prepayments, the retrospective effective yield is recalculated to reflect actual payments to date and a catch up adjustment is recorded in the current period. In addition, the new effective yield, which reflects anticipated future payments, is used prospectively. Any adjustments resulting from changes in effective yield are reflected in net investment income on our Consolidated Statements of Comprehensive Income (Loss).
Realized Gain (Loss)
Realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss) includes realized gains and losses from the sale of investments, write-downs for OTTI of investments, certain derivative and embedded derivative gains and losses, gains and losses on the sale of subsidiaries and businesses and net gains and losses on reinsurance embedded derivatives and trading securities. Realized gains and losses on the sale of investments are determined using the specific identification method. Realized gain (loss) is recognized in net income, net of associated amortization of DAC, VOBA, DSI and DFEL. Realized gain (loss) is also net of allocations of investment gains and losses to certain contract holders and certain funds withheld on reinsurance arrangements for which we have a contractual obligation.
Other Revenues
Other revenues consists primarily of fees attributable to broker-dealer services recorded as earned at the time of sale, changes in the market value of our seed capital investments, proceeds from reinsurance recaptures and communications sales recognized as earned, net of agency and representative commissions.
Interest Credited
Interest credited includes interest credited to contract holder account balances. Interest crediting rates associated with funds invested in our general account during 2013 through 2015 ranged from 1% to 10%.
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Benefits
Benefits for UL and other interest-sensitive life insurance products include benefit claims incurred during the period in excess of contract account balances. Benefits also include the change in reserves for life insurance products with secondary guarantee benefits, annuity products with guaranteed death and living benefits and certain annuities with life contingencies. For traditional life, group health and disability income products, benefits are recognized when incurred in a manner consistent with the related premium recognition policies.
Pension and Other Postretirement Benefit Plans
Pursuant to the accounting rules for our obligations to employees and agents under our various pension and other postretirement benefit plans, we are required to make a number of assumptions to estimate related liabilities and expenses. The mortality assumption is based on actual and anticipated plan experience, determined using acceptable actuarial methods. We use assumptions for the weighted-average discount rate and expected return on plan assets to estimate pension expense. The discount rate assumptions are determined using an analysis of current market information and the projected benefit flows associated with these plans. The expected long-term rate of return on plan assets is based on historical and projected future rates of return on the funds invested in the plan. The calculation of our accumulated postretirement benefit obligation also uses an assumption of weighted-average annual rate of increase in the per capita cost of covered benefits, which reflects a health care cost trend rate.
Stock-Based Compensation
In general, we expense the fair value of stock awards included in our incentive compensation plans. As of the date LNC’s Board of Directors approves stock awards, the fair value of stock options is determined using a Black-Scholes options valuation methodology, and the fair value of other stock awards is based upon the market value of the stock. The fair value of the awards is expensed over the performance or service period, which generally corresponds to the vesting period, and is recognized as an increase to common stock in stockholder’s equity. We classify certain stock awards as liabilities. For these awards, the settlement value is classified as a liability on our Consolidated Balance Sheets, and the liability is marked-to-market through net income at the end of each reporting period. Stock-based compensation expense is reflected in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss).
Interest and Debt Expense
Interest expense on our short-term and long-term debt is recognized as due and any associated premiums, discounts and costs are amortized (accreted) over the term of the related borrowing utilizing the effective interest method. In addition, gains or losses related to certain derivative instruments associated with debt are recognized in interest and debt expense during the period of the change.
Income Taxes
We file a U.S. consolidated income tax return with LNC and its eligible subsidiaries. Ineligible subsidiaries file separate individual corporate tax returns. Deferred income taxes are recognized, based on enacted rates, when assets and liabilities have different values for financial statement and tax reporting purposes. A valuation allowance is recorded to the extent required. Considerable judgment and the use of estimates are required in determining whether a valuation allowance is necessary and, if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance, we consider many factors, including: the nature and character of the deferred tax assets and liabilities; taxable income in prior carryback years; future reversals of temporary differences; the length of time carryovers can be utilized; and any tax planning strategies we would employ to avoid a tax benefit from expiring unused.
Discontinued Operations
The results of operations of a component of the Company that either has been disposed of or is classified as held-for-sale are reported in income (loss) from discontinued operations, net of federal income taxes, if the disposal represents a strategic shift that has, or will have, a major effect on our consolidated financial condition and results of operations.
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2. New Accounting Standards
Adoption of New Accounting Standards
The following table provides a description of our adoption of new Accounting Standard Updates (“ASUs”) issued by the FASB and the impact of the adoption on our financial statements:
Standard |
Description |
Date of Adoption |
Effect on Financial Statements or Other Significant Matters |
ASU 2014-01, Accounting for Investments in Qualified Affordable Housing Projects |
This standard permits an entity to make an accounting policy to use the proportional amortization method of accounting to recognize investments in qualified affordable housing projects, if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). Entities that previously applied the effective yield method to investments in qualified affordable housing prior to the adoption of this standard may continue to apply the effective yield method to those pre-existing investments. |
January 1, 2015 |
The adoption of this ASU did not have an effect on our consolidated financial condition and results of operations. |
ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity |
This standard changes the requirements for reporting discontinued operations. The disposal of a component of an entity must be reported as a discontinued operation if the disposal represents a strategic shift that has a major effect on an entity’s operations and financial results. The amendments also require entities to provide new disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation. Early adoption is permitted, but only for disposals that have not been reported in financial statements previously issued or available for issuance. |
Early adopted as of October 1, 2014 |
We applied the guidance in this standard to our sale of Lincoln Financial Media (“LFM”) in the fourth quarter of 2014. For more information regarding our sale of LFM see Note 3. |
ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures |
This standard eliminates a distinction in current GAAP related to certain repurchase agreements, and amends current GAAP to require repurchase-to-maturity transactions and linked repurchase financings to be accounted for as secured borrowings; consistent with the accounting for other repurchase agreements. The standard also includes new disclosure requirements related to transfers accounted for as sales that are economically similar to repurchase agreements and information about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The new disclosures are not required for comparative periods before the effective date. |
January 1, 2015, except for disclosures related to collateral pledged that were adopted for the interim period ended June 30, 2015 |
The adoption of this ASU did not have an effect on our consolidated financial condition and results of operations. |
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Future Adoption of New Accounting Standards
The following table provides a description of future adoptions of new accounting standards that may have an impact on our financial statements when adopted:
Standard |
Description |
Projected Date of Adoption |
Effect on Financial Statements or Other Significant Matters |
ASU 2014-09, Revenue from Contracts with Customers & ASU 2015- 14, Revenue from Contracts with Customers; Deferral of the Effective Date |
This standard establishes the core principle of recognizing revenue to depict the transfer of promised goods and services. The amendments define a five-step process that systematically identifies the various components of the revenue recognition process, culminating with the recognition of revenue upon satisfaction of an entity’s performance obligation. Retrospective application is required. After performing extensive outreach, the FASB decided to delay the effective date of ASU 2014-09 for one year. Early application is permitted but only for annual reporting periods beginning after December 15, 2016. |
January 1, 2018 |
We will adopt the accounting guidance in this standard for non-insurance related products and services, and are currently evaluating the impact of adoption on our consolidated financial condition and results of operations. |
ASU 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity |
This standard clarifies that when considering the nature of the host contract in a hybrid financial instrument issued in the form of a share; an entity must consider all of the stated and implied substantive terms of the hybrid instrument, including the embedded derivative feature that is being considered for separate accounting from the host contract. Early adoption of this standard is permitted, and application is under a modified retrospective basis to existing hybrid financial instruments that are within the scope of the standard. |
January 1, 2016 |
This amendment is not expected to have a material effect on our consolidated financial condition and results of operations. |
ASU 2015-02, Amendments to the Consolidation Analysis |
This standard is intended to improve consolidation accounting guidance related to limited partnerships, limited liability corporations and securitization structures. The new standard includes changes to existing consolidation models that will eliminate the presumption that a general partner should consolidate a limited partnership, clarify when fees paid to a decision maker should be a factor in the VIEs consolidation evaluation and reduce the VIEs consolidation models from two to one by eliminating the indefinite deferral for certain investment funds. Early adoption is permitted, including adoption in an interim period. |
January 1, 2016 |
This amendment is not expected to have a material effect on our consolidated financial condition and results of operations. |
ASU 2015-03, |
Under current accounting guidance, debt issuance costs are recognized as a deferred charge in the balance sheet. This amendment requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of that debt. This standard does not change the recognition and measurement requirements related to debt issuance costs. Early adoption of this standard is permitted, and retrospective application is required for all periods presented in the financial statements. |
January 1, 2016 |
We will reclassify all of our debt issuance costs in accordance with this ASU. The amendment is not expected to have a material effect on our consolidated financial condition and results of operations. |
ASU 2015-05, |
This standard clarifies the accounting requirements for recognizing cloud computing arrangements. If an entity purchases a software license through a cloud computing arrangement, the software license should be accounted for in a manner consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. Early adoption of this standard is permitted, and the amendments can be adopted either prospectively or retrospectively. |
January 1, 2016 |
We will adopt this ASU prospectively. The amendment is not expected to have a material effect on our consolidated financial condition and results of operations. |
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Standard |
Description |
Projected Date of Adoption |
Effect on Financial Statements or Other Significant Matters |
ASU 2015-07, Disclosures for Certain Investments That Calculate Net Asset Value per Share (or its Equivalent) |
This standard removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. In addition, the standard also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient, and limits those disclosures only to those investments for which the practical expedient has been elected. Early adoption is permitted, and the disclosures must be provided retrospectively for all periods presented in the financial statements. |
January 1, 2016 |
We will appropriately amend our financial statement disclosures in accordance with this standard as of the adoption date. |
ASU 2015-09, Disclosures about Short-Duration Contracts |
This standard enhances the disclosure requirements related to short-duration insurance contracts. The new disclosure requirements focus on providing users of financial statements with more transparent information about an insurance entity’s (1) initial claims estimates and subsequent adjustments to those estimates, (2) methodologies and judgments in estimating claims, and (3) timing, frequency and severity of claims. Early application of this standard is permitted, and retrospective application is required for each comparative period presented, except for those requirements that apply only to the current period. |
Annual periods beginning January 1, 2016; interim periods within annual periods beginning January 1, 2017 |
We are currently evaluating these disclosure changes and will provide the additional disclosures upon adoption. |
ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements |
Given the absence of authoritative accounting guidance in ASU 2015-03 related to debt issuance costs for line-of-credit arrangements, this standard clarifies that the Securities and Exchange Commission ("SEC") Staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement. |
January 1, 2016 |
We will include any necessary disclosures in connection with our adoption of ASU 2015-03. |
ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities |
These amendments require, among other things, the fair value measurement of investments in equity securities and certain other ownership interests that do not result in consolidation and are not accounted for under the equity method of accounting. The change in fair value of the impacted investments in equity securities must be recognized in net income. In addition, the amendments include certain enhancements to the presentation and disclosure requirements for financial assets and financial liabilities. Early adoption of the ASU is generally not permitted, except as defined in the ASU. The amendments should be adopted in the financial statements through a cumulative-effect adjustment to the beginning balance of retained earnings. |
January 1, 2018 |
We are currently evaluating the impact of adopting this ASU on our consolidated financial condition and results of operations. |
ASU 2016-02, Leases |
This standard establishes a new accounting model for leases. Lessees will recognize most leases on the balance as a right-of-use asset and a related lease liability. The lease liability is measured as the present value of the lease payments over the lease term with the right-of-use asset measured at the lease liability amount and including adjustments for certain lease incentives and initial direct costs. Lease expense recognition will continue to differentiate between finance leases and operating leases resulting in a similar pattern of lease expense recognition as under current GAAP. This ASU will use a modified retrospective adoption approach which includes a number of optional practical expedients that entities may elect upon adoption. |
January 1, 2019 |
We are currently evaluating the impact of adopting this ASU on our consolidated financial condition and results of operations. |
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3. Dispositions
LFM
On July 16, 2015, we closed on the sale of LFM to Entercom Communications Corp. (“Entercom Parent”) and Entercom Radio, LLC. We received $75 million in cash, net of transaction expenses, and $28 million face amount of perpetual cumulative convertible preferred stock of Entercom Parent.
As of December 31, 2014, we adjusted the carrying amount of the assets and liabilities of LFM that were to be sold to fair value less cost to sell and reclassified such amounts as held-for-sale within other assets and other liabilities on our Consolidated Balance Sheets. Accordingly, we recognized a loss of $28 million, after-tax, during the fourth quarter of 2014 reflected within income (loss) from continuing operations on our Consolidated Statements of Comprehensive Income (Loss). During 2015, we recognized an additional loss of $2 million, after-tax, related to finalizing the transaction.
4. Business Ceded, Recaptured and Novated
Business Ceded
We completed a reinsurance transaction during 2014 whereby we ceded a block of business to LNBAR that resulted in the release of $64 million of statutory capital previously supporting a portion of statutory reserves related to our Worksite UL business. The following summarizes the effect of this transaction (in millions) on our Consolidated Balance Sheets as of December 31, 2014:
Assets |
|||
Cash and invested cash |
$ |
(1 |
) |
DAC and VOBA |
(12 |
) |
|
Reinsurance recoverables |
3 | ||
Other assets (deferred loss on business sold through reinsurance) |
9 | ||
Total assets |
$ |
(1 |
) |
Liabilities |
|||
Other liabilities |
(1 |
) |
|
Total liabilities |
$ |
(1 |
) |
We completed a reinsurance transaction during 2014 whereby we ceded an additional block of business to LNBAR that resulted in the release of $28 million of statutory capital previously supporting a portion of statutory reserves related to our UL/survivorship UL (“SUL”) business. The following summarizes the effect of this transaction (in millions) on our Consolidated Balance Sheets as of December 31, 2014:
Assets |
|||
Cash and invested cash |
$ |
(2 |
) |
DAC and VOBA |
(8 |
) |
|
Reinsurance recoverables |
5 | ||
Other assets (deferred loss on business sold through reinsurance) |
1 | ||
Total assets |
$ |
(4 |
) |
Liabilities |
|||
Other contract holder funds |
$ |
(2 |
) |
Other liabilities |
(2 |
) |
|
Total liabilities |
$ |
(4 |
) |
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We completed reinsurance transactions during 2013 whereby we ceded blocks of business to LNBAR that resulted in the release of $196 million of statutory capital previously supporting a portion of statutory reserves related to our UL/SUL business. The following summarizes the effect of these transactions (in millions) on our Consolidated Balance Sheets as of December 31, 2013:
Assets |
|||
Cash and invested cash |
$ |
(22 |
) |
DAC and VOBA |
(65 |
) |
|
Reinsurance recoverables |
76 | ||
Total assets |
$ |
(11 |
) |
Liabilities |
|||
Other contract holder funds |
$ |
(7 |
) |
Deferred gain on business sold through reinsurance |
18 | ||
Other liabilities |
(22 |
) |
|
Total liabilities |
$ |
(11 |
) |
Business Recaptured
We completed a reinsurance transaction during 2014 whereby we entered into an agreement to recapture certain traditional and interest sensitive business under several yearly renewable term reinsurance treaties that were originally ceded to a reinsurer. As part of this agreement, we received cash consideration of $500 million, of which $78 million represented reimbursement for prepaid reinsurance premiums related to the recaptured treaties. We recognized a one-time gain of $57 million, after-tax, related to this recapture with the remaining difference between the proceeds and the gain being driven primarily by increases in reserves of $226 million and a reduction of DAC of $123 million.
5. Variable Interest Entities
Consolidated VIEs
Credit-Linked Notes
We have invested in the Class 1 notes of two credit-linked note (“CLN”) structures, which represent special purpose trusts combining ABS with credit default swaps to produce multi-class structured securities. The CLN structures also include subordinated Class 2 notes, which are held by third parties, and, together with the Class 1 notes, represent 100% of the outstanding notes of the CLN structures. The entities that issued the CLNs are financed by the note holders, and, as such, the note holders participate in the expected losses and residual returns of the entities.
Because the note holders do not have voting rights or similar rights, we determined the entities issuing the CLNs are VIEs, and as a note holder, our interest represented a variable interest. We have the power to direct the most significant activity affecting the performance of both CLN structures, as we have the ability to actively manage the reference portfolios underlying the credit default swaps. In addition, we receive returns from the CLN structures and may absorb losses that could potentially be significant to the CLN structures. As such, we concluded that we are the primary beneficiary of the VIEs associated with the CLNs. We reflect the assets and liabilities on our Consolidated Balance Sheets and recognize the results of operations of these VIEs on our Consolidated Statements of Comprehensive Income (Loss).
As a result of consolidating the CLNs, we also consolidate the derivative instruments in the CLN structures. The credit default swaps create variability in the CLN structures and expose the note holders to the credit risk of the referenced portfolio. The contingent forward contracts transfer a portion of the loss in the underlying fixed maturity corporate asset-backed credit card loan securities back to the counterparty after credit losses reach our attachment point.
22
The following summarizes information regarding the CLN structures (dollars in millions) as of December 31, 2015:
Amount and Date of Issuance |
|||||||
$400 |
$200 |
||||||
December |
April |
||||||
2006 |
2007 |
||||||
Original attachment point (subordination) |
5.50% | 2.05% | |||||
Current attachment point (subordination) |
4.21% | 1.48% | |||||
Maturity |
12/20/2016 |
3/20/2017 |
|||||
Current rating of tranche |
BBB+ |
BB |
|||||
Current rating of underlying reference obligations |
AA - B |
AAA - CCC |
|||||
Number of defaults in underlying reference obligations |
3 | 2 | |||||
Number of entities |
123 | 99 | |||||
Number of countries |
20 | 21 |
There has been no event of default on the CLNs themselves. Based upon our analysis, the remaining subordination as represented by the attachment point should be sufficient to absorb future credit losses, subject to changing market conditions. Similar to other debt instruments, our maximum principal loss is limited to our original investment.
The following summarizes the exposure of the CLN structures’ underlying reference portfolios by industry and rating as of December 31, 2015:
AAA |
AA |
A |
BBB |
BB |
B |
CCC |
Total |
|||||||||
Industry |
||||||||||||||||
Financial intermediaries |
0.0% | 2.1% | 5.4% | 3.0% | 0.0% | 0.0% | 0.0% | 10.5% | ||||||||
Telecommunications |
0.0% | 0.0% | 2.4% | 7.2% | 0.9% | 0.5% | 0.0% | 11.0% | ||||||||
Oil and gas |
0.3% | 2.1% | 1.0% | 3.4% | 1.2% | 0.0% | 0.0% | 8.0% | ||||||||
Utilities |
0.0% | 0.0% | 1.6% | 3.0% | 0.0% | 0.0% | 0.0% | 4.6% | ||||||||
Chemicals and plastics |
0.0% | 0.0% | 2.3% | 1.2% | 0.3% | 0.0% | 0.0% | 3.8% | ||||||||
Drugs |
0.3% | 1.6% | 1.8% | 0.0% | 0.0% | 0.0% | 0.0% | 3.7% | ||||||||
Retailers (except food |
||||||||||||||||
and drug) |
0.0% | 0.0% | 2.1% | 0.9% | 0.5% | 0.0% | 0.0% | 3.5% | ||||||||
Industrial equipment |
0.0% | 0.0% | 2.1% | 0.7% | 0.0% | 0.0% | 0.0% | 2.8% | ||||||||
Sovereign |
0.0% | 1.2% | 1.0% | 0.7% | 0.3% | 0.0% | 0.0% | 3.2% | ||||||||
Conglomerates |
0.0% | 2.3% | 0.9% | 0.0% | 0.0% | 0.0% | 0.0% | 3.2% | ||||||||
Forest products |
0.0% | 0.0% | 0.5% | 1.1% | 1.4% | 0.0% | 0.0% | 3.0% | ||||||||
Other |
0.0% | 4.1% | 13.8% | 18.2% | 5.6% | 0.7% | 0.3% | 42.7% | ||||||||
Total |
0.6% | 13.4% | 34.9% | 39.4% | 10.2% | 1.2% | 0.3% | 100.0% |
Statutory Trust Note
In August 2011, we purchased a $100 million note issued by a statutory trust (“Issuer”) in a private placement offering. The proceeds were used by the Issuer to purchase U.S. government bonds to be held as collateral assets supporting an excess mortality swap. We concluded that the Issuer of the note was a VIE and that we were the primary beneficiary. We consolidated all of the assets and liabilities of the Issuer on our Consolidated Balance Sheets as of August 1, 2011.
On December 16, 2013, the excess mortality swap underlying this VIE was terminated as a result of a cancellation event under the associated swap agreement. Subsequently, the U.S. government bonds were redeemed on January 6, 2014, and our $100 million note issued by the statutory trust was cancelled. The combination of these two events, under the direction of LNC and its counterparty, has provided for the dissolution of this VIE effective January 6, 2014. As such, we no longer have any exposure to loss related to this VIE.
23
Asset and liability information (dollars in millions) for the consolidated VIEs included on our Consolidated Balance Sheets was as follows:
As of December 31, 2015 |
As of December 31, 2014 |
|||||||||||||||||||||
Number |
Number |
|||||||||||||||||||||
of |
Notional |
Carrying |
of |
Notional |
Carrying |
|||||||||||||||||
Instruments |
Amounts |
Value |
Instruments |
Amounts |
Value |
|||||||||||||||||
Assets |
||||||||||||||||||||||
Fixed maturity securities: |
||||||||||||||||||||||
Asset-backed credit card loans (1) |
N/A |
$ |
- |
$ |
598 |
N/A |
$ |
- |
$ |
598 | ||||||||||||
Liabilities |
||||||||||||||||||||||
Non-qualifying hedges: |
||||||||||||||||||||||
Credit default swaps |
2 |
$ |
600 |
$ |
4 | 2 |
$ |
600 |
$ |
13 | ||||||||||||
Contingent forwards |
2 |
- |
- |
2 |
- |
- |
||||||||||||||||
Total liabilities (2) |
4 |
$ |
600 |
$ |
4 | 4 |
$ |
600 |
$ |
13 |
(1) |
Reported in variable interest entities’ fixed maturity securities on our Consolidated Balance Sheets. |
(2) |
Reported in variable interest entities’ liabilities on our Consolidated Balance Sheets. |
For details related to the fixed maturity AFS securities for these VIEs, see Note 6.
As described more fully in Note 1, we regularly review our investment holdings for OTTI. Based upon this review, we believe that the AFS fixed maturity securities were not other-than-temporarily impaired as of December 31, 2015.
The gains (losses) for the consolidated VIEs (in millions) recorded on our Consolidated Statements of Comprehensive Income (Loss) were as follows:
For the Years Ended |
||||||||
December 31, |
||||||||
2015 |
2014 |
|||||||
Non-Qualifying Hedges |
||||||||
Credit default swaps |
$ |
9 |
$ |
14 | ||||
Contingent forwards |
- |
- |
||||||
Total non-qualifying hedges (1) |
$ |
9 |
$ |
14 |
(1) |
Reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). |
Unconsolidated VIEs
Reinsurance Related Notes
Effective October 1, 2015, our special purpose financial insurance company subsidiary, the Lincoln Reinsurance Company of Vermont VI, issued a long-term surplus note for $275 million to a non-affiliated VIE in exchange for two corporate bond AFS securities of like principal and duration. The activities of the VIE primarily are to acquire, hold and issue notes and loans and to pay and collect interest on the notes and loans. The outstanding principal balance of the long-term surplus note was $336 million as of December 31, 2015, and is variable in nature; moving concurrently with any variability in the face amount of the corporate bond AFS securities. We have concluded that we are not the primary beneficiary of the non-affiliated VIE because we do not have power over the activities that most significantly affect its economic performance. In addition, the terms of the long-term surplus note provide us with a set-off right with the corporate bond AFS securities we purchased from the VIE; therefore, neither appears on our Consolidated Balance Sheets.
Structured Securities
Through our investment activities, we make passive investments in structured securities issued by VIEs for which we are not the manager. These structured securities include our RMBS, CMBS, CLOs and CDOs. We have not provided financial or other support with respect to these VIEs other than our original investment. We have determined that we are not the primary beneficiary of these VIEs due to the relative size of our investment in comparison to the principal amount of the structured securities issued by the VIEs and the level of credit subordination that reduces our obligation to absorb losses or right to receive benefits. Our maximum exposure to loss on these structured securities is limited to the amortized cost for these investments. We recognize our variable interest in these VIEs at fair value on our Consolidated Balance Sheets. For information about these structured securities, see Note 6.
24
Qualified Affordable Housing Projects
We invest in certain LPs that operate qualified affordable housing projects that we have concluded are VIEs. We are not the primary beneficiary of these VIEs as we do not have the power to direct the most significant activities of the LPs. We receive returns from the LPs in the form of income tax credits and other tax benefits, which are recognized in federal income tax expense (benefit) on our Consolidated Statements of Comprehensive Income (Loss) and were less than $1 million for the years ended December 31, 2015 and 2014. The carrying amounts of our investments in qualified affordable housing projects are recognized in other investments on our Consolidated Balance Sheets and were $47 million and $60 million as of December 31, 2015 and 2014, respectively. Our exposure to loss is limited to the capital we invest in the LPs, and we do not have any contingent commitments to provide additional capital funding to these LPs. There have been no indicators of impairment that would require us to recognize an impairment loss related to these LPs due to forfeiture, ineligibility of tax credits or for any other circumstances as of December 31, 2015.
6. Investments
AFS Securities
Pursuant to the Fair Value Measurements and Disclosures Topic of the FASB ASC, we have categorized AFS securities into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3), as described in Note 1, which also includes additional disclosures regarding our fair value measurements.
25
The amortized cost, gross unrealized gains, losses and OTTI and fair value of AFS securities (in millions) were as follows:
As of December 31, 2015 |
|||||||||||||||
Amortized |
Gross Unrealized |
Fair |
|||||||||||||
Cost |
Gains |
Losses |
OTTI (1) |
Value |
|||||||||||
Fixed maturity securities: |
|||||||||||||||
Corporate bonds |
$ |
70,584 |
$ |
3,787 |
$ |
1,913 |
$ |
1 |
$ |
72,457 | |||||
ABS |
1,022 | 40 | 16 | (12 |
) |
1,058 | |||||||||
U.S. government bonds |
346 | 41 | 2 |
- |
385 | ||||||||||
Foreign government bonds |
459 | 60 | 1 |
- |
518 | ||||||||||
RMBS |
3,400 | 178 | 35 | (11 |
) |
3,554 | |||||||||
CMBS |
347 | 10 | 2 | (4 |
) |
359 | |||||||||
CLOs |
587 | 1 | 3 | (3 |
) |
588 | |||||||||
State and municipal bonds |
3,706 | 672 | 12 |
- |
4,366 | ||||||||||
Hybrid and redeemable preferred securities |
745 | 86 | 44 |
- |
787 | ||||||||||
VIEs’ fixed maturity securities |
596 | 2 |
- |
- |
598 | ||||||||||
Total fixed maturity securities |
81,792 | 4,877 | 2,028 | (29 |
) |
84,670 | |||||||||
Equity securities |
226 | 17 | 6 |
- |
237 | ||||||||||
Total AFS securities |
$ |
82,018 |
$ |
4,894 |
$ |
2,034 |
$ |
(29 |
) |
$ |
84,907 |
As of December 31, 2014 |
|||||||||||||||
Amortized |
Gross Unrealized |
Fair |
|||||||||||||
Cost |
Gains |
Losses |
OTTI (1) |
Value |
|||||||||||
Fixed maturity securities: |
|||||||||||||||
Corporate bonds |
$ |
67,000 |
$ |
6,491 |
$ |
431 |
$ |
5 |
$ |
73,055 | |||||
ABS |
1,037 | 53 | 18 | (7 |
) |
1,079 | |||||||||
U.S. government bonds |
339 | 51 |
- |
- |
390 | ||||||||||
Foreign government bonds |
468 | 68 |
- |
- |
536 | ||||||||||
RMBS |
3,797 | 232 | 13 | (17 |
) |
4,033 | |||||||||
CMBS |
532 | 21 | 1 | 6 | 546 | ||||||||||
CLOs |
374 | 1 | 2 | (2 |
) |
375 | |||||||||
State and municipal bonds |
3,628 | 855 | 4 |
- |
4,479 | ||||||||||
Hybrid and redeemable preferred securities |
864 | 104 | 40 |
- |
928 | ||||||||||
VIEs’ fixed maturity securities |
587 | 11 |
- |
- |
598 | ||||||||||
Total fixed maturity securities |
78,626 | 7,887 | 509 | (15 |
) |
86,019 | |||||||||
Equity securities |
216 | 16 | 1 |
- |
231 | ||||||||||
Total AFS securities |
$ |
78,842 |
$ |
7,903 |
$ |
510 |
$ |
(15 |
) |
$ |
86,250 |
(1) |
Includes unrealized gains and losses on impaired securities related to changes in the fair value of such securities subsequent to the impairment measurement date. |
Certain amounts reported in prior years’ consolidated financial statements have been reclassified to conform to the presentation adopted in the current year. Specifically, we reclassified amounts related to subsequent changes in the fair value of AFS securities for which non-credit OTTI was previously recognized in OCI. Historically, these amounts were recognized through unrealized gain (loss) on AFS securities in the Consolidated Statements of Comprehensive Income (Loss). To better reflect the economic position of our AFS fixed maturity securities, these amounts are now recognized through unrealized OTTI on AFS securities in the Consolidated Statements of Comprehensive Income (Loss). These reclassifications had no effect on net income (loss) or stockholder’s equity for the prior years.
26
The amortized cost and fair value of fixed maturity AFS securities by contractual maturities (in millions) as of December 31, 2015, were as follows:
Amortized |
Fair |
|||||
Cost |
Value |
|||||
Due in one year or less |
$ |
2,623 |
$ |
2,656 | ||
Due after one year through five years |
17,750 | 18,558 | ||||
Due after five years through ten years |
20,100 | 20,051 | ||||
Due after ten years |
35,367 | 37,248 | ||||
Subtotal |
75,840 | 78,513 | ||||
Structured securities (ABS, MBS, CLOs) |
5,952 | 6,157 | ||||
Total fixed maturity AFS securities |
$ |
81,792 |
$ |
84,670 |
Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations.
The fair value and gross unrealized losses, including the portion of OTTI recognized in OCI, of AFS securities (dollars in millions), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:
As of December 31, 2015 |
|||||||||||||||||||
Less Than or Equal |
Greater Than |
||||||||||||||||||
to Twelve Months |
Twelve Months |
Total |
|||||||||||||||||
Gross |
Gross |
Gross |
|||||||||||||||||
Unrealized |
Unrealized |
Unrealized |
|||||||||||||||||
Fair |
Losses and |
Fair |
Losses and |
Fair |
Losses and |
||||||||||||||
Value |
OTTI |
Value |
OTTI |
Value |
OTTI |
||||||||||||||
Fixed maturity securities: |
|||||||||||||||||||
Corporate bonds |
$ |
19,285 |
$ |
1,307 |
$ |
2,349 |
$ |
613 |
$ |
21,634 |
$ |
1,920 | |||||||
ABS |
212 | 4 | 257 | 27 | 469 | 31 | |||||||||||||
U.S. government bonds |
15 | 2 |
- |
- |
15 | 2 | |||||||||||||
Foreign government bonds |
37 | 1 |
- |
- |
37 | 1 | |||||||||||||
RMBS |
593 | 21 | 362 | 21 | 955 | 42 | |||||||||||||
CMBS |
114 | 2 | 11 | 2 | 125 | 4 | |||||||||||||
CLOs |
271 | 2 | 49 | 1 | 320 | 3 | |||||||||||||
State and municipal bonds |
124 | 8 | 27 | 4 | 151 | 12 | |||||||||||||
Hybrid and redeemable |
|||||||||||||||||||
preferred securities |
37 | 1 | 147 | 43 | 184 | 44 | |||||||||||||
Total fixed maturity securities |
20,688 | 1,348 | 3,202 | 711 | 23,890 | 2,059 | |||||||||||||
Equity securities |
47 | 6 |
- |
- |
47 | 6 | |||||||||||||
Total AFS securities |
$ |
20,735 |
$ |
1,354 |
$ |
3,202 |
$ |
711 |
$ |
23,937 |
$ |
2,065 | |||||||
Total number of AFS securities in an unrealized loss position |
1,923 |
27
As of December 31, 2014 |
|||||||||||||||||||
Less Than or Equal |
Greater Than |
||||||||||||||||||
to Twelve Months |
Twelve Months |
Total |
|||||||||||||||||
Gross |
Gross |
Gross |
|||||||||||||||||
Unrealized |
Unrealized |
Unrealized |
|||||||||||||||||
Fair |
Losses and |
Fair |
Losses and |
Fair |
Losses and |
||||||||||||||
Value |
OTTI |
Value |
OTTI |
Value |
OTTI |
||||||||||||||
Fixed maturity securities: |
|||||||||||||||||||
Corporate bonds |
$ |
4,636 |
$ |
202 |
$ |
4,291 |
$ |
238 |
$ |
8,927 |
$ |
440 | |||||||
ABS |
94 | 1 | 310 | 40 | 404 | 41 | |||||||||||||
RMBS |
417 | 7 | 238 | 13 | 655 | 20 | |||||||||||||
CMBS |
121 |
- |
19 | 10 | 140 | 10 | |||||||||||||
CLOs |
110 | 1 | 69 | 1 | 179 | 2 | |||||||||||||
State and municipal bonds |
6 |
- |
26 | 4 | 32 | 4 | |||||||||||||
Hybrid and redeemable |
|||||||||||||||||||
preferred securities |
29 |
- |
176 | 40 | 205 | 40 | |||||||||||||
Total fixed maturity securities |
5,413 | 211 | 5,129 | 346 | 10,542 | 557 | |||||||||||||
Equity securities |
37 | 1 |
- |
- |
37 | 1 | |||||||||||||
Total AFS securities |
$ |
5,450 |
$ |
212 |
$ |
5,129 |
$ |
346 |
$ |
10,579 |
$ |
558 | |||||||
Total number of AFS securities in an unrealized loss position |
990 |
For information regarding our investments in VIEs, see Note 5.
The fair value, gross unrealized losses, the portion of OTTI recognized in OCI (in millions) and number of AFS securities where the fair value had declined and remained below amortized cost by greater than 20% were as follows:
As of December 31, 2015 |
|||||||||||||
Number |
|||||||||||||
Fair |
Gross Unrealized |
of |
|||||||||||
Value |
Losses |
OTTI |
Securities (1) |
||||||||||
Less than six months |
$ |
1,536 |
$ |
678 |
$ |
2 | 135 | ||||||
Six months or greater, but less than nine months |
76 | 85 |
- |
19 | |||||||||
Nine months or greater, but less than twelve months |
39 | 38 |
- |
2 | |||||||||
Twelve months or greater |
153 | 83 | 15 | 60 | |||||||||
Total |
$ |
1,804 |
$ |
884 |
$ |
17 | 216 |
As of December 31, 2014 |
|||||||||||||
Number |
|||||||||||||
Fair |
Gross Unrealized |
of |
|||||||||||
Value |
Losses |
OTTI |
Securities (1) |
||||||||||
Less than six months |
$ |
48 |
$ |
19 |
$ |
- |
12 | ||||||
Six months or greater, but less than nine months |
8 | 7 |
- |
3 | |||||||||
Twelve months or greater |
239 | 70 | 59 | 82 | |||||||||
Total |
$ |
295 |
$ |
96 |
$ |
59 | 97 |
(1) |
We may reflect a security in more than one aging category based on various purchase dates. |
We regularly review our investment holdings for OTTI. Our gross unrealized losses, including the portion of OTTI recognized in OCI, on AFS securities increased $1.5 billion for the year ended December 31, 2015. As discussed further below, we believe the unrealized loss position as of December 31, 2015, did not represent OTTI as (i) we did not intend to sell these fixed maturity AFS securities; (ii) it is not more likely than not that we will be required to sell the fixed maturity AFS securities before recovery of their amortized cost basis; (iii) the estimated future cash flows were equal to or greater than the amortized cost basis of the debt securities; and (iv) we had the ability and intent to hold the equity AFS securities for a period of time sufficient for recovery.
Based upon this evaluation as of December 31, 2015, management believes we have the ability to generate adequate amounts of cash from our normal operations (e.g., insurance premiums and fees and investment income) to meet cash requirements with a prudent margin of safety without requiring the sale of our temporarily-impaired securities.
28
As of December 31, 2015, the unrealized losses associated with our corporate bond securities were attributable primarily to widening credit spreads and rising interest rates since purchase. We performed a detailed analysis of the financial performance of the underlying issuers and determined that we expected to recover the entire amortized cost for each security.
As of December 31, 2015, the unrealized losses associated with our MBS and ABS were attributable primarily to collateral losses and credit spreads. We assessed for credit impairment using a cash flow model that incorporates key assumptions including default rates, severities and prepayment rates. We estimated losses for a security by forecasting the underlying loans in each transaction. The forecasted loan performance was used to project cash flows to the various tranches in the structure, as applicable. Our forecasted cash flows also considered, as applicable, independent industry analyst reports and forecasts, sector credit ratings and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared to our subordination or other credit enhancement, we expected to recover the entire amortized cost basis of each temporarily impaired security.
As of December 31, 2015, the unrealized losses associated with our hybrid and redeemable preferred securities were attributable primarily to wider credit spreads caused by illiquidity in the market and subordination within the capital structure, as well as credit risk of underlying issuers. For our hybrid and redeemable preferred securities, we evaluated the financial performance of the underlying issuers based upon credit performance and investment ratings and determined that we expected to recover the entire amortized cost of each security.
Changes in the amount of credit loss of OTTI recognized in net income (loss) where the portion related to other factors was recognized in OCI (in millions) on fixed maturity AFS securities were as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Balance as of beginning-of-year |
$ |
360 |
$ |
378 |
$ |
402 | |||
Increases attributable to: |
|||||||||
Credit losses on securities for which an OTTI was not previously recognized |
19 | 4 | 37 | ||||||
Credit losses on securities for which an OTTI was previously recognized |
15 | 15 | 40 | ||||||
Decreases attributable to: |
|||||||||
Securities sold, paid down or matured |
(31 |
) |
(37 |
) |
(101 |
) |
|||
Balance as of end-of-year |
$ |
363 |
$ |
360 |
$ |
378 |
During 2015, 2014 and 2013, we recorded credit losses on securities for which an OTTI was not previously recognized as we determined the cash flows expected to be collected would not be sufficient to recover the entire amortized cost basis of the debt security. The credit losses we recorded on securities for which an OTTI was not previously recognized were attributable primarily to one or a combination of the following reasons:
· |
Failure of the issuer of the security to make scheduled payments; |
· |
Deterioration of creditworthiness of the issuer; |
· |
Deterioration of conditions specifically related to the security; |
· |
Deterioration of fundamentals of the industry in which the issuer operates; and |
· |
Deterioration of the rating of the security by a rating agency. |
We recognize the OTTI attributed to the noncredit portion as a separate component in OCI referred to as unrealized OTTI on AFS securities.
29
Details of the amount of credit loss of OTTI recognized in net income (loss) for which a portion related to other factors was recognized in OCI (in millions), were as follows:
As of December 31, 2015 |
||||||||||||
Net |
||||||||||||
Unrealized |
OTTI in |
|||||||||||
Amortized |
Gain/(Loss) |
Fair |
Credit |
|||||||||
Cost |
Position |
Value |
Losses |
|||||||||
Corporate bonds |
$ |
31 |
$ |
(2 |
) |
$ |
29 |
$ |
28 | |||
ABS |
186 | 13 | 199 | 101 | ||||||||
RMBS |
341 | 10 | 351 | 182 | ||||||||
CMBS |
34 | 4 | 38 | 47 | ||||||||
CLOs |
11 | 2 | 13 | 5 | ||||||||
Total |
$ |
603 |
$ |
27 |
$ |
630 |
$ |
363 |
As of December 31, 2014 |
||||||||||||
Net |
||||||||||||
Unrealized |
OTTI in |
|||||||||||
Amortized |
Gain/(Loss) |
Fair |
Credit |
|||||||||
Cost |
Position |
Value |
Losses |
|||||||||
Corporate bonds |
$ |
38 |
$ |
(5 |
) |
$ |
33 |
$ |
20 | |||
ABS |
206 | 7 | 213 | 96 | ||||||||
RMBS |
417 | 17 | 434 | 180 | ||||||||
CMBS |
46 | (6 |
) |
40 | 59 | |||||||
CLOs |
11 | 2 | 13 | 5 | ||||||||
Total |
$ |
718 |
$ |
15 |
$ |
733 |
$ |
360 |
Trading Securities
Trading securities at fair value (in millions) consisted of the following:
As of December 31, |
||||||
2015 |
2014 |
|||||
Fixed maturity securities: |
||||||
Corporate bonds |
$ |
1,328 |
$ |
1,434 | ||
ABS |
25 | 32 | ||||
U.S. government bonds |
221 | 278 | ||||
Foreign government bonds |
24 | 24 | ||||
RMBS |
102 | 132 | ||||
CMBS |
4 | 4 | ||||
CLOs |
10 | 9 | ||||
State and municipal bonds |
17 | 21 | ||||
Hybrid and redeemable preferred securities |
31 | 32 | ||||
Total trading securities |
$ |
1,762 |
$ |
1,966 |
The portion of the market adjustment for gains (losses) that relate to trading securities still held as of December 31, 2015, 2014 and 2013, was $(96) million, $40 million and $(166) million, respectively.
Mortgage Loans on Real Estate
Mortgage loans on real estate principally involve commercial real estate. The commercial loans are geographically diversified throughout the U.S. with the largest concentrations in California and Texas, which accounted for 21% and 10%, respectively, of mortgage loans on real estate as of December 31, 2015 and 24% and 9%, respectively, of mortgage loans on real estate as of December 31, 2014.
30
The following provides the current and past due composition of our mortgage loans on real estate (in millions):
As of December 31, |
||||||
2015 |
2014 |
|||||
Current |
$ |
8,512 |
$ |
7,386 | ||
Valuation allowance associated with impaired mortgage loans on real estate |
(2 |
) |
(3 |
) |
||
Unamortized premium (discount) |
3 | 4 | ||||
Total carrying value |
$ |
8,513 |
$ |
7,387 |
The number of impaired mortgage loans on real estate, each of which had an associated specific valuation allowance, and the carrying value of impaired mortgage loans on real estate (dollars in millions) were as follows:
As of December 31, |
||||||
2015 |
2014 |
|||||
Number of impaired mortgage loans on real estate |
2 | 3 | ||||
Principal balance of impaired mortgage loans on real estate |
$ |
8 |
$ |
26 | ||
Valuation allowance associated with impaired mortgage loans on real estate |
(2 |
) |
(3 |
) |
||
Carrying value of impaired mortgage loans on real estate |
$ |
6 |
$ |
23 |
The changes in the valuation allowance associated with impaired mortgage loans on real estate (in millions) were as follows:
As of December 31, |
||||||||||||
2015 |
2014 |
2013 |
||||||||||
Balance as of beginning-of-year |
$ |
3 |
$ |
3 |
$ |
6 | ||||||
Additions |
- |
- |
3 | |||||||||
Charge-offs, net of recoveries |
(1 |
) |
- |
(6 |
) |
|||||||
Balance as of end-of-year |
$ |
2 |
$ |
3 |
$ |
3 |
The average carrying value on the impaired mortgage loans on real estate (in millions) was as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Average carrying value for impaired mortgage loans on real estate |
$ |
17 |
$ |
24 |
$ |
30 | |||
Interest income recognized on impaired mortgage loans on real estate |
1 | 2 | 2 | ||||||
Interest income collected on impaired mortgage loans on real estate |
1 | 2 | 2 |
As described in Note 1, we use the loan-to-value and debt-service coverage ratios as credit quality indicators for our mortgage loans, which were as follows (dollars in millions):
As of December 31, 2015 |
As of December 31, 2014 |
|||||||||||||
Debt- |
Debt- |
|||||||||||||
Service |
Service |
|||||||||||||
Carrying |
% of |
Coverage |
Carrying |
% of |
Coverage |
|||||||||
Loan-to-Value Ratio |
Value |
Total |
Ratio |
Value |
Total |
Ratio |
||||||||
Less than 65% |
$ |
7,591 | 89.2% |
2.07 |
$ |
6,463 | 87.5% |
1.91 |
||||||
65% to 74% |
650 | 7.6% |
1.60 |
622 | 8.4% |
1.55 |
||||||||
75% to 100% |
266 | 3.1% |
0.80 |
271 | 3.7% |
0.73 |
||||||||
Greater than 100% |
6 | 0.1% |
1.05 |
31 | 0.4% |
0.77 |
||||||||
Total mortgage loans on real estate |
$ |
8,513 | 100.0% |
$ |
7,387 | 100.0% |
Alternative Investments
As of December 31, 2015 and 2014, alternative investments included investments in 190 and 156 different partnerships, respectively, and the portfolio represented approximately 1% of our overall invested assets.
31
Net Investment Income
The major categories of net investment income (in millions) on our Consolidated Statements of Comprehensive Income (Loss) were as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Fixed maturity AFS securities |
$ |
3,981 |
$ |
3,937 |
$ |
3,876 | |||
Equity AFS securities |
9 | 9 | 6 | ||||||
Trading securities |
102 | 119 | 130 | ||||||
Mortgage loans on real estate |
385 | 367 | 377 | ||||||
Real estate |
1 | 3 | 5 | ||||||
Policy loans |
150 | 153 | 153 | ||||||
Invested cash |
3 | 1 | 3 | ||||||
Commercial mortgage loan prepayment and bond make-whole premiums |
98 | 132 | 107 | ||||||
Alternative investments |
88 | 130 | 86 | ||||||
Consent fees |
5 | 2 | 4 | ||||||
Other investments |
6 | (2 |
) |
4 | |||||
Investment income |
4,828 | 4,851 | 4,751 | ||||||
Investment expense |
(217 |
) |
(203 |
) |
(190 |
) |
|||
Net investment income |
$ |
4,611 |
$ |
4,648 |
$ |
4,561 |
Realized Gain (Loss) Related to Certain Investments
The detail of the realized gain (loss) related to certain investments (in millions) was as follows:
For The Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Fixed maturity AFS securities: (1) |
|||||||||
Gross gains |
$ |
41 |
$ |
37 |
$ |
20 | |||
Gross losses |
(94 |
) |
(28 |
) |
(89 |
) |
|||
Equity AFS securities: |
|||||||||
Gross gains |
3 | 5 | 8 | ||||||
Gross losses |
- |
- |
(2 |
) |
|||||
Gain (loss) on other investments |
(7 |
) |
4 | 6 | |||||
Associated amortization of DAC, VOBA, DSI and DFEL |
|||||||||
and changes in other contract holder funds |
(26 |
) |
(31 |
) |
(27 |
) |
|||
Total realized gain (loss) related to certain investments, pre-tax |
$ |
(83 |
) |
$ |
(13 |
) |
$ |
(84 |
) |
(1) |
These amounts are represented net of related fair value hedging activity. See Note 7 for more information.
32 |
Details underlying write-downs taken as a result of OTTI (in millions) that were recognized in net income (loss) and included in realized gain (loss) on AFS securities above, and the portion of OTTI recognized in OCI (in millions) were as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
OTTI Recognized in Net Income (Loss) |
|||||||||
Fixed maturity securities: |
|||||||||
Corporate bonds |
$ |
(42 |
) |
$ |
(1 |
) |
$ |
(16 |
) |
ABS |
(6 |
) |
(10 |
) |
(19 |
) |
|||
RMBS |
(7 |
) |
(7 |
) |
(28 |
) |
|||
CMBS |
(1 |
) |
(1 |
) |
(14 |
) |
|||
Total fixed maturity securities |
(56 |
) |
(19 |
) |
(77 |
) |
|||
Equity securities |
- |
- |
(1 |
) |
|||||
Gross OTTI recognized in net income (loss) |
(56 |
) |
(19 |
) |
(78 |
) |
|||
Associated amortization of DAC, VOBA, DSI and DFEL |
6 | 4 | 13 | ||||||
Net OTTI recognized in net income (loss), pre-tax |
$ |
(50 |
) |
$ |
(15 |
) |
$ |
(65 |
) |
Portion of OTTI Recognized in OCI |
|||||||||
Gross OTTI recognized in OCI |
$ |
29 |
$ |
11 |
$ |
11 | |||
Change in DAC, VOBA, DSI and DFEL |
(4 |
) |
(1 |
) |
(1 |
) |
|||
Net portion of OTTI recognized in OCI, pre-tax |
$ |
25 |
$ |
10 |
$ |
10 |
Determination of Credit Losses on Corporate Bonds and ABS
As of December 31, 2015 and 2014, we reviewed our corporate bond and ABS portfolios for potential shortfall in contractual principal and interest based on numerous subjective and objective inputs. The factors used to determine the amount of credit loss for each individual security, include, but are not limited to, near term risk, substantial discrepancy between book and market value, sector or company-specific volatility, negative operating trends and trading levels wider than peers.
Credit ratings express opinions about the credit quality of a security. Securities rated investment grade, that is those rated BBB- or higher by Standard & Poor’s (“S&P”) Rating Services or Baa3 or higher by Moody’s Investors Service (“Moody’s”), are generally considered by the rating agencies and market participants to be low credit risk. As of December 31, 2015 and 2014, 96% of the fair value of our corporate bond portfolio was rated investment grade. As of December 31, 2015 and 2014, the portion of our corporate bond portfolio rated below investment grade had an amortized cost of $3.6 billion and $3.2 billion, respectively, and a fair value of $3.2 billion. As of December 31, 2015 and 2014, 95% and 88%, respectively, of the fair value of our ABS portfolio was rated investment grade. As of December 31, 2015 and 2014, the portion of our ABS portfolio rated below investment grade had an amortized cost of $104 million and $188 million, respectively, and a fair value of $89 million and $171 million, respectively. Based upon the analysis discussed above, we believed as of December 31, 2015 and 2014, that we would recover the amortized cost of each investment grade corporate bond and ABS security.
Determination of Credit Losses on MBS
As of December 31, 2015 and 2014, default rates were projected by considering underlying MBS loan performance and collateral type. Projected default rates on existing delinquencies vary between 10% to 100% depending on loan type and severity of delinquency status. In addition, we estimate the potential contributions of currently performing loans that may become delinquent in the future based on the change in delinquencies and loan liquidations experienced in the recent history. Finally, we develop a default rate timing curve by aggregating the defaults for all loans in the pool (delinquent loans, foreclosure and real estate owned and new delinquencies from currently performing loans) and the associated loan-level loss severities.
We use certain available loan characteristics such as lien status, loan sizes and occupancy to estimate the loss severity of loans. Second lien loans are assigned 100% severity, if defaulted. For first lien loans, we assume a minimum of 30% severity with higher severity assumed for investor properties and further adjusted by housing price assumptions. With the default rate timing curve and loan-level severity, we derive the future expected credit losses.
33
Payables for Collateral on Investments
The carrying value of the payables for collateral on investments (in millions) included on our Consolidated Balance Sheets and the fair value of the related investments or collateral consisted of the following:
As of December 31, 2015 |
As of December 31, 2014 |
|||||||||||
Carrying |
Fair |
Carrying |
Fair |
|||||||||
Value |
Value |
Value |
Value |
|||||||||
Collateral payable for derivative investments (1) |
$ |
1,294 |
$ |
1,294 |
$ |
1,577 |
$ |
1,577 | ||||
Securities pledged under securities lending agreements (2) |
242 | 231 | 204 | 196 | ||||||||
Securities pledged under repurchase agreements (3) |
674 | 706 | 605 | 631 | ||||||||
Investments pledged for Federal Home Loan Bank of |
||||||||||||
Indianapolis (“FHLBI”) (4) |
2,355 | 3,391 | 1,925 | 3,151 | ||||||||
Total payables for collateral on investments |
$ |
4,565 |
$ |
5,622 |
$ |
4,311 |
$ |
5,555 |
(1) We obtain collateral based upon contractual provisions with our counterparties. These agreements take into consideration the counterparties’ credit rating as compared to ours, the fair value of the derivative investments and specified thresholds that if exceeded result in the receipt of cash that is typically invested in cash and invested cash. See Note 7 for additional information.
(2) Our pledged securities under securities lending agreements are included in fixed maturity AFS securities on our Consolidated Balance Sheets. We generally obtain collateral in an amount equal to 102% and 105% of the fair value of the domestic and foreign securities, respectively. We value collateral daily and obtain additional collateral when deemed appropriate. The cash received in our securities lending program is typically invested in cash and invested cash or fixed maturity AFS securities.
(3) Our pledged securities under repurchase agreements are included in fixed maturity AFS securities on our Consolidated Balance Sheets. We obtain collateral in an amount equal to 95% of the fair value of the securities, and our agreements with third parties contain contractual provisions to allow for additional collateral to be obtained when necessary. The cash received in our repurchase program is typically invested in fixed maturity AFS securities.
(4) Our pledged investments for FHLBI are included in fixed maturity AFS securities and mortgage loans on real estate on our Consolidated Balance Sheets. The collateral requirements are generally 105% to 115% of the fair value for fixed maturity AFS securities and 155% to 175% of the fair value for mortgage loans on real estate. The cash received in these transactions is primarily invested in cash and invested cash or fixed maturity AFS securities.
Increase (decrease) in payables for collateral on investments (in millions) consisted of the following:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Collateral payable for derivative investments |
$ |
(283 |
) |
$ |
1,313 |
$ |
(2,243 |
) |
|
Securities pledged under securities lending agreements |
38 | 20 | (13 |
) |
|||||
Securities pledged under repurchase agreements |
69 | 75 | 250 | ||||||
Securities pledged for Term Asset-Backed Securities Loan Facility |
- |
(36 |
) |
(1 |
) |
||||
Investments pledged for FHLBI |
430 | 74 | 751 | ||||||
Total increase (decrease) in payables for collateral on investments |
$ |
254 |
$ |
1,446 |
$ |
(1,256 |
) |
34
The remaining contractual maturities of repurchase agreements and securities lending transactions accounted for as secured borrowings were as follows:
As of December 31, 2015 |
|||||||||||||||
Overnight and Continuous |
Up to 30 Days |
30 – 90 Days |
Greater Than 90 Days |
Total |
|||||||||||
Repurchase Agreements |
|||||||||||||||
RMBS |
$ |
- |
$ |
- |
$ |
- |
$ |
250 |
$ |
250 | |||||
Corporate bonds |
- |
- |
275 | 149 | 424 | ||||||||||
Total |
- |
- |
275 | 399 | 674 | ||||||||||
Securities Lending |
|||||||||||||||
Corporate bonds |
242 |
- |
- |
- |
242 | ||||||||||
Total |
242 |
- |
- |
- |
242 | ||||||||||
Total secured borrowings |
$ |
242 |
$ |
- |
$ |
275 |
$ |
399 |
$ |
916 | |||||
Gross amount of recognized liabilities for repurchase agreements and securities lending: |
$ |
916 | |||||||||||||
Amounts related to agreements not included in offsetting disclosures: |
$ |
- |
We receive securities in connection with reverse repurchase and securities borrowing agreements that we are permitted to sell or re-pledge. As of December 31, 2015, the fair value of all collateral received that we are permitted to sell or re-pledge was $174 million. We have not sold or re-pledged this collateral.
Investment Commitments
As of December 31, 2015, our investment commitments were $1.3 billion, which included $744 million of LPs, $330 million of private placement securities and $257 million of mortgage loans on real estate.
Concentrations of Financial Instruments
As of December 31, 2015 and 2014, our most significant investments in one issuer were our investments in securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $1.7 billion and $2.1 billion, respectively, or 2% of our invested assets portfolio, and our investments in securities issued by Fannie Mae with a fair value of $1.2 billion and $1.3 billion, respectively, or 1% of our invested assets portfolio.
As of December 31, 2015 and 2014, our most significant investments in one industry were our investment securities in the utilities industry with a fair value of $12.3 billion and $12.4 billion, respectively, or 12% of our invested assets portfolio, and our investment securities in the consumer non-cyclical industry with a fair value of $11.7 billion and $11.3 billion, respectively, or 12% and 11%, respectively, of our invested assets portfolio.
Assets on Deposit
The Company had investment assets on deposit with regulatory agencies with a fair market value of $66 million and $65 million as of December 31, 2015 and 2014, respectively.
7. Derivative Instruments
We maintain an overall risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings that are caused by interest rate risk, foreign currency exchange risk, equity market risk, default risk, basis risk and credit risk. We assess these risks by continually identifying and monitoring changes in our exposures that may adversely affect expected future cash flows and by evaluating hedging opportunities.
Derivative activities are monitored by various management committees. The committees are responsible for overseeing the implementation of various hedging strategies that are developed through the analysis of financial simulation models and other internal and industry sources. The resulting hedging strategies are incorporated into our overall risk management strategies.
See Note 1 for a detailed discussion of the accounting treatment for derivative instruments. See Note 21 for additional disclosures related to the fair value of our derivative instruments and Note 5 for derivative instruments related to our consolidated VIEs.
35
Interest Rate Contracts
We use derivative instruments as part of our interest rate risk management strategy. These instruments are economic hedges unless otherwise noted and include:
Forward-Starting Interest Rate Swaps
We use forward-starting interest rate swaps designated and qualifying as cash flow hedges to hedge our exposure to interest rate fluctuations related to the forecasted purchases of certain assets.
Interest Rate Cap Corridors
We use interest rate cap corridors to provide a level of protection from the effect of rising interest rates for certain life insurance products and annuity contracts. Interest rate cap corridors involve purchasing an interest rate cap at a specific cap rate and selling an interest rate cap with a higher cap rate. For each corridor, the amount of quarterly payments, if any, is determined by the rate at which the underlying index rate resets above the original capped rate. The corridor limits the benefit the purchaser can receive as the related interest rate index rises above the higher capped rate. There is no additional liability to us other than the purchase price associated with the interest rate cap corridor.
Interest Rate Futures
We use interest rate futures contracts to hedge the liability exposure on certain options in variable annuity products. These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price.
Interest Rate Swap Agreements
We use interest rate swap agreements to hedge the liability exposure on certain options in variable annuity products.
We also use interest rate swap agreements designated and qualifying as cash flow hedges to hedge the interest rate risk of floating-rate bond coupon payments by replicating a fixed-rate bond.
Finally, we use interest rate swap agreements designated and qualifying as fair value hedges to hedge against changes in the fair value of certain fixed-rate securities due to interest rate risks.
Reverse Treasury Locks
We use reverse treasury locks designated and qualifying as cash flow hedges to hedge the interest rate exposure related to the anticipated purchase of fixed-rate securities. These derivatives are primarily structured to hedge interest rate risk inherent in the assumptions used to price certain liabilities.
Foreign Currency Contracts
We use derivative instruments as part of our foreign currency risk management strategy. These instruments are economic hedges unless otherwise noted and include:
Currency Futures
We use currency futures to hedge foreign exchange risk associated with certain options in variable annuity products. Currency futures exchange one currency for another at a specified date in the future at a specified exchange rate.
Foreign Currency Swaps
We use foreign currency swaps designated and qualifying as cash flow hedges, to hedge foreign exchange risk of investments in fixed maturity securities denominated in foreign currencies. A foreign currency swap is a contractual agreement to exchange one currency for another at specified dates in the future at a specified rate of exchange.
Equity Market Contracts
We use derivative instruments as part of our equity market risk management strategy that are economic hedges and include:
Call Options Based on the S&P 500 Index®
Our indexed annuity and indexed universal life (“IUL”) contracts permit the holder to elect an interest rate return or an equity market component, where interest credited to the contracts is linked to the performance of the S&P 500 Index® (“S&P 500”). Contract holders may elect to rebalance index options at renewal dates, either annually or biannually. As of each renewal date, we have the opportunity to
36
re-price the indexed component by establishing participation rates, caps, spreads and specified rates, subject to contractual guarantees. We purchase call options that are highly correlated to the portfolio allocation decisions of our contract holders, such that we are economically hedged with respect to equity returns for the current reset period.
Consumer Price Index Swaps
We use consumer price index swaps to hedge the liability exposure on certain options in fixed annuity products. Consumer price index swaps are contracts entered into at no cost and whose payoff is the difference between the consumer price index inflation rate and the fixed-rate determined as of inception.
Equity Futures
We use equity futures contracts to hedge the liability exposure on certain options in variable annuity products. These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price.
Put Options
We use put options to hedge the liability exposure on certain options in variable annuity products. Put options are contracts that require counterparties to pay us at a specified future date the amount, if any, by which a specified equity index is less than the strike rate stated in the agreement, applied to a notional amount.
Total Return Swaps
We use total return swaps to hedge the liability exposure on certain options in variable annuity products. We receive a floating-rate of interest and pay the total return on a portfolio of indexes.
In addition, we use total return swaps to hedge a portion of the liability related to our deferred compensation plans. We receive the total return on a portfolio of indexes and pay a floating-rate of interest.
Variance Swaps
We use variance swaps to hedge the liability exposure on certain options in variable annuity products. Variance swaps are contracts entered into at no cost whose payoff is the difference between the realized variance rate of an underlying index and the fixed variance rate determined as of inception of the contract.
Credit Contracts
We use derivative instruments as part of our credit risk management strategy that are economic hedges and include:
Credit Default Swaps – Selling Protection
We sell credit default swaps to offer credit protection to contract holders and investors. The credit default swaps hedge the contract holders and investors against a drop in bond prices due to credit concerns of certain bond issuers. A credit default swap allows the investor to put the bond back to us at par upon a default event by the bond issuer. A default event is defined as bankruptcy, failure to pay, obligation acceleration or restructuring.
Embedded Derivatives
We have embedded derivatives that include:
GLB Reserves Embedded Derivatives
We use a hedging strategy designed to mitigate the risk and income statement volatility caused by changes in the equity markets, interest rates and volatility associated with GLBs offered in our variable annuity products, including products with GWB and GIB features. Changes in the value of the hedge contracts due to changes in equity markets, interest rates and implied volatilities hedge the income statement effect of changes in embedded derivative GLB reserves caused by those same factors. We rebalance our hedge positions based upon changes in these factors as needed. While we actively manage our hedge positions, these hedge positions may not be totally effective in offsetting changes in the embedded derivative reserve due to, among other things, differences in timing between when a market exposure changes and corresponding changes to the hedge positions, extreme swings in the equity markets and interest rates, market volatility, contract holder behavior, divergence between the performance of the underlying funds and the hedging indices, divergence between the actual and expected performance of the hedge instruments and our ability to purchase hedging instruments at prices consistent with our desired risk and return trade-off. However, the hedging results do not impact LNL due to a funds withheld agreement with LNBAR, which causes the financial impact of the derivatives, as well as the cash flow activity, to be reflected on LNBAR.
Certain features of these guarantees have elements of both insurance benefits accounted for under the Financial Services – Insurance – Claim Costs and Liabilities for Future Policy Benefits Subtopic of the FASB ASC (“benefit reserves”) and embedded derivatives
37
accounted for under the Derivatives and Hedging and the Fair Value Measurements and Disclosures Topics of the FASB ASC (“embedded derivative reserves”). We calculate the value of the benefit reserves and the embedded derivative reserves based on the specific characteristics of each GLB feature.
Indexed Annuity and IUL Contracts Embedded Derivatives
Our indexed annuity and IUL contracts permit the holder to elect an interest rate return or an equity market component, where interest credited to the contracts is linked to the performance of the S&P 500. Contract holders may elect to rebalance index options at renewal dates, either annually or biannually. As of each renewal date, we have the opportunity to re-price the indexed component by establishing participation rates, caps, spreads and specified rates, subject to contractual guarantees. We purchase S&P 500 call options that are highly correlated to the portfolio allocation decisions of our contract holders, such that we are economically hedged with respect to equity returns for the current reset period.
Reinsurance Related Embedded Derivatives
We have certain Modco arrangements and CFW reinsurance arrangements with embedded derivatives related to the withheld assets of the related funds. These derivatives are considered total return swaps with contractual returns that are attributable to various assets and liabilities associated with these reinsurance arrangements.
We are involved in an inter-company reinsurance agreement where we cede the risk under certain UL contracts for no lapse benefit guarantees to LNBAR. If our contract holders’ account value is not sufficient to pay the cost of insurance charges required to keep the policy inforce, and the contract holder has made required deposits, LNBAR will reimburse us for the charges.
38
We have derivative instruments with off-balance-sheet risks whose notional or contract amounts exceed the related credit exposure. Outstanding derivative instruments with off-balance-sheet risks (in millions) were as follows:
As of December 31, 2015 |
As of December 31, 2014 |
|||||||||||||||||
Notional |
Fair Value |
Notional |
Fair Value |
|||||||||||||||
Amounts |
Asset |
Liability |
Amounts |
Asset |
Liability |
|||||||||||||
Qualifying Hedges |
||||||||||||||||||
Cash flow hedges: |
||||||||||||||||||
Interest rate contracts (1) |
$ |
1,474 |
$ |
192 |
$ |
29 |
$ |
2,091 |
$ |
369 |
$ |
198 | ||||||
Foreign currency contracts (1) |
910 | 84 | 2 | 642 | 46 | 21 | ||||||||||||
Total cash flow hedges |
2,384 | 276 | 31 | 2,733 | 415 | 219 | ||||||||||||
Fair value hedges: |
||||||||||||||||||
Interest rate contracts (1) |
654 |
- |
198 |
- |
- |
- |
||||||||||||
Non-Qualifying Hedges |
||||||||||||||||||
Interest rate contracts (1) |
71,899 | 1,087 | 330 | 54,401 | 989 | 342 | ||||||||||||
Foreign currency contracts (1) |
74 |
- |
- |
68 |
- |
- |
||||||||||||
Equity market contracts (1) |
27,712 | 680 | 269 | 24,144 | 886 | 243 | ||||||||||||
Credit contracts (2) |
103 |
- |
9 | 126 |
- |
3 | ||||||||||||
Embedded derivatives: |
||||||||||||||||||
GLB reserves (3) |
- |
952 |
- |
- |
174 |
- |
||||||||||||
GLB reserves (2) |
- |
- |
952 |
- |
- |
174 | ||||||||||||
Reinsurance related (4) |
- |
95 |
- |
- |
- |
109 | ||||||||||||
Indexed annuity and IUL contracts (5) |
- |
- |
1,100 |
- |
- |
1,170 | ||||||||||||
Total derivative instruments |
$ |
102,826 |
$ |
3,090 |
$ |
2,889 |
$ |
81,472 |
$ |
2,464 |
$ |
2,260 |
(1) |
Reported in derivative investments and other liabilities on our Consolidated Balance Sheets. |
(2) |
Reported in other liabilities on our Consolidated Balance Sheets. |
(3) |
Reported in other assets on our Consolidated Balance Sheets. |
(4) |
Reported in reinsurance related embedded derivatives on our Consolidated Balance Sheets. |
(5) |
Reported in future contract benefits on our Consolidated Balance Sheets. |
The maturity of the notional amounts of derivative instruments (in millions) was as follows:
Remaining Life as of December 31, 2015 |
||||||||||||||||||
Less Than |
1 – 5 |
6 – 10 |
11 – 30 |
Over 30 |
||||||||||||||
1 Year |
Years |
Years |
Years |
Years |
Total |
|||||||||||||
Interest rate contracts (1) |
$ |
10,407 |
$ |
32,455 |
$ |
18,554 |
$ |
12,611 |
$ |
- |
$ |
74,027 | ||||||
Foreign currency contracts (2) |
103 | 139 | 334 | 408 |
- |
984 | ||||||||||||
Equity market contracts |
18,048 | 6,626 | 2,753 | 18 | 267 | 27,712 | ||||||||||||
Credit contracts |
45 | 58 |
- |
- |
- |
103 | ||||||||||||
Total derivative instruments |
||||||||||||||||||
with notional amounts |
$ |
28,603 |
$ |
39,278 |
$ |
21,641 |
$ |
13,037 |
$ |
267 |
$ |
102,826 |
(1) |
As of December 31, 2015, the latest maturity date for which we were hedging our exposure to the variability in future cash flows for these instruments was June 2042. |
(2) |
As of December 31, 2015, the latest maturity date for which we were hedging our exposure to the variability in future cash flows for these instruments was December 2045. |
39
The change in our unrealized gain (loss) on derivative instruments in AOCI (in millions) was as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Unrealized Gain (Loss) on Derivative Instruments |
|||||||||
Balance as of beginning-of-year |
$ |
127 |
$ |
5 |
$ |
101 | |||
Other comprehensive income (loss): |
|||||||||
Unrealized holding gains (losses) arising during the period: |
|||||||||
Cash flow hedges: |
|||||||||
Interest rate contracts |
(202 |
) |
78 | (126 |
) |
||||
Foreign currency contracts |
17 | 36 | (24 |
) |
|||||
Change in foreign currency exchange rate adjustment |
48 | 50 | (19 |
) |
|||||
Change in DAC, VOBA, DSI and DFEL |
3 | 2 | 5 | ||||||
Income tax benefit (expense) |
46 | (58 |
) |
57 | |||||
Less: |
|||||||||
Reclassification adjustment for gains (losses) included in net income (loss): |
|||||||||
Cash flow hedges: |
|||||||||
Interest rate contracts (1) |
(190 |
) |
(22 |
) |
(21 |
) |
|||
Foreign currency contracts (1) |
6 |
- |
3 | ||||||
Associated amortization of DAC, VOBA, DSI and DFEL |
2 | 1 | 1 | ||||||
Income tax benefit (expense) |
64 | 7 | 6 | ||||||
Balance as of end-of-year |
$ |
157 |
$ |
127 |
$ |
5 |
(1) |
The OCI offset is reported within net investment income on our Consolidated Statements of Comprehensive Income (Loss). |
The gains (losses) on derivative instruments (in millions) recorded within net income (loss) on our Consolidated Statements of Comprehensive Income (Loss) were as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Qualifying Hedges |
|||||||||
Cash flow hedges: |
|||||||||
Interest rate contracts (1) |
$ |
8 |
$ |
(22 |
) |
$ |
(21 |
) |
|
Foreign currency contracts (1) |
6 |
- |
3 | ||||||
Total cash flow hedges |
14 | (22 |
) |
(18 |
) |
||||
Fair value hedges: |
|||||||||
Interest rate contracts (1) |
(30 |
) |
- |
- |
|||||
Interest rate contracts (2) |
(198 |
) |
- |
- |
|||||
Total fair value hedges |
(228 |
) |
- |
- |
|||||
Non-Qualifying Hedges |
|||||||||
Interest rate contracts (2) |
304 | 1,304 | (998 |
) |
|||||
Foreign currency contracts (2) |
(11 |
) |
(8 |
) |
(4 |
) |
|||
Equity market contracts (2) |
(118 |
) |
(215 |
) |
(1,306 |
) |
|||
Equity market contracts (3) |
1 | 11 | 37 | ||||||
Credit contracts (2) |
(6 |
) |
(1 |
) |
9 | ||||
Embedded derivatives: |
|||||||||
Other assets – GLB reserves (2) |
778 | 1,391 | (2,153 |
) |
|||||
Other liabilities – GLB reserves (2) |
(778 |
) |
(1,391 |
) |
2,153 | ||||
Reinsurance related (2) |
221 | (242 |
) |
352 | |||||
Indexed annuity and IUL contracts (2) |
(57 |
) |
(210 |
) |
(356 |
) |
|||
Total derivative instruments |
$ |
120 |
$ |
617 |
$ |
(2,284 |
) |
(1) |
Reported in net investment income on our Consolidated Statements of Comprehensive Income (Loss). |
(2) |
Reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). |
(3) |
Reported in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss). |
40
Gains (losses) recognized as a component of OCI (in millions) on derivative instruments designated and qualifying as cash flow hedges were as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Offset to net investment income |
$ |
14 | (22 |
) |
(18 |
) |
|||
As of December 31, 2015, $17 million of the deferred net gains (losses) on derivative instruments in AOCI were expected to be reclassified to earnings during the next 12 months. This reclassification would be due primarily to interest rate variances related to our interest rate swap agreements.
For the years ended December 31, 2015 and 2014, there were no material reclassifications to earnings due to hedged firm commitments no longer deemed probable or due to hedged forecasted transactions that had not occurred by the end of the originally specified time period.
Information related to our open credit default swap liabilities for which we are the seller (dollars in millions) was as follows:
As of December 31, 2015 |
|||||||||||||||
Credit |
|||||||||||||||
Reason |
Nature |
Rating of |
Number |
Maximum |
|||||||||||
for |
of |
Underlying |
of |
Fair |
Potential |
||||||||||
Maturity |
Entering |
Recourse |
Obligation (1) |
Instruments |
Value (2) |
Payout |
|||||||||
12/20/2016 (3) |
(4) |
(5) |
BBB- |
2 |
$ |
(2 |
) |
$ |
45 | ||||||
3/20/2017 (3) |
(4) |
(5) |
BBB- |
3 | (7 |
) |
58 | ||||||||
5 |
$ |
(9 |
) |
$ |
103 |
As of December 31, 2014 |
|||||||||||||||
Credit |
|||||||||||||||
Reason |
Nature |
Rating of |
Number |
Maximum |
|||||||||||
for |
of |
Underlying |
of |
Fair |
Potential |
||||||||||
Maturity |
Entering |
Recourse |
Obligation (1) |
Instruments |
Value (2) |
Payout |
|||||||||
12/20/2016 (3) |
(4) |
(5) |
BBB- |
3 |
$ |
(2 |
) |
$ |
68 | ||||||
3/20/2017 (3) |
(4) |
(5) |
BBB- |
3 | (1 |
) |
58 | ||||||||
6 |
$ |
(3 |
) |
$ |
126 |
(1) |
Represents average credit ratings based on the midpoint of the applicable ratings among Moody’s, S&P and Fitch Ratings, as scaled to the corresponding S&P ratings. |
(2) |
Broker quotes are used to determine the market value of our credit default swaps. |
(3) |
These credit default swaps were sold to a counterparty of the consolidated VIEs discussed in Note 5. |
(4) |
Credit default swaps were entered into in order to generate income by providing default protection in return for a quarterly payment. |
(5) |
Sellers do not have the right to demand indemnification or compensation from third parties in case of a loss (payment) on the contract. |
Details underlying the associated collateral of our credit default swaps for which we are the seller if credit risk-related contingent features were triggered (in millions) were as follows:
As of December 31, |
|||||||||
2015 |
2014 |
||||||||
Maximum potential payout |
$ |
103 |
$ |
126 | |||||
Less: Counterparty thresholds |
- |
- |
|||||||
Maximum collateral potentially required to post |
$ |
103 |
$ |
126 |
Certain of our credit default swap agreements contain contractual provisions that allow for the netting of collateral with our counterparties related to all of our collateralized financing transactions that we have outstanding. If these netting agreements were not in place, we would have been required to post $9 million as of December 31, 2015.
Credit Risk
We are exposed to credit loss in the event of non-performance by our counterparties on various derivative contracts and reflect assumptions regarding the credit or NPR. The NPR is based upon assumptions for each counterparty’s credit spread over the estimated
41
weighted average life of the counterparty exposure less collateral held. As of December 31, 2015, the NPR adjustment was less than $1 million. The credit risk associated with such agreements is minimized by entering into agreements with financial institutions with long-standing, superior performance records. Additionally, we maintain a policy of requiring derivative contracts to be governed by an International Swaps and Derivatives Association (“ISDA”) Master Agreement. We are required to maintain minimum ratings as a matter of routine practice in negotiating ISDA agreements. Under some ISDA agreements, our insurance subsidiaries have agreed to maintain certain financial strength or claims-paying ratings. A downgrade below these levels could result in termination of derivative contracts, at which time any amounts payable by us would be dependent on the market value of the underlying derivative contracts. In certain transactions, we and the counterparty have entered into a credit support annex requiring either party to post collateral when net exposures exceed pre-determined thresholds. These thresholds vary by counterparty and credit rating. The amount of such exposure is essentially the net replacement cost or market value less collateral held for such agreements with each counterparty if the net market value is in our favor. As of December 31, 2015, our exposure was $15 million.
The amounts recognized (in millions) by S&P credit rating of counterparty, for which we had the right to reclaim cash collateral or were obligated to return cash collateral, were as follows:
As of December 31, 2015 |
As of December 31, 2014 |
||||||||||||
Collateral |
Collateral |
Collateral |
Collateral |
||||||||||
Posted by |
Posted by |
Posted by |
Posted by |
||||||||||
S&P |
Counter- |
LNL |
Counter- |
LNL |
|||||||||
Credit |
Party |
(Held by |
Party |
(Held by |
|||||||||
Rating of |
(Held by |
Counter- |
(Held by |
Counter- |
|||||||||
Counterparty |
LNL) |
Party) |
LNL) |
Party) |
|||||||||
AA- |
$ |
92 |
$ |
- |
$ |
64 |
$ |
- |
|||||
A+ |
67 |
- |
48 |
- |
|||||||||
A |
791 | (107 |
) |
1,047 | (85 |
) |
|||||||
A- |
11 |
- |
252 |
- |
|||||||||
BBB+ |
333 |
- |
27 |
- |
|||||||||
$ |
1,294 |
$ |
(107 |
) |
$ |
1,438 |
$ |
(85 |
) |
Balance Sheet Offsetting
Information related to the effects of offsetting on our Consolidated Balance Sheets (in millions) was as follows:
As of December 31, 2015 |
||||||||||||
Embedded |
||||||||||||
Derivative |
Derivative |
|||||||||||
Instruments |
Instruments |
Total |
||||||||||
Financial Assets |
||||||||||||
Gross amount of recognized assets |
$ |
1,981 |
$ |
1,048 |
$ |
3,029 | ||||||
Gross amounts offset |
(496 |
) |
- |
(496 |
) |
|||||||
Net amount of assets |
1,485 | 1,048 | 2,533 | |||||||||
Gross amounts not offset: |
||||||||||||
Cash collateral |
(1,294 |
) |
- |
(1,294 |
) |
|||||||
Net amount |
$ |
191 |
$ |
1,048 |
$ |
1,239 | ||||||
Financial Liabilities |
||||||||||||
Gross amount of recognized liabilities |
$ |
340 |
$ |
2,053 |
$ |
2,393 | ||||||
Gross amounts offset |
(61 |
) |
- |
(61 |
) |
|||||||
Net amount of liabilities |
279 | 2,053 | 2,332 | |||||||||
Gross amounts not offset: |
||||||||||||
Cash collateral |
(107 |
) |
- |
(107 |
) |
|||||||
Net amount |
$ |
172 |
$ |
2,053 |
$ |
2,225 |
42
As of December 31, 2014 |
||||||||||||
Embedded |
||||||||||||
Derivative |
Derivative |
|||||||||||
Instruments |
Instruments |
Total |
||||||||||
Financial Assets |
||||||||||||
Gross amount of recognized assets |
$ |
2,240 |
$ |
174 |
$ |
2,414 | ||||||
Gross amounts offset |
(477 |
) |
- |
(477 |
) |
|||||||
Net amount of assets |
1,763 | 174 | 1,937 | |||||||||
Gross amounts not offset: |
||||||||||||
Cash collateral |
(1,438 |
) |
- |
(1,438 |
) |
|||||||
Net amount |
$ |
325 |
$ |
174 |
$ |
499 | ||||||
Financial Liabilities |
||||||||||||
Gross amount of recognized liabilities |
$ |
330 |
$ |
1,453 |
$ |
1,783 | ||||||
Gross amounts offset |
(50 |
) |
- |
(50 |
) |
|||||||
Net amount of liabilities |
280 | 1,453 | 1,733 | |||||||||
Gross amounts not offset: |
||||||||||||
Cash collateral |
(85 |
) |
- |
(85 |
) |
|||||||
Net amount |
$ |
195 |
$ |
1,453 |
$ |
1,648 |
8. Federal Income Taxes
The federal income tax expense (benefit) (in millions) was as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Current |
$ |
71 |
$ |
104 |
$ |
211 | |||
Deferred |
224 | 116 | 220 | ||||||
Federal income tax expense (benefit) |
$ |
295 |
$ |
220 |
$ |
431 |
A reconciliation of the effective tax rate differences (in millions) was as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Tax rate of 35% times pre-tax income |
$ |
514 |
$ |
425 |
$ |
616 | |||
Effect of: |
|||||||||
Separate account dividends |
|||||||||
received deduction |
(192 |
) |
(174 |
) |
(145 |
) |
|||
Tax credits |
(26 |
) |
(24 |
) |
(35 |
) |
|||
Change in uncertain tax positions |
1 | (12 |
) |
7 | |||||
Other items |
(2 |
) |
5 | (12 |
) |
||||
Federal income tax expense (benefit) |
$ |
295 |
$ |
220 |
$ |
431 | |||
Effective tax rate |
20% | 18% | 24% |
The effective tax rate is the ratio of tax expense over pre-tax income (loss). The benefit for tax credits is attributable to foreign tax credits and low income housing tax credits. We file with a consolidated group, however we calculate our tax expense on a separate company basis.
The federal income tax asset (liability) (in millions) was as follows:
As of December 31, |
||||||
2015 |
2014 |
|||||
Current |
$ |
104 |
$ |
49 | ||
Deferred |
(2,422 |
) |
(3,306 |
) |
||
Total federal income tax asset (liability) |
$ |
(2,318 |
) |
$ |
(3,257 |
) |
43
Significant components of our deferred tax assets and liabilities (in millions) were as follows:
As of December 31, |
||||||
2015 |
2014 |
|||||
Deferred Tax Assets |
||||||
Future contract benefits and other contract holder funds |
$ |
960 |
$ |
544 | ||
Deferred gain on business sold through reinsurance |
30 | (7 |
) |
|||
Reinsurance related embedded derivative asset |
25 | 177 | ||||
Investment activity |
- |
317 | ||||
Compensation and benefit plans |
186 | 198 | ||||
Net capital loss |
- |
3 | ||||
Tax credits |
33 |
- |
||||
VIE |
- |
45 | ||||
Other |
172 | 62 | ||||
Total deferred tax assets |
1,406 | 1,339 | ||||
Deferred Tax Liabilities |
||||||
DAC |
2,147 | 1,731 | ||||
VOBA |
306 | (186 |
) |
|||
Net unrealized gain on AFS securities |
1,084 | 3,100 | ||||
Net unrealized gain on trading securities |
67 | 100 | ||||
Intangibles |
7 | 22 | ||||
Investment activity |
183 |
- |
||||
Other |
34 | (122 |
) |
|||
Total deferred tax liabilities |
3,828 | 4,645 | ||||
Net deferred tax asset (liability) |
$ |
(2,422 |
) |
$ |
(3,306 |
) |
As of December 31, 2015, we had $33 million of alternative minimum tax credits that are not subject to expiration. Although realization is not assured, management believes that it is more likely than not that we will realize the benefits of our deferred tax assets, and, accordingly, no valuation allowance has been recorded.
As of December 31, 2015 and 2014, $10 million of our unrecognized tax benefits presented below, if recognized, would have affected our income tax expense and our effective tax rate. We are not aware of any events for which it is likely that unrecognized tax benefits will significantly increase or decrease within the next year. A reconciliation of the unrecognized tax benefits (in millions) was as follows:
For the Years Ended |
||||||
December 31, |
||||||
2015 |
2014 |
|||||
Balance as of beginning-of-year |
$ |
10 |
$ |
75 | ||
Increases for prior year tax positions |
- |
35 | ||||
Decreases for prior year tax positions |
- |
(23 |
) |
|||
Decreases for settlements with taxing authorities |
- |
(77 |
) |
|||
Balance as of end-of-year |
$ |
10 |
$ |
10 |
We recognize interest and penalties accrued, if any, related to unrecognized tax benefits as a component of tax expense. For the years ended December 31, 2015, 2014 and 2013, we recognized interest and penalty expense (benefit) related to uncertain tax positions of $1 million, $(12) million and $2 million, respectively. We had accrued interest and penalty expense related to the unrecognized tax benefits of $2 million and $1 million as of December 31, 2015 and 2014, respectively.
We are subject to examination by U.S. federal, state, local and non-U.S. income authorities. The Internal Revenue Service (“IRS”) examination for tax years 2009 through 2011 was closed in 2015. We are currently not under examination by the IRS. However, LNC has filed a protest with the IRS Appeals division (“Appeals”). A protest for tax years 2005 through 2008 was previously filed with Appeals, and all tax years from 2005 through 2011 for the Company remain open. All protested items have been resolved for all open years but are subject to review by the U.S. Joint Committee on Taxation before a final settlement is reached. We do not expect any adjustments that would be material to our consolidated results of operations or financial condition.
44
9. DAC, VOBA, DSI and DFEL
Changes in DAC (in millions) were as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Balance as of beginning-of-year |
$ |
7,527 |
$ |
7,690 |
$ |
6,030 | |||
Business acquired (sold) through reinsurance |
38 | (20 |
) |
(67 |
) |
||||
Deferrals |
1,483 | 1,525 | 1,559 | ||||||
Amortization, net of interest: |
|||||||||
Amortization, excluding unlocking, net of interest |
(813 |
) |
(956 |
) |
(795 |
) |
|||
Unlocking |
(232 |
) |
18 | 42 | |||||
Adjustment related to realized (gains) losses |
(44 |
) |
(58 |
) |
(49 |
) |
|||
Adjustment related to unrealized (gains) losses |
661 | (672 |
) |
970 | |||||
Balance as of end-of-year |
$ |
8,620 |
$ |
7,527 |
$ |
7,690 |
Changes in VOBA (in millions) were as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Balance as of beginning-of-year |
$ |
628 |
$ |
1,169 |
$ |
702 | |||
Business acquired (sold) through reinsurance |
(22 |
) |
2 | 3 | |||||
Deferrals |
8 | 9 | 13 | ||||||
Amortization: |
|||||||||
Amortization, excluding unlocking |
(128 |
) |
(185 |
) |
(179 |
) |
|||
Unlocking |
(82 |
) |
(21 |
) |
(52 |
) |
|||
Accretion of interest (1) |
56 | 64 | 68 | ||||||
Adjustment related to realized (gains) losses |
(1 |
) |
(1 |
) |
(1 |
) |
|||
Adjustment related to unrealized (gains) losses |
414 | (409 |
) |
615 | |||||
Balance as of end-of-year |
$ |
873 |
$ |
628 |
$ |
1,169 |
(1) |
The interest accrual rates utilized to calculate the accretion of interest ranged from 4.02% to 7.05%. |
Estimated future amortization of VOBA, net of interest (in millions), as of December 31, 2015, was as follows:
2016 |
$ |
61 | |
2017 |
65 | ||
2018 |
68 | ||
2019 |
73 | ||
2020 |
82 |
Changes in DSI (in millions) were as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Balance as of beginning-of-year |
$ |
285 |
$ |
310 |
$ |
296 | |||
Deferrals |
29 | 13 | 10 | ||||||
Amortization, net of interest: |
|||||||||
Amortization, excluding unlocking, net of interest |
(33 |
) |
(37 |
) |
(41 |
) |
|||
Unlocking |
2 | 2 | 8 | ||||||
Adjustment related to realized (gains) losses |
(1 |
) |
(3 |
) |
(3 |
) |
|||
Adjustment related to unrealized (gains) losses |
19 |
- |
40 | ||||||
Balance as of end-of-year |
$ |
301 |
$ |
285 |
$ |
310 |
45
Changes in DFEL (in millions) were as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Balance as of beginning-of-year |
$ |
1,365 |
$ |
1,899 |
$ |
1,342 | |||
Business acquired (sold) through reinsurance |
- |
(2 |
) |
(7 |
) |
||||
Deferrals |
537 | 400 | 319 | ||||||
Amortization, net of interest: |
|||||||||
Amortization, excluding unlocking, net of interest |
(299 |
) |
(326 |
) |
(210 |
) |
|||
Unlocking |
(66 |
) |
(50 |
) |
(14 |
) |
|||
Adjustment related to realized (gains) losses |
(8 |
) |
(8 |
) |
(8 |
) |
|||
Adjustment related to unrealized (gains) losses |
394 | (548 |
) |
477 | |||||
Balance as of end-of-year |
$ |
1,923 |
$ |
1,365 |
$ |
1,899 |
10. Reinsurance
The following summarizes reinsurance amounts (in millions) recorded on our Consolidated Statements of Comprehensive Income (Loss), excluding amounts attributable to the indemnity reinsurance transaction with Swiss Re:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Direct insurance premiums and fee income |
$ |
9,354 |
$ |
8,880 |
$ |
7,833 | |||
Reinsurance assumed |
83 | 16 | 19 | ||||||
Reinsurance ceded |
(1,652 |
) |
(1,917 |
) |
(1,505 |
) |
|||
Total insurance premiums and fee income |
$ |
7,785 |
$ |
6,979 |
$ |
6,347 | |||
Direct insurance benefits |
$ |
6,304 |
$ |
5,970 |
$ |
5,346 | |||
Reinsurance recoveries netted against benefits |
(1,775 |
) |
(1,616 |
) |
(1,733 |
) |
|||
Total benefits |
$ |
4,529 |
$ |
4,354 |
$ |
3,613 |
We cede insurance to other companies. The portion of our life insurance and annuity risks exceeding our retention limit is reinsured with other insurers. We seek reinsurance coverage to limit our exposure to mortality losses and to enhance our capital management. As discussed in Note 24, a portion of this reinsurance activity is with affiliated companies.
As of December 31, 2015, our policy for our reinsurance program was to retain no more than $20 million on a single insured life. We reinsure approximately 25% of the mortality risk on newly issued life insurance contracts. As of December 31, 2015, approximately 38% of our total individual life in-force amount is reinsured. Portions of our deferred annuity business have been reinsured on a Modco basis with other companies to limit our exposure to interest rate risks. As of December 31, 2015, the reserves associated with these reinsurance arrangements totaled $617 million.
We focus on obtaining reinsurance from a diverse group of reinsurers, and we monitor concentration as well as financial strength ratings of our reinsurers. Our amounts recoverable from reinsurers represent receivables from and reserves ceded to reinsurers. The amounts recoverable from reinsurers were $7.1 billion and $6.9 billion as of December 31, 2015 and 2014, respectively. Our reinsurance operations were acquired by Swiss Re in December 2001 through a series of indemnity reinsurance transactions. As such, Swiss Re reinsured certain of our liabilities and obligations under the indemnity reinsurance agreements and thereby represents our largest reinsurance exposure. As we are not relieved of our liability to the ceding companies for this business, the liabilities and obligations associated with the reinsured policies remain on our Consolidated Balance Sheets with a corresponding reinsurance receivable from Swiss Re, which totaled $2.4 billion and $3.1 billion as of December 31, 2015 and 2014, respectively. Swiss Re has funded a trust, with a balance of $2.6 billion as of December 31, 2015, to support this business. In addition to various remedies that we would have in the event of a default by Swiss Re, we continue to hold assets in support of certain of the transferred reserves. These assets consist of those reported as trading securities and certain mortgage loans. Our liabilities for funds withheld and embedded derivatives as of December 31, 2015, included $634 million and $79 million, respectively, related to the business sold to Swiss Re.
We recorded the gain related to the indemnity reinsurance transactions with Swiss Re as a deferred gain on business sold through reinsurance on our Consolidated Balance Sheets. The deferred gain is being amortized into income at the rate that earnings on the reinsured business are expected to emerge, over a period of 15 years from the date of sale. We amortized $48 million, after-tax, of deferred gain on business sold through reinsurance during 2015, 2014 and 2013.
46
11. Goodwill and Specifically Identifiable Intangible Assets
The changes in the carrying amount of goodwill (in millions) by reportable segment were as follows:
For the Year Ended December 31, 2015 |
|||||||||||||||||
Gross |
Accumulated |
||||||||||||||||
Goodwill |
Impairment |
Net |
|||||||||||||||
as of |
as of |
Goodwill |
|||||||||||||||
Beginning- |
Beginning- |
as of End- |
|||||||||||||||
of-Year |
of-Year |
Impairment |
of-Year |
||||||||||||||
Annuities |
$ |
1,040 |
$ |
(600 |
) |
$ |
- |
$ |
440 | ||||||||
Retirement Plan Services |
20 |
- |
- |
20 | |||||||||||||
Life Insurance |
2,186 | (647 |
) |
- |
1,539 | ||||||||||||
Group Protection |
274 |
- |
- |
274 | |||||||||||||
Total goodwill |
$ |
3,520 |
$ |
(1,247 |
) |
$ |
- |
$ |
2,273 |
For the Year Ended December 31, 2014 |
|||||||||||||||||
Gross |
Accumulated |
||||||||||||||||
Goodwill |
Impairment |
Net |
|||||||||||||||
as of |
as of |
Goodwill |
|||||||||||||||
Beginning- |
Beginning- |
as of End- |
|||||||||||||||
of-Year |
of-Year |
Impairment |
of-Year |
||||||||||||||
Annuities |
$ |
1,040 |
$ |
(600 |
) |
$ |
- |
$ |
440 | ||||||||
Retirement Plan Services |
20 |
- |
- |
20 | |||||||||||||
Life Insurance |
2,186 | (647 |
) |
- |
1,539 | ||||||||||||
Group Protection |
274 |
- |
- |
274 | |||||||||||||
Other Operations – Media |
176 | (176 |
) |
- |
- |
||||||||||||
Total goodwill |
$ |
3,696 |
$ |
(1,423 |
) |
$ |
- |
$ |
2,273 |
The gross carrying amounts and accumulated amortization (in millions) for each major specifically identifiable intangible asset class by reportable segment were as follows:
As of December 31, 2015 |
As of December 31, 2014 |
|||||||||||||||
Gross |
Gross |
|||||||||||||||
Carrying |
Accumulated |
Carrying |
Accumulated |
|||||||||||||
Amount |
Amortization |
Amount |
Amortization |
|||||||||||||
Life Insurance: |
||||||||||||||||
Sales force |
$ |
100 |
$ |
39 |
$ |
100 |
$ |
35 | ||||||||
Retirement Plan Services: |
||||||||||||||||
Mutual fund contract rights (1) |
5 |
- |
5 |
- |
||||||||||||
Total |
$ |
105 |
$ |
39 |
$ |
105 |
$ |
35 |
(1) |
No amortization recorded as the intangible asset has indefinite life. |
Future estimated amortization of specifically identifiable intangible assets (in millions) as of December 31, 2015, was as follows:
2016 |
$ |
4 | |
2017 |
4 | ||
2018 |
4 | ||
2019 |
4 | ||
2020 |
4 | ||
Thereafter |
41 |
47
12. Guaranteed Benefit Features
Information on the GDB features outstanding (dollars in millions) was as follows:
As of December 31, |
|||||||||
2015 (1) |
2014 (1) |
||||||||
Return of Net Deposits |
|||||||||
Total account value |
$ |
85,345 |
$ |
85,917 | |||||
Net amount at risk (2) |
1,201 | 183 | |||||||
Average attained age of contract holders |
63 years |
62 years |
|||||||
Minimum Return |
|||||||||
Total account value |
$ |
111 |
$ |
135 | |||||
Net amount at risk (2) |
24 | 25 | |||||||
Average attained age of contract holders |
75 years |
74 years |
|||||||
Guaranteed minimum return |
5% | 5% | |||||||
Anniversary Contract Value |
|||||||||
Total account value |
$ |
24,659 |
$ |
26,021 | |||||
Net amount at risk (2) |
1,345 | 597 | |||||||
Average attained age of contract holders |
69 years |
68 years |
(1) Our variable contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed are not mutually exclusive.
(2) Represents the amount of death benefit in excess of the account balance that is subject to market fluctuations.
The determination of GDB liabilities is based on models that involve a range of scenarios and assumptions, including those regarding expected market rates of return and volatility, contract surrender rates and mortality experience.
The following summarizes the balances of and changes in the liabilities for GDBs (in millions), which were recorded in future contract benefits on our Consolidated Balance Sheets:
For the Years Ended December 31, |
||||||||||
2015 |
2014 |
2013 |
||||||||
Balance as of beginning-of-year |
$ |
89 |
$ |
73 |
$ |
104 | ||||
Changes in reserves |
52 | 34 | (10 |
) |
||||||
Benefits paid |
(26 |
) |
(18 |
) |
(21 |
) |
||||
Balance as of end-of-year |
$ |
115 |
$ |
89 |
$ |
73 |
Variable Annuity Contracts
Account balances of variable annuity contracts with guarantees (in millions) were invested in separate account investment options as follows:
As of December 31, |
|||||||||
2015 |
2014 |
||||||||
Asset Type |
|||||||||
Domestic equity |
$ |
46,668 |
$ |
47,930 | |||||
International equity |
17,686 | 18,103 | |||||||
Bonds |
25,386 | 25,742 | |||||||
Money market |
12,488 | 12,173 | |||||||
Total |
$ |
102,228 |
$ |
103,948 | |||||
Percent of total variable annuity |
|||||||||
separate account values |
99% | 99% |
Secondary Guarantee Products
Future contract benefits and other contract holder funds include reserves for our secondary guarantee products sold through our Life Insurance segment. These UL and VUL products with secondary guarantees represented 36% of total life insurance in-force reserves as of December 31, 2015, and 33% of total sales for the year ended December 31, 2015.
48
13. Short-Term and Long-Term Debt
Details underlying short-term and long-term debt (in millions) were as follows:
As of December 31, |
||||||
2015 |
2014 |
|||||
Short-Term Debt |
||||||
Short-term debt (1) |
$ |
90 |
$ |
2 | ||
Long-Term Debt, Excluding Current Portion |
||||||
1.40% note, due 2016 |
$ |
- |
$ |
4 | ||
LIBOR + 3 bps loan, due 2017 |
250 | 250 | ||||
Surplus notes due LNC: |
||||||
LIBOR + 142 bps surplus note, due 2023 |
240 | 240 | ||||
9.76% surplus note, due 2024 |
50 | 50 | ||||
6.56% surplus note, due 2028 |
500 | 500 | ||||
LIBOR + 111 bps surplus note, due 2028 |
71 | 71 | ||||
LIBOR + 226 bps surplus note, due 2028 |
479 | 422 | ||||
6.03% surplus note, due 2028 |
750 | 750 | ||||
LIBOR + 200 bps surplus note, due 2035 |
30 |
- |
||||
LIBOR + 100 bps surplus note, due 2037 |
375 | 375 | ||||
Total surplus notes |
2,495 | 2,408 | ||||
Total long-term debt |
$ |
2,745 |
$ |
2,662 | ||
(1) The short-term debt represents short-term notes payable to LNC.
Future principal payments due on long-term debt (in millions) as of December 31, 2015, were as follows:
2016 |
$ |
- |
|
2017 |
250 | ||
2018 |
- |
||
2019 |
- |
||
2020 |
- |
||
Thereafter |
2,495 | ||
Total |
$ |
2,745 |
On September 10, 2013, we issued a note of $4 million to LNC. This note calls for us to pay the principal amount of the note on or before September 10, 2016, and interest to be paid semiannually at an annual rate of 1.40%. This note was settled as part of the disposition of LFM in 2015. See Note 3 for additional information.
We have a $250 million floating-rate loan outstanding under our borrowing capacity with the FHLBI due June 20, 2017.
On June 28, 2013, we issued a surplus note of $240 million to LNC. The note calls for us to pay the principal amount of the note on or before June 28, 2023, and interest to be paid quarterly at an annual rate of the London Interbank Offered Rate “LIBOR” + 142 bps. Subject to approval by the Indiana Insurance Commissioner (the “Commissioner”), we have the right to repay the note in whole or in part prior to the maturity date, if our statutory capital surplus exceeds the sum of our surplus at closing plus any accrued but unpaid interest.
We issued a surplus note of $50 million to LNC in 1994. The note calls for us to pay the principal amount of the note on or before September 30, 2024, and interest to be paid semiannually at an annual rate of 9.76%. Subject to approval by the Commissioner, we have the right to repay the note on any March 31 or September 30.
We issued a surplus note of $500 million to LNC in 1998. The note calls for us to pay the principal amount of the note on or before March 31, 2028, and interest to be paid quarterly at an annual rate of 6.56%. Subject to approval by the Commissioner, LNC has the right to redeem the note for immediate repayment in total or in part once per year on the anniversary date of the note. Any payment of interest or repayment of principal may be paid only out of our statutory earnings, only if our statutory capital surplus exceeds our statutory capital as of the date of note issuance of $2.3 billion, and subject to approval by the Commissioner.
On October 1, 2013, we issued a surplus note of $71 million to LNC. The note calls for us to pay the principal amount of the note on or before September 24, 2028, and interest to be paid quarterly at an annual rate of LIBOR + 111 bps. Subject to approval by the
49
Commissioner, we have the right to repay the note in whole or in part prior to the maturity date, if our statutory capital surplus exceeds the sum of our surplus at closing plus any accrued but unpaid interest.
On December 17, 2013, we issued a variable surplus note to a wholly-owned subsidiary of LNC with an initial outstanding principal amount of $287 million. The outstanding principal amount as of December 31, 2015, was $479 million. The note calls for us to pay the principal amount of the note on or before October 1, 2028, and interest to be paid quarterly at an annual rate of LIBOR + 226 bps.
We issued a surplus note of $750 million to LNC in 1998. The note calls for us to pay the principal amount of the note on or before December 31, 2028, and interest to be paid quarterly at an annual rate of 6.03%. Subject to approval by the Commissioner, LNC has the right to redeem the note for immediate repayment in total or in part once per year on the anniversary date of the note. Any payment of interest or repayment of principal may be paid only out of our statutory earnings, only if our statutory capital surplus exceeds our statutory capital surplus as of the date of note issuance of $2.4 billion, and subject to approval by the Commissioner.
On October 1, 2015, we issued a surplus note of $30 million to LNC. The note calls for us to pay the principal amount of the note on or before September 28, 2035, and interest to be paid quarterly at an annual rate of LIBOR + 200 bps. Subject to approval by the Commissioner, we have the right to repay the note in whole or in part prior to the maturity date, if our statutory capital surplus exceeds the sum of our surplus at closing plus any accrued but unpaid interest.
On October 9, 2007, we issued a surplus note of $375 million that LNC has held effective December 31, 2008. The note calls for us to pay the principal amount of the note on or before October 9, 2037, and interest to be paid quarterly at an annual rate of LIBOR + 100 bps.
14. Contingencies and Commitments
Contingencies
Regulatory and Litigation Matters
Regulatory bodies, such as state insurance departments, the SEC, Financial Industry Regulatory Authority and other regulatory bodies regularly make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, laws governing the activities of broker-dealers, registered investment advisors and unclaimed property laws.
LNL and its subsidiaries are involved in various pending or threatened legal or regulatory proceedings, including purported class actions, arising from the conduct of business both in the ordinary course and otherwise. In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experiences of LNL in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.
Due to the unpredictable nature of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time is normally difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.
We establish liabilities for litigation and regulatory loss contingencies when information related to the loss contingencies shows both that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some matters could require us to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of December 31, 2015. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely to have a material adverse effect on LNL’s financial condition.
For some matters, the Company is able to estimate a reasonably possible range of loss. For such matters in which a loss is probable, an accrual has been made. For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. Accordingly, the estimate contained in this paragraph reflects two types of matters. For some matters included within this estimate, an accrual has been made, but there is a reasonable possibility that an exposure exists in excess of the amount accrued. In these cases, the estimate reflects the reasonably possible range of loss in excess of the accrued amount. For other matters included within this estimation, no accrual has been made because a loss, while potentially estimable, is believed to be reasonably possible but not probable. In these cases, the estimate reflects the reasonably possible loss or range of loss. As of December 31, 2015, we estimate the aggregate range of reasonably possible losses, including amounts in excess of amounts accrued for these matters as of such date, to be up to approximately $175 million.
50
For other matters, we are not currently able to estimate the reasonably possible loss or range of loss. We are often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts and the progress of settlement negotiations. On a quarterly and annual basis, we review relevant information with respect to litigation contingencies and update our accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.
On June 13, 2009, a single named plaintiff filed a putative national class action in the Circuit Court of Allen County (“Court”), Indiana, captioned Peter S. Bezich v. The Lincoln National Life Insurance Company, No. 02C01-0906-PL73, asserting he was charged a cost of insurance fee that exceeded the applicable mortality charge, and that this fee breached the terms of the insurance contract. Solely to avoid the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, we reached a settlement with the plaintiff resolving all claims related to this litigation. On September 9, 2015, the litigation was stayed pending court approval of the settlement for the entire class. The Court approved the settlement on February 4, 2016.
On July 23, 2012, LNL was added as a noteholder defendant to a putative class action adversary proceeding captioned Lehman Brothers Special Financing, Inc. v. Bank of America, N.A. et al., Adv. Pro. No. 10-03547 (JMP) and instituted under In re Lehman Brothers Holdings Inc. in the United States Bankruptcy Court in the Southern District of New York. Plaintiff Lehman Brothers Special Financing Inc. seeks to (i) overturn the application of certain priority of payment provisions in 47 CDO transactions on the basis such provisions are unenforceable under the Bankruptcy Code; and (ii) recover funds paid out to noteholders in accordance with the note agreements. We are vigorously defending this matter.
Commitments
Operating Leases
We lease our home office properties. In 2006, we exercised the right and option to extend the Fort Wayne lease for two extended terms such that the lease shall expire in 2019. We retain our right and option to exercise the remaining four extended terms of five years each in accordance with the lease agreement. These agreements also provide us with the right of first refusal to purchase the properties at a price defined in the agreements and the option to purchase the leased properties at fair market value on the last day of any renewal period. In 2012, we exercised the right and option to extend the Hartford lease for one extended term such that the lease shall expire in 2018.
Total rental expense on operating leases for the years ended December 31, 2015, 2014 and 2013, was $35 million, $38 million and $37 million, respectively. Future minimum rental commitments (in millions) as of December 31, 2015, were as follows:
2016 |
$ |
32 | |
2017 |
29 | ||
2018 |
23 | ||
2019 |
15 | ||
2020 |
8 | ||
Thereafter |
28 | ||
Total |
$ |
135 |
Capital Leases
In December 2015, we entered into a five-year, sale-leaseback transaction on $47 million (net of amortization) of assets. In December 2014, we entered into a five-year, sale-leaseback transaction on $83 million (net of amortization) of assets. Both of these transactions have been classified as capital leases on our Consolidated Balance Sheets. These assets will continue to be amortized on a straight-line basis over the assets’ remaining lives. Total accumulated amortization related to these leased assets was $64 million and $55 million as of December 31, 2015 and 2014, respectively. Future minimum lease payments under capital leases (in millions) as of December 31, 2015, were as follows:
2016 |
$ |
2 | |
2017 |
2 | ||
2018 |
2 | ||
2019 |
85 | ||
2020 |
48 | ||
Total minimum lease payments |
139 | ||
Less: Amount representing interest |
9 | ||
Present value of minimum lease payments |
$ |
130 |
51
Vulnerability from Concentrations
As of December 31, 2015, we did not have a concentration of: business transactions with a particular customer or lender; sources of supply of labor or services used in the business; or a market or geographic area in which business is conducted that makes us vulnerable to an event that is at least reasonably possible to occur in the near term and which could cause a severe impact to our financial condition.
Although we do not have any significant concentration of customers, our American Legacy Variable Annuity (“ALVA”) product offered in our Annuities segment is significant to this segment. The ALVA product accounted for 18%, 20% and 17% of Annuities’ variable annuity product deposits in 2015, 2014 and 2013, respectively, and represented approximately 42%, 44% and 47% of the segment’s total variable annuity product account values as of December 31, 2015, 2014 and 2013, respectively. In addition, fund choices for certain of our other variable annuity products offered in our Annuities segment include American Fund Insurance SeriesSM (“AFIS”) funds. For the Annuities segment, AFIS funds accounted for 20%, 22% and 19% of variable annuity product deposits in 2015, 2014 and 2013, respectively, and represented 48%, 50% and 54% of the segment’s total variable annuity product account values as of December 31, 2015, 2014 and 2013, respectively.
Other Contingency Matters
State guaranty funds assess insurance companies to cover losses to contract holders of insolvent or rehabilitated companies. Mandatory assessments may be partially recovered through a reduction in future premium taxes in some states. We have accrued for expected assessments and the related reductions in future state premium taxes, which net to assessments (recoveries) of $(17) million as of December 31, 2015 and 2014, respectively.
52
15. Shares and Stockholder’s Equity
All authorized and issued shares of LNL are owned by LNC.
AOCI
The following summarizes the components and changes in AOCI (in millions):
For the Years Ended December 31, |
||||||||||
2015 |
2014 |
2013 |
||||||||
Unrealized Gain (Loss) on AFS Securities |
||||||||||
Balance as of beginning-of-year |
$ |
3,054 |
$ |
1,453 |
$ |
3,832 | ||||
Unrealized holding gains (losses) arising during the year |
(4,386 |
) |
3,745 | (5,607 |
) |
|||||
Change in foreign currency exchange rate adjustment |
(45 |
) |
(47 |
) |
20 | |||||
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds |
1,293 | (1,252 |
) |
1,835 | ||||||
Income tax benefit (expense) |
1,095 | (857 |
) |
1,314 | ||||||
Less: |
||||||||||
Reclassification adjustment for gains (losses) included in net income (loss) |
147 | 14 | (63 |
) |
||||||
Associated amortization of DAC, VOBA, DSI and DFEL |
(28 |
) |
(32 |
) |
(28 |
) |
||||
Income tax benefit (expense) |
(42 |
) |
6 | 32 | ||||||
Balance as of end-of-year |
$ |
934 |
$ |
3,054 |
$ |
1,453 | ||||
Unrealized OTTI on AFS Securities |
||||||||||
Balance as of beginning-of-year |
$ |
19 |
$ |
(10 |
) |
$ |
(61 |
) |
||
(Increases) attributable to: |
||||||||||
Gross OTTI recognized in OCI during the year |
(29 |
) |
(11 |
) |
(11 |
) |
||||
Change in DAC, VOBA, DSI and DFEL |
4 | 1 | 1 | |||||||
Income tax benefit (expense) |
8 | 3 | 4 | |||||||
Decreases attributable to: |
||||||||||
Changes in fair value, sales, maturities or other settlements of AFS securities |
43 | 61 | 96 | |||||||
Change in DAC, VOBA, DSI and DFEL |
(17 |
) |
(6 |
) |
(8 |
) |
||||
Income tax benefit (expense) |
(9 |
) |
(19 |
) |
(31 |
) |
||||
Balance as of end-of-year |
$ |
19 |
$ |
19 |
$ |
(10 |
) |
|||
Unrealized Gain (Loss) on Derivative Instruments |
||||||||||
Balance as of beginning-of-year |
$ |
127 |
$ |
5 |
$ |
101 | ||||
Unrealized holding gains (losses) arising during the year |
(185 |
) |
114 | (150 |
) |
|||||
Change in foreign currency exchange rate adjustment |
48 | 50 | (19 |
) |
||||||
Change in DAC, VOBA, DSI and DFEL |
3 | 2 | 5 | |||||||
Income tax benefit (expense) |
46 | (58 |
) |
57 | ||||||
Less: |
||||||||||
Reclassification adjustment for gains (losses) included in net income (loss) |
(184 |
) |
(22 |
) |
(18 |
) |
||||
Associated amortization of DAC, VOBA, DSI and DFEL |
2 | 1 | 1 | |||||||
Income tax benefit (expense) |
64 | 7 | 6 | |||||||
Balance as of end-of-year |
$ |
157 |
$ |
127 |
$ |
5 | ||||
Funded Status of Employee Benefit Plans |
||||||||||
Balance as of beginning-of-year |
$ |
(21 |
) |
$ |
(18 |
) |
$ |
(12 |
) |
|
Adjustment arising during the year |
3 | (5 |
) |
(9 |
) |
|||||
Income tax benefit (expense) |
(1 |
) |
2 | 3 | ||||||
Balance as of end-of-year |
$ |
(19 |
) |
$ |
(21 |
) |
$ |
(18 |
) |
53
The following summarizes the reclassifications out of AOCI (in millions) and the associated line item in the Consolidated Statements of Comprehensive Income (Loss):
For the Years Ended December 31, |
||||||||||||
2015 |
2014 |
2013 |
||||||||||
Unrealized Gain (Loss) on AFS Securities |
||||||||||||
Gross reclassification |
$ |
147 |
$ |
14 |
$ |
(63 |
) |
Total realized gain (loss) |
||||
Associated amortization of DAC, |
||||||||||||
VOBA, DSI and DFEL |
(28 |
) |
(32 |
) |
(28 |
) |
Total realized gain (loss) |
|||||
Reclassification before income |
Income (loss) from continuing |
|||||||||||
tax benefit (expense) |
119 | (18 |
) |
(91 |
) |
operations before taxes |
||||||
Income tax benefit (expense) |
(42 |
) |
6 | 32 |
Federal income tax expense (benefit) |
|||||||
Reclassification, net of income tax |
$ |
77 |
$ |
(12 |
) |
$ |
(59 |
) |
Net income (loss) |
|||
Unrealized OTTI on AFS Securities |
||||||||||||
Gross reclassification |
$ |
2 |
$ |
61 |
$ |
96 |
Total realized gain (loss) |
|||||
Change in DAC, VOBA, DSI and DFEL |
- |
(6 |
) |
(8 |
) |
Total realized gain (loss) |
||||||
Reclassification before income |
Income (loss) from continuing |
|||||||||||
tax benefit (expense) |
2 | 55 | 88 |
operations before taxes |
||||||||
Income tax benefit (expense) |
- |
(19 |
) |
(31 |
) |
Federal income tax expense (benefit) |
||||||
Reclassification, net of income tax |
$ |
2 |
$ |
36 |
$ |
57 |
Net income (loss) |
|||||
Unrealized Gain (Loss) on Derivative Instruments |
||||||||||||
Gross reclassifications: |
||||||||||||
Interest rate contracts |
$ |
(190 |
) |
$ |
(22 |
) |
$ |
(21 |
) |
Net investment income |
||
Foreign currency contracts |
6 |
- |
3 |
Net investment income |
||||||||
Total gross reclassifications |
(184 |
) |
(22 |
) |
(18 |
) |
||||||
Associated amortization of DAC, |
||||||||||||
VOBA, DSI and DFEL |
2 | 1 | 1 |
Commissions and other expenses |
||||||||
Reclassifications before income |
Income (loss) from continuing |
|||||||||||
tax benefit (expense) |
(182 |
) |
(21 |
) |
(17 |
) |
operations before taxes |
|||||
Income tax benefit (expense) |
64 | 7 | 6 |
Federal income tax expense (benefit) |
||||||||
Reclassification, net of income tax |
$ |
(118 |
) |
$ |
(14 |
) |
$ |
(11 |
) |
Net income (loss) |
54
16. Realized Gain (Loss)
Details underlying realized gain (loss) (in millions) reported on our Consolidated Statements of Comprehensive Income (Loss) were as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Total realized gain (loss) related to certain investments (1) |
$ |
(83 |
) |
$ |
(13 |
) |
$ |
(84 |
) |
Realized gain (loss) on the mark-to-market on certain instruments (2) |
123 | (250 |
) |
308 | |||||
Indexed annuity and IUL contracts net derivatives results: (3) |
|||||||||
Gross gain (loss) |
(78 |
) |
(35 |
) |
(39 |
) |
|||
Associated amortization of DAC, VOBA, DSI and DFEL |
14 | 6 | 9 | ||||||
Variable annuity net derivatives results: (4) |
|||||||||
Gross gain (loss) |
(161 |
) |
(150 |
) |
(104 |
) |
|||
Associated amortization of DAC, VOBA, DSI and DFEL |
(34 |
) |
(36 |
) |
(33 |
) |
|||
Realized gain (loss) on sale of subsidiaries/businesses (5) |
(3 |
) |
(46 |
) |
- |
||||
Total realized gain (loss) |
$ |
(222 |
) |
$ |
(524 |
) |
$ |
57 |
(1) |
See “Realized Gain (Loss) Related to Certain Investments” section in Note 6. |
(2) |
Represents changes in the fair values of certain derivative investments (not including those associated with our variable and indexed annuity and IUL contracts net derivatives results), reinsurance related embedded derivatives and trading securities. |
(3) |
Represents the net difference between the change in the fair value of the S&P 500 call options that we hold and the change in the fair value of the embedded derivative liabilities of our indexed annuity and IUL contracts along with changes in the fair value of embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products. |
(4) |
Includes the net difference in the change in embedded derivative reserves of our GLB riders and the change in the fair value of the derivative instruments we own to hedge the change in embedded derivative reserves on our GLB riders and the benefit ratio unlocking on our GDB riders, including the cost of purchasing the hedging instruments. |
(5) |
See “LFM” in Note 3. |
17. Commissions and Other Expenses
Details underlying commissions and other expenses (in millions) were as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Commissions |
$ |
2,082 |
$ |
2,100 |
$ |
1,980 | |||
General and administrative expenses |
1,683 | 1,582 | 1,569 | ||||||
Expenses associated with reserve financing and unrelated LOCs |
32 | 31 | 40 | ||||||
DAC and VOBA deferrals and interest, net of amortization |
(292 |
) |
(454 |
) |
(656 |
) |
|||
Broker-dealer expenses |
329 | 302 | 288 | ||||||
Specifically identifiable intangible asset amortization |
4 | 4 | 4 | ||||||
Media expenses |
28 | 60 | 62 | ||||||
Taxes, licenses and fees |
243 | 251 | 239 | ||||||
Total |
$ |
4,109 |
$ |
3,876 |
$ |
3,526 |
18. Retirement and Deferred Compensation Plans
Defined Benefit Pension and Other Postretirement Benefit Plans
We maintain defined benefit pension plans in which many of our agents are participants. These defined benefit pension plans are closed to new entrants and existing participants do not accrue any additional benefits. We comply with applicable minimum funding requirements and do not expect to be required to make any contributions to these pension plans in 2016. We sponsor other postretirement benefit plans that provide health care and life insurance to certain retired agents. Total net periodic cost (recovery) for these plans was $3 million, $3 million, and $(3) million during 2015, 2014, and 2013, respectively. In 2016, we expect to make benefit payments of approximately $13 million for these plans.
55
Information (in millions) with respect to these plans was as follows:
As of or For the Years Ended December 31, |
|||||||||||||
2015 |
2014 |
2015 |
2014 |
||||||||||
Other Postretirement |
|||||||||||||
Pension Plans |
Benefit Plans |
||||||||||||
Fair value of plan assets |
$ |
124 |
$ |
133 |
$ |
7 |
$ |
6 | |||||
Projected benefit obligation |
117 | 127 | 15 | 16 | |||||||||
Funded status of plan |
$ |
7 |
$ |
6 |
$ |
(8 |
) |
$ |
(10 |
) |
|||
Amounts Recognized on the |
|||||||||||||
Consolidated Balance Sheets |
|||||||||||||
Other assets |
$ |
9 |
$ |
9 |
$ |
- |
$ |
- |
|||||
Other liabilities |
(2 |
) |
(3 |
) |
(8 |
) |
(10 |
) |
|||||
Net amount recognized |
$ |
7 |
$ |
6 |
$ |
(8 |
) |
$ |
(10 |
) |
|||
Weighted-Average Assumptions |
|||||||||||||
Benefit obligations: |
|||||||||||||
Weighted-average discount rate |
4.50% | 4.00% | 4.50% | 4.00% | |||||||||
Net periodic benefit cost: |
|||||||||||||
Weighted-average discount rate |
4.00% | 4.50% | 4.00% | 4.50% | |||||||||
Expected return on plan assets |
5.00% | 5.00% | 6.50% | 6.50% | |||||||||
The discount rate was determined based on a corporate yield curve as of December 31, 2015, and projected benefit obligation cash flows. The expected return on plan assets was determined based on historical and expected future returns of the various asset categories, using the plans’ target plan allocation. We reevaluate these assumptions each plan year.
In October 2014, the Society of Actuaries published updated mortality tables that were incorporated into our assumptions, resulting in an increase in our pension plans’ benefit obligation of $7 million, pre-tax.
The following summarizes our fair value measurements of our benefit plans’ assets (in millions) on a recurring basis by asset category
As of December 31, |
|||||||
2015 |
2014 |
||||||
Fixed maturity securities: |
|||||||
Corporate bonds |
$ |
25 |
$ |
30 | |||
U.S. government bonds |
94 | 99 | |||||
Cash and invested cash |
5 | 4 | |||||
Other investments |
7 | 6 | |||||
Total |
$ |
131 |
$ |
139 | |||
See “Fair Value Measurement” in Note 1 for discussion on how we categorize our pension plans’ assets into the three-level fair value hierarchy. See “Financial Instruments Carried at Fair Value” in Note 21 for a summary of our fair value measurement of our pension plans’ assets by the three-level fair value hierarchy.
Participation in Defined Benefit Pension and Other Postretirement Benefit Plans
We participate in defined benefit pension plans that are sponsored by LNC for many of our employees and non-employee directors. These defined benefit pension plans are closed to new entrants, and existing participants do not accrue any additional benefits. We also participate in other postretirement benefit plans sponsored by LNC that provide health care and life insurance to certain retired employees. For the years ended December 31, 2015, 2014 and 2013, expenses for these plans were $30 million, $1 million and $1 million, respectively.
Defined Contribution Plans
We sponsor tax-qualified defined contribution plans for eligible agents that are administered in accordance with the plan documents and various limitations under section 401(a) of the Internal Revenue Code of 1986. We also participate in defined contribution plans sponsored by LNC to eligible employees. For the years ended December 31, 2015, 2014 and 2013, expenses for these plans were $79 million, $75 million and $70 million, respectively.
56
Deferred Compensation Plans
We sponsor non-qualified, unfunded, deferred compensation plans for certain current and former agents. Certain current employees participate in non-qualified, unfunded, deferred compensation plans sponsored by LNC. The results of certain notional investment options within some of the plans are hedged by total return swaps. Our expenses increase or decrease in direct proportion to the change in market value of the participants’ investment options. Participants of certain plans are able to select LNC stock as an investment option; however, it is not hedged by the total return swaps and is a primary source of expense volatility related to these plans. For further discussion of total return swaps related to our deferred compensation plans, see Note 7. For the years ended December 31, 2015, 2014 and 2013, expenses for these plans were $12 million, $21 million and $27 million, respectively.
Information (in millions) with respect to these plans was as follows:
As of December 31, |
|||||||||
2015 |
2014 |
||||||||
Total liabilities (1) |
$ |
417 |
$ |
423 | |||||
Investments dedicated to fund liabilities (2) |
151 | 160 | |||||||
(1)Reported in other liabilities on our Consolidated Balance Sheets.
(2)Reported in other assets on our Consolidated Balance Sheets.
19. Stock-Based Incentive Compensation Plans
Our employees and agents are included in LNC’s various incentive plans that provide for the issuance of stock options, performance shares (performance-vested shares as opposed to time-vested shares), stock appreciation rights (“SARs”) and restricted stock units (“RSUs”). LNC issues new shares to satisfy option exercises.
Total compensation expense (in millions) for all of our stock-based incentive plans was as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Stock options |
$ |
7 |
$ |
9 |
$ |
8 | |||
Performance shares |
11 | 12 | 10 | ||||||
SARs |
- |
2 | 5 | ||||||
RSUs |
21 | 15 | 15 | ||||||
Total |
$ |
39 |
$ |
38 |
$ |
38 | |||
Recognized tax benefit |
$ |
14 |
$ |
13 |
$ |
13 |
57
20. Statutory Information and Restrictions
We prepare financial statements in accordance with statutory accounting principles (“SAP”) prescribed or permitted by the insurance departments of our states of domicile, which may vary materially from GAAP.
Prescribed SAP includes the Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners (“NAIC”) as well as state laws, regulations and administrative rules. Permitted SAP encompasses all accounting practices not so prescribed. The principal differences between statutory financial statements and financial statements prepared in accordance with GAAP are that statutory financial statements do not reflect DAC, some bond portfolios may be carried at amortized cost, assets and liabilities are presented net of reinsurance, contract holder liabilities are generally valued using more conservative assumptions and certain assets are non-admitted.
We are subject to the applicable laws and regulations of our states of domicile. Changes in these laws and regulations could change capital levels or capital requirements for the Company.
Statutory capital and surplus, net gain (loss) from operations, after-tax, net income (loss) and dividends to the LNC holding company amounts (in millions) below consist of all or a combination of the following entities: LNL, Lincoln Reinsurance Company of South Carolina, LLANY, Lincoln Reinsurance Company of Vermont I, Lincoln Reinsurance Company of Vermont II, Lincoln Reinsurance Company of Vermont III, Lincoln Reinsurance Company of Vermont IV, Lincoln Reinsurance Company of Vermont V and Lincoln Reinsurance Company of Vermont VI.
As of December 31, |
||||||
2015 |
2014 |
|||||
U.S. capital and surplus |
$ |
7,614 |
$ |
7,991 |
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
U.S. net gain (loss) from operations, after-tax |
$ |
583 |
$ |
1,170 |
$ |
425 | |||
U.S. net income (loss) |
786 | 1,401 | 495 | ||||||
U.S. dividends to LNC holding company |
1,121 | 705 | 640 |
Comparison of 2015 to 2014
Statutory net income (loss) decreased due primarily to the recapture in 2014 of certain traditional and interest sensitive business under several yearly renewable term reinsurance treaties that were originally ceded to a reinsurer, a change in estimate on reserves for certain products in 2014 and a decrease in favorable tax items.
Comparison of 2014 to 2013
Statutory net income (loss) increased due primarily to the recapture of certain traditional and interest sensitive business under several yearly renewable term reinsurance treaties that were originally ceded to a reinsurer, a change in estimate on reserves for certain products and a lower effective tax rate due to the use of tax credit carryforwards.
Our states of domicile, Indiana for LNL and New York for LLANY, have adopted certain prescribed accounting practices that differ from those found in NAIC SAP. These prescribed practices are the use of continuous Commissioners Annuity Reserve Valuation Method (“CARVM”) in the calculation of reserves as prescribed by the state of New York, the calculation of reserves on universal life policies based on the Indiana universal life method as prescribed by the state of Indiana for policies issued before January 1, 2006, and the use of a more conservative valuation interest rate on certain annuities prescribed by the states of Indiana and New York. The Vermont insurance subsidiaries also have an accounting practice permitted by the state of Vermont that differs from that found in NAIC SAP. Specifically, the permitted practice involves accounting for the lesser of the face amount of all amounts outstanding under a letter of credit (“LOC”) and the value of the Valuation of Life Insurance Policies Model Regulation (“XXX”) additional statutory reserves as an admitted asset and a form of surplus as of December 31, 2015 and 2014.
The favorable (unfavorable) effects on statutory surplus compared to NAIC statutory surplus from the use of these prescribed and permitted practices (in millions) were as follows:
As of December 31, |
||||||
2015 |
2014 |
|||||
Calculation of reserves using the Indiana universal life method |
$ |
109 |
$ |
140 | ||
Calculation of reserves using continuous CARVM |
(1 |
) |
(1 |
) |
||
Conservative valuation rate on certain annuities |
(43 |
) |
(39 |
) |
||
Lesser of LOC and XXX additional reserve as surplus |
2,835 | 2,751 |
58
During the third quarter of 2013, the New York State Department of Financial Services (“NYDFS”) announced that it would not recognize the NAIC revisions to Actuarial Guideline 38 in applying the New York law governing the reserves to be held for UL and VUL products containing secondary guarantees. The change, which was effective as of December 31, 2013, impacts our New York-domiciled insurance subsidiary, LLANY. LLANY discontinued the sale of these products in early 2013, but the change affects those policies sold prior to that time. We began phasing in the increase in reserves over five years beginning in 2013. As of December 31, 2014, we have increased reserves by $180 million. The additional increase in reserves over the next three years is subject to ongoing discussions with the NYDFS. However, we do not expect the amount for each of the remaining years to exceed $90 million per year.
The NAIC has adopted risk-based capital (“RBC”) requirements for life insurance companies to evaluate the adequacy of statutory capital and surplus in relation to investment and insurance risks. The requirements provide a means of measuring the minimum amount of statutory surplus appropriate for an insurance company to support its overall business operations based on its size and risk profile. Under RBC requirements, regulatory compliance is determined by the ratio of a company’s total adjusted capital, as defined by the NAIC, to its company action level of RBC (known as the “RBC ratio”), also as defined by the NAIC. The company action level may be triggered if the RBC ratio is between 75% and 100%, which would require the insurer to submit a plan to the regulator detailing corrective action it proposes to undertake. As of December 31, 2015, the Company’s RBC ratio was nearly five times the aforementioned company action level.
We are subject to certain insurance department regulatory restrictions as to the transfer of funds and payment of dividends to the holding company. Under Indiana laws and regulations, LNL may pay dividends to LNC without prior approval of the Commissioner, only from unassigned surplus and must receive prior approval of the Commissioner to pay a dividend if such dividend, along with all other dividends paid within the preceding 12 consecutive months, would exceed the statutory limitation. The current statutory limitation is the greater of 10% of the insurer’s contract holders’ surplus, as shown on its last annual statement on file with the Commissioner or the insurer’s statutory net gain from operations for the previous 12 months, but in no event to exceed statutory unassigned surplus. Indiana law gives the Commissioner broad discretion to disapprove requests for dividends in excess of these limits. LNL’s subsidiary, LLANY, a New York domiciled insurance company, has similar restrictions, except that in New York it is the lesser of 10% of surplus to contract holders as of the immediately preceding calendar year or net gain from operations for the immediately preceding calendar year, not including realized capital gains. We expect that we could pay dividends of approximately $850 million in 2016 without prior approval from the respective state commissioner.
All payments of principal and interest on surplus notes must be approved by the respective Commissioner of Insurance.
59
21. Fair Value of Financial Instruments
The carrying values and estimated fair values of our financial instruments (in millions) were as follows:
As of December 31, 2015 |
As of December 31, 2014 |
|||||||||||
Carrying |
Fair |
Carrying |
Fair |
|||||||||
Value |
Value |
Value |
Value |
|||||||||
Assets |
||||||||||||
AFS securities: |
||||||||||||
Fixed maturity securities |
$ |
84,072 |
$ |
84,072 |
$ |
85,421 |
$ |
85,421 | ||||
VIEs’ fixed maturity securities |
598 | 598 | 598 | 598 | ||||||||
Equity securities |
237 | 237 | 231 | 231 | ||||||||
Trading securities |
1,762 | 1,762 | 1,966 | 1,966 | ||||||||
Mortgage loans on real estate |
8,513 | 8,762 | 7,387 | 7,838 | ||||||||
Derivative investments (1) |
1,486 | 1,486 | 1,763 | 1,763 | ||||||||
Other investments |
1,588 | 1,588 | 1,551 | 1,551 | ||||||||
Cash and invested cash |
2,400 | 2,400 | 3,224 | 3,224 | ||||||||
Reinsurance related embedded derivatives |
95 | 95 |
- |
- |
||||||||
Other assets – reinsurance recoverable |
952 | 952 | 174 | 174 | ||||||||
Separate account assets |
123,619 | 123,619 | 125,265 | 125,265 | ||||||||
Liabilities |
||||||||||||
Future contract benefits – indexed annuity |
||||||||||||
and IUL contracts embedded derivatives |
(1,100 |
) |
(1,100 |
) |
(1,170 |
) |
(1,170 |
) |
||||
Other contract holder funds: |
||||||||||||
Remaining guaranteed interest and similar contracts |
(687 |
) |
(687 |
) |
(699 |
) |
(699 |
) |
||||
Account values of certain investment contracts |
(30,346 |
) |
(34,567 |
) |
(27,779 |
) |
(31,493 |
) |
||||
Short-term debt |
(90 |
) |
(90 |
) |
(2 |
) |
(2 |
) |
||||
Long-term debt |
(2,745 |
) |
(2,662 |
) |
(2,662 |
) |
(3,047 |
) |
||||
Reinsurance related embedded derivatives |
- |
- |
(109 |
) |
(109 |
) |
||||||
VIEs’ liabilities – derivative instruments |
(4 |
) |
(4 |
) |
(13 |
) |
(13 |
) |
||||
Other liabilities: |
||||||||||||
Credit default swaps |
(9 |
) |
(9 |
) |
(3 |
) |
(3 |
) |
||||
Derivative liabilities (1) |
(271 |
) |
(271 |
) |
(277 |
) |
(277 |
) |
||||
GLB reserves embedded derivatives (2) |
(952 |
) |
(952 |
) |
(174 |
) |
(174 |
) |
||||
Benefit Plans’ Assets (3) |
131 | 131 | 139 | 139 |
(1) |
We have master netting agreements with each of our derivative counterparties, which allow for the netting of our derivative asset and liability positions by counterparty. |
(2) |
Portions of our GLB reserves embedded derivatives are ceded to third-party reinsurance counterparties. Refer to Note 7 for additional detail. |
(3) |
Included in the funded statuses of the benefit plans, which is reported in other liabilities on our Consolidated Balance Sheets. Refer to Note 18 for information regarding our benefit plans. |
Valuation Methodologies and Associated Inputs for Financial Instruments Not Carried at Fair Value
The following discussion outlines the methodologies and assumptions used to determine the fair value of our financial instruments not carried at fair value on our Consolidated Balance Sheets. Considerable judgment is required to develop these assumptions used to measure fair value. Accordingly, the estimates shown are not necessarily indicative of the amounts that would be realized in a one-time, current market exchange of all of our financial instruments.
Mortgage Loans on Real Estate
The fair value of mortgage loans on real estate is established using a discounted cash flow method based on credit rating, maturity and future income. The ratings for mortgages in good standing are based on property type, location, market conditions, occupancy, debt-service coverage, loan-to-value, quality of tenancy, borrower and payment record. The fair value for impaired mortgage loans is based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price or the fair value of the collateral if the loan is collateral dependent. The inputs used to measure the fair value of our mortgage loans on real estate are classified as Level 2 within the fair value hierarchy.
60
Other Investments
The carrying value of our assets classified as other investments approximates fair value. Other investments includes primarily LPs and other privately held investments that are accounted for using the equity method of accounting and the carrying value is based on our proportional share of the net assets of the LPs. The inputs used to measure the fair value of our LPs and other privately held investments are classified as Level 3 within the fair value hierarchy. Other investments also includes securities that are not LPs or other privately held investments and the inputs used to measure the fair value of these securities are classified as Level 1 within the fair value hierarchy.
Other Contract Holder Funds
Other contract holder funds include remaining guaranteed interest and similar contracts and account values of certain investment contracts. The fair value for the remaining guaranteed interest and similar contracts is estimated using discounted cash flow calculations as of the balance sheet date. These calculations are based on interest rates currently offered on similar contracts with maturities that are consistent with those remaining for the contracts being valued. As of December 31, 2015 and 2014, the remaining guaranteed interest and similar contracts carrying value approximated fair value. The fair value of the account values of certain investment contracts is based on their approximate surrender value as of the balance sheet date. The inputs used to measure the fair value of our other contract holder funds are classified as Level 3 within the fair value hierarchy.
Short-Term and Long-Term Debt
The fair value of long-term debt is based on quoted market prices. For short-term debt, excluding current maturities of long-term debt, the carrying value approximates fair value. The inputs used to measure the fair value of our short-term and long-term debt are classified as Level 2 within the fair value hierarchy.
Financial Instruments Carried at Fair Value
We did not have any assets or liabilities measured at fair value on a nonrecurring basis as of December 31, 2015 or 2014, and we noted no changes in our valuation methodologies between these periods.
61
The following summarizes our financial instruments carried at fair value (in millions) on a recurring basis by the fair value hierarchy levels described above:
As of December 31, 2015 |
||||||||||||||||
Quoted |
||||||||||||||||
Prices |
||||||||||||||||
in Active |
||||||||||||||||
Markets for |
Significant |
Significant |
||||||||||||||
Identical |
Observable |
Unobservable |
Total |
|||||||||||||
Assets |
Inputs |
Inputs |
Fair |
|||||||||||||
(Level 1) |
(Level 2) |
(Level 3) |
Value |
|||||||||||||
Assets |
||||||||||||||||
Investments: |
||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||
Corporate bonds |
$ |
60 |
$ |
68,124 |
$ |
4,273 |
$ |
72,457 | ||||||||
ABS |
- |
1,013 | 45 | 1,058 | ||||||||||||
U.S. government bonds |
369 | 16 |
- |
385 | ||||||||||||
Foreign government bonds |
- |
407 | 111 | 518 | ||||||||||||
RMBS |
- |
3,553 | 1 | 3,554 | ||||||||||||
CMBS |
- |
349 | 10 | 359 | ||||||||||||
CLOs |
- |
37 | 551 | 588 | ||||||||||||
State and municipal bonds |
- |
4,366 |
- |
4,366 | ||||||||||||
Hybrid and redeemable preferred securities |
47 | 646 | 94 | 787 | ||||||||||||
VIEs’ fixed maturity securities |
- |
598 |
- |
598 | ||||||||||||
Equity AFS securities |
8 | 65 | 164 | 237 | ||||||||||||
Trading securities |
160 | 1,529 | 73 | 1,762 | ||||||||||||
Derivative investments (1) |
- |
1,190 | 853 | 2,043 | ||||||||||||
Cash and invested cash |
- |
2,400 |
- |
2,400 | ||||||||||||
Reinsurance related embedded derivatives |
- |
95 |
- |
95 | ||||||||||||
Other assets – reinsurance recoverable |
- |
- |
952 | 952 | ||||||||||||
Separate account assets |
1,053 | 122,566 |
- |
123,619 | ||||||||||||
Total assets |
$ |
1,697 |
$ |
206,954 |
$ |
7,127 |
$ |
215,778 | ||||||||
Liabilities |
||||||||||||||||
Future contract benefits – indexed annuity |
||||||||||||||||
and IUL contracts embedded derivatives |
$ |
- |
$ |
- |
$ |
(1,100 |
) |
$ |
(1,100 |
) |
||||||
VIEs’ liabilities – derivative instruments |
- |
- |
(4 |
) |
(4 |
) |
||||||||||
Other liabilities: |
||||||||||||||||
Credit default swaps |
- |
- |
(9 |
) |
(9 |
) |
||||||||||
Derivative liabilities (1) |
- |
(530 |
) |
(298 |
) |
(828 |
) |
|||||||||
GLB reserves embedded derivatives |
- |
- |
(952 |
) |
(952 |
) |
||||||||||
Total liabilities |
$ |
- |
$ |
(530 |
) |
$ |
(2,363 |
) |
$ |
(2,893 |
) |
|||||
Benefit Plans’ Assets |
$ |
- |
$ |
131 |
$ |
- |
$ |
131 |
62
As of December 31, 2014 |
||||||||||||||||
Quoted |
||||||||||||||||
Prices |
||||||||||||||||
in Active |
||||||||||||||||
Markets for |
Significant |
Significant |
||||||||||||||
Identical |
Observable |
Unobservable |
Total |
|||||||||||||
Assets |
Inputs |
Inputs |
Fair |
|||||||||||||
(Level 1) |
(Level 2) |
(Level 3) |
Value |
|||||||||||||
Assets |
||||||||||||||||
Investments: |
||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||
Corporate bonds |
$ |
63 |
$ |
68,940 |
$ |
4,052 |
$ |
73,055 | ||||||||
ABS |
- |
1,045 | 33 | 1,078 | ||||||||||||
U.S. government bonds |
354 | 36 |
- |
390 | ||||||||||||
Foreign government bonds |
- |
426 | 110 | 536 | ||||||||||||
RMBS |
- |
4,032 | 1 | 4,033 | ||||||||||||
CMBS |
- |
532 | 15 | 547 | ||||||||||||
CLOs |
- |
7 | 368 | 375 | ||||||||||||
State and municipal bonds |
- |
4,479 |
- |
4,479 | ||||||||||||
Hybrid and redeemable preferred securities |
44 | 829 | 55 | 928 | ||||||||||||
VIEs’ fixed maturity securities |
- |
598 |
- |
598 | ||||||||||||
Equity AFS securities |
7 | 67 | 157 | 231 | ||||||||||||
Trading securities |
- |
1,893 | 73 | 1,966 | ||||||||||||
Other investments |
150 |
- |
- |
150 | ||||||||||||
Derivative investments (1) |
- |
1,059 | 1,232 | 2,291 | ||||||||||||
Cash and invested cash |
- |
3,224 |
- |
3,224 | ||||||||||||
Other assets – reinsurance recoverable |
- |
- |
174 | 174 | ||||||||||||
Separate account assets |
1,539 | 123,726 |
- |
125,265 | ||||||||||||
Total assets |
$ |
2,157 |
$ |
210,893 |
$ |
6,270 |
$ |
219,320 | ||||||||
Liabilities |
||||||||||||||||
Future contract benefits – indexed annuity |
||||||||||||||||
and IUL contracts embedded derivatives |
$ |
- |
$ |
- |
$ |
(1,170 |
) |
$ |
(1,170 |
) |
||||||
Reinsurance related embedded derivatives |
- |
(109 |
) |
- |
(109 |
) |
||||||||||
VIEs’ liabilities – derivative instruments |
- |
- |
(13 |
) |
(13 |
) |
||||||||||
Other liabilities: |
||||||||||||||||
Credit default swaps |
- |
- |
(3 |
) |
(3 |
) |
||||||||||
Derivative liabilities (1) |
- |
(562 |
) |
(243 |
) |
(805 |
) |
|||||||||
GLB reserves embedded derivatives |
- |
- |
(174 |
) |
(174 |
) |
||||||||||
Total liabilities |
$ |
- |
$ |
(671 |
) |
$ |
(1,603 |
) |
$ |
(2,274 |
) |
|||||
Benefit Plans’ Assets |
$ |
- |
$ |
139 |
$ |
- |
$ |
139 |
(1) |
Derivative investment assets and liabilities presented within the fair value hierarchy are presented on a gross basis by derivative type and not on a master netting basis by counterparty. |
63
The following summarizes changes to our financial instruments carried at fair value (in millions) and classified within Level 3 of the fair value hierarchy. This summary excludes any effect of amortization of DAC, VOBA, DSI and DFEL. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.
For the Year Ended December 31, 2015 |
||||||||||||||||||
Purchases, |
||||||||||||||||||
Gains |
Issuances, |
Transfers |
||||||||||||||||
Items |
(Losses) |
Sales, |
Into or |
|||||||||||||||
Included |
in |
Maturities, |
Out |
|||||||||||||||
Beginning |
in |
OCI |
Settlements, |
of |
Ending |
|||||||||||||
Fair |
Net |
and |
Calls, |
Level 3, |
Fair |
|||||||||||||
Value |
Income |
Other (1) |
Net |
Net (2) |
Value |
|||||||||||||
Investments: (4) |
||||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||||
Corporate bonds |
$ |
4,052 |
$ |
4 |
$ |
(138 |
) |
$ |
298 |
$ |
57 |
$ |
4,273 | |||||
ABS |
33 |
- |
- |
12 |
- |
45 | ||||||||||||
Foreign government bonds |
110 |
- |
1 |
- |
- |
111 | ||||||||||||
RMBS |
1 | 3 |
- |
(3 |
) |
- |
1 | |||||||||||
CMBS |
15 | 1 | 8 | (14 |
) |
- |
10 | |||||||||||
CLOs |
368 |
- |
1 | 194 | (12 |
) |
551 | |||||||||||
Hybrid and redeemable |
||||||||||||||||||
preferred securities |
55 |
- |
(3 |
) |
- |
42 | 94 | |||||||||||
Equity AFS securities |
157 | 1 | 4 | 3 | (1 |
) |
164 | |||||||||||
Trading securities |
73 | 2 | (2 |
) |
- |
- |
73 | |||||||||||
Derivative investments |
989 | (90 |
) |
(41 |
) |
(303 |
) |
- |
555 | |||||||||
Other assets – reinsurance recoverable (5) |
174 | 778 |
- |
- |
- |
952 | ||||||||||||
Future contract benefits – indexed annuity |
||||||||||||||||||
and IUL contracts embedded |
||||||||||||||||||
derivatives (5) |
(1,170 |
) |
(57 |
) |
- |
127 |
- |
(1,100 |
) |
|||||||||
VIEs’ liabilities – derivative instruments (6) |
(13 |
) |
9 |
- |
- |
- |
(4 |
) |
||||||||||
Other liabilities: |
||||||||||||||||||
Credit default swaps (7) |
(3 |
) |
(6 |
) |
- |
- |
- |
(9 |
) |
|||||||||
GLB reserves embedded derivatives (5) |
(174 |
) |
(778 |
) |
- |
- |
- |
(952 |
) |
|||||||||
Total, net |
$ |
4,667 |
$ |
(133 |
) |
$ |
(170 |
) |
$ |
314 |
$ |
86 |
$ |
4,764 |
64
For the Year Ended December 31, 2014 |
||||||||||||||||||
Purchases, |
||||||||||||||||||
Gains |
Issuances, |
Transfers |
||||||||||||||||
Items |
(Losses) |
Sales, |
Into or |
|||||||||||||||
Included |
in |
Maturities, |
Out |
|||||||||||||||
Beginning |
in |
OCI |
Settlements, |
of |
Ending |
|||||||||||||
Fair |
Net |
and |
Calls, |
Level 3, |
Fair |
|||||||||||||
Value |
Income |
Other (1) |
Net |
Net (2)(3) |
Value |
|||||||||||||
Investments: (4) |
||||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||||
Corporate bonds |
$ |
2,951 |
$ |
8 |
$ |
28 |
$ |
1,039 |
$ |
26 |
$ |
4,052 | ||||||
ABS |
9 |
- |
- |
- |
24 | 33 | ||||||||||||
Foreign government bonds |
78 |
- |
7 |
- |
25 | 110 | ||||||||||||
RMBS |
1 |
- |
- |
- |
- |
1 | ||||||||||||
CMBS |
20 |
- |
2 | (13 |
) |
6 | 15 | |||||||||||
CLOs |
178 |
- |
6 | 134 | 50 | 368 | ||||||||||||
State and municipal bonds |
28 |
- |
- |
- |
(28 |
) |
- |
|||||||||||
Hybrid and redeemable |
||||||||||||||||||
preferred securities |
66 |
- |
- |
(5 |
) |
(6 |
) |
55 | ||||||||||
Equity AFS securities |
161 | 4 | (3 |
) |
(5 |
) |
- |
157 | ||||||||||
Trading securities |
53 | 3 | 7 | 10 |
- |
73 | ||||||||||||
Derivative investments |
866 | 72 | 357 | (280 |
) |
(26 |
) |
989 | ||||||||||
Other assets: |
||||||||||||||||||
GLB reserves embedded derivatives |
1,244 | (1,264 |
) |
- |
- |
20 |
- |
|||||||||||
Reinsurance recoverable |
- |
174 |
- |
- |
- |
174 | ||||||||||||
Future contract benefits – |
||||||||||||||||||
indexed annuity and IUL |
||||||||||||||||||
contracts embedded derivatives (5) |
(1,048 |
) |
(210 |
) |
- |
88 |
- |
(1,170 |
) |
|||||||||
VIEs’ liabilities – derivative instruments (6) |
(27 |
) |
14 |
- |
- |
- |
(13 |
) |
||||||||||
Other liabilities: |
||||||||||||||||||
Credit default swaps (7) |
(2 |
) |
(1 |
) |
- |
- |
- |
(3 |
) |
|||||||||
GLB reserves embedded derivatives (5) |
(1,244 |
) |
1,090 |
- |
- |
(20 |
) |
(174 |
) |
|||||||||
Total, net |
$ |
3,334 |
$ |
(110 |
) |
$ |
404 |
$ |
968 |
$ |
71 |
$ |
4,667 |
65
For the Year Ended December 31, 2013 |
||||||||||||||||||
Purchases, |
||||||||||||||||||
Gains |
Issuances, |
Transfers |
||||||||||||||||
Items |
(Losses) |
Sales, |
Into or |
|||||||||||||||
Included |
in |
Maturities, |
Out |
|||||||||||||||
Beginning |
in |
OCI |
Settlements, |
of |
Ending |
|||||||||||||
Fair |
Net |
and |
Calls, |
Level 3, |
Fair |
|||||||||||||
Value |
Income |
Other (1) |
Net |
Net (2) |
Value |
|||||||||||||
Investments: (4) |
||||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||||
Corporate bonds |
$ |
2,051 |
$ |
(17 |
) |
$ |
- |
$ |
996 |
$ |
(79 |
) |
$ |
2,951 | ||||
ABS |
14 |
- |
- |
30 | (35 |
) |
9 | |||||||||||
U.S. government bonds |
1 |
- |
- |
(1 |
) |
- |
- |
|||||||||||
Foreign government bonds |
46 |
- |
(1 |
) |
33 |
- |
78 | |||||||||||
RMBS |
3 |
- |
- |
(2 |
) |
- |
1 | |||||||||||
CMBS |
27 |
- |
6 | (5 |
) |
(8 |
) |
20 | ||||||||||
CLOs |
154 | (1 |
) |
4 | 50 | (29 |
) |
178 | ||||||||||
State and municipal bonds |
32 |
- |
(4 |
) |
- |
- |
28 | |||||||||||
Hybrid and redeemable |
||||||||||||||||||
preferred securities |
116 |
- |
13 | (33 |
) |
(30 |
) |
66 | ||||||||||
Equity AFS securities |
87 | (1 |
) |
2 | 73 |
- |
161 | |||||||||||
Trading securities |
56 | 2 | (7 |
) |
(6 |
) |
8 | 53 | ||||||||||
Derivative investments |
1,916 | (681 |
) |
(194 |
) |
(175 |
) |
- |
866 | |||||||||
Other assets – GLB embedded derivatives |
909 | (2,153 |
) |
- |
- |
2,488 | 1,244 | |||||||||||
Future contract benefits – indexed |
||||||||||||||||||
annuity and IUL contracts |
||||||||||||||||||
embedded derivatives (5) |
(732 |
) |
(356 |
) |
- |
40 |
- |
(1,048 |
) |
|||||||||
VIEs’ liabilities – derivative instruments (6) |
(128 |
) |
101 |
- |
- |
- |
(27 |
) |
||||||||||
Other liabilities – credit default swaps (7) |
(11 |
) |
9 |
- |
- |
- |
(2 |
) |
||||||||||
GLB reserves embedded derivatives |
(909 |
) |
2,153 |
- |
- |
(2,488 |
) |
(1,244 |
) |
|||||||||
Total, net |
$ |
3,632 |
$ |
(944 |
) |
$ |
(181 |
) |
$ |
1,000 |
$ |
(173 |
) |
$ |
3,334 |
(1) |
The changes in fair value of the interest rate swaps are offset by an adjustment to derivative investments (see Note 7). |
(2) |
Transfers into or out of Level 3 for AFS and trading securities are displayed at amortized cost as of the beginning-of-year. For AFS and trading securities, the difference between beginning-of-year amortized cost and beginning-of-year fair value was included in OCI and earnings, respectively, in prior years. |
(3) |
Transfers into or out of Level 3 for GLB reserves embedded derivatives between future contract benefits, other assets and other liabilities on our Consolidated Balance Sheets. |
(4) |
Amortization and accretion of premiums and discounts are included in net investment income on our Consolidated Statements of Comprehensive Income (Loss). Gains (losses) from sales, maturities, settlements and calls and OTTI are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). |
(5) |
Gains (losses) from sales, maturities, settlements and calls are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). |
(6) |
Gains (losses) from sales, maturities, settlements and calls are included in net investment income on our Consolidated Statements of Comprehensive Income (Loss). |
(7) |
The changes in fair value of the credit default swaps and contingency forwards are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). |
66
The following provides the components of the items included in issuances, sales, maturities, settlements and calls, net, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, (in millions) as reported above:
For the Year Ended December 31, 2015 |
||||||||||||||||||
Issuances |
Sales |
Maturities |
Settlements |
Calls |
Total |
|||||||||||||
Investments: |
||||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||||
Corporate bonds |
$ |
537 |
$ |
(38 |
) |
$ |
(44 |
) |
$ |
(117 |
) |
$ |
(40 |
) |
$ |
298 | ||
ABS |
13 |
- |
- |
(1 |
) |
- |
12 | |||||||||||
RMBS |
- |
(3 |
) |
- |
- |
- |
(3 |
) |
||||||||||
CMBS |
- |
- |
- |
(13 |
) |
(1 |
) |
(14 |
) |
|||||||||
CLOs |
217 |
- |
- |
(23 |
) |
- |
194 | |||||||||||
Equity AFS securities |
43 | (40 |
) |
- |
- |
- |
3 | |||||||||||
Trading securities |
1 |
- |
- |
(1 |
) |
- |
- |
|||||||||||
Derivative investments |
179 | (162 |
) |
(320 |
) |
- |
- |
(303 |
) |
|||||||||
Future contract benefits – indexed annuity |
||||||||||||||||||
and IUL contracts embedded derivatives |
(51 |
) |
- |
- |
178 |
- |
127 | |||||||||||
Total, net |
$ |
939 |
$ |
(243 |
) |
$ |
(364 |
) |
$ |
23 |
$ |
(41 |
) |
$ |
314 |
For the Year Ended December 31, 2014 |
||||||||||||||||||
Issuances |
Sales |
Maturities |
Settlements |
Calls |
Total |
|||||||||||||
Investments: |
||||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||||
Corporate bonds |
$ |
1,939 |
$ |
(576 |
) |
$ |
(115 |
) |
$ |
(47 |
) |
$ |
(162 |
) |
$ |
1,039 | ||
CMBS |
- |
- |
- |
(13 |
) |
- |
(13 |
) |
||||||||||
CLOs |
185 |
- |
- |
(46 |
) |
(5 |
) |
134 | ||||||||||
Hybrid and redeemable preferred |
||||||||||||||||||
securities |
- |
(5 |
) |
- |
- |
- |
(5 |
) |
||||||||||
Equity AFS securities |
- |
(5 |
) |
- |
- |
- |
(5 |
) |
||||||||||
Trading securities |
14 |
- |
- |
(4 |
) |
- |
10 | |||||||||||
Derivative investments |
160 | (87 |
) |
(353 |
) |
- |
- |
(280 |
) |
|||||||||
Future contract benefits – indexed annuity |
||||||||||||||||||
and IUL contracts embedded derivatives |
(69 |
) |
- |
- |
157 |
- |
88 | |||||||||||
Total, net |
$ |
2,229 |
$ |
(673 |
) |
$ |
(468 |
) |
$ |
47 |
$ |
(167 |
) |
$ |
968 | |||
For the Year Ended December 31, 2013 |
||||||||||||||||||
Issuances |
Sales |
Maturities |
Settlements |
Calls |
Total |
|||||||||||||
Investments: |
||||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||||
Corporate bonds |
$ |
1,205 |
$ |
(51 |
) |
$ |
(44 |
) |
$ |
(45 |
) |
$ |
(69 |
) |
$ |
996 | ||
ABS |
30 |
- |
- |
- |
- |
30 | ||||||||||||
U.S. government bonds |
- |
- |
- |
(1 |
) |
- |
(1 |
) |
||||||||||
Foreign government bonds |
50 |
- |
(17 |
) |
- |
- |
33 | |||||||||||
RMBS |
- |
- |
- |
(2 |
) |
- |
(2 |
) |
||||||||||
CMBS |
- |
- |
- |
(3 |
) |
(2 |
) |
(5 |
) |
|||||||||
CLOs |
74 |
- |
- |
(24 |
) |
- |
50 | |||||||||||
Hybrid and redeemable preferred |
||||||||||||||||||
securities |
- |
(33 |
) |
- |
- |
- |
(33 |
) |
||||||||||
Equity AFS securities |
78 | (5 |
) |
- |
- |
- |
73 | |||||||||||
Trading securities |
- |
(3 |
) |
(1 |
) |
(2 |
) |
- |
(6 |
) |
||||||||
Derivative investments |
152 | (23 |
) |
(304 |
) |
- |
- |
(175 |
) |
|||||||||
Future contract benefits – indexed annuity |
||||||||||||||||||
and IUL contracts embedded derivatives |
(68 |
) |
- |
- |
108 |
- |
40 | |||||||||||
Total, net |
$ |
1,521 |
$ |
(115 |
) |
$ |
(366 |
) |
$ |
31 |
$ |
(71 |
) |
$ |
1,000 |
67
The following summarizes changes in unrealized gains (losses) included in net income, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, related to financial instruments carried at fair value classified within Level 3 that we still held (in millions):
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Derivative investments (1) |
$ |
(102 |
) |
$ |
(15 |
) |
$ |
(753 |
) |
Embedded derivatives: (1) |
|||||||||
Indexed annuity and IUL contracts |
(84 |
) |
(37 |
) |
(44 |
) |
|||
Other assets – GLB reserves |
(244 |
) |
(678 |
) |
(2,444 |
) |
|||
Other liabilities – GLB reserves |
244 | 678 | 2,444 | ||||||
VIEs’ liabilities – derivative instruments (2) |
9 | 14 | 101 | ||||||
Credit default swaps (1) |
(6 |
) |
(1 |
) |
9 | ||||
Total, net |
$ |
(183 |
) |
$ |
(39 |
) |
$ |
(687 |
) |
(1) |
Included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). |
(2) |
Included in net investment income on our Consolidated Statements of Comprehensive Income (Loss). |
The following provides the components of the transfers into and out of Level 3 (in millions) as reported above:
For the Year Ended December 31, 2015 |
|||||||||
Transfers |
Transfers |
||||||||
Into |
Out of |
||||||||
Level 3 |
Level 3 |
Total |
|||||||
Investments: |
|||||||||
Fixed maturity AFS securities: |
|||||||||
Corporate bonds |
$ |
224 |
$ |
(167 |
) |
$ |
57 | ||
Foreign government bonds |
4 | (4 |
) |
- |
|||||
CLOs |
4 | (16 |
) |
(12 |
) |
||||
Hybrid and redeemable preferred |
|||||||||
securities |
47 | (5 |
) |
42 | |||||
Equity AFS securities |
- |
(1 |
) |
(1 |
) |
||||
Trading securities |
4 | (4 |
) |
- |
|||||
Total, net |
$ |
283 |
$ |
(197 |
) |
$ |
86 |
For the Year Ended December 31, 2014 |
|||||||||
Transfers |
Transfers |
||||||||
Into |
Out of |
||||||||
Level 3 |
Level 3 |
Total |
|||||||
Investments: |
|||||||||
Fixed maturity AFS securities: |
|||||||||
Corporate bonds |
$ |
473 |
$ |
(447 |
) |
$ |
26 | ||
ABS |
26 | (2 |
) |
24 | |||||
Foreign government bonds |
25 |
- |
25 | ||||||
CMBS |
6 |
- |
6 | ||||||
CLOs |
50 |
- |
50 | ||||||
State and municipal bonds |
- |
(28 |
) |
(28 |
) |
||||
Hybrid and redeemable preferred securities |
17 | (23 |
) |
(6 |
) |
||||
Trading securities |
10 | (10 |
) |
- |
|||||
Derivative investments |
- |
(26 |
) |
(26 |
) |
||||
Other assets – GLB reserves |
|||||||||
embedded derivatives |
20 |
- |
20 | ||||||
Other liabilities – GLB reserves embedded |
|||||||||
derivatives |
- |
(20 |
) |
(20 |
) |
||||
Total, net |
$ |
627 |
$ |
(556 |
) |
$ |
71 |
68
For the Year Ended December 31, 2013 |
|||||||||
Transfers |
Transfers |
||||||||
Into |
Out of |
||||||||
Level 3 |
Level 3 |
Total |
|||||||
Investments: |
|||||||||
Fixed maturity AFS securities: |
|||||||||
Corporate bonds |
$ |
367 |
$ |
(446 |
) |
$ |
(79 |
) |
|
ABS |
- |
(35 |
) |
(35 |
) |
||||
CMBS |
- |
(8 |
) |
(8 |
) |
||||
CLOs |
- |
(29 |
) |
(29 |
) |
||||
Hybrid and redeemable preferred securities |
20 | (50 |
) |
(30 |
) |
||||
Trading securities |
8 |
- |
8 | ||||||
Total, net |
$ |
395 |
$ |
(568 |
) |
$ |
(173 |
) |
Transfers into and out of Level 3 are generally the result of observable market information on a security no longer being available or becoming available to our pricing vendors. For the years ended December 31, 2015, 2014 and 2013 transfers in and out were attributable primarily to the securities’ observable market information no longer being available or becoming available. Transfers in and out for GLB reserves embedded derivatives represent reclassifications between future contract benefits and other assets or other liabilities. Transfers into and out of Levels 1 and 2 are generally the result of a change in the type of input used to measure the fair value of an asset or liability at the end of the reporting period. When quoted prices in active markets become available, transfers from Level 2 to Level 1 will result. When quoted prices in active markets become unavailable, but we are able to employ a valuation methodology using significant observable inputs, transfers from Level 1 to Level 2 will result. For the year ended December 31, 2015, the transfers from Level 2 to Level 1 of the fair value hierarchy were $172 million for our financial instruments carried at fair value which was attributable to quoted market prices becoming available. For the years ended December 31, 2014 and 2013 the transfers between Levels 1 and 2 of the fair value hierarchy were less than $1 million for our financial instruments carried at fair value.
69
The following summarizes the fair value (in millions), valuation techniques and significant unobservable inputs of the Level 3 fair value measurements as of December 31, 2015:
Fair |
Valuation |
Significant |
Assumption or |
|||||||||||||
Value |
Technique |
Unobservable Inputs |
Input Ranges |
|||||||||||||
Assets |
||||||||||||||||
Investments: |
||||||||||||||||
Fixed maturity AFS and trading |
||||||||||||||||
securities: |
||||||||||||||||
Corporate bonds |
$ |
1,296 |
Discounted cash flow |
Liquidity/duration adjustment (1) |
0.1 |
% |
- |
11.7 |
% |
|||||||
ABS |
25 |
Discounted cash flow |
Liquidity/duration adjustment (1) |
3.3 |
% |
- |
3.3 |
% |
||||||||
Foreign government bonds |
77 |
Discounted cash flow |
Liquidity/duration adjustment (1) |
1.9 |
% |
- |
4.4 |
% |
||||||||
Hybrid and redeemable |
||||||||||||||||
preferred securities |
20 |
Discounted cash flow |
Liquidity/duration adjustment (1) |
2.1 |
% |
- |
2.1 |
% |
||||||||
Equity AFS and trading securities |
27 |
Discounted cash flow |
Liquidity/duration adjustment (1) |
4.3 |
% |
- |
5.8 |
% |
||||||||
Other assets – reinsurance |
||||||||||||||||
recoverable |
952 |
Discounted cash flow |
Long-term lapse rate (2) |
1 |
% |
- |
30 |
% |
||||||||
Utilization of guaranteed withdrawals (3) |
90 |
% |
- |
100 |
% |
|||||||||||
Claims utilization factor (4) |
60 |
% |
- |
100 |
% |
|||||||||||
Premiums utilization factor (4) |
70 |
% |
- |
120 |
% |
|||||||||||
NPR (5) |
0.02 |
% |
- |
0.38 |
% |
|||||||||||
Mortality rate (6) |
(8) |
|||||||||||||||
Volatility (7) |
1 |
% |
- |
29 |
% |
|||||||||||
Liabilities |
||||||||||||||||
Future contract benefits – indexed |
||||||||||||||||
annuity and IUL contracts |
||||||||||||||||
embedded derivatives |
(1,100 |
) |
Discounted cash flow |
Lapse rate (2) |
1 |
% |
- |
15 |
% |
|||||||
Mortality rate (6) |
(8) |
|||||||||||||||
Other liabilities – GLB reserves |
||||||||||||||||
embedded derivatives |
(952 |
) |
Discounted cash flow |
Long-term lapse rate (2) |
1 |
% |
- |
30 |
% |
|||||||
Utilization of guaranteed withdrawals (3) |
90 |
% |
- |
100 |
% |
|||||||||||
Claims utilization factor (4) |
60 |
% |
- |
100 |
% |
|||||||||||
Premiums utilization factor (4) |
70 |
% |
- |
120 |
% |
|||||||||||
NPR (5) |
0.02 |
% |
- |
0.38 |
% |
|||||||||||
Mortality rate (6) |
(8) |
|||||||||||||||
Volatility (7) |
1 |
% |
- |
29 |
% |
(1) |
The liquidity/duration adjustment input represents an estimated market participant composite of adjustments attributable to liquidity premiums, expected durations, structures and credit quality that would be applied to the market observable information of an investment. |
(2) |
The lapse rate input represents the estimated probability of a contract surrendering during a year, and thereby forgoing any future benefits. The range for indexed annuity and IUL contracts represents the lapse rates during the surrender charge period. |
(3) |
The utilization of guaranteed withdrawals input represents the estimated percentage of contract holders that utilize the guaranteed withdrawal feature. |
(4) |
The utilization factors are applied to the present value of claims or premiums, as appropriate, in the GLB reserve calculation to estimate the impact of inefficient withdrawal behavior, including taking less than or more than the maximum guaranteed withdrawal. |
(5) |
The NPR input represents the estimated additional credit spread that market participants would apply to the market observable discount rate when pricing a contract. |
(6) |
The mortality rate input represents the estimated probability of when an individual belonging to a particular group, categorized according to age or some other factor such as gender, will die. |
(7) |
The volatility input represents overall volatilities assumed for the underlying variable annuity funds, which include a mixture of equity and fixed-income assets. Fair value of the variable annuity GLB embedded derivatives would increase if higher volatilities were used for valuation. |
(8) |
The mortality rate is based on a combination of company and industry experience, adjusted for improvement factors. |
From the table above, we have excluded Level 3 fair value measurements obtained from independent, third-party pricing sources. We do not develop the significant inputs used to measure the fair value of these assets and liabilities, and the information regarding the significant inputs is not readily available to us. Independent broker-quoted fair values are non-binding quotes developed by market makers or broker-dealers obtained from third-party sources recognized as market participants. The fair value of a broker-quoted asset or
70
liability is based solely on the receipt of an updated quote from a single market maker or a broker-dealer recognized as a market participant as we do not adjust broker quotes when used as the fair value measurement for an asset or liability. Significant increases or decreases in any of the quotes received from a third-party broker-dealer may result in a significantly higher or lower fair value measurement.
Changes in any of the significant inputs presented in the table above may result in a significant change in the fair value measurement of the asset or liability as follows:
· |
Investments – An increase in the liquidity/duration adjustment input would result in a decrease in the fair value measurement. |
· |
Indexed annuity and IUL contracts embedded derivatives – An increase in the lapse rate or mortality rate inputs would result in a decrease in the fair value measurement. |
· |
GLB reserves embedded derivatives – Assuming our GLB reserves embedded derivatives are in a liability position: an increase in our lapse rate, NPR or mortality rate inputs would result in a decrease in the fair value measurement; and an increase in the utilization of guarantee withdrawal or volatility inputs would result in an increase in the fair value measurement. |
For each category discussed above, the unobservable inputs are not inter-related; therefore, a directional change in one input will not affect the other inputs.
As part of our ongoing valuation process, we assess the reasonableness of our valuation techniques or models and make adjustments as necessary. For more information, see “Summary of Significant Accounting Policies” above.
22. Segment Information
We provide products and services and report results through our Annuities, Retirement Plan Services, Life Insurance and Group Protection segments. We also have Other Operations, which includes the financial data for operations that are not directly related to the business segments. Our reporting segments reflect the manner by which our chief operating decision makers view and manage the business. The following is a brief description of these segments and Other Operations.
The Annuities segment provides tax-deferred investment growth and lifetime income opportunities for its clients by offering fixed (including indexed) and variable annuities.
The Retirement Plan Services segment provides employer-sponsored defined benefit and individual retirement accounts, as well as individual and group variable annuities, group fixed annuities and mutual-fund based programs in the retirement plan marketplace.
The Life Insurance segment focuses in the creation and protection of wealth through life insurance products, including term insurance, a linked-benefit product (which is a UL policy linked with riders that provide for long-term care costs), IUL and both single and survivorship versions of UL and VUL, including corporate-owned UL and VUL insurance and bank-owned UL and VUL insurance products.
The Group Protection segment offers principally group non-medical insurance products, including term life, universal life, disability, dental, vision, accident and critical illness insurance to the employer market place through various forms of contributory and non-contributory plans. Its products are marketed primarily through a national distribution system of regional group offices. These offices develop business through employee benefit brokers, third-party administrators and other employee benefit firms.
Other Operations includes investments related to our excess capital; investments in media properties (see Note 3 for more information) and other corporate investments; benefit plan net liability; the unamortized deferred gain on indemnity reinsurance related to the sale of reinsurance; the results of certain disability income business; our run-off institutional pension business, the majority of which was sold on a group annuity basis; and debt costs.
Segment operating revenues and income (loss) from operations are internal measures used by our management and Board of Directors to evaluate and assess the results of our segments. Income (loss) from operations is GAAP net income excluding the after-tax effects of the following items, as applicable:
· |
Realized gains and losses associated with the following (“excluded realized gain (loss)”): |
§ |
Sales or disposals and impairments of securities; |
§ |
Changes in the fair value of derivatives, embedded derivatives within certain reinsurance arrangements and trading securities; |
§ |
Changes in the fair value of the derivatives we own to hedge our GDB riders within our variable annuities; |
§ |
Changes in the fair value of the embedded derivatives of our GLB riders reflected within variable annuity net derivative results accounted for at fair value; |
§ |
Changes in the fair value of the derivatives we own to hedge our GLB riders reflected within variable annuity net derivative results; and |
§ |
Changes in the fair value of the embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products accounted for at fair value; |
71
· |
Changes in reserves resulting from benefit ratio unlocking on our GDB and GLB riders; |
· |
Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance; |
· |
Gains (losses) on early extinguishment of debt; |
· |
Losses from the impairment of intangible assets; |
· |
Income (loss) from discontinued operations; and |
· |
Income (loss) from the initial adoption of new accounting standards. |
Operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:
· |
Excluded realized gain (loss); |
· |
Revenue adjustments from the initial adoption of new accounting standards; |
· |
Amortization of DFEL arising from changes in GDB and GLB benefit ratio unlocking; and |
· |
Amortization of deferred gains arising from reserve changes on business sold through reinsurance. |
We use our prevailing corporate federal income tax rate of 35% while taking into account any permanent differences for events recognized differently in our financial statements and federal income tax returns when reconciling our non-GAAP measures to the most comparable GAAP measure. Operating revenues and income (loss) from operations do not replace revenues and net income as the GAAP measures of our consolidated results of operations.
Segment information (in millions) was as follows:
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Revenues |
|||||||||
Operating revenues: |
|||||||||
Annuities |
$ |
3,815 |
$ |
3,450 |
$ |
3,044 | |||
Retirement Plan Services |
1,090 | 1,081 | 1,061 | ||||||
Life Insurance |
5,484 | 5,343 | 4,781 | ||||||
Group Protection |
2,356 | 2,445 | 2,260 | ||||||
Other Operations |
335 | 406 | 392 | ||||||
Excluded realized gain (loss), pre-tax |
(400 |
) |
(689 |
) |
(81 |
) |
|||
Amortization of deferred gain arising from reserve changes on business |
|||||||||
sold through reinsurance, pre-tax |
3 | 3 | 3 | ||||||
Total revenues |
$ |
12,683 |
$ |
12,039 |
$ |
11,460 |
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Net Income (Loss) |
|||||||||
Income (loss) from operations: |
|||||||||
Annuities |
$ |
1,032 |
$ |
901 |
$ |
715 | |||
Retirement Plan Services |
134 | 154 | 135 | ||||||
Life Insurance |
296 | 373 | 464 | ||||||
Group Protection |
42 | 23 | 71 | ||||||
Other Operations |
(73 |
) |
(13 |
) |
(5 |
) |
|||
Excluded realized gain (loss), after-tax |
(260 |
) |
(446 |
) |
(53 |
) |
|||
Income (loss) from reserve changes (net of related amortization) |
|||||||||
on business sold through reinsurance, after-tax |
2 | 2 | 2 | ||||||
Net income (loss) |
$ |
1,173 |
$ |
994 |
$ |
1,329 |
72
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Net Investment Income |
|||||||||
Annuities |
$ |
977 |
$ |
1,013 |
$ |
1,022 | |||
Retirement Plan Services |
842 | 828 | 825 | ||||||
Life Insurance |
2,390 | 2,376 | 2,317 | ||||||
Group Protection |
183 | 180 | 165 | ||||||
Other Operations |
219 | 251 | 232 | ||||||
Total net investment income |
$ |
4,611 |
$ |
4,648 |
$ |
4,561 |
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Amortization of DAC and VOBA, Net of Interest |
|||||||||
Annuities |
$ |
284 |
$ |
346 |
$ |
374 | |||
Retirement Plan Services |
29 | 37 | 48 | ||||||
Life Insurance |
806 | 640 | 441 | ||||||
Group Protection |
80 | 57 | 53 | ||||||
Total amortization of DAC and VOBA, net of interest |
$ |
1,199 |
$ |
1,080 |
$ |
916 |
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Federal Income Tax Expense (Benefit) |
|||||||||
Annuities |
$ |
281 |
$ |
225 |
$ |
159 | |||
Retirement Plan Services |
46 | 48 | 46 | ||||||
Life Insurance |
118 | 167 | 225 | ||||||
Group Protection |
23 | 12 | 38 | ||||||
Other Operations |
(33 |
) |
10 | (9 |
) |
||||
Excluded realized gain (loss) |
(141 |
) |
(243 |
) |
(29 |
) |
|||
Reserve changes (net of related amortization) |
|||||||||
on business sold through reinsurance |
1 | 1 | 1 | ||||||
Total federal income tax expense (benefit) |
$ |
295 |
$ |
220 |
$ |
431 |
As of December 31, |
||||||
2015 |
2014 |
|||||
Assets |
||||||
Annuities |
$ |
130,840 |
$ |
130,509 | ||
Retirement Plan Services |
32,651 | 33,686 | ||||
Life Insurance |
70,695 | 69,712 | ||||
Group Protection |
4,182 | 4,239 | ||||
Other Operations |
14,320 | 15,364 | ||||
Total assets |
$ |
252,688 |
$ |
253,510 |
73
23. Supplemental Disclosures of Cash Flow Data
The following summarizes our supplemental cash flow data (in millions):
For the Years Ended December 31, |
|||||||||
2015 |
2014 |
2013 |
|||||||
Interest paid |
$ |
106 |
$ |
104 |
$ |
91 | |||
Income taxes paid (received) |
125 | 172 | (6 |
) |
|||||
Significant non-cash investing and financing transactions: |
|||||||||
Disposal of note receivable from affiliate |
- |
(500 |
) |
- |
|||||
Acquisition of note receivable from affiliate |
54 | 712 |
- |
||||||
Other assets received in our financing transaction |
252 |
- |
- |
||||||
Exchange of surplus note for promissory note with affiliate: |
|||||||||
Carrying value of asset |
123 | 88 | 360 | ||||||
Carrying value of liability |
(123 |
) |
(88 |
) |
(360 |
) |
|||
Net asset (liability) from exchange |
$ |
- |
$ |
- |
$ |
- |
|||
Reinsurance ceded: |
|||||||||
Carrying value of assets |
$ |
- |
$ |
15 |
$ |
11 | |||
Carrying value of liabilities |
- |
15 | 11 | ||||||
Total reinsurance ceded |
$ |
- |
$ |
30 |
$ |
22 |
74
24. Transactions with Affiliates
The following summarizes transactions with affiliates (in millions) and the associated line item on our Consolidated Balance Sheets:
T
As of December 31, |
|||||||||||||||||||
2015 |
2014 |
||||||||||||||||||
Assets with affiliates: |
|||||||||||||||||||
Accrued inter-company interest receivable |
$ |
4 |
$ |
2 |
Accrued investment income |
||||||||||||||
Bonds |
1,534 | 1,410 |
Fixed maturity AFS securities |
||||||||||||||||
Ceded reinsurance contracts |
(226 |
) |
(239 |
) |
Deferred acquisition costs and value of |
||||||||||||||
business acquired |
|||||||||||||||||||
Ceded reinsurance contracts |
1,983 | 1,700 |
Reinsurance recoverables |
||||||||||||||||
Ceded reinsurance contracts |
184 | 44 |
Reinsurance related embedded derivatives |
||||||||||||||||
Ceded reinsurance contracts |
714 | 71 |
Other assets |
||||||||||||||||
Cash management agreement investment |
98 | 449 |
Other assets |
||||||||||||||||
Service agreement receivable |
42 | 48 |
Other assets |
||||||||||||||||
Ceded reinsurance contracts |
9 | 10 |
Other assets |
||||||||||||||||
Liabilities with affiliates: |
|||||||||||||||||||
Accrued inter-company interest payable |
2 | 4 |
Other liabilities |
||||||||||||||||
Assumed reinsurance contracts |
34 | 25 |
Future contract benefits |
||||||||||||||||
Assumed reinsurance contracts |
414 | 413 |
Other contract holder funds |
||||||||||||||||
Service agreement payable |
34 | 62 |
Other liabilities |
||||||||||||||||
Ceded reinsurance contracts |
(50 |
) |
(53 |
) |
Other contract holder funds |
||||||||||||||
Ceded reinsurance contracts |
3,841 | 3,677 |
Funds withheld reinsurance liabilities |
||||||||||||||||
Ceded reinsurance contracts |
|||||||||||||||||||
Ceded reinsurance contracts |
81 | 72 |
Other liabilities |
||||||||||||||||
Inter-company short-term debt |
90 | 2 |
Short-term debt |
||||||||||||||||
Inter-company long-term debt |
2,495 | 2,412 |
Long-term debt |
||||||||||||||||
The following summarizes transactions with affiliates (in millions) and the associated line item on our Consolidated Statements of Comprehensive Income (Loss):
For the Years Ended |
|||||||||||||||||||
December 31, |
|||||||||||||||||||
2015 |
2014 |
2013 |
|||||||||||||||||
Revenues with affiliates: |
|||||||||||||||||||
Premiums received on assumed reinsurance contracts |
$ |
(411 |
) |
$ |
(574 |
) |
$ |
(318 |
) |
Insurance premiums |
|||||||||
Net investment income on intercompany notes |
31 | 12 | 5 |
Net investment income |
|||||||||||||||
Fees for management of general account |
(109 |
) |
(105 |
) |
(103 |
) |
Net investment income |
||||||||||||
Net investment income on ceded funds withheld treaties |
(62 |
) |
- |
- |
Net investment income |
||||||||||||||
Realized gains (losses) on ceded reinsurance contracts: |
|||||||||||||||||||
GLB reserves embedded derivatives |
664 | 1,265 | (2,153 |
) |
Realized gain (loss) |
||||||||||||||
Reinsurance related settlements |
(881 |
) |
(1,573 |
) |
2,110 |
Realized gain (loss) |
|||||||||||||
Other gains (losses) |
157 | (199 |
) |
242 |
Realized gain (loss) |
||||||||||||||
Benefits and expenses with affiliates: |
|||||||||||||||||||
Reinsurance (recoveries) benefits on ceded reinsurance |
(478 |
) |
255 | (205 |
) |
Benefits |
|||||||||||||
Ceded reinsurance contracts |
(15 |
) |
- |
- |
Commissions and other |
||||||||||||||
expenses |
|||||||||||||||||||
Service agreement payments |
42 | 76 | 100 |
Commissions and other |
|||||||||||||||
expenses |
|||||||||||||||||||
Interest expense on inter-company debt |
102 | 102 | 92 |
Interest and debt expense |
|||||||||||||||
Interest credited on assumed reinsurance contracts |
59 | 15 |
- |
Interest credited |
|||||||||||||||
Bonds
LNC issues bonds to us for a predetermined face value to be repaid by LNC at a predetermined maturity with a specified interest rate.
75
Cash Management Agreement
In order to manage our capital more efficiently, we participate in an inter-company cash management program where LNC can lend to or borrow from us to meet short-term borrowing needs. The cash management program is essentially a series of demand loans, which are permitted under applicable insurance laws, among LNC and its affiliates that reduces overall borrowing costs by allowing LNC and its subsidiaries to access internal resources instead of incurring third-party transaction costs. The borrowing and lending limit is currently 3% of our admitted assets as of our most recent year end.
Service Agreement
In accordance with service agreements with LNC and other subsidiaries of LNC for personnel and facilities usage, general management services and investment management services, we receive services from and provide services to affiliated companies and receive an allocation of corporate overhead. Corporate overhead expenses are allocated based on specific methodologies for each function. The majority of the expenses are allocated based on the following methodologies: headcount, capital, investments by product, weighted policies in force, and sales.
Ceded Reinsurance Contracts
As discussed in Note 10, we cede insurance contracts to and assume insurance contracts from affiliated companies. We cede certain guaranteed benefit risks (including certain GDB and GWB benefits) to LNBAR. As discussed in Note 7, we cede the GLB reserves embedded derivatives and the related hedge results to LNBAR. As discussed in Note 4, we also cede the risks for no-lapse benefit guarantees under certain UL contracts to LNBAR.
Substantially all reinsurance ceded to affiliated companies is with unauthorized companies. To take reserve credit for such reinsurance, we hold assets from the reinsurer, including funds held under reinsurance treaties, and are the beneficiary of LOCs aggregating to $401 million and $186 million as of December 31, 2015 and 2014, respectively. The LOCs are obtained by the affiliate reinsurer and issued by banks in order for the Company to recognize the reserve credit.
25. Subsequent Events
Management evaluated subsequent events for the Company through March 31, 2016, the date the financial statements were available to be issued. On March 28, 2016, LNL paid a cash dividend in the amount of $200 million to LNC. Management identified no other items or events required for disclosure.
76
Lincoln National Variable Annuity Account L
L-1
Lincoln National Variable Annuity Account L
Statements of assets and liabilities
December 31, 2015
Subaccount |
Investments |
Contract Purchases Due From The Lincoln National Life Insurance Company |
Total Assets |
Contract Redemptions Due To The Lincoln National Life Insurance Company |
Mortality & Expense Guarantee Charges Payable To The Lincoln National Life Insurance Company |
Net Assets |
|||||||||||||||||||||
AB VPS Global Thematic Growth Portfolio Class B |
$ |
1,851,733 |
$ |
703 |
$ |
1,852,436 |
$ |
|
$ |
51 |
$ |
1,852,385 |
|||||||||||||||
AB VPS Growth Portfolio Class B |
1,660,896 |
707 |
1,661,603 |
|
45 |
1,661,558 |
|||||||||||||||||||||
American Century VP Balanced Fund Class I |
13,265,346 |
710 |
13,266,056 |
|
357 |
13,265,699 |
|||||||||||||||||||||
American Funds Global Growth Fund Class 2 |
5,696,425 |
2,758 |
5,699,183 |
|
153 |
5,699,030 |
|||||||||||||||||||||
American Funds Growth Fund Class 2 |
26,284,466 |
9,245 |
26,293,711 |
|
709 |
26,293,002 |
|||||||||||||||||||||
American Funds Growth-Income Fund Class 2 |
11,741,203 |
2,922 |
11,744,125 |
|
320 |
11,743,805 |
|||||||||||||||||||||
American Funds International Fund Class 2 |
9,132,099 |
1,557 |
9,133,656 |
|
249 |
9,133,407 |
|||||||||||||||||||||
BlackRock Global Allocation V.I. Fund Class I |
1,532,020 |
521 |
1,532,541 |
|
42 |
1,532,499 |
|||||||||||||||||||||
Delaware VIP Diversified Income Series Standard Class |
5,314,780 |
939 |
5,315,719 |
|
144 |
5,315,575 |
|||||||||||||||||||||
Delaware VIP High Yield Series Standard Class |
2,259,357 |
298 |
2,259,655 |
|
61 |
2,259,594 |
|||||||||||||||||||||
Delaware VIP REIT Series Service Class |
12,490,572 |
624 |
12,491,196 |
|
340 |
12,490,856 |
|||||||||||||||||||||
Delaware VIP Small Cap Value Series Service Class |
7,830,553 |
1,705 |
7,832,258 |
|
213 |
7,832,045 |
|||||||||||||||||||||
Delaware VIP Smid Cap Growth Series Service Class |
5,383,373 |
828 |
5,384,201 |
|
147 |
5,384,054 |
|||||||||||||||||||||
Deutsche Alternative Asset Allocation VIP Portfolio A |
198,333 |
290 |
198,623 |
|
5 |
198,618 |
|||||||||||||||||||||
Fidelity VIP Asset Manager Portfolio Initial Class |
34,755,284 |
2,883 |
34,758,167 |
|
945 |
34,757,222 |
|||||||||||||||||||||
Fidelity VIP Contrafund Portfolio Service Class 2 |
21,567,856 |
3,521 |
21,571,377 |
|
589 |
21,570,788 |
|||||||||||||||||||||
Fidelity VIP Government Money Market Portfolio Initial Class |
33,177 |
1,788 |
34,965 |
|
|
34,965 |
|||||||||||||||||||||
Fidelity VIP Growth Portfolio Initial Class |
76,832,182 |
597 |
76,832,779 |
|
2,089 |
76,830,690 |
|||||||||||||||||||||
Janus Aspen Global Research Portfolio Institutional Shares |
8,849,425 |
866 |
8,850,291 |
|
239 |
8,850,052 |
|||||||||||||||||||||
LVIP Baron Growth Opportunities Fund Service Class |
14,661,689 |
|
14,661,689 |
8,325 |
398 |
14,652,966 |
|||||||||||||||||||||
LVIP BlackRock Emerging Markets Managed Volatility Fund Standard Class |
25,429 |
41 |
25,470 |
|
1 |
25,469 |
|||||||||||||||||||||
LVIP BlackRock Inflation Protected Bond Fund Standard Class |
710,019 |
884 |
710,903 |
|
18 |
710,885 |
|||||||||||||||||||||
LVIP Clarion Global Real Estate Fund Standard Class |
601,550 |
240 |
601,790 |
|
16 |
601,774 |
|||||||||||||||||||||
LVIP Delaware Bond Fund Standard Class |
4,339,053 |
1,481 |
4,340,534 |
|
118 |
4,340,416 |
|||||||||||||||||||||
LVIP Delaware Diversified Floating Rate Fund Service Class |
196,255 |
34 |
196,289 |
|
5 |
196,284 |
|||||||||||||||||||||
LVIP Delaware Foundation Aggressive Allocation Fund Standard Class |
331,569 |
152 |
331,721 |
|
9 |
331,712 |
|||||||||||||||||||||
LVIP Delaware Foundation Conservative Allocation Fund Standard Class |
1,204,988 |
1,105 |
1,206,093 |
|
31 |
1,206,062 |
|||||||||||||||||||||
LVIP Delaware Foundation Moderate Allocation Fund Standard Class |
298,807 |
960 |
299,767 |
|
8 |
299,759 |
|||||||||||||||||||||
LVIP Delaware Social Awareness Fund Standard Class |
15,071,379 |
463 |
15,071,842 |
|
409 |
15,071,433 |
|||||||||||||||||||||
LVIP Dimensional U.S. Core Equity 1 Fund Standard Class |
5,205,247 |
6,720 |
5,211,967 |
|
141 |
5,211,826 |
|||||||||||||||||||||
LVIP Global Conservative Allocation Managed Risk Fund Standard Class |
1,342,239 |
1,001 |
1,343,240 |
|
37 |
1,343,203 |
|||||||||||||||||||||
LVIP Global Growth Allocation Managed Risk Fund Standard Class |
4,655,374 |
|
4,655,374 |
11,044 |
127 |
4,644,203 |
See accompanying notes.
L-2
Lincoln National Variable Annuity Account L
Statements of assets and liabilities (continued)
December 31, 2015
Subaccount |
Investments |
Contract Purchases Due From The Lincoln National Life Insurance Company |
Total Assets |
Contract Redemptions Due To The Lincoln National Life Insurance Company |
Mortality & Expense Guarantee Charges Payable To The Lincoln National Life Insurance Company |
Net Assets |
|||||||||||||||||||||
LVIP Global Income Fund Standard Class |
$ |
349,407 |
$ |
98 |
$ |
349,505 |
$ |
|
$ |
9 |
$ |
349,496 |
|||||||||||||||
LVIP Global Moderate Allocation Managed Risk Fund Standard Class |
15,871,648 |
367,567 |
16,239,215 |
|
155 |
16,239,060 |
|||||||||||||||||||||
LVIP Ivy Mid Cap Growth Managed Volatility Fund Standard Class |
22,758 |
296 |
23,054 |
|
1 |
23,053 |
|||||||||||||||||||||
LVIP JPMorgan Mid Cap Value Managed Volatility Fund Standard Class |
250,407 |
111 |
250,518 |
|
7 |
250,511 |
|||||||||||||||||||||
LVIP Managed Risk Profile 2010 Fund Standard Class |
562,385 |
|
562,385 |
17 |
15 |
562,353 |
|||||||||||||||||||||
LVIP Managed Risk Profile 2020 Fund Standard Class |
2,475,119 |
1,856 |
2,476,975 |
|
67 |
2,476,908 |
|||||||||||||||||||||
LVIP Managed Risk Profile 2030 Fund Standard Class |
4,222,212 |
448 |
4,222,660 |
|
116 |
4,222,544 |
|||||||||||||||||||||
LVIP Managed Risk Profile 2040 Fund Standard Class |
1,601,542 |
4,184 |
1,605,726 |
|
44 |
1,605,682 |
|||||||||||||||||||||
LVIP Managed Risk Profile 2050 Fund Standard Class |
425,170 |
4,572 |
429,742 |
|
12 |
429,730 |
|||||||||||||||||||||
LVIP Mondrian International Value Fund Standard Class |
3,197,914 |
2,230 |
3,200,144 |
|
85 |
3,200,059 |
|||||||||||||||||||||
LVIP SSgA Bond Index Fund Standard Class |
591,932 |
139 |
592,071 |
|
16 |
592,055 |
|||||||||||||||||||||
LVIP SSgA Emerging Markets 100 Fund Standard Class |
969,473 |
1,209 |
970,682 |
|
26 |
970,656 |
|||||||||||||||||||||
LVIP SSgA Global Tactical Allocation Managed Volatility Fund Standard Class |
1,625,624 |
884 |
1,626,508 |
|
44 |
1,626,464 |
|||||||||||||||||||||
LVIP SSgA International Index Fund Standard Class |
201,320 |
379 |
201,699 |
|
6 |
201,693 |
|||||||||||||||||||||
LVIP SSgA S&P 500 Index Fund Standard Class |
101,161,530 |
15,638 |
101,177,168 |
|
2,730 |
101,174,438 |
|||||||||||||||||||||
LVIP SSgA Small-Cap Index Fund Standard Class |
25,714,085 |
2,343 |
25,716,428 |
|
700 |
25,715,728 |
|||||||||||||||||||||
LVIP T. Rowe Price Structured Mid-Cap Growth Fund Standard Class |
18,515,894 |
541 |
18,516,435 |
|
503 |
18,515,932 |
|||||||||||||||||||||
LVIP Templeton Growth Managed Volatility Fund Standard Class |
29,674 |
12 |
29,686 |
|
1 |
29,685 |
|||||||||||||||||||||
LVIP UBS Large Cap Growth Managed Volatility Fund Standard Class |
1,586,173 |
597 |
1,586,770 |
|
43 |
1,586,727 |
|||||||||||||||||||||
NB AMT Large Cap Value Portfolio I Class |
4,359,074 |
955 |
4,360,029 |
|
118 |
4,359,911 |
|||||||||||||||||||||
T. Rowe Price International Stock Portfolio |
9,478,126 |
1,830 |
9,479,956 |
|
257 |
9,479,699 |
See accompanying notes.
L-3
Lincoln National Variable Annuity Account L
Statements of operations
Year Ended December 31, 2015
Subaccount |
Dividends from Investment Income |
Mortality and Expense Guarantee Charges |
Net Investment Income (Loss) |
Net Realized Gain (Loss) on Investments |
|||||||||||||||
AB VPS Global Thematic Growth Portfolio Class B |
$ |
|
$ |
(20,186 |
) |
$ |
(20,186 |
) |
$ |
83,085 |
|||||||||
AB VPS Growth Portfolio Class B |
|
(15,336 |
) |
(15,336 |
) |
65,768 |
|||||||||||||
American Century VP Balanced Fund Class I |
252,770 |
(143,841 |
) |
108,929 |
141,815 |
||||||||||||||
American Funds Global Growth Fund Class 2 |
59,147 |
(56,581 |
) |
2,566 |
134,617 |
||||||||||||||
American Funds Growth Fund Class 2 |
159,043 |
(259,627 |
) |
(100,584 |
) |
797,950 |
|||||||||||||
American Funds Growth-Income Fund Class 2 |
156,555 |
(117,206 |
) |
39,349 |
240,989 |
||||||||||||||
American Funds International Fund Class 2 |
149,386 |
(101,560 |
) |
47,826 |
154,721 |
||||||||||||||
BlackRock Global Allocation V.I. Fund Class I |
18,109 |
(15,888 |
) |
2,221 |
(4,011 |
) |
|||||||||||||
Delaware VIP Diversified Income Series Standard Class |
168,135 |
(55,190 |
) |
112,945 |
19,631 |
||||||||||||||
Delaware VIP High Yield Series Standard Class |
164,855 |
(24,964 |
) |
139,891 |
(18,420 |
) |
|||||||||||||
Delaware VIP REIT Series Service Class |
133,316 |
(129,187 |
) |
4,129 |
359,611 |
||||||||||||||
Delaware VIP Small Cap Value Series Service Class |
43,914 |
(88,858 |
) |
(44,944 |
) |
244,218 |
|||||||||||||
Delaware VIP Smid Cap Growth Series Service Class |
8,760 |
(52,584 |
) |
(43,824 |
) |
151,523 |
|||||||||||||
Deutsche Alternative Asset Allocation VIP Portfolio A |
6,051 |
(2,075 |
) |
3,976 |
287 |
||||||||||||||
Fidelity VIP Asset Manager Portfolio Initial Class |
572,175 |
(370,670 |
) |
201,505 |
325,246 |
||||||||||||||
Fidelity VIP Contrafund Portfolio Service Class 2 |
178,469 |
(223,954 |
) |
(45,485 |
) |
473,990 |
|||||||||||||
Fidelity VIP Government Money Market Portfolio Initial Class |
4 |
|
4 |
|
|||||||||||||||
Fidelity VIP Growth Portfolio Initial Class |
200,141 |
(778,111 |
) |
(577,970 |
) |
3,645,340 |
|||||||||||||
Janus Aspen Global Research Portfolio Institutional Shares |
62,426 |
(93,777 |
) |
(31,351 |
) |
117,937 |
|||||||||||||
LVIP Baron Growth Opportunities Fund Service Class |
|
(160,748 |
) |
(160,748 |
) |
822,170 |
|||||||||||||
LVIP BlackRock Emerging Markets Managed Volatility Fund Standard Class |
448 |
(253 |
) |
195 |
(1,599 |
) |
|||||||||||||
LVIP BlackRock Inflation Protected Bond Fund Standard Class |
8,971 |
(7,281 |
) |
1,690 |
(13,609 |
) |
|||||||||||||
LVIP Clarion Global Real Estate Fund Standard Class |
18,703 |
(5,994 |
) |
12,709 |
19,736 |
||||||||||||||
LVIP Delaware Bond Fund Standard Class |
104,391 |
(46,013 |
) |
58,378 |
43,490 |
||||||||||||||
LVIP Delaware Diversified Floating Rate Fund Service Class |
2,663 |
(2,250 |
) |
413 |
(9,419 |
) |
|||||||||||||
LVIP Delaware Foundation Aggressive Allocation Fund Standard Class |
5,971 |
(3,123 |
) |
2,848 |
3,100 |
||||||||||||||
LVIP Delaware Foundation Conservative Allocation Fund Standard Class |
34,179 |
(11,922 |
) |
22,257 |
3,961 |
||||||||||||||
LVIP Delaware Foundation Moderate Allocation Fund Standard Class |
6,916 |
(4,618 |
) |
2,298 |
14,055 |
||||||||||||||
LVIP Delaware Social Awareness Fund Standard Class |
230,202 |
(154,843 |
) |
75,359 |
350,139 |
||||||||||||||
LVIP Dimensional U.S. Core Equity 1 Fund Standard Class |
88,557 |
(54,670 |
) |
33,887 |
137,884 |
||||||||||||||
LVIP Global Conservative Allocation Managed Risk Fund Standard Class |
29,293 |
(15,817 |
) |
13,476 |
61,934 |
||||||||||||||
LVIP Global Growth Allocation Managed Risk Fund Standard Class |
95,479 |
(50,797 |
) |
44,682 |
117,269 |
||||||||||||||
LVIP Global Income Fund Standard Class |
10,802 |
(3,334 |
) |
7,468 |
(809 |
) |
|||||||||||||
LVIP Global Moderate Allocation Managed Risk Fund Standard Class |
330,574 |
(58,362 |
) |
272,212 |
147,855 |
||||||||||||||
LVIP Ivy Mid Cap Growth Managed Volatility Fund Standard Class |
|
(255 |
) |
(255 |
) |
(1,708 |
) |
||||||||||||
LVIP JPMorgan Mid Cap Value Managed Volatility Fund Standard Class |
1,995 |
(2,408 |
) |
(413 |
) |
(108 |
) |
||||||||||||
LVIP Managed Risk Profile 2010 Fund Standard Class |
10,843 |
(5,608 |
) |
5,235 |
4,851 |
||||||||||||||
LVIP Managed Risk Profile 2020 Fund Standard Class |
47,363 |
(24,471 |
) |
22,892 |
28,506 |
||||||||||||||
LVIP Managed Risk Profile 2030 Fund Standard Class |
77,814 |
(43,827 |
) |
33,987 |
72,627 |
||||||||||||||
LVIP Managed Risk Profile 2040 Fund Standard Class |
28,780 |
(16,973 |
) |
11,807 |
55,690 |
||||||||||||||
LVIP Managed Risk Profile 2050 Fund Standard Class |
6,997 |
(3,497 |
) |
3,500 |
(6,199 |
) |
|||||||||||||
LVIP Mondrian International Value Fund Standard Class |
101,716 |
(34,632 |
) |
67,084 |
(38,002 |
) |
|||||||||||||
LVIP SSgA Bond Index Fund Standard Class |
15,521 |
(6,115 |
) |
9,406 |
(880 |
) |
|||||||||||||
LVIP SSgA Emerging Markets 100 Fund Standard Class |
48,074 |
(11,171 |
) |
36,903 |
(29,133 |
) |
|||||||||||||
LVIP SSgA Global Tactical Allocation Managed Volatility Fund Standard Class |
52,081 |
(17,476 |
) |
34,605 |
16,592 |
||||||||||||||
LVIP SSgA International Index Fund Standard Class |
5,316 |
(2,067 |
) |
3,249 |
346 |
||||||||||||||
LVIP SSgA S&P 500 Index Fund Standard Class |
1,966,055 |
(1,041,857 |
) |
924,198 |
2,575,719 |
||||||||||||||
LVIP SSgA Small-Cap Index Fund Standard Class |
255,892 |
(282,166 |
) |
(26,274 |
) |
536,324 |
|||||||||||||
LVIP T. Rowe Price Structured Mid-Cap Growth Fund Standard Class |
24,307 |
(191,291 |
) |
(166,984 |
) |
825,900 |
|||||||||||||
LVIP Templeton Growth Managed Volatility Fund Standard Class |
439 |
(276 |
) |
163 |
(49 |
) |
|||||||||||||
LVIP UBS Large Cap Growth Managed Volatility Fund Standard Class |
|
(16,064 |
) |
(16,064 |
) |
71,290 |
|||||||||||||
NB AMT Large Cap Value Portfolio I Class |
36,955 |
(49,017 |
) |
(12,062 |
) |
77,983 |
|||||||||||||
T. Rowe Price International Stock Portfolio |
94,025 |
(103,320 |
) |
(9,295 |
) |
242,864 |
See accompanying notes.
L-4
Subaccount |
Dividends from Net Realized Gain on Investments |
Total Net Realized Gain (Loss) on Investments |
Net Change in Unrealized Appreciation or Depreciation on Investments |
Net Increase (Decrease) in Net Assets Resulting from Operations |
|||||||||||||||
AB VPS Global Thematic Growth Portfolio Class B |
$ |
|
$ |
83,085 |
$ |
(37,567 |
) |
$ |
25,332 |
||||||||||
AB VPS Growth Portfolio Class B |
299,417 |
365,185 |
(241,861 |
) |
107,988 |
||||||||||||||
American Century VP Balanced Fund Class I |
1,423,801 |
1,565,616 |
(2,176,833 |
) |
(502,288 |
) |
|||||||||||||
American Funds Global Growth Fund Class 2 |
558,326 |
692,943 |
(380,091 |
) |
315,418 |
||||||||||||||
American Funds Growth Fund Class 2 |
5,465,155 |
6,263,105 |
(4,647,985 |
) |
1,514,536 |
||||||||||||||
American Funds Growth-Income Fund Class 2 |
1,716,913 |
1,957,902 |
(1,947,184 |
) |
50,067 |
||||||||||||||
American Funds International Fund Class 2 |
581,238 |
735,959 |
(1,291,970 |
) |
(508,185 |
) |
|||||||||||||
BlackRock Global Allocation V.I. Fund Class I |
82,472 |
78,461 |
(110,439 |
) |
(29,757 |
) |
|||||||||||||
Delaware VIP Diversified Income Series Standard Class |
61,701 |
81,332 |
(304,750 |
) |
(110,473 |
) |
|||||||||||||
Delaware VIP High Yield Series Standard Class |
34,566 |
16,146 |
(335,781 |
) |
(179,744 |
) |
|||||||||||||
Delaware VIP REIT Series Service Class |
|
359,611 |
(100,244 |
) |
263,496 |
||||||||||||||
Delaware VIP Small Cap Value Series Service Class |
985,448 |
1,229,666 |
(1,813,019 |
) |
(628,297 |
) |
|||||||||||||
Delaware VIP Smid Cap Growth Series Service Class |
450,948 |
602,471 |
(241,384 |
) |
317,263 |
||||||||||||||
Deutsche Alternative Asset Allocation VIP Portfolio A |
445 |
732 |
(19,688 |
) |
(14,980 |
) |
|||||||||||||
Fidelity VIP Asset Manager Portfolio Initial Class |
2,634,953 |
2,960,199 |
(3,372,504 |
) |
(210,800 |
) |
|||||||||||||
Fidelity VIP Contrafund Portfolio Service Class 2 |
2,065,532 |
2,539,522 |
(2,591,726 |
) |
(97,689 |
) |
|||||||||||||
Fidelity VIP Government Money Market Portfolio Initial Class |
|
|
|
4 |
|||||||||||||||
Fidelity VIP Growth Portfolio Initial Class |
2,456,296 |
6,101,636 |
(788,222 |
) |
4,735,444 |
||||||||||||||
Janus Aspen Global Research Portfolio Institutional Shares |
|
117,937 |
(369,844 |
) |
(283,258 |
) |
|||||||||||||
LVIP Baron Growth Opportunities Fund Service Class |
1,268,385 |
2,090,555 |
(2,819,701 |
) |
(889,894 |
) |
|||||||||||||
LVIP BlackRock Emerging Markets Managed Volatility Fund Standard Class |
|
(1,599 |
) |
(3,816 |
) |
(5,220 |
) |
||||||||||||
LVIP BlackRock Inflation Protected Bond Fund Standard Class |
|
(13,609 |
) |
(15,791 |
) |
(27,710 |
) |
||||||||||||
LVIP Clarion Global Real Estate Fund Standard Class |
|
19,736 |
(46,976 |
) |
(14,531 |
) |
|||||||||||||
LVIP Delaware Bond Fund Standard Class |
10,092 |
53,582 |
(133,059 |
) |
(21,099 |
) |
|||||||||||||
LVIP Delaware Diversified Floating Rate Fund Service Class |
|
(9,419 |
) |
4,666 |
(4,340 |
) |
|||||||||||||
LVIP Delaware Foundation Aggressive Allocation Fund Standard Class |
11,279 |
14,379 |
(25,494 |
) |
(8,267 |
) |
|||||||||||||
LVIP Delaware Foundation Conservative Allocation Fund Standard Class |
48,674 |
52,635 |
(97,267 |
) |
(22,375 |
) |
|||||||||||||
LVIP Delaware Foundation Moderate Allocation Fund Standard Class |
12,650 |
26,705 |
(34,299 |
) |
(5,296 |
) |
|||||||||||||
LVIP Delaware Social Awareness Fund Standard Class |
1,690,509 |
2,040,648 |
(2,353,178 |
) |
(237,171 |
) |
|||||||||||||
LVIP Dimensional U.S. Core Equity 1 Fund Standard Class |
632,540 |
770,424 |
(971,866 |
) |
(167,555 |
) |
|||||||||||||
LVIP Global Conservative Allocation Managed Risk Fund Standard Class |
20,644 |
82,578 |
(140,604 |
) |
(44,550 |
) |
|||||||||||||
LVIP Global Growth Allocation Managed Risk Fund Standard Class |
|
117,269 |
(381,122 |
) |
(219,171 |
) |
|||||||||||||
LVIP Global Income Fund Standard Class |
3,057 |
2,248 |
(20,262 |
) |
(10,546 |
) |
|||||||||||||
LVIP Global Moderate Allocation Managed Risk Fund Standard Class |
10,849 |
158,704 |
(1,330,098 |
) |
(899,182 |
) |
|||||||||||||
LVIP Ivy Mid Cap Growth Managed Volatility Fund Standard Class |
265 |
(1,443 |
) |
(2,080 |
) |
(3,778 |
) |
||||||||||||
LVIP JPMorgan Mid Cap Value Managed Volatility Fund Standard Class |
|
(108 |
) |
(23,789 |
) |
(24,310 |
) |
||||||||||||
LVIP Managed Risk Profile 2010 Fund Standard Class |
28,996 |
33,847 |
(53,757 |
) |
(14,675 |
) |
|||||||||||||
LVIP Managed Risk Profile 2020 Fund Standard Class |
86,413 |
114,919 |
(226,974 |
) |
(89,163 |
) |
|||||||||||||
LVIP Managed Risk Profile 2030 Fund Standard Class |
259,267 |
331,894 |
(531,029 |
) |
(165,148 |
) |
|||||||||||||
LVIP Managed Risk Profile 2040 Fund Standard Class |
102,736 |
158,426 |
(236,993 |
) |
(66,760 |
) |
|||||||||||||
LVIP Managed Risk Profile 2050 Fund Standard Class |
699 |
(5,500 |
) |
(17,678 |
) |
(19,678 |
) |
||||||||||||
LVIP Mondrian International Value Fund Standard Class |
|
(38,002 |
) |
(177,748 |
) |
(148,666 |
) |
||||||||||||
LVIP SSgA Bond Index Fund Standard Class |
|
(880 |
) |
(14,195 |
) |
(5,669 |
) |
||||||||||||
LVIP SSgA Emerging Markets 100 Fund Standard Class |
|
(29,133 |
) |
(219,907 |
) |
(212,137 |
) |
||||||||||||
LVIP SSgA Global Tactical Allocation Managed Volatility Fund Standard Class |
|
16,592 |
(181,774 |
) |
(130,577 |
) |
|||||||||||||
LVIP SSgA International Index Fund Standard Class |
|
346 |
(10,061 |
) |
(6,466 |
) |
|||||||||||||
LVIP SSgA S&P 500 Index Fund Standard Class |
975,728 |
3,551,447 |
(4,164,448 |
) |
311,197 |
||||||||||||||
LVIP SSgA Small-Cap Index Fund Standard Class |
852,019 |
1,388,343 |
(2,890,485 |
) |
(1,528,416 |
) |
|||||||||||||
LVIP T. Rowe Price Structured Mid-Cap Growth Fund Standard Class |
1,174,438 |
2,000,338 |
(1,607,047 |
) |
226,307 |
||||||||||||||
LVIP Templeton Growth Managed Volatility Fund Standard Class |
|
(49 |
) |
(2,951 |
) |
(2,837 |
) |
||||||||||||
LVIP UBS Large Cap Growth Managed Volatility Fund Standard Class |
|
71,290 |
(48,564 |
) |
6,662 |
||||||||||||||
NB AMT Large Cap Value Portfolio I Class |
373,461 |
451,444 |
(1,094,109 |
) |
(654,727 |
) |
|||||||||||||
T. Rowe Price International Stock Portfolio |
188,050 |
430,914 |
(556,931 |
) |
(135,312 |
) |
L-5
Lincoln National Variable Annuity Account L
Statements of changes in net assets
Years Ended December 31, 2014 and 2015
AB VPS Global Thematic Growth Portfolio Class B Subaccount |
AB VPS Growth Portfolio Class B Subaccount |
American Century VP Balanced Fund Class I Subaccount |
American Funds Global Growth Fund Class 2 Subaccount |
American Funds Growth Fund Class 2 Subaccount |
American Funds Growth-Income Fund Class 2 Subaccount |
American Funds International Fund Class 2 Subaccount |
|||||||||||||||||||||||||
NET ASSETS AT JANUARY 1, 2014 |
$ |
1,989,204 |
$ |
1,525,730 |
$ |
16,768,685 |
$ |
6,000,890 |
$ |
27,219,661 |
$ |
10,850,076 |
$ |
12,083,542 |
|||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||||||
• Net investment income (loss) |
(19,287 |
) |
(14,139 |
) |
89,332 |
9,402 |
(52,288 |
) |
37,224 |
40,501 |
|||||||||||||||||||||
• Net realized gain (loss) on investments |
62,808 |
146,722 |
1,738,627 |
756,196 |
2,347,352 |
832,945 |
243,300 |
||||||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
24,538 |
23,383 |
(444,437 |
) |
(697,854 |
) |
(388,135 |
) |
156,648 |
(688,222 |
) |
||||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
68,059 |
155,966 |
1,383,522 |
67,744 |
1,906,929 |
1,026,817 |
(404,421 |
) |
|||||||||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||||||
• Contract purchases |
100,362 |
75,977 |
264,922 |
297,044 |
886,495 |
404,839 |
428,435 |
||||||||||||||||||||||||
• Contract withdrawals |
(191,348 |
) |
(253,205 |
) |
(1,792,219 |
) |
(552,263 |
) |
(2,369,629 |
) |
(1,046,419 |
) |
(1,112,221 |
) |
|||||||||||||||||
• Contract transfers |
2,730 |
(18,699 |
) |
(554,415 |
) |
(214,135 |
) |
(870,046 |
) |
641,887 |
(230,270 |
) |
|||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
(88,256 |
) |
(195,927 |
) |
(2,081,712 |
) |
(469,354 |
) |
(2,353,180 |
) |
307 |
(914,056 |
) |
||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
(20,197 |
) |
(39,961 |
) |
(698,190 |
) |
(401,610 |
) |
(446,251 |
) |
1,027,124 |
(1,318,477 |
) |
||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2014 |
1,969,007 |
1,485,769 |
16,070,495 |
5,599,280 |
26,773,410 |
11,877,200 |
10,765,065 |
||||||||||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||||||
• Net investment income (loss) |
(20,186 |
) |
(15,336 |
) |
108,929 |
2,566 |
(100,584 |
) |
39,349 |
47,826 |
|||||||||||||||||||||
• Net realized gain (loss) on investments |
83,085 |
365,185 |
1,565,616 |
692,943 |
6,263,105 |
1,957,902 |
735,959 |
||||||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(37,567 |
) |
(241,861 |
) |
(2,176,833 |
) |
(380,091 |
) |
(4,647,985 |
) |
(1,947,184 |
) |
(1,291,970 |
) |
|||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
25,332 |
107,988 |
(502,288 |
) |
315,418 |
1,514,536 |
50,067 |
(508,185 |
) |
||||||||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||||||
• Contract purchases |
101,478 |
63,271 |
204,336 |
264,944 |
735,815 |
480,612 |
356,856 |
||||||||||||||||||||||||
• Contract withdrawals |
(165,912 |
) |
(116,226 |
) |
(2,178,540 |
) |
(617,476 |
) |
(2,651,158 |
) |
(1,042,166 |
) |
(1,100,139 |
) |
|||||||||||||||||
• Contract transfers |
(77,520 |
) |
120,756 |
(328,304 |
) |
136,864 |
(79,601 |
) |
378,092 |
(380,190 |
) |
||||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
(141,954 |
) |
67,801 |
(2,302,508 |
) |
(215,668 |
) |
(1,994,944 |
) |
(183,462 |
) |
(1,123,473 |
) |
||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
(116,622 |
) |
175,789 |
(2,804,796 |
) |
99,750 |
(480,408 |
) |
(133,395 |
) |
(1,631,658 |
) |
|||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2015 |
$ |
1,852,385 |
$ |
1,661,558 |
$ |
13,265,699 |
$ |
5,699,030 |
$ |
26,293,002 |
$ |
11,743,805 |
$ |
9,133,407 |
See accompanying notes.
L-6
BlackRock Global Allocation V.I. Fund Class I Subaccount |
Delaware VIP Diversified Income Series Standard Class Subaccount |
Delaware VIP High Yield Series Standard Class Subaccount |
Delaware VIP REIT Series Service Class Subaccount |
Delaware VIP Small Cap Value Series Service Class Subaccount |
Delaware VIP Smid Cap Growth Series Service Class Subaccount |
||||||||||||||||||||||
NET ASSETS AT JANUARY 1, 2014 |
$ |
1,563,568 |
$ |
5,916,303 |
$ |
2,864,216 |
$ |
10,850,558 |
$ |
10,528,843 |
$ |
6,490,913 |
|||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||
• Net investment income (loss) |
18,712 |
74,431 |
163,078 |
14,022 |
(65,960 |
) |
(54,926 |
) |
|||||||||||||||||||
• Net realized gain (loss) on investments |
147,557 |
38,066 |
75,536 |
137,480 |
1,287,088 |
815,949 |
|||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(150,107 |
) |
134,046 |
(275,987 |
) |
2,730,049 |
(777,118 |
) |
(741,599 |
) |
|||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
16,162 |
246,543 |
(37,373 |
) |
2,881,551 |
444,010 |
19,424 |
||||||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||
• Contract purchases |
168,520 |
334,624 |
146,639 |
372,380 |
339,417 |
149,153 |
|||||||||||||||||||||
• Contract withdrawals |
(282,003 |
) |
(754,900 |
) |
(416,179 |
) |
(1,223,448 |
) |
(1,143,970 |
) |
(649,723 |
) |
|||||||||||||||
• Contract transfers |
60,623 |
2,215 |
271,764 |
628,520 |
(280,783 |
) |
(785,137 |
) |
|||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
(52,860 |
) |
(418,061 |
) |
2,224 |
(222,548 |
) |
(1,085,336 |
) |
(1,285,707 |
) |
||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
(36,698 |
) |
(171,518 |
) |
(35,149 |
) |
2,659,003 |
(641,326 |
) |
(1,266,283 |
) |
||||||||||||||||
NET ASSETS AT DECEMBER 31, 2014 |
1,526,870 |
5,744,785 |
2,829,067 |
13,509,561 |
9,887,517 |
5,224,630 |
|||||||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||
• Net investment income (loss) |
2,221 |
112,945 |
139,891 |
4,129 |
(44,944 |
) |
(43,824 |
) |
|||||||||||||||||||
• Net realized gain (loss) on investments |
78,461 |
81,332 |
16,146 |
359,611 |
1,229,666 |
602,471 |
|||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(110,439 |
) |
(304,750 |
) |
(335,781 |
) |
(100,244 |
) |
(1,813,019 |
) |
(241,384 |
) |
|||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
(29,757 |
) |
(110,473 |
) |
(179,744 |
) |
263,496 |
(628,297 |
) |
317,263 |
|||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||
• Contract purchases |
149,317 |
297,749 |
129,392 |
347,955 |
305,800 |
177,381 |
|||||||||||||||||||||
• Contract withdrawals |
(106,113 |
) |
(428,389 |
) |
(312,819 |
) |
(1,097,909 |
) |
(906,509 |
) |
(481,563 |
) |
|||||||||||||||
• Contract transfers |
(7,818 |
) |
(188,097 |
) |
(206,302 |
) |
(532,247 |
) |
(826,466 |
) |
146,343 |
||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
35,386 |
(318,737 |
) |
(389,729 |
) |
(1,282,201 |
) |
(1,427,175 |
) |
(157,839 |
) |
||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
5,629 |
(429,210 |
) |
(569,473 |
) |
(1,018,705 |
) |
(2,055,472 |
) |
159,424 |
|||||||||||||||||
NET ASSETS AT DECEMBER 31, 2015 |
$ |
1,532,499 |
$ |
5,315,575 |
$ |
2,259,594 |
$ |
12,490,856 |
$ |
7,832,045 |
$ |
5,384,054 |
L-7
Lincoln National Variable Annuity Account L
Statements of changes in net assets (continued)
Years Ended December 31, 2014 and 2015
Deutsche Alternative Asset Allocation VIP Portfolio A Subaccount |
Fidelity VIP Asset Manager Portfolio Initial Class Subaccount |
Fidelity VIP Contrafund Portfolio Service Class 2 Subaccount |
Fidelity VIP Government Money Market Portfolio Initial Class Subaccount |
Fidelity VIP Growth Portfolio Initial Class Subaccount |
Janus Aspen Global Research Portfolio Institutional Shares Subaccount |
LVIP Baron Growth Opportunities Fund Service Class Subaccount |
|||||||||||||||||||||||||
NET ASSETS AT JANUARY 1, 2014 |
$ |
188,525 |
$ |
40,680,237 |
$ |
22,321,096 |
$ |
8,104 |
$ |
78,065,251 |
$ |
9,962,894 |
$ |
18,887,194 |
|||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||||||
• Net investment income (loss) |
1,497 |
192,121 |
(57,226 |
) |
1 |
(638,171 |
) |
9,615 |
(140,305 |
) |
|||||||||||||||||||||
• Net realized gain (loss) on investments |
2,481 |
2,380,950 |
1,154,358 |
|
3,191,464 |
107,431 |
1,245,677 |
||||||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(1,139 |
) |
(635,607 |
) |
1,153,860 |
|
5,175,765 |
495,424 |
(503,943 |
) |
|||||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
2,839 |
1,937,464 |
2,250,992 |
1 |
7,729,058 |
612,470 |
601,429 |
||||||||||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||||||
• Contract purchases |
11,164 |
499,243 |
708,133 |
57,842 |
1,080,937 |
146,739 |
295,830 |
||||||||||||||||||||||||
• Contract withdrawals |
(52,608 |
) |
(3,136,948 |
) |
(2,085,260 |
) |
(11,773 |
) |
(7,415,914 |
) |
(910,251 |
) |
(2,260,175 |
) |
|||||||||||||||||
• Contract transfers |
74,447 |
(858,778 |
) |
(211,782 |
) |
(44,301 |
) |
2,462 |
(51,337 |
) |
(411,412 |
) |
|||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
33,003 |
(3,496,483 |
) |
(1,588,909 |
) |
1,768 |
(6,332,515 |
) |
(814,849 |
) |
(2,375,757 |
) |
|||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
35,842 |
(1,559,019 |
) |
662,083 |
1,769 |
1,396,543 |
(202,379 |
) |
(1,774,328 |
) |
|||||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2014 |
224,367 |
39,121,218 |
22,983,179 |
9,873 |
79,461,794 |
9,760,515 |
17,112,866 |
||||||||||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||||||
• Net investment income (loss) |
3,976 |
201,505 |
(45,485 |
) |
4 |
(577,970 |
) |
(31,351 |
) |
(160,748 |
) |
||||||||||||||||||||
• Net realized gain (loss) on investments |
732 |
2,960,199 |
2,539,522 |
|
6,101,636 |
117,937 |
2,090,555 |
||||||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(19,688 |
) |
(3,372,504 |
) |
(2,591,726 |
) |
|
(788,222 |
) |
(369,844 |
) |
(2,819,701 |
) |
||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
(14,980 |
) |
(210,800 |
) |
(97,689 |
) |
4 |
4,735,444 |
(283,258 |
) |
(889,894 |
) |
|||||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||||||
• Contract purchases |
13,697 |
646,332 |
688,872 |
110,203 |
842,209 |
182,255 |
351,192 |
||||||||||||||||||||||||
• Contract withdrawals |
(3,322 |
) |
(3,766,504 |
) |
(1,872,534 |
) |
(10,422 |
) |
(7,014,429 |
) |
(651,862 |
) |
(1,486,557 |
) |
|||||||||||||||||
• Contract transfers |
(21,144 |
) |
(1,033,024 |
) |
(131,040 |
) |
(74,693 |
) |
(1,194,328 |
) |
(157,598 |
) |
(434,641 |
) |
|||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
(10,769 |
) |
(4,153,196 |
) |
(1,314,702 |
) |
25,088 |
(7,366,548 |
) |
(627,205 |
) |
(1,570,006 |
) |
||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
(25,749 |
) |
(4,363,996 |
) |
(1,412,391 |
) |
25,092 |
(2,631,104 |
) |
(910,463 |
) |
(2,459,900 |
) |
||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2015 |
$ |
198,618 |
$ |
34,757,222 |
$ |
21,570,788 |
$ |
34,965 |
$ |
76,830,690 |
$ |
8,850,052 |
$ |
14,652,966 |
See accompanying notes.
L-8
LVIP BlackRock Emerging Markets Managed Volatility Fund Standard Class Subaccount |
LVIP BlackRock Inflation Protected Bond Fund Standard Class Subaccount |
LVIP Clarion Global Real Estate Fund Standard Class Subaccount |
LVIP Delaware Bond Fund Standard Class Subaccount |
LVIP Delaware Diversified Floating Rate Fund Service Class Subaccount |
LVIP Delaware Foundation Aggressive Allocation Fund Standard Class Subaccount |
||||||||||||||||||||||
NET ASSETS AT JANUARY 1, 2014 |
$ |
|
$ |
952,551 |
$ |
661,014 |
$ |
5,746,772 |
$ |
128,606 |
$ |
231,692 |
|||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||
• Net investment income (loss) |
189 |
4,210 |
10,224 |
51,134 |
5,154 |
3,886 |
|||||||||||||||||||||
• Net realized gain (loss) on investments |
65 |
(19,319 |
) |
49,447 |
79,549 |
(5 |
) |
4,574 |
|||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(3,351 |
) |
34,201 |
6,203 |
127,308 |
(11,805 |
) |
(180 |
) |
||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
(3,097 |
) |
19,092 |
65,874 |
257,991 |
(6,656 |
) |
8,280 |
|||||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||
• Contract purchases |
434 |
68,391 |
43,619 |
253,538 |
39,668 |
58,951 |
|||||||||||||||||||||
• Contract withdrawals |
(312 |
) |
(163,363 |
) |
(193,576 |
) |
(788,714 |
) |
(15,760 |
) |
(16,698 |
) |
|||||||||||||||
• Contract transfers |
26,678 |
(33,247 |
) |
23,402 |
(402,170 |
) |
596,229 |
122 |
|||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
26,800 |
(128,219 |
) |
(126,555 |
) |
(937,346 |
) |
620,137 |
42,375 |
||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
23,703 |
(109,127 |
) |
(60,681 |
) |
(679,355 |
) |
613,481 |
50,655 |
||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2014 |
23,703 |
843,424 |
600,333 |
5,067,417 |
742,087 |
282,347 |
|||||||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||
• Net investment income (loss) |
195 |
1,690 |
12,709 |
58,378 |
413 |
2,848 |
|||||||||||||||||||||
• Net realized gain (loss) on investments |
(1,599 |
) |
(13,609 |
) |
19,736 |
53,582 |
(9,419 |
) |
14,379 |
||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(3,816 |
) |
(15,791 |
) |
(46,976 |
) |
(133,059 |
) |
4,666 |
(25,494 |
) |
||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
(5,220 |
) |
(27,710 |
) |
(14,531 |
) |
(21,099 |
) |
(4,340 |
) |
(8,267 |
) |
|||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||
• Contract purchases |
6,221 |
72,045 |
45,794 |
194,203 |
35,074 |
80,451 |
|||||||||||||||||||||
• Contract withdrawals |
(201 |
) |
(94,026 |
) |
(41,747 |
) |
(646,205 |
) |
(36,953 |
) |
(12,447 |
) |
|||||||||||||||
• Contract transfers |
966 |
(82,848 |
) |
11,925 |
(253,900 |
) |
(539,584 |
) |
(10,372 |
) |
|||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
6,986 |
(104,829 |
) |
15,972 |
(705,902 |
) |
(541,463 |
) |
57,632 |
||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
1,766 |
(132,539 |
) |
1,441 |
(727,001 |
) |
(545,803 |
) |
49,365 |
||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2015 |
$ |
25,469 |
$ |
710,885 |
$ |
601,774 |
$ |
4,340,416 |
$ |
196,284 |
$ |
331,712 |
L-9
Lincoln National Variable Annuity Account L
Statements of changes in net assets (continued)
Years Ended December 31, 2014 and 2015
LVIP Delaware Foundation Conservative Allocation Fund Standard Class Subaccount |
LVIP Delaware Foundation Moderate Allocation Fund Standard Class Subaccount |
LVIP Delaware Social Awareness Fund Standard Class Subaccount |
LVIP Dimensional U.S. Core Equity 1 Fund Standard Class Subaccount |
LVIP Global Conservative Allocation Managed Risk Fund Standard Class Subaccount |
LVIP Global Growth Allocation Managed Risk Fund Standard Class Subaccount |
LVIP Global Income Fund Standard Class Subaccount |
|||||||||||||||||||||||||
NET ASSETS AT JANUARY 1, 2014 |
$ |
1,235,729 |
$ |
504,590 |
$ |
15,361,248 |
$ |
4,954,347 |
$ |
1,989,465 |
$ |
5,857,083 |
$ |
261,626 |
|||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||||||
• Net investment income (loss) |
22,628 |
5,559 |
84,570 |
56,007 |
17,653 |
54,065 |
(992 |
) |
|||||||||||||||||||||||
• Net realized gain (loss) on investments |
65,087 |
36,574 |
1,276,184 |
429,390 |
100,139 |
159,512 |
553 |
||||||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(38,830 |
) |
(24,293 |
) |
677,705 |
117,901 |
(30,988 |
) |
(67,155 |
) |
2,164 |
||||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
48,885 |
17,840 |
2,038,459 |
603,298 |
86,804 |
146,422 |
1,725 |
||||||||||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||||||
• Contract purchases |
137,934 |
94,811 |
243,344 |
217,650 |
90,311 |
366,683 |
25,673 |
||||||||||||||||||||||||
• Contract withdrawals |
(77,924 |
) |
(152,007 |
) |
(1,760,982 |
) |
(500,650 |
) |
(434,833 |
) |
(742,853 |
) |
(25,661 |
) |
|||||||||||||||||
• Contract transfers |
(32,538 |
) |
74,084 |
201,591 |
391,089 |
128,600 |
(142,796 |
) |
44,889 |
||||||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
27,472 |
16,888 |
(1,316,047 |
) |
108,089 |
(215,922 |
) |
(518,966 |
) |
44,901 |
|||||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
76,357 |
34,728 |
722,412 |
711,387 |
(129,118 |
) |
(372,544 |
) |
46,626 |
||||||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2014 |
1,312,086 |
539,318 |
16,083,660 |
5,665,734 |
1,860,347 |
5,484,539 |
308,252 |
||||||||||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||||||
• Net investment income (loss) |
22,257 |
2,298 |
75,359 |
33,887 |
13,476 |
44,682 |
7,468 |
||||||||||||||||||||||||
• Net realized gain (loss) on investments |
52,635 |
26,705 |
2,040,648 |
770,424 |
82,578 |
117,269 |
2,248 |
||||||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(97,267 |
) |
(34,299 |
) |
(2,353,178 |
) |
(971,866 |
) |
(140,604 |
) |
(381,122 |
) |
(20,262 |
) |
|||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
(22,375 |
) |
(5,296 |
) |
(237,171 |
) |
(167,555 |
) |
(44,550 |
) |
(219,171 |
) |
(10,546 |
) |
|||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||||||
• Contract purchases |
102,459 |
73,973 |
251,298 |
156,533 |
78,540 |
243,844 |
26,022 |
||||||||||||||||||||||||
• Contract withdrawals |
(138,320 |
) |
(94,794 |
) |
(1,269,406 |
) |
(472,053 |
) |
(372,404 |
) |
(820,924 |
) |
(22,521 |
) |
|||||||||||||||||
• Contract transfers |
(47,788 |
) |
(213,442 |
) |
243,052 |
29,167 |
(178,730 |
) |
(44,085 |
) |
48,289 |
||||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
(83,649 |
) |
(234,263 |
) |
(775,056 |
) |
(286,353 |
) |
(472,594 |
) |
(621,165 |
) |
51,790 |
||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
(106,024 |
) |
(239,559 |
) |
(1,012,227 |
) |
(453,908 |
) |
(517,144 |
) |
(840,336 |
) |
41,244 |
||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2015 |
$ |
1,206,062 |
$ |
299,759 |
$ |
15,071,433 |
$ |
5,211,826 |
$ |
1,343,203 |
$ |
4,644,203 |
$ |
349,496 |
See accompanying notes.
L-10
LVIP Global Moderate Allocation Managed Risk Fund Standard Class Subaccount |
LVIP Ivy Mid Cap Growth Managed Volatility Fund Standard Class Subaccount |
LVIP JPMorgan Mid Cap Value Managed Volatility Fund Standard Class Subaccount |
LVIP Managed Risk Profile 2010 Fund Standard Class Subaccount |
LVIP Managed Risk Profile 2020 Fund Standard Class Subaccount |
LVIP Managed Risk Profile 2030 Fund Standard Class Subaccount |
||||||||||||||||||||||
NET ASSETS AT JANUARY 1, 2014 |
$ |
5,571,552 |
$ |
|
$ |
|
$ |
824,648 |
$ |
2,199,903 |
$ |
3,735,879 |
|||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||
• Net investment income (loss) |
87,469 |
(1 |
) |
633 |
4,574 |
20,522 |
50,924 |
||||||||||||||||||||
• Net realized gain (loss) on investments |
242,633 |
17 |
(55 |
) |
46,725 |
85,254 |
46,975 |
||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(156,139 |
) |
10 |
5,816 |
(36,289 |
) |
(26,375 |
) |
27,908 |
||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
173,963 |
26 |
6,394 |
15,010 |
79,401 |
125,807 |
|||||||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||
• Contract purchases |
1,361,204 |
15 |
623 |
56,587 |
266,777 |
561,974 |
|||||||||||||||||||||
• Contract withdrawals |
(1,011,582 |
) |
|
(2,549 |
) |
(321,355 |
) |
(520,750 |
) |
(261,594 |
) |
||||||||||||||||
• Contract transfers |
1,232,526 |
369 |
159,179 |
(20,095 |
) |
236,599 |
293,263 |
||||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
1,582,148 |
384 |
157,253 |
(284,863 |
) |
(17,374 |
) |
593,643 |
|||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
1,756,111 |
410 |
163,647 |
(269,853 |
) |
62,027 |
719,450 |
||||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2014 |
7,327,663 |
410 |
163,647 |
554,795 |
2,261,930 |
4,455,329 |
|||||||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||
• Net investment income (loss) |
272,212 |
(255 |
) |
(413 |
) |
5,235 |
22,892 |
33,987 |
|||||||||||||||||||
• Net realized gain (loss) on investments |
158,704 |
(1,443 |
) |
(108 |
) |
33,847 |
114,919 |
331,894 |
|||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(1,330,098 |
) |
(2,080 |
) |
(23,789 |
) |
(53,757 |
) |
(226,974 |
) |
(531,029 |
) |
|||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
(899,182 |
) |
(3,778 |
) |
(24,310 |
) |
(14,675 |
) |
(89,163 |
) |
(165,148 |
) |
|||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||
• Contract purchases |
9,539,380 |
2,814 |
7,510 |
48,781 |
246,328 |
475,648 |
|||||||||||||||||||||
• Contract withdrawals |
(1,570,214 |
) |
(233 |
) |
(3,066 |
) |
(24,375 |
) |
(160,870 |
) |
(566,601 |
) |
|||||||||||||||
• Contract transfers |
1,841,413 |
23,840 |
106,730 |
(2,173 |
) |
218,683 |
23,316 |
||||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
9,810,579 |
26,421 |
111,174 |
22,233 |
304,141 |
(67,637 |
) |
||||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
8,911,397 |
22,643 |
86,864 |
7,558 |
214,978 |
(232,785 |
) |
||||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2015 |
$ |
16,239,060 |
$ |
23,053 |
$ |
250,511 |
$ |
562,353 |
$ |
2,476,908 |
$ |
4,222,544 |
L-11
Lincoln National Variable Annuity Account L
Statements of changes in net assets (continued)
Years Ended December 31, 2014 and 2015
LVIP Managed Risk Profile 2040 Fund Standard Class Subaccount |
LVIP Managed Risk Profile 2050 Fund Standard Class Subaccount |
LVIP Mondrian International Value Fund Standard Class Subaccount |
LVIP SSgA Bond Index Fund Standard Class Subaccount |
LVIP SSgA Emerging Markets 100 Fund Standard Class Subaccount |
LVIP SSgA Global Tactical Allocation Managed Volatility Fund Standard Class Subaccount |
LVIP SSgA International Index Fund Standard Class Subaccount |
|||||||||||||||||||||||||
NET ASSETS AT JANUARY 1, 2014 |
$ |
1,599,006 |
$ |
143,326 |
$ |
4,114,403 |
$ |
608,997 |
$ |
1,168,805 |
$ |
1,923,158 |
$ |
150,109 |
|||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||||||
• Net investment income (loss) |
22,179 |
3,671 |
115,088 |
5,221 |
23,342 |
23,717 |
3,387 |
||||||||||||||||||||||||
• Net realized gain (loss) on investments |
51,434 |
38,020 |
(6,187 |
) |
(3,013 |
) |
(32,049 |
) |
20,802 |
745 |
|||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(31,558 |
) |
(38,472 |
) |
(235,511 |
) |
23,521 |
(43,908 |
) |
11,748 |
(19,172 |
) |
|||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
42,055 |
3,219 |
(126,610 |
) |
25,729 |
(52,615 |
) |
56,267 |
(15,040 |
) |
|||||||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||||||
• Contract purchases |
377,263 |
181,044 |
153,520 |
29,598 |
98,448 |
93,445 |
17,579 |
||||||||||||||||||||||||
• Contract withdrawals |
(246,429 |
) |
(30,200 |
) |
(355,371 |
) |
(136,210 |
) |
(148,741 |
) |
(218,115 |
) |
(5,229 |
) |
|||||||||||||||||
• Contract transfers |
(31,648 |
) |
13,556 |
(114,675 |
) |
59,086 |
78,679 |
47,240 |
33,439 |
||||||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
99,186 |
164,400 |
(316,526 |
) |
(47,526 |
) |
28,386 |
(77,430 |
) |
45,789 |
|||||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
141,241 |
167,619 |
(443,136 |
) |
(21,797 |
) |
(24,229 |
) |
(21,163 |
) |
30,749 |
||||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2014 |
1,740,247 |
310,945 |
3,671,267 |
587,200 |
1,144,576 |
1,901,995 |
180,858 |
||||||||||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||||||
• Net investment income (loss) |
11,807 |
3,500 |
67,084 |
9,406 |
36,903 |
34,605 |
3,249 |
||||||||||||||||||||||||
• Net realized gain (loss) on investments |
158,426 |
(5,500 |
) |
(38,002 |
) |
(880 |
) |
(29,133 |
) |
16,592 |
346 |
||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(236,993 |
) |
(17,678 |
) |
(177,748 |
) |
(14,195 |
) |
(219,907 |
) |
(181,774 |
) |
(10,061 |
) |
|||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
(66,760 |
) |
(19,678 |
) |
(148,666 |
) |
(5,669 |
) |
(212,137 |
) |
(130,577 |
) |
(6,466 |
) |
|||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||||||
• Contract purchases |
339,055 |
225,973 |
148,566 |
18,003 |
110,107 |
82,489 |
36,082 |
||||||||||||||||||||||||
• Contract withdrawals |
(374,337 |
) |
(69,025 |
) |
(364,335 |
) |
(93,702 |
) |
(56,397 |
) |
(159,800 |
) |
(31,445 |
) |
|||||||||||||||||
• Contract transfers |
(32,523 |
) |
(18,485 |
) |
(106,773 |
) |
86,223 |
(15,493 |
) |
(67,643 |
) |
22,664 |
|||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
(67,805 |
) |
138,463 |
(322,542 |
) |
10,524 |
38,217 |
(144,954 |
) |
27,301 |
|||||||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
(134,565 |
) |
118,785 |
(471,208 |
) |
4,855 |
(173,920 |
) |
(275,531 |
) |
20,835 |
||||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2015 |
$ |
1,605,682 |
$ |
429,730 |
$ |
3,200,059 |
$ |
592,055 |
$ |
970,656 |
$ |
1,626,464 |
$ |
201,693 |
See accompanying notes.
L-12
LVIP SSgA S&P 500 Index Fund Standard Class Subaccount |
LVIP SSgA Small-Cap Index Fund Standard Class Subaccount |
LVIP T. Rowe Price Structured Mid-Cap Growth Fund Standard Class Subaccount |
LVIP Templeton Growth Managed Volatility Fund Standard Class Subaccount |
LVIP UBS Large Cap Growth Managed Volatility Fund Standard Class Subaccount |
NB AMT Large Cap Value Portfolio I Class Subaccount |
||||||||||||||||||||||
NET ASSETS AT JANUARY 1, 2014 |
$ |
110,935,745 |
$ |
33,044,692 |
$ |
19,754,536 |
$ |
|
$ |
1,698,511 |
$ |
5,382,437 |
|||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||
• Net investment income (loss) |
982,109 |
(50,229 |
) |
(145,690 |
) |
281 |
(16,707 |
) |
(12,654 |
) |
|||||||||||||||||
• Net realized gain (loss) on investments |
2,678,246 |
1,323,708 |
1,916,289 |
(2 |
) |
55,966 |
108,490 |
||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
9,145,844 |
(224,085 |
) |
175,999 |
(1,539 |
) |
33,089 |
352,096 |
|||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
12,806,199 |
1,049,394 |
1,946,598 |
(1,260 |
) |
72,348 |
447,932 |
||||||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||
• Contract purchases |
2,268,937 |
611,351 |
340,577 |
833 |
54,532 |
162,931 |
|||||||||||||||||||||
• Contract withdrawals |
(11,080,809 |
) |
(3,005,464 |
) |
(1,931,167 |
) |
|
(140,218 |
) |
(591,969 |
) |
||||||||||||||||
• Contract transfers |
(2,581,446 |
) |
(1,085,177 |
) |
(368,359 |
) |
24,431 |
29,744 |
85,957 |
||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
(11,393,318 |
) |
(3,479,290 |
) |
(1,958,949 |
) |
25,264 |
(55,942 |
) |
(343,081 |
) |
||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
1,412,881 |
(2,429,896 |
) |
(12,351 |
) |
24,004 |
16,406 |
104,851 |
|||||||||||||||||||
NET ASSETS AT DECEMBER 31, 2014 |
112,348,626 |
30,614,796 |
19,742,185 |
24,004 |
1,714,917 |
5,487,288 |
|||||||||||||||||||||
Changes From Operations: |
|||||||||||||||||||||||||||
• Net investment income (loss) |
924,198 |
(26,274 |
) |
(166,984 |
) |
163 |
(16,064 |
) |
(12,062 |
) |
|||||||||||||||||
• Net realized gain (loss) on investments |
3,551,447 |
1,388,343 |
2,000,338 |
(49 |
) |
71,290 |
451,444 |
||||||||||||||||||||
• Net change in unrealized appreciation or depreciation on investments |
(4,164,448 |
) |
(2,890,485 |
) |
(1,607,047 |
) |
(2,951 |
) |
(48,564 |
) |
(1,094,109 |
) |
|||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
311,197 |
(1,528,416 |
) |
226,307 |
(2,837 |
) |
6,662 |
(654,727 |
) |
||||||||||||||||||
Changes From Unit Transactions: |
|||||||||||||||||||||||||||
• Contract purchases |
2,001,109 |
443,423 |
288,121 |
7,686 |
44,691 |
105,457 |
|||||||||||||||||||||
• Contract withdrawals |
(11,834,801 |
) |
(3,010,165 |
) |
(1,620,992 |
) |
(18 |
) |
(152,281 |
) |
(369,993 |
) |
|||||||||||||||
• Contract transfers |
(1,651,693 |
) |
(803,910 |
) |
(119,689 |
) |
850 |
(27,262 |
) |
(208,114 |
) |
||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
(11,485,385 |
) |
(3,370,652 |
) |
(1,452,560 |
) |
8,518 |
(134,852 |
) |
(472,650 |
) |
||||||||||||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
(11,174,188 |
) |
(4,899,068 |
) |
(1,226,253 |
) |
5,681 |
(128,190 |
) |
(1,127,377 |
) |
||||||||||||||||
NET ASSETS AT DECEMBER 31, 2015 |
$ |
101,174,438 |
$ |
25,715,728 |
$ |
18,515,932 |
$ |
29,685 |
$ |
1,586,727 |
$ |
4,359,911 |
L-13
Lincoln National Variable Annuity Account L
Statements of changes in net assets (continued)
Years Ended December 31, 2014 and 2015
T. Rowe Price International Stock Portfolio Subaccount |
|||||||
NET ASSETS AT JANUARY 1, 2014 |
$ |
12,114,559 |
|||||
Changes From Operations: |
|||||||
• Net investment income (loss) |
3,463 |
||||||
• Net realized gain (loss) on investments |
344,977 |
||||||
• Net change in unrealized appreciation or depreciation on investments |
(579,234 |
) |
|||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
(230,794 |
) |
|||||
Changes From Unit Transactions: |
|||||||
• Contract purchases |
536,079 |
||||||
• Contract withdrawals |
(1,397,088 |
) |
|||||
• Contract transfers |
(306,726 |
) |
|||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
(1,167,735 |
) |
|||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
(1,398,529 |
) |
|||||
NET ASSETS AT DECEMBER 31, 2014 |
10,716,030 |
||||||
Changes From Operations: |
|||||||
• Net investment income (loss) |
(9,295 |
) |
|||||
• Net realized gain (loss) on investments |
430,914 |
||||||
• Net change in unrealized appreciation or depreciation on investments |
(556,931 |
) |
|||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
(135,312 |
) |
|||||
Changes From Unit Transactions: |
|||||||
• Contract purchases |
296,490 |
||||||
• Contract withdrawals |
(1,265,613 |
) |
|||||
• Contract transfers |
(131,896 |
) |
|||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS |
(1,101,019 |
) |
|||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
(1,236,331 |
) |
|||||
NET ASSETS AT DECEMBER 31, 2015 |
$ |
9,479,699 |
See accompanying notes.
L-14
Lincoln National Variable Annuity Account L
Notes to financial statements
December 31, 2015
1. Accounting Policies and Variable Account Information
The Variable Account: Lincoln National Variable Annuity Account L (the Variable Account) is a segregated investment account of The Lincoln National Life Insurance Company (the Company) and is registered as a unit investment trust with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended. The operations of the Variable Account, which commenced on September 26, 1996, are part of the operations of the Company. The Variable Account consists of two products as follows:
• Group Variable Annuity
• Lincoln Secured Retirement Income
The assets of the Variable Account are owned by the Company. The Variable Account's assets support the annuity contracts and may not be used to satisfy liabilities arising from any other business of the Company.
Basis of Presentation: The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for unit investment trusts.
Accounting Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts as of the date of the financial statements. Those estimates are inherently subject to change and actual results could differ from those estimates. Included among the material (or potentially material) reported amounts that require use of estimates is the fair value of certain assets.
Investments: The assets of the Variable Account are divided into variable subaccounts, each of which may be invested in shares of one of fifty-three mutual funds (the Funds) of eleven diversified, open-ended management investment companies, each Fund with its own investment objective. The Funds are:
AllianceBernstein Variable Products Series Fund, Inc. (AB VPS):
AB VPS Global Thematic Growth Portfolio Class B
AB VPS Growth Portfolio Class B
American Century Variable Portfolios, Inc. (American Century VP):
American Century VP Balanced Fund Class I
American Funds Insurance Series (American Funds):
American Funds Global Growth Fund Class 2
American Funds Growth Fund Class 2
American Funds Growth-Income Fund Class 2
American Funds International Fund Class 2
BlackRock Variable Series Funds, Inc. (BlackRock):
BlackRock Global Allocation V.I. Fund Class I
Delaware VIP Trust (Delaware VIP):
Delaware VIP Diversified Income Series Standard Class
Delaware VIP High Yield Series Standard Class
Delaware VIP REIT Series Service Class
Delaware VIP Small Cap Value Series Service Class
Delaware VIP Smid Cap Growth Series Service Class
Deutsche Investments VIT Funds (Deutsche):
Deutsche Alternative Asset Allocation VIP Portfolio A
Fidelity Variable Insurance Products Fund (Fidelity VIP):
Fidelity VIP Asset Manager Portfolio Initial Class
Fidelity VIP Contrafund Portfolio Service Class 2
Fidelity VIP Government Money Market Portfolio Initial Class
Fidelity VIP Growth Portfolio Initial Class
Janus Aspen Series:
Janus Aspen Global Research Portfolio Institutional Shares
Lincoln Variable Insurance Products Trust (LVIP)*:
LVIP Baron Growth Opportunities Fund Service Class
LVIP BlackRock Emerging Markets Managed Volatility Fund Standard Class
LVIP BlackRock Inflation Protected Bond Fund Standard Class
LVIP Clarion Global Real Estate Fund Standard Class
LVIP Delaware Bond Fund Standard Class
LVIP Delaware Diversified Floating Rate Fund Service Class
LVIP Delaware Foundation Aggressive Allocation Fund Standard Class
LVIP Delaware Foundation Conservative Allocation Fund Standard Class
LVIP Delaware Foundation Moderate Allocation Fund Standard Class
LVIP Delaware Social Awareness Fund Standard Class
LVIP Dimensional U.S. Core Equity 1 Fund Standard Class
LVIP Global Conservative Allocation Managed Risk Fund Standard Class
LVIP Global Growth Allocation Managed Risk Fund Standard Class
LVIP Global Income Fund Standard Class
LVIP Global Moderate Allocation Managed Risk Fund Standard Class
LVIP Ivy Mid Cap Growth Managed Volatility Fund Standard Class
LVIP JPMorgan Mid Cap Value Managed Volatility Fund Standard Class
LVIP Managed Risk Profile 2010 Fund Standard Class
LVIP Managed Risk Profile 2020 Fund Standard Class
LVIP Managed Risk Profile 2030 Fund Standard Class
LVIP Managed Risk Profile 2040 Fund Standard Class
LVIP Managed Risk Profile 2050 Fund Standard Class
LVIP Mondrian International Value Fund Standard Class
LVIP SSgA Bond Index Fund Standard Class
L-15
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
1. Accounting Policies and Variable Account Information (continued)
LVIP SSgA Emerging Markets 100 Fund Standard Class
LVIP SSgA Global Tactical Allocation Managed Volatility Fund Standard Class
LVIP SSgA International Index Fund Standard Class
LVIP SSgA S&P 500 Index Fund Standard Class
LVIP SSgA Small-Cap Index Fund Standard Class
LVIP T. Rowe Price Structured Mid-Cap Growth Fund Standard Class
LVIP Templeton Growth Managed Volatility Fund Standard Class
LVIP UBS Large Cap Growth Managed Volatility Fund Standard Class
Neuberger Berman Advisors Management Trust
(NB AMT):
NB AMT Large Cap Value I Class Portfolio
T. Rowe Price International Series, Inc. (T. Rowe Price):
T. Rowe Price International Stock Portfolio
* Denotes an affiliate of The Lincoln National Life Insurance Company.
The Fidelity VIP Government Money Market Portfolio is used only for investments of initial contributions for which the Company has not received complete order instructions. Upon receipt of complete order instructions, the payments transferred to the Fidelity VIP Money Market Portfolio are allocated to purchase shares of one of the above Funds.
Each subaccount invests in shares of a single underlying Fund. The investment performance of each subaccount will reflect the investment performance of the underlying Fund less separate account expenses. There is no assurance that the investment objective of any underlying Fund will be met. A Fund calculates a daily net asset value per share ("NAV") which is based on the market value of its investment portfolio. The amount of risk varies significantly between subaccounts. Due to the level of risk associated with certain investment portfolios, it is at least reasonably possible that changes in the values of investment portfolios will occur in the near term and that such changes could materially affect contract holders investments in the Funds and the amounts reported in the financial statements. The contract holder assumes all of the investment performance risk for the subaccounts selected.
Investments in the Funds are stated at fair value as determined by the closing net asset value per share on December 31, 2015. Net asset value is quoted by the Funds
as derived by the fair value of the Funds' underlying investments. The difference between cost and net asset value is reflected as unrealized appreciation or depreciation of investments. There are no redemption restrictions on investments in the Funds.
In May 2015, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2015-07, "Fair Value Measurement (Topic 820) - Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)." ASU No. 2015-07 requires that investments for which the fair value is measured at NAV using the practical expedient (investments in investees measured at NAV) under "Fair Value Measurements and Disclosures" (Topic 820) be excluded from the fair value hierarchy. ASU No. 2015-07 is effective for interim and annual reporting periods beginning after December 15, 2015. ASU No. 2015-07 is required to be applied retrospectively to all periods presented beginning in the period of adoption. The Variable Account early adopted ASU No. 2015-07 and adoption did not affect the Variable Account's financial condition, results of operations, or cash flows. In accordance with ASU No. 2015-07, the Variable Account's investments in the Funds have not been classified in the fair value hierarchy.
Investment transactions are accounted for on a trade-date basis. The cost of investments sold is determined by the average cost method.
ASU 2013-08, Amendments to the Scope, Measurement, and Disclosure Requirements (Topic 946, Investment Companies) provides accounting guidance for assessing whether an entity is an investment company; considering the entity's purpose and design to determine whether the entity is an investment company. The standard also adds additional disclosure requirements regarding contractually required commitments to investees. Management has evaluated the criteria in the standard and concluded that the Variable Account qualifies as an investment company and therefore will continue to apply the accounting requirements of ASC 946. The adoption of this ASU did not have an effect on our financial condition and results of operations.
Dividends: Dividends paid to the Variable Account are automatically reinvested in shares of the Funds on the payable date with the exception of Fidelity VIP Money Market Portfolio, which is invested monthly. Dividend income is recorded on the ex-dividend date.
Federal Income Taxes: Operations of the Variable Account form a part of and are taxed with operations of the Company, which is taxed as a "life insurance company" under the Internal Revenue Code. The Variable Account will not be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended. Under current federal income tax law, no federal income taxes are payable or receivable with respect to the Variable Account's net investment income and the net realized gain (loss) on investments.
L-16
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
1. Accounting Policies and Variable Account Information (continued)
Investment Fund Changes: During 2014, the following funds became available as investment options for account contract owners. Accordingly, for the subaccounts that commenced operations during 2014, the 2014 statements of changes in net assets and total return and investment income ratios in note 3 are for the period from the commencement of operations to December 31, 2014:
LVIP BlackRock Emerging Markets RPM Fund Standard Class |
LVIP JPMorgan Mid Cap Value RPM Fund Standard Class |
||||||
LVIP Columbia Small-Mid Cap Growth RPM Fund Standard Class |
LVIP Templeton Growth RPM Fund Standard Class |
Also during 2014, the DWS Investments VIT Funds (DWS) family of funds changed its name to Deutsche Investments VIT Funds (Deutsche).
During 2015, the following funds changed their names:
Previous Fund Name |
New Fund Name |
||||||
ABVPSF Global Thematic Growth Fund Class B |
AB VPS Global Thematic Growth Fund Class B |
||||||
ABVPSF Growth Fund Class B |
AB VPS Growth Fund Class B |
||||||
Fidelity VIP Money Market Portfolio Initial Class |
Fidelity VIP Government Money Market Portfolio Initial Class |
||||||
LVIP BlackRock Emerging Markets RPM Fund Standard Class |
LVIP BlackRock Emerging Markets Managed Volatility Fund Standard Class |
||||||
LVIP Delaware Growth and Income Fund Standard Class |
LVIP Dimensional U.S. Core Equity 1 Fund Standard Class |
||||||
LVIP Managed Risk Profile Conservative Fund Standard Class |
LVIP Global Conservative Allocation Managed Risk Fund Standard Class |
||||||
LVIP Managed Risk Profile Growth Fund Standard Class |
LVIP Global Growth Allocation Managed Risk Fund Standard Class |
||||||
LVIP Managed Risk Profile Moderate Fund Standard Class |
LVIP Global Moderate Allocation Managed Risk Fund Standard Class |
||||||
LVIP Columbia Small-Mid Cap Growth RPM Fund Standard Class |
LVIP Ivy Mid Cap Growth Managed Volatility Fund Standard Class |
||||||
LVIP JPMorgan Mid Cap Value RPM Fund Standard Class |
LVIP JPMorgan Mid Cap Value Managed Volatility Fund Standard Class |
||||||
LVIP SSgA Global Tactical Allocation RPM Fund Standard Class |
LVIP SSgA Global Tactical Allocation Managed Volatility Fund Standard Class |
||||||
LVIP Templeton Growth RPM Fund Standard Class |
LVIP Templeton Growth Managed Volatility Fund Standard Class |
||||||
LVIP UBS Large Cap Growth RPM Fund Standard Class |
LVIP UBS Large Cap Growth Managed Volatility Fund Standard Class |
2. Mortality and Expense Guarantees and Other Transactions with Affiliates
Amounts are paid to the Company for mortality and expense guarantees at a percentage of the current value of the Variable Account each day with the exception of Fidelity VIP Government Money Market Portfolio, which does not have a mortality and expense charge. The mortality and expense risk charges for each of the variable subaccounts are reported in the statements of operations. The ranges of rates are as follows for the two contract types within the Variable Account:
• Group Variable Annuity at a daily rate of .0020548% to .0027397% (.75% to 1.00% on an annual basis)
• Lincoln Secured Retirement Income at a daily rate of .0001370% to .0017808% (.05% to .65% on an annual basis)
During May, 2013, the fund replacement listed below occurred in certain products. The replacement fund has higher fund expenses than the fund it replaced, so the Company enacted a mortality and expense guarantee (M&E) reduction to ensure that overall fund expenses were the same after the replacement. The M&E reduction will last for a period of at least two years. The fund replacement was as follows:
Previous Fund Name |
Replacement Fund Name |
M&E Reduction | |||||||||
American Century VP Inflation Protection Class I Fund |
LVIP BlackRock Inflation Protected Bond Standard Class Fund |
0.06 |
% |
The Company charges an annual account fee which varies by product. Refer to the product prospectus for the account fee rate. The account fees are for items such as processing applications, issuing contracts, policy value calculation, confirmations and periodic reports. The Company, upon surrender of a policy, may assess a surrender charge. Amounts retained by the Company for account fees and surrender charges for 2015 and 2014 were $240,936 and $258,284, respectively.
Surrender, contract and all other charges are included within Contract withdrawals on the Statements of Changes in Net Assets.
L-17
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
3. Financial Highlights
A summary of the fee rates, unit values, units outstanding, net assets and total return and investment income ratios for variable annuity contracts as of and for each year or period in the five years ended December 31, 2015, follows:
Subaccount |
Year |
Commencement Date(1) |
Minimum Fee Rate(2) |
Maximum Fee Rate(2) |
Minimum Unit Value(3) |
Maximum Unit Value(3) |
Units Outstanding |
Net Assets |
Minimum Total Return(4) |
Maximum Total Return(4) |
Investment Income Ratio(5) |
||||||||||||||||||||||||||||||||||||
AB VPS Global Thematic Growth Portfolio Class B |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
$ |
5.90 |
$ |
6.13 |
313,715 |
$ |
1,852,385 |
1.63 |
% |
1.88 |
% |
0.00 |
% |
||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
5.80 |
6.01 |
338,951 |
1,969,007 |
3.76 |
% |
4.02 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
5.59 |
5.78 |
355,281 |
1,989,204 |
21.70 |
% |
22.01 |
% |
0.02 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
4.60 |
4.74 |
407,020 |
1,872,402 |
12.11 |
% |
12.40 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
4.10 |
4.22 |
453,695 |
1,861,796 |
-24.17 |
% |
-23.98 |
% |
0.35 |
% |
|||||||||||||||||||||||||||||||||
AB VPS Growth Portfolio Class B |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
13.03 |
13.54 |
127,091 |
1,661,558 |
7.74 |
% |
8.01 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
12.10 |
12.54 |
122,461 |
1,485,769 |
11.84 |
% |
12.12 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
10.82 |
11.18 |
140,737 |
1,525,730 |
32.40 |
% |
32.73 |
% |
0.03 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
8.17 |
8.42 |
145,376 |
1,190,058 |
12.45 |
% |
12.73 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
7.27 |
7.47 |
148,943 |
1,083,910 |
-0.04 |
% |
0.21 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
AB VPS Growth and Income Portfolio Class B |
|||||||||||||||||||||||||||||||||||||||||||||||
2013 |
0.00 |
% |
0.00 |
% |
|
|
|
|
0.00 |
% |
0.00 |
% |
1.18 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
13.21 |
13.50 |
91,918 |
1,214,796 |
16.08 |
% |
16.37 |
% |
1.38 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
11.38 |
11.60 |
83,635 |
952,275 |
5.01 |
% |
5.28 |
% |
1.05 |
% |
|||||||||||||||||||||||||||||||||
American Century VP Balanced Fund Class I |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
40.35 |
42.05 |
327,511 |
13,265,699 |
-3.54 |
% |
-3.30 |
% |
1.72 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
41.83 |
43.48 |
382,815 |
16,070,495 |
8.76 |
% |
9.03 |
% |
1.52 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
38.46 |
39.88 |
434,732 |
16,768,685 |
16.26 |
% |
16.55 |
% |
1.58 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
33.08 |
34.22 |
483,889 |
16,049,324 |
10.69 |
% |
10.97 |
% |
2.06 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
29.89 |
30.84 |
529,970 |
15,875,249 |
4.28 |
% |
4.54 |
% |
1.89 |
% |
|||||||||||||||||||||||||||||||||
American Century VP Inflation Protection Fund Class I |
|||||||||||||||||||||||||||||||||||||||||||||||
2013 |
0.00 |
% |
0.00 |
% |
|
|
|
|
0.00 |
% |
0.00 |
% |
0.54 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
13.08 |
13.20 |
124,230 |
1,625,228 |
6.48 |
% |
6.75 |
% |
2.82 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
12.28 |
12.36 |
92,897 |
1,141,311 |
10.98 |
% |
11.26 |
% |
3.96 |
% |
|||||||||||||||||||||||||||||||||
American Funds Global Growth Fund Class 2 |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
24.72 |
25.45 |
229,813 |
5,699,030 |
5.87 |
% |
6.14 |
% |
1.01 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
23.35 |
23.98 |
239,094 |
5,599,280 |
1.30 |
% |
1.55 |
% |
1.14 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
23.05 |
23.61 |
259,684 |
6,000,890 |
27.89 |
% |
28.21 |
% |
1.26 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
18.02 |
18.42 |
274,966 |
4,966,016 |
21.34 |
% |
21.65 |
% |
0.91 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
14.85 |
15.14 |
302,484 |
4,500,793 |
-9.79 |
% |
-9.57 |
% |
1.25 |
% |
|||||||||||||||||||||||||||||||||
American Funds Growth Fund Class 2 |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
16.72 |
17.37 |
1,566,846 |
26,293,002 |
5.79 |
% |
6.06 |
% |
0.60 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
15.80 |
16.38 |
1,688,620 |
26,773,410 |
7.43 |
% |
7.70 |
% |
0.78 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
14.71 |
15.21 |
1,845,206 |
27,219,661 |
28.81 |
% |
29.13 |
% |
0.93 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
11.42 |
11.78 |
2,046,065 |
23,427,228 |
16.72 |
% |
17.01 |
% |
0.79 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
9.79 |
10.07 |
2,203,885 |
21,614,387 |
-5.23 |
% |
-4.99 |
% |
0.61 |
% |
|||||||||||||||||||||||||||||||||
American Funds Growth-Income Fund Class 2 |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
19.78 |
20.37 |
592,659 |
11,743,805 |
0.45 |
% |
0.70 |
% |
1.32 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
19.70 |
20.22 |
602,195 |
11,877,200 |
9.53 |
% |
9.81 |
% |
1.32 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
17.98 |
18.42 |
602,597 |
10,850,076 |
32.17 |
% |
32.50 |
% |
1.41 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
13.60 |
13.90 |
582,370 |
7,932,965 |
16.31 |
% |
16.60 |
% |
1.63 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
11.70 |
11.92 |
607,917 |
7,118,457 |
-2.81 |
% |
-2.56 |
% |
1.49 |
% |
|||||||||||||||||||||||||||||||||
American Funds International Fund Class 2 |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
14.33 |
14.88 |
636,510 |
9,133,407 |
-5.48 |
% |
-5.24 |
% |
1.46 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
15.16 |
15.71 |
709,340 |
10,765,065 |
-3.62 |
% |
-3.38 |
% |
1.34 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
15.72 |
16.25 |
767,401 |
12,083,542 |
20.42 |
% |
20.73 |
% |
1.35 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
13.06 |
13.46 |
868,210 |
11,350,715 |
16.73 |
% |
17.03 |
% |
1.42 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
11.19 |
11.51 |
1,034,750 |
11,586,451 |
-14.82 |
% |
-14.61 |
% |
1.60 |
% |
L-18
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
3. Financial Highlights (continued)
Subaccount |
Year |
Commencement Date(1) |
Minimum Fee Rate(2) |
Maximum Fee Rate(2) |
Minimum Unit Value(3) |
Maximum Unit Value(3) |
Units Outstanding |
Net Assets |
Minimum Total Return(4) |
Maximum Total Return(4) |
Investment Income Ratio(5) |
||||||||||||||||||||||||||||||||||||
BlackRock Global Allocation V.I. Fund Class I |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
$ |
14.63 |
$ |
14.87 |
104,709 |
$ |
1,532,499 |
-1.70 |
% |
-1.45 |
% |
1.13 |
% |
||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
14.88 |
15.09 |
102,561 |
1,526,870 |
1.09 |
% |
1.35 |
% |
2.23 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
14.72 |
14.89 |
106,183 |
1,563,568 |
13.62 |
% |
13.90 |
% |
1.26 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
12.96 |
13.07 |
93,759 |
1,215,132 |
9.18 |
% |
9.46 |
% |
1.48 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
11.87 |
11.95 |
99,310 |
1,178,695 |
-4.45 |
% |
-4.22 |
% |
2.61 |
% |
|||||||||||||||||||||||||||||||||
Delaware VIP Diversified Income Series Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
17.40 |
17.91 |
305,107 |
5,315,575 |
-2.07 |
% |
-1.82 |
% |
3.02 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
17.77 |
18.25 |
323,001 |
5,744,785 |
4.27 |
% |
4.53 |
% |
2.26 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
17.04 |
17.45 |
346,914 |
5,916,303 |
-2.24 |
% |
-2.00 |
% |
2.37 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
17.43 |
17.81 |
404,524 |
7,056,169 |
6.13 |
% |
6.39 |
% |
3.09 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
16.43 |
16.74 |
409,849 |
6,738,120 |
5.34 |
% |
5.60 |
% |
4.35 |
% |
|||||||||||||||||||||||||||||||||
Delaware VIP High Yield Series Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
17.18 |
17.64 |
131,395 |
2,259,594 |
-7.53 |
% |
-7.29 |
% |
6.52 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
18.57 |
19.02 |
152,142 |
2,829,067 |
-1.28 |
% |
-1.03 |
% |
6.53 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
18.81 |
19.22 |
152,088 |
2,864,216 |
8.13 |
% |
8.40 |
% |
7.40 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
17.40 |
17.73 |
176,736 |
3,077,698 |
16.65 |
% |
16.94 |
% |
8.56 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
14.92 |
15.16 |
189,691 |
2,831,730 |
1.36 |
% |
1.62 |
% |
8.83 |
% |
|||||||||||||||||||||||||||||||||
Delaware VIP REIT Series Service Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
38.95 |
40.46 |
319,994 |
12,490,856 |
2.49 |
% |
2.75 |
% |
1.02 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
38.00 |
39.38 |
354,974 |
13,509,561 |
27.84 |
% |
28.16 |
% |
1.11 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
29.73 |
30.73 |
364,544 |
10,850,558 |
0.91 |
% |
1.16 |
% |
1.32 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
29.46 |
30.38 |
392,488 |
11,576,227 |
15.45 |
% |
15.74 |
% |
1.30 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
25.52 |
26.25 |
428,767 |
10,954,794 |
9.52 |
% |
9.79 |
% |
1.37 |
% |
|||||||||||||||||||||||||||||||||
Delaware VIP Small Cap Value Series Service Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
22.84 |
23.51 |
342,295 |
7,832,045 |
-7.39 |
% |
-7.16 |
% |
0.49 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
24.66 |
25.33 |
400,294 |
9,887,517 |
4.57 |
% |
4.83 |
% |
0.33 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
23.58 |
24.16 |
445,837 |
10,528,843 |
31.85 |
% |
32.18 |
% |
0.51 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
17.89 |
18.28 |
450,097 |
8,060,937 |
12.50 |
% |
12.79 |
% |
0.35 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
15.90 |
16.21 |
480,324 |
7,645,697 |
-2.57 |
% |
-2.33 |
% |
0.30 |
% |
|||||||||||||||||||||||||||||||||
Delaware VIP Smid Cap Growth Series Service Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
17.89 |
18.58 |
300,527 |
5,384,054 |
6.24 |
% |
6.51 |
% |
0.16 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
16.84 |
17.44 |
309,856 |
5,224,630 |
1.85 |
% |
2.10 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
16.53 |
17.09 |
392,019 |
6,490,913 |
39.57 |
% |
39.92 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
11.84 |
12.21 |
363,549 |
4,312,965 |
9.61 |
% |
9.88 |
% |
0.01 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
10.81 |
11.11 |
350,408 |
3,795,589 |
6.83 |
% |
7.09 |
% |
0.72 |
% |
|||||||||||||||||||||||||||||||||
Dreyfus Opportunistic Small Cap Portfolio Initial Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
23.82 |
24.64 |
1,016,901 |
24,277,228 |
19.36 |
% |
19.66 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
19.96 |
20.59 |
1,137,365 |
22,743,588 |
-14.70 |
% |
-14.49 |
% |
0.42 |
% |
|||||||||||||||||||||||||||||||||
Dreyfus Stock Index Fund Initial Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2013 |
0.00 |
% |
0.00 |
% |
|
|
|
|
0.00 |
% |
0.00 |
% |
0.45 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
47.72 |
49.36 |
1,018,877 |
48,754,441 |
14.59 |
% |
14.87 |
% |
2.02 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
41.65 |
42.97 |
1,136,755 |
47,470,262 |
0.86 |
% |
1.12 |
% |
1.80 |
% |
|||||||||||||||||||||||||||||||||
Deutsche Alternative Asset Allocation VIP Portfolio A |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
12.43 |
12.63 |
15,980 |
198,618 |
-7.23 |
% |
-6.99 |
% |
2.92 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
13.40 |
13.58 |
16,747 |
224,367 |
2.47 |
% |
2.73 |
% |
1.75 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
13.07 |
13.22 |
14,420 |
188,525 |
-0.07 |
% |
0.18 |
% |
1.81 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
13.08 |
13.20 |
10,010 |
130,967 |
8.63 |
% |
8.90 |
% |
3.26 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
12.04 |
12.04 |
8,100 |
97,553 |
-3.83 |
% |
-3.83 |
% |
1.50 |
% |
|||||||||||||||||||||||||||||||||
Deutsche Equity 500 Index VIP Portfolio A |
|||||||||||||||||||||||||||||||||||||||||||||||
2013 |
0.00 |
% |
0.00 |
% |
|
|
|
|
0.00 |
% |
0.00 |
% |
1.90 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
14.00 |
14.30 |
125,401 |
1,756,809 |
14.55 |
% |
14.83 |
% |
2.09 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
12.22 |
12.45 |
193,503 |
2,366,306 |
0.82 |
% |
1.07 |
% |
1.75 |
% |
|||||||||||||||||||||||||||||||||
Deutsche Small Cap Index VIP Portfolio A |
|||||||||||||||||||||||||||||||||||||||||||||||
2013 |
0.00 |
% |
0.00 |
% |
|
|
|
|
0.00 |
% |
0.00 |
% |
1.77 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
15.31 |
15.65 |
130,153 |
1,997,201 |
15.09 |
% |
15.38 |
% |
0.88 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
13.31 |
13.56 |
133,027 |
1,773,487 |
-5.37 |
% |
-5.13 |
% |
0.89 |
% |
L-19
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
3. Financial Highlights (continued)
Subaccount |
Year |
Commencement Date(1) |
Minimum Fee Rate(2) |
Maximum Fee Rate(2) |
Minimum Unit Value(3) |
Maximum Unit Value(3) |
Units Outstanding |
Net Assets |
Minimum Total Return(4) |
Maximum Total Return(4) |
Investment Income Ratio(5) |
||||||||||||||||||||||||||||||||||||
Fidelity VIP Asset Manager Portfolio Initial Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
$ |
41.92 |
$ |
43.68 |
827,635 |
$ |
34,757,222 |
-0.85 |
% |
-0.61 |
% |
1.53 |
% |
||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
42.28 |
43.95 |
923,700 |
39,121,218 |
4.78 |
% |
5.04 |
% |
1.46 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
40.35 |
41.84 |
1,006,553 |
40,680,237 |
14.56 |
% |
14.84 |
% |
1.53 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
35.22 |
36.43 |
1,117,038 |
39,405,183 |
11.36 |
% |
11.64 |
% |
1.52 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
31.63 |
32.63 |
1,213,528 |
38,437,578 |
-3.53 |
% |
-3.29 |
% |
1.89 |
% |
|||||||||||||||||||||||||||||||||
Fidelity VIP Contrafund Portfolio Service Class 2 |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
21.71 |
22.56 |
991,770 |
21,570,788 |
-0.58 |
% |
-0.33 |
% |
0.79 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
21.84 |
22.63 |
1,050,549 |
22,983,179 |
10.54 |
% |
10.82 |
% |
0.73 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
19.76 |
20.42 |
1,128,066 |
22,321,096 |
29.65 |
% |
29.97 |
% |
0.83 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
15.24 |
15.71 |
1,205,276 |
18,394,701 |
14.99 |
% |
15.27 |
% |
1.13 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
13.25 |
13.63 |
1,238,854 |
16,441,190 |
-3.75 |
% |
-3.51 |
% |
0.75 |
% |
|||||||||||||||||||||||||||||||||
Fidelity VIP Equity-Income Portfolio Initial Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
33.42 |
34.57 |
1,160,289 |
38,900,117 |
16.14 |
% |
16.43 |
% |
3.06 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
28.77 |
29.69 |
1,282,791 |
37,016,452 |
-0.03 |
% |
0.22 |
% |
2.36 |
% |
|||||||||||||||||||||||||||||||||
Fidelity VIP Government Money Market Portfolio Initial Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.00 |
% |
0.00 |
% |
18.02 |
18.04 |
1,941 |
34,965 |
0.02 |
% |
0.03 |
% |
0.02 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.00 |
% |
0.00 |
% |
18.01 |
18.04 |
548 |
9,873 |
0.01 |
% |
0.01 |
% |
0.01 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.00 |
% |
0.00 |
% |
18.01 |
18.04 |
450 |
8,104 |
0.03 |
% |
0.03 |
% |
0.03 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.00 |
% |
0.00 |
% |
18.00 |
18.03 |
449 |
8,090 |
0.12 |
% |
0.14 |
% |
0.14 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.00 |
% |
0.00 |
% |
17.98 |
17.98 |
2,384 |
42,873 |
0.11 |
% |
0.11 |
% |
0.11 |
% |
|||||||||||||||||||||||||||||||||
Fidelity VIP Growth Portfolio Initial Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
72.06 |
75.10 |
1,063,302 |
76,830,690 |
6.11 |
% |
6.37 |
% |
0.25 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
67.91 |
70.60 |
1,167,218 |
79,461,794 |
10.19 |
% |
10.47 |
% |
0.18 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
61.63 |
63.91 |
1,263,909 |
78,065,251 |
34.98 |
% |
35.32 |
% |
0.28 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
45.66 |
47.23 |
1,415,464 |
64,761,253 |
13.55 |
% |
13.83 |
% |
0.59 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
40.21 |
41.49 |
1,530,863 |
61,671,758 |
-0.80 |
% |
-0.55 |
% |
0.35 |
% |
|||||||||||||||||||||||||||||||||
Janus Aspen Global Research Portfolio Institutional Shares |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
18.60 |
19.38 |
474,214 |
8,850,052 |
-3.26 |
% |
-3.02 |
% |
0.65 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
19.22 |
19.98 |
506,118 |
9,760,515 |
6.37 |
% |
6.64 |
% |
1.07 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
18.07 |
18.74 |
549,580 |
9,962,894 |
27.15 |
% |
27.47 |
% |
1.21 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
14.21 |
14.70 |
620,209 |
8,840,691 |
18.89 |
% |
19.18 |
% |
0.87 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
11.95 |
12.33 |
682,174 |
8,176,833 |
-14.60 |
% |
-14.39 |
% |
0.56 |
% |
|||||||||||||||||||||||||||||||||
LVIP Baron Growth Opportunities Fund Service Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
52.48 |
54.70 |
278,447 |
14,652,966 |
-5.72 |
% |
-5.48 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
55.66 |
57.87 |
306,639 |
17,112,866 |
3.81 |
% |
4.07 |
% |
0.18 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
53.62 |
55.60 |
351,269 |
18,887,194 |
38.67 |
% |
39.02 |
% |
0.43 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
38.67 |
40.00 |
362,634 |
14,060,367 |
17.07 |
% |
17.36 |
% |
1.14 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
33.03 |
34.08 |
419,765 |
13,901,459 |
2.99 |
% |
3.25 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
LVIP BlackRock Emerging Markets Managed Volatility Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
7.83 |
7.83 |
3,254 |
25,469 |
-15.86 |
% |
-15.86 |
% |
1.75 |
% |
|||||||||||||||||||||||||||||||||
2014 |
5/27/14 |
1.00 |
% |
1.00 |
% |
9.30 |
9.30 |
2,549 |
23,703 |
-8.29 |
% |
-8.29 |
% |
1.60 |
% |
||||||||||||||||||||||||||||||||
LVIP BlackRock Inflation Protected Bond Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.69 |
% |
0.94 |
% |
9.15 |
9.23 |
77,644 |
710,885 |
-3.73 |
% |
-3.49 |
% |
1.14 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.69 |
% |
0.94 |
% |
9.51 |
9.57 |
88,703 |
843,424 |
2.10 |
% |
2.36 |
% |
1.42 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.69 |
% |
0.94 |
% |
9.31 |
9.31 |
102,316 |
952,551 |
-9.25 |
% |
-9.25 |
% |
0.95 |
% |
|||||||||||||||||||||||||||||||||
2012 |
5/17/12 |
1.00 |
% |
1.00 |
% |
10.26 |
10.26 |
6,748 |
69,225 |
2.22 |
% |
2.22 |
% |
0.00 |
% |
||||||||||||||||||||||||||||||||
LVIP Clarion Global Real Estate Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
9.52 |
9.72 |
63,079 |
601,774 |
-2.21 |
% |
-1.96 |
% |
3.03 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
9.73 |
9.92 |
61,557 |
600,333 |
12.76 |
% |
13.04 |
% |
2.79 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
8.63 |
8.77 |
76,485 |
661,014 |
2.28 |
% |
2.53 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
8.44 |
8.56 |
73,829 |
623,618 |
23.44 |
% |
23.75 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
6.84 |
6.91 |
73,611 |
503,522 |
-9.58 |
% |
-9.35 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
LVIP Delaware Bond Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
16.00 |
16.47 |
271,002 |
4,340,416 |
-0.61 |
% |
-0.36 |
% |
2.25 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
16.10 |
16.53 |
314,538 |
5,067,417 |
4.92 |
% |
5.18 |
% |
1.97 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
15.34 |
15.71 |
374,119 |
5,746,772 |
-3.28 |
% |
-3.04 |
% |
1.56 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
15.86 |
16.21 |
498,292 |
7,912,925 |
5.55 |
% |
5.81 |
% |
2.00 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
15.03 |
15.32 |
531,555 |
7,996,162 |
6.57 |
% |
6.83 |
% |
3.41 |
% |
L-20
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
3. Financial Highlights (continued)
Subaccount |
Year |
Commencement Date(1) |
Minimum Fee Rate(2) |
Maximum Fee Rate(2) |
Minimum Unit Value(3) |
Maximum Unit Value(3) |
Units Outstanding |
Net Assets |
Minimum Total Return(4) |
Maximum Total Return(4) |
Investment Income Ratio(5) |
||||||||||||||||||||||||||||||||||||
LVIP Delaware Diversified Floating Rate Fund Service Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
$ |
9.74 |
$ |
9.74 |
20,149 |
$ |
196,284 |
-1.96 |
% |
-1.96 |
% |
1.17 |
% |
||||||||||||||||||||||||||||||
2014 |
1.00 |
% |
1.00 |
% |
9.94 |
9.94 |
74,690 |
742,087 |
-0.63 |
% |
-0.63 |
% |
2.53 |
% |
|||||||||||||||||||||||||||||||||
2013 |
1.00 |
% |
1.00 |
% |
10.00 |
10.00 |
12,862 |
128,606 |
-0.50 |
% |
-0.50 |
% |
0.90 |
% |
|||||||||||||||||||||||||||||||||
2012 |
1.00 |
% |
1.00 |
% |
10.05 |
10.05 |
2,511 |
25,234 |
2.93 |
% |
2.93 |
% |
1.35 |
% |
|||||||||||||||||||||||||||||||||
2011 |
7/8/11 |
1.00 |
% |
1.00 |
% |
9.76 |
9.76 |
393 |
3,839 |
-2.14 |
% |
-2.14 |
% |
2.73 |
% |
||||||||||||||||||||||||||||||||
LVIP Delaware Foundation Aggressive Allocation Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
1.00 |
% |
1.00 |
% |
17.45 |
17.45 |
19,011 |
331,712 |
-2.31 |
% |
-2.31 |
% |
1.91 |
% |
|||||||||||||||||||||||||||||||||
2014 |
1.00 |
% |
1.00 |
% |
17.86 |
17.86 |
15,807 |
282,347 |
3.30 |
% |
3.30 |
% |
2.49 |
% |
|||||||||||||||||||||||||||||||||
2013 |
1.00 |
% |
1.00 |
% |
17.29 |
17.29 |
13,400 |
231,692 |
19.04 |
% |
19.04 |
% |
1.72 |
% |
|||||||||||||||||||||||||||||||||
2012 |
1.00 |
% |
1.00 |
% |
14.52 |
14.52 |
10,788 |
156,687 |
12.16 |
% |
12.16 |
% |
2.07 |
% |
|||||||||||||||||||||||||||||||||
2011 |
1.00 |
% |
1.00 |
% |
12.95 |
12.95 |
7,754 |
100,414 |
-3.00 |
% |
-3.00 |
% |
2.34 |
% |
|||||||||||||||||||||||||||||||||
LVIP Delaware Foundation Conservative Allocation Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
15.18 |
15.63 |
78,946 |
1,206,062 |
-1.93 |
% |
-1.68 |
% |
2.70 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
15.48 |
15.90 |
84,283 |
1,312,086 |
3.83 |
% |
4.09 |
% |
2.70 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
14.91 |
15.27 |
82,482 |
1,235,729 |
8.25 |
% |
8.52 |
% |
2.22 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
13.77 |
14.07 |
81,986 |
1,134,046 |
9.53 |
% |
9.81 |
% |
2.41 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
12.57 |
12.82 |
78,818 |
995,079 |
1.21 |
% |
1.47 |
% |
6.45 |
% |
|||||||||||||||||||||||||||||||||
LVIP Delaware Foundation Moderate Allocation Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
16.27 |
16.53 |
18,412 |
299,759 |
-2.13 |
% |
-1.89 |
% |
1.48 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
16.62 |
16.84 |
32,432 |
539,318 |
3.59 |
% |
3.85 |
% |
2.03 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
16.05 |
16.22 |
31,435 |
504,590 |
13.10 |
% |
13.40 |
% |
2.33 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
14.19 |
14.30 |
21,793 |
309,208 |
10.20 |
% |
10.42 |
% |
2.62 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
12.88 |
12.88 |
18,011 |
231,921 |
-0.73 |
% |
-0.73 |
% |
2.88 |
% |
|||||||||||||||||||||||||||||||||
LVIP Delaware Social Awareness Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
26.55 |
27.67 |
566,033 |
15,071,433 |
-1.65 |
% |
-1.40 |
% |
1.46 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
27.00 |
28.06 |
594,059 |
16,083,660 |
14.05 |
% |
14.34 |
% |
1.53 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
23.67 |
24.54 |
647,268 |
15,361,248 |
34.34 |
% |
34.68 |
% |
1.26 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
17.62 |
18.22 |
703,524 |
12,425,870 |
14.14 |
% |
14.42 |
% |
0.75 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
15.44 |
15.93 |
761,073 |
11,777,523 |
-0.36 |
% |
-0.11 |
% |
0.70 |
% |
|||||||||||||||||||||||||||||||||
LVIP Dimensional U.S. Core Equity 1 Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
15.37 |
15.97 |
337,969 |
5,211,826 |
-2.98 |
% |
-2.74 |
% |
1.59 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
15.84 |
16.42 |
356,541 |
5,665,734 |
12.05 |
% |
12.33 |
% |
2.05 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
14.14 |
14.62 |
349,480 |
4,954,347 |
31.93 |
% |
32.26 |
% |
1.79 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
10.72 |
11.05 |
354,280 |
3,805,702 |
14.17 |
% |
14.46 |
% |
1.07 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
9.39 |
9.66 |
390,097 |
3,669,574 |
0.19 |
% |
0.44 |
% |
1.00 |
% |
|||||||||||||||||||||||||||||||||
LVIP Global Conservative Allocation Managed Risk Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
16.00 |
16.43 |
83,903 |
1,343,203 |
-2.97 |
% |
-2.73 |
% |
1.84 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
16.49 |
16.89 |
112,782 |
1,860,347 |
4.65 |
% |
4.91 |
% |
1.91 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
15.76 |
16.10 |
126,229 |
1,989,465 |
8.66 |
% |
8.93 |
% |
1.72 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
14.50 |
14.78 |
156,741 |
2,273,449 |
8.68 |
% |
8.96 |
% |
3.87 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
13.34 |
13.56 |
157,522 |
2,102,251 |
2.65 |
% |
2.91 |
% |
1.52 |
% |
|||||||||||||||||||||||||||||||||
LVIP Global Growth Allocation Managed Risk Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
14.51 |
14.90 |
319,676 |
4,644,203 |
-4.65 |
% |
-4.41 |
% |
1.86 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
15.22 |
15.59 |
360,047 |
5,484,539 |
2.44 |
% |
2.70 |
% |
1.93 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
14.86 |
15.18 |
393,939 |
5,857,083 |
12.42 |
% |
12.70 |
% |
1.77 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
13.22 |
13.47 |
391,875 |
5,182,561 |
8.06 |
% |
8.33 |
% |
2.50 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
12.23 |
12.43 |
418,427 |
5,120,586 |
-1.00 |
% |
-0.75 |
% |
1.97 |
% |
|||||||||||||||||||||||||||||||||
LVIP Global Income Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
11.79 |
11.79 |
29,623 |
349,496 |
-3.00 |
% |
-3.00 |
% |
3.24 |
% |
|||||||||||||||||||||||||||||||||
2014 |
1.00 |
% |
1.00 |
% |
12.16 |
12.16 |
25,356 |
308,252 |
0.93 |
% |
0.93 |
% |
0.66 |
% |
|||||||||||||||||||||||||||||||||
2013 |
1.00 |
% |
1.00 |
% |
12.05 |
12.05 |
21,720 |
261,626 |
-3.79 |
% |
-3.79 |
% |
0.26 |
% |
|||||||||||||||||||||||||||||||||
2012 |
1.00 |
% |
1.00 |
% |
12.52 |
12.52 |
19,785 |
247,696 |
6.62 |
% |
6.62 |
% |
1.90 |
% |
|||||||||||||||||||||||||||||||||
2011 |
1.00 |
% |
1.00 |
% |
11.74 |
11.74 |
20,240 |
237,668 |
0.08 |
% |
0.08 |
% |
4.68 |
% |
|||||||||||||||||||||||||||||||||
LVIP Global Moderate Allocation Managed Risk Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.05 |
% |
1.00 |
% |
10.19 |
15.72 |
1,446,630 |
16,239,060 |
-4.34 |
% |
-3.42 |
% |
2.58 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.05 |
% |
1.00 |
% |
16.00 |
16.39 |
525,926 |
7,327,663 |
3.11 |
% |
3.37 |
% |
2.45 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
15.52 |
15.85 |
358,649 |
5,571,552 |
10.74 |
% |
11.02 |
% |
1.79 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
14.01 |
14.28 |
357,635 |
5,016,147 |
8.50 |
% |
8.77 |
% |
3.29 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
12.91 |
13.13 |
369,710 |
4,778,923 |
0.16 |
% |
0.41 |
% |
1.76 |
% |
L-21
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
3. Financial Highlights (continued)
Subaccount |
Year |
Commencement Date(1) |
Minimum Fee Rate(2) |
Maximum Fee Rate(2) |
Minimum Unit Value(3) |
Maximum Unit Value(3) |
Units Outstanding |
Net Assets |
Minimum Total Return(4) |
Maximum Total Return(4) |
Investment Income Ratio(5) |
||||||||||||||||||||||||||||||||||||
LVIP Ivy Mid Cap Growth Managed Volatility Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
$ |
9.62 |
$ |
9.62 |
2,394 |
$ |
23,053 |
-5.15 |
% |
-5.15 |
% |
0.00 |
% |
||||||||||||||||||||||||||||||
2014 |
6/17/14 |
1.00 |
% |
1.00 |
% |
10.15 |
10.15 |
40 |
410 |
-0.06 |
% |
-0.06 |
% |
0.00 |
% |
||||||||||||||||||||||||||||||||
LVIP JPMorgan Mid Cap Value Managed Volatility Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
9.61 |
9.61 |
26,076 |
250,511 |
-8.66 |
% |
-8.66 |
% |
0.83 |
% |
|||||||||||||||||||||||||||||||||
2014 |
5/30/14 |
1.00 |
% |
1.00 |
% |
10.52 |
10.52 |
15,561 |
163,647 |
4.79 |
% |
4.79 |
% |
1.15 |
% |
||||||||||||||||||||||||||||||||
LVIP Managed Risk Profile 2010 Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
1.00 |
% |
1.00 |
% |
12.61 |
12.61 |
44,587 |
562,353 |
-2.59 |
% |
-2.59 |
% |
1.93 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
12.95 |
13.20 |
42,849 |
554,795 |
3.74 |
% |
4.00 |
% |
1.79 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
12.48 |
12.69 |
66,071 |
824,648 |
7.84 |
% |
8.11 |
% |
1.34 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
11.57 |
11.74 |
65,720 |
760,605 |
7.46 |
% |
7.73 |
% |
2.39 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
10.77 |
10.89 |
65,779 |
709,674 |
0.24 |
% |
0.49 |
% |
0.83 |
% |
|||||||||||||||||||||||||||||||||
LVIP Managed Risk Profile 2020 Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
12.10 |
12.36 |
204,519 |
2,476,908 |
-3.18 |
% |
-2.94 |
% |
1.91 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
12.50 |
12.74 |
180,840 |
2,261,930 |
3.35 |
% |
3.61 |
% |
1.86 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
12.09 |
12.29 |
181,807 |
2,199,903 |
10.03 |
% |
10.30 |
% |
1.28 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
10.99 |
11.14 |
194,273 |
2,136,241 |
7.30 |
% |
7.57 |
% |
2.06 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
10.24 |
10.36 |
196,176 |
2,010,079 |
-0.80 |
% |
-0.55 |
% |
0.76 |
% |
|||||||||||||||||||||||||||||||||
LVIP Managed Risk Profile 2030 Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
11.89 |
12.15 |
354,950 |
4,222,544 |
-3.63 |
% |
-3.39 |
% |
1.77 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
12.34 |
12.58 |
360,949 |
4,455,329 |
3.12 |
% |
3.38 |
% |
2.22 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
11.96 |
12.16 |
312,189 |
3,735,879 |
12.61 |
% |
12.90 |
% |
1.38 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
10.62 |
10.78 |
278,616 |
2,960,652 |
6.82 |
% |
7.09 |
% |
1.90 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
9.95 |
10.06 |
249,283 |
2,479,688 |
-1.55 |
% |
-1.31 |
% |
0.66 |
% |
|||||||||||||||||||||||||||||||||
LVIP Managed Risk Profile 2040 Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
11.20 |
11.45 |
143,308 |
1,605,682 |
-4.19 |
% |
-3.95 |
% |
1.69 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
11.69 |
11.92 |
148,817 |
1,740,247 |
2.45 |
% |
2.71 |
% |
2.29 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
11.41 |
11.60 |
140,076 |
1,599,006 |
15.38 |
% |
15.66 |
% |
1.37 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
9.89 |
10.03 |
124,354 |
1,230,346 |
6.06 |
% |
6.32 |
% |
1.84 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
9.33 |
9.44 |
101,413 |
946,060 |
-2.44 |
% |
-2.20 |
% |
0.63 |
% |
|||||||||||||||||||||||||||||||||
LVIP Managed Risk Profile 2050 Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
1.00 |
% |
1.00 |
% |
11.07 |
11.07 |
38,835 |
429,730 |
-4.70 |
% |
-4.70 |
% |
2.00 |
% |
|||||||||||||||||||||||||||||||||
2014 |
1.00 |
% |
1.00 |
% |
11.61 |
11.61 |
26,779 |
310,945 |
1.92 |
% |
1.92 |
% |
2.68 |
% |
|||||||||||||||||||||||||||||||||
2013 |
1.00 |
% |
1.00 |
% |
11.39 |
11.39 |
12,580 |
143,326 |
17.85 |
% |
17.85 |
% |
2.47 |
% |
|||||||||||||||||||||||||||||||||
2012 |
1.00 |
% |
1.00 |
% |
9.67 |
9.67 |
2,647 |
25,589 |
4.93 |
% |
4.93 |
% |
0.30 |
% |
|||||||||||||||||||||||||||||||||
2011 |
7/15/11 |
1.00 |
% |
1.00 |
% |
9.21 |
9.21 |
29,223 |
269,237 |
-7.17 |
% |
-7.17 |
% |
0.00 |
% |
||||||||||||||||||||||||||||||||
LVIP Mondrian International Value Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
16.90 |
17.40 |
188,498 |
3,200,059 |
-4.75 |
% |
-4.51 |
% |
2.83 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
17.75 |
18.22 |
206,128 |
3,671,267 |
-3.51 |
% |
-3.27 |
% |
3.81 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
18.39 |
18.84 |
223,032 |
4,114,403 |
20.63 |
% |
20.93 |
% |
2.43 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
15.25 |
15.58 |
246,515 |
3,768,229 |
8.53 |
% |
8.80 |
% |
2.77 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
14.05 |
14.32 |
288,351 |
4,059,549 |
-5.17 |
% |
-4.93 |
% |
2.84 |
% |
|||||||||||||||||||||||||||||||||
LVIP SSgA Bond Index Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
11.94 |
12.14 |
49,584 |
592,055 |
-0.75 |
% |
-0.50 |
% |
2.54 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
12.03 |
12.03 |
48,811 |
587,200 |
4.70 |
% |
4.70 |
% |
1.93 |
% |
|||||||||||||||||||||||||||||||||
2013 |
1.00 |
% |
1.00 |
% |
11.49 |
11.49 |
53,003 |
608,997 |
-3.54 |
% |
-3.54 |
% |
2.00 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
11.91 |
12.02 |
59,085 |
704,258 |
2.82 |
% |
3.08 |
% |
2.74 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
11.58 |
11.66 |
50,337 |
583,204 |
6.33 |
% |
6.59 |
% |
3.71 |
% |
|||||||||||||||||||||||||||||||||
LVIP SSgA Emerging Markets 100 Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
12.25 |
12.45 |
79,159 |
970,656 |
-17.87 |
% |
-17.66 |
% |
4.25 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
14.92 |
15.12 |
76,682 |
1,144,576 |
-4.33 |
% |
-4.09 |
% |
2.98 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
15.59 |
15.77 |
74,944 |
1,168,805 |
-3.80 |
% |
-3.55 |
% |
2.35 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
16.21 |
16.35 |
77,620 |
1,258,209 |
11.53 |
% |
11.81 |
% |
2.61 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
14.53 |
14.62 |
78,785 |
1,145,087 |
-15.78 |
% |
-15.57 |
% |
2.43 |
% |
L-22
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
3. Financial Highlights (continued)
Subaccount |
Year |
Commencement Date(1) |
Minimum Fee Rate(2) |
Maximum Fee Rate(2) |
Minimum Unit Value(3) |
Maximum Unit Value(3) |
Units Outstanding |
Net Assets |
Minimum Total Return(4) |
Maximum Total Return(4) |
Investment Income Ratio(5) |
||||||||||||||||||||||||||||||||||||
LVIP SSgA Global Tactical Allocation Managed Volatility Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
$ |
12.89 |
$ |
13.24 |
125,993 |
$ |
1,626,464 |
-7.45 |
% |
-7.22 |
% |
2.95 |
% |
||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
13.93 |
14.27 |
136,392 |
1,901,995 |
2.94 |
% |
3.20 |
% |
2.23 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
13.53 |
13.83 |
141,990 |
1,923,158 |
8.72 |
% |
8.99 |
% |
2.04 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
12.45 |
12.69 |
149,416 |
1,861,171 |
10.04 |
% |
10.32 |
% |
3.40 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
11.31 |
11.50 |
156,978 |
1,776,647 |
-0.78 |
% |
-0.53 |
% |
1.30 |
% |
|||||||||||||||||||||||||||||||||
LVIP SSgA International Index Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
14.23 |
14.47 |
14,173 |
201,693 |
-2.20 |
% |
-1.96 |
% |
2.56 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
14.55 |
14.76 |
12,430 |
180,858 |
-6.78 |
% |
-6.51 |
% |
2.92 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
15.60 |
15.78 |
9,619 |
150,109 |
19.78 |
% |
20.08 |
% |
1.82 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
13.03 |
13.15 |
8,001 |
104,237 |
16.95 |
% |
17.26 |
% |
1.86 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
11.14 |
11.14 |
6,474 |
72,113 |
-13.25 |
% |
-13.25 |
% |
1.04 |
% |
|||||||||||||||||||||||||||||||||
LVIP SSgA S&P 500 Index Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
15.77 |
15.91 |
6,410,542 |
101,174,438 |
0.17 |
% |
0.42 |
% |
1.84 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
15.74 |
15.85 |
7,132,300 |
112,348,626 |
12.30 |
% |
12.58 |
% |
1.87 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
14.02 |
14.02 |
7,910,666 |
110,935,745 |
30.69 |
% |
30.69 |
% |
2.38 |
% |
|||||||||||||||||||||||||||||||||
2012 |
5/21/12 |
1.00 |
% |
1.00 |
% |
10.73 |
10.73 |
1,968 |
21,113 |
9.05 |
% |
9.05 |
% |
2.06 |
% |
||||||||||||||||||||||||||||||||
LVIP SSgA Small-Cap Index Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
14.58 |
14.71 |
1,762,892 |
25,715,728 |
-5.66 |
% |
-5.43 |
% |
0.89 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
15.45 |
15.55 |
1,980,246 |
30,614,796 |
3.63 |
% |
3.89 |
% |
0.82 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
14.91 |
14.91 |
2,215,500 |
33,044,692 |
36.53 |
% |
36.53 |
% |
1.21 |
% |
|||||||||||||||||||||||||||||||||
2012 |
6/19/12 |
1.00 |
% |
1.00 |
% |
10.92 |
10.92 |
507 |
5,536 |
8.17 |
% |
8.17 |
% |
1.01 |
% |
||||||||||||||||||||||||||||||||
LVIP T. Rowe Price Structured Mid-Cap Growth Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
25.71 |
26.79 |
718,249 |
18,515,932 |
1.09 |
% |
1.34 |
% |
0.12 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
25.43 |
26.44 |
774,185 |
19,742,185 |
10.48 |
% |
10.75 |
% |
0.23 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
23.02 |
23.87 |
856,195 |
19,754,536 |
33.45 |
% |
33.79 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
17.25 |
17.84 |
904,684 |
15,640,591 |
15.15 |
% |
15.43 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
14.98 |
15.46 |
1,006,689 |
15,117,255 |
-4.82 |
% |
-4.59 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
LVIP Templeton Growth Managed Volatility Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
1.00 |
% |
1.00 |
% |
8.65 |
8.65 |
3,433 |
29,685 |
-8.94 |
% |
-8.94 |
% |
1.59 |
% |
|||||||||||||||||||||||||||||||||
2014 |
6/26/14 |
1.00 |
% |
1.00 |
% |
9.50 |
9.50 |
2,528 |
24,004 |
-6.78 |
% |
-6.78 |
% |
2.35 |
% |
||||||||||||||||||||||||||||||||
LVIP UBS Large Cap Growth Managed Volatility Fund Standard Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
9.89 |
10.28 |
159,858 |
1,586,727 |
0.33 |
% |
0.58 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
9.86 |
10.22 |
173,436 |
1,714,917 |
4.30 |
% |
4.56 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
9.46 |
9.77 |
179,209 |
1,698,511 |
24.25 |
% |
24.56 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
7.61 |
7.85 |
199,348 |
1,521,247 |
15.23 |
% |
15.52 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
6.60 |
6.79 |
210,235 |
1,391,272 |
-6.62 |
% |
-6.39 |
% |
0.21 |
% |
|||||||||||||||||||||||||||||||||
NB AMT Large Cap Value Portfolio I Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
20.96 |
21.84 |
207,472 |
4,359,911 |
-12.68 |
% |
-12.46 |
% |
0.74 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
24.00 |
24.95 |
228,024 |
5,487,288 |
8.76 |
% |
9.03 |
% |
0.75 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
22.07 |
22.88 |
243,292 |
5,382,437 |
29.83 |
% |
30.16 |
% |
1.17 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
17.00 |
17.58 |
253,438 |
4,318,915 |
15.44 |
% |
15.73 |
% |
0.41 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
14.72 |
15.19 |
290,712 |
4,290,578 |
-12.24 |
% |
-12.02 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
NB AMT Mid Cap Growth Portfolio I Class |
|||||||||||||||||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
9.38 |
9.67 |
702,641 |
6,598,276 |
11.30 |
% |
11.57 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
8.42 |
8.66 |
757,209 |
6,387,768 |
-0.53 |
% |
-0.28 |
% |
0.00 |
% |
|||||||||||||||||||||||||||||||||
T. Rowe Price International Stock Portfolio |
|||||||||||||||||||||||||||||||||||||||||||||||
2015 |
0.75 |
% |
1.00 |
% |
20.15 |
20.99 |
469,356 |
9,479,699 |
-1.89 |
% |
-1.64 |
% |
0.90 |
% |
|||||||||||||||||||||||||||||||||
2014 |
0.75 |
% |
1.00 |
% |
20.53 |
21.35 |
520,642 |
10,716,030 |
-2.22 |
% |
-1.98 |
% |
1.02 |
% |
|||||||||||||||||||||||||||||||||
2013 |
0.75 |
% |
1.00 |
% |
21.00 |
21.78 |
575,787 |
12,114,559 |
12.92 |
% |
13.20 |
% |
0.85 |
% |
|||||||||||||||||||||||||||||||||
2012 |
0.75 |
% |
1.00 |
% |
18.60 |
19.24 |
626,616 |
11,673,495 |
17.26 |
% |
17.55 |
% |
1.25 |
% |
|||||||||||||||||||||||||||||||||
2011 |
0.75 |
% |
1.00 |
% |
15.86 |
16.36 |
678,905 |
10,784,826 |
-13.70 |
% |
-13.49 |
% |
1.43 |
% |
(1) Reflects less than a full year of activity. Funds were first received in this option on the commencement date noted or the option was inactive at the date funds were received thereby a succeeding commencement date is disclosed.
L-23
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
3. Financial Highlights (continued)
(2) These amounts represent the annualized minimum and maximum contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying funds have been excluded.
(3) As the unit value is presented as a range of minimum to maximum values for only those subaccounts which existed for the entire year, some individual contract unit values may not be within the ranges presented as a result of partial year activity.
(4) These amounts represent the total return, including changes in value of mutual funds, and reflect deductions for all items included in the fee rate. The total return does not include contract charges deducted directly from policy account values. The total return is not annualized. As the total return is presented as a range of minimum to maximum values for only those subaccounts which existed for the entire year, some individual contract total returns may not be within the ranges presented as a result of partial year activity.
(5) These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense guarantee charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest. Investment income ratios are not annualized.
Note: Fee rate, unit value and total return minimum and maximum are the same where there is only one active contract level charge for the subaccount.
L-24
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
4. Purchases and Sales of Investments
The aggregate cost of investments purchased and the aggregate proceeds from investments sold were as follows for 2015:
Subaccount |
Aggregate Cost of Purchases |
Aggregate Proceeds from Sales |
|||||||||
AB VPS Global Thematic Growth Portfolio Class B |
$ |
183,532 |
$ |
346,842 |
|||||||
AB VPS Growth Portfolio Class B |
553,492 |
204,564 |
|||||||||
American Century VP Balanced Fund Class I |
1,897,550 |
2,684,089 |
|||||||||
American Funds Global Growth Fund Class 2 |
1,297,085 |
954,665 |
|||||||||
American Funds Growth Fund Class 2 |
6,195,593 |
2,842,307 |
|||||||||
American Funds Growth-Income Fund Class 2 |
2,880,880 |
1,314,000 |
|||||||||
American Funds International Fund Class 2 |
1,060,308 |
1,556,288 |
|||||||||
BlackRock Global Allocation V.I. Fund Class I |
356,618 |
238,546 |
|||||||||
Delaware VIP Diversified Income Series Standard Class |
493,972 |
638,831 |
|||||||||
Delaware VIP High Yield Series Standard Class |
382,689 |
598,119 |
|||||||||
Delaware VIP REIT Series Service Class |
864,503 |
2,151,541 |
|||||||||
Delaware VIP Small Cap Value Series Service Class |
1,299,917 |
1,793,268 |
|||||||||
Delaware VIP Smid Cap Growth Series Service Class |
1,162,304 |
921,277 |
|||||||||
Deutsche Alternative Asset Allocation VIP Portfolio A |
18,426 |
25,071 |
|||||||||
Fidelity VIP Asset Manager Portfolio Initial Class |
3,650,559 |
5,006,674 |
|||||||||
Fidelity VIP Contrafund Portfolio Service Class 2 |
2,919,286 |
2,222,792 |
|||||||||
Fidelity VIP Government Money Market Portfolio Initial Class |
103,836 |
80,532 |
|||||||||
Fidelity VIP Growth Portfolio Initial Class |
3,223,235 |
8,799,691 |
|||||||||
Janus Aspen Global Research Portfolio Institutional Shares |
160,554 |
819,842 |
|||||||||
LVIP Baron Growth Opportunities Fund Service Class |
1,472,504 |
1,933,964 |
|||||||||
LVIP BlackRock Emerging Markets Managed Volatility Fund Standard Class |
25,576 |
18,436 |
|||||||||
LVIP BlackRock Inflation Protected Bond Fund Standard Class |
89,241 |
192,964 |
|||||||||
LVIP Clarion Global Real Estate Fund Standard Class |
130,896 |
102,452 |
|||||||||
LVIP Delaware Bond Fund Standard Class |
330,662 |
969,465 |
|||||||||
LVIP Delaware Diversified Floating Rate Fund Service Class |
44,797 |
585,581 |
|||||||||
LVIP Delaware Foundation Aggressive Allocation Fund Standard Class |
91,847 |
20,440 |
|||||||||
LVIP Delaware Foundation Conservative Allocation Fund Standard Class |
168,631 |
182,388 |
|||||||||
LVIP Delaware Foundation Moderate Allocation Fund Standard Class |
84,766 |
304,406 |
|||||||||
LVIP Delaware Social Awareness Fund Standard Class |
2,353,237 |
1,363,057 |
|||||||||
LVIP Dimensional U.S. Core Equity 1 Fund Standard Class |
1,007,446 |
634,057 |
|||||||||
LVIP Global Conservative Allocation Managed Risk Fund Standard Class |
104,618 |
544,853 |
|||||||||
LVIP Global Growth Allocation Managed Risk Fund Standard Class |
268,514 |
835,242 |
|||||||||
LVIP Global Income Fund Standard Class |
103,587 |
41,033 |
|||||||||
LVIP Global Moderate Allocation Managed Risk Fund Standard Class |
12,355,934 |
2,632,022 |
|||||||||
LVIP Ivy Mid Cap Growth Managed Volatility Fund Standard Class |
57,427 |
31,291 |
|||||||||
LVIP JPMorgan Mid Cap Value Managed Volatility Fund Standard Class |
114,752 |
4,000 |
|||||||||
LVIP Managed Risk Profile 2010 Fund Standard Class |
89,261 |
32,465 |
|||||||||
LVIP Managed Risk Profile 2020 Fund Standard Class |
698,709 |
286,795 |
|||||||||
LVIP Managed Risk Profile 2030 Fund Standard Class |
781,749 |
557,701 |
|||||||||
LVIP Managed Risk Profile 2040 Fund Standard Class |
421,541 |
378,047 |
|||||||||
LVIP Managed Risk Profile 2050 Fund Standard Class |
218,675 |
80,960 |
|||||||||
LVIP Mondrian International Value Fund Standard Class |
303,204 |
560,919 |
|||||||||
LVIP SSgA Bond Index Fund Standard Class |
111,889 |
92,098 |
|||||||||
LVIP SSgA Emerging Markets 100 Fund Standard Class |
195,875 |
121,906 |
|||||||||
LVIP SSgA Global Tactical Allocation Managed Volatility Fund Standard Class |
115,195 |
226,497 |
|||||||||
LVIP SSgA International Index Fund Standard Class |
65,629 |
35,451 |
|||||||||
LVIP SSgA S&P 500 Index Fund Standard Class |
4,176,789 |
13,848,392 |
|||||||||
LVIP SSgA Small-Cap Index Fund Standard Class |
1,222,370 |
3,794,642 |
|||||||||
LVIP T. Rowe Price Structured Mid-Cap Growth Fund Standard Class |
2,008,256 |
2,460,702 |
|||||||||
LVIP Templeton Growth Managed Volatility Fund Standard Class |
9,120 |
451 |
|||||||||
LVIP UBS Large Cap Growth Managed Volatility Fund Standard Class |
35,781 |
187,016 |
|||||||||
NB AMT Large Cap Value Portfolio I Class |
500,228 |
613,974 |
|||||||||
T. Rowe Price International Stock Portfolio |
534,897 |
1,460,174 |
L-25
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
5. Investments
The following is a summary of investments owned at December 31, 2015:
Subaccount |
Shares Owned |
Net Asset Value |
Fair Value of Shares |
Cost of Shares |
|||||||||||||||
AB VPS Global Thematic Growth Portfolio Class B |
85,294 |
$ |
21.71 |
$ |
1,851,733 |
$ |
1,415,957 |
||||||||||||
AB VPS Growth Portfolio Class B |
55,922 |
29.70 |
1,660,896 |
1,299,531 |
|||||||||||||||
American Century VP Balanced Fund Class I |
1,914,191 |
6.93 |
13,265,346 |
13,309,193 |
|||||||||||||||
American Funds Global Growth Fund Class 2 |
217,504 |
26.19 |
5,696,425 |
5,117,774 |
|||||||||||||||
American Funds Growth Fund Class 2 |
388,307 |
67.69 |
26,284,466 |
22,407,659 |
|||||||||||||||
American Funds Growth-Income Fund Class 2 |
260,684 |
45.04 |
11,741,203 |
10,711,537 |
|||||||||||||||
American Funds International Fund Class 2 |
506,776 |
18.02 |
9,132,099 |
9,261,738 |
|||||||||||||||
BlackRock Global Allocation V.I. Fund Class I |
101,526 |
15.09 |
1,532,020 |
1,659,271 |
|||||||||||||||
Delaware VIP Diversified Income Series Standard Class |
516,499 |
10.29 |
5,314,780 |
5,351,933 |
|||||||||||||||
Delaware VIP High Yield Series Standard Class |
462,036 |
4.89 |
2,259,357 |
2,620,371 |
|||||||||||||||
Delaware VIP REIT Series Service Class |
787,552 |
15.86 |
12,490,572 |
10,095,282 |
|||||||||||||||
Delaware VIP Small Cap Value Series Service Class |
233,191 |
33.58 |
7,830,553 |
7,435,431 |
|||||||||||||||
Delaware VIP Smid Cap Growth Series Service Class |
188,493 |
28.56 |
5,383,373 |
4,655,637 |
|||||||||||||||
Deutsche Alternative Asset Allocation VIP Portfolio A |
15,741 |
12.60 |
198,333 |
216,543 |
|||||||||||||||
Fidelity VIP Asset Manager Portfolio Initial Class |
2,205,285 |
15.76 |
34,755,284 |
34,139,444 |
|||||||||||||||
Fidelity VIP Contrafund Portfolio Service Class 2 |
648,462 |
33.26 |
21,567,856 |
17,924,808 |
|||||||||||||||
Fidelity VIP Government Money Market Portfolio Initial Class |
33,177 |
1.00 |
33,177 |
33,177 |
|||||||||||||||
Fidelity VIP Growth Portfolio Initial Class |
1,168,550 |
65.75 |
76,832,182 |
44,851,615 |
|||||||||||||||
Janus Aspen Global Research Portfolio Institutional Shares |
219,916 |
40.24 |
8,849,425 |
8,021,552 |
|||||||||||||||
LVIP Baron Growth Opportunities Fund Service Class |
357,062 |
41.06 |
14,661,689 |
9,929,223 |
|||||||||||||||
LVIP BlackRock Emerging Markets Managed Volatility Fund Standard Class |
3,260 |
7.80 |
25,429 |
32,596 |
|||||||||||||||
LVIP BlackRock Inflation Protected Bond Fund Standard Class |
71,452 |
9.94 |
710,019 |
786,942 |
|||||||||||||||
LVIP Clarion Global Real Estate Fund Standard Class |
64,641 |
9.31 |
601,550 |
513,018 |
|||||||||||||||
LVIP Delaware Bond Fund Standard Class |
319,283 |
13.59 |
4,339,053 |
4,293,555 |
|||||||||||||||
LVIP Delaware Diversified Floating Rate Fund Service Class |
19,979 |
9.82 |
196,255 |
203,385 |
|||||||||||||||
LVIP Delaware Foundation Aggressive Allocation Fund Standard Class |
22,292 |
14.87 |
331,569 |
314,789 |
|||||||||||||||
LVIP Delaware Foundation Conservative Allocation Fund Standard Class |
87,629 |
13.75 |
1,204,988 |
1,283,869 |
|||||||||||||||
LVIP Delaware Foundation Moderate Allocation Fund Standard Class |
20,458 |
14.61 |
298,807 |
305,557 |
|||||||||||||||
LVIP Delaware Social Awareness Fund Standard Class |
376,521 |
40.03 |
15,071,379 |
13,096,574 |
|||||||||||||||
LVIP Dimensional U.S. Core Equity 1 Fund Standard Class |
138,651 |
37.54 |
5,205,247 |
4,655,099 |
|||||||||||||||
LVIP Global Conservative Allocation Managed Risk Fund Standard Class |
101,777 |
13.19 |
1,342,239 |
1,253,880 |
|||||||||||||||
LVIP Global Growth Allocation Managed Risk Fund Standard Class |
366,219 |
12.71 |
4,655,374 |
4,312,042 |
|||||||||||||||
LVIP Global Income Fund Standard Class |
32,180 |
10.86 |
349,407 |
370,563 |
|||||||||||||||
LVIP Global Moderate Allocation Managed Risk Fund Standard Class |
1,189,690 |
13.34 |
15,871,648 |
16,512,473 |
|||||||||||||||
LVIP Ivy Mid Cap Growth Managed Volatility Fund Standard Class |
1,902 |
11.97 |
22,758 |
24,828 |
|||||||||||||||
LVIP JPMorgan Mid Cap Value Managed Volatility Fund Standard Class |
17,512 |
14.30 |
250,407 |
268,380 |
|||||||||||||||
LVIP Managed Risk Profile 2010 Fund Standard Class |
49,423 |
11.38 |
562,385 |
533,304 |
|||||||||||||||
LVIP Managed Risk Profile 2020 Fund Standard Class |
220,559 |
11.22 |
2,475,119 |
2,382,549 |
|||||||||||||||
LVIP Managed Risk Profile 2030 Fund Standard Class |
386,260 |
10.93 |
4,222,212 |
4,024,138 |
|||||||||||||||
LVIP Managed Risk Profile 2040 Fund Standard Class |
154,798 |
10.35 |
1,601,542 |
1,569,014 |
|||||||||||||||
LVIP Managed Risk Profile 2050 Fund Standard Class |
45,497 |
9.35 |
425,170 |
470,334 |
|||||||||||||||
LVIP Mondrian International Value Fund Standard Class |
202,630 |
15.78 |
3,197,914 |
3,778,486 |
|||||||||||||||
LVIP SSgA Bond Index Fund Standard Class |
53,026 |
11.16 |
591,932 |
607,613 |
|||||||||||||||
LVIP SSgA Emerging Markets 100 Fund Standard Class |
132,351 |
7.33 |
969,473 |
1,400,185 |
|||||||||||||||
LVIP SSgA Global Tactical Allocation Managed Volatility Fund Standard Class |
149,952 |
10.84 |
1,625,624 |
1,659,787 |
|||||||||||||||
LVIP SSgA International Index Fund Standard Class |
24,180 |
8.33 |
201,320 |
210,659 |
|||||||||||||||
LVIP SSgA S&P 500 Index Fund Standard Class |
7,027,546 |
14.40 |
101,161,530 |
85,747,574 |
|||||||||||||||
LVIP SSgA Small-Cap Index Fund Standard Class |
1,043,464 |
24.64 |
25,714,085 |
24,328,619 |
|||||||||||||||
LVIP T. Rowe Price Structured Mid-Cap Growth Fund Standard Class |
877,655 |
21.10 |
18,515,894 |
13,545,165 |
|||||||||||||||
LVIP Templeton Growth Managed Volatility Fund Standard Class |
997 |
29.76 |
29,674 |
34,164 |
|||||||||||||||
LVIP UBS Large Cap Growth Managed Volatility Fund Standard Class |
50,270 |
31.55 |
1,586,173 |
1,004,175 |
|||||||||||||||
NB AMT Large Cap Value Portfolio I Class |
330,483 |
13.19 |
4,359,074 |
4,517,002 |
|||||||||||||||
T. Rowe Price International Stock Portfolio |
646,089 |
14.67 |
9,478,126 |
8,658,243 |
L-26
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
6. Changes in Units Outstanding
The change in units outstanding for the year ended December 31, 2015, is as follows:
Subaccount |
Units Issued |
Units Redeemed |
Net Increase (Decrease) |
||||||||||||
AB VPS Global Thematic Growth Portfolio Class B |
32,353 |
(57,589 |
) |
(25,236 |
) |
||||||||||
AB VPS Growth Portfolio Class B |
20,361 |
(15,731 |
) |
4,630 |
|||||||||||
American Century VP Balanced Fund Class I |
6,805 |
(62,109 |
) |
(55,304 |
) |
||||||||||
American Funds Global Growth Fund Class 2 |
28,697 |
(37,978 |
) |
(9,281 |
) |
||||||||||
American Funds Growth Fund Class 2 |
40,967 |
(162,741 |
) |
(121,774 |
) |
||||||||||
American Funds Growth-Income Fund Class 2 |
54,131 |
(63,667 |
) |
(9,536 |
) |
||||||||||
American Funds International Fund Class 2 |
25,206 |
(98,036 |
) |
(72,830 |
) |
||||||||||
BlackRock Global Allocation V.I. Fund Class I |
17,922 |
(15,774 |
) |
2,148 |
|||||||||||
Delaware VIP Diversified Income Series Standard Class |
16,950 |
(34,844 |
) |
(17,894 |
) |
||||||||||
Delaware VIP High Yield Series Standard Class |
10,796 |
(31,543 |
) |
(20,747 |
) |
||||||||||
Delaware VIP REIT Series Service Class |
20,488 |
(55,468 |
) |
(34,980 |
) |
||||||||||
Delaware VIP Small Cap Value Series Service Class |
13,102 |
(71,101 |
) |
(57,999 |
) |
||||||||||
Delaware VIP Smid Cap Growth Series Service Class |
41,081 |
(50,410 |
) |
(9,329 |
) |
||||||||||
Deutsche Alternative Asset Allocation VIP Portfolio A |
1,056 |
(1,823 |
) |
(767 |
) |
||||||||||
Fidelity VIP Asset Manager Portfolio Initial Class |
11,953 |
(108,018 |
) |
(96,065 |
) |
||||||||||
Fidelity VIP Contrafund Portfolio Service Class 2 |
36,054 |
(94,833 |
) |
(58,779 |
) |
||||||||||
Fidelity VIP Government Money Market Portfolio Initial Class |
5,864 |
(4,471 |
) |
1,393 |
|||||||||||
Fidelity VIP Growth Portfolio Initial Class |
9,830 |
(113,746 |
) |
(103,916 |
) |
||||||||||
Janus Aspen Global Research Portfolio Institutional Shares |
6,868 |
(38,772 |
) |
(31,904 |
) |
||||||||||
LVIP Baron Growth Opportunities Fund Service Class |
4,786 |
(32,978 |
) |
(28,192 |
) |
||||||||||
LVIP BlackRock Emerging Markets Managed Volatility Fund Standard Class |
2,631 |
(1,926 |
) |
705 |
|||||||||||
LVIP BlackRock Inflation Protected Bond Fund Standard Class |
9,188 |
(20,247 |
) |
(11,059 |
) |
||||||||||
LVIP Clarion Global Real Estate Fund Standard Class |
11,655 |
(10,133 |
) |
1,522 |
|||||||||||
LVIP Delaware Bond Fund Standard Class |
15,116 |
(58,652 |
) |
(43,536 |
) |
||||||||||
LVIP Delaware Diversified Floating Rate Fund Service Class |
4,407 |
(58,948 |
) |
(54,541 |
) |
||||||||||
LVIP Delaware Foundation Aggressive Allocation Fund Standard Class |
4,284 |
(1,080 |
) |
3,204 |
|||||||||||
LVIP Delaware Foundation Conservative Allocation Fund Standard Class |
6,037 |
(11,374 |
) |
(5,337 |
) |
||||||||||
LVIP Delaware Foundation Moderate Allocation Fund Standard Class |
4,097 |
(18,117 |
) |
(14,020 |
) |
||||||||||
LVIP Delaware Social Awareness Fund Standard Class |
18,744 |
(46,770 |
) |
(28,026 |
) |
||||||||||
LVIP Dimensional U.S. Core Equity 1 Fund Standard Class |
20,769 |
(39,341 |
) |
(18,572 |
) |
||||||||||
LVIP Global Conservative Allocation Managed Risk Fund Standard Class |
4,025 |
(32,904 |
) |
(28,879 |
) |
||||||||||
LVIP Global Growth Allocation Managed Risk Fund Standard Class |
13,701 |
(54,072 |
) |
(40,371 |
) |
||||||||||
LVIP Global Income Fund Standard Class |
7,637 |
(3,370 |
) |
4,267 |
|||||||||||
LVIP Global Moderate Allocation Managed Risk Fund Standard Class |
1,132,450 |
(211,746 |
) |
920,704 |
|||||||||||
LVIP Ivy Mid Cap Growth Managed Volatility Fund Standard Class |
5,440 |
(3,086 |
) |
2,354 |
|||||||||||
LVIP JPMorgan Mid Cap Value Managed Volatility Fund Standard Class |
10,816 |
(301 |
) |
10,515 |
|||||||||||
LVIP Managed Risk Profile 2010 Fund Standard Class |
4,082 |
(2,344 |
) |
1,738 |
|||||||||||
LVIP Managed Risk Profile 2020 Fund Standard Class |
46,442 |
(22,763 |
) |
23,679 |
|||||||||||
LVIP Managed Risk Profile 2030 Fund Standard Class |
38,746 |
(44,745 |
) |
(5,999 |
) |
||||||||||
LVIP Managed Risk Profile 2040 Fund Standard Class |
26,319 |
(31,828 |
) |
(5,509 |
) |
||||||||||
LVIP Managed Risk Profile 2050 Fund Standard Class |
18,972 |
(6,916 |
) |
12,056 |
|||||||||||
LVIP Mondrian International Value Fund Standard Class |
12,199 |
(29,829 |
) |
(17,630 |
) |
||||||||||
LVIP SSgA Bond Index Fund Standard Class |
8,324 |
(7,551 |
) |
773 |
|||||||||||
LVIP SSgA Emerging Markets 100 Fund Standard Class |
11,025 |
(8,548 |
) |
2,477 |
|||||||||||
LVIP SSgA Global Tactical Allocation Managed Volatility Fund Standard Class |
5,612 |
(16,011 |
) |
(10,399 |
) |
||||||||||
LVIP SSgA International Index Fund Standard Class |
4,119 |
(2,376 |
) |
1,743 |
|||||||||||
LVIP SSgA S&P 500 Index Fund Standard Class |
89,739 |
(811,497 |
) |
(721,758 |
) |
||||||||||
LVIP SSgA Small-Cap Index Fund Standard Class |
12,822 |
(230,176 |
) |
(217,354 |
) |
||||||||||
LVIP T. Rowe Price Structured Mid-Cap Growth Fund Standard Class |
33,961 |
(89,897 |
) |
(55,936 |
) |
||||||||||
LVIP Templeton Growth Managed Volatility Fund Standard Class |
942 |
(37 |
) |
905 |
|||||||||||
LVIP UBS Large Cap Growth Managed Volatility Fund Standard Class |
4,794 |
(18,372 |
) |
(13,578 |
) |
||||||||||
NB AMT Large Cap Value Portfolio I Class |
4,924 |
(25,476 |
) |
(20,552 |
) |
||||||||||
T. Rowe Price International Stock Portfolio |
14,316 |
(65,602 |
) |
(51,286 |
) |
L-27
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
6. Changes in Units Outstanding (continued)
The change in units outstanding for the year ended December 31, 2014, is as follows:
Subaccount |
Units Issued |
Units Redeemed |
Net Increase (Decrease) |
||||||||||||
AB VPS Global Thematic Growth Portfolio Class B |
29,671 |
(46,001 |
) |
(16,330 |
) |
||||||||||
AB VPS Growth Portfolio Class B |
10,367 |
(28,643 |
) |
(18,276 |
) |
||||||||||
American Century VP Balanced Fund Class I |
5,704 |
(57,621 |
) |
(51,917 |
) |
||||||||||
American Funds Global Growth Fund Class 2 |
17,587 |
(38,177 |
) |
(20,590 |
) |
||||||||||
American Funds Growth Fund Class 2 |
46,318 |
(202,904 |
) |
(156,586 |
) |
||||||||||
American Funds Growth-Income Fund Class 2 |
58,168 |
(58,570 |
) |
(402 |
) |
||||||||||
American Funds International Fund Class 2 |
35,438 |
(93,499 |
) |
(58,061 |
) |
||||||||||
BlackRock Global Allocation V.I. Fund Class I |
19,022 |
(22,644 |
) |
(3,622 |
) |
||||||||||
Delaware VIP Diversified Income Series Standard Class |
25,650 |
(49,563 |
) |
(23,913 |
) |
||||||||||
Delaware VIP High Yield Series Standard Class |
25,575 |
(25,521 |
) |
54 |
|||||||||||
Delaware VIP REIT Series Service Class |
44,533 |
(54,103 |
) |
(9,570 |
) |
||||||||||
Delaware VIP Small Cap Value Series Service Class |
26,887 |
(72,430 |
) |
(45,543 |
) |
||||||||||
Delaware VIP Smid Cap Growth Series Service Class |
17,417 |
(99,580 |
) |
(82,163 |
) |
||||||||||
Deutsche Alternative Asset Allocation VIP Portfolio A |
6,668 |
(4,341 |
) |
2,327 |
|||||||||||
Fidelity VIP Asset Manager Portfolio Initial Class |
8,606 |
(91,459 |
) |
(82,853 |
) |
||||||||||
Fidelity VIP Contrafund Portfolio Service Class 2 |
47,086 |
(124,603 |
) |
(77,517 |
) |
||||||||||
Fidelity VIP Government Money Market Portfolio Initial Class |
8,782 |
(8,684 |
) |
98 |
|||||||||||
Fidelity VIP Growth Portfolio Initial Class |
18,272 |
(114,963 |
) |
(96,691 |
) |
||||||||||
Janus Aspen Global Research Portfolio Institutional Shares |
10,618 |
(54,080 |
) |
(43,462 |
) |
||||||||||
LVIP Baron Growth Opportunities Fund Service Class |
5,029 |
(49,659 |
) |
(44,630 |
) |
||||||||||
LVIP BlackRock Emerging Markets Managed Volatility Fund Standard Class |
3,776 |
(1,227 |
) |
2,549 |
|||||||||||
LVIP BlackRock Inflation Protected Bond Fund Standard Class |
20,542 |
(34,155 |
) |
(13,613 |
) |
||||||||||
LVIP Clarion Global Real Estate Fund Standard Class |
11,497 |
(26,425 |
) |
(14,928 |
) |
||||||||||
LVIP Delaware Bond Fund Standard Class |
30,699 |
(90,280 |
) |
(59,581 |
) |
||||||||||
LVIP Delaware Diversified Floating Rate Fund Service Class |
70,653 |
(8,825 |
) |
61,828 |
|||||||||||
LVIP Delaware Foundation Aggressive Allocation Fund Standard Class |
3,768 |
(1,361 |
) |
2,407 |
|||||||||||
LVIP Delaware Foundation Conservative Allocation Fund Standard Class |
8,617 |
(6,816 |
) |
1,801 |
|||||||||||
LVIP Delaware Foundation Moderate Allocation Fund Standard Class |
11,147 |
(10,150 |
) |
997 |
|||||||||||
LVIP Delaware Social Awareness Fund Standard Class |
17,658 |
(70,867 |
) |
(53,209 |
) |
||||||||||
LVIP Dimensional U.S. Core Equity 1 Fund Standard Class |
37,702 |
(30,641 |
) |
7,061 |
|||||||||||
LVIP Global Conservative Allocation Managed Risk Fund Standard Class |
18,033 |
(31,480 |
) |
(13,447 |
) |
||||||||||
LVIP Global Growth Allocation Managed Risk Fund Standard Class |
31,031 |
(64,923 |
) |
(33,892 |
) |
||||||||||
LVIP Global Income Fund Standard Class |
9,067 |
(5,431 |
) |
3,636 |
|||||||||||
LVIP Global Moderate Allocation Managed Risk Fund Standard Class |
236,276 |
(68,999 |
) |
167,277 |
|||||||||||
LVIP Ivy Mid Cap Growth Managed Volatility Fund Standard Class |
256 |
(216 |
) |
40 |
|||||||||||
LVIP JPMorgan Mid Cap Value Managed Volatility Fund Standard Class |
15,821 |
(260 |
) |
15,561 |
|||||||||||
LVIP Managed Risk Profile 2010 Fund Standard Class |
5,015 |
(28,237 |
) |
(23,222 |
) |
||||||||||
LVIP Managed Risk Profile 2020 Fund Standard Class |
40,536 |
(41,503 |
) |
(967 |
) |
||||||||||
LVIP Managed Risk Profile 2030 Fund Standard Class |
68,601 |
(19,841 |
) |
48,760 |
|||||||||||
LVIP Managed Risk Profile 2040 Fund Standard Class |
31,931 |
(23,190 |
) |
8,741 |
|||||||||||
LVIP Managed Risk Profile 2050 Fund Standard Class |
18,100 |
(3,901 |
) |
14,199 |
|||||||||||
LVIP Mondrian International Value Fund Standard Class |
10,163 |
(27,067 |
) |
(16,904 |
) |
||||||||||
LVIP SSgA Bond Index Fund Standard Class |
19,098 |
(23,290 |
) |
(4,192 |
) |
||||||||||
LVIP SSgA Emerging Markets 100 Fund Standard Class |
16,614 |
(14,876 |
) |
1,738 |
|||||||||||
LVIP SSgA Global Tactical Allocation Managed Volatility Fund Standard Class |
9,677 |
(15,275 |
) |
(5,598 |
) |
||||||||||
LVIP SSgA International Index Fund Standard Class |
4,554 |
(1,743 |
) |
2,811 |
|||||||||||
LVIP SSgA S&P 500 Index Fund Standard Class |
59,619 |
(837,985 |
) |
(778,366 |
) |
||||||||||
LVIP SSgA Small-Cap Index Fund Standard Class |
27,225 |
(262,479 |
) |
(235,254 |
) |
||||||||||
LVIP T. Rowe Price Structured Mid-Cap Growth Fund Standard Class |
22,065 |
(104,075 |
) |
(82,010 |
) |
||||||||||
LVIP Templeton Growth Managed Volatility Fund Standard Class |
2,528 |
|
2,528 |
||||||||||||
LVIP UBS Large Cap Growth Managed Volatility Fund Standard Class |
10,206 |
(15,979 |
) |
(5,773 |
) |
||||||||||
NB AMT Large Cap Value Portfolio I Class |
18,852 |
(34,120 |
) |
(15,268 |
) |
||||||||||
T. Rowe Price International Stock Portfolio |
22,353 |
(77,498 |
) |
(55,145 |
) |
L-28
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
7. Subsequent Event
Management evaluated subsequent events through the date these financial statements were issued and determined there were no additional matters to be disclosed.
L-29
Report of Independent Registered Public Accounting Firm
Board of Directors of The Lincoln National Life Insurance Company
and
Contract Owners of Lincoln National Variable Annuity Account L
We have audited the accompanying statements of assets and liabilities of Lincoln National Variable Annuity Account L ("Variable Account"), comprised of the subaccounts described in Note 1, as of December 31, 2015, and the related statements of operations for the year then ended and the statements of changes in net assets for each of the two years in the period then ended, or for those sub-accounts operating for portions of such periods as disclosed in the financial statements. These financial statements are the responsibility of the Variable Account's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Variable Account's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Variable Account's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of investments owned as of December 31, 2015, by correspondence with the fund companies, or their transfer agents, as applicable. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective subaccounts constituting Lincoln National Variable Annuity Account L at December 31, 2015, and the results of their operations and the changes in their net assets for the periods described above, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania
April 26, 2016
L-30
Name | Positions and Offices with Depositor | |
Charles A. Brawley, III** | Executive Vice President, General Counsel and Secretary1 | |
Ellen G. Cooper** | Executive Vice President, Chief Investment Officer and Director | |
Jeffrey D. Coutts** | Senior Vice President and Treasurer | |
Randal J. Freitag** | Executive Vice President, Chief Financial Officer and Director | |
Wilford H. Fuller** | Executive Vice President and Director | |
Dennis R. Glass** | President and Director | |
Kirkland L. Hicks** | Executive Vice President, General Counsel and Secretary1 | |
Mark E. Konen** | Executive Vice President and Director | |
Christine Janofsky** | Senior Vice President, Chief Accounting Officer and Controller | |
Keith J. Ryan* | Vice President and Director |
Name | Positions and Offices with Underwriter | |
Andrew J. Bucklee* | Senior Vice President and Director | |
Patrick J. Caulfield** | Vice President, Chief Compliance Officer and Senior Counsel | |
Jeffrey D. Coutts* | Senior Vice President and Treasurer | |
Wilford H. Fuller* | President, Chief Executive Officer and Director | |
John C. Kennedy* | Senior Vice President, Head of Retirement Solutions Distribution, and Director | |
Thomas P. O'Neill* | Senior Vice President and Chief Operating Officer | |
Christopher P. Potochar* | Senior Vice President and Director, Head of Finance and Strategy | |
Nancy A. Smith* | Secretary |
a) | As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Registration Statement and has caused this Post-Effective Amendment No. 2 to the Registration Statement to be signed on its behalf, in the City of Fort Wayne, and State of Indiana on this 27th day of April, 2016. |
Lincoln National Variable Annuity Account L (Registrant) Lincoln Retirement Income RolloverSM Version 3 | ||
By: | /s/ Robert M. Melia Robert M. Melia Vice President, The Lincoln National Life Insurance Company (Title) | |
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (Depositor) | ||
By: | /s/ John D. Weber John D. Weber (Signature-Officer of Depositor) Vice President, The Lincoln National Life Insurance Company (Title) |
(b) | As required by the Securities Act of 1933, this Amendment to the Registration Statement has been signed by the following persons in their capacities indicated on April 27, 2016. |
Signature | Title |
* Dennis R. Glass | President and Director (Principal Executive Officer) |
* Ellen Cooper | Executive Vice President, Chief Investment Officer and Director |
* Randal J. Freitag | Executive Vice President, Chief Financial Officer and Director (Principal Financial Officer) |
* Wilford H. Fuller | Executive Vice President and Director |
* Mark E. Konen | Senior Vice President and Director |
* Keith J. Ryan | Vice President and Director |
*By: /s/ John D. Weber John D. Weber | Pursuant to a Power of Attorney |
Exhibit (10)(a)
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Independent Registered Public Accounting Firm in Post-Effective Amendment No. 2 to the 1933 Act Registration Statement (Form N-4 No. 333-198913) and Amendment No. 81 to the 1940 Act Registration Statement (Form N-4 No. 811-07645), and to the use therein of our reports dated (a) March 31, 2016, with respect to the consolidated financial statements of The Lincoln National Life Insurance Company and (b) April 26, 2016, with respect to the financial statements of Lincoln National Variable Annuity Account L for the registration of interests in a separate account under individual flexible payment deferred variable annuity contracts.
Philadelphia, Pennsylvania
April 26, 2016
POWER OF ATTORNEY
We, the undersigned directors and/or officers of The Lincoln National Life Insurance Company, hereby constitute and appoint Delson R. Campbell, Scott C. Durocher, Kimberly A. Genovese, Daniel P. Herr, Donald E. Keller, Brian A. Kroll, John L. Reizian, Lawrence A. Samplatsky, Stephen R. Turer and John D. Weber, individually, our true and lawful attorneys-in-fact, with full power to each of them to sign for us, in our names and in the capacities indicated below, any Registration Statements and any and all amendments to Registration Statements; including exhibits, or other documents filed on Forms N-6 or N-4 or any successors or amendments to these Forms, filed with the Securities and Exchange Commission, under the Securities Act of 1933 and/or Securities Act of 1940, on behalf of the Company in its own name or in the name of one of its Separate Accounts, hereby ratifying and confirming our signatures as they may be signed by any of our attorneys-in-fact to any such amendments to said Registration Statements as follows:
Variable Life Insurance Separate Accounts:
Lincoln Life Flexible Premium Variable Life Account D: File No. 033-00417; 811-04592
Lincoln Life Flexible Premium Variable Life Account F: File No. 033-14692, 333-40745; 811-05164
Lincoln Life Flexible Premium Variable Life Account G: File No. 033-22740; 811-05585
Lincoln Life Flexible Premium Variable Life Account J: File No. 033-76434; 811-08410
Lincoln Life Flexible Premium Variable Life Account K: File No. 033-76432; 811-08412
Lincoln Life Flexible Premium Variable Life Account M: File No. 333-82663, 333-84360, 333-42479, 333-54338, 333-84370, 333-63940, 333-111137, 333-111128, 333-118478, 333-118477, 333-145090, 333-139960, 333-146507; 333-181796; 333-191329; 333-192303; 333-200100; 811-08557
Lincoln Life Flexible Premium Variable Life Account R: File No. 333-43107, 333-33782, 333-90432, 333-115882, 333-125792, 333-125991, 333-145235, 333-145239; 333-188891; 333-207968; 811-08579
Lincoln Life Flexible Premium Variable Life Account S: File No. 333-72875, 333-104719, 333-125790; 811-09241
Lincoln Life Flexible Premium Variable Life Account Y: File No. 333-81884, 333-81882, 333-90438, 333-118482, 333-118481, 333-115883; 333-156123; 811-21028
Lincoln Life Flexible Premium Variable Life Account JF-A: File No. 333-144268, 333-144269, 333-144271, 333-144272; 333-144273, 333-144274, 333-144275; 811-04160
Lincoln Life Flexible Premium Variable Life Account JF-C: File No. 333-144270, 333-144264; 811-08230
Variable Annuity Separate Accounts:
Lincoln National Variable Annuity Fund A: File No. 002-26342, 002-25618; 811-01434
Lincoln National Variable Annuity Account C: 033-25990, 333-50817, 333-68842, 333-112927; 333-179107; 811-03214
Lincoln National Variable Annuity Account E: 033-26032; 811-04882
Lincoln National Variable Annuity Account H: 033-27783, 333-18419, 333-35780, 333-35784, 333-61592, 333-63505, 333-135219; 333-170695; 333-175888; 333-181615; 811-05721
Lincoln National Variable Annuity Account L: 333-04999; 333-187072; 333-187069; 333-187070; 333-187071; 333-198911; 333-198912; 333-198913; 333-198914; 811-07645
Lincoln Life Variable Annuity Account N: 333-40937, 333-36316, 333-36304, 333-61554, 333-135039, 333-138190, 333-149434; 333-170529; 333-170897; 333-172328; 333-174367; 333-181612; 333-186894; 333-193272; 333-193273; 333-193274; 811-08517
Lincoln Life Variable Annuity Account Q: 333-43373; 811-08569
Lincoln Life Variable Annuity Account T: 333-32402, 333-73532; 811-09855
Lincoln Life Variable Annuity Account W: 333-52572, 333-52568, 333-64208; 811-10231
Lincoln Life Variable Annuity Account JL-A: File No. 333-141888; 811-02188
Lincoln Life Variable Annuity Account JF-I: File No. 333-144276, 333-144277; 811-09779
Lincoln Life Variable Annuity Account JF-II: File No. 333-144278; 811-08374
Except as otherwise specifically provided herein, the power-of-attorney granted herein shall not in any manner revoke in whole or in part any power-of-attorney that each person whose signature appears below has previously executed. This power-of-attorney shall not be revoked by any subsequent power-of-attorney each person whose signature appears below may execute, unless such subsequent power specifically refers to this power-of-attorney or specifically states that the instrument is intended to revoke all prior general powers-of-attorney or all prior powers-of-attorney.
This Power-of-Attorney may be executed in separate counterparts each of which when executed and delivered shall be an original; but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies, each signed by less than all, but together signed by all, of the undersigned.
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/s/ Dennis R. Glass |
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President and Director |
Dennis R. Glass |
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/s/ Ellen Cooper |
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Executive Vice President, Chief Investment Officer |
Ellen Cooper |
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and Director |
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/s/ Randal J. Freitag |
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Executive Vice President; Chief Financial Officer and Director |
Randal J. Freitag |
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/s/ Mark E. Konen |
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Executive Vice President and Director |
Mark E. Konen |
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/s/ Wilford H. Fuller |
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Executive Vice President and Director |
Wilford H. Fuller |
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/s/ Keith J. Ryan |
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Vice President and Director |
Keith J. Ryan |
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We, Delson R. Campbell, Scott C. Durocher, Kimberly A. Genovese, Daniel P. Herr, Donald E. Keller, Brian A. Kroll, John L. Reizian, Lawrence A. Samplatsky, Stephen R. Turer and John D. Weber, have read the foregoing Power of Attorney. We are the person(s) identified therein as agent(s) for the principal named therein. We acknowledge our legal responsibilities.
/s/ Delson R. Campbell |
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Delson R. Campbell |
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/s/ Scott C. Durocher |
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Scott C. Durocher |
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/s/ Kimberly A. Genovese |
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Kimberly A. Genovese |
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/s/ Daniel P. Herr |
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Daniel P. Herr |
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/s/ Donald E. Keller |
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Donald E. Keller |
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/s/ Brian A. Kroll |
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Brian A. Kroll |
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/s/ John L. Reizian |
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John L. Reizian |
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/s/ Lawrence A. Samplatsky |
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Lawrence A. Samplatsky |
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/s/ Stephen R. Turer |
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Stephen R. Turer |
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/s/ John D. Weber |
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John D. Weber |
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Version dated: January 2016 |
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