485BPOS

As filed with the Securities and Exchange Commission on April 23, 2020

1933 Act Registration No. 333-04999

1940 Act Registration No. 811-07645

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

POST-EFFECTIVE AMENDMENT NO. 33

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 121

Lincoln National Variable Annuity Account L
(Exact Name of Registrant)

Group Variable Annuity I, II & III

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(Name of Depositor)

1300 South Clinton Street
Post Office Box 1110

Fort Wayne, Indiana 46801

(Address of Depositor’s Principal Executive Offices)

Depositor’s Telephone Number, Including Area Code: (260) 455-2000

Leon E. Roday, Esquire

The Lincoln National Life Insurance Company
150 North Radnor Chester Road
Radnor, PA 19087

(Name and Address of Agent for Service)

Copy to:

Scott C. Durocher, Esquire

The Lincoln National Life Insurance Company
350 Church Street

Hartford, Connecticut 06103

Approximate Date of Proposed Public Offering: Continuous

It is proposed that this filing will become effective:

/ / immediately upon filing pursuant to paragraph (b) of Rule 485

/X/ on May 1, 2020, pursuant to paragraph (b) of Rule 485

/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485

/ / on __________, pursuant to paragraph (a)(1) of Rule 485

Title of Securities being registered:

Interests in a separate account under group flexible
payment deferred variable annuity contracts.

Lincoln National Variable Annuity Account L
Group Variable Annuity Contracts I, II, & III  

May 1, 2020

Home Office:
The Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46802

Servicing Office:
The Lincoln National Life Insurance Company
PO Box 2340
Fort Wayne, IN 46801-2340
1-800-341-0441
www.LincolnFinancial.com

 

This prospectus describes a group annuity contract and an individual certificate that is issued by The Lincoln National Life Insurance Company (Lincoln Life or Company). This prospectus is for use with qualified retirement plans. Generally, you do not pay federal income tax on the contract's growth until it is paid out. Qualified retirement plans already provide for tax deferral. Therefore, there should be reasons other than tax deferral for acquiring the contract within a qualified plan. The contract is designed to accumulate Account Value , and as permitted by the plan, to provide retirement income over a certain period of time, or for life, subject to certain conditions. If the Annuitant dies before the Annuity Commencement Date, a Death Benefit may be payable.

If the Contractowner gives certain rights to Plan Participants, we issue active life certificates to them. Participants choose whether Account Value accumulates on a variable or a fixed (guaranteed) basis or both. If a Participant allocates contributions to the fixed account, we guarantee principal and a minimum interest rate.

All contributions for benefits on a variable basis will be placed in Lincoln National Variable Annuity Account L (VAA). The VAA is a segregated investment account of Lincoln Life. If a Participant puts all or some contributions into one or more of the contract's Subaccounts, the Participant takes all the investment risk on the Account Value and the retirement income. If the selected Subaccounts make money, Account Value goes up; if they lose money, it goes down. How much it goes up or down depends on the performance of the selected Subaccounts. We do not guarantee how any of the Subaccounts or their funds will perform. Also, neither the U.S. Government nor any federal agency insures or guarantees the investment in the contract.

The available Subaccounts, and the funds in which they invest, are listed below. The Contractowner decides which of these Subaccounts are available under the contract for Participant allocations. For more information about the investment objectives, policies and risk of the funds please refer to the Prospectuses for the funds.

AllianceBernstein Variable Products Series Fund:

AB VPS Global Thematic Growth Portfolio

AB VPS Large Cap Growth Portfolio

American Century Variable Portfolios, Inc.:

American Century VP Balanced Fund

American Funds Insurance Series^®:

American Funds Global Growth Fund

American Funds Growth Fund

American Funds Growth-Income Fund

American Funds International Fund

BlackRock Variable Series Funds, Inc.:

BlackRock Global Allocation V.I. Fund

Delaware VIP^® Trust:

Delaware VIP^® Diversified Income Series

Delaware VIP^® High Yield Series

Delaware VIP^® REIT Series

Delaware VIP^® Small Cap Value Series

Delaware VIP^® Smid Cap Core Series

Deutsche DWS Variable Series II:

DWS Alternative Asset Allocation VIP Portfolio

Fidelity^® Variable Insurance Products:

Fidelity^® VIP Asset Manager Portfolio

Fidelity^® VIP Contrafund^® Portfolio

Fidelity^® VIP Freedom 2020 Portfolio^SM

Fidelity^® VIP Freedom 2025 Portfolio^SM

Fidelity^® VIP Freedom 2030 Portfolio^SM

Fidelity^® VIP Freedom 2035 Portfolio^SM

Fidelity^® VIP Freedom 2040 Portfolio^SM

Fidelity^® VIP Freedom 2045 Portfolio^SM

Fidelity^® VIP Freedom 2050 Portfolio^SM

Fidelity^® VIP Freedom 2055 Portfolio^SM

Fidelity^® VIP Freedom 2060 Portfolio^SM

Fidelity^® VIP Growth Portfolio

Janus Aspen Series:

Janus Henderson Global Research Portfolio

Lincoln Variable Insurance Products Trust:

LVIP Baron Growth Opportunities Fund

LVIP BlackRock Advantage Allocation Fund

LVIP BlackRock Global Real Estate Fund

LVIP BlackRock Inflation Protected Bond Fund

LVIP Blended Large Cap Growth Managed Volatility Fund

LVIP Blended Mid Cap Managed Volatility Fund

LVIP Delaware Bond Fund

LVIP Delaware Diversified Floating Rate Fund

LVIP Delaware Social Awareness Fund

LVIP Delaware Wealth Builder Fund

LVIP Dimensional U.S. Core Equity 1 Fund

LVIP Franklin Templeton Global Equity Managed Volatility Fund

LVIP Global Conservative Allocation Managed Risk Fund

 

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LVIP Global Growth Allocation Managed Risk Fund

LVIP Global Income Fund

LVIP Global Moderate Allocation Managed Risk Fund

LVIP JPMorgan Retirement Income Fund

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund

LVIP Mondrian International Value Fund

LVIP SSGA Bond Index Fund

LVIP SSGA Emerging Markets 100 Fund

LVIP SSGA Global Tactical Allocation Managed Volatility Fund

LVIP SSGA International Index Fund

LVIP SSGA International Managed Volatility Fund

LVIP SSGA S&P 500 Index Fund**

LVIP SSGA Small-Cap Index Fund

LVIP T. Rowe Price 2010 Fund

LVIP T. Rowe Price 2020 Fund

LVIP T. Rowe Price 2030 Fund

LVIP T. Rowe Price 2040 Fund

LVIP T. Rowe Price 2050 Fund

LVIP T. Rowe Price 2060 Fund*

LVIP T. Rowe Price Structured Mid-Cap Growth Fund

Neuberger Berman Advisers Management Trust:

Neuberger Berman AMT Sustainable Equity Portfolio

T. Rowe Price International Series, Inc.

T. Rowe Price International Stock Portfolio

*Refer to the Description of Funds section of this prospectus for specific information regarding availability of funds.

** The Index to which this fund is managed is a product of S&P Dow Jones Indices LLC (“SPDJI”) and has been licensed for use by one or more of the portfolio’s service providers (licensee). Standard & Poor’s^® and S&P^® are registered trademarks of Standard & Poor’s Financial Services LLC (S&P); Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by the licensees. S&P^®, S&P GSCI^® and the Index are trademarks of S&P and have been licensed for use by SPDJI and its affiliates and sublicensed for certain purposes by the licensee. The Index is not owned, endorsed, or approved by or associated with any additional third party. The licensee’s products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, or their third party licensors, and none of these parties or their respective affiliates or third party licensors make any representation regarding the advisability of investing in such products, nor do they have any liability for any errors, omissions, or interruptions of the Index.

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission (“SEC”), you may not be receiving paper copies of the funds’ shareholder reports from us by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on a website, and we will notify you by mail each time a report is posted and will provide you with a website link to access the report. We will also provide instructions for requesting paper copies.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you do not need to take any action. You may elect to receive shareholder reports and other communications electronically by following the instructions we have provided.

You may elect to receive all future reports in paper free of charge by informing us that you wish to continue receiving paper copies of your shareholder reports by contacting us at the telephone number listed on the first page of this prospectus. Your election to receive reports in paper will apply to all funds available under your contract.

This prospectus gives you information about the contracts and certificates that contractowners and participants should know before investing. You should also review the prospectuses for the funds that accompany this prospectus, and keep all prospectuses for future reference.

Neither the SEC nor any state securities commission has approved this contract or determined that this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

More information about the contracts is in the current Statement of Additional Information (SAI), dated the same date as this prospectus. The SAI terms are made part of this prospectus, and for a free copy of the SAI, write: The Lincoln National Life Insurance Company, P. O. Box 2340, Fort Wayne, IN 46808 or call 1-800-341-0441. The SAI and other information about Lincoln Life and the VAA are also available on the SEC's website (http://www.sec.gov). There is a table of contents for the SAI on the last page of this prospectus.

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Table of Contents

Item	Page
Special Terms	4
Expense Tables	5
Summary of Common Questions	6
Condensed Financial Information	7
The Lincoln National Life Insurance Company	8
Fixed Side of the Contract	9
Variable Annuity Account (VAA)	9
Investments of the VAA	10
Charges and Other Deductions	14
The Contracts	18
Purchase of the Contracts	18
Transfers On or Before the Annuity Commencement Date	20
Death Benefit Before the Annuity Commencement Date	22
Withdrawals	22
Annuity Payouts	25
Distribution of the Contracts	26
Federal Tax Matters	27
Additional Information	31
Voting Rights	31
Return Privilege	31
State Regulation	32
Records and Reports	32
Cyber Security and Business Interruption Risks	32
Other Information	32
Legal Proceedings	33
Contents of the Statement of Additional Information (SAI) for Lincoln National Variable Annuity Account L	35
Appendix A—Condensed Financial Information	A-1

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Special Terms

In this prospectus, the following terms have the indicated meanings:

Account or Variable Annuity Account (VAA)—The segregated investment account, Account L, into which we set aside and invest the assets for the variable side of the contract offered in this prospectus.

Account Value—At a given time before the Annuity Commencement Date, the value of all Accumulation Units for a contract plus the value of the fixed side of the contract.

Accumulation Unit—A measure used to calculate Contract Value for the variable side of the contract before the Annuity Commencement Date.

Annuitant—The person upon whose life the annuity benefit payments are based, and upon whose death a Death Benefit may be paid.

Annuity Commencement Date—The Valuation Date when funds are withdrawn or converted into Annuity Units or fixed dollar payout for payment of retirement income benefits under the Annuity Payout option you select .

Annuity Payout—A regularly scheduled payment (under any of the available annuity options) that occurs after the Annuity Commencement Date. Payments may be variable or fixed, or a combination of both.

Annuity Unit—A measure used to calculate the amount of Annuity Payouts for the variable side of the contract after the Annuity Commencement Date.

Beneficiary—The person or entity designated by the Participant to receive any Death Benefit paid if the Participant dies before the Annuity Commencement Date.

Contractowner—The party named on the group annuity contract (for example, an employer, a retirement plan trust, an association, or other entity allowed by law).

Contributions—Amounts paid into the contract.

Death Benefit—Before the Annuity Commencement Date, the amount payable to your designated Beneficiary if a Participant dies.

FINRA—Financial Industry Regulatory Authority.

Good Order—The actual receipt at our Home Office of the requested transaction in writing or by other means we accept, along with all information and supporting legal documentation necessary to complete the transaction. The forms we provide will identify the necessary documentation. We may, in our sole discretion, determine whether any particular transaction request is in Good Order, and we reserve the right to change or waive any Good Order requirements at any time.

Lincoln Life (we, us, our, Company)—The Lincoln National Life Insurance Company.

Participant—An employee or other person affiliated with the Contractowner on whose behalf we maintain an account under the contract.

Participant Year—A 12-month period starting with the date we receive the first contribution on behalf of a Participant and on each anniversary after that.

Plan—The retirement program that an employer offers to its employees for which a contract is used to accumulate funds.

SEC—Securities and Exchange Commission.

Subaccount—The portion of the VAA that reflects investments in Accumulation and Annuity Units of a class of a particular fund available under the contracts. There is a separate Subaccount which corresponds to each class of a fund.

Valuation Date—Each day the New York Stock Exchange (NYSE) is open for trading.

Valuation Period—The period starting at the close of trading (normally 4:00 p.m. New York time) on each day that the NYSE is open for trading (Valuation Date) and ending at the close of such trading on the next Valuation Date.

 

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Expense Tables

The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the contract.

The following table describes the fees and expenses that Contractowners or Participants will pay at the time that you buy the contract, surrender the contract, or transfer contract value between investment options and/or the fixed account. State premium taxes may also be deducted.

Contractowner/Participant Transaction Expenses for GVA I, II & III:

The maximum surrender charge (contingent deferred sales charge) (as a percentage of an Account Value withdrawn):

GVA I	GVA II	GVA III
5%*	6%*	None

* The surrender charge percentage is reduced over time. The later the redemption occurs, the lower the surrender charge with respect to that surrender or withdrawal. We may reduce or waive this charge in certain situations. See Charges and Other Deductions – Surrender Charges.

The next table describes the fees and expenses that you will pay periodically during the time that you own the contract, not including fund fees and expenses.

Annual account fee (per Participant): $25

Loan establishment fee (per loan): $50

Systematic withdrawal option fee: $30

The annual fee may be paid by an employer on behalf of Participants. It is not charged during the annuity period. We may reduce or waive these charges in certain situations. See Charges and Other Deductions.

Separate Account L expenses for GVA I, II, & III Subaccounts (as a percentage of average daily net assets in the Subaccounts):

“standard” mortality and expense risk charge	1.00%
“breakpoint” mortality and expense charge*	.75%

* Only certain contract or plans are eligible for a breakpoint charge. See – Charges and Other Deductions.

The next item shows the minimum and maximum total annual operating expenses charged by the funds that you may pay
periodically during the time that you own the contract. The expenses are for the year ended December 31, 2019, adjusted to reflect anticipated changes in fees and expenses, or, for new portfolios, are based on estimates for the current fiscal year. More detail concerning each fund's fees and expenses is contained in the prospectus for each fund.

	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)	0.23%	2.08%
Total Annual Fund Operating Expenses (after contractual waivers/reimbursements*)	0.23%	1.24%

*Some of the funds have entered into contractual waiver or reimbursement arrangements that may reduce fund management and other fees and/or expenses during the period of the arrangement. These arrangements vary in length, but no arrangement will terminate before April 30, 2021. There can be no assurance that fund expense waivers or reimbursements will be extended beyond their current terms as outlined in each fund prospectus, and they may not cover certain expenses such as extraordinary expenses. Certain of these arrangements may provide that amounts previously waived or reimbursed may be recovered in future years. See each fund prospectus for complete information regarding annual operating expenses and any waivers or reimbursements in effect for a particular fund.

Certain underlying funds have reserved the right to impose fees when fund shares are redeemed within a specified period of time of purchase (“redemption fees”). As of the date of this prospectus, none have done so. See The Contracts - Market Timing for a discussion of redemption fees.

For information concerning compensation paid for the sale of the contracts, see Distribution of the Contracts.

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EXAMPLES

This Example is intended to help Contractowners or Participants compare the cost of investing in the contract with the cost of investing in other variable annuity contracts. These costs include Contractowner/Participant transaction expenses, contract fees, separate account annual expenses, and fund fees and expenses.

The Example assumes that you invest $10,000 in the contract for the time periods indicated. The Example also assumes that your investment has a 5% return each year, the maximum fees and expenses of any of the funds. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:

1) If you surrender your contract at the end of the applicable period:

	1 year	3 years	5 years	10 years
GVA I Standard*	$824	$1,491	$2,184	$3,500
GVA II Standard*	$926	$1,597	$2,294	$3,791
GVA III Standard*	$312	$954	$1,620	$3,402

2) If you do not surrender your contract at the end of the applicable time period:

	1 year	3 years	5 years	10 years
GVA I Standard*	$315	$963	$1,635	$3,430
GVA II Standard*	$315	$963	$1,635	$3,430
GVA III Standard*	$312	$954	$1,620	$3,402

* Examples shown may be less for plans qualifying for “breakpoint” mortality and expense risk charge.

The Expense Tables reflect expenses of the VAA as well as the maximum fees and expenses of any of the funds. We provide these examples, which are unaudited, to show the direct and indirect costs and expenses of the contract.

For more information, See – Charges and Other Deductions in the prospectus, and in the prospectuses for the funds. Premium taxes may also apply, although they do not appear in the examples. These examples should not be considered a representation of past or future expense. Actual expenses may be more or less than those shown.

Summary of Common Questions

What kind of contract is this? It is a group variable annuity contract between the Contractowner and Lincoln Life. It may provide for a fixed annuity and/or a variable annuity. This prospectus primarily describes the variable side of the contract. See The Contracts. This prospectus provides a general description of the contract. The contract and certain riders, benefits, service features and enhancements may not be available in all states, and the charges may vary in certain states. You should refer to your contract for any state specific provisions. Please check with your investment representative regarding their availability.

What is the Variable Annuity Account (VAA)? It is a separate account we established under Indiana insurance law, and registered with the SEC as a unit investment trust. VAA assets are allocated to one or more Subaccounts, according to your investment choices. VAA assets are not chargeable with liabilities arising out of any other business which we may conduct. See Variable Annuity Account.

What are my investment choices? You may allocate your Purchase Payments to the VAA or to the fixed account, if available. Based upon your instruction for Purchase Payments, the VAA applies your Purchase Payments to one or more of the Subaccounts, which, in turn, invests in a corresponding underlying fund. Each fund holds a portfolio of securities consistent with its investment policy. See Investments of the Variable Annuity Account – Description of the Funds.

Who invests my money? Several different investment advisers manage the investment options. See Investments of the Variable Annuity Account – Description of the Funds.

How do the contracts work? If we approve the application, we will send the Contractowner a contract. When Participants make Contributions, they buy Accumulation Units. If the Participant decides to receive retirement income payments, we convert Accumulation Units to Annuity Units. Retirement income payments will be based on the number of Annuity Units received and the value of each Annuity Unit on payout days. See – The Contracts and Annuity Payouts.

What charges do I pay under the contract?

If Participants in GVA I or GVA II withdraw account values, a surrender charge of 0-5% or 0-6%, respectively, of the gross withdrawal amount applies depending upon how many participation years the Participant has been in the contract. We may reduce or waive surrender charges in certain situations. See Charges and Other Deductions – Surrender Charge for GVA I and GVA II.

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There is no surrender charge for GVA III.

We charge an annual account fee charge of $25 per Participant Account. We will deduct any applicable premium tax from contributions or Account Value at the time the tax is incurred or at another time we choose or a time as required by law.

We apply a charge to the daily net asset value of the VAA and those charges are:

“standard” mortality and expense risk charge	1.00%
“breakpoint” mortality and expense charge*	.75%

See—Charges and Other Deductions.

The funds' investment management fees, 12b-1 fees, expenses and expense limitations, if applicable, are more fully described in the prospectuses for the funds.

What contributions are necessary, and how often? Contributions made on behalf of Participants may be in any amount, subject to Company maximum limits, unless the Contractowner or the plan has a minimum amount. See The Contracts – Contributions.

How will my Annuity Payouts be calculated? If a Participant decides to annuitize, you may select an annuity option and start receiving Annuity Payouts from your contract as a fixed option or variable option or a combination of both. See Annuity Payouts - Annuity Options. The dollar amount of the first periodic variable Annuity Payout is determined by applying the total value of your Accumulation Units to the annuity tables contained in the contract. See the SAI – Annuity Payouts for more information on how Annuity Payouts are calculated.Participants in the VAA benefit from any gain, and take a risk of any loss, in the value of the securities in the funds' portfolios, which would decrease the amount applied to any payout option and the related payments.

What happens if a Participant dies before annuitizing? Depending upon the Plan, the Beneficiary may receive a Death Benefit and have options as to how the Death Benefit is paid. See The Contracts – Death Benefit.

What happens if I die on or after the Annuity Commencement Date? Once you reach the Annuity Commencement Date, any applicable Death Benefit will terminate.

May Participants transfer Account Value between Subaccounts, and between the VAA and the fixed account? Before the Annuity Commencement Date, yes, subject to the terms of the Plan. See The Contracts – Transfers On or Before the Annuity Commencement Date and Transfers After the Annuity Commencement Date.

May a Participant withdraw Account Value? Yes, during the accumulation period, subject to contract requirements, to the restrictions of any Plan, and to certain restrictions under GVA III. See – Charges and Other Deductions. Under GVA III the following restrictions apply:

• a Participant may not transfer more than 20% of his or her fixed account holdings to the VAA each year, unless the Participant intends to liquidate his or her fixed Account Value;

• liquidation of the entire fixed account value must be over 5 annual installments. See Fixed Account Withdrawal/Transfer Limits for GVA III.

The Contractowner must also approve Participant withdrawals under Section 401(a) plans and plan subject to Title I of ERISA. Certain charges may apply. See – Charges and other deductions. A portion of withdrawal proceeds may be taxable. In addition, a 10% Internal Revenue Service (IRS) additional tax may apply to distributions before age 59 1/2. A withdrawal also may be subject to 20% withholding. See – Federal Tax Matters.

Do Participants get a free look at their certificates? A Participant under a Section 403(b) or 408 plan and certain nonqualified plans can cancel the active life certificate within ten days (in some states longer) of the date the Participant receives the certificate. The Participant needs to give notice to our Servicing Office. See – Return Privilege.

Condensed Financial Information

The Appendix to this prospectus provides more information about Accumulation Unit values.

Investment Results

The VAA advertises the annual performance of the Subaccounts for the funds on both a standardized and non-standardized basis.

The standardized calculation measures average annual total return. This is based on a hypothetical $1,000 payment made at the beginning of a one-year, a five-year and a 10-year period. This calculation reflects all fees and charges that are or could be imposed on all Contractowner accounts.

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The non-standardized calculation compares changes in Accumulation Unit values from the beginning of the most recently completed calendar year to the end of that year. It may also compare changes in Accumulation Unit values over shorter or longer time periods. This calculation reflects mortality and expense risk charges. It also reflects management fees and other expenses of the fund. It does not include the surrender charge or the account charge; if included, they would decrease the performance.

There can be no assurance that a money market fund will be able to maintain a stable net asset value of $1.00 per share. During periods of low interest rates the yield of a money market fund may become extremely low and possible negative. In addition, if the yield of a Subaccount investing in a money market fund becomes negative, due in part to Contract fees and expenses, your Contract Value may decline. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The sponsor of a money market fund has no legal obligation to provide financial support to the fund any you should not expect that the sponsor will provide financial support to the fund at any time. If, under SEC rules, a money market fund suspends payments of redemption proceeds, we will delay payment of any transfer, withdrawal, or benefit from a Subaccount investing in the money market fund until the fund resumes payment. If, under SEC rules, a money market fund institutes a liquidity fee, we may assess the fee against your Contract Value if a payment is made to your from a Subaccount investing in the money market fund.

The Lincoln National Life Insurance Company

The Lincoln National Life Insurance Company (Lincoln Life or Company), organized in 1905, is an Indiana-domiciled insurance company, engaged primarily in the direct issuance of life insurance contracts and annuities. Lincoln Life is wholly owned by Lincoln National Corporation (LNC), a publicly held insurance and financial services holding company incorporated in Indiana. Lincoln Life is obligated to pay all amounts promised to Contractowners under the contracts.

Depending on when you purchased your contract, you may be permitted to make allocations to the fixed account, which is part of our general account. See The Fixed Side of the Contract. In addition, any guarantees under the contract that exceed your Contract Value, such as those associated with Death Benefit options and Living Benefit Riders are paid from our general account (not the VAA). Therefore, any amounts that we may pay under the contract in excess of Contract Value are subject to our financial strength and claims-paying ability and our long-term ability to make such payments.

We issue other types of insurance policies and financial products as well. In addition to any amounts we are obligated to pay in excess of Contract Value under the contracts, we also pay our obligations under these products from our assets in the general account. Moreover, unlike assets held in the VAA, the assets of the general account are subject to the general liabilities of the Company and, therefore, to the Company’s general creditors. In the event of an insolvency or receivership, payments we make from our general account to satisfy claims under the contract would generally receive the same priority as our other Contractowner obligations.

The general account is not segregated or insulated from the claims of the insurance company’s creditors. Investors look to the financial strength of the insurance companies for these insurance guarantees. Therefore, guarantees provided by the insurance company as to benefits promised in the prospectus are subject to the claims paying ability of the insurance company and are subject to the risk that the insurance company may not be able to cover or may default on its obligations under those guarantees.

Our Financial Condition.  Among the laws and regulations applicable to us as an insurance company are those which regulate the investments we can make with assets held in our general account. In general, those laws and regulations determine the amount and type of investments which we can make with general account assets.

In addition, state insurance regulations require that insurance companies calculate and establish on their financial statements, a specified amount of reserves in order to meet the contractual obligations to pay the claims of our Contractowners. In order to meet our claims-paying obligations, we regularly monitor our reserves to ensure we hold sufficient amounts to cover actual or expected contract and claims payments. However, it is important to note that there is no guarantee that we will always be able to meet our claims paying obligations, and that there are risks to purchasing any insurance product.

State insurance regulators also require insurance companies to maintain a minimum amount of capital in excess of liabilities, which acts as a cushion in the event that the insurer suffers a financial impairment, based on the inherent risks in the insurer’s operations. These risks include those associated with losses that we may incur as the result of defaults on the payment of interest or principal on assets held in our general account, which include bonds, mortgages, general real estate investments, and stocks, as well as the loss in value of these investments resulting from a loss in their market value.

COVID-19. The worldwide coronavirus, or COVID-19, outbreak in the first quarter of 2020 has led to an extreme downturn in and volatility of the financial markets, record-low interest rates and wide-ranging changes in consumer behavior. As the economic and regulatory environment continues to react and evolve, we cannot reasonably estimate the length or severity of this event or the impact to our results of operations, financial condition and cash flows. However, in general, a deterioration in general economic and business conditions can have a negative impact on contract values, investment results and claims experience, while declines in or sustained low interest rates can cause a reduction in investment income, the interest margins of our businesses and demand for our products.

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How to Obtain More Information.  We encourage both existing and prospective Contractowners to read and understand our financial statements. We prepare our financial statements on both a statutory basis and according to Generally Accepted Accounting Principles (GAAP). Our audited GAAP financial statements, as well as the financial statements of the VAA, are located in the SAI. If you would like a free copy of the SAI, please write to us at: PO Box 2340, Fort Wayne, IN 46801-2340, or call 1-800-341-0441. In addition, the SAI is available on the SEC’s website at http://www.sec.gov. You may obtain our audited statutory financial statements and any unaudited statutory financial statements that may be available by visiting our website at www.LincolnFinancial.com.

You also will find on our website information on ratings assigned to us by one or more independent rating organizations. These ratings are opinions of an operating insurance company’s financial capacity to meet the obligations of its insurance and annuity contracts based on its financial strength and/or claims-paying ability. Additional information about rating agencies is included in the SAI.

Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. Through its affiliates, Lincoln Financial Group offers annuities, life, group life and disability insurance, 401(k) and 403(b) plans, and comprehensive financial planning and advisory services.

Fixed Side of the Contract

The portion of the Account Value allocated to the fixed side of the contract becomes part of our general account, and does not participate in the investment experience of the VAA. The general account is subject to regulation and supervision by the Indiana Insurance Department as well as the insurance laws and regulations of the jurisdictions in which the contracts are distributed.

In reliance on certain exemptions, exclusions and rules, we have not registered interests in the general account as a security under the Securities Act of 1933 (1933 Act) and have not registered the general account as an investment company under the Investment Company Act of 1940 (1940 Act). Accordingly, neither the general account nor any interests in it are regulated under the 1933 Act or the 1940 Act. We have been advised that the staff of the SEC has not made a review of the disclosures which are included in this prospectus which relate to our general account and to the fixed account under the contract. These disclosures, however, may be subject to certain provisions of the federal securities laws relating to the accuracy and completeness of statements made in prospectuses. This prospectus is generally intended to serve as a disclosure document only for aspects of the contract involving the VAA, and therefore contains only selected information regarding the fixed side of the contract. Complete details regarding the fixed side of the contract are in the contract.

Contributions allocated to the fixed side of the contract are guaranteed to be credited with a minimum interest rate, specified in the contract. A Contribution allocated to the fixed side of the contract is credited with interest beginning on the next calendar day following the date of receipt if all Participant data is complete. Lincoln Life may vary the way in which it credits interest to the fixed side of the contract from time to time.

ANY INTEREST IN EXCESS OF THE GUARANTEED MINIMUM INTEREST RATE WILL BE DECLARED IN ADVANCE AT LINCOLN LIFE'S SOLE DISCRETION. CONTRACTOWNERS AND PARTICIPANTS BEAR THE RISK THAT NO INTEREST IN EXCESS OF THE GUARANTEED MINIMUM INTEREST RATE WILL BE DECLARED.

Under GVA III, special limits apply to transfers and withdrawals from the fixed account. See – Charges and Other Deductions-Fixed Account Withdrawal/Transfer Limits for GVA III.

Variable Annuity Account (VAA)

On April 29, 1996, the VAA was established as an insurance company separate account under Indiana law. It is registered with the SEC as a unit investment trust under the provisions of the Investment Company Act of 1940 (1940 Act). The VAA is a segregated investment account, meaning that its assets may not be charged with liabilities resulting from any other business that we may conduct. Income, gains and losses, whether realized or not, from assets allocated to the VAA are, in accordance with the applicable annuity contracts, credited to or charged against the VAA. They are credited or charged without regard to any other income, gains or losses of Lincoln Life. We are the issuer of the contracts and the obligations set forth in the contract, other than those of the Contractowner, are ours. The VAA satisfies the definition of a separate account under the federal securities laws. We do not guarantee the investment performance of the VAA. Any investment gain or loss depends on the investment performance of the funds. You assume the full investment risk for all amounts allocated to the VAA.

Financial Statements

The December 31, 2019 financial statements of the VAA and the December 31, 2019 consolidated financial statements of Lincoln Life are located in the SAI. If you would like a free copy of the SAI, complete and mail the request on the last page of this prospectus, or call 1-800-341-0441.

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Investments of the VAA

The subaccount(s) available under the contract will be available for participant allocations. There is a separate subaccount which corresponds to each fund. Participant allocations may change without penalty or charges. Shares of the funds will be sold at net asset value with no initial sales charge to the VAA in order to fund the contracts. The funds are required to redeem fund shares at net asset value upon our request.

Investment Advisers

As compensation for its services to the funds, each investment adviser for each fund receives a fee from the funds which is accrued daily and paid monthly. This fee is based on the net assets of each fund, as defined in the prospectuses for the funds.

Certain Payments We Receive with Regard to the Funds

We (and/or our affiliates) incur expenses in promoting, marketing, and administering the contracts and the underlying funds. With respect to a fund, including affiliated funds, the adviser and/or distributor, or an affiliate thereof, may make payments to us (or an affiliate) for certain services we provide on behalf of the funds. Such services include, but are not limited to, recordkeeping; aggregating and processing purchase and redemption orders; providing Contractowners with statements showing their positions within the funds; processing dividend payments; providing subaccounting services for shares held by Contractowners; and forwarding shareholder communications, such as proxies, shareholder reports, dividend and tax notices, and printing and delivering prospectuses and updates to Contractowners. It is anticipated that such payments will be based on a percentage of assets of the particular fund attributable to the contracts along with certain other variable contracts issued or administered by us (or an affiliate). These percentages are negotiated and vary with each fund. Some advisers and/or distributors may pay us significantly more than other advisers and/or distributors and the amount we receive may be substantial. These percentages currently range up to 0.30%, and as of the date of this prospectus, we were receiving payments from most fund families. We (or our affiliates) may profit from these payments. These payments may be derived, in whole or in part, from the investment advisory fee deducted from fund assets. Contractowners, through their indirect investment in the funds, bear the costs of these investment advisory fees (see the funds' prospectuses for more information). Additionally, a fund's adviser and/or distributor or its affiliates may provide us with certain services that assist us in the distribution of the contracts and may pay us and/or certain affiliates amounts for marketing programs and sales support, as well as amounts to participate in training and sales meetings.

In addition to the payments described above, several of the funds offered as part of this contract make payments to us under their distribution plans (12b-1 plans) for the marketing and distribution of fund shares. The payment rates range up to 0.30% based on the amount of assets invested in those funds. Payments made out of the assets of the fund will reduce the amount of assets that otherwise would be available for investment, and will reduce the fund's investment return. The dollar amount of future asset-based fees is not predictable because these fees are a percentage of the fund's average net assets, which can fluctuate over time. If, however, the value of the fund goes up, then so would the payment to us (or our affiliates). Conversely, if the value of the funds goes down, payments to us or our affiliates would decrease.

Description of the Funds

Each of the Subaccounts of the VAA is invested solely in shares of one of the funds available under the contract. Each fund may be subject to certain investment policies and restrictions which may not be changed without a majority vote of shareholders of that fund.

We select the funds offered through the contract based on several factors, including, without limitation, asset class coverage, the strength of the manager’s reputation and tenure, brand recognition, performance, the capability and qualification of each sponsoring investment firm, and whether the fund is affiliated with us.

As noted above, a factor we may consider during the initial selection process is whether the fund (or an affiliate, investment adviser or distributor of the fund) being evaluated is an affiliate of ours and whether we are compensated for providing administrative, marketing, and/or support services that would otherwise be provided by the fund, its investment adviser or its distributor.

Some funds pay us significantly more than others and the amount we receive may be substantial. We often receive more revenue from an affiliated fund than one that is not affiliated with us. These factors give us an incentive to select a fund that yields more revenue, and this is often an affiliated fund.

We may also consider the ability of the fund to help manage volatility and our risks associated with the guarantees we provide under the contract and under optional riders, especially the Living Benefit Riders.

We review each fund periodically after it is selected. We reserve the right to remove a fund or restrict allocation of additional Purchase Payments to a fund if we determine the fund no longer meets one or more of the factors and/or if the fund has not attracted significant Contractowner assets.

Finally, when we develop a variable annuity product in cooperation with a fund family or distributor (e.g., a “private label” product), we generally will include funds based on recommendations made by the fund family or distributor, whose selection criteria may differ

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from our selection criteria. Certain funds offered as part of this contract have similar investment objectives and policies to other portfolios managed by the adviser. The investment results of the funds, however, may be higher or lower than the other portfolios that are managed by the adviser or sub-adviser. There can be no assurance, and no representation is made, that the investment results of any of the funds will be comparable to the investment results of any other portfolio managed by the adviser or sub-adviser, if applicable.

Certain funds invest their assets in other funds. As a result, you will pay fees and expenses at both fund levels. This will reduce your investment return. These arrangements are referred to as fund of funds or master-feeder funds, which may have higher expenses than funds that invest directly in debt or equity securities. An adviser affiliated with us manages some of the available funds of funds. Our affiliates may promote the benefits of such funds to Contractowners and/or suggest that Contractowners consider whether allocating some or all of their Contract Value to such portfolios is consistent with their desired investment objectives. In doing so, we may be subject to conflicts of interest insofar as we may derive greater revenues from the affiliated fund of funds than certain other funds available to you under your contract.

Certain funds may employ risk management strategies to provide for downside protection during sharp downward movements in equity markets. These funds usually, but not always, have “Managed Risk” or “Managed Volatility” in the name of the fund. These strategies could limit the upside participation of the fund in rising equity markets relative to other funds. The Death Benefits and Living Benefit Riders offered under the contract also provide protection in the event of a market downturn. Risk management strategies, in periods of high market volatility, could limit your participation in market gains; this may conflict with your investment objectives by limiting your ability to maximize potential growth of your Contract Value and, in turn, the value of any guaranteed benefit that is tied to investment performance. For more information on these funds and their risk management strategies, please see the Investment Requirements section of this prospectus. You should consult with your registered representative to determine which combination of investment choices are appropriate for you.

Following are brief summaries of the fund descriptions. More detailed information may be obtained from the current prospectus for each fund. You should read each fund prospectus carefully before investing. Prospectuses for each fund are available by contacting us. In addition, if you receive a summary prospectus for a fund, you may obtain a full statutory prospectus by referring to the contact information for the fund company on the cover page of the summary prospectus. Please be advised that there is no assurance that any of the funds will achieve their stated objectives.

AllianceBernstein Variable Products Series Fund, advised by AllianceBernstein L.P.

• AB VPS Global Thematic Growth Portfolio (Class B): Long-term growth of capital.

• AB VPS Large Cap Growth Portfolio (Class B): Long-term growth of capital.

American Century Variable Portfolios, Inc., advised by American Century Investment Management, Inc.

• American Century VP Balanced Fund (Class I): Long-term capital growth and current income by investing approximately 60% of its assets in equity securities and the remainder in bonds and other fixed-income securities.

American Funds Insurance Series^®, advised by Capital Research and Management Company

• American Funds Global Growth Fund (Class 2): Long-term growth of capital.

• American Funds Growth Fund (Class 2): Growth of capital.

• American Funds Growth-Income Fund (Class 2): Long-term growth of capital and income.

• American Funds International Fund (Class 2): Long-term growth of capital.

BlackRock Variable Series Funds, Inc., advised by BlackRock Advisors, LLC

• BlackRock Global Allocation V.I. Fund (Class I): High total investment return.

Delaware VIP^® Trust, advised by Delaware Management Company⁽¹⁾

• Delaware VIP^®Diversified Income Series (Standard Class): Maximum long-term total return consistent with reasonable risk.

• Delaware VIP^® High Yield Series (Standard Class): Total return and, as a secondary objective, high current income.

• Delaware VIP^® REIT Series (Service Class): Maximum long-term total return, with capital appreciation as a secondary objective.

• Delaware VIP^® Small Cap Value Series (Service Class): Capital appreciation.

• Delaware VIP^® Smid Cap Core Series (Service Class): Long-term capital appreciation.

Deutsche DWS Variable Series II, advised by Deutsche Investment Management Americas, Inc.

• DWS Alternative Asset Allocation VIP Portfolio (Class A): Capital appreciation; a fund of funds.

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Fidelity^® Variable Insurance Products, advised by Fidelity Management and Research Company

• Fidelity^® VIPAsset Manager Portfolio (Initial Class): To obtain high total return with reduced risk over the long term by allocating its assets among stocks, bonds, and short-term instruments long-term capital appreciation.

• Fidelity^® VIP Contrafund^® Portfolio (Service Class 2): Long-term capital appreciation.

• Fidelity^® VIP Freedom 2020 Portfolio^SM (Service Class 2): High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond; a fund of funds.

• Fidelity^® VIP Freedom 2025 Portfolio^SM (Service Class 2): High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond; a fund of funds.

• Fidelity^® VIP Freedom 2030 Portfolio^SM (Service Class 2): High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond; a fund of funds.

• Fidelity^® VIP Freedom 2035 Portfolio^SM (Service Class 2): High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond; a fund of funds.

• Fidelity^® VIP Freedom 2040 Portfolio^SM (Service Class 2): High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond; a fund of funds.

• Fidelity^® VIP Freedom 2045 Portfolio^SM (Service Class 2): High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond; a fund of funds.

• Fidelity^® VIP Freedom 2050 Portfolio^SM (Service Class 2): High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond; a fund of funds.

• Fidelity^® VIP Freedom 2055 Portfolio^SM (Service Class 2): High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond; a fund of funds.

• Fidelity^® VIP Freedom 2060 Portolio^SM (Service Class 2): High total return with a secondary objective of principal preservation as the fund approaches its target date and beyond; a fund of funds.

• Fidelity^® VIP Growth Portfolio (Initial Class): To achieve capital appreciation.

Janus Aspen Series, advised by Janus Capital Management LLC

• Janus Henderson Global Research Portfolio (Institutional Shares): Long-term growth of capital.

Lincoln Variable Insurance Products Trust, advised by Lincoln Investment Advisors

• LVIP Baron Growth Opportunities Fund (Service Class): Capital appreciation.

• LVIP BlackRock Advantage Allocation Fund (Standard Class): Total return.

• LVIP BlackRock Global Real Estate Fund (Standard Class): Total return through a combination of current income and long-term capital appreciation.

• LVIP BlackRock Inflation Protected Bond Fund (Standard Class): To maximize real return, consistent with preservation of real capital and prudent investment management.

• LVIP Blended Large Cap Growth Managed Volatility Fund (Standard Class): Long-term growth of capital in a manner consistent with the preservation of capital.

• LVIP Blended Mid Cap Managed Volatility Fund (Standard Class): Capital appreciation.

• LVIP Delaware Bond Fund (Standard Class)⁽¹⁾: Maximum current income (yield) consistent with a prudent investment strategy.

• LVIP Delaware Diversified Floating Rate Fund (Service Class)⁽¹⁾: Total return

• LVIP Delaware Social Awareness Fund (Standard Class)⁽¹⁾: To maximize long-term capital appreciation.

• LVIP Delaware Wealth Builder Fund (Standard Class)⁽¹⁾: To provide a responsible level of income and the potential for capital appreciation.

• LVIP Dimensional U.S. Core Equity 1 Fund (Standard Class): To maximize long-term capital appreciation.

• LVIP Franklin Templeton Global Equity Managed Volatility Fund (Standard Class): Long-term capital growth.

• LVIP Global Conservative Allocation Managed Risk Fund (Standard Class): A high level of current income with some consideration given to growth of capital; a fund of funds.

• LVIP Global Growth Allocation Managed Risk Fund (Standard Class): A balance between a high level of current income and growth of capital, with a greater emphasis on growth of capital; a fund of funds.

• LVIP Global Income Fund (Standard Class): Current income consistent with the preservation of capital.

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• LVIP Global Moderate Allocation Managed Risk Fund (Standard Class): A balance between a high level of current income and growth of capital, with an emphasis on growth of capital; a fund of funds.

• LVIP JPMorgan Retirement Income Fund (Standard Class): Current income and some capital appreciation.

• LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund (Standard Class): Long-term capital appreciation.

• LVIP Mondrian International Value Fund (Standard Class): Long-term capital appreciation as measured by the change in the value of fund shares over a period of three years or longer.

• LVIP SSGA Bond Index Fund (Standard Class): To match as closely as practicable, before fees and expenses, the performance of the Barclays Capital U.S. Aggregate Index.

• LVIP SSGA Emerging Markets 100 Fund (Standard Class): To maximize long-term capital appreciation.

• LVIP SSGA Global Tactical Allocation Managed Volatility Fund (Standard Class): Long-term growth of capital; a fund of funds.

• LVIP SSGA International Index Fund (Standard Class): To approximate as closely as practicable, before fees and expenses, the performance of a broad market index of non-U.S. foreign securities.

• LVIP SSGA International Managed Volatility Fund (Standard Class): Capital appreciation; a fund of funds.

• LVIP SSGA S&P 500 Index Fund (Standard Class): To approximate as closely as practicable, before fees and expenses, the total rate of return of common stocks publicly traded in the United States, as represented by the S&P 500 Index.

• LVIP SSGA Small-Cap Index Fund (Standard Class): To approximate as closely as practicable, before fees and expenses, the performance of the Russell 2000^® Index, which emphasizes stocks of small U.S. companies.

• LVIP T. Rowe Price 2010 Fund (Standard Class): The highest total return over time with an increased emphasis on capital preservation as the target date approaches; a fund of funds.

• LVIP T. Rowe Price 2020 Fund (Standard Class): The highest total return over time with an increased emphasis on capital preservation as the target date approaches; a fund of funds.

• LVIP T. Rowe Price 2030 Fund (Standard Class): The highest total return over time with an increased emphasis on capital preservation as the target date approaches; a fund of funds.

• LVIP T. Rowe Price 2040 Fund (Standard Class): The highest total return over time with an increased emphasis on capital preservation as the target date approaches; a fund of funds.

• LVIP T. Rowe Price 2050 Fund (Standard Class): The highest total return over time with an increased emphasis on capital preservation as the target date approaches; a fund of funds.

• LVIP T. Rowe Price 2060 Fund (Standard Class): The highest total return over time with an increased emphasis on capital preservation as the target date approaches; a fund of funds.
This fund will be available on or about May 11, 2020. Consult your registered representative.

• LVIP T. Rowe Price Structured Mid-Cap Growth Fund (Standard Class): To maximize capital appreciation.

Neuberger Berman Advisers Management Trust, advised by Neuberger Berman Management Inc.

• Neuberger Berman AMT Sustainable Equity Portfolio (I Class): Long-term growth of capital by investing primary in securities of companies that meet the Fund’s environmental, social and governance (ESG) criteria.

T. Rowe Price International Series, Inc., advised by T. Rowe Price International, Inc.

• T. Rowe Price International Stock Portfolio: Long-term growth of capital through investments primarily in the common stocks of established, non-U.S. companies.

(1) Investments in Delaware VIP Series, Delaware Funds, LVIP Delaware Funds or Lincoln Life accounts managed by Macquarie Investment Management Advisers, a series of Macquarie Investments Management Business Trust, are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46008 583 542 and its holding companies, including their subsidiaries or related companies, and are subject to investment risk, including possible delays in prepayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the series or funds or accounts, the repayment of capital from the series or funds or account, or any particular rate of return.

Fund Shares

We will purchase shares of the funds at net asset value and direct them to the appropriate Subaccounts of the VAA. We will redeem sufficient shares of the appropriate funds to pay Annuity Payouts, Death Benefits, surrender/withdrawal proceeds or for other purposes described in the contract. If you want to transfer all or part of your investment from one Subaccount to another, we may redeem shares held in the first Subaccount and purchase shares of the other. Redeemed shares are retired, but they may be reissued later.

Shares of the funds are not sold directly to the general public. They are sold to us, and may be sold to other insurance companies, for investment of the assets of the Subaccounts established by those insurance companies to fund variable annuity and variable life insurance contracts.

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When a fund sells any of its shares both to variable annuity and to variable life insurance separate accounts, it is said to engage in mixed funding. When a fund sells any of its shares to separate accounts of unaffiliated life insurance companies, it is said to engage in shared funding.

The funds currently engage in mixed and shared funding. Therefore, due to differences in redemption rates or tax treatment, or other considerations, the interest of various Contractowners participating in a fund could conflict. Each of the fund’s Board of Directors will monitor for the existence of any material conflicts, and determine what action, if any, should be taken. The funds do not foresee any disadvantage to Contractowners arising out of mixed or shared funding. If such a conflict were to occur, one of the separate accounts might withdraw its investment in a fund. This might force a fund to sell portfolio securities at disadvantageous prices. See the prospectuses for the funds.

Reinvestment of Dividends and Capital Gain Distributions

All dividends and capital gain distributions of the funds are automatically reinvested in shares of the distributing funds at their net asset value on the date of distribution. Dividends are not paid out to Contractowners or participants as additional units, but are reflected as changes in unit values.

Addition, Deletion or Substitution of Investments

We reserve the right, within the law, to make certain changes to the structure and operation of the VAA at our discretion and without your consent. We may add, delete, or substitute funds for all Contractowners or only for certain classes of Contractowners. New or substitute funds may have different fees and expenses, and may only be offered to certain classes of Contractowners.

Substitutions may be made with respect to existing investments or the investment of future Purchase Payments, or both. In the event of a substitution, the Contract Value allocated to the existing fund will be allocated to the substitute fund. Any future allocations to the substitute fund will automatically be allocated according to the instructions we have on file for you unless otherwise instructed by you. If we don’t have instructions from you on file, your Purchase Payments will be allocated to the substitute fund.

We may close Subaccounts to allocations of Purchase Payments or Contract Value, or both, at any time in our sole discretion. The funds, which sell their shares to the Subaccounts pursuant to participation agreements, also may terminate these agreements and discontinue offering their shares to the Subaccounts. In the event of a fund closure, any Contract Value you have invested in the closed fund will remain in that fund until you transfer it elsewhere. Any future allocation to the closed fund will be allocated in accordance with the instructions we have on file for you unless you instruct us otherwise.

In addition, a Subaccount may become unavailable due to the liquidation of its underlying fund portfolio. To the extent permitted by applicable law, upon notice to you and unless you otherwise instruct us, we will re-allocate any Contract Value in the liquidated fund to the money market subaccount or a subaccount investing in another underlying fund portfolio designated by us. Any future allocations to the liquidated fund will automatically be allocated according to the instructions we have on file for you unless you instruct us otherwise.

From time to time, certain of the underlying funds may merge with other funds. If a merger of an underlying fund occurs, the Contract Value allocated to the existing fund will be merged into the surviving underlying fund. Any future allocations to the merged fund will automatically be allocated according to the instructions we have on file for you unless you instruct us otherwise. If we don’t have instructions from you on file, your Purchase Payment will be allocated to the surviving underlying fund.

We may also:

• remove, combine, or add Subaccounts and make the new Subaccounts available to you at our discretion;

• transfer assets supporting the contracts 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.

We may modify the provisions of the contracts to reflect changes to the Subaccounts and the VAA and to comply with applicable law. We will not make any changes without any necessary approval by the SEC. We will also provide you written notice.

Charges and Other Deductions

We will deduct the charges described below to cover our costs and expenses, services provided and risks assumed under the contracts. We incur certain costs and expenses for the distribution and administration of the contracts and for providing the benefits payable thereunder.

Our administrative services include:

• processing applications for and issuing the contracts;

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• processing purchases and redemptions of fund shares as required (including dollar cost averaging, systematic transfer, account sweep and portfolio rebalancing services);

• 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;

• providing toll-free inquiry services and

• furnishing telephone and electronic fund transfer services.

The risks we assume include:

• the risk that Annuitants receiving Annuity Payouts under contracts 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 Death Benefits paid will exceed the actual Contract Value;

• the risk that more owners than expected will qualify for waivers of the surrender charge;

• the risk that our costs in providing the services will exceed our revenues from contract charges (which we cannot change).

The amount of a charge may not necessarily correspond to the costs associated with providing the services or benefits indicated by the description of the charge. For example, the surrender charge collected may not fully cover all of the sales and distribution expenses actually incurred by us. Any remaining expenses will be paid from our general account which may consist, among other things, of proceeds derived from mortality and expense risk charges deducted from the account. We may profit from one or more of the fees and charges deducted under the contract. We may use these profits for any corporate purpose, including financing the distribution of the contracts.

Annual Contract Fee

During the accumulation period, we currently deduct $25 (or the balance of the Participant's account, if less) per year from each Participant's Account Value on the last business day of the month in which a Participant anniversary occurs, to compensate us for administrative services provided. We also deduct the charge from a Participant's account if the Participant's account is totally withdrawn. The charge may be increased or decreased.

Surrender Charge for GVA I and GVA II*

Under GVA I and GVA II, a surrender charge applies (except as described below) to total or partial withdrawals of a Participant's account balance during the accumulation period as follows:

During Participation Year	GVA I	GVA II
1-5	5%	6%
6	5%	3%
7	4%	3%
8	3%	3%
9	2%	3%
10	1%	3%
11-15	0%	1%
16 and later	0%	0%

* There is no surrender charge taken on withdrawals from GVA III.

The surrender charge is imposed on the gross withdrawal amount, and is deducted from the Subaccounts and the fixed account in proportion to the amount withdrawn from each. We do not impose a surrender charge on Death Benefits, or on account balances converted to an Annuity Payout option. For any Participant, the surrender charge will never exceed 8.5% of the cumulative contributions to the Participant's account.

Fixed Account Withdrawal/Transfer Limits for GVA III

GVA III has no surrender charges, but under GVA III, special limits apply to withdrawals and transfers from the fixed account. During any one calendar year a Participant may make one withdrawal from the fixed account, or one transfer to the VAA from the fixed account, of up to 20% of their fixed account balance.

Participants who want to liquidate their entire fixed account balance or transfer it to the VAA, however, may make one withdrawal or transfer request from their fixed account in each of five consecutive calendar years according to the following percentages:

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Year Request Received by Lincoln Life	Percentage of Fixed Account Available Under GVA III
1	20%
2	25%
3	33.33%
4	50%
5	100%

Each consecutive withdrawal or transfer may not be made more frequently than twelve months apart. This liquidation schedule is also subject to the same conditions as other withdrawals and transfers. We reserve the right to prohibit any additional Contributions by a Participant that notifies us of their intention to liquidate their fixed account balance and stop Contributions to the contract. In addition, at contract termination certain 403(b) GVA III contracts offer lump sum payouts from the fixed account which may have a market value adjustment. Lump sum payouts will never be less than net contributions accumulated at the guaranteed minimum rate for the fixed account.

Waiver of Surrender Charges and Fixed Account Withdrawal/Transfer Limits

Under certain conditions, a Participant may withdraw part or all of his or her fixed account balance without incurring a surrender charge under GVA I or GVA II, or without being subject to the fixed account withdrawal/transfer limits under GVA III. We must receive reasonable proof of the condition with the withdrawal request. The chart below shows the standard conditions provided by GVA I, GVA II, and GVA III, as well as optional conditions the Contractowner may or may not make available under the contracts:

	Standard conditions	Optional conditions
GVA I	the Participant has attained age 59½	the Participant has separated from service with their employer and is at least 55 years of age
	the Participant has died	the Participant is experiencing financial hardship
	the Participant has incurred a disability (as defined under the contract)
	the Participant has separated from service with their employer
GVA II	the Participant has attained age 59½	the Participant has separated from service with their employer
	the Participant has died	the Participant is experiencing financial hardship
	the Participant has incurred a disability (as defined under the contract)
	the Participant has separated from service with their employer and is at least 55 years of age
GVA III	the Participant has attained age 59½	the Participant has separated from service with their employer and is at least 55 years of age
	the Participant has died
	the Participant has incurred a disability (as defined under the contract)
	the Participant has separated from service with their employer
	the Participant is experiencing financial hardship*

* A GVA III Contractowner has the option not to include the financial hardship condition.

Under GVA I and GVA II, a Contractowner may also elect an optional contract provision that permits Participants to make a withdrawal once each Contract Year of up to 20% of the Participant's account balance without a surrender charge.

A Contractowner choosing one or more of the optional provisions may receive a different declared interest rate on the fixed account than will holders of contract without these provisions.

Deductions from the VAA for GVA I, II & III

For the base contract, we apply to the average daily net asset value of the Subaccounts, a charge which is equal to an annual rate of:

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“standard” mortality and expense risk charge	1.00%
“breakpoint” mortality and expense charge*	.75%

* Only certain contract or plans are eligible for a breakpoint charge. See—Charges and Other Deductions.

This maximum level of mortality and expense risk charge is guaranteed not to increase. It is assessed during the accumulation period and during the annuity period, even though during the annuity period, we bear no mortality risk on annuity options that do not have life contingencies.

If the mortality and expense risk charge proves insufficient to cover underwriting and administrative costs in excess of the charges made for the administrative expenses, we will absorb the loss. However, if the amount deducted proves more than sufficient, we will keep the profit.

Contracts eligible for the lower, or “breakpoint”, mortality and expense risk charge are those contracts which, either individually or in combination with other contracts under the same employer group or association, either at issue or after issue and at the end of a calendar quarter, satisfy eligibility criteria anticipated to result in lower issue and administrative costs for us over time. Such criteria include, for example, expected size of account value and contributions, administrative simplicity, and/or limited competition. For contracts not eligible for the lower mortality and risk expense charge at issue, the lower charge will be implemented no later than the calendar quarter-end Valuation Date following the end of the calendar quarter in which the contract becomes eligible for the lower charge. We periodically modify the criteria for eligibility. Modifications will not be unfairly discriminatory against any person. Contact your agent for our current eligibility criteria.

Special Arrangements

The surrender and account charges, described previously may be reduced or eliminated for any particular contract. In addition, the amount credited to and/or the interest rate declared on the fixed account may be enhanced for certain contracts. Such reductions, eliminations or enhancements may be available where Lincoln Life's administrative and/or distribution costs or expenses are anticipated to be lower due to, for example, the terms of the contract, the duration or stability of the plan or contract; economies due to the size of the plan, the number of certain characteristics of Participants, or the amount or frequency of contributions anticipated; or other support provided by the Contractowner or the plan. In addition, the group Contractowner or the plan may pay the annual administration charge on behalf of the Participants under a contract or by election impose this charge only on Particpants with account balances in the VAA. Lincoln Life will enhance the fixed interest crediting rate and reduce or eliminate fees, charges, or rates in accordance with Lincoln Life's eligibility criteria in effect at the time a contract is issued, or in certain cases, after a contract has been held for a period of time. Lincoln Life may, from time to time, modify both the amounts of reductions or enhancements and the criteria for qualification. Reductions, enhancements, or waivers will not be unfairly discriminatory against any person, including Participants under other contracts issued through the VAA.

Fees, charges and rates under the contracts, including charges for premium taxes; loan rates of interest; and the availability of certain free withdrawals, may be subject to variation based on state insurance regulation.

The Contractowner and Participant should read the contract carefully to determine whether any variations apply in the state in which the contract is issued. The exact amount for all fees, charges, and rates applicable to a particular contract will be stated in that contract.

Deductions for Premium Taxes

Any premium tax or other tax levied by any governmental entity as a result of the existence of the contracts or the VAA will be deducted from the Account Value, unless the governmental entity dictates otherwise, when incurred, or at another time of our choosing.

The applicable premium tax rates that states and other governmental entities impose on the purchase of an annuity are subject to change by legislation, by administrative interpretation or by judicial action. These premium tax rates generally depend upon the law of your state of residence. The tax rates range from zero to 5%.

Other Charges and Deductions

The mortality and expense risk charge of 1.00% of the contract value will be assessed on all variable annuity payouts, including options that may be offered that do not have a life contingency and therefore no mortality risk. This charge covers the expense risk and administrative services listed previously in this prospectus. The expense risk is the risk that our costs in providing the services will exceed our revenues from contract charges.

There are additional deductions from and expenses paid out of the assets of the underlying funds that are more fully described in the prospectuses for the funds. Among these deductions and expenses are 12b-1 fees which reimburse us or an affiliate for certain expenses incurred in connection with certain administrative and distribution support services provided to the funds.

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The Contracts

Purchase of the Contracts

A prospective Contractowner wishing to purchase a contract must apply for it through one of our authorized registered representatives. The completed application is sent to us and we decide whether we can accept it based on our underwriting guidelines. Once the application is accepted, a contract is prepared and executed by our legally authorized officers. The contract is then sent to the Contractowner either directly or through its registered representative. For plans that have allocated rights to the participant, we will issue to each Participant a separate active life certificate that describes the basic provisions of the contract.

Initial Contributions

When we receive a complete enrollment form and all other information necessary for processing a contribution, we will price the initial contribution for a Participant to his or her account no later than two business days after we receive the contribution. If we receive contribution amounts with incomplete or no allocation instructions, we will notify the Contractowner and direct contribution amounts to the pending allocation account. The pending allocation account invests in Fidelity^® VIP Government Money Market Portfolio, which is not available as an investment option under the contract. We do not impose the mortality and expense risk charge or the annual administration charge on the pending allocation account. The Participant's participation date will be the date we deposited the Participant's Contribution into the pending allocation account.

We will transfer the Account Value from the pending allocation account in accordance with allocation percentages elected on properly completed allocation instructions within two Valuation Dates of receipt of such instructions, and allocate all future contributions in accordance with these percentages until we are notified of a change. If we do not receive properly completed instructions after we have sent three monthly notices, we will refund Account Value in the pending allocation account within 105 days of the initial contribution.

Participants may not allocate contributions to, make transfer to or from, take loans from, or make withdrawals from the pending allocation account, except as set forth in the contract.

Contributions

Contractowners generally forward Contributions to us for investment. Depending on the Plan, the Contributions may consist of salary reduction Contributions, employer Contributions or post-tax Contributions.

Contributions may accumulate on either a guaranteed or variable basis selected from those Subaccounts made available by the Contractowner.

Contributions made on behalf of Participants may be in any amount unless there is a minimum amount set by the Contractowner or Plan. A contract may require the Contractowner to contribute a minimum annual amount on behalf of all Participants. A Participant under the plan cannot make Contributions that exceed $1 million. Annual contributions under qualified plans may be subject to maximum limits imposed by the tax code. Annual Contributions under nonqualified plans may be limited by the terms of the contract.

Subject to any restrictions imposed by the plan or the tax code, we will accept transfers from other contracts and qualified rollover Contributions.

Section 830.205 of the Texas Education Code provides that employer or state Contributions (other than salary reduction Contributions) on behalf of Participants in the Texas Optional Retirement Program (ORP) vest after one year of participation in the program. We will return employer Contributions to the Contractowner for those employees who terminate employment in all Texas institutions of higher education before becoming vested. During this first Participation Year in the ORP, ORP Participants may only direct employer and state Contributions to the fixed account.

Contributions must be in U.S. funds, and all withdrawals and distributions under the contract will be in U.S. funds. If a bank or other financial institution does not honor the check or other payment method used for a Contribution, we will treat the Contribution as invalid. All allocation and subsequent transfers resulting from the invalid Contributions will be reversed and the party responsible for the invalid Contribution must reimburse us for any losses or expenses resulting from the invalid Contribution.

If your retirement plan is no longer submitting new, payroll deduction contributions to a Lincoln contract, no further purchase payments of any type can be made into your contract/certificate without the express permission of your Plan sponsor. In certain limited exceptions, combining contract values from existing Lincoln contracts may be allowed.

Replacement of Existing Insurance

Careful consideration should be given prior to surrendering or withdrawing money from an existing insurance contract to purchase a contract described in this prospectus. Participant Surrender charges may be imposed on your existing contract. The benefits offered under this contract may be less favorable or more favorable than the benefits offered under your current contract. It also may have

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different charges. You should also consult with your registered representative and/or your tax advisor prior to making an exchange. Cash surrenders from an existing contract may be subject to tax and tax penalties.

Valuation Date

Accumulation and Annuity Units will be valued once daily at the close of trading (normally, 4:00 p.m., New York time) on each day the New York Stock Exchange is open (Valuation Date). On any date other than a Valuation Date, the Accumulation Unit value and the Annuity Unit value will not change.

Allocation of Contributions

The Contractowner forwards Contributions to us, specifying the amount being contributed on behalf of each Participant and allocation information in accordance with our procedures. Contributions are placed into the VAA's Subaccounts, each of which invests in shares of a fund, and/or the fixed account, according to written Participant instructions and subject to the Plan. The Contribution allocation percentage to the Subaccount's or the fixed account must be in any whole percent.

If we receive your purchase payment from you or your broker-dealer in Good Order at our Home Office prior to 4:00 p.m., New York time, we will use the Accumulation Unit value computed on that Valuation Date when processing your purchase payment. If we receive your purchase payment at or after 4:00 p.m., New York time, we will use the Accumulation Unit value computed on the next Valuation Date. If you submit your purchase payment to your representative, we will generally not begin processing the purchase payment until we receive it from your representative’s broker-dealer. If your broker-dealer submits your purchase payment to us through the Depository Trust and Clearing Corporation (DTCC) or, pursuant to terms agreeable to us, uses a proprietary order placement system to submit your purchase payment to us, and your purchase payment was placed with your broker-dealer prior to 4:00 p.m., New York time, then we will use the Accumulation Unit value computed on that Valuation Date when processing your purchase payment. If your purchase payment was placed with your broker-dealer at or after 4:00 p.m. New York time, then we will use the Accumulation Unit value computed on the next Valuation Date.

If an underlying fund imposes restrictions with respect to the acceptance of Purchase Payments or allocations, we reserve the right to reject an allocation at any time the underlying fund notifies us of such a restriction. We will notify you if your allocation request is or becomes subject to such restrictions.

The number of Accumulation Units determined in this way is not impacted by any subsequent change in the value of an Accumulation Unit. However, the dollar value of an Accumulation Unit will vary depending not only upon how well the underlying fund’s investments perform, but also upon the expenses of the VAA and the underlying funds.

Subject to the terms of the plan, a participant may change the allocation of contributions by notifying us in writing or by telephone in accordance with our published procedures. The change is effective for all contributions received concurrently with the allocation change form and for all future contributions, unless the participant specifies a later date. Changes in the allocation of future contributions have no effect on amounts a participant may have already contributed. Such amounts, however, may be transferred between subaccount and the fixed account pursuant to the requirements described in Transfers on or before the Annuity Commencement Date. Allocation of employer contributions may be restricted by the applicable plan.

Valuation of Accumulation Units

Purchase Payments allocated to the VAA are converted into Accumulation Units. This is done by dividing the amount allocated by the value of an Accumulation Unit for the Valuation Period during which the Purchase Payments are allocated to the VAA. The Accumulation Unit value for each Subaccount was or will be established at the inception of the Subaccount. It may increase or decrease from Valuation Period to Valuation Period. Accumulation Unit values are affected by investment performance of the funds, fund expenses, and the contract charges. The Accumulation Unit value for a Subaccount for a later Valuation Period is determined as follows:

1.	The total value of the fund shares held in the Subaccount is calculated by multiplying the number of fund shares owned by the Subaccount at the beginning of the Valuation Period by the net asset value per share of the fund at the end of the Valuation Period, and adding any dividend or other distribution of the fund if an ex-dividend date occurs during the Valuation Period; minus
2.	The liabilities of the Subaccount at the end of the Valuation Period. These liabilities include daily charges imposed on the Subaccount, and may include a charge or credit with respect to any taxes paid or reserved for by us that we determine result from the operations of the VAA; and
3.	The result is divided by the number of Subaccount units outstanding at the beginning of the Valuation Period.

The daily charges imposed on a Subaccount for any Valuation Period are equal to the daily mortality and expense risk charge and the daily administrative charge multiplied by the number of calendar days in the Valuation Period.

In certain circumstances, and when permitted by law, it may be prudent for us to use a different standard industry method for this calculation, called the Net Investment Factor method. We will achieve substantially the same result using either method.

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Transfers On or Before the Annuity Commencement Date

Subject to the terms of a Plan, a Participant may transfer all or a portion of the Participant's account balance from one Subaccount to another, and between the VAA and the fixed account. Under GVA III transfers from the fixed account are subject to special limits. See—Fixed account withdrawals/transfer limits for GVA III.

A transfer involves the surrender of Accumulation Units in one Subaccount and the purchase of Accumulation Units in the other Subaccount. A transfer will be done using the respective Accumulation Unit values determined at the end of the Valuation Date on which the transfer request is received. There is no charge for a transfer. We do not limit the number of transfers except as described under—Charges and other deductions-Fixed account withdrawal/transfer limits for GVA III.

A transfer request may be made to our Home Office in writing or by fax. A transfer request may also be made by telephone or other electronic means, provided the appropriate authorization is on file with us. Our address, telephone number, and internet address are on the first page of this prospectus. In order to prevent unauthorized or fraudulent transfers, we may require certain identifying information before we will act upon instructions. We may also assign the Participant a Personal Identification Number (PIN) to serve as identification. We will not be liable for following instructions we reasonably believe are genuine. Telephone requests will be recorded and written confirmation of all transfer requests will be mailed to the Participant on the next Valuation Date.

Please note that the telephone and/or electronic devices may not always be available. Any telephone or electronic device, whether it is yours, your service provider’s, or your agent’s, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing of your request. Although we have taken precautions to limit these problems, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your transfer request by writing to our Servicing Office.

Requests for transfers will be processed on the Valuation Date that they are received in Good Order in our customer service center before the end of the Valuation Date (normally 4:00 p.m. New York time). If we receive a transfer request received in Good Order at or after 4:00 p.m., New York time, we will process the request using the Accumulation Unit value computed on the next Valuation Date.

We may defer or reject a transfer request that is subject to a restriction imposed by an underlying fund. When thinking about a transfer of Contract Value, you should consider the inherent risk involved. Frequent transfers based on short-term expectations may increase the risk that a transfer will be made at an inopportune time.

Market Timing

Frequent, large, or short-term transfers among Subaccounts and the fixed account, such as those associated with “market timing” transactions, can affect the funds and their investment returns. Such transfers may dilute the value of the fund shares, interfere with the efficient management of the fund's portfolio, and increase brokerage and administrative costs of the funds. As an effort to protect our participants and the funds from potentially harmful trading activity, we utilize certain market timing policies and procedures (the “Market Timing Procedures”). Our Market Timing Procedures are designed to detect and prevent such transfer activity among the Subaccounts and the fixed account that may affect other Participants or fund shareholders.

In addition, the funds may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares. The prospectuses for the funds describe any such policies and procedures, which may be more or less restrictive than the frequent trading policies and procedures of other funds and the Market Timing Procedures we have adopted to discourage frequent transfers among Subaccounts. While we reserve the right to enforce these policies and procedures, Participants and other persons with interests under the contracts should be aware that we may not have the contractual authority or the operational capacity to apply the frequent trading policies and procedures of the funds. However, under SEC rules, we are required to: (1) enter into a written agreement with each fund or its principal underwriter that obligates us to provide to the fund promptly upon request certain information about the trading activity of individual Participants, and (2) execute instructions from the fund to restrict or prohibit further purchases or transfers by specific Participants who violate the excessive trading policies established by the fund.

You should be aware that the purchase and redemption orders received by the funds generally are “omnibus” orders from intermediaries such as retirement plans or separate accounts funding variable insurance contracts. The omnibus orders reflect the aggregation and netting of multiple orders from individual retirement plan Participants and/or individual owners of variable insurance contracts. The omnibus nature of these orders may limit the funds’ ability to apply their respective disruptive trading policies and procedures. We cannot guarantee that the funds (and thus our Participants) will not be harmed by transfer activity relating to the retirement plans and/or other insurance companies that may invest in the funds. In addition, if a fund believes that an omnibus order we submit may reflect one or more transfer requests from Participants engaged in disruptive trading activity, the fund may reject the entire omnibus order.

Our Market Timing Procedures detect potential “market timers” by examining the number of transfers made by Participants within given periods of time. In addition, managers of the funds might contact us if they believe or suspect that there is market timing. If requested by a fund company, we may vary our Market Timing Procedures from Subaccount to Subaccount to comply with specific fund policies and procedures.

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We may increase our monitoring of Participants who we have previously identified as market timers. When applying the parameters used to detect market timers, we will consider multiple contracts owned by the same Participant if that Participant has been identified as a market timer. For each Participant, we will investigate the transfer patterns that meet the parameters being used to detect potential market timers. We will also investigate any patterns of trading behavior identified by the funds that may not have been captured by our Market Timing Procedures.

Once a Participant has been identified as a “market timer” under our Market Timing Procedures, we will notify the Participant in writing that future transfers (among the Subaccounts and/or the fixed account) will be temporarily permitted to be made only by original signature sent to us by U.S. mail, first-class delivery for the remainder of the calendar year. Overnight delivery or electronic instructions (which may include telephone, facsimile, or Internet instructions) submitted during this period will not be accepted. If overnight delivery or electronic instructions are inadvertently accepted from a participant that has been identified as a market timer, upon discovery, we will reverse the transaction within 1 or 2 business days. We will impose this “original signature” restriction on that Participant even if we cannot identify, in the particular circumstances, any harmful effect from that Participant's particular transfers.

Participants seeking to engage in frequent, large, or short-term transfer activity may deploy a variety of strategies to avoid detection. Our ability to detect such transfer activity may be limited by operational systems and technological limitations. The identification of Participants determined to be engaged in such transfer activity that may adversely affect other Participants or fund shareholders involves judgments that are inherently subjective. We cannot guarantee that our Market Timing Procedures will detect every potential market timer. If we are unable to detect market timers, you may experience dilution in the value of your fund shares and increased brokerage and administrative costs in the funds. This may result in lower long-term returns for your investments.

Our Market Timing Procedures are applied consistently to all Participants. An exception for any Participant will be made only in the event we are required to do so by a court of law. In addition, certain funds available as investment options in your contract may also be available as investment options for owners of other, older life insurance policies issued by us. Some of these older life insurance policies do not provide a contractual basis for us to restrict or refuse transfers which are suspected to be market timing activity. In addition, because other insurance companies and/or retirement plans may invest in the funds, we cannot guarantee that the funds will not suffer harm from frequent, large, or short-term transfer activity among Subaccounts and the fixed accounts of variable contracts issued by other insurance companies or among investment options available to retirement plan Participants.

In our sole discretion, we may revise our Market Timing Procedures at any time without prior notice as necessary to better detect and deter frequent, large, or short-term transfer activity to comply with state or federal regulatory requirements, and/or to impose additional or alternate restrictions on market timers (such as dollar or percentage limits on transfers). If we modify our Market Timing Procedures, they will be applied uniformly to all Participants or as applicable to all Participants investing in underlying funds.

Some of the funds have reserved the right to temporarily or permanently refuse payments or transfer requests from us if, in the judgment of the fund’s investment adviser, the fund would be unable to invest effectively in accordance with its investment objective or policies, or would otherwise potentially be adversely affected. To the extent permitted by applicable law, we reserve the right to defer or reject a transfer request at any time that we are unable to purchase or redeem shares of any of the funds available through the VAA, including any refusal or restriction on purchases or redemptions of the fund shares as a result of the funds' own policies and procedures on market timing activities. If a fund refuses to accept a transfer request we have already processed, we will reverse the transaction within 1 or 2 business days. We will notify you in writing if we have reversed, restricted or refused any of your transfer requests. Some funds also may impose redemption fees on short-term trading (i.e., redemptions of mutual fund shares within a certain number of business days after purchase). We reserve the right to administer and collect any such redemption fees on behalf of the funds. You should read the prospectuses of the funds for more details on their redemption fees and their ability to refuse or restrict purchases or redemptions of their shares.

Transfers After the Annuity Commencement Date

We do not permit transfers of a Participant's account balance after the Annuity Commencement Date.

Additional Services

These additional services are available to you: dollar-cost averaging (DCA), systematic transfer (GVA III only), account sweep and portfolio rebalancing. In order to take advantage of one of these services, you will need to complete the applicable election form. These services will stop once we are notified of a pending death claim.

Dollar-Cost Averaging. Dollar-cost averaging allows you to transfer a designated amount from certain Subaccounts, or the fixed side of the contract, into one or more Subaccounts on a monthly basis for 1, 2 or 3 years. The minimum amount to be dollar cost averaged is $10,000 for 1 year, and $25,000 for 2 years or 3 years. We may offer different time periods for new Purchase Payments and for transfers of Contract Value. State variations may exist.

Systematic Transfer Service. The systematic transfer service allows you to fully liquidate your fixed account balance over four years and transfer the amounts into one or more of the Subaccounts. This service is only available for GVA III Participants.

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Account Sweep Service. The account sweep service allows you to keep a designated amount in one Subaccount or the fixed account, and automatically transfer the excess to other Subaccounts of your choice. Beginning May 1, 2010, this service will no longer be available unless the Contractowner has enrolled in this service prior to this date.

Portfolio Rebalancing. Portfolio rebalancing is an option that restores to a pre-determined level the percentage of Account Value allocated to each Subaccount or the fixed account. The rebalancing may take place quarterly, semi-annually or annually.

Death Benefit Before the Annuity Commencement Date

The payment of Death Benefits is governed by the applicable plan and the tax code. In addition, no payment of Death Benefits provided upon the death of the Participant will be allowed that does not satisfy the requirements of code section 72(s) or section 401(a)(9) of the tax code. The Participant may designate a Beneficiary during the Participant’s lifetime and change the Beneficiary by filing a written request with us. Each change of Beneficiary revokes any previous designation.

If the Participant dies before the Annuity Commencement Date, the Death Benefit paid to the Participant’s designated Beneficiary will be the greater of: (1) the net contributions; or (2) the Participant’s account balance less any outstanding loan (including principal due and accrued interest), provided that, if we are not notified of the Participant’s death within six months of such death, we pay the Beneficiary the amount in (2).

We determine the value of the Death Benefit as of the date on which the death claim is approved for payment. This payment will occur when we receive (1) proof, satisfactory to us, of the death of the Participant; (2) written authorization for payment; and (3) all required claim forms, fully completed.

If a Death Benefit is payable, the Beneficiary may elect to receive payment of the Death Benefit either in the form of a lump sum settlement or an Annuity Payout, or as a combination of these two. If a lump sum settlement is requested, the proceeds will be mailed within seven days of receipt of satisfactory claim documentation as discussed previously, subject to the laws and regulations governing payment of Death Benefits. If no election is made within 60 days after we receive satisfactory notice of the Participant’s death, we will pay a lump sum settlement to the Beneficiary at that time. This payment may be postponed as permitted by the 1940 Act.

Payment will be made in accordance with applicable laws and regulations governing payment of Death Benefits.

Under qualified contracts, if the Beneficiary is someone other than the spouse of the deceased Participant, the tax code provides that the Beneficiary may not elect an annuity which would commence later than December 31^st of the calendar year following the calendar year of the Participant’s death. If a non-spousal Beneficiary elects to receive payment in a single lump sum, the tax code provides that such payment must be received no later than December 31^st of the fourth calendar year following the calendar year of the Participant’s death.

If the Beneficiary is the surviving spouse of the deceased Participant, distributions generally are not required under the tax code to begin earlier than December 31^st of the calendar year in which the Participant would have attained age 70. If the surviving spouse dies before the date distributions commence, then, for purposes of determining the date distributions to the Beneficiary must commence, the date of death of the surviving spouse is substituted for the date of death of the Participant.

If the Beneficiary is the spouse of the Participant, then the spouse may elect to continue the contract as the new Participant. Same-sex spouses should carefully consider whether to purchase annuity products that provide benefits based upon status as a spouse, and whether to exercise any spousal rights under the contract. You are strongly encouraged to consult a tax advisor before electing spousal rights under the contract.

Other rules apply to nonqualified annuities. See “Federal Tax Matters.”

If there is no living named Beneficiary on file with us at the time of a Participant’s death and unless the plan directs otherwise, we will pay the Death Benefit to the Participant’s estate in the form of a lump sum payment, upon receipt of satisfactory proof of the participant’s death, but only if we receive proof of death no later than the end of the fourth calendar year following the year of the Participant’s death. In such case, the value of the Death Benefit will be determined as of the end of the Valuation Period during which we receive due proof of death, and the lump sum Death Benefit generally will be paid within seven days of that date.

Withdrawals

Before the Annuity Commencement Date and subject to the terms of the Plan, withdrawals may be made from the Subaccounts or the fixed account of all or part of the Participant’s account balance remaining after deductions for any applicable (1) surrender charge; (2) annual administration charge (imposed on total withdrawals), (3) premium taxes, and (4) outstanding loan.

Converting all or part of the account balance or Death Benefit to an Annuity Payout is not considered a withdrawal.

Under GVA III, special limits apply to withdrawals from the fixed account. See “Charges and Other Deductions – Fixed Account Withdrawal/Transfer Limits for GVA III.”

The account balance available for withdrawal is determined at the end of the Valuation Period during which we receive the withdrawal request on an approved Lincoln distribution request form (available from the Home Office). If we receive a surrender or withdrawal

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request placed at or after 4:00 p.m., New York time, we will process the request using the Accumulation Unit value computed on the next Valuation Date. Unless a request for withdrawal specifies otherwise, withdrawals will be made from all Subaccounts within the VAA and from the fixed account in the same proportion that the amount of withdrawal bears to the total Participant account balance. Unless prohibited, withdrawal payments will be mailed within seven days after we receive a valid written request. The payment may be postponed as permitted by the 1940 Act.

There are charges associated with withdrawals of Account Value. See “Charges and Other Deductions.”

The tax consequences of a withdrawal are discussed later in this booklet. See “Federal Tax Matters.”

Total Withdrawals. Only Participants with no outstanding loans can make a total withdrawal. A total withdrawal of a Participant’s account will occur when (a) the Participant or Contractowner requests the liquidation of the Participant’s entire account balance, or (b) the amount requested plus any surrender charge results in a remaining Participant account balance of an amount less than or equal to the annual administration charge, in which case we treat the request as a request for liquidation of the participant’s entire account balance.

Any active life certificate must be surrendered to us when a total withdrawal occurs. If the Contractowner resumes Contributions on behalf of a Participant after a total withdrawal, the Participant will receive a new participation date and active life certificate.

Partial Withdrawals. A partial withdrawal of a Participant’s account balance will occur when less than a total withdrawal is made from a Participant’s account.

Systematic Withdrawal Option. Participants who are at least age 59½, are separated from service from their employer, or are disabled, and certain spousal Beneficiaries and alternate payees who are former spouses, may be eligible for a Systematic Withdrawal Option (“SWO”) under the contract. Payments are made only from the fixed account. Under the SWO a Participant may elect to withdraw either a monthly amount which is an approximation of the interest earned between each payment period based upon the interest rate in effect at the beginning of each respective payment period, or a flat dollar amount withdrawn on a periodic basis. A Participant must have a vested pre-tax account balance of at least $10,000 in the fixed account in order to select the SWO. A Participant may transfer amounts from the VAA to the fixed account in order to support SWO payments. These transfers, however, are subject to the transfer restrictions imposed by any applicable plan. A one-time fee of up to $30 will be charged to set up the SWO. This charge is waived for total vested pre-tax account balances of $25,000 or more. More information about SWO, including applicable fees and charges, is available in the contracts and active life certificates and from us.

Required Minimum Distribution Program. Under certain contracts Participants who are at least age 70½ may ask us to calculate and pay to them the minimum annual distribution required by Sections 401(a)(9), 403(b)(10) or 408 of the tax code. The Participant must complete the forms we require to elect this option. We will base our calculation solely on the Participant’s Account Value with us. Participants who select this option are responsible for determining the minimum distributions amount applicable to their non-Lincoln Life contracts.

Withdrawal Restrictions. Withdrawals under Section 403(b) contracts are subject to the limitations under Section 403(b)(11) of the tax code and regulations thereof and in any applicable plan document. That section provides that withdrawals of salary reduction Contributions deposited and earnings credited on any salary reduction Contributions after December 31, 1988, can only be made if the Participant has (1) died; (2) become disabled; (3) attained age 59½; (4) separated from service; or (5) incurred a hardship. If amounts accumulated in a Section 403(b)(7) custodial account are deposited in a contract, these amounts will be subject to the same withdrawal restrictions as are applicable to post-1988 salary reduction Contributions under the contracts. For more information on these provisions see “Federal Tax Matters.”

Withdrawal requests for a Participant under Section 401(a) plans and plans subject to Title I of ERISA must be authorized by the Contractowner on behalf of a Participant. All withdrawal requests will require the Contractowner’s written authorization and written documentation specifying the portion of the Participant’s account balance which is available for distribution to the Participant.

As required by Section 830.105 of the Texas Education Code, withdrawal requests by Participants in the Texas Optional Retirement Program (“ORP”) are only permitted in the event of (1) death; (2) retirement; (3) termination of employment in all Texas institutions of higher education; or (4) attainment of age 70½. A participant in an ORP contract is required to obtain a certificate of termination from the Participant’s employer before a withdrawal request can be granted.

For withdrawal requests (other than transfers to other investment vehicles) by Participants under plans not subject to Title I of ERISA and non-401(a) plans, the Participant must certify to us that one of the permitted distribution events listed in the tax code has occurred (and provide supporting information, if requested) and that we may rely on this representation in granting the withdrawal request. See “Federal Tax Matters.” A Participant should consult his or her tax adviser as well as review the provisions of their plan before requesting a withdrawal. A plan and applicable law may contain additional withdrawal or transfer restrictions. Withdrawals may have Federal tax consequences. In addition, early withdrawals, as defined under Section 72(q) and 72(t) of the tax code, may be subject to a 10% excise tax.

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Loans

If the Plan permits loans, then during the Participant's accumulation period, the Participant may apply for a loan by completing a loan application that we provide. The Participant's account balance in the fixed account secures the loan. Loans are subject to restrictions imposed by the IRC, Title I of the Employee Retirement Income Security Act of 1974 (ERISA), and the Participant's Plan. For plans subject to the IRC and Title I of ERISA, the initial amount of a Participant loan cannot exceed the lesser of 50% of the Participant's vested account balance in the fixed account or $50,000 and, pursuant to the terms of the contract, must be at least $1,000. For plans subject to the IRC, but not subject to Title I of ERISA, a Participant is subject to the same $50,000 maximum, but may borrow up to $10,000 of his or her vested account balance even if that would be greater than 50% of his or her vested account balance. A Participant who incurs a qualified disaster may borrow up to the lesser of $100,000 or 10% of his or her vested account balance. A Participant may have only one loan outstanding at a time and may not take more than one loan in any six-month period. Amounts serving as collateral for the loan are not subject to the minimum interest rate under the contract and will accrue interest at a rate below the loan interest rate provided in the contract. More information about loan and loan interest rates is provided in the contract, the active life certificates, and the annuity loan agreement, and is also available from us.

Delay of Payments

Contract proceeds from the VAA will be paid within seven days, except:

• 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 to protect Contractowners.

We may delay payment from the fixed account for up to six months. During this period, we will continue to credit the current declared interest rate to a Participant's account in the fixed account.

Due to federal laws designed to counter terrorism and prevent money laundering by criminals, we may be required to reject a Purchase Payment and/or deny payment of a request for transfers, withdrawals, surrenders, or Death Benefits, until instructions are received from the appropriate regulator. We also may be required to provide additional information about a Contractowner's account to government regulators.

Abandoned Property. Every state has unclaimed property laws which generally declare annuity contracts to be abandoned after a period of inactivity of three to five years from the date a benefit is due and payable. For example, if the payment of a Death Benefit has been triggered, but, if after a thorough search, we are still unable to locate the Beneficiary of the Death Benefit, or the Beneficiary does not come forward to claim the Death Benefit in a timely manner, the Death Benefit will be “escheated”. This means that the Death Benefit will be paid to the abandoned property division or unclaimed property office of the state in which the Beneficiary or the Contractowner last resided, as shown on our books and records, or to our state of domicile. This escheatment is revocable and the state is obligated to pay the Death Benefit (without interest) if your Beneficiary steps forward to claim it with the proper documentation.

To prevent such escheatment, it is important that you update your Beneficiary designations, including addresses, if and as they change. You may update your Beneficiary designations by submitting a Beneficiary change form to our Home Office.

Amendment of Contract

We reserve the right to amend the contract to meet the requirements of the 1940 Act or other applicable federal or state laws or regulations. You will be notified in writing of any changes, modifications or waivers. Any changes are subject to prior approval of your state’s insurance department (if required).

Ownership

Contractowners have all rights under the contract. According to Indiana law, the assets of the VAA are held for the exclusive benefit of all Contractowners and their designated Beneficiaries; and the assets of the VAA are not chargeable with liabilities arising from any other business that we may conduct. Qualified contracts may not be assigned or transferred except as permitted by applicable law and upon written notification to us. Qualified contracts and active life certificates may not be assigned or transferred except as permitted by ERISA and on written notification to us. In addition, a Participant, Beneficiary, or Annuitant may not, unless permitted by law, assign or encumber any payment due under the contract.

Contractowner Questions

The obligations to purchasers under the contracts are those of Lincoln Life. This prospectus provides a general description of the material features of the contract. Questions about your contract should be directed to us at 1-800-341-0441.

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Annuity Payouts

As permitted by the plan, the Participant, or the Beneficiary of a deceased Participant, may elect to convert all or part of the Participant's account balance or the Death Benefit to any annuity payout. The contract provides optional forms of payouts of annuities (annuity options), each of which is payable on a variable basis, a fixed basis or a combination of both as you specify. The contract provides that all or part of the contract value may be used to purchase an annuity payout option. The rates used to purchase any of annuity options discussed below are shown in the contract.

You may elect annuity payouts in monthly, quarterly, semiannual or annual installments. If the Participant's account balance or the Beneficiary's Death Benefit is less than $2,000 or if the amount of the first payout is less than $20, we have the right to cancel the annuity and pay the Participant or Beneficiary the entire amount in a lump sum.

We may maintain variable annuity payouts in the VAA, or in another separate account of Lincoln Life (variable payout division). We do not impose a charge when the annuity conversion amount is applied to a variable payout division to provide an annuity payout option. The contract benefits and charges for an annuity payout option, whether maintained in the VAA or in a variable payout division, are as described in this prospectus. The selection of funds available through a variable payout division may be different from the funds available through the VAA. If we will maintain a participant's variable annuity payout in a variable payout division, we will provide a prospectus for the variable payout division before the Annuity Commencement Date.

Annuity Options

Life Annuity. This option offers a periodic payout during the lifetime of the Annuitant and ends with the last payout before the death of the Annuitant. This option offers the highest periodic payout since there is no guarantee of a minimum number of payouts or provision for a Death Benefit for Beneficiaries. However, there is the risk under this option that the recipient would receive no payouts if he or she dies before the date set for the first payout; only one payout if death occurs before the second scheduled payout, and so on.

Life Annuity with Guaranteed Period. This option guarantees periodic payouts during a designated period, usually 10 or 20 years, and then continues throughout the lifetime of the Annuitant. The designated period is selected by the Contractowner (or Participant in an allocated contract).

Joint Life Annuity. This option offers a periodic payout during the joint lifetime of the Annuitant and a designated joint Annuitant. The payouts continue during the lifetime of the survivor. However, under a joint life annuity, if both Annuitants die before the date set for the first payout, no payouts will be made. Only one payment would be made if both deaths occur before the second scheduled payout, and so on.

Non-Life Annuities. Annuity Payouts are guaranteed monthly for the selected number of years. While there is no right to make any total or partial withdrawals during the annuity period, an Annuitant or Beneficiary who has selected this annuity option as a variable annuity may request at any time during the payout period that the present value of any remaining installments be paid in one lump sum. This lump sum payout will be treated as a total withdrawal during the accumulation period and may be subject to a surrender charge. See – Charges and Other Deductions and Federal Tax Matters.

General Information

Under the options listed above, you may not make withdrawals. Other options may be made available by us. Annuity Payout options are only available if consistent with the contract, the Plan, the tax code, and ERISA. The mortality and expense risk charge will be assessed on all variable annuity payments, including options that do not have a life contingency and therefore no mortality risk.

Under any option providing for guaranteed payouts, the number of payouts which remain unpaid at the date of the Annuitant's death (or surviving Annuitant's death in the case of a joint life annuity) will be paid to the Beneficiary as payouts become due.

Annuity Payout Calculation

Fixed Annuity Payouts are determined by dividing the Participant's annuity conversion amount in the fixed account as of the initial Annuity Payout calculation date by the applicable annuity conversion factor (in the contract) for the Annuity Payout option selected.

Variable Annuity Payouts

Variable Annuity Payouts will be determined using:

• The Participant's annuity conversion amount in the VAA as of the initial Annuity Payout calculation date;

• The annuity conversion factor contained in the contract;

• The annuity option selected; and

• The investment performance of the fund(s) selected.

To determine the amount of payouts, we make this calculation:

1. Determine the dollar amount of the first periodic payout; then

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2.	Credit the retired life certificate with a specific number of Annuity Units equal to the first periodic payout divided by the Annuity Unit value; and
3.	Calculate the value of the Annuity Units each period thereafter.

We assume an investment return of a specified percentage per year, as applied to the applicable mortality table. The amount of each Annuity Payout after the initial pay-out will depend upon how the underlying fund(s) perform, relative to the assumed rate. If the actual net investment rate (annualized) exceeds the assumed rate, the payment will increase at a rate proportional to the amount of such excess. Conversely, if the actual rate is less than the assumed rate, Annuity Payouts will decrease. There is a more complete explanation of this calculation in the SAI.

Distribution of the Contracts

Lincoln Financial Distributors, Inc. (“LFD”) serves as Principal Underwriter of this contract. LFD is affiliated with Lincoln Life and is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934 and is a member of FINRA. The Principal Underwriter has entered into selling agreements with Lincoln Financial Advisors Corporation and/or Lincoln Financial Securities Corporation (collectively, “LFN”), also affiliates of ours. The Principal Underwriter has also entered into selling agreements with broker-dealers that are unaffiliated with us (“Selling Firms”). While the Principal Underwriter has the legal authority to make payments to broker-dealers which have entered into selling agreements, we will make such payments on behalf of the Principal Underwriter in compliance with appropriate regulations. We also pay on behalf of LFD certain of its operating expenses related to the distribution of this and other of our contracts. The Principal Underwriter may also offer “non-cash compensation”, as defined under FINRA’s rules, which includes among other things, merchandise, gifts, marketing support, sponsorships, seminars, entertainment and travel expenses. You may ask your registered representative how he/she will personally be compensated, in whole or in part, for the sale of the contract to you or for any alternative proposal that may have been presented to you. You may wish to take such compensation payments into account when considering and evaluating any recommendation made to you in connection with the purchase of a contract. The following paragraphs describe how payments are made by us and the Principal Underwriter to various parties.

Compensation Paid to LFN. The maximum commission the Principal Underwriter pays to LFN is 3.50% of Purchase Payments. LFN may elect to receive a lower commission when a Purchase Payment is made along with an earlier quarterly payment based on Contract Value for so long as the contract remains in effect. Upon annuitization, the maximum commission the Principal Underwriter pays to LFN is 1.18% of annuitized value and/or ongoing annual compensation of up to 0.00% of annuity value or statutory reserves.

Lincoln Life also pays for the operating and other expenses of LFN, including the following sales expenses: registered representative training allowances; compensation and bonuses for LFN's management team; advertising expenses; and all other expenses of distributing the contracts. LFN pays its registered representatives a portion of the commissions received for their sales of contracts. LFN registered representatives and their managers are also eligible for various cash benefits, such as bonuses, insurance benefits and financing arrangements. In addition, LFN registered representatives who meet certain productivity, persistency and length of service standards and/or their managers may be eligible for additional compensation. Sales of the contracts may help LFN registered representatives and/or their managers qualify for such benefits. LFN registered representatives and their managers may receive other payments from us for services that do not directly involve the sale of the contracts, including payments made for the recruitment and training of personnel, production of promotional literature and similar services.

Compensation Paid to Unaffiliated Selling Firms. The Principal Underwriter pays commissions to all Selling Firms. The maximum commission the Principal Underwriter pays to Selling Firms, other than LFN, is 3.50% of Purchase Payments. Some Selling Firms may elect to receive a lower commission when a Purchase Payment is made along with an earlier quarterly payment based on Contract Value for so long as the contract remains in effect. Upon annuitization, the maximum commission the Principal Underwriter pays to Selling Firms is 1.18% of annuitized value and/or ongoing annual compensation of up to 0.00% of annuity value or statutory reserves. LFD also acts as wholesaler of the contracts and performs certain marketing and other functions in support of the distribution and servicing of the contracts.

LFD may pay certain Selling Firms or their affiliates additional amounts for, among other things: (1) “preferred product” treatment of the contracts in their marketing programs, which may include marketing services and increased access to registered representatives; (2) sales promotions relating to the contracts; (3) costs associated with sales conferences and educational seminars for their registered representatives; (4) other sales expenses incurred by them; and (5) inclusion in the financial products the Selling Firm offers.

Lincoln Life may provide loans to broker-dealers or their affiliates to help finance marketing and distribution of the contracts, and those loans may be forgiven if aggregate sales goals are met. In addition, we may provide staffing or other administrative support and services to broker-dealers who distribute the contracts. LFD, as wholesaler, may make bonus payments to certain Selling Firms based on aggregate sales of our variable insurance contracts (including the contracts) or persistency standards. These additional payments are not offered to all Selling Firms, and the terms of any particular agreement governing the payments may vary among Selling Firms.

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These additional types of compensation are not offered to all Selling Firms. The terms of any particular agreement governing compensation may vary among Selling Firms and the amounts may be significant. The prospect of receiving, or the receipt of, additional compensation may provide Selling Firms and/or their registered representatives with an incentive to favor sales of the contracts over other variable annuity contracts (or other investments) with respect to which a Selling Firm receives lower levels of or no additional compensation. You may wish to take such payment arrangements into account when considering and evaluating any recommendation relating to the contracts. Additional information relating to compensation paid in 2019 is contained in the SAI.

Compensation Paid to Other Parties. Depending on the particular selling arrangements, there may be others whom LFD compensates for the distribution activities. For example, LFD may compensate certain “wholesalers”, who control access to certain selling offices, for access to those offices or for referrals, and that compensation may be separate from the compensation paid for sales of the contracts. LFD may compensate marketing organizations, associations, brokers or consultants which provide marketing assistance and other services to broker-dealers who distribute the contracts, and which may be affiliated with those broker-dealers. Commissions and other incentives or payments described above are not charged directly to Contractowners or the VAA. All compensation is paid from our resources, which include fees and charges imposed on your contract.

Federal Tax Matters

Introduction

The Federal income tax treatment of the contract is complex and sometimes uncertain. The Federal income tax rules may vary with your particular circumstances. This discussion does not include all the Federal income tax rules that may affect you and your contract. This discussion also does not address other Federal tax consequences (including consequences of sales to foreign individuals or entities), or state or local tax consequences, associated with the contract. As a result, you should always consult a tax adviser about the application of tax rules found in the Internal Revenue Code (“Code”), Treasury Regulations and applicable IRS guidance to your individual situation.

Qualified Retirement Plans

We have designed the contracts for use in connection with certain types of retirement plans that receive favorable treatment under the tax code. Contracts issued to or in connection with a qualified retirement plan are called “qualified contracts.” We issue contracts for use with various types of qualified retirement plans. The Federal income tax rules applicable to those plans are complex and varied. As a result, this prospectus does not attempt to provide more than general information about the use of the contract with the various types of qualified retirement plans. Persons planning to use the contract in connection with a qualified retirement plan should obtain advice from a competent tax adviser.

Types of Qualified Contracts and Terms of Contracts

Qualified retirement plans may include the following:

• 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)

We will amend contracts to be used with a qualified retirement plan as generally necessary to conform to the tax law requirements for the type of plan. However, the rights of a person to any qualified retirement plan benefits may be subject to the plan's terms and conditions. In addition, we are not bound by the terms and conditions of qualified retirement plans to the extent such terms and conditions contradict the contract, unless we consent.

If your contract was issued pursuant to a 403(b) plan, we now are generally required to confirm, with your 403(b) plan sponsor or otherwise, that contributions (purchase payments), as well as surrenders, loans or transfers you request, comply with applicable tax requirements and to decline purchase payments or requests that are not in compliance. We will defer crediting purchase payments we receive or processing payments you request until all information required under the tax law has been received. By directing purchase payments to the contract or requesting a surrender, loan or transfer, you consent to the sharing of confidential information about you, the contract, and transactions under the contract and any other 403(b) contracts or accounts you have under the 403(b) plan among us, your employer or plan sponsor, any plan administrator or recordkeeper, and other product providers.

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Also, for 403(b) contracts issued on or after January 1, 2009, amounts attributable to employer contributions are subject to restrictions on withdrawals specified in your employer's 403(b) plan, in order to comply with new tax regulations (previously, only amounts attributable to your salary-reduction contributions were subject to withdrawal restrictions). Amounts transferred to a 403(b) contract from other 403(b) contracts or accounts must generally be subject to the same restrictions on withdrawals applicable under the prior contract or account.

Tax Deferral on Earnings

The Federal income tax law generally does not tax any increase in your contract value until you receive a contract distribution. However, for this general rule to apply, certain requirements must be satisfied:

• 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.

Investments in the VAA Must Be Diversified

For a contract to be treated as an annuity for Federal income tax purposes, the investments of the VAA must be “adequately diversified.” Treasury regulations define standards for determining whether the investments of the VAA are adequately diversified. If the VAA fails to comply with these diversification standards, you could be required to pay tax currently on the excess of the contract value over the contract purchase payments. Although we do not control the investments of the underlying investment options, we expect that the underlying investment options will comply with the IRS regulations so that the VAA will be considered “adequately diversified.”

Restrictions

Federal income tax law limits your right to choose particular investments for the contract. Because the IRS has issued little guidance specifying those limits, the limits are uncertain and your right to allocate contract values among the subaccounts may exceed those limits. If so, you would be treated as the owner of the assets of the VAA and thus subject to current taxation on the income, bonus credits, persistency credits and gains, if applicable, from those assets. We do not know what limits may be set by the IRS in any guidance that it may issue and whether any such limits will apply to existing contracts. We reserve the right to modify the contract without your consent to try to prevent the tax law from considering you as the owner of the assets of the VAA.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019

The Setting Every Community Up for Retirement Enhancement (SECURE) Act (the “SECURE Act”) was enacted on December 20, 2019. The SECURE Act made a number of significant changes to the rules that apply to qualified retirement plans and IRA’s, including the following:

• Increased the required beginning date measuring age from 70½ to 72 for any participant or IRA owner who did not attain age 70½ prior to January 1, 2020. As a result, required minimum distributions are generally required to begin by April 1 of the year following the year in which a participant or IRA owner reached age 72.

• Eliminated the age 70½ limit for making contributions to an IRA. Beginning in 2020, an IRA owner can make contributions to his or her IRA at any age.

• Changed the required minimum distribution rules that apply after the death of a participant or IRA owner.

• Created the “Qualified Birth or Adoption” exception to the 10% additional tax on early distributions.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020

The Coronavirus Aid, Relief, and Economic Security (CARES) Act (the “CARES Act”) was enacted on March 27, 2020. The CARES Act includes a number of provisions that affect distributions from qualified retirement plans and IRAs, including the following:

• Tax-favored Coronavirus Related Distributions

• Retirement plan loan relief

• Temporary waiver of required minimum distributions

Tax-favored Coronavirus Related Distributions

The CARES Act provides for tax-favored withdrawals, called Coronavirus Related Distributions (“CRDs”), from retirement plans and IRAs for any plan participant or IRA owner who meets certain requirements. For this purpose, an individual can receive a CRD if the participant or IRA owner can demonstrate that he or she:

• has been diagnosed with COVID-19,

• has a spouse or dependent who has been diagnosed with COVID-19,

• experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, or having reduced work hours.

Retirement plans that can provide CRDs are generally 401(a), 403(a) and (b), and 457(b) plans, as well as IRAs.

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CRDs are limited to $100,000 in the aggregate from all retirement plan accounts and IRAs per individual. CRDs are referred to as “tax-favored” because they are not subject to the 10% early withdrawal penalty or the 20% mandatory withholding for eligible rollover distributions, and are included in taxable income of the recipient ratably over a three-year period is so elected by the recipient. A plan participant or IRA owner may repay the CRD, up to the full amount distributed, within 3 years of the distribution. The repayment is treated as a direct trustee to trustee transfer made within 60 days to the plan or account that receives the repayment.

Any distribution taken between January 1, 2020 and December 31, 2020, will be treated as a CRD if it otherwise meets the requirements and the plan permits the distribution.

Retirement Plan Loan Relief

The CARES Act includes several provisions that affect retirement plan loans. First the maximum plan loan amounts are increased to $100,000 or 100% of the participant’s vested balance for any loan taken by an individual who meets the requirements for taking a CRD (described above) and who takes the loan within 180 days of the enactment of the CARES Act.

Second, any individual who meets the requirements for taking a CRD and who either (i) has a loan outstanding on the date the CARES Act was enacted or (ii) takes a loan after the CARES Act was enacted, can delay any loan repayment due in 2020 for 1 year.

Third, the time period in 2020 for which loan payments are suspended is not counted in the determination of the maximum 5 year period for the term of a non-residential retirement plan loan.

Temporary Waiver of Required Minimum Distributions

The CARES Act waives required minimum distributions from 401(a), 403(a) and (b), and 457(b) plans, as well as IRAs, for 2020. In addition, if a plan participant or IRA owner attained his or her required beginning date in 2019 but did not take his or her required minimum distribution prior to December 31, 2019, his or her required minimum distribution for 2019 is also waived.

As a part of this waiver, the year 2020 is not included in the calculation of any 5 or 10 year required distribution period under section 401(a)(9)(B)(ii).

Tax Treatment of Qualified Contracts

The Federal income tax rules applicable to qualified retirement plans and qualified contracts vary with the type of plan and contract. For example,

• 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.

Please note that qualified retirement plans such as 403(b) plans, 401(k) plans and IRAs generally defer taxation of contributions and earnings until distribution. As such, an annuity does not provide any additional tax deferral benefit beyond the qualified retirement plan itself.

Tax Treatment of Payments

The Federal income tax rules generally include distributions from a qualified contract in the Participant's income as ordinary income. These taxable distributions will include purchase payments that were deductible or excludible from income. Thus, under many qualified contracts, the total amount received is included in income since a deduction or exclusion from income was taken for purchase payments. There are exceptions. For example, you do not include amounts received from a Roth IRA in income if certain conditions are satisfied.

Required Minimum Distributions (RMDs)

Under most qualified plans, you must begin receiving payments from the contract in certain minimum amounts by April 1 of the year following the year you attain age 70 ½ or retire, if later. You are required to take distributions from your traditional IRAs by April 1 of the year following the year you reach age 70 ½. If you own a Roth IRA, you are not required to receive minimum distributions from your Roth IRA during your life.

Failure to comply with the minimum distribution rules applicable to certain qualified plans, such as Traditional IRAs, will result in the imposition of an excise tax. This excise tax equals 50% of the amount by which a minimum required distribution exceeds the actual distribution from the qualified plan.

Treasury regulations applicable to required minimum distributions include a rule that may impact the distribution method you have chosen and the amount of your distributions. Under these regulations, the presence of an enhanced Death Benefit, Lincoln

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SmartSecurity^® Advantage, or other benefit, if any, may require you to take additional distributions. An enhanced Death Benefit is any Death Benefit that has the potential to pay more than the contract value or a return of purchase payments. Please contact your tax adviser regarding any tax ramifications.

Additional Tax on Early Distributions from Qualified Retirement Plans

The tax code may impose a 10% additional tax on an early distribution from a qualified contract that must be included in income. The tax code does not impose the additional tax if one of several exceptions applies. The exceptions vary depending on the type of qualified contract you purchase. For example, in the case of an IRA, the 10% additional tax will not apply to any of the following withdrawals, surrenders, or Annuity Payouts:

• 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.

These exceptions, as well as certain others not described here, generally apply to taxable distributions from other qualified retirement plans. However, the specific requirements of the exception may vary.

Unearned Income Medicare Contribution

Congress enacted the “Unearned Income Medicare Contribution” as a part of the Health Care and Education Reconciliation Act of 2010. This new tax, which affects individuals whose modified adjusted gross income exceeds certain thresholds, is a 3.8% tax on the lesser of (i) the individual’s “unearned income,” or (ii) the dollar amount by which the individual’s modified adjusted gross income exceeds the applicable threshold. Distributions that you take from your contract are not included in the calculation of unearned income because your contract is a qualified plan contract. However, the amount of any such distribution is included in determining whether you exceed the modified adjusted gross income threshold. The tax is effective for tax years after December 31, 2012. Please consult your tax advisor to determine whether your annuity distributions are subject to this tax.

Taxation of Death Benefits

We may distribute amounts from your contract because of your death. Federal tax rules may limit the payment options available to your Beneficiaries. If your spouse is your Beneficiary, your surviving spouse will generally receive special treatment and will have more available payment options. Non-spouse Beneficiaries do not receive the same special treatment. Payment options may be further limited depending upon whether you reached the date upon which you were required to begin minimum distributions. The Pension Protection Act of 2006 (“PPA”) permits non-spouse Beneficiary rollovers to an “inherited IRA” (effective January 1, 2007).

Transfers and Direct Rollovers

As a result of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”), you may be able to move funds between different types of qualified plans, such as 403(b) and 457(b) governmental plans, by means of a rollover or transfer. You may be able to rollover or transfer amounts between qualified plans and traditional IRAs. These rules do not apply to Roth IRAs and 457(b) non-governmental tax-exempt plans. The PPA permits direct conversions from certain qualified, 403(b) or 457(b) plans to Roth IRAs (effective for distribution after 2007). There are special rules that apply to rollovers, direct rollovers and transfers (including rollovers or transfers or after-tax amounts). If the applicable rules are not followed, you may incur adverse Federal income tax consequences, including paying taxes which you might not otherwise have had to pay. Before we send a rollover distribution, we will provide a notice explaining tax withholding requirements (see Federal Income Tax Withholding). We are not required to send you such notice for your IRA. You should always consult your tax adviser before you move or attempt to move any funds.

The IRS issued Announcement 2014-15 following the Tax Court’s decision in Bobrow v. Commissioner, T.C. Memo. 2014-21. In the Announcement, the IRS stated its intent to apply the one-rollover-per-year limitation of 408(d)(3)(B) on an aggregate basis to all IRAs that an individual owns. This means that an individual cannot make a tax-free IRA-to-IRA rollover if he or she has made such a rollover involving any of the individual’s IRAs in the current tax year. If an intended rollover does not qualify for tax-free rollover treatment, contributions to your IRA may constitute excess contributions that may exceed contribution limits. This one-rollover-per-year limitation does not apply to direct trustee-to-trustee transfers.

Federal Income Tax Withholding

We will withhold and remit to the IRS a part of the taxable portion of each distribution made under a contract unless you notify us prior to the distribution that tax is not to be withheld. In certain circumstances, Federal income tax rules may require us to withhold tax. At the time a withdrawal, surrender, or Annuity Payout is requested, we will give you an explanation of the withholding requirements.

Certain payments from your contract may be considered eligible rollover distributions (even if such payments are not being rolled over). Such distributions may be subject to special tax withholding requirements. The Federal income tax withholding rules require that we withhold 20% of the eligible rollover distribution from the payment amount, unless you elect to have the amount directly transferred to certain qualified plans or contracts. The IRS requires that tax be withheld, even if you have requested otherwise. Such

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tax withholding requirements are generally applicable to 401(a), 403(a) or (b), HR 10, and 457(b) governmental plans and contracts used in connection with these types of plans.

Special Considerations for Same-Sex Couples

The U.S. Supreme Court recently held same-sex spouses who have been married under state law will now be treated as spouses for purposes of federal law. You are strongly encouraged to consult a tax advisor before electing spousal rights under the contract.

Nonqualified Annuity Contracts

A nonqualified annuity is a contract not issued in connection with an IRA or a qualified retirement plan receiving special tax treatment under the tax code. These contracts are not intended for use with nonqualified annuity contracts. Different federal tax rules apply to nonqualified annuity contracts. Persons planning to use the contract in connection with a nonqualified annuity should obtain advice from a tax advisor.

Our Tax Status

Under existing Federal income tax laws, we do not pay tax on investment income and realized capital gains of the VAA. We do not expect that we will incur any Federal income tax liability on the income and gains earned by the VAA. However, the Company does expect, to the extent permitted under Federal tax law, to claim the benefit of the foreign tax credit as the owner of the assets of the VAA. Therefore, we do not impose a charge for Federal income taxes. If Federal income tax law changes and we must pay tax on some or all of the income and gains earned by the VAA, we may impose a charge against the VAA to pay the taxes.

Changes in the Law

The above discussion is based on the tax code, IRS regulations, and interpretations existing on the date of this prospectus. However, Congress, the IRS, and the courts may modify these authorities, sometimes retroactively.

Additional Information

Voting Rights

As required by law, we will vote the fund shares held in the VAA at meetings of the shareholders of the funds. The voting will be done according to the instructions of Contractowners who have interests in any Subaccounts which invest in classes of the funds. If the 1940 Act or any regulation under it should be amended or if present interpretations should change, and if as a result we determine that we are permitted to vote the fund shares in our own right, we may elect to do so.

The number of votes which you have the right to cast will be determined by applying your percentage interest in a Subaccount to the total number of votes attributable to the Subaccount. In determining the number of votes, fractional shares will be recognized.

Each underlying fund is subject to the laws of the state in which it is organized concerning, among other things, the matters which are subject to a shareholder vote, the number of shares which must be present in person or by proxy at a meeting of shareholders (a “quorum”), and the percentage of such shares present in person or by proxy which must vote in favor of matters presented. Because shares of the underlying fund held in the VAA are owned by us, and because under the 1940 Act we will vote all such shares in the same proportion as the voting instructions which we receive, it is important that each Contractowner provide their voting instructions to us. For funds un-affiliated with Lincoln, even though Contractowners may choose not to provide voting instruction, the shares of a fund to which such Contractowners would have been entitled to provide voting instruction will be voted by us in the same proportion as the voting instruction which we actually receive. For funds affiliated with Lincoln, shares of a fund to which such Contractowners would have been entitled to provide voting instruction will, once we receive a sufficient number of instructions we deem appropriate to ensure a fair representation of Contractowners eligible to vote, be voted by us in the same proportion as the voting instruction which we actually receive. As a result, the instruction of a small number of Contractowners could determine the outcome of matters subject to shareholder vote. All shares voted by us will be counted when the underlying fund determines whether any requirement for a minimum number of shares be present at such a meeting to satisfy a quorum requirement has been met. Voting instructions to abstain on any item to be voted on will be applied proportionately to reduce the number of votes eligible to be cast.

Whenever a shareholders meeting is called, we will provide or make available to each person having a voting interest in a Subaccount proxy voting material, reports and other materials relating to the funds. Since the funds engage in shared funding, other persons or entities besides Lincoln Life may vote fund shares. See Investments of the Variable Annuity Account – Fund Shares.

Return Privilege

Participants under Sections 403(b), 408 and certain nonqualified plans will receive an active life certificate. Within the free-look period (ten days) after the participant receives the active life certificate, the participant may cancel it for any reason by giving us written notice. The postmark date of the notice is the date of notice for these purposes. An active life certificate canceled under this provision will be void. With respect to the fixed side of the contract, we will return the participant's contributions less withdrawals made on

31

behalf of the participant. With respect to the VAA, we will return the greater of the participant's contributions less withdrawals made on behalf of the participant, or the participant's account balance in the VAA on the date we receive the written notice. No surrender charge applies.

State Regulation

As a life insurance company organized and operated under Indiana law, we are subject to provisions governing life insurers and to regulation by the Indiana Commissioner of Insurance. Our books and accounts are subject to review and examination by the Indiana Department of Insurance at all times. A full examination of our operations is conducted by that Department at least every five years.

Records and Reports

As presently required by the 1940 Act and applicable regulations, we are responsible for maintaining all records and accounts relating to the VAA. We have entered into an agreement with State Street Bank and Trust Company, 801 Pennsylvania Ave, Kansas City, MO 64105, to provide accounting services to the VAA. We will mail to you, at your last known address of record at the Home Office, at least semi-annually after the first Contract Year, reports containing information required by that Act or any other applicable law or regulation.

A written confirmation of each transaction will be mailed to you on the next Valuation Date, except for the following transactions, which are mailed quarterly:

• deduction of any account fee or rider charges;

• any rebalancing event under the portfolio rebalancing service; and

• any transfer or withdrawal under any applicable additional service: dollar cost averaging, systematic transfer service, or account sweep service.

Cyber Security and Business Interruption Risks

We rely heavily on interconnected computer systems and digital data to conduct our annuity products business. Because our business is highly dependent upon the effective operation of our computer systems and those of our business partners, our business is vulnerable to disruptions from utility outages, and susceptible to operational and information security risks resulting from information systems failure (e.g., hardware and software malfunctions), and cyber-attacks. These risks include, among other things, the theft, misuse, corruption and destruction of data maintained online or digitally, interference with or denial of service, attacks on websites and other operational disruption and unauthorized release of confidential customer information. Such systems failures and cyber-attacks affecting us, any third-party administrator, the underlying funds, intermediaries and other affiliated or third-party service providers may adversely affect us and your Contract Value. For instance, systems failures and cyber-attacks may interfere with our processing of contract transactions, including the processing of orders from our website or with the underlying funds, impact our ability to calculate Accumulation Unit value, cause the release and possible destruction of confidential customer or business information, impede order processing, subject us and/or our service providers and intermediaries to regulatory fines and financial losses and/or cause reputational damage. Cyber security risks may also impact the issuers of securities in which the underlying funds invest, which may cause the funds underlying your contract to lose value. There can be no assurance that we or the underlying funds or our service providers will avoid losses affecting your contract due to cyber-attacks or information security breaches in the future.

In addition to cyber security risks, we are exposed to risks related to natural and man-made disasters and catastrophes, such as (but not limited to) storms, fires, floods, earthquakes, public health crises, malicious acts, and terrorist acts, any of which could adversely affect our ability to conduct business. A natural or man-made disaster or catastrophe, including a pandemic (such as COVID-19), could affect the ability or willingness of our employees or the employees of our service providers to perform their job responsibilities. Even if our employees and the employees of our service providers are able to work remotely, those remote work arrangements could result in our business operations being less efficient than under normal circumstances and could lead to delays in our processing of contract-related transactions, including orders from contract owners. Catastrophic events may negatively affect the computer and other systems on which we rely, impact our ability to calculate accumulation unit values, or have other possible negative impacts. There can be no assurance that we or our service providers will be able to successfully avoid negative impacts associated with natural and man-made disasters and catastrophes.

Other Information

Contract Deactivation. Under certain contracts, we may deactivate a contract by prohibiting new contributions and/or new participants after the date of deactivation. We will give the contractowner and participants at least ninety (90) days notice of the deactivation date.

32

Legal Proceedings

In the ordinary course of its business and otherwise, the Company and its subsidiaries or its separate accounts and Principal Underwriter may become or are involved in various pending or threatened regulatory or legal proceedings, including purported class actions, arising from the conduct of its business. In some instances, the proceedings include claims for unspecified or substantial punitive damages and similar types of relief in addition to amounts for alleged contractual liability or requests for equitable relief.

After consultation with legal counsel and a review of available facts, it is management’s opinion that the proceedings, after consideration of any reserves and rights to indemnification, ultimately will be resolved without materially affecting the consolidated financial position of the Company and its subsidiaries, or the financial position of its separate accounts or Principal Underwriter. However, given the large and indeterminate amounts sought in certain of these proceedings and the inherent difficulty in predicting the outcome of such proceedings, it is reasonably possible that an adverse outcome in certain matters could be material to the Company's operating results for any particular reporting period. Please refer to the Statement of Additional Information for possible additional information regarding legal proceedings.

33

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34

Contents of the Statement of Additional Information (SAI)
for Lincoln National Variable Annuity Account L

Item

Special Terms

Services

Principal Underwriter

Purchase of Securities Being Offered

Annuity Payouts

Determination of Accumulation and Annuity Unit Value

Capital Markets

Advertising & Ratings

Additional Services

Other Information

Financial Statements

For a free copy of the SAI complete the form below.

Statement of Additional Information Request Card

Group Variable Annuity Account Contracts I, II, & III

Please send me a free copy of the current Statement of Additional Information for Lincoln National Variable Annuity Account L (Group Variable Annuity Contracts I, II & III).

(Please Print)

Name: 

Address: 

City 

State 

Zip 

Mail to: The Lincoln National Life Insurance Co., P.O. Box 2340, Fort Wayne, IN 46801-2340

35

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36

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37

Appendix A—Condensed Financial Information

Accumulation Unit Values

The following information relates to accumulation unit values and accumulation units for funds available in the periods ended December 31. It should be read along with the VAA’s financial statement and notes which are included in the SAI. The methodology of determining accumulation unit values may be found in the prospectus (see The Contracts - Valuation of Accumulation Units).

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
AB VPS Global Thematic Growth Portfolio - Class B
2010	4.604	5.405	493	4.712	5.546	22
2011	5.405	4.099	435	5.546	4.216	19
2012	4.099	4.595	393	4.216	4.739	14
2013	4.595	5.593	344	4.739	5.781	12
2014	5.593	5.803	330	5.781	6.014	9
2015	5.803	5.898	304	6.014	6.127	10
2016	5.898	5.788	284	6.127	6.028	10
2017	5.788	7.810	267	6.028	8.155	8
2018	7.810	6.961	221	8.155	7.286	13
2019	6.961	8.944	214	7.286	9.385	12
AB VPS Growth and Income Portfolio - Class B(1)
2009	8.144	9.704	99	8.238	9.841	6
2010	9.704	10.837	78	9.841	11.017	5
2011	10.837	11.380	81	11.017	11.598	2
2012	11.380	13.210	90	11.598	13.497	2
2013	13.210	15.477	84	13.497	15.828	2
AB VPS Growth Portfolio - Class B
2010	6.396	7.269	152	6.545	7.457	10
2011	7.269	7.266	141	7.457	7.473	8
2012	7.266	8.171	137	7.473	8.425	9
2013	8.171	10.818	132	8.425	11.182	9
2014	10.818	12.099	113	11.182	12.537	10
2015	12.099	13.035	117	12.537	13.541	10
2016	13.035	13.015	95	13.541	13.554	10
2017	13.015	17.285	94	13.554	18.046	9
2018	17.285	17.758	104	18.046	18.587	9
2019	N/A	N/A	N/A	N/A	N/A	N/A
AB VPS Large Cap Growth Portfolio - Class B
2019	10.058	11.167	236	10.058	11.186	22
American Century VP Balanced Fund - Class I
2010	25.931	28.660	566	26.620	29.495	41
2011	28.660	29.888	492	29.495	30.835	38
2012	29.888	33.083	448	30.835	34.217	36
2013	33.083	38.461	401	34.217	39.880	34
2014	38.461	41.831	348	39.880	43.482	35
2015	41.831	40.349	297	43.482	42.046	30
2016	40.349	42.741	289	42.046	44.650	27
2017	42.741	48.202	262	44.650	50.481	27
2018	48.202	45.895	244	50.481	48.185	26
2019	45.895	54.458	221	48.185	57.320	20
American Century VP Inflation Protection Fund - Class I(2)
2009	10.063	10.611	42	10.487	10.626	1*
2010	10.611	11.069	71	10.626	11.113	1*
2011	11.069	12.285	92	11.113	12.365	1*
2012	12.285	13.080	122	12.365	13.199	2

A-1

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
American Funds Global Growth Fund - Class 2
2010	14.882	16.465	312	15.093	16.740	26
2011	16.465	14.852	274	16.740	15.139	29
2012	14.852	18.022	248	15.139	18.416	27
2013	18.022	23.049	232	18.416	23.611	27
2014	23.049	23.348	212	23.611	23.977	27
2015	23.348	24.719	205	23.977	25.449	25
2016	24.719	24.625	193	25.449	25.415	25
2017	24.625	32.052	202	25.415	33.164	18
2018	32.052	28.864	194	33.164	29.939	17
2019	28.864	38.658	175	29.939	40.198	15
American Funds Growth Fund - Class 2
2010	8.788	10.325	2,209	8.994	10.594	182
2011	10.325	9.785	2,030	10.594	10.065	174
2012	9.785	11.421	1,882	10.065	11.777	164
2013	11.421	14.712	1,697	11.777	15.208	149
2014	14.712	15.805	1540	15.208	16.379	149
2015	15.805	16.720	1421	16.379	17.371	146
2016	16.720	18.125	1324	17.371	18.877	134
2017	18.125	23.021	1241	18.877	24.037	127
2018	23.021	22.736	1137	24.037	23.799	111
2019	22.736	29.436	1014	23.799	30.890	101
American Funds Growth-Income Fund - Class 2
2010	10.908	12.034	642	11.062	12.234	36
2011	12.034	11.696	571	12.234	11.921	36
2012	11.696	13.604	548	11.921	13.900	35
2013	13.604	17.981	569	13.900	18.418	34
2014	17.981	19.695	570	18.418	20.224	32
2015	19.695	19.783	560	20.224	20.365	33
2016	19.783	21.843	537	20.365	22.542	31
2017	21.843	26.466	520	22.542	27.381	27
2018	26.466	25.734	512	27.381	26.691	33
2019	25.734	32.137	449	26.691	33.416	42
American Funds International Fund - Class 2
2010	12.370	13.132	1,245	12.659	13.473	39
2011	13.132	11.186	998	13.473	11.505	37
2012	11.186	13.058	834	11.505	13.464	34
2013	13.058	15.725	737	13.464	16.255	31
2014	15.725	15.155	683	16.255	15.705	27
2015	15.155	14.325	609	15.705	14.882	27
2016	14.325	14.684	569	14.882	15.293	26
2017	14.684	19.211	507	15.293	20.058	27
2018	19.211	16.522	466	20.058	17.293	28
2019	16.522	20.101	409	17.293	21.092	29
BlackRock Global Allocation V.I. Fund - Class I
2010	11.400	12.421	71	11.415	12.471	1*
2011	12.421	11.868	98	12.471	11.945	1*
2012	11.868	12.958	92	11.945	13.075	2
2013	12.958	14.723	104	13.075	14.892	2
2014	14.723	14.884	101	14.892	15.092	2
2015	14.884	14.631	103	15.092	14.873	2
2016	14.631	15.081	94	14.873	15.370	2
2017	15.081	17.000	100	15.370	17.369	3
2018	17.000	15.596	100	17.369	15.974	1*
2019	15.596	18.219	88	15.974	18.707	1*

A-2

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
Delaware VIP® Diversified Income Series - Standard Class
2010	14.577	15.595	452	14.781	15.853	20
2011	15.595	16.427	393	15.853	16.740	17
2012	16.427	17.434	395	16.740	17.811	10
2013	17.434	17.043	337	17.811	17.455	9
2014	17.043	17.770	313	17.455	18.245	10
2015	17.770	17.403	294	18.245	17.913	11
2016	17.403	17.837	254	17.913	18.406	10
2017	17.837	18.582	233	18.406	19.222	10
2018	18.582	18.006	227	19.222	18.673	9
2019	18.006	19.687	201	18.673	20.467	7
Delaware VIP® High Yield Series - Standard Class
2010	12.888	14.715	198	13.037	14.922	10
2011	14.715	14.915	180	14.922	15.163	10
2012	14.915	17.399	169	15.163	17.732	8
2013	17.399	18.813	145	17.732	19.222	7
2014	18.813	18.573	145	19.222	19.024	7
2015	18.573	17.175	125	19.024	17.636	6
2016	17.175	19.242	106	17.636	19.808	6
2017	19.242	20.477	99	19.808	21.132	5
2018	20.477	19.367	89	21.132	20.036	1*
2019	19.367	22.324	79	20.036	23.154	1*
Delaware VIP® REIT Series - Service Class
2010	18.589	23.301	445	19.023	23.904	20
2011	23.301	25.519	411	23.904	26.245	18
2012	25.519	29.461	378	26.245	30.375	14
2013	29.461	29.729	351	30.375	30.728	13
2014	29.729	38.004	341	30.728	39.380	14
2015	38.004	38.951	302	39.380	40.462	18
2016	38.951	40.729	290	40.462	42.415	15
2017	40.729	40.834	237	42.415	42.631	14
2018	40.834	37.389	205	42.631	39.132	8
2019	37.389	46.826	179	39.132	49.132	7
Delaware VIP® Small Cap Value Series - Service Class
2010	12.495	16.319	510	12.672	16.592	30
2011	16.319	15.900	452	16.592	16.206	28
2012	15.900	17.888	425	16.206	18.278	25
2013	17.888	23.585	421	18.278	24.159	24
2014	23.585	24.662	377	24.159	25.326	23
2015	24.662	22.839	321	25.326	23.512	22
2016	22.839	29.640	308	23.512	30.591	20
2017	29.640	32.796	280	30.591	33.932	20
2018	32.796	26.968	249	33.932	27.972	19
2019	26.968	34.100	213	27.972	35.459	20
Delaware VIP® Smid Cap Core Series - Service Class(3)
2010	8.929	10.115	241	9.155	10.376	26
2011	10.115	10.805	320	10.376	11.113	31
2012	10.805	11.843	344	11.113	12.211	20
2013	11.843	16.530	373	12.211	17.086	19
2014	16.530	16.836	297	17.086	17.445	13
2015	16.836	17.886	288	17.445	18.580	13
2016	17.886	19.128	264	18.580	19.919	12
2017	19.128	22.419	253	19.919	23.405	12
2018	22.419	19.443	245	23.405	20.349	12
2019	19.443	24.880	208	20.349	26.105	12
Deutsche Equity 500 Index VIP(1)
2009	8.534	10.673	226	8.632	10.823	7
2010	10.673	12.121	195	10.823	12.321	5
2011	12.121	12.220	186	12.321	12.453	7
2012	12.220	13.998	121	12.453	14.301	5
2013	13.998	16.423	125	14.301	16.795	5

A-3

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
Deutsche Small Cap Index VIP(4)
2009	8.966	11.236	147	9.070	11.394	15
2010	11.236	14.060	135	11.394	14.294	13
2011	14.060	13.306	119	14.294	13.561	14
2012	13.306	15.314	118	13.561	15.647	12
Dreyfus Opportunistic Small Cap(4)
2009	14.439	18.018	1,363	14.786	18.497	100
2010	18.018	23.395	1,217	18.497	24.077	84
2011	23.395	19.955	1,063	24.077	20.589	75
2012	19.955	23.819	949	20.589	24.637	68
Dreyfus Stock Index(1)
2009	29.036	36.317	1,433	29.734	37.283	120
2010	36.317	41.291	1,280	37.283	42.496	98
2011	41.291	41.648	1,041	42.496	42.970	96
2012	41.648	47.723	939	42.970	49.361	80
DWS Alternative Asset Allocation VIP Portfolio - Class A
2010	11.247	12.524	7	N/A	N/A	N/A
2011	12.524	12.043	8	12.958	12.118	1*
2012	12.043	13.083	10	12.118	13.197	1*
2013	13.083	13.074	14	13.197	13.221	1*
2014	13.074	13.396	17	13.221	13.582	1*
2015	13.396	12.428	16	13.582	12.632	1*
2016	12.428	12.957	18	12.632	13.202	1*
2017	12.957	13.779	14	13.202	14.074	1*
2018	13.779	12.395	16	14.074	12.692	1*
2019	12.395	14.074	14	12.692	14.448	1*
Fidelity VIP Equity-Income(1)
2009	19.585	25.248	1,543	20.056	25.919	157
2010	25.248	28.783	1,383	25.919	29.623	121
2011	28.783	28.774	1,167	29.623	29.687	116
2012	28.774	33.418	1,051	29.687	34.565	109
2013	33.418	39.194	996	34.565	40.577	106
Fidelity® VIP Asset Manager Portfolio - Initial Class
2010	28.981	32.785	1,282	29.751	33.741	62
2011	32.785	31.628	1,158	33.741	32.632	56
2012	31.628	35.222	1,067	32.632	36.430	50
2013	35.222	40.349	961	36.430	41.838	45
2014	40.349	42.277	882	41.838	43.947	42
2015	42.277	41.916	790	43.947	43.681	38
2016	41.916	42.773	706	43.681	44.686	37
2017	42.773	48.321	653	44.686	50.607	35
2018	46.852	45.280	597	50.607	47.542	30
2019	45.280	53.011	544	47.542	55.798	28
Fidelity® VIP Contrafund® Portfolio - Service Class 2
2010	11.894	13.769	1,335	12.174	14.128	68
2011	13.769	13.253	1,178	14.128	13.632	60
2012	13.253	15.239	1,147	13.632	15.714	58
2013	15.239	19.757	1,077	15.714	20.425	51
2014	19.757	21.840	1002	20.425	22.635	49
2015	21.840	21.713	948	22.635	22.559	43
2016	21.713	23.158	869	22.559	24.121	39
2017	23.158	27.878	794	24.121	29.109	37
2018	27.878	25.767	761	29.109	26.973	32
2019	25.767	33.490	692	26.973	35.144	27
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2
2017	N/A	N/A	N/A	N/A	N/A	N/A
2018	10.433	9.494	5	N/A	N/A	N/A
2019	9.494	11.268	10	N/A	11.329	N/A

A-4

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2
2017	N/A	N/A	N/A	N/A	N/A	N/A
2018	10.433	9.444	11	N/A	N/A	N/A
2019	9.444	11.362	22	N/A	11.423	N/A
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2
2017	N/A	N/A	N/A	N/A	N/A	N/A
2018	10.303	9.357	15	10.390	9.384	3
2019	9.357	11.498	24	9.384	11.560	3
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2
2017	10.214	10.312	11	N/A	N/A	N/A
2018	10.312	9.240	63	N/A	N/A	N/A
2019	9.240	11.629	60	10.406	11.690	1*
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2
2017	10.212	10.318	1*	N/A	N/A	N/A
2018	10.318	9.181	11	N/A	N/A	N/A
2019	9.181	11.656	16	N/A	11.719	N/A
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2
2017	10.213	10.317	3	N/A	N/A	N/A
2018	10.317	9.180	5	N/A	N/A	N/A
2019	9.180	11.656	9	N/A	11.719	N/A
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2
2017	10.124	10.319	2	N/A	N/A	N/A
2018	10.319	9.182	9	N/A	N/A	N/A
2019	9.182	11.656	23	N/A	11.718	N/A
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2
2019	10.000	10.841	1*	N/A	10.856	N/A
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2
2019	10.446	10.843	1*	N/A	10.857	N/A
Fidelity® VIP Government Money Market Portfolio - Initial Class (Pending Allocation Account)
2010	17.916	17.960	1*	17.946	17.991	1*
2011	17.960	17.979	2	17.991	18.008	1*
2012	17.979	18.004	1*	18.008	18.030	1*
2013	18.004	18.009	1*	18.030	18.036	1*
2014	18.009	18.010	1*	18.036	18.038	1*
2015	18.010	18.015	2	18.038	18.042	1*
2016	18.015	18.052	4	18.042	18.078	1*
2017	18.052	18.173	3	18.078	18.200	1*
2018	18.173	18.474	2	18.200	15.501	1*
2019	18.474	18.846	5	18.501	18.870	1*
Fidelity® VIP Growth Portfolio - Initial Class
2010	32.972	40.536	1,679	33.850	41.719	96
2011	40.536	40.213	1,444	41.719	41.491	87
2012	40.213	45.662	1,333	41.491	47.230	82
2013	45.662	61.634	1,191	47.230	63.910	73
2014	61.634	67.915	1096	63.910	70.599	71
2015	67.915	72.063	995	70.599	75.099	68
2016	72.063	71.917	903	75.099	75.135	63
2017	71.917	96.218	836	75.135	100.774	61
2018	96.218	95.100	773	100.774	99.852	54
2019	95.100	126.461	692	99.852	133.113	48

A-5

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
Janus Henderson Global Research Portfolio - Institutional Shares
2010	12.206	13.998	759	12.531	14.407	60
2011	13.998	11.954	625	14.407	12.334	58
2012	11.954	14.212	567	12.334	14.701	54
2013	14.212	18.071	502	14.701	18.738	47
2014	18.071	19.223	464	18.738	19.983	42
2015	19.223	18.596	434	19.983	19.380	40
2016	18.596	18.791	389	19.380	19.633	39
2017	18.791	23.633	348	19.633	24.752	38
2018	23.633	21.791	324	24.752	22.881	33
2019	21.791	27.840	284	22.881	29.305	30
LVIP Baron Growth Opportunities Fund - Service Class
2010	25.631	32.071	468	26.316	33.010	42
2011	32.071	33.029	385	33.010	34.082	35
2012	33.029	38.666	334	34.082	39.998	29
2013	38.666	53.619	325	39.998	55.605	26
2014	53.619	55.663	286	55.605	57.869	20
2015	55.663	52.480	260	57.869	54.696	18
2016	52.480	54.852	233	54.696	57.311	18
2017	54.852	69.097	218	57.311	72.377	16
2018	69.097	65.719	210	72.377	69.010	14
2019	65.719	88.738	192	69.010	93.415	14
LVIP BlackRock Advantage Allocation Fund - Standard Class
2010	11.800	12.970	12	N/A	N/A	N/A
2011	12.970	12.875	18	13.216	12.952	1*
2012	12.875	14.188	22	12.952	14.302	1*
2013	14.188	16.047	31	14.302	16.219	1*
2014	16.047	16.623	32	16.219	16.843	1*
2015	16.623	16.268	18	16.843	16.525	1*
2016	16.268	16.855	18	16.525	17.164	1*
2017	16.855	19.079	18	17.164	19.482	1*
2018	19.079	17.874	18	19.482	18.311	1*
2019	17.874	20.645	15	18.311	21.201	1*
LVIP BlackRock Emerging Markets Managed Volatility(5)
2014	10.140	9.300	3	N/A	9.314	N/A
2015	9.300	7.825	3	9.321	7.859	1*
2016	7.825	8.289	5	7.859	8.346	0
LVIP BlackRock Global Real Estate Fund - Standard Class
2010	6.472	7.560	80	6.515	7.628	4
2011	7.560	6.835	69	7.628	6.915	5
2012	6.835	8.438	68	6.915	8.557	6
2013	8.438	8.630	70	8.557	8.774	7
2014	8.630	9.731	54	8.774	9.918	7
2015	9.731	9.516	56	9.918	9.724	7
2016	9.516	9.533	63	9.724	9.765	10
2017	9.533	10.464	40	9.765	10.745	4
2018	10.464	9.495	39	10.745	9.776	2
2019	9.495	11.747	25	9.776	12.120	3
LVIP BlackRock Inflation Protected Bond Fund - Standard Class
2012	10.036	10.259	7	N/A	N/A	N/A
2013	10.259	9.310	102	10.000	9.348	1*
2014	9.310	9.505	84	9.348	9.568	4
2015	9.505	9.151	73	9.568	9.234	5
2016	9.151	9.385	76	9.234	9.494	5
2017	9.385	9.494	75	9.494	9.629	1*
2018	9.494	9.426	78	9.629	9.582	1*
2019	9.426	9.882	69	9.582	10.071	1*

A-6

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class
2010	6.416	7.073	209	6.566	7.257	16
2011	7.073	6.604	195	7.257	6.793	15
2012	6.604	7.610	181	6.793	7.847	18
2013	7.610	9.455	167	7.847	9.774	13
2014	9.455	9.862	161	9.774	10.220	13
2015	9.862	9.895	147	10.220	10.280	13
2016	9.895	9.668	117	10.280	10.069	13
2017	9.668	12.073	106	10.069	12.605	11
2018	12.073	11.437	105	12.605	11.971	12
2019	11.437	13.580	105	11.971	14.251	12
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class
2014	10.153	10.147	1*	N/A	10.163	N/A
2015	10.147	9.624	2	9.878	9.663	1*
2016	9.624	9.743	2	9.663	9.806	1*
2017	9.743	12.112	6	9.806	12.219	1*
2018	12.112	12.035	10	12.219	12.172	1*
2019	12.035	14.884	11	12.172	15.091	1*
LVIP Delaware Bond Fund - Standard Class
2010	13.129	14.101	542	13.313	14.336	28
2011	14.101	15.027	503	14.336	15.315	29
2012	15.027	15.861	471	15.315	16.205	28
2013	15.861	15.341	354	16.205	15.713	20
2014	15.341	16.096	304	15.713	16.528	11
2015	16.096	15.997	260	16.528	16.468	11
2016	15.997	16.269	227	16.468	16.790	12
2017	16.269	16.812	187	16.790	17.393	13
2018	16.812	16.506	170	17.393	17.119	7
2019	16.506	17.846	155	17.119	18.556	9
LVIP Delaware Diversified Floating Rate Fund - Service Class
2011	9.976	9.762	1*	N/A	N/A	N/A
2012	9.762	10.049	3	N/A	N/A	N/A
2013	10.049	9.999	13	N/A	N/A	N/A
2014	9.999	9.936	75	10.126	10.027	1*
2015	9.936	9.741	20	10.027	9.853	1*
2016	9.741	9.838	21	9.853	9.990	1*
2017	9.838	9.962	20	9.990	10.126	1*
2018	9.962	9.864	18	10.126	10.044	1*
2019	9.864	10.190	17	10.044	10.400	1*
LVIP Delaware Social Awareness Fund - Standard Class
2010	14.026	15.493	841	14.399	15.945	64
2011	15.493	15.437	702	15.945	15.927	59
2012	15.437	17.619	653	15.927	18.224	51
2013	17.619	23.669	600	18.224	24.543	47
2014	23.669	26.996	550	24.543	28.063	44
2015	26.996	26.550	527	28.063	27.669	39
2016	26.550	28.031	482	27.669	29.285	36
2017	28.031	33.356	441	29.285	34.936	34
2018	33.356	31.517	404	34.936	33.093	29
2019	31.517	41.182	378	33.093	43.348	28
LVIP Delaware Wealth Builder Fund - Standard Class
2010	11.988	13.350	5	12.004	13.401	1*
2011	13.350	12.950	8	13.401	13.031	1*
2012	12.950	14.525	11	13.031	14.653	1*
2013	14.525	17.290	13	14.653	17.487	1*
2014	17.290	17.862	16	17.487	18.110	1*
2015	17.862	17.448	19	18.110	17.735	1*
2016	17.448	18.246	22	17.735	18.592	1*
2017	18.246	20.284	12	18.592	20.721	1*
2018	20.284	19.034	16	20.721	19.493	1*
2019	19.034	21.842	21	19.493	22.424	1*

A-7

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class
2010	8.380	9.370	424	8.576	9.613	29
2011	9.370	9.388	362	9.613	9.656	28
2012	9.388	10.718	328	9.656	11.052	26
2013	10.718	14.140	323	11.052	14.617	26
2014	14.140	15.845	328	14.617	16.420	29
2015	15.845	15.372	311	16.420	15.971	27
2016	15.372	17.413	281	15.971	18.135	24
2017	17.413	20.838	268	18.135	21.758	20
2018	20.838	19.126	248	21.758	20.020	18
2019	19.126	24.638	210	20.020	25.853	18
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class
2014	10.187	9.497	3	N/A	9.512	N/A
2015	9.497	8.648	3	N/A	8.683	N/A
2016	8.648	8.769	5	8.683	8.827	1*
2017	8.769	10.540	8	8.827	10.636	1*
2018	10.540	9.481	9	10.636	9.592	1*
2019	9.481	10.588	6	N/A	10.738	N/A
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class
2010	11.880	12.997	283	12.016	13.179	3
2011	12.997	13.341	154	13.179	13.562	3
2012	13.341	14.500	154	13.562	14.776	3
2013	14.500	15.755	124	14.776	16.096	2
2014	15.755	16.488	111	16.096	16.886	2
2015	16.488	15.998	82	16.886	16.426	2
2016	15.998	16.634	73	16.426	17.122	2
2017	16.634	18.197	74	17.122	18.777	2
2018	18.197	17.214	67	18.777	17.807	2
2019	17.214	19.600	60	17.807	20.327	2
LVIP Global Growth Allocation Managed Risk Fund - Standard Class
2010	11.071	12.355	408	11.196	12.526	13
2011	12.355	12.231	405	12.526	12.432	13
2012	12.231	13.217	379	12.432	13.468	13
2013	13.217	14.858	382	13.468	15.178	12
2014	14.858	15.220	348	15.178	15.587	12
2015	15.220	14.513	307	15.587	14.899	12
2016	14.513	15.051	259	14.899	15.490	12
2017	15.051	17.231	245	15.490	17.778	12
2018	17.231	15.979	228	17.778	16.528	11
2019	15.979	18.329	208	16.528	19.006	11
LVIP Global Income Fund - Standard Class
2010	10.805	11.733	13	10.819	11.778	1*
2011	11.733	11.742	20	11.778	11.817	1*
2012	11.742	12.520	20	11.817	12.631	1*
2013	12.520	12.045	22	12.631	12.183	1*
2014	12.045	12.157	25	12.183	12.326	1*
2015	12.157	11.793	29	12.326	11.987	1*
2016	11.793	11.735	26	11.987	11.957	1*
2017	11.735	12.204	21	11.957	12.467	1*
2018	12.204	12.313	27	12.467	12.609	1*
2019	12.313	13.011	17	12.609	13.358	1*
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class
2010	11.631	12.892	356	11.765	13.074	22
2011	12.892	12.913	347	13.074	13.128	23
2012	12.913	14.010	337	13.128	14.279	21
2013	14.010	15.515	338	14.279	15.853	21
2014	15.515	15.998	300	15.853	16.387	22
2015	15.998	15.304	244	16.387	15.715	22
2016	15.304	15.810	234	15.715	16.275	16
2017	15.810	17.894	230	16.275	18.467	17
2018	17.894	16.754	220	18.467	17.333	18
2019	16.754	19.078	193	17.333	19.787	28

A-8

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
LVIP JPMorgan Retirement Income Fund - Standard Class(6)
2010	11.362	12.422	66	11.524	12.631	16
2011	12.422	12.573	62	12.631	12.817	17
2012	12.573	13.771	65	12.817	14.073	17
2013	13.771	14.907	66	14.073	15.272	17
2014	14.907	15.478	66	15.272	15.897	18
2015	15.478	15.180	62	15.897	15.630	17
2016	15.180	15.737	58	15.630	16.244	17
2017	15.737	17.288	43	16.244	17.890	22
2018	17.288	16.341	39	17.890	16.952	21
2019	16.341	18.433	29	16.952	19.170	46
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class
2014	10.037	10.517	16	N/A	10.534	N/A
2015	10.517	9.606	26	9.909	9.645	1*
2016	9.606	10.463	17	9.645	10.531	1*
2017	10.463	11.880	22	10.531	11.989	1*
2018	11.880	10.374	26	11.989	10.494	1*
2019	10.374	11.931	27	10.494	12.099	3
LVIP Mondrian International Value Fund - Standard Class
2010	14.603	14.814	308	14.809	15.061	34
2011	14.814	14.048	256	15.061	14.318	32
2012	14.048	15.246	217	14.318	15.578	30
2013	15.246	18.391	195	15.578	18.838	28
2014	18.391	17.746	178	18.838	18.223	28
2015	17.746	16.903	161	18.223	17.401	28
2016	16.903	17.406	133	17.401	17.964	30
2017	17.406	20.911	120	17.964	21.634	30
2018	20.911	18.327	114	21.634	19.008	35
2019	18.327	21.455	108	19.008	22.309	36
LVIP SSGA Bond Index Fund - Standard Class
2010	10.385	10.895	39	10.399	10.937	5
2011	10.895	11.584	49	10.937	11.658	1*
2012	11.584	11.911	54	11.658	12.016	5
2013	11.911	11.490	53	12.016	11.620	1*
2014	11.490	12.030	49	11.620	12.197	1*
2015	12.030	11.940	50	12.197	12.136	1*
2016	11.940	12.091	49	12.136	12.320	1*
2017	12.091	12.352	52	12.320	12.617	1*
2018	12.352	12.189	52	12.617	12.482	2
2019	12.189	13.063	64	12.482	13.410	2
LVIP SSGA Emerging Markets 100 Fund - Standard Class
2010	13.640	17.255	77	13.659	17.322	1*
2011	17.255	14.531	76	17.322	14.624	3
2012	14.531	16.207	76	14.624	16.351	2
2013	16.207	15.592	73	16.351	15.770	2
2014	15.592	14.916	73	15.770	15.125	4
2015	14.916	12.251	75	15.125	12.454	4
2016	12.251	14.002	67	12.454	14.268	5
2017	14.002	17.166	68	14.268	17.536	1*
2018	17.166	14.903	68	17.536	15.263	1*
2019	14.903	15.877	62	15.263	16.302	1*
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class
2010	10.590	11.400	162	10.712	11.560	8
2011	11.400	11.312	152	11.560	11.499	5
2012	11.312	12.448	144	11.499	12.686	5
2013	12.448	13.533	137	12.686	13.826	5
2014	13.533	13.931	131	13.826	14.268	6
2015	13.931	12.893	120	14.268	13.238	6
2016	12.893	13.482	110	13.238	13.878	6
2017	13.482	15.326	98	13.878	15.815	4
2018	15.326	13.933	94	15.815	14.414	4
2019	13.933	15.967	90	14.414	16.559	4

A-9

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
LVIP SSGA International Index Fund - Standard Class
2010	12.116	12.841	9	N/A	N/A	N/A
2011	12.841	11.139	6	13.266	11.211	1*
2012	11.139	13.028	8	11.211	13.145	1*
2013	13.028	15.605	10	13.145	15.785	1*
2014	15.605	14.547	12	15.785	14.757	1*
2015	14.547	14.227	14	14.757	14.467	1*
2016	14.227	14.225	14	14.467	14.502	1*
2017	14.225	17.561	18	14.502	17.948	1*
2018	17.561	15.004	26	17.948	15.373	1*
2019	15.004	18.061	31	15.373	18.551	1*
LVIP SSGA International Managed Volatility Fund - Standard Class
2016	10.191	10.147	4	10.193	10.151	1*
2017	10.147	12.483	5	10.151	12.516	1*
2018	12.483	10.851	8	12.516	10.902	1*
2019	10.851	12.761	10	10.902	12.853	1*
LVIP SSGA S&P 500 Index Fund - Standard Class
2012	9.836	10.727	2	N/A	N/A	N/A
2013	10.727	14.019	7,232	10.000	14.075	679
2014	14.019	15.743	6484	14.075	15.846	648
2015	15.743	15.769	5795	15.846	15.912	616
2016	15.769	17.447	5348	15.912	17.650	590
2017	17.447	21.001	4824	17.650	21.297	550
2018	21.001	19.826	4467	21.297	20.156	504
2019	19.826	25.753	4065	20.156	26.248	469
LVIP SSGA Small-Cap Index Fund - Standard Class
2012	10.096	10.921	1*	N/A	N/A	N/A
2013	10.921	14.911	2,065	10.000	14.972	151
2014	14.911	15.453	1838	14.972	15.555	142
2015	15.453	14.578	1635	15.555	14.711	127
2016	14.578	17.417	1478	14.711	17.620	116
2017	17.417	19.694	1324	17.620	19.973	107
2018	19.694	17.281	1225	19.973	17.570	96
2019	17.281	21.393	1113	17.570	21.805	95
LVIP T. Rowe Price 2010 Fund - Standard Class
2010	9.735	10.744	68	9.799	10.841	9
2011	10.744	10.770	56	10.841	10.895	10
2012	10.770	11.573	66	10.895	11.737	1*
2013	11.573	12.481	66	11.737	12.689	1*
2014	12.481	12.947	43	12.689	13.197	1*
2015	12.947	12.612	45	N/A	12.887	N/A
2016	12.612	13.041	34	N/A	N/A	N/A
2017	13.041	14.156	33	N/A	N/A	N/A
2018	14.156	13.423	33	N/A	13.819	N/A
2019	13.423	15.380	27	N/A	15.873	N/A
LVIP T. Rowe Price 2020 Fund - Standard Class
2010	9.309	10.325	212	9.369	10.418	4
2011	10.325	10.242	189	10.418	10.360	7
2012	10.242	10.990	186	10.360	11.144	8
2013	10.990	12.092	174	11.144	12.292	8
2014	12.092	12.497	172	12.292	12.736	8
2015	12.497	12.099	195	12.736	12.361	9
2016	12.099	12.512	152	12.361	12.815	7
2017	12.512	13.877	123	12.815	14.249	8
2018	13.877	12.973	96	14.249	13.354	7
2019	12.973	15.275	100	13.354	15.763	7

A-10

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
LVIP T. Rowe Price 2030 Fund - Standard Class
2010	9.067	10.103	224	9.127	10.195	2
2011	10.103	9.946	246	10.195	10.062	3
2012	9.946	10.624	275	10.062	10.775	3
2013	10.624	11.965	309	10.775	12.165	3
2014	11.965	12.338	353	12.165	12.576	8
2015	12.338	11.891	347	12.576	12.150	8
2016	11.891	12.210	366	12.150	12.507	8
2017	12.210	13.716	356	12.507	14.086	5
2018	13.716	12.549	327	14.086	12.920	8
2019	12.549	15.177	314	12.920	15.664	8
LVIP T. Rowe Price 2040 Fund - Standard Class
2010	8.496	9.560	81	8.551	9.647	2
2011	9.560	9.327	100	9.647	9.435	2
2012	9.327	9.892	123	9.435	10.032	2
2013	9.892	11.413	138	10.032	11.604	2
2014	11.413	11.693	148	11.604	11.918	1*
2015	11.693	11.203	143	11.918	11.447	1*
2016	11.203	11.514	147	11.447	11.795	1*
2017	11.514	13.067	136	11.795	13.421	1*
2018	13.067	11.809	145	13.421	12.159	6
2019	11.809	14.549	141	12.159	15.018	6
LVIP T. Rowe Price 2050 Fund - Standard Class
2011	9.925	9.213	29	N/A	N/A	N/A
2012	9.213	9.667	3	N/A	N/A	N/A
2013	9.667	11.393	13	N/A	N/A	N/A
2014	11.393	11.612	27	N/A	11.719	N/A
2015	11.612	11.066	39	N/A	11.196	N/A
2016	11.066	11.439	55	N/A	N/A	N/A
2017	11.439	13.263	73	N/A	N/A	N/A
2018	13.263	12.018	91	N/A	12.251	N/A
2019	12.018	14.892	120	N/A	15.218	N/A
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class
2010	12.385	15.741	1,087	12.715	16.200	81
2011	15.741	14.981	931	16.200	15.457	75
2012	14.981	17.250	846	15.457	17.843	58
2013	17.250	23.021	805	17.843	23.872	52
2014	23.021	25.433	722	23.872	26.439	52
2015	25.433	25.709	672	26.439	26.792	47
2016	25.709	27.377	591	26.792	28.602	45
2017	27.377	33.811	549	28.602	35.413	42
2018	33.811	32.445	527	35.413	34.067	43
2019	32.445	44.136	494	34.067	46.458	43
Neuberger Berman AMT Large Cap Value Portfolio - I Class
2010	14.651	16.777	336	15.041	17.267	24
2011	16.777	14.724	269	17.267	15.191	22
2012	14.724	16.997	234	15.191	17.581	19
2013	16.997	22.067	227	17.581	22.883	17
2014	22.067	24.000	213	22.883	24.949	15
2015	24.000	20.956	194	24.949	21.840	14
2016	20.956	26.426	195	21.840	27.609	13
2017	26.426	29.659	169	27.609	31.064	13
2018	29.659	29.058	143	31.064	30.511	13
2019	N/A	N/A	N/A	N/A	N/A	N/A
Neuberger Berman AMT Mid Cap Growth(1)
2009	5.085	6.626	905	5.192	6.781	70
2010	6.626	8.469	833	6.781	8.689	40
2011	8.469	8.424	720	8.689	8.664	38
2012	8.424	9.376	666	8.664	9.667	36
2013	9.376	10.731	620	9.667	11.075	36
Neuberger Berman AMT Sustainable Equity Portfolio - I Class
2019	10.049	10.933	407	10.050	10.952	37

A-11

	Standard			Breakpoint
	Accumulation unit value		Number of accumulation units	Accumulation unit value		Number of accumulation units
	Beginning of period	End of period		Beginning of period	End of period
	(Accumulation unit value in dollars and Number of accumulation units in thousands)
T. Rowe Price International Stock Portfolio
2010	16.219	18.379	747	16.650	18.915	41
2011	18.379	15.860	645	18.915	16.364	34
2012	15.860	18.598	596	16.364	19.236	31
2013	18.598	21.000	546	19.236	21.776	29
2014	21.000	20.534	489	21.776	21.345	31
2015	20.534	20.146	441	21.345	20.995	28
2016	20.146	20.370	390	20.995	21.281	23
2017	20.370	25.790	368	21.281	27.011	22
2018	25.790	21.907	328	27.011	23.002	21
2019	21.907	27.712	304	23.002	29.170	19

*	The numbers of accumulation units less than 1000 were rounded up to one.
(1)	On May 17, 2013, this Subaccount was closed and the values were transferred to the LVIP SSGA S&P 500 Index Fund Subaccount.
(2)	On May 17, 2013, this Subaccount was closed and the values were transferred to the LVIP BlackRock Inflation Protected Bond Fund Subaccount.
(3)	Effective October 9, 2010, the Delaware VIP Trend Series was reorganized into the Delaware VIP Smid Cap Core Series. The values in the table for periods prior to the date of the reorganization reflect investments in the Delaware VIP Trend Series.
(4)	On May 17, 2013, this Subaccount was closed and the values were transferred to the LVIP SSGA Small-Cap Index Fund Subaccount.
(5)	On December 9, 2016, this Subaccount was closed and the values were transferred to the LVIP SSGA International Managed Volatility Fund Subaccount.
(6)	Effective June 15, 2009, the LVIP Delaware Managed Fund was reorganized into the LVIP Delaware Wealth Builder Fund. The values in the table for periods prior to the date of the reorganization reflect investments in the LVIP Delaware Managed Fund.
(7)	Effective July 30, 2010, the LVIP Wilshire Aggressive Profile Fund was restructured into the LVIP SSGA Global Tactical Allocation Managed Volatility Fund. The values in the table for periods prior to the date of the restructuring reflect investments in the LVIP Wilshire Aggressive Profile Fund.

A-12

Group Variable Annuity Contracts I, II, & III  

Funded Through the SubAccounts of
Lincoln National Variable Annuity Account L of
The Lincoln National Life Insurance Company  

Statement of Additional Information (SAI)

This SAI should be read in conjunction with the prospectus of the Group Variable Annuity Contracts (the “Contracts”), dated May 1, 2020. You may obtain a copy of the prospectus to which this SAI relates without charge by writing to The Lincoln National Life Insurance Company, PO Box 2340, Fort Wayne, IN 46801-2340, by calling Lincoln Life at 1-800-341-0441, or by visiting www.LincolnFinancial.com.

Table of Contents

Item	Page
Special Terms	B-2
Services	B-2
Principal Underwriter	B-2
Purchase of Securities Being Offered	B-2
Annuity Payouts	B-2
Determination of Accumulation and Annuity Unit Value	B-3
Capital Markets	B-3

Item	Page
Advertising & Ratings	B-4
About the S&P 500 Index	B-4
Unclaimed Property	B-5
Additional Services	B-5
Other Information	B-6
Financial Statements	B-6

 

This SAI is not a prospectus.
The date of this SAI is May 1, 2020.

Special Terms

The special terms used in this SAI are the ones defined in the prospectus.

Services

Independent Registered Public Accounting Firm

Ernst & Young LLP, independent registered public accounting firm, One Commerce Square, 2005 Market Street, Suite 700, Philadelphia, Pennsylvania, 19103, has audited a) the financial statements of each of the subaccounts listed in the appendix to the opinion that comprise Lincoln National Variable Annuity Account L, as of December 31, 2019, the related statements of operations and the statements of changes in net assets for each of the periods indicated in the appendix to the opinion; and b) the consolidated financial statements of The Lincoln National Life Insurance Company as of December 31, 2019 and 2018 and for each of the three years in the period ended December 31, 2019 as set forth in their reports, which are included in this SAI and Registration Statement. The aforementioned financial statements are included herein in reliance on Ernst & Young LLP's reports, given on their authority as experts in accounting and auditing.

Keeper of Records

All accounts, books, records and other documents which are required to be maintained for the VAA are maintained by us or by third parties responsible to Lincoln Life. We have entered into an agreement with State Street Bank and Trust Company, 801 Pennsylvania Ave, Kansas City, MO 64105, to provide accounting services to the VAA. No separate charge against the assets of the VAA is made by us for this service.

Principal Underwriter

Lincoln Financial Distributors, Inc. (“LFD”), an affiliate of Lincoln Life, serves as principal underwriter (the “Principal Underwriter”) for the contracts, as described in the prospectus. The Principal Underwriter offers the contracts to the public on a continuous basis and anticipates continuing to offer the contracts, but reserves the right to discontinue the offering. The Principal Underwriter offers the contracts through sales representatives, who are associated with Lincoln Financial Advisors Corporation and/or Lincoln Financial Securities Corporation (collectively, “LFN”), our affiliates. The Principal Underwriter also may enter into selling agreements with other broker-dealers (“Selling Firms”) for the sale of the contracts. Sales representatives of Selling Firms are appointed as our insurance agents. LFD, acting as Principal Underwriter, paid $1,413,794, $1,425,415 and $1,279,933 to LFN and Selling Firms in 2015, 2016 and 2017, respectively, as sales compensation with respect to the contracts. The Principal Underwriter retained no underwriting commissions for the sale of the contracts.

Purchase of Securities Being Offered

The variable annuity contracts are offered to the public through licensed insurance agents who specialize in selling our products; through independent insurance brokers; and through certain securities brokers/dealers selected by us whose personnel are legally authorized to sell annuity products. There are no special purchase plans for any class of prospective buyers. However, under certain limited circumstances described in the prospectus under the section Charges and Other Deductions, any applicable account fee and/or surrender charge may be reduced or waived.

Both before and after the Annuity Commencement Date, there are exchange privileges between Subaccounts, and from the VAA to the general account (if available) subject to restrictions set out in the prospectus. See The Contracts, in the prospectus. No exchanges are permitted between the VAA and other separate accounts.

The offering of the contracts is continuous.

Annuity Payouts

Variable Annuity Payouts

Variable Annuity Payouts will be determined on the basis of:

• the dollar value of the contract on the Annuity Commencement Date less any applicable premium tax;

• the annuity tables contained in the contract;

• the type of annuity option selected; and

B-2

• the investment results of the fund(s) selected.

In order to determine the amount of variable Annuity Payouts, we make the following calculation:

• first, we determine the dollar amount of the first payout;

• second, we credit the contract with a fixed number of Annuity Units based on the amount of the first payout; and

• third, we calculate the value of the Annuity Units each period thereafter.

These steps are explained below.

The dollar amount of the first periodic variable Annuity Payout is determined by applying the total value of the Accumulation Units credited under the contract valued as of the Annuity Commencement Date (less any premium taxes) to the annuity tables contained in the contract. The first variable Annuity Payout will be paid 14 days after the Annuity Commencement Date. This day of the month will become the day on which all future Annuity Payouts will be paid. Amounts shown in the tables are based on the 1983 Table “a” Individual Annuity Mortality Table modified, with an assumed investment return at the rate of 1%, 2%, 3%, 4%, 5%, or 6% per annum, depending on the terms of your contract. The first Annuity Payout is determined by multiplying the benefit per $1,000 of value shown in the contract tables by the number of thousands of dollars of value accumulated under the contract. These annuity tables vary according to the form of annuity selected and the age of the Annuitant at the Annuity Commencement Date. The assumed interest rate is the measuring point for subsequent Annuity Payouts. If the actual net investment rate (annualized) exceeds the assumed interest rate, the payout will increase at a rate equal to the amount of such excess.

Conversely, if the actual rate is less than the assumed interest rate, Annuity Payouts will decrease. If the assumed rate of interest were to be increased, Annuity Payouts would start at a higher level but would decrease more rapidly or increase more slowly.

We may use sex-distinct annuity tables in contracts that are not associated with employer sponsored plans and where not prohibited by law.

At an Annuity Commencement Date, the contract is credited with Annuity Units for each Subaccount on which variable Annuity Payouts are based. The number of Annuity Units to be credited is determined by dividing the amount of the first periodic payout by the value of an Annuity Unit in each Subaccount selected. Although the number of Annuity Units is fixed by this process, the value of such units will vary with the value of the underlying fund. The amount of the second and subsequent periodic payouts is determined by multiplying the Contractowner’s fixed number of Annuity Units in each Subaccount by the appropriate Annuity Unit value for the Valuation Date ending 14 days prior to the date that payout is due.

The value of each Subaccount’s Annuity Unit will be set initially at $1.00. The Annuity Unit value for each Subaccount at the end of any Valuation Date is determined by multiplying the Subaccount Annuity Unit value for the immediately preceding Valuation Date by the product of:

• The net investment factor of the Subaccount for the Valuation Period for which the Annuity Unit value is being determined, and

• A factor to neutralize the assumed investment return in the annuity table.

The value of the Annuity Units is determined as of a Valuation Date 14 days prior to the payment date in order to permit calculation of amounts of Annuity Payouts and mailing of checks in advance of their due dates. Such checks will normally be issued and mailed at least three days before the due date.

Determination of Accumulation and Annuity Unit Value

A description of the days on which Accumulation and Annuity Units will be valued is given in the prospectus. The New York Stock Exchange's (NYSE) most recent announcement (which is subject to change) states that it will be closed on weekends and on these holidays: New Year's Day, Martin Luther King Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. If any of these holidays occurs on a weekend day, the Exchange may also be closed on the business day occurring just before or just after the holiday. It may also be closed on other days.

Since the portfolios of some of the funds and series will consist of securities primarily listed on foreign exchanges or otherwise traded outside the United States, those securities may be traded (and the net asset value of those funds and series and of the variable account could therefore be significantly affected) on days when the investor has no access to those funds and series.

Capital Markets

In any particular year, our capital may increase or decrease depending on a variety of factors — the amount of our statutory income or losses (which is sensitive to equity market and credit market conditions), the amount of additional capital we must hold to support business growth, changes in reserving requirements, our inability to secure capital market solutions to provide reserve relief, such as issuing letters of credit to support captive reinsurance structures, changes in equity market levels, the value of certain fixed-income and equity securities in our investment portfolio and changes in interest rates.

B-3

Advertising & Ratings

We may include in certain advertisements, endorsements in the form of a list of organizations, individuals or other parties which recommend Lincoln Life or the policies. Furthermore, we may occasionally include in advertisements comparisons of currently taxable and tax deferred investment programs, based on selected tax brackets, or discussions of alternative investment vehicles and general economic conditions.

Our financial strength is ranked and rated by nationally recognized independent rating agencies. The ratings do not imply approval of the product and do not refer to the performance of the product, or any separate account, including the underlying investment options. Ratings are not recommendations to buy our products. Each of the rating agencies reviews its ratings periodically. Accordingly, all ratings are subject to revision or withdrawal at any time by the rating agencies, and therefore, no assurance can be given that these ratings will be maintained. The current outlook for the insurance subsidiaries is stable for Moody’s, A.M. Best and Standard & Poor’s, and positive for Fitch. Our financial strength ratings, which are intended to measure our ability to meet contract holder obligations, are an important factor affecting public confidence in most of our products and, as a result, our competitiveness. A downgrade of our financial strength rating could affect our competitive position in the insurance industry by making it more difficult for us to market our products as potential customers may select companies with higher financial strength ratings and by leading to increased withdrawals by current customers seeking companies with higher financial strength ratings. For more information on ratings, including outlooks, see www.LincolnFinancial.com/investor.

About the S&P 500 Index

The S&P 500 Index (hereinafter “Index”) is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Lincoln Variable Insurance Products Trust and its affiliates (hereinafter “Licensee”). Standard & Poor’s^® and S&P^® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The fund(s) are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or any of their respective affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices do not make any representation or warranty, express or implied, to the owners of the funds or any member of the public regarding the advisability of investing in securities generally or in the funds particularly or the ability of the Index to track general market performance. S&P Dow Jones Indices only relationship to Licensee with respect to the Index is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The Index is determined, composed and calculated by S&P Dow Jones Indices without regard to Licensee or the funds. S&P Dow Jones Indices have no obligation to take the needs of Licensee or the owners of the funds into consideration in determining, composing or calculating the Index. S&P Dow Jones Indices are not responsible for and have not participated in the determination of the prices, and amount of the funds or the timing of the issuance or sale of the funds or in the determination or calculation of the equation by which the funds are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices have no obligation or liability in connection with the administration, marketing or trading of the funds. There is no assurance that investment products based on the Index will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

S&P DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND LICENSEE, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

Compound Interest Illustrations—These will emphasize several advantages of the variable annuity contract. For example, but not by way of illustration, the literature may emphasize the potential tax savings through tax deferral; the potential advantage of the variable annuity account over the fixed account; and the compounding effect when a client makes regular deposits to his or her contract.

Internet—An electronic communications network which may be used to provide information regarding Lincoln Life, performance of the subaccounts and advertisement literature.

B-4

Annuity Payout Illustrations. These will provide an initial benefit payment based in part on the Annuitant, the Contract Value and the fixed and/or variable Annuity Payout option elected. In addition, variable Annuity Payout illustrations may show the historical results of a variable payout in a Subaccount of the VAA.

Dollar-Cost Averaging Illustrations. These illustrations will generally discuss the price-leveling effect of making regular purchases in the same subaccounts over a period of time, to take advantage of the trends in market prices of the portfolio securities purchased for those subaccounts.

Unclaimed Property

We have entered into a Global Resolution Agreement with a third party auditor representing multiple states and jurisdictions. Under the terms of the Global Resolution Agreement, the third party auditor has compared expanded matching criteria to the Social Security Master Death File (“SSMDF”) to identify deceased insureds and policy or contract holders where a valid claim has not been made. We have also entered into a Regulatory Settlement Agreement with multiple states and jurisdictions. The Regulatory Settlement Agreement applies prospectively and requires us to adopt and implement additional procedures comparing our records to the SSMDF to identify unclaimed death benefits and prescribes procedures for identifying and locating beneficiaries once deaths are identified. Other jurisdictions that are not signatories to the Regulatory Settlement Agreement are conducting examinations and audits of our compliance with unclaimed property laws. Any escheatable property identified as a result of the audits and inquiries could result in additional payments of previously unclaimed death benefits or the payment of abandoned funds to U.S. jurisdictions.

Additional Services

Dollar Cost Averaging (DCA)—You may systematically transfer, on a monthly basis, amounts from certain subaccounts, or the fixed side of the contract into the subaccounts over a period of 1, 2 or 3 years. The minimum amount to be dollar cost averaged is $10,000 for 1 year, and $25,000 for 2 years or 3 years. You may elect to participate in the DCA program at the time of application or at any time before the annuity commencement date by completing an election form available from us. We may offer different time periods for new Purchase Payments and for transfers of Contract Value. State variations may exist. You may not allocate any other Contract Value to the DCA fixed account. Once elected, the program will remain in effect until the earlier of:

• the annuity commencement date;

• the value of the amount being DCA'd is depleted; or

• you cancel the program by written request or by telephone if we have your telephone authorization on file.

We reserve the right to discontinue this program at any time. DCA does not assure a profit or protect against loss. GVA III fixed account restrictions may apply.

Systematic Transfer—The systematic transfer service is only available to GVA III participants. This service allows you to fully liquidate your fixed account balance over four years in five annual installments and transfer the amounts into one or more of the subaccounts. You may change the receiving subaccount allocation at any time. A distribution or a non-scheduled transfer from the fixed account may cancel the systematic transfer program prematurely. The program will also be canceled prematurely if the fixed account balance falls to $0.

Account Sweep—The account sweep service allows you to keep a designated amount (the baseline amount) in one subaccount or the fixed account, and automatically transfer the excess to other variable subaccount(s) of your choice. The transfers may take place monthly, quarterly, semi-annually or annually. A $10,000 minimum balance in the holding account is required in order to begin this service. For account sweep to occur, the holding account balance must exceed the designated baseline amount by at least $50. You may change the receiving subaccount allocation at any time. Deposits to or distributions from the holding account will not adjust your baseline amount, but may affect the amount of money available to be transferred. A new account sweep program is required to change the designated baseline amount. GVA III fixed account restrictions may apply.

Portfolio Rebalancing—Portfolio rebalancing is an option, which, if elected by the contractowner, restores to a pre-determined level the percentage of the contract value, allocated to each variable subaccount or the fixed account. This pre-determined level will be the allocation initially selected when the contract was purchased, unless subsequently changed. The portfolio rebalancing allocation may be changed at any time by submitting a written request to us. If portfolio rebalancing is elected, all purchase payments allocated to the variable subaccounts must be subject to portfolio rebalancing. Portfolio rebalancing may take place on either a quarterly, semi-annual or annual basis, as selected by the contractowner. You may choose to either rebalance within your designated investment accounts, or to rebalance your designated investment account based on your total account value within the group annuity contract. This second selection will move 100% of your balance based on your allocated percentages. For portfolio rebalancing to occur, the total transfer amount must be $50 or more. If this minimum transfer amount is not available, the transfer will not occur. You may change the designated investment accounts' allocations or percentages at any time. The portfolio rebalancing program will be cancelled prematurely if the selected rebalancing account balance falls to $0. GVA III fixed account restrictions may apply.

B-5

SecureLine^® Account –SecureLine^® is an interest bearing draft account established from the proceeds payable on a contract administered by us that helps you manage your surrender or death benefit proceeds. You are the owner of the account, and are the only one authorized to transfer proceeds from the account. You may choose to leave the proceeds in this account, or you may use the checkbook we previously provided and write checks against the account until the funds are depleted. The SecureLine^® account is part of our general account. It is not a bank account and it is not insured by the FDIC or any other government agency. As part of our general account, it is subject to the claims of our creditors. We receive a benefit from all amounts left in the SecureLine^® account.

Interest credited in the SecureLine^®account is taxable as ordinary income in the year such interest is credited, and is not tax deferred. We recommend that you consult your tax advisor to determine the tax consequences associated with the payment of interest on amounts in the SecureLine^®account. The balance in your SecureLine^®account began earning interest the day your account was opened and will continue to earn interest until all funds are withdrawn. Interest is compounded daily and credited to your account on the last day of each month. The interest rate will be updated monthly and we may increase or decrease the rate at our discretion. The interest rate credited to your SecureLine^®account may be more or less than the rate earned on funds held in our general account. The interest rate offered with a SecureLine^®account is not necessarily that credited to the fixed account. There are no monthly fees. You may be charged a fee if you stop a payment or if you present a check for payment without sufficient funds.

Sales literature may reference the Group Variable Annuity newsletter which is a newsletter distributed quarterly to clients of the VAA. The contents of the newsletter will be a commentary on general economic conditions and, on some occasions, referencing matters in connection with the Group Variable Annuity.

Sales literature and advertisements may reference these and other similar reports from Best's or other similar publications which report on the insurance and financial services industries.

Other Information

Due to differences in redemption rates, tax treatment or other considerations, the interests of policyholders under the variable life accounts could conflict with those of Contractowners under the VAA. In those cases, where assets from variable life and variable annuity separate accounts are invested in the same fund(s) (i.e., where mixed funding occurs), the Boards of Directors of the fund involved will monitor for any material conflicts and determine what action, if any, should be taken. If it becomes necessary for any separate account to replace shares of any fund with another investment, that fund may have to liquidate securities on a disadvantageous basis. Refer to the prospectus for each fund for more information about mixed funding.

Financial Statements

The December 31, 2019 financial statements of the VAA and the December 31, 2019 consolidated financial statements of Lincoln Life appear on the following pages.

B-6

The Lincoln National Life Insurance Company

Consolidated Financial Statements

December 31, 2019 and 2018

Report of Independent Registered Public Accounting Firm

To the Stockholder and the Board of Directors of The Lincoln National Life Insurance Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Lincoln National Life Insurance Company (the “Company”) as of December 31, 2019 and 2018, 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, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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. 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1966.

Philadelphia, Pennsylvania

March 13, 2020

1

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	As of December 31,
	2019		2018
ASSETS
Investments:
Fixed maturity available-for-sale securities, at fair value
(amortized cost:  2019 – $93,307; 2018 – $91,219)	$	103,773	$	92,787
Trading securities		4,602		1,869
Equity securities		103		99
Mortgage loans on real estate		16,244		13,190
Policy loans		2,460		2,491
Derivative investments		1,911		1,081
Other investments		2,565		1,962
Total investments		131,658		113,479
Cash and invested cash		1,879		1,848
Deferred acquisition costs and value of business acquired		7,745		10,308
Premiums and fees receivable		464		568
Accrued investment income		1,109		1,087
Reinsurance recoverables		19,164		19,826
Reinsurance related embedded derivatives		-		188
Funds withheld reinsurance assets		542		563
Goodwill		1,778		1,782
Other assets		18,106		16,663
Separate account assets		153,571		132,833
Total assets	$	336,016	$	299,145
LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities
Future contract benefits	$	35,717	$	33,884
Other contract holder funds		97,422		90,573
Short-term debt		609		288
Long-term debt		2,414		2,401
Reinsurance related embedded derivatives		375		-
Funds withheld reinsurance liabilities		5,566		4,860
Payables for collateral on investments		5,077		4,786
Other liabilities		13,680		13,201
Separate account liabilities		153,571		132,833
Total liabilities		314,431		282,826
Contingencies and Commitments (See Note 14)
Stockholder’s Equity
Common stock – 10,000,000 shares authorized, issued and outstanding		11,312		11,237
Retained earnings		4,437		4,423
Accumulated other comprehensive income (loss)		5,836		659
Total stockholder’s equity		21,585		16,319
Total liabilities and stockholder’s equity	$	336,016	$	299,145

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,
	2019			2018			2017
Revenues
Insurance premiums	$	5,277		$	4,362		$	3,018
Fee income		6,247			5,733			5,369
Net investment income		4,962			4,844			4,760
Realized gain (loss):
Total other-than-temporary impairment losses on securities		(28	)		(7	)		(18	)
Portion of loss recognized in other comprehensive income		13			-			-
Net other-than-temporary impairment losses on securities recognized in earnings		(15	)		(7	)		(18	)
Realized gain (loss), excluding other-than-temporary impairment losses on securities		(813	)		(85	)		(438	)
Total realized gain (loss)		(828	)		(92	)		(456	)
Amortization of deferred gain on business sold through reinsurance		27			4			18
Other revenues		507			507			439
Total revenues		16,192			15,358			13,148
Expenses
Interest credited		2,754			2,589			2,558
Benefits		7,585			6,144			4,818
Commissions and other expenses		5,065			4,583			3,967
Interest and debt expense		145			136			126
Strategic digitization expense		66			76			43
Impairment of intangibles		-			-			905
Total expenses		15,615			13,528			12,417
Income (loss) before taxes		577			1,830			731
Federal income tax expense (benefit)		(37	)		257			(1,287	)
Net income (loss)		614			1,573			2,018
Other comprehensive income (loss), net of tax:
Unrealized investment gains (losses)		5,173			(3,314	)		1,547
Funded status of employee benefit plans		4			2			(2	)
Total other comprehensive income (loss), net of tax		5,177			(3,312	)		1,545
Comprehensive income (loss)	$	5,791		$	(1,739	)	$	3,563

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,
	2019			2018			2017
Common Stock
Balance as of beginning-of-year	$	11,237		$	10,713		$	10,696
Capital contributions from Lincoln National Corporation		50			500			-
Stock compensation/issued for benefit plans		25			24			17
Balance as of end-of-year		11,312			11,237			10,713
Retained Earnings
Balance as of beginning-of-year		4,423			4,405			3,342
Cumulative effect from adoption of new accounting standards		-			(644	)		-
Net income (loss)		614			1,573			2,018
Dividends paid to Lincoln National Corporation		(600	)		(911	)		(955	)
Balance as of end-of-year		4,437			4,423			4,405
Accumulated Other Comprehensive Income (Loss)
Balance as of beginning-of-year		659			3,327			1,782
Cumulative effect from adoption of new accounting standards		-			644			-
Other comprehensive income (loss), net of tax		5,177			(3,312	)		1,545
Balance as of end-of-year		5,836			659			3,327
Total stockholder’s equity as of end-of-year	$	21,585		$	16,319		$	18,445

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,
	2019			2018			2017
Cash Flows from Operating Activities
Net income (loss)	$	614		$	1,573		$	2,018
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Trading securities purchases, sales and maturities, net		(2,522	)		(120	)		120
Change in:
Deferred acquisition costs, value of business acquired, deferred sales inducements
and deferred front-end loads deferrals and interest, net of amortization		(448	)		(108	)		(17	)
Premiums and fees receivable		104			(87	)		34
Accrued investment income		(22	)		(6	)		19
Future contract benefits and other contract holder funds		(918	)		1,105			(2,062	)
Reinsurance related assets and liabilities		(277	)		(1,233	)		1,001
Accrued expenses		89			(99	)		86
Federal income tax accruals		(282	)		65			(1,502	)
Cash management agreement		(1,115	)		329			(277	)
Realized (gain) loss		828			92			456
Amortization of deferred gain on business sold through reinsurance		(27	)		(4	)		(18	)
Impairment of intangibles		-			-			905
Other		343			88			91
Net cash provided by (used in) operating activities		(3,633	)		1,595			854
Cash Flows from Investing Activities
Purchases of available-for-sale securities and equity securities		(14,927	)		(12,406	)		(9,887	)
Sales of available-for-sale securities and equity securities		6,771			3,191			1,773
Maturities of available-for-sale securities		6,426			6,348			5,790
Purchase of common stock in acquisition, net of cash acquired		-			(1,410	)		-
Sale of business, net		-			(12	)		-
Purchases of alternative investments		(433	)		(314	)		(357	)
Sales and repayments of alternative investments		131			178			184
Proceeds from affiliate transfer of alternative investments		-			-			66
Issuance of mortgage loans on real estate		(4,218	)		(2,920	)		(2,047	)
Repayment and maturities of mortgage loans on real estate		1,144			1,048			1,145
Issuance and repayment of policy loans, net		32			20			49
Net change in collateral on investments, derivatives and related settlements		349			654			(374	)
Other		(259	)		(191	)		(123	)
Net cash provided by (used in) investing activities		(4,984	)		(5,814	)		(3,781	)
Cash Flows from Financing Activities
Capital contribution from Lincoln National Corporation		50			500			-
Payment of long-term debt, including current maturities		(28	)		(13	)		(290	)
Issuance of long-term debt, net of issuance costs		28			13			75
Issuance (payment) of short-term debt		321			278			(270	)
Proceeds from sale-leaseback transactions		-			88			62
Payment related to sale-leaseback transactions		(83	)		-			-
Proceeds from certain financing arrangements		107			-			-
Deposits of fixed account values, including the fixed portion of variable		16,049			13,616			10,775
Withdrawals of fixed account values, including the fixed portion of variable		(5,800	)		(5,957	)		(5,764	)
Transfers to and from separate accounts, net		(1,362	)		(2,469	)		(1,787	)
Common stock issued for benefit plans		(34	)		(25	)		(29	)
Dividends paid to Lincoln National Corporation		(600	)		(911	)		(955	)
Net cash provided by (used in) financing activities		8,648			5,120			1,817
Net increase (decrease) in cash, invested cash and restricted cash		31			901			(1,110	)
Cash, invested cash and restricted cash as of beginning-of-year		1,848			947			2,057
Cash, invested cash and restricted cash as of end-of-year	$	1,879		$	1,848		$	947

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 two insurance company subsidiaries, Lincoln Life & Annuity Company of New York (“LLANY”) and Lincoln Life Assurance Company of Boston (“LLACB”).  We also own several non-insurance companies, including Lincoln Financial Distributors, our wholesale distributor, and Lincoln Financial Advisors Corporation, part of LNC’s retail distributor, Lincoln Financial Network.  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 21 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.  As discussed in Note 3, on May 1, 2018, LNC and LNL completed the acquisition of Liberty Life Assurance Company of Boston (“Liberty Life”), which effective September 1, 2019, was renamed Lincoln Life Assurance Company of Boston.  We use the equity method of accounting to recognize all of our investments in limited liability partnerships.  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 investments 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.

6

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 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:

· 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;

· 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

· 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.

Fixed Maturity Available-For-Sale Securities – Fair Valuation Methodologies and Associated Inputs

Securities classified as available-for-sale (“AFS”) consist of fixed maturity 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 fixed maturity 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 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 fixed maturity 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 fixed maturity 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. 

7

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 fixed maturity AFS securities discussed above:

· 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. 

· 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”).

· 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.

· Hybrid and redeemable preferred securities – We also utilize additional inputs of exchange prices (underlying and common stock of the same issuer) for our hybrid and redeemable preferred 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. 

Fixed Maturity AFS Securities – Evaluation for Recovery of Amortized Cost

We regularly review our fixed maturity AFS securities (also referred to as “debt securities”) for declines in fair value that we determine to be other-than-temporary. 

For our debt securities, we generally consider the following to determine whether our debt securities with unrealized losses are other-than-temporarily impaired:

· The estimated range and average period until recovery;

· The estimated range and average holding period to maturity;

· Remaining payment terms of the security;

· Current delinquencies and nonperforming assets of underlying collateral;

· Expected future default rates;

· Collateral value by vintage, geographic region, industry concentration or property type;

· Subordination levels or other credit enhancements as of the balance sheet date as compared to origination; and

· 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 fixed maturity AFS securities on our Consolidated Statements of Stockholder’s Equity, as this amount is considered a noncredit (i.e., recoverable) impairment.

8

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 securities to meet cash flow needs and sales of securities to capitalize on favorable pricing.  Management considers the following as part of the evaluation:

· The current economic environment and market conditions;

· Our business strategy and current business plans;

· The nature and type of security, including expected maturities and exposure to general credit, liquidity, market and interest rate risk;

· 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;

· 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;

· The capital risk limits approved by management; and

· 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:

· Historical and implied volatility of the security;

· Length of time and extent to which the fair value has been less than amortized cost;

· Adverse conditions specifically related to the security or to specific conditions in an industry or geographic area;

· Failure, if any, of the issuer of the security to make scheduled payments; and

· Recoveries or additional declines in fair value subsequent to the balance sheet date. 

In periods subsequent to the recognition of an OTTI, the fixed maturity 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:

· 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;

· Fundamentals of the industry in which the issuer operates;

· 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;

· Expected cash flows of the issuer (e.g., whether the issuer has cash flows in excess of what is required to fund its operations);

· Expectations regarding defaults and recovery rates;

· Changes to the rating of the security by a rating agency; and

· 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:

· Discounted cash flow analysis based on the current cash flows and future cash flows we expect to recover;

· Level of creditworthiness of the home equity loans or residential mortgages that back an RMBS or commercial mortgages that back a CMBS;

· Susceptibility to fair value fluctuations for changes in the interest rate environment;

· Susceptibility to reinvestment risks, in cases where market yields are lower than the securities’ book yield earned;

· Susceptibility to reinvestment risks, in cases where market yields are higher than the book yields earned on a security;

· Expectations of sale of such a security where market yields are higher than the book yields earned on a security; and

· Susceptibility to variability of prepayments.

9

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 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 fixed maturity 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 fixed maturity 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 securities in designated portfolios, some of which support modified coinsurance (“Modco”) and coinsurance with funds withheld (“CFW”) reinsurance agreements.  Investment results for the portfolios that support Modco and CFW reinsurance agreements, including gains and losses from sales, are passed directly to the reinsurers pursuant to contractual terms of the reinsurance agreements.  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 agreements are recorded in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss) as they occur. 

Equity Securities

Equity securities are carried at fair value, and changes in fair value are recorded in realized gain (loss)on our Consolidated Statements of Comprehensive Income (Loss) as they occur.  Equity securities consist primarily of common stock of publicly-traded companies, privately placed securities and mutual fund shares.  We measure the fair value of our equity securities 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 equity security.  Fair values of publicly-traded equity securities are determined using quoted prices in active markets for identical or comparable securities.  When quoted prices are not available, we use valuation methodologies most appropriate for the specific asset.  Fair values for private placement securities are determined using discounted cash flow, earnings multiple and other valuation models.  The fair values of mutual fund shares that transact regularly are based on transaction prices of identical fund shares.

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 private equity investments 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.

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Mortgage Loans on Real Estate

Mortgage loans on real estate consist of commercial and residential mortgage loans and 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 policy for commercial mortgage loans is to report loans that are 60 or more days past due, which equates to two or more payments missed, as delinquent.  Our policy for residential mortgage loans is to report loans that are 90 or more days past due, which equates to three 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 uncollectible are charged against the valuation allowance, and subsequent recoveries, if any, are credited to the valuation allowance.  

We establish a valuation allowance to provide for the risk of credit losses inherent in our portfolio.  The valuation allowance includes specific valuation allowances for loans that are deemed to be impaired as well as general valuation allowances for pools of loans with similar risk characteristics where a property risk or market specific risk has not been identified but for which we anticipate a loss may occur. 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 specific valuation allowance is established for the excess 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.  Changes in valuation allowances are reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).  General valuation allowances are primarily based on loss history adjusted for current conditions.

Valuation allowances are maintained at a level we believe is adequate to absorb estimated probable credit losses.  Our periodic evaluation of the adequacy of the valuation allowances is based on historical 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. 

Our commercial loan portfolio is primarily comprised of long-term loans secured by existing commercial real estate.  We believe all of the commercial loans in our portfolio share three primary risks:  borrower credit worthiness; sustainability of the cash flow of the property; and market risk; therefore, our methods of monitoring and assessing credit risk are consistent for our entire portfolio.

For our commercial mortgage loan portfolio, 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) a valuation allowance.  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 a valuation allowance for a specific loan based upon this analysis. 

We measure and assess the credit quality of our commercial 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.

Our residential loan portfolio is primarily comprised of first lien mortgages secured by existing residential real estate.  In contrast to the commercial mortgage loan portfolio, residential mortgage loans are primarily smaller-balance homogenous loans that share similar risk characteristics.  Therefore, these pools of loans are collectively evaluated for inherent credit losses.  Such evaluations consider numerous factors, including, but not limited to borrower credit scores, collateral values, loss forecasts, geographic location, delinquency rates and economic trends.  These evaluations and assessments are revised as conditions change and new information becomes available, which can cause the valuation allowances to increase or decrease over time as such evaluations are revised.  Residential mortgage loan pools exclude loans that have been impaired as those loans are evaluated individually using the evaluation framework for specific valuation allowances described above.

For residential mortgage loans, our primary credit quality indicator is whether the loan is performing or nonperforming.  We generally define nonperforming residential mortgage loans as those that are 90 or more days past due and/or in nonaccrual status.  There is generally a higher risk of experiencing credit losses when a residential mortgage loan is nonperforming.

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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 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 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. 

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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 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 lower 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 fixed maturity 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, but are not limited to, capital markets, investment margins, mortality, 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 and our insurance subsidiaries enter into reinsurance agreements in the normal course of business to limit our exposure to the risk of loss and to enhance our capital management.

In order for a reinsurance agreement to qualify for reinsurance accounting, the agreement must satisfy certain risk transfer conditions that include, among other items, a reasonable possibility of a significant loss for the assuming entity.  When we apply reinsurance accounting, premiums, benefits and DAC amortization are reported net of insurance ceded on our Consolidated Statements of Comprehensive Income (Loss).  Amounts currently recoverable, such as ceded reserves, are reported in reinsurance recoverables and amounts currently payable to the reinsurers, such as premiums, are included in other liabilities on our Consolidated Balance Sheets.  Assets and liabilities and premiums and benefits from certain reinsurance contracts that grant statutory surplus relief to our insurance companies are netted on our Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income (Loss), respectively, if there is a contractual right of offset.   

We use deposit accounting to recognize reinsurance agreements that do not transfer significant insurance risk.  This accounting treatment results in amounts paid or received by our insurance subsidiaries to be considered on deposit with the reinsurer and such amounts are reported in other assets and other liabilities, respectively, on our Consolidated Balance Sheets.  As amounts are paid or received, consistent with the underlying contracts, deposit assets or liabilities are adjusted.

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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 for impairment annually as of October 1 and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. 

We perform a quantitative goodwill impairment test where the fair value of the reporting unit is determined and compared to the carrying value of the reporting unit.  If the carrying value of the reporting unit is greater than the reporting unit’s fair value, goodwill is impaired and written down to the reporting unit’s fair value; and a charge is reported in impairment of intangibles on our Consolidated Statements of Comprehensive Income (Loss).  The results of one goodwill impairment test on one reporting unit cannot subsidize the results of another reporting unit.

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 issuance costs associated with line-of-credit arrangements, operating lease right-of-use (“ROU”) assets, finance lease assets, certain financing arrangements and other prepaid expenses.  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, long-term operating lease liabilities, finance lease liabilities, certain financing arrangements, deferred gain on business sold through reinsurance and other accrued expenses. 

Other assets and other liabilities on our Consolidated Balance Sheets include guaranteed living benefit (“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.  Specifically identifiable intangible assets also includes the value of customer relationships acquired (“VOCRA”) and value of distribution agreements (“VODA”) that were acquired through our business combination during 2018.  The carrying values of VOCRA and VODA are amortized using a straight line basis over their weighted average life of 20 years and 13 years, respectively.  See Note 10 for more information regarding specifically identifiable intangible assets acquired.

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 finance leases and certain financing arrangements and 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.

Effective January 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, which resulted in a new measurement and recognition of our long-term operating leases on our Consolidated Balance Sheets.  We lease office space and certain equipment under various long-term lease agreements.  We determine if an arrangement is a lease at inception.  Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the

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commencement date.  Our leases do not provide an implicit rate; therefore, we use our incremental borrowing rate at the commencement date in determining the present value of future payments.  The ROU asset is calculated using the lease liability carrying amount, plus or minus prepaid/accrued lease payments, minus the unamortized balance of lease incentives received, plus unamortized initial direct costs.  Lease terms used to calculate our lease obligation include options when we are reasonably certain that we will exercise such options.  Our lease agreements may contain both lease and non-lease components, which are accounted for separately.  Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.  See Notes 2 and 14 for additional information.

Other assets includes deferred losses on business sold through reinsurance attributable to our 2012 and 2014 reinsurance transactions where 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.

Other liabilities includes deferred gains on business sold through reinsurance.  During 2009, we completed a reinsurance transaction whereby we assumed a closed block of term contracts from First Penn-Pacific Life Insurance Company, a wholly-owned subsidiary of LNC.  We are recognizing the gain related to this transaction over a period of 15 years.  During 2012, we completed a reinsurance transaction whereby we ceded a closed block of UL contracts with secondary guarantees to LNBAR.  We are recognizing the gain related to the transaction over a period of 30 years.  During 2013, we completed a reinsurance transaction whereby we ceded a closed block of UL contracts with secondary guarantees to LNBAR.  During 2019, we amended the 2013 reinsurance transaction by recapturing the underlying base policy from LNBAR while continuing to cede the associated riders.  We are recognizing the gain related to this transaction over the expected life of the underlying business, or 20 years.  Effective October 1, 2018, we entered into an annuity reinsurance agreement with Athene Holding Ltd. (“Athene”).  We are recognizing the gain related to this transaction over the period over which the majority of account values are expected to run off, or 20 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 may 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 6, 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, but are not limited to, assumptions for capital markets (e.g., implied volatilities, correlation among indices, risk-free swap curve, etc.), policyholder behavior (e.g., policy lapse, rider utilization, etc.), mortality, risk margins, maintenance 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 as 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 are equal to deposits net of withdrawals, excluding surrender charges and fees, plus interest credited, and if applicable an additional reserve for other insurance benefit guarantees.  The liabilities for future insurance contract benefits and claim reserves for traditional life

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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 assumptions for immediate and deferred paid-up annuities range from 1.25% to 12.75%.  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).

The liability for future claim reserves for long-term disability contracts for incurred and reported claims are calculated based on assumptions as to interest, claim resolution rates and offsets for other insurance including social security.  Claim resolution rate assumptions and social security offsets are based on our actual experience.  The interest rate assumptions used for discounting claim reserves are based on projected portfolio yield rates, after consideration for defaults and investment expenses, for assets supporting the liabilities.  The incurred but not reported claim reserves are based on our experiences as to the reporting lags and ultimate loss experience.  Claim reserves are subject to revision as current claim experience and projections of future factors affecting claim experience change.  Claim reserves do not include a provision for adverse deviation.

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, 2019 and 2018, participating policies comprised less than 1% of the face amount of business in force, and dividend expenses were $51 million, $56 million and $57 million for the years ended December 31, 2019, 2018 and 2017, 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

Our 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.

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 consists of asset-based fees, 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 as performance obligations are met, over the period underlying customer assets are owned or advisory services are provided.  Wholesaling-related 12b-1 fees received from separate account fund sponsors as compensation for servicing the underlying mutual funds are recorded as revenues based on a contractual percentage of the market value of mutual fund assets over the period shares are owned by customers.  Net investment advisory fees related to asset management of certain separate account funds are recorded as revenues based on a contractual percentage of the customer’s managed assets over the period advisory services are provided.  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 insurance products consist primarily of term life, disability and dental.

Net Investment Income

We earn investment income on the underlying general account investments supporting our fixed products less related expenses.  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 fixed maturity AFS 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) includes realized gains and losses from the sale of investments, write-downs for other-than-temporary impairments of investments, changes in fair value of equity securities, 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 performance obligations are met, either at the time of sale or over time based on a contractual percentage of customer account values, changes in the market value of our seed capital investments, and proceeds from reinsurance recaptures.  The broker-dealer services primarily relate to our retail sales network and consist

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of commission revenue for the sale of non-affiliated securities recorded on a trade date basis and advisory fee income.  Advisory fee income is asset-based revenues recorded as earned based on a contractual percentage of customer account values.  Other revenues earned by our Group Protection segment consist of fees from administrative services performed, which are recognized as performance obligations are met over the terms of the underlying agreements.

Interest Credited

We credit interest to our contract holder account balances based on the contractual terms supporting our products. 

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. 

Strategic Digitization Expense

Strategic digitization expense consists primarily of costs related to our enterprise-wide digitization initiative.

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 apply an estimated forfeiture rate to our accrual of compensation cost. 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

LNC files a U.S. consolidated income tax return that includes us and LNC’s other 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. 

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2.  New Accounting Standards

Adoption of New Accounting Standards

The following table provides a description of our adoption of new ASUs issued by the FASB and the impact of the adoption on our financial statements. ASUs not listed below were assessed and determined to be either not applicable or insignificant in presentation or amount.

Standard	Description	Date of Adoption	Effect on Financial Statements or Other Significant Matters
ASU 2016-02, Leases and all related amendments	This standard establishes a new accounting model for leases.  Lessees will recognize most leases on the balance sheet as a ROU 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 ROU 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 permits a modified retrospective adoption approach that includes a number of optional practical expedients that entities may elect upon adoption.  Early adoption is permitted.	January 1, 2019	We adopted this standard and all related amendments, which resulted in the recognition of $171 million in ROU assets and $176 million in operating lease liabilities reported in other assets and other liabilities, respectively, on our Consolidated Balance Sheets as of January 1, 2019.  Comparative periods continue to be measured and presented under historical guidance, and only the period of adoption is subject to this ASU.  Also, on transition, we have elected not to reassess: 1) whether expired or existing contracts contain a lease under the new definition of a lease; 2) lease classification for expired or existing leases; and 3) whether previously capitalized initial direct costs would qualify for capitalization under this ASU.  Additionally, there is not a significant difference in our pattern of lease expense recognition under this ASU, and there is no impact on cash flows.  For more information, see Note 1.
ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities	These amendments require an entity to shorten the amortization period for certain callable debt securities held at a premium so that the premium is amortized to the earliest call date.  Early adoption is permitted, and the ASU requires adoption under a modified retrospective basis through a cumulative effect adjustment to the beginning balance of retained earnings.	January 1, 2019	We adopted the provisions of this ASU, which did not result in a change to our existing practices; therefore, no cumulative effect adjustment was recorded.  As such, there was no impact on our consolidated financial condition and results of operations.
ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities	These amendments change both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.  These amendments retain the threshold of highly effective for hedging relationships, remove the requirement to bifurcate between the portions of the hedging relationship that are effective and ineffective, record hedge item and hedging instrument results in the same financial statement line item, require quantitative assessment initially for all hedging relationships unless the hedging relationship meets the definition of either the shortcut method or critical terms match method and allow the contractual specified index rate to be designated as the hedged risk in a cash flow hedge of interest rate risk of a variable rate financial instrument.  These amendments also eliminate the benchmark interest rate concept for variable rate instruments.  Early adoption is permitted.	January 1, 2019	We adopted the provisions of this ASU, which did not have an impact on our consolidated financial condition and results of operations.  This ASU does result in our modification of certain hedge documentation and effectiveness methods, which we have reflected in applicable disclosures in Note 6.

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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 2016-13, Measurement of Credit Losses on Financial Instruments and related amendments	These amendments adopt a new model in ASC Topic 326 to measure and recognize credit losses for most financial assets.  The ASU requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected over the life of the asset using an allowance for credit losses. Changes in the allowance are charged to earnings.  The measurement of expected credit losses is based on relevant information about past events, including historical experience, as well as current economic conditions and reasonable and supportable forecasts that affect the collectability of the financial asset.  The method used to measure estimated credit losses for fixed maturity AFS securities will be unchanged from current GAAP; however, the amendments require credit losses to be recognized through an allowance rather than as a reduction to the amortized cost of those securities.  The amendments will permit entities to recognize improvements in credit loss estimates on fixed maturity AFS securities by reducing the allowance account immediately through earnings.  The amendments will be adopted through a cumulative effect adjustment to the beginning balance of retained earnings as of the first reporting period in which the amendments are effective.  Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein.	January 1, 2020	The adoption of this standard and related amendments will result in the recognition of a cumulative effect adjustment that is not expected to be material to our retained earnings, to record allowances for credit losses as of the date of adoption, primarily related to commercial and residential mortgage loans, as well as reinsurance recoverables.
ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging and Topic 825, Financial Instruments	These amendments clarify the measurement, recognition and presentation of the allowance for credit losses on accrued interest receivable balances; the inclusion of recoveries when estimating the allowance for credit losses; the inclusion of all ASC Topic 944 – Financial Services – Insurance reinsurance recoverables within the scope of ASC 326-20; and provide additional targeted clarifications on the calculation of the allowance for credit losses. These amendments also make targeted clarifications to ASC Topics 815 and 825.  Early adoption is permitted.	January 1, 2020	Our adoption of ASU 2016-13 and related amendments is discussed above.  The adoption of the remainder of this guidance will not have a material impact on our consolidated financial condition and results of operations.
ASU 2019-05, Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief	The amendments provide entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments – Credit Losses – Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments – Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of ASC Topic 326.	January 1, 2020	We will recognize a cumulative effect increase to retained earnings of approximately $14 million, after-tax, to elect the fair value option for certain mortgage loans in connection with our adoption of ASC Topic 326.

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Standard	Description	Projected Date of Adoption	Effect on Financial Statements or Other Significant Matters
ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts and related amendments	These amendments make changes to the accounting and reporting for long-duration contracts issued by an insurance entity that will significantly change how insurers account for long-duration contracts, including how they measure, recognize and make disclosures about insurance liabilities and DAC.  Under this ASU, insurers will be required to review cash flow assumptions at least annually and update them if necessary.  They also will have to make quarterly updates to the discount rate assumptions they use to measure the liability for future policyholder benefits.  The ASU creates a new category of market risk benefits (i.e., features that protect the contract holder from capital market risk and expose the insurer to that risk) that insurers will have to measure at fair value.  The ASU provides various transition methods by topic that entities may elect upon adoption.  The ASU is currently effective January 1, 2022, and early adoption is permitted.	January 1, 2022	We are currently evaluating the impact of adopting this ASU on our consolidated financial condition and results of operations.

3.  Acquisition

On May 1, 2018, LNC and LNL completed the acquisition from Liberty Mutual Insurance Company of 100% of the capital stock of Liberty Life, an operator of a group benefits business (the “Liberty Group Business”) and an individual life and individual and group annuity business (the “Liberty Life Business”).  The acquisition expanded the scale and capabilities of the Group Protection business while further diversifying the Company’s sources of earnings.

In connection with the acquisition and pursuant to the Master Transaction Agreement (“MTA”), dated January 18, 2018, which is attached as Exhibit 10.3 to this Form 10-K, Liberty Life sold the Liberty Life Business on May 1, 2018, by entering into reinsurance agreements and related ancillary documents (including administrative services agreements and transition services agreements) with Protective Life Insurance Company and its wholly-owned subsidiary, Protective Life and Annuity Insurance Company (together with Protective Life Insurance Company, “Protective”), providing for the reinsurance and administration of the Liberty Life Business.

We recognized $85 million of acquisition-related costs, pre-tax, for the year ended December 31, 2018.  These costs were included in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss).

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In the year following the May 1, 2018 acquisition date, we adjusted assets acquired by $(5) million and liabilities acquired by $23 million for an increase in goodwill of $28 million.  Under the terms of the MTA, a final balance sheet will be agreed upon at a later date.  The following table presents the adjusted fair values (in millions) of the net assets acquired related to the Liberty Group Business:

	Adjusted
	Fair Value
Assets
Investments	$	2,493
Mortgage loans on real estate		658
Cash and invested cash		107
Reinsurance recoverables		76
Premiums and fees receivable		83
Accrued investment income		24
Other intangible assets acquired		640
Other assets acquired		142
Separate account assets		99
Total assets acquired	$	4,322
Liabilities
Future contract benefits	$	2,930
Other contract holder funds		46
Other liabilities acquired		140
Separate account liabilities		99
Total liabilities assumed	$	3,215
Net identifiable assets acquired	$	1,107
Goodwill		410
Net assets acquired	$	1,517

Financial Information

Since the acquisition date of May 1, 2018, the revenues and net income of the business acquired have been included in our Consolidated Statements of Comprehensive Income (Loss) in the Group Protection segment and were $1.5 billion and $36 million, respectively, for the period ended December 31, 2018.

The following unaudited pro forma condensed consolidated results of operations of the Company assume that the acquisition of Liberty Life was completed on January 1, 2017 (in millions):

	For the Years Ended
	December 31,
	2018		2017
Revenue	$	16,097	$	15,080
Net income		1,642		2,034

Pro forma adjustments include the revenue and net income of the acquired business for each period as well as amortization of identifiable intangible assets acquired and the fair value adjustment to acquired insurance reserves and investments.  Other pro forma adjustments include the impact of reflecting acquisition and integration costs and investment expenses directly attributable to the business combination in 2017 instead of in 2018.  Pro forma adjustments do not include retrospective adjustments to defer and amortize acquisition costs as would be recorded under our accounting policy.

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4.  Variable Interest Entities

Unconsolidated VIEs

Reinsurance Related Notes

Effective October 1, 2017, our captive reinsurance subsidiary, the Lincoln Reinsurance Company of Vermont VI, restructured the $275 million, long-term surplus note which was originally issued to a non-affiliated VIE in October 2015 in exchange for two corporate bond AFS securities of like principal and duration.  The activities of the VIE are primarily 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 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.  As of December 31, 2019, the principal balance of the long-term surplus note was zero and we do not currently have any exposure to this VIE. 

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 5.

Limited Partnerships and Limited Liability Companies

We invest in certain LPs and limited liability companies (“LLCs”), including qualified affordable housing projects, that we have concluded are VIEs.  We do not hold any substantive kick-out or participation rights in the LPs and LLCs, and we do not receive any performance fees or decision maker fees from the LPs and LLCs.  Based on our analysis of the LPs and LLCs, we are not the primary beneficiary of the VIEs as we do not have the power to direct the most significant activities of the LPs and LLCs.

The carrying amounts of our investments in the LPs and LLCs are recognized in other investments on our Consolidated Balance Sheets and were $1.9 billion and $1.7 billion as of December 31, 2019 and 2018, respectively.  Included in these carrying amounts are our investments in qualified affordable housing projects, which were $13 million and $20 million as of December 31, 2019 and 2018, respectively.  We do not have any contingent commitments to provide additional capital funding to these qualified affordable housing projects.  We receive returns from these qualified affordable housing projects 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 $2 million and $1 million for the years ended December 31, 2019 and 2018, respectively. 

Our exposure to loss is limited to the capital we invest in the LPs and LLCs, and there have been no indicators of impairment that would require us to recognize an impairment loss related to the LPs and LLCs as of December 31, 2019.

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5.  Investments

Fixed Maturity AFS Securities

The amortized cost, gross unrealized gains, losses and OTTI and fair value of fixed maturity AFS securities (in millions) were as follows:

	As of December 31, 2019
	Amortized		Gross Unrealized							Fair
	Cost		Gains		Losses		OTTI (1)			Value
Fixed maturity AFS securities:
Corporate bonds	$	78,875	$	9,071	$	172	$	(5	)	$	87,779
U.S. government bonds		355		48		-		-			403
State and municipal bonds		4,605		1,087		7		-			5,685
Foreign government bonds		326		62		-		-			388
RMBS		2,820		179		9		(18	)		3,008
CMBS		1,038		45		1		(1	)		1,083
ABS		4,803		62		17		(35	)		4,883
Hybrid and redeemable preferred securities		485		79		20		-			544
Total fixed maturity AFS securities	$	93,307	$	10,633	$	226	$	(59	)	$	103,773

	As of December 31, 2018
	Amortized		Gross Unrealized							Fair
	Cost		Gains		Losses		OTTI (1)			Value
Fixed maturity AFS securities:
Corporate bonds	$	78,837	$	2,871	$	2,167	$	(8	)	$	79,549
U.S. government bonds		361		27		2		-			386
State and municipal bonds		4,498		703		17		-			5,184
Foreign government bonds		402		42		-		-			444
RMBS		3,099		113		61		(13	)		3,164
CMBS		810		6		16		(3	)		803
ABS		2,644		45		30		(19	)		2,678
Hybrid and redeemable preferred securities		568		44		33		-			579
Total fixed maturity AFS securities	$	91,219	$	3,851	$	2,326	$	(43	)	$	92,787

⁽¹⁾ Includes unrealized (gains) and losses on credit-impaired securities related to changes in the fair value of such securities subsequent to the impairment measurement date.

The amortized cost and fair value of fixed maturity AFS securities by contractual maturities (in millions) as of December 31, 2019, were as follows:

	Amortized		Fair
	Cost		Value
Due in one year or less	$	2,714	$	2,699
Due after one year through five years		15,022		15,578
Due after five years through ten years		17,440		18,854
Due after ten years		49,470		57,668
Subtotal		84,646		94,799
Structured securities (RMBS, CMBS, ABS)		8,661		8,974
Total fixed maturity AFS securities	$	93,307	$	103,773

Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations.

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The fair value and gross unrealized losses, including the portion of OTTI recognized in OCI, of fixed maturity 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, 2019
	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 AFS securities:
Corporate bonds	$	2,827		$	44	$	1,381		$	131	$	4,208		$	175
State and municipal bonds		316			7		18			-		334			7
RMBS		471			9		15			-		486			9
CMBS		48			1		4			-		52			1
ABS		1,791			8		300			9		2,091			17
Hybrid and redeemable
preferred securities		29			1		102			19		131			20
Total fixed maturity AFS securities	$	5,482		$	70	$	1,820		$	159	$	7,302		$	229
Total number of fixed maturity AFS securities in an unrealized loss position															882

	As of December 31, 2018
	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 AFS securities:
Corporate bonds	$	30,947		$	1,464	$	7,023		$	704	$	37,970		$	2,168
U.S. government bonds		70			1		23			1		93			2
State and municipal bonds		376			7		92			10		468			17
RMBS		436			9		796			55		1,232			64
CMBS		470			11		82			5		552			16
ABS		1,237			23		239			16		1,476			39
Hybrid and redeemable
preferred securities		94			6		131			27		225			33
Total fixed maturity AFS securities	$	33,630		$	1,521	$	8,386		$	818	$	42,016		$	2,339
Total number of fixed maturity AFS securities in an unrealized loss position															3,360

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The fair value, gross unrealized losses, the portion of OTTI recognized in OCI (in millions) and number of fixed maturity AFS securities where the fair value had declined and remained below amortized cost by greater than 20% were as follows:

	As of December 31, 2019
								Number
	Fair		Gross Unrealized					of
	Value		Losses		OTTI		Securities (1)
Less than six months	$	15	$	5	$	-			7
Six months or greater, but less than nine months		10		3		-			4
Twelve months or greater		130		74		-			31
Total	$	155	$	82	$	-			42

	As of December 31, 2018
								Number
	Fair		Gross Unrealized					of
	Value		Losses		OTTI		Securities (1)
Less than six months	$	389	$	122	$	1			44
Six months or greater, but less than nine months		96		49		-			11
Nine months or greater, but less than twelve months		11		8		-			2
Twelve months or greater		138		70		8			32
Total	$	634	$	249	$	9			89

⁽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 fixed maturity AFS securities decreased by $2.1 billion for the year ended December 31, 2019.  As discussed further below, we believe the unrealized loss position as of December 31, 2019, 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; and (iii) the estimated future cash flows were equal to or greater than the amortized cost basis of the debt securities.

Based upon this evaluation as of December 31, 2019, management believes we have the ability to generate adequate amounts of cash from our normal operations (e.g., insurance premiums, fee income and investment income) to meet cash requirements with a prudent margin of safety without requiring the sale of our temporarily-impaired securities. 

As of December 31, 2019, 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 temporarily-impaired security. 

As of December 31, 2019, the unrealized losses associated with our MBS and ABS were attributable primarily to widening credit spreads and rising interest rates since purchase.  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 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 of each temporarily-impaired security. 

As of December 31, 2019, 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 temporarily-impaired security. 

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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,
	2019			2018			2017
Balance as of beginning-of-year	$	337		$	358		$	411
Increases attributable to:
Credit losses on securities for which an
OTTI was not previously recognized		13			5			13
Credit losses on securities for which an
OTTI was previously recognized		2			2			7
Decreases attributable to:
Securities sold, paid down or matured		(148	)		(28	)		(73	)
Balance as of end-of-year	$	204		$	337		$	358

During 2019, 2018 and 2017, 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 fixed maturity AFS securities. 

Determination of Credit Losses on Corporate Bonds

As of December 31, 2019 and 2018, we reviewed our corporate bond portfolio for potential shortfalls 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, 2019 and 2018, 96% of the fair value of our corporate bond portfolio was rated investment grade.  As of December 31, 2019 and 2018, the portion of our corporate bond portfolio rated below investment grade had an amortized cost of $3.1billion and a fair value of $3.1 billion and $2.9 billion, respectively.  Based upon the analysis discussed above, we believed as of December 31, 2019 and 2018, that we would recover the amortized cost of each corporate bond.

Determination of Credit Losses on MBS and ABS

As of December 31, 2019 and 2018, default rates were projected by considering underlying MBS and ABS loan performance and collateral type.  Projected default rates on existing delinquencies vary 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 loss severity, we derive the future expected credit losses.

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Trading Securities

Trading securities at fair value (in millions) consisted of the following:

	As of December 31,
	2019		2018
Fixed maturity securities:
Corporate bonds	$	2,877	$	1,559
U.S. government bonds		45		43
State and municipal bonds		16		16
Foreign government bonds		45		23
RMBS		169		78
CMBS		163		7
ABS		1,238		121
Hybrid and redeemable preferred securities		49		22
Total trading securities	$	4,602	$	1,869

The portion of the market adjustment for trading gains and losses recognized in realized gain (loss) that relate to trading securities still held as of December 31, 2019, 2018and 2017, was $(225) million, $(55) million and $8 million, respectively.

Mortgage Loans on Real Estate

The following provides the current and past due composition of our mortgage loans on real estate (in millions):

	As of December 31, 2019									As of December 31, 2018
	Commercial			Residential			Total			Commercial			Residential		Total
Current	$	15,525		$	659		$	16,184		$	12,959		$	230	$	13,189
30 to 59 days past due		3			27			30			-			9		9
60 to 89 days past due		-			10			10			-			1		1
90 or more days past due		-			16			16			-			-		-
Valuation allowance		-			(2	)		(2	)		-			-		-
Unamortized premium (discount)		(17	)		23			6			(17	)		8		(9	)
Total carrying value	$	15,511		$	733		$	16,244		$	12,942		$	248	$	13,190

As of December 31, 2019, we had 38 residential mortgage loans that were either delinquent or in foreclosure.  As of December 31, 2018, we had no loans that were either delinquent or in foreclosure.

For our commercial mortgage loans, there was one specifically identified impaired loan with a carrying value of less than $1 million as of December 31, 2019. There were no specifically identified impaired commercial mortgage loans as of December 31, 2018.

For our residential mortgage loans, there were four specifically identified impaired loans with an aggregate carrying value of $1 million as of December 31, 2019.  There were no specifically identified impaired residential mortgage loans as of December 31, 2018.  The general allowance established on residential mortgage loans was $2 million and less than $1 million as of December 31, 2019 and 2018, respectively.

We establish a valuation allowance to provide for the risk of credit losses inherent in our portfolio.  The valuation allowance includes specific valuation allowances for loans that are deemed to be impaired as well as general valuation allowances for pools of loans with similar risk characteristics where a property risk or market specific risk has not been identified but for which we anticipate a loss has occurred.

The changes in the valuation allowance associated with impaired commercial mortgage loans on real estate (in millions) were as follows:

	For the Years Ended December 31,
	2019		2018			2017
Valuation Allowance
Balance as of beginning-of-year	$	-	$	3		$	2
Additions		-		-			1
Charge-offs, net of recoveries		-		(3	)		-
Balance as of end-of-year	$	-	$	-		$	3

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Additional information related to impaired commercial mortgage loans on real estate (in millions) was as follows:

	For the Years Ended December 31,
	2019		2018		2017
Average carrying value for impaired commercial
mortgage loans on real estate	$	-	$	5	$	6
Interest income recognized on impaired commercial
mortgage loans on real estate		-		1		-
Interest income collected on impaired commercial
mortgage loans on real estate		-		1		-

As described in Note 1, we use loan-to-value and debt-service coverage ratios as credit quality indicators for our commercial mortgage loans on real estate (dollars in millions) as follows:

	As of December 31, 2019				As of December 31, 2018
				Debt-				Debt-
				Service				Service
	Carrying		% of	Coverage	Carrying		% of	Coverage
Loan-to-Value Ratio	Value		Total	Ratio	Value		Total	Ratio
Less than 65%	$	14,121	91.0%	2.35	$	11,656	90.1%	2.30
65% to 74%		1,389	9.0%	1.88		1,234	9.5%	1.76
75% to 100%		1	0.0%	1.09		52	0.4%	1.03
Total	$	15,511	100.0%		$	12,942	100.0%

As described in Note 1, we use loan performance status as the primary credit quality indicator for our residential mortgage loans on real estate (dollars in millions) as follows:

	As of December 31, 2019			As of December 31, 2018
	Carrying		% of	Carrying		% of
Performance Indicator	Value		Total	Value		Total
Performing	$	716	97.7%	$	247	99.6%
Nonperforming		17	2.3%		1	0.4%
Total	$	733	100.0%	$	248	100.0%

Our commercial mortgage loan portfolio is geographically diversified with the largest concentrations in California, which accounted for 24% and 23% of commercial mortgage loans on real estate as of December 31, 2019 and 2018, respectively, and Texas, which accounted for 11% and 12% of commercial mortgage loans on real estate as of December 31, 2019 and 2018, respectively.

Our residential mortgage loan portfolio is geographically diversified with the largest concentrations in California, which accounted for 34% of residential mortgage loans on real estate as of December 31, 2019 and 2018, and Florida, which accounted for 20% and 19% of residential mortgage loans on real estate as of December 31, 2019 and 2018, respectively.

Alternative Investments 

As of December 31, 2019 and 2018, alternative investments included investments in 256 and 234 different partnerships, respectively, and the portfolios represented approximately 1% of our total investments.

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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,
	2019			2018			2017
Fixed maturity AFS securities	$	4,214		$	4,129		$	4,048
Equity AFS securities		-			-			12
Trading securities		187			79			88
Equity securities		4			4			-
Mortgage loans on real estate		626			492			433
Real estate		1			1			1
Policy loans		128			122			134
Invested cash		33			23			11
Commercial mortgage loan prepayment
and bond make-whole premiums		115			78			138
Alternative investments		24			222			165
Consent fees		7			4			6
Other investments		27			24			5
Investment income		5,366			5,178			5,041
Investment expense		(404	)		(334	)		(281	)
Net investment income	$	4,962		$	4,844		$	4,760

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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,
	2019			2018			2017
Fixed maturity AFS securities:
Gross gains	$	44		$	36		$	17
Gross losses		(70	)		(80	)		(43	)
Gross OTTI		(15	)		(7	)		(20	)
Equity AFS securities:
Gross gains		-			-			6
Gain (loss) on other investments (1)		(15	)		(15	)		(10	)
Associated amortization of DAC, VOBA, DSI and DFEL
and changes in other contract holder funds		(13	)		(22	)		(21	)
Total realized gain (loss) related to certain investments		(69	)		(88	)		(71	)
Realized gain (loss) on the mark-to-market on certain
instruments (2)		(426	)		251			(155	)
Indexed annuity and IUL contracts net derivatives results: (3)
Gross gain (loss)		(80	)		(51	)		(22	)
Associated amortization of DAC, VOBA, DSI and DFEL		2			12			(2	)
GLB fees ceded to LNBAR and attributed fees:
Gross gain (loss)		(223	)		(184	)		(174	)
Associated amortization of DAC, VOBA, DSI and DFEL		(32	)		(32	)		(32	)
Total realized gain (loss)	$	(828	)	$	(92	)	$	(456	)

⁽¹⁾ Includes market adjustments on equity securities still held of $(4) million and $(17) million for the years ended December 31, 2019 and 2018, respectively.

⁽²⁾ Represents changes in the fair values of certain derivative investments (not including those associated with our variable and indexed annuity and indexed variable universal life insurance (“IUL”) contracts net derivatives results), reinsurance related embedded derivatives and trading securities.  See Notes 1 and 9 for information regarding Modco.

⁽³⁾ Represents the net difference between the change in fair value of the index 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 options we may purchase or sell in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products.

Details underlying write-downs taken as a result of OTTI that were recognized in net income (loss) and included in realized gain (loss) on fixed maturity AFS securities above and the portion of OTTI recognized in OCI (in millions) were as follows:

	For the Years Ended December 31,
	2019			2018			2017
OTTI Recognized in Net Income (Loss)
Fixed maturity AFS securities:
Corporate bonds	$	(13	)	$	(5	)	$	(13	)
State and municipal bonds		-			-			(1	)
RMBS		(1	)		(1	)		(2	)
CMBS		-			-			(2	)
ABS		(1	)		(1	)		(2	)
Gross OTTI recognized in net income (loss)		(15	)		(7	)		(20	)
Associated amortization of DAC, VOBA, DSI and DFEL		-			-			2
Net OTTI recognized in net income (loss)	$	(15	)	$	(7	)	$	(18	)
OTTI Recognized in OCI
Gross OTTI recognized in OCI	$	14		$	-		$	-
Change in DAC, VOBA, DSI and DFEL		(1	)		-			-
Net OTTI recognized in OCI	$	13		$	-		$	-

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Payables for Collateral on Investments

The carrying value of the payables for collateral on investments included on our Consolidated Balance Sheets and the fair value of the related investments or collateral (in millions) consisted of the following:

	As of December 31, 2019				As of December 31, 2018
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Collateral payable for derivative investments (1)	$	1,383	$	1,383	$	616	$	616
Securities pledged under securities lending agreements (2)		114		110		88		85
Securities pledged under repurchase agreements (3)		-		-		152		157
Investments pledged for Federal Home Loan Bank of
Indianapolis (“FHLBI”) (4)		3,580		5,480		3,930		5,923
Total payables for collateral on investments	$	5,077	$	6,973	$	4,786	$	6,781

⁽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 6 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.  The collateral requirements are generally 80% 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.  As of December 31, 2019, we were not participating in any open repurchase agreements.

⁽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,
	2019			2018			2017
Collateral payable for derivative investments	$	767		$	(85	)	$	(112	)
Securities pledged under securities lending agreements		26			(134	)		5
Securities pledged under repurchase agreements		(152	)		(379	)		1
Investments pledged for FHLBI		(350	)		1,030			(450	)
Total increase (decrease) in payables for collateral on investments	$	291		$	432		$	(556	)

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We have elected not to offset our securities lending and repurchase agreements transactions in our financial statements.  The remaining contractual maturities of securities lending and repurchase agreements transactions accounted for as secured borrowings (in millions) were as follows:

	As of December 31, 2019
	Overnight and Continuous		Up to 30 Days		30 -  90 Days		Greater Than 90 Days		Total
Securities Lending
Corporate bonds	$	114	$	-	$	-	$	-	$	114
Total gross secured borrowings	$	114	$	-	$	-	$	-	$	114

	As of December 31, 2018
	Overnight and Continuous		Up to 30 Days		30 - 90 Days		Greater Than 90 Days		Total
Securities Lending
Corporate bonds	$	88	$	-	$	-	$	-	$	88
Repurchase Agreements
Corporate bonds		-		-		-		152		152
Total gross secured borrowings	$	88	$	-	$	-	$	152	$	240

We accept collateral in the form of securities in connection with repurchase agreements.  In instances where we are permitted to sell or re-pledge the securities received, we report the fair value of the collateral received and a related obligation to return the collateral in the financial statements.  In addition, we receive securities in connection with securities borrowing agreements which we are permitted to sell or re-pledge.  As of December 31, 2019, the fair value of all collateral received that we are permitted to sell or re-pledge was $25 million.  As of December 31, 2019, we have re-pledged $25 million of this collateral to cover initial margin and over-the-counter collateral requirements on certain derivative investments.

Investment Commitments

As of December 31, 2019, our investment commitments were $2.0 billion, which included $1.0 billion of LPs, $544 million of mortgage loans on real estate and $407 million of private placement securities.

Concentrations of Financial Instruments

As of December 31, 2019 and 2018, 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 $1.3 billion and $1.4 billion, respectively, or 1% of total investments, and our investments in securities issued by the Federal National Mortgage Association with a fair value of $1.0 billion and $1.2 billion, respectively, or 1% of total investments.  These concentrations include fixed maturity AFS, trading and equity securities.

As of December 31, 2019 and 2018, our most significant investments in one industry were our investments in securities in the financial services industry with a fair value of $18.2 billion and $16.0 billion, respectively, or 14% of total investments, and our investments in securities in the consumer non-cyclical industry with a fair value of $15.4 billion and $14.3 billion, respectively, or 12% and 13%, respectively, of total investments.  These concentrations include fixed maturity AFS, trading and equity securities.

6.  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, 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 20 for additional disclosures related to the fair value of our derivative instruments and Note 4 for derivative instruments related to our consolidated VIEs.

We adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, in 2019.  See Note 2 for additional information.

33

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.

We also use forward-starting interest rate swaps to hedge the interest rate exposure within our life products 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 maturity 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 or the anticipated future cash flows of floating-rate fixed maturity securities due to changes in interest rates.  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 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 exchange rate.

We also 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.

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Foreign Currency Forwards

We use foreign currency forwards to hedge foreign exchange risk of investments in fixed maturity securities denominated in foreign currencies. A foreign currency forward is a contractual agreement to exchange one currency for another at specified dates in the future at a specified current exchange rate.

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 and Other Indices

We use call options to hedge the liability exposure on certain options in variable annuity products.

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 Standard & Poor's 500 Index (“S&P 500”) and other indices. Contract holders may elect to rebalance index options at renewal dates. At the end of each indexed term, which can be up to 6 years, we have the opportunity to re-price the indexed component by establishing participation rates, caps, spreads and specified rates, subject to contractual guarantees. We use 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 the seller to pay the buyer 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. 

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. 

Credit Contracts

We use derivative instruments as part of our credit risk management strategy that are economic hedges and include: 

Credit Default Swaps – Buying Protection

We use credit default swaps to hedge the liability exposure on certain options in variable annuity products. 

We buy credit default swaps to hedge against a drop in bond prices due to credit concerns of certain bond issuers.  A credit default swap allows us to put the bond back to the counterparty at par upon a default event by the bond issuer.  A default event is defined as bankruptcy, failure to pay, obligation acceleration or restructuring. 

Credit Default Swaps – Selling Protection

We use credit default swaps to hedge the liability exposure on certain options in variable annuity products. 

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. 

35

Embedded Derivatives

We have embedded derivatives that include:

GLB Reserves Embedded Derivatives

We are exposed to 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.  These GLB features are reinsured among various reinsurance counterparties on either a Modco or coinsurance basis.  We cede a portion of the GLB features to LNBAR on a funds withheld Modco basis.  The funds withheld arrangement includes a dynamic hedging strategy designed to mitigate selected risks. Changes in the value of the hedge contracts due to changes in equity markets, interest rates and implied volatilities hedge the changes in embedded derivative GLB reserves assumed by LNBAR caused by those same factors.  The hedge positions are rebalanced based upon changes in these factors as needed.  While we actively manage the hedge positions, these hedge positions may not be totally effective in offsetting changes in the embedded derivative reserve assumed by LNBAR 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 the 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 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 or other indices.  Contract holders may elect to rebalance index options at renewal dates.  At the end of each indexed term, which can be up to 6 years, we have the opportunity to re-price the indexed component by establishing participation rates, caps, spreads and specified rates, subject to contractual guarantees.  We use 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 and coinsurance with funds withheld reinsurance agreements 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 agreements. 

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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, 2019						As of December 31, 2018
	Notional		Fair Value				Notional		Fair Value
	Amounts		Asset		Liability		Amounts		Asset		Liability
Qualifying Hedges
Cash flow hedges:
Interest rate contracts (1)	$	1,174	$	108	$	12	$	1,528	$	33	$	9
Foreign currency contracts (1)		2,874		191		51		2,326		167		39
Total cash flow hedges		4,048		299		63		3,854		200		48
Fair value hedges:
Interest rate contracts (1)		546		-		202		553		-		137
Non-Qualifying Hedges
Interest rate contracts (1)		112,921		1,082		219		100,628		464		138
Foreign currency contracts (1)		262		1		3		47		-		-
Equity market contracts (1)		43,283		1,442		664		30,273		676		162
Credit contracts (1)		55		-		-		-		-		-
Embedded derivatives:
GLB direct (2)		-		450		-		-		123		-
GLB ceded (2) (3)		-		60		510		-		72		196
Reinsurance related (4)		-		-		375		-		188		-
Indexed annuity and IUL contracts (2) (5)		-		927		2,585		-		902		1,305
Total derivative instruments	$	161,115	$	4,261	$	4,621	$	135,355	$	2,625	$	1,986

⁽¹⁾ Reported in derivative investments and other liabilities on our Consolidated Balance Sheets.

⁽²⁾ Reported in other assets on our Consolidated Balance Sheets.

⁽³⁾ Reported in other liabilities 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, 2019
	Less Than		1 – 5		6 – 10		11 – 30		Over 30
	1 Year		Years		Years		Years		Years		Total
Interest rate contracts (1)	$	11,341	$	53,011	$	20,948	$	28,841	$	500	$	114,641
Foreign currency contracts (2)		218		383		961		1,473		101		3,136
Equity market contracts		27,594		7,720		3,762		13		4,194		43,283
Credit contracts		-		55		-		-		-		55
Total derivative instruments
with notional amounts	$	39,153	$	61,169	$	25,671	$	30,327	$	4,795	$	161,115

⁽¹⁾ As of December 31, 2019, the latest maturity date for which we were hedging our exposure to the variability in future cash flows for these instruments was November 24, 2021.

⁽²⁾ As of December 31, 2019, the latest maturity date for which we were hedging our exposure to the variability in future cash flows for these instruments was February 26, 2050.

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The following amounts (in millions) were recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges:

	As of December 31, 2019
			Cumulative
			Fair Value Hedging
			Adjustment Included
	Amortized Cost		in the Amortized
	of the Hedged		Cost of the Hedged
	Assets (Liabilities)		Assets (Liabilities)
Line Items in which the Hedged Items are Recorded
Fixed maturity AFS securities, at fair value	$	776	$	202

The change in our unrealized gain (loss) on derivative instruments within accumulated other comprehensive income (loss) (“AOCI”) (in millions) was as follows:

	For the Years Ended December 31,
	2019			2018			2017
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	119		$	27		$	93
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period:
Cumulative effect from adoption of
new accounting standard		-			6			-
Cash flow hedges:
Interest rate contracts		73			(4	)		43
Foreign currency contracts		108			44			20
Change in foreign currency exchange rate adjustment		(52	)		111			(137	)
Change in DAC, VOBA, DSI and DFEL		(5	)		(14	)		1
Income tax benefit (expense)		(26	)		(29	)		26
Less:
Reclassification adjustment for gains (losses)
included in net income (loss):
Cash flow hedges:
Interest rate contracts (1)		3			4			4
Foreign currency contracts (1)		35			27			18
Foreign currency contracts (2)		9			-			9
Associated amortization of DAC, VOBA, DSI and DFEL		(2	)		(3	)		(2	)
Income tax benefit (expense)		(9	)		(6	)		(10	)
Balance as of end-of-year	$	181		$	119		$	27

⁽¹⁾ The OCI offset is reported within net investment income on our Consolidated Statements of Comprehensive Income (Loss).

⁽²⁾ The OCI offset is reported within realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

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The effects of qualifying and non-qualifying hedges (in millions) on the Consolidated Statements of Comprehensive Income (Loss) were as follows:

	Gain (Loss)
	Recognized in Income
	For the Year Ended
	December 31, 2019
	Realized				Net
	Gain				Investment
	(Loss)				Income
Total Line Items in which the Effects of Fair Value
or Cash Flow Hedges are Recorded		$	(828	)	$	4,962
Qualifying Hedges
Gain or (loss) on fair value hedging relationships:
Interest rate contracts:
Hedged items			-			63
Derivatives designated as hedging instruments			-			(63	)
Gain or (loss) on cash flow hedging relationships:
Interest rate contracts:
Amount of gain or (loss) reclassified from AOCI into income			-			3
Foreign currency contracts:
Amount of gain or (loss) reclassified from AOCI into income			9			35
Non-Qualifying Hedges
Interest rate contracts			982			-
Foreign currency contracts			(1	)		-
Equity market contracts			(137	)		-
Embedded derivatives:
GLB			1			-
Reinsurance related			(626	)		-
Indexed annuity and IUL contracts			(742	)		-

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The gains (losses) on derivative instruments (in millions) recorded within income (loss) from continuing operations on our Consolidated Statements of Comprehensive Income (Loss) were as follows:

	For the Years Ended
	December 31,
	2018			2017
Qualifying Hedges
Cash flow hedges:
Interest rate contracts (1)	$	4		$	4
Foreign currency contracts (1)		27			18
Foreign currency contracts (2)		-			9
Total cash flow hedges		31			31
Fair value hedges:
Interest rate contracts (1)		(14	)		(23	)
Interest rate contracts (2)		37			7
Total fair value hedges		23			(16	)
Non-Qualifying Hedges
Interest rate contracts (2)		(149	)		103
Foreign currency contracts (2)		5			-
Equity market contracts (2)		445			(1,427	)
Equity market contracts (3)		(17	)		28
Credit contracts (3)		-			1
Embedded derivatives:
GLB(2)		(1	)		-
Reinsurance related (2)		292			(141	)
Indexed annuity and IUL contracts (2)		81			(400	)
Total derivative instruments	$	710		$	(1,821	)

⁽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).

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,
	2018		2017
Offset to net investment income		4		22
Offset to realized gain (loss)		27		9

As of December 31, 2019, $45 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, 2019 and 2018, 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.

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As of December 31, 2019, information related to our credit default swaps for which we are the seller (dollars in millions) was as follows:

					Credit
		Reason	Nature		Rating of	Number			Maximum
		for	of	Underlying		of	Fair		Potential
Credit Contract Type	Maturity	Entering	Recourse	Obligation (1)		Instruments	Value (2)		Payout
Basket credit default swaps	12/20/2024	(3)	(4)		BBB+	1	$	1	$	55

⁽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⁾ Credit default swaps were entered into in order to hedge the liability exposure on certain variable annuity products.

⁽⁴⁾ Sellers do not have the right to demand indemnification or compensation from third parties in case of a loss (payment) on the contract.

As of December 31, 2018, we did not have any exposure related to credit default swaps for which we are the seller. 

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			As of
	December 31,			December 31,
		2019			2018
Maximum potential payout		$	55		$	-
Less:  Counterparty thresholds			-			-
Maximum collateral potentially required to post		$	55		$	-

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 collateral if the market value was less than zero.

Credit Risk

We are exposed to credit losses 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 weighted average life of the counterparty exposure, less collateral held.  As of December 31, 2019, the NPR adjustment was zero.  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, we and LLANY 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.  We did not have any exposure as of December 31, 2019 or 2018. 

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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, 2019					As of December 31, 2018
	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-	$	441	$	(22	)	$	33	$	(4	)
A+		549		(168	)		296		(26	)
A		36		-			106		(36	)
A-		355		-			4		-
BBB+		-		-			177		-
	$	1,381	$	(190	)	$	616	$	(66	)

Balance Sheet Offsetting

Information related to the effects of offsetting on our Consolidated Balance Sheets (in millions) was as follows:

		As of December 31, 2019
					Embedded
	Derivative				Derivative
	Instruments				Instruments			Total
Financial Assets
Gross amount of recognized assets		$	2,619			$	1,437	$	4,056
Gross amounts offset			(708	)			-		(708	)
Net amount of assets			1,911				1,437		3,348
Gross amounts not offset:
Cash collateral			(1,381	)			-		(1,381	)
Non-cash collateral			(242	)			-		(242	)
Net amount		$	288			$	1,437	$	1,725
Financial Liabilities
Gross amount of recognized liabilities		$	771			$	3,470	$	4,241
Gross amounts offset			(15	)			-		(15	)
Net amount of liabilities			756				3,470		4,226
Gross amounts not offset:
Cash collateral			(190	)			-		(190	)
Non-cash collateral			-				-		-
Net amount		$	566			$	3,470	$	4,036

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		As of December 31, 2018
					Embedded
	Derivative				Derivative
	Instruments				Instruments			Total
Financial Assets
Gross amount of recognized assets		$	1,282			$	1,285	$	2,567
Gross amounts offset			(201	)			-		(201	)
Net amount of assets			1,081				1,285		2,366
Gross amounts not offset:
Cash collateral			(616	)			-		(616	)
Non-cash collateral			(58	)			-		(58	)
Net amount		$	407			$	1,285	$	1,692
Financial Liabilities
Gross amount of recognized liabilities		$	806			$	1,501	$	2,307
Gross amounts offset			(59	)			-		(59	)
Net amount of liabilities			747				1,501		2,248
Gross amounts not offset:
Cash collateral			(66	)			-		(66	)
Non-cash collateral			(190	)			-		(190	)
Net amount		$	491			$	1,501	$	1,992

7.  Federal Income Taxes

The federal income tax expense (benefit) on continuing operations (in millions) was as follows:

	For the Years Ended December 31,
	2019			2018		2017
Current	$	175		$	179	$	118
Deferred		(212	)		78		(1,405	)
Federal income tax expense (benefit)	$	(37	)	$	257	$	(1,287	)

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A reconciliation of the effective tax rate differences (in millions) was as follows:

	For the Years Ended December 31,
	2019			2018			2017
Income (loss) before taxes	$	577		$	1,830		$	731
Federal statutory rate		21%			21%			35%
Federal income tax expense (benefit) at federal statutory rate		121			384			256
Effect of:
Tax-preferred investment income (1)		(99	)		(87	)		(280	)
Tax credits		(40	)		(39	)		(29	)
Excess tax benefits from stock-based compensation		(6	)		(3	)		(8	)
Goodwill impairment		-			-			316
Tax impact associated with the Tax Cuts and Jobs Act (2)		(16	)		3			(1,526	)
Other items		3			(1	)		(16	)
Federal income tax expense (benefit)	$	(37	)	$	257		$	(1,287	)
Effective tax rate		-6%			14%			-176%

⁽¹⁾ Relates primarily to separate account dividends eligible for the dividends-received deduction. As a result of the Tax Cuts and Jobs Act (the “Tax Act”), the recorded tax benefit for the separate account dividends-received deduction was substantially less in 2019 and 2018 as compared to 2017. 

⁽²⁾ As a result of the enactment of the Tax Act in 2017, we remeasured our existing deferred tax balances at the prevailing corporate federal income tax rate of 21% and recognized a $1.5 billion tax benefit.  In 2018, we recognized a $3 million net tax benefit from the impact of the reduced federal statutory rate under the Tax Act on our adoption of an Internal Revenue Service pronouncement related to variable annuity contracts.  In 2019, we recognized a $16 million net tax benefit from the impact of the reduced corporate tax rate under the Tax Act on our election to revalue policyholder tax reserves.

The federal income tax asset (liability) (in millions) was as follows:

	As of December 31,
	2019			2018
Current	$	255		$	205
Deferred		(2,605	)		(1,421	)
Total federal income tax asset (liability)	$	(2,350	)	$	(1,216	)

Significant components of our deferred tax assets and liabilities (in millions) were as follows:

	As of December 31,
	2019			2018
Deferred Tax Assets
Future contract benefits and other contract holder funds	$	527		$	549
Reinsurance related embedded derivative liability		79			-
Compensation and benefit plans		135			120
Intangibles		26			40
Net operating losses		216			264
Other		14			59
Total deferred tax assets	$	997		$	1,032
Deferred Tax Liabilities
DAC	$	854		$	1,380
VOBA		191			302
Net unrealized gain on fixed maturity AFS securities		2,216			333
Net unrealized gain on trading securities		70			25
Investment activity		154			334
Reinsurance related embedded derivative asset		-			39
Deferred gain on business sold through reinsurance		4			34
Other		113			6
Total deferred tax liabilities	$	3,602		$	2,453
Net deferred tax asset (liability)	$	(2,605	)	$	(1,421	)

As of December 31, 2019, we have $1.0 billion of net operating losses to carry forward to future years.  The net operating losses arose in tax year 2018, and under the Tax Act changes, have an unlimited carryforward period.  As a result, management believes that it is more

44

likely than not that the deferred tax asset associated with the loss carryforwards will be realized.  Inclusive of the tax attribute for the net operating losses, although realization is not assured, management believes that it is more likely than not that we will realize the benefits of all of our deferred tax assets, and, accordingly, no valuation allowance has been recorded.

As of December 31, 2019, and 2018,$41 million and $12 million, respectively, of our unrecognized tax benefits presented below, if recognized, would have affected our federal income tax expense (benefit) 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,
	2019		2018
Balance as of beginning-of-year	$	12	$	11
Increases for prior year tax positions		29		-
Increases for current year tax positions		-		1
Balance as of end-of-year	$	41	$	12

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, 2019, 2018 and 2017, we recognized no interest and penalty expense (benefit), and there was no accrued interest and penalty expense related to the unrecognized tax benefits as of December 31, 2019 and 2018. 

We are subject to examination by U.S. federal, state, local and non-U.S. income authorities.  We are currently not under examination by the Internal Revenue Service; however, tax years 2016 and forward remain open under the applicable statute of limitations.  We are currently under examination by several state and local taxing jurisdictions; however, we do not expect these examinations will materially impact us.

8.  DAC, VOBA, DSI and DFEL

Changes in DAC (in millions) were as follows:

	For the Years Ended December 31,
	2019			2018			2017
Balance as of beginning-of-year	$	9,509		$	7,909		$	8,269
Business acquired (sold) through reinsurance		-			(246	)		-
Business recaptured through reinsurance		59			-			-
Deferrals		1,900			1,596			1,345
Amortization, net of interest:
Amortization, excluding unlocking, net of interest		(922	)		(913	)		(922	)
Unlocking		(471	)		(115	)		61
Adjustment related to realized (gains) losses		(43	)		(42	)		(55	)
Adjustment related to unrealized (gains) losses		(2,614	)		1,320			(789	)
Balance as of end-of-year	$	7,418		$	9,509		$	7,909

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Changes in VOBA (in millions) were as follows:

	For the Years Ended December 31,
	2019			2018			2017
Balance as of beginning-of-year	$	799		$	499		$	874
Business acquired (sold) through reinsurance		-			(11	)		-
Business acquired		-			30			-
Deferrals		6			7			7
Amortization:
Amortization, excluding unlocking		(115	)		(127	)		(105	)
Unlocking		143			(60	)		(48	)
Accretion of interest (1)		45			48			52
Adjustment related to realized (gains) losses		(1	)		(2	)		(1	)
Adjustment related to unrealized (gains) losses		(550	)		415			(280	)
Balance as of end-of-year	$	327		$	799		$	499

⁽¹⁾ The interest accrual rates utilized to calculate the accretion of interest ranged from 4.2% to 6.9%.

Estimated future amortization of VOBA, net of interest (in millions), as of December 31, 2019, was as follows:

2020	$	72
2021		66
2022		67
2023		65
2024		61

Changes in DSI (in millions) were as follows:

	For the Years Ended December 31,
	2019			2018			2017
Balance as of beginning-of-year	$	298		$	287		$	293
Business acquired (sold) through reinsurance		-			(21	)		-
Deferrals		26			48			29
Amortization, net of interest:
Amortization, excluding unlocking, net of interest		(28	)		(28	)		(30	)
Unlocking		(3	)		-			(4	)
Adjustment related to realized (gains) losses		(2	)		(1	)		(2	)
Adjustment related to unrealized (gains) losses		(10	)		13			1
Balance as of end-of-year	$	281		$	298		$	287

Changes in DFEL (in millions) were as follows:

	For the Years Ended December 31,
	2019			2018			2017
Balance as of beginning-of-year	$	2,763		$	1,429		$	1,855
Business recaptured through reinsurance		5			-			-
Deferrals		1,092			874			753
Amortization, net of interest:
Amortization, excluding unlocking, net of interest		(533	)		(474	)		(383	)
Unlocking		(426	)		(52	)		(3	)
Adjustment related to realized (gains) losses		(11	)		(19	)		(18	)
Adjustment related to unrealized (gains) losses		(2,244	)		1,005			(775	)
Balance as of end-of-year	$	646		$	2,763		$	1,429

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9.  Reinsurance

The following summarizes reinsurance amounts (in millions) recorded on our Consolidated Statements of Comprehensive Income (Loss), excluding amounts attributable to the indemnity reinsurance agreements with Protective and Swiss Re Life & Health America, Inc. (“Swiss Re”):

	For the Years Ended December 31,
	2019			2018			2017
Direct insurance premiums and fee income	$	13,347		$	11,882		$	10,103
Reinsurance assumed		97			96			101
Reinsurance ceded		(1,920	)		(1,883	)		(1,817	)
Total insurance premiums and fee income	$	11,524		$	10,095		$	8,387
Direct insurance benefits	$	9,482		$	8,513		$	6,669
Reinsurance recoveries netted against benefits		(1,897	)		(2,369	)		(1,851	)
Total benefits	$	7,585		$	6,144		$	4,818

We and our insurance subsidiaries 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.  Reinsurance does not discharge us from our primary obligation to contract holders for losses insured under the policies we issue.  As discussed in Note 24, a portion of this reinsurance activity is with affiliated companies.

As of December 31, 2019, the policy for our reinsurance program was to retain up to $20 million on a single insured life.  As the amount we retain varies by policy, we reinsured approximately 25% of the mortality risk on newly issued life insurance contracts in 2019. 

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 and LNBAR.  The amounts recoverable from reinsurers were $19.2 billion and $19.8 billion as of December 31, 2019 and 2018, respectively.

Protective represents our largest reinsurance exposure following the sale of the Liberty Life Business as discussed in Note 3, which resulted in amounts recoverable from Protective of $11.8 billion and $12.1 billion as of December 31, 2019 and 2018, respectively.  Protective has funded trusts, of which the balance in the trusts changes as a result of ongoing reinsurance activity, to support the business ceded, which totaled $14.7 billion and $13.7 billion as of December 31, 2019 and 2018, 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 liabilities and obligations under the indemnity reinsurance agreements.  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 $1.3 billion and $1.5 billion as of December 31, 2019 and 2018, respectively.  Swiss Re has funded a trust, with a balance of $2.7 billion as of December 31, 2019, 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, 2019, included $164 million and $31 million, respectively, related to the business sold to Swiss Re.  In addition, the amounts recoverable from LNBAR were $2.4 billion and $2.5 billion as of December 31, 2019 and 2018, respectively.  LNBAR has funded trusts to support the business ceded of which the balance in the trusts changes as a result of ongoing reinsurance activity and totaled $2.3 billion as of December 31, 2019. 

Some portions of our annuity business have been reinsured on a Modco basis with other companies.  In a Modco agreement, we as the ceding company retain the reserves, as well as the assets backing those reserves, and the reinsurer shares proportionally in all financial terms of the reinsured policies based on their respective percentage of the risk.  Effective October 1, 2018, we entered into one such Modco agreement with Athene to reinsure fixed and fixed indexed annuity products, which resulted in a deposit asset of $6.6 billion and $7.5 billion as of December 31, 2019 and 2018, respectively, within other assets on our Consolidated Balance Sheets.  We held investments of $6.9 billion as of December 31, 2019, in support of reserves associated with the transaction in a Modco investment portfolio.  As of December 31, 2019, the portfolio included trading securities, fixed maturity AFS securities, commercial mortgage loans, derivative investments, other investments, cash, accrued investment income and equity securities that had carrying values of $3.5 billion, $2.3 billion, $698 million, $130 million, $94 million, $62 million, $57 million and $14 million, respectively.   In addition, the portfolio was supported by $201 million of over-collateralization and a $200 million letter of credit as of December 31, 2019. As described in Note 1, we recorded a deferred gain on business sold through reinsurance related to the transaction with Athene and amortized $30 million and $8 million of the gain during 2019 and 2018, respectively.

In repositioning the Modco investment portfolio, purchases of securities classified as trading during 2019 primarily resulted in negative cash flows from operating activities that were largely offset by sales of securities classified as fixed maturity AFS within investing activities in our Consolidated Statements of Cash Flows.

See Note 6 for information on reinsurance related embedded derivatives.

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10.  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, 2019
	Gross			Accumulated
	Goodwill			Impairment								Net
	as of			as of				Acquisition				Goodwill
	Beginning-			Beginning-				Accounting				as of End-
		of-Year			of-Year			Adjustments		Impairment		of-Year
Annuities		$	1,040		$	(600	)	$	-	$	-	$	440
Retirement Plan Services			20			-			-		-		20
Life Insurance			2,186			(1,552	)		-		-		634
Group Protection			688			-			(4)		-		684
Total goodwill		$	3,934		$	(2,152	)	$	(4)	$	-	$	1,778

		For the Year Ended December 31, 2018
	Gross			Accumulated
	Goodwill			Impairment								Net
	as of			as of				Acquisition				Goodwill
	Beginning-			Beginning-				Accounting				as of End-
		of-Year			of-Year			Adjustments		Impairment		of-Year
Annuities		$	1,040		$	(600	)	$	-	$	-	$	440
Retirement Plan Services			20			-			-		-		20
Life Insurance			2,186			(1,552	)		-		-		634
Group Protection			274			-			414		-		688
Total goodwill		$	3,520		$	(2,152	)	$	414	$	-	$	1,782

The fair values of our reporting units (Level 3 fair value estimates) are comprised of the value of in-force (i.e., existing) business and the value of new business.  Specifically, new business is representative of cash flows and profitability associated with policies or contracts we expect to issue in the future, reflecting our forecasts of future sales volume and product mix over a 10-year period.  To determine the values of in-force and new business, we use a discounted cash flows technique that applies a discount rate reflecting the market expected, weighted-average rate of return adjusted for the risk factors associated with operations to the projected future cash flows for each reporting unit.

As of October 1, 2019 and 2018, we performed our annual quantitative goodwill impairment test for our reporting units, and, as of each such date, the fair value was in excess of each reporting unit’s carrying value for Annuities, Retirement Plan Services, Life Insurance and Group Protection.

As of October 1, 2017, the date of our annual quantitative assessment of goodwill, our Annuities, Retirement Plan Services and Group Protection reporting units had fair values that exceeded the carrying value of each reporting unit. Our early adoption of ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” resulted in impairment of the Life Insurance reporting unit goodwill of $905 million during the fourth quarter of 2017 driven primarily from the impact of the December 22, 2017, enactment of the Tax Act that increased the carrying value of the Life Insurance reporting unit in excess of its fair value.

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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, 2019					As of December 31, 2018
	Gross					Gross
	Carrying		Accumulated			Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
Retirement Plan Services:
Mutual fund contract rights (1)	$	5		$	-	$	5		$	-
Life Insurance:
Sales force		100			55		100			51
Group Protection:
VOCRA		576			25		576			5
VODA		31			2		31			-
Insurance licenses (1)		3			-		3			-
Total	$	715		$	82	$	715		$	56

⁽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, 2019, was as follows:

2020	$	37
2021		37
2022		37
2023		37
2024		37
Thereafter		440

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11.  Guaranteed Benefit Features

Information on the GDB features outstanding (dollars in millions) was as follows:

	As of December 31,
	2019 (1)		2018 (1)
Return of Net Deposits
Total account value	$	101,601	$	89,783
Net amount at risk (2)		71		1,002
Average attained age of contract holders		65 years		65 years
Minimum Return
Total account value	$	92	$	88
Net amount at risk (2)		13		18
Average attained age of contract holders		77 years		77 years
Guaranteed minimum return		5%		5%
Anniversary Contract Value
Total account value	$	25,763	$	23,365
Net amount at risk (2)		384		2,007
Average attained age of contract holders		71 years		71 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,
	2019			2018			2017
Balance as of beginning-of-year	$	161		$	100		$	110
Changes in reserves		(24	)		77			8
Benefits paid		(20	)		(16	)		(18	)
Balance as of end-of-year	$	117		$	161		$	100

Variable Annuity Contracts

Account balances of variable annuity contracts, including those with guarantees, (in millions) were invested in separate account investment options as follows:

	As of December 31,
	2019		2018
Asset Type
Domestic equity	$	64,093	$	54,060
International equity		19,852		18,359
Fixed income		41,405		37,942
Total	$	125,350	$	110,361
Percent of total variable annuity separate account values		98%		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.  Reserves on UL and VUL products with secondary guarantees represented 35% and33% of total life insurance in-force reserves as of December 31, 2019 and 2018, respectively.  UL and VUL products with secondary guarantees represented 27%,36% and 27% of total life insurance sales for the years ended December 31, 2019, 2018 and 2017, respectively.

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12.  Liability for Unpaid Claims

The liability for unpaid claims consists primarily of long-term disability claims and is reported in future contract benefits on our Consolidated Balance Sheets.  Changes in the liability for unpaid claims (in millions) were as follows:

	For the Years Ended December 31,
	2019			2018			2017
Balance as of beginning-of-year	$	5,335		$	2,222		$	2,242
Reinsurance recoverable		143			57			69
Net balance as of beginning-of-year		5,192			2,165			2,173
Business acquired (1)		-			2,842			-
Incurred related to:
Current year		3,193			2,531			1,346
Prior years:
Interest		151			120			69
All other incurred (2)		(308	)		(208	)		(76	)
Total incurred		3,036			2,443			1,339
Paid related to:
Current year		(1,518	)		(1,197	)		(798	)
Prior years		(1,310	)		(1,061	)		(549	)
Total paid		(2,828	)		(2,258	)		(1,347	)
Net balance as of end-of-year		5,400			5,192			2,165
Reinsurance recoverable		152			143			57
Balance as of end-of-year	$	5,552		$	5,335		$	2,222

⁽¹⁾ Represents acquired group life and disability reserves, net, as of May 1, 2018. See Note 3 for additional information.

⁽²⁾ All other incurred is primarily impacted by the level of claim resolutions in the period compared to that which is expected by the reserve assumption. A negative number implies a favorable result where claim resolutions were more favorable than assumed. Our claim resolution rate assumption used in determining reserves is our expectation of the resolution rate we will experience over the long-term life of the block of claims. It will vary from actual experience in any one period, both favorably and unfavorably.

The interest rate assumption used for discounting long-term claim reserves is an important part of the reserving process due to the long benefit period for these claims.  Interest accrued on prior years’ reserves has been calculated on the opening reserve balance less one-half of the prior years’ incurred claim payments at our average reserve discount rate.

Long-term disability benefits may extend for many years, and claim development schedules do not reflect these longer benefit periods.  As a result, we use longer term retrospective runoff studies, experience studies and prospective studies to develop our liability estimates.  Long-term disability reserves are discounted using rates ranging from 3.25% to 5%. The discount rates vary by year of claim incurral.

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13.  Short-Term and Long-Term Debt

Details underlying short-term and long-term debt (in millions) were as follows:

	As of December 31,
	2019		2018
Short-Term Debt
Short-term debt (1)	$	609	$	288
Long-Term Debt, Excluding Current Portion
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		613		600
6.03% surplus note, due 2028		750		750
LIBOR + 200 bps surplus note, due 2035		30		30
LIBOR + 155 bps surplus note, due 2037		25		25
4.20% surplus note, due 2037		50		50
LIBOR + 100 bps surplus note, due 2037		284		312
4.225% surplus note, due 2037		28		-
4.50% surplus note, due 2038		13		13
Total long-term debt	$	2,414	$	2,401

⁽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, 2019, were as follows:

2020	$	-
2021		-
2022		-
2023		-
2024		50
Thereafter		2,364
Total	$	2,414

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 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, 2019, was $613 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.

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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 July 1, 2017, we issued a surplus note of $25 million to LNC.  The note calls for us to pay the principal amount of the note on or before June 30, 2037, and interest to be paid quarterly at an annual rate of LIBOR + 155 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 1, 2017, we issued a surplus note of $50 million to LNC.  The note calls for us to pay the principal amount of the note on or before July 1, 2037, and interest to be paid quarterly at an annual rate of 4.20%.  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.  On June 15, 2017, the surplus note was amended to include repayment terms stating 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.  The outstanding principal amount as of December 31, 2019, was $284 million due to executing our right to repay the surplus note in part to LNC.

On July 1, 2018, we issued a surplus note of $13 million to LNC.  The note calls for us to pay the principal amount of the note on or before June 30, 2038, and interest to be paid quarterly at an annual rate of 4.50%.  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 July 1, 2019, we issued a surplus note of $28 million to LNC.  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 4.225%.  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. 

Credit Facilities and Letters of Credit

Credit facilities, which allow for borrowing or issuances of letters of credit (“LOCs”), and LOCs (in millions) were as follows:

		As of December 31, 2019
	Expiration	Maximum		LOCs
	Date	Available		Issued
Credit Facilities
Five-year revolving credit facility	July 31, 2024	$	2,250	$	340
LOC facility (1)	August 26, 2031		990		965
LOC facility (1)	October 1, 2031		982		982
Total		$	4,222	$	2,287

⁽¹⁾ Our wholly-owned subsidiaries entered into irrevocable LOC facility agreements with third-party lenders supporting inter-company reinsurance agreements. 

On July 31, 2019, LNC refinanced its existing credit facility with a syndicate of banks.  This facility (the “credit facility”) allows for the issuance of LOCs and borrowing of up to $2.25 billion.  The credit facility is unsecured and has a commitment termination date of July 31, 2024.  The LOCs under the credit facility are used primarily to satisfy reserve credit requirements of (i) LNL and LNC’s other domestic insurance companies for which reserve credit is provided by our captive reinsurance subsidiaries and LNBAR and (ii) certain ceding companies of our legacy reinsurance business.

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The credit agreement governing the credit facility contains or includes:

· Customary terms and conditions, including covenants restricting the ability of LNC and its subsidiaries to incur liens and the ability of LNC to merge or consolidate with another entity where it is not the surviving entity and dispose of all or substantially all of its assets;

· Financial covenants including maintenance by LNC of a minimum consolidated net worth (as defined in the credit agreement) equal to the sum of $10.6 billion plus 50% of the aggregate net proceeds of equity issuances received by LNC or any of its subsidiaries as set forth in the credit agreement; and a debt-to-capital ratio as defined in accordance with the credit facility not to exceed 0.35 to 1.00;

· A cap on LNC’s secured non-operating indebtedness and non-operating indebtedness of LNC’s subsidiaries equal to 7.5% of total capitalization, as defined in accordance with the credit agreement; and

· Customary events of default, subject to certain materiality thresholds and grace periods for certain of those events of default.

Upon an event of default, the credit agreement provides that, among other things, the commitments may be terminated and the loans then outstanding may be declared due and payable.  As of December 31, 2019, LNC was in compliance with all such covenants.

Our LOC facility agreements each contain customary terms and conditions, including early termination fees, covenants restricting the ability of the subsidiaries to incur liens, merge or consolidate with another entity and dispose of all or substantially all of their assets.  Upon an event of early termination, the agreements require the immediate payment of all or a portion of the present value of the future LOC fees that would have otherwise been paid.  Further, the agreements contain customary events of default, subject to certain materiality thresholds and grace periods for certain of those events of default.  The events of default include payment defaults, covenant defaults, material inaccuracies in representations and warranties, bankruptcy and liquidation proceedings and other customary defaults.  Upon an event of default, the agreements provide that, among other things, obligations to issue, amend or increase the amount of any LOC shall be terminated and any obligations shall become immediately due and payable.  As of December 31, 2019, we were in compliance with all such covenants.

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 advisers and unclaimed property laws. 

LNL and its affiliates 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 verdicts obtained 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, 2019.  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,

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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, 2019, 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 $90 million.  Any estimate is not an indication of expected loss, if any, or of the Company’s maximum possible loss exposure on such matters.

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.

Certain reinsurers have sought rate increases on certain yearly renewable term treaties.  We are disputing the requested rate increases under these treaties.  We have initiated and will initiate arbitration proceedings, as necessary, under these treaties in order to protect our contractual rights.  Additionally, reinsurers may initiate arbitration proceedings against us.  We believe it is unlikely the outcome of these disputes will have a material adverse effect on our financial condition.  For more information about reinsurance, see Note 9.

Cost of Insurance Litigation

Glover v. Connecticut General Life Insurance Company and The Lincoln National Life Insurance Company, filed in the U.S. District Court for the District of Connecticut, No. 3:16-cv-00827, is a putative class action that was served on LNL on June 8, 2016.  Plaintiff is the owner of a universal life insurance policy who alleges that LNL charged more for non-guaranteed cost of insurance than permitted by the policy.  Plaintiff seeks to represent all universal life and variable universal life policyholders who owned policies containing non-guaranteed cost of insurance provisions that are similar to those of Plaintiff’s policy and seeks damages on behalf of all such policyholders.  On January 11, 2019, the court dismissed Plaintiff’s complaint in its entirety.  In response, Plaintiff filed a motion for leave to amend the complaint, which we have opposed.

Hanks v. The Lincoln Life and Annuity Company of New York (“LLANY”) and Voya Retirement Insurance and Annuity Company (“Voya”), filed in the U.S. District Court for the Southern District of New York, No. 1:16-cv-6399, is a putative class action that was served on LLANY on August 12, 2016.  Plaintiff owns a universal life policy originally issued by Aetna (now Voya) and alleges that (i) Voya breached the terms of the policy when it increased non-guaranteed cost of insurance rates on Plaintiff’s policy; and (ii) LLANY, as reinsurer and administrator of Plaintiff’s policy, engaged in wrongful conduct related to the cost of insurance increase and was unjustly enriched as a result.  Plaintiff seeks to represent all owners of Aetna life insurance policies that were subject to non-guaranteed cost of insurance rate increases in 2016 and seeks damages on their behalf.  On March 13, 2019, the court issued an order granting plaintiff’s motion for class certification for the breach of contract claim and denying such motion with respect to the unjust enrichment claim against LLANY, and, on September 12, 2019, the court issued an order approving the parties’ joint stipulation of dismissal with respect to the unjust enrichment claim and dismissed LLANY as a defendant in the case.  In light of LLANY’s role as reinsurer and administrator under the 1998 coinsurance agreement with Aetna (now Voya), and of the parties’ rights and obligations thereunder, LLANY continues to be actively engaged in the vigorous defense of this action.

EFG Bank AG, Cayman Branch, et al. v. The Lincoln National Life Insurance Company, pending in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:17-cv-02592, is a civil action filed on February 1, 2017.  Plaintiffs own Legend Series universal life insurance policies originally issued by Jefferson-Pilot (now LNL).  Plaintiffs allege that LNL breached the terms of policyholders’ contracts when it increased non-guaranteed cost of insurance rates beginning in 2016.  We are vigorously defending this matter.

In re: Lincoln National COI Litigation, pending in the U.S. District Court for the Eastern District of Pennsylvania, Master File No. 2:16-cv-06605-GJP, is a consolidated litigation matter related to multiple putative class action filings that were consolidated by an order dated March 20, 2017.  In addition to consolidating a number of existing matters, the order also covers any future cases filed in the same district related to the same subject matter.  Plaintiffs own universal life insurance policies originally issued by Jefferson-Pilot (now LNL).  Plaintiffs allege that LNL and LNC breached the terms of policyholders’ contracts by increasing non-guaranteed cost of insurance rates beginning in 2016.  Plaintiffs seek to represent classes of policyowners and seek damages on their behalf.  We are vigorously defending this matter.

In re: Lincoln National 2017 COI Rate Litigation, Master File No. 2:17-cv-04150 is a consolidated litigation matter related to multiple putative class action filings that were consolidated by an order of the court in March 2018.  Plaintiffs own universal life insurance policies originally issued by former Jefferson-Pilot (now LNL).  Plaintiffs allege that LNL and LNC breached the terms of policyholders’ contracts by increasing non-guaranteed cost of insurance rates beginning in 2017.  Plaintiffs seek to represent classes of policyholders and seek damages on their behalf.  We are vigorously defending this matter.

TVPX ARS INC., as Securities Intermediary for Consolidated Wealth Management, LTD. v. The Lincoln National Life Insurance Company, filed in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:18-cv-02989, is a putative class action that was filed on July 17, 2018.  Plaintiff alleges that LNL charged more for non-guaranteed cost of insurance than permitted by the policy.  Plaintiff seeks to represent all universal life and variable universal life policyholders who own policies issued by LNL or its predecessors containing non-guaranteed cost

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of insurance provisions that are similar to those of Plaintiff’s policy and seeks damages on behalf of all such policyholders.  We are vigorously defending this matter.

LSH Co. and Wells Fargo Bank, National Association, as securities intermediary for LSH Co. v. Lincoln National Corporation and The Lincoln National Life Insurance Company, pending in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:18-cv-05529, is a civil action filed on December 21, 2018.  Plaintiffs own universal life insurance policies originally issued by Jefferson-Pilot (now LNL).  Plaintiffs allege that LNL breached the terms of policyholders’ contracts when it increased non-guaranteed cost of insurance rates in 2016 and 2017.  We are vigorously defending this matter.

Vida Longevity Fund, LP v. Lincoln Life & Annuity Company of New York, pending in the U.S. District Court for the Southern District of New York, No. 1:19-cv-06004, is a putative class action that was filed on June 27, 2019.  Plaintiff alleges that LLANY charged more for non-guaranteed cost of insurance than was permitted by the policies.  Plaintiff seeks to represent all current and former owners of universal life (including variable universal life) policies who own or owned policies issued by LLANY and its predecessors in interest that were in force at any time on or after June 27, 2013, and which contain non-guaranteed cost of insurance provisions that are similar to those of Plaintiff’s policies.  Plaintiff also seeks to represent a sub-class of such policyholders who own or owned “life insurance policies issued in the State of New York.”  Plaintiff seeks damages on behalf of the policyholder class and sub-class.  We are vigorously defending this matter.

Commitments

Leases

We recognized operating lease ROU assets of $202 million and associated lease liabilities of $208 million as of December 31, 2019.   We classified the operating lease ROU assets within other assets and the lease liabilities within other liabilities on our Consolidated Balance Sheets.  The weighted-average discount rate and remaining lease term were 3.2% and 6 years, respectively, as of December 31, 2019.  Operating lease expense for the years ended December 31, 2019, 2018 and 2017, was$46 million,  $43 million and $36 million, respectively, and reported in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss).  

As of December 31, 2019, the net book value of assets recorded as finance leases was $128 million, and the associated accumulated amortization was $345 million.  These transactions have been classified as other assets on our Consolidated Balance Sheets.  These assets will continue to be amortized on a straight-line basis over the assets’ remaining lives.  The weighted-average discount rate and remaining lease term were 2.2% and 2 years, respectively, as of December 31, 2019.

Finance lease expense (in millions) was as follows:

	For the Year Ended
	December 31,
	2019
Amortization of ROU assets (1)	$	67
Interest on lease liabilities (2)		13
Total	$	80

⁽¹⁾ Amortization of ROU assets is reported in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss).  

⁽²⁾ Interest on lease liabilities is reported in interest and debt expense on our Consolidated Statements of Comprehensive Income (Loss).

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The table below presents cash flow information (in millions) related to leases: 

	For the Year Ended
	December 31,
	2019
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	47
Financing cash flows from finance leases		96
Supplemental Non-cash Information
ROU assets obtained in exchange for new lease obligations:
Operating leases	$	78

Our future minimum lease payments (in millions) under non-cancellable leases as of December 31, 2019, were as follows:

	Operating		Finance
	Leases		Leases
2020	$	44	$	56
2021		40		66
2022		35		66
2023		32		90
2024		26		17
Thereafter		65		12
Total future minimum lease payments		242		307
Less: Amount representing interest		34		26
Present value of minimum lease payments	$	208	$	281

As of December 31, 2019, we had no leases that had not yet commenced.

Vulnerability from Concentrations

As of December 31, 2019, 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.  For information on our investment and reinsurance concentrations, see Notes 5 and 9, 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 $(13) million and $(18) million as of December 31, 2019 and 2018, respectively.

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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,
	2019			2018			2017
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year	$	536		$	3,283		$	1,687
Cumulative effect from adoption of new accounting standards		-			634			-
Unrealized holding gains (losses) arising during the year		8,856			(5,995	)		2,872
Change in foreign currency exchange rate adjustment		46			(107	)		134
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		(2,460	)		1,748			(703	)
Income tax benefit (expense)		(1,370	)		923			(745	)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(26	)		(44	)		(40	)
Associated amortization of DAC, VOBA, DSI and DFEL		(11	)		(19	)		(19	)
Income tax benefit (expense)		8			13			21
Balance as of end-of-year	$	5,637		$	536		$	3,283
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year	$	29		$	39		$	22
(Increases) attributable to:
Cumulative effect from adoption of new accounting standards		-			9			-
Gross OTTI recognized in OCI during the year		(14	)		-			-
Change in DAC, VOBA, DSI and DFEL		1			-			-
Income tax benefit (expense)		3			-			-
Decreases attributable to:
Changes in fair value, sales, maturities or other settlements of AFS securities		30			(18	)		34
Change in DAC, VOBA, DSI and DFEL		(2	)		(5	)		(7	)
Income tax benefit (expense)		(7	)		4			(10	)
Balance as of end-of-year	$	40		$	29		$	39
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	119		$	27		$	93
Cumulative effect from adoption of new accounting standard		-			6			-
Unrealized holding gains (losses) arising during the year		181			40			63
Change in foreign currency exchange rate adjustment		(52	)		111			(137	)
Change in DAC, VOBA, DSI and DFEL		(5	)		(14	)		1
Income tax benefit (expense)		(26	)		(29	)		26
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		47			31			31
Associated amortization of DAC, VOBA, DSI and DFEL		(2	)		(3	)		(2	)
Income tax benefit (expense)		(9	)		(6	)		(10	)
Balance as of end-of-year	$	181		$	119		$	27
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(25	)	$	(22	)	$	(20	)
Cumulative effect from adoption of new accounting standard		-			(5	)		-
Adjustment arising during the year		4			3			(4	)
Income tax benefit (expense)		(1	)		(1	)		2
Balance as of end-of-year	$	(22	)	$	(25	)	$	(22	)

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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,
	2019			2018			2017
Unrealized Gain (Loss) on AFS Securities
Gross reclassification	$	(26	)	$	(44	)	$	(40	)	Total realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		(11	)		(19	)		(19	)	Total realized gain (loss)
Reclassification before income										Income (loss) from continuing
tax benefit (expense)		(37	)		(63	)		(59	)	operations before taxes
Income tax benefit (expense)		8			13			21		Federal income tax expense (benefit)
Reclassification, net of income tax	$	(29	)	$	(50	)	$	(38	)	Net income (loss)
Unrealized OTTI on AFS Securities
Gross reclassification	$	4		$	7		$	5		Total realized gain (loss)
Change in DAC, VOBA, DSI and DFEL		-			-			(1	)	Total realized gain (loss)
Reclassification before income										Income (loss) from continuing
tax benefit (expense)		4			7			4		operations before taxes
Income tax benefit (expense)		(1	)		(1	)		(1	)	Federal income tax expense (benefit)
Reclassification, net of income tax	$	3		$	6		$	3		Net income (loss)
Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	3		$	4		$	4		Net investment income
Foreign currency contracts		35			27			18		Net investment income
Foreign currency contracts		9			-			9		Total realized gain (loss)
Total gross reclassifications		47			31			31
Associated amortization of DAC,
VOBA, DSI and DFEL		(2	)		(3	)		(2	)	Commissions and other expenses
Reclassifications before income										Income (loss) from continuing
tax benefit (expense)		45			28			29		operations before taxes
Income tax benefit (expense)		(9	)		(6	)		(10	)	Federal income tax expense (benefit)
Reclassifications, net of income tax	$	36		$	22		$	19		Net income (loss)

16.  Commissions and Other Expenses

Details underlying commissions and other expenses (in millions) were as follows:

	For the Years Ended December 31,
	2019			2018			2017
Commissions	$	2,566		$	2,271		$	1,998
General and administrative expenses		2,152			1,910			1,715
Expenses associated with reserve financing and unrelated LOCs		52			64			57
DAC and VOBA deferrals and interest, net of amortization		(586	)		(436	)		(390	)
Broker-dealer expenses		372			358			329
Specifically identifiable intangible asset amortization		26			9			4
Taxes, licenses and fees		353			322			254
Acquisition and integration costs related to mergers and acquisitions		130			85			-
Total	$	5,065		$	4,583		$	3,967

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17.  Retirement and Deferred Compensation Plans

Defined Benefit Pension and Other Postretirement Benefit Plans

We maintain defined benefit pension plans in which certain 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. In accordance with such practice, we were not required to make contributions but elected to contribute zero and $8 million for the years ended December 31, 2019 and 2018, respectively.  We do not expect to be required to make any contributions to these pension plans in 2020.  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 $6  million, $6 million and $5 million during 2019, 2018 and 2017, respectively.  In 2020, we expect the plans to make benefit payments of approximately $10 million. 

Information (in millions) with respect to these plans was as follows:

	As of or For the Years Ended December 31,
	2019			2018			2019			2018
							Other Postretirement
	Pension Plans						Benefit Plans
Fair value of plan assets	$	109		$	107		$	9		$	8
Projected benefit obligation		115			112			10			10
Funded status	$	(6	)	$	(5	)	$	(1	)	$	(2	)
Amounts Recognized on the
Consolidated Balance Sheets
Other assets	$	-		$	-		$	-		$	-
Other liabilities		(6	)		(5	)		(1	)		(2	)
Net amount recognized	$	(6	)	$	(5	)	$	(1	)	$	(2	)
Weighted-Average Assumptions
Benefit obligations:
Weighted-average discount rate		3.50%			4.50%			3.50%			4.50%
Net periodic benefit cost:
Weighted-average discount rate		4.50%			4.00%			4.50%			4.00%
Expected return on plan assets		4.50%			4.50%			6.50%			6.50%

The weighted average discount rate was determined based on a corporate yield curve as of December 31, 2019, 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. 

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,
	2019		2018
Fixed maturity securities:
Corporate bonds	$	-	$	1
U.S. government bonds		83		87
Cash and invested cash		26		19
Other investments		9		8
Total	$	118	$	115

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 20 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 certain 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.  Our expense (benefit) for these plans was  $10 million, $(4) million and $7 million for the years ended December 31, 2019, 2018 and 2017, respectively.

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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 for eligible employees.  Our expense for these plans was $101  million, $90 million and $85 million, for the years ended December 31, 2019, 2018 and 2017, respectively. 

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 a notional investment option; however, it is not hedged by the total return swaps and is a primary source of expense volatility related to these plans.  Our expense for these plans was $22 million, $12 million and $27 million for the years ended December 31, 2019, 2018 and 2017, respectively.  For further discussion of total return swaps related to our deferred compensation plans, see Note 6. 

Information (in millions) with respect to these plans was as follows:

	As of December 31,
	2019		2018
Total liabilities (1)	$	579	$	487
Investments dedicated to fund liabilities (2)		202		170

⁽¹⁾ Reported in other liabilities on our Consolidated Balance Sheets.

⁽²⁾ Reported in other assets on our Consolidated Balance Sheets.   

18.  Stock-Based Incentive Compensation Plans

Our employees and agents are included in LNC’s various stock-based incentive compensation plans that provide for the issuance of stock options, performance shares, stock appreciation rights (“SARs”) and restricted stock units (“RSUs”).  LNC issues new shares to satisfy option exercises and vested performance shares and RSUs.

Total compensation expense (in millions) by award type for stock-based incentive compensation plans was as follows:

	For the Years Ended December 31,
	2019		2018			2017
Stock options	$	8	$	5		$	9
Performance shares		16		14			12
SARs		-		(1	)		2
RSUs		35		30			24
Total	$	59	$	48		$	47
Recognized tax benefit	$	12	$	10		$	16

19.  Statutory Information and Restrictions

We prepare financial statements in accordance with statutory accounting principles (“SAP”) prescribed or permitted by the insurance departments of our respective 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 respective states of domicile.  Changes in these laws and regulations could change capital levels or capital requirements for the Company.

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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, LLANY, LLACB, Lincoln Reinsurance Company of South Carolina, Lincoln Reinsurance Company of Vermont I, Lincoln Reinsurance Company of Vermont III, Lincoln Reinsurance Company of Vermont IV, Lincoln Reinsurance Company of Vermont V, Lincoln Reinsurance Company of Vermont VI and Lincoln Reinsurance Company of Vermont VII.

	As of December 31,
	2019		2018
U.S. capital and surplus	$	8,425	$	8,330

	For the Years Ended December 31,
	2019		2018		2017
U.S. net gain (loss) from operations, after-tax	$	379	$	686	$	1,312
U.S. net income (loss)		359		1,013		1,452
U.S. dividends to LNC holding company		600		910		954

Comparison of 2019 to 2018

Statutory net income (loss) decreased due primarily to lower dividends from affiliates, unfavorable reserve strain on certain products, and integration costs incurred as part of the acquisition of Liberty Life.  See Note 3 for information regarding the acquisition.

Comparison of 2018 to 2017

Statutory net income (loss) decreased due primarily to lower dividends from affiliates, acquisition and integration costs incurred as part of the acquisition of Liberty Life and unfavorable reserve strain on certain products. 

State Prescribed and Permitted Practices

The states of domicile for LNL and LLANY, Indiana and New York, respectively, 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 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 reinsurance subsidiaries also have certain accounting practices permitted by the state of Vermont that differ from those found in NAIC SAP.  One permitted practice involves accounting for the lesser of the face amount of all amounts outstanding under an 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, 2019 and 2018.  Another permitted practice involves the acquisition of an LLC note in exchange for a variable value surplus note that is recognized as an admitted asset and a form of surplus as of December 31, 2019.  Lastly, the state of Vermont has permitted a practice to account for certain excess of loss reinsurance treaties with unaffiliated reinsurers as an asset and form of surplus as of December 31, 2019.  These permitted practices are related to structures that continue to be allowed in accordance with the grandfathered structures under the provisions of Actuarial Guideline 48 (“AG48”) or are compliant under AG48 requirements. 

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,
	2019			2018
State Prescribed Practices
Calculation of reserves using the Indiana universal life method	$	24		$	36
Conservative valuation rate on certain annuities		(49	)		(55	)
Vermont Subsidiaries Permitted Practices(1)
Lesser of LOC and XXX additional reserve as surplus		1,947			1,959
LLC notes and variable value surplus notes		1,648			1,634
Excess of loss reinsurance treaties		419			330

⁽¹⁾ These permitted practices are related to structures that continue to be allowed in accordance with the grandfathered structures under the provisions of AG48 or are compliant under AG48 requirements.

The NAIC has adopted 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

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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, 2019, the Company’s RBC ratio was in excess of four 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 Indiana Insurance Commissioner (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 subsidiaries, LLANY, a New York-domiciled insurance company, and LLACB, a New Hampshire-domiciled company, are bound by similar restrictions, under the laws of New York and New Hampshire, respectively.  Under both New York and New Hampshire law, the applicable statutory limitation on dividends is equal to 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 to LNC of approximately $815 million in 2020 without prior approval from the Commissioner of Insurance.

All payments of principal and interest on surplus notes must be approved by the respective Commissioner of Insurance.

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20.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, 2019						As of December 31, 2018
	Carrying			Fair			Carrying			Fair
	Value			Value			Value			Value
Assets
Fixed maturity AFS securities	$	103,773		$	103,773		$	92,787		$	92,787
Trading securities		4,602			4,602			1,869			1,869
Equity securities		103			103			99			99
Mortgage loans on real estate		16,244			16,774			13,190			13,020
Derivative investments (1)		1,911			1,911			1,081			1,081
Other investments		2,554			2,554			1,951			1,951
Cash and invested cash		1,879			1,879			1,848			1,848
Reinsurance related embedded derivatives		-			-			188			188
Other assets:
GLB direct embedded derivatives		450			450			123			123
GLB ceded embedded derivatives		60			60			72			72
Indexed annuity ceded embedded derivatives		927			927			902			902
Separate account assets		153,571			153,571			132,833			132,833
Liabilities
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(2,585	)		(2,585	)		(1,305	)		(1,305	)
Other contract holder funds:
Remaining guaranteed interest and similar contracts		(1,900	)		(1,900	)		(542	)		(542	)
Account values of certain investment contracts		(38,606	)		(46,781	)		(34,500	)		(36,321	)
Short-term debt		(609	)		(609	)		(288	)		(288	)
Long-term debt		(2,414	)		(2,714	)		(2,401	)		(2,519	)
Reinsurance related embedded derivatives		(375	)		(375	)		-			-
Other liabilities:
Derivative liabilities (1)		(238	)		(238	)		(226	)		(226	)
GLB ceded embedded derivatives		(510	)		(510	)		(196	)		(196	)
Benefit Plans’ Assets (2)		118			118			115			115

⁽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⁾ Included in the funded statuses of the benefit plans, which is reported in other liabilities on our Consolidated Balance Sheets.  Refer to Note 17 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. 

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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.  Other investments also includes Federal Home Loan Bank (“FHLB”) stock carried at cost and periodically evaluated for impairment based on ultimate recovery of par value.  The inputs used to measure the fair value of our LPs, other privately held investments and FHLB stock are classified as Level 3 within the fair value hierarchy.  The remaining assets in other investments include cash collateral receivables and securities that are not LPs or other privately held investments.  The inputs used to measure the fair value of these assets are classified as Level 1 within the fair value hierarchy.

Separate Account Assets

Separate account assets are primarily carried at fair value.  A portion of our separate account assets includes LPs, which are accounted for using the equity method of accounting.  The carrying value is based on our proportional share of the net assets of the LPs and approximates fair value.  The inputs used to measure the fair value of the separate account asset LPs are classified as Level 3 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, 2019 and 2018, 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 short-term and long-term debt is based on quoted market prices.  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, 2019 or 2018, and we noted no changes in our valuation methodologies between these periods. 

65

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, 2019
		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		$	-		$	80,801			$	6,978		$	87,779
U.S. government bonds			391			7				5			403
State and municipal bonds			-			5,685				-			5,685
Foreign government bonds			-			298				90			388
RMBS			-			2,997				11			3,008
CMBS			-			1,082				1			1,083
ABS			-			4,615				268			4,883
Hybrid and redeemable preferred securities			77			389				78			544
Trading securities			50			3,886				666			4,602
Equity securities			25			48				30			103
Derivative investments (1)			-			1,089				1,735			2,824
Cash and invested cash			-			1,879				-			1,879
Other assets:
GLB direct embedded derivatives			-			-				450			450
GLB ceded embedded derivatives			-			-				60			60
Indexed annuity ceded embedded derivatives			-			-				927			927
Separate account assets			644			152,916				-			153,560
Total assets		$	1,187		$	255,692			$	11,299		$	268,178
Liabilities
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		$	-		$	-			$	(2,585	)	$	(2,585	)
Reinsurance related embedded derivatives			-			(375	)			-			(375	)
Other liabilities:
Derivative liabilities (1)			-			(284	)			(867	)		(1,151	)
GLB ceded embedded derivatives			-			-				(510	)		(510	)
Total liabilities		$	-		$	(659	)		$	(3,962	)	$	(4,621	)
Benefit Plans’ Assets		$	-		$	118			$	-		$	118

66

		As of December 31, 2018
		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		$	-		$	73,897			$	5,652		$	79,549
U.S. government bonds			368			18				-			386
State and municipal bonds			-			5,184				-			5,184
Foreign government bonds			-			335				109			444
RMBS			-			3,157				7			3,164
CMBS			-			801				2			803
ABS			-			2,544				134			2,678
Hybrid and redeemable preferred securities			66			438				75			579
Trading securities			43			1,759				67			1,869
Equity securities			16			58				25			99
Derivative investments (1)			-			636				704			1,340
Cash and invested cash			-			1,848				-			1,848
Reinsurance related embedded derivatives			-			188				-			188
Other assets:
GLB direct embedded derivatives			-			-				123			123
GLB ceded embedded derivatives			-			-				72			72
Indexed annuity ceded embedded derivatives			-			-				902			902
Separate account assets			665			132,135				-			132,800
Total assets		$	1,158		$	222,998			$	7,872		$	232,028
Liabilities
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		$	-		$	-			$	(1,305	)	$	(1,305	)
Other liabilities:
Derivative liabilities (1)			-			(314	)			(171	)		(485	)
GLB ceded embedded derivatives			-			-				(196	)		(196	)
Total liabilities		$	-		$	(314	)		$	(1,672	)	$	(1,986	)
Benefit Plans’ Assets		$	-		$	115			$	-		$	115

⁽¹⁾ Derivative investment assets and liabilities are presented within the fair value hierarchy on a gross basis by derivative type and not on a master netting basis by counterparty. 

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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, 2019
							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 (3)			Value
Investments: (5)
Fixed maturity AFS securities:
Corporate bonds	$	5,652		$	3		$	177		$	1,195		$	(49	)	$	6,978
U.S. government bonds		-			-			-			-			5			5
Foreign government bonds		109			-			6			(25	)		-			90
RMBS		7			-			-			21			(17	)		11
CMBS		2			1			-			5			(7	)		1
ABS		134			-			1			619			(486	)		268
Hybrid and redeemable
preferred securities		75			-			3			-			-			78
Trading securities		67			17			-			850			(268	)		666
Equity securities		25			(12	)		-			17			-			30
Derivative investments		533			9			164			162			-			868
Other assets: (6)
GLB direct embedded derivatives		123			327			-			-			-			450
GLB ceded embedded derivatives		72			(12	)		-			-			-			60
Indexed annuity ceded embedded derivatives		902			158			-			(133	)		-			927
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives (6)		(1,305	)		(900	)		-			(380	)		-			(2,585	)
Other liabilities – GLB ceded embedded
derivatives (6)		(196	)		(314	)		-			-			-			(510	)
Total, net	$	6,200		$	(723	)	$	351		$	2,331		$	(822	)	$	7,337

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	For the Year Ended December 31, 2018
							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 (2)			Net (3)(4)			Value
Investments: (5)
Fixed maturity AFS securities:
Corporate bonds	$	5,350		$	10		$	(198	)	$	542		$	(52	)	$	5,652
U.S. government bonds		5			-			-			(5	)		-			-
Foreign government bonds		110			-			(1	)		-			-			109
RMBS		12			-			-			7			(12	)		7
CMBS		6			-			-			35			(39	)		2
ABS		117			-			-			223			(206	)		134
Hybrid and redeemable
preferred securities		76			-			(1	)		-			-			75
Equity AFS securities		161			-			-			-			(161	)		-
Trading securities		49			(5	)		-			30			(7	)		67
Equity securities		-			(1	)		-			-			26			25
Derivative investments		30			168			(74	)		409			-			533
Other assets: (6)
GLB direct embedded derivatives		903			(780	)		-			-			-			123
GLB ceded embedded derivatives		51			21			-			-			-			72
Indexed annuity ceded embedded derivatives		11			(117	)		-			1,008			-			902
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives (6)		(1,418	)		198			-			(85	)		-			(1,305	)
Other liabilities – GLB ceded embedded
derivatives (6)		(954	)		758			-			-			-			(196	)
Total, net	$	4,509		$	252		$	(274	)	$	2,164		$	(451	)	$	6,200

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	For the Year Ended December 31, 2017
							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 (3)			Value
Investments: (5)
Fixed maturity AFS securities:
Corporate bonds	$	4,809		$	17		$	199		$	(45	)	$	370		$	5,350
U.S. government bonds		-			-			-			-			5			5
Foreign government bonds		111			-			(1	)		-			-			110
RMBS		3			-			-			19			(10	)		12
CMBS		7			-			1			54			(56	)		6
ABS		101			-			-			124			(108	)		117
State and municipal bonds		-			(1	)		-			-			1			-
Hybrid and redeemable
preferred securities		76			-			14			-			(14	)		76
Equity AFS securities		177			1			(3	)		(13	)		(1	)		161
Trading securities		65			3			8			(26	)		(1	)		49
Derivative investments		(93	)		(27	)		127			23			-			30
Other assets: (6)
GLB direct embedded derivatives		-			903			-			-			-			903
GLB ceded embedded derivatives		371			(320	)		-			-			-			51
Indexed annuity ceded embedded derivatives		-			-			-			11			-			11
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives (6)		(1,139	)		(400	)		-			121			-			(1,418	)
Other liabilities: (6)
GLB direct embedded derivatives		(371	)		371			-			-			-			-
GLB ceded embedded derivatives		-			(954	)		-			-			-			(954	)
Total, net	$	4,117		$	(407	)	$	345		$	268		$	186		$	4,509

⁽¹⁾ The changes in fair value of the interest rate swaps are offset by an adjustment to derivative investments (see Note 6).

⁽²⁾ Issuances, sales, maturities, settlements, calls, net, includes financial instruments acquired in the Liberty Life transaction as follows:  corporate bonds of $67 million and ABS of $17 million.

⁽³⁾ Transfers into or out of Level 3 for fixed maturity AFS and trading securities are reported at amortized cost as of the beginning-of-year.  For fixed maturity 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 the prior years.

⁽⁴⁾ Transfers into or out of Level 3 for FHLB stock between equity securities and other investments are reported at cost on our Consolidated Balance Sheets.

⁽⁵⁾ 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).

⁽⁶⁾ Gains (losses) from sales, maturities, settlements and calls are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

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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, 2019
	Issuances			Sales			Maturities		Settlements				Calls			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	1,502		$	(45	)	$	(78	)	$	(154	)	$	(30	)	$	1,195
Foreign government bonds		-			-			(25	)		-			-			(25	)
RMBS		21			-			-			-			-			21
CMBS		7			-			-			(2	)		-			5
ABS		646			(8	)		-			(19	)		-			619
Trading securities		872			-			-			(22	)		-			850
Equity securities		50			(33	)		-			-			-			17
Derivative investments		555			(61	)		(332	)		-			-			162
Other assets – indexed annuity ceded
embedded derivatives		56			-			-			(189	)		-			(133	)
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(591	)		-			-			211			-			(380	)
Total, net	$	3,118		$	(147	)	$	(435	)	$	(175	)	$	(30	)	$	2,331

	For the Year Ended December 31, 2018
	Issuances			Sales			Maturities		Settlements				Calls			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	1,068		$	(171	)	$	(3	)	$	(275	)	$	(77	)	$	542
U.S. government bonds		-			(5	)		-			-			-			(5	)
RMBS		7			-			-			-			-			7
CMBS		39			-			-			(4	)		-			35
ABS		240			(17	)		-			-			-			223
Trading securities		54			(24	)		-			-			-			30
Equity securities		1			(1	)		-			-			-			-
Derivative investments		365			465			(421	)		-			-			409
Other assets – indexed annuity ceded
embedded derivatives		1,030			-			-			(22	)		-			1,008
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(284	)		-			-			199			-			(85	)
Total, net	$	2,520		$	247		$	(424	)	$	(102	)	$	(77	)	$	2,164

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	For the Year Ended December 31, 2017
	Issuances			Sales			Maturities		Settlements				Calls			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	850		$	(448	)	$	(98	)	$	(205	)	$	(144	)	$	(45	)
RMBS		19			-			-			-			-			19
CMBS		55			-			-			(1	)		-			54
ABS		124			-			-			-			-			124
Equity AFS securities		18			(31	)		-			-			-			(13	)
Trading securities		2			(27	)		-			(1	)		-			(26	)
Derivative investments		197			233			(407	)		-			-			23
Other assets – indexed annuity ceded
embedded derivatives		11			-			-			-			-			11
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(71	)		-			-			192			-			121
Total, net	$	1,205		$	(273	)	$	(505	)	$	(15	)	$	(144	)	$	268

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,
	2019			2018			2017
Derivative investments	$	168		$	90		$	(266	)
Embedded derivatives:
Indexed annuity and IUL contracts		(97	)		(38	)		(14	)
Other assets – GLB direct and ceded		1,015			(75	)		1,904
Other liabilities – GLB direct and ceded		(1,015	)		75			(1,904	)
Total, net (1)	$	71		$	52		$	(280	)

⁽¹⁾ Included in realized gain (loss) 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, 2019
	Transfers		Transfers
	Into		Out of
	Level 3		Level 3			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	173	$	(222	)	$	(49	)
U.S. government bonds		5		-			5
RMBS		-		(17	)		(17	)
CMBS		-		(7	)		(7	)
ABS		9		(495	)		(486	)
Trading securities		5		(273	)		(268	)
Total, net	$	192	$	(1,014	)	$	(822	)

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	For the Year Ended December 31, 2018
	Transfers		Transfers
	Into		Out of
	Level 3		Level 3			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	78	$	(130	)	$	(52	)
RMBS		-		(12	)		(12	)
CMBS		1		(40	)		(39	)
ABS		-		(206	)		(206	)
Equity AFS securities		-		(161	)		(161	)
Trading securities		-		(7	)		(7	)
Equity securities		26		-			26
Total, net	$	105	$	(556	)	$	(451	)

	For the Year Ended December 31, 2017
	Transfers		Transfers
	Into		Out of
	Level 3		Level 3			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	458	$	(88	)	$	370
U.S. government bonds		5		-			5
RMBS		-		(10	)		(10	)
CMBS		3		(59	)		(56	)
ABS		44		(152	)		(108	)
State and municipal bonds		2		(1	)		1
Hybrid and redeemable preferred securities		-		(14	)		(14	)
Equity AFS securities		-		(1	)		(1	)
Trading securities		4		(5	)		(1	)
Total, net	$	516	$	(330	)	$	186

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, 2019, 2018 and 2017, transfers in and out of Level 3 were attributable primarily to the securities’ observable market information no longer being available or becoming available.  In 2018, transfers into or out of Level 3 also included FHLB stock between equity securities and other investments at cost on our Consolidated Balance Sheets. 

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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, 2019:

	Fair			Valuation	Significant	Assumption or
	Value			Technique	Unobservable Inputs	Input Ranges
Assets
Investments:
Fixed maturity AFS and trading
securities:
Corporate bonds	$	2,996		Discounted cash flow	Liquidity/duration adjustment (1)	0.1	%	-	6.4	%
Foreign government bonds		52		Discounted cash flow	Liquidity/duration adjustment (1)	2.1	%	-	2.5	%
ABS		22		Discounted cash flow	Liquidity/duration adjustment (1)	3.0	%	-	3.0	%
Hybrid and redeemable
preferred securities		4		Discounted cash flow	Liquidity/duration adjustment (1)	1.4	%	-	1.4	%
Equity securities		21		Discounted cash flow	Liquidity/duration adjustment (1)	4.5	%	-	5.2	%
Other assets:
GLB direct and ceded
embedded derivatives		510		Discounted cash flow	Long-term lapse rate (2)	1	%	-	30	%
					Utilization of guaranteed withdrawals (3)	85	%	-	100	%
					Claims utilization factor (4)	60	%	-	100	%
					Premiums utilization factor (4)	80	%	-	115	%
					NPR (5)	0.01	%	-	0.27	%
					Mortality rate (6)				(8)
					Volatility (7)	1	%	-	28	%
Indexed annuity ceded
embedded derivatives		927		Discounted cash flow	Lapse rate (2)	1	%	-	9	%
					Mortality rate (6)				(8)
Liabilities
Future contract benefits – indexed
annuity and IUL contracts
embedded derivatives	$	(2,585	)	Discounted cash flow	Lapse rate (2)	1	%	-	9	%
					Mortality rate (6)				(8)
Other liabilities – GLB ceded
embedded derivatives		(510	)	Discounted cash flow	Long-term lapse rate (2)	1	%	-	30	%
					Utilization of guaranteed withdrawals (3)	85	%	-	100	%
					Claims utilization factor (4)	60	%	-	100	%
					Premiums utilization factor (4)	80	%	-	115	%
					NPR (5)	0.01	%	-	0.27	%
					Mortality rate (6)				(8)
					Volatility (7)	1	%	-	28	%

⁽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.

74

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 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 – For direct embedded derivatives, an increase in the lapse rate or mortality rate inputs would result in a decrease in the fair value measurement. 

· GLB embedded derivatives – Assuming our GLB direct 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 guaranteed 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.

21.  Segment Information

We provide products and services and report results through our Annuities, Retirement Plan Services, Life Insurance and Group Protection segments.  As discussed in Note 3, we completed the acquisition of Liberty Life during the second quarter of 2018.  Related results are included within the Group Protection segment.  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 group non-medical insurance products, including short and long-term disability, absence management services, term life, dental, vision and accident and critical illness benefits and services to the employer marketplace through various forms of employee-paid and employer-paid plans. 

Other Operations includes investments related to our excess capital; 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; debt costs; strategic digitization expense; and other corporate investments.

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 (“gain (loss) on the mark-to-market on certain instruments”);

§ GLB rider fees ceded to LNBAR;

§ The net valuation premium of the GLB attributed rider fees;

75

§ Changes in the fair value of the embedded derivative liabilities related to index options we may purchase or sell in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products accounted for at fair value (“indexed annuity forward-starting option”); and

§ Changes in the fair value of equity securities;

· 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;

· Acquisition and integration costs related to mergers and acquisitions; and

· Income (loss) from the initial adoption of new accounting standards, regulations, and policy changes including the net impact from the Tax Cuts and Jobs Act.

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 rates of 21% and 35%, where applicable, while taking into account any permanent differences for events recognized differently in our financial statements and federal income tax returns when reconciling our segment measures of performance to the GAAP measures presented in our consolidated results of operations.  Operating revenues and income (loss) from operations do not replace revenues and net income as the GAAP measures of our consolidated results of operations.

The tables below reconcile our segment measures of performance to the GAAP measures presented in our Consolidated Statements of Comprehensive Income (Loss) (in millions):

	For the Years Ended December 31,
	2019			2018			2017
Revenues
Operating revenues:
Annuities	$	4,240		$	4,025		$	4,034
Retirement Plan Services		1,186			1,164			1,152
Life Insurance		6,999			6,489			6,128
Group Protection		4,587			3,756			2,200
Other Operations		199			209			263
Excluded realized gain (loss), pre-tax		(1,019	)		(285	)		(630	)
Amortization of deferred gain arising from reserve changes
on business sold through reinsurance, pre-tax		-			-			1
Total revenues	$	16,192		$	15,358		$	13,148

	For the Years Ended December 31,
		2019			2018			2017
Net Income (Loss)
Income (loss) from operations:
Annuities	$	987		$	1,122		$	1,072
Retirement Plan Services		162			160			142
Life Insurance		267			530			522
Group Protection		237			186			103
Other Operations		(148	)		(130	)		(30	)
Excluded realized gain (loss), after-tax		(804	)		(225	)		(409	)
Gain (loss) on early extinguishment of debt, after-tax		-			-			(3	)
Net impact from the Tax Cuts and Jobs Act		16			(3	)		1,526
Impairment of intangibles, after-tax		-			-			(905	)
Acquisition and integration costs related to mergers and acquisitions, after-tax		(103	)		(67	)		-
Net income (loss)	$	614		$	1,573		$	2,018

76

Other segment information (in millions) was as follows:

	For the Years Ended December 31,
	2019		2018		2017
Net Investment Income
Annuities	$	1,070	$	947	$	982
Retirement Plan Services		917		892		893
Life Insurance		2,494		2,546		2,496
Group Protection		306		259		167
Other Operations		175		200		222
Total net investment income	$	4,962	$	4,844	$	4,760

	For the Years Ended December 31,
	2019		2018		2017
Amortization of DAC and VOBA, Net of Interest
Annuities	$	427	$	347	$	402
Retirement Plan Services		25		27		26
Life Insurance		757		701		455
Group Protection		111		92		79
Total amortization of DAC and VOBA, net of interest	$	1,320	$	1,167	$	962

	For the Years Ended December 31,
	2019			2018			2017
Federal Income Tax Expense (Benefit)
Annuities	$	148		$	187		$	198
Retirement Plan Services		21			28			50
Life Insurance		50			116			236
Group Protection		63			50			55
Other Operations		(61	)		(48	)		(78	)
Excluded realized gain (loss)		(215	)		(61	)		(220	)
Gain (loss) on early extinguishment of debt		-			-			(2	)
Net impact from the Tax Cuts and Jobs Act		(16	)		3			(1,526	)
Acquisition and integration costs related to
mergers and acquisitions		(27	)		(18	)		-
Total federal income tax expense (benefit)	$	(37	)	$	257		$	(1,287	)

	As of December 31,
	2019		2018
Assets
Annuities	$	166,639	$	145,462
Retirement Plan Services		40,190		35,742
Life Insurance		93,327		82,153
Group Protection		9,468		8,495
Other Operations		26,392		27,293
Total assets	$	336,016	$	299,145

77

22.  Supplemental Disclosures of Cash Flow Data

The following summarizes our supplemental cash flow data (in millions):

	For the Years Ended December 31,
	2019			2018			2017
Interest paid	$	152		$	154		$	123
Income taxes paid (received)		245			192			215
Significant non-cash investing and financing transactions:
Reduction of other assets in connection with
the expiration of an affiliate repurchase agreement		(150	)		-			-
Acquisition of note receivable from affiliate		392			31			74
Investments received in financing transactions		-			263			-
Exchange of surplus note for promissory note with affiliate:
Carrying value of asset		40			58			109
Carrying value of liability		(40	)		(58	)		(109	)
Net asset (liability) from exchange	$	-		$	-		$	-

23.  Quarterly Results of Operations (Unaudited)

The unaudited quarterly results of operations (in millions) were as follows:

	For the Three Months Ended
	March 31,		June 30,		September 30,				December 31,
2019
Total revenues	$	3,764	$	3,928		$	4,227			$	4,273
Total expenses		3,646		3,686			4,526				3,757
Net income (loss)		133		222			(201	)			460
2018
Total revenues	$	3,404	$	3,852		$	4,039			$	4,063
Total expenses		2,921		3,357			3,619				3,631
Net income (loss)		407		420			378				368

78

24.  Transactions with Affiliates

The following summarizes transactions with affiliates (in millions) and the associated line item on our Consolidated Balance Sheets:

	As of December 31,
	2019			2018
Assets with affiliates:
Inter-company notes	$	1,557		$	1,512		Fixed maturity AFS securities
Ceded reinsurance contracts		(115	)		(188	)	Deferred acquisition costs and value of
							business acquired
Accrued inter-company interest receivable		6			11		Accrued investment income
Ceded reinsurance contracts		2,473			2,574		Reinsurance recoverables
Ceded reinsurance contracts		-			191		Reinsurance related embedded derivatives
Ceded reinsurance contracts		228			235		Other assets
Cash management agreement		1,227			112		Other assets
Service agreement receivable		6			5		Other assets
Liabilities with affiliates:
Assumed reinsurance contracts		26			29		Future contract benefits
Assumed reinsurance contracts		390			400		Other contract holder funds
Ceded reinsurance contracts		(38	)		(46	)	Other contract holder funds
Inter-company short-term debt		609			288		Short-term debt
Inter-company long-term debt		2,414			2,401		Long-term debt
Ceded reinsurance contracts		46			-		Reinsurance related embedded derivatives
Ceded reinsurance contracts		3,757			3,120		Funds withheld reinsurance liabilities
Ceded reinsurance contracts		497			325		Other liabilities
Accrued inter-company interest payable		5			13		Other liabilities
Service agreement payable		22			56		Other liabilities

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,
	2019			2018			2017
Revenues with affiliates:
Premiums received on assumed (paid on ceded)	$
reinsurance contracts		(407	)	$	(404	)	$	(393	)	Insurance premiums
Fees for management of general account		(133	)		(106	)		(100	)	Net investment income
Net investment income on ceded funds withheld treaties		(139	)		(123	)		(84	)	Net investment income
Net investment income on inter-company notes		53			49			42		Net investment income
Realized gains (losses) on ceded reinsurance contracts:
GLB reserves embedded derivatives		(305	)		709			(1,055	)	Realized gain (loss)
Other gains (losses)		(301	)		237			(150	)	Realized gain (loss)
Reinsurance related settlements		472			(1,189	)		951		Realized gain (loss)
Amortization of deferred gain (loss) on reinsurance
contracts		(4	)		(5	)		(5	)	Amortization of deferred gain
										on business sold through
										reinsurance
Benefits and expenses with affiliates:
Interest credited on assumed reinsurance contracts		60			57			67		Interest credited
Reinsurance (recoveries) benefits on ceded reinsurance		(254	)		(610	)		(299	)	Benefits
Ceded reinsurance contracts		(19	)		(8	)		(12	)	Commissions and other
										expenses
Service agreement payments		15			3			3		Commissions and other
										expenses
Interest expense on inter-company debt		130			126			120		Interest and debt expense

79

Inter-Company Notes

LNC issues inter-company notes to us for a predetermined face value to be repaid by LNC at a predetermined maturity with a specified interest rate.

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 December 31, 2019.

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, assets under management, weighted policies in force and sales.

Ceded Reinsurance Contracts

As discussed in Note 9, we cede insurance contracts to LNBAR.  We cede certain guaranteed benefit risks (including certain GDB and GWB benefits) to LNBAR.  As discussed in Note 6, we cede the GLB reserves embedded derivatives and the related hedge results 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 $115 million and $1.2 billion as of December 31, 2019 and 2018, respectively.  The LOCs are obtained by the affiliate reinsurer and issued by banks in order for the Company to recognize the reserve credit.

80

Lincoln National Variable Annuity Account L

L-1

Lincoln National Variable Annuity Account L

Statements of assets and liabilities

December 31, 2019

Subaccount	Investments		Total Assets		Net Assets
AB VPS Global Thematic Growth Portfolio - Class B	$	2,029,831	$	2,029,831	$	2,029,831
AB VPS Large Cap Growth Portfolio - Class B		2,882,013		2,882,013		2,882,013
American Century VP Balanced Fund - Class I		13,192,668		13,192,668		13,192,668
American Funds Global Growth Fund - Class 2		7,360,327		7,360,327		7,360,327
American Funds Growth Fund - Class 2		32,985,214		32,985,214		32,985,214
American Funds Growth-Income Fund - Class 2		15,844,128		15,844,128		15,844,128
American Funds International Fund - Class 2		8,820,850		8,820,850		8,820,850
BlackRock Global Allocation V.I. Fund - Class I		1,629,501		1,629,501		1,629,501
Delaware VIP® Diversified Income Series - Standard Class		4,113,303		4,113,303		4,113,303
Delaware VIP® High Yield Series - Standard Class		1,794,403		1,794,403		1,794,403
Delaware VIP® REIT Series - Service Class		8,717,062		8,717,062		8,717,062
Delaware VIP® Small Cap Value Series - Service Class		7,968,017		7,968,017		7,968,017
Delaware VIP® Smid Cap Core Series - Service Class		5,502,290		5,502,290		5,502,290
DWS Alternative Asset Allocation VIP Portfolio - Class A		200,030		200,030		200,030
Fidelity® VIP Asset Manager Portfolio - Initial Class		30,363,400		30,363,400		30,363,400
Fidelity® VIP Contrafund® Portfolio - Service Class 2		24,129,405		24,129,405		24,129,405
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		111,844		111,844		111,844
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		247,708		247,708		247,708
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		314,033		314,033		314,033
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		700,075		700,075		700,075
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		188,206		188,206		188,206
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		99,884		99,884		99,884
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		266,837		266,837		266,837
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		1,660		1,660		1,660
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		190		190		190
Fidelity® VIP Government Money Market Portfolio - Initial Class		94,105		94,105		94,105
Fidelity® VIP Growth Portfolio - Initial Class		93,845,360		93,845,360		93,845,360
Janus Henderson Global Research Portfolio - Institutional Shares		8,796,357		8,796,357		8,796,357
LVIP Baron Growth Opportunities Fund - Service Class		18,321,342		18,321,342		18,321,342
LVIP BlackRock Advantage Allocation Fund - Standard Class		315,197		315,197		315,197
LVIP BlackRock Global Real Estate Fund - Standard Class		332,443		332,443		332,443
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		690,046		690,046		690,046
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		1,595,087		1,595,087		1,595,087
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		171,008		171,008		171,008
LVIP Delaware Bond Fund - Standard Class		2,937,405		2,937,405		2,937,405
LVIP Delaware Diversified Floating Rate Fund - Service Class		175,518		175,518		175,518
LVIP Delaware Social Awareness Fund - Standard Class		16,740,886		16,740,886		16,740,886
LVIP Delaware Wealth Builder Fund - Standard Class		453,187		453,187		453,187
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		5,642,089		5,642,089		5,642,089
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		63,689		63,689		63,689
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		1,218,599		1,218,599		1,218,599
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		4,025,873		4,025,873		4,025,873
LVIP Global Income Fund - Standard Class		223,341		223,341		223,341
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		22,282,932		22,282,932		22,282,932
LVIP JPMorgan Retirement Income Fund - Standard Class		1,418,476		1,418,476		1,418,476
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		363,034		363,034		363,034
LVIP Mondrian International Value Fund - Standard Class		3,118,399		3,118,399		3,118,399
LVIP SSGA Bond Index Fund - Standard Class		862,934		862,934		862,934
LVIP SSGA Emerging Markets 100 Fund - Standard Class		988,430		988,430		988,430
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		1,515,834		1,515,834		1,515,834
LVIP SSGA International Index Fund - Standard Class		552,975		552,975		552,975
LVIP SSGA International Managed Volatility Fund - Standard Class		125,390		125,390		125,390
LVIP SSGA S&P 500 Index Fund - Standard Class		117,002,612		117,002,612		117,002,612
LVIP SSGA Small-Cap Index Fund - Standard Class		25,873,093		25,873,093		25,873,093
LVIP T. Rowe Price 2010 Fund - Standard Class		408,207		408,207		408,207
LVIP T. Rowe Price 2020 Fund - Standard Class		1,631,311		1,631,311		1,631,311
LVIP T. Rowe Price 2030 Fund - Standard Class		4,897,286		4,897,286		4,897,286
LVIP T. Rowe Price 2040 Fund - Standard Class		2,134,848		2,134,848		2,134,848
LVIP T. Rowe Price 2050 Fund - Standard Class		1,781,890		1,781,890		1,781,890
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		23,785,568		23,785,568		23,785,568
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		4,860,849		4,860,849		4,860,849
T. Rowe Price International Stock Portfolio		8,974,514		8,974,514		8,974,514

See accompanying notes.
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Lincoln National Variable Annuity Account L

Statements of operations

Year Ended December 31, 2019

Subaccount	Dividends from Investment Income		Mortality and Expense Guarantee Charges			Net Investment Income (Loss)			Net Realized Gain (Loss) on Investments			Dividends from Net Realized Gain on Investments
AB VPS Global Thematic Growth Portfolio - Class B	$	3,123	$	(18,597	)	$	(15,474	)	$	55,891		$	109,402
AB VPS Growth Portfolio - Class B		—		(7,287	)		(7,287	)		124,999			534,191
AB VPS Large Cap Growth Portfolio - Class B		—		(17,846	)		(17,846	)		(30,282	)		346,529
American Century VP Balanced Fund - Class I		202,400		(128,376	)		74,024			184,746			295,635
American Funds Global Growth Fund - Class 2		75,157		(67,526	)		7,631			181,156			385,629
American Funds Growth Fund - Class 2		229,320		(303,286	)		(73,966	)		707,074			3,279,631
American Funds Growth-Income Fund - Class 2		250,416		(151,590	)		98,826			216,759			1,596,602
American Funds International Fund - Class 2		121,117		(84,953	)		36,164			69,330			222,630
BlackRock Global Allocation V.I. Fund - Class I		20,020		(15,914	)		4,106			2,759			53,152
Delaware VIP® Diversified Income Series - Standard Class		125,990		(42,085	)		83,905			12,563			—
Delaware VIP® High Yield Series - Standard Class		118,342		(18,229	)		100,113			(51,811	)		—
Delaware VIP® REIT Series - Service Class		165,400		(86,612	)		78,788			67,681			—
Delaware VIP® Small Cap Value Series - Service Class		61,348		(76,706	)		(15,358	)		84,191			632,588
Delaware VIP® Smid Cap Core Series - Service Class		16,545		(54,436	)		(37,891	)		(172,085	)		328,422
DWS Alternative Asset Allocation VIP Portfolio - Class A		8,342		(2,065	)		6,277			(1,854	)		—
Fidelity® VIP Asset Manager Portfolio - Initial Class		519,180		(295,324	)		223,856			16,125			1,263,644
Fidelity® VIP Contrafund® Portfolio - Service Class 2		48,920		(226,278	)		(177,358	)		325,930			2,642,382
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		1,798		(800	)		998			6			3,176
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		4,172		(1,429	)		2,743			617			3,408
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		5,102		(2,710	)		2,392			4,765			6,991
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		11,935		(6,864	)		5,071			7,002			21,004
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		2,684		(1,434	)		1,250			2			4,322
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		1,340		(673	)		667			30			1,983
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		3,705		(1,654	)		2,051			331			4,360
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		17		(2	)		15			—			7
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		2		—			2			—			1
Fidelity® VIP Government Money Market Portfolio - Initial Class		725		—			725			—			—
Fidelity® VIP Growth Portfolio - Initial Class		229,687		(876,550	)		(646,863	)		3,897,897			5,506,817
Janus Henderson Global Research Portfolio - Institutional Shares		83,508		(82,230	)		1,278			335,815			509,407
LVIP Baron Growth Opportunities Fund - Service Class		—		(169,696	)		(169,696	)		973,147			482,598
LVIP BlackRock Advantage Allocation Fund - Standard Class		7,841		(3,228	)		4,613			(11,787	)		15,529
LVIP BlackRock Global Real Estate Fund - Standard Class		11,603		(4,086	)		7,517			21,483			13,067
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		16,535		(7,587	)		8,948			(11,661	)		—
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		10,212		(14,270	)		(4,058	)		31,497			62,180
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		—		(1,431	)		(1,431	)		2,248			13,731
LVIP Delaware Bond Fund - Standard Class		88,532		(29,178	)		59,354			14,746			26,035
LVIP Delaware Diversified Floating Rate Fund - Service Class		4,392		(1,950	)		2,442			368			—
LVIP Delaware Social Awareness Fund - Standard Class		318,189		(152,204	)		165,985			109,976			761,060
LVIP Delaware Wealth Builder Fund - Standard Class		12,597		(3,310	)		9,287			(10,509	)		18,110
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		97,262		(54,163	)		43,099			57,011			274,030
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		1,132		(717	)		415			709			349
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		30,726		(11,925	)		18,801			15,719			46,193
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		89,320		(38,445	)		50,875			72,369			179,137
LVIP Global Income Fund - Standard Class		5,775		(2,536	)		3,239			512			—
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		507,982		(57,342	)		450,640			202,901			933,179
LVIP JPMorgan Retirement Income Fund - Standard Class		43,089		(11,783	)		31,306			(38,403	)		—
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		4,306		(3,225	)		1,081			3,051			3,529
LVIP Mondrian International Value Fund - Standard Class		112,893		(27,059	)		85,834			(47,319	)		61,401
LVIP SSGA Bond Index Fund - Standard Class		26,440		(8,181	)		18,259			6,278			—
LVIP SSGA Emerging Markets 100 Fund - Standard Class		36,612		(10,034	)		26,578			(30,105	)		—
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		37,371		(14,119	)		23,252			6,663			20,791

See accompanying notes.
L-4

Subaccount	Net Realized Gain on Investments		Total Net Realized Gain (Loss) on Investments			Net Change in Unrealized Appreciation or Depreciation on Investments			Net Increase in Net Assets Resulting from Operations
AB VPS Global Thematic Growth Portfolio - Class B	$	—	$	165,293		$	309,250		$	459,069
AB VPS Growth Portfolio - Class B		—		659,190			(209,033	)		442,870
AB VPS Large Cap Growth Portfolio - Class B		—		316,247			(10,531	)		287,870
American Century VP Balanced Fund - Class I		—		480,381			1,684,785			2,239,190
American Funds Global Growth Fund - Class 2		—		566,785			1,404,692			1,979,108
American Funds Growth Fund - Class 2		—		3,986,705			4,061,538			7,974,277
American Funds Growth-Income Fund - Class 2		—		1,813,361			1,473,252			3,385,439
American Funds International Fund - Class 2		—		291,960			1,357,539			1,685,663
BlackRock Global Allocation V.I. Fund - Class I		—		55,911			188,919			248,936
Delaware VIP® Diversified Income Series - Standard Class		2		12,565			287,522			383,992
Delaware VIP® High Yield Series - Standard Class		—		(51,811	)		206,747			255,049
Delaware VIP® REIT Series - Service Class		—		67,681			1,784,942			1,931,411
Delaware VIP® Small Cap Value Series - Service Class		1		716,780			1,120,669			1,822,091
Delaware VIP® Smid Cap Core Series - Service Class		—		156,337			1,209,506			1,327,952
DWS Alternative Asset Allocation VIP Portfolio - Class A		—		(1,854	)		21,739			26,162
Fidelity® VIP Asset Manager Portfolio - Initial Class		—		1,279,769			3,179,852			4,683,477
Fidelity® VIP Contrafund® Portfolio - Service Class 2		—		2,968,312			3,103,289			5,894,243
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		—		3,182			7,972			12,152
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		—		4,025			19,338			26,106
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		—		11,756			35,667			49,815
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		—		28,006			120,729			153,806
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		—		4,324			26,973			32,547
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		—		2,013			13,080			15,760
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		—		4,691			30,130			36,872
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		—		7			61			83
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		—		1			3			6
Fidelity® VIP Government Money Market Portfolio - Initial Class		—		—			(1	)		724
Fidelity® VIP Growth Portfolio - Initial Class		—		9,404,714			16,178,471			24,936,322
Janus Henderson Global Research Portfolio - Institutional Shares		—		845,222			1,205,446			2,051,946
LVIP Baron Growth Opportunities Fund - Service Class		—		1,455,745			3,690,853			4,976,902
LVIP BlackRock Advantage Allocation Fund - Standard Class		—		3,742			39,444			47,799
LVIP BlackRock Global Real Estate Fund - Standard Class		—		34,550			47,281			89,348
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		—		(11,661	)		39,041			36,328
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		2		93,679			157,899			247,520
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		—		15,979			13,577			28,125
LVIP Delaware Bond Fund - Standard Class		1		40,782			130,832			230,968
LVIP Delaware Diversified Floating Rate Fund - Service Class		1		369			3,315			6,126
LVIP Delaware Social Awareness Fund - Standard Class		—		871,036			3,044,510			4,081,531
LVIP Delaware Wealth Builder Fund - Standard Class		1		7,602			28,494			45,383
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		—		331,041			1,007,451			1,381,591
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		—		1,058			6,236			7,709
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		—		61,912			75,797			156,510
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		—		251,506			235,344			537,725
LVIP Global Income Fund - Standard Class		—		512			11,000			14,751
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		—		1,136,080			1,330,732			2,917,452
LVIP JPMorgan Retirement Income Fund - Standard Class		—		(38,403	)		169,209			162,112
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		—		6,580			37,721			45,382
LVIP Mondrian International Value Fund - Standard Class		1		14,083			358,231			458,148
LVIP SSGA Bond Index Fund - Standard Class		—		6,278			30,808			55,345
LVIP SSGA Emerging Markets 100 Fund - Standard Class		—		(30,105	)		67,472			63,945
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		—		27,454			145,330			196,036

L-5

Lincoln National Variable Annuity Account L

Statements of operations (continued)

Year Ended December 31, 2019

Subaccount	Dividends from Investment Income		Mortality and Expense Guarantee Charges			Net Investment Income (Loss)			Net Realized Gain (Loss) on Investments			Dividends from Net Realized Gain on Investments
LVIP SSGA International Index Fund - Standard Class	$	13,817	$	(4,811	)	$	9,006		$	959		$	—
LVIP SSGA International Managed Volatility Fund - Standard Class		2,798		(977	)		1,821			3,809			196
LVIP SSGA S&P 500 Index Fund - Standard Class		1,836,299		(1,073,395	)		762,904			4,110,038			4,270,698
LVIP SSGA Small-Cap Index Fund - Standard Class		237,887		(245,782	)		(7,895	)		534,803			1,212,808
LVIP T. Rowe Price 2010 Fund - Standard Class		11,702		(3,987	)		7,715			(747	)		67,734
LVIP T. Rowe Price 2020 Fund - Standard Class		44,000		(14,732	)		29,268			(5,031	)		260,179
LVIP T. Rowe Price 2030 Fund - Standard Class		115,314		(46,466	)		68,848			21,396			637,350
LVIP T. Rowe Price 2040 Fund - Standard Class		45,358		(20,142	)		25,216			12,173			286,770
LVIP T. Rowe Price 2050 Fund - Standard Class		34,903		(15,128	)		19,775			6,688			147,350
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		36,853		(217,021	)		(180,168	)		902,658			1,582,595
Neuberger Berman AMT Large Cap Value Portfolio - I Class		95,166		(15,353	)		79,813			(821,721	)		1,020,631
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		18,807		(30,476	)		(11,669	)		(1,091	)		249,174
T. Rowe Price International Stock Portfolio		199,997		(82,616	)		117,381			67,818			356,752

See accompanying notes.
L-6

Subaccount	Net Realized Gain on Investments		Total Net Realized Gain (Loss) on Investments		Net Change in Unrealized Appreciation or Depreciation on Investments			Net Increase in Net Assets Resulting from Operations
LVIP SSGA International Index Fund - Standard Class	$	—	$	959	$	77,116		$	87,081
LVIP SSGA International Managed Volatility Fund - Standard Class		—		4,005		10,885			16,711
LVIP SSGA S&P 500 Index Fund - Standard Class		—		8,380,736		19,307,591			28,451,231
LVIP SSGA Small-Cap Index Fund - Standard Class		—		1,747,611		3,528,142			5,267,858
LVIP T. Rowe Price 2010 Fund - Standard Class		—		66,987		(18,048	)		56,654
LVIP T. Rowe Price 2020 Fund - Standard Class		—		255,148		(48,306	)		236,110
LVIP T. Rowe Price 2030 Fund - Standard Class		—		658,746		146,728			874,322
LVIP T. Rowe Price 2040 Fund - Standard Class		—		298,943		87,622			411,781
LVIP T. Rowe Price 2050 Fund - Standard Class		—		154,038		123,600			297,413
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		—		2,485,253		4,233,234			6,538,319
Neuberger Berman AMT Large Cap Value Portfolio - I Class		—		198,910		246,523			525,246
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		—		248,083		156,589			393,003
T. Rowe Price International Stock Portfolio		—		424,570		1,418,271			1,960,222

L-7

Lincoln National Variable Annuity Account L

Statements of changes in net assets

Years Ended December 31, 2018 and 2019

	AB VPS Global Thematic Growth Portfolio - Class B Subaccount			AB VPS Growth Portfolio - Class B Subaccount			AB VPS Large Cap 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
NET ASSETS AT JANUARY 1, 2018	$	2,155,522		$	1,780,387		$	—		$	13,957,461		$	7,087,753		$	31,609,079		$	14,516,853
Changes From Operations:
• Net investment income (loss)		(18,762	)		(19,550	)		—			58,728			(23,767	)		(179,636	)		65,081
• Net realized gain (loss) on investments		237,018			304,769			—			186,705			657,520			4,164,515			1,262,840
• Net change in unrealized appreciation or depreciation on investments		(428,180	)		(256,982	)		—			(857,747	)		(1,309,969	)		(4,123,355	)		(1,696,439	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		(209,924	)		28,237			—			(612,314	)		(676,216	)		(138,476	)		(368,518	)
Changes From Unit Transactions:
• Net unit transactions		(314,733	)		205,946			—			(852,013	)		(311,090	)		(2,971,688	)		(98,216	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(314,733	)		205,946			—			(852,013	)		(311,090	)		(2,971,688	)		(98,216	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		(524,657	)		234,183			—			(1,464,327	)		(987,306	)		(3,110,164	)		(466,734	)
NET ASSETS AT DECEMBER 31, 2018		1,630,865			2,014,570			—			12,493,134			6,100,447			28,498,915			14,050,119
Changes From Operations:
• Net investment income (loss)		(15,474	)		(7,287	)		(17,846	)		74,024			7,631			(73,966	)		98,826
• Net realized gain (loss) on investments		165,293			659,190			316,247			480,381			566,785			3,986,705			1,813,361
• Net change in unrealized appreciation or depreciation on investments		309,250			(209,033	)		(10,531	)		1,684,785			1,404,692			4,061,538			1,473,252
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		459,069			442,870			287,870			2,239,190			1,979,108			7,974,277			3,385,439
Changes From Unit Transactions:
• Net unit transactions		(60,103	)		(2,457,440	)		2,594,143			(1,539,656	)		(719,228	)		(3,487,978	)		(1,591,430	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(60,103	)		(2,457,440	)		2,594,143			(1,539,656	)		(719,228	)		(3,487,978	)		(1,591,430	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		398,966			(2,014,570	)		2,882,013			699,534			1,259,880			4,486,299			1,794,009
NET ASSETS AT DECEMBER 31, 2019	$	2,029,831		$	—		$	2,882,013		$	13,192,668		$	7,360,327		$	32,985,214		$	15,844,128

See accompanying notes.
L-8

	American Funds International Fund - Class 2 Subaccount			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
NET ASSETS AT JANUARY 1, 2018	$	10,285,892		$	1,750,130		$	4,515,407		$	2,142,719		$	10,265,880		$	9,889,988
Changes From Operations:
• Net investment income (loss)		62,729			(356	)		95,853			98,640			79,412			(34,469	)
• Net realized gain (loss) on investments		646,350			73,722			(13,766	)		(39,549	)		183,750			922,343
• Net change in unrealized appreciation or depreciation on investments		(2,040,969	)		(212,427	)		(220,866	)		(162,420	)		(1,053,497	)		(2,467,481	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		(1,331,890	)		(139,061	)		(138,779	)		(103,329	)		(790,335	)		(1,579,607	)
Changes From Unit Transactions:
• Net unit transactions		(773,290	)		(39,919	)		(117,267	)		(304,503	)		(1,502,871	)		(1,054,647	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(773,290	)		(39,919	)		(117,267	)		(304,503	)		(1,502,871	)		(1,054,647	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		(2,105,180	)		(178,980	)		(256,046	)		(407,832	)		(2,293,206	)		(2,634,254	)
NET ASSETS AT DECEMBER 31, 2018		8,180,712			1,571,150			4,259,361			1,734,887			7,972,674			7,255,734
Changes From Operations:
• Net investment income (loss)		36,164			4,106			83,905			100,113			78,788			(15,358	)
• Net realized gain (loss) on investments		291,960			55,911			12,565			(51,811	)		67,681			716,780
• Net change in unrealized appreciation or depreciation on investments		1,357,539			188,919			287,522			206,747			1,784,942			1,120,669
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		1,685,663			248,936			383,992			255,049			1,931,411			1,822,091
Changes From Unit Transactions:
• Net unit transactions		(1,045,525	)		(190,585	)		(530,050	)		(195,533	)		(1,187,023	)		(1,109,808	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(1,045,525	)		(190,585	)		(530,050	)		(195,533	)		(1,187,023	)		(1,109,808	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		640,138			58,351			(146,058	)		59,516			744,388			712,283
NET ASSETS AT DECEMBER 31, 2019	$	8,820,850		$	1,629,501		$	4,113,303		$	1,794,403		$	8,717,062		$	7,968,017

L-9

Lincoln National Variable Annuity Account L

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019

	Delaware VIP® Smid Cap Core Series - Service Class Subaccount			DWS Alternative Asset Allocation VIP Portfolio - Class A Subaccount			Fidelity® VIP Asset Manager Portfolio - Initial Class Subaccount			Fidelity® VIP Contrafund® Portfolio - Service Class 2 Subaccount			Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2 Subaccount			Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2 Subaccount			Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2 Subaccount
NET ASSETS AT JANUARY 1, 2018	$	5,944,277		$	200,147		$	33,305,989		$	23,211,096		$	—		$	—		$	—
Changes From Operations:
• Net investment income (loss)		(59,273	)		2,180			207,488			(129,346	)		510			561			1,124
• Net realized gain (loss) on investments		1,852,038			(729	)		(579,295	)		2,441,334			(443	)		1,141			784
• Net change in unrealized appreciation or depreciation on investments		(2,551,452	)		(22,330	)		(1,557,552	)		(3,934,854	)		(2,820	)		(8,092	)		(16,537	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		(758,687	)		(20,879	)		(1,929,359	)		(1,622,866	)		(2,753	)		(6,390	)		(14,629	)
Changes From Unit Transactions:
• Net unit transactions		(191,741	)		18,637			(2,930,672	)		(1,132,633	)		53,025			108,482			181,247
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(191,741	)		18,637			(2,930,672	)		(1,132,633	)		53,025			108,482			181,247
TOTAL INCREASE (DECREASE) IN NET ASSETS		(950,428	)		(2,242	)		(4,860,031	)		(2,755,499	)		50,272			102,092			166,618
NET ASSETS AT DECEMBER 31, 2018		4,993,849			197,905			28,445,958			20,455,597			50,272			102,092			166,618
Changes From Operations:
• Net investment income (loss)		(37,891	)		6,277			223,856			(177,358	)		998			2,743			2,392
• Net realized gain (loss) on investments		156,337			(1,854	)		1,279,769			2,968,312			3,182			4,025			11,756
• Net change in unrealized appreciation or depreciation on investments		1,209,506			21,739			3,179,852			3,103,289			7,972			19,338			35,667
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		1,327,952			26,162			4,683,477			5,894,243			12,152			26,106			49,815
Changes From Unit Transactions:
• Net unit transactions		(819,511	)		(24,037	)		(2,766,035	)		(2,220,435	)		49,420			119,510			97,600
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(819,511	)		(24,037	)		(2,766,035	)		(2,220,435	)		49,420			119,510			97,600
TOTAL INCREASE (DECREASE) IN NET ASSETS		508,441			2,125			1,917,442			3,673,808			61,572			145,616			147,415
NET ASSETS AT DECEMBER 31, 2019	$	5,502,290		$	200,030		$	30,363,400		$	24,129,405		$	111,844		$	247,708		$	314,033

See accompanying notes.
L-10

	Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2 Subaccount			Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2 Subaccount			Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2 Subaccount			Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2 Subaccount			Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2 Subaccount		Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2 Subaccount
NET ASSETS AT JANUARY 1, 2018	$	111,024		$	7,055		$	26,658		$	18,159		$	—	$	—
Changes From Operations:
• Net investment income (loss)		1,227			731			115			502			—		—
• Net realized gain (loss) on investments		4,602			(157	)		6			292			—		—
• Net change in unrealized appreciation or depreciation on investments		(67,580	)		(10,723	)		(6,542	)		(9,089	)		—		—
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		(61,751	)		(10,149	)		(6,421	)		(8,295	)		—		—
Changes From Unit Transactions:
• Net unit transactions		529,937			103,468			27,090			74,084			—		—
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		529,937			103,468			27,090			74,084			—		—
TOTAL INCREASE (DECREASE) IN NET ASSETS		468,186			93,319			20,669			65,789			—		—
NET ASSETS AT DECEMBER 31, 2018		579,210			100,374			47,327			83,948			—		—
Changes From Operations:
• Net investment income (loss)		5,071			1,250			667			2,051			15		2
• Net realized gain (loss) on investments		28,006			4,324			2,013			4,691			7		1
• Net change in unrealized appreciation or depreciation on investments		120,729			26,973			13,080			30,130			61		3
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		153,806			32,547			15,760			36,872			83		6
Changes From Unit Transactions:
• Net unit transactions		(32,941	)		55,285			36,797			146,017			1,577		184
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(32,941	)		55,285			36,797			146,017			1,577		184
TOTAL INCREASE (DECREASE) IN NET ASSETS		120,865			87,832			52,557			182,889			1,660		190
NET ASSETS AT DECEMBER 31, 2019	$	700,075		$	188,206		$	99,884		$	266,837		$	1,660	$	190

L-11

Lincoln National Variable Annuity Account L

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019

	Fidelity® VIP Government Money Market Portfolio - Initial Class Subaccount			Fidelity® VIP Growth Portfolio - Initial Class Subaccount			Janus Henderson Global Research Portfolio - Institutional Shares Subaccount			LVIP Baron Growth Opportunities Fund - Service Class Subaccount			LVIP BlackRock Advantage Allocation Fund - Standard Class Subaccount			LVIP BlackRock Global Real Estate Fund - Standard Class Subaccount			LVIP BlackRock Inflation Protected Bond Fund - Standard Class Subaccount
NET ASSETS AT JANUARY 1, 2018	$	50,046		$	86,565,270		$	9,148,987		$	16,192,827		$	337,435		$	464,809		$	720,731
Changes From Operations:
• Net investment income (loss)		328			(671,453	)		13,189			(166,015	)		4,622			11,613			29,839
• Net realized gain (loss) on investments		—			15,744,288			255,366			1,348,926			61,953			3,784			(6,409	)
• Net change in unrealized appreciation or depreciation on investments		—			(15,474,717	)		(908,983	)		(1,922,070	)		(88,545	)		(55,192	)		(28,640	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		328			(401,882	)		(640,428	)		(739,159	)		(21,970	)		(39,795	)		(5,210	)
Changes From Unit Transactions:
• Net unit transactions		(13,112	)		(7,255,001	)		(700,719	)		(696,327	)		15,352			(29,706	)		25,622
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(13,112	)		(7,255,001	)		(700,719	)		(696,327	)		15,352			(29,706	)		25,622
TOTAL INCREASE (DECREASE) IN NET ASSETS		(12,784	)		(7,656,883	)		(1,341,147	)		(1,435,486	)		(6,618	)		(69,501	)		20,412
NET ASSETS AT DECEMBER 31, 2018		37,262			78,908,387			7,807,840			14,757,341			330,817			395,308			741,143
Changes From Operations:
• Net investment income (loss)		725			(646,863	)		1,278			(169,696	)		4,613			7,517			8,948
• Net realized gain (loss) on investments		—			9,404,714			845,222			1,455,745			3,742			34,550			(11,661	)
• Net change in unrealized appreciation or depreciation on investments		(1	)		16,178,471			1,205,446			3,690,853			39,444			47,281			39,041
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		724			24,936,322			2,051,946			4,976,902			47,799			89,348			36,328
Changes From Unit Transactions:
• Net unit transactions		56,119			(9,999,349	)		(1,063,429	)		(1,412,901	)		(63,419	)		(152,213	)		(87,425	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		56,119			(9,999,349	)		(1,063,429	)		(1,412,901	)		(63,419	)		(152,213	)		(87,425	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		56,843			14,936,973			988,517			3,564,001			(15,620	)		(62,865	)		(51,097	)
NET ASSETS AT DECEMBER 31, 2019	$	94,105		$	93,845,360		$	8,796,357		$	18,321,342		$	315,197		$	332,443		$	690,046

See accompanying notes.
L-12

	LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class Subaccount			LVIP Blended Mid Cap Managed Volatility Fund - Standard Class Subaccount			LVIP Delaware Bond Fund - Standard Class Subaccount			LVIP Delaware Diversified Floating Rate Fund - Service Class Subaccount			LVIP Delaware Social Awareness Fund - Standard Class Subaccount			LVIP Delaware Wealth Builder Fund - Standard Class Subaccount
NET ASSETS AT JANUARY 1, 2018	$	1,424,678		$	79,413		$	3,362,696		$	202,868		$	15,887,276		$	245,760
Changes From Operations:
• Net investment income (loss)		(3,726	)		(1,043	)		62,932			4,067			49,736			6,759
• Net realized gain (loss) on investments		184,293			6,257			(6,846	)		461			1,681,724			49,264
• Net change in unrealized appreciation or depreciation on investments		(253,178	)		(6,347	)		(118,031	)		(6,209	)		(2,475,037	)		(74,288	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		(72,611	)		(1,133	)		(61,945	)		(1,681	)		(743,577	)		(18,265	)
Changes From Unit Transactions:
• Net unit transactions		(14,188	)		37,107			(385,667	)		(20,807	)		(1,428,188	)		68,405
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(14,188	)		37,107			(385,667	)		(20,807	)		(1,428,188	)		68,405
TOTAL INCREASE (DECREASE) IN NET ASSETS		(86,799	)		35,974			(447,612	)		(22,488	)		(2,171,765	)		50,140
NET ASSETS AT DECEMBER 31, 2018		1,337,879			115,387			2,915,084			180,380			13,715,511			295,900
Changes From Operations:
• Net investment income (loss)		(4,058	)		(1,431	)		59,354			2,442			165,985			9,287
• Net realized gain (loss) on investments		93,679			15,979			40,782			369			871,036			7,602
• Net change in unrealized appreciation or depreciation on investments		157,899			13,577			130,832			3,315			3,044,510			28,494
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		247,520			28,125			230,968			6,126			4,081,531			45,383
Changes From Unit Transactions:
• Net unit transactions		9,688			27,496			(208,647	)		(10,988	)		(1,056,156	)		111,904
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		9,688			27,496			(208,647	)		(10,988	)		(1,056,156	)		111,904
TOTAL INCREASE (DECREASE) IN NET ASSETS		257,208			55,621			22,321			(4,862	)		3,025,375			157,287
NET ASSETS AT DECEMBER 31, 2019	$	1,595,087		$	171,008		$	2,937,405		$	175,518		$	16,740,886		$	453,187

L-13

Lincoln National Variable Annuity Account L

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019

	LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class Subaccount			LVIP Franklin Templeton Global Equity Managed Volatility 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			LVIP Global Moderate Allocation Managed Risk Fund - Standard Class Subaccount			LVIP JPMorgan Retirement Income Fund - Standard Class Subaccount
NET ASSETS AT JANUARY 1, 2018	$	6,005,103		$	87,079		$	1,390,988		$	4,428,996		$	250,523		$	21,517,364		$	1,138,548
Changes From Operations:
• Net investment income (loss)		28,105			390			19,603			58,604			7,722			478,278			19,127
• Net realized gain (loss) on investments		177,148			1,060			41,912			82,547			45			310,568			130,287
• Net change in unrealized appreciation or depreciation on investments		(653,486	)		(11,146	)		(128,348	)		(442,675	)		(5,328	)		(2,016,427	)		(208,551	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		(448,233	)		(9,696	)		(66,833	)		(301,524	)		2,439			(1,227,581	)		(59,137	)
Changes From Unit Transactions:
• Net unit transactions		(440,521	)		7,721			(138,797	)		(297,955	)		83,803			634,088			(89,842	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(440,521	)		7,721			(138,797	)		(297,955	)		83,803			634,088			(89,842	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		(888,754	)		(1,975	)		(205,630	)		(599,479	)		86,242			(593,493	)		(148,979	)
NET ASSETS AT DECEMBER 31, 2018		5,116,349			85,104			1,185,358			3,829,517			336,765			20,923,871			989,569
Changes From Operations:
• Net investment income (loss)		43,099			415			18,801			50,875			3,239			450,640			31,306
• Net realized gain (loss) on investments		331,041			1,058			61,912			251,506			512			1,136,080			(38,403	)
• Net change in unrealized appreciation or depreciation on investments		1,007,451			6,236			75,797			235,344			11,000			1,330,732			169,209
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		1,381,591			7,709			156,510			537,725			14,751			2,917,452			162,112
Changes From Unit Transactions:
• Net unit transactions		(855,851	)		(29,124	)		(123,269	)		(341,369	)		(128,175	)		(1,558,391	)		266,795
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(855,851	)		(29,124	)		(123,269	)		(341,369	)		(128,175	)		(1,558,391	)		266,795
TOTAL INCREASE (DECREASE) IN NET ASSETS		525,740			(21,415	)		33,241			196,356			(113,424	)		1,359,061			428,907
NET ASSETS AT DECEMBER 31, 2019	$	5,642,089		$	63,689		$	1,218,599		$	4,025,873		$	223,341		$	22,282,932		$	1,418,476

See accompanying notes.
L-14

	LVIP JPMorgan Select Mid Cap Value Managed Volatility 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, 2018	$	268,820		$	3,143,240		$	639,241		$	1,190,182		$	1,564,389		$	321,293
Changes From Operations:
• Net investment income (loss)		1,263			65,166			11,478			38,736			27,877			7,498
• Net realized gain (loss) on investments		757			23,697			(4,026	)		(13,007	)		10,143			2,315
• Net change in unrealized appreciation or depreciation on investments		(39,884	)		(462,600	)		(16,276	)		(183,217	)		(175,645	)		(75,063	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		(37,864	)		(373,737	)		(8,824	)		(157,488	)		(137,625	)		(65,250	)
Changes From Unit Transactions:
• Net unit transactions		42,050			(18,208	)		17,432			(4,235	)		(52,832	)		130,972
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		42,050			(18,208	)		17,432			(4,235	)		(52,832	)		130,972
TOTAL INCREASE (DECREASE) IN NET ASSETS		4,186			(391,945	)		8,608			(161,723	)		(190,457	)		65,722
NET ASSETS AT DECEMBER 31, 2018		273,006			2,751,295			647,849			1,028,459			1,373,932			387,015
Changes From Operations:
• Net investment income (loss)		1,081			85,834			18,259			26,578			23,252			9,006
• Net realized gain (loss) on investments		6,580			14,083			6,278			(30,105	)		27,454			959
• Net change in unrealized appreciation or depreciation on investments		37,721			358,231			30,808			67,472			145,330			77,116
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		45,382			458,148			55,345			63,945			196,036			87,081
Changes From Unit Transactions:
• Net unit transactions		44,646			(91,044	)		159,740			(103,974	)		(54,134	)		78,879
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		44,646			(91,044	)		159,740			(103,974	)		(54,134	)		78,879
TOTAL INCREASE (DECREASE) IN NET ASSETS		90,028			367,104			215,085			(40,029	)		141,902			165,960
NET ASSETS AT DECEMBER 31, 2019	$	363,034		$	3,118,399		$	862,934		$	988,430		$	1,515,834		$	552,975

L-15

Lincoln National Variable Annuity Account L

Statements of changes in net assets (continued)

Years Ended December 31, 2018 and 2019

	LVIP SSGA International Managed Volatility Fund - Standard Class Subaccount			LVIP SSGA S&P 500 Index Fund - Standard Class Subaccount			LVIP SSGA Small-Cap Index Fund - Standard Class Subaccount			LVIP T. Rowe Price 2010 Fund - Standard Class Subaccount			LVIP T. Rowe Price 2020 Fund - Standard Class Subaccount			LVIP T. Rowe Price 2030 Fund - Standard Class Subaccount
NET ASSETS AT JANUARY 1, 2018	$	64,257		$	113,020,936		$	28,226,020		$	468,127		$	1,827,841		$	4,951,009
Changes From Operations:
• Net investment income (loss)		1,429			917,187			(12,047	)		5,436			11,521			36,422
• Net realized gain (loss) on investments		922			5,684,608			1,746,558			30,831			110,902			193,833
• Net change in unrealized appreciation or depreciation on investments		(13,825	)		(12,216,409	)		(4,869,047	)		(61,041	)		(217,028	)		(604,176	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		(11,474	)		(5,614,614	)		(3,134,536	)		(24,774	)		(94,605	)		(373,921	)
Changes From Unit Transactions:
• Net unit transactions		36,195			(8,685,096	)		(2,226,190	)		6,269			(399,812	)		(370,632	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		36,195			(8,685,096	)		(2,226,190	)		6,269			(399,812	)		(370,632	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		24,721			(14,299,710	)		(5,360,726	)		(18,505	)		(494,417	)		(744,553	)
NET ASSETS AT DECEMBER 31, 2018		88,978			98,721,226			22,865,294			449,622			1,333,424			4,206,456
Changes From Operations:
• Net investment income (loss)		1,821			762,904			(7,895	)		7,715			29,268			68,848
• Net realized gain (loss) on investments		4,005			8,380,736			1,747,611			66,987			255,148			658,746
• Net change in unrealized appreciation or depreciation on investments		10,885			19,307,591			3,528,142			(18,048	)		(48,306	)		146,728
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		16,711			28,451,231			5,267,858			56,654			236,110			874,322
Changes From Unit Transactions:
• Net unit transactions		19,701			(10,169,845	)		(2,260,059	)		(98,069	)		61,777			(183,492	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		19,701			(10,169,845	)		(2,260,059	)		(98,069	)		61,777			(183,492	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		36,412			18,281,386			3,007,799			(41,415	)		297,887			690,830
NET ASSETS AT DECEMBER 31, 2019	$	125,390		$	117,002,612		$	25,873,093		$	408,207		$	1,631,311		$	4,897,286

See accompanying notes.
L-16

	LVIP T. Rowe Price 2040 Fund - Standard Class Subaccount			LVIP T. Rowe Price 2050 Fund - Standard Class Subaccount			LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class Subaccount			Neuberger Berman AMT Large Cap Value Portfolio - I Class Subaccount			Neuberger Berman AMT Sustainable Equity Portfolio - I Class Subaccount			T. Rowe Price International Stock Portfolio Subaccount
NET ASSETS AT JANUARY 1, 2018	$	1,781,962		$	963,677		$	20,032,741		$	5,421,035		$	—		$	10,066,206
Changes From Operations:
• Net investment income (loss)		13,824			9,705			(124,674	)		8,277			—			27,977
• Net realized gain (loss) on investments		80,199			14,346			2,178,859			564,489			—			1,044,481
• Net change in unrealized appreciation or depreciation on investments		(275,094	)		(138,976	)		(2,816,079	)		(667,914	)		—			(2,491,411	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		(181,071	)		(114,925	)		(761,894	)		(95,148	)		—			(1,418,953	)
Changes From Unit Transactions:
• Net unit transactions		183,435			250,708			(703,518	)		(777,737	)		—			(966,610	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		183,435			250,708			(703,518	)		(777,737	)		—			(966,610	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		2,364			135,783			(1,465,412	)		(872,885	)		—			(2,385,563	)
NET ASSETS AT DECEMBER 31, 2018		1,784,326			1,099,460			18,567,329			4,548,150			—			7,680,643
Changes From Operations:
• Net investment income (loss)		25,216			19,775			(180,168	)		79,813			(11,669	)		117,381
• Net realized gain (loss) on investments		298,943			154,038			2,485,253			198,910			248,083			424,570
• Net change in unrealized appreciation or depreciation on investments		87,622			123,600			4,233,234			246,523			156,589			1,418,271
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		411,781			297,413			6,538,319			525,246			393,003			1,960,222
Changes From Unit Transactions:
• Net unit transactions		(61,259	)		385,017			(1,320,080	)		(5,073,396	)		4,467,846			(666,351	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(61,259	)		385,017			(1,320,080	)		(5,073,396	)		4,467,846			(666,351	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		350,522			682,430			5,218,239			(4,548,150	)		4,860,849			1,293,871
NET ASSETS AT DECEMBER 31, 2019	$	2,134,848		$	1,781,890		$	23,785,568		$	—		$	4,860,849		$	8,974,514

L-17

Lincoln National Variable Annuity Account L

Notes to financial statements

December 31, 2019

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 three products as follows:

• Group Variable Annuity
• Lincoln Secured Retirement Income • Lincoln Retirement Income Rollover

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 sixty-two mutual funds (the Funds) of eleven open-ended management investment companies, each Fund with its own investment objective. The Funds are:

AllianceBernstein Variable Products Series Fund:

AB VPS Global Thematic Growth Portfolio - Class B

AB VPS Large Cap Growth Portfolio - Class B

American Century Variable Portfolios, Inc.:

American Century VP Balanced Fund - Class I

American Funds Insurance Series^®:

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 Global Allocation V.I. Fund - Class I

Delaware VIP^® Trust:

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 Core Series - Service Class

Deutsche DWS Variable Series II:

DWS Alternative Asset Allocation VIP Portfolio - Class A

Fidelity^® Variable Insurance Products:

Fidelity^® VIP Asset Manager Portfolio - Initial Class

Fidelity^® VIP Contrafund^® Portfolio - Service Class 2

Fidelity^® VIP Freedom 2020 Portfolio^(SM) - Service Class 2

Fidelity^® VIP Freedom 2025 Portfolio^(SM) - Service Class 2

Fidelity^® VIP Freedom 2030 Portfolio^(SM) - Service Class 2

Fidelity^® VIP Freedom 2035 Portfolio^(SM) - Service Class 2

Fidelity^® VIP Freedom 2040 Portfolio^(SM) - Service Class 2

Fidelity^® VIP Freedom 2045 Portfolio^(SM) - Service Class 2

Fidelity^® VIP Freedom 2050 Portfolio^(SM) - Service Class 2

Fidelity^® VIP Freedom 2055 Portfolio^(SM) - Service Class 2

Fidelity^® VIP Freedom 2060 Portfolio^(SM) - Service Class 2

Fidelity^® VIP Government Money Market Portfolio - Initial Class

Fidelity^® VIP Growth Portfolio - Initial Class

Janus Aspen Series:

Janus Henderson Global Research Portfolio - Institutional Shares

Lincoln Variable Insurance Products Trust*:

LVIP Baron Growth Opportunities Fund - Service Class

LVIP BlackRock Advantage Allocation Fund - Standard Class

LVIP BlackRock Global Real Estate Fund - Standard Class

LVIP BlackRock Inflation Protected Bond Fund - Standard Class

LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class

LVIP Blended Mid Cap Managed Volatility Fund - Standard Class

LVIP Delaware Bond Fund - Standard Class

LVIP Delaware Diversified Floating Rate Fund - Service Class

LVIP Delaware Social Awareness Fund - Standard Class

LVIP Delaware Wealth Builder Fund - Standard Class

L-18

Lincoln National Variable Annuity Account L

Notes to financial statements (continued)

1. Accounting Policies and Variable Account Information (continued)

LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class

LVIP Franklin Templeton Global Equity Managed Volatility 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 JPMorgan Retirement Income Fund - Standard Class

LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class

LVIP Mondrian International Value Fund - Standard Class

LVIP SSGA Bond Index Fund - Standard Class

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 International Managed Volatility Fund - Standard Class

LVIP SSGA S&P 500 Index Fund - Standard Class

LVIP SSGA Small-Cap Index Fund - Standard Class

LVIP T. Rowe Price 2010 Fund - Standard Class

LVIP T. Rowe Price 2020 Fund - Standard Class

LVIP T. Rowe Price 2030 Fund - Standard Class

LVIP T. Rowe Price 2040 Fund - Standard Class

LVIP T. Rowe Price 2050 Fund - Standard Class

LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class

Neuberger Berman Advisers Management Trust:

Neuberger Berman AMT Sustainable Equity Portfolio - I Class

T. Rowe Price International Series, Inc.:

T. Rowe Price International Stock Portfolio

*  Denotes an affiliate of the 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 Government Money Market Portfolio are allocated to purchase shares of one or more 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, 2019. 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.

Investments for which the fair value is measured at NAV using the practical expedient (investments in investees measured at NAV) are excluded from the fair value hierarchy. Accordingly, 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.

ASC 946-10-15, "Financial Services - Investment Companies (Topic 946) - Scope and Scope Exceptions" provides accounting guidance for assessing whether an entity is an investment company. This guidance evaluates 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 applies the accounting requirements of ASC 946.

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

L-19

Lincoln National Variable Annuity Account L

Notes to financial statements (continued)

1. Accounting Policies and Variable Account Information (continued)

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.

Investment Fund Changes: During 2018, the following funds changed their names:

Previous Fund Name	New Fund Name
LVIP Managed Risk Profile 2010 Fund - Standard Class	LVIP T. Rowe Price 2010 Fund - Standard Class
LVIP Managed Risk Profile 2020 Fund - Standard Class	LVIP T. Rowe Price 2020 Fund - Standard Class
LVIP Managed Risk Profile 2030 Fund - Standard Class	LVIP T. Rowe Price 2030 Fund - Standard Class
LVIP Managed Risk Profile 2040 Fund - Standard Class	LVIP T. Rowe Price 2040 Fund - Standard Class
LVIP Managed Risk Profile 2050 Fund - Standard Class	LVIP T. Rowe Price 2050 Fund - Standard Class

Also during 2018, the following fund family changed its name:

Previous Fund Family Name	New Fund Family Name
Deutsche Variable Series II	Deutsche DWS Variable Series II

During 2019, the following funds became available as investment options for account contract owners. Accordingly, for the subaccounts that commenced operations during 2019, the 2019 statements of operations and 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, 2019:

AB VPS Large Cap Growth Portfolio - Class B	Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2	Neuberger Berman AMT Sustainable Equity Portfolio - I Class

During 2019, the following funds changed their names:  

Previous Fund Name	New Fund Name
LVIP BlackRock Scientific Allocation Fund - Standard Class	LVIP BlackRock Advantage Allocation Fund - Standard Class
LVIP Clarion Global Real Estate Fund - Standard Class	LVIP BlackRock Global Real Estate Fund - Standard Class

Also during 2019, the following funds ceased to be available as investment options to Variable Account contract owners:

AB VPS Growth Portfolio - Class B Neuberger Berman AMT Large Cap Value Portfolio - I 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 three 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)

•  Lincoln Retirement Income Rollover at a daily rate of .0001370% to .0017808% (.05% to .65% on an annual basis)

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 2019 and 2018 were $186,134 and $192,109, respectively.

Surrender, contract and all other charges are included within Contract withdrawals on the Statements of Changes in Net Assets.

L-20

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, 2019, 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
		2019			0.75	%		1.00	%	$	8.94	$	9.39		226,348	$	2,029,831		28.49	%		28.81	%		0.17	%
		2018			0.75	%		1.00	%		6.96		7.29		233,702		1,630,865		-10.88	%		-10.66	%		0.00	%
		2017			0.75	%		1.00	%		7.81		8.15		275,626		2,155,522		34.94	%		35.28	%		0.28	%
		2016			0.75	%		1.00	%		5.79		6.03		293,802		1,702,782		-1.86	%		-1.62	%		0.00	%
		2015			0.75	%		1.00	%		5.90		6.13		313,715		1,852,385		1.63	%		1.88	%		0.00	%
AB VPS Growth Portfolio - Class B
		2018			0.75	%		1.00	%		17.76		18.59		113,026		2,014,570		2.74	%		2.99	%		0.00	%
		2017			0.75	%		1.00	%		17.28		18.05		102,612		1,780,387		32.81	%		33.14	%		0.00	%
		2016			0.75	%		1.00	%		13.01		13.55		105,554		1,379,285		-0.15	%		0.10	%		0.00	%
		2015			0.75	%		1.00	%		13.03		13.54		127,091		1,661,558		7.74	%		8.01	%		0.00	%
AB VPS Large Cap Growth Portfolio - Class B
		2019	4/26/19		0.75	%		1.00	%		11.17		11.19		258,055		2,882,013		11.02	%		11.21	%		0.00	%
American Century VP Balanced Fund - Class I
		2019			0.75	%		1.00	%		54.46		57.32		241,211		13,192,668		18.66	%		18.96	%		1.54	%
		2018			0.75	%		1.00	%		45.89		48.19		270,897		12,493,134		-4.79	%		-4.55	%		1.41	%
		2017			0.75	%		1.00	%		48.20		50.48		288,309		13,957,461		12.78	%		13.06	%		1.54	%
		2016			0.75	%		1.00	%		42.74		44.65		315,713		13,545,258		5.93	%		6.19	%		1.46	%
		2015			0.75	%		1.00	%		40.35		42.05		327,511		13,265,699		-3.54	%		-3.30	%		1.72	%
American Funds Global Growth Fund - Class 2
		2019			0.75	%		1.00	%		38.66		40.20		189,801		7,360,327		33.93	%		34.27	%		1.09	%
		2018			0.75	%		1.00	%		28.86		29.94		210,734		6,100,447		-9.95	%		-9.72	%		0.65	%
		2017			0.75	%		1.00	%		32.05		33.16		220,493		7,087,753		30.16	%		30.49	%		0.68	%
		2016			0.75	%		1.00	%		24.62		25.42		218,019		5,388,246		-0.38	%		-0.13	%		0.84	%
		2015			0.75	%		1.00	%		24.72		25.45		229,813		5,699,030		5.87	%		6.14	%		1.01	%
American Funds Growth Fund - Class 2
		2019			0.75	%		1.00	%		29.44		30.89		1,115,556		32,985,214		29.47	%		29.80	%		0.74	%
		2018			0.75	%		1.00	%		22.74		23.80		1,248,307		28,498,915		-1.24	%		-0.99	%		0.42	%
		2017			0.75	%		1.00	%		23.02		24.04		1,367,467		31,609,079		27.02	%		27.33	%		0.50	%
		2016			0.75	%		1.00	%		18.12		18.88		1,458,298		26,531,963		8.40	%		8.67	%		0.71	%
		2015			0.75	%		1.00	%		16.72		17.37		1,566,846		26,293,002		5.79	%		6.06	%		0.60	%
American Funds Growth-Income Fund - Class 2
		2019			0.75	%		1.00	%		32.14		33.42		491,348		15,844,128		24.88	%		25.19	%		1.62	%
		2018			0.75	%		1.00	%		25.73		26.69		544,747		14,050,119		-2.76	%		-2.52	%		1.42	%
		2017			0.75	%		1.00	%		26.47		27.38		547,569		14,516,853		21.16	%		21.47	%		1.41	%
		2016			0.75	%		1.00	%		21.84		22.54		568,668		12,443,140		10.41	%		10.69	%		1.37	%
		2015			0.75	%		1.00	%		19.78		20.37		592,659		11,743,805		0.45	%		0.70	%		1.32	%
American Funds International Fund - Class 2
		2019			0.75	%		1.00	%		20.10		21.09		437,426		8,820,850		21.66	%		21.96	%		1.40	%
		2018			0.75	%		1.00	%		16.52		17.29		493,856		8,180,712		-14.00	%		-13.78	%		1.64	%
		2017			0.75	%		1.00	%		19.21		20.06		534,213		10,285,892		30.83	%		31.16	%		1.25	%
		2016			0.75	%		1.00	%		14.68		15.29		594,190		8,740,565		2.50	%		2.76	%		1.26	%
		2015			0.75	%		1.00	%		14.33		14.88		636,510		9,133,407		-5.48	%		-5.24	%		1.46	%
BlackRock Global Allocation V.I. Fund - Class I
		2019			0.75	%		1.00	%		18.22		18.71		89,412		1,629,501		16.82	%		17.11	%		1.25	%
		2018			0.75	%		1.00	%		15.60		15.97		100,713		1,571,150		-8.26	%		-8.03	%		0.97	%
		2017			0.75	%		1.00	%		17.00		17.37		102,881		1,750,130		12.73	%		13.01	%		1.38	%
		2016			0.75	%		1.00	%		15.08		15.37		95,894		1,446,798		3.08	%		3.34	%		1.14	%
		2015			0.75	%		1.00	%		14.63		14.87		104,709		1,532,499		-1.70	%		-1.45	%		1.13	%
Delaware VIP® Diversified Income Series - Standard Class
		2019			0.75	%		1.00	%		19.69		20.47		208,647		4,113,303		9.34	%		9.61	%		2.96	%
		2018			0.75	%		1.00	%		18.01		18.67		236,208		4,259,361		-3.10	%		-2.86	%		3.20	%
		2017			0.75	%		1.00	%		18.58		19.22		242,662		4,515,407		4.18	%		4.44	%		2.66	%
		2016			0.75	%		1.00	%		17.84		18.41		263,775		4,710,551		2.49	%		2.75	%		3.12	%
		2015			0.75	%		1.00	%		17.40		17.91		305,107		5,315,575		-2.07	%		-1.82	%		3.02	%

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)
Delaware VIP® High Yield Series - Standard Class
		2019			0.75	%		1.00	%	$	22.32	$	23.15		80,340	$	1,794,403		15.27	%		15.56	%		6.47	%
		2018			0.75	%		1.00	%		19.37		20.04		89,546		1,734,887		-5.42	%		-5.18	%		6.11	%
		2017			0.75	%		1.00	%		20.48		21.13		104,467		2,142,719		6.42	%		6.68	%		6.07	%
		2016			0.75	%		1.00	%		19.24		19.81		112,364		2,165,692		12.04	%		12.32	%		6.56	%
		2015			0.75	%		1.00	%		17.18		17.64		131,395		2,259,594		-7.53	%		-7.29	%		6.52	%
Delaware VIP® REIT Series - Service Class
		2019			0.75	%		1.00	%		46.83		49.13		185,807		8,717,062		25.24	%		25.55	%		1.89	%
		2018			0.75	%		1.00	%		37.39		39.13		212,859		7,972,674		-8.44	%		-8.21	%		1.86	%
		2017			0.75	%		1.00	%		40.83		42.63		250,792		10,265,880		0.26	%		0.51	%		1.37	%
		2016			0.75	%		1.00	%		40.73		42.42		304,963		12,446,688		4.56	%		4.83	%		0.95	%
		2015			0.75	%		1.00	%		38.95		40.46		319,994		12,490,856		2.49	%		2.75	%		1.02	%
Delaware VIP® Small Cap Value Series - Service Class
		2019			0.75	%		1.00	%		34.10		35.46		232,887		7,968,017		26.45	%		26.77	%		0.78	%
		2018			0.75	%		1.00	%		26.97		27.97		268,330		7,255,734		-17.77	%		-17.56	%		0.61	%
		2017			0.75	%		1.00	%		32.80		33.93		300,858		9,889,988		10.65	%		10.92	%		0.65	%
		2016			0.75	%		1.00	%		29.64		30.59		328,415		9,753,563		29.78	%		30.11	%		0.66	%
		2015			0.75	%		1.00	%		22.84		23.51		342,295		7,832,045		-7.39	%		-7.16	%		0.49	%
Delaware VIP® Smid Cap Core Series - Service Class
		2019			0.75	%		1.00	%		24.88		26.11		220,546		5,502,290		27.97	%		28.29	%		0.30	%
		2018			0.75	%		1.00	%		19.44		20.35		256,302		4,993,849		-13.27	%		-13.06	%		0.00	%
		2017			0.75	%		1.00	%		22.42		23.40		264,634		5,944,277		17.20	%		17.50	%		0.09	%
		2016			0.75	%		1.00	%		19.13		19.92		275,984		5,288,718		6.94	%		7.21	%		0.00	%
		2015			0.75	%		1.00	%		17.89		18.58		300,527		5,384,054		6.24	%		6.51	%		0.16	%
DWS Alternative Asset Allocation VIP Portfolio - Class A
		2019			0.75	%		1.00	%		14.07		14.45		14,211		200,030		13.54	%		13.83	%		4.03	%
		2018			0.75	%		1.00	%		12.39		12.69		15,965		197,905		-10.04	%		-9.82	%		2.11	%
		2017			0.75	%		1.00	%		13.78		14.07		14,525		200,147		6.34	%		6.61	%		2.37	%
		2016			0.75	%		1.00	%		12.96		13.20		17,766		230,194		4.25	%		4.51	%		2.03	%
		2015			0.75	%		1.00	%		12.43		12.63		15,980		198,618		-7.23	%		-6.99	%		2.92	%
Fidelity® VIP Asset Manager Portfolio - Initial Class
		2019			0.75	%		1.00	%		53.01		55.80		571,317		30,363,400		17.07	%		17.37	%		1.73	%
		2018			0.75	%		1.00	%		45.28		47.54		626,716		28,445,958		-6.29	%		-6.06	%		1.64	%
		2017			0.75	%		1.00	%		48.32		50.61		687,618		33,305,989		12.97	%		13.25	%		1.86	%
		2016			0.75	%		1.00	%		42.77		44.69		743,480		31,871,934		2.05	%		2.30	%		1.32	%
		2015			0.75	%		1.00	%		41.92		43.68		827,635		34,757,222		-0.85	%		-0.61	%		1.53	%
Fidelity® VIP Contrafund® Portfolio - Service Class 2
		2019			0.75	%		1.00	%		33.49		35.14		719,182		24,129,405		29.97	%		30.29	%		0.21	%
		2018			0.75	%		1.00	%		25.77		26.97		792,368		20,455,597		-7.57	%		-7.34	%		0.43	%
		2017			0.75	%		1.00	%		27.88		29.11		830,957		23,211,096		20.38	%		20.68	%		0.77	%
		2016			0.75	%		1.00	%		23.16		24.12		908,140		21,068,336		6.66	%		6.93	%		0.56	%
		2015			0.75	%		1.00	%		21.71		22.56		991,770		21,570,788		-0.58	%		-0.33	%		0.79	%
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2
		2019			1.00	%		1.00	%		11.27		11.27		9,926		111,844		18.69	%		18.69	%		2.25	%
		2018	1/16/18		1.00	%		1.00	%		9.49		9.49		5,295		50,272		-9.00	%		-9.00	%		3.54	%
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2
		2019			1.00	%		1.00	%		11.36		11.36		21,802		247,708		20.30	%		20.30	%		2.93	%
		2018	1/11/18		1.00	%		1.00	%		9.44		9.44		10,810		102,092		-9.48	%		-9.48	%		1.69	%
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2
		2019			0.75	%		1.00	%		11.50		11.56		27,297		314,033		22.88	%		23.19	%		1.83	%
		2018	3/6/18		0.75	%		1.00	%		9.36		9.38		17,798		166,618		-9.68	%		-9.18	%		1.76	%
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2
		2019			0.75	%		1.00	%		11.63		11.63		60,195		700,075		25.87	%		25.87	%		1.74	%
		2018			1.00	%		1.00	%		9.24		9.24		62,689		579,210		-10.40	%		-10.40	%		1.24	%
		2017	12/13/17		1.00	%		1.00	%		10.31		10.31		10,767		111,024		0.96	%		0.96	%		0.94	%

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)
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2
		2019			1.00	%		1.00	%	$	11.66	$	11.66		16,146	$	188,206		26.96	%		26.96	%		1.87	%
		2018			1.00	%		1.00	%		9.18		9.18		10,933		100,374		-11.02	%		-11.02	%		3.15	%
		2017	12/11/17		1.00	%		1.00	%		10.32		10.32		684		7,055		1.04	%		1.04	%		0.88	%
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2
		2019			1.00	%		1.00	%		11.66		11.66		8,569		99,884		26.98	%		26.98	%		2.00	%
		2018			1.00	%		1.00	%		9.18		9.18		5,156		47,327		-11.03	%		-11.03	%		1.29	%
		2017	12/12/17		1.00	%		1.00	%		10.32		10.32		2,584		26,658		1.03	%		1.03	%		0.91	%
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2
		2019			1.00	%		1.00	%		11.66		11.66		22,893		266,837		26.94	%		26.94	%		2.24	%
		2018			1.00	%		1.00	%		9.18		9.18		9,143		83,948		-11.02	%		-11.02	%		2.28	%
		2017	12/5/17		1.00	%		1.00	%		10.32		10.32		1,760		18,159		1.93	%		1.93	%		1.63	%
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2
		2019	6/24/19		1.00	%		1.00	%		10.84		10.84		153		1,660		8.41	%		8.41	%		3.13	%
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2
		2019	11/18/19		1.00	%		1.00	%		10.84		10.84		18		190		3.80	%		3.80	%		1.69	%
Fidelity® VIP Government Money Market Portfolio - Initial Class
		2019			0.00	%		0.00	%		18.85		18.87		4,993		94,105		1.99	%		2.02	%		1.92	%
		2018			0.00	%		0.00	%		18.47		18.50		2,017		37,262		1.65	%		1.65	%		1.59	%
		2017			0.00	%		0.00	%		18.17		18.20		2,754		50,046		0.67	%		0.67	%		0.65	%
		2016			0.00	%		0.00	%		18.05		18.08		3,786		68,351		0.20	%		0.20	%		0.19	%
		2015			0.00	%		0.00	%		18.02		18.04		1,941		34,965		0.02	%		0.03	%		0.02	%
Fidelity® VIP Growth Portfolio - Initial Class
		2019			0.75	%		1.00	%		126.46		133.11		739,567		93,845,360		32.98	%		33.31	%		0.26	%
		2018			0.75	%		1.00	%		95.10		99.85		827,062		78,908,387		-1.16	%		-0.91	%		0.24	%
		2017			0.75	%		1.00	%		96.22		100.77		896,802		86,565,270		33.79	%		34.12	%		0.22	%
		2016			0.75	%		1.00	%		71.92		75.13		965,781		69,659,103		-0.20	%		0.05	%		0.03	%
		2015			0.75	%		1.00	%		72.06		75.10		1,063,302		76,830,690		6.11	%		6.37	%		0.25	%
Janus Henderson Global Research Portfolio - Institutional Shares
		2019			0.75	%		1.00	%		28		29		314,370		8,796,357		27.76	%		28.08	%		0.99	%
		2018			0.75	%		1.00	%		21.79		22.88		356,650		7,807,840		-7.79	%		-7.56	%		1.12	%
		2017			0.75	%		1.00	%		23.63		24.75		385,355		9,148,987		25.76	%		26.08	%		0.82	%
		2016			0.75	%		1.00	%		18.79		19.63		428,756		8,090,071		1.05	%		1.30	%		0.99	%
		2015			0.75	%		1.00	%		18.60		19.38		474,214		8,850,052		-3.26	%		-3.02	%		0.65	%
LVIP Baron Growth Opportunities Fund - Service Class
		2019			0.75	%		1.00	%		88.74		93.41		205,745		18,321,342		35.03	%		35.36	%		0.00	%
		2018			0.75	%		1.00	%		65.72		69.01		223,853		14,757,341		-4.89	%		-4.65	%		0.00	%
		2017			0.75	%		1.00	%		69.10		72.38		233,609		16,192,827		25.97	%		26.29	%		0.00	%
		2016			0.75	%		1.00	%		54.85		57.31		250,256		13,770,178		4.52	%		4.78	%		0.45	%
		2015			0.75	%		1.00	%		52.48		54.70		278,447		14,652,966		-5.72	%		-5.48	%		0.00	%
LVIP BlackRock Advantage Allocation Fund - Standard Class
		2019			0.75	%		1.00	%		20.64		21.20		15,265		315,197		15.50	%		15.78	%		2.42	%
		2018			0.75	%		1.00	%		17.87		18.31		18,507		330,817		-6.32	%		-6.01	%		2.35	%
		2017			0.75	%		1.00	%		19.08		19.48		17,685		337,435		13.19	%		13.51	%		2.02	%
		2016			0.75	%		1.00	%		16.86		17.16		17,993		303,308		3.61	%		3.87	%		1.73	%
		2015			0.75	%		1.00	%		16.27		16.53		18,412		299,759		-2.13	%		-1.89	%		1.48	%
LVIP BlackRock Emerging Markets Managed Volatility Fund - Standard Class
		2016			0.00	%		0.00	%		—		—		—		—		0.00	%		0.00	%		5.21	%
		2015			0.75	%		1.00	%		7.83		7.83		3,254		25,469		-15.86	%		-15.86	%		1.75	%
LVIP BlackRock Global Real Estate Fund - Standard Class
		2019			0.75	%		1.00	%		11.75		12.12		28,214		332,443		23.71	%		23.98	%		2.79	%
		2018			0.75	%		1.00	%		9.50		9.78		41,558		395,308		-9.25	%		-9.03	%		3.74	%
		2017			0.75	%		1.00	%		10.46		10.75		44,301		464,809		9.76	%		10.04	%		3.54	%
		2016			0.75	%		1.00	%		9.53		9.77		72,541		693,843		0.18	%		0.43	%		4.20	%
		2015			0.75	%		1.00	%		9.52		9.72		63,079		601,774		-2.21	%		-1.96	%		3.03	%

L-23

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 BlackRock Inflation Protected Bond Fund - Standard Class
		2019			0.75	%		1.00	%	$	9.88	$	10.07		69,810	$	690,046		4.84	%		5.10	%		2.17	%
		2018			0.75	%		1.00	%		9.43		9.58		78,616		741,143		-0.72	%		-0.49	%		5.16	%
		2017			0.75	%		1.00	%		9.49		9.63		75,902		720,731		1.17	%		1.42	%		1.62	%
		2016			0.75	%		1.00	%		9.38		9.49		80,502		755,992		2.56	%		2.82	%		1.23	%
		2015			0.69	%		0.94	%		9.15		9.23		77,644		710,885		-3.73	%		-3.49	%		1.14	%
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class
		2019			0.75	%		1.00	%		13.58		14.25		116,888		1,595,087		18.74	%		19.04	%		0.70	%
		2018			0.75	%		1.00	%		11.44		11.97		116,442		1,337,879		-5.27	%		-5.03	%		0.72	%
		2017			0.75	%		1.00	%		12.07		12.61		117,506		1,424,678		24.88	%		25.19	%		0.64	%
		2016			0.75	%		1.00	%		9.67		10.07		130,333		1,265,216		-2.29	%		-2.05	%		0.40	%
		2015			0.75	%		1.00	%		9.89		10.28		159,858		1,586,727		0.33	%		0.58	%		0.00	%
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class
		2019			0.75	%		1.00	%		14.88		15.09		11,489		171,008		23.67	%		23.98	%		0.00	%
		2018			0.75	%		1.00	%		12.03		12.17		9,587		115,387		-0.64	%		-0.39	%		0.00	%
		2017			0.75	%		1.00	%		12.11		12.22		6,553		79,413		24.31	%		24.62	%		0.00	%
		2016			0.75	%		1.00	%		9.74		9.81		2,177		21,233		1.24	%		1.48	%		0.00	%
		2015			0.75	%		1.00	%		9.62		9.62		2,394		23,053		-5.15	%		-5.15	%		0.00	%
LVIP Delaware Bond Fund - Standard Class
		2019			0.75	%		1.00	%		17.85		18.56		164,242		2,937,405		8.12	%		8.39	%		3.00	%
		2018			0.75	%		1.00	%		16.51		17.12		176,354		2,915,084		-1.82	%		-1.57	%		2.99	%
		2017			0.75	%		1.00	%		16.81		17.39		199,585		3,362,696		3.33	%		3.59	%		2.71	%
		2016			0.75	%		1.00	%		16.27		16.79		238,942		3,893,446		1.70	%		1.96	%		2.26	%
		2015			0.75	%		1.00	%		16.00		16.47		271,002		4,340,416		-0.61	%		-0.36	%		2.25	%
LVIP Delaware Diversified Floating Rate Fund - Service Class
		2019			0.75	%		1.00	%		10.19		10.40		17,218		175,518		3.30	%		3.54	%		2.24	%
		2018			0.75	%		1.00	%		9.86		10.04		18,280		180,380		-0.97	%		-0.81	%		3.11	%
		2017			0.75	%		1.00	%		9.96		10.13		20,363		202,868		1.26	%		1.36	%		0.80	%
		2016			0.75	%		1.00	%		9.84		9.99		20,628		202,946		0.99	%		1.40	%		0.00	%
		2015			0.75	%		1.00	%		9.74		9.74		20,149		196,284		-1.96	%		-1.96	%		1.17	%
LVIP Delaware Social Awareness Fund - Standard Class
		2019			0.75	%		1.00	%		41.18		43.35		405,064		16,740,886		30.66	%		30.99	%		2.05	%
		2018			0.75	%		1.00	%		31.52		33.09		433,711		13,715,511		-5.51	%		-5.28	%		1.30	%
		2017			0.75	%		1.00	%		33.36		34.94		474,679		15,887,276		19.00	%		19.30	%		1.28	%
		2016			0.75	%		1.00	%		28.03		29.28		517,239		14,543,103		5.58	%		5.84	%		1.42	%
		2015			0.75	%		1.00	%		26.55		27.67		566,033		15,071,433		-1.65	%		-1.40	%		1.46	%
LVIP Delaware Wealth Builder Fund - Standard Class
		2019			0.75	%		1.00	%		21.84		22.42		20,746		453,187		14.75	%		15.04	%		3.80	%
		2018			0.75	%		1.00	%		19.03		19.03		15,545		295,900		-6.16	%		-6.16	%		3.51	%
		2017			1.00	%		1.00	%		20.28		20.28		12,116		245,760		11.17	%		11.17	%		2.09	%
		2016			1.00	%		1.00	%		18.25		18.25		22,324		407,323		4.57	%		4.57	%		1.80	%
		2015			1.00	%		1.00	%		17.45		17.45		19,011		331,712		-2.31	%		-2.31	%		1.91	%
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class
		2019			0.75	%		1.00	%		24.64		25.85		228,116		5,642,089		28.82	%		29.14	%		1.76	%
		2018			0.75	%		1.00	%		19.13		20.02		266,645		5,116,349		-8.22	%		-7.99	%		1.46	%
		2017			0.75	%		1.00	%		20.84		21.76		287,313		6,005,103		19.67	%		19.97	%		1.41	%
		2016			0.75	%		1.00	%		17.41		18.14		304,680		5,322,325		13.27	%		13.55	%		1.52	%
		2015			0.75	%		1.00	%		15.37		15.97		337,969		5,211,826		-2.98	%		-2.74	%		1.59	%
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class
		2019			1.00	%		1.00	%		10.59		10.59		6,015		63,689		11.67	%		11.67	%		1.58	%
		2018			1.00	%		1.00	%		9.48		9.48		8,976		85,104		-10.05	%		-10.05	%		1.42	%
		2017			0.75	%		1.00	%		10.54		10.64		8,261		87,079		20.20	%		20.50	%		1.57	%
		2016			0.75	%		1.00	%		8.77		8.77		5,483		48,081		1.40	%		1.40	%		1.73	%
		2015			1.00	%		1.00	%		8.65		8.65		3,433		29,685		-8.94	%		-8.94	%		1.59	%
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class
		2019			0.75	%		1.00	%		19.60		20.33		62,097		1,218,599		13.87	%		14.15	%		2.55	%
		2018			0.75	%		1.00	%		17.21		17.81		68,794		1,185,358		-5.40	%		-5.17	%		2.53	%
		2017			0.75	%		1.00	%		18.20		18.78		76,364		1,390,988		9.40	%		9.67	%		2.38	%
		2016			0.75	%		1.00	%		16.63		17.12		75,021		1,249,003		3.98	%		4.24	%		1.95	%
		2015			0.75	%		1.00	%		16.00		16.43		83,903		1,343,203		-2.97	%		-2.73	%		1.84	%

L-24

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 Global Growth Allocation Managed Risk Fund - Standard Class
		2019			0.75	%		1.00	%	$	18.33	$	19.01		219,235	$	4,025,873		14.70	%		14.99	%		2.29	%
		2018			0.75	%		1.00	%		15.98		16.53		239,271		3,829,517		-7.26	%		-7.03	%		2.38	%
		2017			0.75	%		1.00	%		17.23		17.78		256,663		4,428,996		14.48	%		14.77	%		2.29	%
		2016			0.75	%		1.00	%		15.05		15.49		271,306		4,088,600		3.71	%		3.97	%		1.66	%
		2015			0.75	%		1.00	%		14.51		14.90		319,676		4,644,203		-4.65	%		-4.41	%		1.86	%
LVIP Global Income Fund - Standard Class
		2019			0.75	%		1.00	%		13.01		13.36		17,164		223,341		5.67	%		5.94	%		2.28	%
		2018			0.75	%		1.00	%		12.31		12.61		27,351		336,765		0.89	%		1.14	%		3.91	%
		2017			0.75	%		1.00	%		12.20		12.47		20,528		250,523		4.00	%		4.26	%		0.00	%
		2016			0.75	%		1.00	%		11.73		11.96		27,092		318,100		-0.49	%		-0.25	%		0.00	%
		2015			0.75	%		1.00	%		11.79		11.79		29,623		349,496		-3.00	%		-3.00	%		3.24	%
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class
		2019			0.05	%		1.00	%		12.88		19.79		1,576,348		22,282,932		13.87	%		14.96	%		2.39	%
		2018			0.05	%		1.00	%		11.27		17.33		1,699,666		20,923,871		-6.37	%		-5.48	%		2.49	%
		2017			0.05	%		1.00	%		11.99		18.47		1,641,212		21,517,364		13.18	%		14.26	%		2.35	%
		2016			0.05	%		1.00	%		10.56		16.28		1,630,771		18,774,053		3.30	%		4.29	%		1.85	%
		2015			0.05	%		1.00	%		10.19		15.72		1,446,630		16,239,060		-4.34	%		-3.42	%		2.58	%
LVIP JPMorgan Retirement Income Fund - Standard Class
		2019			0.75	%		1.00	%		18.43		19.17		75,123		1,418,476		12.80	%		13.08	%		3.12	%
		2018			0.75	%		1.00	%		16.34		16.95		59,774		989,569		-5.48	%		-5.24	%		2.68	%
		2017			0.75	%		1.00	%		17.29		17.89		65,102		1,138,548		9.85	%		10.13	%		2.51	%
		2016			0.75	%		1.00	%		15.74		16.24		75,190		1,192,016		3.67	%		3.93	%		2.32	%
		2015			0.75	%		1.00	%		15.18		15.63		78,946		1,206,062		-1.93	%		-1.68	%		2.70	%
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class
		2019			0.75	%		1.00	%		11.93		12.10		30,385		363,034		15.01	%		15.29	%		1.31	%
		2018			0.75	%		1.00	%		10.37		10.49		26,312		273,006		-12.68	%		-12.47	%		1.41	%
		2017			0.75	%		1.00	%		11.88		11.99		22,623		268,820		13.55	%		13.84	%		1.24	%
		2016			0.75	%		1.00	%		10.46		10.53		17,667		184,878		8.92	%		9.18	%		0.47	%
		2015			0.75	%		1.00	%		9.61		9.61		26,076		250,511		-8.66	%		-8.66	%		0.83	%
LVIP Mondrian International Value Fund - Standard Class
		2019			0.75	%		1.00	%		21.46		22.31		143,908		3,118,399		17.07	%		17.36	%		3.90	%
		2018			0.75	%		1.00	%		18.33		19.01		148,817		2,751,295		-12.36	%		-12.14	%		3.12	%
		2017			0.75	%		1.00	%		20.91		21.63		149,295		3,143,240		20.13	%		20.43	%		3.28	%
		2016			0.75	%		1.00	%		17.41		17.96		162,608		2,847,099		2.98	%		3.23	%		2.64	%
		2015			0.75	%		1.00	%		16.90		17.40		188,498		3,200,059		-4.75	%		-4.51	%		2.83	%
LVIP SSGA Bond Index Fund - Standard Class
		2019			0.75	%		1.00	%		13.06		13.41		66,019		862,934		7.16	%		7.43	%		3.21	%
		2018			0.75	%		1.00	%		12.19		12.48		53,111		647,849		-1.31	%		-1.07	%		2.77	%
		2017			0.75	%		1.00	%		12.35		12.62		51,752		639,241		2.16	%		2.41	%		2.60	%
		2016			0.75	%		1.00	%		12.09		12.32		48,947		591,820		1.26	%		1.51	%		2.08	%
		2015			0.75	%		1.00	%		11.94		12.14		49,584		592,055		-0.75	%		-0.50	%		2.54	%
LVIP SSGA Emerging Markets 100 Fund - Standard Class
		2019			0.75	%		1.00	%		15.88		16.30		62,246		988,430		6.54	%		6.80	%		3.63	%
		2018			0.75	%		1.00	%		14.90		15.26		68,986		1,028,459		-13.18	%		-12.96	%		4.38	%
		2017			0.75	%		1.00	%		17.17		17.54		69,315		1,190,182		22.60	%		22.91	%		2.56	%
		2016			0.75	%		1.00	%		14.00		14.27		71,846		1,007,266		14.29	%		14.57	%		2.50	%
		2015			0.75	%		1.00	%		12.25		12.45		79,159		970,656		-17.87	%		-17.66	%		4.25	%
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class
		2019			0.75	%		1.00	%		15.97		16.56		94,775		1,515,834		14.60	%		14.89	%		2.61	%
		2018			0.75	%		1.00	%		13.93		14.41		98,464		1,373,932		-9.09	%		-8.86	%		2.85	%
		2017			0.75	%		1.00	%		15.33		15.82		101,941		1,564,389		13.67	%		13.96	%		4.03	%
		2016			0.75	%		1.00	%		13.48		13.88		115,459		1,558,913		4.57	%		4.84	%		1.78	%
		2015			0.75	%		1.00	%		12.89		13.24		125,993		1,626,464		-7.45	%		-7.22	%		2.95	%
LVIP SSGA International Index Fund - Standard Class
		2019			0.75	%		1.00	%		18.06		18.55		30,617		552,975		20.37	%		20.67	%		2.87	%
		2018			0.75	%		1.00	%		15.00		15.37		25,793		387,015		-14.56	%		-14.35	%		2.91	%
		2017			0.75	%		1.00	%		17.56		17.95		18,295		321,293		23.45	%		23.76	%		2.96	%
		2016			0.75	%		1.00	%		14.23		14.50		14,300		203,433		-0.01	%		0.24	%		2.81	%
		2015			0.75	%		1.00	%		14.23		14.47		14,173		201,693		-2.20	%		-1.96	%		2.56	%

L-25

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 International Managed Volatility Fund - Standard Class
		2019			0.75	%		1.00	%	$	12.76	$	12.85		9,825	$	125,390		17.61	%		17.90	%		2.85	%
		2018			0.75	%		1.00	%		10.85		10.90		8,200		88,978		-13.08	%		-12.90	%		2.79	%
		2017			0.75	%		1.00	%		12.48		12.52		5,147		64,257		23.03	%		23.30	%		2.50	%
		2016	12/9/16		0.75	%		1.00	%		10.15		10.15		3,998		40,571		-0.43	%		-0.42	%		1.00	%
LVIP SSGA S&P 500 Index Fund - Standard Class
		2019			0.75	%		1.00	%		25.75		26.25		4,534,311		117,002,612		29.90	%		30.22	%		1.67	%
		2018			0.75	%		1.00	%		19.83		20.16		4,971,046		98,721,226		-5.59	%		-5.36	%		1.79	%
		2017			0.75	%		1.00	%		21.00		21.30		5,374,033		113,020,936		20.37	%		20.67	%		1.85	%
		2016			0.75	%		1.00	%		17.45		17.65		5,938,000		103,721,849		10.65	%		10.92	%		1.85	%
		2015			0.75	%		1.00	%		15.77		15.91		6,410,542		101,174,438		0.17	%		0.42	%		1.84	%
LVIP SSGA Small-Cap Index Fund - Standard Class
		2019			0.75	%		1.00	%		21.39		21.80		1,207,619		25,873,093		23.79	%		24.10	%		0.95	%
		2018			0.75	%		1.00	%		17.28		17.57		1,321,514		22,865,294		-12.25	%		-12.03	%		0.94	%
		2017			0.75	%		1.00	%		19.69		19.97		1,431,731		28,226,020		13.07	%		13.35	%		0.98	%
		2016			0.75	%		1.00	%		17.42		17.62		1,593,485		27,777,094		19.48	%		19.78	%		1.28	%
		2015			0.75	%		1.00	%		14.58		14.71		1,762,892		25,715,728		-5.66	%		-5.43	%		0.89	%
LVIP T. Rowe Price 2010 Fund - Standard Class
		2019			1.00	%		1.00	%		15.38		15.38		26,542		408,207		14.58	%		14.58	%		2.93	%
		2018			1.00	%		1.00	%		13.42		13.42		33,497		449,622		-5.18	%		-5.18	%		2.16	%
		2017			1.00	%		1.00	%		14.16		14.16		33,070		468,127		8.55	%		8.55	%		1.77	%
		2016			1.00	%		1.00	%		13.04		13.04		34,374		448,270		3.40	%		3.40	%		1.71	%
		2015			1.00	%		1.00	%		12.61		12.61		44,587		562,353		-2.59	%		-2.59	%		1.93	%
LVIP T. Rowe Price 2020 Fund - Standard Class
		2019			0.75	%		1.00	%		15.27		15.76		106,583		1,631,311		17.74	%		18.04	%		2.94	%
		2018			0.75	%		1.00	%		12.97		13.35		102,578		1,333,424		-6.52	%		-6.28	%		1.70	%
		2017			0.75	%		1.00	%		13.88		14.25		131,500		1,827,841		10.91	%		11.19	%		1.76	%
		2016			0.75	%		1.00	%		12.51		12.82		159,040		1,992,170		3.41	%		3.67	%		1.60	%
		2015			0.75	%		1.00	%		12.10		12.36		204,519		2,476,908		-3.18	%		-2.94	%		1.91	%
LVIP T. Rowe Price 2030 Fund - Standard Class
		2019			0.75	%		1.00	%		15.18		15.66		322,422		4,897,286		20.93	%		21.24	%		2.46	%
		2018			0.75	%		1.00	%		12.55		12.92		334,961		4,206,456		-8.51	%		-8.28	%		1.82	%
		2017			0.75	%		1.00	%		13.72		14.09		360,838		4,951,009		12.34	%		12.62	%		1.95	%
		2016			0.75	%		1.00	%		12.21		12.51		374,363		4,573,267		2.68	%		2.94	%		1.86	%
		2015			0.75	%		1.00	%		11.89		12.15		354,950		4,222,544		-3.63	%		-3.39	%		1.77	%
LVIP T. Rowe Price 2040 Fund - Standard Class
		2019			0.75	%		1.00	%		14.55		15.02		146,547		2,134,848		23.20	%		23.51	%		2.23	%
		2018			0.75	%		1.00	%		11.81		12.16		150,928		1,784,326		-9.63	%		-9.40	%		1.77	%
		2017			0.75	%		1.00	%		13.07		13.42		136,361		1,781,962		13.49	%		13.79	%		1.99	%
		2016			0.75	%		1.00	%		11.51		11.79		147,627		1,699,884		2.78	%		3.04	%		1.83	%
		2015			0.75	%		1.00	%		11.20		11.45		143,308		1,605,682		-4.19	%		-3.95	%		1.69	%
LVIP T. Rowe Price 2050 Fund - Standard Class
		2019			1.00	%		1.00	%		14.89		14.89		119,658		1,781,890		23.91	%		23.91	%		2.31	%
		2018			1.00	%		1.00	%		12.02		12.02		91,484		1,099,460		-9.38	%		-9.38	%		1.91	%
		2017			1.00	%		1.00	%		13.26		13.26		72,662		963,677		15.94	%		15.94	%		2.23	%
		2016			1.00	%		1.00	%		11.44		11.44		55,235		631,833		3.38	%		3.38	%		2.06	%
		2015			1.00	%		1.00	%		11.07		11.07		38,835		429,730		-4.70	%		-4.70	%		2.00	%
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class
		2019			0.75	%		1.00	%		44.14		46.46		536,674		23,785,568		36.03	%		36.37	%		0.17	%
		2018			0.75	%		1.00	%		32.45		34.07		570,133		18,567,329		-4.04	%		-3.80	%		0.38	%
		2017			0.75	%		1.00	%		33.81		35.41		590,506		20,032,741		23.50	%		23.81	%		0.20	%
		2016			0.75	%		1.00	%		27.38		28.60		636,474		17,479,698		6.49	%		6.75	%		0.27	%
		2015			0.75	%		1.00	%		25.71		26.79		718,249		18,515,932		1.09	%		1.34	%		0.12	%
Neuberger Berman AMT Large Cap Value Portfolio - I Class
		2019			0.00	%		0.00	%		—		—		—		—		0.00	%		0.00	%		1.99	%
		2018			0.75	%		1.00	%		29.06		30.51		155,853		4,548,150		-2.02	%		-1.78	%		1.14	%
		2017			0.75	%		1.00	%		29.66		31.06		182,155		5,421,035		12.23	%		12.51	%		0.58	%
		2016			0.75	%		1.00	%		26.43		27.61		208,670		5,530,042		26.10	%		26.41	%		0.73	%
		2015			0.75	%		1.00	%		20.96		21.84		207,472		4,359,911		-12.68	%		-12.46	%		0.74	%

L-26

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)
Neuberger Berman AMT Sustainable Equity Portfolio - I Class
		2019	4/29/19		0.75	%		1.00	%	$	10.93	$	10.95		444,546	$	4,860,849		8.79	%		8.98	%		0.41	%
T. Rowe Price International Stock Portfolio
		2019			0.75	%		1.00	%		27.71		29.17		322,849		8,974,514		26.50	%		26.82	%		2.38	%
		2018			0.75	%		1.00	%		21.91		23.00		349,531		7,680,643		-15.06	%		-14.84	%		1.28	%
		2017			0.75	%		1.00	%		25.79		27.01		389,279		10,066,206		26.61	%		26.93	%		1.11	%
		2016			0.75	%		1.00	%		20.37		21.28		413,387		8,441,756		1.11	%		1.36	%		0.95	%
		2015			0.75	%		1.00	%		20.15		20.99		469,356		9,479,699		-1.89	%		-1.64	%		0.90	%

(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.

(2)  These amounts represent the annualized minimum and maximum contract expenses of the separate account, consisting primarily of mortality and expense charges, for only those subaccounts which contain investments as of the respective year end. 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.

4. Purchases and Sales of Investments

The aggregate cost of investments purchased and the aggregate proceeds from investments sold were as follows for 2019:

Subaccount	Aggregate Cost of Purchases		Aggregate Proceeds from Sales
AB VPS Global Thematic Growth Portfolio - Class B	$	209,267	$	175,470
AB VPS Growth Portfolio - Class B		746,169		2,676,755
AB VPS Large Cap Growth Portfolio - Class B		3,302,347		379,521
American Century VP Balanced Fund - Class I		667,659		1,840,139
American Funds Global Growth Fund - Class 2		919,966		1,246,152
American Funds Growth Fund - Class 2		3,846,165		4,136,545
American Funds Growth-Income Fund - Class 2		2,552,947		2,449,632
American Funds International Fund - Class 2		546,862		1,333,834
BlackRock Global Allocation V.I. Fund - Class I		186,885		320,218
Delaware VIP® Diversified Income Series - Standard Class		520,453		966,348
Delaware VIP® High Yield Series - Standard Class		538,284		633,450

L-27

Lincoln National Variable Annuity Account L

Notes to financial statements (continued)

4. Purchases and Sales of Investments (continued)

Subaccount	Aggregate Cost of Purchases		Aggregate Proceeds from Sales
Delaware VIP® REIT Series - Service Class	$	285,779	$	1,395,401
Delaware VIP® Small Cap Value Series - Service Class		933,714		1,426,925
Delaware VIP® Smid Cap Core Series - Service Class		461,832		991,170
DWS Alternative Asset Allocation VIP Portfolio - Class A		33,569		51,347
Fidelity® VIP Asset Manager Portfolio - Initial Class		1,770,173		3,050,748
Fidelity® VIP Contrafund® Portfolio - Service Class 2		2,874,113		2,630,194
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		54,453		478
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		142,720		16,992
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		223,131		115,602
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		214,634		221,217
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		61,694		845
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		50,503		11,000
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		164,967		12,446
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		1,601		2
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		187		—
Fidelity® VIP Government Money Market Portfolio - Initial Class		154,533		97,689
Fidelity® VIP Growth Portfolio - Initial Class		5,975,825		11,124,582
Janus Henderson Global Research Portfolio - Institutional Shares		635,196		1,189,727
LVIP Baron Growth Opportunities Fund - Service Class		1,267,341		2,372,578
LVIP BlackRock Advantage Allocation Fund - Standard Class		39,144		82,283
LVIP BlackRock Global Real Estate Fund - Standard Class		56,376		188,034
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		178,434		255,684
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		168,391		100,709
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		58,773		18,958
LVIP Delaware Bond Fund - Standard Class		388,668		511,977
LVIP Delaware Diversified Floating Rate Fund - Service Class		100,256		108,782
LVIP Delaware Social Awareness Fund - Standard Class		1,297,928		1,427,973
LVIP Delaware Wealth Builder Fund - Standard Class		209,781		70,291
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		421,007		963,914
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		19,899		48,276
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		103,847		162,185
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		369,163		480,626
LVIP Global Income Fund - Standard Class		21,166		146,124
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		5,772,126		5,940,976
LVIP JPMorgan Retirement Income Fund - Standard Class		541,544		243,355
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		164,865		115,656
LVIP Mondrian International Value Fund - Standard Class		502,006		445,767
LVIP SSGA Bond Index Fund - Standard Class		559,573		381,613
LVIP SSGA Emerging Markets 100 Fund - Standard Class		121,764		198,904
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		117,030		127,355
LVIP SSGA International Index Fund - Standard Class		113,893		25,438
LVIP SSGA International Managed Volatility Fund - Standard Class		100,761		79,029
LVIP SSGA S&P 500 Index Fund - Standard Class		6,661,563		11,799,354
LVIP SSGA Small-Cap Index Fund - Standard Class		1,581,671		2,641,669
LVIP T. Rowe Price 2010 Fund - Standard Class		97,978		120,678
LVIP T. Rowe Price 2020 Fund - Standard Class		621,679		270,480
LVIP T. Rowe Price 2030 Fund - Standard Class		1,014,775		492,783
LVIP T. Rowe Price 2040 Fund - Standard Class		542,787		297,608
LVIP T. Rowe Price 2050 Fund - Standard Class		706,182		154,004
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		2,505,523		2,424,297
Neuberger Berman AMT Large Cap Value Portfolio - I Class		1,135,009		5,122,632
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		5,194,676		489,325
T. Rowe Price International Stock Portfolio		695,406		888,711

L-28

Lincoln National Variable Annuity Account L

Notes to financial statements (continued)

5. Investments

The following is a summary of investments owned at December 31, 2019:

Subaccount	Shares Owned		Net Asset Value		Fair Value of Shares		Cost of Shares
AB VPS Global Thematic Growth Portfolio - Class B		63,058	$	32.19	$	2,029,831	$	1,329,482
AB VPS Large Cap Growth Portfolio - Class B		50,314		57.28		2,882,013		2,892,544
American Century VP Balanced Fund - Class I		1,612,796		8.18		13,192,668		11,318,620
American Funds Global Growth Fund - Class 2		228,298		32.24		7,360,327		5,860,854
American Funds Growth Fund - Class 2		409,398		80.57		32,985,214		25,898,350
American Funds Growth-Income Fund - Class 2		316,376		50.08		15,844,128		13,788,462
American Funds International Fund - Class 2		424,487		20.78		8,820,850		7,850,701
BlackRock Global Allocation V.I. Fund - Class I		95,181		17.12		1,629,501		1,559,728
Delaware VIP® Diversified Income Series - Standard Class		384,062		10.71		4,113,303		3,971,084
Delaware VIP® High Yield Series - Standard Class		353,229		5.08		1,794,403		1,858,902
Delaware VIP® REIT Series - Service Class		594,615		14.66		8,717,062		7,794,579
Delaware VIP® Small Cap Value Series - Service Class		209,354		38.06		7,968,017		7,081,181
Delaware VIP® Smid Cap Core Series - Service Class		258,566		21.28		5,502,290		5,968,982
DWS Alternative Asset Allocation VIP Portfolio - Class A		14,984		13.35		200,030		199,405
Fidelity® VIP Asset Manager Portfolio - Initial Class		1,993,657		15.23		30,363,400		28,897,668
Fidelity® VIP Contrafund® Portfolio - Service Class 2		668,405		36.10		24,129,405		19,454,309
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		8,035		13.92		111,844		106,692
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		16,286		15.21		247,708		236,462
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		20,674		15.19		314,033		294,903
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		28,965		24.17		700,075		647,927
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		8,201		22.95		188,206		172,039
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		4,356		22.93		99,884		93,551
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		12,972		20.57		266,837		246,005
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		151		10.97		1,660		1,599
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		17		10.98		190		187
Fidelity® VIP Government Money Market Portfolio - Initial Class		94,105		1.00		94,105		94,106
Fidelity® VIP Growth Portfolio - Initial Class		1,186,564		79.09		93,845,360		55,643,975
Janus Henderson Global Research Portfolio - Institutional Shares		155,440		56.59		8,796,357		5,968,108
LVIP Baron Growth Opportunities Fund - Service Class		304,645		60.14		18,321,342		10,270,072
LVIP BlackRock Advantage Allocation Fund - Standard Class		25,274		12.47		315,197		358,201
LVIP BlackRock Global Real Estate Fund - Standard Class		34,027		9.77		332,443		307,730
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		68,675		10.05		690,046		721,786
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		42,726		37.33		1,595,087		1,058,997
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		9,972		17.15		171,008		151,924
LVIP Delaware Bond Fund - Standard Class		214,378		13.70		2,937,405		2,904,570
LVIP Delaware Diversified Floating Rate Fund - Service Class		17,554		10.00		175,518		177,833
LVIP Delaware Social Awareness Fund - Standard Class		406,786		41.15		16,740,886		14,634,972
LVIP Delaware Wealth Builder Fund - Standard Class		38,367		11.81		453,187		495,285
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		162,606		34.70		5,642,089		5,032,479
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		1,797		35.45		63,689		59,927
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		86,346		14.11		1,218,599		1,105,126
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		276,483		14.56		4,025,873		3,392,628
LVIP Global Income Fund - Standard Class		19,384		11.52		223,341		220,097
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		1,497,912		14.88		22,282,932		21,186,183
LVIP JPMorgan Retirement Income Fund - Standard Class		112,918		12.56		1,418,476		1,484,974
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		20,754		17.49		363,034		334,300
LVIP Mondrian International Value Fund - Standard Class		183,846		16.96		3,118,399		3,262,207
LVIP SSGA Bond Index Fund - Standard Class		75,300		11.46		862,934		861,482
LVIP SSGA Emerging Markets 100 Fund - Standard Class		115,188		8.58		988,430		1,119,065
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		123,560		12.27		1,515,834		1,392,031
LVIP SSGA International Index Fund - Standard Class		56,180		9.84		552,975		514,263
LVIP SSGA International Managed Volatility Fund - Standard Class		12,659		9.91		125,390		119,216
LVIP SSGA S&P 500 Index Fund - Standard Class		5,574,473		20.99		117,002,612		73,990,062
LVIP SSGA Small-Cap Index Fund - Standard Class		816,392		31.69		25,873,093		20,185,966
LVIP T. Rowe Price 2010 Fund - Standard Class		42,001		9.72		408,207		450,925
LVIP T. Rowe Price 2020 Fund - Standard Class		162,319		10.05		1,631,311		1,755,277
LVIP T. Rowe Price 2030 Fund - Standard Class		453,957		10.79		4,897,286		4,860,677
LVIP T. Rowe Price 2040 Fund - Standard Class		207,468		10.29		2,134,848		2,158,975

L-29

Lincoln National Variable Annuity Account L

Notes to financial statements (continued)

5. Investments (continued)

Subaccount	Shares Owned		Net Asset Value		Fair Value of Shares		Cost of Shares
LVIP T. Rowe Price 2050 Fund - Standard Class		164,411	$	10.84	$	1,781,890	$	1,722,315
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		800,403		29.72		23,785,568		14,836,060
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		180,768		26.89		4,860,849		4,704,260
T. Rowe Price International Stock Portfolio		574,553		15.62		8,974,514		7,945,962

6. Changes in Units Outstanding

The change in units outstanding for the year ended December 31, 2019, is as follows:

Subaccount	Units Issued		Units Redeemed			Net Increase (Decrease)
AB VPS Global Thematic Growth Portfolio - Class B		13,125		(20,479	)		(7,354	)
AB VPS Growth Portfolio - Class B		11,166		(124,192	)		(113,026	)
AB VPS Large Cap Growth Portfolio - Class B		294,852		(36,797	)		258,055
American Century VP Balanced Fund - Class I		4,297		(33,983	)		(29,686	)
American Funds Global Growth Fund - Class 2		14,142		(35,075	)		(20,933	)
American Funds Growth Fund - Class 2		16,624		(149,375	)		(132,751	)
American Funds Growth-Income Fund - Class 2		27,621		(81,020	)		(53,399	)
American Funds International Fund - Class 2		13,599		(70,029	)		(56,430	)
BlackRock Global Allocation V.I. Fund - Class I		8,108		(19,409	)		(11,301	)
Delaware VIP® Diversified Income Series - Standard Class		21,838		(49,399	)		(27,561	)
Delaware VIP® High Yield Series - Standard Class		20,495		(29,701	)		(9,206	)
Delaware VIP® REIT Series - Service Class		3,583		(30,635	)		(27,052	)
Delaware VIP® Small Cap Value Series - Service Class		9,085		(44,528	)		(35,443	)
Delaware VIP® Smid Cap Core Series - Service Class		6,368		(42,124	)		(35,756	)
DWS Alternative Asset Allocation VIP Portfolio - Class A		1,965		(3,719	)		(1,754	)
Fidelity® VIP Asset Manager Portfolio - Initial Class		1,826		(57,225	)		(55,399	)
Fidelity® VIP Contrafund® Portfolio - Service Class 2		8,913		(82,099	)		(73,186	)
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		4,631		—			4,631
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		12,485		(1,493	)		10,992
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		19,889		(10,390	)		9,499
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		18,539		(21,033	)		(2,494	)
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		5,258		(45	)		5,213
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		4,410		(997	)		3,413
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		14,876		(1,126	)		13,750
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		153		—			153
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		18		—			18
Fidelity® VIP Government Money Market Portfolio - Initial Class		8,223		(5,247	)		2,976
Fidelity® VIP Growth Portfolio - Initial Class		3,213		(90,708	)		(87,495	)
Janus Henderson Global Research Portfolio - Institutional Shares		2,863		(45,143	)		(42,280	)
LVIP Baron Growth Opportunities Fund - Service Class		10,464		(28,572	)		(18,108	)
LVIP BlackRock Advantage Allocation Fund - Standard Class		923		(4,165	)		(3,242	)
LVIP BlackRock Global Real Estate Fund - Standard Class		3,175		(16,519	)		(13,344	)
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		17,108		(25,914	)		(8,806	)
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		8,112		(7,666	)		446
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		3,240		(1,338	)		1,902
LVIP Delaware Bond Fund - Standard Class		16,933		(29,045	)		(12,112	)
LVIP Delaware Diversified Floating Rate Fund - Service Class		9,600		(10,662	)		(1,062	)
LVIP Delaware Social Awareness Fund - Standard Class		7,379		(36,026	)		(28,647	)
LVIP Delaware Wealth Builder Fund - Standard Class		8,614		(3,413	)		5,201
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		3,307		(41,836	)		(38,529	)
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		1,902		(4,863	)		(2,961	)
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		1,804		(8,501	)		(6,697	)
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		7,383		(27,419	)		(20,036	)
LVIP Global Income Fund - Standard Class		1,338		(11,525	)		(10,187	)
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		340,450		(463,768	)		(123,318	)
LVIP JPMorgan Retirement Income Fund - Standard Class		29,059		(13,710	)		15,349
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		14,046		(9,973	)		4,073
LVIP Mondrian International Value Fund - Standard Class		16,841		(21,750	)		(4,909	)
LVIP SSGA Bond Index Fund - Standard Class		42,126		(29,218	)		12,908
LVIP SSGA Emerging Markets 100 Fund - Standard Class		6,155		(12,895	)		(6,740	)

L-30

Lincoln National Variable Annuity Account L

Notes to financial statements (continued)

6. Changes in Units Outstanding (continued)

Subaccount	Units Issued		Units Redeemed			Net Increase (Decrease)
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		4,492		(8,181	)		(3,689	)
LVIP SSGA International Index Fund - Standard Class		6,238		(1,414	)		4,824
LVIP SSGA International Managed Volatility Fund - Standard Class		8,064		(6,439	)		1,625
LVIP SSGA S&P 500 Index Fund - Standard Class		32,012		(468,747	)		(436,735	)
LVIP SSGA Small-Cap Index Fund - Standard Class		9,306		(123,201	)		(113,895	)
LVIP T. Rowe Price 2010 Fund - Standard Class		1,396		(8,351	)		(6,955	)
LVIP T. Rowe Price 2020 Fund - Standard Class		22,969		(18,964	)		4,005
LVIP T. Rowe Price 2030 Fund - Standard Class		21,550		(34,089	)		(12,539	)
LVIP T. Rowe Price 2040 Fund - Standard Class		17,046		(21,427	)		(4,381	)
LVIP T. Rowe Price 2050 Fund - Standard Class		39,156		(10,982	)		28,174
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		24,204		(57,663	)		(33,459	)
Neuberger Berman AMT Large Cap Value Portfolio - I Class		950		(156,803	)		(155,853	)
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		491,752		(47,206	)		444,546
T. Rowe Price International Stock Portfolio		7,517		(34,199	)		(26,682	)

The change in units outstanding for the year ended December 31, 2018, is as follows:

Subaccount	Units Issued		Units Redeemed			Net Increase (Decrease)
AB VPS Global Thematic Growth Portfolio - Class B		46,431		(88,355	)		(41,924	)
AB VPS Growth Portfolio - Class B		23,050		(12,636	)		10,414
American Century VP Balanced Fund - Class I		4,773		(22,185	)		(17,412	)
American Funds Global Growth Fund - Class 2		21,074		(30,833	)		(9,759	)
American Funds Growth Fund - Class 2		35,045		(154,205	)		(119,160	)
American Funds Growth-Income Fund - Class 2		46,355		(49,177	)		(2,822	)
American Funds International Fund - Class 2		34,808		(75,165	)		(40,357	)
BlackRock Global Allocation V.I. Fund - Class I		8,464		(10,632	)		(2,168	)
Delaware VIP® Diversified Income Series - Standard Class		22,078		(28,532	)		(6,454	)
Delaware VIP® High Yield Series - Standard Class		5,977		(20,898	)		(14,921	)
Delaware VIP® REIT Series - Service Class		6,442		(44,375	)		(37,933	)
Delaware VIP® Small Cap Value Series - Service Class		14,205		(46,733	)		(32,528	)
Delaware VIP® Smid Cap Core Series - Service Class		16,140		(24,472	)		(8,332	)
DWS Alternative Asset Allocation VIP Portfolio - Class A		2,316		(876	)		1,440
Fidelity® VIP Asset Manager Portfolio - Initial Class		5,158		(66,060	)		(60,902	)
Fidelity® VIP Contrafund® Portfolio - Service Class 2		30,940		(69,529	)		(38,589	)
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		7,540		(2,245	)		5,295
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		11,093		(283	)		10,810
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		17,865		(67	)		17,798
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		60,202		(8,280	)		51,922
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		11,081		(832	)		10,249
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		2,989		(417	)		2,572
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		8,899		(1,516	)		7,383
Fidelity® VIP Government Money Market Portfolio - Initial Class		5,675		(6,412	)		(737	)
Fidelity® VIP Growth Portfolio - Initial Class		13,651		(83,391	)		(69,740	)
Janus Henderson Global Research Portfolio - Institutional Shares		4,471		(33,176	)		(28,705	)
LVIP Baron Growth Opportunities Fund - Service Class		9,860		(19,616	)		(9,756	)
LVIP BlackRock Advantage Allocation Fund - Standard Class		1,477		(655	)		822
LVIP BlackRock Global Real Estate Fund - Standard Class		4,122		(6,865	)		(2,743	)
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		14,253		(11,539	)		2,714
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		6,401		(7,465	)		(1,064	)
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		7,603		(4,569	)		3,034
LVIP Delaware Bond Fund - Standard Class		13,665		(36,896	)		(23,231	)
LVIP Delaware Diversified Floating Rate Fund - Service Class		2,954		(5,037	)		(2,083	)
LVIP Delaware Social Awareness Fund - Standard Class		5,181		(46,149	)		(40,968	)
LVIP Delaware Wealth Builder Fund - Standard Class		4,249		(820	)		3,429
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		7,877		(28,545	)		(20,668	)
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		2,373		(1,658	)		715
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		4,934		(12,504	)		(7,570	)
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		8,099		(25,491	)		(17,392	)
LVIP Global Income Fund - Standard Class		9,947		(3,124	)		6,823
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		302,339		(243,885	)		58,454
LVIP JPMorgan Retirement Income Fund - Standard Class		2,438		(7,766	)		(5,328	)

L-31

Lincoln National Variable Annuity Account L

Notes to financial statements (continued)

6. Changes in Units Outstanding (continued)

Subaccount	Units Issued		Units Redeemed			Net Increase (Decrease)
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		6,143		(2,454	)		3,689
LVIP Mondrian International Value Fund - Standard Class		10,324		(10,802	)		(478	)
LVIP SSGA Bond Index Fund - Standard Class		10,661		(9,302	)		1,359
LVIP SSGA Emerging Markets 100 Fund - Standard Class		14,389		(14,718	)		(329	)
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		4,401		(7,878	)		(3,477	)
LVIP SSGA International Index Fund - Standard Class		9,243		(1,745	)		7,498
LVIP SSGA International Managed Volatility Fund - Standard Class		4,133		(1,080	)		3,053
LVIP SSGA S&P 500 Index Fund - Standard Class		56,963		(459,950	)		(402,987	)
LVIP SSGA Small-Cap Index Fund - Standard Class		21,789		(132,006	)		(110,217	)
LVIP T. Rowe Price 2010 Fund - Standard Class		1,978		(1,551	)		427
LVIP T. Rowe Price 2020 Fund - Standard Class		11,326		(40,248	)		(28,922	)
LVIP T. Rowe Price 2030 Fund - Standard Class		37,404		(63,281	)		(25,877	)
LVIP T. Rowe Price 2040 Fund - Standard Class		26,162		(11,595	)		14,567
LVIP T. Rowe Price 2050 Fund - Standard Class		22,350		(3,528	)		18,822
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		18,732		(39,105	)		(20,373	)
Neuberger Berman AMT Large Cap Value Portfolio - I Class		3,694		(29,996	)		(26,302	)
T. Rowe Price International Stock Portfolio		9,173		(48,921	)		(39,748	)

7. Subsequent Events

Management evaluated subsequent events through the date these financial statements were issued.

The worldwide coronavirus, or COVID-19, outbreak in the first quarter of 2020 has led to an extreme downturn and volatility of the financial markets and wide-ranging changes in consumer behavior. As the economic and regulatory environment continues to evolve, we cannot reasonably estimate the length or severity of this event or the impact to Separate Account performance and financial results. However, in general, a deterioration in general economic and business conditions can have a negative impact on individual unit values and could cause a net decrease in net assets resulting from operations of the separate account.

Management identified no other items or events required for disclosure.

L-32

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of The Lincoln National Life Insurance Company
and

Contract Owners of Lincoln National Variable Annuity Account L

Opinion on the Financial Statements

We have audited the accompanying statements of assets and liabilities of each of the subaccounts listed in the Appendix that comprise Lincoln National Variable Annuity Account L ("Variable Account"), as of December 31, 2019, the related statements of operations and the statements of changes in net assets for each of the periods indicated in the Appendix, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of each subaccount as of December 31, 2019, the results of its operations and changes in its net assets for each of the periods indicated in the Appendix, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Variable Account's management. Our responsibility is to express an opinion on each of the subaccounts' financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Variable Account in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the fund companies or their transfer agents, as applicable. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Ernst & Young

We have served as the Variable Account's Auditor since 1996.
Philadelphia, Pennsylvania
April 23, 2020

L-33

Subaccount	Statements of Assets and Liabilities	Statements of Operations	Statements of Changes in Net Assets
AB VPS Global Thematic Growth Portfolio - Class B	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
AB VPS Growth Portfolio - Class B	N/A - the fund ceased to be available as an investment option to Variable Account contract owners during 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019 (the fund ceased to be available as an investment option to Variable Account contract owners during 2019)
AB VPS Large Cap Growth Portfolio - Class B	As of December 31, 2019	For the period from April 26, 2019 through December 31, 2019	For the period from April 26, 2019 through December 31, 2019
American Century VP Balanced Fund - Class I	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
American Funds Global Growth Fund - Class 2	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
American Funds Growth Fund - Class 2	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
American Funds Growth-Income Fund - Class 2	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
American Funds International Fund - Class 2	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
BlackRock Global Allocation V.I. Fund - Class I	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Delaware VIP® Diversified Income Series - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Delaware VIP® High Yield Series - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Delaware VIP® REIT Series - Service Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Delaware VIP® Small Cap Value Series - Service Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Delaware VIP® Smid Cap Core Series - Service Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
DWS Alternative Asset Allocation VIP Portfolio - Class A	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Fidelity® VIP Asset Manager Portfolio - Initial Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Fidelity® VIP Contrafund® Portfolio - Service Class 2	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2	As of December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019 and the period from January 16, 2018 (commencement of operations) through December 31, 2018
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2	As of December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019 and the period from January 11, 2018 (commencement of operations) through December 31, 2018
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2	As of December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019 and the period from March 6, 2018 (commencement of operations) through December 31, 2018

L-34

Subaccount	Statements of Assets and Liabilities	Statements of Operations	Statements of Changes in Net Assets
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2	As of December 31, 2019	For the period from June 24, 2019 through December 31, 2019	For the period from June 24, 2019 through December 31, 2019
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2	As of December 31, 2019	For the period from November 18, 2019 through December 31, 2019	For the period from November 18, 2019 through December 31, 2019
Fidelity® VIP Government Money Market Portfolio - Initial Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Fidelity® VIP Growth Portfolio - Initial Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Janus Henderson Global Research Portfolio - Institutional Shares	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Baron Growth Opportunities Fund - Service Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP BlackRock Advantage Allocation Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP BlackRock Global Real Estate Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP BlackRock Inflation Protected Bond Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Delaware Bond Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Delaware Diversified Floating Rate Fund - Service Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Delaware Social Awareness Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Delaware Wealth Builder Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Global Growth Allocation Managed Risk Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019

L-35

Subaccount	Statements of Assets and Liabilities	Statements of Operations	Statements of Changes in Net Assets
LVIP Global Income Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP JPMorgan Retirement Income Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP Mondrian International Value Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP SSGA Bond Index Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP SSGA Emerging Markets 100 Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP SSGA International Index Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP SSGA International Managed Volatility Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP SSGA S&P 500 Index Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP SSGA Small-Cap Index Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP T. Rowe Price 2010 Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP T. Rowe Price 2020 Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP T. Rowe Price 2030 Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP T. Rowe Price 2040 Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP T. Rowe Price 2050 Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019
Neuberger Berman AMT Large Cap Value Portfolio - I Class	N/A - the fund ceased to be available as an investment option to Variable Account contract owners during 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019 (the fund ceased to be available as an investment option to Variable Account contract owners during 2019)
Neuberger Berman AMT Sustainable Equity Portfolio - I Class	As of December 31, 2019	For the period from April 29, 2019 through December 31, 2019	For the period from April 29, 2019 through December 31, 2019
T. Rowe Price International Stock Portfolio	As of December 31, 2019	For the year ended December 31, 2019	For each of the two years in the period ended December 31, 2019

L-36

Lincoln National Variable Annuity Account L

PART C - OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) List of Financial Statements

1. Part A

The Table of Condensed Financial Information is included in Part A of this Registration Statement.

2. Part B

The following financial statements for the Variable Account are included in Part B of this Registration Statement:

Statement of Assets and Liabilities - December 31, 2019

Statement of Operations - Year ended December 31, 2019

Statements of Changes in Net Assets - Years ended December 31, 2019 and 2018

Notes to Financial Statements - December 31, 2019

Report of Independent Registered Public Accounting Firm

3. Part B

The following consolidated financial statements for The Lincoln National Life Insurance Company are included in Part B of this Registration Statement:

Consolidated Balance Sheets - Years ended December 31, 2019 and 2018

Consolidated Statements of Comprehensive Income (Loss) - Years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Stockholder’s Equity - Years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Cash Flows - Years ended December 31, 2019, 2018 and 2017

Notes to Consolidated Financial Statements - December 31, 2019

Report of Independent Registered Public Accounting Firm

(b) List of Exhibits

(1)(a) Resolution of Board of Directors of The Lincoln National Life Insurance Company authorizing establishment of the Variable Account incorporated herein by reference to Pre-Effective Amendment No. 1 (File No. 333-04999) filed on September 25, 1996.

(b) Amendment dated December 2, 1996 to Resolution of Board of Directors of The Lincoln National Life Insurance Company authorizing establishment of the Variable Account incorporated herein by reference to Post-Effective Amendment No. 2 (File No. 333-04999) filed on April 30, 1998.

(2) Not Applicable.

(3)(a) Broker-Dealer Sales Agreement incorporated herein by reference to Pre-Effective Amendment No. 1 (File No. 333-04999) filed on September 25, 1996.

(b) Amended and Restated Principal Underwriting Agreement dated May 1, 2007 between The Lincoln National Life Insurance Company and Lincoln Financial Distributors, Inc. incorporated herein by reference to Post-Effective Amendment No. 24 (File No. 333-61554) filed on December 18, 2007.

(4)(a) Group Variable Annuity I Contract incorporated herein by reference to Post-Effective Amendment No. 7 (File No. 333-05827) filed on April 26, 2000.

(b) Group Variable Annuity II Contract incorporated herein by reference to Post-Effective Amendment No. 7 (File No. 333-05827) filed on April 26, 2000.

(c) Group Variable Annuity III Contract incorporated herein by reference to Post-Effective Amendment No. 7 (File No. 333-05827) filed on April 26, 2000.

(d) Endorsement to Group Annuity Contracts incorporated herein by reference to Post-Effective Amendment No. 7 (File No. 333-05827) filed on April 26, 2000.

(e) Group Annuity Amendment to Group Annuity Contracts incorporated herein by reference to Post-Effective Amendment No. 7 (File No. 333-05827) filed on April 26, 2000.

(f) Endorsement to Certificate incorporated herein by reference to Post-Effective Amendment No. 7 (File No. 333-05827) filed on April 26, 2000.

(g) Section 403(b) Annuity Amendment incorporated herein by reference to Post-Effective Amendment No. 10 (File No. 333-05827) filed on April 9, 2002.

(h) Group Annuity Amendment incorporated herein by reference to Post-Effective Amendment No. 10 (File No. 333-05827) filed on April 9, 2002.

(i) Qualified Individual Retirement Annuity Rider incorporated herein by reference to Post-Effective Amendment No. 12 (File No. 333-05827) filed on April 6, 2004.

(j) Section 403(b) Annuity Endorsement (32481-G-12/08) incorporated herein by reference to Post-Effective Amendment No. 14 (File No. 333-43373) filed on April 7, 2009.

(5)(a) Application for Group Annuity Contract incorporated herein by reference to Post-Effective Amendment No. 7 (File No. 333-05827) filed on April 26, 2000.

(b) Participant Enrollment Form incorporated herein by reference to Post-Effective Amendment No. 7 (File No. 333-05827) filed on April 26, 2000.

(6)(a) Articles of Incorporation of The Lincoln National Life Insurance Company incorporated herein by reference to Pre-Effective Amendment No. 1 (File No. 333-04999) filed on September 25, 1996.

(b) By-Laws of The Lincoln National Life Insurance Company incorporated herein by reference to Post- Effective Amendment No. 3 on Form N-6 (File No. 333-118478) filed on April 5, 2007.

(7) Not Applicable.

(8)(a) Accounting and Financial Administration Services Agreement dated January 1, 2019 among State Street Bank and Trust Company, The Lincoln National Life Insurance Company and Lincoln Life & Annuity Company of New York is incorporated herein by reference to Post-Effective Amendment No. 36 on Form N-6 (File No. 333-125790) filed on April 12, 2019.

(b) Fund Participation Agreements and Amendments between The Lincoln National Life Insurance Company and:

(i) AllianceBernstein Variable Products Series Fund incorporated herein by reference to Po st-Effective Amendment No. 23 on Form N-6 (File No. 333-146507) filed on April 1, 2015 .

(ii) American Century Investment Services, Inc. incorporated herein by reference to Post-Effective Amendment No. 34 on Form N-6 (File No. 333-125790) filed on April 9, 2018.

(iii) American Funds Insurance Series incorporated herein by reference to Post-Effective Amendment No. 26 on Form N-6 (File No. 333-146507) filed on April 3, 2017;

(iii-a) amendment no. 15 incorporated herein by reference to Post-Effective Amendment No. 27 on Form N-4 (File No. 333-181615) filed on April 3, 2020.

(iv) BlackRock Variable Series Funds, Inc. and BlackRock Variable Series Funds II, Inc. incorporated herein by reference to Post-Effective Amendment No. 16 on Form N-6 (File No. 333-146507) filed on April 1, 2011;

(iv-a) amendments incorporated herein by reference to Post-Effective Amendment No. 36 on Form N-6 (File No. 333-125790) filed on April 12, 2019.

(v) Delaware VIP Trust incorporated herein by reference to Post-Effective Amendment No. 23 on Form N-6 (File No. 333-146507) filed on April 1, 2015.

(vi) Deutsche DWS Variable Series II incorporated herein by reference to Post-Effective Amendment No. 23 on Form N-6 (File No. 333-146507) filed on April 1, 2015.

(vii) Fidelity Variable Insurance Products Fund incorporated herein by reference to Post-Effective Amendment No. 34 on Form N-6 (File No. 333-125790) filed on April 9, 2018.

(viii) Janus Aspen Series incorporated herein by reference to Post-Effective Amendment No. 13 on Form N-6 (File No. 333-146507) filed on April 1, 2010.

(ix) Lincoln Variable Insurance Products Trust incorporated herein by reference to Post-Effective Amendment No. 24 on Form N-6 (File No. 333-146507) filed on April 1, 2016.

(x) Neuberger Berman Advisers Management Trust incorporated herein by reference to Post-Effective Amendment No. 38 on Form N-6 (File No. 333-125790) filed on April 8, 2020.

B-2

(xi)(a) T. Rowe Price International Series Inc. and T. Rowe Price Investment Services Inc. incorporated herein by reference to Pre-Effective Amendment No. 1 (File No. 333-04999) filed on September 25, 1996 (Fund Participation Agreement).

(b) T. Rowe Price International Series Inc. and T. Rowe Price Investment Services Inc. (Amendment) incorporated herein by reference to Post-Effective Amendment No. 11 (File No. 333-05827) filed on April 3, 2003.

(c) T. Rowe Price International Series Inc. and T. Rowe Price Investment Services Inc. (Amendment No. 3) incorporated herein by reference to Post-Effective Amendment No. 21 (File No. 333-04999) filed on April 6, 2011.

(d) T. Rowe Price International Series Inc. and T. Rowe Price Investment Services Inc. (Amendment No. 4 dated October 10, 2011) incorporated herein by reference to Post-Effective Amendment No. 22 (File No. 333-04999) filed on April 6, 2012.

(e) T. Rowe Price International Series Inc. and T. Rowe Price Investment Services Inc. (Amendment No. 6 dated March 24, 2014) incorporated herein by reference to Post-Effective Amendment No. 28 on Form N-6 (File No. 333-125790) filed on April 1, 2015.

(c) Rule 22c-2 Agreements between The Lincoln National Life Insurance Company and:

(i) American Century Variable Products incorporated herein by reference to Post-Effective Amendment No. 29 (File No. 333-61554) filed on March 16, 2009.

(ii) American Funds incorporated herein by reference to Post-Effective Amendment No. 30 (File No. 333-36304) filed on May 29, 2008.

(iii) Delaware VIP Trust incorporated herein by reference to Post-Effective Amendment No. 57 (File No. 333-36316) filed on March 30, 2012.

(iv) Fidelity Variable Insurance Products Fund incorporated herein by reference to Post-Effective Amendment No. 30 (File No. 333-36304) filed on May 29, 2008.

(v) Janus Aspen Series incorporated herein by reference to Post-Effective Amendment No. 30 (File No. 333-36304) filed on May 29, 2008.

(vi) Lincoln Variable Insurance Products Trust incorporated herein by reference to Post-Effective Amendment No. 30 (File No. 333-36304) filed on May 29, 2008.

(vii) Neuberger Berman Advisers Management Trust incorporated herein by reference to Post-Effective Amendment No. 57 (File No. 333-36316) filed on March 30, 2012.

(9) Opinion and Consent of Jeremy Sachs, Senior Counsel of The Lincoln National Life Insurance Company as to the legality of securities being issued incorporated herein by reference to Pre-Effective Amendment No. 1 (File No. 333-05827) filed on September 25, 1996.

(10)(a) Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

(b) Power of Attorney - Principal Officers and Directors of The Lincoln National Life Insurance Company filed herein.

(11) Not Applicable

(12) Not Applicable

(13) Lincoln National Corporation Organizational Chart incorporated herein by reference to Post-Effective Amendment No. 63 (File No. 033-26032) filed on September 6, 2019.

Item 25. Directors and Officers of the Depositor

The following list contains the officers and directors of The Lincoln National Life Insurance Company who are engaged directly or indirectly in activities relating to Lincoln National Variable Annuity Account L as well as the contracts. The list also shows The Lincoln National Life Insurance Company's executive officers.

B-3

Name	Positions and Offices with Depositor
Ellen G. Cooper*	Executive Vice President, Chief Investment Officer, and Director
Randal J. Freitag*	Executive Vice President, Chief Financial Officer, and Director
Wilford H. Fuller*	Executive Vice President and Director
Christopher A. Giovanni*	Senior Vice President and Treasurer
Dennis R. Glass*	President and Director
Stephen B. Harris*	Senior Vice President and Chief Ethics and Compliance Officer
Christine Janofsky*	Senior Vice President and Controller
Leon E. Roday*	Executive Vice President, General Counsel and Director
Keith J. Ryan**	Vice President and Director
Nancy A. Smith*	Senior Vice President and Secretary
Joseph D. Spada***	Vice President and Chief Compliance Officer for Separate Accounts

*Principal business address is Radnor Financial Center, 150 Radnor Chester Road, Radnor, PA 19087

**Principal business address is 1300 South Clinton Street, Fort Wayne, Indiana 46802

***Principal business address is 350 Church Street, Hartford, Connecticut 06096

Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant

See Exhibit 13 above: Lincoln National Corporation Organizational Chart.

Item 27. Number of Contractowners

As of March 31, 2020 there were 37,591 participants in group contracts under Account L.

Item 28. Indemnification

a) Brief description of indemnification provisions.

In general, Article VII of the By-Laws of The Lincoln National Life Insurance Company (Lincoln Life or Company) provides that Lincoln Life will indemnify certain persons against expenses, judgments and certain other specified costs incurred by any such person if he/she is made a party or is threatened to be made a party to a suit or proceeding because he/she was a director, officer, or employee of Lincoln Life, as long as he/she acted in good faith and in a manner he/she reasonably believed to be in the best interests of, or act opposed to the best interests of, Lincoln Life. Certain additional conditions apply to indemnification in criminal proceedings.

In particular, separate conditions govern indemnification of directors, officers, and employees of Lincoln Life in connection with suits by, or in the right of, Lincoln Life.

Please refer to Article VII of the By-Laws of Lincoln Life (Exhibit no. 6(b) hereto) for the full text of the indemnification provisions. Indemnification is permitted by, and is subject to the requirements of, Indiana law.

b) Undertaking pursuant to Rule 484 of Regulation C under the Securities Act of 1933:

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 28(a) above or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any such action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Item 29. Principal Underwriter

(a) Lincoln Financial Distributors, Inc. (“LFD”) currently serves as Principal Underwriter for: Lincoln National Variable Annuity Account C; Lincoln National Flexible Premium Variable Life Account D; Lincoln National Variable Annuity Account E; Lincoln National Flexible Premium Variable Life Account F; Lincoln National Flexible Premium Variable Life Account G; Lincoln National Variable Annuity Account H; Lincoln Life & Annuity Variable Annuity Account H; Lincoln Life Flexible Premium Variable Life

B-4

Account J; Lincoln Life Flexible Premium Variable Life Account K; Lincoln National Variable Annuity Account L; Lincoln Life & Annuity Variable Annuity Account L; Lincoln Life Flexible Premium Variable Life Account M; Lincoln Life & Annuity Flexible Premium Variable Life Account M; Lincoln Life Variable Annuity Account N; Lincoln New York Account N for Variable Annuities; Lincoln Life Variable Annuity Account Q; Lincoln Life Flexible Premium Variable Life Account R; LLANY Separate Account R for Flexible Premium Variable Life Insurance; Lincoln Life Flexible Premium Variable Life Account S; LLANY Separate Account S for Flexible Premium Variable Life Insurance; Lincoln Life Variable Annuity Account T; Lincoln Life Variable Annuity Account W; and Lincoln Life Flexible Premium Variable Life Account Y and Lincoln Life & Annuity Flexible Premium Variable Life Account Y; Lincoln Life Variable Annuity Account JF-H; Lincoln Life Variable Annuity Account JF-I; Lincoln Life Flexible Premium Variable Life Account JF-A; Lincoln Life Flexible Premium Variable Life Account JF-C; Lincoln Life Variable Annuity Account JL-A; Lincoln Life & Annuity Flexible Premium Variable Life Account JA-B; Lincoln Variable Insurance Products Trust; Lincoln Advisors Trust.

(b) Officers and Directors of Lincoln Financial Distributors, Inc.:

Name	Positions and Offices with Underwriter
Andrew J. Bucklee*	Senior Vice President and Director
Wilford H. Fuller*	President, Chief Executive Officer and Director
Christopher A. Giovanni*	Senior Vice President and Treasurer
John C. Kennedy*	Senior Vice President, Head of Retirement Solutions Distribution, and Director
Macgregor B. Maitland*	Vice President and Chief Compliance Officer (Distribution)
Thomas P. O'Neill*	Senior Vice President and Chief Operating Officer
Christopher P. Potochar*	Senior Vice President and Director, Head of Finance and Strategy
Claire H. Hanna*	Secretary

*Principal Business address is Radnor Financial Center, 150 Radnor Chester Road, Radnor, PA 19087

(c) N/A

Item 30. Location of Accounts and Records

All accounts, books, and other documents, except accounting records, required to be maintained by Section 31a of the 1940 Act and the Rules promulgated thereunder are maintained by The Lincoln National Life Insurance Company, 1300 South Clinton Street, Fort Wayne, Indiana 46802. The accounting records are maintained by State Street Bank and Trust Company, 801 Pennsylvania Avenue, Kansas City, MO 64105.

Item 31. Management Services

Not Applicable.

Item 32. Undertakings

(a) Registrant undertakes that it will file a post-effective amendment to this registration statement as frequently as necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted.

(b) Registrant undertakes that it will include either (1) as part of any application to purchase a Certificate or an Individual Contract offered by the Prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or a similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information.

(c) Registrant undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request to Lincoln Life at the address or phone number listed in the Prospectus.

(d) The Lincoln National Life Insurance Company hereby represents that the fees and charges deducted under the contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by The Lincoln National Life Insurance Company.

Item 33.

For contracts sold in connection with the Texas Optional Retirement Program, Registrant is relying on Rule 6c-7 and represents that paragraphs (a) through (d) of that rule have been complied with.

B-5

SIGNATURES

(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 these Registration Statements and has caused the following Post-Effective Amendments to the Registration Statement to be signed on its behalf, in the City of Fort Wayne, and the State of Indiana on this 9th day of April, 2020 at 1:20 pm.

Lincoln National Variable Annuity Account L (811-07645; CIK: 0001015343)

333-187072 (Amendment No: 9)	333-187069 (Amendment No: 9)	333-187070 (Amendment No: 9)
333-187071 (Amendment No: 9)	333-198911 (Amendment No: 6)	333-198912 (Amendment No: 6)
333-198913 (Amendment No: 6)	333-198914 (Amendment No: 6)	333-04999 (Amendment No: 33)

Lincoln National Variable Annuity Account C (811-03214; CIK:0000353894)

033-25990 (Amendment No: 57) 333-112927 (Amendment No: 28) 333-179107 (Amendment No: 12)

Lincoln Life Variable Annuity Account Q (811-08569; CIK:0001048604)

333-43373 (Amendment No: 28)

Lincoln National Variable Annuity Account C

Lincoln National Variable Annuity Account L

Lincoln Life Variable Annuity Account Q

(Registrant)

By:	/s/ John D. Weber
	John D. Weber
	Vice President, The Lincoln National Life Insurance Company

Signed on its behalf, in the City of Radnor, and the State of Pennsylvania on this 9th day of April, 2020 at 1:20 pm.

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

(Depositor)

By:	/s/ Ralph R. Ferraro
	Ralph R. Ferraro
	(Signature-Officer of Depositor)
	Senior Vice President, The Lincoln National Life Insurance Company

(b) As required by the Securities Act of 1933, these Amendments to the Registration Statements have been signed by the following persons in their capacities indicated on April 9, 2020 at 1:20 pm.

Signature	Title
*/s/ Dennis R. Glass	President, Director, and Chairman
Dennis R. Glass	(Principal Executive Officer)
*/s/ Ellen Cooper	Executive Vice President, Chief Investment Officer, and Director
Ellen Cooper
* /s/ Randal J. Freitag	Executive Vice President, Chief Financial Officer, and Director
Randal J. Freitag	(Principal Financial Officer)
* /s/ Wilford H. Fuller	Executive Vice President, and Director
Wilford H. Fuller

* /s/ Leon E. Roday	Executive Vice President, General Counsel and Director
Leon E. Roday
* /s/ Keith J. Ryan	Vice President and Director
Keith J. Ryan

* By	/s/ John D. Weber, Pursuant to a Power of Attorney
	John D. Weber

EX-99.B(10)(A)

Exhibit (10)(a)

Consent of 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. 33 to the 1933 Act Registration Statement (Form N-4 No. 333-04999) and Amendment No. 121 to the 1940 Act Registration Statement (Form N-4 No. 811-07645), and to the use therein of our reports dated (a) March 13, 2020, with respect to the consolidated financial statements of The Lincoln National Life Insurance Company and (b) April 23, 2020, with respect to the financial statements of Lincoln National Variable Annuity Account L for the registration of interests in a separate account under group flexible payment deferred variable annuity contracts.

Philadelphia, Pennsylvania

April 23, 2020

EX-99.B(10)(B)

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, Michelle Grindle,  Jeffrey L. Smith, Jassmin McIver-Jones, Carolyn Augur 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, N-4 or S-3 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:

Account	Product name
Lincoln Life Flexible Premium Variable Life Account D (811-04592)	Variable Universal Life Leadership Series
Lincoln Life Flexible Premium Variable Life Account F (811-05164)	American Legacy Life American Legacy Estate Builder
Lincoln Life Flexible Premium Variable Life Account G (811-05585)	VUL-III
Lincoln Life Flexible Premium Variable Life Account J (811-08410)	American Legacy Variable Life
Lincoln Life Flexible Premium Variable Life Account K (811-08412)	Multi Fund Variable Life
Lincoln Life Flexible Premium Variable Life Account M (811-08557)	VULdb / VULdb ES VULdb-II ES VUL-I / VULcv VULcv-II / VULcvII ES / VUL Flex VULcv-III ES MoneyGuard VUL VULone ES / VULone 2005 ES Momentum VULone / Momentum VULone 2005 VULcv-IV ES VULdb-IV ES Momentum VULone 2007 VULone 2007 AssetEdge VUL AssetEdge VUL2015/AssetEdge Exec VUL 2015 VULone2012 VULone2014 InReach VULone2014 VULone2019 AssetEdge VUL2019/AssetEdge Exec VUL 2019 AssetEdge VUL2019-2/AssetEdge Exec VUL 2019-2
Lincoln Life Flexible Premium Variable Life Account R (811-08579)	SVUL / SVUL-I SVUL-II / SVUL-II ES SVUL-III ES SVUL-IV ES / PreservationEdge SVUL SVULone ES Momentum SVULone SVULone 2007 ES Momentum SVULone 2007 SVULone2013 SVULone2016 SVULone2019

Lincoln Life Flexible Premium Variable Life Account S (811-09241)	CVUL / CVUL Series III / CVUL Series III ES LCV4 ES LCV5 ES / LCC VUL Lincoln Corporate Executive VUL
Lincoln Life Flexible Premium Variable Life Account Y (811-21028)	American Legacy VULcv-III American Legacy VULdb-II American Legacy SVUL-II American Legacy SVUL-III American Legacy VULcv-IV American Legacy VULdb-IV American Legacy SVUL-IV/PreservationEdge SVUL American Legacy AssetEdge

Variable Annuity Separate Accounts:

Account	Product name
Lincoln National Variable Annuity Account C (811-03214)	Multi-Fund Multi-Fund Select Multi-Fund 5 Retirement Annuity
Lincoln National Variable Annuity Account E (811-04882)	The American Legacy
Lincoln National Variable Annuity Account H (811-05721)	American Legacy II American Legacy III American Legacy III B Class American Legacy III C Share American Legacy III Plus American Legacy III View American Legacy Design American Legacy Signature American Legacy Fusion American Legacy Series American Legacy Advisory American Legacy Target Date Income B Share American Legacy Target Date Income Advisory Shareholder’s Advantage Shareholder’s Advantage A Class Shareholder’s Advantage purchased on and after May 21, 2018
Lincoln National Variable Annuity Account L (811-07645)	Group Variable Annuity Secured Retirement Income Version 1 Secured Retirement Income Version 2 Secured Retirement Income Version 3 Secured Retirement Income Version 4 Retirement Income Rollover Version 1 Retirement Income Rollover Version 2 Retirement Income Rollover Version 3 Retirement Income Rollover Version 4
Lincoln Life Variable Annuity Account N (811-08517)	ChoicePlus Assurance (A Share) ChoicePlus Assurance (A Class) ChoicePlus Assurance (B Share) ChoicePlus Assurance (B Class) ChoicePlus Assurance (C Share) ChoicePlus Assurance (L Share) ChoicePlus Assurance (Bonus) Choice Plus Choice Plus II ChoicePlus Access ChoicePlus II Access ChoicePlus Bonus ChoicePlus II Bonus

Lincoln Life Variable Annuity Account N (811-08517) Continued	ChoicePlus II Advance ChoicePlus Design ChoicePlus Signature ChoicePlus Rollover ChoicePlus Fusion ChoicePlus Series ChoicePlus Prime ChoicePlus Advisory ChoicePlus Select B-Share InvestmentSolutions InvestmentSolutions RIA Lincoln Investor Advantage Lincoln Invester Advantage 2018 Lincoln Investor Advantage Fee-Based Lincoln Investor Advantage RIA Lincoln Investor Advantage Advisory Lincoln Investor Advantage RIA Class Lincoln Level Advantage B Share Indexed Variable Annuity Lincoln Level Advantage Advisory Indexed Variable Annuity Lincoln Level Advantage B Class Indexed Variable Annuity Lincoln Level Advantage Advisory Class Indexed Variable Annuity Lincoln Level Advantage Fee-Based Indexed Variable Annuity Lincoln Level Advantage Select B-Share Indexed Variable Annuity Lincoln Level Advantage Design B-Share Indexed Variable Annuity Lincoln Level Advantage Design Advisory Indexed Variable Annuity Core Income
Lincoln Life Variable Annuity Account Q (811-08569)	Multi-Fund Group
Lincoln Life S-3 Filing (File No. 333-231487)	Lincoln Level Advantage B Share Indexed Variable Annuity Lincoln Level Advantage Advisory Indexed Variable Annuity Lincoln Level Advantage B Class Indexed Variable Annuity Lincoln Level Advantage Advisory Class Indexed Variable Annuity Lincoln Level Advantage Fee-Based Indexed Variable Annuity Lincoln Level Advantage Select B Share Indexed Variable Annuity Lincoln Level Advantage Design B-Share Indexed Variable Annuity Lincoln Level Advantage Design Advisory Indexed Variable Annuity

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.

Signature	Title
/s/Dennis R. Glass	President, Chairman and Director
Dennis R. Glass
/s/Ellen G. Cooper	Executive Vice President, Chief Investment Officer and Director
Ellen G. Cooper

/s/Randal J. Freitag	Executive Vice President; Chief Financial Officer and Director
Randal J. Freitag
/s/Christine A. Janofsky	Senior Vice President and Controller
Christine A. Janofsky
/s/Leon E. Roday	Executive Vice President, General Counsel and Director
Leon E. Roday
/s/Wilford H. Fuller	Executive Vice President and Director
Wilford H. Fuller
/s/Keith J. Ryan	Vice President and Director
Keith J. Ryan

We, Delson R. Campbell, Scott C. Durocher, Kimberly A. Genovese, Daniel P. Herr, Donald E. Keller,  Michelle Grindle, Jeffrey L. Smith, Jassmin McIver-Jones, Carolyn Augur 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	/s/Scott C. Durocher
Delson R. Campbell	Scott C. Durocher
/s/Kimberly A. Genovese	/s/Daniel P. Herr
Kimberly A. Genovese	Daniel P. Herr
/s/Donald E. Keller	/s/Michelle Grindle
Donald E. Keller	Michelle Grindle
/s/Jeffrey L. Smith	/s/John D. Weber
Jeffrey L. Smith	John D. Weber
/s/Jassmin McIver-Jones	/s/Caroly Augur
Jassmin McIver-Jones	Carolyn Augur
Version dated: February 2020