The Lincoln National Life Insurance Company

Consolidated Financial Statements

December 31, 2021 and 2020

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Consolidated Financial Statements

Table of Contents

	Page
Report of Independent Registered Public Accounting Firm	3
Consolidated Balance Sheets	6
Consolidated Statements of Comprehensive Income (Loss)	7
Consolidated Statements of Stockholder’s Equity	8
Consolidated Statements of Cash Flows	9
Notes to Consolidated Financial Statements:	10
Note 1 – Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies	10
Note 2 – New Accounting Standards	24
Note 3 – Variable Interest Entities	25
Note 4 – Investments	26
Note 5 – Derivatives	37
Note 6 – Federal Income Taxes	47
Note 7 – DAC, VOBA, DSI and DFEL	49
Note 8 – Reinsurance	50
Note 9 – Goodwill and Specifically Identifiable Intangible Assets	52
Note 10 – Guaranteed Benefit Features	53
Note 11 – Liability for Unpaid Claims	54
Note 12 – Short-Term and Long-Term Debt	55
Note 13 – Contingencies and Commitments	57
Note 14 – Shares and Stockholder’s Equity	62
Note 15 – Realized Gain (Loss)	64
Note 16 – Commissions and Other Expenses	64
Note 17 – Retirement and Deferred Compensation Plans	65
Note 18 – Stock-Based Incentive Compensation Plans	66
Note 19 – Statutory Information and Restrictions	66
Note 20 – Fair Value of Financial Instruments	69
Note 21 – Segment Information	80
Note 22 – Supplemental Disclosures of Cash Flow Data	83
Note 23 – Transactions with Affiliates	84

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2

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, 2021 and 2020, and the related consolidated statements of comprehensive income (loss), stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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) (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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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3

	Deferred Acquisition Costs Asset and Future Contract Benefits Liability
Description of the Matter	At December 31, 2021, deferred acquisition costs totaled $5.8 billion and future contract benefits liabilities totaled $40.4 billion, a portion of which related to universal life-type contracts with secondary guarantees and variable annuity contracts with guaranteed benefit riders. The carrying amount of the deferred acquisition costs related to these products is the total of costs deferred less amortization, which is calculated in relation to the present value of estimated gross profits of the underlying contracts. As described in Notes 1 (see section on DAC, VOBA, DSI and DFEL) and 7 to the consolidated financial statements, there is a significant amount of uncertainty inherent in calculating estimated gross profits as the calculation includes significant management judgment in developing certain assumptions, such as expected future frequency and level of mortality claims, investment margins, retention and rider utilization. Management’s assumptions are adjusted, also known as unlocked, for emerging experience and expected changes in trends. The unlocking results in deferred acquisition cost amortization being recalculated, using the new assumptions for estimated gross profits, that results either in additional or less cumulative amortization expense. The future contract benefits liability related to these product guarantees is based on estimates of how much the Company will need to pay for future benefits and the amount of fees to be collected from policyholders for these policy features. As described in Note 1 to the consolidated financial statements (see section on Future Contract Benefits), there is significant uncertainty inherent in estimating this liability because there is a significant amount of management judgment involved in developing certain assumptions that impact the liability balance, which are consistent with the assumptions used to amortize the related deferred acquisition cost asset as noted above and which include expected future frequency and level of mortality claims, investment margins, retention and rider utilization. Auditing the valuation of deferred acquisition costs and future contract benefits liabilities related to these products was complex and required the involvement of our actuarial specialists due to the high degree of judgment used by management in setting the assumptions used in the estimate of both the amortization of deferred acquisition costs and the future contract benefits liability related to these products.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the deferred acquisition costs and future contract benefits liability estimation processes, including, among others, controls related to the review and approval processes that management has in place for the assumptions used in estimating the estimated gross profits related to deferred acquisition costs and the future contract benefits liability. This included testing controls related to management’s evaluation of the need to update assumptions based on the comparison of actual Company experience to previous assumptions and updating investment margins for current and expected future market conditions. We involved actuarial specialists to assist with our audit procedures which included, among others, an evaluation of the methodology applied by management with those methods used in prior periods. To assess the significant assumptions used by management, we compared the significant assumptions noted above to historical experience, observable market data or management’s estimates of prospective changes in these assumptions. In addition, we performed an independent recalculation of estimated gross profits related to deferred policy acquisition costs and the future policy benefit reserves for a sample of cohorts or contracts which we compared to the actuarial model used by management.

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4

	Variable Annuity Guaranteed Living Benefit Riders Embedded Derivatives
Description of the Matter	The Company’s variable annuity guaranteed living benefit riders include an embedded derivative, represented by an asset totaling $2.0 billion as of December 31, 2021, related to the non-life contingent feature of the product which is accounted for at fair value, with changes in fair value recognized in income. As described in Notes 1 (see section on Future Contract Benefits), 5 and 20 to the consolidated financial statements, there is a significant amount of estimation uncertainty inherent in measuring the fair value of the embedded derivative because of the sensitivity of certain assumptions underlying the estimate, including stock market performance, policy lapse experience and rider utilization. Management’s assumptions are adjusted over time for emerging experience and expected changes in trends, resulting in changes to the estimated fair value of the embedded derivative. Auditing the valuation of the embedded derivative related to variable annuity guaranteed living benefit riders was complex and required the involvement of our actuarial specialists due to the high degree of judgment used by management in setting the assumptions used in the estimate of the value of the embedded derivative.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the embedded derivative estimation process, including, among others, controls related to the review and approval processes that management has in place to develop the assumptions used in measuring the fair value of the embedded derivative. This included testing controls related to management’s evaluation of current and future market conditions and the need to update policy lapse and rider utilization assumptions. We involved actuarial specialists to assist with our audit procedures which included, among others, an evaluation of the methodology applied by management with those methods used in prior periods. To assess the significant assumptions used by management, we compared the significant assumptions noted above to historical experience, observable market data or management’s estimates of prospective changes in these assumptions. In addition, we performed an independent recalculation of the embedded derivative for a sample of contracts which we compared to the fair value model used by management.
	Valuation of Goodwill for the Life Insurance Reporting Unit
Description of the Matter	At December 31, 2021, the Company’s goodwill was $1.8 billion, of which $634 million related to the Company’s Life Insurance reporting unit. As discussed in Notes 1 (see section on Goodwill) and 9 of the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level. Determining the fair value of the Life Insurance reporting unit as part of the goodwill impairment analysis is sensitive to significant assumptions such as the discount rate, which reflects the market expected, weighted-average rate of return adjusted for the risk factors associated with the operations, and other relevant assumptions impacting projected financial information, such as the profitability of new and in-force business, all of which are affected by expectations about future market or economic conditions. Auditing the fair value of the Company’s Life Insurance reporting unit was complex and required the involvement of our valuation and actuarial specialists due to the high degree of judgment used by management.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process. This included, among others, controls related to the review and approval processes that management has in place to develop the assumptions used in the estimation process, including management’s determination of the applicable discount rate, and other assumptions for the Life Insurance reporting unit. We involved actuarial and valuation specialists to assist with our audit procedures which included, among others, an evaluation of the methodology applied by management with those methods used in prior periods. To assess the significant assumptions used by management, we compared the significant assumptions noted above to current industry and economic trends, recent market transactions and other relevant factors. We reviewed the historical accuracy of management’s estimate and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the Life Insurance reporting unit that would result from changes in the assumptions.

/s/ Ernst & Young LLP

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

Philadelphia, Pennsylvania

March 8, 2022

5

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	As of December 31,
	2021		2020
ASSETS
Investments:
Fixed maturity available-for-sale securities, at fair value
(amortized cost: 2021 - $104,526; 2020 - $103,021; allowance for credit losses: 2021 - $19; 2020 - $13)	$	117,511	$	121,111
Trading securities		4,427		4,442
Equity securities		314		127
Mortgage loans on real estate, net of allowance for credit losses
(portion at fair value: 2021 - $739; 2020 - $832)		17,893		16,681
Policy loans		2,349		2,411
Derivative investments		5,437		3,109
Other investments		3,449		3,025
Total investments		151,380		150,906
Cash and invested cash		2,331		1,462
Deferred acquisition costs and value of business acquired		5,985		5,824
Premiums and fees receivable		580		484
Accrued investment income		1,157		1,217
Reinsurance recoverables, net of allowance for credit losses		22,755		18,752
Funds withheld reinsurance assets		517		530
Goodwill		1,778		1,778
Other assets		22,949		19,401
Separate account assets		182,583		167,965
Total assets	$	392,015	$	368,319
LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities
Future contract benefits	$	40,416	$	40,146
Other contract holder funds		111,174		104,858
Short-term debt		1,084		497
Long-term debt		2,334		2,412
Reinsurance related embedded derivatives		578		540
Funds withheld reinsurance liabilities		7,089		7,179
Payables for collateral on investments		8,936		6,215
Other liabilities		15,441		13,466
Separate account liabilities		182,583		167,965
Total liabilities		369,635		343,278
Contingencies and Commitments (See Note 13)
Stockholder’s Equity
Common stock – 10,000,000 shares authorized, issued and outstanding		11,950		11,853
Retained earnings		3,886		4,167
Accumulated other comprehensive income (loss)		6,544		9,021
Total stockholder’s equity		22,380		25,041
Total liabilities and stockholder’s equity	$	392,015	$	368,319

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See accompanying Notes to Consolidated Financial Statements

6

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

	For the Years Ended December 31,
	2021			2020			2019
Revenues
Insurance premiums	$	5,359		$	5,122		$	5,277
Fee income		6,612			6,120			6,247
Net investment income		5,844			5,264			4,962
Realized gain (loss)		89			(526	)		(828	)
Amortization of deferred gain on business sold through reinsurance		40			33			27
Other revenues		657			553			507
Total revenues		18,601			16,566			16,192
Expenses
Interest credited		2,893			2,899			2,754
Benefits		8,039			8,050			7,585
Commissions and other expenses		5,546			4,889			5,065
Interest and debt expense		114			125			145
Spark and strategic digitization expense		87			68			66
Total expenses		16,679			16,031			15,615
Income (loss) before taxes		1,922			535			577
Federal income tax expense (benefit)		293			(56	)		(37	)
Net income (loss)		1,629			591			614
Other comprehensive income (loss), net of tax:
Unrealized investment gains (losses)		(2,480	)		3,177			5,173
Funded status of employee benefit plans		3			8			4
Total other comprehensive income (loss), net of tax		(2,477	)		3,185			5,177
Comprehensive income (loss)	$	(848	)	$	3,776		$	5,791

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See accompanying Notes to Consolidated Financial Statements

7

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(in millions)

	For the Years Ended December 31,
	2021			2020			2019
Common Stock
Balance as of beginning-of-year	$	11,853		$	11,312		$	11,237
Capital contribution from Lincoln National Corporation		65			510			50
Stock compensation/issued for benefit plans		32			31			25
Balance as of end-of-year		11,950			11,853			11,312
Retained Earnings
Balance as of beginning-of-year		4,167			4,437			4,423
Cumulative effect from adoption of new accounting standards		-			(201	)		-
Net income (loss)		1,629			591			614
Dividends paid to Lincoln National Corporation		(1,910	)		(660	)		(600	)
Balance as of end-of-year		3,886			4,167			4,437
Accumulated Other Comprehensive Income (Loss)
Balance as of beginning-of-year		9,021			5,836			659
Other comprehensive income (loss), net of tax		(2,477	)		3,185			5,177
Balance as of end-of-year		6,544			9,021			5,836
Total stockholder’s equity as of end-of-year	$	22,380		$	25,041		$	21,585

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See accompanying Notes to Consolidated Financial Statements

8

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	For the Years Ended December 31,
	2021			2020			2019
Cash Flows from Operating Activities
Net income (loss)	$	1,629		$	591		$	614
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Realized (gain) loss		(89	)		526			828
Trading securities purchases, sales and maturities, net		(108	)		253			(2,522	)
Amortization of deferred gain on business sold through reinsurance		(40	)		(33	)		(27	)
Change in:
Deferred acquisition costs, value of business acquired, deferred sales inducements
and deferred front-end loads deferrals and interest, net of amortization		292			68			(448	)
Premiums and fees receivable		(95	)		(20	)		104
Accrued investment income		8			(88	)		(22	)
Insurance liabilities and reinsurance-related balances		(585	)		392			(1,195	)
Accrued expenses		367			(21	)		89
Federal income tax accruals		264			(134	)		(282	)
Cash management agreement		(1,286	)		(1,341	)		(1,115	)
Other		(165	)		92			343
Net cash provided by (used in) operating activities		192			285			(3,633	)
Cash Flows from Investing Activities
Purchases of available-for-sale securities and equity securities		(16,834	)		(16,149	)		(14,927	)
Sales of available-for-sale securities and equity securities		2,341			1,214			6,771
Maturities of available-for-sale securities		9,417			5,180			6,426
Purchases of alternative investments		(754	)		(395	)		(433	)
Sales and repayments of alternative investments		377			171			131
Issuance of mortgage loans on real estate		(3,062	)		(1,790	)		(4,218	)
Repayment and maturities of mortgage loans on real estate		1,873			1,133			1,144
Issuance (repayment) of policy loans, net		61			49			32
Net change in collateral on investments, derivatives and related settlements		3,095			1,775			349
Other		(253	)		(149	)		(259	)
Net cash provided by (used in) investing activities		(3,739	)		(8,961	)		(4,984	)
Cash Flows from Financing Activities
Capital contribution from Lincoln National Corporation		65			510			50
Payment of long-term debt, including current maturities		(60	)		(30	)		(28	)
Issuance of long-term debt, net of issuance costs		-			30			28
Issuance (payment) of short-term debt		587			(112	)		321
Payment related to sale-leaseback transactions		(59	)		(47	)		(83	)
Proceeds from certain financing arrangements		159			109			107
Deposits of fixed account values, including the fixed portion of variable		12,622			14,009			16,049
Withdrawals of fixed account values, including the fixed portion of variable		(6,575	)		(6,069	)		(5,800	)
Transfers to and from separate accounts, net		(340	)		528			(1,362	)
Common stock issued for benefit plans		(13	)		(9	)		(34	)
Dividends paid to Lincoln National Corporation		(1,910	)		(660	)		(600	)
Other		(60	)		-			-
Net cash provided by (used in) financing activities		4,416			8,259			8,648
Net increase (decrease) in cash, invested cash and restricted cash		869			(417	)		31
Cash, invested cash and restricted cash as of beginning-of-year		1,462			1,879			1,848
Cash, invested cash and restricted cash as of end-of-year	$	2,331		$	1,462		$	1,879

See accompanying Notes to Consolidated Financial Statements

9

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies

Nature of Operations

The Lincoln National Life Insurance Company (“LNL” or the “Company,” which also may be referred to as “we,” “our” or “us”), a wholly-owned subsidiary of Lincoln National Corporation (“LNC” or the “Parent Company”), is domiciled in the state of Indiana. We own 100% of the outstanding common stock of one insurance company subsidiary, Lincoln Life & Annuity Company of New York (“LLANY”). Effective October 1, 2021, Lincoln Life Assurance Company of Boston (“LLACB”) was merged into LNL, which had no impact on our consolidated financial statements. 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. 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. In applying these estimates and assumptions, management makes subjective and complex judgments that frequently require assumptions about matters that are uncertain and inherently subject to change, including matters related to or impacted by the COVID-19 pandemic. Actual results could differ from these estimates and assumptions. Included among the material (or potentially material) reported amounts and disclosures that require extensive use of estimates are: fair value of certain financial assets, derivatives, allowances for credit losses, deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), deferred sales inducements (“DSI”), goodwill and other intangibles, future contract benefits, other contract holder funds including deferred front-end loads (“DFEL”), pension plans, stock-based incentive compensation, income taxes including the recoverability of our deferred tax assets, 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.

10

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 Codification^TM (“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.

11

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 Engine^TM 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”) and collateralized loan obligations (“CLOs”).

●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 impairment-related, including those attributable to credit risk factors that may require a credit loss allowance.

For our debt securities, we generally consider the following to determine whether our debt securities with unrealized losses are credit 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 impairment 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 impairment has occurred, and a credit loss allowance is recorded, with a corresponding charge to realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). The remainder of the decline to fair value related to factors other than credit loss is recorded in other comprehensive income (“OCI”) to unrealized losses on fixed maturity AFS securities on our Consolidated Statements of Stockholder’s Equity, as this amount is considered a noncredit impairment.

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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;

●The 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 a credit loss impairment through a credit loss allowance, we continue to reassess the expected cash flows of the debt security at each subsequent measurement date as necessary. If the measurement of credit loss changes, we recognize a provision for (or reversal of) credit loss expense through realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss), limited by the amount that amortized cost exceeds fair value. Losses are charged against the allowance for credit losses when management believes the uncollectibility of a debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Accrued interest on debt securities is written-off when deemed uncollectible.

To determine the recovery value of a corporate bond or CLO, 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).

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Each quarter, we review the cash flows for the MBS portfolio, including current credit enhancements and trends in the underlying collateral performance to determine whether or not they are sufficient to provide for the recovery of our amortized cost. 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 borrower 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.

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 requires a credit loss allowance. 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 a credit loss by comparing the expected cash flows to amortized cost. To the extent that the security has already been impaired through a credit loss allowance 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 credit loss allowance 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 an impairment through a credit loss allowance is recognized.

We further monitor the cash flows of all of our debt 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 debt 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 through a credit loss allowance for the security.

Trading Securities

Trading securities consist of fixed maturity securities in designated portfolios, some of which support modified coinsurance and coinsurance with funds withheld reinsurance agreements. Investment results for the portfolios that support modified coinsurance and coinsurance with funds withheld 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.

Mortgage Loans on Real Estate

Mortgage loans on real estate consist of commercial and residential mortgage loans and are generally carried at unpaid principal balances adjusted for amortization of premiums and accretion of discounts and are net of allowance for credit losses. We carry certain commercial mortgage loans at fair value where the fair value option has been elected. Interest income is accrued on the principal balance of the loan

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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 allowance for credit losses, and subsequent recoveries, if any, are likewise credited to the allowance for credit losses. Accrued interest on mortgage loans is written-off when deemed uncollectible.

In connection with our recognition of an allowance for credit losses for mortgage loans on real estate, we perform a quantitative analysis using a probability of default/loss given default/exposure at default approach to estimate expected credit losses in our mortgage loan portfolio as well as unfunded commitments related to commercial mortgage loans, exclusive of certain mortgage loans held at fair value. Our model estimates expected credit losses over the contractual terms of the loans, which are the periods over which we are exposed to credit risk, adjusted for expected prepayments. Credit loss estimates are segmented by commercial mortgage loans, residential mortgage loans, and unfunded commitments related to commercial mortgage loans.

The allowance for credit losses for pooled loans of similar risk (i.e., commercial and residential mortgage loans) is estimated using relevant historical credit loss information adjusted for current conditions and reasonable and supportable forecasts of future conditions. Historical credit loss experience provides the basis for the estimation of expected credit losses with adjustments for differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level, or term lengths as well as adjustments for changes in environmental conditions, such as unemployment rates, property values, or other factors that management deems relevant. We apply probability weights to the positive, base and adverse scenarios we use. For periods beyond our reasonable and supportable forecast, we use implicit mean reversion over the remaining life of the recoverable, meaning our model will inherently revert to the baseline scenario as the baseline is representative of the historical average over a longer period of time.

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 credit loss 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.

Allowance for credit losses are maintained at a level we believe is adequate to absorb current expected lifetime credit losses. Our periodic evaluation of the adequacy of the allowance for credit losses 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, reasonable and supportable forecasts about the future and other relevant factors.

Mortgage loans on real estate are presented net of the allowance for credit losses on our Consolidated Balance Sheets. Changes in the allowance are reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). Mortgage loans on real estate deemed uncollectible are charged against the allowance for credit losses, and subsequent recoveries, if any, are credited to the allowance for credit losses, limited to the aggregate of amounts previously charged-off and expected to be charged-off.

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) an allowance for credit losses. In addition, we review each loan individually in our commercial mortgage loan portfolio on an annual basis to identify emerging risks. We focus on properties that experienced a reduction in debt-service coverage or that have significant exposure to tenants with deteriorating credit profiles. Where warranted, we establish or increase a credit loss 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. These credit quality metrics are monitored and reviewed at least annually.

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We have off-balance sheet commitments related to commercial mortgage loans. As such, an allowance for credit losses is developed based on the commercial mortgage loan process outlined above, along with an internally developed conversion factor.

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, including updated forecasts, which can cause the allowance for credit losses to increase or decrease over time as such evaluations are revised. Generally, residential mortgage loan pools exclude loans that are nonperforming, as those loans are evaluated individually using the evaluation framework for specific allowance for credit losses 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. We monitor and update aging schedules and nonaccrual status on a monthly basis.

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.

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.

Other Investments

Other investments consist primarily of alternative investments, cash collateral receivables related to our derivative instruments, Federal Home Loan Bank (“FHLB”) common stock and short-term investments.

Alternative investments consist primarily of investments in limited partnerships (“LPs”). 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.

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In uncleared derivative transactions, we and the counterparty enter into a credit support annex requiring either party to post collateral, which may be in the form of cash, equal to the net derivative exposure. Cash collateral we have posted to a counterparty is recorded within other investments. Cash collateral a counterparty has posted is recorded within payables for collateral on investments. We also have investments in FHLB common stock, carried at cost, that enable access to the FHLB lending program. For more information on our collateralized financing arrangements, see “Payables for Collateral on Investments” below.

Short-term investments consist of securities with original maturities of one year or less, but greater than three months. Securities included in short-term investments are carried at fair value, with valuation methods and inputs consistent with those applied to fixed maturity AFS securities.

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, group life and disability 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, and the unamortized balance is reported within other assets on our Consolidated Balance Sheets. Contract sales charges that are collected in the early years of an insurance contract are deferred (i.e., DFEL), and the unamortized balance is reported in other contract holder funds on our Consolidated Balance Sheets.

Both DAC and VOBA amortization, excluding amounts reported in realized gain (loss), is reported within commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss). DSI amortization, excluding amounts reported in realized gain (loss), is reported in interest credited on our Consolidated Statements of Comprehensive Income (Loss). The amortization of DFEL, excluding amounts reported in realized gain (loss), is reported within fee income on our Consolidated Statements of Comprehensive Income (Loss). The methodology for determining the amortization of DAC, VOBA, DSI and DFEL varies by product type. Amortization is based on assumptions consistent with those used in the development of the underlying contract adjusted for emerging experience and expected trends.

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).

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.

Acquisition costs for all traditional contracts, including term life insurance, individual whole life and group business, are amortized over the premium-paying period or level term period, depending on the contract, which generally results in amortization less than or equal to 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 intangible balance or related amortization for fixed and variable payout annuities.

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, death benefits expected to be paid, 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.

During the third quarter of each year, we conduct our 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. These assumptions include, but are not limited to, capital markets, investment margins, mortality rates, 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

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aware of information that warrants updating assumptions outside of our 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 and DFEL.

DAC, VOBA, DSI and DFEL are reviewed to ensure that the unamortized portion does not exceed the expected recoverable amounts.

Reinsurance

We and LLANY 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 revenue and expenses 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 us 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.

We estimated an allowance for credit losses for all reinsurance recoverables and related reinsurance deposit assets held by our subsidiaries. As such, we performed a quantitative analysis using a probability of loss approach to estimate expected credit losses for reinsurance recoverables, inclusive of similar assets recognized using the deposit method of accounting. The credit loss allowance is a general allowance for pools of receivables with similar risk characteristics segmented by credit risk ratings and receivables assessed on an individual basis that do not share similar risk characteristics where we anticipate a credit loss over the life of reinsurance-related assets.

Our model uses relevant internal or external historical loss information adjusted for current conditions and reasonable and supportable forecasts of future events and conditions in developing our loss estimate. We utilized historical credit rating data to form an estimation of probability of default of counterparties by means of a transition matrix that provides the rates of credit migration for credit ratings transitioning to impairment. We updated reinsurer credit ratings during the quarter to incorporate the most up-to-date information on the current state of the financial stability of our reinsurers. To simulate changes in economic conditions, we used positive, base and adverse scenarios that include varying levels of loss given default assumptions to reflect the impact of changes in severity of losses. We applied probability weights to the positive, base and adverse scenarios. For periods beyond our reasonable and supportable forecasts, we used implicit mean reversion over the remaining life of the recoverable. Additionally, we considered factors that impact our exposure at default that are driven by actuarial expectations around term assumptions rather than being directly driven by market or economic environment.

Our model estimates the expected credit losses over the life of the reinsurance asset. Credit loss estimates are segmented based on counterparty credit risk. Our modeling process utilizes counterparty credit ratings, collateral types and amounts, and term and run-off assumptions. For reinsurance recoverables that do not share similar risk characteristics, we assessed on an individual basis to determine a specific credit loss allowance.

We estimated expected credit losses over the contractual term of the recoverable, which is the period during which we are exposed to the credit risk. Reinsurance recoverables may not have explicit contractual lives, but are tied to the underlying insurance products; as a result, we estimated the contractual life by utilizing actuarial estimates of the timing of payouts related to those underlying products.

Reinsurance agreements often require the reinsurer to collateralize the recoverable with funds in a trust account or with a letter of credit for the benefit of the ceding insurance entity that can reduce the expected credit losses on a given agreement. As such, we review reinsurance collateral by individual agreement to sensitize risk of loss based on level of collateralization. This review is driven by the assumption that non-collateralized reinsurance recoverables would have materially higher losses in time of default. Therefore, reinsurance recoverables are pooled as either fully-collateralized or non-collateralized.

Reinsurance recoverables are presented net of the allowance for credit losses on our Consolidated Balance Sheets. Changes in the allowance for credit losses are reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). Reinsurance recoverables deemed uncollectible are charged against the allowance for credit losses, and subsequent recoveries, if any, are credited to the allowance for credit losses, limited to the aggregate of amounts previously charged-off and expected to be charged-off.

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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 certain reinsurance assets, net of allowance for credit losses, certain guaranteed living benefit (“GLB”) features, specifically identifiable intangible assets, property and equipment owned by the Company, balances associated with corporate-owned and bank-owned life insurance, receivables resulting from sales of securities that had not yet settled as of the balance sheet date, DSI, operating lease right-of-use (“ROU”) assets, finance lease assets and other receivables and prepaid expenses. Other liabilities consist primarily of certain reinsurance payables, certain GLB features, current and deferred taxes, pension and other employee benefit liabilities, deferred gain on business sold through reinsurance, derivative instrument liabilities, payables resulting from purchases of securities that had not yet settled as of the balance sheet date, long-term operating lease liabilities, certain financing arrangements, finance lease liabilities and other accrued expenses.

The carrying values of specifically identifiable intangible assets are reviewed at least annually for indicators of impairment in value that are related to credit loss or non-credit, 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”). 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 9 for more information regarding specifically identifiable intangible assets.

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.

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 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.

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.

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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 a 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 is expected to run off, or 20 years. Effective October 1, 2021, we entered into a reinsurance agreement with Security Life of Denver Insurance Company (a subsidiary of Resolution Life that we refer to herein as “Resolution Life”). We are recognizing the gain related to this transaction over the projected life of the policies, or 30 years. See Note 8 for additional information.

Separate Account Assets and Liabilities

Separate accounts represent segregated funds that are maintained to meet specific investment objectives of contract holders who direct the investments and bear the investment risk, except to the extent of minimum guarantees made by the Company with respect to certain accounts. The assets of each account are legally segregated and are not subject to claims that arise out of any other business of the Company.

We report separate account assets as a summary total on the Consolidated Balance Sheets based on the fair value of the underlying investments. The underlying investments consist primarily of mutual funds, fixed maturity securities, short-term investments and cash. Investment income and net realized and unrealized gains (losses) of the separate accounts generally accrue directly to the contract holders; therefore, they are not reflected in the Consolidated Statements of Comprehensive Income (Loss), and the Consolidated Statements of Cash Flows do not reflect investment activity of the separate accounts. Asset-based fees and contract administration charges are assessed against the accounts and included within fee income on the Consolidated Statements of Comprehensive Income (Loss). An amount equivalent to the separate account assets is recorded as separate account liabilities, representing the account balance obligated to be returned to the contract holder.

Future Contract Benefits

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. 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 liabilities for future insurance contract benefits and claim reserves for traditional life policies are computed using assumptions for investment yields, mortality rates 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 liabilities for future contract benefits and claims reserves for immediate and deferred paid-up annuities are computed using investment yield assumptions that range from 0.50% 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 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. During the third quarter of each year, we conduct our comprehensive review of the assumptions and reserving models used in calculating these reserves. 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.

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, 2021, 2020 and 2019, participating policies comprised less than 1% of the face amount of business in force, and dividend expenses were $48 million, $53 million and $51 million for the years ended December 31, 2021, 2020 and 2019, respectively.

We issue variable annuity and life contracts through separate accounts that may include various types of guaranteed benefits. The liabilities for these guarantees 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 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 payments made 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 or, in other words, 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

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resulting change in liability reported in benefits on our Consolidated Statements of Comprehensive Income (Loss). During the third quarter of each year, we conduct our comprehensive review of the assumptions and projection models used in estimating these reserves and unlock assumptions similar to the DAC discussion above. We may have unlocking in other quarters as we become aware of information that warrants updating assumptions outside of our comprehensive review. We may also identify and implement actuarial modeling refinements that result in increases or decreases to the carrying value of these reserves. The change in liability impacts 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 report the insurance portion of the reserves in future contract benefits. We classify these GLB reserves embedded derivatives items in Level 3 within the hierarchy levels described above in “Fair Value Measurement.” 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 45 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 rates, 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. As discussed in Note 5, 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).

Other Contract Holder Funds

Other contract holder funds includes account balances on UL and VUL insurance and investment-type annuity products where account balances are equal to deposits plus interest credited less withdrawals, surrender charges, asset-based fees and contract administration charges, as well as amounts representing the fair value of embedded derivative instruments associated with our IUL and indexed annuity products. During the third quarter of each year, we conduct our comprehensive review of the assumptions and projection models used in estimating these embedded derivatives and unlock assumptions similar to the DAC discussion above. We may have unlocking in other quarters as we become aware of information that warrants updating assumptions outside of our comprehensive review. We may also identify and implement actuarial modeling refinements that result in increases or decreases to the carrying value of these embedded derivatives. Other contract holder funds also includes DFEL (see “DAC, VOBA, DFEL and DSI” above), dividends payable to contract holders and undistributed earnings on participating business.

Short-Term and Long-Term Debt

Short-term debt has contractual or expected maturities of one year or less. Long-term debt has contractual or expected maturities greater than one year.

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.

Contingencies and Commitments

A loss contingency is an existing condition, situation or set of circumstances involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur. 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, based on our best estimate.

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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 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, certain annuities with life contingencies 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 and term life insurance. 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 impairments of investments and changes in the allowance for credit losses for financial assets, changes in fair value for mortgage loans on real estate accounted for under the fair value option, 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, and proceeds from reinsurance recaptures. The broker-dealer services primarily relate to our retail sales network and consist of commission revenue for the sale of non-affiliated

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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 life and disability income products, benefits are recognized when incurred in a manner consistent with the related premium recognition policies.

Spark and Strategic Digitization Expense

Spark and strategic digitization expense consists primarily of costs related to our Spark and strategic digitization initiatives.

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 over the term of the related borrowing.

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

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

Standard	Description	Effective Date	Effect on Financial Statements or Other Significant Matters
ASU 2020-04, Reference Rate Reform (Topic 848) and related amendments	The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions impacted by reference rate reform. If certain criteria are met, an entity will not be required to remeasure or reassess contracts impacted by reference rate reform. Additionally, changes to the critical terms of a hedging relationship affected by reference rate reform will not require entities to de-designate the relationship if certain requirements are met. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, with certain exceptions. The amendments are effective for contract modifications made between March 12, 2020, and December 31, 2022.	March 12, 2020 through December 31, 2022	This standard may be elected and applied prospectively as reference rate reform unfolds. We have elected practical expedients to maintain hedge accounting for certain derivatives. We will continue to evaluate our options under this guidance as our reference rate reform adoption process continues. This ASU has not had a material impact to our consolidated financial condition and results of operations, but we will continue to evaluate those impacts as our transition progresses.

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Standard	Description	Effective Date	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 deferred acquisition costs. 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 effective January 1, 2023, and early adoption is permitted.	January 1, 2023	We will adopt this ASU effective January 1, 2023, with a transition date of January 1, 2021, using a modified retrospective approach, except for market risk benefits in which we will apply a full retrospective transition approach. We continue to make progress in our implementation process that includes, but is not limited to, making significant accounting policy decisions, employing appropriate internal controls, building and updating actuarial models and systems, revising reporting processes and developing informative qualitative and quantitative disclosures. In 2022, we will begin the process of recording our transition adjustments and restating applicable prior periods. We are currently evaluating the impact of adopting this ASU on our consolidated financial condition and results of operations and will be able to better assess the effects as we progress with our implementation efforts. For example, upon adoption, there will be adjustments to retained earnings resulting from the remeasurement of certain current benefits (e.g., guaranteed minimum death benefits on variable annuities) to fair valued market risk benefits, excluding the portion attributable to non-performance risk, which will result in an impact to AOCI. There will be additional impacts to AOCI resulting from the remeasurement of in-force future contract benefits using current upper-medium grade fixed income instrument yields as well as the elimination of shadow accounting for DAC and DAC-like intangibles. While the impact may be material, the magnitude is currently being assessed.

3. 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, 2021, the principal balance of the long-term surplus note was zero and we do not currently have any exposure to this VIE.

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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 ABS, RMBS and CMBS. 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 4.

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. Our exposure to loss is limited to the capital we invest in the LPs and LLCs. 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 $2.8 billion and $2.1 billion as of December 31, 2021 and 2020, respectively.

4. Investments

Fixed Maturity AFS Securities

In 2020, we adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and related amendments (“ASU 2016-13”), which resulted in a new recognition and measurement of credit losses on most financial assets.

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

	As of December 31, 2021
							Allowance
	Amortized		Gross Unrealized				for Credit		Fair
	Cost		Gains		Losses		Losses		Value
Fixed maturity AFS securities:
Corporate bonds	$	86,197	$	11,569	$	326	$	17	$	97,423
U.S. government bonds		348		54		2		-		400
State and municipal bonds		5,113		1,275		11		-		6,377
Foreign government bonds		365		63		5		-		423
RMBS		2,132		178		4		1		2,305
CMBS		1,542		62		14		-		1,590
ABS		8,433		127		54		-		8,506
Hybrid and redeemable preferred securities		396		103		11		1		487
Total fixed maturity AFS securities	$	104,526	$	13,431	$	427	$	19	$	117,511

	As of December 31, 2020
							Allowance
	Amortized		Gross Unrealized				for Credit		Fair
	Cost		Gains		Losses		Losses		Value
Fixed maturity AFS securities:
Corporate bonds	$	85,625	$	15,947	$	136	$	12	$	101,424
U.S. government bonds		369		81		1		-		449
State and municipal bonds		5,145		1,517		-		-		6,662
Foreign government bonds		380		86		1		-		465
RMBS		2,551		289		1		1		2,838
CMBS		1,380		115		-		-		1,495
ABS		7,035		158		15		-		7,178
Hybrid and redeemable preferred securities		536		94		30		-		600
Total fixed maturity AFS securities	$	103,021	$	18,287	$	184	$	13	$	121,111

The amortized cost and fair value of fixed maturity AFS securities by contractual maturities (in millions) as of December 31, 2021, were as follows:

	Amortized		Fair
	Cost		Value
Due in one year or less	$	2,854	$	2,868
Due after one year through five years		15,315		15,944
Due after five years through ten years		19,344		20,660
Due after ten years		54,906		65,638
Subtotal		92,419		105,110
Structured securities (RMBS, CMBS, ABS)		12,107		12,401
Total fixed maturity AFS securities	$	104,526	$	117,511

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 of fixed maturity AFS securities (dollars in millions) for which an allowance for credit losses has not been recorded, 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, 2021
	Less Than or Equal					Greater Than
	to Twelve Months					Twelve Months					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value			Losses		Value			Losses		Value			Losses (1)
Fixed maturity AFS securities:
Corporate bonds	$	10,611		$	230	$	1,386		$	96	$	11,997		$	326
U.S. government bonds		6			-		26			2		32			2
State and municipal bonds		498			10		19			1		517			11
Foreign government bonds		61			3		56			2		117			5
RMBS		261			3		20			1		281			4
CMBS		440			12		33			2		473			14
ABS		4,646			49		165			5		4,811			54
Hybrid and redeemable
preferred securities		47			1		76			10		123			11
Total fixed maturity AFS securities	$	16,570		$	308	$	1,781		$	119	$	18,351		$	427
Total number of fixed maturity AFS securities in an unrealized loss position															2,577

	As of December 31, 2020
	Less Than or Equal					Greater Than
	to Twelve Months					Twelve Months					Total
				Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value			Losses		Value			Losses		Value			Losses (1)
Fixed maturity AFS securities:
Corporate bonds	$	2,785		$	85	$	588		$	51	$	3,373		$	136
U.S. government bonds		28			1		-			-		28			1
Foreign government bonds		57			1		-			-		57			1
RMBS		43			1		6			-		49			1
ABS		1,527			9		355			6		1,882			15
Hybrid and redeemable
preferred securities		112			13		96			17		208			30
Total fixed maturity AFS securities	$	4,552		$	110	$	1,045		$	74	$	5,597		$	184
Total number of fixed maturity AFS securities in an unrealized loss position															782

⁽¹⁾As of December 31, 2021 and 2020, we recognized $8 million and $1 million of gross unrealized losses, respectively, in OCI for fixed maturity AFS securities for which an allowance for credit losses has been recorded.

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The fair value, gross unrealized losses (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, 2021
			Gross			Number
	Fair		Unrealized			of
	Value		Losses		Securities (1)
Less than six months	$	12	$	3			6
Twelve months or greater		58		8			24
Total	$	70	$	11			30

	As of December 31, 2020
			Gross			Number
	Fair		Unrealized			of
	Value		Losses		Securities (1)
Less than six months	$	63	$	23			14
Six months or greater, but less than nine months		2		1			4
Nine months or greater, but less than twelve months		22		6			13
Twelve months or greater		30		11			20
Total	$	117	$	41			51

⁽¹⁾We may reflect a security in more than one aging category based on various purchase dates.

Our gross unrealized losses on fixed maturity AFS securities increased by $243 million for the year ended December 31, 2021. As discussed further below, we believe the unrealized loss position as of December 31, 2021, did not require an impairment recognized in earnings 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 difference in the fair value compared to the amortized cost was due to factors other than credit loss. Based upon this evaluation as of December 31, 2021, 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 impaired securities.

As of December 31, 2021, the unrealized losses associated with our corporate bond, U.S. government bond, state and municipal bond and foreign government 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 of each impaired security.

Credit ratings express opinions about the credit quality of a security. Securities rated investment grade (those rated BBB- or higher by S&P Global Ratings (“S&P”) 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, 2021 and 2020, 96% of the fair value of our corporate bond portfolio was rated investment grade. As of December 31, 2021 and 2020, the portion of our corporate bond portfolio rated below investment grade had an amortized cost of $3.5 billion and $3.8 billion, respectively, and a fair value of $3.7 billion and $4.0 billion, respectively. Based upon the analysis discussed above, we believe that as of December 31, 2021 and 2020, we would have recovered the amortized cost of each corporate bond.

As of December 31, 2021, 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 impaired security.

As of December 31, 2021, 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 impaired security.

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Credit Loss Impairment on Fixed Maturity AFS Securities

We regularly review our fixed maturity AFS securities for declines in fair value that we determine to be impairment-related, including those attributable to credit risk factors that may require an allowance for credit losses. See Note 1 for a detailed discussion regarding our accounting policy relating to the allowance for credit losses on our fixed maturity AFS securities.

Changes in the allowance for credit losses on fixed maturity AFS securities (in millions), aggregated by investment category, were as follows:

	For the Year Ended December 31, 2021
	Corporate
	Bonds			RMBS		Other		Total
Balance as of beginning-of-year	$	12		$	1	$	-	$	13
Additions for securities for which credit losses were not
previously recognized		8			-		1		9
Additions from purchases of PCD debt securities (1)		-			-		-		-
Additions (reductions) for securities for which credit losses
were previously recognized		5			-		-		5
Reductions for securities disposed		(2	)		-		-		(2	)
Reductions for securities charged-off		(6	)		-		-		(6	)
Balance as of end-of-year (2)	$	17		$	1	$	1	$	19

	For the Year Ended December 31, 2020
	Corporate
	Bonds			RMBS		ABS			Total
Balance as of beginning-of-year	$	-		$	-	$	-		$	-
Additions for securities for which credit losses were not
previously recognized		40			1		1			42
Additions from purchases of PCD debt securities (1)		-			-		-			-
Additions (reductions) for securities for which credit losses
were previously recognized		(1	)		-		(1	)		(2	)
Reductions for securities disposed		(15	)		-		-			(15	)
Reductions for securities charged-off		(12	)		-		-			(12	)
Balance as of end-of-year (2)	$	12		$	1	$	-		$	13

⁽¹⁾Represents purchased credit-deteriorated (“PCD”) fixed maturity AFS securities.

⁽²⁾As of December 31, 2021 and 2020, accrued interest receivable on fixed maturity AFS securities totaled $944 million and $1.0 billion, respectively, and was excluded from the estimate of credit losses.

Changes in the amount of credit loss of other-than-temporary impairment (“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
	Year
	Ended
	December 31,
	2019
Balance as of beginning-of-year		$	337
Increases attributable to:
Credit losses on securities for which an
OTTI was not previously recognized			13
Credit losses on securities for which an
OTTI was previously recognized			2
Decreases attributable to:
Securities sold, paid down or matured			(148	)
Balance as of end-of-year		$	204

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Trading Securities

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

	As of December 31,
	2021		2020
Fixed maturity securities:
Corporate bonds	$	2,679	$	3,049
U.S. government bonds		32		-
State and municipal bonds		27		28
Foreign government bonds		73		92
RMBS		95		131
CMBS		137		134
ABS		1,338		966
Hybrid and redeemable preferred securities		46		42
Total trading securities	$	4,427	$	4,442

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, 2021, 2020 and 2019, was $(48) million, $117 million and $225 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, 2021									As of December 31, 2020
	Commercial			Residential			Total			Commercial			Residential			Total
Current	$	17,068		$	837		$	17,905		$	16,162		$	610		$	16,772
30 to 59 days past due		15			21			36			4			28			32
60 to 89 days past due		-			5			5			-			8			8
90 or more days past due		-			29			29			-			69			69
Allowance for credit losses		(78	)		(17	)		(95	)		(186	)		(17	)		(203	)
Unamortized premium (discount)		(11	)		27			16			(14	)		22			8
Mark-to-market gains (losses) (1)		(3	)		-			(3	)		(5	)		-			(5	)
Total carrying value	$	16,991		$	902		$	17,893		$	15,961		$	720		$	16,681

⁽¹⁾Represents the mark-to-market on certain mortgage loans on real estate for which we have elected the fair value option. See Note 20 for additional information.

Our commercial mortgage loan portfolio has the largest concentrations in California, which accounted for 26% and 24% of commercial mortgage loans on real estate as of December 31, 2021 and 2020, respectively, and Texas, which accounted for 9% and 10% of commercial mortgage loans on real estate as of December 31, 2021 and 2020, respectively.

Our residential mortgage loan portfolio has the largest concentrations in California, which accounted for 22% and 32% of residential mortgage loans on real estate as of December 31, 2021 and 2020, respectively, and Florida, which accounted for 14% and 18% of residential mortgage loans on real estate as of December 31, 2021 and 2020, respectively.

As of December 31, 2021 and 2020, we had 65 and 147 residential mortgage loans, respectively, that were either delinquent or in foreclosure. As of December 31, 2021 and 2020, we had 34 and 75 residential mortgage loans in foreclosure, respectively, with an aggregate carrying value of $15 million and $27 million, respectively.

As of December 31, 2021 and 2020, there were four specifically identified impaired commercial mortgage loans with an aggregate carrying value of $1 million.

As of December 31, 2021 and 2020, there were 50 and 76 specifically identified impaired residential mortgage loans, respectively, with an aggregate carrying value of $22 million and $34 million, respectively.

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

	For the Years Ended December 31,
	2021		2020		2019
Average aggregate carrying value for impaired mortgage loans on real estate	$	32	$	21	$	-
Interest income recognized on impaired mortgage loans on real estate		-		-		-
Interest income collected on impaired mortgage loans on real estate		-		-		-

The amortized cost of mortgage loans on real estate on nonaccrual status (in millions) was as follows:

	As of December 31, 2021				As of December 31, 2020
	Nonaccrual				Nonaccrual
	with no				with no
	Allowance				Allowance
	for Credit				for Credit
	Losses		Nonaccrual		Losses		Nonaccrual
Commercial mortgage loans on real estate	$	-	$	-	$	-	$	-
Residential mortgage loans on real estate		-		30		-		71
Total	$	-	$	30	$	-	$	71

We use loan-to-value and debt-service coverage ratios as credit quality indicators for our commercial mortgage loans on real estate. The amortized cost of commercial mortgage loans on real estate (dollars in millions) by year of origination and credit quality indicator was as follows:

	As of December 31, 2021
			Debt-			Debt-			Debt-
			Service			Service			Service
	Less		Coverage	65%		Coverage	Greater		Coverage
	than 65%		Ratio	to 75%		Ratio	than 75%		Ratio	Total
Origination Year
2021	$	2,361	3.05	$	136	1.74	$	-	-	$	2,497
2020		1,349	3.02		144	2.06		-	-		1,493
2019		2,875	2.14		187	1.42		-	-		3,062
2018		2,272	2.13		168	1.59		15	1.02		2,455
2017		1,648	2.33		149	1.74		27	0.83		1,824
2016 and prior		5,543	2.41		171	1.76		27	1.08		5,741
Total	$	16,048		$	955		$	69		$	17,072

	As of December 31, 2020
			Debt-			Debt-			Debt-
			Service			Service			Service
	Less		Coverage	65%		Coverage	Greater		Coverage
	than 65%		Ratio	to 75%		Ratio	than 75%		Ratio	Total
Origination Year
2020	$	1,495	2.85	$	32	1.52	$	-	-	$	1,527
2019		3,098	2.24		258	1.78		2	1.74		3,358
2018		2,379	2.16		182	1.49		15	0.71		2,576
2017		1,779	2.34		169	1.73		-	-		1,948
2016		1,711	2.37		174	1.56		22	1.58		1,907
2015 and prior		4,695	2.38		133	1.95		8	1.02		4,836
Total	$	15,157		$	948		$	47		$	16,152

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We use loan performance status as the primary credit quality indicator for our residential mortgage loans on real estate. The amortized cost of residential mortgage loans on real estate (in millions) by year of origination and credit quality indicator was as follows:

	As of December 31, 2021
	Performing		Nonperforming			Total
Origination Year
2021	$	467		$	2	$	469
2020		129			2		131
2019		189			21		210
2018		104			5		109
2017		-			-		-
2016 and prior		-			-		-
Total	$	889		$	30	$	919

	As of December 31, 2020
	Performing		Nonperforming			Total
Origination Year
2020	$	176		$	8	$	184
2019		315			51		366
2018		175			12		187
2017		-			-		-
2016		-			-		-
2015 and prior		-			-		-
Total	$	666		$	71	$	737

Credit Losses on Mortgage Loans on Real Estate

In connection with our recognition of an allowance for credit losses for mortgage loans on real estate, we perform a quantitative analysis using a probability of default/loss given default/exposure at default approach to estimate expected credit losses in our mortgage loan portfolio as well as unfunded commitments related to commercial mortgage loans, exclusive of certain mortgage loans held at fair value. See Note 1 for a detailed discussion regarding our accounting policy relating to the allowance for credit losses on our mortgage loans on real estate.

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Changes in the allowance for credit losses on mortgage loans on real estate (in millions) were as follows:

	For the Year Ended December 31, 2021
	Commercial			Residential		Total
Balance as of beginning-of-year	$	186		$	17	$	203
Additions (reductions) from provision for credit loss expense (1)		(108	)		-		(108	)
Additions from purchases of PCD mortgage loans on real estate		-			-		-
Balance as of end-of-year (2)	$	78		$	17	$	95

	For the Year Ended December 31, 2020
	Commercial		Residential			Total
Balance as of beginning-of-year	$	-	$	2		$	2
Impact of adopting ASU 2016-13		61		26			87
Additions (reductions) from provision for credit loss expense (3)		125		(11	)		114
Additions from purchases of PCD mortgage loans on real estate		-		-			-
Balance as of end-of-year (2)	$	186	$	17		$	203

⁽¹⁾Due to improving economic projections, the provision for credit loss expense decreased by $108 million for the year ended December 31, 2021. We recognized $3 million of credit loss benefit (expense) related to unfunded commitments for mortgage loans on real estate for the year ended December 31, 2021.

⁽²⁾Accrued interest receivable on mortgage loans on real estate totaled $48 million as of December 31, 2021 and 2020, and was excluded from the estimate of credit losses.

⁽³⁾Due to changes in economic projections driven by the impact of the COVID-19 pandemic, the provision for credit loss expense increased by $114 million for the year ended December 31, 2020. We recognized $(2) million of credit loss benefit (expense) related to unfunded commitments for mortgage loans on real estate for the year ended December 31, 2020.

There were no changes in the valuation allowance associated with impaired mortgage loans on real estate for the year ended December 31, 2019.

Alternative Investments 

As of December 31, 2021 and 2020, alternative investments included investments in 305 and 270 different partnerships, respectively, and represented approximately 2% and 1% of total investments, respectively.

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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,
	2021			2020			2019
Fixed maturity AFS securities	$	4,242		$	4,241		$	4,214
Trading securities		165			198			187
Equity securities		3			3			4
Mortgage loans on real estate		677			674			626
Real estate		-			1			1
Policy loans		115			124			128
Invested cash		-			13			33
Commercial mortgage loan prepayment
and bond make-whole premiums		195			78			115
Alternative investments		677			218			24
Consent fees		10			5			7
Other investments		60			42			27
Investment income		6,144			5,597			5,366
Investment expense		(300	)		(333	)		(404	)
Net investment income	$	5,844		$	5,264		$	4,962

Impairments on Fixed Maturity AFS Securities

Details underlying credit loss benefit (expense) incurred as a result of impairments that were recognized in net income (loss) and included in realized gain (loss) on fixed maturity AFS securities (in millions) were as follows:

	For the Years Ended December 31,
	2021			2020			2019
Credit Loss Benefit (Expense) (1)
Fixed maturity AFS securities:
Corporate bonds	$	(10	)	$	(24	)	$	(13	)
RMBS		-			(1	)		(1	)
ABS		-			-			(1	)
Hybrid and redeemable preferred securities		(1	)		-			-
Gross credit loss benefit (expense)		(11	)		(25	)		(15	)
Associated amortization of DAC, VOBA, DSI and DFEL		-			1			-
Net credit loss benefit (expense)	$	(11	)	$	(24	)	$	(15	)

⁽¹⁾For the years ended December 31, 2021 and 2020, we recognized credit loss benefit (expense) incurred and write-downs taken as a result of impairments through net income (loss), pursuant to ASU 2016-13. For the year ended December 31, 2019, prior to the adoption of ASU 2016-13, we recognized write-downs taken as a result of OTTI through net income (loss).

During the year ended December 31, 2019, we recorded $14 million of OTTI recognized in OCI.

‎

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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, 2021				As of December 31, 2020
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Collateral payable for derivative investments (1)	$	5,565	$	5,565	$	2,970	$	2,970
Securities pledged under securities lending agreements (2)		241		235		115		112
Investments pledged for Federal Home Loan Bank of
Indianapolis (“FHLBI”) (3)		3,130		4,876		3,130		5,049
Total payables for collateral on investments	$	8,936	$	10,676	$	6,215	$	8,131

⁽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. This also includes interest payable on collateral. See Note 5 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 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.

We have repurchase agreements through which we can obtain liquidity by pledging securities. 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, 2021 and 2020, we were not participating in any open repurchase agreements.

Increase (decrease) in payables for collateral on investments (in millions) consisted of the following:

	For the Years Ended December 31,
	2021		2020			2019
Collateral payable for derivative investments	$	2,595	$	1,587		$	767
Securities pledged under securities lending agreements		126		1			26
Securities pledged under repurchase agreements		-		-			(152	)
Investments pledged for FHLBI		-		(450	)		(350	)
Total increase (decrease) in payables for collateral on investments	$	2,721	$	1,138		$	291

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

	As of December 31, 2021
	Overnight and Continuous		Up to 30 Days		30 - 90 Days		Greater Than 90 Days		Total
Securities Lending
Corporate bonds	$	239	$	-	$	-	$	-	$	239
Equity securities		1		-		-		-		1
Foreign government bonds		1		-		-		-		1
Total gross secured borrowings	$	241	$	-	$	-	$	-	$	241

	As of December 31, 2020
	Overnight and Continuous		Up to 30 Days		30 - 90 Days		Greater Than 90 Days		Total
Securities Lending
Corporate bonds	$	114	$	-	$	-	$	-	$	114
Foreign government bonds		1		-		-		-		1
Total gross secured borrowings	$	115	$	-	$	-	$	-	$	115

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 consolidated financial statements. In addition, we receive securities in connection with securities borrowing agreements that we are permitted to sell or re-pledge. As of December 31, 2021, the fair value of all collateral received that we are permitted to sell or re-pledge was $22 million, and we had re-pledged all of this collateral to cover initial margin and over-the-counter collateral requirements on certain derivative investments.

Investment Commitments

As of December 31, 2021, our investment commitments were $3.1 billion, which included $1.5 billion of LPs, $987 million of private placement securities and $574 million of mortgage loans on real estate.

Concentrations of Financial Instruments

As of December 31, 2021, our most significant investments in one issuer were our investments in securities issued by the White Chapel LLC and Federal Home Loan Mortgage Corporation with a fair value of $995 million and $910 million, respectively, or 1% of total investments. As of December 31, 2020, our most significant investments in one issuer were our investments in securities issued by the Federal Home Loan Mortgage Corporation and by White Chapel LLC with a fair value of $1.2 billion and $1.0 billion, respectively, or 1% of total investments. These concentrations include fixed maturity AFS, trading and equity securities.

As of December 31, 2021 and 2020, our most significant investments in one industry were our investments in securities in the financial services industry with a fair value of$21.7 billion, or 14% of total investments, and our investments in securities in the consumer non-cyclical industry with a fair value of $18.6 billion and $19.2 billion, respectively, or 12% and 13%, respectively, of total investments. These concentrations include fixed maturity AFS, trading and equity securities.

5. 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 3 for derivative instruments related to our consolidated VIEs.

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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® Index and Other Indices

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

Our indexed annuity and indexed universal life insurance (“IUL”) contracts permit the holder to elect an interest rate return or an equity market component, where interest credited to the contracts is linked to the performance of the S&P 500 Index 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 six 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 counterparties to pay us at a specified future date the amount, if any, by which a specified equity index is less than the strike rate stated in the agreement, applied to a notional amount.

Total Return Swaps

We use total return swaps to hedge the liability exposure on certain options in variable annuity products and indexed 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 (“CDSs”) to hedge the liability exposure on certain options in variable annuity products.

We buy CDSs to hedge against a drop in bond prices due to credit concerns of certain bond issuers. A CDS 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.

CDSs – Selling Protection

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

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We sell CDSs to offer credit protection to contract holders and investors. The CDSs hedge the contract holders and investors against a drop in bond prices due to credit concerns of certain bond issuers. A CDS 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.

Other Derivatives

Lapse Protection Rider Ceded Derivative

We also have an inter-company agreement through which LNBAR, an affiliated insurer, assumes the risk under certain UL contracts for lapse protection riders (“LPR”). If the contract holder’s account value is insufficient to pay the cost of insurance charges required to keep the policy in force, and the contract holder has made the required deposits, we will be reimbursed for those charges.

Embedded Derivatives

We have embedded derivatives that include:

GLB Reserves Embedded Derivatives

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.

We use a hedging strategy designed to mitigate the risk and income statement volatility caused by changes in the equity markets, interest rates and volatility associated with GLBs offered in our variable annuity products, including products with guaranteed withdrawal benefit and guaranteed income benefit features. These GLB features are reinsured among various reinsurance counterparties on a coinsurance basis. We cede a portion of the GLB features to LNBAR, a wholly-owned subsidiary of LNC, on a funds withheld coinsurance 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 income statement effect of changes in embedded derivative GLB reserves assumed by LNBAR caused by those same factors. We rebalance our hedge positions based upon changes in these factors as needed. While we actively manage our hedge positions, these hedge positions may not be totally effective in offsetting changes in the embedded derivative reserve 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 our desired risk and return trade-off. However, the hedging results do not impact LNL due to a funds withheld agreement with LNBAR, which causes the financial impact of the derivatives, as well as the cash flow activity, to be reflected on LNBAR.

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® Index 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 six 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 modified coinsurance 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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40

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, 2021						As of December 31, 2020
	Notional		Fair Value				Notional		Fair Value
	Amounts		Asset		Liability		Amounts		Asset		Liability
Qualifying Hedges
Cash flow hedges:
Interest rate contracts (1)	$	2,009	$	98	$	11	$	964	$	87	$	11
Foreign currency contracts (1)		3,979		283		51		3,089		147		151
Total cash flow hedges		5,988		381		62		4,053		234		162
Fair value hedges:
Interest rate contracts (1)		526		-		210		530		-		271
Non-Qualifying Hedges
Interest rate contracts (1)		82,786		897		176		135,434		1,587		159
Foreign currency contracts (1)		487		7		2		304		1		8
Equity market contracts (1)		92,278		6,461		2,108		74,300		3,486		1,952
Credit contracts (1)		49		-		-		51		-		-
LPR ceded derivative (2)		-		318		-		-		-		-
Embedded derivatives:
GLB direct (3)		-		1,963		-		-		450		-
GLB ceded (3)		-		56		2,015		-		82		531
Reinsurance related (4)		-		-		578		-		-		540
Indexed annuity and IUL contracts (3) (5)		-		528		6,131		-		550		3,594
Total derivative instruments	$	182,114	$	10,611	$	11,282	$	214,672	$	6,390	$	7,217

⁽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 assets and 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, 2021
	Less Than		1 – 5		6 – 10		11 – 30		Over 30
	1 Year		Years		Years		Years		Years		Total
Interest rate contracts (1)	$	4,413	$	49,847	$	17,324	$	13,737	$	-	$	85,321
Foreign currency contracts (2)		410		553		1,574		1,856		73		4,466
Equity market contracts		57,636		17,752		8,267		11		8,612		92,278
Credit contracts		-		49		-		-		-		49
Total derivative instruments
with notional amounts	$	62,459	$	68,201	$	27,165	$	15,604	$	8,685	$	182,114

⁽¹⁾As of December 31, 2021, the latest maturity date for which we were hedging our exposure to the variability in future cash flows for these instruments was June 15, 2037.

⁽²⁾As of December 31, 2021, the latest maturity date for which we were hedging our exposure to the variability in future cash flows for these instruments was June 16, 2061.

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41

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

					Cumulative Fair Value
					Hedging Adjustment
					Included in the
	Amortized Cost of the				Amortized Cost of the
	Hedged				Hedged
	Assets / (Liabilities)				Assets / (Liabilities)
	As of		As of		As of		As of
	December 31,		December 31,		December 31,		December 31,
	2021		2020		2021		2020
Line Item in the Consolidated Balance Sheets in
which the Hedged Item is Included
Fixed maturity AFS securities, at fair value	$	764	$	824	$	211	$	271

The change in our unrealized gain (loss) on derivative instruments within AOCI (in millions) was as follows:

	For the Years Ended December 31,
	2021			2020			2019
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	42		$	181		$	119
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period:
Cash flow hedges:
Interest rate contracts		11			(16	)		73
Foreign currency contracts		130			93			108
Change in foreign currency exchange rate adjustment		152			(174	)		(52	)
Change in DAC, VOBA, DSI and DFEL		7			(23	)		(5	)
Income tax benefit (expense)		(65	)		26			(26	)
Less:
Reclassification adjustment for gains (losses)
included in net income (loss):
Cash flow hedges:
Interest rate contracts (1)		3			2			3
Foreign currency contracts (1)		48			56			35
Foreign currency contracts (2)		(2	)		6			9
Associated amortization of DAC, VOBA, DSI and DFEL		(2	)		(7	)		(2	)
Income tax benefit (expense)		(10	)		(12	)		(9	)
Balance as of end-of-year	$	240		$	42		$	181

⁽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, 2021
	Realized			Net
	Gain			Investment
	(Loss)			Income			Benefits
Total Line Items in which the Effects of Fair Value or Cash
Flow Hedges are Recorded	$	89		$	5,844		$	8,039
Qualifying Hedges
Gain or (loss) on fair value hedging relationships:
Interest rate contracts:
Hedged items		-			(60	)		-
Derivatives designated as hedging instruments		-			60			-
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		(2	)		48			-
Non-Qualifying Hedges
Interest rate contracts		(957	)		-			-
Foreign currency contracts		(1	)		-			-
Equity market contracts		3,355			-			-
Credit contracts		(1	)		-			-
Embedded derivatives:
GLB		3			-			-
Reinsurance related		280			-			-
Indexed annuity and IUL contracts		(2,622	)		-			-

	Gain (Loss) Recognized in Income
	For the Year Ended December 31, 2020
	Realized			Net
	Gain			Investment
	(Loss)			Income			Benefits
Total Line Items in which the Effects of Fair Value or Cash
Flow Hedges are Recorded	$	(526	)	$	5,264		$	8,050
Qualifying Hedges
Gain or (loss) on fair value hedging relationships:
Interest rate contracts:
Hedged items		-			69			-
Derivatives designated as hedging instruments		-			(69	)
Gain or (loss) on cash flow hedging relationships:
Interest rate contracts:
Amount of gain or (loss) reclassified from AOCI into income		-			2			-
Foreign currency contracts:
Amount of gain or (loss) reclassified from AOCI into income		6			56			-
Non-Qualifying Hedges
Interest rate contracts		1,287			-			-
Foreign currency contracts		(3	)		-			-
Equity market contracts		971			-			-
Credit contracts		(6	)		-			-
Embedded derivatives:
GLB		1			-			-
Reinsurance related		(241	)		-			-
Indexed annuity and IUL contracts		(471	)		-			-

Gain (Loss) Recognized in Income

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	For the Year Ended December 31, 2019
	Realized			Net
	Gain			Investment
	(Loss)			Income			Benefits
Total Line Items in which the Effects of Fair Value or Cash
Flow Hedges are Recorded	$	(828	)	$	4,962		$	7,585
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	)		-			-
Credit contracts		-			-			-
Embedded derivatives:
GLB		1			-			-
Reinsurance related		(626	)		-			-
Indexed annuity and IUL contracts		(742	)		-			-

As of December 31, 2021, $79 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, 2021 and 2020, 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.

As of December 31, 2021, we did not have any exposure related to CDSs for which we are the seller.

Information related to our CDSs for which we are the seller (dollars in millions) was as follows:

As of December 31, 2020
					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 CDSs	12/20/2025	(3)	(4)		BBB+	1	$	1	$	51

⁽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 CDSs.

⁽³⁾CDSs 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.

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Details underlying the associated collateral of our CDSs 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,
		2021			2020
Maximum potential payout		$	-		$	51
Less: Counterparty thresholds			-			-
Maximum collateral potentially required to post		$	-		$	51

Certain of our CDS 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, 2021, 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, 2021 or 2020.

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, 2021					As of December 31, 2020
	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-	$	2,346	$	-		$	1,232	$	(7	)
A+		2,762		(44	)		1,112		(175	)
A		456		-			53		-
A-		-		-			572		-
	$	5,564	$	(44	)	$	2,969	$	(182	)

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Balance Sheet Offsetting

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

		As of December 31, 2021
					Embedded
	Derivative				Derivative
	Instruments				Instruments			Total
Financial Assets
Gross amount of recognized assets		$	7,938			$	2,547	$	10,485
Gross amounts offset			(2,241	)			-		(2,241	)
Net amount of assets (1)			5,697				2,547		8,244
Gross amounts not offset:
Cash collateral			(5,564	)			-		(5,564	)
Non-cash collateral			(133	)			-		(133	)
Net amount		$	-			$	2,547	$	2,547
Financial Liabilities
Gross amount of recognized liabilities		$	349			$	8,724	$	9,073
Gross amounts offset			(68	)			-		(68	)
Net amount of liabilities			281				8,724		9,005
Gross amounts not offset:
Cash collateral			(44	)			-		(44	)
Non-cash collateral			-				-		-
Net amount		$	237			$	8,724	$	8,961

⁽¹⁾Includes deferred premiums of $260 million reported in other assets on our Consolidated Balance Sheets.

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46

		As of December 31, 2020
					Embedded
	Derivative				Derivative
	Instruments				Instruments			Total
Financial Assets
Gross amount of recognized assets		$	4,978			$	1,082	$	6,060
Gross amounts offset			(1,869	)			-		(1,869	)
Net amount of assets			3,109				1,082		4,191
Gross amounts not offset:
Cash collateral			(2,969	)			-		(2,969	)
Non-cash collateral			(56	)			-		(56	)
Net amount		$	84			$	1,082	$	1,166
Financial Liabilities
Gross amount of recognized liabilities		$	902			$	4,665	$	5,567
Gross amounts offset			(330	)			-		(330	)
Net amount of liabilities			572				4,665		5,237
Gross amounts not offset:
Cash collateral			(182	)			-		(182	)
Non-cash collateral			-				-		-
Net amount		$	390			$	4,665	$	5,055

6. Federal Income Taxes

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

	For the Years Ended December 31,
	2021		2020			2019
Current	$	20	$	(59	)	$	175
Deferred		273		3			(212	)
Federal income tax expense (benefit)	$	293	$	(56	)	$	(37	)

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

	For the Years Ended December 31,
	2021			2020			2019
Income (loss) before taxes	$	1,922		$	535		$	577
Federal statutory rate		21%			21%			21%
Federal income tax expense (benefit) at federal statutory rate		404			112			121
Effect of:
Tax-preferred investment income (1)		(88	)		(98	)		(99	)
Tax credits		(26	)		(39	)		(40	)
Excess tax benefits from stock-based compensation		-			2			(6	)
Tax impact associated with the Tax Cuts and Jobs Act (2)		-			(37	)		(16	)
Other items		3			4			3
Federal income tax expense (benefit)	$	293		$	(56	)	$	(37	)
Effective tax rate		15%			-10%			-6%

⁽¹⁾Relates primarily to separate account dividends eligible for the dividends-received deduction.

⁽²⁾In 2019, we recognized a $16 million tax benefit from the impact of the reduced corporate tax rate under the Tax Cuts and Jobs Act (the “Tax Act”) on our election to revalue policyholder tax reserves. In 2020, we recognized a $37 million tax benefit attributable to the carry back of a 2020 net operating loss under the provisions of the Coronavirus Aid, Relief, and Economic Security Act, which provides for a five-year carryback period.

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

	As of December 31,
	2021			2020
Current	$	382		$	381
Deferred		(3,022	)		(3,422	)
Total federal income tax asset (liability)	$	(2,640	)	$	(3,041	)

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

	As of December 31,
	2021			2020
Deferred Tax Assets
Future contract benefits and other contract holder funds	$	3,381		$	2,262
Reinsurance related embedded derivative asset		121			113
Compensation and benefit plans		180			163
Intangibles		25			27
Net operating losses		292			218
Other		103			5
Total deferred tax assets	$	4,102		$	2,788
Deferred Tax Liabilities
DAC	$	433		$	418
VOBA		147			165
Net unrealized gain on fixed maturity AFS securities		2,754			3,836
Net unrealized gain on trading securities		64			88
Investment activity		3,423			1,299
Other		303			404
Total deferred tax liabilities	$	7,124		$	6,210
Net deferred tax asset (liability)	$	(3,022	)	$	(3,422	)

As of December 31, 2021, we have $1.4 billion of net operating losses to carry forward to future years. The net operating losses arose in tax years 2018 and 2021, and under the Tax Act changes, have an unlimited carryforward period. As a result, management believes that it is more 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 our deferred tax assets, and, accordingly, no valuation allowance has been recorded.

We are subject to examination by U.S. federal, state, local and non-U.S. income authorities. With few exceptions for limited scope review, we are no longer subject to U.S. federal examinations for years before 2018. In the first quarter of 2021, the Internal Revenue Service commenced an examination of our refund claims for 2014 and 2015 that is anticipated to be completed by the end of 2022. We are currently under examination by several state and local taxing jurisdictions; however, we do not expect these examinations will materially impact us.

A reconciliation of the unrecognized tax benefits (in millions) was as follows:

	For the Years Ended
	December 31,
	2021		2020
Balance as of beginning-of-year	$	43	$	41
Increases for prior year tax positions		2		2
Balance as of end-of-year	$	45	$	43

As of December 31, 2021 and2020,$45 million and $43 million, respectively, of our unrecognized tax benefits presented above, if recognized, would have affected our federal income tax expense (benefit) and our effective tax rate. We anticipate that it is reasonably possible that unrecognized tax benefits associated with separate account dividends-received deduction and tax credits will decrease by $8 million by the end of 2022, upon the completion of the examination of our refund claims for 2014 and 2015.

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, 2021, 2020 and2019, 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, 2021 and 2020.

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7. DAC, VOBA, DSI and DFEL

Changes in DAC (in millions) were as follows:

	For the Years Ended December 31,
	2021			2020			2019
Balance as of beginning-of-year	$	5,590		$	7,418		$	9,509
Cumulative effect from adoption of new accounting
standard		-			5			-
Business acquired (sold) through reinsurance		(362	)		(26	)		-
Business recaptured through reinsurance		-			-			59
Deferrals		1,364			1,427			1,900
Amortization, net of interest:
Amortization, excluding unlocking, net of interest		(980	)		(811	)		(922	)
Unlocking		(558	)		(211	)		(471	)
Adjustment related to realized (gains) losses		(45	)		(35	)		(43	)
Adjustment related to unrealized (gains) losses		792			(2,177	)		(2,614	)
Balance as of end-of-year	$	5,801		$	5,590		$	7,418

Changes in VOBA (in millions) were as follows:

	For the Years Ended December 31,
	2021			2020			2019
Balance as of beginning-of-year	$	234		$	327		$	799
Business acquired (sold) through reinsurance		(288	)		-			-
Deferrals		-			3			6
Amortization:
Amortization, excluding unlocking		(91	)		(107	)		(115	)
Unlocking		(8	)		(201	)		143
Accretion of interest (1)		35			44			45
Adjustment related to realized (gains) losses		(3	)		-			(1	)
Adjustment related to unrealized (gains) losses		305			168			(550	)
Balance as of end-of-year	$	184		$	234		$	327

⁽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, 2021, was as follows:

2022	$	45
2023		44
2024		42
2025		40
2026		37

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Changes in DSI (in millions) were as follows:

	For the Years Ended December 31,
	2021			2020			2019
Balance as of beginning-of-year	$	259		$	281		$	298
Deferrals		5			7			26
Amortization, net of interest:
Amortization, excluding unlocking, net of interest		(25	)		(20	)		(28	)
Unlocking		-			(1	)		(3	)
Adjustment related to realized (gains) losses		(2	)		(2	)		(2	)
Adjustment related to unrealized (gains) losses		8			(6	)		(10	)
Balance as of end-of-year	$	245		$	259		$	281

Changes in DFEL (in millions) were as follows:

	For the Years Ended December 31,
	2021			2020			2019
Balance as of beginning-of-year	$	396		$	646		$	2,763
Cumulative effect from adoption of new accounting
standard		-			4			-
Business acquired (sold) through reinsurance		(290	)		-			-
Business recaptured through reinsurance		-			-			5
Deferrals		1,014			1,002			1,092
Amortization, net of interest:
Amortization, excluding unlocking, net of interest		(593	)		(529	)		(533	)
Unlocking		(387	)		(275	)		(426	)
Adjustment related to realized (gains) losses		(22	)		16			(11	)
Adjustment related to unrealized (gains) losses		281			(468	)		(2,244	)
Balance as of end-of-year	$	399		$	396		$	646

8. 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,
	2021			2020			2019
Direct insurance premiums and fee income	$	14,010		$	13,159		$	13,347
Reinsurance assumed		97			101			97
Reinsurance ceded		(2,136	)		(2,018	)		(1,920	)
Total insurance premiums and fee income	$	11,971		$	11,242		$	11,524
Direct insurance benefits	$	10,578		$	10,497		$	9,482
Reinsurance recoveries netted against benefits		(2,539	)		(2,447	)		(1,897	)
Total benefits	$	8,039		$	8,050		$	7,585

We and LLANY 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 incurred under the policies we issue. We evaluate each reinsurance agreement to determine whether the agreement provides indemnification against loss or liability. As discussed in Note 23, a portion of this reinsurance activity is with affiliated companies.

As of December 31, 2021, 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 20% of the mortality risk on newly issued life insurance contracts in 2021.

Reinsurance Exposures

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.

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The amounts recoverable from reinsurers were $22.8 billion and $18.8 billion as of December 31, 2021 and 2020, respectively. Protective represents our largest reinsurance exposure following the sale of individual life and individual and group annuity business acquired from Liberty Life Assurance Company of Boston in 2018, which resulted in amounts recoverable from Protective of $10.7 billion and $11.3 billion as of December 31, 2021 and 2020, 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 $14.0 billion and $15.2 billion as of December 31, 2021 and 2020, respectively.

Effective October 1, 2021, we entered into a reinsurance agreement with Resolution Life to reinsure liabilities under a block of in-force executive benefit and universal life policies. The agreement is structured as coinsurance for the general account reserves and modified coinsurance for the separate account reserves. Amounts recoverable from Resolution Life were $4.7 billion as of December 31, 2021. Resolution Life has funded trusts, the balances of which change as a result of ongoing reinsurance activity to support the business ceded, that totaled $4.1 billion as of December 31, 2021. As described in Note 1, we recorded a deferred gain on business sold through reinsurance related to the transaction with Resolution Life and amortized $10 million of the gain during 2021.

Some portions of our annuity business have been reinsured on a modified coinsurance basis with other companies. In a modified coinsurance 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 modified coinsurance agreement with Athene to reinsure fixed annuity products, which resulted in a deposit asset of $5.0 billion and $5.8 billion as of December 31, 2021 and 2020, respectively, within other assets on our Consolidated Balance Sheets.

We held assets in support of reserves associated with the Athene transaction in a modified coinsurance investment portfolio, which consisted of the following (in millions):

	As of			As of
	December 31,			December 31,
	2021			2020
Fixed maturity AFS securities		$	744		$	1,531
Trading securities			3,399			3,357
Equity securities			54			17
Mortgage loans on real estate			739			832
Derivative investments			93			103
Other investments			227			167
Cash and invested cash			110			92
Accrued investment income			33			42
Other assets			5			3
Total		$	5,404		$	6,144

The portfolio was supported by $157 million of over-collateralization and a $146 million letter of credit as of December 31, 2021. Additionally, we recorded a deferred gain on business sold through reinsurance related to the transaction with Athene and amortized $26 million, $29 million and $30 million of the gain during 2021, 2020 and 2019, respectively.

See “Realized Gain (Loss)” in Note 15 for information on reinsurance related embedded derivatives.

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 $1.1 billion and $1.2 billion as of December 31, 2021 and 2020, respectively. Swiss Re has funded a trust, with a balance of $1.0 billion and $1.2 billion as of December 31, 2021 and 2020, respectively, 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, 2021, included $143 million and $31 million, respectively, related to the business sold to Swiss Re.

The amounts recoverable from LNBAR were $2.9 billion and $2.7 billion as of December 31, 2021 and 2020, 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 $3.0 billion and $3.2 billion as of December 31, 2021 and 2020, respectively.

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Credit Losses on Reinsurance Related Assets

In connection with our recognition of an allowance for credit losses for reinsurance-related assets, we perform a quantitative analysis using a probability of loss approach to estimate expected credit losses for reinsurance recoverables, inclusive of similar assets recognized using the deposit method of accounting. Our allowance for credit losses was $188 million and $190 million as of December 31, 2021 and 2020, respectively.

9. 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, 2021
	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			684			-			-		-		684
Total goodwill		$	3,930		$	(2,152	)	$	-	$	-	$	1,778

		For the Year Ended December 31, 2020
	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			684			-			-		-		684
Total goodwill		$	3,930		$	(2,152	)	$	-	$	-	$	1,778

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, 2021 and 2020, 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.

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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, 2021					As of December 31, 2020
	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			63		100			59
Group Protection:
VOCRA		576			85		576			55
VODA		31			7		31			5
Insurance licenses (1)		3			-		3			-
Total	$	715		$	155	$	715		$	119

⁽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, 2021, was as follows:

2022	$	37
2023		37
2024		37
2025		37
2026		37
Thereafter		367

10. Guaranteed Benefit 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. Information on the GDB features outstanding (dollars in millions) was as follows:

	As of December 31,
	2021 (1)		2020 (1)
Return of Net Deposits
Total account value	$	117,503	$	109,856
Net amount at risk (2)		84		72
Average attained age of contract holders		67 years		66 years
Minimum Return
Total account value	$	102	$	100
Net amount at risk (2)		11		12
Average attained age of contract holders		79 years		78 years
Guaranteed minimum return		5%		5%
Anniversary Contract Value
Total account value	$	28,788	$	27,650
Net amount at risk (2)		400		390
Average attained age of contract holders		73 years		72 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.

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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,
	2021			2020			2019
Balance as of beginning-of-year	$	121		$	117		$	161
Changes in reserves		31			30			(24	)
Benefits paid		(20	)		(26	)		(20	)
Balance as of end-of-year	$	132		$	121		$	117

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,
	2021		2020
Asset Type
Domestic equity	$	77,290	$	70,362
International equity		21,223		20,855
Fixed income		45,231		43,521
Total	$	143,744	$	134,738

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 37% of total life insurance in-force reserves as of December 31, 2021 and 2020.

11. 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,
	2021			2020			2019
Balance as of beginning-of-year	$	5,934		$	5,552		$	5,335
Reinsurance recoverable		151			152			143
Net balance as of beginning-of-year		5,783			5,400			5,192
Incurred related to:
Current year		4,026			3,517			3,193
Prior years:
Interest		141			148			151
All other incurred (1)		(271	)		(209	)		(308	)
Total incurred		3,896			3,456			3,036
Paid related to:
Current year		(2,074	)		(1,707	)		(1,518	)
Prior years		(1,472	)		(1,366	)		(1,310	)
Total paid		(3,546	)		(3,073	)		(2,828	)
Net balance as of end-of-year		6,133			5,783			5,400
Reinsurance recoverable		147			151			152
Balance as of end-of-year	$	6,280		$	5,934		$	5,552

⁽¹⁾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.

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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 2.5% to 5.0% that vary by year of claim incurral.

12. Short-Term and Long-Term Debt

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

	As of December 31,
	2021		2020
Short-Term Debt
Short-term debt (1)	$	1,084	$	497
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		593		611
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		194		254
4.225% surplus note, due 2037		28		28
4.00% surplus note, due 2037		30		30
4.50% surplus note, due 2038		13		13
Total long-term debt	$	2,334	$	2,412

⁽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, 2021, were as follows:

2022	$	-
2023		-
2024		50
2025		-
2026		-
Thereafter		2,284
Total	$	2,334

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.

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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, 2021, was $593 million. The note calls for us to pay the principal amount of the note on or before October 1, 2028, and interest to be paid quarterly at an annual rate of LIBOR + 226 bps.

We issued a surplus note of $750 million to LNC in 1998. The note calls for us to pay the principal amount of the note on or before December 31, 2028, and interest to be paid quarterly at an annual rate of 6.03%. Subject to approval by the Commissioner, LNC has the right to redeem the note for immediate repayment in total or in part once per year on the anniversary date of the note. Any payment of interest or repayment of principal may be paid only out of our statutory earnings, only if our statutory capital surplus exceeds our statutory capital surplus as of the date of note issuance of $2.4 billion, and subject to approval by the Commissioner.

On October 1, 2015, we issued a surplus note of $30 million to LNC. The note calls for us to pay the principal amount of the note on or before September 28, 2035, and interest to be paid quarterly at an annual rate of LIBOR + 200 bps. Subject to approval by the Commissioner, we have the right to repay the note in whole or in part prior to the maturity date, if our statutory capital surplus exceeds the sum of our surplus at closing plus any accrued but unpaid interest.

On 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, 2021, was $194 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.

On March 31, 2020, 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 October 9, 2037, and interest to be paid quarterly at an annual rate of 4.00%. 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

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

		As of December 31, 2021
	Expiration	Maximum		LOCs
	Date	Available		Issued
Credit Facilities
Five-year revolving credit facility	June 19, 2026	$	2,500	$	10
LOC facility (1)	August 26, 2031		983		926
LOC facility (1)	October 1, 2031		920		920
Total		$	4,403	$	1,856

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

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During June 2021, LNC entered into an amended and restated credit agreement with a syndicate of banks, which amended and restated our existing five-year revolving credit facility agreement. The amended credit facility, which is unsecured, allows for the issuance of LOCs and borrowing of up to $2.5 billion and has a commitment termination date of June 19, 2026. 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.

The amended credit facility agreement contains:

●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 equal to the sum of $10.0 billion plus 50% of the aggregate net proceeds of equity issuances received by LNC or any of its subsidiaries in accordance with the terms of the agreement; and a debt-to-capital ratio as defined in accordance with the agreement 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 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 amended credit facility 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, 2021, 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, 2021, we were in compliance with all such covenants.

13. 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, 2021.

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For some matters, the Company is able to estimate a reasonably possible range of loss. For such matters in which a loss is probable, an accrual has been made. For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. Accordingly, the estimate contained in this paragraph reflects two types of matters. For some matters included within this estimate, an accrual has been made, but there is a reasonable possibility that an exposure exists in excess of the amount accrued. In these cases, the estimate reflects the reasonably possible range of loss in excess of the accrued amount. For other matters included within this estimation, no accrual has been made because a loss, while potentially estimable, is believed to be reasonably possible but not probable. In these cases, the estimate reflects the reasonably possible loss or range of loss. As of December 31, 2021, 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 $120 million, after-tax. 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.

Among other matters, we are presently engaged in litigation, including relating to cost of insurance rates (“Cost of Insurance and Other Litigation”), as described below. No accrual has been made for several of these matters. Although a loss is believed to be reasonably possible for these matters, we are not able to estimate a reasonably possible amount or range of potential liability. An adverse outcome in one or more of these matters may have a material impact on our consolidated financial statements, but, based on information currently known, management does not believe those cases are likely to have such an impact.

Reinsurance Disputes

Certain reinsurers have sought rate increases on certain yearly renewable term agreements. We are disputing the requested rate increases under these agreements. We may initiate legal proceedings, as necessary, under these agreements in order to protect our contractual rights. Additionally, reinsurers have initiated, and may in the future initiate, legal proceedings against us. We believe it is unlikely the outcome of these disputes would have a material impact on our consolidated financial statements. For more information about reinsurance, see Note 8.

Cost of Insurance and Other Litigation

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. Lincoln Life & 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 defense of this case. On September 30, 2020, the court denied plaintiff’s motion for summary judgment and granted in part Voya’s motion for summary judgment. On October 22, 2021, the parties informed the presiding judge that they have reached a settlement of the action, subject to court approval. On January 19, 2022, plaintiffs filed a renewed motion for preliminary approval of the class action settlement. The settlement, subject to final approval by the court, consists of $92.5 million in pre-tax cash and a five-year cost of insurance rate freeze, among other terms. On February 3, 2022, the court preliminarily approved the class action settlement and set a final fairness hearing for June 9, 2022.

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

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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, pending in the U.S. District Court for the Eastern District of Pennsylvania, 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 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.

Other Litigation

Andrew Nitkewicz v. Lincoln Life & Annuity Company of New York, pending in the U.S. District Court for the Southern District of New York, No. 1:20-cv-06805, is a putative class action that was filed on August 24, 2020. Plaintiff Andrew Nitkewicz, as trustee of the Joan C. Lupe Trust, 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 for which planned annual, semi-annual, or quarterly premiums were paid for any period beyond the end of the policy month of the insured’s death. Plaintiff alleges LLANY failed to refund unearned premium in violation of New York Insurance Law Section 3203(a)(2) in connection with the payment of death benefit claims for certain insurance policies. Plaintiff seeks compensatory damages and pre-judgment interest on behalf of the various classes and sub-class. On July 2, 2021, the court granted, with prejudice, LLANY’s November 2020 motion to dismiss this matter. On July 28, 2021, plaintiff filed a notice of appeal with respect to this ruling.

Commitments

Leases

As of December 31, 2021 and 2020, we had operating lease ROU assets of $134 million and $162 million, respectively, and associated lease liabilities of $140 million and $170 million, respectively. The weighted-average discount rate was 2.5% and 3.1%, respectively, and the remaining lease term was five years and six years, respectively, as of December 31, 2021 and 2020. Operating lease expense for the years ended December 31, 2021, 2020 and 2019, was $41 million, $42 million and $46 million, respectively, and reported in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss).

As of December 31, 2021 and 2020, we had finance lease assets of $37 million and $75 million, respectively, and associated finance lease liabilities of $175 million and $234 million, respectively. The accumulated amortization associated with the finance lease assets was $436 million and $398 million as of December 31, 2021 and 2020, respectively. These assets will continue to be amortized on a straight-line

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basis over the assets’ remaining lives. The weighted-average discount rate was 1.4% and 2.2%, respectively, and the remaining lease term was one year and two years, respectively, as of December 31, 2021 and 2020.

Finance lease expense (in millions) was as follows:

	For the Years Ended
	December 31,
	2021		2020		2019
Amortization of finance lease assets (1)	$	38	$	53	$	67
Interest on finance lease liabilities (2)		3		6		13
Total	$	41	$	59	$	80

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

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

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

	For the Years Ended
	December 31,
	2021		2020		2019
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	40	$	43	$	47
Financing cash flows from finance leases		62		53		96
Supplemental Non-cash Information
ROU assets obtained in exchange for new lease obligations:
Operating leases	$	8	$	10	$	78

Our future minimum lease payments (in millions) under non-cancellable leases as of December 31, 2021, were as follows:

	Operating		Finance
	Leases		Leases
2022	$	37	$	72
2023		33		79
2024		27		17
2025		23		7
2026		21		4
Thereafter		27		-
Total future minimum lease payments		168		179
Less: Amount representing interest		28		4
Present value of minimum lease payments	$	140	$	175

As of December 31, 2021, we had one lease that had not yet commenced.

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Certain Financing Arrangements

We periodically enter into sale-leaseback arrangements that do not meet the criteria of a sale for accounting purposes. As such, we account for these transactions as financing arrangements. As of December 31, 2021 and 2020, we had $375 million and $216 million, respectively, of financing obligations reported within other liabilities on our Consolidated Balance Sheets. Future payments due on certain financing arrangements (in millions) as of December 31, 2021, were as follows:

2022	$	8
2023		26
2024		80
2025		114
2026		165
Thereafter		4
Total future minimum lease payments		397
Less: Amount representing interest		22
Present value of minimum lease payments	$	375

Vulnerability from Concentrations

As of December 31, 2021, 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 4 and 8, 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 $(7) million and $(9) million as of December 31, 2021 and 2020, respectively.

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14. 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,
	2021			2020			2019
Unrealized Gain (Loss) on Fixed Maturity AFS Securities and Certain Other
Investments
Balance as of beginning-of-year	$	8,993		$	5,637		$	536
Cumulative effect from adoption of new accounting standards		-			40			-
Unrealized holding gains (losses) arising during the year		(5,109	)		7,585			8,856
Change in foreign currency exchange rate adjustment		(146	)		180			46
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		1,818			(3,559	)		(2,460	)
Income tax benefit (expense)		733			(901	)		(1,370	)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(10	)		(52	)		(26	)
Associated amortization of DAC, VOBA, DSI and DFEL		(23	)		38			(11	)
Income tax benefit (expense)		7			3			8
Balance as of end-of-year	$	6,315		$	8,993		$	5,637
Unrealized OTTI on Fixed Maturity AFS Securities
Balance as of beginning-of-year	$	-		$	40		$	29
(Increases) attributable to:
Cumulative effect from adoption of new accounting standards		-			(40	)		-
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
Change in DAC, VOBA, DSI and DFEL		-			-			(2	)
Income tax benefit (expense)		-			-			(7	)
Balance as of end-of-year	$	-		$	-		$	40
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	42		$	181		$	119
Unrealized holding gains (losses) arising during the year		141			77			181
Change in foreign currency exchange rate adjustment		152			(174	)		(52	)
Change in DAC, VOBA, DSI and DFEL		7			(23	)		(5	)
Income tax benefit (expense)		(65	)		26			(26	)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		49			64			47
Associated amortization of DAC, VOBA, DSI and DFEL		(2	)		(7	)		(2	)
Income tax benefit (expense)		(10	)		(12	)		(9	)
Balance as of end-of-year	$	240		$	42		$	181
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(14	)	$	(22	)	$	(25	)
Adjustment arising during the year		4			10			4
Income tax benefit (expense)		(1	)		(2	)		(1	)
Balance as of end-of-year	$	(11	)	$	(14	)	$	(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,
	2021			2020			2019
Unrealized Gain (Loss) on Fixed Maturity AFS
Securities and Certain Other Investments
Gross reclassification	$	(10	)	$	(52	)	$	(26	)	Realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		(23	)		38			(11	)	Realized gain (loss)
Reclassification before income
tax benefit (expense)		(33	)		(14	)		(37	)	Income (loss) before taxes
Income tax benefit (expense)		7			3			8		Federal income tax expense (benefit)
Reclassification, net of income tax	$	(26	)	$	(11	)	$	(29	)	Net income (loss)
Unrealized OTTI on Fixed Maturity AFS Securities
Gross reclassification	$	-		$	-		$	4		Realized gain (loss)
Change in DAC, VOBA, DSI and DFEL		-			-			-		Realized gain (loss)
Reclassification before income
tax benefit (expense)		-			-			4		Income (loss) before taxes
Income tax benefit (expense)		-			-			(1	)	Federal income tax expense (benefit)
Reclassification, net of income tax	$	-		$	-		$	3		Net income (loss)
Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	3		$	2		$	3		Net investment income
Foreign currency contracts		48			56			35		Net investment income
Foreign currency contracts		(2	)		6			9		Realized gain (loss)
Total gross reclassifications		49			64			47
Associated amortization of DAC,
VOBA, DSI and DFEL		(2	)		(7	)		(2	)	Commissions and other expenses
Reclassifications before income
tax benefit (expense)		47			57			45		Income (loss) before taxes
Income tax benefit (expense)		(10	)		(12	)		(9	)	Federal income tax expense (benefit)
Reclassifications, net of income tax	$	37		$	45		$	36		Net income (loss)

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15. 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,
	2021			2020			2019
Fixed maturity AFS securities:
Gross gains	$	18		$	26		$	44
Gross losses		(28	)		(78	)		(70	)
Credit loss benefit (expense) (1)		(11	)		(25	)		-
Gross OTTI		-			-			(15	)
Realized gain (loss) on equity securities (2)		40			8			(4	)
Credit loss benefit (expense) on mortgage loans on real estate		111			(117	)		(2	)
Credit loss benefit (expense) on reinsurance related assets		2			-			-
Other gain (loss) on investments		-			(7	)		(9	)
Associated amortization of DAC, VOBA, DSI and DFEL
and changes in other contract holder funds		(25	)		31			(13	)
Total realized gain (loss) related to certain financial assets		107			(162	)		(69	)
Realized gain (loss) on the mark-to-market on certain instruments (3)(4)		173			(142	)		(426	)
Indexed annuity and IUL contracts net derivative results: (5)
Gross gain (loss)		30			38			(80	)
Associated amortization of DAC, VOBA, DSI and DFEL		4			(26	)		2
GLB fees ceded to LNBAR and attributed fees:
Gross gain (loss)		(192	)		(205	)		(223	)
Associated amortization of DAC, VOBA, DSI and DFEL		(33	)		(29	)		(32	)
Total realized gain (loss)	$	89		$	(526	)	$	(828	)

⁽¹⁾Includes changes in the allowance for credit losses as well as direct write-downs to amortized cost as a result of negative credit events.

⁽²⁾Includes market adjustments on equity securities still held of $43 million, $8 million and $(4) million for the years ended December 31, 2021, 2020 and 2019, respectively.

⁽³⁾Represents changes in the fair values of certain derivative investments (not including those associated with our variable and indexed annuity and IUL contracts, net derivative results), reinsurance related embedded derivatives, mortgage loans on real estate accounted for under the fair value option and trading securities. See Notes 1 and 8 for information regarding modified coinsurance.

⁽⁴⁾Includes gains and losses from fair value changes on mortgage loans on real estate accounted for under the fair value option of $3 million and $(24) million for the years ended December 31, 2021 and 2020, respectively.

⁽⁵⁾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.

16. Commissions and Other Expenses

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

	For the Years Ended December 31,
	2021		2020			2019
Commissions	$	2,225	$	2,193		$	2,566
General and administrative expenses		2,187		2,014			2,152
Expenses associated with reserve financing and LOCs		57		55			52
DAC and VOBA deferrals and interest, net of amortization		238		(144	)		(586	)
Broker-dealer expenses		441		378			372
Specifically identifiable intangible asset amortization		37		37			26
Taxes, licenses and fees		347		336			353
Transaction and integration costs related to mergers, acquisitions and divestitures		14		20			130
Total	$	5,546	$	4,889		$	5,065

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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 for the years ended December 31, 2021 and 2020. We do not expect to be required to make any contributions to these pension plans in 2022. 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 $1 million, $4 million and $6 million during 2021, 2020 and 2019, respectively, which was reported within commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss). In 2022, we expect the plans to make benefit payments of approximately $11 million.

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

	As of or For the Years Ended December 31,
	2021			2020			2021			2020
							Other Postretirement
	Pension Plans						Benefit Plans
Fair value of plan assets	$	108		$	115		$	8		$	8
Projected benefit obligation		107			116			9			10
Funded status	$	1		$	(1	)	$	(1	)	$	(2	)
Amounts Recognized on the
Consolidated Balance Sheets
Other assets	$	4		$	-		$	-		$	-
Other liabilities		(3	)		(1	)		(1	)		(2	)
Net amount recognized	$	1		$	(1	)	$	(1	)	$	(2	)
Weighted-Average Assumptions
Benefit obligations:
Weighted-average discount rate		3.07%			2.95%			3.10%			2.96%
Net periodic benefit cost:
Weighted-average discount rate		2.95%			3.50%			2.96%			3.50%
Expected return on plan assets		4.25%			4.25%			6.50%			6.50%

The weighted average discount rate was determined based on a corporate yield curve as of December 31, 2021, 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,
	2021		2020
Fixed maturity securities:
Corporate bonds	$	49	$	12
U.S. government bonds		20		67
CMBS		2		-
Common stock		32		-
Cash and invested cash		5		36
Other investments		8		8
Total	$	116	$	123

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 $(28) million, $(9) million and $10 million for the years ended December 31, 2021, 2020 and 2019, 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 $104 million, $97 million and $101 million, for the years ended December 31, 2021, 2020 and 2019, 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 $18 million, $35 million and $22 million for the years ended December 31, 2021, 2020 and 2019, respectively. For further discussion of total return swaps related to our deferred compensation plans, see Note 5.

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

	As of December 31,
	2021		2020
Total liabilities (1)	$	755	$	673
Investments dedicated to fund liabilities (2)		254		229

⁽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, and restricted stock units (“RSUs”), among other types of awards. 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,
	2021		2020		2019
Stock options	$	8	$	9	$	8
Performance shares		17		5		16
RSUs		33		34		35
Total	$	58	$	48	$	59
Recognized tax benefit	$	12	$	10	$	12

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, 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,
	2021		2020
U.S. capital and surplus	$	8,647	$	8,783

	For the Years Ended December 31,
	2021			2020			2019
U.S. net gain (loss) from operations, after-tax	$	(1,285	)	$	(247	)	$	379
U.S. net income (loss)		(569	)		53			359
U.S. dividends to LNC holding company		1,910			660			600

Comparison of 2021 to 2020

Statutory net income (loss) decreased due primarily to the fourth quarter 2021 reinsurance agreement with Resolution Life (see Note 8 for more information) and unfavorable reserve strain on certain products, partially offset by favorable equity markets. U.S. dividends to LNC holding company included an extraordinary dividend from LNL of $900 million related to proceeds received from the fourth quarter 2021 reinsurance agreement with Resolution Life.

Comparison of 2020 to 2019

Statutory net income (loss) decreased due primarily to increases in benefits and unfavorable reserve strain on certain products, partially offset by favorable equity markets.

State Prescribed and Permitted Practices

The states of domicile for LNL and LLANY, Indiana and New York, respectively, have adopted certain prescribed or permitted accounting practices that differ from those found in NAIC SAP.  These prescribed practices are 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, the use of a more conservative valuation interest rate on certain annuities prescribed by the states of Indiana and New York. Also, the state of New York prescribes use of the continuous Commissioners’ Annuity Reserve Valuation Method in the calculation of reserves and use of minimum reserve methods and assumptions for variable annuity contracts that may be more conservative than those required by NAIC SAP.  The statutory permitted practice allows accounting for certain call option derivative assets at amortized cost and allows determining certain indexed annuity and indexed life statutory reserve calculations with the assumption that the market value of the related liability call option(s) associated with the current index term is zero. At the conclusion of the index term, credited interest is reflected in the reserve as realized, based on actual index performance.

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, 2021 and 2020. 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, 2021 and 2020. Lastly, the state of Vermont has permitted a practice to account for certain excess of loss reinsurance agreements with unaffiliated reinsurers as an asset and form of surplus as of December 31, 2021 and 2020. 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.

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67

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,
	2021			2020
State Prescribed Practices
Calculation of reserves using the Indiana universal life method	$	6		$	14
Conservative valuation rate on certain annuities		(40	)		(44	)
Calculation of reserves using continuous CARVM		-			(1	)
Conservative Reg 213 reserves on VA contracts		(27	)		-
State Permitted Practice
Derivative instruments and equity indexed reserves		(113	)		(100	)
Vermont Subsidiaries Permitted Practices
Lesser of LOC and XXX additional reserve as surplus		1,847			1,897
LLC notes and variable value surplus notes		1,616			1,640
Excess of loss reinsurance agreements		493			452

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 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, 2021, the Company’s RBC ratio was in excess of four times the aforementioned company action level RBC.

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 subsidiary, LLANY, a New York-domiciled insurance company, is bound by similar restrictions under the laws of New York. Under New York 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 $840 million in 2022 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, 2021						As of December 31, 2020
	Carrying			Fair			Carrying			Fair
	Value			Value			Value			Value
Assets
Fixed maturity AFS securities	$	117,511		$	117,511		$	121,111		$	121,111
Trading securities		4,427			4,427			4,442			4,442
Equity securities		314			314			127			127
Mortgage loans on real estate		17,893			18,599			16,681			18,129
Derivative investments (1)		5,437			5,437			3,109			3,109
Other investments		3,439			3,439			3,015			3,015
Cash and invested cash		2,331			2,331			1,462			1,462
Other assets:
GLB direct embedded derivatives		1,963			1,963			450			450
GLB ceded embedded derivatives		56			56			82			82
Indexed annuity ceded embedded derivatives		528			528			550			550
LPR ceded derivative		318			318			-			-
Separate account assets		182,583			182,583			167,965			167,965
Liabilities
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(6,131	)		(6,131	)		(3,594	)		(3,594	)
Other contract holder funds:
Remaining guaranteed interest and similar contracts		(1,788	)		(1,788	)		(1,854	)		(1,854	)
Account values of certain investment contracts		(41,164	)		(47,828	)		(40,917	)		(49,709	)
Short-term debt		(1,084	)		(1,084	)		(497	)		(497	)
Long-term debt		(2,334	)		(2,675	)		(2,412	)		(2,834	)
Reinsurance related embedded derivatives		(578	)		(578	)		(540	)		(540	)
Other liabilities:
Derivative liabilities (1)		(249	)		(249	)		(353	)		(353	)
GLB ceded embedded derivatives		(2,015	)		(2,015	)		(531	)		(531	)

⁽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.

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, excluding mortgage loans accounted for using the fair value option, 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, excluding mortgage loans accounted for using the fair value option, 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, excluding short-term 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 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 2 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, 2021 and 2020, 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.

Fair Value Option

Mortgage loans on real estate, net of allowance for credit losses, as reported on our Consolidated Balance Sheets, includes mortgage loans on real estate for which the fair value option was elected. The fair value option allows us to elect fair value as an alternative measurement for mortgage loans not otherwise reported at fair value. We have made these elections for certain mortgage loans associated with modified coinsurance agreements to help mitigate the inconsistency in earnings that would otherwise result from the use of embedded derivatives included with these loans. Changes in fair value are reflected in realized gain (loss) on our Consolidated Statement of Comprehensive Income (Loss). Changes in fair value due to instrument-specific credit risk are estimated using changes in credit spreads and quality ratings for the period reported. Mortgage loans on real estate for which the fair value option was elected are valued using third-party pricing services. We have procedures in place to review the valuations each quarter to ensure they are reasonable, including utilizing a separate third party to reperform the valuation for a selection of mortgage loans on an annual basis. Due to lack of observable inputs, mortgage loans electing the fair value option are categorized as Level 3 within the fair value hierarchy.

The fair value and aggregate contractual principal for mortgage loans on real estate where the fair value option was elected (in millions) were as follows:

	As of		As of
	December 31,		December 31,
	2021		2020
Fair value	$	739	$	832
Aggregate contractual principal		742		839

As of December 31, 2021 and 2020, no loans for which the fair value option was elected were in non-accrual status, and none were more than 90 days past due and still accruing interest.

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Financial Instruments Carried at Fair Value

Short-Term Investments

Short-term investments consist of securities with original maturities of one year or less, but greater than three months, and are included in other investments on our Consolidated Balance Sheets. Securities included in short-term investments are carried at fair value, with valuation methods and inputs consistent with those applied to fixed maturity AFS securities.

We did not have any assets or liabilities measured at fair value on a nonrecurring basis as of December 31, 2021 or 2020.

The following summarizes our financial instruments carried at fair value (in millions) on a recurring basis by the fair value hierarchy levels:

		As of December 31, 2021
		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		$	-		$	88,622			$	8,801		$	97,423
U.S. government bonds			395			5				-			400
State and municipal bonds			-			6,377				-			6,377
Foreign government bonds			-			382				41			423
RMBS			-			2,302				3			2,305
CMBS			-			1,590				-			1,590
ABS			-			7,636				870			8,506
Hybrid and redeemable preferred securities			53			344				90			487
Trading securities			32			3,567				828			4,427
Equity securities			7			216				91			314
Mortgage loans on real estate			-			-				739			739
Derivative investments (1)			-			7,597				149			7,746
Other investments – short-term investments			-			114				-			114
Cash and invested cash			-			2,331				-			2,331
Other assets:
GLB direct embedded derivatives			-			-				1,963			1,963
GLB ceded embedded derivatives			-			-				56			56
Indexed annuity ceded embedded derivatives			-			-				528			528
LPR ceded derivative			-			-				318			318
Separate account assets			646			181,929				-			182,575
Total assets		$	1,133		$	303,012			$	14,477		$	318,622
Liabilities
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		$	-		$	-			$	(6,131	)	$	(6,131	)
Reinsurance related embedded derivatives			-			(578	)			-			(578	)
Other liabilities:
Derivative liabilities (1)			-			(2,430	)			(128	)		(2,558	)
GLB ceded embedded derivatives			-			-				(2,015	)		(2,015	)
Total liabilities		$	-		$	(3,008	)		$	(8,274	)	$	(11,282	)

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		As of December 31, 2020
		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		$	-		$	93,663			$	7,761		$	101,424
U.S. government bonds			438			6				5			449
State and municipal bonds			-			6,662				-			6,662
Foreign government bonds			-			391				74			465
RMBS			-			2,836				2			2,838
CMBS			-			1,494				1			1,495
ABS			-			6,608				570			7,178
Hybrid and redeemable preferred securities			53			444				103			600
Trading securities			5			3,794				643			4,442
Equity securities			22			48				57			127
Mortgage loans on real estate			-			-				832			832
Derivative investments (1)			-			1,733				3,575			5,308
Cash and invested cash			-			1,462				-			1,462
Other assets:
GLB direct embedded derivatives			-			-				450			450
GLB ceded embedded derivatives			-			-				82			82
Indexed annuity ceded embedded derivatives			-			-				550			550
Separate account assets			606			167,351				-			167,957
Total assets		$	1,124		$	286,492			$	14,705		$	302,321
Liabilities
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		$	-		$	-			$	(3,594	)	$	(3,594	)
Reinsurance related embedded derivatives			-			(540	)			-			(540	)
Other liabilities:
Derivative liabilities (1)			-			(519	)			(2,033	)		(2,552	)
GLB ceded embedded derivatives			-			-				(531	)		(531	)
Total liabilities		$	-		$	(1,059	)		$	(6,158	)	$	(7,217	)

⁽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, 2021
									Purchases,
							Gains		Issuances,				Transfers
				Items			(Losses)		Sales,				Into or
				Included			in		Maturities,				Out
	Beginning			in			OCI		Settlements,				of			Ending
	Fair			Net			and			Calls,			Level 3,			Fair
	Value			Income			Other (1)			Net			Net			Value
Investments: (2)
Fixed maturity AFS securities:
Corporate bonds	$	7,761		$	3		$	(182	)	$	1,189		$	30		$	8,801
U.S. government bonds		5			-			-			(5	)		-			-
Foreign government bonds		74			-			(11	)		80			(102	)		41
RMBS		2			-			-			2			(1	)		3
CMBS		1			(1	)		-			8			(8	)		-
ABS		570			1			(9	)		602			(294	)		870
Hybrid and redeemable preferred
securities		103			-			25			(38	)		-			90
Trading securities		643			(3	)		-			210			(22	)		828
Equity securities		57			38			-			(4	)		-			91
Mortgage loans on real estate		832			11			5			(109	)		-			739
Derivative investments		1,542			1,255			(3	)		(139	)		(2,634	)		21
Other assets:
GLB direct embedded derivatives (3)		450			1,513			-			-			-			1,963
GLB ceded embedded derivatives (3)		82			(26	)		-			-			-			56
Indexed annuity ceded embedded derivatives (3)		550			87			-			(109	)		-			528
LPR ceded derivative (4)		-			-			-			-			318			318
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives (3)		(3,594	)		(2,709	)		-			172			-			(6,131	)
Other liabilities – GLB ceded embedded
derivatives (3)		(531	)		(1,484	)		-			-			-			(2,015	)
Total, net	$	8,547		$	(1,315	)	$	(175	)	$	1,859		$	(2,713	)	$	6,203

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73

	For the Year Ended December 31, 2020
									Purchases,
							Gains		Issuances,				Transfers
				Items			(Losses)		Sales,				Into or
				Included			in		Maturities,				Out
	Beginning			in			OCI		Settlements,				of			Ending
	Fair			Net			and			Calls,			Level 3,			Fair
	Value			Income			Other (1)			Net			Net			Value
Investments: (2)
Fixed maturity AFS securities:
Corporate bonds	$	6,978		$	(7	)	$	281		$	435		$	74		$	7,761
U.S. government bonds		5			-			-			-			-			5
Foreign government bonds		90			-			3			(19	)		-			74
RMBS		11			-			-			-			(9	)		2
CMBS		1			-			-			-			-			1
ABS		268			-			10			495			(203	)		570
Hybrid and redeemable preferred
securities		78			-			(2	)		9			18			103
Trading securities		666			10			-			(32	)		(1	)		643
Equity securities		30			4			-			18			5			57
Mortgage loans on real estate		-			(1	)		(10	)		56			787			832
Derivative investments		868			986			267			(363	)		(216	)		1,542
Other assets: (3)
GLB direct embedded derivatives		450			-			-			-			-			450
GLB ceded embedded derivatives		60			22			-			-			-			82
Indexed annuity ceded embedded derivatives		927			538			-			(915	)		-			550
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives (3)		(2,585	)		(1,009	)		-			-			-			(3,594	)
Other liabilities – GLB ceded embedded
derivatives (3)		(510	)		(21	)		-			-			-			(531	)
Total, net	$	7,337		$	522		$	549		$	(316	)	$	455		$	8,547

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	For the Year Ended December 31, 2019
									Purchases,
							Gains		Issuances,				Transfers
				Items			(Losses)		Sales,				Into or
				Included			in		Maturities,				Out
	Beginning			in			OCI		Settlements,				of			Ending
	Fair			Net			and			Calls,			Level 3,			Fair
	Value			Income			Other (1)			Net			Net			Value
Investments: (2)
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: (3)
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 (3)		(1,305	)		(900	)		-			(380	)		-			(2,585	)
Other liabilities – GLB ceded embedded
derivatives (3)		(196	)		(314	)		-			-			-			(510	)
Total, net	$	6,200		$	(723	)	$	351		$	2,331		$	(822	)	$	7,337

⁽¹⁾The changes in fair value of the interest rate swaps are offset by an adjustment to derivative investments (see Note 5).

⁽²⁾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 credit loss expense are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

⁽³⁾Gains (losses) from the changes in fair value are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

⁽⁴⁾Gains (losses) from the changes in fair value are included in benefits 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, 2021
	Issuances			Sales			Maturities		Settlements				Calls			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	1,861		$	(110	)	$	(109	)	$	(423	)	$	(30	)	$	1,189
U.S. government bonds		-			-			(5	)		-			-			(5	)
Foreign government bonds		80			-			-			-			-			80
RMBS		2			-			-			-			-			2
CMBS		8			-			-			-			-			8
ABS		835			-			-			(233	)		-			602
Hybrid and redeemable preferred
securities		12			(20	)		-			-			(30	)		(38	)
Trading securities		383			(25	)		-			(148	)		-			210
Equity securities		6			(10	)		-			-			-			(4	)
Mortgage loans on real estate		96			(101	)		(26	)		(78	)		-			(109	)
Derivative investments		174			(124	)		(189	)		-			-			(139	)
Other assets – indexed annuity ceded
embedded derivatives		55			-			-			(164	)		-			(109	)
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(400	)		-			-			572			-			172
Total, net	$	3,112		$	(390	)	$	(329	)	$	(474	)	$	(60	)	$	1,859

	For the Year Ended December 31, 2020
	Issuances			Sales			Maturities		Settlements				Calls			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	1,123		$	(318	)	$	(43	)	$	(195	)	$	(132	)	$	435
Foreign government bonds		-			-			(19	)		-			-			(19	)
ABS		571			-			-			(76	)		-			495
Hybrid and redeemable preferred
securities		13			(4	)		-			-			-			9
Trading securities		300			(126	)		(40	)		(166	)		-			(32	)
Equity securities		20			(2	)		-			-			-			18
Mortgage loans on real estate		71			(15	)		-			-			-			56
Derivative investments		520			(412	)		(471	)		-			-			(363	)
Other assets – indexed annuity ceded
embedded derivatives		25			-			-			(940	)		-			(915	)
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(284	)		-			-			284			-			-
Total, net	$	2,359		$	(877	)	$	(573	)	$	(1,093	)	$	(132	)	$	(316	)

‎

76

	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

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,
	2021			2020			2019
Trading securities	$	4		$	-		$	-
Equity securities		40			-			-
Mortgage loans on real estate		12			-			-
Derivative investments		1,051			536			168
Embedded derivatives:
Indexed annuity and IUL contracts		44			634			(97	)
Other assets – GLB direct and ceded		2,311			671			1,015
Other liabilities – GLB ceded		(2,306	)		(671	)		(1,015	)
Total, net (1)	$	1,156		$	1,170		$	71

⁽¹⁾Included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

The following summarizes changes in unrealized gains (losses) included in OCI, net of tax, 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,
	2021			2020
Fixed maturity AFS securities:
Corporate bonds	$	(183	)	$	60
Foreign government bonds		(10	)		4
ABS		(9	)		5
Hybrid and redeemable preferred securities		26			(3	)
Mortgage loans on real estate		4			-
Total, net	$	(172	)	$	66

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The following provides the components of the transfers into and out of Level 3 (in millions) as reported above:

1
	For the Year Ended December 31, 2021
	Transfers		Transfers
	Into		Out of
	Level 3		Level 3			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	164	$	(134	)	$	30
Foreign government bonds		-		(102	)		(102	)
RMBS		-		(1	)		(1	)
CMBS		-		(8	)		(8	)
ABS		36		(330	)		(294	)
Trading securities		12		(34	)		(22	)
Derivative investments		24		(2,658	)		(2,634	)
Other assets – LPR ceded derivative		318		-			318
Total, net	$	554	$	(3,267	)	$	(2,713	)

	For the Year Ended December 31, 2020
	Transfers		Transfers
	Into		Out of
	Level 3		Level 3			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	290	$	(216	)	$	74
RMBS		1		(10	)		(9	)
ABS		-		(203	)		(203	)
Hybrid and redeemable preferred securities		18		-			18
Trading securities		1		(2	)		(1	)
Equity securities		5		-			5
Mortgage loans on real estate		787		-			787
Derivative investments		-		(216	)		(216	)
Total, net	$	1,102	$	(647	)	$	455

	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	)

Transfers into and out of Level 3 are generally the result of observable market information on financial instruments no longer being available or becoming available to our pricing vendors. For the years ended December 31, 2021, 2020 and 2019, transfers in and out of Level 3 were attributable primarily to the financial instruments’ observable market information no longer being available or becoming available. During 2021, transfers into and out of Level 3 included free-standing instruments for which we changed valuation techniques. This change in valuation technique was primarily from unobservable inputs in counterparty models to a mathematical model provided by a third party. The updated valuation technique is considered industry standard and provides us with greater visibility into the economic valuation inputs.
‎

78

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, 2021:

											Weighted
											Average
	Fair			Valuation	Significant	Assumption or					Input
	Value			Technique	Unobservable Inputs	Input Ranges					Range (1)
Assets
Investments:
Fixed maturity AFS and
trading securities:
Corporate bonds	$	3,736		Discounted cash flow	Liquidity/duration adjustment (2)	0.1	%	-	4.9	%	1.5	%
Foreign government
bonds		41		Discounted cash flow	Liquidity/duration adjustment (2)	1.3	%	-	8.0	%	6.0	%
Hybrid and redeemable
preferred securities		7		Discounted cash flow	Liquidity/duration adjustment (2)	1.7	%	-	1.7	%	1.7	%
Equity securities		21		Discounted cash flow	Liquidity/duration adjustment (2)	4.5	%	-	6.7	%	6.1	%
Other assets:
GLB direct and ceded
embedded derivatives		2,019		Discounted cash flow	Long-term lapse rate (3)	1	%	-	30	%	(10)
					Utilization of guaranteed withdrawals (4)	85	%	-	100	%	94	%
					Claims utilization factor (5)	60	%	-	100	%	(10)
					Premiums utilization factor (5)	80	%	-	115	%	(10)
					NPR (6)	0.07	%	-	1.27	%	0.86	%
					Mortality rate (7)				(9)		(10)
					Volatility (8)	1	%	-	28	%	14.59	%
Indexed annuity ceded
embedded derivatives		528		Discounted cash flow	Lapse rate (3)	0	%	-	9	%	(10)
					Mortality rate (7)				(9)		(10)
LPR ceded derivative		318		Discounted cash flow	Long-term lapse rate (3)	0	%	-	1.65	%	(10)
					NPR (6)	0.07	%	-	1.27	%	0.84	%
					Mortality rate (7)				(9)		(10)
Liabilities
Future contract benefits –
indexed annuity contracts
embedded derivatives	$	(6,062	)	Discounted cash flow	Lapse rate (3)	0	%	-	9	%	(10)
					Mortality rate (7)				(9)		(10)
Other liabilities –
GLB ceded embedded
derivatives		(2,015	)	Discounted cash flow	Long-term lapse rate (3)	1	%	-	30	%	(10)
					Utilization of guaranteed withdrawals (4)	85	%	-	100	%	94	%
					Claims utilization factor (5)	60	%	-	100	%	(10)
					Premiums utilization factor (5)	80	%	-	115	%	(10)
					NPR (6)	0.07	%	-	1.27	%	0.86	%
					Mortality rate (7)				(9)		(10)
					Volatility (8)	1	%	-	28	%	14.59	%

⁽¹⁾Unobservable inputs were weighted by the relative fair value of the instruments, unless otherwise noted.

⁽²⁾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.

⁽³⁾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 contracts represents the lapse rates during the surrender charge period.

⁽⁴⁾The utilization of guaranteed withdrawals input represents the estimated percentage of contract holders that utilize the guaranteed withdrawal feature.

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⁽⁵⁾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.

⁽⁶⁾The NPR input represents the estimated additional credit spread that market participants would apply to the market observable discount rate when pricing a contract. The NPR input for direct and ceded embedded derivatives was weighted by the absolute value of the sensitivity of the reserve to the NPR assumption. The NPR input for LPR ceded derivative was weighted using a simple average.

⁽⁷⁾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.

⁽⁸⁾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. Volatility assumptions vary by fund due to the benchmarking of different indices. The volatility input was weighted by the relative account value assigned to each index.

⁽⁹⁾The mortality rate is based on a combination of company and industry experience, adjusted for improvement factors.

⁽¹⁰⁾A weighted average input range is not a meaningful measurement for lapse rate, utilization factors or mortality rate.

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 would have resulted 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 have resulted in a decrease in the fair value measurement.

●Indexed annuity contracts embedded derivatives – For direct embedded derivatives, an increase in the lapse rate or mortality rate inputs would have resulted in a decrease in the fair value measurement.

●LPR ceded derivative – Assuming our LPR ceded derivative is in an asset position: an increase in our lapse rate, NPR or mortality rate inputs would have resulted in an increase 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 have resulted in a decrease in the fair value measurement; and an increase in the utilization of guaranteed withdrawal or volatility inputs would have resulted 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 would not have affected 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 Note 1.

21. Segment Information

We provide products and services and report results through our Annuities, Retirement Plan Services, Life Insurance and Group Protection segments. We also have Other Operations, which includes the financial data for operations that are not directly related to the business segments. Our reporting segments reflect the manner by which our chief operating decision makers view and manage the business. The following is a brief description of these segments and Other Operations.

The Annuities segment provides tax-deferred investment growth and lifetime income opportunities for its clients by offering fixed (including indexed) and variable annuities.

The Retirement Plan Services segment provides employer-sponsored defined benefit and individual retirement accounts, as well as individual and group variable annuities, group fixed annuities and mutual-fund based programs in the retirement plan marketplace.

The Life Insurance segment focuses in the creation and protection of wealth through life insurance products, including term insurance, a linked-benefit product (which is a UL policy linked with riders that provide for long-term care costs), IUL and both single and survivorship versions of UL and VUL, including corporate-owned UL and VUL and bank-owned UL and VUL 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, critical illness and hospital indemnity benefits and services to the employer marketplace through various forms of employee-paid and employer-paid plans.

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Other Operations includes investments related to our excess capital; benefit plan obligations; 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; Spark and 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 financial assets;

◾Changes in the fair value of equity 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; and

◾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”);

●Changes in reserves resulting from benefit ratio unlocking on our GLB riders (“benefit ratio unlocking”);

●Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance;

●Gains (losses) on modification or early extinguishment of debt;

●Losses from the impairment of intangible assets;

●Income (loss) from discontinued operations;

●Transaction and integration costs related to mergers and acquisitions including the acquisition or divestiture, through reinsurance or other means, of businesses or blocks of business; 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 GLB benefit ratio unlocking; and

●Amortization of deferred gains arising from reserve changes on business sold through reinsurance.

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,
	2021			2020			2019
Revenues
Operating revenues:
Annuities	$	4,566		$	4,067		$	4,240
Retirement Plan Services		1,308			1,197			1,186
Life Insurance		7,692			7,086			6,999
Group Protection		4,995			4,792			4,587
Other Operations		157			166			199
Excluded realized gain (loss), pre-tax		(117	)		(742	)		(1,019	)
Total revenues	$	18,601		$	16,566		$	16,192

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	For the Years Ended December 31,
	2021			2020			2019
Net Income (Loss)
Income (loss) from operations:
Annuities	$	1,326		$	1,125		$	987
Retirement Plan Services		223			157			162
Life Insurance		540			(12	)		267
Group Protection		(128	)		42			237
Other Operations		(243	)		(161	)		(148	)
Excluded realized gain (loss), after-tax		(93	)		(586	)		(804	)
Benefit ratio unlocking, after-tax		15			4			-
Net impact from the Tax Cuts and Jobs Act		-			37			16
Transaction and integration costs related to mergers, acquisitions
and divestitures, after-tax		(11	)		(15	)		(103	)
Net income (loss)	$	1,629		$	591		$	614

Other segment information (in millions) was as follows:

	For the Years Ended December 31,
	2021		2020		2019
Net Investment Income
Annuities	$	1,316	$	1,192	$	1,070
Retirement Plan Services		983		924		917
Life Insurance		3,056		2,689		2,494
Group Protection		365		329		306
Other Operations		124		130		175
Total net investment income	$	5,844	$	5,264	$	4,962

	For the Years Ended December 31,
	2021		2020		2019
Amortization of DAC and VOBA, Net of Interest
Annuities	$	436	$	376	$	427
Retirement Plan Services		31		28		25
Life Insurance		1,029		768		757
Group Protection		107		114		111
Total amortization of DAC and VOBA, net of interest	$	1,603	$	1,286	$	1,320

	For the Years Ended December 31,
	2021			2020			2019
Federal Income Tax Expense (Benefit)
Annuities	$	251		$	187		$	148
Retirement Plan Services		47			21			21
Life Insurance		123			(28	)		50
Group Protection		(33	)		11			63
Other Operations		(70	)		(51	)		(61	)
Excluded realized gain (loss)		(25	)		(155	)		(215	)
Benefit ratio unlocking		4			1			-
Net impact from the Tax Cuts and Jobs Act		-			(37	)		(16	)
Transaction and integration costs related to mergers,
acquisitions and divestitures		(4	)		(5	)		(27	)
Total federal income tax expense (benefit)	$	293		$	(56	)	$	(37	)

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	As of December 31,
	2021		2020
Assets
Annuities	$	200,827	$	183,721
Retirement Plan Services		47,633		45,379
Life Insurance		106,973		102,806
Group Protection		10,522		10,201
Other Operations		26,060		26,212
Total assets	$	392,015	$	368,319

22. Supplemental Disclosures of Cash Flow Data

The following summarizes our supplemental cash flow data (in millions):

	For the Years Ended December 31,
	2021			2020		2019
Interest paid	$	115		$	127	$	152
Income taxes paid (received)		29			78		245
Significant non-cash investing transactions:
Equity securities received in exchange of fixed maturity AFS securities		-			17		-
Significant non-cash financing transactions:
Net increase (decrease) in fixed maturity AFS securities and
accrued investment income in connection with reinsurance transactions		(3,066	)		58		432
Decrease in other assets in connection with the expiration of a repurchase agreement		-			-		(150	)

‎

83

23. 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,
	2021			2020
Assets with affiliates:
Inter-company notes	$	1,474		$	1,514		Fixed maturity AFS securities
Ceded reinsurance contracts		(150	)		(141	)	Deferred acquisition costs and value of
							business acquired
Accrued inter-company interest receivable		11			4		Accrued investment income
Ceded reinsurance contracts		2,867			2,701		Reinsurance recoverables, net of allowance
							for credit losses
Ceded reinsurance contracts		529			221		Other assets
Cash management agreement		3,854			2,568		Other assets
Service agreement receivable		64			34		Other assets
Liabilities with affiliates:
Assumed reinsurance contracts		21			26		Future contract benefits
Assumed reinsurance contracts		364			387		Other contract holder funds
Ceded reinsurance contracts		(37	)		(34	)	Other contract holder funds
Inter-company short-term debt		1,084			497		Short-term debt
Inter-company long-term debt		2,334			2,412		Long-term debt
Ceded reinsurance contracts		368			145		Reinsurance related embedded derivatives
Ceded reinsurance contracts		4,971			5,233		Funds withheld reinsurance liabilities
Ceded reinsurance contracts		2,124			(287	)	Other liabilities
Accrued inter-company interest payable		4			4		Other liabilities
Service agreement payable		35			28		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,
	2021			2020			2019
Revenues with affiliates:
Premiums received on assumed (paid on ceded)
reinsurance contracts	$	(463	)	$	(439	)	$	(407	)	Insurance premiums
Fees for management of general account		(138	)		(140	)		(133	)	Net investment income
Net investment income on ceded funds withheld treaties		(113	)		(119	)		(139	)	Net investment income
Net investment income on inter-company notes		29			40			53		Net investment income
Realized gains (losses) on ceded reinsurance contracts:
GLB reserves embedded derivatives		(1,301	)		(30	)		(305	)	Realized gain (loss)
Other gains (losses)		94			(175	)		(301	)	Realized gain (loss)
Reinsurance related settlements		1,626			193			472		Realized gain (loss)
Amortization of deferred gain (loss) on reinsurance
contracts		3			3			(4	)	Amortization of deferred gain
										on business sold through
										reinsurance
Benefits and expenses with affiliates:
Interest credited on assumed reinsurance contracts		48			45			60		Interest credited
Reinsurance (recoveries) benefits on ceded reinsurance		(443	)		(585	)		(254	)	Benefits
Ceded reinsurance contracts		-			(1	)		(19	)	Commissions and other
										expenses
Service agreement payments (receipts)		(29	)		(17	)		15		Commissions and other
										expenses
Interest expense on inter-company debt		107			116			130		Interest and debt expense

84

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, 2021.

Service Agreements

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, account values, weighted policies in force and sales.

Ceded Reinsurance Contracts

As discussed in Note 8, we cede insurance contracts to LNBAR. We cede certain guaranteed benefit risks (including certain GDB and GWB benefits) to LNBAR. As discussed in Note 5, 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 $1 million as of December 31, 2021 and 2020. The LOCs are obtained by the affiliate reinsurer and issued by banks in order for the Company to recognize the reserve credit.

85

Lincoln National Variable Annuity Account L

L-1

Lincoln National Variable Annuity Account L

Statements of assets and liabilities

December 31, 2021

Subaccount	Investments		Total Assets		Net Assets
AB VPS Global Thematic Growth Portfolio - Class B	$	2,962,967	$	2,962,967	$	2,962,967
AB VPS Large Cap Growth Portfolio - Class B		4,282,533		4,282,533		4,282,533
American Century VP Balanced Fund - Class I		13,314,502		13,314,502		13,314,502
American Funds Global Growth Fund - Class 2		8,363,738		8,363,738		8,363,738
American Funds Growth Fund - Class 2		47,627,119		47,627,119		47,627,119
American Funds Growth-Income Fund - Class 2		16,920,691		16,920,691		16,920,691
American Funds International Fund - Class 2		7,714,877		7,714,877		7,714,877
BlackRock Global Allocation V.I. Fund - Class I		1,701,059		1,701,059		1,701,059
Delaware VIP® Small Cap Value Series - Service Class		8,402,199		8,402,199		8,402,199
DWS Alternative Asset Allocation VIP Portfolio - Class A		293,163		293,163		293,163
Fidelity® VIP Asset Manager Portfolio - Initial Class		28,898,776		28,898,776		28,898,776
Fidelity® VIP Contrafund® Portfolio - Service Class 2		29,576,432		29,576,432		29,576,432
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		239,147		239,147		239,147
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		585,642		585,642		585,642
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		1,200,626		1,200,626		1,200,626
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		1,129,825		1,129,825		1,129,825
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		610,949		610,949		610,949
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		601,709		601,709		601,709
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		846,813		846,813		846,813
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		202,829		202,829		202,829
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		127,030		127,030		127,030
Fidelity® VIP Government Money Market Portfolio - Initial Class		251,368		251,368		251,368
Fidelity® VIP Growth Portfolio - Initial Class		113,506,732		113,506,732		113,506,732
Janus Henderson Global Research Portfolio - Institutional Shares		9,246,372		9,246,372		9,246,372
LVIP American Global Balanced Allocation Managed Risk Fund - Standard Class		3,129,925		3,129,925		3,129,925
LVIP Baron Growth Opportunities Fund - Service Class		21,367,364		21,367,364		21,367,364
LVIP BlackRock Advantage Allocation Fund - Standard Class		259,368		259,368		259,368
LVIP BlackRock Global Real Estate Fund - Standard Class		426,712		426,712		426,712
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		760,181		760,181		760,181
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		1,992,415		1,992,415		1,992,415
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		321,286		321,286		321,286
LVIP Delaware Bond Fund - Standard Class		3,187,337		3,187,337		3,187,337
LVIP Delaware Diversified Floating Rate Fund - Service Class		176,891		176,891		176,891
LVIP Delaware Diversified Income Fund - Standard Class		4,180,191		4,180,191		4,180,191
LVIP Delaware High Yield Fund - Standard Class		1,885,338		1,885,338		1,885,338
LVIP Delaware REIT Fund - Service Class		8,714,688		8,714,688		8,714,688
LVIP Delaware SMID Cap Core Fund - Service Class		5,656,001		5,656,001		5,656,001
LVIP Delaware Social Awareness Fund - Standard Class		17,988,237		17,988,237		17,988,237
LVIP Delaware Wealth Builder Fund - Standard Class		505,041		505,041		505,041
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		6,503,287		6,503,287		6,503,287
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		76,457		76,457		76,457
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		1,142,684		1,142,684		1,142,684
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		3,858,136		3,858,136		3,858,136
LVIP Global Income Fund - Standard Class		146,426		146,426		146,426
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		18,772,461		18,772,461		18,772,461
LVIP JPMorgan Retirement Income Fund - Standard Class		1,402,614		1,402,614		1,402,614
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		593,643		593,643		593,643
LVIP Mondrian International Value Fund - Standard Class		2,631,677		2,631,677		2,631,677
LVIP SSGA Bond Index Fund - Standard Class		1,003,643		1,003,643		1,003,643
LVIP SSGA Emerging Markets 100 Fund - Standard Class		945,525		945,525		945,525
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		1,694,109		1,694,109		1,694,109
LVIP SSGA International Index Fund - Standard Class		752,937		752,937		752,937
LVIP SSGA International Managed Volatility Fund - Standard Class		191,240		191,240		191,240
LVIP SSGA S&P 500 Index Fund - Standard Class		127,497,632		127,497,632		127,497,632
LVIP SSGA Small-Cap Index Fund - Standard Class		25,015,146		25,015,146		25,015,146
LVIP T. Rowe Price 2010 Fund - Standard Class		369,754		369,754		369,754
LVIP T. Rowe Price 2020 Fund - Standard Class		1,795,733		1,795,733		1,795,733
LVIP T. Rowe Price 2030 Fund - Standard Class		5,936,641		5,936,641		5,936,641
LVIP T. Rowe Price 2040 Fund - Standard Class		3,125,384		3,125,384		3,125,384
LVIP T. Rowe Price 2050 Fund - Standard Class		3,337,242		3,337,242		3,337,242
LVIP T. Rowe Price 2060 Fund - Standard Class		32,857		32,857		32,857
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		26,000,456		26,000,456		26,000,456
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		5,697,613		5,697,613		5,697,613
T. Rowe Price International Stock Portfolio		7,962,508		7,962,508		7,962,508

See accompanying notes.
L-2

[THIS PAGE INTENTIONALLY LEFT BLANK]

Lincoln National Variable Annuity Account L

Statements of operations

Year Ended December 31, 2021

Subaccount	Dividends from Investment Income		Mortality and Expense Guarantee Charges			Net Investment Income (Loss)			Net Realized Gain (Loss) on Investments
AB VPS Global Thematic Growth Portfolio - Class B	$	—	$	(27,371	)	$	(27,371	)	$	171,044
AB VPS Large Cap Growth Portfolio - Class B		—		(38,552	)		(38,552	)		162,361
American Century VP Balanced Fund - Class I		98,432		(134,578	)		(36,146	)		579,470
American Funds Global Growth Fund - Class 2		29,647		(85,750	)		(56,103	)		639,960
American Funds Growth Fund - Class 2		100,086		(460,616	)		(360,530	)		3,515,063
American Funds Growth-Income Fund - Class 2		186,972		(166,409	)		20,563			841,987
American Funds International Fund - Class 2		197,308		(85,477	)		111,831			322,742
BlackRock Global Allocation V.I. Fund - Class I		15,217		(16,669	)		(1,452	)		37,873
Delaware VIP® Small Cap Value Series - Service Class		52,001		(77,905	)		(25,904	)		351,562
DWS Alternative Asset Allocation VIP Portfolio - Class A		4,758		(2,595	)		2,163			2,755
Fidelity® VIP Asset Manager Portfolio - Initial Class		463,211		(304,731	)		158,480			1,145,166
Fidelity® VIP Contrafund® Portfolio - Service Class 2		8,084		(283,539	)		(275,455	)		2,436,912
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		1,987		(1,852	)		135			5,015
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		4,251		(3,953	)		298			16,729
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		9,977		(11,592	)		(1,615	)		23,570
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		8,906		(10,615	)		(1,709	)		31,698
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		3,780		(5,024	)		(1,244	)		31,641
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		3,245		(4,064	)		(819	)		3,860
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		5,634		(7,039	)		(1,405	)		5,796
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		2,148		(1,498	)		650			1,221
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		1,330		(812	)		518			3,468
Fidelity® VIP Government Money Market Portfolio - Initial Class		23		—			23			—
Fidelity® VIP Growth Portfolio - Initial Class		—		(1,169,178	)		(1,169,178	)		14,408,682
Janus Henderson Global Research Portfolio - Institutional Shares		48,756		(93,538	)		(44,782	)		947,384
LVIP American Global Balanced Allocation Managed Risk Fund - Standard Class		84,330		(2,573	)		81,757			1,915
LVIP Baron Growth Opportunities Fund - Service Class		—		(212,164	)		(212,164	)		2,524,991
LVIP BlackRock Advantage Allocation Fund - Standard Class		3,341		(2,878	)		463			(334	)
LVIP BlackRock Global Real Estate Fund - Standard Class		26,777		(3,684	)		23,093			3,525
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		49,856		(6,848	)		43,008			10,117
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		—		(19,007	)		(19,007	)		220,391
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		—		(2,814	)		(2,814	)		3,413
LVIP Delaware Bond Fund - Standard Class		67,109		(33,943	)		33,166			16,905
LVIP Delaware Diversified Floating Rate Fund - Service Class		1,693		(1,800	)		(107	)		(169	)
LVIP Delaware Diversified Income Fund - Standard Class		220,898		(44,388	)		176,510			29,519
LVIP Delaware High Yield Fund - Standard Class		175,251		(18,542	)		156,709			(6,463	)
LVIP Delaware REIT Fund - Service Class		184,961		(76,453	)		108,508			155,962
LVIP Delaware SMID Cap Core Fund - Service Class		34,650		(57,561	)		(22,911	)		94,195
LVIP Delaware Social Awareness Fund - Standard Class		141,454		(180,189	)		(38,735	)		1,213,548
LVIP Delaware Wealth Builder Fund - Standard Class		10,215		(5,383	)		4,832			6,943
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		70,892		(62,543	)		8,349			317,885
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		867		(769	)		98			5,055
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		39,440		(11,817	)		27,623			26,561
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		117,491		(37,281	)		80,210			61,271
LVIP Global Income Fund - Standard Class		4,930		(1,732	)		3,198			772
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		564,731		(58,779	)		505,952			646,377
LVIP JPMorgan Retirement Income Fund - Standard Class		31,512		(13,537	)		17,975			7,026
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		5,691		(5,889	)		(198	)		60,314
LVIP Mondrian International Value Fund - Standard Class		90,133		(25,294	)		64,839			(10,437	)
LVIP SSGA Bond Index Fund - Standard Class		19,361		(10,308	)		9,053			(2,823	)
LVIP SSGA Emerging Markets 100 Fund - Standard Class		54,067		(10,743	)		43,324			(919	)
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		84,919		(16,297	)		68,622			13,157
LVIP SSGA International Index Fund - Standard Class		19,099		(6,974	)		12,125			14,894
LVIP SSGA International Managed Volatility Fund - Standard Class		4,265		(1,705	)		2,560			2,822
LVIP SSGA S&P 500 Index Fund - Standard Class		1,505,703		(1,242,214	)		263,489			14,768,799
LVIP SSGA Small-Cap Index Fund - Standard Class		211,751		(271,778	)		(60,027	)		2,395,466
LVIP T. Rowe Price 2010 Fund - Standard Class		10,033		(4,733	)		5,300			4,111
LVIP T. Rowe Price 2020 Fund - Standard Class		51,831		(18,251	)		33,580			19,542
LVIP T. Rowe Price 2030 Fund - Standard Class		131,941		(53,509	)		78,432			42,178

See accompanying notes.
L-4

Subaccount	Dividends from Net Realized Gain on Investments		Total Net Realized Gain (Loss) on Investments			Net Change in Unrealized Appreciation or Depreciation on Investments			Net Increase (Decrease) in Net Assets Resulting from Operations
AB VPS Global Thematic Growth Portfolio - Class B	$	340,758	$	511,802		$	48,262		$	532,693
AB VPS Large Cap Growth Portfolio - Class B		282,229		444,590			542,181			948,219
American Century VP Balanced Fund - Class I		664,495		1,243,965			689,509			1,897,328
American Funds Global Growth Fund - Class 2		441,166		1,081,126			225,713			1,250,736
American Funds Growth Fund - Class 2		6,019,592		9,534,655			(298,448	)		8,875,677
American Funds Growth-Income Fund - Class 2		168,579		1,010,566			2,424,617			3,455,746
American Funds International Fund - Class 2		—		322,742			(608,849	)		(174,276	)
BlackRock Global Allocation V.I. Fund - Class I		233,737		271,610			(177,954	)		92,204
Delaware VIP® Small Cap Value Series - Service Class		—		351,562			1,803,308			2,128,966
DWS Alternative Asset Allocation VIP Portfolio - Class A		—		2,755			22,138			27,056
Fidelity® VIP Asset Manager Portfolio - Initial Class		158,140		1,303,306			1,189,789			2,651,575
Fidelity® VIP Contrafund® Portfolio - Service Class 2		3,560,558		5,997,470			987,351			6,709,366
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		9,635		14,650			(1,292	)		13,493
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		16,446		33,175			(29	)		33,444
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		48,272		71,842			48,921			119,148
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		37,227		68,925			65,352			132,568
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		20,579		52,220			22,525			73,501
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		14,408		18,268			42,352			59,801
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		24,859		30,655			71,378			100,628
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		6,382		7,603			11,178			19,431
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		4,538		8,006			2,112			10,636
Fidelity® VIP Government Money Market Portfolio - Initial Class		—		—			—			23
Fidelity® VIP Growth Portfolio - Initial Class		24,341,492		38,750,174			(13,771,150	)		23,809,846
Janus Henderson Global Research Portfolio - Institutional Shares		452,845		1,400,229			159,110			1,514,557
LVIP American Global Balanced Allocation Managed Risk Fund - Standard Class		—		1,915			42,894			126,566
LVIP Baron Growth Opportunities Fund - Service Class		488,811		3,013,802			649,147			3,450,785
LVIP BlackRock Advantage Allocation Fund - Standard Class		18,275		17,941			900			19,304
LVIP BlackRock Global Real Estate Fund - Standard Class		15,292		18,817			45,290			87,200
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		—		10,117			(27,307	)		25,818
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		170,378		390,769			132,997			504,759
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		9,195		12,608			22,134			31,928
LVIP Delaware Bond Fund - Standard Class		40,132		57,037			(190,159	)		(99,956	)
LVIP Delaware Diversified Floating Rate Fund - Service Class		—		(169	)		(1,268	)		(1,544	)
LVIP Delaware Diversified Income Fund - Standard Class		127,721		157,240			(437,634	)		(103,884	)
LVIP Delaware High Yield Fund - Standard Class		—		(6,463	)		(79,730	)		70,516
LVIP Delaware REIT Fund - Service Class		—		155,962			2,403,742			2,668,212
LVIP Delaware SMID Cap Core Fund - Service Class		467,046		561,241			578,975			1,117,305
LVIP Delaware Social Awareness Fund - Standard Class		743,195		1,956,743			2,189,586			4,107,594
LVIP Delaware Wealth Builder Fund - Standard Class		13,830		20,773			29,358			54,963
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		243,345		561,230			906,584			1,476,163
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		—		5,055			6,917			12,070
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		27,910		54,471			(5,141	)		76,953
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		178,991		240,262			94,321			414,793
LVIP Global Income Fund - Standard Class		2,971		3,743			(17,494	)		(10,553	)
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		712,457		1,358,834			135,791			2,000,577
LVIP JPMorgan Retirement Income Fund - Standard Class		17,426		24,452			24,099			66,526
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		5,653		65,967			56,581			122,350
LVIP Mondrian International Value Fund - Standard Class		—		(10,437	)		211,138			265,540
LVIP SSGA Bond Index Fund - Standard Class		3,822		999			(43,003	)		(32,951	)
LVIP SSGA Emerging Markets 100 Fund - Standard Class		—		(919	)		39,762			82,167
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		103,405		116,562			(9,512	)		175,672
LVIP SSGA International Index Fund - Standard Class		—		14,894			34,165			61,184
LVIP SSGA International Managed Volatility Fund - Standard Class		—		2,822			8,960			14,342
LVIP SSGA S&P 500 Index Fund - Standard Class		1,964,353		16,733,152			13,587,076			30,583,717
LVIP SSGA Small-Cap Index Fund - Standard Class		696,487		3,091,953			572,655			3,604,581
LVIP T. Rowe Price 2010 Fund - Standard Class		12,443		16,554			12,475			34,329
LVIP T. Rowe Price 2020 Fund - Standard Class		42,434		61,976			65,175			160,731
LVIP T. Rowe Price 2030 Fund - Standard Class		68,958		111,136			420,801			610,369

L-5

Lincoln National Variable Annuity Account L

Statements of operations (continued)

Year Ended December 31, 2021

Subaccount	Dividends from Investment Income		Mortality and Expense Guarantee Charges			Net Investment Income (Loss)			Net Realized Gain (Loss) on Investments
LVIP T. Rowe Price 2040 Fund - Standard Class	$	78,715	$	(28,263	)	$	50,452		$	24,367
LVIP T. Rowe Price 2050 Fund - Standard Class		84,252		(30,108	)		54,144			19,125
LVIP T. Rowe Price 2060 Fund - Standard Class		709		(136	)		573			426
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		3,242		(270,592	)		(267,350	)		2,751,005
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		20,766		(55,116	)		(34,350	)		251,950
T. Rowe Price International Stock Portfolio		48,798		(89,029	)		(40,231	)		366,219

See accompanying notes.
L-6

Subaccount	Dividends from Net Realized Gain on Investments		Total Net Realized Gain (Loss) on Investments		Net Change in Unrealized Appreciation or Depreciation on Investments			Net Increase (Decrease) in Net Assets Resulting from Operations
LVIP T. Rowe Price 2040 Fund - Standard Class	$	36,271	$	60,638	$	287,266		$	398,356
LVIP T. Rowe Price 2050 Fund - Standard Class		42,051		61,176		318,339			433,659
LVIP T. Rowe Price 2060 Fund - Standard Class		390		816		225			1,614
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		3,645,328		6,396,333		(2,845,364	)		3,283,619
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		106,185		358,135		802,885			1,126,670
T. Rowe Price International Stock Portfolio		539,105		905,324		(777,717	)		87,376

L-7

Lincoln National Variable Annuity Account L

Statements of changes in net assets

Years Ended December 31, 2020 and 2021

	AB VPS Global Thematic 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			American Funds International Fund - Class 2 Subaccount
NET ASSETS AT JANUARY 1, 2020	$	2,029,831		$	2,882,013		$	13,192,668		$	7,360,327		$	32,985,214		$	15,844,128		$	8,820,850
Changes From Operations:
• Net investment income (loss)		(11,033	)		(30,877	)		25,873			(45,686	)		(236,670	)		52,479			(25,489	)
• Net realized gain (loss) on investments		312,225			286,136			659,241			489,885			2,404,887			549,286			13,977
• Net change in unrealized appreciation or depreciation on investments		392,793			690,514			758,879			1,465,126			13,399,069			1,014,716			946,669
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		693,985			945,773			1,443,993			1,909,325			15,567,286			1,616,481			935,157
Changes From Unit Transactions:
• Net unit transactions		(126,616	)		(89,122	)		(1,002,960	)		(975,527	)		(3,591,135	)		(1,860,946	)		(802,270	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(126,616	)		(89,122	)		(1,002,960	)		(975,527	)		(3,591,135	)		(1,860,946	)		(802,270	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		567,369			856,651			441,033			933,798			11,976,151			(244,465	)		132,887
NET ASSETS AT DECEMBER 31, 2020		2,597,200			3,738,664			13,633,701			8,294,125			44,961,365			15,599,663			8,953,737
Changes From Operations:
• Net investment income (loss)		(27,371	)		(38,552	)		(36,146	)		(56,103	)		(360,530	)		20,563			111,831
• Net realized gain (loss) on investments		511,802			444,590			1,243,965			1,081,126			9,534,655			1,010,566			322,742
• Net change in unrealized appreciation or depreciation on investments		48,262			542,181			689,509			225,713			(298,448	)		2,424,617			(608,849	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		532,693			948,219			1,897,328			1,250,736			8,875,677			3,455,746			(174,276	)
Changes From Unit Transactions:
• Net unit transactions		(166,926	)		(404,350	)		(2,216,527	)		(1,181,123	)		(6,209,923	)		(2,134,718	)		(1,064,584	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(166,926	)		(404,350	)		(2,216,527	)		(1,181,123	)		(6,209,923	)		(2,134,718	)		(1,064,584	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		365,767			543,869			(319,199	)		69,613			2,665,754			1,321,028			(1,238,860	)
NET ASSETS AT DECEMBER 31, 2021	$	2,962,967		$	4,282,533		$	13,314,502		$	8,363,738		$	47,627,119		$	16,920,691		$	7,714,877

See accompanying notes.
L-8

	BlackRock Global Allocation V.I. Fund - Class I Subaccount			Delaware VIP® Small Cap Value 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
NET ASSETS AT JANUARY 1, 2020	$	1,629,501		$	7,968,017		$	200,030		$	30,363,400		$	24,129,405		$	111,844
Changes From Operations:
• Net investment income (loss)		3,761			6,839			3,300			146,269			(227,186	)		191
• Net realized gain (loss) on investments		101,934			80,750			(196	)		539,804			1,213,702			7,128
• Net change in unrealized appreciation or depreciation on investments		177,412			(556,942	)		7,954			3,150,959			5,436,311			11,036
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		283,107			(469,353	)		11,058			3,837,032			6,422,827			18,355
Changes From Unit Transactions:
• Net unit transactions		(236,221	)		(981,567	)		17,564			(2,488,179	)		(3,057,661	)		30,469
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(236,221	)		(981,567	)		17,564			(2,488,179	)		(3,057,661	)		30,469
TOTAL INCREASE (DECREASE) IN NET ASSETS		46,886			(1,450,920	)		28,622			1,348,853			3,365,166			48,824
NET ASSETS AT DECEMBER 31, 2020		1,676,387			6,517,097			228,652			31,712,253			27,494,571			160,668
Changes From Operations:
• Net investment income (loss)		(1,452	)		(25,904	)		2,163			158,480			(275,455	)		135
• Net realized gain (loss) on investments		271,610			351,562			2,755			1,303,306			5,997,470			14,650
• Net change in unrealized appreciation or depreciation on investments		(177,954	)		1,803,308			22,138			1,189,789			987,351			(1,292	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		92,204			2,128,966			27,056			2,651,575			6,709,366			13,493
Changes From Unit Transactions:
• Net unit transactions		(67,532	)		(243,864	)		37,455			(5,465,052	)		(4,627,505	)		64,986
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(67,532	)		(243,864	)		37,455			(5,465,052	)		(4,627,505	)		64,986
TOTAL INCREASE (DECREASE) IN NET ASSETS		24,672			1,885,102			64,511			(2,813,477	)		2,081,861			78,479
NET ASSETS AT DECEMBER 31, 2021	$	1,701,059		$	8,402,199		$	293,163		$	28,898,776		$	29,576,432		$	239,147

L-9

Lincoln National Variable Annuity Account L

Statements of changes in net assets (continued)

Years Ended December 31, 2020 and 2021

	Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2 Subaccount			Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2 Subaccount			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
NET ASSETS AT JANUARY 1, 2020	$	247,708		$	314,033		$	700,075		$	188,206		$	99,884		$	266,837		$	1,660
Changes From Operations:
• Net investment income (loss)		686			2,878			(647	)		(311	)		48			(276	)		265
• Net realized gain (loss) on investments		11,461			28,900			22,184			15,410			6,495			13,866			1,570
• Net change in unrealized appreciation or depreciation on investments		33,325			112,747			91,414			54,645			41,529			70,327			3,704
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		45,472			144,525			112,951			69,744			48,072			83,917			5,539
Changes From Unit Transactions:
• Net unit transactions		102,724			626,981			17,996			159,306			136,401			170,829			59,240
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		102,724			626,981			17,996			159,306			136,401			170,829			59,240
TOTAL INCREASE (DECREASE) IN NET ASSETS		148,196			771,506			130,947			229,050			184,473			254,746			64,779
NET ASSETS AT DECEMBER 31, 2020		395,904			1,085,539			831,022			417,256			284,357			521,583			66,439
Changes From Operations:
• Net investment income (loss)		298			(1,615	)		(1,709	)		(1,244	)		(819	)		(1,405	)		650
• Net realized gain (loss) on investments		33,175			71,842			68,925			52,220			18,268			30,655			7,603
• Net change in unrealized appreciation or depreciation on investments		(29	)		48,921			65,352			22,525			42,352			71,378			11,178
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		33,444			119,148			132,568			73,501			59,801			100,628			19,431
Changes From Unit Transactions:
• Net unit transactions		156,294			(4,061	)		166,235			120,192			257,551			224,602			116,959
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		156,294			(4,061	)		166,235			120,192			257,551			224,602			116,959
TOTAL INCREASE (DECREASE) IN NET ASSETS		189,738			115,087			298,803			193,693			317,352			325,230			136,390
NET ASSETS AT DECEMBER 31, 2021	$	585,642		$	1,200,626		$	1,129,825		$	610,949		$	601,709		$	846,813		$	202,829

See accompanying notes.
L-10

	Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2 Subaccount		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 American Global Balanced Allocation Managed Risk Fund - Standard Class Subaccount		LVIP Baron Growth Opportunities Fund - Service Class Subaccount
NET ASSETS AT JANUARY 1, 2020	$	190	$	94,105	$	93,845,360		$	8,796,357		$	—	$	18,321,342
Changes From Operations:
• Net investment income (loss)		97		487		(911,768	)		(20,648	)		14,055		(175,952	)
• Net realized gain (loss) on investments		1,068		—		15,850,271			696,465			6		1,598,813
• Net change in unrealized appreciation or depreciation on investments		5,324		—		21,684,140			801,883			7,128		4,028,034
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		6,489		487		36,622,643			1,477,700			21,189		5,450,895
Changes From Unit Transactions:
• Net unit transactions		33,430		90,452		(12,420,403	)		(690,563	)		774,281		(2,207,879	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		33,430		90,452		(12,420,403	)		(690,563	)		774,281		(2,207,879	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		39,919		90,939		24,202,240			787,137			795,470		3,243,016
NET ASSETS AT DECEMBER 31, 2020		40,109		185,044		118,047,600			9,583,494			795,470		21,564,358
Changes From Operations:
• Net investment income (loss)		518		23		(1,169,178	)		(44,782	)		81,757		(212,164	)
• Net realized gain (loss) on investments		8,006		—		38,750,174			1,400,229			1,915		3,013,802
• Net change in unrealized appreciation or depreciation on investments		2,112		—		(13,771,150	)		159,110			42,894		649,147
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		10,636		23		23,809,846			1,514,557			126,566		3,450,785
Changes From Unit Transactions:
• Net unit transactions		76,285		66,301		(28,350,714	)		(1,851,679	)		2,207,889		(3,647,779	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		76,285		66,301		(28,350,714	)		(1,851,679	)		2,207,889		(3,647,779	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		86,921		66,324		(4,540,868	)		(337,122	)		2,334,455		(196,994	)
NET ASSETS AT DECEMBER 31, 2021	$	127,030	$	251,368	$	113,506,732		$	9,246,372		$	3,129,925	$	21,367,364

L-11

Lincoln National Variable Annuity Account L

Statements of changes in net assets (continued)

Years Ended December 31, 2020 and 2021

	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			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
NET ASSETS AT JANUARY 1, 2020	$	315,197		$	332,443		$	690,046		$	1,595,087		$	171,008		$	2,937,405		$	175,518
Changes From Operations:
• Net investment income (loss)		1,675			13,598			(5,474	)		(9,623	)		(1,892	)		49,910			504
• Net realized gain (loss) on investments		1,363			7,284			(4,313	)		112,186			3,121			90,611			(45	)
• Net change in unrealized appreciation or depreciation on investments		23,998			(31,209	)		36,719			225,865			50,325			139,977			(174	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		27,036			(10,327	)		26,932			328,428			51,554			280,498			285
Changes From Unit Transactions:
• Net unit transactions		(77,274	)		(2,786	)		(64,452	)		(117,466	)		27,271			424,563			5,391
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(77,274	)		(2,786	)		(64,452	)		(117,466	)		27,271			424,563			5,391
TOTAL INCREASE (DECREASE) IN NET ASSETS		(50,238	)		(13,113	)		(37,520	)		210,962			78,825			705,061			5,676
NET ASSETS AT DECEMBER 31, 2020		264,959			319,330			652,526			1,806,049			249,833			3,642,466			181,194
Changes From Operations:
• Net investment income (loss)		463			23,093			43,008			(19,007	)		(2,814	)		33,166			(107	)
• Net realized gain (loss) on investments		17,941			18,817			10,117			390,769			12,608			57,037			(169	)
• Net change in unrealized appreciation or depreciation on investments		900			45,290			(27,307	)		132,997			22,134			(190,159	)		(1,268	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		19,304			87,200			25,818			504,759			31,928			(99,956	)		(1,544	)
Changes From Unit Transactions:
• Net unit transactions		(24,895	)		20,182			81,837			(318,393	)		39,525			(355,173	)		(2,759	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(24,895	)		20,182			81,837			(318,393	)		39,525			(355,173	)		(2,759	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		(5,591	)		107,382			107,655			186,366			71,453			(455,129	)		(4,303	)
NET ASSETS AT DECEMBER 31, 2021	$	259,368		$	426,712		$	760,181		$	1,992,415		$	321,286		$	3,187,337		$	176,891

See accompanying notes.
L-12

	LVIP Delaware Diversified Income Fund - Standard Class Subaccount			LVIP Delaware High Yield Fund - Standard Class Subaccount			LVIP Delaware REIT Fund - Service Class Subaccount			LVIP Delaware SMID Cap Core 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, 2020	$	4,113,303		$	1,794,403		$	8,717,062		$	5,502,290		$	16,740,886		$	453,187
Changes From Operations:
• Net investment income (loss)		75,256			86,665			50,362			(31,780	)		49,567			5,043
• Net realized gain (loss) on investments		29,928			(38,090	)		250,059			(116,093	)		1,257,119			(28,180	)
• Net change in unrealized appreciation or depreciation on investments		299,688			40,524			(1,375,744	)		505,632			1,385,810			28,302
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		404,872			89,099			(1,075,323	)		357,759			2,692,496			5,165
Changes From Unit Transactions:
• Net unit transactions		115,187			(132,987	)		(744,144	)		(528,989	)		(2,131,264	)		9,178
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		115,187			(132,987	)		(744,144	)		(528,989	)		(2,131,264	)		9,178
TOTAL INCREASE (DECREASE) IN NET ASSETS		520,059			(43,888	)		(1,819,467	)		(171,230	)		561,232			14,343
NET ASSETS AT DECEMBER 31, 2020		4,633,362			1,750,515			6,897,595			5,331,060			17,302,118			467,530
Changes From Operations:
• Net investment income (loss)		176,510			156,709			108,508			(22,911	)		(38,735	)		4,832
• Net realized gain (loss) on investments		157,240			(6,463	)		155,962			561,241			1,956,743			20,773
• Net change in unrealized appreciation or depreciation on investments		(437,634	)		(79,730	)		2,403,742			578,975			2,189,586			29,358
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		(103,884	)		70,516			2,668,212			1,117,305			4,107,594			54,963
Changes From Unit Transactions:
• Net unit transactions		(349,287	)		64,307			(851,119	)		(792,364	)		(3,421,475	)		(17,452	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(349,287	)		64,307			(851,119	)		(792,364	)		(3,421,475	)		(17,452	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		(453,171	)		134,823			1,817,093			324,941			686,119			37,511
NET ASSETS AT DECEMBER 31, 2021	$	4,180,191		$	1,885,338		$	8,714,688		$	5,656,001		$	17,988,237		$	505,041

L-13

Lincoln National Variable Annuity Account L

Statements of changes in net assets (continued)

Years Ended December 31, 2020 and 2021

	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, 2020	$	5,642,089		$	63,689		$	1,218,599		$	4,025,873		$	223,341		$	22,282,932		$	1,418,476
Changes From Operations:
• Net investment income (loss)		28,634			65			12,971			38,966			971			340,114			21,789
• Net realized gain (loss) on investments		240,088			760			33,318			139,243			3,873			528,186			23,114
• Net change in unrealized appreciation or depreciation on investments		456,560			6,994			20,266			(20,342	)		7,335			440,619			69,180
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		725,282			7,819			66,555			157,867			12,179			1,308,919			114,083
Changes From Unit Transactions:
• Net unit transactions		(528,012	)		616			(95,748	)		(584,798	)		(48,468	)		(3,734,323	)		(120,259	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(528,012	)		616			(95,748	)		(584,798	)		(48,468	)		(3,734,323	)		(120,259	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		197,270			8,435			(29,193	)		(426,931	)		(36,289	)		(2,425,404	)		(6,176	)
NET ASSETS AT DECEMBER 31, 2020		5,839,359			72,124			1,189,406			3,598,942			187,052			19,857,528			1,412,300
Changes From Operations:
• Net investment income (loss)		8,349			98			27,623			80,210			3,198			505,952			17,975
• Net realized gain (loss) on investments		561,230			5,055			54,471			240,262			3,743			1,358,834			24,452
• Net change in unrealized appreciation or depreciation on investments		906,584			6,917			(5,141	)		94,321			(17,494	)		135,791			24,099
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		1,476,163			12,070			76,953			414,793			(10,553	)		2,000,577			66,526
Changes From Unit Transactions:
• Net unit transactions		(812,235	)		(7,737	)		(123,675	)		(155,599	)		(30,073	)		(3,085,644	)		(76,212	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(812,235	)		(7,737	)		(123,675	)		(155,599	)		(30,073	)		(3,085,644	)		(76,212	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		663,928			4,333			(46,722	)		259,194			(40,626	)		(1,085,067	)		(9,686	)
NET ASSETS AT DECEMBER 31, 2021	$	6,503,287		$	76,457		$	1,142,684		$	3,858,136		$	146,426		$	18,772,461		$	1,402,614

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, 2020	$	363,034		$	3,118,399		$	862,934		$	988,430		$	1,515,834		$	552,975
Changes From Operations:
• Net investment income (loss)		875			33,431			9,303			21,866			12,754			7,825
• Net realized gain (loss) on investments		(1,121	)		(48,320	)		63,584			(37,415	)		59,028			(3,473	)
• Net change in unrealized appreciation or depreciation on investments		7,805			(211,384	)		2,478			33,343			17,232			31,255
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		7,559			(226,273	)		75,365			17,794			89,014			35,607
Changes From Unit Transactions:
• Net unit transactions		10,393			(327,356	)		151,021			1,748			(58,886	)		7,932
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		10,393			(327,356	)		151,021			1,748			(58,886	)		7,932
TOTAL INCREASE (DECREASE) IN NET ASSETS		17,952			(553,629	)		226,386			19,542			30,128			43,539
NET ASSETS AT DECEMBER 31, 2020		380,986			2,564,770			1,089,320			1,007,972			1,545,962			596,514
Changes From Operations:
• Net investment income (loss)		(198	)		64,839			9,053			43,324			68,622			12,125
• Net realized gain (loss) on investments		65,967			(10,437	)		999			(919	)		116,562			14,894
• Net change in unrealized appreciation or depreciation on investments		56,581			211,138			(43,003	)		39,762			(9,512	)		34,165
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		122,350			265,540			(32,951	)		82,167			175,672			61,184
Changes From Unit Transactions:
• Net unit transactions		90,307			(198,633	)		(52,726	)		(144,614	)		(27,525	)		95,239
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		90,307			(198,633	)		(52,726	)		(144,614	)		(27,525	)		95,239
TOTAL INCREASE (DECREASE) IN NET ASSETS		212,657			66,907			(85,677	)		(62,447	)		148,147			156,423
NET ASSETS AT DECEMBER 31, 2021	$	593,643		$	2,631,677		$	1,003,643		$	945,525		$	1,694,109		$	752,937

L-15

Lincoln National Variable Annuity Account L

Statements of changes in net assets (continued)

Years Ended December 31, 2020 and 2021

	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, 2020	$	125,390		$	117,002,612		$	25,873,093		$	408,207		$	1,631,311		$	4,897,286
Changes From Operations:
• Net investment income (loss)		1,336			681,527			15,154			5,332			24,446			52,448
• Net realized gain (loss) on investments		(5,993	)		6,546,870			1,279,793			8,174			23,866			60,677
• Net change in unrealized appreciation or depreciation on investments		4,284			10,163,103			2,413,214			33,242			159,348			463,996
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		(373	)		17,391,500			3,708,161			46,748			207,660			577,121
Changes From Unit Transactions:
• Net unit transactions		16,173			(11,587,920	)		(2,802,766	)		11,181			(9,101	)		(609,811	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		16,173			(11,587,920	)		(2,802,766	)		11,181			(9,101	)		(609,811	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		15,800			5,803,580			905,395			57,929			198,559			(32,690	)
NET ASSETS AT DECEMBER 31, 2020		141,190			122,806,192			26,778,488			466,136			1,829,870			4,864,596
Changes From Operations:
• Net investment income (loss)		2,560			263,489			(60,027	)		5,300			33,580			78,432
• Net realized gain (loss) on investments		2,822			16,733,152			3,091,953			16,554			61,976			111,136
• Net change in unrealized appreciation or depreciation on investments		8,960			13,587,076			572,655			12,475			65,175			420,801
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		14,342			30,583,717			3,604,581			34,329			160,731			610,369
Changes From Unit Transactions:
• Net unit transactions		35,708			(25,892,277	)		(5,367,923	)		(130,711	)		(194,868	)		461,676
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		35,708			(25,892,277	)		(5,367,923	)		(130,711	)		(194,868	)		461,676
TOTAL INCREASE (DECREASE) IN NET ASSETS		50,050			4,691,440			(1,763,342	)		(96,382	)		(34,137	)		1,072,045
NET ASSETS AT DECEMBER 31, 2021	$	191,240		$	127,497,632		$	25,015,146		$	369,754		$	1,795,733		$	5,936,641

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 2060 Fund - Standard Class Subaccount		LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class Subaccount			Neuberger Berman AMT Sustainable Equity Portfolio - I Class Subaccount			T. Rowe Price International Stock Portfolio Subaccount
NET ASSETS AT JANUARY 1, 2020	$	2,134,848		$	1,781,890	$	—	$	23,785,568		$	4,860,849		$	8,974,514
Changes From Operations:
• Net investment income (loss)		24,135			20,731		28		(226,506	)		(16,747	)		(34,434	)
• Net realized gain (loss) on investments		22,445			16,191		6		2,655,283			184,486			445,503
• Net change in unrealized appreciation or depreciation on investments		277,393			247,196		187		4,166,520			634,081			657,891
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		323,973			284,118		221		6,595,297			801,820			1,068,960
Changes From Unit Transactions:
• Net unit transactions		(14,997	)		89,872		1,651		(2,337,071	)		(392,826	)		(765,248	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		(14,997	)		89,872		1,651		(2,337,071	)		(392,826	)		(765,248	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		308,976			373,990		1,872		4,258,226			408,994			303,712
NET ASSETS AT DECEMBER 31, 2020		2,443,824			2,155,880		1,872		28,043,794			5,269,843			9,278,226
Changes From Operations:
• Net investment income (loss)		50,452			54,144		573		(267,350	)		(34,350	)		(40,231	)
• Net realized gain (loss) on investments		60,638			61,176		816		6,396,333			358,135			905,324
• Net change in unrealized appreciation or depreciation on investments		287,266			318,339		225		(2,845,364	)		802,885			(777,717	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		398,356			433,659		1,614		3,283,619			1,126,670			87,376
Changes From Unit Transactions:
• Net unit transactions		283,204			747,703		29,371		(5,326,957	)		(698,900	)		(1,403,094	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS		283,204			747,703		29,371		(5,326,957	)		(698,900	)		(1,403,094	)
TOTAL INCREASE (DECREASE) IN NET ASSETS		681,560			1,181,362		30,985		(2,043,338	)		427,770			(1,315,718	)
NET ASSETS AT DECEMBER 31, 2021	$	3,125,384		$	3,337,242	$	32,857	$	26,000,456		$	5,697,613		$	7,962,508

L-17

Lincoln National Variable Annuity Account L

Notes to financial statements

December 31, 2021

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 six products as follows:

• Group Variable Annuity
• Lincoln PathBuilder^SM Income Version 1
• Lincoln PathBuilder^SM Income Version 2 • Lincoln PathBuilder^SM Income Version 3
• Lincoln PathBuilder^SM Income Version 4
• 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-four 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^® Small Cap Value 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 American Global Balanced Allocation Managed Risk Fund - Standard Class

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 Diversified Income Fund - Standard Class

LVIP Delaware High Yield Fund - Standard Class

LVIP Delaware REIT Fund - Service Class

LVIP Delaware SMID Cap Core Fund - Service Class

LVIP Delaware Social Awareness Fund - Standard Class

LVIP Delaware Wealth Builder Fund - Standard Class

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

L-18

Lincoln National Variable Annuity Account L

Notes to financial statements (continued)

1. Accounting Policies and Variable Account Information (continued)

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 2060 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, 2021. 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 Account will not be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended. Under current federal income tax law, no federal income taxes are payable or receivable with respect to the Variable Account's net investment income and the net realized gain (loss) on investments.

L-19

Lincoln National Variable Annuity Account L

Notes to financial statements (continued)

1. Accounting Policies and Variable Account Information (continued)

Annuity Reserves: Reserves on contracts not involving life contingencies are calculated using an assumed investment return of 3%, 4%, 5% or 6%, as approved in each state. Reserves on contracts involving life contingencies are calculated using an assumed investment return of 3%, 4%, 5% or 6%, as approved in each state, and mortality tables based on issue year. For issue years

2015 and later, the 2012 IAM Table is used. Issue years 1998 to 2014 use the A2000 individual mortality table. Issue years 1985 to 1997 use the 1983a individual mortality table. Issue years 1976 to 1985 use the 1971 individual mortality table. Tables used for issues prior to 1976 include the Code Progressive with 4-year setback table and Code 49 table.

Investment Fund Changes: During 2020, the following funds became available as investment options for account contract owners. Accordingly, for the subaccounts that commenced operations during 2020, the 2020 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, 2020:

LVIP American Global Balanced Allocation Managed Risk Fund -
Standard Class LVIP T. Rowe Price 2060 Fund - Standard Class

Also during 2020, the Lincoln Secured Retirement Income product changed its name to Lincoln PathBuilder^SM Income Version 1.

During 2021, the Lincoln Variable Insurance Products Trust assumed the assets and liabilities of the Delaware VIP^® Trust. The following funds were affected:

Fund Acquired	Acquiring Fund
Delaware VIP® Diversified Income Series - Standard Class	LVIP Delaware Diversified Income Fund - Standard Class
Delaware VIP® High Yield Series - Standard Class	LVIP Delaware High Yield Fund - Standard Class
Delaware VIP® REIT Series - Service Class	LVIP Delaware REIT Fund - Service Class
Delaware VIP® Smid Cap Core Series - Service Class	LVIP Delaware SMID Cap Core Fund - Service Class

COVID-19 Risk: The novel coronavirus (COVID-19), which was first detected in 2020, has resulted in, among other things, stressors to healthcare service infrastructure, country border closings, business and school closings and disruptions to supply chains and customer activity. This pandemic risk could have a significant adverse impact on subaccount investments.

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 six 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 PathBuilder^SM Income Version 1 at a daily rate of .0001370% (.05% on an annual basis)

•  Lincoln PathBuilder^SM Income Version 2 at a daily rate of .0006849% (.25% on an annual basis)

•  Lincoln PathBuilder^SM Income Version 3 at a daily rate of .0012329% (.45% on an annual basis)

•  Lincoln PathBuilder^SM Income Version 4 at a daily rate of .0017808% (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 2021 and 2020 were $143,326 and $176,475, respectively.

Surrender, contract and all other charges are included within Net unit transactions 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, 2021, 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
		2021			0.75	%		1.00	%	$	14.94	$	15.76		197,887	$	2,962,967		21.35	%		21.66	%		0.00	%
		2020			0.75	%		1.00	%		12.32		12.96		210,493		2,597,200		37.70	%		38.04	%		0.45	%
		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	%
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	%
AB VPS Large Cap Growth Portfolio - Class B
		2021			0.75	%		1.00	%		19.03		19.16		224,950		4,282,533		27.37	%		27.69	%		0.00	%
		2020			0.75	%		1.00	%		14.94		15.00		250,130		3,738,664		33.80	%		34.14	%		0.00	%
		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
		2021			0.75	%		1.00	%		69.54		73.56		190,514		13,314,502		14.62	%		14.91	%		0.71	%
		2020			0.75	%		1.00	%		60.67		64.02		223,556		13,633,701		11.41	%		11.69	%		1.17	%
		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	%
American Funds Global Growth Fund - Class 2
		2021			0.75	%		1.00	%		57.55		60.15		144,783		8,363,738		15.26	%		15.55	%		0.34	%
		2020			0.75	%		1.00	%		49.93		52.05		165,537		8,294,125		29.17	%		29.49	%		0.35	%
		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	%
American Funds Growth Fund - Class 2
		2021			0.75	%		1.00	%		53.53		56.45		885,942		47,627,119		20.78	%		21.08	%		0.21	%
		2020			0.75	%		1.00	%		44.32		46.63		1,009,535		44,961,365		50.57	%		50.94	%		0.32	%
		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	%
American Funds Growth-Income Fund - Class 2
		2021			0.75	%		1.00	%		44.39		46.38		380,327		16,920,691		22.86	%		23.17	%		1.10	%
		2020			0.75	%		1.00	%		36.13		37.66		430,204		15,599,663		12.42	%		12.70	%		1.34	%
		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	%
American Funds International Fund - Class 2
		2021			0.75	%		1.00	%		22.12		23.33		347,503		7,714,877		-2.48	%		-2.23	%		2.27	%
		2020			0.75	%		1.00	%		22.68		23.86		393,355		8,953,737		12.84	%		13.12	%		0.65	%
		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	%
BlackRock Global Allocation V.I. Fund - Class I
		2021			0.75	%		1.00	%		23.05		23.79		73,757		1,701,059		5.61	%		5.88	%		0.91	%
		2020			0.75	%		1.00	%		21.83		22.47		76,772		1,676,387		19.80	%		20.10	%		1.24	%
		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	%
Delaware VIP® Small Cap Value Series - Service Class
		2021			0.75	%		1.00	%		43.82		45.79		191,142		8,402,199		32.68	%		33.01	%		0.65	%
		2020			0.75	%		1.00	%		33.03		34.43		196,667		6,517,097		-3.15	%		-2.91	%		1.09	%
		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	%

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)
DWS Alternative Asset Allocation VIP Portfolio - Class A
		2021			0.75	%		1.00	%	$	16.44	$	16.96		17,829	$	293,163		11.62	%		11.90	%		1.83	%
		2020			0.75	%		1.00	%		14.73		15.16		15,522		228,652		4.66	%		4.92	%		2.64	%
		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	%
Fidelity® VIP Asset Manager Portfolio - Initial Class
		2021			0.75	%		1.00	%		65.61		69.40		439,389		28,898,776		8.83	%		9.10	%		1.50	%
		2020			0.75	%		1.00	%		60.29		63.62		524,599		31,712,253		13.73	%		14.01	%		1.48	%
		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	%
Fidelity® VIP Contrafund® Portfolio - Service Class 2
		2021			0.75	%		1.00	%		54.51		57.49		541,673		29,576,432		26.24	%		26.56	%		0.03	%
		2020			0.75	%		1.00	%		43.18		45.43		635,374		27,494,571		28.94	%		29.26	%		0.08	%
		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	%
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2
		2021			0.75	%		1.00	%		13.84		13.84		17,206		239,147		8.18	%		8.18	%		1.03	%
		2020			1.00	%		1.00	%		12.80		12.80		12,554		160,668		13.58	%		13.58	%		1.14	%
		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
		2021			1.00	%		1.00	%		14.24		14.24		41,122		585,642		9.45	%		9.45	%		1.07	%
		2020			1.00	%		1.00	%		13.01		13.01		30,426		395,904		14.53	%		14.53	%		1.24	%
		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
		2021			0.75	%		1.00	%		14.73		14.89		81,463		1,200,626		10.96	%		11.23	%		0.85	%
		2020			0.75	%		1.00	%		13.28		13.38		81,731		1,085,539		15.48	%		15.77	%		1.41	%
		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
		2021			0.75	%		1.00	%		15.49		15.65		72,948		1,129,825		14.03	%		14.33	%		0.84	%
		2020			0.75	%		1.00	%		13.58		13.69		61,185		831,022		16.78	%		17.07	%		0.90	%
		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	%
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2
		2021			1.00	%		1.00	%		15.97		15.97		38,247		610,949		16.33	%		16.33	%		0.75	%
		2020			1.00	%		1.00	%		13.73		13.73		30,386		417,256		17.81	%		17.81	%		0.90	%
		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
		2021			1.00	%		1.00	%		15.98		15.98		37,666		601,709		16.36	%		16.36	%		0.80	%
		2020			1.00	%		1.00	%		13.73		13.73		20,713		284,357		17.78	%		17.78	%		1.02	%
		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
		2021			1.00	%		1.00	%		15.98		15.98		53,005		846,813		16.35	%		16.35	%		0.80	%
		2020			1.00	%		1.00	%		13.73		13.73		37,984		521,583		17.81	%		17.81	%		0.92	%
		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	%

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 2055 Portfolio(SM) - Service Class 2
		2021			1.00	%		1.00	%	$	14.86	$	14.86		13,646	$	202,829		16.35	%		16.35	%		1.43	%
		2020			1.00	%		1.00	%		12.77		12.77		5,201		66,439		17.83	%		17.83	%		2.84	%
		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
		2021			1.00	%		1.00	%		14.87		14.87		8,544		127,030		16.35	%		16.35	%		1.64	%
		2020			1.00	%		1.00	%		12.78		12.78		3,139		40,109		17.85	%		17.85	%		1.58	%
		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
		2021			0.00	%		0.00	%		18.91		18.93		13,294		251,368		0.00	%		0.01	%		0.01	%
		2020			0.00	%		0.00	%		18.91		18.93		9,787		185,044		0.32	%		0.32	%		0.27	%
		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	%
Fidelity® VIP Growth Portfolio - Initial Class
		2021			0.75	%		1.00	%		219.78		232.49		514,667		113,506,732		21.99	%		22.29	%		0.00	%
		2020			0.75	%		1.00	%		180.16		190.11		652,781		118,047,600		42.46	%		42.82	%		0.08	%
		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	%
Janus Henderson Global Research Portfolio - Institutional Shares
		2021			0.75	%		1.00	%		38.69		40.93		237,795		9,246,372		16.92	%		17.21	%		0.51	%
		2020			0.75	%		1.00	%		33.09		34.92		287,958		9,583,494		18.87	%		19.16	%		0.72	%
		2019			0.75	%		1.00	%		27.84		29.31		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	%
LVIP American Global Balanced Allocation Managed Risk Fund - Standard Class
		2021			0.05	%		0.25	%		11.82		11.82		264,362		3,129,925		9.09	%		9.09	%		4.63	%
		2020	11/30/20		0.25	%		0.25	%		10.83		10.83		73,425		795,470		2.75	%		2.75	%		1.81	%
LVIP Baron Growth Opportunities Fund - Service Class
		2021			0.75	%		1.00	%		138.46		146.48		153,937		21,367,364		17.54	%		17.83	%		0.00	%
		2020			0.75	%		1.00	%		117.80		124.32		182,409		21,564,358		32.75	%		33.08	%		0.00	%
		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	%
LVIP BlackRock Advantage Allocation Fund - Standard Class
		2021			0.75	%		1.00	%		24.66		25.45		10,516		259,368		6.64	%		6.92	%		1.16	%
		2020			0.75	%		1.00	%		23.12		23.80		11,456		264,959		12.00	%		12.27	%		1.65	%
		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	%
LVIP BlackRock Global Real Estate Fund - Standard Class
		2021			0.75	%		1.00	%		14.41		14.95		29,486		426,712		26.74	%		27.06	%		7.06	%
		2020			0.75	%		1.00	%		11.37		11.76		27,976		319,330		-3.18	%		-2.94	%		5.51	%
		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	%
LVIP BlackRock Inflation Protected Bond Fund - Standard Class
		2021			0.75	%		1.00	%		10.67		10.93		71,194		760,181		3.63	%		3.89	%		7.24	%
		2020			0.75	%		1.00	%		10.30		10.52		63,329		652,526		4.23	%		4.49	%		0.16	%
		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	%
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class
		2021			0.75	%		1.00	%		21.57		22.75		92,215		1,992,415		29.56	%		29.88	%		0.00	%
		2020			0.75	%		1.00	%		16.65		17.51		107,947		1,806,049		22.59	%		22.89	%		0.37	%
		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	%

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 Blended Mid Cap Managed Volatility Fund - Standard Class
		2021			1.00	%		1.00	%	$	21.11	$	21.11		15,221	$	321,286		12.16	%		12.16	%		0.00	%
		2020			0.75	%		1.00	%		18.82		19.13		13,275		249,833		26.44	%		26.76	%		0.00	%
		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	%
LVIP Delaware Bond Fund - Standard Class
		2021			0.75	%		1.00	%		18.87		19.72		168,673		3,187,337		-2.78	%		-2.53	%		1.96	%
		2020			0.75	%		1.00	%		19.41		20.23		187,390		3,642,466		8.77	%		9.05	%		2.45	%
		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	%
LVIP Delaware Diversified Floating Rate Fund - Service Class
		2021			0.75	%		1.00	%		10.11		10.37		17,481		176,891		-0.85	%		-0.63	%		0.94	%
		2020			0.75	%		1.00	%		10.20		10.44		17,754		181,194		0.11	%		0.35	%		1.28	%
		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	%
LVIP Delaware Diversified Income Fund - Standard Class
		2021			0.75	%		1.00	%		21.15		22.10		197,372		4,180,191		-2.28	%		-2.03	%		4.93	%
		2020			0.75	%		1.00	%		21.64		22.56		213,783		4,633,362		9.93	%		10.21	%		2.69	%
		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	%
LVIP Delaware High Yield Fund - Standard Class
		2021			0.75	%		1.00	%		24.62		25.66		76,566		1,885,338		3.88	%		4.14	%		9.44	%
		2020			0.75	%		1.00	%		23.70		24.64		73,840		1,750,515		6.17	%		6.44	%		6.22	%
		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	%
LVIP Delaware REIT Fund - Service Class
		2021			0.75	%		1.00	%		58.46		61.65		148,863		8,714,688		41.13	%		41.48	%		2.40	%
		2020			0.75	%		1.00	%		41.43		43.57		166,165		6,897,595		-11.53	%		-11.31	%		1.71	%
		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	%
LVIP Delaware SMID Cap Core Fund - Service Class
		2021			0.75	%		1.00	%		33.17		34.98		169,939		5,656,001		21.60	%		21.91	%		0.59	%
		2020			0.75	%		1.00	%		27.28		28.69		194,802		5,331,060		9.64	%		9.91	%		0.28	%
		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	%
LVIP Delaware Social Awareness Fund - Standard Class
		2021			0.75	%		1.00	%		61.08		64.62		293,402		17,988,237		25.18	%		25.49	%		0.77	%
		2020			0.75	%		1.00	%		48.80		51.49		353,132		17,302,118		18.50	%		18.79	%		1.30	%
		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	%
LVIP Delaware Wealth Builder Fund - Standard Class
		2021			1.00	%		1.00	%		25.28		25.28		19,981		505,041		10.67	%		10.67	%		1.90	%
		2020			0.75	%		1.00	%		22.84		23.51		20,467		467,530		4.56	%		4.83	%		2.33	%
		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	%
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class
		2021			0.75	%		1.00	%		35.85		37.81		180,736		6,503,287		26.28	%		26.60	%		1.11	%
		2020			0.75	%		1.00	%		28.39		29.87		204,725		5,839,359		15.24	%		15.53	%		1.54	%
		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	%

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 Franklin Templeton Global Equity Managed Volatility Fund - Standard Class
		2021			1.00	%		1.00	%	$	13.72	$	13.72		5,574	$	76,457		16.15	%		16.15	%		1.13	%
		2020			1.00	%		1.00	%		11.81		11.81		6,107		72,124		11.54	%		11.54	%		1.10	%
		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	%
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class
		2021			0.75	%		1.00	%		22.14		23.08		51,577		1,142,684		6.56	%		6.83	%		3.32	%
		2020			0.75	%		1.00	%		20.78		21.60		57,205		1,189,406		6.01	%		6.27	%		2.10	%
		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	%
LVIP Global Growth Allocation Managed Risk Fund - Standard Class
		2021			0.75	%		1.00	%		21.45		22.35		179,465		3,858,136		11.65	%		11.93	%		3.10	%
		2020			0.75	%		1.00	%		19.21		19.97		186,913		3,598,942		4.80	%		5.07	%		2.06	%
		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	%
LVIP Global Income Fund - Standard Class
		2021			1.00	%		1.00	%		12.93		12.93		11,328		146,426		-6.03	%		-6.03	%		2.85	%
		2020			0.75	%		1.00	%		13.76		14.16		13,597		187,052		5.72	%		5.99	%		1.44	%
		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	%
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class
		2021			0.05	%		1.00	%		14.94		22.92		1,118,699		18,772,461		9.72	%		10.76	%		2.83	%
		2020			0.05	%		1.00	%		13.57		20.84		1,313,101		19,857,528		5.04	%		6.04	%		2.17	%
		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	%
LVIP JPMorgan Retirement Income Fund - Standard Class
		2021			0.75	%		1.00	%		20.94		21.89		66,526		1,402,614		4.82	%		5.08	%		2.22	%
		2020			0.75	%		1.00	%		19.98		20.83		70,087		1,412,300		8.39	%		8.66	%		2.45	%
		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	%
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class
		2021			1.00	%		1.00	%		15.39		15.39		38,577		593,643		27.79	%		27.79	%		0.97	%
		2020			0.75	%		1.00	%		12.04		12.24		31,635		380,986		0.93	%		1.17	%		1.27	%
		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	%
LVIP Mondrian International Value Fund - Standard Class
		2021			0.75	%		1.00	%		22.24		23.24		116,927		2,631,677		10.16	%		10.43	%		3.32	%
		2020			0.75	%		1.00	%		20.19		21.04		125,699		2,564,770		-5.92	%		-5.68	%		2.27	%
		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	%
LVIP SSGA Bond Index Fund - Standard Class
		2021			1.00	%		1.00	%		13.49		13.49		74,399		1,003,643		-2.95	%		-2.95	%		1.87	%
		2020			0.75	%		1.00	%		13.90		14.31		78,318		1,089,320		6.42	%		6.68	%		1.63	%
		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	%
LVIP SSGA Emerging Markets 100 Fund - Standard Class
		2021			0.75	%		1.00	%		17.38		17.93		54,395		945,525		7.70	%		7.97	%		5.03	%
		2020			0.75	%		1.00	%		16.14		16.61		62,457		1,007,972		1.63	%		1.89	%		3.59	%
		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	%

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 Global Tactical Allocation Managed Volatility Fund - Standard Class
		2021			0.75	%		1.00	%	$	18.86	$	19.65		89,672	$	1,694,109		11.46	%		11.74	%		5.14	%
		2020			0.75	%		1.00	%		16.92		17.59		91,209		1,545,962		5.95	%		6.22	%		1.88	%
		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	%
LVIP SSGA International Index Fund - Standard Class
		2021			0.75	%		1.00	%		21.20		21.89		35,495		752,937		9.95	%		10.23	%		2.73	%
		2020			0.75	%		1.00	%		19.28		19.86		30,931		596,514		6.78	%		7.04	%		2.53	%
		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	%
LVIP SSGA International Managed Volatility Fund - Standard Class
		2021			0.75	%		1.00	%		13.72		13.89		13,938		191,240		9.66	%		9.92	%		2.49	%
		2020			0.75	%		1.00	%		12.51		12.64		11,284		141,190		-1.96	%		-1.67	%		2.13	%
		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	%
LVIP SSGA S&P 500 Index Fund - Standard Class
		2021			0.75	%		1.00	%		38.26		39.19		3,324,633		127,497,632		27.14	%		27.46	%		1.18	%
		2020			0.75	%		1.00	%		30.09		30.75		4,071,622		122,806,192		16.86	%		17.15	%		1.59	%
		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	%
LVIP SSGA Small-Cap Index Fund - Standard Class
		2021			0.75	%		1.00	%		28.63		29.33		872,312		25,015,146		13.42	%		13.70	%		0.77	%
		2020			0.75	%		1.00	%		25.25		25.80		1,058,878		26,778,488		18.01	%		18.31	%		1.05	%
		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	%
LVIP T. Rowe Price 2010 Fund - Standard Class
		2021			1.00	%		1.00	%		18.39		18.39		20,111		369,754		7.53	%		7.53	%		2.12	%
		2020			1.00	%		1.00	%		17.10		17.10		27,262		466,136		11.17	%		11.17	%		2.28	%
		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	%
LVIP T. Rowe Price 2020 Fund - Standard Class
		2021			0.75	%		1.00	%		18.69		19.39		96,021		1,795,733		9.13	%		9.40	%		2.83	%
		2020			0.75	%		1.00	%		17.13		17.72		106,775		1,829,870		12.14	%		12.42	%		2.51	%
		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	%
LVIP T. Rowe Price 2030 Fund - Standard Class
		2021			0.75	%		1.00	%		19.48		20.20		304,568		5,936,641		12.47	%		12.75	%		2.45	%
		2020			0.75	%		1.00	%		17.32		17.92		280,683		4,864,596		14.10	%		14.39	%		2.20	%
		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	%
LVIP T. Rowe Price 2040 Fund - Standard Class
		2021			0.75	%		1.00	%		19.45		20.17		160,651		3,125,384		15.77	%		16.06	%		2.78	%
		2020			0.75	%		1.00	%		16.80		17.38		145,433		2,443,824		15.46	%		15.75	%		2.16	%
		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	%
LVIP T. Rowe Price 2050 Fund - Standard Class
		2021			1.00	%		1.00	%		20.13		20.13		165,744		3,337,242		16.83	%		16.83	%		2.80	%
		2020			1.00	%		1.00	%		17.23		17.23		125,095		2,155,880		15.73	%		15.73	%		2.16	%
		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	%

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)
LVIP T. Rowe Price 2060 Fund - Standard Class
		2021			1.00	%		1.00	%	$	15.57	$	15.57		2,111	$	32,857		17.51	%		17.51	%		5.21	%
		2020	8/11/20		1.00	%		1.00	%		13.25		13.25		141		1,872		15.41	%		15.41	%		2.35	%
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class
		2021			0.75	%		1.00	%		64.86		68.62		399,522		26,000,456		12.71	%		12.99	%		0.01	%
		2020			0.75	%		1.00	%		57.55		60.73		485,121		28,043,794		30.38	%		30.71	%		0.00	%
		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	%
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	%
Neuberger Berman AMT Sustainable Equity Portfolio - I Class
		2021			0.75	%		1.00	%		15.82		15.93		359,949		5,697,613		22.25	%		22.55	%		0.37	%
		2020			0.75	%		1.00	%		12.94		13.00		407,047		5,269,843		18.37	%		18.67	%		0.61	%
		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
		2021			0.75	%		1.00	%		31.50		33.32		252,065		7,962,508		0.31	%		0.56	%		0.54	%
		2020			0.75	%		1.00	%		31.40		33.14		294,429		9,278,226		13.31	%		13.59	%		0.57	%
		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	%

(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.

L-27

Lincoln National Variable Annuity Account L

Notes to financial statements (continued)

4. Purchases and Sales of Investments

The aggregate cost of investments purchased and the aggregate proceeds from investments sold were as follows for 2021:

Aggregate Subaccount	Aggregate Cost of Purchases		Proceeds from Sales
AB VPS Global Thematic Growth Portfolio - Class B	$	542,885	$	396,424
AB VPS Large Cap Growth Portfolio - Class B		497,912		658,585
American Century VP Balanced Fund - Class I		1,088,642		2,676,820
American Funds Global Growth Fund - Class 2		899,576		1,695,636
American Funds Growth Fund - Class 2		7,415,437		7,966,298
American Funds Growth-Income Fund - Class 2		965,150		2,910,726
American Funds International Fund - Class 2		443,517		1,396,270
BlackRock Global Allocation V.I. Fund - Class I		375,332		210,579
Delaware VIP® Small Cap Value Series - Service Class		1,399,195		1,668,963
DWS Alternative Asset Allocation VIP Portfolio - Class A		72,722		33,104
Fidelity® VIP Asset Manager Portfolio - Initial Class		574,546		5,722,978
Fidelity® VIP Contrafund® Portfolio - Service Class 2		4,606,607		5,949,009
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		118,406		43,650
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		325,456		152,418
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		197,559		154,963
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		364,045		162,292
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		313,723		174,196
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		292,600		21,460
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		276,927		28,871
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		139,281		15,290
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		109,783		28,442
Fidelity® VIP Government Money Market Portfolio - Initial Class		227,798		161,474
Fidelity® VIP Growth Portfolio - Initial Class		25,560,625		30,739,025
Janus Henderson Global Research Portfolio - Institutional Shares		871,155		2,314,771
LVIP American Global Balanced Allocation Managed Risk Fund - Standard Class		2,488,673		199,027
LVIP Baron Growth Opportunities Fund - Service Class		925,501		4,296,633
LVIP BlackRock Advantage Allocation Fund - Standard Class		71,906		78,063
LVIP BlackRock Global Real Estate Fund - Standard Class		88,462		29,895
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		437,717		312,872
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		268,625		435,647
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		57,154		11,248
LVIP Delaware Bond Fund - Standard Class		393,575		675,450
LVIP Delaware Diversified Floating Rate Fund - Service Class		10,523		13,389
LVIP Delaware Diversified Income Fund - Standard Class		697,186		742,242
LVIP Delaware High Yield Fund - Standard Class		451,885		230,869
LVIP Delaware REIT Fund - Service Class		856,656		1,599,267
LVIP Delaware SMID Cap Core Fund - Service Class		895,689		1,243,918
LVIP Delaware Social Awareness Fund - Standard Class		1,255,608		3,972,623
LVIP Delaware Wealth Builder Fund - Standard Class		128,973		127,763
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		526,821		1,087,362
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		15,209		22,848
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		100,217		168,359
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		386,324		282,722
LVIP Global Income Fund - Standard Class		21,262		45,166
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		4,180,010		6,047,245
LVIP JPMorgan Retirement Income Fund - Standard Class		94,788		135,599
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		492,574		396,812
LVIP Mondrian International Value Fund - Standard Class		207,118		340,912
LVIP SSGA Bond Index Fund - Standard Class		115,613		155,464
LVIP SSGA Emerging Markets 100 Fund - Standard Class		230,161		331,451
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		236,679		92,177
LVIP SSGA International Index Fund - Standard Class		201,145		93,781
LVIP SSGA International Managed Volatility Fund - Standard Class		61,563		23,295
LVIP SSGA S&P 500 Index Fund - Standard Class		5,110,073		28,774,508
LVIP SSGA Small-Cap Index Fund - Standard Class		1,477,063		6,208,526
LVIP T. Rowe Price 2010 Fund - Standard Class		32,824		145,792
LVIP T. Rowe Price 2020 Fund - Standard Class		151,917		270,771

L-28

Lincoln National Variable Annuity Account L

Notes to financial statements (continued)

4. Purchases and Sales of Investments (continued)

Aggregate Subaccount	Aggregate Cost of Purchases		Proceeds from Sales
LVIP T. Rowe Price 2030 Fund - Standard Class	$	867,695	$	258,629
LVIP T. Rowe Price 2040 Fund - Standard Class		511,752		141,825
LVIP T. Rowe Price 2050 Fund - Standard Class		944,126		100,228
LVIP T. Rowe Price 2060 Fund - Standard Class		35,194		4,860
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		3,508,345		5,457,324
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		471,640		1,098,705
T. Rowe Price International Stock Portfolio		840,739		1,744,959

5. Investments

The following is a summary of investments owned at December 31, 2021:

Subaccount	Shares Owned		Net Asset Value		Fair Value of Shares		Cost of Shares
AB VPS Global Thematic Growth Portfolio - Class B		67,648	$	43.80	$	2,962,967	$	1,821,563
AB VPS Large Cap Growth Portfolio - Class B		49,989		85.67		4,282,533		3,060,369
American Century VP Balanced Fund - Class I		1,392,730		9.56		13,314,502		9,992,066
American Funds Global Growth Fund - Class 2		186,109		44.94		8,363,738		5,173,426
American Funds Growth Fund - Class 2		377,155		126.28		47,627,119		27,439,634
American Funds Growth-Income Fund - Class 2		254,676		66.44		16,920,691		11,425,692
American Funds International Fund - Class 2		341,366		22.60		7,714,877		6,406,908
BlackRock Global Allocation V.I. Fund - Class I		95,619		17.79		1,701,059		1,631,828
Delaware VIP® Small Cap Value Series - Service Class		185,643		45.26		8,402,199		6,268,997
DWS Alternative Asset Allocation VIP Portfolio - Class A		19,376		15.13		293,163		262,446
Fidelity® VIP Asset Manager Portfolio - Initial Class		1,576,584		18.33		28,898,776		23,092,296
Fidelity® VIP Contrafund® Portfolio - Service Class 2		563,253		52.51		29,576,432		18,477,674
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		15,620		15.31		239,147		224,251
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		33,181		17.65		585,642		541,100
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		67,413		17.81		1,200,626		1,019,828
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		37,939		29.78		1,129,825		920,911
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		21,191		28.83		610,949		517,612
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		20,699		29.07		601,709		511,495
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		32,346		26.18		846,813		684,276
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		14,234		14.25		202,829		187,886
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		8,977		14.15		127,030		119,591
Fidelity® VIP Government Money Market Portfolio - Initial Class		251,368		1.00		251,368		251,369
Fidelity® VIP Growth Portfolio - Initial Class		1,108,140		102.43		113,506,732		67,392,357
Janus Henderson Global Research Portfolio - Institutional Shares		129,719		71.28		9,246,372		5,457,130
LVIP American Global Balanced Allocation Managed Risk Fund - Standard Class		238,017		13.15		3,129,925		3,079,903
LVIP Baron Growth Opportunities Fund - Service Class		233,352		91.57		21,367,364		8,638,913
LVIP BlackRock Advantage Allocation Fund - Standard Class		20,092		12.91		259,368		277,474
LVIP BlackRock Global Real Estate Fund - Standard Class		42,556		10.03		426,712		387,918
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		73,604		10.33		760,181		782,509
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		36,628		54.40		1,992,415		1,097,463
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		13,347		24.07		321,286		229,743
LVIP Delaware Bond Fund - Standard Class		232,805		13.69		3,187,337		3,204,684
LVIP Delaware Diversified Floating Rate Fund - Service Class		17,861		9.90		176,891		180,648
LVIP Delaware Diversified Income Fund - Standard Class		396,866		10.53		4,180,191		4,175,918
LVIP Delaware High Yield Fund - Standard Class		389,131		4.85		1,885,338		1,989,043
LVIP Delaware REIT Fund - Service Class		518,176		16.82		8,714,688		6,764,207
LVIP Delaware SMID Cap Core Fund - Service Class		219,949		25.72		5,656,001		5,038,086
LVIP Delaware Social Awareness Fund - Standard Class		327,678		54.90		17,988,237		12,306,927
LVIP Delaware Wealth Builder Fund - Standard Class		39,208		12.88		505,041		489,479
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		140,345		46.34		6,503,287		4,530,533
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		1,667		45.87		76,457		58,784
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		77,649		14.72		1,142,684		1,014,086
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		247,269		15.60		3,858,136		3,150,912
LVIP Global Income Fund - Standard Class		13,430		10.90		146,426		153,341
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		1,186,328		15.82		18,772,461		17,099,302

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 JPMorgan Retirement Income Fund - Standard Class		103,407	$	13.56	$	1,402,614	$	1,375,833
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		26,583		22.33		593,643		500,523
LVIP Mondrian International Value Fund - Standard Class		159,709		16.48		2,631,677		2,775,731
LVIP SSGA Bond Index Fund - Standard Class		86,926		11.55		1,003,643		1,042,716
LVIP SSGA Emerging Markets 100 Fund - Standard Class		107,998		8.76		945,525		1,003,055
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		135,637		12.49		1,694,109		1,562,586
LVIP SSGA International Index Fund - Standard Class		67,119		11.22		752,937		648,805
LVIP SSGA International Managed Volatility Fund - Standard Class		18,329		10.43		191,240		171,822
LVIP SSGA S&P 500 Index Fund - Standard Class		4,237,914		30.09		127,497,632		60,734,903
LVIP SSGA Small-Cap Index Fund - Standard Class		631,122		39.64		25,015,146		16,342,150
LVIP T. Rowe Price 2010 Fund - Standard Class		34,278		10.79		369,754		366,755
LVIP T. Rowe Price 2020 Fund - Standard Class		157,645		11.39		1,795,733		1,695,176
LVIP T. Rowe Price 2030 Fund - Standard Class		451,627		13.15		5,936,641		5,015,235
LVIP T. Rowe Price 2040 Fund - Standard Class		239,383		13.06		3,125,384		2,584,852
LVIP T. Rowe Price 2050 Fund - Standard Class		240,193		13.89		3,337,242		2,712,132
LVIP T. Rowe Price 2060 Fund - Standard Class		2,187		15.03		32,857		32,445
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		717,056		36.26		26,000,456		15,729,792
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		153,865		37.03		5,697,613		4,104,058
T. Rowe Price International Stock Portfolio		497,346		16.01		7,962,508		7,053,782

6. Changes in Units Outstanding

The change in units outstanding for the year ended December 31, 2021, is as follows:

Subaccount	Units Issued		Units Redeemed			Net Increase (Decrease)
AB VPS Global Thematic Growth Portfolio - Class B		16,248		(28,854	)		(12,606	)
AB VPS Large Cap Growth Portfolio - Class B		15,471		(40,651	)		(25,180	)
American Century VP Balanced Fund - Class I		5,725		(38,767	)		(33,042	)
American Funds Global Growth Fund - Class 2		9,114		(29,868	)		(20,754	)
American Funds Growth Fund - Class 2		31,351		(154,944	)		(123,593	)
American Funds Growth-Income Fund - Class 2		18,208		(68,085	)		(49,877	)
American Funds International Fund - Class 2		12,195		(58,047	)		(45,852	)
BlackRock Global Allocation V.I. Fund - Class I		6,065		(9,080	)		(3,015	)
Delaware VIP® Small Cap Value Series - Service Class		34,230		(39,755	)		(5,525	)
DWS Alternative Asset Allocation VIP Portfolio - Class A		4,373		(2,066	)		2,307
Fidelity® VIP Asset Manager Portfolio - Initial Class		2,422		(87,632	)		(85,210	)
Fidelity® VIP Contrafund® Portfolio - Service Class 2		24,141		(117,842	)		(93,701	)
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		7,798		(3,146	)		4,652
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		21,946		(11,250	)		10,696
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		10,376		(10,644	)		(268	)
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		22,446		(10,683	)		11,763
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		19,166		(11,305	)		7,861
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		18,297		(1,344	)		16,953
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		16,793		(1,772	)		15,021
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		9,509		(1,064	)		8,445
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		7,386		(1,981	)		5,405
Fidelity® VIP Government Money Market Portfolio - Initial Class		12,048		(8,541	)		3,507
Fidelity® VIP Growth Portfolio - Initial Class		7,740		(145,854	)		(138,114	)
Janus Henderson Global Research Portfolio - Institutional Shares		10,713		(60,876	)		(50,163	)
LVIP American Global Balanced Allocation Managed Risk Fund - Standard Class		207,984		(17,047	)		190,937
LVIP Baron Growth Opportunities Fund - Service Class		4,083		(32,555	)		(28,472	)
LVIP BlackRock Advantage Allocation Fund - Standard Class		2,191		(3,131	)		(940	)
LVIP BlackRock Global Real Estate Fund - Standard Class		3,700		(2,190	)		1,510
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		37,145		(29,280	)		7,865
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		6,085		(21,817	)		(15,732	)
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		2,461		(515	)		1,946
LVIP Delaware Bond Fund - Standard Class		15,979		(34,696	)		(18,717	)
LVIP Delaware Diversified Floating Rate Fund - Service Class		973		(1,246	)		(273	)
LVIP Delaware Diversified Income Fund - Standard Class		17,665		(34,076	)		(16,411	)

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 Delaware High Yield Fund - Standard Class		11,982		(9,256	)		2,726
LVIP Delaware REIT Fund - Service Class		13,934		(31,236	)		(17,302	)
LVIP Delaware SMID Cap Core Fund - Service Class		13,773		(38,636	)		(24,863	)
LVIP Delaware Social Awareness Fund - Standard Class		8,996		(68,726	)		(59,730	)
LVIP Delaware Wealth Builder Fund - Standard Class		4,622		(5,108	)		(486	)
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		7,570		(31,559	)		(23,989	)
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		1,184		(1,717	)		(533	)
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		1,837		(7,465	)		(5,628	)
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		5,422		(12,870	)		(7,448	)
LVIP Global Income Fund - Standard Class		1,088		(3,357	)		(2,269	)
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		195,450		(389,852	)		(194,402	)
LVIP JPMorgan Retirement Income Fund - Standard Class		2,705		(6,266	)		(3,561	)
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		34,110		(27,168	)		6,942
LVIP Mondrian International Value Fund - Standard Class		5,890		(14,662	)		(8,772	)
LVIP SSGA Bond Index Fund - Standard Class		7,352		(11,271	)		(3,919	)
LVIP SSGA Emerging Markets 100 Fund - Standard Class		10,721		(18,783	)		(8,062	)
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		3,170		(4,707	)		(1,537	)
LVIP SSGA International Index Fund - Standard Class		9,004		(4,440	)		4,564
LVIP SSGA International Managed Volatility Fund - Standard Class		4,352		(1,698	)		2,654
LVIP SSGA S&P 500 Index Fund - Standard Class		66,778		(813,767	)		(746,989	)
LVIP SSGA Small-Cap Index Fund - Standard Class		23,044		(209,610	)		(186,566	)
LVIP T. Rowe Price 2010 Fund - Standard Class		693		(7,844	)		(7,151	)
LVIP T. Rowe Price 2020 Fund - Standard Class		3,850		(14,604	)		(10,754	)
LVIP T. Rowe Price 2030 Fund - Standard Class		37,332		(13,447	)		23,885
LVIP T. Rowe Price 2040 Fund - Standard Class		23,336		(8,118	)		15,218
LVIP T. Rowe Price 2050 Fund - Standard Class		45,679		(5,030	)		40,649
LVIP T. Rowe Price 2060 Fund - Standard Class		2,281		(311	)		1,970
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		5,424		(91,023	)		(85,599	)
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		26,386		(73,484	)		(47,098	)
T. Rowe Price International Stock Portfolio		8,880		(51,244	)		(42,364	)

The change in units outstanding for the year ended December 31, 2020, is as follows:

Subaccount	Units Issued		Units Redeemed			Net Increase (Decrease)
AB VPS Global Thematic Growth Portfolio - Class B		21,634		(37,489	)		(15,855	)
AB VPS Large Cap Growth Portfolio - Class B		40,885		(48,810	)		(7,925	)
American Century VP Balanced Fund - Class I		6,509		(24,164	)		(17,655	)
American Funds Global Growth Fund - Class 2		8,330		(32,594	)		(24,264	)
American Funds Growth Fund - Class 2		44,010		(150,031	)		(106,021	)
American Funds Growth-Income Fund - Class 2		13,639		(74,783	)		(61,144	)
American Funds International Fund - Class 2		11,789		(55,860	)		(44,071	)
BlackRock Global Allocation V.I. Fund - Class I		5,075		(17,715	)		(12,640	)
Delaware VIP® Small Cap Value Series - Service Class		18,891		(55,111	)		(36,220	)
DWS Alternative Asset Allocation VIP Portfolio - Class A		1,744		(433	)		1,311
Fidelity® VIP Asset Manager Portfolio - Initial Class		4,262		(50,980	)		(46,718	)
Fidelity® VIP Contrafund® Portfolio - Service Class 2		25,859		(109,667	)		(83,808	)
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2		6,186		(3,558	)		2,628
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2		13,218		(4,594	)		8,624
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2		64,699		(10,265	)		54,434
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2		10,997		(10,007	)		990
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2		15,660		(1,420	)		14,240
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2		13,593		(1,449	)		12,144
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2		15,891		(800	)		15,091
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2		5,050		(2	)		5,048
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2		3,121		—			3,121
Fidelity® VIP Government Money Market Portfolio - Initial Class		13,751		(8,957	)		4,794
Fidelity® VIP Growth Portfolio - Initial Class		15,372		(102,158	)		(86,786	)
Janus Henderson Global Research Portfolio - Institutional Shares		6,752		(33,164	)		(26,412	)
LVIP American Global Balanced Allocation Managed Risk Fund - Standard Class		73,483		(58	)		73,425
LVIP Baron Growth Opportunities Fund - Service Class		3,024		(26,360	)		(23,336	)
LVIP BlackRock Advantage Allocation Fund - Standard Class		986		(4,795	)		(3,809	)

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 BlackRock Global Real Estate Fund - Standard Class		3,546		(3,784	)		(238	)
LVIP BlackRock Inflation Protected Bond Fund - Standard Class		7,971		(14,452	)		(6,481	)
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class		9,652		(18,593	)		(8,941	)
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class		3,060		(1,274	)		1,786
LVIP Delaware Bond Fund - Standard Class		41,312		(18,164	)		23,148
LVIP Delaware Diversified Floating Rate Fund - Service Class		793		(257	)		536
LVIP Delaware Diversified Income Fund - Standard Class		43,290		(38,154	)		5,136
LVIP Delaware High Yield Fund - Standard Class		8,172		(14,672	)		(6,500	)
LVIP Delaware REIT Fund - Service Class		7,392		(27,034	)		(19,642	)
LVIP Delaware SMID Cap Core Fund - Service Class		15,108		(40,852	)		(25,744	)
LVIP Delaware Social Awareness Fund - Standard Class		3,631		(55,563	)		(51,932	)
LVIP Delaware Wealth Builder Fund - Standard Class		8,731		(9,010	)		(279	)
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class		6,964		(30,355	)		(23,391	)
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class		1,258		(1,166	)		92
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class		1,792		(6,684	)		(4,892	)
LVIP Global Growth Allocation Managed Risk Fund - Standard Class		11,344		(43,666	)		(32,322	)
LVIP Global Income Fund - Standard Class		2,293		(5,860	)		(3,567	)
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class		547,231		(810,478	)		(263,247	)
LVIP JPMorgan Retirement Income Fund - Standard Class		29,719		(34,755	)		(5,036	)
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class		5,596		(4,346	)		1,250
LVIP Mondrian International Value Fund - Standard Class		3,888		(22,097	)		(18,209	)
LVIP SSGA Bond Index Fund - Standard Class		196,813		(184,514	)		12,299
LVIP SSGA Emerging Markets 100 Fund - Standard Class		8,762		(8,551	)		211
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class		4,430		(7,996	)		(3,566	)
LVIP SSGA International Index Fund - Standard Class		6,506		(6,192	)		314
LVIP SSGA International Managed Volatility Fund - Standard Class		5,960		(4,501	)		1,459
LVIP SSGA S&P 500 Index Fund - Standard Class		67,065		(529,754	)		(462,689	)
LVIP SSGA Small-Cap Index Fund - Standard Class		19,447		(168,188	)		(148,741	)
LVIP T. Rowe Price 2010 Fund - Standard Class		1,009		(289	)		720
LVIP T. Rowe Price 2020 Fund - Standard Class		12,796		(12,604	)		192
LVIP T. Rowe Price 2030 Fund - Standard Class		21,644		(63,383	)		(41,739	)
LVIP T. Rowe Price 2040 Fund - Standard Class		13,476		(14,590	)		(1,114	)
LVIP T. Rowe Price 2050 Fund - Standard Class		17,453		(12,016	)		5,437
LVIP T. Rowe Price 2060 Fund - Standard Class		141		—			141
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class		9,175		(60,728	)		(51,553	)
Neuberger Berman AMT Sustainable Equity Portfolio - I Class		8,798		(46,297	)		(37,499	)
T. Rowe Price International Stock Portfolio		4,285		(32,705	)		(28,420	)

7. Subsequent Events

Management evaluated subsequent events through the date these financial statements were issued and determined there were no additional matters to be disclosed.

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, 2021, 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, 2021, 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, 2021, 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, LLP

We have served as the Variable Account's Auditor since 1996.
Philadelphia, Pennsylvania

April 20, 2022

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, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
AB VPS Large Cap Growth Portfolio - Class B	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
American Century VP Balanced Fund - Class I	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
American Funds Global Growth Fund - Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
American Funds Growth Fund - Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
American Funds Growth-Income Fund - Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
American Funds International Fund - Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
BlackRock Global Allocation V.I. Fund - Class I	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Delaware VIP® Small Cap Value Series - Service Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
DWS Alternative Asset Allocation VIP Portfolio - Class A	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Asset Manager Portfolio - Initial Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Contrafund® Portfolio - Service Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Freedom 2020 Portfolio(SM) - Service Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Freedom 2025 Portfolio(SM) - Service Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Freedom 2030 Portfolio(SM) - Service Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Freedom 2035 Portfolio(SM) - Service Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Freedom 2040 Portfolio(SM) - Service Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Freedom 2045 Portfolio(SM) - Service Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Freedom 2050 Portfolio(SM) - Service Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Freedom 2055 Portfolio(SM) - Service Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Freedom 2060 Portfolio(SM) - Service Class 2	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Government Money Market Portfolio - Initial Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Fidelity® VIP Growth Portfolio - Initial Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Janus Henderson Global Research Portfolio - Institutional Shares	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021

L-34

Subaccount	Statements of Assets and Liabilities	Statements of Operations	Statements of Changes in Net Assets
LVIP American Global Balanced Allocation Managed Risk Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For the year ended December 31, 2021 and the period from November 30, 2020 (commencement of operations) through December 31, 2020
LVIP Baron Growth Opportunities Fund - Service Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP BlackRock Advantage Allocation Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP BlackRock Global Real Estate Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP BlackRock Inflation Protected Bond Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Blended Large Cap Growth Managed Volatility Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Blended Mid Cap Managed Volatility Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Delaware Bond Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Delaware Diversified Floating Rate Fund - Service Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Delaware Diversified Income Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Delaware High Yield Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Delaware REIT Fund - Service Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Delaware SMID Cap Core Fund - Service Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Delaware Social Awareness Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Delaware Wealth Builder Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Dimensional U.S. Core Equity 1 Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Franklin Templeton Global Equity Managed Volatility Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Global Conservative Allocation Managed Risk Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Global Growth Allocation Managed Risk Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Global Income Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Global Moderate Allocation Managed Risk Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP JPMorgan Retirement Income Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021

L-35

Subaccount	Statements of Assets and Liabilities	Statements of Operations	Statements of Changes in Net Assets
LVIP JPMorgan Select Mid Cap Value Managed Volatility Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP Mondrian International Value Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP SSGA Bond Index Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP SSGA Emerging Markets 100 Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP SSGA Global Tactical Allocation Managed Volatility Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP SSGA International Index Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP SSGA International Managed Volatility Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP SSGA S&P 500 Index Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP SSGA Small-Cap Index Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP T. Rowe Price 2010 Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP T. Rowe Price 2020 Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP T. Rowe Price 2030 Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP T. Rowe Price 2040 Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP T. Rowe Price 2050 Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
LVIP T. Rowe Price 2060 Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For the year ended December 31, 2021 and the period from August 11, 2020 (commencement of operations) through December 31, 2020
LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Standard Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
Neuberger Berman AMT Sustainable Equity Portfolio - I Class	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021
T. Rowe Price International Stock Portfolio	As of December 31, 2021	For the year ended December 31, 2021	For each of the two years in the period ended December 31, 2021

L-36