Lincoln National Life Insurance 10-Q 2024 Q3 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549  

FORM 10-Q

(Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024

OR

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _________ to _________.

Commission File Number: 000-55871

________________________________  

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)

________________________________ 

Indiana	35-0472300
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1301 South Harrison Street, Fort Wayne, Indiana	46802
(Address of principal executive offices)	(Zip Code)

(260) 455 - 2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

    

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-accelerated Filer	x	Smaller Reporting Company	¨
		Emerging Growth Company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of November 7, 2024, 10,000,000 shares of common stock of the registrant ($2.50 par value) were outstanding, all of which were directly owned by Lincoln National Corporation.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.

The Lincoln National Life Insurance Company

Table of Contents

		Page
PART I
Item 1.	Financial Statements:
	Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023	1
	Unaudited Consolidated Statements of Comprehensive Income (Loss) for the three and nine months
	ended September 30, 2024 and 2023	2
	Unaudited Consolidated Statements of Stockholder’s Equity for the three and nine months
	ended September 30, 2024 and 2023	3
	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023	4
	Notes to Unaudited Consolidated Financial Statements:
	Note 1 – Nature of Operations and Basis of Presentation	5
	Note 2 – New Accounting Standards	6
	Note 3 – Investments	7
	Note 4 – Variable Interest Entities	17
	Note 5 – Derivative Instruments	17
	Note 6 – DAC, VOBA, DSI and DFEL	27
	Note 7 – Reinsurance	30
	Note 8 – MRBs	31
	Note 9 – Separate Accounts	32
	Note 10 – Policyholder Account Balances	33
	Note 11 – Future Contract Benefits	37
	Note 12 – Fair Value of Financial Instruments	43
	Note 13 – Contingencies and Commitments	58
	Note 14 – Shares and Stockholder’s Equity	61
	Note 15 – Segment Information	62
	Note 16 – Realized Gain (Loss)	66
	Note 17 – Federal Income Taxes	66
	Note 18 – Supplemental Disclosures of Cash Flow Data	67
Item 2.	Management’s Narrative Analysis of the Results of Operations	68
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	86
Item 4.	Controls and Procedures	86
PART II
Item 1.	Legal Proceedings	87
Item 1A.	Risk Factors	87
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	88
Item 5.	Other Information	88
Item 6.	Exhibits	88
	Exhibit Index for the Report on Form 10-Q	89
	Signatures	90

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	As of		As of
	September 30,		December 31,
	2024		2023
	(Unaudited)
ASSETS
Investments:
Fixed maturity available-for-sale securities, at fair value
(amortized cost: 2024 - $88,998; 2023 - $88,231; allowance for credit losses: 2024 - $47; 2023 - $19)	$	84,571	$	82,300
Trading securities	2,185		2,321
Equity securities	293		306
Mortgage loans on real estate, net of allowance for credit losses
(portion at fair value: 2024 - $263; 2023 - $288)	20,701		18,873
Policy loans	2,499		2,463
Derivative investments	9,434		6,305
Other investments	5,470		4,757
Total investments	125,153		117,325
Cash and invested cash	4,743		3,193
Deferred acquisition costs, value of business acquired and deferred sales inducements	12,374		12,418
Reinsurance recoverables, net of allowance for credit losses	48,984		45,110
Deposit assets, net of allowance for credit losses	28,942		21,056
Market risk benefit assets	4,565		3,894
Accrued investment income	1,032		982
Goodwill	1,144		1,144
Other assets	11,253		10,597
Separate account assets	171,483		158,257
Total assets	$	409,673	$	373,976
LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities
Policyholder account balances	$	125,579	$	120,316
Future contract benefits	41,409		40,174
Funds withheld reinsurance liabilities	26,809		13,628
Market risk benefit liabilities	1,272		1,716
Deferred front-end loads	6,538		5,923
Payables for collateral on investments	10,530		7,982
Short-term debt	269		840
Long-term debt	2,177		2,195
Other liabilities	12,824		12,438
Separate account liabilities	171,483		158,257
Total liabilities	398,890		363,469
Contingencies and Commitments (See Note 13)
Stockholder’s Equity
Common stock – 10,000,000 shares authorized, issued and outstanding	13,004		12,961
Retained earnings (deficit)	(1,300)		(869)
Accumulated other comprehensive income (loss)	(921)		(1,585)
Total stockholder’s equity	10,783		10,507
Total liabilities and stockholder’s equity	$	409,673	$	373,976

See accompanying Notes to Consolidated Financial Statements

1

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in millions)

	For the Three Months Ended   September 30,				For the Nine Months Ended September 30,
	2024		2023			2024		2023
Revenues
Insurance premiums	$	1,559	$	1,514		$	322	$	4,581
Fee income	1,118		1,305			3,347		3,934
Net investment income	1,304		1,466			3,761		4,351
Realized gain (loss)	(571)		(867)			(345)		(4,513)
Other revenues	72		159			497		488
Total revenues	3,482		3,577			7,582		8,841
Expenses
Benefits	1,572		1,895			583		5,766
Interest credited	808		827			2,341		2,412
Market risk benefit (gain) loss	676		(1,014)			(190)		(1,182)
Policyholder liability remeasurement (gain) loss	(63)		157			(182)		(70)
Commissions and other expenses	1,238		1,311			3,932		3,906
Interest and debt expense	46		49			142		142
Total expenses	4,277		3,225			6,626		10,974
Income (loss) before taxes	(795)		352			956		(2,133)
Federal income tax expense (benefit)	(195)		37			138		(564)
Net income (loss)	(600)		315			818		(1,569)
Other comprehensive income (loss), net of tax:
Unrealized investment gain (loss)	320		(2,807)			989		1,088
Market risk benefit non-performance risk gain (loss)	373		(844)			(288)		(742)
Policyholder liability discount rate remeasurement gain (loss)	(226)		345			(36)		257
Foreign currency translation adjustment	(1)		–			(1)		–
Total other comprehensive income (loss), net of tax	466		(3,306)			664		603
Comprehensive income (loss)	$	(134)	$	(2,991)		$	1,482	$	(966)

See accompanying Notes to Consolidated Financial Statements

2

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(Unaudited, in millions)

	For the Three Months Ended   September 30,				For the Nine Months Ended September 30,
	2024		2023			2024		2023
Common Stock
Balance as of beginning-of-period	$	12,991	$	12,935		$	12,961	$	12,903
Capital contribution from Lincoln National Corporation	–		–			–		5
Stock compensation/issued for benefit plans	13		13			43		40
Balance as of end-of-period	13,004		12,948			13,004		12,948
Retained Earnings (Deficit)
Balance as of beginning-of-period	(575)		(730)			(869)		1,414
Net income (loss)	(600)		315			818		(1,569)
Dividends paid to Lincoln National Corporation	(125)		(105)			(1,249)		(365)
Balance as of end-of-period	(1,300)		(520)			(1,300)		(520)
Accumulated Other Comprehensive Income (Loss)
Balance as of beginning-of-period	(1,387)		(1,804)			(1,585)		(5,713)
Other comprehensive income (loss), net of tax	466		(3,306)			664		603
Balance as of end-of-period	(921)		(5,110)			(921)		(5,110)
Total stockholder’s equity as of end-of-period	$	10,783	$	7,318		$	10,783	$	7,318

See accompanying Notes to Consolidated Financial Statements

3

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)

	For the Nine Months Ended September 30,
	2024		2023
Cash Flows from Operating Activities
Net income (loss)	$	818	$	(1,569)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Realized (gain) loss	345		4,513
Market risk benefit (gain) loss	(190)		(1,182)
Sales and maturities (purchases) of trading securities, net	207		689
Change in:
Deferred acquisition costs, value of business acquired, deferred sales inducements
and deferred front-end loads	548		501
Accrued investment income	(49)		(74)
Insurance liabilities and reinsurance-related balances	(1,316)		(1,358)
Accrued expenses	(10)		(67)
Federal income tax accruals	383		(415)
Cash management agreement	(1,500)		(622)
Other	(997)		(145)
Net cash provided by (used in) operating activities	(1,761)		271
Cash Flows from Investing Activities
Purchases of available-for-sale securities and equity securities	(7,775)		(8,151)
Sales of available-for-sale securities and equity securities	1,055		2,828
Maturities of available-for-sale securities	6,187		3,975
Purchases of alternative investments	(884)		(416)
Sales and repayments of alternative investments	238		104
Issuance of mortgage loans on real estate	(3,087)		(1,375)
Repayment and maturities of mortgage loans on real estate	992		906
Repayment (issuance) of policy loans, net	(35)		(73)
Net change in collateral on investments, certain derivatives and related settlements	3,657		(407)
Cash received from disposition, net of cash transferred	512		–
Other	(70)		(269)
Net cash provided by (used in) investing activities	790		(2,878)
Cash Flows from Financing Activities
Capital contribution from Lincoln National Corporation	–		5
Payment of long-term debt, including current maturities	(50)		–
Issuance (payment) of short-term debt	(521)		(65)
Payment related to sale-leaseback transactions	(12)		(63)
Proceeds from certain financing arrangements	53		65
Payment related to certain financing arrangements	(103)		(35)
Deposits of fixed account balances	12,302		11,117
Withdrawals of fixed account balances	(8,951)		(7,740)
Transfers from (to) separate accounts, net	131		(519)
Common stock issued for benefit plans	(8)		(7)
Dividends paid to Lincoln National Corporation	(320)		(365)
Net cash provided by (used in) financing activities	2,521		2,393
Net increase (decrease) in cash, invested cash and restricted cash	1,550		(214)
Cash, invested cash and restricted cash as of beginning-of-year	3,193		2,499
Cash, invested cash and restricted cash as of end-of-period	$	4,743	$	2,285

See accompanying Notes to Consolidated Financial Statements

4

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Operations and Basis of Presentation

Nature of Operations

The Lincoln National Life Insurance Company (“LNL” or the “Company,” which also may be referred to as “we,” “our” or “us”), a wholly owned subsidiary of Lincoln National Corporation (“LNC” or the “Parent Company”), is domiciled in the state of Indiana. We own 100% of the outstanding common stock of one insurance company subsidiary, Lincoln Life & Annuity Company of New York (“LLANY”). We also own several non-insurance companies, including Lincoln Financial Distributors, our wholesale distributor. LNL is licensed and sells its products throughout the U.S. and several U.S. territories. Through our business segments, we sell a wide range of wealth accumulation, wealth protection, group protection and retirement income products and solutions. These products primarily include variable annuities, fixed annuities (including indexed), registered index-linked annuities (“RILA”), universal life insurance (“UL”), variable universal life insurance (“VUL”), linked-benefit UL and VUL, indexed universal life insurance (“IUL”), term life insurance, group life, disability and dental and employer-sponsored retirement plans and services. For more information on our segments and the products and solutions we provide, see Note 15.

Basis of Presentation

The accompanying unaudited consolidated financial statements are prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10-Q, including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The information contained in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”), should be read in connection with the reading of these interim unaudited consolidated financial statements.

Certain GAAP policies, which significantly affect the determination of financial condition, results of operations and cash flows, are summarized in our 2023 Form 10-K.

In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Interim results for the nine months ended September 30, 2024, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024. All material inter-company accounts and transactions have been eliminated in consolidation.

Certain amounts reported in prior periods’ consolidated financial statements have been reclassified to conform to the presentation adopted in the current period. Effective in the third quarter of 2024, we collapsed the amortization of deferred gain (loss) on business sold through reinsurance line item, reclassifying the deferred gain amortization to other revenues and presenting the amortization of deferred loss within commissions and other expenses. For prior periods, the amortization of deferred gain (loss) on business sold through reinsurance is presented on a net basis within other revenues.

We present disaggregated disclosures in the Notes below for long-duration insurance balances, applying the level of aggregation by reportable segment as follows:

Reportable Segment	Level of Aggregation
Annuities	Variable Annuities
	Fixed Annuities
	Payout Annuities
Life Insurance	Traditional Life
	UL and Other
Group Protection	Group Protection
Retirement Plan Services	Retirement Plan Services

The variable annuities level of aggregation includes RILA products, which are indexed variable annuities. The fixed annuities level of aggregation represents deferred fixed annuities. We have excluded amounts reported in Other Operations from our disaggregated disclosures that are attributable to the indemnity reinsurance agreements with Protective Life Insurance Company (“Protective”) and Swiss Re Life & Health America, Inc (“Swiss Re”) as these contracts are fully reinsured, run-off institutional pension business in the form of group annuity and the results of certain disability income business.

5

Sale of Wealth Management Business

On May 6, 2024, our parent company LNC closed the previously announced sale of all of the ownership interests in the subsidiaries of LNC that comprise its wealth management business, including our subsidiary Lincoln Financial Advisors Corporation, to Osaic Holdings, Inc., a Delaware corporation (“Osaic”), pursuant to the Stock Purchase Agreement entered into between LNC and Osaic on December 14, 2023 (the “Agreement”). LNC received $723 million in cash, inclusive of a post-closing adjustment during the third quarter of 2024. LNL was allocated $598 million of the cash proceeds, and we recognized a $455 million pre-tax realized gain for the nine months ended September 30, 2024, net of transaction expenses. Transaction expenses for the three and nine months ended September 30, 2024, of $2 million and $26 million, respectively, were reported in commissions and other expenses on the Consolidated Statements of Comprehensive Income (Loss). For more information, see Note 16.

2. New Accounting Standards

Adoption of New Accounting Standards

In the current period, we did not adopt any new Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board that were material in presentation or amount.

Future Adoption of New Accounting Standards

The following table provides a description of future adoptions of new ASUs that may have an impact on our consolidated financial statements when adopted. 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 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures	This ASU aims to enhance reportable segment disclosure requirements. It requires that a public entity disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), disclose and describe other segment items and report additional measures of a segment’s profit or loss if used by the CODM.	January 1, 2024 (Annual Filings) and January 1, 2025 (Quarterly Filings)	We are evaluating the impact of this ASU to our consolidated financial statements.
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures	This ASU establishes new income tax disclosure requirements, along with adjusting certain existing requirements. It specifically requires expanded and disaggregated disclosures around the tax rate reconciliation.	January 1, 2025	We are evaluating the impact of this ASU to our consolidated financial statements.

6

3. Investments

Fixed Maturity AFS Securities

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

	As of September 30, 2024
	Amortized Cost		Gross Unrealized				Allowance for Credit Losses			Fair Value
			Gains		Losses
Fixed maturity AFS securities:
Corporate bonds	$	68,637	$	1,064	$	4,927		$	17		$	64,757
U.S. government bonds	415		8		25			–			398
State and municipal bonds	2,427		87		196			–			2,318
Foreign government bonds	278		16		46			–			248
RMBS	1,789		38		107			6			1,714
CMBS	1,661		14		116			–			1,559
ABS	13,557		125		331			23			13,328
Hybrid and redeemable preferred securities	234		26		10			1			249
Total fixed maturity AFS securities	$	88,998	$	1,378	$	5,758		$	47		$	84,571

	As of December 31, 2023
	Amortized Cost		Gross Unrealized				Allowance for Credit Losses			Fair Value
			Gains		Losses
Fixed maturity AFS securities:
Corporate bonds	$	68,811	$	820	$	5,757		$	8		$	63,866
U.S. government bonds	414		7		28			–			393
State and municipal bonds	2,675		97		230			–			2,542
Foreign government bonds	309		15		46			–			278
RMBS	1,719		27		138			6			1,602
CMBS	1,520		5		181			–			1,344
ABS	12,556		62		571			4			12,043
Hybrid and redeemable preferred securities	227		21		15			1			232
Total fixed maturity AFS securities	$	88,231	$	1,054	$	6,966		$	19		$	82,300

The amortized cost and fair value of fixed maturity AFS securities by contractual maturities (in millions) as of September 30, 2024, were as follows:

	Amortized Cost		Fair Value
Due in one year or less	$	4,750	$	4,724
Due after one year through five years	18,005		17,705
Due after five years through ten years	14,186		13,618
Due after ten years	35,050		31,923
Subtotal	71,991		67,970
Structured securities (RMBS, CMBS, ABS)	17,007		16,601
Total fixed maturity AFS securities	$	88,998	$	84,571

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

7

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 September 30, 2024
	Less Than or Equal to Twelve Months				Greater Than Twelve Months				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses (1)
Fixed maturity AFS securities:
Corporate bonds	$	16,496	$	1,841	$	25,346	$	3,086	$	41,842	$	4,927
U.S. government bonds	26		2		223		23		249		25
State and municipal bonds	493		63		658		133		1,151		196
Foreign government bonds	45		17		100		29		145		46
RMBS	290		18		724		89		1,014		107
CMBS	619		48		515		68		1,134		116
ABS	2,763		110		3,897		221		6,660		331
Hybrid and redeemable
preferred securities	13		1		89		9		102		10
Total fixed maturity AFS securities	$	20,745	$	2,100	$	31,552	$	3,658	$	52,297	$	5,758
Total number of fixed maturity AFS securities in an unrealized loss position											6,060

	As of December 31, 2023
	Less Than or Equal to Twelve Months				Greater Than Twelve Months				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses (1)
Fixed maturity AFS securities:
Corporate bonds	$	13,439	$	1,744	$	33,285	$	4,013	$	46,724	$	5,757
U.S. government bonds	65		6		194		22		259		28
State and municipal bonds	371		72		814		158		1,185		230
Foreign government bonds	108		31		57		15		165		46
RMBS	355		20		840		118		1,195		138
CMBS	583		56		586		125		1,169		181
ABS	1,898		68		7,212		503		9,110		571
Hybrid and redeemable
preferred securities	32		2		94		13		126		15
Total fixed maturity AFS securities	$	16,851	$	1,999	$	43,082	$	4,967	$	59,933	$	6,966
Total number of fixed maturity AFS securities in an unrealized loss position											7,167

(1) As of September 30, 2024, and December 31, 2023, we recognized $15 million and $7 million of gross unrealized losses, respectively, in other comprehensive income (loss) (“OCI”) for fixed maturity AFS securities for which an allowance for credit losses has been recorded.

8

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 September 30, 2024
	Fair Value		Gross Unrealized Losses		Number of Securities (1)
Less than six months	$	694	$	252	287
Six months or greater, but less than nine months	80		35		41
Nine months or greater, but less than twelve months	1,650		637		365
Twelve months or greater	3,140		1,216		587
Total	$	5,564	$	2,140	1,280

	As of December 31, 2023
	Fair Value		Gross Unrealized Losses		Number of Securities (1)
Less than six months	$	2,480	$	916	529
Six months or greater, but less than nine months	321		90		79
Nine months or greater, but less than twelve months	321		106		87
Twelve months or greater	3,485		1,336		704
Total	$	6,607	$	2,448	1,399

(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 decreased by $1.2 billion for the nine months ended September 30, 2024. As discussed further below, we do not believe the unrealized loss position as of September 30, 2024, required 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 September 30, 2024, 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 September 30, 2024, 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 rising interest rates and widening credit spreads 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 September 30, 2024, and December 31, 2023, 96% of the fair value of our corporate bond portfolio was rated investment grade. As of September 30, 2024, and December 31, 2023, the portion of our corporate bond portfolio rated below investment grade had an amortized cost of $2.8 billion and $2.7 billion, respectively, and a fair value of $2.7 billion and $2.6 billion, respectively. Based upon the analysis discussed above, we believe that as of September 30, 2024, and December 31, 2023, we would have recovered the amortized cost of each corporate bond.

As of September 30, 2024, the unrealized losses associated with our mortgage-backed securities (“MBS”) and asset-backed securities (“ABS”) were attributable primarily to rising interest rates and widening credit spreads 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.

9

As of September 30, 2024, 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.

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

	For the Three Months Ended September 30, 2024
	Corporate Bonds		RMBS		ABS		Hybrids		Total
Balance as of beginning-of-period	$	13	$	6	$	19	$	1	$	39
Additions from purchases of PCD debt securities (1)	–		–		–		–		–
Additions for securities for which credit losses were
not previously recognized	6		–		1		–		7
Additions (reductions) for securities for which
credit losses were previously recognized	4		–		3		–		7
Reductions for disposed securities	–		–		–		–		–
Reductions for securities charged-off	(6)		–		–		–		(6)
Balance as of end-of-period (2)	$	17	$	6	$	23	$	1	$	47

	For the Nine Months Ended September 30, 2024
	Corporate Bonds		RMBS		ABS		Hybrids		Total
Balance as of beginning-of-year	$	8	$	6	$	4	$	1	$	19
Additions from purchases of PCD debt securities (1)	–		–		–		–		–
Additions for securities for which credit losses were
not previously recognized	8		–		15		–		23
Additions (reductions) for securities for which
credit losses were previously recognized	12		–		4		–		16
Reductions for disposed securities	–		–		–		–		–
Reductions for securities charged-off	(11)		–		–		–		(11)
Balance as of end-of-period (2)	$	17	$	6	$	23	$	1	$	47

	For the Three Months Ended September 30, 2023
	Corporate Bonds		RMBS		ABS		Hybrids		Total
Balance as of beginning-of-period	$	13	$	6	$	5	$	1	$	25
Additions from purchases of PCD debt securities (1)	–		–		–		–		–
Additions for securities for which credit losses were
not previously recognized	1		–		–		–		1
Additions (reductions) for securities for which
credit losses were previously recognized	–		–		–		–		–
Reductions for securities charged-off	(5)		–		–		–		(5)
Balance as of end-of-period (2)	$	9	$	6	$	5	$	1	$	21

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	For the Nine Months Ended September 30, 2023
	Corporate Bonds		RMBS		ABS		Hybrids		Total
Balance as of beginning-of-year	$	9	$	7	$	4	$	1	$	21
Additions from purchases of PCD debt securities (1)	–		–		–		–		–
Additions for securities for which credit losses were
not previously recognized	21		–		–		–		21
Additions (reductions) for securities for which
credit losses were previously recognized	(3)		(1)		1		–		(3)
Reductions for disposed securities	(1)		–		–		–		(1)
Reductions for securities charged-off	(17)		–		–		–		(17)
Balance as of end-of-period (2)	$	9	$	6	$	5	$	1	$	21

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

(2) As of September 30, 2024 and 2023, accrued investment income on fixed maturity AFS securities totaled $812 million and $1.2 billion, respectively, and was excluded from the estimate of credit losses.

Losses from debt instrument modifications were less than $1 million for the three months ended September 30, 2024 and 2023, and $3 million and less than $1 million for the nine months ended September 30, 2024 and 2023, respectively, reported in realized gain (loss) on the Consolidated Statements of Comprehensive Income (Loss).

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 September 30, 2024						As of December 31, 2023
	Commercial		Residential		Total		Commercial		Residential		Total
Current	$	17,539	$	3,064	$	20,603	$	17,165	$	1,665	$	18,830
30 to 59 days past due	85		34		119		61		28		89
60 to 89 days past due	–		20		20		–		9		9
90 or more days past due	34		60		94		–		60		60
Allowance for credit losses	(122)		(47)		(169)		(86)		(28)		(114)
Unamortized premium (discount)	(6)		73		67		(7)		43		36
Mark-to-market gains (losses) (1)	(33)		–		(33)		(36)		(1)		(37)
Total carrying value	$	17,497	$	3,204	$	20,701	$	17,097	$	1,776	$	18,873

(1) Represents the mark-to-market on certain mortgage loans on real estate that support our modified coinsurance agreements where the investment results are passed directly to the reinsurers, and for which we have elected the fair value option. As of September 30, 2024, the amortized cost and fair value of such mortgage loans on real estate that were in nonaccrual status was $30 million and $21 million, respectively. As of December 31, 2023, the amortized cost and fair value of such mortgage loans on real estate that were in nonaccrual status was less than $1 million. As of September 30, 2024 and December 31, 2023, there were no such mortgage loans on real estate that were more than 90 days past due and still accruing interest. See Note 12 for additional information.        

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The amortized cost of mortgage loans on real estate on nonaccrual status (in millions) was as follows, excluding certain mortgage loans on real estate that support our modified coinsurance agreements where the investment results are passed directly to the reinsurers:

	As of September 30, 2024		As of December 31, 2023
Commercial mortgage loans on real estate	$	4	$	–
Residential mortgage loans on real estate	62		62
Total	$	66	$	62

We use loan-to-value (“LTV”) 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 September 30, 2024
	LTV Less Than 65%		Debt-Service Coverage Ratio	LTV 65% to 75%		Debt-Service Coverage Ratio	LTV Greater Than 75%		Debt-Service Coverage Ratio	Total
Origination Year
2024	$	1,197	1.64	$	58	1.30	$	–	–	$	1,255
2023	1,347		1.75	44		1.36	–		–	1,391
2022	1,728		2.04	95		1.55	4		1.31	1,827
2021	2,289		3.08	48		1.52	–		–	2,337
2020	1,168		3.16	4		1.53	–		–	1,172
2019 and prior	9,535		2.35	127		1.58	8		1.30	9,670
Total	$	17,264		$	376		$	12		$	17,652

	As of December 31, 2023
	LTV Less Than 65%		Debt-Service Coverage Ratio	LTV 65% to 75%		Debt-Service Coverage Ratio	LTV Greater Than 75%		Debt-Service Coverage Ratio	Total
Origination Year
2023	$	1,366	1.90	$	54	1.38	$	–	–	$	1,420
2022	1,709		2.07	140		1.54	–		–	1,849
2021	2,317		3.34	61		1.55	–		–	2,378
2020	1,205		3.23	11		1.38	–		–	1,216
2019	2,404		2.39	80		1.56	10		2.33	2,494
2018 and prior	7,770		2.39	78		1.60	14		0.87	7,862
Total	$	16,771		$	424		$	24		$	17,219

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 September 30, 2024
	Performing		Nonperforming		Total
Origination Year
2024	$	1,260	$	–	$	1,260
2023	790		7		797
2022	498		26		524
2021	435		13		448
2020	70		2		72
2019 and prior	136		14		150
Total	$	3,189	$	62	$	3,251

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	As of December 31, 2023
	Performing		Nonperforming		Total
Origination Year
2023	$	515	$	2	$	517
2022	533		22		555
2021	465		18		483
2020	78		3		81
2019	99		13		112
2018 and prior	53		4		57
Total	$	1,743	$	62	$	1,805

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.

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

	For the Three Months Ended  September 30, 2024
	Commercial		Residential		Total
Balance as of beginning-of-period	$	92	$	40	$	132
Additions (reductions) from provision for credit loss
expense (1)	40		7		47
Additions from purchases of PCD mortgage loans on
real estate	–		–		–
Reductions for mortgage loans on real estate charged-off	(10)		–		(10)
Balance as of end-of-period (2)	$	122	$	47	$	169

	For the Nine Months Ended  September 30, 2024
	Commercial		Residential		Total
Balance as of beginning-of-year	$	86	$	28	$	114
Additions (reductions) from provision for credit loss
expense (1)	46		19		65
Additions from purchases of PCD mortgage loans on
real estate	–		–		–
Reductions for mortgage loans on real estate charged-off	(10)		–		(10)
Balance as of end-of-period (2)	$	122	$	47	$	169

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	For the Three Months Ended  September 30, 2023
	Commercial		Residential		Total
Balance as of beginning-of-period	$	81	$	23	$	104
Additions (reductions) from provision for credit loss
expense (1)	8		1		9
Additions from purchases of PCD mortgage loans on
real estate	–		–		–
Balance as of end-of-period (2)	$	89	$	24	$	113

	For the Nine Months Ended  September 30, 2023
	Commercial		Residential		Total
Balance as of beginning-of-year	$	83	$	15	$	98
Additions (reductions) from provision for credit loss
expense (1)	6		9		15
Additions from purchases of PCD mortgage loans on
real estate	–		–		–
Balance as of end-of-period (2)	$	89	$	24	$	113

(1) We recognized less than $1 million of credit loss benefit (expense) related to unfunded commitments for mortgage loans on real estate for the three months ended September 30, 2024 and 2023, and less than $1 million and $(1) million for the nine months ended September 30, 2024 and 2023, respectively.

(2) Accrued investment income on mortgage loans on real estate totaled $88 million and $54 million as of September 30, 2024 and 2023, respectively, and was excluded from the estimate of credit losses.

Alternative Investments 

As of September 30, 2024, and December 31, 2023, alternative investments included investments in 341 and 332 different partnerships, respectively, and represented approximately 3% of total investments.

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Impairments on Fixed Maturity AFS Securities

Details underlying intent to sell impairments and 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 Three Months Ended   September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
Intent to Sell Impairments (1)
Fixed maturity AFS securities:
Corporate bonds	$	–	$	(1,057)	$	–	$	(3,805)
State and municipal bonds	–		(62)		–		(214)
RMBS	–		(19)		–		(74)
CMBS	–		(7)		–		(60)
ABS	–		(4)		–		(57)
Hybrid and redeemable preferred securities	–		(1)		–		(3)
Total intent to sell impairments	$	–	$	(1,150)	$	–	$	(4,213)
Credit Loss Benefit (Expense)
Fixed maturity AFS securities:
Corporate bonds	$	(10)	$	(1)	$	(20)	$	(16)
RMBS	–		–		–		1
ABS	(4)		–		(19)		(1)
Total credit loss benefit (expense)	$	(14)	$	(1)	$	(39)	$	(16)

(1) The three and nine months ended September 30, 2023, include impairments of certain fixed maturity AFS securities in an unrealized loss position, resulting from the Company's intent to sell these securities as part of the fourth quarter 2023 reinsurance transaction.

Payables for Collateral on Investments

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

	As of September 30, 2024				As of December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
Collateral payable for derivative investments (1)	$	7,145	$	7,145	$	5,127	$	5,127
Securities pledged under securities lending agreements (2)	185		178		205		197
Investments pledged for FHLBI (3)	3,200		4,548		2,650		3,603
Total payables for collateral on investments	$	10,530	$	11,871	$	7,982	$	8,927

(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 or fixed maturity AFS securities. 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 the 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 Federal Home Loan Bank (“FHLB”) of Indianapolis (“FHLBI”) are included in fixed maturity AFS securities and mortgage loans on real estate on the 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.

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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 September 30, 2024, and December 31, 2023, 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 Nine Months Ended September 30,
	2024		2023
Collateral payable for derivative investments	$	2,018	$	1,312
Securities pledged under securities
lending agreements	(20)		(8)
Investments pledged for FHLBI	550		(210)
Total increase (decrease) in payables for
collateral on investments	$	2,548	$	1,094

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

	As of September 30, 2024
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 Days		Total
Securities Lending
Corporate bonds	$	168	$	–	$	–	$	–	$	168
Equity securities	17		–		–		–		17
Total gross secured borrowings	$	185	$	–	$	–	$	–	$	185

	As of December 31, 2023
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater Than 90 Days		Total
Securities Lending
Corporate bonds	$	202	$	–	$	–	$	–	$	202
Equity securities	3		–		–		–		3
Total gross secured borrowings	$	205	$	–	$	–	$	–	$	205

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 September 30, 2024, the fair value of this collateral received that we are permitted to sell or re-pledge was $25 million, and we had not re-pledged any of this collateral to cover our collateral requirements.

We also accept collateral from derivative counterparties in the form of securities that we are permitted to sell or re-pledge. As of September 30, 2024, the fair value of this collateral received that we are permitted to sell or re-pledge was $2.3 billion, and we had re-pledged $11 million of this collateral to cover our collateral requirements.

We have also pledged fixed maturity AFS securities to derivative counterparties with a fair value of $19 million as of September 30, 2024.

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Investment Commitments

As of September 30, 2024, our investment commitments were $5.0 billion, which included $3.2 billion of limited partnerships (“LPs”), $1.5 billion of mortgage loans on real estate and $283 million of private placement securities.

Concentrations of Financial Instruments

As of September 30, 2024, our most significant investments in one issuer were our investments in securities issued by White Chapel V LLC and White Chapel LLC with a fair value of $1.5 billion and $1.1 billion, respectively, or 1% of total investments. As of December 31, 2023, our most significant investments in one issuer were our investments in securities issued by White Chapel V LLC and White Chapel LLC with a fair value of $1.3 billion and $1.0 billion, respectively, or 1% of total investments. These concentrations include fixed maturity AFS, trading and equity securities.

As of September 30, 2024, and December 31, 2023, our most significant investments in one industry were our investments in securities in the financial services industry with a fair value of $16.3 billion and $16.6 billion, respectively, or 13% and 14%, respectively, of total investments, and our investments in securities in the consumer non-cyclical industry with a fair value of $11.5 billion and $11.3 billion, respectively, or 9% and 10%, respectively, of total investments. These concentrations include fixed maturity AFS, trading and equity securities.

4. Variable Interest Entities

Unconsolidated Variable Interest Entities

Structured Securities

Through our investment activities, we make passive investments in structured securities issued by variable interest entities (“VIEs”) for which we are not the manager. These structured securities include our ABS, residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“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 the Consolidated Balance Sheets. For information about these structured securities, see Note 3.

Limited Partnerships and Limited Liability Companies

We invest in certain LPs and limited liability companies (“LLCs”) 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 the Consolidated Balance Sheets and were $4.7 billion and $4.0 billion as of September 30, 2024, and December 31, 2023, respectively.

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, commodity 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 12 for additional disclosures related to the fair value of our derivative instruments.

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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 to hedge the interest rate exposure within our annuity and life insurance products.

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 annuity contracts and life insurance products. 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 and RILA 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.

Bond Forwards and Reverse Treasury Locks

We use bond forwards and 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 and fair value 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, RILA, fixed indexed annuity, IUL and VUL products.

Our RILA, fixed 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. Policyholders 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 policyholders, 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 and RILA 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, RILA and VUL products. Put options are contracts that require the buyers to pay 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, RILA and VUL 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.

Commodity Contracts

We use commodity contracts to economically hedge certain investments that are closely tied to the changes in commodity values. The commodity contract is an over-the-counter contract that combines a purchase put/sold call to lock in a commodity price within a predetermined range in exchange for a net premium.

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.

19

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.

We sell CDSs to offer credit protection to policyholders and investors. The CDSs hedge the policyholders 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 Lincoln National Reinsurance Company (Barbados) Limited (“LNBAR”), an affiliated reinsurer, assumes the risk under certain UL contracts for lapse protection riders (“LPR”). If the policyholder’s account balance is insufficient to pay the cost of insurance charges required to keep the policy in force, and the policyholder has made the required deposits, we will be reimbursed for those charges.

Embedded Derivatives

We have embedded derivatives that include:

RILA, Fixed Indexed Annuity and IUL Contracts Embedded Derivatives

Our RILA, fixed 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. Policyholders 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 policyholders, 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.

20

Primary Risks Managed by Derivatives

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 September 30, 2024						As of December 31, 2023
	Notional Amounts		Fair Value				Notional Amounts		Fair Value
			Asset		Liability				Asset		Liability
Qualifying Hedges
Cash flow hedges:
Interest rate contracts (1)	$	747	$	18	$	4	$	485	$	11	$	47
Foreign currency contracts (1)	4,830		432		83		4,662		423		78
Total cash flow hedges	5,577		450		87		5,147		434		125
Fair value hedges:
Interest rate contracts (1)	435		1		42		450		1		39
Foreign currency contracts (1)	25		–		1		25		–		1
Total fair value hedges	460		1		43		475		1		40
Non-Qualifying Hedges
Interest rate contracts (1)	68,999		54		230		90,829		636		979
Foreign currency contracts (1)	345		11		6		306		11		6
Equity market contracts (1)	250,306		15,539		6,332		225,251		10,244		4,227
Credit contracts (1)	112		–		–		91		–		–
LPR ceded derivative (2)	–		202		–		–		206		–
Embedded derivatives:
Reinsurance-related (3)	–		103		–		–		493		–
RILA, fixed indexed annuity and IUL
contracts (4)	–		1,961		12,270		–		940		9,077
Total derivative instruments	$	325,799	$	18,321	$	18,968	$	322,099	$	12,965	$	14,454

(1) These asset and liability balances are presented on a gross basis. Amounts are reported in derivative investments and other liabilities on the Consolidated Balance Sheets after the evaluation for right of offset subject to master netting agreements.

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

(3) Reported in funds withheld reinsurance liabilities on the Consolidated Balance Sheets.

(4) Reported in policyholder account balances and deposit assets on the Consolidated Balance Sheets.

The maturity of the notional amounts of derivative instruments (in millions) was as follows:

	Remaining Life as of September 30, 2024
	Less Than 1 Year		1 - 5 Years		6 - 10 Years		11 - 30 Years		Over 30 Years		Total
Interest rate contracts (1)	$	6,473	$	18,712	$	23,280	$	21,716	$	–	$	70,181
Foreign currency contracts (2)	226		1,137		1,892		1,903		42		5,200
Equity market contracts	209,391		29,579		9,210		8		2,118		250,306
Credit contracts	–		112		–		–		–		112
Total derivative instruments with
notional amounts	$	216,090	$	49,540	$	34,382	$	23,627	$	2,160	$	325,799

(1) As of September 30, 2024, the latest maturity date for which we were hedging our exposure to the variability in future cash flows for these instruments was June 9, 2027.

(2) As of September 30, 2024, 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.

21

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

	Amortized Cost of the Hedged Assets / (Liabilities)				Cumulative Fair Value Hedging Adjustment Included in the Amortized Cost of the Hedged Assets / (Liabilities)
	As of  September 30, 2024		As of December 31, 2023		As of  September 30, 2024		As of December 31, 2023
Line Item in the Consolidated Balance Sheets in
which the Hedged Item is Included
Fixed maturity AFS securities, at fair value	$	521	$	534	$	42	$	39

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

	For the Nine Months Ended September 30,
	2024		2023
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	249	$	301
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period:
Cash flow hedges:
Interest rate contracts	46		102
Foreign currency contracts	167		(92)
Change in foreign currency exchange rate adjustment	(121)		30
Income tax benefit (expense)	(20)		(9)
Less:
Reclassification adjustment for gains (losses)
included in net income (loss):
Cash flow hedges:
Interest rate contracts (1)	(2)		–
Foreign currency contracts (1)	41		42
Foreign currency contracts (2)	1		4
Income tax benefit (expense)	(8)		(10)
Balance as of end-of-period	$	289	$	296

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

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

22

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 Three Months Ended September 30,

2024

2023

Realized Gain (Loss)

Net Investment Income

Benefits

Realized Gain (Loss)

Net Investment Income

Benefits

Total Line Items in which the

Effects of Fair Value or Cash

Flow Hedges are Recorded

$

(571)

$

1,304

$

1,572

$

(867)

$

1,466

$

1,895

Qualifying Hedges

Gain or (loss) on fair value hedging

relationships:

Interest rate contracts:

Hedged items

–

27

–

–

(41)

–

Derivatives designated as hedging

instruments

–

(27)

–

–

41

–

Foreign currency contracts:

Hedged items

–

1

–

–

–

–

Derivatives designated as hedging

instruments

–

(1)

–

–

–

–

Gain or (loss) on cash flow hedging

relationships:

Interest rate contracts:

Amount of gain or (loss) reclassified

from AOCI into income

–

(1)

–

–

–

–

Foreign currency contracts:

Amount of gain or (loss) reclassified

from AOCI into income

2

12

–

2

14

–

Non-Qualifying Hedges

Interest rate contracts

370

–

–

(604)

–

–

Foreign currency contracts

(1)

–

–

–

–

–

Equity market contracts

1,079

–

–

163

–

–

Commodity contracts

–

–

–

(1)

–

–

LPR ceded derivative

–

–

–

–

–

18

Embedded derivatives:

Reinsurance-related

(482)

–

–

243

–

–

RILA, fixed indexed annuity and IUL

contracts

(666)

–

–

572

–

–

23

Gain (Loss) Recognized in Income For the Nine Months Ended September 30,

2024

2023

Realized Gain (Loss)

Net Investment Income

Benefits

Realized Gain (Loss)

Net Investment Income

Benefits

Total Line Items in which the

Effects of Fair Value or Cash

Flow Hedges are Recorded

$

(345)

$

3,761

$

583

$

(4,513)

$

4,351

$

5,766

Qualifying Hedges

Gain or (loss) on fair value hedging

relationships:

Interest rate contracts:

Hedged items

–

3

–

–

(44)

–

Derivatives designated as hedging

instruments

–

(3)

–

–

44

–

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

1

41

–

4

42

–

Non-Qualifying Hedges

Interest rate contracts

93

–

–

(592)

–

–

Foreign currency contracts

(1)

–

–

(2)

–

–

Equity market contracts

4,031

–

–

913

–

–

Commodity contracts

–

–

–

10

–

–

Credit contracts

–

–

–

(2)

–

–

LPR ceded derivative

–

–

4

–

–

28

Embedded derivatives:

Reinsurance-related

(390)

–

–

252

–

–

RILA, fixed indexed annuity and IUL

contracts

(2,636)

–

–

(1,706)

–

–

As of September 30, 2024, $44 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 nine months ended September 30, 2024 and 2023, there were no material reclassifications to earnings due to hedged firm commitments no longer deemed probable or due to hedged forecasted transactions that had not occurred by the end of the originally specified time period.

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

	As of September 30, 2024
Credit Contract Type	Maturity	Reason for Entering	Name of Recourse	Credit Rating of Underlying Obligation (1)	Number of Instruments	Fair Value (2)		Maximum Potential Payout
Basket CDSs	6/20/2029	(3)	(4)	BBB+	2	$	3	$	112

(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)    Third-party valuation specialists 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.

As of December 31, 2023, we did not have any exposure related to CDSs for which we are the seller.

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 September 30, 2024		As of December 31, 2023
Maximum potential payout	$	112	$	–
Less: Counterparty thresholds	–		–
Maximum collateral potentially required to post	$	112	$	–

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, our counterparties would have been required to post $3 million of collateral as of September 30, 2024.

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 non-performance risk. The non-performance risk 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 September 30, 2024, the non-performance risk 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 nearly all ISDA agreements, we and LLANY have agreed to maintain certain financial strength 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 September 30, 2024, or December 31, 2023.

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The amounts recognized (in millions) by S&P credit rating of counterparty, for which we had the right to reclaim cash collateral or were obligated to return cash collateral, were as follows:

	As of September 30, 2024				As of December 31, 2023
S&P Credit Rating of Counterparty	Collateral Posted by Counter- Party (Held by LNL)		Collateral Posted by LNL (Held by Counter- Party)		Collateral Posted by Counter- Party (Held by LNL)		Collateral Posted by LNL (Held by Counter- Party)
AA-	$	2,601	$	(7)	$	2,330	$	(63)
A+	3,754		(1)		2,422		(125)
A	70		–		82		–
A-	691		–		273		–
Total cash collateral	$	7,116	$	(8)	$	5,107	$	(188)

Balance Sheet Offsetting

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

	As of September 30, 2024
	Derivative Instruments		Embedded Derivative Instruments		Total
Financial Assets
Gross amount of recognized assets	$	16,016	$	2,064	$	18,080
Gross amounts offset	(6,582)		–		(6,582)
Net amount of assets	9,434		2,064		11,498
Gross amounts not offset:
Cash collateral	(7,116)		–		(7,116)
Non-cash collateral (1)	(2,318)		–		(2,318)
Net amount	$	–	$	2,064	$	2,064
Financial Liabilities
Gross amount of recognized liabilities	116		12,270		12,386
Gross amounts offset	(39)		–		(39)
Net amount of liabilities	77		12,270		12,347
Gross amounts not offset:
Cash collateral	(8)		–		(8)
Non-cash collateral	(19)		–		(19)
Net amount	$	50	$	12,270	$	12,320

(1) Excludes excess non-cash collateral received of $1.4 billion, as the collateral offset is limited to the net estimated fair value of derivatives after application of netting arrangements.

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	As of December 31, 2023
	Derivative Instruments		Embedded Derivative Instruments		Total
Financial Assets
Gross amount of recognized assets	$	10,714	$	1,433	$	12,147
Gross amounts offset	(4,409)		–		(4,409)
Net amount of assets	6,305		1,433		7,738
Gross amounts not offset:
Cash collateral	(5,107)		–		(5,107)
Non-cash collateral (1)	(1,198)		–		(1,198)
Net amount	–		1,433		1,433
Financial Liabilities
Gross amount of recognized liabilities	968		9,077		10,045
Gross amounts offset	(612)		–		(612)
Net amount of liabilities	356		9,077		9,433
Gross amounts not offset:
Cash collateral	(188)		–		(188)
Non-cash collateral (2)	(168)		–		(168)
Net amount	$	–	$	9,077	$	9,077

(1) Excludes excess non-cash collateral received of $1.3 billion, as the collateral offset is limited to the net estimated fair value of derivatives after application of netting arrangements.

(2) Excludes excess non-cash collateral pledged of $81 million, as the collateral offset is limited to the net estimated fair value of derivatives after application of netting arrangements.

6. DAC, VOBA, DSI and DFEL

The following table reconciles deferred acquisition costs (“DAC”), value of business acquired (“VOBA”) and deferred sales inducements (“DSI”) (in millions) to the Consolidated Balance Sheets:

	As of  September 30, 2024		As of December 31, 2023
DAC, VOBA and DSI
Variable Annuities	$	4,054	$	4,025
Fixed Annuities	431		456
Traditional Life	1,345		1,374
UL and Other	6,122		6,139
Group Protection	136		154
Retirement Plan Services	286		270
Total DAC, VOBA and DSI	$	12,374	$	12,418

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The following table reconciles deferred front-end loads (“DFEL”) (in millions) to the Consolidated Balance Sheets:

	As of  September 30, 2024		As of December 31, 2023
DFEL
Variable Annuities	$	295	$	300
UL and Other (1)	6,193		5,579
Other Operations (2)	50		44
Total DFEL	$	6,538	$	5,923

(1) We reported $2.4 billion and $2.3 billion of ceded DFEL in reinsurance recoverables on the Consolidated Balance Sheets as of September 30, 2024, and December 31, 2023, respectively.

(2) Represents DFEL reported in Other Operations attributable to the indemnity reinsurance agreement with Protective that is excluded from the following tables. We reported $50 million and $44 million of ceded DFEL in reinsurance recoverables on the Consolidated Balance Sheets as of September 30, 2024, and December 31, 2023, respectively.

The following tables summarize the changes in DAC (in millions):

	For the Nine Months Ended September 30, 2024
	Variable Annuities		Fixed Annuities		Traditional Life		UL and Other		Group Protection		Retirement Plan Services
Balance as of beginning-of-year	$	3,868	$	421	$	1,332	$	5,709	$	154	$	244
Business acquired (sold) through
reinsurance	–		–		–		(73)		(38)		–
Deferrals	308		35		85		310		101		15
Amortization	(270)		(55)		(109)		(225)		(81)		(14)
Balance as of end-of-period	$	3,906	$	401	$	1,308	$	5,721	$	136	$	245

	For the Nine Months Ended September 30, 2023
	Variable Annuities		Fixed Annuities		Traditional Life		UL and Other		Group Protection		Retirement Plan Services
Balance as of beginning-of-year	$	3,880	$	439	$	1,286	$	5,518	$	141	$	241
Deferrals	269		31		148		346		79		15
Amortization	(281)		(51)		(106)		(217)		(73)		(14)
Balance as of end-of-period	$	3,868	$	419	$	1,328	$	5,647	$	147	$	242

DAC amortization expense of $252 million and $754 million was recorded in commissions and other expenses on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2024, respectively, and $248 million and $742 million, respectively, for the corresponding periods in 2023.

The following tables summarize the changes in VOBA (in millions):

	For the Nine Months Ended  September 30, 2024
	Fixed Annuities		Traditional Life		UL and Other
Balance as of beginning-of-year	$	15	$	42	$	402
Deferrals	–		–		1
Amortization	(2)		(5)		(29)
Balance as of end-of-period	$	13	$	37	$	374

28

	For the Nine Months Ended  September 30, 2023
	Fixed Annuities		Traditional Life		UL and Other
Balance as of beginning-of-year	$	17	$	50	$	454
Deferrals	–		–		1
Amortization	(2)		(6)		(32)
Balance as of end-of-period	$	15	$	44	$	423

VOBA amortization expense of $12 million and $36 million was recorded in commissions and other expenses on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2024, respectively, and $13 million and $40 million, respectively, for the corresponding periods in 2023. No additions or write-offs were recorded for each respective period.

The following tables summarize the changes in DSI (in millions):

	For the Nine Months Ended  September 30, 2024
	Variable Annuities		Fixed Annuities		UL and Other		Retirement Plan Services
Balance as of beginning-of-year	$	157	$	20	$	28	$	26
Deferrals	1		–		1		16
Amortization	(10)		(3)		(2)		(1)
Balance as of end-of-period	$	148	$	17	$	27	$	41

	For the Nine Months Ended  September 30, 2023
	Variable Annuities		Fixed Annuities		UL and Other		Retirement Plan Services
Balance as of beginning-of-year	$	167	$	23	$	30	$	17
Deferrals	3		–		1		5
Amortization	(11)		(3)		(2)		–
Balance as of end-of-period	$	159	$	20	$	29	$	22

DSI amortization expense of $5 million and $16 million was recorded in interest credited on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023, respectively.

The following tables summarize the changes in DFEL (in millions):

	For the Nine Months Ended September 30,2024				For the Nine Months Ended September 30,2023
	Variable Annuities		UL and Other		Variable Annuities		UL and Other
Balance as of beginning-of-year	$	300	$	5,579	$	310	$	4,766
Deferrals	14		826		15		799
Amortization	(19)		(212)		(22)		(192)
Balance as of end-of-period	295		6,193		303		5,373
Less: ceded DFEL	–		2,391		–		30
Balance as of end-of-period, net of reinsurance	$	295	$	3,802	$	303	$	5,343

DFEL amortization of $79 million and $231 million was recorded in fee income on the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2024, respectively, and $74 million and $214 million, respectively, for the corresponding periods in 2023.

29

7. Reinsurance

Lincoln Pinehurst Reinsurance Company (Bermuda) Limited

Effective June 30, 2024, we entered into a reinsurance agreement with Lincoln Pinehurst Reinsurance Company (Bermuda) Limited (“LPINE”), an affiliated reinsurer, to reinsure certain blocks of in-force group protection and fixed annuity products.

This agreement is structured as coinsurance with funds withheld. As significant insurance risk was transferred for the group protection block, amounts recoverable from LPINE were $4.1 billion as of September 30, 2024. We reported a deferred loss of $14 million as of September 30, 2024. Fixed annuities are not life-contingent and do not contain significant insurance risk; therefore, we reported a deposit assets of $6.5 billion as of September 30, 2024. In this coinsurance with funds withheld reinsurance agreement, we as the ceding company withhold, and therefore retain, the assets backing the reserves and deposit assets.

We held investments with a carrying value of $10.5 billion in support of reserves associated with the LPINE transaction in a funds withheld arrangement as of September 30, 2024, which consisted of the following (in millions):

Fixed maturity AFS securities	$	8,932
Mortgage loans on real estate	1,481
Accrued investment income	93
Total	$	10,506

See “Realized Gain (Loss)” in Note 16 for information on reinsurance-related embedded derivatives

LNBAR

We reinsure blocks of business to LNBAR, an affiliated reinsurer. Effective October 1, 2023, we entered into an agreement with LNBAR that is structured as a coinsurance treaty, with some assets withheld, for certain blocks of in-force MoneyGuard® products. As significant insurance risk was transferred for the MoneyGuard blocks, amounts recoverable from LNBAR were $13.4 billion and $13.2 billion as of September 30, 2024, and December 31, 2023, respectively. We reported a deferred gain on the transaction of $4.1 billion and $4.2 billion as of September 30, 2024, and December 31, 2023, respectively. We amortized $42 million and $125 million of the deferred gain during the three and nine months ended September 30, 2024, respectively. We held other investments and cash and invested cash with a carrying value of $1.2 billion and $871 million as of September 30, 2024, and December 31, 2023, respectively, in support of reserves associated with this agreement.

LNBAR has funded trusts to support reserves ceded by us of which the balance in the trusts changes as a result of ongoing reinsurance activity and totaled $13.0 billion as of September 30, 2024, and December 31, 2023.

Fortitude Reinsurance Company Ltd.

Effective October 1, 2023, we entered into a reinsurance agreement with Fortitude Reinsurance Company Ltd. (“Fortitude Re”), an authorized Bermuda reinsurer with reciprocal jurisdiction reinsurer status in Indiana, to reinsure certain blocks of in-force UL with secondary guarantees (“ULSG”) and fixed annuity products, including group pension annuities. Fortitude Re represents our largest unaffiliated reinsurance exposure as of September 30, 2024, and December 31, 2023.

The agreement between us and Fortitude Re is structured as a coinsurance treaty for the ULSG and fixed annuities blocks. As significant insurance risk was transferred for ULSG products and life-contingent annuities, amounts recoverable from Fortitude Re were $10.7 billion and $10.5 billion as of September 30, 2024, and December 31, 2023, respectively. We reported a deferred loss on the transaction of $2.6 billion and $2.7 billion as of September 30, 2024, and December 31, 2023, respectively. We amortized $23 million and $67 million of the deferred loss during the three and nine months ended September 30, 2024, respectively. Annuities that are not life-contingent do not contain significant insurance risk; therefore, we reported deposit assets for these contracts of $3.4 billion and $4.2 billion as of September 30, 2024, and December 31, 2023, respectively.

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8. MRBs

The following table reconciles market risk benefits (“MRBs”) (in millions) to MRB assets and MRB liabilities on the Consolidated Balance Sheets:

	As of September 30, 2024						As of December 31, 2023
	Assets		Liabilities		Net (Assets) Liabilities		Assets		Liabilities		Net (Assets) Liabilities
Variable Annuities	$	4,448	$	1,121	$	(3,327)	$	3,763	$	1,583	$	(2,180)
Fixed Annuities	73		147		74		96		128		32
Retirement Plan Services	44		4		(40)		35		5		(30)
Total MRBs	$	4,565	$	1,272	$	(3,293)	$	3,894	$	1,716	$	(2,178)

The following table summarizes the balances of and changes in net MRB (assets) liabilities (in millions):

	As of or For the Nine Months Ended September 30, 2024						As of or For the Nine Months Ended September 30, 2023
	Variable Annuities		Fixed Annuities		Retirement Plan Services		Variable Annuities		Fixed Annuities		Retirement Plan Services
Balance as of beginning-of-year	$	(2,180)	$	32	$	(30)	$	(662)	$	(45)	$	(22)
Less: Effect of cumulative changes in
non-performance risk	(1,299)		(58)		(4)		(2,173)		(40)		(2)
Balance as of beginning-of-year, before the effect
of changes in non-performance risk	(881)		90		(26)		1,511		(5)		(20)
Issuances	6		–		–		3		–		–
Attributed fees collected	1,143		24		4		1,127		23		4
Benefit payments	(29)		–		–		(49)		–		–
Effect of changes in interest rates	(101)		8		(6)		(2,347)		(66)		(7)
Effect of changes in equity markets	(2,347)		(16)		(8)		(1,430)		(5)		(6)
Effect of changes in equity index volatility	(65)		(4)		–		(358)		6		(3)
In-force updates and other changes in MRBs (1)	69		3		6		182		4		–
Effect of assumption review:
Effect of changes in future expected
policyholder behavior	7		11		–		(33)		70		–
Effect of changes in other future expected
assumptions (2)	(199)		18		(6)		(66)		15		(2)
Balance as of end-of-period, before the effect of
changes in non-performance risk	(2,397)		134		(36)		(1,460)		42		(34)
Effect of cumulative changes in
non-performance risk	(930)		(60)		(4)		(1,213)		(59)		1
Balance as of end-of-period	(3,327)		74		(40)		(2,673)		(17)		(33)
Less: ceded MRB assets (liabilities)	(2,155)		–		(12)		(1,457)		–		(6)
Balance as of end-of-period, net of reinsurance	$	(1,172)	$	74	$	(28)	$	(1,216)	$	(17)	$	(27)
Weighted-average age of policyholders (years)	72		69		63		72		68		63
Net amount at risk (3)	$	1,544	$	231	$	3	$	6,235	$	188	$	9

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(1)     Consists primarily of changes in MRB assets and liabilities related to differences between separate account fund performance and modeled indices and other changes such as actual to expected policyholder behavior.

(2)     Consists primarily of the update of fund mapping, volatility and other capital market assumptions.

(3)     Net amount at risk (“NAR”) is the current guaranteed minimum benefit in excess of the current account balance as of the balance sheet date. For guaranteed living benefits (“GLBs”), the guaranteed minimum benefit is calculated based on the present value of GLB payments. Our variable annuity products may offer more than one type of guaranteed benefit rider to a policyholder. In instances where more than one guaranteed benefit feature exists in a contract, the guaranteed benefit rider that provides the highest NAR is used in the calculation.

Effect of Assumption Review

For the nine months ended September 30, 2024, Variable Annuities had a favorable impact to net income (loss) attributable to the annual assumption review driven by model enhancements and updates to capital market assumptions. For the nine months ended September 30, 2024, Fixed Annuities had an unfavorable impact to net income (loss) attributable to the annual assumption review driven by model enhancements and updates to policyholder GLB utilization assumptions. Retirement Plan Services did not have any significant assumption updates.

For the nine months ended September 30, 2023, Variable Annuities had a favorable impact to net income (loss) attributable to the annual assumption review from updates to volatility and policyholder GLB utilization behavior assumptions, partially offset by unfavorable impacts from updates to mortality and policyholder lapse behavior assumptions. For the nine months ended September 30, 2023, Fixed Annuities had an unfavorable impact to net income (loss) attributable to the annual assumption review from updates to mortality and policyholder GLB utilization and lapse behavior assumptions. Retirement Plan Services did not have any significant assumption updates.

See “MRBs” in Note 12 for details related to our fair value judgments, assumptions, inputs and valuation methodology.

9. Separate Accounts

The following table presents the fair value of separate account assets (in millions) reported on the Consolidated Balance Sheets by major investment category:

	As of  September 30,		As of December 31,
	2024		2023
Mutual funds and collective investment trusts	$	170,806	$	157,578
Exchange-traded funds	349		350
Fixed maturity AFS securities	166		167
Cash and invested cash	7		25
Other investments	155		137
Total separate account assets	$	171,483	$	158,257

The following table reconciles separate account liabilities (in millions) to the Consolidated Balance Sheets:

	As of  September 30,		As of December 31,
	2024		2023
Variable Annuities	$	120,470	$	113,356
UL and Other	28,921		25,150
Retirement Plan Services	22,033		19,699
Other Operations (1)	59		52
Total separate account liabilities	$	171,483	$	158,257

(1) Represents separate account liabilities reported in Other Operations primarily attributable to the indemnity reinsurance agreements with Protective ($50 million and $46 million as of September 30, 2024, and December 31, 2023, respectively) that are excluded from the following tables.

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The following table summarizes the balances of and changes in separate account liabilities (in millions):

	As of or For the Nine Months Ended September 30, 2024						As of or For the Nine Months Ended September 30, 2023
	Variable Annuities		UL and Other		Retirement Plan Services		Variable Annuities		UL and Other		Retirement Plan Services
Balance as of beginning-of-year	$	113,356	$	25,150	$	19,699	$	105,573	$	20,920	$	16,996
Gross deposits	3,002		1,058		1,751		2,137		1,178		1,576
Withdrawals	(10,190)		(347)		(2,382)		(7,402)		(227)		(1,795)
Policyholder assessments	(1,970)		(742)		(134)		(1,883)		(714)		(121)
Change in market performance	15,664		3,945		3,065		6,320		1,573		1,316
Net transfers from (to) general account	608		(143)		34		447		(88)		(44)
Balance as of end-of-period	$	120,470	$	28,921	$	22,033	$	105,192	$	22,642	$	17,928
Cash surrender value	$	119,106	$	26,498	$	22,018	$	103,729	$	20,324	$	17,914

10. Policyholder Account Balances

The following table reconciles policyholder account balances (in millions) to the Consolidated Balance Sheets:

	As of September 30,		As of December 31,
	2024		2023
Variable Annuities	$	34,344	$	29,141
Fixed Annuities	26,336		25,330
UL and Other	36,327		36,784
Retirement Plan Services	23,727		23,784
Other (1)	4,845		5,277
Total policyholder account balances	$	125,579	$	120,316

(1) Represents policyholder account balances reported primarily in Other Operations attributable to the indemnity reinsurance agreements with Protective ($4.5 billion and $4.9 billion as of September 30, 2024, and December 31, 2023, respectively) that are excluded from the following tables.

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The following table summarizes the balances and changes in policyholder account balances (in millions):

	As of or For the Nine Months Ended September 30, 2024
	Variable Annuities			Fixed Annuities			UL and Other			Retirement Plan Services
Balance as of beginning-of-year	$	29,141		$	25,330		$	36,784		$	23,784
Gross deposits	3,391			3,663			2,631			2,580
Withdrawals	(726)			(3,721)			(1,102)			(3,370)
Policyholder assessments	(1)			(45)			(3,351)			(10)
Net transfers from (to) separate account	(241)			–			143			230
Interest credited	506			592			1,098			513
Change in fair value of embedded
derivative instruments and other	2,274			517			124			–
Balance as of end-of-period	$	34,344		$	26,336		$	36,327		$	23,727
Weighted-average crediting rate	2.1		%	3.1		%	4.0		%	2.9		%
Net amount at risk (1)(2)	$	1,544		$	231		$	296,736		$	3
Cash surrender value	33,107			25,214			31,969			23,697

	As of or For the Nine Months Ended September 30, 2023
	Variable Annuities			Fixed Annuities			UL and Other			Retirement Plan Services
Balance as of beginning-of-year	$	22,184		$	23,338		$	37,258		$	25,138
Gross deposits	3,626			2,698			2,737			2,026
Withdrawals	(508)			(2,861)			(1,077)			(3,262)
Policyholder assessments	(1)			(41)			(3,337)			(10)
Net transfers from (to) separate account	(311)			–			90			(297)
Interest credited	391			469			1,101			504
Change in fair value of embedded
derivative instruments and other	1,391			52			38			–
Balance as of end-of-period	$	26,772		$	23,655		$	36,810		$	24,099
Weighted-average crediting rate	2.1		%	2.6		%	4.0		%	2.7		%
Net amount at risk (1)(2)	$	6,235		$	188		$	301,876		$	9
Cash surrender value	25,629			22,753			32,685			24,094

(1) NAR is the current guaranteed minimum benefit in excess of the current account balance as of the balance sheet date. For GLBs, the guaranteed minimum benefit is calculated based on the present value of GLB payments. Our variable annuity products may offer more than one type of guaranteed benefit rider to a policyholder. In instances where more than one guaranteed benefit rider exists in a contract, the guaranteed benefit rider that provides the highest NAR is used in the calculation.

(2) Calculation is based on total account balances and includes both policyholder account balances and separate account balances.

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The following table presents policyholder account balances (in millions) by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between the interest being credited to policyholders and the respective guaranteed contract minimums:

	As of September 30, 2024
	At Guaranteed Minimum		1-50 Basis Points Above		51-100 Basis Points Above		101-150 Basis Points Above		Greater Than 150 Basis Points Above		Total
Range of Guaranteed
Minimum Crediting Rate
Variable Annuities
Up to 1.00%	$	–	$	–	$	–	$	–	$	–	$	–
1.01% - 2.00%	3		–		–		–		7		10
2.01% - 3.00%	523		–		–		–		–		523
3.01% - 4.00%	1,257		–		–		–		–		1,257
4.01% and above	8		–		–		–		–		8
Other (1)	–		–		–		–		–		32,546
Total	$	1,791	$	–	$	–	$	–	$	7	$	34,344
Fixed Annuities
Up to 1.00%	$	436	$	730	$	620	$	373	$	2,381	$	4,540
1.01% - 2.00%	253		145		200		239		4,685		5,522
2.01% - 3.00%	1,649		38		6		2		33		1,728
3.01% - 4.00%	1,289		–		–		–		–		1,289
4.01% and above	170		–		–		–		–		170
Other (1)	–		–		–		–		–		13,087
Total	$	3,797	$	913	$	826	$	614	$	7,099	$	26,336
UL and Other
Up to 1.00%	$	261	$	–	$	222	$	121	$	52	$	656
1.01% - 2.00%	553		–		–		–		3,161		3,714
2.01% - 3.00%	6,651		10		151		–		–		6,812
3.01% - 4.00%	15,072		–		1		–		–		15,073
4.01% and above	3,582		–		–		–		–		3,582
Other (1)	–		–		–		–		–		6,490
Total	$	26,119	$	10	$	374	$	121	$	3,213	$	36,327
Retirement Plan Services
Up to 1.00%	$	515	$	287	$	731	$	3,417	$	5,277	$	10,227
1.01% - 2.00%	470		1,028		1,947		990		503		4,938
2.01% - 3.00%	2,253		112		1		1		–		2,367
3.01% - 4.00%	4,493		85		6		8		–		4,592
4.01% and above	1,603		–		–		–		–		1,603
Total	$	9,334	$	1,512	$	2,685	$	4,416	$	5,780	$	23,727

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	As of September 30, 2023
	At Guaranteed Minimum		1-50 Basis Points Above		51-100 Basis Points Above		101-150 Basis Points Above		Greater Than 150 Basis Points Above		Total
Range of Guaranteed
Minimum Crediting Rate
Variable Annuities
Up to 1.00%	$	–	$	–	$	–	$	–	$	–	$	–
1.01% - 2.00%	5		–		–		–		8		13
2.01% - 3.00%	602		–		–		–		–		602
3.01% - 4.00%	1,429		–		–		–		–		1,429
4.01% and above	10		–		–		–		–		10
Other (1)	–		–		–		–		–		24,718
Total	$	2,046	$	–	$	–	$	–	$	8	$	26,772
Fixed Annuities
Up to 1.00%	$	744	$	427	$	515	$	518	$	2,427	$	4,631
1.01% - 2.00%	481		106		212		456		1,264		2,519
2.01% - 3.00%	1,881		32		6		–		3		1,922
3.01% - 4.00%	929		–		–		–		–		929
4.01% and above	182		–		–		–		–		182
Other (1)	–		–		–		–		–		13,472
Total	$	4,217	$	565	$	733	$	974	$	3,694	$	23,655
UL and Other
Up to 1.00%	$	284	$	–	$	192	$	34	$	362	$	872
1.01% - 2.00%	553		–		–		–		3,181		3,734
2.01% - 3.00%	6,998		11		147		–		–		7,156
3.01% - 4.00%	15,385		–		1		–		–		15,386
4.01% and above	3,783		–		–		–		–		3,783
Other (1)	–		–		–		–		–		5,879
Total	$	27,003	$	11	$	340	$	34	$	3,543	$	36,810
Retirement Plan Services
Up to 1.00%	$	407	$	596	$	762	$	4,882	$	2,837	$	9,484
1.01% - 2.00%	610		2,405		1,474		668		–		5,157
2.01% - 3.00%	2,594		–		–		–		–		2,594
3.01% - 4.00%	5,223		–		–		–		–		5,223
4.01% and above	1,641		–		–		–		–		1,641
Total	$	10,475	$	3,001	$	2,236	$	5,550	$	2,837	$	24,099

(1) Consists of indexed account balances that include the fair value of embedded derivative instruments, payout annuity account balances, short-term dollar cost averaging annuities business and policy loans.

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11. Future Contract Benefits

The following table reconciles future contract benefits (in millions) to the Consolidated Balance Sheets:

	As of September 30,		As of December 31,
	2024		2023
Payout Annuities (1)	$	2,118	$	2,084
Traditional Life (1)	3,660		3,553
Group Protection (2)	5,773		5,689
UL and Other (3)	17,214		15,752
Other Operations (4)	9,354		9,753
Other (5)	3,290		3,343
Total future contract benefits	$	41,409	$	40,174

(1) See liability for future policy benefits (“LFPB”) below for further information.

(2) See “Liability for Future Claims” below for further information.

(3) See “Additional Liabilities for Other Insurance Benefits” below for further information.

(4) Represents future contract benefits reported in Other Operations primarily attributable to the indemnity reinsurance agreements with Protective ($5.6 billion as of September 30, 2024, and December 31, 2023) and Swiss Re ($1.8 billion and $2.1 billion as of September 30, 2024, and December 31, 2023, respectively) that are excluded from the following tables.

(5) Represents other miscellaneous reserves that are not representative of long-duration contracts and are excluded from the following tables.

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LFPB

The following table summarizes the balances of and changes in the present values of expected net premiums and LFPB (in millions, except years):

	As of or For the Nine Months Ended September 30, 2024				As of or For the Nine Months Ended September 30, 2023
	Payout Annuities		Traditional Life		Payout Annuities		Traditional Life
Present Value of Expected Net Premiums
Balance as of beginning-of-year	$	–	$	6,084	$	–	$	5,896
Less: Effect of cumulative changes in discount
rate assumptions	–		(152)		–		(584)
Beginning balance at original discount rate	–		6,236		–		6,480
Effect of changes in cash flow assumptions	–		(3)		–		(5)
Effect of actual variances from expected experience	–		(29)		–		(262)
Adjusted balance as of beginning-of-year	–		6,204		–		6,213
Issuances	–		289		–		460
Interest accrual	–		184		–		176
Net premiums collected	–		(581)		–		(588)
Flooring impact of LFPB	–		1		–		3
Ending balance at original discount rate	–		6,097		–		6,264
Effect of cumulative changes in discount
rate assumptions	–		(23)		–		(527)
Balance as of end-of-period	$	–	$	6,074	$	–	$	5,737
Present Value of Expected LFPB
Balance as of beginning-of-year	$	2,084	$	9,637	$	2,003	$	9,086
Less: Effect of cumulative changes in discount
rate assumptions	(187)		(202)		(263)		(793)
Beginning balance at original discount rate (1)	2,271		9,839		2,266		9,879
Effect of changes in cash flow assumptions	–		(105)		17		(21)
Effect of actual variances from expected experience	3		(41)		(1)		(289)
Adjusted balance as of beginning-of-year	2,274		9,693		2,282		9,569
Issuances	78		289		83		460
Interest accrual	65		285		64		270
Benefit payments	(152)		(530)		(142)		(479)
Ending balance at original discount rate (1)	2,265		9,737		2,287		9,820
Effect of cumulative changes in discount
rate assumptions	(147)		(3)		(344)		(831)
Balance as of end-of-period	$	2,118	$	9,734	$	1,943	$	8,989
Net balance as of end-of-period	$	2,118	$	3,660	$	1,943	$	3,252
Less: reinsurance recoverables (2)	1,590		215		11		232
Net balance as of end-of-period, net of reinsurance	$	528	$	3,445	$	1,932	$	3,020
Weighted-average duration of future policyholder
benefit liability (years)	9		9		9		10

(1) Includes deferred profit liability within Payout Annuities of $60 million and $38 million as of September 30, 2024 and 2023, respectively.

(2) Increase in Payout Annuities reinsurance recoverables driven by the fourth quarter 2023 reinsurance transaction. See Note 7 for additional information.

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For the nine months ended September 30, 2024, Payout Annuities did not have a significant cash flow assumption impact to net income (loss) attributable to the annual assumption review, and Traditional Life had a favorable cash flow assumption impact from updates to mortality assumptions, partially offset by an unfavorable impact from updates to policyholder behavior assumptions. For the nine months ended September 30, 2024, Payout Annuities and Traditional Life did not have any significantly different actual experience compared to expected.

For the nine months ended September 30, 2023, Payout Annuities had an unfavorable cash flow assumption impact to net income (loss) attributable to the annual assumption review from updates to mortality assumptions, and Traditional Life had a favorable cash flow assumption impact from updates to mortality assumptions, partially offset by an unfavorable impact from updates to policyholder lapse behavior assumptions. For the nine months ended September 30, 2023, Payout Annuities and Traditional Life did not have any significantly different actual experience compared to expected.

The following table summarizes the discounted and undiscounted expected future gross premiums and expected future benefit payments (in millions):

	As of September 30, 2024				As of September 30, 2023
	Undiscounted		Discounted		Undiscounted		Discounted
Payout Annuities
Expected future gross premiums	$	–	$	–	$	–	$	–
Expected future benefit payments	3,436		2,118		3,552		1,943
Traditional Life
Expected future gross premiums	13,610		9,559		13,410		8,802
Expected future benefit payments	13,932		9,734		14,077		8,989

The following table summarizes the gross premiums and interest accretion (in millions) recognized in insurance premiums and benefits, respectively, on the Consolidated Statements of Comprehensive Income (Loss):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
Payout Annuities
Gross premiums	$	40	$	16	$	84	$	88
Interest accretion	22		22		65		64
Traditional Life
Gross premiums	296		293		895		885
Interest accretion	34		31		101		94

The following table summarizes the weighted-average interest rates:

	For the Nine Months Ended September 30,
	2024		2023
Payout Annuities
Interest accretion rate	4.0	%	3.9	%
Current discount rate	4.7	%	5.8	%
Traditional Life
Interest accretion rate	5.0	%	5.0	%
Current discount rate	4.4	%	5.6	%

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Liability for Future Claims

The following table summarizes the balances of and changes in liability for future claims (in millions, except years):

	Group Protection
	As of or For the Nine Months Ended September 30,
	2024		2023
Balance as of beginning-of-year	$	5,689	$	5,462
Less: Effect of cumulative changes in discount
rate assumptions	(490)		(597)
Beginning balance at original discount rate	6,179		6,059
Effect of changes in cash flow assumptions	(2)		(27)
Effect of actual variances from expected experience	(278)		(233)
Adjusted beginning-of-year balance	5,899		5,799
New incidence	1,236		1,267
Interest	138		122
Benefit payments	(1,125)		(1,095)
Ending balance at original discount rate	6,148		6,093
Effect of cumulative changes in discount
rate assumptions	(375)		(720)
Balance as of end-of-period	5,773		5,373
Less: reinsurance recoverables (1)	4,153		117
Balance as of end-of-period, net of reinsurance	$	1,620	$	5,256
Weighted-average duration of liability for future
claims (years)	5		5

(1) Increase in reinsurance recoverables driven by the second quarter 2024 reinsurance transaction. See Note 7 for additional information.

For the nine months ended September 30, 2024, we did not have a significant cash flow assumption impact to net income (loss) attributable to the annual assumption review. For the nine months ended September 30, 2024, we experienced more favorable reported incidence and claim terminations than assumed.

For the nine months ended September 30, 2023, we had a favorable cash flow assumption impact to net income (loss) attributable to the annual assumption review from updates to long-term disability and life waiver claim termination rate assumptions, partially offset by unfavorable impacts from updates to long-term disability social security offset assumptions. For the nine months ended September 30, 2023, we experienced more favorable reported incidence and claim terminations than assumed.

The following table summarizes the discounted and undiscounted expected future benefit payments (in millions):

	As of September 30, 2024				As of September 30, 2023
	Undiscounted		Discounted		Undiscounted		Discounted
Group Protection
Expected future benefit payments	$	7,154	$	5,773	$	7,148	$	5,373

40

The following table summarizes the gross premiums and interest accretion (in millions) recognized in insurance premiums and benefits, respectively, on the Consolidated Statements of Comprehensive Income (Loss):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
Group Protection
Gross premiums	$	887	$	874	$	2,676	$	2,645
Interest accretion	45		39		138		122

The following table summarizes the weighted-average interest rates:

	For the Nine Months Ended September 30,
	2024		2023
Group Protection
Interest accretion rate	3.3	%	3.0	%
Current discount rate	4.4	%	5.7	%

Additional Liabilities for Other Insurance Benefits

The following table summarizes the balances of and changes in additional liabilities for other insurance benefits (in millions, except years):

	UL and Other
	As of or For the Nine Months Ended September 30,
	2024		2023
Balance as of beginning-of-year	$	15,752	$	14,777
Less: Effect of cumulative changes in shadow
balance in AOCI	(853)		(905)
Balance as of beginning-of-year, excluding
shadow balance in AOCI	16,605		15,682
Effect of changes in cash flow assumptions	207		173
Effect of actual variances from expected experience	170		(28)
Adjusted beginning-of-year balance	16,982		15,827
Interest accrual	623		573
Net assessments collected	946		334
Benefit payments	(718)		(473)
Balance as of end-of-period, excluding shadow
balance in AOCI	17,833		16,261
Effect of cumulative changes in shadow
balance in AOCI	(619)		(1,362)
Balance as of end-of-period	17,214		14,899
Less: reinsurance recoverables (1)	10,499		1,897
Balance as of end-of-period, net of reinsurance	$	6,715	$	13,002
Weighted-average duration of additional liabilities
for other insurance benefits (years)	16		17

(1) Increase in reinsurance recoverables driven by the fourth quarter 2023 reinsurance transaction, for certain blocks of in-force ULSG. See Note 7 for additional information.

41

For the nine months ended September 30, 2024, we had an unfavorable cash flow assumption impact to net income (loss) attributable to the annual assumption review for updates to policyholder behavior and mortality assumptions that were partially offset by updates to capital market assumptions. For the nine months ended September 30, 2024, we had unfavorable actual mortality experience compared to expected on reinsured and retained business.

For the nine months ended September 30, 2023, we had an unfavorable cash flow assumption impact to net income (loss) attributable to the annual assumption review from updates to policyholder lapse behavior assumptions, partially offset by a favorable impact from updates to interest rate assumptions. For the nine months ended September 30, 2023, we did not have any significantly different actual experience compared to expected.

The following table summarizes the gross assessments and interest accretion (in millions) recognized in insurance premiums and benefits, respectively, on the Consolidated Statements of Comprehensive Income (Loss):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
UL and Other
Gross assessments	$	751	$	337	$	2,290	$	1,794
Interest accretion	213		197		623		573

The following table summarizes the weighted-average interest rates:

	For the Nine Months Ended September 30,
	2024		2023
UL and Other
Interest accretion rate	5.4	%	5.1	%

42

12. Fair Value of Financial Instruments

The carrying values and estimated fair values of our financial instruments (in millions) were as follows:

	As of September 30, 2024				As of December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Fixed maturity AFS securities	$	84,571	$	84,571	$	82,300	$	82,300
Trading securities	2,185		2,185		2,321		2,321
Equity securities	293		293		306		306
Mortgage loans on real estate	20,701		19,801		18,873		17,330
Derivative investments	9,434		9,434		6,305		6,305
Other investments	5,470		5,470		4,757		4,757
Cash and invested cash	4,743		4,743		3,193		3,193
MRB assets	4,565		4,565		3,894		3,894
Other assets:
Ceded MRBs	50		50		274		274
Indexed annuity ceded embedded derivatives	1,961		1,961		940		940
LPR ceded derivative	202		202		206		206
Separate account assets	171,483		171,483		158,257		158,257
Liabilities
Policyholder account balances:
Account balances of certain investment contracts	(45,799)		(35,864)		(44,615)		(34,020)
RILA, fixed annuity and IUL contracts	(12,270)		(12,270)		(9,077)		(9,077)
Funds withheld reinsurance liabilities – reinsurance-related
embedded derivatives	103		103		493		493
MRB liabilities	(1,272)		(1,272)		(1,716)		(1,716)
Short-term debt	(269)		(269)		(840)		(841)
Long-term debt	(2,177)		(2,196)		(2,195)		(2,125)
Other liabilities:
Ceded MRBs	(2,217)		(2,217)		(1,149)		(1,149)
Derivative liabilities	(77)		(77)		(356)		(356)
Remaining guaranteed interest and similar contracts	(355)		(355)		(411)		(411)

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 the 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, LTV, 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.

43

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.

Policyholder Account Balances

Policyholder account balances include account balances of certain investment contracts. The fair value of the account balances 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 these policyholder account balances are classified as Level 3 within the fair value hierarchy.

Other Liabilities

Other liabilities include remaining guaranteed interest and similar 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 September 30, 2024, and December 31, 2023, the remaining guaranteed interest and similar contracts carrying value approximated fair value. The inputs used to measure the fair value of these other liabilities 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 the 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 the 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 classified 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 September 30,		As of December 31,
	2024		2023
Fair value	$	263	$	288
Aggregate contractual principal	297		326

For information on current and past due composition and accruing status for loans where we have elected the fair value option, see Note 3.

44

Financial Instruments Carried at Fair Value

We did not have any assets or liabilities measured at fair value on a nonrecurring basis as of September 30, 2024, or December 31, 2023.

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

	As of September 30, 2024
	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	$	–	$	57,898	$	6,859	$	64,757
U.S. government bonds	377		21		–		398
State and municipal bonds	–		2,318		–		2,318
Foreign government bonds	–		248		–		248
RMBS	–		1,701		13		1,714
CMBS	–		1,538		21		1,559
ABS	–		11,227		2,101		13,328
Hybrid and redeemable preferred securities	50		123		76		249
Trading securities	–		1,911		274		2,185
Equity securities	–		258		35		293
Mortgage loans on real estate	–		–		263		263
Derivative investments (1)	–		16,045		9		16,054
Other investments – short-term investments	–		210		20		230
Cash and invested cash	–		4,743		–		4,743
MRB assets	–		–		4,565		4,565
Other assets:
Ceded MRBs	–		–		50		50
Indexed annuity ceded embedded derivatives	–		–		1,961		1,961
LPR ceded derivative	–		–		202		202
Separate account assets	403		171,080		–		171,483
Total assets	$	830	$	269,321	$	16,449	$	286,600
Liabilities
Policyholder account balances – RILA,
fixed annuity and IUL contracts	$	–	$	–	$	(12,270)	$	(12,270)
Funds withheld reinsurance liabilities –
reinsurance-related embedded derivatives	–		145		(42)		103
MRB liabilities	–		–		(1,272)		(1,272)
Other liabilities:
Ceded MRBs	–		–		(2,217)		(2,217)
Derivative liabilities (1)	–		(6,687)		(10)		(6,697)
Total liabilities	$	–	$	(6,542)	$	(15,811)	$	(22,353)

45

	As of December 31, 2023
	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	$	–	$	57,397	$	6,469	$	63,866
U.S. government bonds	373		20		–		393
State and municipal bonds	–		2,537		5		2,542
Foreign government bonds	–		278		–		278
RMBS	–		1,589		13		1,602
CMBS	–		1,336		8		1,344
ABS	–		10,559		1,484		12,043
Hybrid and redeemable preferred securities	46		138		48		232
Trading securities	–		2,037		284		2,321
Equity securities	1		263		42		306
Mortgage loans on real estate	–		–		288		288
Derivative investments (1)	–		10,705		622		11,327
Other investments – short-term investments	–		233		–		233
Cash and invested cash	–		3,193		–		3,193
MRB assets	–		–		3,894		3,894
Other assets:
Ceded MRBs	–		–		274		274
Indexed annuity ceded embedded derivatives	–		–		940		940
LPR ceded derivative	–		–		206		206
Separate account assets	402		157,855		–		158,257
Total assets	$	822	$	248,140	$	14,577	$	263,539
Liabilities
Policyholder account balances – RILA,
fixed annuity and IUL contracts	$	–	$	–	$	(9,077)	$	(9,077)
Funds withheld reinsurance liabilities –
reinsurance-related embedded derivatives	–		493		–		493
MRB liabilities	–		–		(1,716)		(1,716)
Other liabilities:
Ceded MRBs	–		–		(1,149)		(1,149)
Derivative liabilities (1)	–		(4,792)		(586)		(5,378)
Total liabilities	$	–	$	(4,299)	$	(12,528)	$	(16,827)

(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.
 

46

The following summarizes changes to our financial instruments carried at fair value (in millions) and classified within Level 3 of the fair value hierarchy. 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. The summary schedule excludes changes to MRB assets and MRB liabilities as these balances are rolled forward in Note 8.

	For the Three Months Ended September 30, 2024
					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
Assets
Investments: (2)
Fixed maturity AFS securities:
Corporate bonds	$	6,817	$	(1)	$	39	$	11	$	(7)	$	6,859
RMBS	18		–		–		–		(5)		13
CMBS	22		–		1		14		(16)		21
ABS	1,997		1		49		232		(178)		2,101
Hybrid and redeemable preferred
securities	50		–		1		16		9		76
Trading securities	273		7		–		(6)		–		274
Equity securities	38		–		–		1		(4)		35
Mortgage loans on real estate	258		2		4		(1)		–		263
Derivative investments	(8)		6		–		1		–		(1)
Other investments	–		–		–		10		10		20
Other assets:
Ceded MRBs (3)	39		11		–		–		–		50
Indexed annuity ceded embedded
derivatives (4)	1,756		232		–		(27)		–		1,961
LPR ceded derivative (5)	202		–		–		–		–		202
Liabilities
Policyholder account balances –
RILA, fixed annuity and
IUL contracts (4)	(11,417)		(898)		–		45		–		(12,270)
Funds withheld reinsurance liabilities –
reinsurance-related embedded derivatives (4)	(53)		11		–		–		–		(42)
Other liabilities – ceded MRBs (3)	(2,189)		(28)		–		–		–		(2,217)
Total, net	$	(2,197)	$	(657)	$	94	$	296	$	(191)	$	(2,655)

47

	For the Three Months Ended September 30, 2023
					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
Assets
Investments: (2)
Fixed maturity AFS securities:
Corporate bonds	$	6,177	$	(7)	$	(13)	$	353	$	(43)	$	6,467
State and municipal bonds	36		(2)		(1)		–		–		33
RMBS	6		–		(1)		–		7		12
ABS	1,208		–		(5)		247		(113)		1,337
Hybrid and redeemable preferred
securities	60		–		1		–		(13)		48
Trading securities	351		(3)		–		(4)		6		350
Equity securities	125		12		–		–		–		137
Mortgage loans on real estate	404		2		(3)		(88)		–		315
Derivative investments	31		(26)		–		8		–		13
Other assets:
Ceded MRBs (3)	401		(128)		–		–		–		273
Indexed annuity ceded embedded
derivatives (4)	603		(49)		–		32		–		586
LPR ceded derivative (5)	202		(18)		–		–		–		184
Liabilities
Policyholder account balances –
RILA, fixed annuity and
IUL contracts (4)	(7,600)		621		–		(195)		–		(7,174)
Other liabilities – ceded MRBs (3)	(1,440)		(296)		–		–		–		(1,736)
Total, net	$	564	$	106	$	(22)	$	353	$	(156)	$	845

48

	For the Nine Months Ended September 30, 2024
					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
Assets
Investments: (2)
Fixed maturity AFS securities:
Corporate bonds	$	6,469	$	(1)	$	23	$	492	$	(124)	$	6,859
State and municipal bonds	5		–		–		–		(5)		–
RMBS	13		–		(1)		6		(5)		13
CMBS	8		–		1		28		(16)		21
ABS	1,484		2		54		798		(237)		2,101
Hybrid and redeemable preferred
securities	48		–		3		16		9		76
Trading securities	284		7		–		(17)		–		274
Equity securities	42		(3)		–		–		(4)		35
Mortgage loans on real estate	288		6		5		(36)		–		263
Derivative investments	36		11		–		3		(51)		(1)
Other investments (4)	–		–		–		10		10		20
Other assets:
Ceded MRBs (3)	274		(224)		–		–		–		50
Indexed annuity ceded embedded
derivatives (4)	940		276		–		745		–		1,961
LPR ceded derivative (5)	206		(4)		–		–		–		202
Liabilities
Policyholder account balances -
RILA, fixed annuity and
IUL contracts (4)	(9,077)		(2,915)		–		(278)		–		(12,270)
Funds withheld reinsurance liabilities –
reinsurance-related embedded derivatives (4)	–		(42)		–		–		–		(42)
Other liabilities - ceded MRBs (3)	(1,149)		(1,068)		–		–		–		(2,217)
Total, net	$	(129)	$	(3,955)	$	85	$	1,767	$	(423)	$	(2,655)

49

	For the Nine Months Ended September 30, 2023
					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
Assets
Investments: (2)
Fixed maturity AFS securities:
Corporate bonds	$	5,186	$	(19)	$	2	$	1,302	$	(4)	$	6,467
State and municipal bonds	35		(4)		3		(1)		–		33
RMBS	1		–		(1)		5		7		12
CMBS	–		–		–		(4)		4		–
ABS	1,117		–		(3)		567		(344)		1,337
Hybrid and redeemable preferred
securities	49		–		(2)		(2)		3		48
Trading securities	581		(1)		–		(236)		6		350
Equity securities	153		(17)		–		1		–		137
Mortgage loans on real estate	487		–		2		(174)		–		315
Derivative investments	2		(28)		–		8		31		13
Other assets:
Ceded MRBs (3)	540		(267)		–		–		–		273
Indexed annuity ceded embedded
derivatives (4)	525		(37)		–		98		–		586
LPR ceded derivative (5)	212		(28)		–		–		–		184
Liabilities
Policyholder account balances -
RILA, fixed annuity and
IUL contracts (4)	(4,783)		(1,669)		–		(722)		–		(7,174)
Other liabilities – ceded MRBs (3)	(246)		(1,490)		–		–		–		(1,736)
Total, net	$	3,859	$	(3,560)	$	1	$	842	$	(297)	$	845

(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 the 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 the Consolidated Statements of Comprehensive Income (Loss).

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

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

(5) Gains (losses) from the changes in fair value are included in benefits on the Consolidated Statements of Comprehensive Income (Loss).

50

The following provides the components of the items included in issuances, sales, maturities, settlements and calls, net, (in millions) as reported above:

	For the Three Months Ended September 30, 2024
	Issuances		Sales		Maturities		Settlements		Calls		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	273	$	(92)	$	–	$	(170)	$	–	$	11
CMBS	14		–		–		–		–		14
ABS	402		(20)		–		(104)		(46)		232
Hybrid and redeemable preferred
securities	16		–		–		–		–		16
Trading securities	1		–		–		(7)		–		(6)
Equity securities	1		–		–		–		–		1
Mortgage loans on real estate	–		–		–		(1)		–		(1)
Derivative investments	–		–		1		–		–		1
Other investments (4)	10		–		–		–		–		10
Other assets – indexed annuity ceded
embedded derivatives	51		–		–		(78)		–		(27)
Policyholder account balances –
RILA, fixed annuity and
IUL contracts	(317)		–		–		362		–		45
Total, net	$	451	$	(112)	$	1	$	2	$	(46)	$	296

	For the Three Months Ended September 30, 2023
	Issuances		Sales		Maturities		Settlements		Calls		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	435	$	(47)	$	–	$	(35)	$	–	$	353
ABS	279		–		–		(32)		–		247
Trading securities	–		–		–		(4)		–		(4)
Mortgage loans on real estate	1		–		–		(89)		–		(88)
Derivative investments	9		–		(1)		–		–		8
Other assets – indexed annuity ceded
embedded derivatives	28		–		–		4		–		32
Policyholder account balances –
RILA, fixed annuity and
IUL contracts	(231)		–		–		36		–		(195)
Total, net	$	521	$	(47)	$	(1)	$	(120)	$	–	$	353

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	For the Nine Months Ended September 30, 2024
	Issuances		Sales		Maturities		Settlements		Calls		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	1,184	$	(298)	$	(2)	$	(391)	$	(1)	$	492
RMBS	6		–		–		–		–		6
CMBS	28		–		–		–		–		28
ABS	1,128		(50)		–		(223)		(57)		798
Hybrid and redeemable preferred
securities	16		–		–		–		–		16
Trading securities	5		(2)		–		(20)		–		(17)
Equity securities	1		(1)		–		–		–		–
Mortgage loans on real estate	1		(31)		–		(6)		–		(36)
Derivative investments	4		–		(1)		–		–		3
Other investments	10		–		–		–		–		10
Other assets – indexed annuity ceded
embedded derivatives	103		–		–		642		–		745
Policyholder account balances –
RILA, fixed annuity and
IUL contracts	(849)		–		–		571		–		(278)
Total, net	$	1,637	$	(382)	$	(3)	$	573	$	(58)	$	1,767

	For the Nine Months Ended September 30, 2023
	Issuances		Sales		Maturities		Settlements		Calls		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	1,825	$	(164)	$	(34)	$	(314)	$	(11)	$	1,302
RMBS	5		–		–		–		–		5
CMBS	–		–		–		(4)		–		(4)
ABS	736		(2)		–		(167)		–		567
State and municipal bonds	–		(1)		–		–		–		(1)
Hybrid and redeemable preferred
securities	–		–		–		–		(2)		(2)
Trading securities	–		(155)		–		(81)		–		(236)
Equity securities	1		–		–		–		–		1
Mortgage loans on real estate	5		–		–		(179)		–		(174)
Derivative investments	9		–		(1)		–		–		8
Other assets – indexed annuity ceded
embedded derivatives	112		–		–		(14)		–		98
Policyholder account balances –
RILA, fixed annuity and
IUL contracts	(846)		–		–		124		–		(722)
Total, net	$	1,847	$	(322)	$	(35)	$	(635)	$	(13)	$	842

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The following summarizes changes in unrealized gains (losses) included in net income related to financial instruments carried at fair value classified within Level 3 that we still held (in millions):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
Trading securities (1)	$	7	$	(3)	$	6	$	(2)
Equity securities (1)	–		12		(2)		(17)
Mortgage loans on real estate (1)	2		2		(2)		(1)
Derivative investments (1)	5		(25)		14		(27)
MRBs (2)	(684)		1,001		161		1,133
Other assets – LPR ceded derivative (3)	–		(18)		(4)		(28)
Funds withheld reinsurance liabilities –
reinsurance-related embedded derivatives (1)	11		–		(42)		–
Embedded derivatives – indexed annuity
and IUL contracts (1)	287		(4)		755		(223)
Total, net	$	(372)	$	965	$	886	$	835

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

(2) Included in market risk benefit gain (loss) on the Consolidated Statements of Comprehensive Income (Loss).

(3) Included in benefits on the Consolidated Statements of Comprehensive Income (Loss).

The following summarizes changes in unrealized gains (losses) included in OCI, net of tax, related to financial instruments carried at fair value classified within Level 3 that we still held (in millions):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
Fixed maturity AFS securities:
Corporate bonds	$	39	$	(17)	$	2	$	(5)
State and municipal bonds	–		–		–		3
RMBS	1		(1)		–		(1)
ABS	47		(5)		26		(4)
Hybrid and redeemable preferred
securities	1		–		2		(2)
Mortgage loans on real estate	4		(3)		5		1
Total, net	$	92	$	(26)	$	35	$	(8)

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

	For the Three Months Ended September 30, 2024						For the Three Months Ended September 30, 2023
	Transfers		Transfers				Transfers		Transfers
	Into		Out of				Into		Out of
	Level 3		Level 3		Total		Level 3		Level 3		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	–	$	(7)	$	(7)	$	36	$	(79)	$	(43)
RMBS	–		(5)		(5)		12		(5)		7
CMBS	–		(16)		(16)		–		–		–
ABS	–		(178)		(178)		–		(113)		(113)
Hybrid and redeemable preferred
securities	9		–		9		–		(13)		(13)
Trading securities	–		–		–		6		–		6
Equity securities	–		(4)		(4)		–		–		–
Other investments	10		–		10		–		–		–
Total, net	$	19	$	(210)	$	(191)	$	54	$	(210)	$	(156)

	For the Nine Months Ended September 30, 2024						For the Nine Months Ended September 30, 2023
	Transfers		Transfers					Transfers		Transfers
	Into		Out of					Into		Out of
	Level 3		Level 3		Total			Level 3		Level 3		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	19	$	(143)	$	(124)		$	194	$	(198)	$	(4)
State and municipal bonds	–		(5)		(5)			–		–		–
RMBS	–		(5)		(5)			12		(5)		7
CMBS	–		(16)		(16)			4		–		4
ABS	49		(286)		(237)			2		(346)		(344)
Hybrid and redeemable preferred
securities	9		–		9			16		(13)		3
Trading securities	–		–		–			6		–		6
Equity securities	–		(4)		(4)			–		–		–
Derivative investments	–		(51)		(51)			31		–		31
Other investments	10		–		10			–		–		–
Total, net	$	87	$	(510)	$	(423)		$	265	$	(562)	$	(297)

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 three and nine months ended September 30, 2024 and 2023, transfers in and out of Level 3 were attributable primarily to the financial instruments’ observable market information no longer being available or becoming available.

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The following summarizes the fair value (in millions), valuation techniques and significant unobservable inputs of the Level 3 fair value measurements as of September 30, 2024:

										Weighted
	Fair		Valuation	Significant	Assumption or					Average Input
	Value		Technique	Unobservable Inputs	Input Ranges					Range (1)
Assets
Investments:
Fixed maturity AFS
securities:
Corporate bonds	$	181	Discounted cash flow	Liquidity/duration adjustment (2)	0%		–	4.2	%	2.0	%
CMBS	8		Discounted cash flow	Liquidity/duration adjustment (2)	2.1	%	–	2.1	%	2.1	%
ABS	11		Discounted cash flow	Liquidity/duration adjustment (2)	1.5	%	–	1.5	%	1.5	%
Hybrid and redeemable
preferred securities	24		Discounted cash flow	Liquidity/duration adjustment (2)	1.4	%	–	2.0	%	1.8	%
Equity securities	5		Discounted cash flow	Liquidity/duration adjustment (2)	4.5	%	–	4.5	%	4.5	%
MRB assets	4,565
Other assets:
Ceded MRBs	50		Discounted cash flow	Lapse (3)	1	%	–	30	%	(10)
				Utilization of GLB withdrawals (4)	85	%	–	100	%	94	%
				Claims utilization factor (5)	60	%	–	100	%	(10)
				Premiums utilization factor (5)	80	%	–	115	%	(10)
				Non-performance risk (6)	0.27	%	–	2.24	%	1.81	%
				Mortality (7)				(9)		(10)
				Volatility (8)	1	%	–	29	%	14.47	%
Indexed annuity
ceded embedded
derivatives	1,961		Discounted cash flow	Lapse (3)	0%		–	9	%	(10)
				Mortality (7)				(9)		(10)
LPR ceded
derivative	202		Discounted cash flow	Lapse (3)	0.10	%		2.00	%	(10)
				Non-performance risk (6)	0.27	%		2.24	%	1.60	%
				Mortality (7)				(9)		(10)
Liabilities
Policyholder account
balances – indexed annuity
contracts embedded
derivatives	$	(12,176)	Discounted cash flow	Lapse (3)	0%		–	9	%	(10)
				Mortality (7)				(9)		(10)
MRB liabilities	(1,272)
Other liabilities – ceded
MRBs	(2,217)		Discounted cash flow	Lapse (3)	1	%	–	30	%	(10)
				Utilization of GLB withdrawals (4)	85	%	–	100	%	94	%
				Claims utilization factor (5)	60	%	–	100	%	(10)
				Premiums utilization factor (5)	80	%	–	115	%	(10)
				Non-performance risk (6)	0.27	%	–	2.24	%	1.81	%
				Mortality (7)				(9)		(10)
				Volatility (8)	1	%	–	29	%	14.47	%

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The following summarizes the fair value (in millions), valuation techniques and significant unobservable inputs of the Level 3 fair value measurements as of December 31, 2023:

										Weighted
	Fair		Valuation	Significant	Assumption or					Average Input
	Value		Technique	Unobservable Inputs	Input Ranges					Range (1)
Assets
Investments:
Fixed maturity AFS
securities:
Corporate bonds	$	183	Discounted cash flow	Liquidity/duration adjustment (2)	(0.2)	%	–	3.7	%	2.1	%
State and municipal
bonds	5		Discounted cash flow	Liquidity/duration adjustment (2)	0.9	%	–	2.2	%	2.1	%
CMBS	8		Discounted cash flow	Liquidity/duration adjustment (2)	2.3	%	–	2.3	%	2.3	%
ABS	12		Discounted cash flow	Liquidity/duration adjustment (2)	1.8	%	–	1.8	%	1.8	%
Hybrid and redeemable
preferred securities	7		Discounted cash flow	Liquidity/duration adjustment (2)	1.4	%	–	1.5	%	1.5	%
Equity securities	5		Discounted cash flow	Liquidity/duration adjustment (2)	4.5	%	–	4.5	%	4.5	%
MRB assets	3,894
Other assets:
Ceded MRBs	274		Discounted cash flow	Lapse (3)	1	%	–	30	%	(10)
				Utilization of GLB withdrawals (4)	85	%	–	100	%	94	%
				Claims utilization factor (5)	60	%	–	100	%	(10)
				Premiums utilization factor (5)	80	%	–	115	%	(10)
				Non-performance risk (6)	0.51	%	–	2.13	%	1.78	%
				Mortality (7)				(9)		(10)
				Volatility (8)	1	%	–	29	%	13.92	%
Indexed annuity
ceded embedded
derivatives	940		Discounted cash flow	Lapse (3)	0%		–	9	%	(10)
				Mortality (7)				(9)		(10)
LPR ceded
derivative	206		Discounted cash flow	Lapse (3)	0.1	%		2.00	%	(10)
				Non-performance risk (6)	1	%		2.13	%	1.58	%
				Mortality (7)				(9)		(10)
Liabilities
Policyholder account
balances – indexed annuity
contracts embedded
derivatives	$	(9,013)	Discounted cash flow	Lapse (3)	0%		–	9	%	(10)
				Mortality (7)				(9)		(10)
MRB liabilities	(1,716)
Other liabilities – ceded
MRBs	(1,149)		Discounted cash flow	Lapse (3)	1	%	–	30	%	(10)
				Utilization of GLB withdrawals (4)	85	%	–	100	%	94	%
				Claims utilization factor (5)	60	%	–	100	%	(10)
				Premiums utilization factor (5)	80	%	–	115	%	(10)
				Non-performance risk (6)	0.51	%	–	2.13	%	1.78	%
				Mortality (7)				(9)		(10)
				Volatility (8)	1	%	–	29	%	13.92	%

(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.

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(3) The lapse 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 lapses during the surrender charge period.

(4) The utilization of GLB withdrawals input represents the estimated percentage of policyholders that utilize the GLB withdrawal riders.

(5) The utilization factors are applied to the present value of claims or premiums, as appropriate, in the MRB calculation to estimate the impact of inefficient GLB withdrawal behavior, including taking less than or more than the maximum GLB withdrawal.

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

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

(9) The mortality 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, utilization factors or mortality.

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.

The embedded derivative liability associated with Fortitude Re was excluded from the above table. As discussed in Note 7, this embedded derivative liability was created through a coinsurance with funds withheld reinsurance agreement where the investments supporting the reinsurance agreement were withheld by and continue to be reported on the Consolidated Balance Sheet. This reinsurance-related embedded derivative is valued as a total return swap with reference to the fair value of the investments held by us. Accordingly, the unobservable inputs utilized in the valuation of the reinsurance-related embedded derivative are a component of the investments supporting the reinsurance agreement that are reported on the Consolidated Balance Sheet.

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 or mortality 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, non-performance risk or mortality inputs would have resulted in an increase in the fair value measurement.

•MRBs – Assuming our MRBs are in a liability position: an increase in our lapse, non-performance risk or mortality inputs would have resulted in a decrease in the fair value measurement, except for policies with guaranteed death benefit (“GDB”) riders only, in which case an increase in mortality 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.

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13. Contingencies and Commitments

Contingencies

Reinsurance Disputes

Certain reinsurers have in the past sought, and may in the future seek, rate increases on certain yearly renewable term agreements. We may initiate legal proceedings, as necessary, under these agreements in order to protect our contractual rights. Additionally, reinsurers have in the past initiated, and may in the future initiate, legal proceedings against us.

Regulatory and Litigation Matters

Regulatory bodies, such as state insurance departments, the SEC, the Financial Industry Regulatory Authority, tax authorities and other regulatory bodies regularly make inquiries and conduct examinations, investigations or audits concerning our compliance with, among other things, insurance laws, securities laws, tax laws, laws governing the activities of broker-dealers, registered investment advisers and unclaimed property laws. Tax-related matters can include disputes with taxing authorities, ongoing audits, evaluation of filing positions and any potential assessments related thereto.

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 September 30, 2024.

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 September 30, 2024, 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 $150 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 some of these matters. Although a loss is believed to be reasonably possible for these matters, for some of these matters, we are not able to estimate a reasonably possible amount or range of potential

58

liability. An adverse outcome in one or more of these matters may have a material impact on the consolidated financial statements, but, based on information currently known, management does not believe those cases are likely to have such an impact.

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, on September 25, 2023, the court granted in part and denied in part. Plaintiff filed an amended complaint on October 10, 2023. On March 7, 2024, the parties entered into a provisional settlement agreement that encompasses policies that are at issue in this case, which also includes all policies at issue in the lawsuits captioned TVPX ARS INC., as Securities Intermediary for Consolidated Wealth Management, LTD. v. The Lincoln National Life Insurance Company and Vida Longevity Fund, LP v. Lincoln Life & Annuity Company of New York, both of which are described below, and one additional case to which an affiliate of LNL is a party, Iwanski v. First Penn-Pacific Life Insurance Company, which has been previously disclosed by our parent company, LNC. The Glover plaintiffs’ motion for preliminary approval of the provisional settlement was filed on March 8, 2024, and on September 4, 2024, the court granted preliminary approval of the provisional settlement. The provisional settlement, which is still subject to final approval of the court, consists of a $147.5 million pre-tax cash payment for Glover class members (inclusive of all policyholders in TVPX ARS INC., Vida and Iwanski).

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. On March 7, 2024, the parties in Glover v. Connecticut General Life Insurance Company and The Lincoln National Life Insurance Company (discussed above) entered into a provisional settlement agreement that encompasses all policies at issue in this case, as the Glover case is inclusive of all policies in this case, as well as in the lawsuit captioned Vida Longevity Fund, LP v. Lincoln Life & Annuity Company of New York (discussed below), and one additional case to which an affiliate of LNL is a party, Iwanski v. First Penn-Pacific Life Insurance Company, which has been previously disclosed by our parent company, LNC. The Glover plaintiffs’ motion for preliminary approval of the provisional settlement was filed on March 8, 2024, and on September 4, 2024, the court granted preliminary approval of the provisional settlement. The provisional settlement, which is still subject to final approval of the court, consists of a $147.5 million pre-tax cash payment for Glover class members (inclusive of all policyholders in TVPX ARS INC., Vida and Iwanski). A motion has been filed to stay the proceedings in this matter (as well as the Iwanski matter) pending the completion of the settlement approval process in Glover.

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. On March 31, 2022, the court issued an order granting plaintiff’s motion for class certification and certified a class of all current or former owners of six universal life insurance products issued by LLANY that were assessed a cost of insurance charge any time on or after June 27, 2013. Plaintiff seeks damages on behalf of the class. On April 19, 2023, LLANY filed a motion for summary judgment. On March 7, 2024, the parties in Glover v. Connecticut General Life Insurance Company and The Lincoln National Life Insurance Company (discussed above) entered into a provisional settlement agreement that encompasses all policies at issue in this case, as the Glover case is inclusive of all policies in this case, as well as in the lawsuit captioned TVPX ARS INC., as Securities Intermediary for Consolidated Wealth Management, LTD. v. The Lincoln National Life Insurance Company (discussed above), and one additional case to which an affiliate of LNL is a party, Iwanski v. First Penn-Pacific Life Insurance Company, which has been previously disclosed by our parent company, LNC. The Glover plaintiffs’ motion for preliminary approval of the provisional settlement was filed on March 8, 2024, and on September 4, 2024, the court granted preliminary approval of the provisional settlement. The provisional settlement, which is still subject to final approval of the court, consists of a $147.5 million pre-tax cash payment for Glover class members (inclusive of all policyholders in TVPX ARS INC., Vida and Iwanski). On March 29, 2024, the court issued its summary judgment decision, granting LLANY’s motion in part and denying it in part, and entering summary judgment against twenty-two policyholders that the court determined were not economically harmed. On June 25, 2024, the court granted LLANY’s April 12, 2024, motion to stay proceedings in this matter pending the completion of the approval process in Glover.

Angus v. The Lincoln National Life Insurance Company, pending in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:22-cv-01878, is a putative class action filed on May 13, 2022. Plaintiff alleges that defendant LNL breached the terms of her life insurance policy by deducting non-guaranteed cost of insurance charges in excess of what is permitted by the policies. Plaintiff seeks to represent all owners of universal life insurance policies issued or insured by LNL or its predecessors containing non-guaranteed cost of insurance

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provisions that are similar to those of plaintiff’s policy and seeks damages on their behalf. Breach of contract is the only cause of action asserted. On August 26, 2022, LNL filed a motion to dismiss. We are vigorously defending this matter.

On May 7, 2024, the U.S. District Court for the Eastern District of Pennsylvania consolidated for all purposes four previously disclosed civil actions: EFG Bank AG, Cayman Branch, et al. v. The Lincoln National Life Insurance Company, No. 17-cv-02592-GJP (E.D. Pa.) filed on February 1, 2017; LSH CO, et al. v. Lincoln National Corp., et al., No. 18-cv-05529-GJP (E.D. Pa.), filed on December 21, 2018; Brighton Trustees, LLC, et al. v. The Lincoln National Life Insurance Company, No. 2:23-cv-2251-GJP (E.D. Pa.), filed on April 20, 2023 (and transferred to the U.S. District Court for the Eastern District of Pennsylvania on June 12, 2023); and Ryan K. Crayne, on behalf of and as trustee for Carlton Peak Trust v. The Lincoln National Life Insurance Company, No. 2:24-cv-00053-GJP, filed on November 17, 2023 (and transferred to the U.S. District Court for the Eastern District of Pennsylvania on January 4, 2024), and one additional pending civil action, Conestoga Trust, et al. v. Lincoln National Corp., et al., No. 18-cv-02379-GJP (E.D. Pa.), filed on June 6, 2018. In each case other than Crayne, plaintiffs purport to own universal life insurance policies or interests in universal life insurance policies originally issued by Jefferson-Pilot (now LNL). In Crayne, plaintiffs purport to own litigation claims concerning universal life policies originally issued by Jefferson-Pilot (now LNL). Among other things, plaintiffs in each case allege that LNL (or, in LSH Co. and Conestoga, LNL and LNC) breached the terms of policyholders’ contracts when it increased non-guaranteed cost of insurance rates beginning in 2016 (or, in Brighton Trustees and LSH Co., in 2016 and 2017). We are vigorously defending these consolidated matters.

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. Plaintiff filed a notice of appeal on July 28, 2021, and on September 26, 2022, the U.S. Court of Appeals for the Second Circuit reserved its decision and certified a question to the New York Court of Appeals. On October 20, 2022, the New York Court of Appeals accepted the question. On October 19, 2023, the New York Court of Appeals answered the question in LLANY’s favor and transmitted the decision to the U.S. Court of Appeals for the Second Circuit. Plaintiff sought, and was granted, supplemental briefing before the U.S. Court of Appeals for the Second Circuit with respect to certain aspects of the New York Court of Appeals’ decision. The supplemental briefing was completed January 23, 2024. On August 8, 2024, the U.S. Court of Appeals for the Second Circuit affirmed the District Court’s decision dismissing the case. We are vigorously defending this matter.

Henry Morgan et al. v. Lincoln National Corporation d/b/a Lincoln Financial Group, et al, filed in the District Court of the 14th Judicial District of Dallas County, Texas, No. DC-23-02492, is a putative class action that was filed on February 22, 2023. Plaintiffs Henry Morgan, Susan Smith, Charles Smith, Laura Seale, Terri Cogburn, Laura Baesel, Kathleen Walton, Terry Warner, and Toni Hale (“Plaintiffs”) allege on behalf of a putative class that Lincoln National Corporation d/b/a Lincoln Financial Group, LNL and LLANY (together, “Lincoln”), FMR, LLC, and Fidelity Product Services, LLC (“Fidelity”) created and marketed misleading and deceptive insurance products with attributes of investment products. The putative class comprises all individuals and entities who purchased Lincoln OptiBlend products that allocated account monies to the 1-Year Fidelity AIM Dividend Participation Account, between January 1, 2020, to December 31, 2022. Plaintiffs assert the following claims individually and on behalf of the class, (1) violations of the Texas Deceptive Trade Practices Act against Lincoln; (2) common-law fraud against Lincoln; (3) negligent misrepresentation against Lincoln and Fidelity; and (4) aiding and abetting fraud against Fidelity. Plaintiffs allege they suffered damages from “a missed investment return of approximately 5-6%” and mitigation damages. They seek actual, consequential and punitive damages, as well as pre-judgment and post-judgment interest, attorney’s fees and litigation costs. On March 31, 2023, the Lincoln defendants filed a notice of removal removing the action from the 14th Judicial District of Dallas County, Texas, to the United States District Court for the Northern District of Texas, Dallas Division. On May 8, 2023, the Lincoln defendants and the Fidelity defendants filed motions to dismiss, which remain pending. We are vigorously defending this matter.

Tax Assessment Proceeding

Lincoln National Life Insurance Company v. Township of Radnor, pending in the Court of Common Pleas of Delaware County, Pennsylvania Civil Division, No. 2022-001894, is a de novo appeal filed by LNL on March 21, 2022, regarding a September 30, 2021, Notice of Tax Assessment issued by the Township of Radnor to LNL for additional business privilege tax (“BPT”) for the years 2014-2019/2020 estimate. The assessment was based on an audit undertaken by a third-party auditor and consultant to the Township of Radnor, following a periodic business review of LNL undertaken by the same individual in 2018. The assessment is comprised of taxes, interest and penalties for the period in question. LNL filed a motion for summary judgment, that was denied by the court. The trial of this matter began in October 2024 and is scheduled to continue in November 2024. We are vigorously defending this matter.

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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 Nine Months Ended September 30,
	2024		2023
Unrealized Gain (Loss) on Fixed Maturity AFS Securities and Certain
Other Investments
Balance as of beginning-of-year	$	(3,532)	$	(8,526)
Unrealized holding gains (losses) arising during the period	1,523		(2,781)
Change in foreign currency exchange rate adjustment	125		(21)
Change in future contract benefits and policyholder account balances,
net of reinsurance	(453)		491
Income tax benefit (expense)	(253)		478
Less:
Reclassification adjustment for gains (losses) included in net income (loss)	(9)		(3,704)
Income tax benefit (expense)	2		778
Balance as of end-of-period	$	(2,583)	$	(7,433)
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	249	$	301
Unrealized holding gains (losses) arising during the period	213		10
Change in foreign currency exchange rate adjustment	(121)		30
Income tax benefit (expense)	(20)		(9)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)	40		46
Income tax benefit (expense)	(8)		(10)
Balance as of end-of-period	$	289	$	296
Market Risk Benefit Non-Performance Risk Gain (Loss)
Balance as of beginning-of-year	$	1,069	$	1,739
Adjustment arising during the period	(367)		(944)
Income tax benefit (expense)	79		202
Balance as of end-of-period	$	781	$	997
Policyholder Liability Discount Rate Remeasurement Gain (Loss)
Balance as of beginning-of-year	$	645	$	790
Adjustment arising during the period	(46)		326
Income tax benefit (expense)	10		(69)
Balance as of end-of-period	$	609	$	1,047
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	–	$	–
Foreign currency translation adjustment arising during the period	(1)		–
Balance as of end-of-period	$	(1)	$	–
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(16)	$	(17)
Balance as of end-of-period	$	(16)	$	(17)

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The following summarizes the reclassifications out of AOCI (in millions) and the associated line item on the Consolidated Statements of Comprehensive Income (Loss):

	For the Nine Months Ended September 30,
	2024		2023
Unrealized Gain (Loss) on Fixed Maturity AFS
Securities and Certain Other Investments
Reclassification	$	(15)	$	(4,293)	Realized gain (loss)
Associated change in future contract benefits	6		589		Benefits
Reclassification before income tax benefit (expense)	(9)		(3,704)		Income (loss) before taxes
Income tax benefit (expense)	2		778		Federal income tax expense (benefit)
Reclassification, net of income tax	$	(7)	$	(2,926)	Net income (loss)
Unrealized Gain (Loss) on Derivative Instruments
Interest rate contracts	$	(2)	$	–	Interest and debt expense
Foreign currency contracts	41		42		Net investment income
Foreign currency contracts	1		4		Realized gain (loss)
Reclassifications before income tax benefit (expense)	40		46		Income (loss) before taxes
Income tax benefit (expense)	(8)		(10)		Federal income tax expense (benefit)
Reclassifications, net of income tax	$	32	$	36	Net income (loss)

15. Segment Information

We provide products and services and report results through our Annuities, Life Insurance, Group Protection and Retirement Plan Services 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 CODM views and manages the business. A discussion of these segments and Other Operations is found in Note 20 to the Consolidated Financial Statements in our 2023 Form 10-K.

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. In the third quarter of 2024, we revised our definition of income (loss) from operations to exclude the impact of certain items that are not indicative of the ongoing operations of the business and may obscure trends in the underlying performance of the Company. The revised definition now excludes, as applicable, certain legal accruals, severance expense related to initiatives that realign the workforce, mark-to-market adjustment related to the LNC stock component of our deferred compensation plans, impacts from the settlement or curtailment of defined benefit obligations and the effect of tax adjustments such as changes to deferred tax valuation allowances from the definition of income (loss) from operations. The presentation of prior period income (loss) from operations has been recast to conform to the current period presentation.

Income (loss) from operations is GAAP net income excluding the following items, as applicable:

•Items related to annuity product features, which include changes in MRBs, including gains and losses and benefit payments, changes in the fair value of the derivative instruments we hold to hedge GLB and GDB riders, net of fee income allocated to support the cost of hedging them, and changes in the fair value of the embedded derivative liabilities of our indexed annuity contracts and the associated index options we hold to hedge them, including collateral expense associated with the hedge program (collectively, “net annuity product features”);

•Items related to life insurance product features, which include changes in the fair value of derivatives we hold as part of VUL hedging, changes in reserves resulting from benefit ratio unlocking associated with the impact of capital markets, and changes in the fair value of the embedded derivative liabilities of our IUL contracts and the associated index options we hold to hedge them (collectively, “net life insurance product features”);

•Credit loss-related adjustments on fixed maturity AFS securities, mortgage loans on real estate and reinsurance-related assets (“credit loss-related adjustments”);

•Changes in the fair value of equity securities, certain derivatives, certain other investments and realized gains (losses) on sales, disposals and impairments of financial assets (collectively, “investment gains (losses)”);

•Changes in the fair value of reinsurance-related embedded derivatives, trading securities and mortgage loans on real estate electing the fair value option (“changes in the fair value of reinsurance-related embedded derivatives, trading securities and certain mortgage loans”);

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•GLB rider fees ceded to LNBAR;

•Income (loss) from the initial adoption of new accounting standards, accounting policy changes and new regulations, including changes in tax law;

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

•Losses from the impairment of intangible assets and gains (losses) on other non-financial assets;

•Income (loss) from discontinued operations;

•Other items, which include the following: certain legal accruals; severance expense related to initiatives that realign the workforce; 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; mark-to-market adjustment related to the LNC stock component of our deferred compensation plans (“deferred compensation mark-to-market adjustment”); gains (losses) on modification or early extinguishment of debt; and impacts from settlement or curtailment of defined benefit obligations; and

•Income tax benefit (expense) related to the above pre-tax items, including the effect of tax adjustments such as changes to deferred tax valuation allowances.

Operating revenues represent GAAP revenues excluding the effects of the following items, as applicable:

•Changes in the fair value of the derivative instruments we hold to hedge GLB and GDB riders, net of fee income allocated to support the cost of hedging them, and changes in the fair value of the embedded derivative liabilities of our indexed annuity and IUL contracts and the associated index options we hold to hedge them (collectively, “revenue adjustments from annuity and life insurance product features”);

•Credit loss-related adjustments;

•Investment gains (losses);

•Changes in the fair value of reinsurance-related embedded derivatives, trading securities and certain mortgage loans;

•GLB rider fees ceded to LNBAR;

•Revenue adjustments from the initial adoption of new accounting standards;

•Amortization of deferred gains arising from reserve changes on business sold through reinsurance; and

•Gains (losses) on other non-financial assets.

We use our prevailing corporate federal income tax rate of 21%, where applicable, net of the impacts related to dividends-received deduction and foreign tax credits and any other permanent differences for events recognized differently in our consolidated financial statements and federal income tax returns.

The tables below reconcile our segment measures of performance to the GAAP measures presented on the Consolidated Statements of Comprehensive Income (Loss) (in millions):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
Revenues
Operating revenues:
Annuities	$	1,101	$	1,095	$	3,421	$	3,236
Life Insurance	1,249		1,627		3,748		4,920
Group Protection (1)	1,353		1,387		(273)		4,174
Retirement Plan Services	331		321		971		972
Other Operations	55		32		114		106
Revenue adjustments from annuity and
life insurance product features	196		268		589		154
Credit loss-related adjustments	(88)		(25)		(123)		(50)
Investment gains (losses) (2)	(57)		(1,091)		(317)		(4,228)
Changes in the fair value of reinsurance-related embedded
derivatives, trading securities and certain mortgage loans (3)	(416)		190		(326)		251
GLB rider fees ceded to LNBAR	(242)		(227)		(703)		(694)
Gains (losses) on other non-financial assets – sale of
subsidiaries/businesses (4)	–		–		481		–
Total revenues	$	3,482	$	3,577	$	7,582	$	8,841

 

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	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023 (5)		2024		2023 (5)
Net Income (Loss)
Income (loss) from operations:
Annuities	$	227	$	190	$	702	$	626
Life Insurance	133		(152)		160		(152)
Group Protection	62		67		271		246
Retirement Plan Services	41		39		110		120
Other Operations	(38)		(66)		(152)		(191)
Net annuity product features, pre-tax	(347)		1,203		1,066		1,536
Net life insurance product features, pre-tax (6)	(132)		248		(277)		390
Credit loss-related adjustments, pre-tax	(88)		(25)		(123)		(50)
Investment gains (losses), pre-tax (2)	(57)		(1,091)		(317)		(4,228)
Changes in the fair value of reinsurance-related
embedded derivatives, trading securities and
certain mortgage loans, pre-tax (3)	(416)		190		(326)		251
GLB rider fees ceded to LNBAR, pre-tax	(242)		(227)		(703)		(694)
Gains (losses) on other non-financial assets – sale of
subsidiaries/businesses, pre-tax (4)	–		–		481		–
Other items, pre-tax (7) (8) (9) (10)	(19)		(10)		(113)		(23)
Income tax benefit (expense) related to the
above pre-tax items	276		(51)		39		600
Net income (loss)	$	(600)	$	315	$	818	$	(1,569)

(1)    The nine months ended September 30, 2024, reflect day one impacts pertaining to the second quarter 2024 reinsurance transaction. For more information, see Note 7.

(2)    The three and nine months ended September 30, 2023, include impairments of certain fixed maturity AFS securities in an unrealized loss position, resulting from the Company’s intent to sell these securities as part of the fourth quarter 2023 reinsurance transaction. See Notes 3 and 7 for additional information.

(3)    Includes primarily changes in the fair value of embedded derivatives related to affiliate reinsurance transactions. For more information, see Note 7.

(4)    For information on the sale of the wealth management business, see Note 1.

(5)    The prior period presentation has been recast to conform to the revised definition of income (loss) from operations.

(6)    Includes $162 million and $580 million for the three and nine months ended September 30, 2023, respectively, related to the fourth quarter 2023 reinsurance transaction. For more information, see Note 7.

(7)    Includes certain legal accruals of $(10) million in the third quarter of 2023 and $(3) million in the first quarter of 2024.

(8)    Includes severance expense related to initiatives that realign the workforce of $(3) million, $(3) million, $(49) million, $(7) million and $(16) million in the first quarter of 2023, second quarter of 2023, first quarter of 2024, second quarter of 2024 and third quarter of 2024, respectively.

(9)    Includes transaction and integration costs related to mergers, acquisitions and divestitures of $(9) million, $(1) million, $(10) million, $(16) million and $(2) million for the second quarter of 2023, third quarter of 2023, first quarter of 2024, second quarter of 2024 and third quarter of 2024, respectively.

(10)    Includes deferred compensation mark-to-market adjustment of $7 million, $(5) million, $1 million, $(9) million and $(1) million in the first quarter of 2023, second quarter of 2023, third quarter of 2023, first quarter of 2024 and third quarter of 2024, respectively.

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Other segment information (in millions) was as follows:

	As of  September 30,		As of  December 31,
	2024		2023
Assets
Annuities	$	210,688	$	186,716
Life Insurance	115,017		107,529
Group Protection	13,260		9,741
Retirement Plan Services	49,647		46,969
Other Operations	21,061		23,021
Total assets	$	409,673	$	373,976

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16. Realized Gain (Loss)

Realized gain (loss) on the Consolidated Statements of Comprehensive Income (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, VUL derivative and embedded derivative gains and losses, gains and losses on the sale of subsidiaries and businesses and net gains and losses on reinsurance-related 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 also net of allocations of investment gains and losses to certain policyholders, certain funds withheld on reinsurance arrangements and certain modified coinsurance arrangements for which we have a contractual obligation. Details underlying realized gain (loss) (in millions) were as follows:

	For the Three Months Ended   September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
Fixed maturity AFS securities:
Gross gains	$	3	$	1	$	19	$	34
Gross losses	(18)		(3)		(196)		(114)
Credit loss benefit (expense) (1)	(14)		(1)		(39)		(16)
Intent to sell impairments (2)	–		(1,150)		–		(4,213)
Realized gain (loss) on equity securities (3)	6		8		18		(20)
Credit loss benefit (expense) on mortgage loans on real estate	(47)		(9)		(65)		(16)
Credit loss benefit (expense) on reinsurance-related assets	(27)		(15)		(19)		(19)
Realized gain (loss) on the mark-to-market on certain
instruments (4)(5)	(591)		341		(791)		136
Indexed product derivative results (6)	82		4		304		(199)
GLB rider fees ceded to LNBAR and attributed fees	(41)		(26)		(102)		(83)
Realized gain (loss) on subsidiaries/businesses (7)	–		–		481		–
Other realized gain (loss)	76		(17)		45		(3)
Total realized gain (loss)	$	(571)	$	(867)	$	(345)	$	(4,513)

(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) The three and nine months ended September 30, 2023, include impairments of certain fixed maturity AFS securities in an unrealized loss position, resulting from the Company’s intent to sell these securities as part of the fourth quarter 2023 reinsurance transaction. See Notes 3 and 7 for additional information.

(3) Includes mark-to-market adjustments on equity securities still held of $6 million and $9 million for the three months ended September 30, 2024 and 2023, respectively, and $21 million and $(22) million for the nine months ended September 30, 2024 and 2023, respectively.

(4) Represents changes in the fair values of derivatives we hold as part of VUL hedging, reinsurance-related embedded derivatives and trading securities.

(5) Includes gains and losses from fair value changes on mortgage loans on real estate accounted for under the fair value option of $1 million and $2 million for the three months ended September 30, 2024 and 2023, respectively, and $4 million and $1 million for the nine months ended September 30, 2024 and 2023, respectively.

(6) Represents 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, and the associated index options to hedge policyholder index allocations applicable to future reset periods for our indexed annuity products.

(7) For information on the sale of the wealth management business, see Note 1.

17. Federal Income Taxes

The effective tax rate is the ratio of tax expense (benefit) over pre-tax income (loss). The effective tax rate was 25% and 14% for the three and nine months ended September 30, 2024, respectively, compared to 11% and 26%, respectively, for the corresponding periods in 2023. The effective tax rate on pre-tax income is typically lower than the prevailing corporate federal income tax rate of 21% due to benefits from preferential tax items including the separate account dividends-received deduction and tax credits.

For the three months ended September 30, 2024, the effective tax rate differed from the prevailing corporate federal income tax rate due primarily to a tax benefit at 21% from pre-tax losses in addition to the effects of preferential tax items. For the nine months ended

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September 30, 2024, the effective tax rate differed from the prevailing corporate federal income tax rate due primarily to the effects of preferential tax items.

For the three months ended September 30, 2023, the effective tax rate differed from the prevailing corporate federal income tax rate due primarily to the effects of preferential tax items. For the nine months ended September 30, 2023, the effective tax rate differed from the prevailing corporate federal income tax rate due primarily to a tax benefit at 21% from pre-tax losses in addition to the effects of preferential tax items.

18. Supplemental Disclosures of Cash Flow Data

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

	For the Nine Months Ended September 30,
	2024		2023
Non-cash transactions:
Establishment of funds withheld liability in connection with a reinsurance transaction	$	(7,361)	$	–
Extraordinary dividend to LNC in the form of fixed maturity AFS securities,
mortgage loans on real estate and accrued investment income	(929)		–
Net increase (decrease) in fixed maturity AFS securities and accrued investment
income in connection with reinsurance activity	767		1,272

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Item 2. Management’s Narrative Analysis of the Results of Operations

	Page
Forward-Looking Statements – Cautionary Language	69
Summary of Critical Accounting Estimates	70
Results of Consolidated Operations	75
Results of Annuities	77
Results of Life Insurance	79
Results of Group Protection	80
Results of Retirement Plan Services	82
Results of Other Operations	83
Liquidity and Capital Resources	84

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The following Management’s Narrative Analysis of the Results of Operations (“MNA”) is intended to help the reader understand the financial condition as of September 30, 2024, compared with December 31, 2023, and the results of operations for the three and nine months ended September 30, 2024, compared with the corresponding periods in 2023 of The Lincoln National Life Insurance Company (“LNL”) and its consolidated subsidiaries. Unless otherwise stated or the context otherwise requires, “LNL,” “Company,” “we,” “our” or “us” refers to The Lincoln National Life Insurance Company and its consolidated subsidiaries. LNL is a wholly owned subsidiary of Lincoln National Corporation (“LNC”). The MNA is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and the accompanying notes to the consolidated financial statements (“Notes”) presented in “Part I – Item 1. Financial Statements”; our Annual Report on Form 10-K for the year ended December 31, 2023; and other reports filed with the Securities and Exchange Commission (“SEC”).

MNA is presented pursuant to General Instructions H(2)(a) of Form 10-Q in lieu of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

See “Part I – Item 1. Business” in our 2023 Form 10-K and Note 1 herein for a description of the business.

In this report, in addition to providing consolidated revenues and net income (loss), we also provide segment operating revenues and income (loss) from operations because we believe they are meaningful measures of revenues and the profitability of our operating segments. Operating revenues and income (loss) from operations are the financial performance measures we use to evaluate and assess the results of our segments. Accordingly, we define and report operating revenues and income (loss) from operations by segment in Note 15. Our management believes that operating revenues and income (loss) from operations explain the results of our ongoing businesses in a manner that allows for a better understanding of the underlying trends in our current businesses. Certain items are excluded from operating revenue and income (loss) from operations because they are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments, and, in many instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. In addition, we believe that our definitions of operating revenues and income (loss) from operations will provide readers with a more valuable measure of our performance because it better reveals trends in our business.

FORWARD-LOOKING STATEMENTS – CAUTIONARY LANGUAGE

Certain statements made in this report and in other written or oral statements made by us or on our behalf are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements. Forward-looking statements may contain words like: “anticipate,” “believe,” “estimate,” “expect,” “project,” “shall,” “will” and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in our businesses, prospective services or products, future performance or financial results and the outcome of contingencies, such as legal proceedings. We claim the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.

Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those expressed in or implied by such forward-looking statements due to a variety of factors, including:

•Weak general economic and business conditions that may affect demand for our products, account balances, investment results, guaranteed benefit liabilities, premium levels and claims experience;

•Adverse global capital and credit market conditions that may affect our ability to raise capital, if necessary, and may cause us to realize impairments on investments and certain intangible assets, including goodwill and the valuation allowance against deferred tax assets, which may reduce future earnings and/or affect our financial condition;

•Legislative, regulatory or tax changes that affect: the cost of, or demand for, our products; the required amount of reserves and/or surplus; our ability to conduct business as well as restrictions on the payment of revenue sharing and 12b-1 distribution fees;

•Changes in tax law or the interpretation of or application of existing tax laws that could impact our tax costs and the products that we sell;

•The impact of regulations adopted by the SEC, the Department of Labor or other federal or state regulators or self-regulatory organizations that could adversely affect our distribution model and sales of our products and result in additional disclosure and other requirements related to the sale and delivery of our products;

•The impact of new and emerging rules, laws and regulations relating to privacy, cybersecurity and artificial intelligence that may lead to increased compliance costs, reputation risk and/or changes in business practices;

•Increasing scrutiny and evolving expectations and regulations regarding environmental, social and governance (“ESG”) matters that may adversely affect our reputation and our investment portfolio;

•Actions taken by reinsurers to raise rates on in-force business;

•Declines in or sustained low interest rates causing a reduction in investment income, the interest margins of our businesses and demand for our products;

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•Rapidly increasing or sustained high interest rates that may negatively affect our profitability, value of our investment portfolio and capital position and may cause policyholders to surrender annuity and life insurance policies, thereby causing realized investment losses;

•The impact of the implementation of the provisions of the European Market Infrastructure Regulation relating to the regulation of derivatives transactions;

•The initiation of legal or regulatory proceedings against us, and the outcome of any legal or regulatory proceedings, such as: adverse actions related to present or past business practices common in businesses in which we compete; adverse decisions in significant actions including, but not limited to, actions brought by federal and state authorities and class action cases; new decisions that result in changes in law; and unexpected trial court rulings;

•A decline or continued volatility in the equity markets causing a reduction in the sales of our products; a reduction of asset-based fees that we charge on various investment and insurance products; and an increase in liabilities related to guaranteed benefit riders, which are accounted for as market risk benefits (“MRBs”), of our variable annuity products;

•Ineffectiveness of our risk management policies and procedures;

•A deviation in actual experience regarding future policyholder behavior, mortality, morbidity, interest rates or equity market returns from the assumptions used in pricing our products and in establishing related insurance reserves, which may reduce future earnings;

•Changes in accounting principles that may affect our consolidated financial statements;

•Lowering of one or more of our financial strength ratings;

•Significant credit, accounting, fraud, corporate governance or other issues that may adversely affect the value of certain financial assets, as well as counterparties to which we are exposed to credit risk, requiring that we realize losses on financial assets;

•Interruption in telecommunication, information technology or other operational systems or failure to safeguard the confidentiality or privacy of sensitive data on such systems, including from cyberattacks or other breaches of our data security systems;

•The effect of acquisitions and divestitures, including the inability to realize the anticipated benefits of acquisitions and dispositions of businesses and potential operating difficulties and unforeseen liabilities relating thereto, as well as the effect of restructurings, product withdrawals and other unusual items;

•The inability to realize or sustain the benefits we expect from, greater than expected investments in, and the potential impact of efforts related to, our strategic initiatives;

•The adequacy and collectability of reinsurance that we have obtained;

•Pandemics, acts of terrorism, war or other man-made and natural catastrophes that may adversely impact liabilities for policyholder claims, affect our businesses and increase the cost and availability of reinsurance;

•Competitive conditions, including pricing pressures, new product offerings and the emergence of new competitors, that may affect the level of premiums and fees that we can charge for our products;

•The unknown effect on our businesses resulting from evolving market preferences and the changing demographics of our client base; and

•The unanticipated loss of key management or wholesalers.

The risks and uncertainties included here are not exhaustive. Our 2023 Form 10-K as well as other reports that we file with the SEC include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.

We do not intend, and are under no obligation, to update any particular forward-looking statement included in this document. See “Part I – Item 1A. Risk Factors” in our 2023 Form 10-K and “Part II – Item 1A. Risk Factors” herein for a discussion of certain risks relating to our business segments and products.

SUMMARY OF CRITICAL ACCOUNTING ESTIMATES

The MNA included in our 2023 Form 10-K contains a detailed discussion of our critical accounting estimates. The following information updates the “Summary of Critical Accounting Estimates” provided in our 2023 Form 10-K, and therefore, should be read in conjunction with that disclosure.

Investments

Investment Valuation

For more information about the valuation of our financial instruments carried at fair value, see “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Summary of Critical Accounting Estimates – Investments – Investment Valuation” in our 2023 Form 10-K and Note 12 herein.

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Derivatives

Derivatives are primarily used for hedging purposes. We hedge certain portions of our exposure to interest rate risk, foreign currency exchange risk, equity market risk, basis risk, commodity risk and credit risk by entering into derivative transactions. We also purchase and issue financial instruments that contain embedded derivative instruments. See “Policyholder Account Balances” below for information on embedded derivatives. Assessing the effectiveness of hedging and evaluating the carrying values of the related derivatives often involve a variety of assumptions and estimates

We carry our derivative instruments at fair value, which we determine through valuation techniques or models that use market data inputs or independent broker quotations. The fair values fluctuate from period to period due to the volatility of the valuation inputs, including but not limited to swap interest rates, interest and equity volatility and equity index levels, foreign currency forward and spot rates, credit spreads and correlations, some of which are significantly affected by economic conditions. The effect to revenue is reported in realized gain (loss) and such amount along with the associated federal income taxes is excluded from income (loss) from operations of our segments.

For more information on derivatives, see Note 1 in our 2023 Form 10-K and Note 5 herein. For more information on market exposures associated with our derivatives, including sensitivities, see “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our 2023 Form 10-K.

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.

Liability for Future Policy Benefits

Liability for future policy benefits (“LFPB”) represents the reserve amounts associated with non-participating traditional life insurance contracts and limited payment life-contingent annuity contracts that are calculated to meet the various policy and contract obligations as they mature. Establishing adequate reserves for our obligations to policyholders requires assumptions to be made that are intended to represent an estimation of experience for the period that policy benefits are payable. If actual experience is better than or equal to the assumptions, then reserves should be adequate to provide for future benefits and expenses. If experience is worse than the assumptions, additional reserves may be required. Significant assumptions include mortality rates, morbidity and policyholder behavior (e.g., persistency) and withdrawals. During the third quarter of each year, we conduct our comprehensive review of the actuarial assumptions to best estimate future premium and benefit cash flows (“cash flow assumptions”) and projection models used in estimating these liabilities and update these assumptions as needed (excluding the claims settlement expense assumption that is locked-in at inception) in the calculation of the net premium ratio. We may also update these assumptions in other quarters as we become aware of information that is indicative of the need for such an update. See “Annual Assumption Review” below for more information. In measuring our LFPB, we establish cohorts, which are groupings of long-duration contracts. On a quarterly basis, we retrospectively update the net premium ratio at the cohort level for actual experience. For all contract cohorts issued after January 1, 2021, interest is accrued on LFPB at the single-A interest rate on the contract cohort inception date. For contract cohorts issued prior to January 1, 2021, interest remains accruing at the original discount rate in effect on the contract cohort inception date due to the modified retrospective transition method. We also remeasure the LFPB using the single-A interest rate as of the end of each reporting period.

Liability for Future Claims

Future contract benefits include reserves for long-term life and disability claims associated with our Group Protection segment. These reserves use actuarial assumptions primarily based on claim termination rates, offsets for other insurance including social security and long-term disability incidence and severity assumptions. Such cash flow assumptions are subject to the comprehensive review process discussed above. We remeasure the liability for future claims using a single-A interest rate as of the end of each reporting period. See “Annual Assumption Review” below for more information.

Universal Life Insurance Products with Secondary Guarantees

We issue UL-type contracts where we provide a secondary guarantee to the policyholder. The policy can remain in force, even if the base policy account balance is zero, as long as contractual secondary guarantee requirements have been met. These guaranteed benefits require an additional liability that is calculated based on the application of a benefit ratio (calculated as 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). These secondary guarantees are reported within future contract benefits on the Consolidated Balance Sheets. The level and direction of the change in reserves will vary over time based on the emergence of the benefit ratio and the level of assessments associated with the contracts. Cash flow assumptions incorporated in a benefit ratio in measuring these additional liabilities for other insurance benefits include mortality rates, morbidity, policyholder behavior (e.g., persistency) and withdrawals based principally on generally

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accepted actuarial methods and assumptions. During the third quarter of each year, we conduct our comprehensive review of the cash flow assumptions and projection models used in estimating these liabilities and update these assumptions in the calculation of the benefit ratio. We may also update these assumptions in other quarters as we become aware of information that is indicative of the need for such an update. See “Annual Assumption Review” below for more information.

For additional information on future contract benefits, see Note 11.

Market Risk Benefits

MRBs are contracts or contract features that provide protection to the policyholder from other-than-nominal capital market risk and expose us to other-than-nominal capital market risk upon the occurrence of a specific event or circumstance, such as death, annuitization or periodic withdrawal. An MRB can be in either an asset or a liability position. Our MRB assets and MRB liabilities are reported at fair value separately on the Consolidated Balance Sheet.

We issue variable and fixed annuity contracts that may include various types of guaranteed living benefit (“GLB”) and guaranteed death benefit (“GDB”) riders that we have accounted for as MRBs. For contracts that contain multiple riders that qualify as MRBs, the MRBs are valued on a combined basis using an integrated model. We have entered into reinsurance agreements to cede certain GLB and GDB riders where the reinsurance agreements themselves are accounted for as MRBs or contain MRBs. We therefore record ceded MRB assets and ceded MRB liabilities associated with these reinsurance agreements. We report ceded MRBs associated with these reinsurance agreements in other assets or other liabilities on the Consolidated Balance Sheets.

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

MRBs are valued based on a stochastic projection of risk-neutral scenarios that incorporate a spread reflecting our non-performance risk. Ceded MRBs are valued based on a stochastic projection of risk-neutral scenarios that incorporate a spread reflecting our counterparties’ non-performance risk. The scenario assumptions, at each valuation date, are those we view to be appropriate for a hypothetical market participant and include assumptions for capital markets, lapse, benefit utilization, mortality, risk margin and administrative expenses. These assumptions are based on a combination of historical data and actuarial judgments. The assumption for our own non-performance risk and our counterparties’ non-performance risk for MRBs and ceded MRBs, respectively, are determined at each valuation date and reflect our risk and our counterparties’ risks of not fulfilling the obligations of the underlying liability. The spread for the non-performance risk is added to the discount rates used in determining the fair value from the net cash flows. 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. During the third quarter of each year, we conduct our comprehensive review of the assumptions used in calculating the fair value of these MRBs and update these assumptions on a prospective basis as needed. We may also update these assumptions in other quarters as we become aware of information that is indicative of the need for such an update. For information on fair value inputs, see Note 12. See “Annual Assumption Review” below for more information.

We cede a portion of these GLB and GDB features to Lincoln National Reinsurance Company (Barbados) Limited (“LNBAR”) on a modified coinsurance basis. The modified coinsurance arrangement includes a hedging strategy designed to mitigate selected risk to LNBAR. The hedge program focuses on generating sufficient income to fund future claims with a goal of maximizing distributable earnings and explicitly protecting capital. This hedging strategy utilizes options and total return swaps on U.S.-based equity indices, and futures on U.S.-based and international equity indices, as well as interest rate futures, interest rate swaps and currency futures.

As part of the hedge program, equity market and interest rate conditions are monitored on a daily basis. The hedge positions are rebalanced based upon changes in these factors as needed. While the hedge positions are actively managed, these positions may not completely offset changes in the fair value of the GLB and GDB riders caused by movements in these factors 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, interest rates and market-implied volatilities, realized market volatility, policyholder behavior, divergence between the performance of the underlying funds and the hedging indices, divergence between the actual and expected performance of the hedge instruments or ability to purchase hedging instruments at prices consistent with the desired risk and return trade-off.

The hedging results do not impact LNL due to the modified coinsurance arrangement with LNBAR, as LNL cedes these derivative results to LNBAR. For additional information on MRBs, see Note 8.

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Policyholder Account Balances

Policyholder account balances include the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability includes universal life insurance (“UL”) and variable universal life insurance (“VUL”) and investment-type annuity products where account balances are equal to deposits plus interest credited less withdrawals, surrender charges, asset-based fees and policyholder administration charges (collectively known as “policyholder assessments”), as well as amounts representing the fair value of embedded derivative instruments associated with our indexed universal life insurance (“IUL”) and indexed annuity products. During the third quarter of each year, we conduct our comprehensive review of the assumptions and projection models underlying our reserves and embedded derivatives and update assumptions as needed. We may also update these assumptions in other quarters as we become aware of information that is indicative of the need for such an update. See “Annual Assumption Review” below for more information.

Our indexed annuity and IUL contracts permit the holder to elect a fixed interest rate return or a return where interest credited to the contracts is linked to the performance of the S&P 500® Index or other indices. The value of the variable portion of the policyholder’s account balance varies with the performance of the underlying variable funds chosen by the policyholder. Policyholders may elect to rebalance among the various accounts within the product 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 different participation rates, caps, spreads or specified rates, subject to contractual guarantees. We purchase and sell index options that are highly correlated to the portfolio allocation decisions of our policyholders, such that we are economically hedged with respect to equity returns for the current reset period. The mark-to-market of the options held generally offsets the change in value of the embedded derivative within the contract, both of which are recorded as a component of realized gain (loss) on the Consolidated Statements of Comprehensive Income (Loss). The Derivatives and Hedging and the Fair Value Measurements and Disclosures Topics of the Financial Accounting Standards Board Accounting Standards CodificationTM require that we calculate fair values of index options we may purchase or sell in the future to hedge policyholder index allocations in future reset periods. These fair values represent an estimate of the cost of the options we will purchase or sell in the future, discounted back to the date of the balance sheet, using current market indicators of volatility and interest rates. Changes in the fair values of these liabilities are included as a component of realized gain (loss) on the Consolidated Statements of Comprehensive Income (Loss). For more information on indexed product derivative results, see Note 16.

For additional information on the liability for policyholder account balances, see Note 10.

Reinsurance Recoverables

Reinsurance recoverables are generally measured and recognized consistent with the assumptions and methodologies used to project the future performance of the underlying direct business as discussed in the “Future Contract Benefits” and “Policyholder Account Balances” sections above. During the third quarter of each year, we conduct our comprehensive review of the assumptions and projection models and update assumptions as needed. See “Annual Assumption Review” below for more information. In addition, we consider the potential impact of counterparty credit risks related to the reinsurance recoverable by estimating an allowance for credit losses using a probability of loss model approach to estimate expected credit losses for reinsurance recoverables. For additional information on our allowance for credit losses on reinsurance-related assets, see Note 8 in our 2023 Form 10-K.

Annual Assumption Review

During the third quarter of each year, we conduct our comprehensive review of the assumptions and projection models used in estimating MRBs, our reserves and embedded derivatives. For more information on our comprehensive review, see Note 1 in our 2023 Form 10-K. Details underlying the effect to net income (loss) from our annual assumption review (in millions) were as follows:

	For the Three Months Ended   September 30,
	2024		2023
Income (loss) from operations:
Annuities	$	1	$	(12)
Life Insurance	58		(119)
Group Protection	15		24
Retirement Plan Services	–		–
Excluded from income (loss) from operations	96		(47)
Net income (loss)	$	170	$	(154)

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The impacts of our annual assumption review were driven primarily by the following:

2024

•For Life Insurance, the favorable impact was driven by updates to mortality and capital market assumptions and other items, partially offset by unfavorable updates to policyholder behavior assumptions.

•For Group Protection, the favorable impact was driven by updates to life waiver incurred assumptions.

•For excluded from income (loss) from operations, the favorable impact, related to net annuity product features, was driven by model enhancements.

2023

•For Annuities, the unfavorable impact was driven by updates to mortality assumptions.

•For Life Insurance, the unfavorable impact was driven by updates to policyholder lapse behavior and mortality assumptions, partially offset by the favorable impact of a 50-basis-points increase in our long-term new money investment yield assumption.

•For Group Protection, the favorable impact was driven by updates to long-term disability and life waiver claim termination rate assumptions, partially offset by the unfavorable impact due to updates to long-term disability social security offset assumptions.

•For excluded from income (loss) from operations, the unfavorable impact, related to net annuity product features, was driven by updates to mortality and policyholder lapse behavior assumptions and other items, partially offset by a favorable impact from updates to volatility and policyholder GLB utilization behavior assumptions.

Goodwill

During the fourth quarter of 2024, we will perform our annual quantitative goodwill impairment test as of October 1, 2024, on all of our reporting units. For more information on goodwill, see “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Introduction – Summary of Critical Accounting Estimates – Goodwill and Other Intangible Assets” and Notes 1 and 9 in our 2023 Form 10-K.

Income Taxes

Management uses certain assumptions and estimates in determining the income taxes payable or refundable for the current year, the deferred income tax assets and liabilities for items recognized differently in its financial statements from amounts shown on its income tax returns and the federal income tax expense. Determining these amounts requires analysis and interpretation of current tax laws and regulations. Management exercises judgment in evaluating the amount and timing of recognition of the resulting income tax assets and liabilities. These judgments and estimates are re-evaluated on a continual basis as regulatory and business factors change. Legislative changes to the Internal Revenue Code of 1986, as amended, modifications or new regulations, administrative rulings, or court decisions could increase or decrease our effective tax rate.

The application of GAAP requires us to evaluate the recoverability of our deferred tax assets and establish a valuation allowance, if necessary, to reduce our deferred tax asset to an amount that is more likely than not to be realizable. 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 existing temporary differences; the length of time carryovers can be utilized; and any future prudent and feasible tax planning strategies.

As of September 30, 2024, we had a $960 million deferred tax asset related to net unrealized losses on fixed maturity available-for-sale (“AFS”) securities. In the assessment of the future realizability of this deferred tax asset, management concluded that its tax planning strategy to hold these securities to recovery was prudent and feasible as these unrealized losses were caused by factors other than credit loss, and we have the intent and ability to hold these securities to recovery and collect all of the contractual cash flows.

Although realization is not assured, management believes it is more likely than not that the deferred tax assets, will be realized.

For risks related to establishing a valuation allowance against our deferred tax assets, see “Part I – Item 1A. Risk Factors – Assumptions and Estimates – We may be required to recognize an impairment of our goodwill or to establish a valuation allowance against our deferred tax assets” in our 2023 Form 10-K.

For additional information on income taxes, see “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Introduction – Summary of Critical Accounting Estimates – Income Taxes” in our 2023 Form 10-K and Note 17 herein.

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RESULTS OF CONSOLIDATED OPERATIONS

Details underlying the consolidated results (in millions) were as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023 (1)			2024		2023 (1)
Net Income (Loss)
Income (loss) from operations:
Annuities	$	227	$	190		$	702	$	626
Life Insurance	133		(152)			160		(152)
Group Protection	62		67			271		246
Retirement Plan Services	41		39			110		120
Other Operations	(38)		(66)			(152)		(191)
Net annuity product features, pre-tax	(347)		1,203			1,066		1,536
Net life insurance product features, pre-tax (2)	(132)		248			(277)		390
Credit loss-related adjustments, pre-tax	(88)		(25)			(123)		(50)
Investment gains (losses), pre-tax (3)	(57)		(1,091)			(317)		(4,228)
Changes in the fair value of reinsurance-related
embedded derivatives, trading securities and
certain mortgage loans, pre-tax (4)	(416)		190			(326)		251
GLB rider fees ceded to LNBAR, pre-tax	(242)		(227)			(703)		(694)
Gains (losses) on other non-financial assets - sale of
subsidiaries/businesses, pre-tax (5)	–		–			481		–
Other items, pre-tax (6) (7) (8) (9)	(19)		(10)			(113)		(23)
Income tax benefit (expense) related to the
above pre-tax items	276		(51)			39		600
Net income (loss)	$	(600)	$	315		$	818	$	(1,569)

(1)    The prior period presentation has been recast to conform to the revised definition of income (loss) from operations. See Note 15 for additional information.

(2)    Includes $162 million and $580 million for the three and nine months ended September 30, 2023, respectively, related to the fourth quarter 2023 reinsurance transaction. For more information, see Note 7.

(3)    The three and nine months ended September 30, 2023, include impairments of certain fixed maturity AFS securities in an unrealized loss position, resulting from the Company’s intent to sell these securities as part of the fourth quarter 2023 reinsurance transaction. See Notes 3 and 7 for additional information.

(4)    Includes primarily changes in the fair value of embedded derivatives related to affiliate reinsurance transactions. For more information, see Note 7.

(5)    For information on the sale of the wealth management business, see Note 1.

(6)    Includes certain legal accruals of $(10) million in the third quarter of 2023 and $(3) million in the first quarter of 2024.

(7)    Includes severance expense related to initiatives that realign the workforce of $(3) million, $(3) million, $(49) million, $(7) million and $(16) million in the first quarter of 2023, second quarter of 2023, first quarter of 2024, second quarter of 2024 and third quarter of 2024, respectively.

(8)    Includes transaction and integration costs related to mergers, acquisitions and divestitures of $(9) million, $(1) million, $(10) million, $(16) million and $(2) million for the second quarter of 2023, third quarter of 2023, first quarter of 2024, second quarter of 2024 and third quarter of 2024, respectively.

(9)    Includes deferred compensation mark-to-market adjustment of $7 million, $(5) million, $1 million, $(9) million and $(1) million in the first quarter of 2023, second quarter of 2023, third quarter of 2023, first quarter of 2024 and third quarter of 2024, respectively.

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Comparison of the Three Months Ended September 30, 2024 to 2023

Net income decreased due primarily to the following:

•Loss in net annuity product features in 2024 compared to gain in 2023, driven by unfavorable changes in interest rates in 2024 compared to favorable changes in 2023, partially offset by favorable changes in equity markets in 2024 compared to unfavorable changes in 2023, driving MRB-related impacts.

•Unfavorable changes in the fair value of reinsurance-related embedded derivatives, trading securities and certain mortgage loans in 2024 compared to favorable changes in 2023, driven by changes in the fair value of reinsurance-related embedded derivatives due primarily to the second quarter 2024 reinsurance transaction and the impact of capital markets.

•Loss in net life insurance product features in 2024 compared to gain in 2023 driven by mark-to-market losses on hedges associated with VUL products and less favorable benefit ratio impacts as a result of the fourth quarter 2023 reinsurance transaction.

•Higher credit loss-related adjustments on mortgage loans on real estate and fixed maturity AFS securities.

The decrease in net income was partially offset by the following:

•Lower investment losses driven by intent to sell impairment in 2023 on fixed maturity AFS securities as part of the fourth quarter 2023 reinsurance transaction.

•Favorable impact from our annual assumption review in 2024 compared to unfavorable impact in 2023.

•Growth in average account balances.

Comparison of the Nine Months Ended September 30, 2024 to 2023

Net income increased due primarily to the following:

•Lower investment losses driven by intent to sell impairment in 2023 on fixed maturity AFS securities as part of the fourth quarter 2023 reinsurance transaction.

•Gain on other non-financial assets due to the sale of the wealth management business in the second quarter of 2024.

•Favorable impact from our annual assumption review in 2024 compared to unfavorable impact in 2023.

•Growth in average account balances.

The increase in net income was partially offset by the following:

•Loss in net life insurance product features in 2024 compared to gain in 2023 driven by less favorable benefit ratio impacts as a result of the fourth quarter 2023 reinsurance transaction and mark-to-market losses on hedges associated with VUL products.

•Lower gain in net annuity product features driven by less favorable changes in interest rates, partially offset by more favorable changes in equity markets, driving MRB-related impacts.

•Unfavorable changes in the fair value of reinsurance-related embedded derivatives, trading securities and certain mortgage loans in 2024 compared to favorable changes in 2023, driven by changes in the fair value of reinsurance-related embedded derivatives due primarily to the second quarter 2024 reinsurance transaction and the impact of capital markets.

•Higher credit loss-related adjustments on mortgage loans on real estate and fixed maturity AFS securities.

See “Summary of Critical Accounting Estimates – Annual Assumption Review” above for information on the impacts from our annual assumption review.

We provide information about our segments’ and Other Operations’ operating revenue and expense line items, key drivers of changes and historical details underlying the line items below. For factors that could cause actual results to differ materially from those set forth, see “Forward-Looking Statements – Cautionary Language” above, “Part I – Item 1A. Risk Factors” in our 2023 Form 10-K and “Part II – Item 1A. Risk Factors” in our Second Quarter 2024 Form 10-Q.

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RESULTS OF ANNUITIES

Details underlying the results for Annuities (in millions) were as follows:

	For the Three Months Ended   September 30,				For the Nine Months Ended September 30,
	2024		2023			2024		2023
Operating Revenues
Insurance premiums (1)	$	38	$	24		$	98	$	116
Fee income	548		512			1,620		1,508
Net investment income	493		472			1,434		1,351
Other revenues (2)	22		87			269		261
Total operating revenues	1,101		1,095			3,421		3,236
Operating Expenses
Benefits (1)	37		43			102		175
Interest credited	400		331			1,130		915
Policyholder liability remeasurement (gain) loss	(1)		19			1		17
Commissions and other expenses	399		493			1,351		1,449
Total operating expenses	835		886			2,584		2,556
Income (loss) from operations before taxes	266		209			837		680
Federal income tax expense (benefit)	39		19			135		54
Income (loss) from operations	$	227	$	190		$	702	$	626

(1) Insurance premiums include primarily our income annuities that have a corresponding offset in benefits. Benefits include primarily changes in income annuity reserves driven by insurance premiums.

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

Comparison of the Three and Nine Months Ended September 30, 2024 to 2023

Income from operations for this segment increased due primarily to the following:

•Higher fee income driven by higher average daily variable account balances.

•Lower policyholder liability remeasurement loss driven by the impact from our annual assumption review.

The increase in income from operations was partially offset by the following:

•Lower net investment income, net of interest credited, which more than offset impacts from higher average fixed account balances and improving portfolio yields from the current interest rate environment. The lower net investment income, net of interest credited, was experienced in certain reinsured portfolios that have a corresponding increase in other revenues and decrease in benefits.

•Higher commissions and other expenses, net of broker-dealer expenses, driven by higher trail commissions resulting from higher average daily variable account balances.

The increase in income from operations for the nine months ended September 30, 2024, was also partially offset by higher federal income tax expense due to the separate account dividends-received deduction in the first quarter of 2024.

See “Summary of Critical Accounting Estimates – Annual Assumption Review” above for information on the impacts from our annual assumption review.

Additional Information

Effective June 30, 2024, we entered into a reinsurance agreement with Lincoln Pinehurst Reinsurance Company (Bermuda) Limited (“LPINE”), a wholly owned subsidiary of LNC, to reinsure liabilities under certain blocks of in-force fixed annuities. See Note 7 for more information.

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New deposits are an important component of net flows and key to our efforts to grow our business. Although deposits do not significantly affect current period income from operations, they can significantly impact future income from operations.

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

Our fixed annuities and registered index-linked annuities have discretionary fixed and indexed crediting rates that reset on an annual or periodic basis and may be subject to surrender charges. Our ability to retain these annuities will be subject to current competitive conditions at the time crediting rates for these products reset. We expect to manage the effects of spreads on near-term income from operations through portfolio management and, to a lesser extent, crediting rate actions, which assumes no significant changes in net flows or other changes that may cause interest rate spreads to differ from our expectations. For information on interest rate spreads and interest rate risk, see “Part I – Item 1A. Risk Factors – Market Conditions – Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease, impacting our profitability, and make it more challenging to meet certain statutory requirements,” “Part I – Item 1A. Risk Factors – Market Conditions – Increases in interest rates may negatively affect our profitability, capital position and the value of our investment portfolio and may also result in increased contract withdrawals” and “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk” in our 2023 Form 10-K.

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RESULTS OF LIFE INSURANCE

Details underlying the results for Life Insurance (in millions) were as follows:

	For the Three Months Ended   September 30,				For the Nine Months Ended September 30,
	2024		2023			2024		2023
Operating Revenues
Insurance premiums (1)	$	250	$	239		$	863	$	697
Fee income	494		729			1,506		2,236
Net investment income	453		652			1,272		1,964
Other revenues	52		7			107		23
Total operating revenues	1,249		1,627			3,748		4,920
Operating Expenses
Benefits	579		1,026			1,959		3,090
Interest credited	229		321			677		965
Policyholder liability remeasurement (gain) loss	(29)		180			46		181
Commissions and other expenses	308		301			881		899
Total operating expenses	1,087		1,828			3,563		5,135
Income (loss) from operations before taxes	162		(201)			185		(215)
Federal income tax expense (benefit)	29		(49)			25		(63)
Income (loss) from operations	$	133	$	(152)		$	160	$	(152)

(1)    Includes term insurance premiums, which have a corresponding partial offset in benefits for changes in reserves.

Comparison of the Three and Nine Months Ended September 30, 2024 to 2023

Income from operations for this segment increased due primarily to the following:

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

•Higher other revenues driven by the run-rate impact of the fourth quarter 2023 reinsurance transaction.

The increase in income from operations was partially offset by the following:

•Lower fee income driven by the run-rate impact of the fourth quarter 2023 reinsurance transaction.

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

Additionally, for the nine months ended September 30, 2024, the increase in income from operations was driven by lower commissions and other expenses driven by expense management.

For more information on the fourth quarter 2023 reinsurance transaction, see “Additional Information” below.

See “Summary of Critical Accounting Estimates – Annual Assumption Review” above for information on the impacts from our annual assumption review.

Additional Information

Effective October 1, 2023, we entered into reinsurance agreements with Fortitude Reinsurance Company Ltd. and LNBAR to reinsure liabilities under certain blocks of in-force UL with secondary guarantees (“ULSG”) and MoneyGuard®. We expect an ongoing unfavorable impact to operating results in future quarters of approximately $20 million to $25 million per quarter as a result of this reinsurance transaction. See Note 7 for more information on the transaction, which improved our capital position and is expected to be accretive to ongoing free cash flow.

Generally, we experience higher mortality in the first quarter of the year due to the seasonality of claims.

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Generally, we have higher sales during the second half of the year with the fourth quarter being our strongest.

For information on interest rate spreads and interest rate risk, see “Part I – Item 1A. Risk Factors – Market Conditions – Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease, impacting our profitability, and make it more challenging to meet certain statutory requirements,” “Part I – Item 1A. Risk Factors – Market Conditions – Increases in interest rates may negatively affect our profitability, capital position and the value of our investment portfolio and may also result in increased contract withdrawals” and “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk” in our 2023 Form 10-K.

RESULTS OF GROUP PROTECTION

Details underlying the results for Group Protection (in millions) were as follows:

	For the Three Months Ended   September 30,				For the Nine Months Ended September 30,
	2024		2023			2024		2023
Operating Revenues
Insurance premiums	$	1,270	$	1,251		$	(639)	$	3,765
Net investment income	80		83			253		252
Other revenues (1)	3		53			113		157
Total operating revenues	1,353		1,387			(273)		4,174
Operating Expenses
Benefits	954		979			(1,475)		3,036
Interest credited	1		1			3		4
Policyholder liability remeasurement (gain) loss	(31)		(39)			(222)		(260)
Commissions and other expenses	350		361			1,078		1,083
Total operating expenses	1,274		1,302			(616)		3,863
Income (loss) from operations before taxes	79		85			343		311
Federal income tax expense (benefit)	17		18			72		65
Income (loss) from operations	$	62	$	67		$	271	$	246

(1) Consists of revenue from third parties for administrative services performed, which has a corresponding partial offset in commissions and other expenses, and the ceded net investment income related to the second quarter 2024 reinsurance transaction. For more information on the reinsurance transaction, see “Additional Information” below.

Comparison of the Three Months Ended September 30, 2024 to 2023

Income from operations for this segment decreased due primarily to lower other revenues driven by the net settlement related to the second quarter 2024 reinsurance transaction.

The decrease in income from operations was partially offset by the following:

•Higher insurance premiums due to growth in business in force, partially offset by the reduction in insurance premiums due to the second quarter 2024 reinsurance transaction.

•Lower benefits, net of policyholder liability remeasurement gain, due to the second quarter 2024 reinsurance transaction and lower incidence in our life business, partially offset by the impact from our annual assumption review.

•Lower commissions and other expenses due to the second quarter 2024 reinsurance transaction, partially offset by higher incentive compensation as a result of production performance.

Comparison of the Nine Months Ended September 30, 2024 to 2023

Income from operations for this segment increased due primarily to:

•Lower benefits, net of policyholder liability remeasurement gain, due to the second quarter 2024 reinsurance transaction, partially offset by growth in business in force and the impact from our annual assumption review.

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•Lower commissions and other expenses due to the second quarter 2024 reinsurance transaction, partially offset by higher incentive compensation as a result of production performance.

The increase in income from operations was partially offset by the following:

•Lower insurance premiums due to the second quarter 2024 reinsurance transaction, partially offset by growth in business force.

•Lower other revenues due to the net settlement related to the second quarter 2024 reinsurance transaction.

See “Summary of Critical Accounting Estimates – Annual Assumption Review” above for information on the impacts from our annual assumption review.

Additional Information

Effective June 30, 2024, we entered into a reinsurance agreement with LPINE to reinsure liabilities under certain blocks of in-force group protection products. Insurance premiums and benefits for the nine months ended September 30, 2024, reflect day one impacts of $4.5 billion attributable to the reinsurance agreement that had no income (loss) from operations effect. See Note 7 for more information.

Our total loss ratio for the three and nine months ended September 30, 2024, not including the day one impact of the second quarter 2024 reinsurance agreement discussed above, was 72.8% and 72.6%, respectively, compared to 75.2% and 73.8%, for the corresponding periods in 2023.

For information about the effect of the loss ratio sensitivity on our income (loss) from operations, see “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Results of Group Protection – Additional Information” in our 2023 Form 10-K.

Generally, we experience higher mortality in the first quarter of the year and higher disability claims in the fourth quarter of the year due to the seasonality of claims.

For information on the effects of current interest rates on our long-term disability claim reserves, see “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk – Effect of Interest Rate Sensitivity” in our 2023 Form 10-K.

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RESULTS OF RETIREMENT PLAN SERVICES

Details underlying the results for Retirement Plan Services (in millions) were as follows:

	For the Three Months Ended   September 30,				For the Nine Months Ended September 30,
	2024		2023			2024		2023
Operating Revenues
Fee income	$	72	$	64		$	211	$	190
Net investment income	251		247			736		754
Other revenues (1)	8		10			24		28
Total operating revenues	331		321			971		972
Operating Expenses
Interest credited	170		165			505		501
Commissions and other expenses	116		111			343		330
Total operating expenses	286		276			848		831
Income (loss) from operations before taxes	45		45			123		141
Federal income tax expense (benefit)	4		6			13		21
Income (loss) from operations	$	41	$	39		$	110	$	120

(1) Consists primarily of mutual fund account program revenues from mid to large employers.

Comparison of the Three Months Ended September 30, 2024 to 2023

Income from operations for this segment increased due primarily to the following:

•Higher fee income driven by higher average daily variable account balances.

•Lower federal income tax expense due to favorable tax return true-ups.

The increase in income from operations was partially offset by the following:

•Higher commissions and other expenses driven by higher trail commissions resulting from higher average daily variable account balances.

•Lower net investment income, net of interest credited, driven by an increase in crediting rates.

Comparison of the Nine Months Ended September 30, 2024 to 2023

Income from operations for this segment decreased due primarily to the following:

•Lower net investment income, net of interest credited, driven by lower average fixed account balances and an increase in crediting rates.

•Higher commissions and other expenses driven by higher trail commissions resulting from higher average daily variable account balances.

The decrease in income from operations was partially offset by higher fee income driven by higher average daily variable account balances.

Additional Information

Net flows in this business fluctuate based on the timing of larger plans being implemented and terminating over the course of the year.

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

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Our net flows are negatively affected by the continued net outflows from our oldest blocks of annuities business, which are among our higher margin product lines in this segment, due to the fact that they are mature blocks with low distribution and servicing costs. The proportion of these products to our total account balances was 13% and 16% as of September 30, 2024 and 2023, respectively. Due to this overall shift in business mix toward products with lower returns, new deposit production continues to be necessary to maintain earnings at current levels.

Our fixed annuity business includes products with discretionary and index-based crediting rates that are reset on either a quarterly or semi-annual basis. Our ability to retain quarterly or semi-annual reset annuities will be subject to current competitive conditions at the time crediting rates for these products reset. We expect to manage the effects of spreads on near-term income from operations through portfolio management and, to a lesser extent, crediting rate actions, which assumes no significant changes in net flows into or out of our fixed accounts or other changes that may cause interest rate spreads to differ from our expectations. For information on interest rate spreads and interest rate risk, see “Part I – Item 1A. Risk Factors – Market Conditions – Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease, impacting our profitability, and make it more challenging to meet certain statutory requirements,” “Part I – Item 1A. Risk Factors – Market Conditions – Increases in interest rates may negatively affect our profitability, capital position and the value of our investment portfolio and may also result in increased contract withdrawals” and “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk” in our 2023 Form 10-K.

RESULTS OF OTHER OPERATIONS

Details underlying the results for Other Operations (in millions) were as follows:

	For the Three Months Ended   September 30,				For the Nine Months Ended September 30,
	2024		2023 (1)		2024		2023 (1)
Operating Revenues
Insurance premiums (2)	$	–	$	–	$	–	$	3
Net investment income (3)	29		30		65		83
Other revenues (4)	26		2		49		20
Total operating revenues	55		32		114		106
Operating Expenses
Benefits	3		16		3		53
Interest credited	8		9		26		27
Policyholder liability remeasurement (gain) loss	–		(5)		–		(3)
Other expenses	47		49		130		130
Interest and debt expense	46		49		142		142
Total operating expenses	104		118		301		349
Income (loss) from operations before taxes	(49)		(86)		(187)		(243)
Federal income tax expense (benefit)	(11)		(20)		(35)		(52)
Income (loss) from operations	$	(38)	$	(66)	$	(152)	$	(191)

(1)    Prior period amounts have been recast to conform to our revised definition of income (loss) from operations. See Note 15 for additional information.

(2)    Includes our disability income business, which has a corresponding offset in benefits for changes in reserves.

(3)    Includes our institutional pension business, which has a corresponding offset in premiums and benefits for changes in reserves.

(4)    Includes certain third-party advisory fees, which has a partial offset in other expenses.

Comparison of the Three Months Ended September 30, 2024 to 2023

Loss from operations for Other Operations decreased due primarily to higher other revenues due to the effect of market fluctuations on assets held as part of certain compensation plans, which increased during the three months ended September 30, 2024, compared to a decrease during the corresponding period in 2023.

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Comparison of the Nine Months Ended September 30, 2024 to 2023

Loss from operations for Other Operations decreased due primarily to higher other revenues due to the effect of market fluctuations on assets held as part of certain compensation plans, which increased during the nine months ended September 30, 2024, compared to a less significant increase during the corresponding period in 2023.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Liquidity refers to our ability to generate adequate amounts of cash from our normal operations to meet cash requirements with a prudent margin of safety. Capital refers to our long-term financial resources to support the operations of our businesses, to fund long-term growth strategies and to support our operations during adverse conditions. Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of our businesses, general economic conditions and access to the capital markets and other sources of liquidity and capital as described below. When considering our liquidity, it is important to distinguish between our needs, the needs of Lincoln Life & Annuity Company of New York (“LLANY”) and the needs of the holding company, LNC. As a holding company with no operations of its own, LNC derives its cash primarily from its operating subsidiaries. Disruptions, uncertainty or volatility in the capital and credit markets may materially affect our business operations and results of operations and may adversely affect our or LLANY’s capital position.

Reductions to our or LLANY’s capital position may cause us to retain more capital, which may pressure our ability to receive dividends from LLANY or pay dividends to LNC, which may lead us to take steps to preserve or raise additional capital. We believe we and LLANY have appropriate capital to operate our business in accordance with our strategy.

For factors that could cause actual results to differ materially from those set forth in this section and that could affect our expectations for liquidity and capital, see “Forward-Looking Statements – Cautionary Language” above, “Part I – Item 1A. Risk Factors” in our 2023 Form 10-K and “Part II – Item 1A. Risk Factors” in our Second Quarter 2024 Form 10-Q.

Sources and Uses of Liquidity and Capital

Our primary sources of liquidity and capital are insurance premiums and fees, investment income, maturities and sales of investments, issuance of debt or other types of securities and policyholder deposits. We also have access to alternative sources of liquidity as discussed below. Our primary uses are to pay policy claims and benefits, to fund commissions and other general operating expenses, to purchase investments, to fund policy surrenders and withdrawals, to pay dividends to LNC and to repay debt. Our operating activities provided (used) cash of $(1.8) billion and $271 million for the nine months ended September 30, 2024 and 2023, respectively. We paid cash dividends to LNC of $125 million and $320 million during the three and nine months ended September 30, 2024, respectively, compared to $105 million and $365 million for the corresponding periods in 2023. During the second quarter of 2024, we made a $929 million extraordinary dividend in the form of investments to LNC. We also received dividends from our subsidiaries of $102 million and $358 million during the three and nine months ended September 30, 2024, respectively, compared to $76 million and $341 million for the corresponding periods in 2023.

Statutory Capital and Surplus

We must maintain certain regulatory capital levels. We utilize the RBC ratio as a primary measure of our capital adequacy. The RBC ratio is an important factor in the determination of our financial strength ratings, and a reduction in our or LLANY’s surplus will affect our RBC ratios and dividend-paying capacity. For additional information on RBC ratios, see “Part I – Item 1. Business – Regulatory – Insurance Regulation – Risk-Based Capital” in our 2023 Form 10-K.

Our regulatory capital levels are affected by statutory accounting rules, which are subject to change by each applicable insurance regulator. For instance, our term products and UL products containing secondary guarantees subject to the NAIC RBC framework require reserves calculated pursuant to the Valuation of Life Insurance Policies Model Regulation (“XXX”) and Actuarial Guideline XXXVIII (“AG38”), respectively. We employ strategies to reduce the strain caused by XXX and AG38 by reinsuring the business to reinsurance captives or reinsurance subsidiaries. Our captive reinsurance subsidiaries and LNBAR provide a mechanism for financing a portion of the excess reserve amounts in a more efficient manner and free up capital we can use for any number of purposes, including paying dividends to LNC. We use long-dated letters of credit (“LOCs”) and debt financing as well as other financing strategies to finance those reserves. For information on the LOCs, see the credit facilities table in Note 14 in our 2023 Form 10-K. Our captive reinsurance subsidiaries and LNBAR have also issued long-term notes to finance a portion of the excess reserves. For information on long-term notes issued by our captive reinsurance subsidiaries, see Note 5 in our 2023 Form 10-K. We have also used the proceeds from certain senior notes issued by LNC to execute long-term structured solutions primarily supporting reinsurance of UL products containing secondary guarantees.

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Statutory reserves and RBC requirements for variable annuity guaranteed benefit riders and guaranteed benefits on VUL policies are sensitive to changes in the equity markets and interest rates and are affected by the level of account balances relative to the level of any guarantees, product design and reinsurance arrangements. As a result, the relationship between reserve changes and equity market performance is non-linear during any given reporting period. We cede a portion of the variable annuity guaranteed benefit riders to LNBAR through a modified coinsurance agreement. The variable annuity hedge program mitigates the risk to LNBAR from guaranteed benefit riders and continues to focus on generating sufficient income to fund future claims with a goal of maximizing distributable earnings and explicitly protecting capital. We also use a partial hedge that mitigates potential capital volatility from guaranteed benefits on VUL policies. Market conditions greatly influence the ultimate capital required due to its effect on the valuation of reserves and supporting derivatives.

Changes in equity markets may also affect our capital position. We may decide to reallocate available capital among us and our insurance and captive reinsurance subsidiaries, which would result in different RBC ratios for us. In addition, changes in the equity markets can affect the value of our variable annuity and VUL separate accounts. When the market value of our separate account assets increases, the statutory surplus within us and LLANY also increases. Contrarily, when the market value of our separate account assets decreases, the statutory surplus within us and LLANY may also decrease, which will affect RBC ratios, and in the case of our separate account assets becoming less than the related product liabilities, we must allocate additional capital to fund the difference.

Effective June 20, 2024, we entered into a coinsurance with funds withheld reinsurance agreement with LPINE. For more information, see Note 7.

On May 6, 2024, LNC closed the previously announced sale of all of the ownership interests in the subsidiaries of LNC that comprised its wealth management business, including our subsidiary Lincoln Financial Advisors Corporation, to Osaic Holdings, Inc. For more information on the sale of the wealth management business, see Note 1.

Debt

For information about our short-term and long-term debt and our credit facilities, see Note 14 in our 2023 Form 10-K.

Alternative Sources of Liquidity

Inter-Company Cash Management Program

To promote effective short-term cash management strategies, we participate in an inter-company cash management program between LNC and its participating subsidiaries under which each entity can lend to or borrow from the holding company to meet short-term borrowing needs. As of September 30, 2024, we had a net receivable balance of $2.1 billion due from certain affiliates in the inter-company cash management program. Loans under the cash management program are permitted under applicable insurance laws subject to certain restrictions. LNL, domiciled in Indiana, is currently subject to a borrowing and lending limit of 3% of the insurance company’s admitted assets as of its most recent year end. For our New York-domiciled insurance subsidiary, it may borrow from LNC less than 2% of its admitted assets as of its most recent year end but may not lend any amounts to LNC.

Federal Home Loan Bank

LNL is a member of the Federal Home Loan Bank (“FHLB”) of Indianapolis (“FHLBI”). Membership allows LNL access to the FHLBI’s financial services, including the ability to obtain loans and to issue funding agreements as an alternative source of liquidity that are collateralized by qualifying mortgage-related assets, agency securities or U.S. Treasury securities. Borrowings under this facility are subject to the FHLBI’s discretion and require the availability of qualifying assets at LNL. As of September 30, 2024, LNL had an estimated maximum borrowing capacity of $7.0 billion under the FHLBI facility and maximum available borrowing based on qualifying assets of $5.0 billion. As of September 30, 2024, LNL had outstanding borrowings of $3.2 billion under this facility reported within payables for collateral on investments on the Consolidated Balance Sheets. LLANY is a member of the Federal Home Loan Bank of New York (“FHLBNY”) with an estimated maximum borrowing capacity of $750 million. Borrowings under this facility are subject to the FHLBNY’s discretion and require the availability of qualifying assets at LLANY. As of September 30, 2024, LLANY had no outstanding borrowings under this facility. For additional information, see “Payables for Collateral on Investments” in Note 3.

Repurchase Agreements and Securities Lending Programs

We and LNBAR had access to $2.75 billion of committed repurchase facilities, of which $25 million was utilized as of September 30, 2024. LNL and LLANY, by virtue of their general account fixed-income investment holdings, can also access liquidity through securities lending programs. As of September 30, 2024, we had securities pledged under securities lending agreements with a carrying value of $185 million. The cash received in our securities lending programs is typically invested in cash and invested cash or fixed maturity AFS securities. For additional information, see “Payables for Collateral on Investments” in Note 3.

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Collateral on Derivative Contracts

Our cash flows associated with collateral received from counterparties (when we are in a net collateral payable position) and posted with counterparties (when we are in a net collateral receivable position) change as the market value of the underlying derivative contract changes. The net collateral position depends on changes in interest rates and equity markets related to the amount of the exposures hedged. As of September 30, 2024, we were in a net collateral payable position of $7.1 billion compared to $4.9 billion as of December 31, 2023. In the event of adverse changes in fair value of our derivative instruments, we may need to return collateral to counterparties or post collateral to counterparties. If we do not have sufficient high quality securities or cash to provide as collateral to counterparties, we have alternative sources of liquidity. In addition to the liquidity from repurchase agreements and FHLB facilities discussed above, we also have a $500 million liquidity facility that is contingent upon interest rates and the five-year revolving credit facility discussed in Note 14 in our 2023 Form 10-K. Alternative liquidity sources include uncommitted repurchase agreements and selling highly liquid assets in the general account. For additional information, see “Credit Risk” in Note 5.

Ratings

Financial Strength Ratings

See “Part I – Item 1. Business – Financial Strength Ratings” in our 2023 Form 10-K for information on our financial strength ratings.

If our current financial strength ratings were downgraded in the future, terms in our derivative agreements and/or certain repurchase agreements may be triggered, which could negatively affect overall liquidity. For the majority of our derivative counterparties, there is a termination event if our financial strength ratings drop below BBB-/Baa3 (S&P Global Ratings (“S&P”)/Moody’s Investor Service (“Moody’s”)). For certain repurchase agreements, there is a termination event if the long-term credit ratings of LNC drop below BBB-/Baa3 (S&P/Moody’s) or our financial strength ratings drop below BBB+/Baa1 (S&P/Moody’s). In addition, contractual selling agreements with intermediaries could be negatively affected, which could have an adverse effect on overall sales of annuities, life insurance and investment products.

See “Part I – Item 1A. Risk Factors – Covenants and Ratings – A downgrade in our financial strength ratings could limit our ability to market products, increase the number or value of policies being surrendered and/or hurt our relationships with creditors” in our 2023 Form 10-K for more information.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We analyze and manage the risks arising from market exposures of financial instruments, as well as other risks, in an integrated asset-liability management process that considers diversification. We have exposures to several market risks including interest rate risk, equity market risk, credit risk and, to a lesser extent, foreign currency exchange risk. For information on these market risks, see “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our 2023 Form 10-K.

Item 4. Controls and Procedures

Conclusions Regarding Disclosure Controls and Procedures

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including our President (the principal executive officer) and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period required by this report, we, under the supervision and with the participation of our President and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act).

Based on that evaluation, our President and Chief Financial Officer have concluded that our disclosure controls and procedures are not effective, based solely on the material weakness described below, in timely alerting them to material information relating to us and our consolidated subsidiaries required to be disclosed in our periodic reports under the Exchange Act.

Existence of Material Weakness

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In the course of preparing our financial statements for the interim period ended June 30, 2024, management identified a material weakness in our internal controls over financial reporting related to the design of the Company’s controls over the calculation of amounts pertaining to certain affiliate reinsurance treaties. Specifically, controls were not designed to review the accuracy of

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system code changes and to ensure the data used to record ceded premiums and claims for certain affiliate reinsurance treaties was complete, accurate, and in accordance with the contractual terms of the treaties. The material weakness in our internal controls over financial reporting did not result in a material misstatement to the Company’s previously issued consolidated financial statements but did result in immaterial out-of-period adjustments to ceded premiums and claims for the interim period ended September 30, 2024. Affiliate transactions eliminate in consolidation for purposes of reporting and disclosure for our Parent Company, LNC, and therefore, this control assessment is not applicable to and has no effect on LNC’s consolidated financial statements.

Because of this material weakness, management concluded that the Company did not maintain effective internal control over financial reporting as of September 30, 2024.

Remediation Plan

Since identifying the material weakness related to management’s controls over the calculation of amounts related to certain affiliate reinsurance treaties, management has taken the following steps towards remediating the material weakness:

•The establishment of a control to ensure code changes implemented to calculate affiliate reinsurance amounts are operating as intended and utilizing complete and accurate data.

•The formation of a reinsurance governance function under which retrospective reviews of affiliate reinsurance deals will be performed and reviewed on an ongoing basis to ensure actual results are in line with deal model expectations.

The effectiveness of the Company’s internal control over financial reporting as of September 30, 2024, has not been audited by an independent public accounting firm as it is not required by the Securities and Exchange Act of 1934.

Changes in Internal Control Over Financial Reporting

Except as noted above with the respect to the identification and implementation of remediating controls with respect to the material weakness, there was no change in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

A control system, no matter how well designed and operated, can provide only reasonable assurance that the control system’s objectives will be met. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Reference is made to the lawsuits captioned Glover v. Connecticut General Life Insurance Company and The Lincoln National Life Insurance Company, TVPX ARS INC., as Securities Intermediary for Consolidated Wealth Management, LTD. v. The Lincoln National Life Insurance Company and Vida Longevity Fund, LP v. Lincoln Life & Annuity Company of New York, each of which was previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”) and our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2024 and the quarter ended June 30, 2024 (“Second Quarter 2024 Form 10-Q”). On September 4, 2024, the court granted preliminary approval of the provisional settlement, which is still subject to final approval.

Reference is made to Lincoln National Life Insurance Company v. Township of Radnor, previously disclosed in our Second Quarter 2024 Form 10-Q. The trial of this matter began in October 2024 and is scheduled to continue in November 2024.

See Note 13 in “Part I – Item 1. Financial Statements” for further discussion regarding these matters and other contingencies.

Item 1A. Risk Factors

In addition to the factors set forth in “Part I – Item 2. Management’s Narrative Analysis of the Results of Operations – Forward-Looking Statements – Cautionary Language,” you should carefully consider the risks described under “Part I – Item 1A. Risk Factors” in our 2023 Form 10-K and “Part II – Item 1A. Risk Factors” in our Second Quarter 2024 Form 10-Q. Such risks and uncertainties are not the only ones facing our Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of these risks actually occur, our business, financial condition and results of operations could be materially affected.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 5. Other Information

Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements

All of the Company’s common stock is held by Lincoln National Corporation. As such, during the three months ended September 30, 2024, none of our directors or officers (as defined in Exchange Act Rule 16a-1(f)) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

Item 6. Exhibits

The Exhibits included in this report are listed in the Exhibit Index beginning on page 89, which is incorporated herein by reference.

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THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

Exhibit Index for the Report on Form 10-Q

For the Quarter Ended September 30, 2024

31.1	Certification of the President pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the President pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Dated: November 7, 2024	By:	/s/ Adam Cohen
		Adam Cohen Senior Vice President, Chief Accounting Officer and Treasurer (Authorized Signatory and Principal Accounting Officer)

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