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Lincoln National - Life Insurance -
Category Main Page
(215) 448-1400
1500 Market Street, Suite 3900
Philadelphia, PA 19102
www.lfg.com
Sales
$5.3
billion
Business Description
Lincoln National Corporation (“LNC”) is a holding company, which operates
multiple insurance and investment management businesses through subsidiary
companies. The collective group of companies uses “Lincoln Financial Group”
as its marketing identity. Based on assets, LNC is the 44th largest U.S.
Corporation and based on revenues, is the 8th largest U.S. stockholder-owned
company within the Fortune 500 Life Insurance /Health Insurance Industry
Ranking.
LNC’s operations are divided into four business segments: 1) Lincoln
Retirement, 2) Life Insurance, 3) Investment Management and 4) Lincoln UK.
Over the past five years, segments have been redefined as follows. During
the first quarter of 2000, an internal reorganization resulted in the
creation of a separate Lincoln Retirement segment and a separate Life
Insurance segment.
Life
Insurance
The Life Insurance segment, with principal operations in Hartford,
Connecticut, and Fort Wayne, Indiana, and additional operations in
Schaumburg, Illinois, focuses on the creation and protection of wealth for
its clients through the manufacture of life insurance products. The Life
Insurance segment offers both single and survivorship versions of universal
life (“UL”), variable universal life (“VUL”), and interest-sensitive whole
life (“ISWL”), as well as corporate owned life insurance (“COLI”) and term
insurance. The segment also offers a linked-benefit product which is a
universal life insurance policy linked with an accelerated benefits rider
that provides a benefit for long-term care needs. The life insurance
operation targets the affluent market, defined as households with at least
$500,000 of investable net worth. Two key measures of the effectiveness of
meeting the needs of this market include average face amount of policies
sold, which for LNC was $1.1 million for the year ended December 31, 2003,
and average premiums paid per policy sold, which were approximately $28,000
for the same period (products included in this calculation are UL, VUL, ISWL
and COLI cases covering less than 200 lives).
The Life Insurance segment’s book of business includes
interest/market-sensitive products (UL, VUL, ISWL, COLI) and traditional
life products (term and guaranteed cost whole life). Profitability is driven
by mortality margins (defined below), investment margins (spreads/fees),
expenses and surrender fees.
Mortality margins represent the difference between amounts charged the
customer to cover the mortality risk and the cost of reinsurance and death
benefits paid. Mortality charges are either specifically deducted from the
contractholder’s fund (i.e., cost of insurance assessments or “COI’s”) or
embedded in the premiums charged to the customer. In either case, these
amounts are a function of the rates priced into the product and level of
insurance in-force (less reserves previously set aside to fund benefits).
Insurance in-force, in turn, is driven by sales, persistency and mortality
experience.
Similar to the annuity product classifications described above, life
products can be classified as “fixed” and “variable” contracts. This
classification describes whether the policyholder or LNC bears the
investment risk of the assets supporting the policy. This also determines
the manner in which LNC earns investment margin profits from these products,
either as investment spreads for fixed products or as fees charged for
variable products.
Fixed Life Insurance (primarily UL and ISWL): Premiums net of expense loads
and charges received on fixed products are invested in LNC’s general account
investment portfolio, so LNC bears the risk on investment performance. LNC
manages investment margins (i.e. the difference between the rate the
portfolio earns compared to the rate that is credited to the customer) by
seeking to maximize current yields, in line with asset/liability and risk
management targets, while crediting a competitive rate to the customer.
Crediting rates are typically subject to guaranteed minimums specified in
the underlying life insurance contract.
Variable Universal Life Insurance (VUL): Premiums net of expense loads and
charges received on VUL products are invested in separate accounts that
offer several investment options for the customer’s selection. The
investment choices are the same, in most cases, as the investment choices
offered in LNC’s variable annuity contracts. In addition, VUL products offer
a fixed account option that is managed by LNC. Investment risk is borne by
the customer on all but the fixed account option. LNC charges fees for
mortality costs and administrative expenses, as well as investment
management fees.
Corporate Owned Life Insurance (COLI): COLI is typically purchased by
corporations funding non-qualified benefit plans. These include 401(k)
excess - voluntary deferrals of executive salary and/or bonus in excess of
401(k) limits and Supplemental Executive Retirement Plans (SERP’s) in a
variety of forms, paid for with corporate funds. LNC offers a portfolio of
both fixed UL and variable UL COLI products sold primarily through specialty
brokers.
Term Life Insurance: Term life insurance provides a death benefit without a
cash accumulation balance. Policy premiums are generally paid annually.
Distribution
Distribution of the Life Insurance segment’s products occurs primarily
through LFD and LFA. Both channels have an industry-wide reputation of being
highly skilled in the development of financial and estate planning solutions
for the affluent market.
Market Position
LNC is a leading provider of life insurance products designed specifically
for the high net-worth and affluent markets. In addition to the growth
opportunity offered by its target market, LNC’s product breadth, design
innovation, competitiveness, speed to market, exceptional customer service
and an extensive distribution network all contribute to the strength of
LNC’s life insurance operations. Averaging close to nine major product
ticker: LNC
Life Insurance Companies in the Directory
Genworth
Jefferson Pilot
Kansas City Life Insurance
Company
Lincoln National
Manulife
Metlife
National
Western Life Insurance
Nationwide Financial Services
Presidential
Life
Protective Life
Prudential
Reinsurance Group of America
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