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FOR IMMEDIATE RELEASE
OLDWICK - FEBRUARY 14, 2019 03:11 PM (EST)
AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of The Lincoln National Life Insurance Company and its wholly owned subsidiary, Lincoln Life & Annuity Company of New York (Syracuse, NY), which are the key life/health insurance subsidiaries of Lincoln National Corporation (LNC) (headquartered in Radnor, PA) [NYSE: LNC] and are marketed as Lincoln Financial Group (Lincoln). Additionally, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” of Lincoln’s affiliates, Liberty Life Assurance Company of Boston (Dover, NH) (LLAC) and First Penn-Pacific Life Insurance Company (FPP). Concurrently, AM Best has affirmed the Long-Term ICR of “a-” and all existing Long- and Short-Term Issue Credit Ratings (Long-Term IR; Short-Term IR) of LNC. The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Fort Wayne, IN, unless otherwise specified. (Please see below for a detailed listing of the Long- and Short-Term IRs).
The ratings reflect Lincoln’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM). Lincoln maintains leading market positions in its core product lines, and is well-diversified by product type, source of earnings and distribution channels. The company has consistently reported favorable premium trends and strong statutory and GAAP earnings, which support growth in capital and risk-adjusted capitalization. However, AM Best’s view of the quality of capital is somewhat diminished due to the utilization of captives and external reinsurance for its XXX and AXX reserves. Additionally, capital growth has been constrained by dividends to the holding company, used for shareholder dividends and share buyback programs. Financial and operating leverage metrics are within guidelines for the current rating at the operating entities and the holding company with strong interest coverage and LNC maintains a high cash balance to support ongoing interest needs.
The ratings of LLAC reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, limited business profile and appropriate ERM. As part of its earlier acquisition, LLAC entered into reinsurance agreements to cede all insurance reserves to Lincoln National Life and a non-affiliated reinsurer, limiting its business profile to be a marketing entity for Lincoln’s large case group life and accident and health business. The ratings also reflect a capital maintenance guarantee from Lincoln to support LLAC’s capital above regulatory minimums.
The ratings of FPP reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and very strong ERM. The ratings also reflect the financial strength of its parent organization and its integration into Lincoln’s management and risk management functions. However, the company has been placed in runoff and maintains a large proportion of reserves related to interest-sensitive products with high guaranteed minimum crediting rates.
The following Long-Term IRs have been affirmed with a stable outlook:
Lincoln National Corporation—
— “a-” on $300 million 6.25% senior unsecured notes, due 2020
— “a-” on $300 million 4.85% senior unsecured notes, due 2021
— “a-” on $300 million 4.20% senior unsecured notes, due 2022
— “a-” on $500 million 4.099% senior unsecured notes, due 2023
— “a-” on $300 million 3.35% senior unsecured notes, due 2025
— “a-” on $400 million 3.625% senior unsecured notes, due 2026
— “a-” on $500 million 3.8% senior unsecured notes, due 2028
— “a-” on $500 million 6.15% senior unsecured notes, due 2036
— “a-” on $375 million 6.30% senior unsecured notes, due 2037
— “a-” on $500 million 7.00% senior unsecured notes, due 2040
— “a-” on $450 million 4.35% senior unsecured notes, due 2048
— “bbb” on $800 million 7.00% junior subordinated capital securities, due 2066
— “bbb” on $500 million 6.05% junior subordinated capital securities, due 2067
The following Short-Term IR has been affirmed:
Lincoln National Corporation—
— AMB-1 on commercial paper
The following indicative Long-Term IRs on securities available under a universal shelf registration have been affirmed with a stable outlook:
Lincoln National Corporation—
— “a-” on senior unsecured debt
— “bbb+” on subordinated debt
— “bbb” on junior subordinated debt
— “bbb” on preferred stock
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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