LINCOLN NATIONAL LIFE INSURANCE CO /IN/ – 10-Q – Management's Narrative Analysis of the Results of Operations

Management's narrative analysis ("MNA") of the results of operations for the
three and nine months ended September 30, 2021, compared with the corresponding
periods in 2020 of The Lincoln National Life Insurance Company ("LNL") and its
consolidated subsidiaries should be read in conjunction with our consolidated
financial statements and the accompanying notes to the consolidated financial
statements ("Notes") presented in "Part I - Item 1. Financial Statements," our
Form 10-K for the year ended December 31, 2020 ("2020 Form 10-K") and other
reports filed with the Securities and Exchange Commission ("SEC"). 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").

See "Part I - Item 1. Business" and Note 1 in our 2020 Form 10-K 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.

Management's narrative analysis 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.

                FORWARD-LOOKING STATEMENTS - CAUTIONARY LANGUAGE

This Quarterly Report on Form 10-Q, including "Risk Factors" and "Management's
Narrative Analysis of the Results of Operations," contains "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:

?The continuation of the COVID-19 pandemic, or future outbreaks of COVID-19, and
uncertainty surrounding the length and severity of future impacts on the global
economy and on our business, results of operations and financial condition;

?Further deterioration in general economic and business conditions that may
affect account values, investment results 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;

?Legislative, regulatory or tax changes that affect: the cost of, or demand for,
our products; our ability to conduct business;

?The impact of U.S. federal tax reform legislation on our business, earnings and
capital;

?The impact of Regulation Best Interest or other regulations adopted by the SEC,
the Department of Labor or other federal or state regulators or self-regulatory
organizations relating to the standard of care owed by investment advisers
and/or broker-dealers that could affect our distribution model;

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

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

?Rapidly increasing interest rates causing contract holders to surrender life
insurance and annuity policies, thereby causing realized investment losses, and
reduced hedge performance related to variable annuities;

?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 features of our variable annuity products;

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?Changes in our assumptions related to deferred acquisition costs ("DAC") or
value of business acquired ("VOBA");

?Ineffectiveness of our risk management policies and procedures;

?A deviation in actual experience regarding future persistency, mortality,
morbidity, interest rates or equity market returns from the assumptions used in
pricing our products;

?Changes in accounting principles that may affect our business, results of
operations and financial condition;

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

?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 adequacy and collectability of reinsurance that we have obtained;

?Future pandemics, acts of terrorism, war or other man-made and natural
catastrophes that may adversely affect our businesses and 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, financial planners or wholesalers.

The risks and uncertainties included here are not exhaustive. Our most recent
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 "Risk Factors" included
in "Part I - Item 1A. Risk Factors" in our 2020 Form 10-K for a discussion of
certain risks relating to our business.

                                  INTRODUCTION

COVID-19 Pandemic

The health, economic and business conditions precipitated by the worldwide
COVID-19 pandemic that emerged in 2020 continue to adversely affect our
business, results of operations and financial condition. The COVID-19 pandemic
led to an extreme downturn in and volatility of the capital markets in the early
part of 2020, record-low interest rates and wide-ranging changes in consumer
behavior, including as a result of quarantines, shelter-in-place orders and
limitations on business activity. Although vaccinations are under way,
hospitalization rates remain elevated in populations with lower vaccination
rates due to COVID-19 variants. While states have eased restrictions and the
capital markets have recovered, it is unclear when the economy will operate
under normal conditions. Because the economic and regulatory environment
continues to react and evolve, we cannot predict the full impact of the pandemic
and ensuing conditions on our business and financial condition.

We continue to monitor vaccination rates and U.S. CDC reports related to
COVID-19 and the potential impacts of the COVID-19 pandemic in our Life
Insurance and Group Protection segments. We expect elevated mortality in the
fourth quarter of 2021 in our Life Insurance and Group Protection segments as a
result of the impacts of the COVID-19 pandemic.

Because the profitability of some of our business depends in part on interest
rates, changes in interest rates may impact both our margins and our return on
invested capital. In response to the economic impact of the COVID-19 pandemic,
the Federal Reserve cut interest rates to near zero in March 2020 and has
announced its intention to keep interest rates near zero in the near term. We
expect the continuation of the low interest rate environment to continue to
adversely affect the interest margins of our businesses. We continue to be
proactive in our investment strategies, product designs, crediting rate
strategies, expense management actions and overall asset-liability practices to
mitigate the risk of unfavorable consequences in this low interest rate
environment. For risks related to sustained low interest rates, 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, and changes in interest rates may also result in
increased contract withdrawals" in our 2020 Form 10-K.

The economic environment has continued to improve from the early part of 2020
and economic restrictions have eased, but there could be ongoing weakness if
there is a resurgence of COVID-19 cases that could cause renewed restrictions on
economic activity. This could impact select corporate industries and parts of
the commercial mortgage loan market, which could lead to increased credit
defaults and/or negative ratings migrations within our broader investment
portfolio. We continue to closely monitor developments relating to the COVID-19
pandemic.

For more information on the risks related to the COVID-19 pandemic, see "Part I
- Item 1A. Risk Factors - Market Conditions - The impacts of the COVID-19
pandemic have adversely affected and are expected to continue to adversely
affect our business and results of operations, and the future impacts of the
COVID-19 pandemic on the company's business, results of operations and financial
condition remain uncertain" in our 2020 Form 10-K.

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Spark Initiative

In the fourth quarter of 2021, LNC formally communicated its new expense savings
initiative, the Spark Initiative, focused on driving efficiencies throughout all
aspects of its business from leveraging automation to simplifying and improving
process efficiency. In addition, this program will target benefits beyond cost
savings including improving the way we work by focusing on reskilling and
upskilling our valuable employee base.

                   Critical Accounting Policies and Estimates

The MNA included in our 2020 Form 10-K contains a detailed discussion of our
critical accounting policies and estimates. The following information updates
the "Critical Accounting Policies and Estimates" provided in our 2020 Form 10-K,
and therefore, should be read in conjunction with that disclosure.

DAC, VOBA, Deferred Sales Inducements ("DSI") and Deferred Front-End Loads
("DFEL")

Unlocking

As stated in "Part II - Item 7. Management's Narrative Analysis of the Results
of Operations - Critical Accounting Policies and Estimates - Unlocking" in our
2020 Form 10-K, we conduct our annual comprehensive review of the assumptions
and projection models underlying the amortization of DAC, VOBA, DSI, DFEL,
embedded derivatives and reserves for life insurance and annuity products in the
third quarter of each year. As a result of this review, we recorded unlocking
that resulted in increases and decreases to the carrying values of these items.
See "DAC, VOBA, DSI and DFEL" in Note 1 of our 2020 Form 10-K for a detailed
discussion of our unlocking process.

Details underlying the effect to net income (loss) from our unlocking as a
result of our annual comprehensive review (in millions) were as follows:

                                 For the Three
                                 Months Ended
                                 September 30,
                                2021       2020
Income (loss) from operations:
Annuities                      $    18    $  (10 )
Retirement Plan Services             -        (3 )
Life Insurance                     (51 )    (426 )
Excluded realized gain (loss)      (11 )      21
Net income (loss)              $   (44 )  $ (418 )

Unlocking was driven primarily by the following:

2021

?For Annuities, favorable unlocking was driven by updates to expense and
policyholder behavior assumptions, partially offset by unfavorable updates to
interest rate assumptions.

?For Life Insurance, unfavorable unlocking was driven by updates to policyholder
behavior and interest rate assumptions, partially offset by favorable updates to
investment allocation assumptions.

?For excluded realized gain (loss), unfavorable unlocking was driven by updates
to policyholder behavior assumptions, partially offset by favorable updates to
other items.

2020

As part of our annual comprehensive review in the third quarter of 2021, we
updated our interest rate assumptions. These updates included lowering starting
new money rates to reflect the current interest rate environment and reducing
our long-term new money investment yield assumption by 50 basis points,
resulting in an ultimate long-term assumption of 3.0% for a 10-year U.S.
Treasury. As a result of these updates, we recorded unfavorable after-tax
unlocking of $351 million for Life Insurance, $46 million for Annuities and $7
million for Retirement Plan Services.

?For Annuities, unfavorable unlocking was driven by updates to interest rate
assumptions, partially offset by favorable updates to policyholder behavior
assumptions and other items.

?For Retirement Plan Services, unfavorable unlocking was driven by updates to
interest rate assumptions, partially offset by favorable updates to expense
assumptions and other items.

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?For Life Insurance, unfavorable unlocking was driven by updates to interest
rate and policyholder behavior assumptions.

?For excluded realized gain (loss), favorable unlocking was driven by updates to
reserves for fixed and indexed annuities, partially offset by unfavorable
updates to policyholder behavior assumptions.

Reversion to the Mean

As variable fund returns do not move in a systematic manner, we reset the
baseline of account values from which EGPs are projected, which we refer to as
our reversion to the mean ("RTM") process, as discussed in our 2020 Form 10-K.

If we had unlocked our RTM assumption as of September 30, 2021, we would have
recorded favorable unlocking of approximately $440 million, pre-tax, primarily
within our Annuities segment.

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 - Critical Accounting Policies and Estimates - Investments
- Investment Valuation" in our 2020 Form 10-K and Note 14 herein.

Derivatives

Our accounting policies for derivatives and the potential effect on interest
spreads in a falling rate environment are discussed in "Part II - Item 7A.
Quantitative and Qualitative Disclosures About Market Risk" in our 2020 Form
10-K and Note 5 herein.

                         Acquisitions and Dispositions

For information about acquisitions and dispositions, see Note 3 in our 2020 Form
10-K.

?

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