Ratings agency A.M. Best has reaffirmed the credit and financial strength ratings (:FSR) of Lincoln National Corp. (LNC) and its subsidiaries, while retaining a stable outlook over all.

A.M. Best asserted its issuer credit ratings (:ICR) of “aa-” and FSR of “A+” for the major life and health subsidiaries of Lincoln National – The Lincoln National Life Insurance Co. (:LNL) and Lincoln Life & Annuity Co. of New York (:LLANY).

The ratings agency also maintained an ICR of “a-” on the holding company’s long-term debt. Additionally, it asserted the ICR and FSR of Lincoln’s separate subsidiary – First Penn-Pacific Life Insurance Co. – at “a+” and “A”, respectively.

Ratings Validation

Lincoln National’s diversified product portfolio along with prudent risk management and ability to a large extent to overcome the low interest rate environment has been commended by A.M. Best. This was reflected in the company’s improved top line in the first nine months of 2014, which was fuelled by growth in premiums, fees, investment income, realized gains and others.

A leading market position, superior brand value within its core operations, and disciplined claims management have also scaled up Lincoln National’s underwriting capacities and operating leverage.

Moreover, portfolio alterations that now offer universal life policies with secondary guarantees, along with reduction in variable annuity sales with living benefit riders and interest rate risk, and divestment of non-core assets are driving Lincoln National toward favorable operating trends. An expected re-pricing within the Group Protection segment should further boost premiums over the next two years.

Furthermore, Lincoln National’s risk-adjusted capital remains secure with boosted liquidity and lowered debt from 2013-end level. With operating cash flow of $1.09 billion (up 117% from the year-ago level) and with a near-term debt maturity of only $250 million in Jun 2015, the company enjoys a flexible capital position. We believe these factors will continue to enhance shareholder value.

Zacks Rank

Currently, Lincoln National carries a Zacks Rank #2 (Buy). Other insurers holding the same rank are American International Group Inc. (AIG), Protective Life Corporation (PL) and StanCorp Financial Group Inc. (SFG).

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