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Segment Information | 9 Months Ended
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Sep. 30, 2024
Segment Reporting [Abstract] |
Segment Information | 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”); •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; •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 | $ | 1,195 |  |  | $ | 1,197 |  |  | $ | 3,673 |  |  | $ | 3,528 |
Life Insurance | 1,589 |  |  | 1,723 |  |  | 4,640 |  |  | 5,241 |
Group Protection | 1,432 |  |  | 1,388 |  |  | 4,299 |  |  | 4,176 |
Retirement Plan Services | 335 |  |  | 327 |  |  | 984 |  |  | 988 |
Other Operations | 52 |  |  | 38 |  |  | 118 |  |  | 127 |
Revenue adjustments from annuity and |  |  |  |  |  |  |
life insurance product features | 149 |  |  | (14) |  |  | (325) |  |  | (1,908) |
Credit loss-related adjustments | (88) |  |  | (27) |  |  | (124) |  |  | (53) |
Investment gains (losses) (1) | (105) |  |  | (400) |  |  | (416) |  |  | (1,126) |
Changes in the fair value of reinsurance-related embedded |  |  |  |  |  |  |
derivatives, trading securities and certain mortgage loans (2) | (446) |  |  | (29) |  |  | (51) |  |  | (27) |
Gains (losses) on other non-financial assets – sale of |  |  |  |  |  |  |
subsidiaries/businesses (3) | (2) |  |  | – |  |  | 582 |  |  | – |
Total revenues | $ | 4,111 |  |  | $ | 4,203 |  |  | $ | 13,380 |  |  | $ | 10,946 |
| For the Three Months Ended September 30, |  | For the Nine Months Ended September 30, |  |
| 2024 |  | 2023 (4) |  | 2024 |  | 2023 (4) |  |  |  |  |
Net Income (Loss) |  |  |  |  |  |  |  |  |  |  |  |
Income (loss) from operations: |  |  |  |  |  |  |  |  |  |  |  |
Annuities | $ | 301 |  |  | $ | 248 |  |  | $ | 857 |  |  | $ | 794 |  |  |  |  |  |
Life Insurance | 22 |  |  | (173) |  |  | (48) |  |  | (153) |  |  |  |  |  |
Group Protection | 109 |  |  | 68 |  |  | 318 |  |  | 247 |  |  |  |  |  |
Retirement Plan Services | 44 |  |  | 43 |  |  | 120 |  |  | 133 |  |  |  |  |  |
Other Operations | (84) |  |  | (102) |  |  | (276) |  |  | (293) |  |  |  |  |  |
Net annuity product features, pre-tax | (381) |  |  | 1,322 |  |  | 1,319 |  |  | 1,076 |  |  |  |  |  |
Net life insurance product features, pre-tax | (125) |  |  | 108 |  |  | (253) |  |  | (168) |  |  |  |  |  |
Credit loss-related adjustments, pre-tax | (88) |  |  | (27) |  |  | (124) |  |  | (53) |  |  |  |  |  |
Investment gains (losses), pre-tax (1) | (105) |  |  | (400) |  |  | (416) |  |  | (1,126) |  |  |  |  |  |
Changes in the fair value of reinsurance-related |  |  |  |  |  |  |  |  |  |  |  |
embedded derivatives, trading securities and |  |  |  |  |  |  |  |  |  |  |  |
certain mortgage loans, pre-tax (2) | (446) |  |  | (29) |  |  | (51) |  |  | (27) |  |  |  |  |  |
Gains (losses) on other non-financial assets – sale of |  |  |  |  |  |  |  |  |  |  |  |
subsidiaries/businesses, pre-tax (3) | (2) |  |  | – |  |  | 582 |  |  | – |  |  |  |  |  |
Other items, pre-tax (5) (6) (7) (8) | (19) |  |  | (12) |  |  | (238) |  |  | (23) |  |  |  |  |  |
Income tax benefit (expense) related to the |  |  |  |  |  |  |  |  |  |  |  |
above pre-tax items | 246 |  |  | (193) |  |  | (202) |  |  | 76 |  |  |  |  |  |
Net income (loss) | $ | (528) |  |  | $ | 853 |  |  | $ | 1,588 |  |  | $ | 483 |  |  |  |  |  |
(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. See Notes 3 and 7 for additional information. (2) Includes primarily changes in the fair value of the embedded derivative related to the fourth quarter 2023 reinsurance transaction. For more information, see Note 7. (3) For information on the sale of our wealth management business, including the statutory capital benefit, see Note 1. (4) The prior period presentation has been recast to conform to the revised definition of income (loss) from operations. (5) Includes certain legal accruals of $(12) million in the third quarter of 2023 and $(114) million primarily related to the settlement of cost of insurance litigation in the first quarter of 2024. (6) 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. (7) Includes transaction and integration costs related to mergers, acquisitions and divestitures of $(9) million, $(1) million, $(10) million, $(27) 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. (8) Includes deferred compensation mark-to-market adjustment of $12 million, $(8) million, $1 million, $(13) million, $1 million and $(1) million in the first quarter of 2023, second quarter of 2023, third quarter of 2023, first quarter of 2024, second quarter of 2024 and third quarter of 2024, respectively. Other segment information (in millions) was as follows:
| As of September 30, |  | As of December 31,
| 2024 |  | 2023
Assets |  |  |
Annuities | $ | 202,827 |  |  | $ | 185,599 |
Life Insurance | 115,397 |  |  | 108,932 |
Group Protection | 9,216 |  |  | 9,714 |
Retirement Plan Services | 49,533 |  |  | 46,793 |
Other Operations | 19,867 |  |  | 21,375 |
Total assets | $ | 396,840 |  |  | $ | 372,413 |

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