SEC Company Response from LINCOLN NATIONAL LIFE INSURANCE — Jan 30, 2020
LINCOLN NATIONAL LIFE INSURANCE CO /IN/ (CIK 0000726865)
Date: Jan. 30, 2020 · CIK: 0000726865 · Accession: 0000726865-20-000038
AI Filing Summary & Sentiment
File numbers found in text: 333-231487
Letter
Division of Investment Management Securities and Exchange Commission Washington, DC 20549-8629 Re: The Lincoln National Life Insurance Company Post-Effective Amendment No. 1 File No. 333-231487
Dear Mr. Zapata:
This letter is in response to your voicemail of January 29, 2020 where you requested that we include in the supplement language explaining that participation rates may vary based on market conditions. Similar language will be added to the underlying prospectus.
We intend to file another post-effective amendment on February 6, and that filing will include a request to accelerate the effective date to February 7. Please call me at 860-466-1222 with any questions or additional comments.
Sincerely,
Scott C. Durocher
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Law Department
The Lincoln National Life Insurance Company
350 Church Street
Hartford, CT 06103
Scott C. Durocher
Assistant Vice President
and Senior Counsel
Phone: 860-466-1222
Scott.Durocher@LFG.com
VIA Email & EDGAR
January 30, 2020
Alberto Zapata
Senior Counsel
Disclosure Review and Accounting Office
Division of Investment Management
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-8629
Re: The Lincoln National Life Insurance Company
Post-Effective Amendment No. 1
File No. 333-231487
Dear Mr. Zapata:
This letter is in response to your voicemail of January 29, 2020 where you requested that we include in the supplement language explaining that participation
rates may vary based on market conditions. Similar language will be added to the underlying prospectus.
We intend to file another post-effective amendment on February 6, and that filing will include a request to accelerate the effective date to
February 7. Please call me at 860-466-1222 with any questions or additional comments.
Sincerely,
Scott C. Durocher
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Lincoln Life Variable Annuity Account N
Lincoln Level Advantage®
B-Share Indexed Variable Annuity
Lincoln Level Advantage®
Advisory Indexed Variable Annuity
Lincoln
Level Advantage® Design B-Share Indexed Variable Annuity
Lincoln Level Advantage® Design Advisory Indexed Variable Annuity
Supplement dated February 7, 2020
This supplement to your Lincoln
Level Advantage® Indexed Variable Annuity prospectus describes the addition of new investment options. It is for informational purposes and requires no action on your part. All other provisions in your prospectus remain
unchanged.
OVERVIEW
Two new Indexed Accounts will be available on new contracts beginning February 18, 2020 (April 6, 2020
for existing contracts). These accounts will each offer a 3-year Indexed Term, a 10% Protection Level, and a participation crediting strategy. The 3-Year Indexed Accounts with Participation Rates do not have Annual Locks. If
the Performance Rate of the index you select is positive, your Indexed Segment will be credited with a percentage of that positive performance based on the Participation Rate for the Indexed Segment. The Participation Rate is declared at the
beginning of the Indexed Term. The Participation Rate will not change during the Indexed Term, but we may declare a different Participation Rate, which can be higher or lower depending on market conditions , for subsequent terms.
DESCRIPTION OF CHANGES
The following Indexed Accounts are available:
3-Year Indexed Accounts with Participation Rate
•
S&P 500 Participation, 10% Protection
•
Capital Strength Net Fee IndexSM Participation, 10% Protection
As a result, the following discussion describes changes that are incorporated into
the specified sections of your prospectus.
Special
Terms – The following changes are made to the Special Terms section:
The following term is added:
Participation Rate –The
Participation Rate used to determine the Performance Rate for an Indexed Segment at the end of an Indexed Term for any positive index performance. A different Participation Rate may be declared for each Indexed Segment and for each Death Benefit
type.
The following term is revised:
Performance Rate – A rate of
return for an Indexed Segment based on the performance of an Index over a period of time adjusted for the Protection Level, and subject to either the Performance Cap or Participation Rate depending on the Indexed Segment.
Risk
Factors – In addition to those Risk Factors outlined in Risks of Investing in the Indexed Accounts section, the following potential risks are associated with Indexed Accounts with Participation and are added to the Risks of Investing in the Indexed Accounts section.
1.
Gains in your Indexed Segment are limited by any applicable Participation Rate. If the Participation Rate is less than 100%, the
increase in your Segment Value will never reflect the entire corresponding rise in the applicable Index over the Indexed Term. The Participation Rate exists for the full term of
the Indexed Segment. The Participation Rate may be lower for contracts with the Guarantee of Principal Death Benefit. Participation Rates for new Segments will be declared 5 business days in advance of the beginning of a Segment.
2.
The available Indexed Accounts with applicable Participation Rates and Protection Levels will vary over time. Before investing in
a new Indexed Segment, you should determine exactly what Indexed Account, Participation Rates, and Protection Levels are available to you. There is no guarantee that an Indexed Account will be available in the future. The Participation
Rate for a new Segment may be lower than the current Rate. You risk the possibility that a declared Participation Rate may be lower than you would find acceptable, so you should make sure the Segment you select is appropriate for your
investment goals.
3.
If we do not receive investment instructions from you by the end of an Indexed Term, we will invest your Segment Maturity Value in
a new Indexed Segment with the same term, Index, and Protection Level, if available. The Participation Rate in effect at the time for new Indexed Segments will apply. If the same type of Indexed Segment is not available, your Segment
Maturity Value will be moved to the LVIP PIMCO Low Duration Bond Fund. If your Contract Value has been invested in a new Segment and you wish to withdraw your investment, the Contract Value for that Segment will equal the Interim Value.
The following information is added to the Investments of the Indexed Accounts
section:
The following is added to the list of available Indexed Accounts:
3-Year Indexed Accounts
•
S&P 500 Participation, 10% Protection
•
Capital Strength Net Fee IndexSM Participation, 10% Protection
Indexed
Term – Indexed Terms of 3 years are available for the new Indexed Accounts with Participation Rate. If you choose to allocate your Purchase Payments to Indexed Accounts, all Indexed Segments of the Indexed Accounts to which you allocate
Purchase Payments, including future Segments, must begin on the same Indexed Anniversary Date. The Indexed Anniversary Date is the yearly anniversary of the Start Date of your initial allocation to an Indexed Account. For example, if you select a
3-Year Indexed Account, two years later, you may start a Segment of a 1-Year Indexed Account, as long as the 1-Year Segment begins on the Indexed Anniversary Date for your contract. If you have more than one Segment of a 3-Year Indexed Account in
effect at any time, these Segments must have the same Start Date and End Date.
Participation
Rates – The Participation Rate represents the proportion of the index performance that is reflected in the value of the Indexed Segment. The Participation Rate may be equal to, or greater or less than 100, and may vary depending on the
Death Benefit option, the Index, and the Protection Level you select. The Participation Rate will not change during the Indexed Term.
The initial Participation Rate applies to the initial Indexed Term. Indexed Segments with a Guarantee
of Principal Death Benefit may have lower Participation Rates than Indexed Segments with the Account Value Death Benefit. The Company will declare, at its discretion, a Participation Rate for each subsequent Indexed Term.
Depending on market conditions, s ubsequent Participation Rates may be higher or lower than the
initial Participation Rate. Subsequent Participation Rates may differ from the Participation Rate used for new contracts or for other contracts issued at different times. The Company will determine new Participation Rates on a basis that does not
discriminate unfairly within any class of contracts.
Indexed
Segments with Participation and Without Annual Locks – The Performance Rate is the percentage change in the Index Value from the Start Date to the End date, adjusted by the Protection Level and Participation Rate. The Performance Rate can
be positive, negative, or zero. The percentage change in the Index Value is calculated by subtracting the Index Value on the Start Date from the Index Value on the End Date. The difference is divided by the Index Value on the Start Date. The daily
Index Value is posted on the index’s website. If an Index Value is not published for a particular day, we will use the Index Value at the close of the next Valuation Date the index is published.
If the percentage change of the Index Value from the Start Date to the End Date is positive, then the
Performance Rate equals the Participation Rate multiplied by the Performance Rate. If the percentage change is negative but is absorbed by the Protection Level percentage, the Performance Rate equals zero. If the percentage change is negative, and
is greater than the Protection Level percentage, the Performance Rate is equal to the percentage change in excess of the Protection Level.
The amount credited to or deducted from the Indexed Segment is equal to the Performance Rate times
the Indexed Crediting Base on the End Date. This will be used to determine the Segment Maturity Value as set forth below. The Indexed Crediting Base is the amount you allocated to the Indexed Segment, less any transfers and withdrawals during the
Indexed Term deducted proportionately by the amount that the transfer or withdrawal reduced the Interim Value. Withdrawals include any applicable surrender charge, premium tax or rider charge deductions. If the Performance Rate is positive, the
value of your Indexed Segment will increase. If the Performance Rate is negative (after calculation including the Protection Level), the value of your Indexed Segment is reduced. If the Performance Rate is zero, the value of your Indexed Segment
will not change. The Segment Maturity Value on the End Date is equal to the sum of A plus (A times B) where:
A = the Indexed Crediting Base on the End Date and
B = the Performance Rate.
For example:
Indexed Term Segment Start Date = 1/8/2019
Indexed Account = 3-Year with 115% Participation Rate
Indexed Value at Beginning of Term = 1569
Allocation to Indexed Segment = $100,000
Indexed Crediting Base: $100,000
Indexed Segment
Anniversary
Index Value
Index % Change
Account Performance Rate (adjusted for Participation Rate)
Account
Value
1/8/2020
1679
-
-
-
1/8/2021
1780
-
-
-
1/8/2022
1883
+20
%
+20% * (115%) = 23%
$
123,000
The following examples demonstrate how the Interim Value is calculated in different scenarios for
Indexed Segments with Participation without Annual Locks.
3 Year
3 Year
Indexed Term length ………………………………………………………….
36 months
36 months
Months since Indexed Term Start Date …………………………………….
33
15
Indexed Crediting Base ………………………………………………………
$
1,000
$
1,000
Protection Level ……………………………………………………………….
10
%
10
%
Participation Rate ……………………………………………………………..
104
%
104
%
Months to End Date …………………………………………………………..
3
21
Change in Index Value is -30%
3 Year
3 Year
1. Fair Value of Hypothetical Fixed Instrument ……………………………
$
995
$
968
2. Fair Value of Hypothetical Derivatives …………………………………..
$
(199
)
$
(197
)
3. Sum of 1 + 2 ………………………………………………………………..
$
796
$
771
4. Application of pro-rated Participation Rate …..……………………..
$
1,000
$
1,000
Account Interim Value = Minimum of 3 and 4 ……………………………..
$
796
$
771
Change in Index Value is -10%
3 Year
3 Year
1. Fair Value of Hypothetical Fixed Instrument ……………………………
$
995
$
968
2. Fair Value of Hypothetical Derivatives …………………………………..
$
(23
)
$
(46
)
3. Sum of 1 + 2 ………………………………………………………………..
$
972
$
922
4. Application of pro-rated Participation Rate ………………………..
$
1,000
$
1,000
Account Interim Value = Minimum of 3 and 4 ……………………………..
$
972
$
922
Change in Index Value is 20%
3 Year
3 Year
1. Fair Value of Hypothetical Fixed Instrument ……………………………
$
995
$
968
2. Fair Value of Hypothetical Derivatives …………………………………..
$
209
$
220
3. Sum of 1 + 2 ………………………………………………………………..
$
1,204
$
1,188
4. Application of pro-rated Participation Rate ………………………..
$
1,207
$
1,203
Account Interim Value = Minimum of 3 and 4 ……………………………..
$
1,204
$
1,188
Change in Index Value is 40%
3 Year
3 Year
1. Fair Value of Hypothetical Fixed Instrument ……………………………
$
995
$
968
2. Fair Value of Hypothetical Derivatives …………………………………..
$
414
$
414
3. Sum of 1 + 2 ………………………………………………………………..
$
1,409
$
1,382
4. Application of pro-rated Participation Rate ………………………..
$
1,414
$
1,406
Account Interim Value = Minimum of 3 and 4 ……………………………..
$