AM Best has assigned a Long-Term Issue Credit Rating (Long-Term IR) of “bbb+” (Good) to the $350 million 5.852% senior unsecured notes, due March 15, 2034, issued by Lincoln National Corporation (LNC) (headquartered in Radnor, PA). The outlook assigned to this Credit Rating (rating) is negative, which is consistent with the outlook assigned to the core insurance operating subsidiaries of LNC on Dec. 8, 2023 (see related press release). LNC’s existing Long-Term Issuer Credit Rating and Long-Term IRs remain unchanged.

LNC intends to use the note offering proceeds to repay all or portions of the outstanding principal of $250 million of its existing term loan due December 2024, and $300 million of its 3.35% senior notes due March 2025. This issuance is part of LNC’s overall de-leveraging and liability management program to reduce near-term refinancing risk, manage leverage ratios and extend its overall maturity profile. Proceeds from the sale of the LNC’s wealth management business to Osaic, anticipated to close in the second quarter of 2024, are expected to be used to further de-lever the group’s balance sheet and/or enhance its risk-adjusted capitalization.

AM Best notes that, for the interim period, LNC’s financial leverage ratio is elevated but remains within tolerance levels for its current ratings. LNC’s fixed-coverage ratio trends have been unfavorable but operating earnings improved in 2023, and are expected to continue rebounding over the near to medium term. Additionally, LNC has sufficient liquidity to service its debt, and AM Best anticipates that the cost of coupons on the senior note offering may be partially offset by investment of the note’s proceeds.

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