LincolnNational(LNC)Q42014ResultsEarningsCall

Transcript
LincolnNational(NYSE:LNC)
Q42014EarningsCall
February05,201510:00amET
Executives
ChristopherGiovanniHeadofInvestorRelationsandSeniorVicePresident
DennisR.GlassChiefExecutiveOfficer,President,Director,ChairmanofCommitteeOnCorporateActionand
MemberofExecutiveCommittee
RandalJ.FreitagChiefFinancialOfficerandExecutiveVicePresident
Analysts
SeanDarganMacquarieResearch
RandyBinnerFBRCapitalMarkets&Co.,ResearchDivision
ThomasG.GallagherCrditSuisseAG,ResearchDivision
SuneetL.KamathUBSInvestmentBank,ResearchDivision
SethWeissBofAMerrillLynch,ResearchDivision
ErikJamesBassCitigroupInc,ResearchDivision
JamminderS.BhullarJPMorganChase&Co,ResearchDivision
YaronKinarDeutscheBankAG,ResearchDivision
Operator
Goodmorning,andthankyouforjoiningLincolnFinancialGroup'sFourthQuarter2014EarningsConferenceCall.
[OperatorInstructions]Atthistime,IwouldliketoturntheconferenceovertotheSeniorVicePresidentofInvestor
Relations,ChrisGiovanni.Pleasegoahead,sir.
ChristopherGiovanni
Thankyou,Karen.Goodmorning,andwelcometoLincolnFinancial'sfourthquarterearningscall.Beforewebegin,I
haveanimportantreminder.Anycommentsmadeduringthecallregardingfutureexpectations,trendsandmarket
conditions,includingcommentsaboutsalesanddeposits,expenses,incomefromoperations,sharerepurchasesand
liquidityandcapitalresources,areforwardlookingstatementsunderthePrivateSecuritiesLitigationReformActof
1995.Theseforwardlookingstatementsinvolverisksanduncertaintiesthatcouldcauseactualresultstodiffer
materiallyfromcurrentexpectations.Theserisksanduncertaintiesaredescribedinthecautionarystatement
disclosuresinourearningsreleaseissuedyesterdayandourreportsonForms8K,10Qand10KfiledwiththeSEC.
WeappreciateyourparticipationtodayandinviteyoutovisitLincoln'swebsite,www.lincolnfinancial.com,whereyou
canfindourpressreleaseandstatisticalsupplement,whichincludeafullreconciliationofthenonGAAPmeasures
usedinthiscall,includingincomefromoperationsandreturnonequity,totheirmostcomparableGAAPmeasures.
Sopresentingontoday'scallareDennisGlass,PresidentandCEOandRandyFreitag,CFO.Aftertheirprepared
remarks,wewillmovetothequestionandanswerportionofthecall.

Andwiththat,I'dliketoturnthingsovertoDennis.
DennisR.Glass
Thankyou,Chris.Andgoodmorning,everyone.FourthquarterresultscappedanotherverygoodyearforLincoln.
OperatingEPSwasupnearly20%forthefullyear,whichenabledouroperatingreturnonequitytoexceed13%,a100
basispointincreaseovertheprioryear.TheROEexpansionisimpressiveconsideringbookvaluepershare,excluding
AOIC,alsogrew9%.Themajorityofourbusinesssegmentsareperformingwell.The1areawhereremain
disappointedisGroupProtectionearnings,butwearetakingthenecessaryactionstorestoreprofitability.
Werecognizelowinterestratesremaintopical,givenfurtherdeclinesinlongtermrates,andRandywilldiscussthis
later.However,weremainconfidentthatwehavetheinternalleversandinherentproductdemandthatwillenableour
positivemomentumtocontinueeveniflowinterestratespersist.
Specifictothefourthquarter,resultsincludedabitmorenoisethanpriorperiods.Thatsaid,ouractionswere
opportunisticandresultedinmorefavorableearningsandpositionedustodeployadditionalcapitalin2015.
Importantly,ourstrategicinitiatives,riskmanagementrigorandthewayweapproachthemarketplaceandkey
constituentsisunchanged.Bottomline,weremainaverycleanstoryasweenter2015,andwe'llleverageourstrengths
toadvanceLincolnevenfurther.
Notableamongthemareconsistentpresenceinkeymarkets.Thisaffordsustheopportunitytoexpanddistribution
partnersandmethodicallygrowsalesinhighergrowthmarketsatattractivereturns.
Robustcapitalmanagement.Buybackstotaled$650millionforthefullyear,a44%increaseovertheprioryear.Our
activecapitalmanagementstrategyalsoincludeda25%increaseinourcommonstockdividend.
Broadbalancesheetandriskmanagementstrength.Thiswasonceagainexhibitedaswecompletedourannual
goodwillandstatutorycashflowtestingwithnomaterialimpactfromeitherreview.Lincolniswellpositionedwitha
healthyRBCratio,ahighqualityanddiversifiedinvestmentportfolio,ampleliquidityandrobustriskmanagement
programs.
Turningtothebusinesslines.IndividualLifehadanothersolidyear,particularlycomingoffverystrongsalesin2013
andfurtherproductintroductions.IndividualLifesalesincreased5%forthefullyearandwereflatinthefourthquarter.
OurdiversifiedsalesmixremainsahallmarkofLincolnandisdrivenbyabroadproductportfolioanddisciplinedrisk
managementasnosingleproductrepresentedmorethan25%ofourtotalproductionthisquarter.
IndexedUniversalLifeandVariableUniversalLifesalescontinuetoshowgoodmomentumasIULpostedarecord
salesquarter.We'reencouragedthatournewMoneyGuardproductcontinuestogaintractionassalesincreased
sequentiallythroughout2014andtotaled$47millioninthefourthquarter.Weexpectthismomentumtocontinuein
2015astheproductgetsapprovedinafewmorekeystates.Itisworthareminderthatourfocusonsalesisnotjustto
growbuttogrowprofitably.ItisgroundedinourgoaltopriceourentireLifeportfoliotoachieve12%to15%returns.
Lookingforward,Lifeiswellpositionedforsalesgrowth,giventhedepthandbreadthofourdistributionrelationships
andproductdiversity.Equallyimportant,wehaveaprovenabilitytocapturenewmarketopportunitiesandadaptto
changingmacroeconomicandregulatoryconditions.
BeforeIshifttoIndividualAnnuities,IbrieflywanttomentionthatinDecemberweenteredintoanagreementwithakey
reinsurerpartner.Theagreementallowsustoopportunisticallyrecaptureseverallifeinsurancetreaties.Randywill
providemoredetails,butweviewthetransactionveryfavorablygiventhepositiveeconomicbenefits.
IntheIndividualAnnuitybusiness.Positiveoperatingleveragecontinuedinthefourthquarter,whichledtoanother
outstandingquarter.Lookingatthefullyear,disciplinedpricingcontributedtosteadyearningsgrowthandstrong
returns,andourcomprehensiveannualreviewvalidatedpolicyholderbehaviorassumptions.Ourstablemarket
presenceonceagainresultedinover$3.3billionofdepositsinthefourthquarterandmorethan$0.5billionofpositive
netflows.Forthefullyear,totaldepositsofabout$14billionledtopositivenetflowsof$2.6billion.Lincoln'sconsistent
approachtotheannuitymarket,combinedwithproductintroductionsdesignedtomeetconsumerneeds,hasresultedin
$16billionofpositivenetflowsoverthepast5years,allonourterms.
OneofthemostrecentproductintroductionswasInvestorAdvantage,ourinvestmentfocusedproduct.Wecontinueto
gainsignificanttraction,withfourthquartersalesup74%fromourverysuccessfullaunchinthethirdquarter.Thishas
furtheracceleratedakeystrategicinitiative,whichistopushourvariableannuitysalesmixto30%nonlivingbenefitand
70%livingbenefit.Inthefourthquarter,thisstillcontinuedasnonlivingbenefitsaleswere26%oftotalVAsales,up
from18%intheprioryearquarter.Includingtheimpactonsalescoveredbyourreinsurancetreaty,nonguaranteed

productscomprised58%oftotalVAsalesinthequarter.
WeremainoptimisticandareconfidentwearepositionedforgrowthintheAnnuitybusiness.Demographictailwindsstill
supportproductdemand,whilethereemergenceofseveralkeycompetitorsandcontinuedmacrouncertaintyfurther
validatetheneedforourdiverseannuityproductportfolio.Ourdisciplinedapproachtoriskmanagement,combinedwith
productinnovation,willenableustowriteattractivenewbusinesstoaddtoourexistingblockofhighqualitybusiness.
TurningtoGroupProtection.Weakearningsinthefourthquarterandthroughout2014wereprimarilytheresultofpoor
longtermdisabilitylossratios.AsIhavediscussedinthepast,toimproveprofitabilitywearetakingaggressivepricing
actions,primarilyaimedatouremployeepaidemployerpaidbusinesses.Wealsothinkmostoftherecentearnings
pressureandvolatilityisrelatedtoourmovetoanewclaimsysteminJulyandassociatedprocesschanges.Asa
result,weseeanopportunitytoimproveprofitabilityaswerefinetheintegration.WhileI'mdisappointedwedidnot
showanotherquarterofsequentialearningsimprovement,itisimportanttorememberthatourearningsrecoverywill
notbelinearandwhenmarginsarethislowdoesnottakemuchforearningstobouncearoundquartertoquarter.
Fourthquartersalesof$250millionweredown7%forthesameperiodlastyear,andfullyearsalesweredown11%.
Asaresultofourpricingactions,theemployerpaidportionofoursalesweredownmoremeaningfully,18%inthe
fourthquarterand19%forthefullyear.Highermarginemployeepaidproductsaleswereup5%inthefourthquarter
andrepresented54%ofquarterlysalescomparedto48%intheprioryearquarter.Lookingforward,we'dexpectsales
growthtoremainpressuredaswetakethenecessarystepstoreturnGroupProtectionmarginsovertimetoour5%to
7%aftertaxmargintarget.
TurningtoRetirementPlanServices.Theearningsprofileremainssteadythroughout2014.Totaldepositsforthe
quarterof$2.3billionwereup42%fromayearago.Fullyear'sresultswereaverygoodstory,withtotaldepositsup
11%toarecord$7.5billion,withstrengthinboththesmallandmidtolargemarkets.Recurringdepositscontributed
$4.8billionin2014,up7%.Favorableequitymarketperformanceresultedinasequentialincreaseinaccountvalues,
whichnowstandatjustunder$54billion,a4%increasefromayearago.
Lumpinessinnetflowsisbeingdrivenbythenaturalebbandflowinthemidtolargecasemarket.Thisquarter
depositsbenefitedfromonelargecase.Butthelargecaseterminationwereferencedonourthirdquarterconference
callledtonegativeflowsofaround$900millioninthequarterand$880millionforthefullyear.Weremainoptimisticin
thegrowthoutlookforourRetirementbusiness.Ourcoreproductsarepoisedtogrowfasterthantheindustry,while
continuedexpansionintosegmentslikethegovernmentandsmallmarketbodewellforLincoln.Infact,weareseeing
severalnotablewinsaswestarttheyear,andthepipelinelooksstrong.Basedoncurrentvisibility,whichgoesout
aboutahalfayear,weexpecttoseepositivenetflowsinthefirsthalfoftheyear.
TurningtoDistribution.Thedepthandbreadthofourretail,wholesaleandworksiteteamsremainacompetitive
advantageforLincoln.Eachchannelcontinuestodeliveroutstandingresultsandcreatefinancialandstrategicflexibility
byproperlybalancinggrowth,productdiversificationandprofitability.
Lincoln'sproducerbasestandsatover63,000strong.We'vecontinuedtogaintractiononproducerproductivity,with
1/4ofourfixedannuitiesand1/3ofbothRPSandMoneyGuardsalescomingfromourcrosssellstrategies.
Clientfacingdistributionheadcountincreased6%atbothLFDandacrossLFG.Importantly,headcountgreweven
fasterinkeygrowthareas.Notably,smallmarketRPSwasup29%,andIndividualLifeincreased10%.
AtLFN,ournearly8,500affiliatedadvisersisunchangedyearoveryear.However,ourregisteredrepsareup2%due
toinvestmentsinourbrokerdealerclearingplatformandrecruiting.Lookingahead,we'llcontinuetoinvestin
Distributionasweseektoexpandourextensivefootprinttogrowsalesfurtherin2015.
Andfinally,inInvestmentManagement.Ournewmoneypurchasesof$2.2billioninthefourthquarterwereinvestedat
anaverageyieldof4.3%,whichwas210basispointsovertheaverage10yeartreasury.Thisstrongresultwas
primarilyattributabletoinvestmentgradespreadwideningwhereunderlyingcreditfundamentalsremainstrong.
AswediscussedatourrecentInvestorDayconference,wecontinuetoutilizeouryieldenhancingdebtprogram,which
added22basispointstoournewmoneyyieldthisquarter.Themajorityofouryieldenhancingdebtpurchaseswerein
investmentgradeassets,whichactuallyhelpedreduceouroverallportfoliosbelowinvestmentgradeexposurefromthe
prioryearquarter.
Ourbusinessmodelissupportingouryieldenhancingdebtprogram.Ourretailfocusedproductmixresultsinlong
durationliabilitieswithpredictablepaymentpatterns.Thisenablesustoinvestinlessliquidassets,anareawherewe
havefoundincrementalvalueandhaveadditionalcapacity.Withrecentvolatilityintheenergymarket,itisworthnoting

thatourenergyexposureisconsistentwithourbroaderportfolio,highqualityanddiversified95%ofourenergy
holdingsareinvestmentgrade,withdiversificationacrosssubsectorsandissuers.Infact,ourprimaryfixedincome
energyexposurehadanetunrealizedgainofover$700millionor8%ofbookvalueattheendofJanuary,upfromthe
yearendoftheyear.
Soinclosing,Lincolnhadaverygoodquarter.AsInotedatourInvestorDay,Idon'trecallatimewhereourrelative
strengthandindustrypositionhasbeenthisstrong,whichaffordsustheopportunitytogrowandgrowprofitably.This
shouldenableustoremainasteadyEPSgrowthstory.
Withthat,letmeturnitovertoRandy.
RandalJ.Freitag
Thankyou,Dennis.Lastnight,wereportedincomefromoperationsof$439millionor$1.67pershareforthefourth
quarter,up19%fromtheprioryear.Thequarter'sexcellentresultscappedoffastrongyear,whichsawfullyear
operatingEPSincrease20%to$6.03,anotherrecordforLincoln.
Asnotedinthepressrelease,wehadnormalizingitemsof$53millionor$0.20pershareinthequarter,primarily
relatedtotherecaptureofpreviouslyreinsuredlifeinsurancebusiness.Excludingnormalizingitems,EPSincreased
12%inthequarterand18%forthefullyear.
Lookingatkeyperformancemetrics.Toplinegrowthremainsstrong,evenexcludingthereinsurancerecapture,with
operatingrevenueup6%forthequarterand8%forthefullyear,drivenbypositivenetflowsineveryquarteroftheyear
andthebenefitoffavorableequitymarkets.Continuedfocusonmanagingexpensescreatedfurthermarginexpansion
asthe5%growthinannualG&A,netofcapitalizedexpenses,trailedrevenuegrowthandimprovedourexpenseratio
by40basispoints.
Bookvaluepershare,excludingAOCI,grew9%to$49.29.Operatingreturnonequitycameinat13.1%forthefull
year.Excludingnormalizingitems,ROEwas12.3%inthequarterand12.5%in2014,an80basispointincreaseversus
2013.
Thestrengthofourbalancesheetishighlightedbyrecordstatutorycapitalof$8.8billionandanRBCratioof
approximately540%,whichgivesussignificantfinancialflexibility.
Acoupleotheritemsofnotespecifictothefourthquarter.G&Awasaboveournormalizedlevelduetoseasonalitywe
typicallyseeduringthefourthquarteralongwithhigherincentivecompexpenses.HigherG&Awasoffsetbyfavorable
taxtrueupsandtheprepaymentrelatedinvestmentincomethatcameinaboveourexpectations.AsInotedinprior
calls,thatisexpectedinthisenvironment.
Netincomeresultsforthequarterwerenegativelyimpactedbytheagreementtosellourmediabusinessandmodest
breakageintheVAhedgeprogram.Fullyearnetincomewasastrongstory,withrealizedlossescominginatjust$47
millionfortheyear,whileVAheadresultswereverygood,withjust$4millionofvariableannuitynetderivativelosses.
Thisresultedinnetincomeequaling94%ofoperatingincomefortheyear.
Beforeshiftingtosegmenthighlights,Iwouldliketocommentonthepersistentlylowinterestrateenvironment.Atour
NovemberInvestorDay,wenotedthatinterestratesremainjustanearningsheadwind,andwereiteratethatview
today,evenasrateshavemovedlower.
Acoupleofpoints.Our2014yearendcashflowtestingcontinuestopointtosignificantstatutoryreserveadequacy.In
fact,wehaveseenourreservesufficiencyincreasefrom2013inbothourbasecaseandstressscenarios.Weshowed
atInvestorDaythatspreadcompressionisabating,evenifweassumedratesremainflatatcurrentlevels.Recallthat
weestimatedflatrateswithdepressedEPSgrowthby2%to3%versus4%to5%inprioryearsbutstillenableusto
achieveourtargetedEPSgrowthrateof8%to10%.GiventhedeclineininterestratessinceourNovemberInvestor
Day,weestimatewearelikelytobeatthetopendofthis2%to3%range,butthatcapitalmanagementactionswill
provideamorefavorableoffset.
NowIwillturntosegmentresultsandstartwithAnnuities.Reportedearningsforthequarterwere$237million,a19%
increaseoverlastyear.Operatingrevenuesincreasedto9%fromthefourthquarterof2013aspositivenetflows
continued,andwebenefitedfromfurthertailwindsinequitymarkets,whichcombineddrovean8%increaseinaverage
accountvaluesthatreached$122billionatyearend.
ReturnsintheAnnuitybusinesscontinuedtobeverystrongandhighlightthequalityofourAnnuitybook.ROIonce
againincreasedsequentially,andROEcameinat25%forthequarterand26%fortheyear.Withrecordassets,

earningsandreturns,itwasanotheroutstandingyearfortheAnnuitybusiness.
Asweenter2015,ourstrongmarketposition,successwithourrelativelynewinvestmentfocusedproduct,ourhedge
programandrecentproductrefinementsshouldsupportfurtherprofitablegrowthindepositsandnetflows.
InRetirementPlanServices,werecordedearningsof$42million.Fourthquarterrevenuegrowthwasup2%yearover
yearandsequentially,consistentwithourannualrevenuegrowth.Accountvaluesendedtheyearat$54billion,up4%
versustheprioryear,aspositivefundperformancewaspartiallyoffsetbythenetoutflowsthatDennismentioned
earlier.TheimpactoninterestmarginsfromlowrateshasbeenmostpronouncedinRPS.Normalizedspreads
compressed11basispointsfortheyear.Thisisatthelowendofourpriorguidance.Andlookingforward,wecontinue
toexpectspreadstodeclineby10to15basispointsannuallyintheretirementbusiness.
Returnonassetsof31basispointsforthefourthquarterand30basispointsforthefullyearwerebothatthetopendof
ourlongtermtargetedrangeof25to30basispoints.WhileintotalacrossthecompanythenetimpactofG&A
prepaymentincomeandtaxeswas0,theRPSsegmentdidbenefitfromthesumtotalofthoseitemsbyapproximately
$5million.
Pretaxnetmarginincreased250basispointsin2014to34.1%.Overall,2014wasagoodyearfortheRetirement
business,despiteconsistentdeclinesininterestrates.Revenuegrowthoutpacedexpensegrowth,resultingina13%
increaseinearningsanda16.4%returnonequity.
TheLifeInsurancesegmentreportedfourthquarterearningsof$193millionor$140millionafternormalizingitems,
primarilyrelatedtotherecaptureoflifeinsurancetreaties.Letmefirstspeaktotherecapture.Wereachedan
agreementinDecemberwithakeyreinsurancepartnerinwhichwerecapturedbusinesswithinourcurrentretention
limitsrelatedtoseverallifeinsurancetreaties.Therecaptureincludesanestablishedblockofmortalityriskwritteninthe
1990stoearly2000sandincreasesourtotalfaceamountretainedby5%.Aswehavenotedinthepast,thisisaperiod
wherereinsurerswereparticularlyaggressiveintheirpricingassumptions.Withthistransaction,wecapitalizeona
mutuallybeneficialresolutionwiththereinsurerinwhichtheypaidus$500milliontorecapturethebusiness.
Afewkeypointsaboutthetransaction.Themortalityassumptionthatweemployedinassessingthedealisbasedupon
currentassumptionsthatreflectactualexperienceonthebusiness.Additionally,weemployedanoutsideactuarial
consultantwithsignificantmortalityexpertise.Theunderlyingexperienceontherecapturebusinessisrightinlinewith
ourcurrentretainedexperience.Thisisabookofbusinesswherewewereoftenpayingoutlessinreinsurance
premiumsthanwewerereceivingbackingclaimsfromthereinsurer.Whatwewereabletodowiththistransactionis
capitalizethosefutureprofitsataveryattractivediscountrate.Afterestablishingreservesandpayingtaxes,weexpect
totakethe$200millionofnetproceedsanduseittofundincrementalsharerepurchases.Whencombinedwiththe
earningsimpactoftherecapturedbusiness,weexpectthetransactiontobeaccretivetoannualEPS.
TurningbacktounderlyingresultsinourLifebusiness.Earningsdriversremainedsteadyforthequarterandyear,with
averageaccountbalancesup6%to7%,andLifeInsuranceinforceup4%.Normalizedspreadsinthefourthquarter
wereflatquarteroverquarteranddown11basispointsforthefullyear.Lookingforward,wecontinuetoexpect
spreadstodeclineby5to10basispointsonanannualbasisintheLifebusiness,consistentwithcommentsatour
InvestorDay.Overall,asolidyearforourLifeInsurancebusiness,cappedbyaveryfavorableeconomictransaction
thatweexpecttobeaccretivetoannualEPS.
TheGroupProtectionsegmentresultscontinuetofallshortofexpectationsaswereportedalossfromoperationsof$7
millioninthefourthquartercomparedtoagainof$11millionintheprioryear.Earningsremainednegativelyimpacted
bypoorresultsintheLTDbusiness,drivenbyhigherthanexpectedincidenceandlowerthanexpectedrecoveries.Let
meputsomenumbersaroundthose2items.Wetypicallydoseehigherincidenceratesinthefourthquarter.Overthe
fourthquarter2014,incidenceratewas10%higherthantheprioryear.Incidencesmoreinlinewithhistorical
seasonalitypatternsbuthaveimprovedresultsbyapproximately$8millionforthequarter.
Claimrecoveriesweredownsignificantlyinthefourthquarter,cominginabout20%belowourexpectationsbasedon
historicallevels.Althoughsomemovementinthisnumbercanbeexpected,thatsortofdeviationisdefinitelyoutofthe
norm.I'destimatethatthelowerrecoveriesnegativelyimpactedthequarterby$9million.
Givenouranalysisofthehigherincidenceratesandlowerrecoveries,webelievetheintroductionofournewclaims
managementsystemanditsassociatedprocesschangesexplainmostofthedeteriorationandincreasedvolatilitywe
haveseenoverthelast3quarters.Aswebetterintegratethenewclaimssystemintoouroperation,webelievethatwe
willseeimprovedclaimmanagementeffectivenessand,thus,improvedmorbidityandprofitability.
Lookingforward,ouroutlookforthegroupbusinessisconsistentwithpriorcomments,includingthosefromour

NovemberInvestorDay.Notably,weexpectearningstoimprove,buttheimprovementwillnotbelinear.Therealization
ofbenefitsfromournewclaimssystemandcontinuedfocusonstrengtheningthegroupleadershipteam,combined
withsignificantpriceincreases,willbepositiveleverstoLincoln'slongtermearningsgrowthandenableustoultimately
achieveourmargintargets.
LetmediscussourcapitalpositionandcapitalmanagementbeforeweturntoQ&A.2014wasanothergreatyearfrom
acapitalgenerationanddeploymentstandpoint.Strongstatutoryperformancewithoperatingearningsof$1.4billion
allowedustoupstreamnearly$1billiontotheholdingcompany,whichledustodeployover$800millionin2014,up
42%.Thisincluded$650millioninsharebuybacksand$168millioninshareholderdividends.Holdingcompanycash
endedtheyearat$554million.Statutorysurplusgrewby$800milliontoarecordlevelof$8.8billion.Andasnoted
earlier,weestimateourRBCratiowillendtheyearatapproximately540%.Theincreasesaredrivenbythestrong
statutoryearningscombinedwiththereinsurancerecaptureandothertacticalactivitiesinthefourthquarter.
Asyoumaybeaware,wehave$250millionofdebtdueinJune.Wearecomfortablewithourcurrentleverageand
capitalstructureanddonotseeaneedtodeleverfurther.
Finally,letmecommentoncapitaldeploymentexpectationsfor2015.Giventhestrengthofthebalancesheetand
strongcapitalgenerationtrends,Iwouldexpectsharebuybackstoexceedthe$650millionweputtoworkin2014.We
continuetoviewbuybacksasanexcellentuseofcapitalbutanticipategrowingandmaintainingacompetitivedividend
aswell.Bottomline,returningcapitaltoshareholdersremainsapriorityforLincoln.
Withthat,letmeturnthecallovertotheoperatorforquestions.
QuestionandAnswerSession
Operator
[OperatorInstructions]OurfirstquestioncomesfromthelineofSeanDarganfromMacquarie.
SeanDarganMacquarieResearch
I'mjustwonderingifyoucouldquantifytheincrementalamountofpremiumthatwillbecomingbackwiththetreaty
recapture.
RandalJ.Freitag
The2items,asImentioned,onthisbookofbusinessisthathistoricallyandoftentimeswehadbeenreceivingback
moreinclaimsthanwewerepayingoutinpremiums.Theapproximatepremiumnumberthatwearepayingoutonan
annualbasiswasroughly$150million.
SeanDarganMacquarieResearch
Okay.Andarethereopportunitiesformoretreatyrecapturesouttherewithothercounterparties?
RandalJ.Freitag
Idon'tthinkoftheseasopportunities.We'reinconstantnegotiationswithourreinsurersoveranynumberofitems.SoI
wouldn'tsaythatthereareopportunitiesasmuchasthesethingscomeupfromtimetotime.
SeanDarganMacquarieResearch
Great.Andthenoneabouttheinvestmentportfolio.Youscreenonthehighsidewithexposuretoenergy.Canyougive
usanyupdatesonyourexposuretoenergy,thesector,bothinvestmentgradeandbelowinvestmentgrade?
DennisR.Glass
Yes.Wehaveabout$9.5billioninenergyexposure.Andthat'sverydiversified,asImentioned.Sobycategory,inthe
independentcategory,maybe29%midstream,28%oilfieldservices,21%integratedenergycompanies,19%
refining,2%.Soyoucanseeit'sverydiversifiedbythetypeofenergycompany.Specifically,toansweryourquestion,
95%ofourexposureor$9billionofthe$9.5billionisininvestmentgrade.$0.5billionisinbelowinvestmentgrade.We
havespentthelast2to3weekswell,actually,thelastcoupleofmonths,goingcompanybycompanyatthe$50oil
price.Andwedon'tseesignificantcreditissuesat$50.Andsowe'requitecomfortablewiththeoverallenergyportfolio.
Operator

AndournextquestioncomesfromthelineofRandyBinnerfromFBRCapitalMarkets.
RandyBinnerFBRCapitalMarkets&Co.,ResearchDivision
I'mgoingtotryandaskyouaquestionaroundthegroupsegment,andappreciatethedatayougavethereaboutbeing
belowplanned.ButIguessI'mtryingtounderstandalittlebitbetterhowtheimplementationofthenewclaimssystems,
andIassumemorestaff,hurtresults,ifIheardthatcorrectly,ormaybehinderedprocesses.Ifyoucouldwalkus
throughthatmore,I'dbeinterested.Obviously,andIdon'tthinktheywouldaffectincidence,butmaybehowthat
affectedrecoveriesandotherelementsoftheclaimsprocess.Andalso,howfarthroughthatprocesswearebefore
thosethingsstabilize?
RandalJ.Freitag
Yes.Thanksforthequestion,Randy.Ithinkanytimeyoumakechangesintheclaimsareayou'regoingtoseesome
dissonance.Sospecifically,wewereintroducing,makingoneofthelargestchanges,again,andwewereintroducinga
wholenewclaimssystem.Thewholeprocessarounddoingsomethingthatmeansthatyouaregoingtobespendinga
lotoftimeoryourclaimsexaminersaregoingtobespendingalotoftimeontraining.They'regoingtobespending
that'sbothbeforetheintroductionofthesystemandafter.They'regoingtobespendingtimeonunderstandingnew
processesthatcomewiththenewsystem.They'regoingtobespendingtimeunderstandingthenewtechnologyoverall
thattheyhaveinplace.Sowhathappensisthatyourclaimsexaminersneedtospendmoretimedoingthosethings.
Andwhathappensasaresultisthatcaseloadstendtotickupalittlebitaroundtheintroductionofsomethinglikethis.
There'sadirectlinkbetweenincreasedcaseloadsandincreasedlossratios.Andthat'swhatwe'veseen.Ithinkthatwe
could'vedoneabetterjobofmanagingthewholeprocessaroundtheintroductionoftheclaimssystem,andthat'spartly
whywe'veseensomechangesinmanagementinthegroupbusiness.Butit'sthatwholeprocessthatinvolvesthatis
involvedwithintroducinganewclaimssystem,thetraining,theprocesses,everything,thatcausescaseloadstotickup,
whichcauseslossratiostogoup.We'reintheprocessoftrainingshouldberampingdown.Theclaimsexaminers
shouldbefullytrainedonthenewsystem.We'llgettheprocessesstraightenedout.SoIdon'tthinkthisisaverylong
termitem.Butit'sgoingtotakeusalittlebit,andyou'llseealittlemorevolatilityalongtheway.
RandyBinnerFBRCapitalMarkets&Co.,ResearchDivision
Okay,that'shelpful.Soyou'reaboutayearintothelaunchofthenewclaimssystem,andareyouhaveyoustaffed
uptokeepthecaseloadmoremanageablefortheadjusters?
RandalJ.Freitag
Ithinkpartofthefixismakingsurethatyou'restaffinguptoappropriateleveltohandleanyneartermvolatility.And
we'redoingsomeofthat.
RandyBinnerFBRCapitalMarkets&Co.,ResearchDivision
AndisityearRandy,attheyearend,isthathowfarareweintothisprocess?
RandalJ.Freitag
Hardtogiveanexactmeasure.Butwe'reIthinkwe'llbefullydonewithallthesethingsweneedtodo,thetraining,
theprocessandeverythinginaboutroughlythemiddleoftheyear.
DennisR.Glass
Letmecommentonemoretimeonmyviewonthegroupbusiness.Firststartbysaying,themarketisinlargepart
acceptingourrenewalincreases.We'regettingthemonthebusinessthatwewanttogetthem.We'redrivingawaythe
moreunprofitablebusinesseswherewe'vebeenaskingforhigherrate.AndI'mspeakingspecificallytotheemployer
paid.Somanagementisincontrolofturningthisbusinessaround.There'snothinginthemarketthat'sgoingtostandin
ourway.Andcandidly,asRandyjustmentioned,managementinpartmadesomemisstepstoputusinthisposition.
ButI'mconfidentthatwe'regettingthepriceincreasesonouremployerpaidbusinessthatweneed.I'mconfidentthat
theworktobedonearoundimprovingtheclaimsmanagementprocesswillbedone.AndsoIdoseeusgettingbackto
our5%to7%marginsinthe2015,2016timeframe.Andagain,I'mgoingtoreemphasize,Ibelieveit'sin
management'scontroltogetbacktothosenumbersbecausethemarketiscompetitive,butpricingisprettyfirminthe
marketplace.
Operator

OurnextquestioncomesfromthelineofTomGallagherfromCrditSuisse.
ThomasG.GallagherCrditSuisseAG,ResearchDivision
Randy,Iwantedtocirclebackonthereinsurancerecapture.ThewayyouexplaineditIthinkclearsthingsupforme.
ButIjustwanttomakesureIgotthis.Soessentially,whatwasthecasewasyouhada,Iwouldsay,veryfavorable
termsontermsofthetreatiesthatyouhad,justintermsofthepremiumsthatyouwerepayingoutversustheclaims
youwerepayingout.Andsoinordertounwindthatfavorabledeal,you'regettingpaidalotessentially.Sowhatshould
happenhereisyourlifeearningswouldgodown.Butthen,saidanotherway,you'regivingupsomeofthoseearnings
bygettingthecashandthestockgain.Butthebuybackamountyou'reabletodowiththatincrementalcashwillmore
thanoffsetthelostearningsinthelifebook.IsthatamIunderstandingthatcorrectly,justmechanically,thewaythis
isgoingtowork?
RandalJ.Freitag
Yes.That'saverygoodsummaryoftheoveralltransaction,Tom.Ifyouthinkaboutjustalittlemoreonthisdeal.If
yougobacktothe'90sandearly2000swhenwerepricedthisbusiness,weexpectedtohavereinsurancegains.Itwas
partofthepricingprocess.Atthattime,asImentioned,reinsurerswereparticularlyaggressive,itseems,withtheir
pricingassumptionsthatwethat'swhatweanticipated.Sotheprofitswewereexperiencingonthereinsuranceare
notsurprising.Andinfact,theywerepartofourpricing.Butwhatwewereabletodowiththisislookatthatstreamof
expectedreinsuranceprofitsinthefuture,discountthemataveryattractiverate,midsingledigitsortofrate,andthat
representsthe$200millionthatItalkedabout.That'sthestatutorygain.Nowseparatefromthat,there'sGAAP
accounting.SowebringthisbookofbusinessontoourGAAPbalancesheet.Weadjustourassumptionsaroundcostof
reinsurance,etcetera.AndyousawsoyouseeaslightlysmallergainontheGAAPside.AsImentioned,thelife
businessbenefitedbyroughly$53millionduringthequarter,primarilyrelatedtothistransaction,solowerthanthe$200
million.Soyou'llhavesomeessentially,you'vestrengthenedyourGAAPbalancesheet.Soyouhaveasmaller
impactontheGAAPbasis.SowhatIexpectontheGAAPbasisisalittlemorevolatility,notawholelotofvolatility,
becauseattheendofthedaywedidn'tincreaseourretainedamountbyallthatmuch.Infact,Ithinkthisdealtookour
averageretainedfaceamountfrom$175,000to$185,000,soabouta5%increase.SoIexpectalittlemorevolatility,
notahugeamountofvolatility.AndIdon'texpectamaterialimpactontheoveralllifeinsuranceearningsattheendof
theday.Andasyousaid,we'llthentakethe$200million,putitintoincrementalsharebuybacks.Netnetoverall,I
expectittobeaccretivetoEPS.
ThomasG.GallagherCrditSuisseAG,ResearchDivision
Yes,that'shelpful.Soyouwouldn'texpectlifeearningspowertogodown?Youjustexpectalittlemorevolatilityaround
it?
RandalJ.Freitag
Whenviewedonanannualbasis,Imean,theymaygodownalittlebit.ButIdon'texpectamaterialimpact.Remember
thatthisisroughlya5%increaseintheirretainedfaceamount.Soit'snotahugeimpactinsideofwhatisaverylarge
business.Sotheremaybesomesmallimpact.ButnothingthatIwouldcallmaterial,nonethatwouldspikeout.
ThomasG.GallagherCrditSuisseAG,ResearchDivision
Gotyou.Andthenjustmylastquestion.SoItotallygetwhyyou'redoingit.IfthemainquestionI'mgettingis,itwould
seemtobenotagreateconomictransactionforyourcounterparty.Andisitfairtoassumethattheywouldhavea
differenceofviewsintermsofhowtheywouldexpectthisbooktodevelopthanyou?Iassumethathastobethe
questionunlessthere'ssomethingregulatoryorotherwisethatiscausingthemtoenterintothistransactionwithyou.
RandalJ.Freitag
All'sIcansay,Tom,asImentionedinmyscript,Ithinkitwasamutuallybeneficialarrangement.Idon'tknowhowthey
wouldcharacterizeitontheirsideotherthanIthinkthenegotiationswereamicable,andwereachedamutually
beneficialresolution.
Operator
AndournextquestioncomesfromthelineofSuneetKamathfromUBS.
SuneetL.KamathUBSInvestmentBank,ResearchDivision

Justaquestiononinterestrates.Randy,yousaidinyourpreparedremarks,muchlikeatInvestorDaythatthecurrent
levelofinterestratesisnotgoingtocreateabalancesheetissueit'smoreofanearningsheadwind.Iguessthe
questionis,atwhatratelevel,whethercurrentorforwardcurve,wouldwereallystarttoseethebalancesheetimpact?
Becauseitjustseemslikeeverytimeinterestratesfall,youfocususonearnings,whichIget.Buttherehastobeat
somepointwherethepressurebuildsandwestarttoseesomethingintermsofthebalancesheet.
RandalJ.Freitag
AsImentionedinmyscript,Ipointedout2specificitems.First,Italkedtoouryearendreservesufficiencyemerging
fromthecashflowtestingresults,andthatremainsverystrong.Infact,itincreasedover2013.AndItalkedaboutthe
earningsheadwindcomponent.Thereareoutsideofthat,youhavesomesubsettestsonthelifeinsurancebusiness
thatIthinkgetpressuredovertimeinaverylowrateenvironment.ButasImentioned,that'sovertime.Ithinkit'seasily
manageablegiventheoverallsizeofourcapitalpositionandbalancesheet.Andseparatefromthat,ofcourse,we
typically,inthethirdquarter,doanannualreviewofallofourassumptions.Sowe'llhavetolookatourlongterm
interestrateassumptions.AndasImentionedinthepast,theimpactofloweringourlongtermrateassumption50
basispointsisaroughly$125million.Sowehavethoseotherthingswehavetothinkabout.Idon'tthinkthere's
anythingthatIwouldconsidertobedramaticoutthere.
SuneetL.KamathUBSInvestmentBank,ResearchDivision
Okay.Andthenthereweresomecommentsinthepreparedremarksaboutgoodwilltesting,and,obviously,therewas
noimpairmentthistime.Canyougiveanycolor,likeyoutypicallydointheK,aroundwheretheremayhavebeensome
pressureintermsofgoodwillandwherewemighthaveseenormayseesomeimpairmentsdowntheroad?
RandalJ.Freitag
ThereandthesewillbesimilarcommentsthatI'vemadeeveryyearatthistime.Thereare3maindriversofgoodwill.
There'stheamountofnewbusinessyou'reselling.Inthelifeinsurancebusiness,we'veseenoursalesgrow.Inthe
groupbusiness,wecontinuetohaveverystrongsales.There'stheprofitabilityofthatnewbusinessyou'reselling.As
Dennismentioned,we'retargeting12%to15%inthelifeinsurancebusiness.That'sverystrongprofitability.Andwe're
alsolookingatstrongpriceincreasesonthegroupside.Sowe'relookingatprofitablenewbusinessthatwe'reselling
today.Andthethirditemisthediscountrate,what'stherateyou'rediscountingthosethings.Idon'tthinkthatrateson
acquiredlifeinsurancebusinessandgroupbusinesshavereallyeverbeenlowerinthemarketplace.Sodiscountrates
areveryattractive.Soall3itemsthatarethemaindriversofgoodwillareinverygoodshapetoday.Andsoitdidn't
surprisemeatallthatwhenwewentthroughtheanalysistherewasnogoodwillimpairment.
SuneetL.KamathUBSInvestmentBank,ResearchDivision
Didanyofthesegmentsmovetostep2ofyourprocess?
RandalJ.Freitag
Ithinktypicallyacoupleofthesegmentshavemovedtostep2almosteverysingleyear.AndIthinkthatwasthesame.
SuneetL.KamathUBSInvestmentBank,ResearchDivision
Assumingit'slifeandgroup?
RandalJ.Freitag
Yes.
Operator
OurnextquestioncomesfromthelineofSethWeissfromBankofAmericaMerrillLynch.
SethWeissBofAMerrillLynch,ResearchDivision
Randy,Iwantedtofocusonyourcommentsonprepayments.AndIunderstandthatinthislowrateenvironmentthey're
goingtoremainelevated.IfIlookatyourdisclosures,Ithinkprepaymentsrangefroma30to35basispointcontribution
ofspreadinthisquarter,whichissignificantlyhigherthanthe10basispointsofspreadcontributionfromprepayifyou
lookovertheaverageofthelast3years.Iunderstandthatthisstayselevated.Butthisisamaterialdelta.Canyougive
usasenseofhowyouthinkaboutprepaysgoingforwardrelativetothisquarterandrelativetotheaverageofthelast3

years?
RandalJ.Freitag
AsImentioned,itwasastrongquarterforprepays.Letmespeaktothesumtotalofprepaysandalternativeinvestment
incomesforthequarter,becausealternativeinvestmentincomewaslowerthanwe'dexpectedduringthequarter.I
mentioned3itemsinmyscript,notnormalizeditems,butjust3itemsthatoffseteachother.Imentionedprepayment,
thesumtotalofprepaymentalternativeinvestmentincome.I'destimatethatwasroughlya$50millionbenefitacrossall
thebusinessesforthequarter.Ialsomentionedthatwehadsomefavorabletaxitemsduringthequarter.Thatwas
roughly$50millionacrosstheacrossallthebusinesses.AndthenImentionedthatitwasoffsetbyG&A.AndG&A
wasdrivenbyhigherincentivecompexpensesinthequarter.Wealwayshaveseasonalityaroundprojectsgetting
done,thosesortsofthings,inthefourthquarter.SotherewereanumberofitemsthatdroveG&Auptoabout$30
millionaftertaxacrossthebusinesses,completelyoffsettingthose2particularitems.Butfocusinjustontheinvestment
incomecomponent,itwasroughly$50millionacrossthebusinesses.
SethWeissBofAMerrillLynch,ResearchDivision
Okay.AndthenjusttoclarifythatG&A.Whenyousay$30millionhigher,thatisaboveandbeyondthenormal
seasonalityofthefourthquarter,isthatcorrect?
RandalJ.Freitag
Yes.IthinkifyoulookattheG&Anetofamountscapitalizedinthefourthquarterandcompareittoanaverageforthe
fullyear,you'dseewhatI'mtalkingabout.JustonthepreDACbasis,Ithinkthefourthquarterisroughly$58million
higherthantheaverageforthefullyear.
SethWeissBofAMerrillLynch,ResearchDivision
Okay.Andjustafollowupontheprepays.AndIunderstandthepositiveGAAPearningselementofprepays.Butfrom
aneconomicstandpoint,whyshouldn'twebethinkingabouttheseprepaysasnegative?Presumably,youneedto
reinvestthesefundsbackintotheportfolio.Sowouldn'tacceleratedprepaysleadto,ultimately,fasterspread
compressioninthelongterm?
RandalJ.Freitag
Yes.Andit'sbeenembeddedinourspreadcompressionnowforthe4yearsyou'vetalkedabout,especiallyinthelast
coupleofyears.Sothereisn'tachangeinthetrajectoryorspreadcompressionbecauseofprepays.It'sjustbeeninthe
resultsandinourguidanceforsometimenow.Allelsebeingequal,Ipreferthatpeopledidn'tprepay.Imean,Iwould
lovetheassetstayingaround.Butwe'redealingwithit.It'sinthespreadcompression,expectationsthatI'dgivenyou
forthe2mainimpactofbusinesses,whichislifeandretirement.
Operator
OurnextquestioncomesfromthelineofErikBassfromCitigroup.
ErikJamesBassCitigroupInc,ResearchDivision
Justfirstwanttoaskaassetquestiontoseeifyoucouldclarifytheexpectedtimingoftheincrementalbuyback.Isthis
somethingweshouldexpecttobesortoffrontloadedgiventhatyouhavethecashonhandnow?
RandalJ.Freitag
AsImentioned,weexpecttoexceedthe$650millionwedidinthein2014.AndIexpectwe'llgostrongearlyinthe
yearalso.
ErikJamesBassCitigroupInc,ResearchDivision
Gotit.Andthatexceedingthatincludesthebenefitofthe$200million,correct?
RandalJ.Freitag
Yes.
ErikJamesBassCitigroupInc,ResearchDivision

Okay.Andthenjustonequestiononretirement.Canyoujusttalkaboutthedynamicsyou'reseeinginthemarketright
nowaroundcompetitionanddecliningactivitylevels?
DennisR.Glass
Yes.Themarketplaceiscompetitive.AndIthinkI'llbroadenedthequestiontoallofourproducts.Weparticipatein
competitivemarkets.Specificallyinthegroupbusiness,wehaven'tseenanuptickincompetitivenessovertheprior
years.Butitcontinuestherecontinuestobealotofgoodprovidersthatwe'recompetingwith.We'reseeinggood
resultsonourpresentationsandthenumberofpresentationsthatwe'rewinning.SoI'djustcharacterizeitasa
competitivemarket.Andacrossourbusinesses,wehavetostayrelevant.Wehavetofocusonproductdistributionand
technologytokeepourcompetitivepositionsolid,andwe'redoingthat.Soallbusinessesarecompetitive.Wedon'tsee
anyextremesinanyofthe4businesses.Again,Ifeltforthelastcoupleofyearsthatit'saprettysolidmarket,andin
largepart,thecompetitionissensibleandreasonable.Andwe'recompetingjustasweneedto.
Operator
OurnextquestioncomesfromthelineofJimmyBhullarfromJPMorgan.
JamminderS.BhullarJPMorganChase&Co,ResearchDivision
Youspokeaboutlikethechangesintheclaimmanagementsystemforthedisabilitybusiness.Canyoualsodiscuss
whatyou'redoingonthepricingsideandhowmuchofthebooksbeenrepriced?Whendoyouexpectthatprocessto
becompleted?
RandalJ.Freitag
Intermsofhowmuchhascomethroughthepipelineandtherepricingprocess,fromafinancialmergerstandpoint,it's
roughly30%asoftheendoftheyearhascomethroughintermsofthepriceincreases.
DennisR.Glass
Letmeanswerthat.In2014,again,we'retalkingaboutemployerpaid.We'redrivingmidtosingledigitincreasesat
targetsinaggregate.Renewalpricingin2014,that'sfornewbusiness,isupmiddlemidsingledigits.Butimportantly,
wearerunningoffunprofitablebusinesswherewepushedforhigherrateincreases.Asaresultofcontinuedpricing
actions,fourthquarterpersistencywasdownalittlebit,notdramatically.Somiddlesingledigitforthebusinessthat's
staying,again,predominantlyemployerpaid.Andinthefirstquarterof2015,we'regoingtodrivethatexpectationalittle
bithigher,sortofaskingforlowdoubledigitincreases.It'shardtopredictwhatwewillget.Butthesearesolidincreases
onthebusinessthat'sstayingandtherenewal,solidnewbusinesspricing.AndasRandysaid,itwillcontinuetoroll
throughtheincomestream.
JamminderS.BhullarJPMorganChase&Co,ResearchDivision
Andthenlastly,you'vehadsomelargelapsesintheretirementbusiness.Doyouhaveanyvisibilityintomorelower
potentiallargecaseofwithdrawalsorlapsesasyouoverthenextcoupleofquartersinRetirement?
DennisR.Glass
Yes.Inaggregate,ourvisibilityrightnowistheexpectationthatwehavepositivecashflowinthefirsthalfof2015.And
thegoalfurtherthanthat,wejustdon'thaveenoughactualinformationtogiveyouathoughtonthatoranestimationon
that.
Operator
Andwehavetimeforonemorequestiontoday.OurfinalquestioncomesfromthelineofYaronKinarfromDeutsche
Bank.
YaronKinarDeutscheBankAG,ResearchDivision
Quickfollowuponthereinsurancerecapture.Wasanyofthecashreceivedalreadydeployedin2014?
RandalJ.Freitag
No.2014buybacksdidnotincludeanyimpactfromthereinsurancerecapture.

DennisR.Glass
We'reinclosedperiod.Wecan'tbebuyinguntilacoupleofdaysaftertoday'smeeting.
YaronKinarDeutscheBankAG,ResearchDivision
Right.AndthencouldyoumaybeaddalittlecolorastohowitisthatthespreadcompressionoutlookfromNovember
hasn'tsorry,letmestartover.Howisitthatspreadcompressiontodayofyouroutlooktodayhasn'treallychanged
beyondtheguidancelevelsofferedinNovembergiventhefactthatwehaveseenthe50basispointdeclinesince
November?Areyouabletooffsetthecompressionbyadditionalenhancements?Oristheresomethingelsethat's
drivingkindofyourabilitytokeepwithintherange?
RandalJ.Freitag
Yaron,I'dsay,Ithinkwehavechanged.Remember,atInvestorDay,weprovidedarangeof2%to3%.Ithinkatthe
timewewereatthelowendofit,theverylowendofthatrange.AndasImentionedinmyscript,I'dsay,we'remoreat
theupperendofthatrangerightnowbutthat,thatincreaseintheimpactofspreadcompressionwillbemorethan
offsetbythecapitalactionsthatwe'vetalkedabout.SoIthinkweareexperiencingalittlemorespreadcompression.It's
justnotuptothelevelitwasacoupleofyearsago.
YaronKinarDeutscheBankAG,ResearchDivision
Soputdifferently,whenyoucameupwiththe2%to3%rangebackinNovember,youalreadycontemplatedascenario
yieldswouldbeatthislevel?
RandalJ.Freitag
No.AsImentioned,attheInvestorDayweprovidedarangeof2%to3%.Andwewereatthelowend.Inactualitywith
ratesatthatlevel,wewereatthelowendofthatrange.Ratesarealittlelowernow.There'sbeensomeoffsetfrom
spreadwidening,Iwouldnote.Butoverall,allinnewmoneyyieldsarealittlelowernow.Andthatmeansthatthe
compressionimpacthasnowmovedtotheupperendofthatrange,sofrom2%to3%.
Operator
Andthatconcludesourquestionandanswersessionfortoday.IwouldliketoturntheconferencebackovertoChris
Giovanniforanyclosingcomments.
ChristopherGiovanni
Thankyou,Karen.Andthankyou,all,forjoiningusthismorning.Asalways,we'rearoundtotakeyourquestionsonthe
InvestorRelationslineat(800)2372920oremailatInvestorRelations@LFG.com.Thankyou,all,andhaveagood
day.
Operator
Thankyou.Ladiesandgentlemen,thankyouforyourparticipationintoday'sconference.Thisdoesconcludethe
program,andyoumaynowdisconnect.Everyone,haveagoodday.Speakers,pleaseholdyourlines.
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