Ⅰ.Introduction to Lincoln Financial Group
Lincoln Financial Group is a US holding insurance company headquartered in Radnor, Pennsylvania, listed on the New York Stock Exchange (stock code LNC), and a component of the S&P 500 index.
It was originally established in 1905 in Fort Wayne, Indiana, and has a history of over 110 years. Lincoln Financial Group uses the name and image of one of the greatest presidents in US history, Abraham Lincoln, as its company name and brand logo, and is the first and only company to use his name, image, and ideals as its brand core.
For over a century, Lincoln Financial Group has promoted the inclusive vision and values of President Lincoln by establishing an honest and reliable financial services company, committed to helping Americans achieve their financial goals and strive for a better future. Today, Lincoln Financial Group is recognized as one of the best life insurance companies in the United States.
Lincoln Financial Group has won numerous awards in the insurance industry. In 2013, 2015, and 2016, it was named the best life insurance company in the US by “World Finance Magazine.” In addition, it was named the best employer in the US by Forbes in 2017, 2018, and 2019.
On the Fortune 500 list for 2019, Lincoln Financial Group ranked 187th in revenue and 23rd in assets. It’s worth noting that Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliated subsidiaries.
Company History
In 1905, a group of business leaders from Fort Wayne came together to establish a life insurance company based on reliability, honesty, and service. The company was named after one of America’s greatest leaders, Abraham Lincoln, with the authorization of Robert Todd Lincoln.
In 1912, Lincoln entered the reinsurance business, becoming one of the pioneering companies in the American reinsurance industry.
By 1955, Lincoln became the ninth-largest life insurance company in the United States and the second-largest reinsurance company in the world.
In 1968, Lincoln National Corporation (LNC) was founded, making it one of the earliest holding companies in the insurance industry.
In 1969, Lincoln National Corporation was listed on the New York Stock Exchange and Midwest Stock Exchange.
In 1998, Lincoln National Corporation launched its new marketing name, “Lincoln Financial Group,” to enhance its brand as a financial services company. The same year, the Lincoln National Corporation board of directors voted to relocate the company’s headquarters to Philadelphia.
In 2002, Lincoln Financial Group acquired the naming rights to the new Philadelphia Eagles football stadium, now known as Lincoln Financial Field.
In 2006, Lincoln National Corporation merged with Jefferson Pilot Financial, creating one of the largest financial services organizations in the United States.
In 2019, Lincoln Financial Group ranked 187th on the Fortune 500 list, with assets ranking 23rd and total assets reaching $298.1 billion.
Credit Rating
Credit rating agencies, including Standard & Poor’s, Fitch, Moody’s, and A.M. Best, have given Lincoln Financial Group a strong credit rating. As of July 17, 2019, its Comdex composite score was excellent.
Financial Strength
According to the benchmark rating agency A.M. Best, Lincoln Financial Group ranked fifth among the top 25 U.S. holding insurance companies based on total assets. Its indexed universal life insurance (IUL) brand ranked 5th among U.S. companies.
Ranking of US-Indexed Universal Life Insurance Companies
- Pacific Life
- National Life Group
- TransAmerica Life
- Minnesota Life
- Nationwide
- Zurich
- Lincoln National Life
- Prudential (not to be confused with UK-based Prudential)
- Allianz
- AXA
- Voya
The above rankings are from the 2018 Wink® Top Indexed Universal Life Insurance Brands.
Ⅱ.Lincoln Product Introduction
The Lincoln WealthAccumulate IUL is one of the most advanced life insurance products currently available in the US life insurance market. It focuses on the accumulation of cash value in the policy while also providing high death benefit protection. The profit account is mainly tied to mainstream stock indexes, and through structured operations, it ensures that clients’ account funds are not affected by losses in the stock index market during major downturns and provides substantial growth potential when the stock index market surges. Its overall rate of return far exceeds that of other types of insurance. Customers can use this insurance product for various needs, such as children’s education, retirement planning, and wealth transfer.
- Product Features
- Product Characteristics
- Flexible Premiums
The indexed universal life insurance has flexible payment methods, which can be paid monthly, quarterly, semi-annually, or annually, and the payment amount of premiums is also flexible.
The Lincoln WealthAccumulate IUL product is designed for middle and high-income groups. If the full premium is paid for the first 10 years, the policy can continue to generate an ideal accumulation of cash value even without any premium income in the future. Premiums can also be paid flexibly, with higher leverage and higher death benefit, but this method leads to slower cash value accumulation and future policy risk. Therefore, it is particularly important to tailor a policy design for each customer.
- Underwriting Ratings
Preferred Plus (Chinese customers can obtain the first rating)
Preferred Non-tobacco
Standard Non-tobacco
Preferred Tobacco
Standard Tobacco
- Death Benefit Options
Option I: Level
MAX {face amount, account value * Corridor}
Option II: Increasing
MAX {face amount + account value, face amount * 115%, account value * Corridor}
Option III: Return of Premium
MAX {face amount + cumulative premiums – withdrawals, account value * Corridor}
- 10-Year No-Lapse Guarantee
This guarantees that the policy will remain in force for 10 years even if the policy’s surrender value is not enough to cover the monthly deductions. The policy must meet the minimum monthly premium (MMP) requirement, otherwise, it will enter a grace period.
- Return of Premium Rider (ROP)
This is an additional provision that offers the opportunity to completely surrender the policy at the end of the 20th policy year and receive 100% of the total premium paid, provided that the minimum premium requirements are met.
The minimum premium requirement is the monthly minimum premium (MMP) multiplied by the number of policy months that have elapsed.
If the minimum monthly premium is not met, the policyholder may pay additional premiums to “make up” for the premium requirements of the first 10 policy years. After the 10th policy year, the minimum monthly premium requirement must be met to keep the additional provision in effect.
This additional provision is free and the policy must be issued to a person under 60 years of age and have a risk class of Table D or higher.
- Premium Deposit Fund (PDF)
The PDF allows policyholders to pay future premiums in advance, which can help avoid the policy from becoming a Modified Endowment Contract (MEC) due to the limitations of Section 7702A.
Interest is credited to the fund at a declared rate (guaranteed at 1%) and is taxed annually.
The minimum deposit is $250 and the maximum is 10 times the annual premium. The annual premium is automatically deposited into the policy by the PDF.
- Interest Bonuses
Index Credit Enhancement (ICE) is based on index performance and adds a percentage bonus at maturity starting from the first year.
Positive Performance Credit (PPC), if applicable, is added to ICE when the index strategy block expires and is a non-guaranteed bonus that applies only to the Perform Plus, Perform, and Balance index accounts.
Account Value Enhancement (AVE) adds a guaranteed bonus to the applicable account starting from the first year.
- Loans and Withdrawals
- Riders
Overloan Protection Rider
Accelerated Death Benefit-without chronic illness
- Account Analysis
- Fixed Account
The fixed strategy account earns daily interest;
Current rate: 3% per year (not guaranteed)
Guaranteed rate: 1% per year
The Account Value Enhancement (AVE) is credited with an effective interest rate of 0.35% per annum every month.
- Dollar Cost Averaging (DCA) Account
Premiums can be directly transferred to the optional DCA account, and a portion of it will be systematically transferred from the account every month;
On each monthly allocation date, the amount equivalent to one-twelfth of the premiums allocated to the DCA account in the past 12 months, plus any interest amounts credited since the last allocation date, will be transferred to the Holding Account for monthly allocation processing;
DCA account is only applicable to annual and semi-annual payment modes, except for 1035 premiums, and requires a minimum premium of $1,000;
The DCA account earns interest daily, and the credited interest rate is determined by the insurance company:
Current rate: 4% per year
Guaranteed rate: not less than 1.00% per year
The Account Value Enhancement (AVE) is credited with an effective interest rate of 0.35% per annum every month.
Note: The Dollar Cost Averaging Account allows for spreading a lump-sum payment over several months so that the entire payment is not based solely on the market performance on a single date. Whether to use the DCA account is your choice, and it will affect the amount of interest earned by the policy, which may increase or decrease depending on the index performance.
- Holding Account
The Holding Account temporarily holds funds allocated to the account until the next monthly allocation date;
The Holding Account value includes premiums (including any portion of the DCA account transferred by the system) and funds available for transfer, such as expired Indexed Account portions;
The Holding Account earns interest daily:
Current rate: 3% per year
Guaranteed rate: 1% per year
The Account Value Enhancement (AVE) is credited with an effective interest rate of 0.35% per annum every month.
- Indexed Accounts
Finally, we come to the focus of this article, the most important part of the product!
There are four indexed account strategies in this product, all linked to the S&P 500 index, with a term of one year and starting and ending on the 15th of each month.
Overview of indexed strategies
Upper Limit 1: 1 Year Point-to-Point Perform Plus Indexed Account with a 0% Floor
Upper Limit 2: 1 Year Point-to-Point Perform Indexed Account with a 0% Floor
Upper Limit 3: 1 Year Point-to-Point Balance Indexed Account with a 0% Floor
Upper Limit 4: 1 Year Point-to-Point Conserve Indexed Account with a 1% Floor
Historical performance of indexed strategies
The maximum and minimum average annual returns for every 25 years for the S&P 500 index in the past 66 years for each indexed strategy:
Recent 20-year historical performance
Perform Plus Indexed Account (excluding ICE and PPC dividend portions)
Perform Indexed Accounts (excluding ICE and PPC dividend portions)
Balance Indexed Account (excluding ICE and PPC dividend portions)
Conserve Indexed Account (excluding AVE dividend portions)
- How to calculate the value of indexed accounts
Assuming the current strategy for the indexed account, as follows:
Case: S&P 500 index performance exceeds the Cap
Case: S&P 500 index performance is below the Cap
Case: S&P 500 index performance is below the Floor
For more details, please consult the author!
Ⅲ.Case Analysis of Lincoln
- Customer Profile (for illustration only)
- Excerpt from the Policy Plan Presentation
At the end of the 10th year, the policy account cash value was $408,539, total premiums paid were $448,000, and the death benefit was $3 million.
At the end of the 37th year, when Ada was 81 years old, the policy cash value account reached $3 million, and the basic death benefit began to increase to $3.15 million.
Assuming the average lifespan is 85 years old, in the 41st year of the policy, the policy cash value account has a limit of $4.14 million and the death benefit reaches $4.35 million.
- IRR
Compared with the popular Hong Kong AIA’s Future Savings Plan with an average annual compound interest rate of 6.5% over 100 years, Lincoln WealthAccumulate IUL, an index universal life insurance policy from Lincoln Financial Group (as shown in the above case), reached the same level of returns as the Future Savings Plan in the 40th year of the policy while providing high-leverage life insurance protection. If conditions permit, Lincoln WealthAccumulate IUL is worth your consideration.
Ⅳ.Overall Evaluation of Lincoln
Lincoln Financial Group is a trusted name that has established an excellent insurance brand in its more than 100 years of business history. Few companies have as strong and resilient a public image as Lincoln Life, representing trust and excellence. Today, over 17 million customers trust Lincoln Life to help them meet their needs for savings, protection, and wealth transfer. Lincoln Life is consistently ranked in the top 10 of many US insurance company rankings, and its index universal life insurance policy, Lincoln WealthAccumulate IUL, is similarly excellent and competitive compared to similar products. We believe it can provide you with a secure and prosperous life.
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