A.M. Best Co. has assigned a debt rating of “a-” to the $350 million 4.10% unsecured senior notes, due August 13, 2023 issued by Lincoln National Corporation (Lincoln) (headquartered in Radnor, PA) [NYSE: LNC]. The outlook assigned is stable. All other ratings of Lincoln and its subsidiaries are unchanged.
Lincoln intends to use the proceeds from the offering to repay at maturity all or a portion of the 4.75% senior notes due in the first quarter of 2014. Although there may be a small increase in Lincoln’s financial leverage ratio upon issuance, the pro forma impact on financial leverage is expected to improve in the medium term given Lincoln’s plans to retire the 2014 maturing debt. Lincoln’s financial leverage and interest coverage ratios remain well within A.M. Best expectations for its current rating. In addition, the company continues to benefit from steady cash flows, access to multiple liquidity sources and its profitable insurance operations, which facilitate its debt service.
A.M. Best notes that Lincoln’s operating results remain favorable in 2013 as increased earnings in the variable annuity line of business has offset an increase in mortality in the ordinary life insurance line of business as well as the impact of the low interest rate environment on its spread based businesses. However, Lincoln does continue to benefit from its good product platform and distribution franchise. Lincoln’s operating results also have been supported by rising equity markets and a rise in interest rates. A.M. Best notes that although Lincoln’s group protection business is profitable, it continues to lag with respect to its overall contribution to the company’s earnings.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.