Key Takeaways
- Lincoln National closed a $500M subordinated debt offering on June 29 at 6.800% — AM Best rated the notes in the ‘bbb’ range (Good) on July 1, consistent with its existing subordinated debt ratings for Lincoln.
- The prospectus discloses a key risk most coverage ignores: Lincoln can defer interest payments on these notes for up to five consecutive years — a right that protects the issuer, not the bondholder.
- If you hold a Lincoln Financial life or annuity contract, the subordination stack and deferral rights in this offering are a useful window into how the company ranks its obligations — insurance policyholder claims rank above these notes, but the structure reflects a company still actively managing its capital position after a difficult 2022.
- Proceeds are earmarked in part for potential preferred stock repurchase or redemption, suggesting Lincoln is cleaning up its capital structure from the bottom up.
Lincoln National Corporation closed a $500 million subordinated debt offering on June 29, 2026. AM Best assigned its indicative issue credit rating to the notes the following day. The offering, priced at 100% of principal, carries a 6.800% fixed coupon through July 15, 2036, then resets every five years at the five-year U.S. Treasury rate plus 240 basis points.
That’s the transaction. What the prospectus supplement filed with the SEC on June 29 says underneath it is a different story.
What the SEC Filing Actually Shows
The notes are unsecured subordinated obligations. They rank junior to all of Lincoln National’s existing and future senior indebtedness, and the company disclosed approximately $6.4 billion in short- and long-term debt outstanding as of March 31, 2026, essentially all of which ranks senior to these new notes. Lincoln’s insurance subsidiaries, which hold the policyholder obligations, had roughly $185.3 billion in liabilities as of the same date, all of which are structurally senior to this new paper.
That subordination is standard for this type of instrument. What isn’t always flagged in coverage of insurance debt deals is the deferral right buried in the terms: Lincoln can elect to defer interest payments on these notes for one or more consecutive interest periods of up to five years per deferral period. Deferred interest accrues additional interest at the applicable coupon rate, so you eventually get paid more if you’re a noteholder, but the five-year window before any obligation to pay tells you something real about who this instrument is designed to protect.
AM Best’s indicative rating on the new notes is consistent with its March 2026 affirmation of Lincoln National’s existing subordinated debt at “bbb” (Good). The company’s operating subsidiaries, Lincoln Life and Annuity Company of New York and The Lincoln National Life Insurance Company, hold financial strength ratings that are stronger than the holding-company debt ratings, which is the normal pattern at major carriers. Policyholders have a prior claim on the regulated operating entities’ assets; bondholders sit behind that in the event of a stressed scenario.
Why Lincoln Is Doing This Now
The prospectus states net proceeds will be used for general corporate purposes, which may include repurchase or redemption of specified preferred stock series. That’s not nothing. Preferred stock repurchase from the holding company level indicates Lincoln is working the bottom of its capital stack, retiring the most expensive and most junior obligations as the capital position permits.
Lincoln National has had a specific capital-management story since AM Best downgraded the company in November 2022, citing the impact of market volatility on its variable annuity and variable life blocks. The company has been shedding closed-block VAs steadily since, most notably the Venerable Holdings deal, which transferred approximately $51 billion in variable annuities off Lincoln’s balance sheet. This $500 million raise at 6.800% is a cost-of-capital read: this is what the market charges Lincoln for junior capital today. That’s neither alarming nor reassuring on its own; it’s a data point.
For comparison, a 10-year U.S. Treasury note currently yields somewhere around 4.2% to 4.5% depending on the day. Lincoln is paying roughly 240 basis points above that for 10 years of fixed-rate subordinated money, with the spread persisting as a floor in the reset structure. The market is telling you something about how it prices Lincoln’s credit tier relative to the risk-free rate.
What This Means If You Hold a Lincoln Contract
I spent years on the agency desk watching clients renew Lincoln term policies and buy Lincoln VUL products without ever knowing what the holding company’s balance sheet looked like. Most of them wouldn’t have cared. But when a carrier’s financial structure makes news, it’s worth translating the capital markets story into the question an ordinary policyholder would ask: should I be concerned?
The honest answer here is: not particularly. Insurance policyholder claims sit above subordinated debt in the capital stack at the regulated subsidiary level. AM Best’s financial strength ratings on Lincoln’s operating subsidiaries are in the “A” tier, not under review, and the company has been actively strengthening its balance sheet since 2022. The subordinated note deferral right is designed to let the holding company preserve cash in a stress scenario without triggering a default, that actually protects policyholders indirectly, because it reduces the risk of a cascade.
The signal worth watching is the preferred stock redemption. If Lincoln follows through on using proceeds to retire preferred, it simplifies the capital structure and reduces ongoing preferred dividends. That’s a positive for long-term financial stability. If they don’t, and the proceeds get absorbed into general operations, the story looks less disciplined.
For anyone currently shopping Lincoln Financial products, and Lincoln remains a significant player in term life, VUL, and the indexed universal life market, the best life insurance calculus doesn’t change based on this offering. But running the carrier’s AM Best financial strength rating before buying any permanent product is baseline hygiene. AM Best’s operating subsidiary ratings for Lincoln are available free at ambest.com; the holding-company debt ratings are a separate and more volatile signal.
If you’re comparing term options, Lincoln’s pricing has historically been competitive in the preferred and preferred-plus rate classes. A 35-year-old male buying a 20-year, $500,000 level term policy at preferred-plus rates currently prices in the $24 to $30 per month range across major carriers; Lincoln typically lands in that range. The holding-company capital action doesn’t affect that pricing. Underwriting guides are set at the subsidiary level, and those haven’t changed in this transaction.
Preferred-plus underwriting at Lincoln and most major carriers still runs the same stack it always has: no nicotine for at least five years, BMI typically under 28 to 30 depending on the guide, clean driving record, no felony history, and family history that clears the table-rating criteria. The MIB Group database and the prescription pharmacy database get pulled before any offer is finalized. None of that moves because Lincoln raised subordinated debt.
The one thing to actually watch in the coming quarters: whether AM Best takes any action on Lincoln’s holding-company outlook as the preferred redemption plan clarifies. The March 2026 affirmation left the “bbb” rating on subordinated obligations without a negative outlook. If the new notes get a negative outlook attached in a follow-on action, that would be worth covering. For now, the July 1 indicative rating is a routine step, and the best term life insurance comparison landscape doesn’t shift because of it.
