LincolnNational's(LNC)CEODennisGlassonQ12015ResultsEarningsCallTranscriptStartTime:10:00

EndTime:11:01

LincolnNationalCorporation(NYSE:LNC)

Q12015EarningsConferenceCall

April30,2015,10:00AMET

Executives

DennisR.GlassPresidentandCEO

RandalJ.FreitagCFO

ChrisGiovanniSVP,IR

Analysts

SuneetKamathUBS

RyanKruegerKeefe,Bruyette&Woods,Inc.

SethWeissBankofAmericaMerrillLynch

ThomasGallagherCreditSuisse

StevenSchwartzRaymondJames

ErikBassCitigroup

HumphreyLeeDowling&Partners

RandyBinnerFBRCapitalMarkets

EricBergRBCCapitalMarkets

Operator

Goodmorning,andthankyouforjoiningLincolnFinancialGroup'sFirstQuarter2015EarningsConferenceCall.Atthistime,alllinesareinlistenonlymode.Later,wewillannouncetheopportunityforquestionsandinstructionswillbegivingatthattime.[OperatorInstructions].

Atthistime,IwouldliketoturntheconferenceovertotheSeniorVicePresidentofInvestorRelations,ChrisGiovanni.Pleasegoahead,sir.

ChrisGiovanni

Thankyou,Liz.Goodmorning,andwelcometoLincolnFinancialsfirstquarterearningscall.

Beforewebegin,Ihaveanimportantreminder.Anycommentsmadeduringthecallregardingfutureexpectations,trendsandmarketconditionsincludingcommentsaboutsalesanddeposits,expenses,incomefromoperations,andliquidityandcapitalresourcesareforwardlookingstatementsunderthePrivateSecuritiesLitigationReformActof1995.Theseforwardlookingstatementsinvolverisksanduncertaintiesthatcouldcauseactualresultstodiffermateriallyfromcurrentexpectations.Theserisksanduncertaintiesaredescribedinthecautionarystatement

disclosuresinourearningsreleaseissuedyesterdayandourreportsonforms8K,10Qand10KfiledwiththeSEC.

WeappreciateyouparticipatingtodayandinviteyoutovisitLincolnsWebsitewww.lincolnfinancial.comwhereyoucanfindourpressreleaseandstatisticalsupplement,whichincludeafullreconciliationofthenonGAAPmeasuresusedinthecallincludingincomefromoperationsandreturnonequitytotheirmostcomparableGAAPmeasures.

SopresentingontodayscallareDennisGlass,PresidentandChiefExecutiveOfficerandRandyFreitag,ChiefFinancialOfficer.Aftertheirpreparedremarks,wewillmovetoquestionandanswerportionofthecall.

IwouldnowliketoturnthingsovertoDennis.

DennisR.Glass

Thankyou,Chris,andgoodmorning,everyone.Operatingearningspershareonceagainincreasedovertheprioryearquarter,albeitslightlyasoperatingearningsweredownduetoelevatedmortalityinIndividualLifeandpoorGroupProtectionresults.Weacknowledgedatthestarttotheyearwaslowerthananalystprojections,butweremaincomfortablewithourfinancialplanningandbusinesstargets.Ourconfidenceisgroundedonseveralfronts.

Firstandforemost,ourbroadanddeepdistributionfranchiseconsistentlygivesLincolnacompetitiveadvantage.Thisenablesmomentumandlongtermrevenueandearningsdriverstocontinue.Wesawthisinthefirstquarterwithpositivenetflowsinallofourbusinesses,salesthatbenefitedfromvariousproductintroductionsandrefinements,whichresultedingoodsalesgrowthasthequarterprogressedandhascontinuedinApril.Accountvaluegrowthineverybusinesswithtotalbalancesup6%toarecord222billion.

Next,wehavearigorousapproachtoexpensemanagement.Thisquarter,weonceagainsawourexpenseratiodecreasefromtheprioryear.Also,ourbalancesheetstrengthandcapitalgenerationenablesustocomplementorganicearningswithcapitalmanagement,furtheraugmentingearningspersharegrowth.

Allofthissupportskeyshareholdermetrics,severalofwhichshowedimpressivegrowththisquarterincludingbookvaluepershare,excludingAOCI,increased9%fromtheprioryear.Therepurchaseof350millionofLincolnshares,apostfinancialcrisishigh,anda25%yearoveryearincreaseinourcommonstockdividend.

WhileourROEwasnegativelyimpactedbytheearningsitemsInotedupfront,ourROEinaseasonallyweakquarterandinthemidstofacontinuedturnaroundinGroupProtectionexceeded11%whichisconsistentwithreturnsgeneratedbyourpeersduring2014.Thatbeingsaid,weclearlyexpectourROEstorecoverandremainabovepeers.

Letmenowturntoourbusinesslines,startingwithannuities.Favorableequitymarketsandpositivenetflowsledtoa7%increaseinouraverageaccountbalancesandanothersolidearningsquarter.Ourconsistentmarketpresencecontinuestoproducequarterlysalesinthe$3billionrangeandpositivenetflows.Variableannuitydepositsof2.7billiondecreased8%fromthefirstquarteroflastyear,butweareencouragedbythesalesmomentumwesawoverthecourseofthefirstquarter.

Toprovidesomecontext,averagedailysalesinMarchwereup15%comparedtoJanuaryandFebruaryandthistrajectoryhascontinuedinApril.Asaresult,weexpectquarterlyannuitysalestoexceed3billioninthenextquarter,whichshouldalsoenhancenetflows.

Weremainfocusedonpushingthepercentageofvariableannuitysalesfromproductswithoutlivingbenefitsto30%.Thisquarter,wereached27%,upfrom19%intheprioryearperiod,makingtheseventhstraightquarterofsequentialincreases.Whenfactoringintheimpactofsalesonsalescoveredbyourreinsurancetreaty,nonguaranteeproductscomprise58%oftotalDAsales.

OurconsistentmarketpresenceandproventrackrecordofofferingvaluablecustomersolutionsthatalsoenableLincolntoachievegoodreturnsandmanagedriskstillholdstruetoday.InaDAmarketplacethatremainsrational,weareconfidentwearepositionedforgrowth.

TurningtoIndividualLife,totallifeinsurancesalesinthequarterwere153million,a6%increasefromtheprioryearquarter.Withoneofthebroadestproductportfoliosintheindustry,wecontinuetodelivergrowthwithadiversifiedmixofsalesandbysellingmoreproductswithoutlongtermguarantees.

Thisquarter,nosingleproductrepresentedmorethan29%oftotalproduction,downfrom32%lastyearand62%ofoursalesdidnothavelongtermguarantees,upfrom59%intheprioryearquarter.Equallyimportant,withineachproductwehavedifferentfeaturesandoptionsthatenableourdistributorstoexpandconsumerreach,butalsogiveLincolnanothertactictodiversifyrisk.AnexampleofthisisourMoneyGuardproduct,whereroughlyhalfofoursalesthis

quarterwereflexpayandtheotherhalfsinglepay.Thisreducesinterestratesensitivity.

Focusingonindividuallifeinsurance,salesdecreased2%inthequarter,however,similartomypriorcommentsaroundvariableannuitysales,weareencouragedbythesalesmomentumwesawinMarchandthecarrythroughtoApril.Alsoofnote,mostproductscontributedtothismomentum.

COLIandBOLIsaleswere14millioninthequartercomparedwithjust3millionintheprioryearquarter.OuroutlookandappetiteforCOLIandBOLIhasnotchanged,aswewillremainopportunistic.Overall,saleshereneedtomeetthesame12%to15%returnhurdlewetargetforourentirelifeportfolio.

Lookingforward,whilewedidseeabumpinmortality,whichRandywillspeaktolater,weexpectprofitablesalesgrowthin2015giventhedepthandbreadthofourdistributionrelationshipsandproductdiversitycombinedwithprudentunderwriting.

TurningtoGroupProtection,Randywilltouchonouroperatingearningslossshortly.Thelackofearningsimprovementisdisappointing,butdoesnotchangeourexpectationsofapproachingourtargetmarginstowardtheendof2016to2017timeframe.Wearebeginningtoseetractionontheactionswehavebeenimplementingandareencouragedbytheunderlyingpricingandclaimsmanagementtrends.Weremainfocusedontakingpricingactionsaimedatouremployerpaidbusinessesandenhancingclaimsmanagementtorestoreprofitability.

Firstquartersalesof56millionweredown13%fromthesameperiodlastyear.Ourpricingactionscontinuedtoputdownwardpressureonnewbusinessopportunities,particularlyinthe1,000plusmarket,whichhistoricallyhasbeenamorecompetitivesegmentofthemarket.Lookingforward,weseesalesgrowthremainingpressuredaswecontinuetopushforrateincreases.

InRetirementPlanServices,earningswereimpactedbysomespreadcompressionthoughweareencouragedbyunderlyingbusinessdrivers.Notably,wereturnedtopositivenetflows.Flowsof$115millionimprovedsignificantlywhenmeasuredagainstoutflowsinthefourthquarterandprioryearquarter.Positivenetflowsinthefirstquarterisconsistentwithouryearendoutlookthatcalledforpositivenetflowsforthefirsthalfof2015.

Ouroptimismandvisibilitynowextendsthroughthethirdquarter.Afewpiecestothisoutlook.First,ourpipelineisstrong.Thisshouldbenefitfirstyearsalesinthenextcoupleofquarters.Also,ourexpectationsaroundretentionremainfavorable.Weattributethistoourconstanttradedeffortonimprovingplannedsponsorandparticipantexperiences.

Weremainoptimisticinthegrowthoutlookforourretirementbusiness.Longerterm,ourcoremarketsarepoisedtogrowfasterthantheindustrywhilecontinuedexpansionintosegmentslikegovernmentandsmallmarketsbodewellforLincoln.

Turningtodistribution,thedepthandbreadthofourretail,wholesaleandworksiteteamscontinuestodifferentiateLincoln.Wecurrentlyhaveover1,400clientfacingprofessionals,up4%versustheprioryear.ThenumberofproducerssellingLincolnproductsis63,000strongand26%ofthemarecrossselling,upfromtheprioryear.

Aswehavediscussedinthepast,ourlargedistributionforceenablesourmixshifts.Forexample,ourfocusongrowingvariableannuitieswithoutguarantees.Wenowhavealmost13,000producerssellingBAswithoutguarantees,up26%fromayearago.AtLincolnFinancialNetwork,wehad163experiencedadvisorschoosetoaffiliatewithLincolnthisquarter,whichputsouradvisornetworkatmorethan8,300,includinga2%increaseinregisteredreps.

SpendingaminuteonInvestmentManagement,ournewmoneypurchasesof$2.8billioninthefirstquarterwereinvestedatanaverageyieldof3.8%,whichwasdownfromthe4.3%inthefourthquarter,primarilydrivenbythedropintreasuryrates,aswellasanassetmix,whichfluctuatesfromquartertoquarter.

Wedelivereda186basispointspreadonnewmoneyovertheaverage10yeartreasury,whichisstrongandconsistentwithourhistoricalexperience.Ouryieldenhancingdebtprogramcontinuestoaddvaluetoourcoreinvestmentstrategyandadded12basispointstonewmoneyratesinthequarter.

Incomefromalternativeinvestmentswas8millionforthequarter,whichwasbelowtheprioryearsquarteraswellasourhistoricalaverage.Thisresultwasdrivenbyheadwindsfromourenergyexposure,whichwebelievehasstabilized.

Beforewrappingup,IwanttobrieflydiscusstheDepartmentofLaborsfiduciarystandardsproposal.Asyouhaveheardfromothermanagementteams,thisisavoluminousandcomplexproposalandlikemostfinancialservicecompanies,wearereviewingtheproposaltounderstandallofitspotentialimplications.Aswithallpertinentregulatorymatters,thereisaprocessandthedetailsareveryimportant.Wewillbeveryengaged,expressourviews,aswellascollaboratewithvariousindustrytradegroups.

Intheend,therelikelywillbesomechange.Webelievecompanieswithscale,abroadsetofproductofferingsandastronganddiversedistributionfranchiseswithaprovenabilitytopivotinresponsetomarketplaceorregulatorychangeswillbebestpositionedtonavigatechanges.Clearly,weareconfidentonallthesefrontsandexpectittoonceagaindifferentiateLincoln.

Inclosing,Irecognizetheyearstartedslowerthanmanyexpected.However,Idonotexpectseasonalfluctuationsinmortalitytodefineouryear.Ourfranchiseremainsacompetitiveadvantage,whileoursalesandflowsoutlookarestrong.Bothwillenableourlongtermrevenueandearningsmomentumtocontinue.

IwillnowturnthecallovertoRandy.

RandalJ.Freitag

Thankyou,Dennis.Lastnight,wereportedincomefromoperationsof352millionor$1.35pershareforthefirstquarter,up1%fromtheprioryear.Consistentwithfirstquarterresultsthepastfewyears[indiscernible]by30millioncomparedto18millionlastyear.

Asyouknow,wedonotnormalizeformortality,asitwillfluctuatefromquartertoquarter.However,wefeltthedeviationrelativetoourexpectationwaslargeenoughthatitshouldbementioned.

Lookingatkeyperformancemetrics,thetoplinecontinuestoshowhealthymidsingledigitgrowthwithoperatingrevenueup5%forthequarter,drivenbyanotherquarterofpositivenetflowsandthebenefitoffavorableequitymarkets.

Weremainfocusedonmanagingexpenses,whichagaindrovemarginexpansionasthe4%growthinG&Anetofcapitalizedexpensestrailedrevenuegrowth.Itisalsoworthnotingtheelevatedexpenses,whichIattributedtoseasonalityinthefourthquarter,didnormalize.

Bookvaluepershare,excludingAOCI,grew9%to$49.70,analltimehigh.AsDennisnoted,operatingreturnonequitycameinat11.2%,negativelyimpactedbytheadversemortalityandpoorresultsinGroupProtection.Ourbalancesheetremainsanimportantsourceofstrength,whichgivesussignificantfinancialflexibility.

Netincomeresultsforthequarterwerenegativelyimpactedby28millionforvariableannuitynetderivativelossesand10millionoflosseswithinourgeneralaccount.

Now,Iwillturntosegmentresultsandstartwithannuities.Reportedearningsforthequarterwere239million,an11%increaseoverlastyear.Operatingrevenuesincreased9%fromthefirstquarterof2014,aspositivenetflowscontinuedandwebenefitedfromfurthertailwindsinequitymarkets,whichcombineddrovea7%increaseinaverageaccountvaluesthatreached123billionattheendofthequarter.

Returnmetrics,whethermeasuredbyROAorROE,remainstrong.ROAincreasedthreebasispointsversustheprioryearandstandsat78basispointswhileROEcameinat25%,consistentwiththefourthquarter.Wecontinuetoexpectprofitablegrowthindepositsandnetflows,whichwilladdtoourrecordassetlevelsanddrivefurtherupsidetoannuitiesearnings.

InRetirementPlanServices,wereportedearningsof35million.Firstquarterrevenuegrowthwasup1%yearoveryear.Accountvaluesbenefitedfrompositivenetflowsinthefirstquarteralongwithfavorableequitymarketperformance.Asaresult,accountvaluesincreasedsequentiallyandendedthequarterat55billion,up5%versustheprioryear.

Normalizedspreadscompressed13basispointsversustheprioryearquarter,consistentwithourexpectationsforspreadstodeclineby10to15basispointsannuallyintheretirementbusiness.Ourreturnonassetswas26basispointsforthefirstquarter,withinthe25to30basispointrangewehavediscussedinthepast.

TurningtoourLifeInsurancesegment,earningsof111millionweredownasaresultofthefluctuationsinmortality.26millionofthequartersadversemortalityhittheLifeInsurancesegmentversus18millionintheprioryearquarter.Aswehavediscussedinthepast,ourfocusonretainingmoremortalityexposurecombinedwiththebusinessrecapturedatyearendshouldleadtosomeincreaseinquarterlyvolatility.

Lookingatmortalityexperienceinthecurrentquarter,andunderstandingthatwedontyethavecompleteinformation,wedobelievetheseverewinterweatherandfluseasonlikelyplayedapartinourexperience,consistentwithcommentsmadefromothersintheindustry.Itisworthnotingthatwetypicallyhaveseenseasonallyhighmortalityinthefirstquarteronlytoseemortalityimproveoverthecourseoftheyear.

Toprovidesomecontext,IndividualLifesfirstquarterearningsforthepastcoupleofyearshaveaveraged20%offullyearearnings.SowhileLifesfirstquarterresultswereonceagainnegativelyimpactedbyelevatedmortality,weexpectthatwhenviewedovermoreextendedperiodoftime,experiencewillbeinlinewithourlongertermexpectations.

Itisalsoworthmentioningthatouroutlookforthebusinesswerecapturedatyearendhasnotchanged.Notably,itwillhaveamodestnegativeimpactonIndividualLifeearningsandslightlyincreaseourquarterlyearningsvolatilitybutbeaccretivetoEPSgiventhebenefitofincrementalsharebuybacks.

Turningquicklytothelifeearningsdrivers,averageaccountvalueswereup5%withaverageinforcebaseamountup4%,bothconsistentwithrecentperformance.Normalizedspreadscameinaround166basispoints,down5basispointsfromtheprioryear,onceagaininlinewithourexpectations.

GroupProtectionfellshortofexpectations,aswereportedalossfromoperationsof6millioninthefirstquartercomparedtoagainof20millionintheprioryear.Theearningsdomasksignificantsequentialimprovementinkeymetrics.Ournonmedicallossratioimprovedfrom81%inthefourthquarteroflastyearto78%thisquarter.

Importantly,ourdisabilitylossratiodeclinednearly10percentagepointsto80[indiscernible]processandisevenlysplitbetweenthedecreaseinclaimincidentsandhigherrecoverieswithbothimprovingbyapproximately10%.Thesepositiveearningsdriverswereoffsetbyafewnegativeitems,includingacceleratedamortizationofDACandaportionoftheelevatedmortalityInotedupfront.

IntermsoftheacceleratedamortizationofDAC,thiswasprimarilyduetoourextensiverepricingofpolicyrenewals.Thisreducedearningsbyapproximately10millionwhencomparedtothefourthquarter.Withthefirstquarterourheaviestrenewalperiod,theamortizationimpactisgreatestinthisperiod.

Lookingforward,althoughweexpectamortizationtobeupversusprioryearquarters,wedonotanticipatethe10millionInotedforthisquartertorecurinsubsequentperiodsof2015.Bottomline,wedoexpectearningstoimprovebutcontinuetocautionthattheimprovementwillnotbelinear.

BeforemovingtoQ&A,letmecommentonafewotheritemsofnote.Givenourstrongyearendcapitalpositionandthebenefitfromthereinsurancerecapture,weacceleratedcapitalmanagementinthequarterwith350millioninbuybacks.Wecontinuetoviewsharerepurchasesasanexcellentuseofcapitalandexpecttoexceedthe650millionweveputtoworkin2014.

Returningcapitaltoshareholdersremainsapriorityandasaresult,weexpecttogototheBoardinafewweekstoaskforanincreaseinoursharerepurchaseauthorization,consistentwithourpastpractices.Statutorysurplusstandsat8.5billionandweestimateourRBCratiowillendthequarteratapproximately515%,downfromyearendaswepaid400millionindividendstotheholdingcompany.Holdingcompanycashendedthequarteratnearly800million.

Finally,inMarch,wecompleteda$300milliondebtoffering,theproceedswhichwillbeusedtoretirethe250millionofdebtdueinJune.Weremaincomfortablewithourleverageandcapitalstructure.

Sowrappingthingsup,earningscameupabitshorttostarttheyear,butweremainveryconfidentlookingforward.InadditiontothestrongfranchisehighlightedbyDennis,weareencouragedbyourbeliefthatelevatedmortalityinthefirstquarterisdrivenbyseasonality,consistentwithourpastexperienceinprioryearsandthatwewillseebettermortalityinIndividualLiferesultsovertheremainderoftheyear.

Theimprovementswesawinunderlyingdisabilitytrendsthatledtoameaningfulsequentialdecreaseinourdisabilitylossratioandfinally,thestrengthofourbalancesheetandstrongcapitalgeneration,whichallowsustocontinueactivelydeployingcapital.

Withthat,letmeturnthecallovertotheoperatorforquestions.

QuestionandAnswerSession

Operator

[OperatorInstructions].OurfirstquestioncomesfromthelineofSuneetKamathwithUBS.Yourlineisnowopen.

SuneetKamath

Thanksandgoodmorning.FirstquestionontheDOLforfiduciarystandards,IappreciatethatitsstillearlydaysbutIjustwantedtogetahighlevelsense,maybefromDennis,howyouthinkthiscouldimpactyourannuitiesandRPS

business?Andthenspecificallyrelatedtoannuities,couldthismovetheindustrybacktowardsofferingmorelivingbenefitguaranteesinordertoimprovethevaluepropositionofthevariableannuity?Thanks.

DennisR.Glass

Yes,Suneet,Ithinkitiscomplicatedandthereslotyettoberevealedintermsofthefinalchangeshere.Idothink,ifyoudontmind,IllrepeatwhatIsaidinmyremarksandthatisthatwebelievetherewillbesomechangebutwethinkthatLincoln,becauseofourscale,broadsetofproductofferingsandstronganddiversedistributionfranchiseswithaprovenabilitytopivotinresponsetomarketorregulatedchangeswillbeablewillthereforebeabletonavigatethroughwhatevercomesdowntheroad.

Buthavingsaidthat,letmedigalittlebitdeeperintoyourquestionandfirsttalkaboutannuities.Sooneofthebigissues,oneoftheoverarchingissuesinthisdocumentishowagentsgetpaid,feesversuscommissions.Itsworthnotingwecurrentlyofferfeebasedproductsthatmeetthefiduciarystandardofprovidinginvestmentadvice.Asanexample,ourBAproductsarealreadysetuptobesoldasfeebasedadvisoryproductssowealreadyhavetakenaction.Wellcontinuetorespondtochanges,beitthroughlaworneedsandpreferencesfromourdistributionpartner.Sothatsimportant.

Stickingwithannuities,wevealwaysbeenknownmoreforournonqualifiedcompetitivepositioningduetoourpatentedEyeforLifeincomefeature,specificallyVAs58%ofwhatwesellisnonqualifiedand42%arequalified,andwethinkthisisprobablyalittlebetterthantheindustryaverage.Withrespecttononlivingbenefits,wedontthinktheresgoingtobeanyreductioninthepaceofourgrowthinthatproduct.Sothatsaspecificansweronthataswell.

Andthenfinally,onRPS,theresalotofissues.Ithinkthebiggerretirementcompanieshavetouchedonthem.Ithinkourbottomlineiswethinkthatwellbeabletorespondtochangesandwemayhavetomakesomechangesinthewaywedobusiness.Butwedontseethisasasignificanthurdleforcontinuingtogrowthatbusiness.Andletmejuststopthere.

SuneetKamath

Okay,thatshelpful.Ididwanttoaskanotheroneoncaptives.Justintermsofwhatyourehearingaroundregulatoryreview,variableannuitycaptives,ifyoucanupdateusonthat.Andthenalso,maybeforRandy,ifyoucanremindus,howyouwhatkindofassetsdoyouhaveinthecaptivelettersofcreditexposure,thosekindsofthings?Thanks.

DennisR.Glass

Yes,letmestartbyremindingallofusthatwejustfinishedwebeingtheindustryandtheregulatorsalong,thoughtfulprocessaroundcaptiveregulationsforATripleXandTripleXandthatturnedoutprettygood,bothfromaregulatorystandpointandfromtheperspectiveoftheindustry.So,Imkindofencouragedbythefactthatwejustwentthroughthiswiththem.

Onceagain,LincolnistakingsortofaleadingroleinthediscussionswithrespecttoVAcaptives.Onceagain,goodnewsintermsoftheprocess,similartowhattheregulatorsdidonATripleX,TripleX.Theyarehiringacoupleofoutsideconsultantstobringmoreperspectiveandhelpthemastheylookatthisissue.

InthiscaseofVAcaptives,thedifficultyisthatyouhavearegulatoryregimethatismoreonabookvaluebasisandyouhaveeconomicsofthepolicymoreonthebasisoffairmarketandsortofmoreGAAPeconomics.Sothecompanieshavetochooseandwevetalkedaboutbalancesheetrisk,theyhavetochoosebetweenhedgingtoprotectyourselfortobuildassetstopayfutureclaims.Andthenyoucanatthesametimeprotectagainstsomepotentialswingsin,Illcall,statutorycapitalcallsrelatedtoextremeeconomicscenarios.

SoImoptimisticthatmaybewellbeabletocraftasolutionwiththeregulatorsthatsortofmitigatesthistugandpullbetweenthateconomics.Andmaybe,thisisbeingabitoptimistic,wewontneedVAcaptivesifwecangetthatatall,ifwecangetthatproblemsolved.Sotheprocessisunderway.ImencouragedwithwhatIhearbeingsaidbytheregulatorsandwhattheyvealreadyaccomplished,andwellseewhereitturnsout.

RandalJ.Freitag

Suneet,hi,thisisRandy.WeremainverywellpositionedfromanassetstandpointintheVAcaptive.Ibelieveattheendofthequarter,ourassetsexceededourhedgetargetbyroughly$1.5billion,soIthinkthatsastorythatcontinuestodifferentiateusasacompany.Soverywellpositionedfromwherewesit.

Ifyouremember,andDennissortofdescribeditinhisdiscussion,themainriskaroundthisisthedifferencethatcan

emergebetweenstatutoryliabilitiesandeconomicliabilitiesincertaineconomicenvironments.Itsreallyonlythathoteconomicenvironment,whichisprimarilyabigspikeininterestrates,whichwouldcauseustouseanythingbutthehardassetsthatwecurrentlyusetoday.

Sowhatmakesupourcurrenthedgeassets,itsthevalueofthederivativeassetswehold,somebondsthatweholdinthere,butwerecurrentlyusingwhatyouwoulddescribeassoftassets.

SuneetKamath

Gotit.OnelastoneforDennis.Intermsofyourregulatorydiscussions,ImeanIthinkonTripleXandATripleX,theregulatorstookaviewofsortofaprospectiveapproachtothisasopposedtoaretroactive.IsthatyoursenseintermsofhavinganapproachVAcaptives,orisittooearlytotellonthat?Thanks.

DennisR.Glass

Alltheconversationisaroundprospective.Ithinkifyoulookbackhistoricallyintheinsuranceindustry,theregulatoryframeworkveryseldomlydomakethingsretroactive.Clearly,inthespecificcaseofATripleX,TripleX,therewasnoretroactivitybutIwouldhopethatitwouldbeforwardlookingbutIcantsaydefinitivelyifitwillorwontbe,becausewerenotthatfardowntheroad.

SuneetKamath

Okay.Thankyou.

Operator

OurnextquestioncomesfromthelineofRyanKruegerwithKBW.Yourlineisnowopen.

RyanKrueger

Thanks.Goodmorning.Onequickfollowup,Randy.Youmentionedthe1.5billionofnetassetsinthecaptives.CanyoutelluswhattheRBCimpactwouldbeifyoudidconsolidatethecaptiveatthispoint?

RandalJ.Freitag

Yes,itsnotsomethingwelookatonaregularbasisbutitcontinuestobethesamestory,whichisnonegativeimpactonourLNL,RBCorlifeinsurancecompanyreportedRBCifweweretobringourcaptivesbackin.

RyanKrueger

Okay,gotit.ThenIwanttomovetocapitalmanagement.InthepastyoutalkedaboutaninterestingroupbenefitsM&A.Wouldyoufeelcomfortablemakinganacquisitioninthatspacerightnowiftherightopportunitypresenteditselfgiventhechallengesthatyoureworkingthroughinyourownbusiness?

DennisR.Glass

Greatquestion.Whatwevesaidinthepastwasthefollowing,andourattitudehasntchanged,whichiswedliketoincreasemorbidityearningsattherighttimeandprobablywithinacquisition.Werenotrulingoutanacquisitionnow,butbecauseofthedifficultywerehavingwithourcorebusiness,itmakesithardertogetoverthehurdleofdoinganacquisition.Andthenfinally,quiteclearly,anythingwedointermsofacquisitionshastobemeasuredagainstothersourcesofcapitalsuchasbuyingoursharesback.Soopenminded,butatthemomentthingswouldhavetoatthemomenttheressomeimpediments.Notsayingthatwewouldntdosomethingbutitdbehardertodoit.

RyanKrueger

Okay.Andthenjustlastone,istheIguesswheredoyoufeellikeyoucouldbringyourRBCratiodowntoinanM&AifyouweretodoalargerM&Atransaction,isaround450stilltherightwaytothinkaboutwhereyoumightbeabletobringthatto?

RandalJ.Freitag

Ryan,IthinkitsthenatureoftheM&Adealyoudo.Ifitwasagroupdeal,Ithinkthatsprobablyareasonableestimate.Ithinkthewaywevetalkedaboutthisinthepastissortof,onourbalancesheetweprobablyhavecapacitytodo750millionorsoofM&Awithexistingcapitalfromthebalancesheet.

DennisR.Glass

Butagain,Iwanttoreinforcethisissuethatcontinuingtofocusonsharebuybacksisahighpriorityforus.Andthatwhenwetalkaboutexcesscapital,itsdifferentastowhetheryouusethatexcesscapitalforsharebuybacksorforacquisitionsintermsofthesplit,becausewhenyoudoanacquisition,thecapitalstaysinthecompanywhereassharebuybacksthecapitalgoesout.Sotheexcesscapitalcantallbeusedforsharebuybackswhereasmorbidcouldbeusedforacquisitions.

RyanKrueger

Veryhelpful.Thankyou.

Operator

OurnextquestioncomesfromthelineofSethWeisswithBankofAmericaMerrillLynch.Yourlineisnowopen.

SethWeiss

Hi.Thankyou.Aclarificationquestiononthe$30millionadversemortalityhit.Justwanttomakesurethisisrelativetoexpectationsforaseasonallyhigher1Q.Isthatcorrect?

RandalJ.Freitag

Thatssortofrelativetoourbaselineexpectationsforafullyear.Soifyouweretolookatanaveragequarterduringtheyear,30millionwouldbewhatsoverandabovethatnumberanditsreallysortofconsistentwithwhatweveexperiencedinthepast.IfIlookattheAtoEinthefirstquarterofthisyear,itsreallynodifferentthantheAtoEforthefirstquarterlastyear.Sowedidntseeanythingabnormalintheseasonality.WejustcontinuetogrowandretainmorebusinessandIthinkthatswhythenumberisbiggerthanlastyears.

SethWeiss

Okay.Thankyou.AndifIcanmoveontogroupandmaybealittlebitmoregranularityhere.IfIweretonormalizefortheacceleratedamortizationandmaybeaddinacouplemillionmoreformortalityattributedthere,wegettomodestprofitabilitybutstillunder$5millionundera1%margin.Andlastquarteryouspokeaboutnewclaimsmanagementcausingsomepressureonincidentsandrecoveriesbutexpectationstoimprovethoseclaimsmanagementissueswithinthenext6to12months.Socouldyouspeakaboutwhatclaimsmanagementpressuresyoumayhavefeltthisquarter?Andhowprogressonshoringupthoseissuesisgoing?

RandalJ.Freitag

Sure,Seth.Youremembertheoriginalissuesaroundclaimsmanagementprocessarosewhenweinstalledthenewsysteminthemiddleofnextyear,andthatcausedaveragecaseloadsperexaminertogoupandsomeofthenewprocesschangesthatwentinplacereallycausedsortofabackup.Sowehadsomethingsthatweneededtofix.Aswesaid,itwouldbesomethingthatwedfixaswecameintothesecondhalfofthisyear.Wethoughtwedbewhereweneededtobe.

Ithinkwemadesignificantimprovementinthisquarterandthatreallydrovethesignificantimprovementyousawonthedisabilitylossratio,asImentioneditimprovenearly10points,withalotofthatimprovementdirectlyattributableIbelievetosomeoftheimprovementsthatwemadeintheclaimsmanagementprocess.Westillhaveawaystogo.

Specifically,Ithinkwehavemoreworktodoonbringingaveragecaseloadsdownperexaminer.Ithinkthatsstilltocome.Butwemadealotoftheprocessimprovementsbringinginsupportforclaimsexaminers,forinstance,whetherthatsnursingsupport,whetherthatssupportatthemanageriallevel,orwhateveritis.Sowemadealotofprocessandsupportiveimprovements,butwestillhavemoretogoIthinkbeforewegettowhereweneedtobe.

SethWeiss

Okay.Thankyou.AndthenifIcouldjustdoonequickoneoncapital,absentM&A,howshouldwethinkaboutbringingthatRBCratiodownovertime,whichat515,Ithinkisstillquitehighrelativetopeers?

RandalJ.Freitag

Yes,IthinkitsstillhighandIthinkaswevesaidinthepast,thewaywevebeendeployingcapital,weexpectitto

comedown.Therehavebeensomeitemswhichhavebeenfavorable,whetheritwastheimpactofthereinsurancerecaptureinthefourthquarterorsomefavorableexperiencewehadlastyearintheRMBSreratingprocess,forinstance.Sotherehavebeenanumberofthingsthathavebeenfavorable.Butthewayweredistributingcapital,wecontinuetoexpectittocomedown10to15,10to20pointsayear,somewhereinthatrange.

SethWeiss

Okay.Thankyou.

RandalJ.Freitag

Youbet.

Operator

[OperatorInstructions].OurnextquestioncomesfromthelineofTomGallagherwithCreditSuisse.Yourlineisnowopen.

ThomasGallagher

Goodmorning.Firstquestionisjustontheadversemortalitythisquarter.Canyoucommentonwhetherorwhatimpactyousawfromtherecaptureblockthisquarter?Didthatcontributetotheweakness?Andifso,howmuch?

RandalJ.Freitag

Hi,Tom.Yes,Imeanitcontributedoveralltotheelevatedmortalityexperience.So,aswementioned,inbringinginthatbookofbusiness,weexpectitsimilartoexperiencefortherestofourbookandwesawthat.AsImentioned,overall,wehadanactualtoexpectedexperience.Inthisquarterthatwasverysimilartothefirstquarterof2014.Sotherewasnobigimpactfromthat.

Doingtherecaptureincreasedtheaveragepaysizeofourpolicyandwasgoingtocreatealittlemorevolatility.Andinaquarterwhereyouhavebadexperiencethatincreasedmortalitythatincreasedvolatility,meansyouregoingtohavemoreclaims,morebadexperience,andwehadthat,the30millionversusthefirst18millionwehadlastyear.Sotheresreallynodifferentiatedimpactfromtherecapturebusinesscomparedtowhatweveexperiencedinprioryearsfirstquarters.

ThomasGallagher

Gotyou.So,Randy,essentiallycontributeditsfairshareasapercentofthetotalblockbutnothingbeyondthat.Isthatafaircharacterization?

RandalJ.Freitag

Thatsaveryfaircharacterization.

ThomasGallagher

Okay.Andthenonefollowup.Dennis,thecommentyoumadeonliving,orVAsalesoutlivingbenefitguarantees.Iguessmyquestionthereis,whatpercentofthosesalesarecomingfromqualifiedsources?Isitsimilartoyouroverallmixinthelow40%range?Andwouldyouseethosesalesaspotentiallyvulnerableorpotentiallygettingoverhauls,justconsideringthevaluepropositionthatmaybehardertoproveunderafiduciarystandardsthreshold?

DennisR.Glass

Yes.Tom,letmerepeatthequestion.Whatpercentageofournonguaranteedbusinessiscomingfromqualifiedplans?

ThomasGallagher

Thatsright.Yes.

DennisR.Glass

Yes.Theanswertothatisabout25%iscomingfromqualifiedplansand75%fromnonqualifiedplans.

ThomasGallagher

Gotyou.Anddoyouthinkthat25%,justconsideringwhatshappeninghereandunderstandingthetechnicalitiesoftheproposalareyettobedetermined,butifyouthinkaboutthespiritofwhatsbeingproposedhere,wouldyouexpectthat25%potentiallygoingaway?

DennisR.Glass

Tom,thatsaveryspecificquestionanditsactuallyaquestionthatisprobablymoreappropriateforthebroaddistributionorganizations.Wehavesuchdifferentalternativestosellproduct,differentdistributionsystemsandchannels,asyouknow.Wedontthinkthatthereisaseriousrisktothat25%butitmayendupcomingfromdifferentchannelsthanitscomingfromtoday.SoIfallbackonourcommentbroad,diversifieddistributionandourprovenabilitytopivot,whetheritsforcustomerpreferences,pricingissuesorregulatoryreasons.Andthatwellfindawaywiththisdistributionorganizationtocontinuetogrowoursales.

ThomasGallagher

Okay.Thanks,Dennis.

Operator

OurnextquestioncomesfromthelineofStevenSchwartzwithRaymondJames.Yourlineisnowopen.

StevenSchwartz

Hi.Goodmorning,everybody.TofollowupalittlebitonTomsquestion.Iminterestedin,Dennis,ifyouknowwhatpercentageofyourVAsalesareinupfrontcommissionasopposedtofeebased?Letsjustputitthatwaysimplyintodaysworld,howaretheysold?

DennisR.Glass

Imtryingtogetananswerforthat.Thevastmajorityaresoldonanupfrontcommissionbasis.

StevenSchwartz

Okay,allright.Andthen,Dennis,youtalkedalittlebitaboutsalesandhowtheypickedup

DennisR.Glass

CouldIcometobackandagainreinforcethefactofhowyoupaytheagentsisreallydeterminedbyourdistributionchannels.AndasIsaidinmypreparedremarks,wearepreparedalreadytosellthesesameVAproductsonafeebasisratherthanfrontendcommission.AndIwanttoreemphasizeanotherpoint,whichwevemadeinthepast,livingbenefitproductsareanimportantpartoftheretirementplanningforAmericans,andIdontseethedemandforthatproductgoingawayeventhoughcompaniesanddistributionorganizationsmayhavetoadjustthewaytheygetittotheconsumer.

StevenSchwartz

Yes,Imeanitsagoodpoint,itsnotreallyyourissue.Youcandoit.Itsaquestionofwhetherbrokerdealersandbrokerswanttosellthatwayornotandmaybetheyllhaveto.Thatsalloutthere.ThatswhyIaskedthequestion.

DennisR.Glass

Yes.

StevenSchwartz

Thenduringyourpreparedremarks,youtalkedabouthowsalesbothinannuitiesandlifeinsurancepickedupinthequarterandcontinuetopickup.Ithinkyoureferencedmaybenewproductsorrevisionstoolderproducts,ifyoucouldfillthatoutplease.

DennisR.Glass

Yes.Ithinkthepickupisjustrelatedtobetterproductivity.TheresbeensomeproductchangesbutIwouldntattribute

thepickuptoanyspecificproduct.Theresnothingdramaticinthewayofproductimprovementsthatwouldhaveledtothat15%pickup.Ijustthinkwegotofftoaslowerstartandwearenowbacktowherewethinkweatlevelsofsalesthataremoreconsistentwithourexpectationsfortherestahigherlevelofsales.

StevenSchwartz

Okay.AndthelastoneforRandy,IthinkmaybeSethaskedthisquestion.Theadversemortalitythatyourepointingtoisrelativetowhatyoudexpectonaveragefortheyear,Igetthat.Butweknowthefirstquarterisalwaysgoingtohavebadweather.Weknowthefirstquarterisalwaysgoingtohavethefluseason.WevegottheChristmaseffect.Sodoyouhaveasense,Randy,ofgenerallyspeaking,whatyouwouldconsidertobeIdcallitnormaladversemortalityinthefirstquarterrelativetoyourbaseline?

RandalJ.Freitag

Steven,obviouslyitsatoughnumberestimateifyouaskmetosortoftakeastabatit.Maybehalfofthe$30millionwassortofoverandaboveanormalseasonalfirstquarter,butputabigconfidenceintervalaroundthatnumber.

StevenSchwartz

Okay,fairenough.Thankyou,guys.

Operator

OurnextquestioncomesfromthelineofErikBasswithCitigroup.Yourlineisnowopen.

ErikBass

Hi.Thankyou.IguessfirstjustwantedtofollowuponIthinkwhatSethwasaskingonthegroupside.Haverecentresultschangedyourviewatall?AndhowlongitwilltakegroupresultstorecoverandgetbacktoIthinkthe5%to6%marginyouvetargetedonarunratebases,ordoyouthinkwerejustseeingmorenegativenoiserelatedtoDACandmortalityandotherfactors?Butkindofthetimingofgettingtotheendgoalhasntchanged.

RandalJ.Freitag

Ididsayinmyremarksthatourexpectationswithrespecttogettingbacktogoodmarginshaventchanged.Itssortoflate2016,early2017.Sothathasntchanged.

ErikBass

Gotit.Andthatsonarunratebases?

RandalJ.Freitag

Right.

ErikBass

Okay.Andthenmaybecanaskoneonvariableannuities.HaveyouseenmuchimpactfromincreasedcompetitionasotherinsurershaverolledoutbothnewguaranteefeaturesaswellasproductswithoutlivingbenefitsorisyoursensethattheoverallindustrydemandforVAsjusttickeddownalittlebitinthefirstquarter?

DennisR.Glass

Ithinkittickeddownalittlebitinthefirstquarter,asyousay.WecontinuetohavewhatIwouldrefertoasrationalcompetitioninthismarketrightnow.Differentcompanieshavedifferentvaluepropositions,differentfeaturesand,atanypointintime,youcanseeonegetaheadoftheotherforwhateverreason.Butwereastrong,consistentplayer.Wellcontinuetogetourfairshare.Overall,ourcostandbenefitsareconsistentwithwhatothercarriersareoffering.Andthenwehavethebenefitofthebestwholesalingforcewethinkinthecountry.So,wellcontinuetogetourfairshareonourterms.

ErikBass

Gotit.Thankyou.

Operator

OurnextquestioncomesfromthelineofHumphreyLeewithDowlingPartners.Yourlineisnowopen.

HumphreyLee

Thankyouandgoodmorning.JustwanttofollowontheGroupProtectionintermsoftheDACamortization.Canyoujustremindus,inanygivenyearswhatisthepatternforyourrenewalcycle?SowhatpercentageofyourbusinessinanygivenyeargothroughtheJan1renewalcycleversustheJuly1cycle?

RandalJ.Freitag

Soletsstartoutwithyourtypicalgroupcontractisaboutathreeyearguarantee,somaybeabouta30yearbusinessisgoingthroughinanyparticularyear.Insideofthat,roughly60%orsoisinthe50%to60%isinthefirstquarteroftheyear.AndthenoursecondbiggestwouldbethethirdquarterforJulyrenewals.

HumphreyLee

Okay.AndthenhowshouldwekindofcomparetheJulyrenewaltokindoftherestofthepattern?

RandalJ.Freitag

Yes,IthinkasIsaid50%to60%thefirstquarterandthethirdquarteristhenextbiggest.But,look,thebulkofitisinthefirstquarteroftheyearandIlljuststoprightthere.

HumphreyLee

Okay,gotit.Andthenintermsofyourretirementplanservices,Lincolnsalwaysbeenastrongplayerinthe403(b)market.Canyoureminduswhatpercentageofyourretirementplanservicesisinthe403(b)market?

DennisR.Glass

Whatpercentageofsalesareinthe403(b)market?

HumphreyLee

Maybeanaccountvalueaswell?

DennisR.Glass

About50%.

HumphreyLee

Okay.Sobasicallythosewouldnotbeaffectedbythefiduciaryproposal,buttheremaining50%couldpotentiallybeaffected?

DennisR.Glass

Again,intheretirementbusinessandinourotherbusinesses,wethinkwecancontinuetosellthroughregulatorychanges.Andsomeoftheregulatorychangesbythewaythatarebeingproposed,wevebeenadvocatesforsometime.So,yes,Iunderstandtheresalotofquestionsaboutit.Theresgoingtobechange.Goodcompanieswillreacttothechange.Boththelivingbenefitproductsandretirementproductsareinbigdemandandsoitsmoreaboutthechangesyouhavetomakeinthesellingprocess,commissionsandsoforthtobeabletomeetthedemandsofthemarketplace,whichwillcontinuetobestrong.

HumphreyLee

Okay.Thankyou.

Operator

OurnextquestioncomesfromthelineofRandyBinnerwithFBR.Yourlineisnowopen.

RandyBinner

Hi,thanks.Mostlyaskedandanswered,soImgoingtoaskaDOLfiduciaryfollowupforDennis.Theresdifferentpiecesoftheconversationherethathavetalkedaboutkindofapotential,Icallitbifurcationofregulation,whereasifaproductisaffectedbyERISA,itwouldhaveacertainsetofrules.Andthenifitsnot,itwouldnt.SowhetheritwasHumphreysquestionorIthinkTomGallaghersbeforethatonqualified,nonqualified.

Iguessmyquestionforyou,Dennis,isyourperspectiveonitifthatwouldbefeasibleinthemarketthatyouwouldhavekindofdramaticallydifferentrulesbasedonwhetheritkindofhittheERISAformatornotoriftherewouldbekindofalowestcommondenominatoreffectinthemarketandeveryonewouldeverythingwouldkindofmigratetowardswhateverthenewrulesarepushedbyDOL?

DennisR.Glass

Yes,Ithinkthatshardtopredict.

RandyBinner

Okay.IthoughtIdtakeatryatthat.TheoneotherfollowupIhadjustonthegrouppiecewasafterthisfirstquarterrenewal,howmuchofthebookhasbeenrepricedsinceyoustartedthelastmajorrepricinginitiative?Ithinkitwas30%atthefourthquarter.Doyouhaveafigureofhowmuchhasbeenrepricedatthispoint?

RandalJ.Freitag

Yes.Soaswementionedearlier,30%wentthroughthepipelastyearandIthinkbytheendofthisyearwillbeatabout80%.Aswementioned,50%to60%ofthisyearsgoesthroughinthefirstquarter.Soifyousortofdothemaththereandapplythat,roughly50%ofthepremiumhaswentthroughthepipeline.

RandyBinner

Halfwaydone.Okay.ThatsallIhave.Thanks.

RandalJ.Freitag

Youbet.

Operator

OurnextquestioncomesfromthelineofEricBergwithRBCCapital.Yourlineisnowopen.

EricBerg

Thanksverymuch.Idliketoreturntothetwotopicsthathavesortofbeendominantinthiscall,mainlybeingthemortalityandthegroupinsurance.Ontheindividualside,Ijustwanttosortofsharpenmyunderstandingonceandforallofwhathappenedhere.Randy,yousaidthatactualtoexpectedsweresimilarthisyeartolastyear.IguesswhatIdliketoknowis,weretheybothabove100%thisyearandlastyear?

RandalJ.Freitag

No,theyrenotabove100%.Sotypicallyforayear,ouractualtoexpectedisgoingtobeinthe80s.Andwhatweveseenoverthepastyearsinthefirstquarteristhatitsroughly10pointshigherthanthatinthefirstquarter.Andthatswhatweexperiencedagainthisyear.

EricBerg

Okay.IllhavetocirclebackbecauseIdontunderstandhowyoucouldIllcirclebacktoChrishowyoucanexpectsomethingtobebelowyourexpectations.ItdoesntIcantgetmymindaroundit.

RandalJ.Freitag

Well,Eric,letmedescribethatalittlebitmaybetoinformyou.Itsbecauseofhowwecalculateit.Soforotherbusinesswevesoldinthelast15yearsorso,weusedtheexactpricingexpectations.Weexpecttoberoughlyinthe100%range.Foralltheoldhistoricbusiness,weusedsortofastandardindustrytable.Andsothatnumbertypicallycomesupsomewherebelow100.Soforeverythingthatwevesoldrecently,everythingthatwehavereallygooddataandrecordsfor,weusedtheexactpricingexperience.Andthenforalltheolderbusiness,weusemoreofanindustrytable.Andthatswhyyouendupwiththisblendednumber,whichendsupbelow100%.

EricBerg

IfIcouldaskyounowaboutthegroupinsurance.Itsstillnotapparenttomeagain,Idliketosharpenmyunderstandinghavinglistenedcloselytothelastquestionsaboutwhatisnotgoingwellhereinthefollowingsense.YouvedescribedtheresultsascoreandIthinkRandy,youdescribedthemaspoor.Butwhatweknowisthattherehasbeenasignificantimprovementinincidence.Theresbeenasignificantimprovementinrecovery.Youveraisedpricessharply.ThishasledtoIguesslactation,whichinturnhastriggeredanoncashchargefortheacceleratedamortizationofDAC.Sogivenallthat,yourelosingcustomersasyouexpected,youregettingabetterclaimsexperienceasyouexpected.Whatisnothappeningthatyouwouldliketohaveseenhappenedbynow?Whereareyoubehind?

DennisR.Glass

Yes,Eric,Ithinknowweregettingintoalittlebitofsemantics.Ourcommentsimplyweredisappointedinanegativequarterintheabsolute.Thatsnotacommentwithrespecttoexpectationsofsomeofthesethingsthatyouretalkingabout.Werejustdisappointedthatwevehadalostquarter.

EricBerg

Okay.

DennisR.Glass

Andaswevesaidallalong,theprogressthatweregoingtomakehereisnotgoingtobelinear.Iapologizeforrepeatingthis.Westilltheresnothinghappenedatthisquarterthatwehaventseenexcuseme,thatchangesourexpectationsastogettingclosertoourmarginslate2016,2017.

Ithinkitsfairtosay,andIknowthatwevebeentalkingaboutpriceincreasesnowforacoupleofquarters,Ithinkitsfairtosaythatwehavegottenmuchmoreaggressiveinthelastsixmonthswithourpriceincreasesthanwedidinthefirstsixmonths.Soitsnotthatwereseeingtheprogress,butwereevengettingbetterincreasesbutthosearentgoingtoshowupforalittlebit.

Anddontforgetthatitshardtorememberthatthesepriceincreasesaregoingtoflowinovertime.Yourenotgettingthemallatonetime.SoIunderstandthequestion.Thereisalotofvariables.Iguesswejustfallbackonweremakinggoodprogressandourexpectationsremainthesame.

EricBerg

Thatanswersmyquestion.Thankyouverymuch.

DennisR.Glass

Yes.

Operator

Ladiesandgentlemen,weareatthetopofthehour.IdliketoturnthecallbacktoChrisGiovanniforclosingremarks.

ChrisGiovanni

Thankyousomuchandthankyouallforjoiningusthismorning.Asalways,werearoundtotakeyourquestionsontheInvestorRelationslineat8002372920orthroughemailatinvestorrelations@lfg.com.Again,thankyouallforjoiningandhaveagreatday.

Operator

Ladiesandgentlemen,thankyouforyourparticipationintodaysconference.Thisconcludestheprogramandyoumaynowdisconnect.Everyone,haveagreatday.

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