Core Insights - Lincoln National Corporation (LNC) reported second-quarter adjusted earnings per share of $2.36, exceeding the Zacks Consensus Estimate by 23.6% and reflecting a year-over-year increase of 28.3% [1][8] - Adjusted operating revenues rose 4.4% year over year to $4.7 billion, surpassing the consensus mark by 1.2% [1][8] Financial Performance - The strong quarterly results were driven by higher insurance premiums, strong annuity deposits, and solid Group Protection performance [2] - Insurance premiums increased by 3.5% year over year to $1.7 billion, slightly above the Zacks Consensus Estimate [3] - Net investment income grew by 10.1% year over year to $1.5 billion, beating the consensus estimate of $1.4 billion [3][8] - Total expenses decreased by 21.2% year over year to $3.2 billion [4][8] - Lincoln National generated a net income of $699 million, down from $895 million in the prior-year quarter [4] Segment Performance - The Annuities segment's operating income was $287 million, a 3% decline year over year, but above the consensus estimate [6] - The Life Insurance unit reported an operating income of $32 million, improving from a loss of $35 million in the prior year [7] - The Group Protection segment's operating income increased by 33.1% year over year to $173 million, exceeding the Zacks Consensus Estimate [8] - The Retirement Plan Services segment recorded an operating income of $37 million, down 8% year over year [10] Financial Position - As of June 30, 2025, Lincoln National had cash and invested cash of $7.1 billion, up from $5.8 billion at the end of 2024 [12] - Total assets increased to $399.1 billion from $390.8 billion at the end of 2024 [12] - Long-term debt decreased to $5.8 billion from $7.1 billion as of December 31, 2024 [12] - Total stockholders' equity rose to $9.5 billion from $8.3 billion at the end of 2024 [12] Outlook - The Group Protection unit is expected to experience a seasonally higher loss ratio in the fourth quarter of 2025 [15] - The Life Insurance segment is forecasted to see favorable mortality results in the third and fourth quarters of 2025 [15] - In 2026, the Annuities, Life Insurance, Group Protection, and Retirement Plan Services units are projected to account for 55-65%, 10-15%, 20-30%, and 5-15% of total operating income, respectively [16]

Financial Data and Key Metrics Changes - Adjusted operating income increased by 32% year over year, reaching $427 million or $2.36 per diluted share [4][27] - Net income available to common stockholders was $688 million or $3.80 per diluted share, reflecting positive market risk benefits [27] - The estimated RBC ratio remained above 420%, consistent with the company's strategy to maintain a capital buffer above the 400% target [43] Business Line Data and Key Metrics Changes - Group Protection business achieved record earnings of $173 million, up 33% year over year, with a margin increase to 12.5% [28][18] - Annuities generated operating income of $287 million, slightly down from $297 million in the prior year, primarily due to traditional variable annuity outflows [35] - Life Insurance reported operating earnings of $32 million, a significant improvement from an operating loss of $35 million in the prior year [40] Market Data and Key Metrics Changes - All four business segments delivered double-digit sales growth in the first half of the year, with notable contributions from previously non-key products [8] - Retirement Plan Services saw first-year sales increase by nearly 50% year over year, with total deposits up by 10% [22] Company Strategy and Development Direction - The company is focused on increasing risk-adjusted returns, reducing volatility, and growing its franchise through a disciplined growth strategy [5][24] - Strategic investments are being made in higher-margin products and segments, enhancing digital capabilities, and optimizing the operating model [7][8] - The company aims to deepen its strategic moat and evolve into a more agile, scalable organization [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's trajectory, emphasizing the importance of disciplined execution and strategic clarity [25][48] - The economic backdrop remains volatile, but the company is committed to delivering long-term value and sustainable growth [8][24] Other Important Information - The company has launched a Bermuda-based reinsurance subsidiary to enhance its investment strategy [7] - The alternative investment portfolio achieved a 10% annualized return, contributing positively to overall earnings [27][47] Q&A Session Summary Question: On group and the shift into smaller local markets and supplemental health products - Management highlighted the successful execution of a targeted segment strategy, particularly in local markets and supplemental health, which are expected to drive margin expansion [50][51] Question: On the restructuring of the Life Captives - Management indicated that specifics on the impact of restructuring on earnings and free cash flow would be provided once more concrete details are available, with potential impacts expected in the following year [62][64] Question: On RILA product sales and market competition - Management reported a 32% increase in RILA sales year over year, attributing growth to the introduction of a second-generation product and expanding distribution segments [67][69] Question: On free cash flow conversion guidance - Management expressed confidence in the long-term free cash flow conversion rate being above previous targets, especially with the deployment of Bain Capital [74][76] Question: On distribution strategies in the group business - Management emphasized the importance of strategic broker relationships and investments in digital capabilities to enhance competitive differentiation and drive growth [80][82] Question: On external reinsurance solutions - Management is exploring options for external reinsurance focused on the legacy life block, with the potential for less reliance on structured deals due to deployable excess capital [88]

Financial Performance - Adjusted operating income increased by 32% year-over-year (YoY), marking the fourth consecutive quarter of YoY growth[7, 13] - Adjusted operating income was $427 million, or $2.36 per share[12] - Group Protection achieved record earnings, up 33% YoY, with a record margin of 12.5%, a 250 basis points increase[13] - Life Insurance reported earnings of $32 million, supported by in-line alternative investment income and favorable mortality[7, 13] Sales and Growth - Annuities sales increased by 5% YoY, driven by a diversified product mix[7, 13] - Group Protection sales increased by 16% YoY, fueled by local market and supplemental health sales[13] - Life Insurance sales increased by 15% YoY, driven by momentum in risk-sharing products[13] - Retirement Plan Services experienced strong deposit growth, up 10% YoY[13] Capital and Leverage - Estimated Risk-Based Capital (RBC) ratio is greater than 420%, exceeding the 400% target[7, 13] - Leverage ratio improved by 330 basis points YoY to 25.6%, primarily due to equity growth[7, 13] - The company issued $1 billion in P-Caps, increasing access to on-demand capital and extending duration to 2055[13]

Core Insights - Lincoln National Corporation (LNC) is a diversified life insurance and investment management company, providing a range of wealth accumulation, protection, and retirement products. The company has outperformed the industry average with a year-to-date increase of 9.1% compared to 3.7% [1][2]. Company Overview - LNC is headquartered in Radnor, PA, with a market capitalization of $5.9 billion. The company operates through four business segments: Annuities, Life Insurance, Group Protection, and Retirement Plan Services. Its trailing 12-month price-to-book (P/B) ratio is 0.82X, significantly lower than the industry average of 2.02X [2]. Financial Estimates - The Zacks Consensus Estimate for LNC's 2025 earnings is $7.11 per share, reflecting a 0.6% year-over-year increase. Revenue estimates for 2025 are projected at $18.7 billion. LNC has consistently beaten earnings estimates over the past four quarters, with an average surprise of 10.7% [4]. Growth Drivers - LNC's revenue growth is driven by strong performance in its Annuities and Group Protection segments, supported by higher insurance premiums and fee income. The company is enhancing its in-force book and margin expansion initiatives, positioning itself well for future growth [5]. - The Annuities segment saw a 33% year-over-year increase in total sales, reaching $3.8 billion in Q1 2025. The company is shifting towards a more balanced mix of products, focusing on spread-based offerings [6]. - The Group Protection business reported a 26% year-over-year increase in income from operations in Q1 2025, with improved underwriting results and prudent acquisitions contributing to its growth. The segment's operating margin improved by 120 basis points [7]. Strategic Initiatives - LNC has formed a long-term strategic partnership with Bain Capital, aimed at enhancing private asset origination and accelerating value creation across various streams. This partnership is part of LNC's efforts to reshape its life product portfolio and improve its retirement business capabilities [8]. Shareholder Returns - In Q1 2025, LNC allocated $77 million for dividend payouts, maintaining a quarterly dividend of 45 cents per share, resulting in a dividend yield of 5.2%, which exceeds the industry average of 3.2% [9].

Core Viewpoint - Lincoln National Corporation (LNC) reported a decline in shares by 1.9% following its first-quarter 2025 results, primarily due to a significant rise in total expenses, although this was partially offset by higher insurance premiums and strong annuity deposits [1] Financial Performance - Adjusted earnings per share were $1.60, exceeding the Zacks Consensus Estimate by 3.9% and reflecting a year-over-year increase of 31.1% [2] - Adjusted operating revenues grew 2.2% year over year to $4.7 billion, but missed the consensus mark by 0.5% [2] - Total expenses more than doubled year over year to $5.7 billion, while net loss amounted to $722 million compared to a net income of $1.2 billion in the prior year [4] Segment Performance - The Annuities segment reported operating income of $290 million, a 12% increase year over year, but fell short of the consensus estimate [6] - The Life Insurance unit incurred an operating loss of $16 million, an improvement from the previous year's loss of $35 million, with operating revenues growing 3% year over year to $1.6 billion [7] - The Group Protection segment's operating income increased by 26.3% year over year to $101 million, supported by favorable long-term disability results [8] - The Retirement Plan Services segment recorded an operating income of $34 million, down 5.6% year over year, with total deposits advancing 8.2% year over year to $4.1 billion [9] Financial Position - As of March 31, 2025, Lincoln National had cash and invested cash of $4.3 billion, a decrease of 26.2% from the end of 2024 [11] - Total assets were $382.9 billion, down 2% from the previous year-end [11] - Book value per share, excluding accumulated other comprehensive income, was $61.63, a decline of 14.5% from the end of 2024 [12] Dividend and Outlook - Lincoln National paid out quarterly dividends of $77 million [13] - The company anticipates a seasonally higher loss ratio in the Group Protection unit for the fourth quarter of 2025, while favorable mortality results are expected in the Life Insurance segment [14] Long-term Projections - By 2026, the Annuities, Life Insurance, Group Protection, and Retirement Plan Services units are projected to account for 55-65%, 10-15%, 20-30%, and 5-15% of total operating income, respectively [15]

Core Viewpoint - Lincoln National (LNC) reported a revenue of $4.69 billion for Q1 2025, marking a year-over-year increase of 2.2% and an EPS of $1.60, up from $1.37 a year ago, although slightly below the consensus revenue estimate of $4.71 billion, resulting in a surprise of -0.52% [1] Financial Performance Metrics - Loss Ratio for Group Protection was reported at 72.4%, better than the estimated 74.4% [4] - Net Flows for Annuities were -$1.68 billion, worse than the estimated -$1.54 billion [4] - Net Flows for Life Insurance were $569 million, below the estimated $643.81 million [4] - Net Flows for Retirement Plan Services were -$2.18 billion, significantly worse than the estimated -$493.84 million [4] - Net investment income revenue was $1.46 billion, exceeding the estimate of $1.39 billion, with a year-over-year increase of 8.3% [4] - Fee income revenue was $1.37 billion, matching the average estimate, with a year-over-year change of 3.1% [4] - Insurance premiums revenue was $1.68 billion, slightly above the estimated $1.65 billion, reflecting a year-over-year increase of 4.7% [4] - Life Insurance net investment income was $571 million, slightly below the estimate of $577.29 million, showing a year-over-year decrease of 1.7% [4] - Group Protection revenue was $1.52 billion, exceeding the estimate of $1.47 billion, with a year-over-year increase of 6.7% [4] - Life Insurance revenue was $1.59 billion, slightly below the estimated $1.60 billion, representing a year-over-year increase of 3% [4] - Retirement Plan Services revenue was $327 million, below the estimated $334.72 million, with a year-over-year increase of 1.6% [4] - Annuities insurance premiums revenue was $21 million, significantly below the estimated $33.76 million, reflecting a year-over-year decrease of 19.2% [4] Stock Performance - Lincoln National's shares returned +3% over the past month, compared to the Zacks S&P 500 composite's +11.3% change, with a current Zacks Rank of 3 (Hold) indicating potential performance in line with the broader market [3]

Financial Data and Key Metrics Changes - Adjusted operating income increased by 14% year over year, demonstrating continued execution of strategic initiatives [7][22] - First quarter adjusted operating income available to common stockholders was $280 million, or $1.60 per diluted share [23] - Net loss available to common shareholders was $756 million, or $4.41 per diluted share, primarily due to negative movements in market risk benefits [23][24] Business Line Data and Key Metrics Changes - Group Protection business saw a 26% year-over-year increase in earnings and 120 basis points of margin expansion [10][24] - Annuities reported operating income of $290 million, consistent with the prior year quarter, with total sales of $3.8 billion increasing 33% year over year [11][29] - Life insurance segment reported an operating loss of $16 million, an improvement from a loss of $35 million in the prior year quarter [33] Market Data and Key Metrics Changes - Total deposits in Retirement Plan Services increased by 8%, driven by growth in recurring deposits [20][32] - Group sales grew 9% year over year, with all market segments contributing to this result [16] - Annuity account balances net of reinsurance ended the quarter 5% above the prior year period [29] Company Strategy and Development Direction - The company is focusing on diversifying its business mix and enhancing operational efficiency to manage through market turbulence [6][10] - A long-term partnership with Bain Capital is expected to enhance growth in spread-based products and improve capital deployment [9][39] - The strategic emphasis on growing group business has increased its contribution to operating earnings from less than 10% pre-COVID to over 25% today [45] Management's Comments on Operating Environment and Future Outlook - Management acknowledged high market volatility and an uncertain external backdrop but expressed confidence in the company's resilience and strategic positioning [5][6] - The company is well-prepared to navigate potential economic downturns, maintaining a capital buffer above its 400% target [7][44] - Management remains focused on disciplined execution and advancing strategic priorities to deliver long-term shareholder value [21][46] Other Important Information - The alternative investments portfolio delivered a 7.6% annualized return in the quarter, though it was below the target [23][38] - The company ended the quarter with an estimated RBC ratio well above 420%, consistent with its strategy [37] Q&A Session Summary Question: Insights on Bain partnership and expected free cash flow improvement - Management indicated that the improvement in free cash flow per share is driven by capital deployment into growth areas, not share repurchases [48] Question: Favorability of mortality in the life business - Management noted that mortality was favorable relative to expectations, with first quarter typically being seasonally higher [50] Question: Rationale for issuing new equity to Bain instead of open market purchase - Management emphasized the importance of alignment and the ability to utilize capital for growth, which would not be feasible through open market purchases [56][58] Question: Impact of large plan termination on Retirement Plan Services - Management confirmed that a large case termination affected net outflows but noted that excluding this, flows were positive [78] Question: Update on expense initiatives and their impact - Management confirmed that expense reductions are emerging from operational efficiencies and that reinvestments are being made in growth areas [83]

Financial Data and Key Metrics Changes - Adjusted operating income increased by 14% year over year, demonstrating continued execution of strategic initiatives [6][10] - First quarter adjusted operating income available to common stockholders was $280 million, or $1.60 per diluted share [24] - Net loss available to common shareholders was $756 million, or $4.41 per diluted share, primarily due to negative movements in market risk benefits [25][26] Business Line Data and Key Metrics Changes - Group Protection business saw a 26% year-over-year increase in earnings and 120 basis points of margin expansion [10][16] - Annuities reported first quarter operating income of $290 million, consistent with the prior year quarter [30] - Life insurance segment reported a first quarter operating loss of $16 million, an improvement from a loss of $35 million in the prior year [34] Market Data and Key Metrics Changes - Total deposits in Retirement Plan Services grew by 8%, driven by a 13% increase in recurring deposits [33] - Group sales grew by 9% year over year, with all market segments contributing to this result [17] - Annuities total sales reached $3.8 billion, a 33% increase from the prior year quarter [11] Company Strategy and Development Direction - The company is focusing on diversifying its business mix and enhancing operational efficiency to manage market volatility [5][10] - A long-term partnership with Bain Capital is expected to enhance growth in spread-based products and improve capital deployment [9][40] - The strategic emphasis on growing group business has increased its contribution to operating earnings from less than 10% pre-COVID to over 25% today [46] Management's Comments on Operating Environment and Future Outlook - Management acknowledged high market volatility and an uncertain external backdrop but expressed confidence in the company's resilience and strategic positioning [4][10] - The company is well-prepared to navigate potential economic downturns due to proactive capital management and diversified earnings sources [38][46] - Management remains focused on disciplined execution and believes current actions will lead to sustainable long-term value [47] Other Important Information - The company maintains an estimated RBC ratio well above 420%, providing a buffer against adverse economic conditions [7][38] - The alternative investments portfolio delivered a 7.6% annualized return in the quarter, though it was below the target [25][39] Q&A Session Summary Question: Insights on the Bain partnership and expected free cash flow improvements - Management indicated that the capital from Bain will be deployed to grow spread-based earnings and optimize the legacy LifeBlock, with no immediate plans for share repurchases [49] Question: Favorability of mortality in the life business - Management noted that mortality was better than expected, with first quarter typically being seasonally higher [50][51] Question: Rationale for issuing new equity to Bain instead of open market purchases - Management emphasized the importance of alignment with Bain and the ability to utilize capital for growth, which would not be feasible through open market purchases [56][59] Question: Annuity business ROA trends - Management acknowledged that the decline in ROA is due to a shift in business mix, with a focus on growing RILA and fixed annuities [64] Question: RBC ratio sensitivity to macro volatility - Management clarified that the RBC ratio remains stable and is not materially affected by recent market conditions [69] Question: Impact of large plan termination on Retirement Plan Services - Management confirmed that a large case termination affected net outflows but overall flows were positive excluding this event [80]

Earnings Supplement First Quarter 2025 May 8, 2025 Forward-Looking Statements – Cautionary Language Certain statements made in this press release and in other written or oral statements made by Lincoln or on Lincoln's behalf are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply f ...

Core Viewpoint - Lincoln National (LNC) is expected to report quarterly earnings of $1.54 per share, a 12.4% increase year-over-year, with revenues projected at $4.71 billion, reflecting a 2.7% increase from the previous year [1]. Earnings Estimates - The consensus EPS estimate has been revised downward by 3.7% over the past 30 days, indicating a collective reassessment by analysts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical research shows a strong correlation between earnings estimate revisions and short-term stock performance [3]. Revenue Projections - Analysts forecast 'Revenues- Net investment income' to reach $1.39 billion, a 3.5% increase year-over-year [5]. - 'Revenues- Fee income' is expected to be $1.37 billion, indicating a 3.8% increase from the previous year [5]. - 'Revenues- Insurance premiums' are projected to be $1.65 billion, reflecting a 3.4% year-over-year change [5]. - 'Revenues- Life Insurance- Net investment income' is estimated at $577.29 million, showing a slight decline of 0.6% year-over-year [6]. - 'Revenues- Group Protection' is expected to reach $1.47 billion, a 3% increase from the previous year [6]. - 'Revenues- Life Insurance' is projected at $1.60 billion, indicating a 3.6% increase year-over-year [6]. - 'Revenues- Retirement Plan Services' is expected to be $334.72 million, a 4% increase from the previous year [7]. - 'Revenues- Annuities- Insurance premiums' are projected at $33.76 million, reflecting a significant increase of 29.9% year-over-year [7]. - 'Revenues- Annuities- Fee income' is expected to be $602.05 million, indicating a 3.8% increase from the previous year [7]. Key Metrics - The 'Loss Ratio - Group Protection' is projected to be 74.4%, down from 75% year-over-year [8]. - 'Net Flows - Life Insurance' is estimated at $643.81 million, compared to $741 million in the previous year [8]. - 'Net Flows - Retirement Plan Services' is expected to be -$493.84 million, a decline from $391 million year-over-year [8]. - Over the past month, shares of Lincoln National have returned +13.9%, outperforming the Zacks S&P 500 composite's +10.6% change [8].