Lincoln(US:LNC)2025-05-08 13:00Financial 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]