Lincoln National Corporation Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Ellen Cooper: Delivered strong financial results, 5th consecutive quarter of adjusted operating income growth. Each business made progress on transformation roadmap. Capital position well above RBC buffer, operational model optimized. Businesses shifting to higher margin, stable cash flow segments. Annual assumption review had small favorable impact on adjusted operating income.
• Christopher Neczypor: Recapped consolidated results, including adjusted operating income of $397 million. Discussed segment level performance, noting Annuities' $318 million operating earnings, Group Protection's $110 million, Retirement Plan Services' $46 million, and Life's $54 million. Update on capital position with RBC ratio well above buffer, progress on retaining fixed annuity business and scaling institutional funding agreements.

Segment Performance

• Annuities: Reported sales of $4.5 billion, with each core product category (fixed, RILA, variable annuities) exceeding $1 billion. Fixed annuity sales increased 36% YOY, RILA sales rose 21% YOY, and variable annuity sales were up YOY. Spread-based products represent 29% of total annuity account balances, net of reinsurance, with RILA accounting for 22% and fixed annuities 11%.
• Life Insurance: Earnings reached $54 million, a significant YOY improvement. Sales totaled nearly $300 million, with executive benefits making up 2/3 of the volume. Other Life sales had a well-balanced product mix aligned to strategic targets.
• Group Protection: Earnings were in line with prior year record Q3, with 5% premium growth, 33% growth in supplemental health, and 40% sales growth YOY. Core fundamentals remain strong with broad-based premium expansion across market segments.
• Retirement Plan Services: Achieved 5% YOY earnings growth, first year sales of $2.4 billion, total deposits up 20% YOY, and positive net flows driven by strong sales momentum.

Guidance

• Deploy excess capital over next year to execute strategic objectives. Transitioned to retain all fixed annuity business, a key step in balancing annuity earnings mix. Scaling institutional funding agreement program with $1.9 billion issued YTD. Evaluating actions to optimize legacy life block. Group margin expected to improve mid- to upper 8% range. Life earnings power seen as stable with normalization of drivers.

Risks

• Forward-looking statements involve risks from filings, including potential variability in results due to macroeconomic factors. Private credit and structured securities asset class dynamics could impact performance. Volatility in mortality and alternative investment returns in Life Insurance business.

Question and Answer

Q: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lincoln Financial Third Quarter 2025 Earnings Webcast. [Operator Instructions] I would now like to turn the call over to Tina Madon, Head of Investor Relations. Tina, please go ahead.

A: Thank you. Good morning, everyone, and welcome to our third quarter earnings call. We appreciate your interest in Lincoln. Our quarterly earnings press release, earnings supplement and statistical supplement can all be found on the Investor Relations page of our website, www.lincolnfinancial.com. These documents include reconciliations of the non-GAAP measures used on today's call, including adjusted income from operations and adjusted income from operations available to common stockholders or adjusted operating income to the most comparable GAAP measures. Before we begin, I want to remind you that any statements made during today's call regarding expectations, future actions, trends in our businesses, prospective services or products, future performance or financial results, including those relating to deposits, expenses, income from operations, free cash flow or free cash flow conversion ratios, share repurchases, liquidity and capital resources are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from our current expectations. These risks and uncertainties include those described in the cautionary statement disclosures in our earnings release issued earlier this morning as well as those detailed in our 2024 annual report on Form 10-K, most recent quarterly reports on Form 10-Q and from time to time in our other filings with the SEC. These forward-looking statements are made only as of today, and we undertake no obligation to update or revise any of them to reflect events or circumstances that occur after today. Presenting this morning are Ellen Cooper, Chairman, President and CEO; and Chris Neczypor, Chief Financial Officer. After their prepared remarks, we'll address your questions. Let me now turn the call over to Ellen. Ellen?

Q: Joel Hurwitz with Dowling & Partners asks about Life earnings drivers and capital repurchase.

A: Christopher Neczypor explains Life earnings were stable this quarter, driven by mortality and alt returns, with third quarter as a good run rate once normalized for seasonality, and on capital repurchase, plans to detail in fourth quarter earnings call.

Q: Ryan Krueger with KBW asks about Group margin normalization.

A: Christopher Neczypor and Ellen Cooper discuss Group margin, with disability loss ratio factors like incidence and resolutions, premium growth in supplemental health, and continued opportunity in local markets.

Q: Suneet Kamath with Jefferies asks about assumption review and fixed annuity retention.

A: Christopher Neczypor says assumption review impact was minor, and fixed annuity retention leads to near-term higher acquisition expenses but long-term spread income growth.

Q: Alex Scott with Barclays asks about private credit and SGUL optimization.

A: Christopher Neczypor talks about comfort with private credit portfolio quality and SGUL optimization plans, with more details in next quarter's outlook.

Q: Wesley Carmichael with Autonomous Research asks about products for ROE.

A: Ellen Cooper discusses various products across businesses, including executive benefits in Life, unique crediting strategies in Annuities, supplemental health in Group, and pooled employer plans in Retirement Plan Services as areas for higher ROE.

Q: Tom Gallagher with Evercore asks about Group Protection pricing and seasonality.

A: Ellen Cooper and Christopher Neczypor discuss Group Protection pricing competitiveness, seasonal trends in disability loss ratio, and renewal rate expectations for 2026.