LNC-PD — Lincoln National Corporation

Summary of Lincoln National Corporation (LNC-PD) Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 Adjusted Operating Income: $434 million, or $2.21 per diluted share, a 31% year-over-year increase.
• Full Year Adjusted Operating Income: Over $1.5 billion, a 23% improvement from 2024.
• Net Income for Q4: $745 million, or $3.80 per diluted share, influenced by favorable market conditions.
• Group Protection Operating Income: $109 million, up from $107 million in Q4 2024.
• Annuities Operating Income: $311 million for Q4, with account balances reaching a record $175 billion.
• Retirement Plan Services Operating Income: $46 million for Q4, up from $43 million in the prior year.
• Life Insurance Operating Earnings: $77 million for Q4, a significant recovery from a $15 million loss in Q4 2024.

2. Strategic Updates and Business Highlights

• Capital Foundation: Strong and resilient, with capital levels well above established buffers and improved leverage ratios.
• Annuities Business: Total sales up 25% in 2025, with a focus on spread-based products to reduce market sensitivity.
• Life Insurance: Sales increased by approximately 50% year-over-year, with a strategic pivot towards accumulation and protection products.
• Group Protection: Continued strong performance with premium growth of nearly 7% and a focus on local and supplemental health markets.
• Operational Enhancements: Investments in technology and digital capabilities to improve efficiency and customer service.

3. Forward Guidance and Outlook

• 2026 Expectations: Continued focus on balancing profitability and capital efficiency, with anticipated lower variable annuity sales aligning with pre-2025 levels.
• Remittances: Projected to grow significantly, with a medium-term target of $400 to $600 million in capital return to shareholders.
• Free Cash Flow: Expected to improve, with a conversion ratio of 45% in 2025, indicating strong cash generation capabilities.

4. Bad News, Challenges, or Points of Concern

• Market Sensitivity: Continued exposure to market volatility, particularly in variable annuities, which may impact future earnings.
• Retirement Plan Services: Facing headwinds from participant outflows and known planned terminations, with expectations of ongoing negative net flows.
• Competitive Pressures: Increased competition in the RILA market, necessitating a strategic shift towards fixed and indexed annuities.
• Expense Management: G&A expenses increased due to higher variable compensation and ongoing investments, which may pressure margins if not managed effectively.

5. Notable Q&A Insights

• Capital Return Strategy: Management confirmed that capital deployment priorities focus on maintaining buffer capital while preparing for optimal handling of preferred securities.
• Growth in Remittances: Analysts inquired about the significant jump in expected remittances, with management indicating that this growth is driven by improved free cash flow and capital allocation strategies.
• Reinsurance and Risk Transfer: Future external risk transfer deals were noted as potential incremental benefits, but not included in current remittance projections.
• Life Insurance Improvements: Management highlighted ongoing efforts to improve the free cash flow profile of the legacy Life block through captive consolidation and product strategy shifts.

Overall, Lincoln National Corporation reported strong financial performance in Q4 2025, driven by strategic initiatives across its business segments. However, challenges remain in managing market sensitivity and competitive pressures, particularly in the annuities and retirement segments. The outlook for 2026 appears positive, with a focus on profitability and capital efficiency.