Lincoln National signals continued growth with $4.5B annuities sales and margin expansion in group protection

Earnings Call Insights: Lincoln National Corporation (LNC) Q3 2025

MANAGEMENT VIEW

* Ellen Cooper, Chairman, President & CEO, stated that Lincoln delivered "strong financial results in the third quarter, marking our fifth consecutive quarter of year-over-year growth in adjusted operating income and underscoring the broad-based momentum and disciplined execution as we accelerate our strategic priorities." She highlighted that each of the company's four businesses made "measurable progress against our transformation road map," with a focus on capital, operational efficiency, and profitable growth. Cooper described their capital position as "well in excess of our 20 percentage point RBC buffer" and said the company has made "significant enhancements to optimize our operating model, creating a more efficient and nimble organization." She pointed to progress shifting to "products and segments with higher margins, more stable cash flow profiles and greater capital efficiency."
* Cooper detailed business segment performance: Annuities achieved reported sales of $4.5 billion, marking the fourth consecutive quarter of increased sales with spread-based products representing 63% of new business. Fixed annuity sales increased by 36% year-over-year, and RILA sales rose 21% year-over-year. Life Insurance posted improved earnings, with executive benefits accounting for two-thirds of nearly $300 million in sales. Group Protection earnings were in line with the prior year record third quarter, with 5% premium growth and supplemental health up 33% year-over-year. Retirement Plan Services achieved positive net flows and first-year sales of $2.4 billion.
* Cooper noted "we are delivering innovative new features that are meeting evolving customer needs across various environments, further distinguishing us in the marketplace" and that "we are continuing to invest to ensure a long-term growth path and are encouraged by the results we're seeing."
* Christopher Neczypor, Executive VP & CFO, said, "Our third quarter results represent another quarter of strong execution and meaningful progress on our strategic initiatives, delivering year-over-year adjusted operating income growth for the fifth consecutive quarter." He added, "each of our businesses delivered stable or improved year-over-year earnings. Alongside this, we maintain a strong emphasis on free cash flow generation and capital efficiency, reinforcing Lincoln's ability to deliver attractive risk-adjusted returns and positioning the enterprise for durable long-term success."

OUTLOOK

* Neczypor stated, "As we look ahead to the fourth quarter, we expect flows to be pressured by a few known plan terminations, the majority of which were not meeting our profitability targets." He also said, "As we've indicated previously, we expect to deploy this excess capital over the next year as we execute against our strategic objectives."
* Regarding Group Protection, Neczypor commented, "Looking ahead and incorporating the third quarter trends and these seasonal factors, we expect to end the full year with a margin in the range of mid- to upper 8%, representing a roughly 50 basis point improvement year-over-year."
* There was an explicit statement about providing more color on capital plans and share repurchase program during the fourth quarter outlook.

FINANCIAL RESULTS

* Neczypor reported third quarter adjusted operating income available to common stockholders of $397 million or $2.04 per share. Net income available to common stockholders was $411 million or $2.12 per diluted share.
* The annual assumption review resulted in a $2 million net benefit to adjusted operating income. Group Protection operating earnings were $110 million, with a margin of 8.1%. Annuities delivered operating earnings of $318 million, up $18 million year-over-year. Retirement Plan Services reported operating income of $46 million, up from $44 million in the prior year quarter. Life delivered operating earnings of $54 million for the third quarter compared to $14 million in the prior year quarter.
* Net flows into spread-based products exceeded $1 billion. Account balances in Retirement Plan Services reached $123 billion, up 5% sequentially.
* Neczypor noted, "full year expenses will reflect the disciplined actions we've executed this year, which we expect will result in relatively flat expenses compared to the prior year despite higher sales and increased volumes."

Q&A

* Joel Hurwitz, Dowling & Partners Securities, LLC, asked about Life earnings drivers and seasonality. Neczypor answered that "this quarter was really a reflection of a stable quarter for the life insurance block" and explained, "you could look at the third quarter as a good run rate once you normalize for seasonality."
* Hurwitz also asked about resuming the share repurchase program. Neczypor responded that "when we get the fourth quarter and give a more detailed look as it relates to how we're thinking about capital and deployment, both internally and for return to shareholders, we'll go through that in more detail."
* Ryan Krueger, KBW, asked about Group margins. Neczypor indicated "the outlook for Group hasn't changed. What's happening this quarter is that some of the normalization that we had expected maybe more in 2026 is just happening a little bit earlier."
* Krueger followed up on disability resolutions. Neczypor noted, "as the mix of your inventory changes, just to keep it simple, your rate -- the rate itself will normalize over time. And that's not a Lincoln specific thing, that's an industry thing."
* Suneet Kamath, Jefferies, inquired about assumption review impacts. Neczypor: "No, nothing material. We would spike it out if there was anything to note there."
* Kamath also asked about fixed annuity business retention. Neczypor explained, "you'll see growth in spread income, but that comes in as the assets and liabilities are emerging over the life of the policy. In the near term, what happens is you actually have slightly higher retained acquisition expenses."
* Taylor Scott, Barclays, asked about private credit. Neczypor stated, "we feel really comfortable with our portfolio. You can look at the investment details that we give each quarter. The credit quality is very stable."
* Scott inquired about optimizing SGUL block. Neczypor said, "We think there's a number of ways to continue to optimize that block, some external, some internal."
* Wesley Carmichael, Autonomous Research, asked about increasing risk-adjusted ROE and product development. Cooper highlighted "we're building tools that differentiate us from presale and post-sale. We've completely optimized the distribution footprint."
* Carmichael further questioned LNBAR dividends. Neczypor replied, "the $50 million dividend is consistent with what we took last year."
* Thomas Gallagher, Evercore, focused on Group Protection trends and pricing. Neczypor advised, "a loss ratio that's slightly in line with third quarter to maybe up a little bit depending on the degree of seasonality would be a decent expectation."
* Gallagher asked about sales and retention trade-off. Cooper responded, "we have seen much improved persistency while putting rate increases through at the same time."

SENTIMENT ANALYSIS

* Analysts' tone was largely neutral with a focus on understanding margin sustainability, capital deployment, and normalization trends, with questions probing for clarity on future prospects and potential headwinds.
* Management's tone remained confident and consistent in both prepared remarks and Q&A, emphasizing progress, capital strength, and strategic execution. There was some defensiveness when managing expectations for normalization and timing, as evidenced by Neczypor's comment, "as I mentioned in the prepared remarks, we would normalize for that volatility, but then you also have seasonality that happens in the fourth quarter."
* Compared to the previous quarter, analysts maintained a neutral stance, while management displayed increased confidence in operational improvements and margin sustainability.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted to suggest some normalization in Group Protection margins occurring earlier than previously expected, but with a reaffirmation of full-year improvement.
* Strategic focus remained on margin expansion, capital deployment, and product diversification, with explicit mention of fully retaining fixed annuity flows and segment-level investments for future growth.
* Analysts' questions continued to probe margin sustainability, free cash flow, and the impact of normalization and capital deployment strategies, consistent with the prior quarter.
* Key metric changes included higher annuity sales, Life Insurance earnings rising to $54 million from $32 million, and sequential increases in RPS account balances.
* Management's tone in the current quarter was more assertive about recent progress and less cautious regarding macro headwinds than in the previous quarter, while analysts' tone remained focused on validation and clarification.

RISKS AND CONCERNS

* Management acknowledged some volatility in disability loss ratios and lower LTD recoveries, with Neczypor stating, "the lower LTD recovery rate will likely continue."
* Seasonal expense increases and known plan terminations in Retirement Plan Services are expected to pressure fourth quarter flows.
* Group Protection results were "modestly below our expectations," but the fundamentals were described as strong.
* There was mention of slightly higher retained acquisition expenses in Annuities due to the shift from reinsurance, posing a near-term headwind.

FINAL TAKEAWAY

Lincoln National Corporation management emphasized the company's continued momentum in financial performance, margin expansion, and product diversification, supported by disciplined execution and a strong capital position. The call highlighted robust annuities sales, further gains in Life Insurance, and ongoing investments in growth initiatives. Looking ahead, management remains focused on capital deployment, enhancing risk-adjusted returns, and sustaining durable earnings, while navigating normalization in some business lines and preparing for seasonal expense and flow changes in the coming quarter.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/lnc/earnings/transcripts]

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