Lincoln National Corporation (NYSE:LNC) Q3 2025 Earnings Call Transcript

Lincoln National Corporation (NYSE:LNC) Q3 2025 Earnings Call Transcript October 30, 2025

Lincoln National Corporation beats earnings expectations. Reported EPS is $2.04, expectations were $1.84.

Operator: 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.

Tina Madon: 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?

Ellen Cooper: Thank you, Tina, and good morning, everyone. We appreciate you joining us. We 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. We have remained focused and consistent in advancing our vision for Lincoln, and this quarter is another proof point. Each of our 4 businesses continued to make measurable progress against our transformation road map, translating strategy into results and contributing to the strong fundamentals that are reshaping the company into a more agile, scalable and growth-focused enterprise with durable earnings power and a clear path to building long-term shareholder value.

The core tenets of foundational capital, enhanced operational efficiency and a strategy for profitable growth are increasingly evident in our results. We’re evolving the direction of the organization with a clear focus on increasing our risk-adjusted return on capital, reducing the volatility of our results and growing our franchise. And we’re starting to see the benefits of those actions. Our capital position remains well in excess of our 20 percentage point RBC buffer, and we have made significant enhancements to optimize our operating model, creating a more efficient and nimble organization. Our businesses have made notable progress on strategies to shift to products and segments with higher margins, more stable cash flow profiles and greater capital efficiency.

We see meaningful opportunity ahead and are continuing to invest for future growth. Our businesses operate in attractive, expanding markets where we compete from a position of strength grounded in our trusted brand, leading franchise and clear competitive advantages in distribution, product manufacturing and customer service. Our trajectory continues to accelerate, our track record is increasingly clear, and while our progress won’t always be linear, we’re confident in the direction we’re heading and excited about the path forward. I’d like to briefly comment on our annual assumption review, which continues to be a rigorous and comprehensive process, encompassing all key assumptions. The outcome this year reflected some puts and takes, resulting in a small favorable impact to adjusted operating income in the quarter, highlighting the continued alignment between our underlying experience and our go-forward expectations.

The process provides a strong foundation for disciplined evaluation and well-structured governance of assumptions. Now turning to our third quarter performance, excluding the impact of our annual assumption review. Each of our businesses generated robust year-over-year results, reflecting continued momentum and execution against our strategic priorities. Key highlights included Annuities recording earnings growth driven by higher account balances and strong and diversified sales. Life Insurance posted improved earnings, supported by stable mortality and operational efficiencies while achieving higher sales driven by executive benefits. Group Protection delivered earnings that were in line with its prior year record third quarter, healthy premium growth and broad-based sales growth across market segments and products.

Retirement Plan Services delivered higher earnings attributable to increased account balances and produced positive net flows in the quarter. Now turning to our business results, starting with Annuities. Our Annuities business continued to deliver excellent year-over-year and sequential sales growth, reflecting sustained progress in our strategy to diversify our new business mix. Reported sales reached $4.5 billion, our fourth consecutive quarter of increased sales with our spread-based products, including fixed annuities and RILA, representing 63% of the new business total. Each of our 3 core product categories, fixed, RILA and variable annuities exceeded $1 billion in sales, supporting our focus on building and sustaining a more balanced product mix, supporting our strategic and financial goals with strong profitability and capital efficiency and underscoring our differentiated ability to capture customer demand.

Our go-to-market strategy, combined with our breadth of products, deep long-standing distribution relationships and consultative wholesaler model enables us to broaden our addressable markets and reach more customers seeking to retire with confidence and financial security. Our distribution partners value our customer-centric approach, which equips producers with the insights, tools and capabilities to deliver the right solutions while enhancing their productivity and ease of doing business. As a holistic solutions provider with a product suite that continues to expand, we are positioning our Annuities business for further growth. As a leading product manufacturer, we are delivering innovative new features that are meeting evolving customer needs across various environments, further distinguishing us in the marketplace.

Our fixed annuity sales increased by 36% year-over-year as we leveraged the foundational product and distribution capabilities we built to sustain a consistent and growing presence in the fixed segment. We also continue to invest in our service model to deliver more seamless value-add capabilities to support our customers. Additionally, during the quarter, we transitioned to fully retaining the flows from our fixed sales, which will enhance the growth of our spread-based earnings over time. Our RILA sales increased 21% year-over-year, a sixth consecutive quarter of sequential growth that reflects our ability to differentiate through distinctive and expanded product features and crediting strategies that resonate with customers. Sales volumes of our traditional variable annuities were also up year-over-year.

Our variable product suite offers a broad array of features and benefits that meet customer needs and remain integral to our overall offering. VAs remain a valuable contributor to our overall product mix, generating strong free cash flow and attractive risk-adjusted returns. In summary, these results demonstrate the success we are achieving in delivering a diversified product mix that meets customers where they are across different life stages, risk tolerances and economic environments. The strategy to increase the proportion of our spread-based earnings through profitable new business generation translates into more resilient and predictable cash flows over time while meeting our risk-adjusted return targets and balancing the financial contribution across products.

We remain confident in the strategic trajectory within our Annuities business and our ability to leverage our competitive strengths to achieve our profitability objectives. Now turning to Life Insurance. As I’ve mentioned on prior calls, we have taken decisive steps to reposition this business for long-term value creation. We have strategically shifted our new business mix to emphasize products that support our strategic objectives, those with growing addressable markets that offer compelling value propositions for our customers, enable efficient capital deployment and position us for durable profitable growth. This quarter’s results reflect the progress we are making as our strategic realignment continues to gain traction. Excluding the impact of our annual assumption review, Life earnings reached $54 million, marking a significant year-over-year improvement.

Sales totaled nearly $300 million with executive benefits accounting for 2/3 of that volume, driven by a couple of large cases. In this product category, we have enhanced our competitiveness through targeted product additions and by strengthening our distribution relationships and expanding our service model, enabling us to deliver a strong quarter for executive benefit sales. While we don’t expect this level of sales to repeat in the fourth quarter, given the natural variability in large case activity, we have built the foundational capabilities to support a growing presence in this segment. We are continuing to invest to ensure a long-term growth path and are encouraged by the results we’re seeing. Our other Life sales were a well-balanced product mix aligned to our targeted strategy.

The momentum this quarter reflects the effect of the deliberate actions we’ve taken over the past several years, optimizing our wholesaler footprint, emphasizing products with more stable cash flows and enhancing the customer experience. We are continuing to invest in modernizing our service model and advancing our digital offerings to deliver a more integrated customer experience. Through expanded technology, we are differentiating our capabilities to provide real-time insights to support faster data-driven decisions and position us for sustained growth. In the Life business, we are seeing the early impact of our repositioning efforts and remain steadfast in our commitment to enhance and grow this business and realize its full long-term potential.

Next, turning to our Group Protection business. As mentioned earlier, Group’s earnings were in line with its prior year record third quarter, although modestly below our expectations. Importantly, the core fundamentals of this business remain strong. We continue to execute on our targeted strategy of delivering value across 3 unique market segments: local, regional and national with an ongoing strategic focus on repositioning this business for sustainable profitable growth, transforming how we operate and delivering reliable quality customer service. We’re seeing tangible results from our actions as reflected in our year-over-year 5% premium growth, driven by robust sales, strong persistency and pricing discipline across both new and renewal business.

Our premium expansion was broad-based with increasing results across all market segments and product categories with supplemental health, a strategic area of focus, increasing 33% year-over-year. This growth underscores the execution of our strategy to diversify across market segments, expand and deepen the product portfolio and invest in the people, process and technology to create differentiated capabilities that deliver a simpler, faster and more connected customer experience. While the third quarter is typically a seasonally lighter sales period, Group delivered year-over-year sales growth of nearly 40%, broadly diversified across market segments and products. In this business, servicing our customers with excellence is a strategic differentiator.

As we look ahead, we will continue to drive our segment strategy in a profitable and sustainable way by broadening our distribution relationships, expanding our product suite and continuing to expand our digital tools and technology to drive more productivity, efficiency and effectiveness. Grounded in a strong foundation and disciplined execution from pricing to expansion in growing addressable markets, our Group business is well positioned to drive sustainable growth and profitability. While we expect some variability in results from quarter-to-quarter, the fundamentals are strong, and the long-term trajectory is positive. Now turning to Retirement Plan Services or RPS. RPS delivered a strong quarter, achieving 5% year-over-year earnings growth and first year sales of $2.4 billion as the robust new business pipeline we previously communicated materialized this quarter.

Additionally, total deposits increased 20% year-over-year and net flows were positive, driven by the strong sales momentum in the quarter. Our offerings and our core recordkeeping and institutional markets continue to drive meaningful customer engagement, reinforcing our long-term growth potential. Looking ahead, we will continue to focus on initiatives that will enhance our operational and service capabilities, broaden our product offerings and drive greater efficiency as we pursue sustainable and profitable growth. In closing, we are moving forward with conviction, intention and collective determination. The progress we have made is evident not only in our financial results, but in the precision of our execution and operating model we are continuing to refine and fortify and the durability of our capital position.

We are expanding our strategic advantage by pivoting toward higher-margin, capital-efficient growth, investing in the foundational core that sharpens our competitive edge and evolving into a more agile, scalable and forward-looking enterprise. Through disciplined transformation, we are building a market-leading franchise equipped to thrive in a dynamic environment, align capital with strategic priorities and capture value where we have built scale and momentum. In summary, we are delivering today while advancing the capabilities that will drive tomorrow. With that, I will turn the call over to Chris.

Christopher Neczypor: Thank you, Ellen, and good morning, everyone. 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. This continued broadening momentum underscores the effectiveness of our strategy, and a disciplined approach consistently demonstrated across our businesses. Importantly, 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.

This morning, I’ll focus on 3 primary areas. First, I’ll discuss our consolidated results for the third quarter, including the outcome of our annual review of reserve assumptions. Second, I’ll provide insights into our segment level performance. And third, I’ll offer a brief update on our capital position and investment portfolio. Let’s begin with a recap of the quarter. This morning, we reported third quarter adjusted operating income available to common stockholders of $397 million or $2.04 per share. This includes the impact of this year’s assumption review, which increased adjusted operating income by $2 million or $0.01 per share. Additionally, our alternative investment returns were largely in line with expectations, delivering an annualized return of just under 10% or $101 million.

After tax, this was $2 million below our target or $0.01 per diluted share. Turning to net income. We reported net income available to common stockholders of $411 million or $2.12 per diluted share. The difference between the net income and adjusted operating income was predominantly driven by 2 main factors. First, there was a negative after-tax change of $151 million in the fair value of the GAAP embedded derivatives related to the Fortitude Re reinsurance transaction. This change was primarily driven by the impact of lower interest rates on available-for-sale securities in the funds withheld portfolio backing the agreement with the corresponding offset flowing through accumulated other comprehensive income or AOCI. Second, more than offsetting this negative was a favorable after-tax impact of $324 million within nonoperating income, driven primarily by the positive movement in market risk benefits amid a stable interest rate environment and higher equity markets.

Of note, our hedge program continues to perform well, in line with expectations. As in prior years, the effectiveness of our hedging strategy allowed us to take a $50 million distribution from LNBAR this quarter. Before turning to our segment results, I want to briefly touch on the impacts of our annual review of reserve assumptions on adjusted operating income. As I noted earlier, the overall impact from the assumption review this quarter was minimal, resulting in a $2 million net benefit to adjusted operating income. While there were some positive and some negative adjustments, none were material relative to the scope of our reserves. Group Protection earnings benefited from a positive adjustment of $39 million this quarter, driven mainly by updated assumptions in our [ LTD and life lines ], reflecting favorable trends we’ve seen over the past few years.

This was offset by modest negative impacts in both our Life and Annuities operating income of $29 million and $8 million, respectively. As it relates to our life assumptions, the impact this quarter stems from slightly elevated mortality experience within our universal life block, which was primarily offset by more favorable mortality experience in our term block, consistent with the drivers of our recent results. Importantly, policyholder behavior remains broadly in line with our expectations. The impacts of our annual assumption review on our segment results for this period and the prior year period are detailed in our earnings release issued this morning. Now turning to our segment results. Excluding the impact of the assumption review, Group Protection operating earnings were $110 million, consistent with the prior year record third quarter, and the margin for the quarter was 8.1%, reflecting a modest decline of 40 basis points year-over-year.

The main driver of our result was a moderation in our disability loss ratio, which increased to 76.7% compared to 70.5% in the third quarter of 2024, excluding the impacts of the assumption review. This increase reflected both volatility, specifically 1 month of unfavorable severity in our LTD experience as well as lower LTD recoveries. While we’ve seen the volatility in severity normalize, the lower LTD recovery rate will likely continue. Over recent years, enhancements in our claims management practices have significantly improved early-stage resolutions. But as these practices mature, incremental benefits naturally moderate. Offsetting this unfavorability during the quarter was continued favorability in LTD incidence and continued favorability in Life results.

Group life results, in particular, remained strong year-over-year, delivering the second lowest loss ratio post the pandemic, supported by lower incidence and favorable severity outcomes. Excluding the impact of the assumption review, our life loss ratio improved relative to the favorable prior year quarter, declining to 65.3% compared with 71.8% in the third quarter of 2024. Although quarterly fluctuations in mortality outcomes are expected, this continued strength underscores the effectiveness of our disciplined pricing. As a reminder, we typically experience seasonal pressure from the third to fourth quarter. 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.

We remain confident in our strategy, disciplined execution and ability to deliver attractive and resilient long-term performance. Now turning to Annuities. Excluding the impact of the assumption review, Annuities delivered operating earnings of $318 million, up $18 million year-over-year, driven by higher average account balances, net of reinsurance and continued growth in spread income. Additionally, this quarter’s earnings included a benefit of approximately $10 million from favorable expense dynamics, primarily related to expense timing and certain tax items that were partially offset within Other Operations. Turning to spreads. Spread income continued to grow with spread-based products representing 29% of total annuity account balances, net of reinsurance, reflecting our commitment to diversifying our annuity business.

RILA account balances increased 16% over the prior year quarter, representing 22% of total balances, net of reinsurance. Fixed annuity account balances were 11% higher year-over-year as we began retaining all of the fixed business we sold during the quarter. From a net flows perspective, VA net outflows continued at a similar pace as in recent quarters, reflecting the maturity of the block, while net flows into spread-based products exceeded $1 billion, further underscoring the success of our strategic diversification efforts. Overall, our Annuities business delivered strong earnings growth, reflecting our ongoing efforts to diversify and strengthen the stability of our earnings base in this business. We remain confident that our disciplined approach positions us well to deliver stable, attractive returns over the long term.

Retirement Plan Services reported operating income of $46 million, up slightly from $44 million in the prior year quarter, driven by higher account balances amid a favorable equity market backdrop and spread expansion. This was partially offset by pressure from stable value outflows over the past 12 months, although the level of stable value outflows has stabilized in recent quarters. Sequentially, earnings improved by $9 million, the result of favorable equity markets and improved spreads. It’s worth noting that this quarter benefited from approximately $2 million of nonrecurring items, primarily driven by net investment income favorability, which had an offset in Other Operations. Base spreads were 107 basis points, up from the prior quarter and prior year.

The sequential increase reflects normalization following last quarter’s onetime administrative adjustment as well as about 2 basis points of benefit from the nonrecurring net investment income dynamic just discussed. On a normalized basis, spreads are broadly consistent with last year’s third quarter. Net inflows totaled $755 million, reflecting strong sales momentum and a robust pipeline noted last quarter. 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. Account balances benefited from equity market performance with average balances increasing nearly 8% year-over-year. End-of-period balances reached $123 billion, up 5% sequentially.

Overall, our third quarter results highlight steady improvement and positive momentum within Retirement Plan Services. While we remain focused on disciplined expense management and continue to target efficiencies aligned with our long-term earnings objectives, it’s important to remember that the fourth quarter typically brings a seasonal increase in expenses, which we expect to be a modest sequential headwind. Beyond expense discipline, we remain focused on initiatives aimed at delivering underlying growth and enhancing the long-term profitability of Retirement Plan Services. Now turning to Life. Excluding the impact of the assumption review, Life delivered operating earnings of $54 million for the third quarter compared to $14 million in the prior year quarter.

The increase was driven by stabilization of our mortality experience, increased investment income and continued expense discipline. Mortality results for the quarter improved compared to the prior year quarter, driven by lower incidence. While severity was slightly higher, overall experience was consistent with our expectations. Turning to expenses. We continue to see year-over-year improvement driven by disciplined expense management. Net G&A expenses declined 4% compared to the prior year quarter, reflecting continued underlying efficiency. Annualized alternative investment returns for the quarter were roughly 10%, essentially in line with our target, but below the 11% return we achieved in the prior year quarter. More broadly, we are beginning to realize the benefits of increased investment income, driven in part by continued growth in alternative investments, which remain well aligned with our life liabilities as well as ongoing enhancements to our overall investment profile, all of which should continue to support earnings going forward.

Overall, the strong results this quarter highlight the ongoing progress that we have made in our Life business, further validating the strategic initiatives we’ve implemented to position this business for sustained profitability. Turning now to expenses. As we’ve discussed, expense management remains a strategic priority across the organization, and we’ve made meaningful progress year-to-date. Through the first 3 quarters, we achieved significant improvements in operational efficiency with expenses tracking favorably compared to the prior year. This disciplined approach has been driven both from a total company perspective and through targeted actions such as within our Life business. However, as is typical, we anticipate that expenses will rise sequentially in the fourth quarter in certain areas, largely attributable to higher variable compensation, including the impact of anticipated growth in sales volumes during the quarter.

Additionally, certain strategic investments intended to enhance the long-term profitability of our businesses will have a slightly greater impact in the fourth quarter compared to earlier quarters. Despite this expected sequential increase, our 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. We remain committed to disciplined expense management, ensuring we maintain and build upon our progress in managing the expense base effectively. Now for an update on capital. We again ended the quarter with an estimated RBC ratio well above our 420% buffer, continuing to maintain a strong excess capital position above our target due to the Bain proceeds and growth in retained free cash flow during the year.

As we’ve indicated previously, we expect to deploy this excess capital over the next year as we execute against our strategic objectives. This quarter, we made meaningful progress on 3 specific initiatives. First, we fully transitioned to retaining all of the fixed annuity business we originate with the exiting of our external flow reinsurance agreement. The strategic objective of achieving a more balanced mix of variable and spread annuity earnings will come through various actions with the full retention of existing sales, the important first step. Leveraging our Bermuda-based affiliate and a more fully optimized asset allocation framework will allow us to expand profitability while a portion of the proceeds from the Bain transaction currently sitting in excess capital will be deployed to support this retention.

It’s worth noting from a GAAP perspective, you’ll see slightly higher retained acquisition expenses in the near term, which should translate to higher spread income and profitability over time. Second, we continue to scale our institutional funding agreement program with $1.9 billion in issuance completed year-to-date. As we’ve discussed previously, FABN and other similar programs are an important growth engine for our spread earnings and will utilize some of our excess capital over the next year or 2. Over the next year, we plan to begin disclosing the specific earnings metrics as we scale the program. Lastly, optimizing our legacy life block has been a critical objective that we’ve been working on for the last 3 years. And as we discussed, post the Bain transaction, we are evaluating a number of actions that should enhance the long-term free cash flow from this block.

We’ll have more to say on this in our outlook discussion next quarter. Looking ahead, we remain committed to a disciplined and balanced approach to deploying our excess capital aimed at enhancing our risk-adjusted returns and positioning Lincoln for sustainable long-term success. Turning to investments. Our investment portfolio delivered solid results in the third quarter, reflecting disciplined management, effective diversification and ongoing execution. Portfolio credit quality remained strong with 97% of investments rated investment grade and below investment grade exposure near historic lows. Our partnership with Bain Capital continues to enhance our investment capabilities, and we are already benefiting from increased sourcing flexibility and execution efficiency.

Within private credit, we remain comfortable and confident in our long-standing disciplined approach and continue to lean into investment-grade private and structured strategies as we further optimize our investment portfolio while supporting objectives around sales growth, earnings potential and capital generation. Lastly, alternative investments generated roughly a 2.5% return for the quarter, generally consistent with our long-term expectations and reflecting continued strength across strategies. In closing, our third quarter results reflect another period of consistent execution and meaningful progress on our strategic priorities. We delivered strong earnings across all businesses, advanced initiatives to diversify and enhance our earnings base and maintained a healthy capital position.

These outcomes underscore the effectiveness of our strategy and a disciplined approach we’ve taken to enhance capital efficiency, free cash flow generation and long-term profitability. While our results will not always be linear, the broader momentum across the enterprise remains clear. The actions we’ve taken this year position Lincoln for a strong 2025, and we remain focused and on track to achieve the objectives outlined in our 2026 outlook. Our commitment to disciplined execution and balanced capital deployment continues to reinforce our ability to deliver durable, attractive risk-adjusted returns and long-term shareholder value. With that, let me turn the call back over to Tina.

Tina Madon: Thank you, Chris. Let me turn the call over to the operator to begin Q&A. Operator?

Q&A Session

Operator: [Operator Instructions] Your first question comes from the line of Joel Hurwitz with Dowling & Partners.

Joel Hurwitz: I wanted to start on Life. So good to see another quarter of improved earnings. Can you unpack the drivers there? Anything unusual in the quarter? And then there’s been volatility over the past several quarters with Life earnings. I believe your ’26 guide that you provided a couple of quarters ago suggested earnings may even be above the level we saw in Q3. Any way you could help us understand the earnings power of this business in the near to intermediate term?

Christopher Neczypor: Sure, Joel. It’s Chris. What I would say is that this quarter was really a reflection of a stable quarter for the life insurance block. If you think about it, there’s drivers of volatility that are probably more outsized for that business. As you’re well aware, mortality and alternative investment returns as the 2 big ones. And as I said in my prepared remarks, both mortality and alt returns came in basically as expected for this quarter. And so it’s actually a really nice quarter because you can see in a stable environment for the big drivers of volatility, what the third quarter earnings power would look like. The reason I emphasize third quarter is because, as I’m sure you know, there is seasonality in that business.

And so third quarter and fourth quarter tend to be, call it, $20 million higher than the average second quarter tends to — would represent a flat quarter and then first quarter, the $40 million worse, just given the drivers of mortality. So you could look at the third quarter as a good run rate once you normalize for seasonality. What I would say as it relates to the drivers because when you do that for this year and last year, you are seeing growth year-over-year, which is positive. It’s in line with the expectations that we had set out. And it’s driven by the things that we said it would be driven by. Its increased net investment income, part of that is the growth in the alternative investment income portfolio, not necessarily the rate which has stabilized, but the growth in the balances.

We’ve discussed how they are a good long-term fit for the long-duration nature of the liabilities. And most importantly, you continue to see the expense discipline that we’ve talked about and that’s starting to come through in a more fulsome way. So at the end of the day, a number of those drivers should continue as we look out over the next couple of years. We’re excited about the growth potential as it relates to the earnings power of that business. And it’s just nice to have a really clean quarter so you can see what the underlying earnings power looks like for a third quarter.

Joel Hurwitz: Got it. That’s helpful. And then just on capital, with leverage essentially back to your 25% target and a much improved capital position, where do you guys stand on resuming a share repurchase program?

Christopher Neczypor: Yes, Joel, thanks for the question. I think, as you know, we tend to talk in more detail about our capital plans and free cash flow outlook and so forth as part of our fourth quarter earnings call when we give the outlook. What I would say is that relative to the guidance that we put out 2 years ago and then reiterated at the beginning of this year, we are tracking at expectations, if not better, across almost all the metrics. So we feel really good about the direction of the company, both from a GAAP earnings perspective, sales, free cash flow, RBC. We’re obviously working through the deployment of the Bain proceeds over the next year. And at the end of the day, as we’ve talked about before, 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.

Operator: Your next question comes from the line of Ryan Krueger with KBW.

Ryan Krueger: I had a question to start on Group. So with this year’s margin expected to come in at the mid- to upper 8% range, is that a good starting point when thinking about going forward? Or I mean, because I think you probably still had pretty favorable mortality this year, and it sounds like disability maybe is reverting more to a bit of a lower level. So just trying to think through if that’s a good starting point or if we should actually normalize a bit lower going forward, at least in the near term.

Christopher Neczypor: Sure. I’ll answer your question, and I’ll give you more detail maybe than you had asked. But if you step back, let’s just start by saying that we’re — we feel really good about the trajectory of Group, right? I mean the business there was a 1% to 3% margin business a couple of years ago. We’ve improved to over 8% last year. We’re going to see another 50 basis points improvement this year. You’re seeing premium growth 4% to 5% on average. So 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. And I’ll unpack all of that. But I just want to reiterate by saying we feel really strong about the trajectory for Group.

And at the end of the day, our outlook has not changed. So if you step back and sort of unpack this quarter, and I’ll hit on both disability and life to your question. Disability loss ratio, it’s up, call it, 6 points. As you know, disability loss ratios are driven by 2 primary things: the incidence, so the new claims being filed and then the resolutions, obviously, the reserves released as claimants return to work. Incidence continues to be very positive. The trend there has been good for a number of years, and we haven’t seen any signs of that reverting. It’s a positive trend that will revert at some point to a more normalized level. But the incidence trends remain very strong. We would expect that trend to continue into fourth quarter. Resolutions is where we saw less favorability this quarter, and it’s really just — it’s driven by 2 things.

So if you think about the 6-point change in the disability loss ratio, half of that, we would say, was driven by severity volatility. And so all that means is that during the month of August, the average size of the claim as it relates to resolutions was lower than we would expect. That’s volatility that happens. We’ve already seen that revert in September and October. The other half, though, is a normalization of the resolution rate. And it’s still really good compared to historical levels, but it is normalizing off of what was an extremely strong 2024 number. And we would expect that trend to continue. As I mentioned, part of the dynamic that’s occurred over the past couple of years is we’ve invested in our systems and our processes. You were seeing resolutions trend lower than we would expect over the long term, the rate being higher.

And so what’s — when we think about our outlook, 2026, 2027 and beyond, we’d always expected that normalization. So at the end of the day, what I would say is third quarter results had a little bit less favorability as it relates to the resolution rate. That was to be expected at some point. We’re seeing it start a little bit earlier. But then as you look into next year, our expectation hasn’t really changed. On the Life side, I would say 2 things. One, the results have been pretty good over the past 2 years. Part of that, as we emerge further and further away from the pandemic, you’re just seeing mortality improvement, and that’s reaching a decent steady state. But the other thing that’s happened, and we’ve talked a lot about this is that a good portion of our rate increases or the rate actions in general that we’ve taken over the past 2 or 3 years have really been executed through the life block.

So in 2025, we’ve seen mortality improvement, and we’ve seen the impact of the rate actions come through. That’s contributing to improved loss ratios. Year-to-date, I think our life loss ratio has improved around 5%. And so that’s going to have the favorable mortality in there, the pricing actions. And keep in mind, we also include supp health in the life loss ratio. We’ll look to think about incremental disclosures there over time. But at the end of the day, going forward, while we know there will be some volatility quarter-to-quarter, the results this year have been relatively within our expected range. I would say third quarter was probably at the low end of that range. And as we think about fourth quarter, we are continuing to see some of those positive trends.

Ellen Cooper: And Ryan, I’ll also add that as we think about future growth, we also — as Chris alluded to and also as you heard in our remarks, we continue to also see premium growth. Now we will always continue to prioritize profitable growth over pure top line growth. But if you look at our overall premium growth, and we talked about the fact that we grew 5% year-over-year. And importantly, we are continuing to lean in, and we see more opportunity in local markets, which is a higher-margin part of this overall business. We’ve done an awful lot in the last couple of years to invest in the capabilities there to be able to strengthen our overall relationships with brokers that are also leaning in there. And then we see this broadening, expanding opportunity as it relates to supplemental health.

And just to give you a sense, when we look at the overall premium growth year-over-year of 5%, 33% growth year-over-year in supplemental health. And in all cases, we see opportunity to just continue to expand lines of coverage in our regional and in national in that space. So we see that there continues to just be future opportunity to grow as it relates to the Group business.

Christopher Neczypor: So when you put all that together, Ryan, to answer your question specifically, yes, there will be some normalization of some of the LTD trends that we’ve talked about. But offsetting that will be the positive impact from the dynamics Ellen just walked through, the growth in supplemental health, continued repricing. So I wouldn’t say that we’re expecting deterioration in our margin. I think that this quarter, we just saw a little bit of that normalization happen earlier.

Ryan Krueger: Great. And I appreciate all those details. One just quick follow-up on disability resolutions. Do you think that — I mean, do you think that/it has anything to do with the economy? Or do you think it’s more just company specific, given how favorable it had been and just normalizing to a more sustainable level?

Christopher Neczypor: So I don’t know that it really is anything to do with the economy, but I would also say it’s more than just company specific, right, Ryan, because there’s really 2 dynamics. One has been the increased processes and overall investments in our claims management process. That’s certainly — I can’t speak for our peers. That is a very much Lincoln-specific strategic initiative we’ve talked about. But also as you just think about the fact that incidence rates have been very low over the past 2 years, the composition of your claim inventory has been shifting. And so as you know, late-stage duration — late duration claims have a lower probability as it relates to being resolved and you work that down. So 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.

Operator: Your next question comes from the line of Suneet Kamath with Jefferies.

Suneet Kamath: I wanted to start with the assumption review, acknowledging that it was fairly minor. Are there any statutory impacts that we should think about? And is there any kind of ongoing earnings GAAP impacts that we should think about as well?

Christopher Neczypor: No, nothing material. We would spike it out if there was anything to note there.

Suneet Kamath: Got it. And then I guess on the retention of the fixed annuity business, is that something that we’re going to actually see in the earnings in the near term here? Or is that going to take some time to sort of develop? Just curious about the cadence of that.

Christopher Neczypor: Yes. Good question. So — and the answer is both, but for different reasons. So what happens is you’ll see the account — the net retained account balances grow, and you will see increase in investment income and increase in interest credited grow. I will say that one of the things we’re looking at is as spread-based account values become a bigger part of the annuities block. We’re going to look to get better disclosure next year to more explicitly spike out some of the individual drivers there. But that aside, what you will see is 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.

So this is one of the things that I spiked out in my commentary where because we don’t have the flow deal anymore, you don’t see the offset as it relates to some of the acquisition expenses. And so that’s a slight near-term headwind to Annuities. But then over time, you’ll see growth in spread income.

Suneet Kamath: Got it. Is there any way to size that drag?

Christopher Neczypor: We’ll look to give you more color there as it relates to the fourth quarter outlook. I think we’ve said before that we were ceding 60% to 70% depending on what time period you’re looking at as it relates to fixed annuity flow. If you have an estimate for what acquisition expenses are, you could see that. I think in this quarter, we had 1 month of retained — or actually, I think it was 2 months of retained fixed annuity flow on a 100% basis. So you can look at some of the expense line items there. But we’ll get you something more detailed as it relates to the 2026 outlook.

Operator: Your next question comes from the line of Alex Scott with Barclays.

Taylor Scott: First one I’ve got for you is just on the topic of private credit. I’d be interested in what your take is on some of the, I guess, one-offs that have kind of popped up recently. And maybe just to add on to that, just your views of potentially growing into private credit as we’re looking at the growth in your business, retaining more. I assume that comes with a little more private credit allocation to the Bain partnership. What is your comfort with the stability of that business and the quality of the assets that you’re putting on?

Christopher Neczypor: Yes. So as it relates to the one-offs, I don’t — we don’t have a view. We don’t really have exposure or an impact from some of the names in the headlines. What I would say is big picture, I think when you look at our portfolio relative to others, especially relative to others in the annuity space, we’ve been somewhat underallocated to different parts of the private credit and structured securities asset classes. We certainly have a good healthy allocation over the past 10 years, but it hasn’t been a focus of growth the way that it has for others, just given the fact that we haven’t been as big in some of the retained spread business historically. So my point is 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. Our credit losses this quarter, you can see in the [ investor supp were ], I think one of the lowest quarters of the past quarter — I mean they’re very, very de minimis and in line with the past 2 years, let’s say. So we don’t see any issues as it relates to the existing portfolio as it relates to growing. Look, we’re going to be thoughtful about it, right? We’re going to apply the same discipline around portfolio construction and risk management that we’ve done before. And it’s something that we think will be a driver, but it doesn’t necessarily mean that we’re going to be taking outsized risk.

Taylor Scott: Got it. Helpful. Second one I had for you is on the SGUL. You mentioned optimizing that block further. And I just wanted to see if you could provide any extra color around some of the things you’re considering. Are we talking about things that are more internal or external reinsurance? Any way you can help dimension that for us?

Christopher Neczypor: Sure. And again, I think we’ll have more to say next quarter when we give our outlook as we do every year. But Alex, what I would do is probably reiterate what we’ve said in the past. We think there’s a number of ways to continue to optimize that block, some external, some internal. We think that the options as it relates to repositioning the asset portfolio would be a driver to free cash flow and NII over time. We’ve talked a lot about looking at our historical captive framework and looking for efficiencies there. We’ve talked about the potential to explore another external deal. So I think we went through this when we announced the Bain transaction, but all of those projects are in the works from an exploration perspective, some we think will have real meaningful impact, some we’re still studying.

But at the end of the day, part of the capital as it relates to the Bain equity will be deployed to execute on a number of the things that we’ve discussed.

Operator: Your next question comes from the line of Wes Carmichael with Autonomous Research.

Wesley Carmichael: I had a question on, Ellen, your comments, just thinking about increasing the risk-adjusted ROE of the company and reducing volatility. Just wondering if there’s any kind of new developments in terms of products that you want to lean into there. And I understand you’ve been growing Group Protection, but are there other kind of product areas you’d point to where ROE and cash flow are more attractive now?

Ellen Cooper: So we really — when we think about overall product, first of all, and expansion of product, everything that we’re doing inside of each of our businesses is really to support our overall strategic and financial objectives. So the idea of continuing to really lean into places where we see, first of all, growing expandable markets and also additionally stable cash flow and higher risk-adjusted returns. So we really can take it case by case. So for example, we talked about really strong sales in the quarter in Life Insurance. And one of the places there was related to executive benefits. So I want to call out just a couple of things there. We had historically had a presence in executive benefits. But in the last year or so, as we really have been focusing on pivoting the entire Life franchise, we really strengthened our overall offering.

We broadened our capabilities there. We continue to deepen our relationships on the distribution side. And we also built some necessary capabilities, dedicated resources, and you see that we put up a couple of large cases in the quarter. And at the same time, all of the sales that you see in the life portfolio as we continue to build momentum there are all products that we’ve leaned into that are really emphasizing more accumulation and more limited guarantees that also will produce stable cash flows. So we have repriced and put up completely new products in the IUL space as an example. Accumulation VUL is another example. And we also have a risk-sharing product in our MoneyGuard space. And at the same time, we’re building tools that differentiate us from presale and post-sale.

We’ve completely optimized the distribution footprint. In our annuity business, one of the places where we believe that we’re winning and one of the reasons why we continue to see strong sales, 32% year-over-year sales growth is that in each of our product categories, we’re continuing to expand. And there, we’ve got unique crediting strategies. We have unique index features. We commented already on Group Protection and really leaning into, as an example, supplemental health. And then I’ll just call out in Retirement Plan Services, one of the things that is driving our strong sales in the quarter, our small market sales were up 24%. And there, we’re leaning into pooled employer plans, and that has also — that’s some of the higher-margin parts of the Retirement business.

And our stable value investment only was up more than 2x. And there, we developed a new product as well that was shorter duration. So — and we will continue because it’s part of our competitive advantage to really lean into new product, product expansion, very much listening to the voice of our customer and what the compelling value propositions are and then testing that alongside what meets our strategic and financial objectives.

Wesley Carmichael: Got it. And maybe a more detailed question. But I think, Chris, you mentioned a $50 million dividend out of LNBAR. I think it’s been a little while since you executed on taking money from that subsidiary, and I appreciate you may want to share more next quarter with the outlook. But is there an annual expected level of dividends out of that sub? Or — and how much, I guess, do you think it might fluctuate if we get a little more volatility with the macro?

Christopher Neczypor: So Wes, what I would say is the $50 million dividend is consistent with what we took last year. And frankly, to your specific question, we saw a lot of volatility in April and May. And so it’s actually a good testament to the effectiveness of the hedge strategy. And the overall dynamics as it relates to the way that we operate our variable annuity risk that we were able to take another $50 million dividend this year. I think longer term, as we build excess capital in different parts of the organization, you would expect to see some growth in dividends. As a reminder, we also have our Bermuda affiliate, which is now over a year in the operational phase. So I would say, over time, I would expect growth in dividends from all of our entities, but the fact is that this year was very in line with last year as it relates to the LNBAR dividend.

Operator: Your next question comes from the line of Tom Gallagher with Evercore.

Thomas Gallagher: Just a few questions on Group Protection. Chris, if I follow what you were saying, it sounds like you think the higher severity trends in disability should improve, but the lower claim recoveries is probably going to continue. And I think you said it was 50-50 in terms of the impact on the loss ratio between those 2 things. So having said all that, is it reasonable to assume the trend into Q4 that’s embedded in your guidance should be improvement in the Group disability loss ratio by — if we had to pick a number, something like 3 points, but then partly offset by higher group life loss ratio just because that was so favorable.

Christopher Neczypor: Yes. So Tom, what I would say is first point, this is just a nit, but I wouldn’t really call the severity impact the trend. It was 1 month, and that can happen from time to time. So for what it’s worth, I mean, it was more volatility than the trend. But that’s right. I mean you have the math right. It was about half of the disability loss ratio growth due to that dynamic and the other half due to trend. So if you move from third quarter to fourth quarter, 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 relative to third quarter for disability. So just keep that in mind. I would say that 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 for the disability loss ratio, consistent with what we’ve seen in the past.

Thomas Gallagher: Got you. That’s a good point on the seasonality. The — and then I guess just a follow-up. What are you guys seeing in pricing now? You’ve clearly had pretty good growth in Group Protection. What are you seeing on ’26 renewals for rate? Are things softening a bit? Are they stable, firming?

Ellen Cooper: So Tom, we will continue to message what we’ve said in the past, which is it is very competitive out there. It always has been, and it’s also rational at the same time. We are continuing to see a strong cycle as it relates to going into the fourth quarter. We are going to continue to lean into prioritizing profitable growth over top line growth. And so you’ll see us really focusing on leaning into the places in particular, where we see further opportunity in local markets, as an example, supplemental health, as we called out earlier. And just in general, we would expect that — you may recall that last year’s annual cycle was particularly strong and active across the entire industry. So I think it’s fair to expect that you will likely see less activity as we move into the fourth quarter.

Thomas Gallagher: Got you. And Ellen, sorry, one quick follow-up on that. So you would expect maybe not as strong as sales, but then better retention. Is that way to think — is that a way to think about the trade-off of that?

Ellen Cooper: So we have seen much improved persistency while putting rate increases through at the same time. And I think a lot of this really speaks to all of the infrastructure, technology and customer service capabilities that we have invested in along the way. Just to give you an example, if — when we create the infrastructure so that we are — we have technology that is now connecting directly into our customers. And we build an infrastructure with them, and we’re supporting them in terms of ease and access. We just become much more of a long-term partner. And so we’ve invested in that. It’s supporting us in terms of really being able to have more persistent client base and continuing to build on additional digital tools to enable us to just have longer relationships with our customers.

Operator: That concludes our question-and-answer session. I will now turn the call back over to Tina for closing remarks.

Tina Madon: Thank you, everyone, for joining our call today. If you have any follow-up questions, please don’t hesitate to reach out at investorrelations@lfg.com. Thank you for your time.

Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.