Inquiring about an early view on Q2 alternative investment returns given the mentioned variability and how they might trend for the rest of the year.

Chris Neczypor stated it's too early for a Q2 view but reminded that the portfolio operates on a lag, so Q1 market volatility could impact Q2. He emphasized the portfolio's strong performance and diversification ($4.2B, 400+ funds, 4500+ portfolio companies) across private equity, growth equity, real assets, and other strategies, which helps mitigate volatility. “It's too early, Wes. But I think the comments that I made in the prepared remarks are just a reminder that the portfolio is on a lag. And so if you think about what happened in first quarter, you would imagine any volatility that would play through would come through next quarter.”

Requesting quantification of the PFML impact on the disability loss ratio and an assessment of whether the business has reached a stable state after macro-driven favorability.

Chris Neczypor declined to size the PFML impact but noted it's consistent with industry trends for new states and will normalize. He explained that the elevated loss ratio is also due to ongoing normalization in claims resolution severity from older, higher-severity claims. Incidence remains favorable but has normalized from record-low levels, suggesting a more stable state, though sensitive to macro changes like unemployment. “On the first question on PFML, we're not going to size the specific impact. I think it's -- the dynamic there is relatively consistent with what you've heard from others in the industry. Two new states came online that has a near-term impact, but then normalizes throughout the year.”

Questioning if the Annuities business is trending towards the lower end of the 66-70 basis point ROA guide, after normalizing for Q1 noise.

Chris Neczypor acknowledged the Q1 noise (tax, NII reallocation, incremental acquisition expense) and explained that the VA block's 80bps ROA is sensitive to market movements and outflows. He noted that spread-based products' ROA will expand over time as account balances grow and non-deferrable acquisition expenses are absorbed. He reiterated Q2 tailwinds from tax normalization and an extra fee day. “So it's 1 quarter. And what I would say is you're right, there's a lot of noise in the numbers. And so there's the tax item, which we mentioned. There's the NII allocation dynamic that we talked about.”

LNC

Lincoln National (LNC) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Financials· May 7, 2026

Source: earnings call transcript

Executive summary

Lincoln National Corporation Q1 FY26 — Strong Execution Drives 16% Adjusted Operating Income Growth

Lincoln National delivered strong Q1 FY26 results, demonstrating continued execution of its strategy to strengthen the balance sheet, optimize operations, and drive profitable growth. The company is pivoting its business mix towards more capital-efficient and less market-sensitive products, particularly in Annuities and Life Insurance, while maintaining a disciplined approach to pricing and capital deployment. Management remains confident in building a higher-quality earnings profile and durable value creation despite ongoing market volatility.

Highlights

Adjusted operating income increased 16% year-over-year, marking the seventh consecutive quarter of growth.
Group Protection operating income rose 11% to $112 million, with an 8% margin, a 60 basis point improvement.
Life Insurance sales were up over 30% year-over-year to $129 million, driven by growth across all product categories.
Retirement Plan Services operating income grew 26% to $43 million, supported by spread expansion and higher equity markets.
Fixed Indexed Annuity (FIA) sales increased over 90% year-over-year, reflecting a focus on differentiated offerings.

Concerns

Annuities operating income decreased to $275 million from $290 million in the prior year, impacted by NII reallocation, tax items, and fewer fee days.
Total net outflows for Annuities increased to $2.2 billion, driven by higher traditional variable annuity outflows.
The Disability loss ratio in Group Protection rose to 73.4% from 70.1% in the prior year, due to new Paid Family Medical Leave (PFML) states and unfavorable resolution severity.
Annuities ending account balances declined approximately 4% sequentially, expected to be a headwind to fee income in Q2.
Retirement Plan Services anticipates elevated net outflows of $2 billion to $2.5 billion in Q2 due to known plan terminations.

Guidance & targets

Category	Target	Timeline	Confidence
Group Protection Premium Growth	3% to 6% range medium materiality	medium term	High
RILA Sales	in line with the average of the past several years medium materiality	this year · FY26	Medium
Variable Annuity Volumes	move closer to pre-2025 levels medium materiality	FY26	Medium
Annuities Sequential Earnings	sequential tailwind medium materiality	Q2 · FY26	High
Retirement Plan Services Net Outflows	$2 billion to $2.5 billion medium materiality	Q2 · FY26	High
Retirement Plan Services Year-over-Year Growth	sustain a similar level of year-over-year growth medium materiality	Q2 · FY26	Medium
Life Insurance Mortality	modest improvement low materiality	Q2 · FY26	Medium
Alternative Investment Returns	experience some variability relative to our 10% annual guidance medium materiality	near term	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Group Protection Strong quarter with improved operating income and margin. Group Life results were strong due to favorable incidence and severity, supported by disciplined pricing. Disability loss ratio elevated due to new PFML states and unfavorable resolution severity, but underlying fundamentals remain strong. Operating income (prior year): $101 millionMargin: 8%Margin improvement: 60 basis pointsGroup Life loss ratio: 67%Group Life loss ratio improvement: >800 basis points from Q1 2025Disability loss ratio: 73.4%Disability loss ratio (prior year): 70.1%Premiums growth YoY: 2%Local market premium growth: >4%Supplemental health premium growth YoY: 28%Sales from existing customers: 74%	—	11%	—	$112 million operating income
Annuities Operating income decreased due to several factors including NII reallocation, tax items, and fewer fee days. The business is shifting towards spread-based products, with strong FIA sales. Account balances saw sequential decline due to equity markets and VA outflows. Net outflows increased, primarily from traditional VAs, but spread-based products continued to generate inflows. Operating income (prior year): $290 millionOperating income (prior quarter): $311 millionUnderlying earnings (prior quarter, ex-payout annuity mortality): $303 millionTotal sales: $3.9 billionSpread-based products as % of sales: 64%RILA sales: up year-over-year, lower sequentiallyFIA sales growth YoY: >90%Total fixed annuity sales: $716 million (below prior year)Variable annuity sales: $1.4 billion (down year-over-year)Account balances net of reinsurance: $169 billionAccount balances growth YoY: 7%Account balances growth QoQ: -4%RILA balances growth: 15%Fixed annuity balances growth: 24%Spread-based products as % of total annuity account balances: 31%Spread-based products as % of total annuity account balances (prior year): 28%Total net outflows: $2.2 billionTraditional variable annuity net outflows: $2.6 billionFixed annuity net inflows: $100 millionRILA net inflows: $285 million	—	—	—	$275 million operating income
Retirement Plan Services Strong quarter driven by spread expansion and higher equity markets. Sales growth concentrated in the core market segment. Net outflows improved significantly year-over-year, though elevated outflows are expected in Q2 due to strategic plan terminations. Operating income (prior year): $34 millionFirst year sales: $1.1 billionFirst year sales growth YoY: nearly 3%Total deposits: $4.1 billionBase spreads: 116 basis pointsBase spreads (prior year): 103 basis pointsBase spreads increase: 13 basis pointsAverage account balances: $125 billionAverage account balances growth YoY: 10%Net outflows: $200 million	—	26%	—	$43 million operating income
Life Insurance Strongest first quarter result in 5 years, driven by higher alternative investment returns and the benefit of captive consolidation. Mortality was favorable to expectations. Sales momentum reflects the strategic repositioning towards products with more predictable cash flows and attractive risk characteristics. Operating earnings (prior year): -$16 million operating lossSales: $129 millionSales growth YoY: >30%Core Life and MoneyGuard sales: $96 millionCore Life and MoneyGuard sales growth YoY: 20%Executive Benefits sales growth YoY: nearly doubling	—	—	—	$41 million operating earnings

LNC operating KPIs by quarter

LNC operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Net new assets Annuities	~-$2.2B Total net outflows for the quarter were approximately $2.2 billion, an increase from the prior year quarter, reflecting higher traditional variable annuity outflows, partially offset by continued positive net flows in spread-based products. Source: earnings call transcript	~-$2.9B Total net outflows were approximately $2.9 billion, driven by traditional variable annuities. Source: earnings call transcript	—
Net new assets Traditional variable annuity	~-$2.6B Traditional variable annuity net outflows for the quarter were approximately $2.6 billion. Source: earnings call transcript	~-$2.7B Traditional variable annuity net outflows were about $2.7 billion with the pace of outflows consistent with recent quarters and in line with our expectations. Source: earnings call transcript	—
Net new assets Retirement Plan Services	~-$200M Net outflows for the quarter were approximately $200 million, a meaningful improvement from the prior year quarter. Source: earnings call transcript	~-$2.4B Net outflows were approximately $2.4 billion in the quarter, driven by 3 large plan sponsor terminations, none of which met our profitability thresholds. Source: earnings call transcript	—
Leverage ratio	25% Second, our leverage ratio improved further during the quarter to 25%, which is now at our long-term target. Source: earnings call transcript	~25% Our estimated RBC ratio remains well above our 400% target and the 20-point buffer we hold on top of it, and we maintained our leverage ratio at roughly 25%, in line with our long-term target. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
Second-generation RILA	milestone	launched nearly 2 years ago
New generation of Life Insurance products	launch	—

Risks & headwinds

Economic backdrop uncertainty

not quantified

Mitigation:Strengthened balance sheet, diversified earnings sources, deepened risk framework.

Annuities earnings headwinds Q1 FY26

Operating income down to $275 million from $290 million YoY

Mitigation:Strategic shift to spread-based products, disciplined risk and hedging framework, expected Q2 sequential tailwind from tax normalization and additional fee day.

Disability loss ratio normalization Q1 FY26

Disability loss ratio 73.4% vs 70.1% prior year

Mitigation:Expected moderation of PFML impact throughout the year, underlying fundamentals remain strong and in line with expectations.

Elevated market volatility impacting alternative investment returns near term

Alternative investment returns could experience some variability relative to 10% annual guidance

Mitigation:Highly diversified portfolio across asset classes, strategies, and funds; robust asset allocation framework with rigorous stress testing.

Traditional variable annuity outflows Q1 FY26

Traditional variable annuity net outflows $2.6 billion

Mitigation:Outflow rate consistent with expectations, focus on diversifying product mix towards spread-based products.

RILA net flows moderation ongoing

RILA net flows expected to moderate relative to recent years

Mitigation:Overall account balance dependent on overall sales, focus on profitable sales and product features.

Elevated Retirement Plan Services net outflows Q2 FY26

Expected net outflows of $2 billion to $2.5 billion

Mitigation:Driven by known plan terminations that did not meet profitability targets; deliberate strategy to retain profitable business.

Less favorable year-over-year earnings comparison for Life Insurance Q2 FY26

Q2 2025 benefited from favorable mortality experience

Mitigation:Underlying trajectory of the business continues to improve through disciplined expense management, investment portfolio optimization, and strategic repositioning.

What to watch in Q2 FY26

Group Protection Premium Growth

next quarter

Current 2% YoY

Target towards 3% to 6% range

Why it matters

Indicates the effectiveness of the targeted segment strategy and the ability to balance margin expansion with top-line growth.

importantly, our in-line, our persistency was in line ex the one large case. And while we saw premium growth of 2%, there are a couple of things that I want to emphasize here year-over-year. One is that we feel very comfortable with the medium-term outlook that we laid out for all of you last quarter, expecting premium growth to be in the 3% to 6% range over the medium term.

Find out whether LNC delivers this. Inve re-checks your case every morning.

Q&A highlights

Clarification on the increase in holdco liquidity and its relation to free cash flow, considering quarterly expenses and dividend upstreaming.

Chris Neczypor confirmed the increase in holdco cash to over $800 million net of prefunding, noting it's the highest in a long time and reflects increasing free cash flow generation. He cautioned about quarter-to-quarter variations due to dividend timing (typically H2) and differences between FCF and GAAP for taxes/seasonal expenses, but affirmed strong FCF conversion.

“the holding company cash increased to over $800 million, net of the prefunding for the quarter. It's the highest it's been in a long time. We talked about this last quarter where as free cash flow is being generated, you will see an increasing amount of that move to the holding company.”

asked by Wesley Carmichael · answered by Christopher Neczypor

3 min read 6 chapters

Detailed narrative

Strategic Priorities and Balance Sheet Strength

Lincoln National's strategy is anchored by three priorities: fortifying its capital foundation, optimizing its operating model, and driving profitable growth. The company's capital levels remain strong, with the RBC ratio well above the 400% target and a 20 percentage point buffer, marking the eighth consecutive quarter above 420%.

The leverage ratio improved to 25%, reaching the long-term target, reinforcing financial flexibility. Holding company liquidity, net of prefunding for a December senior note maturity, stood at $805 million, exceeding the historical operating range.

Annuities Business Mix Shift and Performance

The Annuities business is strategically shifting towards a more balanced, less market-sensitive mix, with spread-based products now representing 64% of total sales. Fixed Indexed Annuity (FIA) sales increased over 90% year-over-year, driven by differentiated offerings and expanded distribution, while MYGA sales were deliberately reduced due to price sensitivity.

Total net outflows were $2.2 billion, primarily from traditional variable annuities, though fixed annuity and RILA products continued to generate positive net inflows of $100 million and $285 million, respectively.

Life Insurance Transformation and Growth

The Life Insurance business is undergoing a significant transformation, refocusing its new business mix on products with more predictable cash flows and attractive risk-adjusted returns, such as IUL, accumulation VUL, and executive benefits. First quarter life sales were $129 million, up over 30% year-over-year, with core Life and MoneyGuard sales up 20% to $96 million, and executive benefits sales nearly doubling.

This progress reinforces the strategy to build a more diversified and profitable life franchise.

Group Protection Segment Strategy and Strong Results

Group Protection delivered another strong quarter with operating income up 11% to $112 million and an 8% margin, a 60 basis point improvement. The success is attributed to a targeted segment strategy across local, regional, and national markets. Local market premium increased by over 4%, its strongest year-over-year increase in nearly a decade, and supplemental health premium grew 28% year-over-year.

The company continues to prioritize margin expansion over top-line growth, as evidenced by a large case lapse due to disciplined pricing.

Retirement Plan Services Realignment and Outlook

Retirement Plan Services reported strong Q1 operating income of $43 million, up 26% year-over-year, driven by continued spread expansion and higher equity markets. First-year sales were $1.1 billion, up nearly 3%, concentrated in the core market segment. Total deposits were $4.1 billion.

The business is in the early stages of realignment, focusing on disciplined growth, service excellence, and technology modernization. While Q2 is expected to see elevated net outflows of $2 billion to $2.5 billion from strategic plan terminations, the underlying trajectory for durable earnings growth remains positive.

Investment Portfolio and Private Credit Overview

The investment portfolio maintained strong credit quality, with 97% of investments rated investment grade. The alternatives portfolio delivered a 3.1% return (12.3% annualized) in Q1, exceeding the 10% annual target. Private credit constitutes approximately 20% of the general account, primarily comprising $19 billion (15% of general account) in investment-grade private placements and $4 billion (3.5% of general account) in private structured securities.

Direct lending, representing less than 1.5% of the general account, is expected to decrease over time, aligning with the strategy to support interest-sensitive liabilities more efficiently.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.