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    LNC
    Earnings call· Mar 2026(Q1 FY26)

    LINCOLN NATIONAL Q1 FY26 earnings call LNC

    May 7, 2026 Source

    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

    5

    • 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

    5

    • 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

    8
    CategoryTargetConfidence
    Group Protection Premium Growth
    3% to 6% range
    medium materiality
    High
    RILA Sales
    in line with the average of the past several years
    medium materiality
    Medium
    Variable Annuity Volumes
    move closer to pre-2025 levels
    medium materiality
    Medium
    Annuities Sequential Earnings
    sequential tailwind
    medium materiality
    High
    Retirement Plan Services Net Outflows
    $2 billion to $2.5 billion
    medium materiality
    High
    Retirement Plan Services Year-over-Year Growth
    sustain a similar level of year-over-year growth
    medium materiality
    Medium
    Life Insurance Mortality
    modest improvement
    low materiality
    Medium
    Alternative Investment Returns
    experience some variability relative to our 10% annual guidance
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    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

    Operational metrics

    17
    Adjusted operating income growth
    16%YoY
    Q1 FY26

    Seventh consecutive quarter of year-over-year adjusted operating income growth.

    Alternative investments annualized return
    12.3%above 10% target
    Q1 FY26

    Annualized return for the alternative investments portfolio in Q1, exceeding the 10% target.

    Alternative investments portfolio return
    3.1%above 10% annualized target
    Q1 FY26

    Q1 return for the alternative investments portfolio.

    Alternative investments portfolio size
    $4.2 billion
    Q1 FY26

    Size and diversification of the alternative investments portfolio.

    Holding company liquidity
    $1.2 billionup $150 million from year-end
    Q1 FY26

    Total holding company liquidity, including prefunding for senior notes.

    Leverage ratio
    25%improved further
    Q1 FY26

    Leverage ratio reached the long-term target.

    Investment grade portfolio
    97%
    Q1 FY26

    Percentage of investments rated investment grade.

    Private credit as % of general account
    20%
    Q1 FY26

    Overall allocation of private credit within the general account.

    Investment-grade private placements as % of general account
    15%
    Q1 FY26

    Largest component of private credit portfolio.

    Private structured securities as % of general account
    3.5%
    Q1 FY26

    Allocation to private structured securities.

    Direct lending as % of general account
    <1.5%
    Q1 FY26

    Smallest allocation within private credit, expected to decrease over time.

    G&A expenses
    $589 millionup modestly YoY, down sequentially
    Q1 FY26

    General and administrative expenses, net of amounts capitalized.

    Annuities NII reallocation impact
    $10 million
    Q1 FY26

    Net interest income earned on collateral for index credit hedging strategies reallocated from annuities operating income to nonoperating income.

    Annuities tax-related items impact
    $7 million
    Q1 FY26

    One-time impact from unfavorable tax-related items, reflecting a true-up of prior year tax positions on variable annuity separate accounts.

    Annuities fee days impact
    $10 millionsequential pressure
    Q1 FY26

    Impact of two fewer fee days on Annuities operating income sequentially.

    Life captive consolidation tailwind
    $10 millionYoY
    Q1 FY26

    Year-over-year benefit from the captive consolidation executed in Q4 FY25, expected to continue for Q2 and Q3 FY26.

    Other operations NII reallocation impact
    $5 million
    Q1 FY26

    Minor impact on other operations from the net interest income reallocation.

    Industry KPIs

    6
    MetricValueDetails
    Capital returns$805 millionUSD
    Net investment income116 basis pointsbps
    Retention persistencyin-line
    Life specific when present—
    Net premiums written earned2%%
    Statutory regulatory capitalwell above 400%%

    Product announcements

    2
    ProductTypeDetails
    Second-generation RILAmilestone
    New generation of Life Insurance productslaunch

    Risks & headwinds

    8
    Economic backdrop uncertainty

    not quantified

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

    Annuities earnings headwindsQ1 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 normalizationQ1 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 returnsnear 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 outflowsQ1 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 moderationongoing

    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 outflowsQ2 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 InsuranceQ2 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

    5

    Group Protection Premium Growth

    next quarter
    Current2% YoY
    Targettowards 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⏳.

    Q&A highlights

    5

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.