Lincoln National (LNC) Q2 FY26 earnings call: guidance and Q&A

Seeking more insight on the timing for resumption of share repurchases given increased capital flexibility.

Management confirmed significant progress on capital priorities, including rebuilding RBC, reducing leverage, retaining fixed annuity sales, and dealing with legacy life blocks. With preferred stock prefunding complete, the company has $400 million of excess capital above its liquidity buffer. While not announcing specific timing, the Board recently reconfirmed the existing $1.5 billion share repurchase authorization, with over $700 million remaining.

“But what I can tell you is that we do have an outstanding repurchase authorization. It's obviously been dormant the past few years, and our Board has recently reconfirmed that program which is a good sign.”

asked by Wesley Carmichael · answered by Christopher Neczypor

Clarification on whether the redefinition of operating earnings, excluding amortization of deferred gains/losses from reinsurance deals, would change adjusted earnings going forward.

The redefinition is an accounting policy change to align with industry practice and underlying economics. For the current Talcott transaction, the deferred loss will not impact operating income under the new definition. In aggregate, deferred gains/losses from past deals have been a net negative, implying that excluding them would generally lift operating earnings, but the specific impact depends on each segment and deal.

“What we realized was we were a little bit of an outlier as it relates to the way the industry treats those transactions and frankly, when you think about the underlying economics, getting GAAP to be as close as we can is important from an operating income perspective.”

asked by Wesley Carmichael · answered by Christopher Neczypor

Confirming if the reported $57 million in Life Insurance earnings for Q2 is a reasonable expectation for Q3, or if the normalized figure (excluding alt underperformance) should be considered.

The reported $57 million for Q2 should be a reasonable baseline for Q3, before accounting for any favorable mortality trends that might continue. The Q2 figure already reflects the very favorable mortality and underperformance in alternative investments. Seasonality typically means Q3 and Q4 are better than Q2, but the exceptional Q2 favorability needs to be considered.

“Now, the reported for this quarter should get you to within some range, Ryan, how you would think about the third quarter. And that's before accounting for or adjusting for any favorable mortality trends that might continue.”

asked by Ryan Krueger · answered by Christopher Neczypor

Asking if the 1.5 years of favorable mortality trends could become more permanent.

Mortality trends are very long-term. While 5 out of the last 6 quarters have been favorable, mostly in the term block, and general U.S. mortality trends are improving, it's too early to definitively say they are permanent. The UL block has also shown positive quarters. The underlying trends are encouraging, but severity volatility can still impact quarterly results.

“So these are very long-term trends, as you know. And I think when you go back and you look 5 out of the last 6 quarters have been very favorable for mortality.”

asked by Ryan Krueger · answered by Christopher Neczypor

Seeking color on why the $30 million to $40 million incremental free cash flow from the Talcott deal seems low compared to the prior Fortitude deal.

The $30 million to $40 million is an annual number for this specific deal. The Fortitude deal was larger and included other business blocks, making it a different comparison. This Talcott deal is a more straightforward block, removing 40% of capital-intensive mortality, interest rate, and lapse risk for a $200 million capital cost, which is considered a strong return.

“I mean we're spending $200 million of capital, and we're getting $30 million to $40 million. That's a pretty good return.”

asked by Suneet Kamath · answered by Christopher Neczypor

Inquiring about the subdued fixed annuity sales in Q2 and the confidence for a rebound in H2.

Lincoln is a holistic annuity provider, prioritizing profitability over volume. While fixed annuity sales were lower, conviction remains high for long-term growth, especially in FIAs. Investments in unique crediting strategies, differentiated product features, the Bain Capital partnership, and expanded distribution (adding product to 9 existing firm relationships) support expectations for meaningfully increased FIA sales in the back half of the year.

“We believe this product category offers the longest runway for growth within our annuity business with capacity to extend our competitive position over time.”

asked by Joel Hurwitz · answered by Ellen Cooper

Asking about competition in the Group Protection space and anticipated trends for the end of the year.

The market remains competitive but rational. Lincoln is well-positioned with a targeted segment strategy, strong distribution, high retention, and broad product coverage, especially in voluntary supplemental health. Investments in claims, underwriting, and digital capabilities enhance persistency and new business. The company sees a healthy pipeline and expects to continue leaning into supplemental health and local markets, which are the fastest-growing areas.

“So as you would expect, the market remains competitive as -- really as it always is, but still completely rational.”

asked by Taylor Scott · answered by Ellen Cooper