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LINCOLN NATIONAL CORP (LNC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 adjusted operating income available to common stockholders was $427 million ($2.36 per diluted share), up ~32% year over year; GAAP diluted EPS was $3.80. Group Protection delivered record earnings and a 12.5% margin; annuities sales reached $4.0B with 66% spread-based mix .
  • EPS beat Wall Street consensus ($1.88*) by ~$0.48, while revenue of $4.044B missed consensus ($4.65B*), driven by market risk benefit (MRB) dynamics and lower fee income; the earnings mix remained diversified with strong segment execution .
  • Capital remains robust: estimated RBC ratio >420% and leverage ratio improved to 25.6% (from 27.5% in Q1), aided by equity growth and Bain partnership close; holding company liquidity was $466M .
  • Management reiterated near-term discipline with “second-half 2025 Group margin broadly in line with 2H 2024” and expects RPS net flows to turn positive in Q3; annuities will retain more fixed business beginning Q4 to reduce reliance on external reinsurance—key stock catalysts around margin sustainability and cash flow trajectory .

Values retrieved from S&P Global for consensus figures (*).

What Went Well and What Went Wrong

What Went Well

  • Group Protection: record earnings ($173M) and highest-ever operating margin (12.5%), driven by favorable life experience and LTD results; premiums +7% YoY; sales +16% YoY, led by local markets and supplemental health .
  • Annuities: third-highest sales quarter ($4.019B) with balanced mix; spread-based products were 66% of sales; ending account balances rose 5% sequentially, positioning a tailwind into Q3 .
  • Management tone: “With a more balanced business mix, greater capital flexibility…we are well positioned to build on this momentum and unlock Lincoln’s full potential,” CEO Ellen Cooper stated, highlighting diversified earnings sources and disciplined execution .

What Went Wrong

  • Consolidated revenue fell to $4.044B (from $5.153B in Q2’24 and $4.691B in Q1’25), as MRBs and lower fee income weighed; GAAP revenue miss versus consensus .
  • Retirement Plan Services (RPS): operating income down 8% YoY to $37M; base spread dipped to 99 bps; net outflows of $585M persisted despite strong first-year sales, reflecting stable value outflows and plan terminations .
  • Variable annuity outflows pressured balances; life results—though positive this quarter—can be volatile quarter-to-quarter, prompting caution on sustainability of life loss ratio and Group margins (macro tailwinds may revert) .

Financial Results

Consolidated Results vs Prior Periods and Estimates

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$5.063 $4.691 $4.044
GAAP Diluted EPS ($)$9.63 $(4.41) $3.80
Adjusted Operating EPS ($)$1.91 $1.60 $2.36
EPS Consensus (S&P Global) ($)——$1.88*
Revenue Consensus (S&P Global) ($B)——$4.65*

Values retrieved from S&P Global for consensus figures (*).

Segment Operating Income

Segment Operating Income ($USD Millions)Q2 2024Q1 2025Q2 2025
Annuities$297 $290 $287
Life Insurance$(35) $(16) $32
Group Protection$130 $101 $173
Retirement Plan Services$40 $34 $37

Segment Sales / Deposits

Segment Sales/Deposits ($USD Millions)Q2 2024Q1 2025Q2 2025
Annuities Sales$3,817 $3,789 $4,019
Life Insurance Sales$105 $97 $121
Group Protection Sales$161 $157 $187
RPS Total Deposits$3,282 $4,115 $3,594

KPIs and Capital

KPI12/31/20243/31/20256/30/2025
RBC Ratio (%)433% >420% >420%
Leverage Ratio (%)27.8% 27.5% 25.6%
Holding Co. Liquidity ($USD Millions)$463 $466 $466
BVPS incl. AOCI ($)$42.60 $41.96 $44.91
BVPS excl. AOCI ($)$72.06 $67.04 $67.95
Adjusted BVPS ($)$72.34 $73.19 $72.77

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Group Protection Operating MarginFY 2025 (2H)Margin expansion YoY; 2026 ≥8% 2H 2025 margin broadly in line with 2H 2024; full-year ~9%+ implied by 1H + 2H mix Maintained near term; clarity added
RPS Base Spread2H 2025Stabilize at current levels (early 2025) Move back toward Q1 levels (~103 bps) after Q2 dip to 99 bps Raised near-term outlook
RPS Net FlowsQ3 2025Not specifiedNet flows expected to turn positive New positive
Experience Refund RecognitionFY 2025 onwardRecognize when received (e.g., $15M in Q2) Switch to quarterly accrual to better match full-year ops (subject to annual adjustment) Accounting policy change
Annuities Fixed Retention vs External FlowQ4 2025 onwardHeavy reliance on external flow reinsurance Retain more fixed annuity business; reduce reliance on external flow (requires capital) Strategic shift
Free Cash Flow ConversionFY 202645–55% 45–60%; longer-term potential above with Bain/Alpine, mix shift Upper bound raised
Leverage RatioFY 202625–28% 25–26.5% Improved target

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Capital & LeverageRBC >430%; leverage improvement progress RBC >420%; leverage 25.6%, liquidity steady Improving
Group ProtectionRecord Q4; margin 8.4%; disciplined repricing & LTD favorability Record Q2; margin 12.5%; local market + supplemental health driving growth; 2H margin in line with prior year Strong but normalizing
Annuities Mix Shift2/3 spread-based sales; RILA momentum 66% spread sales; ending balances +5% seq; retention of fixed starting Q4 Diversifying, cash-flow focus
RILA Product & Competition2nd-gen launched; share gains +32% YoY RILA sales; flows impacted by block aging; goal to retain into new RILA Growing, manage churn
RPS Spreads & FlowsBase spread ~101–103 bps; stable value outflows Spread 99 bps; net outflows $585M; expect positive flows Q3 Near-term pressure, improving
Bain PartnershipAnnounced terms & strategy Closed; enabling private/structured sourcing and spread growth Execution phase
Bermuda Reinsurance (Alpine)First internal flow approved (fixed) Optimize internal/external mix; support retention & returns Scaling
Alternatives ReturnsQ4: 2.8% (FY 8.9%) Q2: 2.5% quarterly; ~10% annualized In line with target
Digital/DistributionInvestments in tech, leave mgmt, InsurTech connectivity Expanded digital capabilities; local market bundling; broker partnerships Building competitive moat

Management Commentary

  • CEO Ellen Cooper: “Group Protection delivered a record quarter for earnings and its highest-ever margin… Annuities generated its third-highest sales quarter… Life Insurance delivered positive earnings, driven by favorable mortality and improved expenses.” .
  • CFO Chris Neczypor: “We would expect…a 9%+ margin for the year [Group], which is 100 basis points of improvement relative to last year” and “we anticipate [RPS] overall net flows will turn positive in the third quarter.” .
  • CFO on capital deployment: “Retaining more of the fixed business…starting in the fourth quarter…Reducing our reliance on flow reinsurance requires capital, and a portion of the deployable excess capital…will be set aside to support this initiative.” .

Q&A Highlights

  • Group margin drivers and sustainability: Local market expansion, supplemental health mix, disciplined repricing; management expects 2H 2025 margins broadly in line with 2H 2024 and ~9%+ for FY25 given macro and internal execution .
  • RILA competition and flows: Lincoln gaining share with second-gen product; outflows reflect block aging as surrender periods end—strategy is to retain customers into new RILA products while sustaining profitability .
  • Legacy life optimization: Exploring captive restructuring and external reinsurance; any earnings/FCF impact would be 2026+ timing, not 2025 .
  • RPS trajectory: Base spread expected to revert toward Q1 levels; pipeline healthy; net flows anticipated to turn positive in Q3 as stable value pressures moderate .
  • Accounting update: Moving to quarterly accrual of annual experience refund for paid family leave program to better match full-year operations .

Estimates Context

  • EPS: Adjusted operating EPS of $2.36 vs consensus $1.88*—material beat driven by Group record margin, positive life mortality/expenses, and diversified annuity spread income .
  • Revenue: $4.044B vs consensus $4.65B*—miss on reported GAAP revenue amid MRB/hedge dynamics and lower fee income; note hedging program targets capital stability .

Values retrieved from S&P Global for consensus figures (*).

Key Takeaways for Investors

  • EPS beat was quality-driven (Group record margin, life turnaround, spread income growth) even as GAAP revenue missed—reinforces pivot toward stable cash flows and risk-adjusted returns .
  • Capital strength and deleveraging are on track; with Bain closed and Alpine active, Lincoln can retain more profitable fixed business beginning Q4—supportive of FCF conversion trajectory .
  • Near-term watch items: LTD incidence sustainability, life loss ratio variability, RPS spread recovery and net flows turning positive in Q3—these are key determinants for margin durability and sentiment .
  • RILA growth continues, but manage churn as cohorts age; execution on retention and product differentiation remains central to sustaining balances and spread income .
  • Mix shift to spread-based products (66% of annuity sales) and Group’s local/supplemental strategy are driving margin expansion—expect normalization but year-end margins still favorable vs 2024 .
  • Longer-term FCF conversion guide raised to 45–60% for 2026, with potential upside as mix and capital efficiency improve—catalysts include legacy life optimization and reinsurance actions .
  • Trading implications: Positive EPS surprise vs consensus and deleveraging may support near-term multiple, but revenue miss and guidance for Group margin normalization could temper exuberance; focus on Q3 RPS flows and Q4 fixed retention milestones .

Additional Relevant Q2 2025 Press Releases

  • Bain Capital partnership: Closed in Q2; strategic investment manager role to scale private/structured sourcing and support spread-based growth .
  • Technology leadership: Appointment of Tom Anfuso as SVP, Chief Technology Officer—supports ongoing digital capability build in distribution and customer experience .
  • Product enhancements: Expanded indexed UL portfolio and annuity features—aligns with risk-sharing and spread-based product strategy .

Document References

  • Q2 2025 8‑K/Press Release/Supplement: .
  • Q2 2025 Press Release: .
  • Q2 2025 Earnings Call Transcript: .
  • Q1 2025 Earnings Call Transcript: .
  • Q4 2024 Earnings Call Transcript: .

Values retrieved from S&P Global for consensus figures (*).