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LN

LINCOLN NATIONAL CORP (LNC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 adjusted operating EPS was $2.04, a beat versus Wall Street consensus of $1.87*, while reported diluted EPS was $2.12; consolidated revenues were $4.56B, below consensus of ~$4.81B* .
    Estimates disclaimer: Values retrieved from S&P Global.
  • Segment performance was balanced: Annuities operating income (ex assumption review) rose to $318M on record $174B ending account balances; Life operating income (ex assumption) improved to $54M; Group delivered $110M ex assumption with premiums +5% YoY; Retirement Plan Services posted $46M and net inflows of $0.8B .
  • Capital remains strong: estimated RBC ratio >420% with a >20pp buffer above the 400% target and leverage ratio improved to 25.2% (from 25.6% in Q2 and 27.5% in Q1), supported by equity growth .
  • Management highlighted full retention of fixed annuity flows (a near-term acquisition expense headwind, but supportive of spread earnings over time), continued scaling of the FABN program, and FY Group margin outlook in the mid-to-upper 8% range, implying ~50 bps YoY improvement .
  • Narrative catalysts: EPS beat alongside revenue miss; durable capital metrics; spread-based annuity mix shift; Group margin normalization and supplemental health growth; potential updates on capital deployment and share repurchase at the Q4 outlook call .

What Went Well and What Went Wrong

What Went Well

  • “Broadening momentum resulted in fifth consecutive quarter of YoY earnings growth,” with adjusted operating income up 13% YoY to $397M and adjusted diluted EPS $2.04; reported net income to common was $411M ($2.12) .
  • Annuities delivered operating income of $318M (ex assumption review), record $174B ending account balances, and $4.5B sales with spread-based products >60% of total; “we transitioned to fully retaining the flows from our fixed sales” to enhance spread earnings over time .
  • Life Insurance operating income (ex assumption) improved to $54M on stable mortality, higher investment income, lower net G&A; segment sales more than doubled YoY to $298M, driven by executive benefits .

What Went Wrong

  • Consolidated revenue missed consensus*, with reported revenues of $4.56B versus ~$4.81B* .
    Estimates disclaimer: Values retrieved from S&P Global.
  • Group Protection ex assumption review earnings were “in line” YoY at $110M, but LTD resolutions normalized and ex-assumption operating margin dipped to 8.1% (reported margin 11.0% benefited from +$39M assumption review) .
  • VA net outflows persisted, and RPS faced stable value outflows; while RPS posted positive net inflows of $0.8B in Q3, management flagged known Q4 terminations (most below profitability targets) as a near-term headwind .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$4.691 $4.044 $4.555
Diluted EPS (GAAP) ($)$(4.41) $3.80 $2.12
Adjusted Operating EPS ($)$1.60 $2.36 $2.04
Group Protection Operating Margin (%)7.4% 12.5% 11.0%
Segment Operating Income ($USD Millions)Q2 2025Q3 2025
Annuities (reported / ex assumption)$287 $310 / $318
Life Insurance (reported / ex assumption)$32 $25 / $54
Group Protection (reported / ex assumption)$173 $149 / $110
Retirement Plan Services$37 $46
Segment KPIsQ3 2025
Annuities Sales ($USD Billions)$4.467
Annuities Ending Account Balances ($USD Billions, net of reinsurance)$174.079
Annuities Return on Avg Account Balances (bps, ex assumption)75
Life Sales ($USD Millions)$298
Group Premiums ($USD Millions)$1,352
Group Total Loss Ratio (reported / ex assumption)68.3% / 72.2%
RPS Deposits ($USD Millions)$5,008
RPS Net Flows ($USD Millions)$755
RPS Ending Account Balances ($USD Billions)$123
Estimates vs Actual (S&P Global)Q3 2025
Primary EPS Consensus Mean ($)1.87*
Actual Adjusted Operating EPS ($)2.04
Revenue Consensus Mean ($USD Billions)4.81*
Actual Revenue ($USD Billions)4.555
Estimates disclaimer: Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Group Protection Operating MarginFY 2025Not specifiedMid-to-upper 8% (≈ +50 bps YoY) New/clarified
RBC RatioOngoingTarget ≥400% bufferEstimated >420%; maintain >20pp buffer above 400% target Maintained strong buffer
Leverage RatioOngoingTarget ~25%25.2% (progressing toward target) Improved
Fixed Annuity RetentionOngoingExternal flow reinsurance used“Full retention” of fixed annuity business; near-term acquisition expense headwind; supports future spread earnings Raised retention stance
FABN ProgramNext 12–24 monthsScaling$1.9B issuance YTD in 2025; plan to disclose earnings metrics as program scales Scaling continues

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Capital strength (RBC, leverage)RBC >420%; leverage 27.5% (Q1) and 25.6% (Q2) RBC >420%; leverage 25.2% Improving leverage; stable RBC buffer
Annuity mix shift to spread-basedSpread products ~60% of sales (Q1); 66% (Q2) >60% of sales; full retention of fixed flows Continued push to spread earnings
Group margin/experience7.4% (Q1), 12.5% (Q2) 11.0% reported; 8.1% ex assumption; LTD resolutions normalize Normalizing off record levels
Life profitability pivotLoss improving (Q1); $32M (Q2) $54M ex assumption; executive benefits strength Improving earnings trajectory
RPS flows/spreadsOutflows and plan terminations; spreads ~1.01–1.05% (Q1–Q2) Net inflows $0.8B; base spreads 107 bps; known Q4 terminations ahead Sequential improvement; near-term headwinds
Technology/digital & supplemental healthInvestment in capabilities; supplemental health growth (Q1–Q2) Continued digital tools focus; supplemental health +33% YoY premiums Building capabilities; product diversification

Management Commentary

  • Ellen Cooper (CEO): “Annuities delivered year-over-year earnings growth driven by higher account balances and an increase in spread income… Group Protection continued to execute its profitable growth strategy… Retirement Plan Services also reported strong performance” .
  • CFO on capital and hedging: “Our hedge program continues to perform well… we were able to take a $50 million dividend from Linbar this quarter” .
  • Strategic actions: “We transitioned to fully retaining the flows from our fixed sales… leveraging our Bermuda affiliate and optimized asset allocation to expand profitability” .
  • Product focus: Executive benefits drove Life sales; “we strengthened our offering… built capabilities… delivering a strong quarter for executive benefit sales,” while cautioning variability in large-case activity .

Q&A Highlights

  • Life earnings stability and seasonality: Q3 shows “underlying run-rate” with stable mortality and alternative returns; expect seasonal patterns with Q4 typically higher than Q2 .
  • Share repurchase outlook: Management plans detailed capital deployment discussion with Q4 outlook; tracking better than prior guidance across GAAP earnings, sales, free cash flow, RBC .
  • Group disability resolutions: Severity volatility in August normalized; resolution rates trending to sustainable levels; FY 2025 margin expected mid-to-upper 8% .
  • Fixed annuity retention cadence: Near-term acquisition expense drag without flow reinsurance offset; spreads and profitability to build over time; more detail at Q4 outlook .
  • Private credit: No exposure to headline names; portfolio quality strong (97% IG assets); under-allocated historically, growing with discipline via Bain partnership .

Estimates Context

  • EPS: Adjusted operating EPS beat consensus ($2.04 actual vs $1.87*), driven by diversified earnings and favorable annuity spreads .
    Estimates disclaimer: Values retrieved from S&P Global.
  • Revenue: Revenue missed consensus ($4.56B actual vs ~$4.81B*), reflecting normalization in Group resolutions and ongoing VA outflows despite strong spread-based sales .
    Estimates disclaimer: Values retrieved from S&P Global.
  • Participation: 13 EPS estimates and 6 revenue estimates underpin consensus*, with Q4 2025 EPS consensus at ~$1.90* (context for forward expectations).
    Estimates disclaimer: Values retrieved from S&P Global.

Key Takeaways for Investors

  • EPS beat with a revenue miss: Focus on mix quality—spread-based annuity growth and Life profitability improvements are strengthening earnings durability .
  • Capital trajectory supportive: RBC >420% and leverage down to 25.2% provide flexibility for measured capital deployment, including FABN scaling and potential future buybacks .
  • Annuity strategy adds resilience: Full retention of fixed flows plus RILA growth should expand spread income; expect a near-term acquisition expense drag but stronger run-rate spreads thereafter .
  • Group margin normalization: Reported margin elevated by assumption review; ex-assumption margin steady at ~8%; FY margin guide mid-to-upper 8% suggests sustainable profitability without relying on one-offs .
  • Life execution: Executive benefits and risk-sharing products support improved earnings; watch for large-case variability quarter to quarter .
  • RPS momentum with caveats: Q3 net inflows and spread improvement are positives; known Q4 terminations will pressure flows near-term; monitor base spreads and expense discipline .
  • Trading lens: Near-term stock drivers include capital deployment clarity at Q4 outlook (buybacks), visibility into spread growth from annuity retention/FABN, Group margin sustainability without assumption benefits, and continued Life profitability trajectory .