LINCOLN NATIONAL CORP Q1 FY2025 earnings call

• Macroeconomic Environment: Market volatility remains high, but Lincoln is navigating with discipline. Strategic actions over two years have fortified the foundation, including balance sheet strength, operating model optimization, etc.
• Strategic Partnership with Bain Capital: Bain Capital will be a strategic investment manager for general account assets, providing expanded scale and private asset access. It will also collaborate on broader value streams to drive growth.
• First Quarter Highlights: Group Protection had 26% y/y earnings growth and 120 bps margin expansion. Annuities had robust sales growth. Life business sales up 7%. Retirement Plan Services had first year sales in line and total deposits up 8%.
• Segment-Specific Progress: Group Protection continued strong momentum with premium growth, disability results, and shift to higher margin business. Annuities saw sales growth and focus on spread based products. Life business improved with sales growth in risk-sharing products. Retirement Plan Services had steady first year sales and deposit growth.

Group Protection: Operating income was $101 million, up 26% year over year, with a margin of 7.4%, up 120 basis points. Annuities: Total sales of $3.8 billion increased 33% from the prior year quarter, with spread based products comprising approximately 60% of the quarter’s new business mix. Life: Reported an operating loss of $16 million compared to $35 million in the prior year first quarter, with improved mortality. Retirement Plan Services: First year sales were in line with the prior period, and total deposits were up 8%.

• The partnership with Bain Capital is expected to enhance growth in spread based products and provide flexibility to adapt to market dynamics.
• Expectations for continued execution of strategic initiatives to drive profitable growth and stable cash flows, including further diversification of the business mix.

• Market volatility could impact earnings, with potential effects on AUM, hedge costs, and credit losses.
• Economic downturns could affect disability performance, with potential easing in disability results if unemployment rises.
• Sensitivity of RBC to equity and interest rate volatility, though Lincoln maintains a capital buffer above target.

Q: On the Bain partnership, what drives the improvement in 2027 free cash flow per share?

A: It's purely about deploying capital into spread based earnings growth and other strategic areas like repositioning the legacy LifeBlock.

Q: How favorable was mortality in the life business relative to expectations?

A: Mortality was better than expected, with first quarter showing improvement after seasonal factors and prior quarter severity.

Q: Explain the competitive environment in annuities?

A: Lincoln is focused on profitable growth, using walled gardens, unique crediting strategies, and product features to compete, with the Bain partnership aiding spread based business growth.

Q: What's the sensitivity of RBC to equity and interest rate volatility?

A: RBC remains in the 420%+ range, with no material change in capital, and timing differences in disclosures are normal.